Table of Contents
ALPHA NATURAL RESOURCES, LLC | ALPHA NR HOLDING, INC. | |
(Exact name of registrant co-issuer as specified in its charter) | (Exact name of registrant parent guarantor as specified in its charter) | |
Delaware | Delaware | |
(State or other jurisdiction of incorporation or organization) | (State or other jurisdiction of incorporation or organization) | |
1221 | 1221 | |
(Primary Standard Industrial Classification Code Number) | (Primary Standard Industrial Classification Code Number) | |
56-2298262 | 02-0590704 | |
(I.R.S. Employer Identification Number) | (I.R.S. Employer Identification Number) |
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 NR Holding, Inc. Alpha Natural Resources, LLC 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) |
Proposed Maximum | Proposed Maximum | Amount of | ||||||
Title of Each Class of | Amount to be | Offering | Aggregate | Registration | ||||
Securities to be Registered | Registered | Price per Note | Offering Price(1) | Fee | ||||
10% Senior Notes due 2012 | $175,000,000 | 100% | $175,000,000 | $20,597.50(3) | ||||
Guarantees of 10% Senior Notes due 2012 | N/A(2) | (2) | (2) | (2) | ||||
(1) | Estimated solely for the purpose of calculating the registration fee under Rule 457(f) of the Securities Act of 1933, as amended (the “Securities Act”). |
(2) | Pursuant to Rule 457(n) under the Securities Act, no separate filing fee is required for the guarantees. |
(3) | Previously paid. |
Table of Contents
State or Other | Address, Including Zip Code and | |||||||||
Jurisdiction of | I.R.S. Employer | Telephone Number, Including | ||||||||
Exact Name of Registrant | Incorporation or | Identification | Area Code, of Registrants | |||||||
as Specified in its Charter | Organization | Number | Principal Executive Offices | |||||||
Alpha Coal Sales Co., LLC | Delaware | 16-1641207 | One Energy Place, Ste 1000 Latrobe, PA 15650 (724) 537-5731 | |||||||
Alpha Land and Reserves, LLC | Delaware | 57-1136960 | 406 West Main Street Abingdon, VA 24210 (276) 619-4410 | |||||||
Alpha Natural Resources Capital Corp.* | Delaware | 41-2136215 | 406 West Main Street Abingdon, VA 24210 (276) 619-4410 | |||||||
Alpha Natural Resources Services, LLC | Delaware | 27-0075099 | 406 West Main Street Abingdon, VA 24210 (276) 619-4410 | |||||||
Alpha NR Ventures, Inc. | Delaware | 59-3796841 | 406 West Main Street Abingdon, VA 24210 (276) 619-4410 | |||||||
Alpha Terminal Company, LLC | Delaware | 55-0802473 | 406 West Main Street Abingdon, VA 24210 (276) 619-4410 | |||||||
AMFIRE, LLC | Delaware | 51-0430939 | 406 West Main Street Abingdon, VA 24210 (276) 619-4410 | |||||||
AMFIRE Holdings, Inc. | Delaware | 11-3673814 | 406 West Main Street Abingdon, VA 24210 (276) 619-4410 | |||||||
AMFIRE Mining Company, LLC | Delaware | 11-3673833 | One Energy Place, Suite 2800 Latrobe, PA 15650 (724) 537-5731 | |||||||
AMFIRE WV, L.P. | Delaware | 56-2312151 | 406 West Main Street Abingdon, VA 24210 (276) 619-4410 | |||||||
ANR Holdings, LLC | Delaware | 11-3673839 | 406 West Main Street Abingdon, VA 24210 (276) 619-4410 | |||||||
Black Dog Coal Corp. | Virginia | 54-1686572 | 406 West Main Street Abingdon, VA 24210 (276) 619-4410 | |||||||
Brooks Run Mining Company, LLC | Delaware | 52-2070922 | 25 Little Birch Rd. Sutton, WV 26601 (304) 765-4006 | |||||||
Dickenson-Russell Coal Company, LLC | Delaware | 54-2079085 | Rt. 2, Box 73 Cleveland, VA 24225 (276) 889-6100 | |||||||
Enterprise Mining Company, LLC | Delaware | 38-3671602 | 1014 Laurel Avenue Coeburn, VA 24230 (276) 395-3316 | |||||||
Esperanza Coal Co., LLC | Delaware | 06-1652549 | Rt. 2, Box 73 Cleveland, VA 24225 (276) 889-6100 |
Table of Contents
State or Other | Address, Including Zip Code and | |||||||||
Jurisdiction of | I.R.S. Employer | Telephone Number, Including | ||||||||
Exact Name of Registrant | Incorporation or | Identification | Area Code, of Registrants | |||||||
as Specified in its Charter | Organization | Number | Principal Executive Offices | |||||||
GTTC LLC | New Mexico | 91-1765387 | 406 West Main Street Abingdon, VA 24210 (276) 619-4410 | |||||||
Herndon Processing Company, LLC | West Virginia | 51-0442749 | Route 10 Herndon, WV 24726 (304) 294-4565 | |||||||
Kepler Processing Company, LLC | West Virginia | 51-0442560 | Route 97 Pineville, WV 24844 (304) 732-6452 | |||||||
Kingwood Mining Company, LLC | Delaware | 57-1148058 | Rt. 1 Box 294C Newburg, WV 26410 (304) 568-2466 | |||||||
Litwar Processing Company, LLC | West Virginia | 51-0442687 | Rural Route 1/5 Litwar, WV 24844 (304) 938-2922 | |||||||
Maxxim Rebuild Co., LLC | Delaware | 01-0749355 | 12003 Virginia Boulevard Ashland, KY 41102 (606) 928-7911 | |||||||
Maxxim Shared Services, LLC | Delaware | 55-0814342 | 406 West Main Street Abingdon, VA 24210 (276) 619-4410 | |||||||
Maxxum Carbon Resources, LLC | Delaware | 55-0802477 | 406 West Main Street Abingdon, VA 24210 (276) 619-4410 | |||||||
McDowell-Wyoming Coal Company LLC | Delaware | 54-2079104 | P.O. Box 1226 Welch, WV 24801 (304) 436-8451 | |||||||
NatCoal LLC | Colorado | 84-1309669 | 406 West Main Street Abingdon, VA 24210 (276) 619-4410 | |||||||
Paramont Coal Company Virginia, LLC | Delaware | 56-2298367 | 1014 Laurel Avenue Coeburn, VA 24230 (276) 395-3316 | |||||||
Riverside Energy Company, LLC | West Virginia | 51-0442691 | Route 10 Pineville, WV 24874 (304) 732-6422 | |||||||
Solomons Mining Company | West Virginia | 55-0680485 | P.O. Box 989 Phelps, KY 41533 (606) 432-7168 |
* | Co-issuer, together with Alpha Natural Resources, LLC, of the 10% Senior Notes due 2012 registered hereunder; the other above-listed registrants are subsidiaries or parents of Alpha Natural Resources, LLC that have guaranteed the notes. |
Table of Contents

• | We will exchange all outstanding notes that are validly tendered and not validly withdrawn for an equal principal amount of exchange notes that have been registered. | |
• | You may withdraw tenders of outstanding notes at any time prior to the expiration date of the exchange offer. | |
• | The exchange offer expires at 5:00 p.m. New York City time, on July 6, 2005, unless extended. | |
• | The exchange of outstanding notes for exchange notes in this exchange offer will not be a taxable event for U.S. federal income tax purposes. |
• | The terms of the exchange notes to be issued in this exchange offer are substantially identical to the outstanding notes, except that the exchange notes will be freely tradeable by persons who are not affiliated with us. | |
• | No public market currently exists for the outstanding notes. We do not intend to list the exchange notes on any securities exchange and, therefore, no active public market is anticipated. | |
• | The exchange notes, like the outstanding notes, will be guaranteed on a senior unsecured basis by each of Alpha Natural Resources, LLC’s direct and indirect subsidiaries that guarantee its and its restricted subsidiaries obligations under its credit facility (other than Alpha Natural Resources Capital Corp., which is a co-issuer of the outstanding notes and will be a co-issuer of the exchange notes), and by its parent companies, ANR Holdings, LLC, Alpha NR Ventures, Inc. and Alpha NR Holding, Inc. |
Table of Contents
1
Table of Contents
2
Table of Contents
• | 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 | |
• | coordinating company-wide purchasing activities with major vendors to provide materials and supplies at lower overall cost. |
3
Table of Contents
• | stronger industrial demand following a recovery in the U.S. manufacturing sector, evidenced by the most recent estimate of 3.5% real GDP growth in the first quarter of 2005, as reported by the Bureau of Economic Analysis; | |
• | relatively low customer stockpiles, estimated by the U.S. Energy Information Administration (“EIA”) to be approximately 104.6 million tons at the end of February 2005, down 8% from the same period in the prior year; | |
• | declining coal production in Central Appalachia, including an average annual decline of 4.9% in Central Appalachian coal production volume from January 1, 2001 through December 31, 2004; | |
• | capacity constraints of U.S. nuclear-powered electricity generators, which operated at an average utilization rate of 90.5% in 2004, up from 73.8% in 1994, as estimated by the EIA; | |
• | high current and forward prices for natural gas and heating oil, the primary fuels for electricity generation, with spot prices as of May 31, 2005, for natural gas and heating oil at $6.33 per million Btu and $1.45 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. |
4
Table of Contents
Increase in Average | Percentage of Produced and | |||||||
Reference Prices | Processed Coal Sales in 2004 | |||||||
Central Appalachia | 14 | % | 70 | % | ||||
Northern Appalachia | 24 | % | 27 | % |
Percentage | ||||||||||||||
Average Sale Prices per Ton for Low Volatile Metallurgical | Increase | |||||||||||||
Coal at Hampton Roads, Virginia Export Terminals | Year-Over-Year | |||||||||||||
April 5, 2004 | $ | 135.00 | April 1, 2005 | $ | 135.00 | 0 | % | |||||||
January 12, 2004 | $ | 71.50 | January 3, 2005 | $ | 137.50 | 92 | % | |||||||
October 6, 2003 | $ | 52.00 | October 4, 2004 | $ | 135.00 | 160 | % | |||||||
July 7, 2003 | $ | 50.45 | July 5, 2004 | $ | 125.00 | 148 | % |
5
Table of Contents
6
Table of Contents

7
Table of Contents
General | In connection with the private offering, the Issuers and the subsidiary guarantors of the outstanding notes entered into a registration rights agreement with the initial purchasers in which they agreed to use commercially reasonable efforts to (1) have the exchange offer registration statement of which this prospectus forms a part declared effective by the Securities and Exchange Commission (the “SEC”) on or prior to 270 days after the closing of the offering and (2) consummate the exchange offer within 30 days after the exchange offer registration statement is declared effective. The exchange offer registration statement of which this prospectus forms a part was originally declared effective by the SEC on May 11, 2005. This prospectus is part of a post-effective amendment to the exchange offer registration statement we filed in order to include additional financial information regarding the parent guarantors. You are entitled to exchange in this exchange offer your outstanding notes for exchange notes which are identical in all material respects to the outstanding notes except that: | |
• the exchange notes have been registered under the Securities Act and will be freely tradeable by persons who are not affiliated with us; | ||
• the exchange notes are not entitled to any registration rights which are applicable to the outstanding notes under the registration rights agreement; and | ||
• our obligation to pay additional interest on the outstanding notes because (1) the exchange offer registration statement of which this prospectus forms a part was not declared effective by February 14, 2005 (the “Effectiveness Target Date”) or (2) this exchange offer was not consummated within 30 business days of the Effectiveness Target Date, in each case, at incremental rates ranging from 0.25% per annum to 1.0% per annum depending on how long we fail to comply with these deadlines, does not apply to the exchange notes. Notwithstanding the foregoing, by exchanging your outstanding notes for exchange notes you will not give up your right to receive any additional interest that has accrued on the outstanding notes. | ||
The Exchange Offer | The Issuers are offering to exchange up to $175,000,000 aggregate principal amount of their 10% senior notes which have been registered under the Securities Act for any and all of their outstanding 10% senior notes which were issued on May 18, |
8
Table of Contents
2004. Outstanding notes may be exchanged only in integral multiples of $1,000. | ||
Resales | Based on an interpretation by the staff of the SEC set forth in no-action letters issued to third parties, we believe that the exchange notes issued pursuant to this exchange offer in exchange for outstanding notes may be offered for resale, resold and otherwise transferred by you (unless you are our “affiliate” within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that: | |
• you are acquiring the exchange notes in the ordinary course of business; and | ||
• you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the exchange notes. | ||
Each participating broker-dealer that receives exchange notes for its own account pursuant to this exchange offer in exchange for the outstanding notes that were acquired as a result of market-making or other trading activity must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. See “Plan of Distribution.” | ||
Any holder of outstanding notes who | ||
• is our affiliate; | ||
• does not acquire the exchange notes in the ordinary course of its business; or | ||
• tenders its outstanding notes in this exchange offer with the intention to participate, or for the purpose of participating, in a distribution of exchange notes, | ||
cannot rely on the position of the staff of the SEC expressed inExxon Capital Holdings Corporation(available May 13, 1988) andMorgan Stanley & Co. Incorporated(available June 5, 1991), as interpreted in the SEC’s letter toShearman & Sterling(dated July 2, 1993), or similar no-action letters and, in the absence of an exemption, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with the resale of the exchange notes. | ||
Expiration Date; Withdrawal of Tenders | This exchange offer will expire at 5:00 p.m. New York City time, on July 6, 2005, unless extended by us. We do not currently intend to extend the expiration date. A tender of outstanding notes pursuant to this exchange offer may be withdrawn at any time prior to the expiration date. Any outstanding notes not accepted for exchange for any reason will be returned without expense to the tendering holder promptly after the expiration or termination of this exchange offer. | |
9
Table of Contents
Conditions to this Exchange Offer | This exchange offer is subject to customary conditions, which we may waive. See “The Exchange Offer — Certain Conditions to this Exchange Offer.” | |
Procedures for Tendering Outstanding Notes | If you wish to participate in this exchange offer, you must complete, sign and date the accompanying letter of transmittal, or a copy of the letter of transmittal, according to the instructions contained in this prospectus and the letter of transmittal. You must then mail or otherwise deliver the letter of transmittal, or the copy, together with the outstanding notes and any other required documents, to the exchange agent at the address set forth on the cover of the letter of transmittal. If you hold outstanding notes through The Depository Trust Company (“DTC”) and wish to participate in this exchange offer, you must comply with the Automated Tender Offer Program procedures of DTC, through which you will agree to be bound by the letter of transmittal. | |
By signing or agreeing to be bound by the letter of transmittal, you will represent to us that, among other things: | ||
• any exchange notes that you receive will be acquired in the ordinary course of your business; | ||
• you have no arrangement or understanding with any person or entity to participate in the distribution of the exchange notes; | ||
• if you are a broker-dealer that will receive exchange notes for your own account in exchange for outstanding notes that were acquired as a result of market-making activities, that you will deliver a prospectus, as required by law, in connection with any resale of such exchange notes; and | ||
• you are not our “affiliate” as defined in Rule 405 under the Securities Act. | ||
Special Procedures for Beneficial Owners | If you are a beneficial owner of outstanding notes that are registered in the name of a broker, dealer, commercial bank or trust company or other nominee and you wish to tender those outstanding notes in this exchange offer, you should contact the registered holder promptly and instruct the registered holder to tender those outstanding notes on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the letter of transmittal and delivering your outstanding notes, either make appropriate arrangements to register ownership of the outstanding notes in your name or obtain a properly completed bond power form the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration date. | |
Guaranteed Delivery Procedures | If you wish to tender your outstanding notes and your outstanding notes are not immediately available or you cannot deliver your outstanding notes, the letter of transmittal or any other documents required by the letter of transmittal or comply with the applicable procedures under DTC’s Automated Tender |
10
Table of Contents
Offer Program prior to the expiration date, you must tender your outstanding notes according to the guaranteed delivery procedures set forth in this prospectus under “The Exchange Offer — Guaranteed Delivery Procedures.” | ||
Effect on Holders of Outstanding Notes | As a result of the making of, and upon acceptance for exchange of all validly tendered outstanding notes pursuant to the terms of, this exchange offer, we will have fulfilled a covenant contained in the registration rights agreement and, accordingly, we will not be obligated to continue to pay additional interest as described in the registration rights agreement. If you are a holder of outstanding notes and do not tender your outstanding notes in this exchange offer, you will continue to hold such outstanding notes and you will be entitled to all the rights and limitations applicable to the outstanding notes in the indenture, except for any rights under the registration rights agreement that by their terms terminate upon the consummation of this exchange offer. To the extent that outstanding notes are tendered and accepted in this exchange offer, the trading market for outstanding notes could be adversely affected. | |
Consequences of Failure to Exchange | All untendered outstanding notes will continue to be subject to the restrictions on transfer provided for in the outstanding notes and in the indenture. In general, the outstanding notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with this exchange offer, or as otherwise required under certain limited circumstances pursuant to the terms of the registration rights agreement, we do not currently anticipate that we will register the outstanding notes under the Securities Act. | |
Material United States Federal Income Tax Consequences | The exchange of outstanding notes for exchange notes in this exchange offer will not be a taxable event for U.S. federal income tax purposes. See “Material United States Federal Income Tax Consequences.” | |
Use of Proceeds | We will not receive any cash proceeds from the issuance of the exchange notes in this exchange offer. See “Use of Proceeds.” | |
Exchange Agent | Wells Fargo Bank, National Association is the exchange agent for this exchange offer. The address and telephone number of the exchange agent are set forth in the section captioned “The Exchange Offer — Exchange Agent” of this prospectus. |
11
Table of Contents
Issuers | Alpha Natural Resources, LLC and Alpha Natural Resources Capital Corp. | |
Exchange Notes Offered | $175,000,000 aggregate principal amount of 10% Senior Notes due 2012. | |
Maturity Date | June 1, 2012. | |
Interest | The exchange notes will bear interest at a rate equal to 10% per annum, payable semi-annually in arrears, on June 1 and December 1 of each year, commencing on June 1, 2005. | |
Guarantees | Alpha Natural Resources, LLC’s direct and indirect domestic subsidiaries that guarantee its obligations under the credit facility (other than Alpha Natural Resources Capital Corp., which will be a co-issuer of the exchange notes) and its parent companies that guarantee its obligations under the credit facility will fully and unconditionally guarantee the exchange notes on a senior unsecured basis. | |
Ranking | The exchange notes and the guarantees will be unsecured senior obligations of ours and the guarantors’ and will: | |
• rank equally in right of payment to all of our and the guarantors’ existing and future unsecured senior debt; | ||
• rank senior in right of payment to all of our and the guarantors’ existing and future senior subordinated indebtedness and subordinated indebtedness; and | ||
• be effectively subordinated to any of our and our the guarantors’ existing and future secured debt, including borrowings under our credit facility; and | ||
• be effectively subordinated to any existing and future liabilities of any non-guarantor subsidiaries. | ||
As of March 31, 2005, we and the guarantors had approximately $221.7 million of indebtedness outstanding, of which approximately $35.6 million was secured and effectively senior to the notes. In addition, under our credit facility we had $53.4 million of letters of credit outstanding and additional borrowings available under the revolving portion of our credit facility of $89.1 million. | ||
Optional Redemption | We may redeem some or all of the notes at any time prior to June 1, 2008, at a price equal to 100% of the principal amount of the notes, plus a “make-whole” premium. Thereafter, we may redeem some or all of the notes at the redemption prices set forth in this prospectus. At any time and from time to time on or prior to June 1, 2007, we may redeem up to 40% of the aggregate principal amount of the notes with the net cash |
12
Table of Contents
proceeds of certain equity offerings. See “Description of Notes — Optional Redemption.” | ||
Change of Control Offer | Upon the occurrence of a change of control, we will be required to make an offer to purchase each holder’s notes at a repurchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of repurchase. See “Description of Notes — Repurchase at the Option of Holders — Change of Control.” | |
Certain Covenants | The indenture governing the notes contains covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to: | |
• incur additional indebtedness or enter into sale and leaseback transactions; | ||
• pay dividends or make other equity distributions; | ||
• make investments; | ||
• create liens; | ||
• engage in transactions with affiliates; and | ||
• merge or consolidate with other companies or sell substantially all of our assets. | ||
These limitations are subject to a number of important exceptions and qualifications. Moreover, these covenants do not apply to the parent guarantors of the notes. See “Description of Notes — Certain Covenants.” | ||
Termination of Certain Covenants | Many of the restrictive covenants will terminate if the notes achieve an investment grade rating from both Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Services in the future, and no default or event of default has occurred and is continuing under the indenture. Covenants that cease to apply as a result of achieving these ratings will not be restored, even if the credit ratings assigned to the notes later fall below investment grade. See “Description of Notes — Changes in Covenants When Notes Rated Investment Grade.” | |
No Public Market | The exchange notes will be freely transferable but will be new securities for which there will not initially be a market. Although the initial purchasers in the offering of the outstanding notes have informed us that they currently intend to make a market in the exchange notes, they are not obligated to do so, and may discontinue market-making at any time without notice. For this reason, a liquid market for the exchange notes may not develop or be maintained. | |
Risk Factors | Investment in the exchange notes involves certain risks. You should carefully consider the information in the “Risk Factors” section and all other information included in this prospectus prior to exchanging your outstanding notes pursuant to this exchange offer. |
13
Table of Contents
14
Table of Contents
ANR Fund IX Holdings, L.P. and | ||||||||||||||||||||||||||||||||||
Predecessor | Alpha NR Holding, Inc. and Subsidiaries | Alpha NR Holding, Inc. and Subsidiaries | ||||||||||||||||||||||||||||||||
Pro Forma | ||||||||||||||||||||||||||||||||||
January 1, | December 14, | Year Ended | Three Months | Pro Forma | Three Months | Three Months | ||||||||||||||||||||||||||||
2002 to | 2002 to | December 31, | Ended | Year Ended | Ended | Ended | ||||||||||||||||||||||||||||
December 13, | December 31, | March 31, | December 31, | March 31, | March 31, | |||||||||||||||||||||||||||||
2002 | 2002 | 2003 | 2004 | 2004 | 2004(1) | 2005 | 2005(1) | |||||||||||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||||||||||||||||||
(In thousands, except ratios and per ton data) | ||||||||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||
Coal revenues | $ | 154,715 | $ | 6,260 | $ | 701,262 | $ | 1,089,992 | $ | 214,373 | $ | 1,079,733 | $ | 275,333 | $ | 273,134 | ||||||||||||||||||
Freight and handling revenues | 17,001 | 1,009 | 73,800 | 146,166 | 25,604 | 141,100 | 33,165 | 31,753 | ||||||||||||||||||||||||||
Other revenues | 6,031 | 101 | 17,504 | 33,560 | 6,761 | 31,869 | 7,275 | 7,269 | ||||||||||||||||||||||||||
Total revenues | 177,747 | 7,370 | 792,566 | 1,269,718 | 246,738 | 1,252,702 | 315,773 | 312,156 | ||||||||||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||||||||
Cost of coal sales (exclusive of items shown separately below) | 158,924 | 6,268 | 632,979 | 930,914 | 187,593 | 920,359 | 228,845 | 226,285 | ||||||||||||||||||||||||||
Freight and handling costs | 17,001 | 1,009 | 73,800 | 146,166 | 25,604 | 141,100 | 33,165 | 31,753 | ||||||||||||||||||||||||||
Cost of other revenues | 7,973 | 120 | 16,750 | 25,064 | 5,161 | 22,994 | 6,138 | 6,065 | ||||||||||||||||||||||||||
Depreciation, depletion and amortization | 6,814 | 274 | 36,054 | 56,012 | 11,929 | 55,261 | 14,480 | 14,170 | ||||||||||||||||||||||||||
Asset impairment charge | — | — | — | 5,100 | — | — | — | — | ||||||||||||||||||||||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately above and including stock-based compensation of $36,407 in 2005) | 8,797 | 471 | 21,949 | 43,881 | 11,805 | 43,881 | 47,697 | 47,697 | ||||||||||||||||||||||||||
Costs to exit business | 25,274 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Total costs and expenses | 224,783 | 8,142 | 781,532 | 1,207,137 | 242,092 | 1,183,595 | 330,325 | 325,970 | ||||||||||||||||||||||||||
Refund of federal black lung excise tax | 2,049 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Other operating income, net | 1,430 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Income (loss) from operations | (43,557 | ) | (772 | ) | 11,034 | 62,581 | 4,646 | 69,107 | (14,552 | ) | (13,814 | ) | ||||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||||||
Interest expense | (35 | ) | (203 | ) | (7,848 | ) | (20,041 | ) | (2,051 | ) | (22,738 | ) | (5,827 | ) | (5,827 | ) | ||||||||||||||||||
Interest income | 2,072 | 6 | 103 | 531 | 21 | 531 | 294 | 294 | ||||||||||||||||||||||||||
Miscellaneous income | — | — | 575 | 734 | 213 | 723 | (42 | ) | (43 | ) | ||||||||||||||||||||||||
Total other income (expense), net | 2,037 | (197 | ) | (7,170 | ) | (18,776 | ) | (1,817 | ) | (21,484 | ) | (5,575 | ) | (5,576 | ) | |||||||||||||||||||
Income (loss) before income taxes and minority interest | (41,520 | ) | (969 | ) | 3,864 | 43,805 | 2,829 | 47,623 | (20,127 | ) | (19,390 | ) | ||||||||||||||||||||||
Income tax expense (benefit) | (17,198 | ) | (334 | ) | 668 | 3,960 | 310 | 13,947 | 2,457 | 3,383 | ||||||||||||||||||||||||
Minority Interest | — | — | 934 | 19,830 | 1,282 | — | 2,846 | — | ||||||||||||||||||||||||||
Net income (loss) | $ | (24,322 | ) | $ | (635 | ) | $ | 2,262 | $ | 20,015 | $ | 1,237 | $ | 33,676 | $ | (25,430 | ) | $ | (22,773 | ) | ||||||||||||||
15
Table of Contents
ANR Fund IX Holdings, L.P. and | ||||||||||||||||||||||||||||||||||
Predecessor | Alpha NR Holding, Inc. and Subsidiaries | Alpha NR Holding, Inc. and Subsidiaries | ||||||||||||||||||||||||||||||||
Pro Forma | ||||||||||||||||||||||||||||||||||
January 1, | December 14, | Year Ended | Three Months | Pro Forma | Three Months | Three Months | ||||||||||||||||||||||||||||
2002 to | 2002 to | December 31, | Ended | Year Ended | Ended | Ended | ||||||||||||||||||||||||||||
December 13, | December 31, | March 31, | December 31, | March 31, | March 31, | |||||||||||||||||||||||||||||
2002 | 2002 | 2003 | 2004 | 2004 | 2004(1) | 2005 | 2005(1) | |||||||||||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||||||||||||||||||
(In thousands, except ratios and per ton data) | ||||||||||||||||||||||||||||||||||
Balance sheet data (at period end): | ||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 8,444 | $ | 11,246 | $ | 7,391 | $ | 8,514 | $ | 214 | $ | 4,814 | ||||||||||||||||||||||
Operating and working capital | (12,223 | ) | 32,714 | 56,257 | 23,148 | 71,497 | 75,897 | |||||||||||||||||||||||||||
Total assets | 108,442 | 379,336 | 477,121 | 389,752 | 547,412 | 547,887 | ||||||||||||||||||||||||||||
Total debt | 25,743 | 84,964 | 201,705 | 76,299 | 221,728 | 221,728 | ||||||||||||||||||||||||||||
Stockholder’s equity and partners’ capital (deficit) | 23,384 | 86,367 | 45,933 | 87,529 | 104,004 | 104,677 | ||||||||||||||||||||||||||||
Statement of cash flows data: | ||||||||||||||||||||||||||||||||||
Net cash provided by (used in) | ||||||||||||||||||||||||||||||||||
Operating activities | $ | (13,816 | ) | $ | (295 | ) | $ | 54,104 | $ | 106,776 | $ | 16,024 | $ | 2,447 | ||||||||||||||||||||
Investing activities | (22,054 | ) | (38,893 | ) | (100,072 | ) | (86,202 | ) | (16,055 | ) | (34,433 | ) | ||||||||||||||||||||||
Financing activities | 35,783 | 47,632 | 48,770 | (24,429 | ) | (2,701 | ) | 24,809 | ||||||||||||||||||||||||||
Capital expenditures | 21,866 | 960 | 27,719 | 72,046 | 16,269 | 30,268 | ||||||||||||||||||||||||||||
Other financial data (unaudited): | ||||||||||||||||||||||||||||||||||
EBITDA(2) | $ | (498 | ) | $ | 46,729 | $ | 99,497 | $ | 15,506 | $ | 125,091 | $ | (2,960 | ) | $ | 313 | ||||||||||||||||||
Ratio of earnings to fixed charges(3) | $ | (77.94x | ) | (3.55x | ) | 1.37 | x | 2.17 | x | 2.96 | x | 3.06 | x | (2.91x | ) | (2.30x | ) | |||||||||||||||||
Deficiency amount(3) | (41,520 | ) | (969 | ) | (17,096 | ) | (13,513 | ) | ||||||||||||||||||||||||||
Other data (unaudited): | ||||||||||||||||||||||||||||||||||
Tons sold | 4,283 | 186 | 21,930 | 25,808 | 6,061 | 25,327 | 5,632 | 5,533 | ||||||||||||||||||||||||||
Tons produced and processed | 4,508 | 87 | 17,532 | 19,525 | 5,135 | 19,068 | 4,978 | 4,872 | ||||||||||||||||||||||||||
Average coal sales realization (per ton) | $ | 36.12 | $ | 33.66 | $ | 31.98 | $ | 42.23 | $ | 35.37 | $ | 42.63 | $ | 48.89 | $ | 49.36 |
16
Table of Contents
(1) | The unaudited pro forma statement of operations data gives pro forma effect to the 2004 Financings, the Internal Restructuring and subsequent NKC Disposition as if they had occurred on January 1, 2004. The unaudited pro forma balance sheet data gives pro forma effect to the subsequent NKC Disposition as if it had occurred on March 31, 2005. |
(2) | EBITDA, a measure used by management to measure operating performance, is defined as net income (loss) 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 can 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 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 — Analysis of Material Debt Covenants.” |
ANR Fund IX Holdings, L.P. and | ||||||||||||||||||||||||||||
Alpha NR Holding, Inc. and Subsidiaries | Alpha NR Holding, Inc. and Subsidiaries | |||||||||||||||||||||||||||
Pro Forma | ||||||||||||||||||||||||||||
December 14, | Year Ended | Three Months | Pro Forma | Three Months | Three Months | |||||||||||||||||||||||
2002 to | December 31, | Ended | Year Ended | Ended | Ended | |||||||||||||||||||||||
December 31, | March 31, | December 31, | March 31, | March 31, | ||||||||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2004(1) | 2005 | 2005(1) | ||||||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Net income (loss) | $ | (635 | ) | $ | 2,262 | $ | 20,015 | $ | 1,237 | $ | 33,676 | $ | (25,430 | ) | $ | (22,773 | ) | |||||||||||
Interest expense | 203 | 7,848 | 20,041 | 2,051 | 22,738 | 5,827 | 5,827 | |||||||||||||||||||||
Interest income | (6 | ) | (103 | ) | (531 | ) | (21 | ) | (531 | ) | (294 | ) | (294 | ) | ||||||||||||||
Income tax expense (benefit) | (334 | ) | 668 | 3,960 | 310 | 13,947 | 2,457 | 3,383 | ||||||||||||||||||||
Depreciation, depletion and amortization | 274 | 36,054 | 56,012 | 11,929 | 55,261 | 14,480 | 14,170 | |||||||||||||||||||||
EBITDA | $ | (498 | ) | $ | 46,729 | $ | 99,497 | $ | 15,506 | $ | 125,091 | $ | (2,960 | ) | $ | 313 | ||||||||||||
(3) | For purposes of this computation, “earnings” consist of income (loss) before income taxes and after minority interest plus fixed charges and amortization of capitalized interest. “Fixed charges” consist of interest expense on all indebtedness plus capitalized interest and amortization of deferred costs of financing and the estimated interest component of lease rental expense. The deficiency amount is calculated for periods for which the ratio of earnings to fixed charges is less than one-to-one. |
17
Table of Contents
A substantial or extended decline in coal prices could reduce our revenues and the value of our coal reserves. |
• | 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. |
Our coal mining production is subject to conditions and events beyond our control, which could result in higher operating expenses and/or decreased production and adversely affect our operating results. |
• | delays and difficulties in acquiring, maintaining or renewing 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; | |
• | mining and processing equipment failures and unexpected maintenance problems; | |
• | limited availability of mining and processing equipment and parts from suppliers; | |
• | interruptions due to transportation delays; | |
• | adverse weather and natural disasters, such as heavy rains and flooding; | |
• | accidental mine water discharges; |
18
Table of Contents
• | the unavailability of qualified labor; | |
• | strikes and other labor-related interruptions; and | |
• | unexpected mine safety accidents, including fires and explosions from methane and other sources. |
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. |
A decline in demand for metallurgical coal would limit our ability to sell our high quality steam coal as higher-priced metallurgical coal and could affect the economic viability of certain of our mines that have higher operating costs. |
19
Table of Contents
Our business will be adversely affected if we are unable to develop or acquire additional coal reserves that are economically recoverable. |
Defects in title of any leasehold interests in our properties could limit our ability to mine these properties or result in significant unanticipated costs. |
20
Table of Contents
Acquisitions that we have completed since our formation, as well as acquisitions that we may undertake in the future, involve a number of risks, any of which could cause us not to realize the anticipated benefits. |
• | 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. |
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. |
21
Table of Contents
The loss of, or significant reduction in, purchases by our largest customers could adversely affect our revenues and profitability. |
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. |
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. |
22
Table of Contents
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. |
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. |
23
Table of Contents
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. |
24
Table of Contents
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. |
• | 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. |
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. |
Our work force could become increasingly unionized in the future, which could adversely affect the stability of our production and reduce our profitability. |
25
Table of Contents
Our unionized work force could strike in the future, which could disrupt production and shipments of our coal and increase costs. |
Our ability to collect payments from our customers could be impaired if their creditworthiness deteriorates. |
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. |
• | 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; |
26
Table of Contents
• | surface subsidence from underground mining; and | |
• | the effects of mining on groundwater quality and availability. |
Extensive environmental regulations affect our customers and could reduce the demand for coal as a fuel source and cause our sales to decline. |
27
Table of Contents
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. |
28
Table of Contents
We may be unable to obtain and renew permits necessary for our operations, which would reduce our production, cash flow and profitability. |
We may not be able to implement required public-company internal controls over financial reporting in the required time frame or with adequate compliance, and implementation of the controls will increase our costs. |
29
Table of Contents
Our ability to operate our company effectively could be impaired if we fail to attract and retain key personnel. |
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. |
• | 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, including our obligations with respect to the notes; | |
• | 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; |
30
Table of Contents
• | place us at a competitive disadvantage compared to less leveraged competitors; and | |
• | limit our ability to borrow additional funds. |
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. |
The covenants in our credit facility and the indenture governing the notes impose restrictions that may limit our operating and financial flexibility. |
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. |
31
Table of Contents
• | 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. |
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. |
32
Table of Contents
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. |
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 earnings will be reduced in future periods as a result of our parent’s issuance of shares of its common stock to members of management as part of the Internal Restructuring. |
Our Sponsors have significant influence on our company and may have conflicts of interest with us or you in the future. |
33
Table of Contents
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. |
The exchange notes and the guarantees will be unsecured and therefore will be structurally subordinated to our and our subsidiary guarantors’ existing and future secured indebtedness. |
If the exchange notes become rated investment grade by both Standard & Poor’s and Moody’s, certain covenants contained in the indenture will be terminated, and note holders will lose the protection of these covenants permanently, even if the exchange notes subsequently fall back below investment grade. |
34
Table of Contents
• | incur additional indebtedness; | |
• | make distributions; | |
• | sell capital stock or other assets; and | |
• | engage in transactions with affiliates. |
We may be unable to repurchase the notes in the event of a change of control. |
The guarantees may be limited by fraudulent conveyance considerations. |
Your ability to transfer the exchange notes may be limited in the absence of an active trading market. |
• | the number of holders of notes; | |
• | our operating performance and financial condition; | |
• | our ability to complete the offer to exchange the outstanding notes for the exchange notes; | |
• | the market for similar securities; | |
• | the interest of securities dealers in making a market in the notes; and | |
• | prevailing interest rates. |
35
Table of Contents
There may be adverse consequences to you if you do not exchange your outstanding notes. |
36
Table of Contents
• | 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; | |
• | availability of mining and processing equipment and parts; | |
• | 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; |
37
Table of Contents
• | our liquidity, results of operations and financial condition; and | |
• | other factors, including those discussed in “Risk Factors.” |
38
Table of Contents
As of March 31, 2005 | ||||||
(In thousands) | ||||||
Cash and cash equivalents | $ | 214 | ||||
Debt: | ||||||
Revolving credit facility(1) | 32,500 | |||||
10% senior notes due 2012 | 175,000 | |||||
Other debt(2) | 14,228 | |||||
Total debt | 221,728 | |||||
Stockholder’s equity | 104,004 | |||||
Total capitalization | $ | 325,732 | ||||
(1) | Our credit facility provides for a $50.0 million funded letter of credit facility 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 March 31, 2005, we had $32.5 million of indebtedness and an additional $53.4 million of letters of credit outstanding under our credit facility, resulting in availability under the revolving credit facility of $89.1 million. |
(2) | Includes $1.9 million of capital lease obligations extending through March 2009, $1.2 million principal amount in variable rate term notes maturing in April 2006 that we incurred in connection with the equipment financing and $11.1 million payable to an insurance premium finance company in installments of approximately $1.4 million per month through November of 2005. |
39
Table of Contents
• | the issuance by Alpha Natural Resources, LLC and its wholly-owned subsidiary, Alpha Natural Resources Capital Corp. on May 18, 2004, of $175.0 million principal amount of 10% senior notes due 2012, and our entry into a new $175.0 million credit facility on May 28, 2004 (together referred to as the “2004 Financings”); | |
• | the Internal Restructuring described in Note (1) to the audited combined financial statements of ANR Fund IX Holdings, L.P. and Alpha NR Holding, Inc. and subsidiaries included elsewhere in this prospectus; and | |
• | the subsequent NKC Disposition, as if they had occurred on January 1, 2004. |
40
Table of Contents
NKC | |||||||||||||
Disposition | |||||||||||||
Pro Forma | |||||||||||||
Historical(1) | Adjustments(2) | Pro Forma | |||||||||||
(In thousands) | |||||||||||||
ASSETS | |||||||||||||
Current assets | $ | 238,810 | $ | 4,400 | $ | 243,210 | |||||||
Property, plant and equipment, net | 232,802 | (3,925 | ) | 228,877 | |||||||||
Other assets | 75,800 | — | 75,800 | ||||||||||
Total assets | $ | 547,412 | $ | 475 | $ | 547,887 | |||||||
LIABILITIES AND STOCKHOLDER’S EQUITY | |||||||||||||
Note payable and current portion of long-term debt | $ | 12,843 | $ | — | $ | 12,843 | |||||||
Other current liabilities | 154,470 | — | 154,470 | ||||||||||
Total current liabilities | 167,313 | — | 167,313 | ||||||||||
Long-term debt, net of current portion | 208,885 | — | 208,885 | ||||||||||
Other liabilities | 67,210 | (198 | ) | 67,012 | |||||||||
Total liabilities | 443,408 | (198 | ) | 443,210 | |||||||||
Stockholder’s equity | 104,004 | 673 | 104,677 | ||||||||||
Total liabilities and stockholder’s equity | $ | 547,412 | $ | 475 | $ | 547,887 | |||||||
(1) | Reflects the consolidated condensed balance sheet of Alpha NR Holding, Inc. and subsidiaries as of March 31, 2005. |
(2) | Adjusts for the receipt of proceeds and the elimination of the net assets of NKC as if the subsequent NKC Disposition had occurred on March 31, 2005. The cash proceeds from the NKC Disposition in the amount of $4.4 million plus payment of $0.2 million for NKC’s coal inventory as of March 31, 2005 are reflected as an addition to cash, with a net increase of $4.4 million to current assets after elimination of NKC’s coal inventory. Other assets and liabilities eliminated are NKC’s net property, plant and equipment as of March 31, 2005, and the March 31, 2005 balance of NKC’s other liabilities assumed by the buyer in the NKC Disposition. |
41
Table of Contents
Internal | NKC | |||||||||||||||||||
Restructuring | Disposition | |||||||||||||||||||
Pro Forma | Pro Forma | |||||||||||||||||||
Historical | Adjustments | Adjustments | ||||||||||||||||||
(1) | (2) | SubTotal | (3) | Pro Forma | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Total Revenues | $ | 315,773 | — | $ | 315,773 | $ | (3,617 | ) | $ | 312,156 | ||||||||||
Operating expenses (exclusive of items shown below)(4) | 268,148 | — | 268,148 | (4,045 | ) | 264,103 | ||||||||||||||
Depreciation, depletion and amortization | 14,480 | — | 14,480 | (310 | ) | 14,170 | ||||||||||||||
Selling, general and administrative expenses (exclusive of depreciation, depletion, and amortization shown separately above) | 47,697 | — | 47,697 | — | 47,697 | |||||||||||||||
Income (loss) from operations | (14,552 | ) | — | (14,552 | ) | 738 | (13,814 | ) | ||||||||||||
Interest expense | (5,827 | ) | — | (5,827 | ) | — | (5,827 | ) | ||||||||||||
Interest income | 294 | — | 294 | — | 294 | |||||||||||||||
Miscellaneous income | (42 | ) | (42 | ) | (1 | ) | (43 | ) | ||||||||||||
Income tax expense (benefit) | 2,457 | 759 | 3,216 | 167 | 3,383 | |||||||||||||||
Minority interest | 2,846 | (2,846 | ) | — | — | — | ||||||||||||||
Net income (loss) | $ | (25,430 | ) | $ | 2,087 | $ | (23,343 | ) | $ | 570 | $ | (22,773 | ) | |||||||
(1) | Reflects the consolidated results of operations for Alpha NR Holding, Inc. and subsidiaries for the three months ended March 31, 2005. |
(2) | Reflects the elimination of minority interest and related income tax effects as a result of the Internal Restructuring. |
(3) | Eliminates the operating results of NKC as if the subsequent NKC Disposition had occurred on January 1, 2004. |
(4) | Operating expenses include cost of coal sales, freight and handling costs and cost of other revenues. |
42
Table of Contents
2004 | Internal | NKC | ||||||||||||||||||||||
Financings | Restructuring | Disposition | ||||||||||||||||||||||
Pro Forma | Pro Forma | Pro Forma | ||||||||||||||||||||||
Historical | Adjustments | Adjustments | Adjustments | |||||||||||||||||||||
(1) | (2) | (3) | Subtotal | (4) | Pro Forma | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Total revenues | $ | 1,269,718 | $ | — | $ | — | $ | 1,269,718 | $ | (17,016 | ) | $ | 1,252,702 | |||||||||||
Costs and expenses: | ||||||||||||||||||||||||
Operating expenses (exclusive of items shown separately below)(5) | 1,102,144 | — | — | 1,102,144 | (17,691 | ) | 1,084,453 | |||||||||||||||||
Depreciation, depletion and amortization | 56,012 | — | — | 56,012 | (751 | ) | 55,261 | |||||||||||||||||
Asset impairment charge | 5,100 | — | — | 5,100 | (5,100 | ) | — | |||||||||||||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately above) | 43,881 | — | — | 43,881 | — | 43,881 | ||||||||||||||||||
Income (loss) from operations | 62,581 | — | — | 62,581 | 6,526 | 69,107 | ||||||||||||||||||
Interest expense | (20,041 | ) | (2,697 | ) | (22,738 | ) | — | (22,738 | ) | |||||||||||||||
Interest income | 531 | — | — | 531 | — | 531 | ||||||||||||||||||
Miscellaneous income | 734 | — | — | 734 | (11 | ) | 723 | |||||||||||||||||
Income tax expense (benefit) | 3,960 | (1,025 | ) | 8,536 | 11,471 | 2,476 | 13,947 | |||||||||||||||||
Minority interest | 19,830 | — | (19,830 | ) | — | — | — | |||||||||||||||||
Net income (loss) | $ | 20,015 | $ | (1,672 | ) | $ | 11,294 | $ | 29,637 | $ | 4,039 | $ | 33,676 | |||||||||||
(1) | Reflects the combined results of operations for ANR Fund IX Holdings, L.P. and Alpha NR Holding, Inc. and subsidiaries for the year ended December 31, 2004. |
(2) | Represents pro forma interest expense resulting from our 2004 Financings as shown in the table below (in thousands): |
Note payable(a) | $ | 228 | |||
Equipment financing(b) | 101 | ||||
Senior notes(c) | 17,500 | ||||
Funded revolver(d) | 1,111 | ||||
Letter of credit fees(e) | 1,563 | ||||
Commitment fees(f) | 495 | ||||
Total cash interest expense | 20,998 | ||||
Amortization of deferred loan costs(g) | 1,740 | ||||
Total pro forma interest expense | 22,738 | ||||
Less historical interest expense | (20,041 | ) | |||
Adjustment to interest expense | $ | 2,697 | |||
(a) | Reflects interest at a fixed rate of 3.55% on an 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 $2.1 million. |
43
Table of Contents
(c) | Reflects pro forma interest expense on our senior notes at 10%. | |
(d) | Reflects pro forma Interest at LIBOR of 1.52% plus 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 letters of credit outstanding under our funded letter of credit facility. | |
(f) | Reflects commitment fees at 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. |
(3) | Reflects the elimination of minority interest and related income tax effects as a result of the Internal Restructuring. |
(4) | Eliminates the operating results of NKC as if the subsequent NKC Disposition had occurred on January 1, 2004. |
(5) | Operating expenses include cost of coal sales, freight and handling costs and cost of other revenues. |
44
Table of Contents
45
Table of Contents
Alpha NR | |||||||||||||||||||||||||||||||||||
Holding, Inc. | |||||||||||||||||||||||||||||||||||
ANR Fund IX Holdings, L.P. and | and | ||||||||||||||||||||||||||||||||||
Predecessor | Alpha NR Holding, Inc. and Subsidiaries | Subsidiaries | |||||||||||||||||||||||||||||||||
Year Ended | January 1, | December 14, | Year Ended | Three Months | Three Months | ||||||||||||||||||||||||||||||
December 31, | 2002 to | 2002 to | December 31, | Ended | Ended | ||||||||||||||||||||||||||||||
December 13, | December 31, | March 31, | March 31, | ||||||||||||||||||||||||||||||||
2000 | 2001 | 2002 | 2002 | 2003 | 2004 | 2004 | 2005 | ||||||||||||||||||||||||||||
(In thousands, except ratios and per ton data) | |||||||||||||||||||||||||||||||||||
Statement of Operations Data: | |||||||||||||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||||||
Coal revenues | $ | 226,653 | $ | 227,237 | $ | 154,715 | $ | 6,260 | $ | 701,262 | $ | 1,089,992 | $ | 214,373 | $ | 275,333 | |||||||||||||||||||
Freight and handling revenues | 25,470 | 25,808 | 17,001 | 1,009 | 73,800 | 146,166 | 25,604 | 33,165 | |||||||||||||||||||||||||||
Other revenues | 5,601 | 8,472 | 6,031 | 101 | 17,504 | 33,560 | 6,761 | 7,275 | |||||||||||||||||||||||||||
Total revenues | 257,724 | 261,517 | 177,747 | 7,370 | 792,566 | 1,269,718 | 246,738 | 315,773 | |||||||||||||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||||||||||||||
Cost of coal sales (exclusive of items shown separately below) | 224,230 | 219,545 | 158,924 | 6,268 | 632,979 | 930,914 | 187,593 | 228,845 | |||||||||||||||||||||||||||
Freight and handling costs | 25,470 | 25,808 | 17,001 | 1,009 | 73,800 | 146,166 | 25,604 | 33,165 | |||||||||||||||||||||||||||
Cost of other revenues | 4,721 | 8,156 | 7,973 | 120 | 16,750 | 25,064 | 5,161 | 6,138 | |||||||||||||||||||||||||||
Depreciation, depletion and amortization | 7,890 | 7,866 | 6,814 | 274 | 36,054 | 56,012 | 11,929 | 14,480 | |||||||||||||||||||||||||||
Asset impairment charge | — | — | — | — | — | 5,100 | — | — | |||||||||||||||||||||||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately above and including stock-based compensation of $36,407 in 2005) | 8,543 | 9,370 | 8,797 | 471 | 21,949 | 43,881 | 11,805 | 47,697 | |||||||||||||||||||||||||||
Costs to exit business | 26,937 | 3,500 | 25,274 | — | — | — | — | — | |||||||||||||||||||||||||||
Total costs and expenses | 297,791 | 274,245 | 224,783 | 8,142 | 781,532 | 1,207,137 | 242,092 | 330,325 | |||||||||||||||||||||||||||
Refund of federal black lung excise tax | — | 16,213 | 2,049 | — | — | — | — | — | |||||||||||||||||||||||||||
Other operating income, net | 57 | 94 | 1,430 | — | — | — | — | — | |||||||||||||||||||||||||||
Income (loss) from operations | (40,010 | ) | 3,579 | (43,557 | ) | (772 | ) | 11,034 | 62,581 | 4,646 | (14,552 | ) | |||||||||||||||||||||||
Other income (expense): | |||||||||||||||||||||||||||||||||||
Interest expense | — | — | (35 | ) | (203 | ) | (7,848 | ) | (20,041 | ) | (2,051 | ) | (5,827 | ) | |||||||||||||||||||||
Interest income | 2,263 | 1,993 | 2,072 | 6 | 103 | 531 | 21 | 294 | |||||||||||||||||||||||||||
Miscellaneous income | 4,215 | 1,250 | — | — | 575 | 734 | 213 | (42 | ) | ||||||||||||||||||||||||||
Total other income (expense), net | 6,478 | 3,243 | 2,037 | (197 | ) | (7,170 | ) | (18,776 | ) | (1,817 | ) | (5,575 | ) | ||||||||||||||||||||||
Income (loss) before income taxes and minority interest | (33,532 | ) | 6,822 | (41,520 | ) | (969 | ) | 3,864 | 43,805 | 2,829 | (20,127 | ) | |||||||||||||||||||||||
Income tax expense (benefit) | (13,545 | ) | (1,497 | ) | (17,198 | ) | (334 | ) | 668 | 3,960 | 310 | 2,457 | |||||||||||||||||||||||
Minority interest | — | — | — | — | 934 | 19,830 | 1,282 | 2,846 | |||||||||||||||||||||||||||
Net income (loss) | $ | (19,987 | ) | $ | 8,319 | $ | (24,322 | ) | $ | (635 | ) | $ | 2,262 | $ | 20,015 | $ | 1,237 | $ | (25,430 | ) | |||||||||||||||
Balance sheet data (at period end): | |||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 185 | $ | 175 | $ | 8,444 | $ | 11,246 | $ | 7,391 | $ | 8,514 | $ | 214 | |||||||||||||||||||||
Operating and working capital | (26,634 | ) | (22,958 | ) | (12,223 | ) | 32,714 | 56,257 | 23,148 | 71,497 | |||||||||||||||||||||||||
Total assets | 130,608 | 139,467 | 108,442 | 379,336 | 477,121 | 389,752 | 547,412 | ||||||||||||||||||||||||||||
Notes payable and long-term debt, including current portion | — | — | 25,743 | 84,964 | 201,705 | 76,299 | 221,728 | ||||||||||||||||||||||||||||
Stockholder’s equity and partners’ capital (deficit) | (142,067 | ) | (136,593 | ) | 23,384 | 86,367 | 45,933 | 87,529 | 104,004 | ||||||||||||||||||||||||||
Statement of cash flows data: | |||||||||||||||||||||||||||||||||||
Net cash provided by (used in): | |||||||||||||||||||||||||||||||||||
Operating activities | $ | 20,659 | $ | 10,655 | $ | (13,816 | ) | $ | (295 | ) | $ | 54,104 | $ | 106,776 | $ | 16,024 | $ | 2,447 | |||||||||||||||||
Investing activities | (8,564 | ) | (9,203 | ) | (22,054 | ) | (38,893 | ) | (100,072 | ) | (86,202 | ) | (16,055 | ) | (34,433 | ) | |||||||||||||||||||
Financing activities | (12,106 | ) | (1,462 | ) | 35,783 | 47,632 | 48,770 | (24,429 | ) | (2,701 | ) | 24,809 | |||||||||||||||||||||||
Capital expenditures | 9,127 | 10,218 | 21,866 | 960 | 27,719 | 72,046 | 16,269 | 30,268 | |||||||||||||||||||||||||||
Other financial data (unaudited): | |||||||||||||||||||||||||||||||||||
EBITDA(1) | $ | (498 | ) | $ | 46,729 | $ | 99,497 | $ | 15,506 | $ | (2,960 | ) | |||||||||||||||||||||||
Ratio of earnings to fixed charges(2) | (42.83x | ) | 12.76 | x | (77.94x | ) | (3.55x | ) | 1.37 | x | 2.17 | x | 2.96 | x | (2.91x | ) | |||||||||||||||||||
Deficiency amount(2) | $ | (33,532 | ) | $ | (41,520 | ) | (969 | ) | (17,096 | ) | |||||||||||||||||||||||||
Other data (unaudited): | |||||||||||||||||||||||||||||||||||
Tons sold | 7,947 | 6,975 | 4,283 | 186 | 21,930 | 25,808 | 6,061 | 5,632 | |||||||||||||||||||||||||||
Tons produced and processed | 6,281 | 6,248 | 4,508 | 87 | 17,532 | 19,525 | 5,135 | 4,978 | |||||||||||||||||||||||||||
Average coal sales realization (per ton) | $ | 28.52 | $ | 32.58 | $ | 36.12 | $ | 33.66 | $ | 31.98 | $ | 42.23 | $ | 35.37 | $ | 48.89 |
46
Table of Contents
(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 can 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 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 — Analysis of Material Debt Covenants.” |
EBITDA is calculated and reconciled to net income (loss) in the table below: |
Alpha NR | ||||||||||||||||||||
Holding, Inc. | ||||||||||||||||||||
ANR Fund IX Holdings, L.P. and | and | |||||||||||||||||||
Alpha NR Holding, Inc. and Subsidiaries | Subsidiaries | |||||||||||||||||||
December 14, | Year Ended | Three Months | Three Months | |||||||||||||||||
2002 to | December 31, | Ended | Ended | |||||||||||||||||
December 31, | March 31, | March 31, | ||||||||||||||||||
2002 | 2003 | 2004 | 2004 | 2005 | ||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Net income (loss) | $ | (635 | ) | $ | 2,262 | $ | 20,015 | $ | 1,237 | $ | (25,430 | ) | ||||||||
Interest expense | 203 | 7,848 | 20,041 | 2,051 | 5,827 | |||||||||||||||
Interest income | (6 | ) | (103 | ) | (531 | ) | (21 | ) | (294 | ) | ||||||||||
Income tax expense (benefit) | (334 | ) | 668 | 3,960 | 310 | 2,457 | ||||||||||||||
Depreciation, depletion and amortization | 274 | 36,054 | 56,012 | 11,929 | 14,480 | |||||||||||||||
EBITDA | $ | (498 | ) | $ | 46,729 | $ | 99,497 | $ | 15,506 | $ | (2,960 | ) | ||||||||
(2) | For purposes of this computation, “earnings” consist of income (loss) before income taxes and after minority interest plus fixed charges and amortization of capitalized interest. “Fixed charges” consist of interest expense on all indebtedness plus capitalized interest and amortization of deferred costs of financing and the estimated interest component of lease rental expense. The deficiency amount is calculated for periods for which the ratio of earnings to fixed charges is less than one-to-one. |
47
Table of Contents
48
Table of Contents
49
Table of Contents
50
Table of Contents
ANR Fund IX | ||||||||||||||
Holdings, L.P. and | ||||||||||||||
Alpha NR | (Non- | |||||||||||||
Holding, Inc. and | GAAP) | |||||||||||||
Predecessor | Subsidiaries | Combined | ||||||||||||
January 1, | December 14, | January 1, | ||||||||||||
2002 to | 2002 to | 2002 to | ||||||||||||
December 13, | December 31, | December 31, | ||||||||||||
2002 | 2002 | 2002 | ||||||||||||
(In thousands, except per ton data) | ||||||||||||||
Statement of Operations Data: | ||||||||||||||
Revenues: | ||||||||||||||
Coal revenues | $ | 154,715 | $ | 6,260 | $ | 160,975 | ||||||||
Freight and handling revenues | 17,001 | 1,009 | 18,010 | |||||||||||
Other revenues | 6,031 | 101 | 6,132 | |||||||||||
Total revenues | 177,747 | 7,370 | 185,117 | |||||||||||
Costs and expenses: | ||||||||||||||
Cost of coal sales (exclusive of items shown separately below) | 158,924 | 6,268 | 165,192 | |||||||||||
Freight and handling costs | 17,001 | 1,009 | 18,010 | |||||||||||
Cost of other revenues | 7,973 | 120 | 8,093 | |||||||||||
Depreciation, depletion and amortization | 6,814 | 274 | 7,088 | |||||||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately above) | 8,797 | 471 | 9,268 | |||||||||||
Costs to exit business | 25,274 | — | 25,274 | |||||||||||
Total costs and expenses | 224,783 | 8,142 | 232,925 | |||||||||||
Refund of federal black lung excise tax | 2,049 | — | 2,049 | |||||||||||
Other operating income, net | 1,430 | — | 1,430 | |||||||||||
Income (loss) from operations | $ | (43,557 | ) | $ | (772 | ) | $ | (44,329 | ) | |||||
51
Table of Contents
ANR Fund IX | ||||||||||||
Holdings, L.P. and | ||||||||||||
Alpha NR | (Non- | |||||||||||
Holding, Inc. and | GAAP) | |||||||||||
Predecessor | Subsidiaries | Combined | ||||||||||
January 1, | December 14, | January 1, | ||||||||||
2002 to | 2002 to | 2002 to | ||||||||||
December 13, | December 31, | December 31, | ||||||||||
2002 | 2002 | 2002 | ||||||||||
(In thousands, except per ton data) | ||||||||||||
Other Data: | ||||||||||||
Tons sold | 4,283 | 186 | 4,469 | |||||||||
Coal sales realization per ton sold | $ | 36.12 | $ | 33.66 | $ | 36.02 | ||||||
Cost of coal sales per ton sold | $ | 37.11 | $ | 33.70 | $ | 36.96 |
Three months Ended March 31, 2005 Compared to the Three months Ended March 31, 2004 |
Summary |
52
Table of Contents
Revenues |
Three Months Ended | Increase | |||||||||||||||
March 31, | (Decrease) | |||||||||||||||
2004 | 2005 | $ or Tons | % | |||||||||||||
(In thousands, except per ton data) | ||||||||||||||||
Coal revenues | $ | 214,373 | $ | 275,333 | $ | 60,960 | 28 | % | ||||||||
Freight and handling revenues | 25,604 | 33,165 | 7,561 | 30 | % | |||||||||||
Other revenues | 6,761 | 7,275 | 514 | 8 | % | |||||||||||
Total revenues | $ | 246,738 | $ | 315,773 | $ | 69,035 | 28 | % | ||||||||
Tons Sold: | ||||||||||||||||
Steam | 3,881 | 3,304 | (577 | ) | (15 | )% | ||||||||||
Metallurgical | 2,180 | 2,328 | 148 | 7 | % | |||||||||||
Total | 6,061 | 5,632 | (429 | ) | (7 | )% | ||||||||||
Coal sales realization per ton: | ||||||||||||||||
Steam | $ | 30.11 | $ | 36.20 | $ | 6.09 | 20 | % | ||||||||
Metallurgical | 44.73 | 66.89 | 22.16 | 50 | % | |||||||||||
Total | $ | 35.37 | $ | 48.89 | $ | 13.52 | 38 | % | ||||||||
53
Table of Contents
Costs and Expenses |
Three Months Ended | |||||||||||||||||
March 31, | Increase (Decrease) | ||||||||||||||||
2004 | 2005 | $ | % | ||||||||||||||
(In thousands, except per ton data) | |||||||||||||||||
Cost of coal sales (exclusive of items shown separately below) | $ | 187,593 | $ | 228,845 | $ | 41,252 | 22% | ||||||||||
Freight and handling costs | 25,604 | 33,165 | 7,561 | 30% | |||||||||||||
Cost of other revenues | 5,161 | 6,138 | 977 | 19% | |||||||||||||
Depreciation, depletion and amortization | 11,929 | 14,480 | 2,551 | 21% | |||||||||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately above and including stock-based compensation expense in the amount of $36,407 in 2005) | 11,805 | 47,697 | 35,892 | 304% | |||||||||||||
Total costs and expenses | $ | 242,092 | $ | 330,325 | $ | 88,233 | 36% | ||||||||||
Cost of coal sales per ton: | |||||||||||||||||
Company mines | $ | 27.24 | $ | 33.77 | $ | 6.53 | 24% | ||||||||||
Contract mines (including purchased and processed) | 35.17 | 48.28 | 13.11 | 37% | |||||||||||||
Total produced and processed | 29.03 | 36.68 | 7.65 | 26% | |||||||||||||
Purchased and sold without processing | 38.55 | 60.67 | 22.12 | 57% | |||||||||||||
Cost of coal sales per ton | $ | 30.95 | $ | 40.63 | $ | 9.68 | 31% | ||||||||||
54
Table of Contents
55
Table of Contents
Year Ended December 31, 2004 Compared to Year Ended December 31, 2003 |
Summary |
Revenues |
Year Ended December 31, | Increase (Decrease) | |||||||||||||||
2003 | 2004 | $ or Tons | % | |||||||||||||
(In thousands, except per ton data) | ||||||||||||||||
Coal revenues | $ | 701,262 | $ | 1,089,992 | $ | 388,730 | 55% | |||||||||
Freight and handling revenues | 73,800 | 146,166 | 72,366 | 98% | ||||||||||||
Other revenues | 17,504 | 33,560 | 16,056 | 92% | ||||||||||||
Total revenues | $ | 792,566 | $ | 1,269,718 | $ | 477,152 | 60% | |||||||||
Tons sold | 21,930 | 25,808 | 3,878 | 18% | ||||||||||||
Coal sales realization per ton sold | $ | 31.98 | $ | 42.23 | $ | 10.25 | 32% |
56
Table of Contents
Costs and Expenses |
Year Ended December 31, | Increase (Decrease) | |||||||||||||||
2003 | 2004 | $ | % | |||||||||||||
(In thousands, except per ton data) | ||||||||||||||||
Cost of coal sales (exclusive of items shown separately below) | $ | 632,979 | $ | 930,914 | $ | 297,935 | 47 | % | ||||||||
Freight and handling costs | 73,800 | 146,166 | 72,366 | 98 | % | |||||||||||
Cost of other revenues | 16,750 | 25,064 | 8,314 | 50 | % | |||||||||||
Depreciation, depletion and amortization | 36,054 | 56,012 | 19,958 | 55 | % | |||||||||||
Asset impairment charge | — | 5,100 | 5,100 | |||||||||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately above) | 21,949 | 43,881 | 21,932 | 100 | % | |||||||||||
Total costs and expenses | $ | 781,532 | $ | 1,207,137 | $ | 425,605 | 54 | % | ||||||||
Cost of coal sales per ton sold | $ | 28.86 | $ | 36.07 | $ | 7.21 | 25 | % |
57
Table of Contents
Interest Expense |
Interest Income |
Income Tax Expense |
58
Table of Contents
Year Ended December 31, 2003 Compared to Year Ended December 31, 2002 |
Summary |
Revenues |
Year Ended December 31, | Increase (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. |
59
Table of Contents
Costs and Expenses |
Year Ended December 31, | Increase (Decrease) | |||||||||||||||
2002* | 2003 | $ | % | |||||||||||||
(In thousands, except per ton data) | ||||||||||||||||
Cost of coal sales (exclusive of items shown separately below) | $ | 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 (exclusive of depreciation and amortization shown separately above) | 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. |
60
Table of Contents
Interest Expense |
Interest Income |
Income Tax Expense (Benefit) |
Cash Flows |
61
Table of Contents
62
Table of Contents
Credit Facility and Long-term Debt |
March 31, | |||||
2005 | |||||
10% Senior notes due 2012 | $ | 175,000 | |||
Revolving credit facility | 32,500 | ||||
Variable rate term notes(1) | 1,173 | ||||
Capital lease obligation | 1,875 | ||||
Other | 44 | ||||
Total long-term debt | 210,592 | ||||
Less current portion | (1,707 | ) | |||
Long-term debt, net of current portion | $ | 208,885 | |||
(1) | The term notes, which were issued in connection with equipment financing provided by The CIT Group Equipment Financing, Inc., bear interest at a variable rate of 6.17% at March 31, 2005, are payable in monthly installments ranging from $34,000 to $64,000 through April 2006 and are secured by a lien on the equipment purchased with the proceeds of the notes. |
63
Table of Contents
64
Table of Contents
Other |
Analysis of Material Debt Covenants |
• | 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 3.75 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. | |
65
Table of Contents
Three | ||||||||||||||||||||
Months | Three Months | Three Months | Twelve Months | |||||||||||||||||
Three Months | Ended | Ended | Ended | Ended | ||||||||||||||||
Ended | September 30, | December 31, | March 31, | March 31, | ||||||||||||||||
June 30, 2004 | 2004 | 2004 | 2005 | 2005 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Net income (loss) | $ | 12,088 | $ | 5,342 | $ | 1,115 | $ | (25,430 | ) | $ | (6,885 | ) | ||||||||
Interest expense, net | 6,711 | 5,449 | 5,344 | 5,533 | 23,037 | |||||||||||||||
Income tax expense (benefit) | 3,022 | 1,335 | (772 | ) | 2,457 | 6,042 | ||||||||||||||
Depreciation, depletion and amortization expenses | 13,111 | 14,312 | 16,660 | 14,480 | 58,563 | |||||||||||||||
EBITDA | 34,932 | 26,438 | 22,347 | (2,960 | ) | 80,757 | ||||||||||||||
Minority interest(1) | 12,872 | 5,688 | 268 | 2,846 | 21,674 | |||||||||||||||
Stock-based compensation charge(2) | — | — | — | 28,932 | 28,932 | |||||||||||||||
Asset impairment charge(2) | — | 5,100 | — | — | 5,100 | |||||||||||||||
Adjusted EBITDA | $ | 47,804 | $ | 37,226 | $ | 22,615 | $ | 28,818 | $ | 136,463 | ||||||||||
Leverage ratio(3) | 1.62 | |||||||||||||||||||
Interest coverage ratio(4) | 9.51 |
(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 and the non-cash portion of the stock-based compensation charge related to our Internal Restructuring and the initial public offering of our parent. |
(3) | Leverage ratio is defined in our credit facility as total debt divided by Adjusted EBITDA. |
(4) | Interest coverage ratio is defined in our credit facility as Adjusted EBITDA divided by cash interest expense. |
66
Table of Contents
2005 | 2006-2007 | 2008-2009 | After 2009 | Total | ||||||||||||||||
Long-term debt and capital leases(1) | $ | 1,693 | $ | 1,236 | $ | 8,548 | $ | 175,000 | $ | 186,477 | ||||||||||
Equipment purchases | 43,271 | — | — | — | 43,271 | |||||||||||||||
Operating leases | 4,307 | 6,463 | 769 | 261 | 11,800 | |||||||||||||||
Minimum royalties | 9,212 | 17,368 | 15,509 | 30,031 | 72,120 | |||||||||||||||
Coal purchases | 342,422 | 110,463 | — | — | 452,885 | |||||||||||||||
Coal contract buyout | 680 | 1,360 | 1,360 | 567 | 3,967 | |||||||||||||||
Total | $ | 401,585 | $ | 136,890 | $ | 26,186 | $ | 205,859 | $ | 770,520 | ||||||||||
(1) | Long-term debt and capital leases include principal amounts due in the years shown. Interest payable on these obligations, assuming a rate of 7.0% on our variable rate loan, would be approximately $18.3 million in 2005, $36.4 million in 2006 to 2007, $35.8 million in 2008 to 2009, and $42.3 million after 2009. |
2005 | 2006-2007 | 2008-2009 | After 2009 | Total | ||||||||||||||||
Reclamation | $ | 6,691 | $ | 11,062 | $ | 8,473 | $ | 34,209 | $ | 60,435 | ||||||||||
Postretirement | 39 | 193 | 1,078 | 155,365 | 156,675 | |||||||||||||||
Workers’ compensation benefits | 1,612 | 2,235 | 324 | 2,119 | 6,290 | |||||||||||||||
Total | $ | 8,342 | $ | 13,490 | $ | 9,875 | $ | 191,693 | $ | 223,400 | ||||||||||
67
Table of Contents
68
Table of Contents
• | Discount Rate. SFAS No. 143 requires that asset retirement obligations be recorded at fair value. In accordance with the provisions of SFAS No. 143, we utilize discounted cash flow techniques to estimate the fair value of our obligations. We base our discount rate on the rates of treasury bonds with maturities similar to expected mine lives, adjusted for our credit standing. | |
• | 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. |
• | 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. |
69
Table of Contents
70
Table of Contents
71
Table of Contents
72
Table of Contents
73
Table of Contents
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. |
Cost per | ||||
Megawatt | ||||
Electrical Generation Type | Hour | |||
Natural Gas | $ | 57.48 | ||
Oil | 51.35 | |||
Coal | 18.30 | |||
Nuclear | 17.01 | |||
Hydroelectric | 5.35 |
74
Table of Contents
% of | |||||
Total | |||||
Electricity | |||||
Electricity Generation Source | Generation | ||||
Coal | 53 | % | |||
Nuclear | 21 | % | |||
Natural Gas | 15 | % | |||
Hydro | 7 | % | |||
Oil and Other | 4 | % | |||
Total | 100 | % | |||
75
Table of Contents
76
Table of Contents
• | 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. |
• | stronger industrial demand following a recovery in the U.S. manufacturing sector, evidenced by the most recent estimate of 3.5% real GDP growth in the first quarter of 2005, as reported by the Bureau of Economic Analysis; | |
• | relatively low customer stockpiles, estimated by the EIA to be approximately 104.6 million tons at the end of February 2005, down 8% from the same period in the prior year; | |
• | declining coal production in Central Appalachia, including an average annual decline of 4.9% in Central Appalachian coal production volume from January 1, 2001 to December 31, 2004; | |
• | capacity constraints of U.S. nuclear-powered electricity generators, which operated at an average utilization rate of 90.5% in 2004, up from 73.8% in 1994, as estimated by the EIA; | |
• | high current and forward prices for natural gas and heating oil, the primary fuels for electricity generation, with spot prices as of May 31, 2005 for natural gas and heating oil at $6.33 per million Btu and $1.45 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. |
77
Table of Contents
Increase in Average | Percentage of Produced and | |||||||
Reference Prices | Processed Coal Sales in 2004 | |||||||
Central Appalachia | 14 | % | 70 | % | ||||
Northern Appalachia | 24 | % | 27 | % |

78
Table of Contents
Average Sale Prices per Ton for Low Volatile Metallurgical | Percentage Increase | |||||||||||||
Coal at Hampton Roads, Virginia Export Terminals | Year-Over-Year | |||||||||||||
April 5, 2004 | $ | 135.00 | April 1, 2005 | $ | 135.00 | 0% | ||||||||
January 12, 2004 | $ | 71.50 | January 3, 2005 | $ | 137.50 | 92% | ||||||||
October 6, 2003 | $ | 52.00 | October 4, 2004 | $ | 135.00 | 160% | ||||||||
July 7, 2003 | $ | 50.45 | July 5, 2004 | $ | 125.00 | 148% |
79
Table of Contents
80
Table of Contents
81
Table of Contents
82
Table of Contents
• | 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 | |
• | coordinating company-wide purchasing activities with major vendors to provide materials and supplies at lower overall cost. |
• | 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. |
83
Table of Contents
84
Table of Contents
Number and Type of Mines as of | 2004 | |||||||||||||||||||||||
April 15, 2005 | Production of | |||||||||||||||||||||||
Preparation Plant(s) | Saleable | |||||||||||||||||||||||
Regional Business Unit | Location | as of April 15, 2005 | Underground | Surface | Total | Railroad | Tons(1)(2) | |||||||||||||||||
(In 000’s) | ||||||||||||||||||||||||
Paramont | Virginia | Toms Creek | 10 | 5 | 15 | NS | 5,876 | |||||||||||||||||
Dickenson-Russell | Virginia | McClure River and Moss #3 | 6 | 1 | 7 | CSX, NS | 1,951 | |||||||||||||||||
Kingwood | West Virginia | Whitetail | 1 | 0 | 1 | CSX | 1,862 | |||||||||||||||||
Brooks Run | West Virginia | Erbacon | 3 | 0 | 3 | CSX | 1,987 | |||||||||||||||||
Welch | West Virginia | Litwar, Kepler and Herndon | 14 | 0 | 14 | NS | 2,401 | |||||||||||||||||
AMFIRE | Pennsylvania | Clymer and Portage | 6 | 13 | 19 | NS | 3,514 | |||||||||||||||||
Enterprise | Kentucky | Roxana | 3 | 2 | 5 | CSX | 1,477 | |||||||||||||||||
Total | 43 | 21 | 64 | 19,068 |
(1) | Includes coal purchased from third-party producers that was processed at our subsidiaries’ preparation plants in 2004. |
(2) | Excludes 457,000 tons of coal produced in 2004 by NKC. We sold NKC on April 14, 2005. |
CSX Railroad = CSX | |
Norfolk Southern Railroad = NS |
85
Table of Contents
86
Table of Contents
87
Table of Contents
88
Table of Contents
Recoverable | Sulfur Content(2) | Average Btu(2) | ||||||||||||||||||||||||
Reserves Proven & | ||||||||||||||||||||||||||
Regional Business Unit | State | Probable(1)(2) | <1% | 1.0%-1.5% | >1.5% | >12,500 | <12,500 | |||||||||||||||||||
(In millions of tons) | ||||||||||||||||||||||||||
(In millions of tons) | (In millions of tons) | |||||||||||||||||||||||||
Paramont/ Alpha Land and Reserves(3) | Virginia | 154.9 | 110.8 | 32.1 | 12.0 | 153.3 | 1.6 | |||||||||||||||||||
Dickenson-Russell | Virginia | 32.9 | 32.9 | 0 | 0 | 32.9 | 0 | |||||||||||||||||||
Kingwood | West Virginia | 31.5 | 0 | 18.9 | 12.6 | 31.5 | 0 | |||||||||||||||||||
Brooks Run | West Virginia | 25.9 | 7.8 | 18.1 | 0 | 10.6 | 15.3 | |||||||||||||||||||
Welch | West Virginia | 95.7 | 95.7 | 0 | 0 | 95.7 | 0 | |||||||||||||||||||
AMFIRE | Pennsylvania | 93.7 | 14.1 | 49.4 | 30.2 | 84.3 | 9.4 | |||||||||||||||||||
Enterprise | Kentucky | 66.3 | 26.3 | 38.4 | 1.6 | 64.2 | 2.1 | |||||||||||||||||||
Totals | 500.9 | 287.6 | 156.9 | 56.4 | 472.5 | 28.4 | ||||||||||||||||||||
Percentages | 57 | % | 31 | % | 11 | % | 94 | % | 6% |
(1) | Recoverable reserves represent the amount of proven and probable reserves that can actually be recovered taking into account all mining and preparation losses involved in producing a saleable product using existing methods under current law. The reserve numbers set forth in 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) | Excludes 10.2 million tons of proven and probable reserves leased as of December 31, 2004, by NKC, which we sold on April 14, 2005, of which 9.1 million tons had a sulfur content below 1% and 1.1 million tons had a sulfur content of between 1.0% and 1.5%. All of the proven and probable reserves held by NKC had an average Btu content of greater than 12,500. Percentages do not add to 100% due to the effect of rounding. |
(3) | Includes proven and probable reserves in Virginia controlled by our subsidiary Alpha Land and Reserves, LLC as of December 31, 2004. Alpha Land and Reserves, LLC subleases a portion of the mining rights to its proven and probable reserves in Virginia to our subsidiary Paramont Coal Company Virginia, LLC. |
89
Table of Contents
Recoverable | Total Tons(2) | Total Tons(2) | ||||||||||||||||||||||
Reserves Proven & | ||||||||||||||||||||||||
Regional Business Unit | State | Probable(1)(2) | Assigned(3) | Unassigned(3) | Owned | Leased | Coal Type(4) | |||||||||||||||||
(In millions of | ||||||||||||||||||||||||
tons) | (In millions of tons) | (In millions of | ||||||||||||||||||||||
tons) | ||||||||||||||||||||||||
Paramont/ Alpha Land and Reserves(5) | Virginia | 154.9 | 75.9 | 79.0 | 0 | 154.9 | Steam and Metallurgical | |||||||||||||||||
Dickenson-Russell | Virginia | 32.9 | 30.7 | 2.2 | 0 | 32.9 | Steam and Metallurgical | |||||||||||||||||
Kingwood | West Virginia | 31.5 | 23.1 | 8.4 | 0 | 31.5 | Steam and Metallurgical | |||||||||||||||||
Brooks Run | West Virginia | 25.9 | 3.4 | 22.5 | 3.3 | 22.6 | Steam and Metallurgical | |||||||||||||||||
Welch | West Virginia | 95.7 | 54.3 | 41.4 | 1.3 | 94.4 | Steam and Metallurgical | |||||||||||||||||
AMFIRE | Pennsylvania | 93.7 | 43.6 | 50.1 | 3.5 | 90.2 | Steam and Metallurgical | |||||||||||||||||
Enterprise | Kentucky | 66.3 | 10.9 | 55.4 | 7.2 | 59.1 | Steam | |||||||||||||||||
Totals | 500.9 | 241.9 | 259.0 | 15.3 | 485.6 | |||||||||||||||||||
Percentages | 48 | % | 52 | % | 3 | % | 97 | % |
(1) | Recoverable reserves represent the amount of proven and probable reserves that can actually be recovered taking into account all mining and preparation losses involved in producing a saleable product using existing methods under current law. The reserve numbers set forth in 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) | Excludes 10.2 million tons of proven and probable reserves leased as of December 31, 2004, by NKC, which we sold on April 14, 2005, of which 1.4 million tons were assigned and 8.8 million tons were unassigned as of December 31, 2004. |
(3) | Assigned reserves represent recoverable coal reserves that can be mined without a significant capital expenditure for mine development, whereas unassigned reserves will require significant capital expenditures to mine the reserves. |
(4) | Almost all of our reserves that we currently market as metallurgical coal also possess quality characteristics that would enable us to market them as steam coal. |
(5) | Includes proven and probable reserves in Virginia controlled by our subsidiary Alpha Land and Reserves, LLC as of December 31, 2004. Alpha Land and Reserves, LLC subleases a portion of the mining rights to its proven and probable reserves in Virginia to our subsidiary Paramont Coal Company Virginia, LLC. |
90
Table of Contents

91
Table of Contents
Steam Coal Sales(1) | Metallurgical Coal Sales | |||||||||||||||
Year | Tons | % of Total Sales | Tons | % of Total Sales | ||||||||||||
(In millions, except percentages) | ||||||||||||||||
2004 | 16.3 | 63 | % | 9.5 | 37 | % | ||||||||||
2003 | 15.6 | 71 | % | 6.3 | 29 | % |
(1) | Steam coal sales include sales to utility and industrial customers. Sales of steam coal to industrial customers, who we define as consumers of steam coal who do not generate electricity for sale to third parties, accounted for approximately 4% and 5% of total sales in 2004 and 2003, respectively. |
Export Tons | Export Sales | |||||||||||||||
Sold as a | Revenues as a | |||||||||||||||
Export Tons | Percentage of | Export Sales | Percentage of | |||||||||||||
Year | Sold | Total Coal Sales | Revenues(1) | Total Revenues | ||||||||||||
(In millions, except percentages) | ||||||||||||||||
2004 | 8.3 | 32 | % | $ | 602.6 | 47% | ||||||||||
2003 | 4.9 | 22 | % | $ | 220.8 | 28% |
(1) | Export sales revenues in 2004 include approximately $4.0 million in equipment export sales. All other export sales revenues are coal sales revenues and freight and handling revenues. |
92
Table of Contents
93
Table of Contents
94
Table of Contents
95
Table of Contents
96
Table of Contents
97
Table of Contents
• | 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 U.S. Environmental Protection Agency (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 promulgated by the EPA on January 5, 2005. On March 7, 2005, a number of entities filed an appeal of the non-attainment designations in the United States Federal Court for the D.C. Circuit. On May 12, the court ordered the case held in abeyance and directed the EPA to file 90-day status reports. The first such status report is due in July of 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. |
98
Table of Contents
• | Clear Skies Initiative. The Bush Administration has proposed legislation, commonly referred to as the Clear Skies Initiative, that could require dramatic reductions in nitrous oxide, sulfur dioxide, and mercury emissions by power plants through “cap-and-trade” programs similar to the existing Acid Rain regulations and current NOx budget programs. The Senate Environment and Public Works Committee considered this proposed legislation and failed to recommend it for a vote by the full Senate on March 10, 2005. Some members of the House and Senate have publicized their efforts to add the Clear Skies Initiative as an amendment to the currently proposed Energy Bill. It is currently not possible to predict what, if any, new regulatory requirements will ultimately evolve out of this initiative. | |
• | Clean Air Interstate Rule. The EPA finalized the Clean Air Interstate Rule (CAIR) on March 10, 2005. The new CAIR calls for power plants in 29 eastern states and the District of Columbia to reduce emission levels of sulfur dioxide and nitrous oxide. The rule requires states to 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. When fully implemented, this rule is expected to reduce regional sulfur dioxide emissions by over 70% and nitrogen oxides emissions by over 60% from 2003 levels. The stringency of the cap may require many coal-fired electricity generation plants to install additional pollution control equipment, such as wet scrubbers, to comply, which could decrease the demand for low sulfur coal at these plants and thereby potentially reduce market prices for low sulfur coal. Emissions are permanently capped and cannot increase. | |
• | Utility Mercury Reductions Rule. On March 15, 2005, the EPA issued the Clean Air Mercury Rule, originally proposed as the Utility Mercury Reduction Rule, to permanently cap and reduce mercury emissions from coal-fired power plants. The Clean Air Mercury Rule establishes mercury emissions limits from new and existing coal-fired power plants and creates a market-based cap-and-trade program that is expected to reduce nationwide utility emissions of mercury in two phases. The cap on mercury emissions during the first phase is 38 tons. To the extent mercury emissions are required to be reduced during the first phase, emissions may reduced by taking advantage of “co-benefit” reductions — that is, mercury reductions achieved by reducing sulfur dioxide and nitrogen oxides emissions under CAIR. In the second phase, due in 2018, coal-fired power plants will be subject to a second cap, which will reduce emissions to 15 tons. | |
• | 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. Although the court heard arguments in this case on April 12, 2005, to date, no decision has been rendered. | |
• | 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 intended to develop a model rule by April 2005, but the process has been delayed and no model rule has been made public to date. 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 implemented by the states where our customers operate, will not affect the future market for coal in this region. | |
99
Table of Contents
• | 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. |
100
Table of Contents
101
Table of Contents
102
Table of Contents
Name | Age | Position with Alpha Natural Resources, LLC | ||||
Michael J. Quillen | 56 | President, Chief Executive Officer and Manager | ||||
Kevin S. Crutchfield | 44 | Executive Vice President | ||||
D. Scott Kroh | 55 | Executive Vice President | ||||
David C. Stuebe | 65 | Vice President and Chief Financial Officer | ||||
Michael D. Brown | 43 | Vice President | ||||
Vaughn R. Groves | 48 | Vice President and General Counsel | ||||
Eddie W. Neely | 54 | Vice President and Controller |
103
Table of Contents
104
Table of Contents
105
Table of Contents
106
Table of Contents
107
Table of Contents
108
Table of Contents
Long-Term | |||||||||||||||||||||
Compensation | |||||||||||||||||||||
Annual Compensation | |||||||||||||||||||||
Securities | |||||||||||||||||||||
All Other | Underlying | ||||||||||||||||||||
Name and Principal Position | Year | Salary($) | Bonus ($)(1),(2) | Compensation ($)(5) | Options (#) | ||||||||||||||||
Michael J. Quillen | 2004 | 420,004 | 929,409 | 35,136 | (6) | — | |||||||||||||||
Chief Executive Officer and | 2003 | 420,468 | 115,000 | 8,000 | |||||||||||||||||
President(3) | 2002 | — | — | — | |||||||||||||||||
Kevin Crutchfield | 2004 | 360,022 | 600,359 | 32,727 | (7) | — | |||||||||||||||
Executive Vice President(4) | 2003 | 311,295 | 100,000 | 134,495 | |||||||||||||||||
2002 | — | — | — | ||||||||||||||||||
D. Scott Kroh | 2004 | 358,000 | 401,000 | 28,518 | (8) | — | |||||||||||||||
Executive Vice President(4) | 2003 | 287,332 | 100,000 | 6,000 | |||||||||||||||||
2002 | — | — | — | ||||||||||||||||||
Michael D. Brown | 2004 | 257,696 | 425,143 | 32,537 | (9) | 62,841 | |||||||||||||||
Vice President(4) | 2003 | 169,091 | 100,000 | 6,224 | |||||||||||||||||
2002 | — | — | — | ||||||||||||||||||
David C. Stuebe | 2004 | 280,020 | 396,060 | 75,137 | (10) | — | |||||||||||||||
Vice President and Chief | 2003 | 84,620 | 30,000 | 28,375 | |||||||||||||||||
Financial Officer(4) | 2002 | — | — | — |
(1) | We generally pay bonuses in the year following the year in which they were earned. Unless otherwise noted, bonus amounts presented represent employee performance bonuses and are reported for the year in which they were earned, though they may have been paid in the following year. |
(2) | Each of the bonuses presented for 2004 include a special bonus paid in June 2004 to recognize efforts in connection with the recapitalization of Alpha Natural Resources, LLC in May 2004, a vacation bonus in the amount of $1,000 and bonuses earned in 2004 under our Annual Incentive Bonus Plan based on the achievement of specified financial performance, operating and safety goals for fiscal 2004. |
(3) | Although Mr. Quillen joined us in August 2002, he did not receive any compensation from us during 2002. |
(4) | 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. |
(5) | Amounts shown in this column for 2003 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. |
(6) | Includes $10,250 contributed to Mr. Quillen’s account under our 401(k) Plan, $21,888 for a vehicle allowance and imputed income of $2,998 in respect of life insurance. |
(7) | Includes $10,250 contributed to Mr. Crutchfield’s account under our 401(k) Plan, $21,888 for a vehicle allowance and imputed income of $589 in respect of life insurance. |
(8) | Includes $6,150 contributed to Mr. Kroh’s account under our 401(k) Plan, $21,024 for a vehicle allowance and imputed income of $1,344 in respect of life insurance. |
(9) | Includes $10,250 contributed to Mr. Brown’s account under our 401(k) Plan, $21,888 for a vehicle allowance and imputed income of $399 in respect of life insurance. |
109
Table of Contents
(10) | Includes $61,949 of relocation expenses reimbursed by us and tax gross-up payments paid by us in connection with the expense reimbursement, $10,250 contributed to Mr. Stuebe’s account under our 401(k) Plan and imputed income of $2,938 in respect of life insurance. |
Individual Grants | ||||||||||||||||||||||||
Potential Realizable | ||||||||||||||||||||||||
Number | % of Total | Value at Assumed | ||||||||||||||||||||||
of | Options | Annual Rate of Stock | ||||||||||||||||||||||
Securities | Granted to | Exercise | Price Appreciation for | |||||||||||||||||||||
Underlying | Employees | Price per | Option Year(5) | |||||||||||||||||||||
Options | in | Share | Expiration | |||||||||||||||||||||
Name | Granted(1) | 2004(2) | ($/Share)(3) | Date(4) | 5.0%($) | 10.0% ($) | ||||||||||||||||||
Michael J. Quillen | — | — | — | — | — | — | ||||||||||||||||||
Kevin Crutchfield | — | — | — | — | — | — | ||||||||||||||||||
D. Scott Kroh | — | — | — | — | — | — | ||||||||||||||||||
Michael D. Brown | 62,841 | 10 | % | $ | 12.73 | 11/10/14 | 503,084 | 1,274,940 | ||||||||||||||||
David C. Stuebe | — | — | — | — | — | — |
(1) | Represents options granted under the Amended and Restated Alpha Natural Resources, Inc. 2004 Long-Term Incentive Plan, which Alpha Natural Resources, Inc. assumed in connection with the Internal Restructuring. These options vest over a five year period, with 20% vesting on each of the first, second, third, fourth and fifth anniversaries of the date of grant. |
(2) | Based on an aggregate of 596,285 shares of common stock of Alpha Natural Resources, Inc. that are subject to options granted to employees during 2004, net of options granted in 2004 and cancelled upon termination of the optionholder’s employment prior to the completion of our Internal Restructuring, using the same assumptions as note (1) above. |
(3) | Options were granted at an exercise price equal to the fair market value of ANR Holdings’ common equity as determined by the ANR Holdings board of directors at the date of grant. In determining the fair market value of ANR Holdings’ equity, the board considered various factors, including the company’s financial condition and business prospects, operating results, the absence of a market for the company’s common equity and marketability discount, and third party valuations of the company. |
(4) | The term of each option granted under the 2004 Long-Term Incentive Plan is generally ten years from the date of grant. Options may terminate before their expiration date if the option holder’s status as an employee is terminated or upon the option holder’s death or disability. |
(5) | The potential realizable values are based on an assumption that the stock price of Alpha Natural Resources, Inc.’s common stock will appreciate at the annual rate shown, compounded annually, from the date of grant until the end of the option term. These values do not take into account amounts required to be paid as income taxes under the Internal Revenue Code and any applicable state laws or option provisions providing for termination of an option following termination of employment, non-transferability or vesting. These amounts are calculated based on the requirements promulgated by the SEC and do not reflect estimates of future stock price growth of the shares of Alpha Natural Resources, Inc.’s common stock. |
110
Table of Contents
111
Table of Contents
112
Table of Contents
• | each person who is known by us to own beneficially more than 5% of the common stock of Alpha Natural Resources, Inc.; | |
• | each director of Alpha Natural Resources, Inc.; | |
• | our Chief Executive Officer and each of our other four other most highly compensated executive officers for 2004; and | |
• | all current members of Alpha Natural Resources, Inc.’s board of directors and our executive officers as a group. |
Name and Address of Beneficial Owner(1) | Number | Percent | ||||||
First Reserve GP IX, Inc.(2) | 13,998,911 | 22.50 | % | |||||
First Reserve Fund IX, L.P.(2) | 12,462,992 | 20.03 | ||||||
ANR Fund IX Holdings, L.P.(2) | 1,535,919 | 2.47 | ||||||
Fritz R. Kundrun(3) | 11,351,896 | 18.25 | ||||||
Hans J. Mende(3) | 11,351,896 | 18.25 | ||||||
Michael J. Quillen(4) | 931,164 | 1.50 | ||||||
Kevin S. Crutchfield(5) | 465,577 | 0.75 | ||||||
D. Scott Kroh(6) | 1,786,368 | 2.87 | ||||||
Michael D. Brown(7) | 277,214 | 0.45 | ||||||
David C. Stuebe(8) | 279,299 | 0.45 | ||||||
Glenn A. Eisenberg | — | |||||||
E. Linn Draper, Jr.(9) | — | |||||||
John W. Fox, Jr.(9) | — | |||||||
Alex T. Krueger(10) | — | |||||||
William E. Macaulay(10) | — | |||||||
All executive officers and directors as a group (13 persons) | 15,314,910 | 24.62 |
(1) | The shares of Alpha Natural Resources, Inc. 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 |
113
Table of Contents
investment power with respect to the indicated shares of our parent’s common stock. In accordance with the beneficial ownership rules of the SEC, the table does not reflect (1) an aggregate of 596,985 shares of common stock reserved for issuance upon the exercise of outstanding options under the Alpha Natural Resources, Inc. Amended and Restated 2004 Long-Term Incentive Plan that our parent assumed in connection with the Internal Restructuring and (2) an aggregate of 3,338,841 shares of common stock reserved for issuance under the Alpha Natural Resources, Inc. 2005 Long-Term Incentive Plan, of which an aggregate of 702,905 shares of common stock are subject to outstanding options under the Long-Term Incentive Plan as of June 1, 2005. | ||
(2) | The shares of 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. First Reserve Corporation is the investment advisor to both First Reserve Fund IX, L.P. and ANR Fund IX Holdings, 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 common stock held by the following entities affiliated with the owners of AMCI, which entities own of record the following number of shares of our Common Stock: Beta Resources, LLC (1,126,250 shares), Creekside Energy Development Company (1,568,071 shares), Dunamis Resources, Inc. (116,218 shares), I-22 Processing, Inc. (145,940 shares), Laurel Energy, L.P. (684,148 shares), Laurel Resources, L.P. (91,020 shares), Madison Mining Company LLC (124,754 shares), Newhall Pocahontas Energy, Inc. (164,124 shares), Redbank, Inc. (368,065 shares), REI, Inc. (1,288,521 shares), RRD, Inc. (1,240,309 shares), SCM, Inc. (307,662 shares), Still Run Coal Company, Inc. (210,854 shares), Tanoma Energy, Inc. (2,824,863 shares), and Vollow Resources LLC (1,091,097 shares). REI, Inc. wholly owns Still Run Coal Company and may be deemed to have beneficial ownership of the shares held by Still Run Coal Company, Inc. RRD, Inc. wholly owns REI, Inc. and may be deemed to have beneficial ownership of the shares held by REI, Inc. and Still Run Coal Company, Inc. RRD, Inc. is also the indirect owner of 100% of Newhall Pocahontas Energy, Inc., SCM, Inc. and Creekside Energy Development Company, and may be deemed to have beneficial ownership of the shares held by those entities. 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) | Includes beneficial ownership of 451,663 unvested shares subject to forfeiture under the terms of the Alpha Natural Resources, Inc. stockholder agreement, as described in “— Executive Compensation — Employment Contracts, Termination of Employment and Change of Control Arrangements — Vesting Provisions Regarding Options and Stock.” The address for Mr. Quillen is c/o Alpha Natural Resources, Inc., 406 West Main Street, Abingdon, Virginia 24210. |
(5) | Includes beneficial ownership of 225,829 unvested shares subject to forfeiture under the terms of the Alpha Natural Resources, Inc. stockholder agreement, as described in “— Executive Compensation — Employment Contracts, Termination of Employment and Change of Control Arrangements — Vesting Provisions Regarding Options and Stock.” The address for Mr. Crutchfield is c/o Alpha Natural Resources, Inc., 406 West Main Street, Abingdon, Virginia 24210. | |
(6) | Includes beneficial ownership of 180,661 unvested shares subject to forfeiture under the terms of the Alpha Natural Resources, Inc. stockholder agreement, as described in “— Executive Compensation — Employment Contracts, Termination of Employment and Change of Control Arrangements — Vesting Provisions Regarding Options and 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 |
114
Table of Contents
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. | ||
(7) | Includes beneficial ownership of 134,492 unvested shares subject to forfeiture under the terms of the Alpha Natural Resources, Inc. stockholder agreement, as described in “— Executive Compensation — Employment Contracts, Termination of Employment and Change of Control Arrangements — Vesting Provisions Regarding Options and Stock.” The address for Mr. Brown is c/o Alpha Natural Resources, Inc., 406 West Main Street, Abingdon, Virginia 24210. | |
(8) | Includes beneficial ownership of 135,504 unvested shares subject to forfeiture under the terms of the Alpha Natural Resources, Inc. stockholder agreement, as described in “— Executive Compensation — Employment Contracts, Termination of Employment and Change of Control Arrangements — Vesting Provisions Regarding Options and Stock.” The address for Mr. Stuebe is c/o Alpha Natural Resources, Inc., 406 West Main Street, Abingdon, Virginia 24210. | |
(9) | The address for Messrs. Draper, Eisenberg and Fox is c/o Alpha Natural Resources, Inc., 406 West Main Street, Abingdon, Virginia 24210. |
(10) | 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 Chairman, Chief Executive Officer and managing director of First Reserve G.P. IX, Inc. 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. |
115
Table of Contents
116
Table of Contents
117
Table of Contents
• | The AMCI Parties established an escrow of $2.8 million in favor of us and First Reserve in respect of certain retiree medical liabilities retained by the AMCI Parties. This escrow arrangement was eliminated as part of the Internal Restructuring. | |
• | Certain of the AMCI Parties entered into a pledge agreement with First Reserve under 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 was terminated in connection with the Internal Restructuring. | |
• | The AMCI Parties gave First Reserve the right to purchase from them 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 the AMCI parties’ indemnification obligations under the contribution agreement to discharge certain retiree medical liabilities retained by the AMCI Parties. This right to purchase was terminated in connection with the Internal Restructuring. | |
• | We reimbursed AMCI $2.0 million in transaction costs related to the acquisitions of our Predecessor and Coastal Coal Company. | |
• | We entered into an agreement with certain of the AMCI Parties under which they granted us the right to acquire AMCI’s wholly-owned subsidiary, AMCI Export Corporation, an export trading company. These rights expired on September 11, 2004. We also entered into an agreement with Messrs. Mende, Kundrun and Kroh and others that gives us the option to acquire an ocean going port in Nova Scotia from them for $2.0 million plus the amount of follow-on investments made in the port after the date of the agreement, payable in shares of our parent’s common stock. This purchase option expired on March 11, 2005. We also have a right of first refusal that expires on March 11, 2008 to acquire the port if the owners of the port propose to sell it to a third party. | |
• | We paid $35.0 million for the working capital of U.S. AMCI, subject to a post-closing audit. On September 13, 2004, we, 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 us. We 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 us, estimated to be $0.1 million, 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. |
118
Table of Contents
119
Table of Contents
• | Amendment to AMCI Related Agreements: We amended certain of the post-closing arrangements that are part of our acquisition of U.S. AMCI discussed above. The AMCI Parties posted for our benefit a letter of credit that provides, for a period of ten years, financial assurances supporting the obligations of the AMCI Parties to indemnify us under the contribution agreement in respect of certain retiree medical liabilities. The letter of credit is initially 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 the U.S. AMCI Acquisition” were terminated. |
120
Table of Contents
• | Releases and Indemnities. Each former member of ANR Holdings (including members of our management team) released 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, agreed to indemnify them with respect to any action which may be brought against any former 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. |
• | Stockholder Agreement. Alpha Natural Resources, Inc. entered into a stockholder agreement with its management stockholders, the First Reserve Stockholders, the AMCI Parties and Madison Capital Funding LLC that became effective upon consummation of the Internal Restructuring and replaced the former member agreement among these parties and ANR Holdings. As part of the stockholder agreement: |
• | Agreement on Board Composition: Alpha Natural Resources, Inc.’s board of directors consisted of seven members upon consummation of its initial public 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 Alpha Natural Resources, Inc. 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). The Alpha Natural Resources, Inc. 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 15% of the outstanding shares of our parent’s common stock, then the applicable party will only be entitled to designate one director, and if either the First Reserve Stockholders or the AMCI Parties and their affiliates as a group beneficially own less than 7.5% of the outstanding shares of our parent’s common stock, then the applicable party will no longer be entitled to designate any directors pursuant to the stockholder agreement; and | |
• | Registration Rights: Each of the First Reserve Stockholders and the AMCI Parties have the right in certain circumstances after consummation of Alpha Natural Resources, Inc.’s initial public offering to require our parent to register their shares of common stock in connection with a public offering and sale. In addition, in connection with other registered offerings by our parent, existing holders of shares of its common stock will have the ability to exercise certain piggyback registration rights with respect to the shares. |
121
Table of Contents
General |
Interest Rate and Fees |
Prepayments |
122
Table of Contents
Guarantee and Security |
Certain Covenants and Events of Default |
• | 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; |
123
Table of Contents
• | engage in sale and leaseback transactions; and | |
• | declare distributions from subsidiaries. |
• | 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. |
Surety Bonds |
124
Table of Contents
(1) we are not |
(a) required to file the exchange offer registration statement; or | |
(b) permitted to consummate the exchange offer because the exchange offer is not permitted by applicable law or SEC policy; or |
(2) any holder of “Transfer Restricted Securities” notifies us prior to the 20th business day following consummation of the exchange offer that: |
(a) it is prohibited by law or SEC policy from participating in the exchange offer; | |
(b) it may not resell the exchange notes acquired by it in the exchange offer to the public without delivering a prospectus and the prospectus contained in the exchange offer registration statement is not appropriate or available for such resales; or | |
(c) it is a broker-dealer and owns notes acquired directly from the Issuers or affiliates of the Issuers. |
(1) the date on which such note has been exchanged by a person other than a broker-dealer for an exchange note in the exchange offer; | |
(2) following the exchange by a broker-dealer in the exchange offer of an outstanding note for an exchange note, the date on which such exchange note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the exchange offer registration statement; | |
(3) the date on which such note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement; or | |
(4) the date on which such note is sold pursuant to Rule 144 under the Securities Act. |
(1) either the exchange offer registration statement or the shelf registration statement is not declared effective by the SEC on or prior to the date specified for such effectiveness (the “effectiveness target date”); |
125
Table of Contents
(2) the Issuers and the subsidiary guarantors fail to consummate the exchange offer within 30 business days of the effectiveness target date with respect to the exchange offer registration statement; or | |
(3) the shelf registration statement or the exchange offer registration statement is declared effective but thereafter ceases to be effective or usable in connection with resales of Transfer Restricted Securities during the periods specified in the registration rights agreement (each such event referred to in clauses (1) through (3) above, a “registration default”), |
• | you are acquiring the exchange notes in the ordinary course of your business; | |
• | you do not have an arrangement or understanding with any person to participate in a distribution of the exchange notes within the meaning of the Securities Act; | |
• | you are not an “affiliate,” as defined in Rule 405 of the Securities Act, of the Issuers or any of the guarantors; | |
• | if you are not a broker dealer, you are not engaged in, and do not intend to engage in, a distribution of the exchange notes; and | |
• | if you are a broker dealer, you are acquiring exchange notes for your own account in exchange for outstanding notes that you acquired as a result of market-making activities or other trading activities and you will deliver a prospectus in connection with any resale of such exchange notes. Please see “Plan of Distribution.” |
• | you are acquiring the exchange notes in the ordinary course of your business; | |
• | you do not have an arrangement or understanding with any person to participate in a distribution of the exchange notes within the meaning of the Securities Act; | |
• | you are not engaged in, and do not intend to engage in, a distribution of the exchange notes; and | |
• | you are not an “affiliate,” as defined in Rule 405 of the Securities Act, of the Issuers or any of the guarantors. |
126
Table of Contents
• | You cannot rely on the position of the SEC set forth inMorgan Stanley & Co. Incorporated(available June 5, 1991) andExxon Capital Holdings Corporation(available May 13, 1988), as interpreted in the SEC’s letter toShearman & Sterling,dated July 2, 1993, or similar no-action letters; and | |
• | in the absence of an exception from the position stated immediately above, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the exchange notes. |
127
Table of Contents
• | to delay accepting for exchange any outstanding notes (if we amend or extend the exchange offer); | |
• | to extend the exchange offer or to terminate the exchange offer if any of the conditions set forth below under “— Conditions to the Exchange Offer” have not been satisfied, by giving oral or written notice of such delay, extension or termination to the exchange agent; and | |
• | subject to the terms of the registration rights agreement, to amend the terms of the exchange offer in any manner. |
• | The exchange notes to be received will not be tradeable by the holder without restriction under the Securities Act or the Exchange Act and without material restriction under the blue sky or securities laws of substantially all of the states of the United States; |
128
Table of Contents
• | the exchange offer or the making of any exchange by a holder of outstanding notes violates any applicable law or any applicable interpretation of the staff of the SEC; or | |
• | any action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the exchange offer that, in our judgment, would reasonably be expected to impair our ability to proceed with the exchange offer. |
• | the representations described under “— Purpose and Effect of the Exchange Offer,” “— Procedures for Tendering Outstanding Notes” and “Plan of Distribution;” or | |
• | any other representations as may be reasonably necessary under applicable SEC rules, regulations, or interpretations to make available to us an appropriate form for registration of the exchange notes under the Securities Act. |
• | complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal, have the signature on the letter of transmittal guaranteed if required by the letter of transmittal and mail or deliver such letter of transmittal or facsimile thereof to the exchange agent at the address set forth below under “— Exchange Agent” prior to the expiration date; or |
129
Table of Contents
• | comply with DTC’s Automated Tender Offer Program procedures described below. |
• | the exchange agent must receive certificates for outstanding notes along with the letter of transmittal prior to the expiration date; | |
• | the exchange agent must receive a timely confirmation of book-entry transfer of outstanding notes into the exchange agent’s account at DTC according to the procedures for book-entry transfer described below or a properly transmitted agent’s message prior to the expiration date; or | |
• | the holder must comply with the guaranteed delivery procedures described below. |
• | make appropriate arrangements to register ownership of the outstanding notes in your name; or | |
• | obtain a properly completed bond power from the registered holder of outstanding notes. |
• | by a registered holder of the outstanding notes who has not completed the box entitled “Special Registration Instructions” or “Special Delivery Instructions” on the letter of transmittal; or | |
• | for the account of an eligible guarantor institution. |
130
Table of Contents
• | DTC has received an express acknowledgment from a participant in its Automated Tender Offer Program that is tendering outstanding notes that are the subject of the book-entry confirmation; | |
• | the participant has received and agrees to be bound by the terms of the letter of transmittal, or in the case of an agent’s message relating to guaranteed delivery, that such participant has received and agrees to be bound by the applicable notice of guaranteed delivery; and | |
• | we may enforce that agreement against such participant. |
• | outstanding notes or a timely book-entry confirmation of such outstanding notes into the exchange agent’s account at the book-entry transfer facility; and | |
• | a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent’s message. |
• | you are acquiring the exchange notes in the ordinary course of your business; | |
• | you do not have an arrangement or understanding with any person to participate in a distribution of the exchange notes within the meaning of the Securities Act; | |
• | you are not an “affiliate,” as defined in Rule 405 of the Securities Act, of the Issuers or any of the guarantors; and | |
• | if you are not a broker dealer, you are not engaged in, and do not intend to engage in, a distribution of the exchange notes. |
131
Table of Contents
• | the tender is made through an eligible guarantor institution; | |
• | prior to the expiration date, the exchange agent receives from such eligible guarantor institution either a properly completed and duly executed notice of guaranteed delivery, by facsimile transmission, mail, or hand delivery or a properly transmitted agent’s message and notice of guaranteed delivery, that (1) sets forth your name and address, the certificate number(s) of such outstanding notes and the principal amount of outstanding notes tendered; (2) states that the tender is being made thereby; and (3) guarantees that, within three New York Stock Exchange trading days after the expiration date, the letter of transmittal, or facsimile thereof, together with the outstanding notes or a book-entry confirmation, and any other documents required by the letter of transmittal, will be deposited by the eligible guarantor institution with the exchange agent; and | |
• | the exchange agent receives the properly completed and executed letter of transmittal or facsimile thereof, as well as certificate(s) representing all tendered outstanding notes in proper form for transfer or a book-entry confirmation of transfer of the outstanding notes into the exchange agent’s account at DTC, and all other documents required by the letter of transmittal within three New York Stock Exchange trading days after the expiration date. |
132
Table of Contents
• | the exchange agent must receive a written notice, which may be by telegram, telex, facsimile or letter, of withdrawal at its address set forth below under “— Exchange Agent;” or | |
• | you must comply with the appropriate procedures of DTC’s Automated Tender Offer Program system. |
• | specify the name of the person who tendered the outstanding notes to be withdrawn; | |
• | identify the outstanding notes to be withdrawn, including the certificate numbers and principal amount of the outstanding notes; and | |
• | where certificates for outstanding notes have been transmitted, specify the name in which such outstanding notes were registered, if different from that of the withdrawing holder. |
• | the serial numbers of the particular certificates to be withdrawn; and | |
• | a signed notice of withdrawal with signatures guaranteed by an eligible institution unless you are an eligible guarantor institution. |
133
Table of Contents
By Registered and Certified Mail: Wells Fargo Bank , N.A. Corporate Trust Operations MAC N9303-121 P.O. Box 1517 Minneapolis, MN 55480 | By Overnight Courier or Regular Mail: Wells Fargo Bank, N.A. Corporate Trust Operations MAC N9303-121 6(th) & Marquette Avenue Minneapolis, MN 55479 or Facsimile:(612) 667-6282 Telephone:(800) 344-5128 | By Hand Delivery: Wells Fargo Bank, N.A. Corporate Trust Services 608 2(nd) Avenue South Northstar East Building — 12(th) Floor Minneapolis, MN 55402 |
• | SEC registration fees; | |
• | fees and expenses of the exchange agent and trustee; | |
• | accounting and legal fees and printing costs; and | |
• | related fees and expenses. |
• | certificates representing outstanding notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of outstanding notes tendered; |
• | tendered outstanding notes are registered in the name of any person other than the person signing the letter of transmittal; or |
134
Table of Contents
• | a transfer tax is imposed for any reason other than the exchange of outstanding notes under the exchange offer. |
• | as set forth in the legend printed on the notes as a consequence of the issuances of the outstanding notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws; and | |
• | as otherwise set forth in the confidential offering circular distributed in connection with the private placement of the outstanding notes. |
135
Table of Contents
The Notes |
• | are general unsecured obligations of the Issuers; | |
• | arepari passuin right of payment with all existing and future unsecured senior Indebtedness of the Issuers; | |
• | are senior in right of payment to any future subordinated Indebtedness of the Issuers; and | |
• | are unconditionally guaranteed, jointly and severally, by the Guarantors and by the Parent Guarantors. |
The Note Guarantees |
• | is a general unsecured obligation of the Guarantor or Parent Guarantor, as applicable; | |
• | ispari passuin right of payment with all existing and future unsecured senior Indebtedness of that Guarantor or Parent Guarantor, as applicable; and | |
• | is senior in right of payment to any future subordinated Indebtedness of that Guarantor or Parent Guarantor, as applicable. |
136
Table of Contents
Alpha Capital |
137
Table of Contents
(1) immediately after giving effect to that transaction, no Default or Event of Default exists; and | |
(2) either: |
(a) the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger assumes all the obligations of that Guarantor under the indenture, its Note Guarantee and the registration rights agreement pursuant to a supplemental indenture reasonably satisfactory to the trustee; or | |
(b) the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the indenture. |
(1) in connection with any sale or other disposition of all or substantially all of the assets of that Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) the Company or a Restricted Subsidiary of the Company, if the sale or other disposition does not violate the “Asset Sale” provisions of the indenture; | |
(2) in connection with any sale or other disposition of all of the Capital Stock of that Guarantor to a Person that is not (either before or after giving effect to such transaction) the Company or a Restricted Subsidiary of the Company, if the sale or other disposition does not violate the “Asset Sale” provisions of the indenture; | |
(3) if the Company designates any Restricted Subsidiary that is a Guarantor to be an Unrestricted Subsidiary in accordance with the applicable provisions of the indenture; |
138
Table of Contents
(4) upon legal defeasance or satisfaction and discharge of the indenture as provided below under the captions “— Legal Defeasance and Covenant Defeasance” and “— Satisfaction and Discharge”; or | |
(5) upon the release of such Guarantors’ guarantee under the Credit Agreement. |
The Parent Guarantee of a Parent Guarantor will be released: |
(a) in connection with any sale or other disposition of all or substantially all of the assets of that Parent Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) the Company, another Parent Guarantor or a Restricted Subsidiary of the Company; | |
(b) in connection with any sale or other disposition of all of the Capital Stock of that Parent Guarantor to a Person that is not (either before or after giving effect to such transaction) the Company, another Parent Guarantor or a Restricted Subsidiary of the Company; | |
(c) upon legal defeasance or satisfaction and discharge of the indenture as provided below under the captions “— Legal Defeasance and Covenant Defeasance” and “— Satisfaction and Discharge”; | |
(d) upon the release of such Guarantors’ guarantee under the Credit Agreement; or |
(6) upon 30 days prior written notice to the Trustee that such Parent Guarantor is no longer able or willing to provide the Parent Guarantee;provided, however, that the Parent Guarantee of a Parent Guarantor shall not be released pursuant to this clause (6) if a demand for payment pursuant to the terms of such Parent Guarantee and the related supplemental indenture was made by holders of notes or the Trustee on their behalf prior to the delivery of the guarantee termination to the Trustee, and such demand has not been satisfied or waived |
(1) at least 65% of the aggregate principal amount of notes issued under the indenture (excluding notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption; and | |
(2) the redemption occurs within 180 days of the date of the closing of such Public Equity Offering. |
139
Table of Contents
Year | Percentage | |||
2008 | 105.000 | % | ||
2009 | 102.500 | % | ||
2010 and thereafter | 100.000 | % |
Change of Control |
(1) accept for payment all notes or portions of notes properly tendered pursuant to the Change of Control Offer; | |
(2) deposit with the paying agent an amount equal to the Change of Control Payment in respect of all notes or portions of notes properly tendered; and | |
(3) deliver or cause to be delivered to the trustee the notes properly accepted together with an officers’ certificate stating the aggregate principal amount of notes or portions of notes being purchased by the Issuers. |
140
Table of Contents
Asset Sales |
(1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or otherwise disposed of; and | |
(2) at least 75% of the consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of cash, Cash Equivalents or Marketable Securities. For purposes of this provision, each of the following will be deemed to be cash: |
(a) any liabilities of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the notes or any Note Guarantee) that are assumed by the transferee of any such assets and as a result of which, the Company or such Restricted Subsidiary is released from further liability; | |
(b) any securities, notes, other obligations or assets received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash or Cash Equivalents within 180 days of the receipt thereof, to the extent of the cash or Cash Equivalents received in that conversion; | |
(c) any Designated Non-cash Consideration received by the Company or any of its Restricted Subsidiaries in such Asset Sale; provided that the aggregate Fair Market Value of such Designated Non-cash Consideration, taken together with the Fair Market Value at the time of receipt of all other Designated Non-cash Consideration received pursuant to this clause (c) less the amount of Net Proceeds previously realized in cash from prior Designated Non-cash |
141
Table of Contents
Consideration is less than the greater of (x) 5% of Total Assets at the time of the receipt of such Designated Non-cash Consideration (with the Fair Market Value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value), and (y) $15.0 million; and | |
(d) any Capital Stock or assets of the kind referred to in clauses (2) or (4) of the next paragraph of this covenant. |
(a) apply such Net Proceeds, at its option: |
(1) to repay (w) Indebtedness and other Obligations under a Credit Facility, (x) any Indebtedness that was secured by the assets sold in such Asset Sale, (y) otherpari passuIndebtedness (provided, that the Company shall also equally and ratably reduce Indebtedness under the notes by making an offer (in accordance with the procedures set forth below for an Asset Sale) to all holders to purchase at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, thepro rataprincipal amount of notes), or (z) Indebtedness of a Restricted Subsidiary that is not a Guarantor, in each case other than Indebtedness owed to the Company or an Affiliate of the Company; | |
(2) to acquire all or substantially all of the assets of, or any Capital Stock of, another Permitted Business;provided,that in the case of any such acquisition of Capital Stock, the Permitted Business is or becomes a Restricted Subsidiary of the Company; | |
(3) to make a capital expenditure; or | |
(4) to acquire other assets that are not classified as current assets under GAAP and that are used or useful in a Permitted Business; or |
(b) enter into a binding commitment to apply the Net Proceeds pursuant to clauses (a)(2), (3) or (4) above, provided that such binding commitment shall be treated as a permitted application of the Net Proceeds from the date of such commitment until the earlier of (x) the date on which such acquisition or expenditure is consummated, and (y) the 180th day following the expiration of the aforementioned 365 day period. |
142
Table of Contents
(1) if the notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the notes are listed; or | |
(2) if the notes are not listed on any national securities exchange, on apro ratabasis. |
Changes in Covenants when notes Rated Investment Grade |
(1) the notes are assigned an Investment Grade Rating from both of the Rating Agencies; and | |
(2) no Default or Event of Default shall have occurred and be continuing, |
143
Table of Contents
Restricted Payments |
(1) declare or pay any dividend or make any other payment or distribution on account of the Company’s or any of its Restricted Subsidiaries’ Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company’s or any of its Restricted Subsidiaries’ Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company and other than dividends or distributions payable to the Company or a Restricted Subsidiary of the Company); | |
(2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company; | |
(3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value, any Indebtedness of the Company or any Guarantor that is contractually subordinated to the notes or to any Note Guarantee (excluding any intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries), except a payment of interest or principal at the Stated Maturity thereof; or | |
(4) make any Restricted Investment; |
144
Table of Contents
(a) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing prior to the date of the indenture to the end of the Company’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit);plus | |
(b) 100% of the aggregate net proceeds, including cash and the Fair Market Value of property other than cash, received by the Company since the date of the indenture (x) as a contribution to its common equity capital or (y) from the issue or sale of Equity Interests of the Company or any direct or indirect parent company of the Company (other than Disqualified Stock, Designated Preferred Stock and Excluded Contributions) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company or any direct or indirect parent company of the Company that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company);plus | |
(c) to the extent that any Restricted Investment that was made after the date of the indenture is sold for cash or otherwise liquidated or repaid for cash, 100% of the aggregate amount received in cash and the Fair Market Value of property other than cash received;plus | |
(d) to the extent that any Unrestricted Subsidiary of the Company designated as such after the date of the indenture is redesignated as a Restricted Subsidiary after the date of the indenture or has been merged into, consolidated or amalgamated with or into, or transfers or conveys its assets to, the Company or a Restricted Subsidiary of the Company, 100% of the Fair Market Value of the Company’s Investment in such Subsidiary as of the date of such redesignation, combination or transfer (or of the assets transferred or conveyed, as applicable) after deducting any Indebtedness associated with the Unrestricted Subsidiary so designated or combined or any Indebtedness associated with the assets so transferred or conveyed);plus | |
(e) 100% of any dividends or distributions received by the Company or a Wholly-Owned Restricted Subsidiary of the Company after the date of the indenture from an Unrestricted Subsidiary of the Company, to the extent that such dividends or distributions were not otherwise included in the Consolidated Net Income of the Company for such period. |
(1) the payment of any dividend or distribution or the consummation of any redemption within 60 days after the date of declaration of the dividend or distribution or giving of the redemption notice, as the case may be, if, at the date of declaration or notice, the dividend, distribution or redemption payment would have complied with the provisions of the indenture; | |
(2) the making of any Restricted Payment in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, Equity Interests of the Company or any direct or indirect parent company of the Company (other than Disqualified Stock) or from the substantially concurrent contribution of common equity capital to the Company;providedthat the amount of any such net cash proceeds that are utilized for any such Restricted Payment will be excluded from clause (3)(b) of the preceding paragraph; | |
(3) the repurchase, redemption, defeasance or other acquisition or retirement for value of Indebtedness of the Company or any Restricted Subsidiary that is contractually subordinated to the |
145
Table of Contents
notes or to any Note Guarantee with the net cash proceeds from a substantially concurrent incurrence of Permitted Refinancing Indebtedness; | |
(4) the payment of any dividend (or, in the case of any partnership or limited liability company, any similar distribution) by a Restricted Subsidiary of the Company to the holders of its Equity Interests on apro ratabasis; | |
(5) the repurchase, redemption or other acquisition or retirement (or dividends or distributions to any direct or indirect parent company of the Company to finance any such repurchase, redemption or other acquisition or retirement) for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company or any direct or indirect parent company of the Company held by any current or former officer, director or employee of the Company or any of its Restricted Subsidiaries or any direct or indirect parent company of the Company pursuant to any equity subscription agreement, stock option agreement, shareholders’ or members’ agreement or similar agreement, plan or arrangement;providedthat the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $2.0 million in any calendar year (with unused amounts in any calendar year being permitted to be carried over for the two succeeding calendar years);provided further, that the amount in any calendar year may be increased by an amount not to exceed: |
(a) the cash proceeds received by the Company or any of its Restricted Subsidiaries from the sale of Equity Interests (other than Disqualified Stock) of the Company or any direct or indirect parent company of the Company (to the extent contributed to the Company) to members of management, directors or consultants of the Company and its Restricted Subsidiaries or any direct or indirect parent company of the Company that occurs after the date of the indenture (providedthat the amount of such cash proceeds utilized for any such repurchase, retirement, other acquisition, or dividend or distribution will not increase the amount available for Restricted Payments under clause (3) of the immediately proceeding paragraph);plus | |
(b) the cash proceeds of key man life insurance policies received by the Company or any direct or indirect parent company of the Company (to the extent contributed to the Company) and its Restricted Subsidiaries after the date of the indenture; |
(6) the repurchase of Equity Interests deemed to occur upon the exercise of stock options to the extent such Equity Interests represent a portion of the exercise price of those stock options; | |
(7) the declaration and payment of regularly scheduled or accrued dividends or distributions to holders of any class or series of Disqualified Stock of the Company or any Restricted Subsidiary of the Company issued on or after the date of the indenture in accordance with the Fixed Charge Coverage Ratio test described below under the caption “— Incurrence of Indebtedness and Issuance of Preferred Equity;” | |
(8) without duplication as to amounts distributable with respect to taxes under clause (9) below, so long as the Company is a pass-through or disregarded entity for U.S. federal income tax purposes, Tax Distributions to members of the Company in an amount, with respect to any period after the last day of the fiscal quarter preceding the issuance of the notes in 2004, not to exceed the Tax Amount for such period; | |
(9) without duplication as to amounts distributed under clause (8) above, Permitted Payments to Parent; | |
(10) purchases of receivables pursuant to a Receivables Repurchase Obligation in connection with a Qualified Receivables Financing; | |
(11) the declaration and payment of dividends or distributions to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued after the date of the indenture and |
146
Table of Contents
the declaration and payment of dividends to any direct or indirect parent company of the Company, the proceeds or which will be used to fund the payment of dividends or distributions to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) of any direct or indirect parent company of the Company issued after the date of the indenture;provided, however, that (A) for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock, after giving effect to such issuance (and the payment of dividends or distributions) on a pro forma basis, the Company could incur an additional $1.00 of Indebtedness pursuant to the Fixed Charge Coverage Ratio, and (B) the aggregate amount of dividends declared and paid pursuant to this clause (11) does not exceed the net cash proceeds actually received by the Company (including any such proceeds contributed to the Company by any direct or indirect parent company of the Company) from any such sale of Designated Preferred Stock (other than Disqualified Stock) issued after the date of the indenture; | |
(12) any payments made in connection with the consummation of the Transactions (as defined in the offering circular relating to the outstanding notes); | |
(13) Investments that are made with Excluded Contributions; | |
(14) other Restricted Payments in an aggregate amount not to exceed $10.0 million since the date of the indenture; | |
(15) the satisfaction of change of control obligations once the Company has fulfilled its obligations under the indenture with respect to a Change of Control; | |
(16) the repayment of intercompany debt that was permitted to be incurred under the indenture; and | |
(17) the payment of dividends or distributions on the Company’s common equity (or the payment of dividends or distributions to a direct or indirect parent company of the Company to fund the payment by such parent company of dividends or distributions on its common equity) of up to 5.0% per calendar year of the net proceeds received by the Company from any Public Equity Offering or contributed to the Company by a direct or indirect parent company of the Company from any Public Equity Offering;providedthat the amount of any such net cash proceeds that are utilized for any such Restricted Payment will be excluded from clause (3)(b) of the preceding paragraph; |
Incurrence of Indebtedness and Issuance of Preferred Equity |
147
Table of Contents
(1) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness and letters of credit and bankers’ acceptances thereunder under Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) not to exceed $200.0 million; | |
(2) the incurrence by the Company and its Restricted Subsidiaries of Indebtedness to the extent outstanding on the date of the indenture; | |
(3) the incurrence by the Company and the Guarantors (including any future Guarantor) of Indebtedness represented by the notes and the related Note Guarantees to be issued on the date of the indenture and the exchange notes and the related Note Guarantees to be issued pursuant to the registration rights agreement; | |
(4) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings, industrial revenue bonds or purchase money obligations, synthetic lease obligations, or the Attributable Debt with respect to sale and leaseback transactions, in each case, incurred for the purpose of financing all or any part of the purchase price or cost of design, development, construction, installation or improvement of property (real or personal and including Capital Stock), plant or equipment used in the business of the Company or any of its Restricted Subsidiaries (in each case, whether through the direct purchase of such assets or the Equity Interests of any Person owning such assets), in an aggregate principal amount not to exceed at any time outstanding the greater of (x) $20.0 million and (y) 5% of Total Assets; | |
(5) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge any Indebtedness (other than intercompany Indebtedness) that was permitted by the indenture to be incurred under the first paragraph of this covenant or clauses (2), (3), (4), (5), (12), (15) or (16) of this paragraph; | |
(6) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries;provided, however, that: |
(a) if the Company or any Guarantor is the obligor on such Indebtedness and the payee is not the Company or a Guarantor, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations then due with respect to the notes, in the case of the Company, or the Note Guarantee, in the case of a Guarantor; and | |
(b) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary of the Company, and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary of the Company, will be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6); |
148
Table of Contents
(7) the issuance by any of the Company’s Restricted Subsidiaries to the Company or to any of its Restricted Subsidiaries of shares of preferred equity;provided, however, that: |
(a) any subsequent issuance or transfer of Equity Interests that results in any such preferred equity being held by a Person other than the Company or a Restricted Subsidiary of the Company, and | |
(b) any sale or other transfer of any such preferred equity to a Person that is not either the Company or a Restricted Subsidiary of the Company, |
(8) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations in the ordinary course of business; | |
(9) the guarantee by the Company or any of the Restricted Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this covenant (including the first paragraph hereof);providedthat if the Indebtedness being guaranteed is subordinated to orpari passuwith the notes, then the Guarantee shall be subordinated orpari passu,as applicable, to the same extent as the Indebtedness guaranteed; | |
(10) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness in respect of workers’ compensation claims, payment obligations in connection with health or other types of social security benefits, unemployment or other insurance or self-insurance obligations, reclamation, statutory obligations, bankers’ acceptances, performance, surety or similar bonds and letters of credit or completion or performance guarantees (including without limitation, performance guarantees pursuant to coal supply agreements or equipment leases), or other similar obligations in the ordinary course of business; | |
(11) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds; | |
(12) Indebtedness or Disqualified Stock of Persons that are acquired by the Company or any of its Restricted Subsidiaries or merged into a Restricted Subsidiary in accordance with the terms of the indenture;provided, however, that such Indebtedness or Disqualified Stock is not incurred in contemplation of such acquisition or merger or to provide all or a portion of the funds or credit support required to consummate such acquisition or merger;provided further, however, that, for any such indebtedness outstanding under this clause (12) in excess of $10.0 million on the date such Person is acquired by the Company or a Restricted Subsidiary, after giving effect to such acquisition and the incurrence of such Indebtedness either: |
(a) the Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first sentence of this covenant; or | |
(b) the Fixed Charge Coverage Ratio would not be less than immediately prior to such acquisition; |
(13) Indebtedness incurred by a Receivables Subsidiary in a Qualified Receivables Financing that is not recourse to the Company or any Restricted Subsidiary of the Company other than a Receivables Subsidiary (except for Standard Securitization Undertakings); | |
(14) the incurrence of Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price, earn outs, or similar obligations, in each case, incurred or assumed in connection with the disposition or acquisition of any business, assets or a Subsidiary in accordance with the terms of the indenture, other than guarantees |
149
Table of Contents
of Indebtedness incurred or assumed by any Person acquiring all or any portion of such business, assets or Subsidiary for the purpose of financing such acquisition; | |
(15) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness or the issuance of Disqualified Stock in an aggregate principal amount (or accreted value, as applicable) or having an aggregate liquidation preference at any time outstanding not to exceed $10.0 million (it being understood that any Indebtedness or Disqualified Stock incurred pursuant to this clause (15) shall cease to be deemed incurred or outstanding for purposes of this covenant from and after the date on which the Company, or the Restricted Subsidiary, as the case may be, could have incurred such Indebtedness or Disqualified Stock under the first paragraph of this covenant without reliance upon this clause (15)); and | |
(16) Contribution Indebtedness. |
(1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount; | |
(2) the principal amount of the Indebtedness, in the case of any other Indebtedness; and | |
(3) in respect of Indebtedness of another Person secured by a Lien on the assets of the specified Person, the lesser of: |
(a) the Fair Market Value of such assets at the date of determination; and | |
(b) the amount of the Indebtedness of the other Person. |
150
Table of Contents
Liens |
Limitation on Sale and Leaseback Transactions |
(1) after givingpro formaeffect to the application of the proceeds from such transaction, the Company or that Restricted Subsidiary, as applicable, could have (a) incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction under the covenant described above under the caption “— Incurrence of Indebtedness and Issuance of Preferred Equity” and (b) incurred a Lien to secure such Indebtedness pursuant to the covenant described above under the caption “— Liens;” and | |
(2) the transfer of assets in that sale and leaseback transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, the covenant described above under the caption “— Repurchase at the Option of Holders — Asset Sales.” |
Dividend and Other Payment Restrictions Affecting Subsidiaries |
(a) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries; | |
(b) make loans or advances to the Company or any of its Restricted Subsidiaries; or | |
(c) sell, lease or transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. |
(1) agreements governing Indebtedness outstanding on the issue date, the Credit Agreement and Credit Facilities as in effect on the date of the indenture and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements;providedthat the amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings are not materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date of the indenture; | |
(2) the indenture, the notes and the Note Guarantees; | |
(3) applicable law, rule, regulation, order, approval, license, permit or similar restriction; | |
(4) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties |
151
Table of Contents
or assets of any Person, other than the Person, or the property or assets of the Person, so acquired;providedthat, in the case of Indebtedness, such Indebtedness was permitted by the terms of the indenture to be incurred; | |
(5) non-assignment provisions or subletting restrictions in contracts, leases and licenses entered into in the ordinary course of business; | |
(6) purchase money obligations for property (including Capital Stock) acquired in the ordinary course of business and Capital Lease Obligations that impose restrictions on the property purchased or leased of the nature described in clause (c) of the preceding paragraph; | |
(7) any agreement for the sale or other disposition of the Capital Stock or assets of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending closing of the sale or other disposition; | |
(8) Permitted Refinancing Indebtedness;providedthat the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; | |
(9) Liens permitted to be incurred under the provisions of the covenant described above under the caption “— Liens” that limits the right of the debtor to dispose of the assets securing such Indebtedness; | |
(10) provisions limiting the disposition or distribution of assets or property or transfer of Capital Stock in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements, limited liability company organizational documents, and other similar agreements entered into in the ordinary course of business or with the approval of the Company’s Board of Directors, which limitation is applicable only to the assets, property or Capital Stock that are the subject of such agreements; | |
(11) any encumbrance or restriction of a Receivables Subsidiary effected in connection with a Qualified Receivables Financing;provided, however, that such restrictions apply only to such Receivables Subsidiary; | |
(12) restrictions on cash, Cash Equivalents, Marketable Securities or other deposits or net worth imposed by customers or lessors under contracts or leases entered into in the ordinary course of business; | |
(13) other Indebtedness of Restricted Subsidiaries (i) that are Guarantors that is incurred subsequent to the date of the indenture pursuant to the first paragraph of the covenant described under “— Incurrence of Indebtedness and Issuance of Preferred Equity” or (ii) that is incurred subsequent to the date of the indenture pursuant to clause (15) of the second paragraph of the covenant described under “— Incurrence of Indebtedness and Issuance of Preferred Equity”; | |
(14) encumbrances on property that exist at the time the property was acquired by the Company or a Restricted Subsidiary; | |
(15) Contractual encumbrances or restrictions in effect on the issue date, and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements;providedthat the amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings are not materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date of the indenture; or | |
(16) any encumbrances or restrictions imposed by any amendments or refinancings of the contracts, instruments or obligations referred to above in clauses (1) through (15); provided that such amendments or refinancings are not materially more restrictive, taken as a whole, then such encumbrances and restrictions prior to such amendment or refinancing. |
152
Table of Contents
Merger, Consolidation or Sale of Assets |
(1) either: (a) the Company or Alpha Capital is the surviving entity; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Company or Alpha Capital) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a corporation, partnership or limited liability company organized or existing under the laws of the United States, any state of the United States or the District of Columbia; | |
(2) the Person formed by or surviving any such consolidation or merger (if other than the Company or Alpha Capital) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of such Issuer under the notes, the indenture and the registration rights agreement pursuant to agreements reasonably satisfactory to the trustee; | |
(3) immediately after such transaction, no Default or Event of Default exists; and | |
(4) the Issuers or the Person formed by or surviving any such consolidation or merger (if other than the Company or Alpha Capital), or to which such sale, assignment, transfer, conveyance or other disposition has been made would, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, (a) be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption “— Incurrence of Indebtedness and Issuance of Preferred Equity” or (b) the Fixed Charge Coverage Ratio for the successor entity and its Restricted Subsidiaries would not be less than such ratio for the Company and its Restricted Subsidiaries immediately prior to such transaction. |
(1) a merger of either the Company or Alpha Capital with an Affiliate solely for the purpose of reincorporating the Company or Alpha Capital in another jurisdiction; or | |
(2) any consolidation or merger, or any sale, assignment, transfer, conveyance, lease or other disposition of assets between or among the Company and its Restricted Subsidiaries; or | |
(3) a merger so that the Company may become a “C corporation.” |
Transactions with Affiliates |
(1) the Affiliate Transaction is on terms that are not materially less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and |
153
Table of Contents
(2) the Company delivers to the trustee: |
(a) a resolution of the Board of Directors of the Company set forth in an officers’ certificate certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors of the Company; and | |
(b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $25.0 million, an opinion as to the fairness to the Company or such Subsidiary of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. |
(1) any employment agreement, employee benefit plan, officer or director indemnification agreement or any similar arrangement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and payments pursuant thereto; | |
(2) transactions (including a merger) between or among the Company and/or any of its Restricted Subsidiaries; | |
(3) transactions with a Person (other than an Unrestricted Subsidiary of the Company) that is an Affiliate of the Company solely because the Company owns, directly or through a Restricted Subsidiary, an Equity Interest in, or controls, such Person; | |
(4) payment of reasonable fees to, and indemnity provided on behalf of, officers, directors, employees or consultants of the Company or any of its Restricted Subsidiaries or any direct or indirect parent company of the Company; | |
(5) any issuance of Equity Interests (other than Disqualified Stock) of the Company to Affiliates of the Company or to any director, officer, employee or consultant of the Company or any direct or indirect parent company of the Company, and the granting and performance of registration rights; | |
(6) Restricted Payments and Investments that do not violate the provisions of the indenture described above under the caption “— Restricted Payments;” | |
(7) the entering into any agreement to pay, and the payment of, customary annual management, consulting, monitoring and advisory fees and related expenses to the Equity Investors; | |
(8) loans or advances to employees or consultants in the ordinary course of business not to exceed $2.0 million in the aggregate at any one time outstanding; | |
(9) any transaction effected as part of a Qualified Receivables Financing; | |
(10) any transaction in which the Company or any of its Restricted Subsidiaries, as the case may be, delivers to the trustee a letter from an accounting, appraisal or investment banking firm of national standing stating that such transaction is fair to the Company or such Restricted Subsidiary from a financial point of view or that such transaction meets the requirements of clause (1) of the preceding paragraph; | |
(11) the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under the terms of, any acquisition agreements or members’ or stockholders agreement or related documents to which it is a party as of the date of the indenture and any amendment thereto or similar agreements which it may enter into thereafter;provided, however,that the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under, any future amendment to any such existing agreement or under any similar agreement entered into after the date of the indenture shall only be permitted by this clause (11) to the extent that the terms of any such existing agreement, together with all amendments thereto, taken |
154
Table of Contents
as a whole, or such new agreement are not otherwise more disadvantageous to the holders of the notes in any material respect than the original agreement as in effect on the date of the indenture; | |
(12) transactions with Unrestricted Subsidiaries, customers, clients, suppliers, joint venture partners or purchasers or sellers of goods or services, or lessors or lessees of property, in each case in the ordinary course of business and otherwise in compliance with the terms of the indenture which are, in the aggregate (taking into account all the costs and benefits associated with such transactions), materially no less favorable to the Company or its Restricted Subsidiaries than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person, in the reasonable determination of the Board of Directors of the Company or senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party; | |
(13) (x) guarantees of performance by the Company and its Restricted Subsidiaries of Unrestricted Subsidiaries in the ordinary course of business, except for guarantees of Indebtedness in respect of borrowed money, and (y) pledges of Equity Interests of Unrestricted Subsidiaries for the benefit of lenders of Unrestricted Subsidiaries. | |
(14) if such Affiliate Transaction is with a Person in its capacity as a holder of Indebtedness or Capital Stock of the Company or any Restricted Subsidiary where such Person is treated no more favorably than the holders of Indebtedness or Capital Stock of the Company or any Restricted Subsidiary; | |
(15) transactions effected pursuant to agreements in effect on the issue date and any amendment, modification or replacement of such agreement (so long as such amendment or replacement is not materially more disadvantageous to the holders of the notes, taken as a whole); and | |
(16) payments to the Equity Investors made for any financial advisory, financing or other investment banking activities, including without limitation, in connection with acquisitions or divestitures, which payments are approved by a majority of the Board of Directors. |
Restrictions on Activities of Alpha Capital |
Business Activities |
Additional Note Guarantees |
155
Table of Contents
Designation of Restricted and Unrestricted Subsidiaries |
Payments for Consent |
156
Table of Contents
(1) default for 30 days in the payment when due of interest on, or Additional Interest, if any, with respect to, the notes; | |
(2) default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on, the notes; | |
(3) failure by the Company or any of its Restricted Subsidiaries to comply with the provisions described under the captions “— Repurchase at the Option of Holders — Change of Control” or “— Certain Covenants — Merger, Consolidation or Sale of Assets;” | |
(4) failure by the Company or any of its Restricted Subsidiaries for 60 days after notice to the Company by the trustee or the holders of at least 25% in aggregate principal amount of the notes then outstanding voting as a single class to comply with any of the other agreements in the indenture; | |
(5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Significant Subsidiaries or group of Restricted Subsidiaries that taken as a whole would constitute a Significant Subsidiary (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists, or is created after the date of the indenture (but excluding Indebtedness owing to the Company or a Restricted Subsidiary), if that default: |
(a) is caused by a failure to pay principal of, or interest or premium, if any, on, such Indebtedness prior to the expiration of the grace period provided in such Indebtedness following the Stated Maturity of such Indebtedness (a“Payment Default”); or | |
(b) results in the acceleration of such Indebtedness prior to its Stated Maturity, |
(6) failure by the Company or any of its Significant Subsidiaries, or group of Restricted Subsidiaries that taken as a whole would constitute a Significant Subsidiary, to pay final and non-appealable judgments entered by a court or courts of competent jurisdiction aggregating in excess of $15.0 million (net of any amounts which are covered by insurance or bonded), which judgments are not paid, waived, satisfied discharged or stayed for a period of 60 days; |
157
Table of Contents
(7) except as permitted by the indenture, any Note Guarantee of any Significant Subsidiary or group of Restricted Subsidiaries that taken as a whole would constitute a Significant Subsidiary is held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force and effect (other than in accordance with the terms of such Note Guarantee and the indenture), or any Guarantor, or any Person acting on behalf of any Guarantor, denies or disaffirms its obligations under its Note Guarantee and such Default continues for 10 days; and | |
(8) certain events of bankruptcy or insolvency described in the indenture with respect to the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary. |
(1) such holder has previously given the trustee notice that an Event of Default is continuing; | |
(2) holders of at least 25% in aggregate principal amount of the then outstanding notes have requested the trustee to pursue the remedy; | |
(3) such holders have offered the trustee reasonable security or indemnity against any loss, liability or expense; | |
(4) the trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity; and | |
(5) holders of a majority in aggregate principal amount of the then outstanding notes have not given the trustee a direction inconsistent with such request within such 60-day period. |
158
Table of Contents
(1) the rights of holders of outstanding notes to receive payments in respect of the principal of, or interest or premium and Additional Interest, if any, on, such notes when such payments are due from the trust referred to below; | |
(2) the Issuers’ obligations with respect to the notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payment and money for security payments held in trust; | |
(3) the rights, powers, trusts, duties and immunities of the trustee, and the Issuers’ and the Guarantors’ obligations in connection therewith; and | |
(4) the Legal Defeasance provisions of the indenture. |
(1) the Issuers must irrevocably deposit with the trustee, in trust, for the benefit of the holders of the notes, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants, to pay the principal of, or interest and premium and Additional Interest, if any, on, the outstanding notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Issuers must specify whether the notes are being defeased to such stated date for payment or to a particular redemption date; | |
(2) in the case of Legal Defeasance, the Issuers must deliver to the trustee an opinion of counsel reasonably acceptable to the trustee (subject to customary exceptions and exclusions) confirming that (a) the Issuers have received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of the indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of |
159
Table of Contents
counsel will confirm that, the holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; | |
(3) in the case of Covenant Defeasance, the Issuers must deliver to the trustee an opinion of counsel reasonably acceptable to the trustee (subject to customary exceptions and exclusions) confirming that the holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; | |
(4) no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit and the grant of any Lien securing such borrowing); | |
(5) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than the indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; | |
(6) the Issuers must deliver to the trustee an officers’ certificate stating that the deposit was not made by the Issuers with the intent of preferring the holders of notes over the other creditors of the Issuers with the intent of defeating, hindering, delaying or defrauding any creditors of the Issuers or others; and | |
(7) the Issuers must deliver to the trustee an officers’ certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with. |
(1) reduce the principal amount of notes whose holders must consent to an amendment, supplement or waiver; | |
(2) reduce the principal of or extend the fixed maturity of any note or alter the provisions with respect to the redemption of the notes (other than provisions relating to the covenants described above under the caption “— Repurchase at the Option of Holders”); | |
(3) reduce the rate of or extend the time for payment of interest, including default interest, on any note; | |
(4) waive a Default or Event of Default in the payment of principal of, or interest or premium, or Additional Interest, if any, on, the notes (except a rescission of acceleration of the notes by the holders of at least a majority in aggregate principal amount of the then outstanding notes and a waiver of the payment default that resulted from such acceleration); |
160
Table of Contents
(5) make any note payable in money other than that stated in the notes; | |
(6) make any change in the provisions of the indenture relating to waivers of past Defaults or impair the rights of holders of notes to receive payments of principal of, or interest or premium or Additional Interest, if any, on, the notes; | |
(7) waive a redemption payment with respect to any note (other than a payment required by one of the covenants described above under the caption “— Repurchase at the Option of Holders”); | |
(8) release any Guarantor that is a Significant Subsidiary from any of its obligations under its Note Guarantee or the indenture, except in accordance with the terms of the indenture; or | |
(9) make any change in the preceding amendment and waiver provisions. |
(1) to cure any ambiguity, defect or inconsistency; | |
(2) to provide for uncertificated notes in addition to or in place of certificated notes; | |
(3) to provide for the assumption of the Issuers’ or a Guarantor’s obligations to holders of notes and Note Guarantees in the case of a merger or consolidation or sale of all or substantially all of the Issuers’ or such Guarantor’s assets, as applicable; | |
(4) to make any change that would provide any additional rights or benefits to the holders of notes or that does not adversely affect the legal rights under the indenture of any such holder; | |
(5) to comply with requirements of the SEC in order to effect or maintain the qualification of the indenture under the Trust Indenture Act; | |
(6) to conform the text of the indenture, the Note Guarantees or the notes to any provision of this Description of Notes to the extent that such provision in this Description of Notes was intended to be a verbatim recitation of a provision of the indenture, the Note Guarantees or the notes; | |
(7) to provide for the issuance of additional notes in accordance with the limitations set forth in the indenture as of the date of the indenture; or | |
(8) to allow any Guarantor to execute a supplemental indenture and/or a Note Guarantee with respect to the Notes and to release Guarantors from the Note Guarantee in accordance with the terms of the indenture. |
(1) either: |
(a) all notes that have been authenticated and, except lost, stolen or destroyed notes that have been replaced or paid and notes for whose payment money has been deposited in trust or segregated and held in trust by the Issuers and thereafter repaid to the Issuers, have been delivered to the trustee for cancellation; or | |
(b) all notes that have not been delivered to the trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Issuers or any Guarantor have irrevocably deposited or caused to be deposited with the trustee as trust funds in trust solely for the benefit of the holders, |
161
Table of Contents
cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness (including all principal, interest, and Additional Interest) on the notes not delivered to the trustee for cancellation; |
(2) no Default or Event of Default has occurred and is continuing on the date of the deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Issuers or any Guarantor is a party or by which the Issuers or any Guarantor are bound; | |
(3) the Issuers or any Guarantor have paid or caused to be paid all other sums payable by them under the indenture; and | |
(4) the Issuers have delivered irrevocable instructions to the trustee under the indenture to apply the deposited money toward the payment of the notes at maturity or on the redemption date, as the case may be. |
(1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Restricted Subsidiary of, such specified Person; and | |
(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. |
162
Table of Contents
(1) 1.0% of the principal amount of the note; or | |
(2) the excess of: |
(a) the present value at such redemption date of (i) the redemption price of the note at June 1, 2008, (such redemption price being set forth in the table appearing above under the caption “— Optional Redemption”), plus (ii) all required interest payments due on the note through June 1, 2008, (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over | |
(b) the principal amount of the note. |
(1) an Investment by the Company or any Restricted Subsidiary of the Company in any other Person pursuant to which such Person shall become a Restricted Subsidiary of the Company or any Restricted Subsidiary of the Company, or shall be merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company; or | |
(2) the acquisition by the Company or any Restricted Subsidiary of the Company of the assets of any Person (other than a Restricted Subsidiary of the Company) which constitute all or substantially all of the assets of such Person or comprise any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business. |
(1) the sale, lease, conveyance or other disposition of any assets or rights;providedthat the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by the provisions of the indenture described above under the caption “— Repurchase at the Option of Holders — Change of Control” and/or the provisions described above under the caption “— Certain Covenants — Merger, Consolidation or Sale of Assets” and not by the provisions described above under the caption “— Certain Covenants — Asset Sales”; and | |
(2) the issuance or sale of Equity Interests in any of the Company’s Restricted Subsidiaries. |
(1) any single transaction or series of related transactions that involves assets or Equity Interests of any Restricted Subsidiary having a Fair Market Value of less than $5.0 million; | |
(2) a transfer of assets between or among the Company and any of its Restricted Subsidiaries; | |
(3) an issuance or sale of Equity Interests by a Restricted Subsidiary of the Company to the Company or to another Restricted Subsidiary of the Company; | |
(4) the sale or lease of inventory, products or services or the lease, assignment or sub-lease of any real or personal property in the ordinary course of business; | |
(5) the sale or discounting of accounts receivable in the ordinary course of business; |
163
Table of Contents
(6) any sale or other disposition of damaged, worn-out, obsolete or no longer useful assets or properties (including, without limitation, equipment and property sold in connection with the closure or abandonment of a mine) in the ordinary course of business; | |
(7) any sale of assets received by the Company or any of its Restricted Subsidiaries upon the foreclosure on a Lien; | |
(8) the sale or other disposition of cash, Cash Equivalents or Marketable Securities; | |
(9) a sale of accounts receivable and related assets of the type specified in the definition of “Receivables Financing” to a Receivables Subsidiary in a Qualified Receivables Financing; | |
(10) a transfer of accounts receivable and related assets of the type specified in the definition of “Receivables Financing” (or a fractional undivided interest therein) by a Receivables Subsidiary in a Qualified Receivables Financing; | |
(11) a Restricted Payment that does not violate the covenant described above under the caption “— Certain Covenants — Restricted Payments” or a Permitted Investment; | |
(12) any sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary; | |
(13) the granting of Liens not otherwise prohibited by the indenture; | |
(14) the surrender, or waiver of contract rights or settlement, release or surrender of contract, tort or other claims; and | |
(15) any exchange of assets related to a Permitted Business of comparable market value, as determined in good faith by the Company. |
(1) with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board; | |
(2) with respect to a partnership, the Board of Directors or other governing body of the general partner of the partnership; | |
(3) with respect to a limited liability company, the Board of Directors or other governing body, and in the absence of same, the manager or board of managers or the managing member or members or any controlling committee thereof; and |
164
Table of Contents
(4) with respect to any other Person, the board or committee of such Person serving a similar function. |
(1) in the case of a corporation, corporate stock; | |
(2) in the case of an association or business entity that is not a corporation, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; | |
(3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and | |
(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock. |
(1) United States dollars or, in the case of any Foreign Subsidiary that is a Restricted Subsidiary, such local currencies held by it from time to time in the ordinary course of business; | |
(2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (providedthat the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than one year from the date of acquisition; | |
(3) certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of “B” or better; | |
(4) repurchase obligations for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; | |
(5) commercial paper having one of the two highest ratings obtainable from Moody’s or S&P and, in each case, maturing within one year after the date of acquisition; | |
(6) securities issued or fully guaranteed by any state or commonwealth of the United States, or by any political subdivision or taxing authority thereof having one of the two highest ratings obtainable from Moody’s or S&P, and, in each case, maturing within one year after the date of acquisition; | |
(7) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition; and | |
(8) Indebtedness or Preferred Stock issued by Persons with a rating of “A” or higher from S&P or “A-2” from Moodys. |
165
Table of Contents
(1) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole to any “person” (as that term is used in Section 13(d) of the Exchange Act), other than the Permitted Holders; | |
(2) the adoption of a plan relating to the liquidation or dissolution of the Company; or | |
(3) the consummation of any transaction (including, without limitation, any merger or consolidation), the result of which is that any “person” (as defined above), other than the Permitted Holders, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the Company, measured by voting power rather than number of shares. |
(1) an amount equal to any extraordinary loss plus any net loss realized by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing such Consolidated Net Income;plus | |
(2) provision for taxes based on income, profits or capital (including without limitation state, franchise and similar taxes) of such Person and its Restricted Subsidiaries or the Tax Amount for such period, to the extent that such provision for taxes or Tax Amount was deducted in computing such Consolidated Net Income;plus | |
(3) the Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the extent that such Fixed Charges were deducted in computing such Consolidated Net Income;plus | |
(4) depreciation, depletion, amortization (including amortization of goodwill and other intangibles, but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (including without limitation write-downs and impairment of property, plant, equipment and intangibles and other long-lived assets, but excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income;minus | |
(5) non-cash items increasing such Consolidated Net Income for such period, other than any items which represent the reversal of any accrual of, or cash reserve for, anticipated charges in any prior period where such accrual or reserve is no longer required, in each case, on a consolidated basis and determined in accordance with GAAP. |
166
Table of Contents
(1) the Net Income of any Person that is not a Restricted Subsidiary or any Person that is accounted for by the equity method of accounting will be included only to the extent of the amount of dividends or similar distributions paid in cash to the specified Person or a Restricted Subsidiary of the Person; | |
(2) the Net Income of any Restricted Subsidiary that is not a Subsidiary Guarantor will be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders or members, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived; | |
(3) the cumulative effect of a change in accounting principles will be excluded; | |
(4) notwithstanding clause (1) above, the Net Income of any Unrestricted Subsidiary will be excluded, whether or not distributed to the specified Person or one of its Subsidiaries; and | |
(5) any non-recurring fees, expense or charges related to any Public Equity Offering, Permitted Investment, acquisition or Indebtedness permitted to be incurred by the indenture (in each case, whether or not successful), including any such fees, expenses and charges related to the Transactions, will be excluded to the extent that such fees, expenses and charges were deducted in computing Consolidated Net Income. |
(1) to purchase any such primary obligation or any property constituting direct or indirect security thereof, | |
(2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; or | |
(3) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such obligation against loss in respect thereof. |
(1) if the aggregate principal amount of such Contribution Indebtedness is greater than one times such cash contributions to the equity capital of the Company or such Guarantor, as applicable, the amount in excess shall be Indebtedness (other than secured Indebtedness) with a Stated Maturity later than the Stated Maturity of the notes, and | |
(2) such Contribution Indebtedness (x) is incurred within 180 days after the making of such cash contributions and (y) is designated as Contribution Indebtedness pursuant to an Officer’s Certificate on the incurrence date thereof. |
167
Table of Contents
168
Table of Contents
(1) contributions to its common equity capital, and | |
(2) the sale (other than to a Subsidiary of the Company) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Company, |
169
Table of Contents
(1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations in respect of interest rates;plus | |
(2) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period;plus | |
(3) any interest on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon;plus | |
(4) the product of (a) all cash dividend payments or other distributions (and non-cash dividend payments or other distributions in the case of a Person that is a Restricted Subsidiary) on any series of preferred equity of such Person, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person (or, in the case of a Person that is a partnership or a limited liability company, the combined federal, state and local income tax rate that was or would have been utilized to calculate the Tax Amount of such Person), expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP, plus | |
(5) commissions, discounts, yield and other fees and charges incurred in connection with any Receivables Financing which are payable to Persons other than the Company and its Restricted Subsidiaries. |
170
Table of Contents
(1) Alpha Coal Sales Co., LLC, Alpha Energy Global Marketing, LLC, Alpha Land and Reserves, LLC, Alpha Terminal Company, LLC, AMFIRE Holdings, Inc., AMFIRE Mining Company, LLC, AMFIRE, LLC, AMFIRE WV, L.P., Brooks Run Mining Company, LLC, Dickenson-Russell Coal Company, LLC, Enterprise Mining Company, LLC, Esperanza Coal Co., LLC, Gallup Transportation and Transloading Company, LLC, Herndon Processing Company, LLC , Kepler Processing Company, LLC, Kingwood Mining Company, LLC, Litwar Processing Company, LLC, Maxxim Rebuild Co., LLC, Maxxim Shared Services, LLC, Maxxum Carbon Resources, LLC, McDowell-Wyoming Coal Company, LLC, NATIONAL KING COAL LLC, Newhall Mining Company, LLC, Paramont Coal Company Virginia, LLC, Riverside Energy Company, LLC and Solomons Mining Company; and | |
(2) any other Subsidiary of the Company that executes a Note Guarantee in accordance with the provisions of the indenture, |
(1) interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements; | |
(2) other agreements or arrangements designed to manage interest rates or interest rate risk; and | |
(3) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices. |
(1) in respect of borrowed money; | |
(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); | |
(3) in respect of banker’s acceptances; | |
(4) representing Capital Lease Obligations or Attributable Debt in respect of sale and leaseback transactions; | |
(5) representing the balance deferred and unpaid of the purchase price of any property or services due more than six months after such property is acquired or such services are completed; | |
(6) representing any Hedging Obligations; or | |
(7) to the extent not otherwise included, with respect to the Company and its Restricted Subsidiaries, the amount then outstanding (i.e., advanced, and received by, and available for use by, the Company or any of its Restricted Subsidiaries) under any Receivables Financing (as set forth in |
171
Table of Contents
the books and records of the Company or any Restricted Subsidiary and confirmed by the agent, trustee or other representative of the institution or group providing such Receivables Financing), |
(1) securities issued or directly and fully guaranteed or insured by the U.S. government or any agency or instrumentality thereof (other than Cash Equivalents) and in each case with maturities not exceeding two years from the date of acquisition, | |
(2) investments in any fund that invests exclusively in investments of the type described in clause (1) which fund may also hold immaterial amounts of cash pending investment and/or distribution; and | |
(3) corresponding instruments in countries other than the United States customarily utilized for high quality investments and in each case with maturities not exceeding two years from the date of acquisition. |
172
Table of Contents
(1) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) other than a pledge of the Equity Interests of any Unrestricted Subsidiaries, (b) is directly or indirectly liable (as a guarantor or otherwise) other than by virtue of a pledge of the Equity Interests of any Unrestricted Subsidiaries, or (c) constitutes the lender; and | |
(2) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit, upon notice, |
173
Table of Contents
lapse of time or both, any holder of any other Indebtedness (other than the notes offered hereby) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its Stated Maturity. |
(1) any Investment in the Company or in a Restricted Subsidiary of the Company; | |
(2) any Investment in, cash, Cash Equivalents, Marketable Securities or Investment Grade Securities; | |
(3) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment: |
(a) such Person becomes a Restricted Subsidiary of the Company; or | |
(b) such Person, in one transaction or a series of related transactions, is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company; |
(4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption “— Repurchase at the Option of Holders — Asset Sales;” | |
(5) any acquisition of assets or Capital Stock solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company or a direct or indirect parent company of the Company; | |
(6) any Investments received (i) in compromise or resolution of (A) obligations of trade creditors or customers that were incurred in the ordinary course of business of the Company or any of its Restricted Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; or (B) litigation, arbitration or other disputes; or (ii) as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; | |
(7) Investments represented by Hedging Obligations; |
174
Table of Contents
(8) loans or advances to officers, directors and employees made in the ordinary course of business of the Company or any Restricted Subsidiary of the Company in an aggregate principal amount not to exceed $2.0 million at any one time outstanding; | |
(9) repurchases of the notes; | |
(10) Investments in Unrestricted Subsidiaries and/or joint ventures having an aggregate Fair Market Value, taken together with all other Investments made pursuant to this clause (10) that are at that time outstanding, not to exceed the greater of (x) $5.0 million, and (y) 2% of Total Assets at the time of such Investment (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value); | |
(11) any Investment in a Receivables Subsidiary or any Investment by a Receivables Subsidiary in any other Person in connection with a Qualified Receivables Financing, including Investments of funds held in accounts permitted or required by the arrangements governing such Qualified Receivables Financing or any related Indebtedness;provided, however,that any Investment in a Receivables Subsidiary is in the form of a Purchase Money Note, contribution of additional receivables or an equity interest; | |
(12) any transaction to the extent it constitutes an Investment that is permitted by and made in accordance with the provisions of the second paragraph of the covenant described under “— Transactions with Affiliates” (except for transactions described in clauses (6), (8), (10) and (12) of such paragraph); and | |
(13) Guarantees issued in accordance with the covenants described under “— Incurrence of Indebtedness and Issuance of Preferred Equity” and “Additional Note Guarantees”; | |
(14) Any Investment existing on the date of the indenture and any Investment that replaces, refinances or refunds an existing Investment; provided, that the new Investment is in an amount that does not exceed the amount replaced, refinanced or refunded, and is made in the same Person as the Investment replaced, refinanced or refunded; | |
(15) Investments consisting of purchases and acquisitions of inventory, supplies, materials and equipment or purchases of contract rights or licenses or leases of intellectual property, in each case in the ordinary course of business; and | |
(16) Additional Investments by the Company or any Restricted Subsidiary having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), taken together with all other Investments made pursuant to this clause (16) that are at the time outstanding not to exceed the greater of (x) $20.0 million, and (y) 5% of Total Assets at the time of the Investment; provided, however, that if any Investment pursuant to this clause (16) is made in a Person that is not a Restricted Subsidiary of the Company at the date of the making of such Investment and such Person becomes a Restricted Subsidiary of the Company after such date, such Investment shall thereafter be deemed to have been made pursuant to clause (1) above and shall cease to have been made pursuant to this clause (16) for so long as such Person continues to be a Restricted Subsidiary; |
(1) Liens securing Indebtedness and other Obligations under Credit Facilities that was incurred pursuant to clauses (1), (2) to the extent such Indebtedness is secured, and Liens securing Indebtedness permitted to be incurred pursuant to clauses (15) or (16) of the definition of Permitted Debt and/or securing Hedging Obligations related thereto; | |
(2) Liens in favor of the Company or any of its Restricted Subsidiaries; |
175
Table of Contents
(3) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Subsidiary of the Company;providedthat such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Subsidiary; | |
(4) Liens on property (including Capital Stock) existing at the time of acquisition of the property by the Company or any Subsidiary of the Company;providedthat such Liens were in existence prior to, such acquisition, and not incurred in contemplation of, such acquisition; | |
(5) Liens or deposits to secure the performance of statutory or regulatory obligations, or surety, appeal, indemnity or performance bonds, warranty and contractual requirements or other obligations of a like nature incurred in the ordinary course of business; | |
(6) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other assets relating to such letters of credit and products and proceeds thereof; | |
(7) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (4) of the second paragraph of the covenant entitled “— Certain Covenants — Incurrence of Indebtedness and Issuance of Preferred Equity” covering only the assets acquired with or financed by such Indebtedness; | |
(8) Liens existing on the date of the indenture; | |
(9) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded;providedthat any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor; | |
(10) Liens incurred or deposits made in the ordinary course of business to secure payment of workers’ compensation or to participate in any fund in connection with workmen’s compensation, unemployment insurance, old-age pensions or other social security programs; | |
(11) Liens imposed by law, such as carriers’, warehousemen’s, landlord’s, lessor’s, suppliers, banks, repairmen’s and mechanics’ Liens, and Liens of landlords securing obligations to pay lease payments that are not yet due and payable or in default, in each case, incurred in the ordinary course of business; | |
(12) contract mining agreements and leases or subleases granted to others that do not materially interfere with the ordinary conduct of business of the Company or any of its Restricted Subsidiaries; | |
(13) easements, rights of way, zoning and similar restrictions, reservations (including severances, leases or reservations of oil, gas, coal, minerals or water rights), restrictions or encumbrances in respect of real property or title defects that were not incurred in connection with Indebtedness and that do not in the aggregate materially adversely affect the value of said properties (as such properties are used by the Company or its Subsidiaries) or materially impair their use in the operation of the business of the Company and its Subsidiaries; | |
(14) Liens created for the benefit of (or to secure) the notes (or the Note Guarantees); | |
(15) Liens to secure any Permitted Refinancing Indebtedness permitted to be incurred under the indenture;provided, however, that: |
(a) the new Lien shall be limited to all or part of the same property and assets that secured or, under the written agreements pursuant to which the original Lien arose, could secure the original Lien (plus improvements and accessions to, such property or proceeds or distributions thereof); and | |
(b) the Indebtedness secured by the new Lien is not increased to any amount greater than the sum of (x) the outstanding principal amount, or, if greater, committed amount, of the |
176
Table of Contents
Permitted Refinancing Indebtedness and (y) an amount necessary to pay any fees and expenses, including premiums, related to such renewal, refunding, refinancing, replacement, defeasance or discharge; |
(16) Liens arising from precautionary Uniform Commercial Code financing statement filings regarding operating leases entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business; | |
(17) judgment Liens not giving rise to an Event of Default so long as any appropriate legal proceedings that may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such legal proceedings may be initiated shall not have expired; | |
(18) Liens securing Indebtedness or other obligations incurred in the ordinary course of business of the Company or any Subsidiary of the Company with respect to obligations that do not exceed, the greater of (x) $15.0 million and (y) 2.5% of Total Assets at any one time outstanding; | |
(19) Liens on accounts receivable and related assets of the type specified in the definition of “Receivables Financing” incurred in connection with a Qualified Receivables Financing; | |
(20) licenses of intellectual property in the ordinary course of business; | |
(21) Liens on Capital Stock of an Unrestricted Subsidiary that secure Indebtedness or other obligations of such Unrestricted Subsidiary; | |
(22) leases and subleases of real property which do not materially interfere with the ordinary conduct of the business of the Company and its Restricted Subsidiaries; | |
(23) Liens to secure a defeasance trust; | |
(24) Liens on equipment of the Company or any Restricted Subsidiary granted in the ordinary course of business to clients of which such equipment is located. | |
(25) Liens securing insurance premium financing arrangements,providedthat such Lien is limited to the applicable insurance contracts; and | |
(26) Liens securing the aggregate amount of Indebtedness (including Acquired Debt) incurred in connection with (or at any time following the consummation of) an Asset Acquisition made in accordance with the indenture equal to, at the time of incurrence, the net increase in inventory, accounts receivable and net property, reserves, plant and equipment attributable to such Asset Acquisition from the amounts reflected on the Company’s historical consolidated balance sheet as of the end of the full fiscal quarter ending on or prior to the date of such Asset Acquisition, calculated after giving effect on apro formabasis to such Asset Acquisition (which amount may, but need not, be incurred in whole or in part under the Credit Agreement) less the amount of Indebtedness incurred in connection with such Asset Acquisition secured by Liens pursuant to clauses (4) or (7) above. |
(1) payments to the Parent to permit the Parent to pay reasonable accounting, legal and administrative expenses of the Parent when due in an aggregate amount not to exceed $2.0 million per calendar year; | |
(2) for so long as the Company is a member of a group filing a consolidated or combined tax return with the Parent, payments to the Parent in respect of an allocable portion of the tax liabilities of such group that is attributable to the Company and its Subsidiaries(“Tax Payments”). The Tax Payments shall not exceed the lesser of (i) the amount of the relevant tax (including any penalties and interest) that the Company would owe if the Company were filing a separate tax return (or a separate consolidated or combined return with its Subsidiaries that are members of the consolidated or combined group), taking into account any carryovers and carrybacks of tax attributes (such as net |
177
Table of Contents
operating losses) of the Company and such Subsidiaries from other taxable years and (ii) the net amount of the relevant tax that the Parent actually owes to the appropriate taxing authority. Any Tax Payments received from the Company shall be paid over to the appropriate taxing authority within 30 days of the Parent’s receipt of such Tax Payments or refunded to the Company; and | |
(3) dividends or distributions paid to the Parent, if applicable, in amounts equal to amounts required for the Parent, if applicable, to pay interest and/or principal on Indebtedness the proceeds of which have been contributed to the Company or any of its Restricted Subsidiaries and that has been guaranteed by, or is otherwise considered Indebtedness of, the Company incurred in accordance with the covenant described under “— Incurrence of Indebtedness and Issuance of Preferred Equity”. |
(1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness renewed, refunded, refinanced, replaced, defeased or discharged (plus any premium required to be paid on the Indebtedness being so renewed, refunded, replaced, defeased or discharged, plus the amount of all fees and expenses incurred in connection therewith); | |
(2) such Permitted Refinancing Indebtedness has a final maturity date equal to or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the remaining Weighted Average Life to Maturity of, the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged; | |
(3) if the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged is subordinated in right of payment to the notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the notes on terms at least as favorable to the holders of notes as those contained in the documentation governing the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged; and | |
(4) such Refinancing Indebtedness shall not include Indebtedness of the Company or a Restricted Subsidiary that refinance Indebtedness of an Unrestricted Subsidiary. |
(1) the Board of Directors of the Company will have determined in good faith that such Qualified Receivables Financing (including financing terms, covenants, termination events and other |
178
Table of Contents
provisions) is in the aggregate economically fair and reasonable to the Company and the Receivables Subsidiary, | |
(2) all sales of accounts receivable and related assets to the Receivables Subsidiary are made at Fair Market Value (as determined in good faith by the Company), and | |
(3) the financing terms, covenants, termination events and other provisions thereof will be market terms (as determined in good faith by the Company) and may include Standard Securitization Undertakings. |
(1) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which (i) is guaranteed by the Company or any other Subsidiary of the Company (excluding guarantees of obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings), (ii) is recourse to or obligates the Company or any other Subsidiary of the Company in any way other than pursuant to Standard Securitization Undertakings, or (iii) subjects any property or asset of the Company or any other Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings, |
179
Table of Contents
(2) with which neither the Company nor any other Subsidiary of the Company has any material contract, agreement, arrangement or understanding other than on terms which the Company reasonably believes to be no less favorable to the Company or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Company, and | |
(3) to which neither the Company nor any other Subsidiary of the Company has any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors of the Company shall be evidenced to the trustee by filing with the trustee a certified copy of the resolution of the Board of Directors of the Company giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing conditions. |
(1) any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Permitted Holder; or | |
(2) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (1). |
(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and | |
(2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). |
180
Table of Contents
(1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors of the Company in the manner provided below; and | |
(2) any Subsidiary of an Unrestricted Subsidiary. |
(a) the Subsidiary to be so designated has total consolidated assets of $1,000 or less; or | |
(b) if such Subsidiary has consolidated assets greater than $1,000, then such designation would be permitted under the covenant entitled “— Limitation on Restricted Payments.” |
181
Table of Contents
(x) (1) the Company could incur $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test described under “— Incurrence of Indebtedness and Issuance of Preferred Equity,” or (2) the Fixed Charge Coverage Ratio for the Company and its Restricted Subsidiaries would be greater than such ratio for the Company and its Restricted Subsidiaries immediately prior to such designation, in each case on a pro forma basis taking into account such designation, and | |
(y) no Event of Default shall have occurred and be continuing. |
(1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment;by | |
(2) the then outstanding principal amount of such Indebtedness. |
182
Table of Contents
(a) upon the issuance of the global notes, DTC or its custodian will credit, on its internal system, the principal amount of notes of the individual beneficial interests represented by such global notes to the respective accounts of persons who have accounts with such depositary, and | |
(b) ownership of beneficial interests in the global notes will be shown on, and the transfer of such ownership will be effected only through: |
• | records maintained by DTC or its nominee with respect to interests of persons who have accounts with DTC “participants” and | |
• | the records of participants with respect to interests of persons other than participants. |
183
Table of Contents
(1) a limited-purpose trust company organized under the laws of the State of New York, | |
(2) a member of the Federal Reserve System, | |
(3) a “clearing corporation” within the meaning of the New York Uniform Commercial Code and | |
(4) a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. |
(1) we deliver to the Trustee a notice from DTC that it (a) is no longer willing or able to act as a depository for the global notes or (b) has ceased to be a clearing agency registered under the Exchange Act and, in either case, we are unable to locate a qualified successor within 120 days, or | |
(2) we, at our option, notify the Trustee in writing that we elect to cause the issuance of exchange notes in definitive form under the indenture, or | |
(3) there has occurred and is continuing a Default or Event of Default with respect to the notes, |
184
Table of Contents
185
Table of Contents
• | an individual who is a citizen or resident of the United States; | |
• | a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof; | |
• | an estate the income of which is subject to U.S. Federal income taxation regardless of its source; or | |
• | a trust if |
• | a court within the United States is able to exercise primary supervision over the administration of the trust, and | |
• | one or more U.S. fiduciaries have the authority to control all substantial decisions of the trust. |
186
Table of Contents
187
Table of Contents
188
Table of Contents
Alpha NR Holding, Inc. and subsidiaries | |||||
F-3 | |||||
F-4 | |||||
F-5 | |||||
F-6 | |||||
F-7 | |||||
ANR Fund IX Holdings, L.P. and Alpha NR Holding, Inc. and subsidiaries | |||||
F-24 | |||||
F-25 | |||||
F-26 | |||||
F-27 | |||||
F-28 | |||||
F-30 | |||||
Coastal Coal Company, LLC and subsidiary | |||||
F-73 | |||||
F-74 | |||||
F-75 | |||||
F-76 | |||||
F-77 | |||||
F-78 | |||||
North American Division of American Metals and Coal International, Inc. and Affiliates | |||||
F-89 | |||||
F-90 | |||||
F-91 | |||||
F-92 | |||||
F-93 | |||||
F-94 |
F-1
Table of Contents
The Combined Pennsylvania Entities of Mears Enterprises, Inc. | |||||
F-109 | |||||
F-110 | |||||
F-111 | |||||
F-112 | |||||
F-113 | |||||
F-114 |
F-2
Table of Contents
March 31, | December 31, | |||||||||||
2005 | 2004 | |||||||||||
(Unaudited) | ||||||||||||
(In thousands, | ||||||||||||
except share and | ||||||||||||
per share amounts) | ||||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 214 | $ | 7,391 | ||||||||
Trade accounts receivable, net | 111,806 | 95,828 | ||||||||||
Notes and other receivables | 11,294 | 10,835 | ||||||||||
Inventories | 90,862 | 54,569 | ||||||||||
Due from affiliate | 1,323 | 323 | ||||||||||
Deferred income taxes | 909 | 4,674 | ||||||||||
Prepaid expenses and other current assets | 22,402 | 28,915 | ||||||||||
Total current assets | 238,810 | 202,535 | ||||||||||
Property, plant, and equipment, net | 232,802 | 217,964 | ||||||||||
Goodwill | 18,641 | 18,641 | ||||||||||
Other intangibles, net | 862 | 1,155 | ||||||||||
Deferred income taxes | 21,585 | — | ||||||||||
Other assets | 34,712 | 36,826 | ||||||||||
Total assets | $ | 547,412 | $ | 477,121 | ||||||||
LIABILITIES AND STOCKHOLDER’S EQUITY AND PARTNERS’ CAPITAL | ||||||||||||
Current liabilities: | ||||||||||||
Current portion of long-term debt | $ | 1,707 | $ | 1,693 | ||||||||
Note payable | 11,136 | 15,228 | ||||||||||
Bank overdraft | 20,942 | 10,024 | ||||||||||
Trade accounts payable | 70,987 | 51,050 | ||||||||||
Accrued expenses and other current liabilities | 62,541 | 68,283 | ||||||||||
Total current liabilities | 167,313 | 146,278 | ||||||||||
Long-term debt, net of current portion | 208,885 | 184,784 | ||||||||||
Workers’ compensation benefits | 4,751 | 4,678 | ||||||||||
Postretirement medical benefits | 17,800 | 15,637 | ||||||||||
Asset retirement obligation | 33,978 | 32,888 | ||||||||||
Deferred gains on sale of property interests | 5,312 | 5,516 | ||||||||||
Deferred income taxes | — | 7,718 | ||||||||||
Other liabilities | 5,369 | 4,911 | ||||||||||
Total liabilities | 443,408 | 402,410 | ||||||||||
Minority interest | — | 28,778 | ||||||||||
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 | 132,133 | 22,153 | ||||||||||
Retained earnings (accumulated deficit) | (28,129 | ) | 18,828 | |||||||||
Total Alpha NR Holding, Inc. stockholder’s equity | 104,004 | 40,981 | ||||||||||
ANR Fund IX Holdings, L.P.: | ||||||||||||
Partners’ capital | — | 4,952 | ||||||||||
Total stockholder’s equity and partners’ capital | 104,004 | 45,933 | ||||||||||
Total liabilities and stockholder’s equity and partners’ capital | $ | 547,412 | $ | 477,121 | ||||||||
F-3
Table of Contents
Three Months Ended | |||||||||||
March 31, | |||||||||||
2005 | 2004 | ||||||||||
(Unaudited) | |||||||||||
(In thousands) | |||||||||||
Revenues: | |||||||||||
Coal revenues | $ | 275,333 | $ | 214,373 | |||||||
Freight and handling revenues | 33,165 | 25,604 | |||||||||
Other revenues | 7,275 | 6,761 | |||||||||
Total revenues | 315,773 | 246,738 | |||||||||
Costs and expenses: | |||||||||||
Cost of coal sales (exclusive of items shown separately below) | 228,845 | 187,593 | |||||||||
Freight and handling costs | 33,165 | 25,604 | |||||||||
Cost of other revenues | 6,138 | 5,161 | |||||||||
Depreciation, depletion and amortization | 14,480 | 11,929 | |||||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately above and including stock-based compensation of $36,407 in 2005) | 47,697 | 11,805 | |||||||||
Total costs and expenses | 330,325 | 242,092 | |||||||||
Income (loss) from operations | (14,552 | ) | 4,646 | ||||||||
Other income (expense): | |||||||||||
Interest expense | (5,827 | ) | (2,051 | ) | |||||||
Interest income | 294 | 21 | |||||||||
Miscellaneous income (expense), net | (42 | ) | 213 | ||||||||
Total other income (expense), net | (5,575 | ) | (1,817 | ) | |||||||
Income (loss) before income taxes and minority interest | (20,127 | ) | 2,829 | ||||||||
Income tax expense | 2,457 | 310 | |||||||||
Income (loss) before minority interest | (22,584 | ) | 2,519 | ||||||||
Minority interest | 2,846 | 1,282 | |||||||||
Net income (loss) | $ | (25,430 | ) | $ | 1,237 | ||||||
F-4
Table of Contents
ANR Fund IX | ||||||||||||||||||||||||
Alpha NR Holding, Inc. | Holdings, L.P. | |||||||||||||||||||||||
Total | ||||||||||||||||||||||||
Retained | Stockholder’s | |||||||||||||||||||||||
Additional | Earnings | Total | Equity and | |||||||||||||||||||||
Common | Paid-In | (Accumulated | Stockholder’s | Partners’ | Partners’ | |||||||||||||||||||
Stock | Capital | Deficit) | Equity | Capital | Capital | |||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Balances, December 31, 2003 | $ | — | $ | 75,710 | $ | 1,442 | $ | 77,152 | $ | 9,215 | $ | 86,367 | ||||||||||||
Net income | — | — | 17,386 | 17,386 | 2,629 | 20,015 | ||||||||||||||||||
Noncash distribution of Virginia Tax Credit | — | — | — | — | (292 | ) | (292 | ) | ||||||||||||||||
Distributions | — | (53,557 | ) | — | (53,557 | ) | (6,600 | ) | (60,157 | ) | ||||||||||||||
Balances, December 31, 2004 | — | 22,153 | 18,828 | 40,981 | 4,952 | 45,933 | ||||||||||||||||||
Noncash distribution of Virginia Tax Credit | — | — | — | — | (40 | ) | (40 | ) | ||||||||||||||||
Net income prior to Internal Restructuring | — | — | 2,320 | 2,320 | 379 | 2,699 | ||||||||||||||||||
Distribution to First Reserve Fund IX, L. P. and ANR Fund IX Holdings, L.P. prior to the Internal Restructuring | — | — | (8,160 | ) | (8,160 | ) | (1,243 | ) | (9,403 | ) | ||||||||||||||
Adjustments to give effect to the Internal Restructuring (note 1) | — | 47,928 | (12,988 | ) | 34,940 | (4,048 | ) | 30,892 | ||||||||||||||||
Change in net deferred income taxes recognized upon the completion of the Internal Restructuring | — | 25,729 | — | 25,729 | — | 25,729 | ||||||||||||||||||
Recognition of stock-based compensation earned | — | 36,323 | — | 36,323 | — | 36,323 | ||||||||||||||||||
Net loss subsequent to Internal Restructuring | — | — | (28,129 | ) | (28,129 | ) | — | (28,129 | ) | |||||||||||||||
Balances, March 31, 2005 | $ | — | $ | 132,133 | $ | (28,129 | ) | $ | 104,004 | $ | — | $ | 104,004 | |||||||||||
F-5
Table of Contents
Three Months Ended | ||||||||||||
March 31, | ||||||||||||
2005 | 2004 | |||||||||||
(Unaudited) | ||||||||||||
(In thousands) | ||||||||||||
Operating activities: | ||||||||||||
Net income (loss) | $ | (25,430 | ) | $ | 1,237 | |||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||
Depreciation, depletion and amortization | 14,480 | 11,929 | ||||||||||
Amortization of debt issuance costs | 435 | 384 | ||||||||||
Minority interest | 2,846 | 1,282 | ||||||||||
Accretion of asset retirement obligation | 808 | 976 | ||||||||||
Virginia tax credit | (343 | ) | (637 | ) | ||||||||
Stock-based compensation | 36,407 | — | ||||||||||
Bad debt provision | — | 15 | ||||||||||
Amortization of deferred gains on sales of property interests | (204 | ) | (238 | ) | ||||||||
Gain on sale of fixed assets, net | (363 | ) | (196 | ) | ||||||||
Deferred income taxes | 191 | 160 | ||||||||||
Changes in operating assets and liabilities: | ||||||||||||
Trade accounts receivable | (15,903 | ) | (5,724 | ) | ||||||||
Notes and other receivables | (384 | ) | (1,865 | ) | ||||||||
Inventories | (36,293 | ) | (6,221 | ) | ||||||||
Due from affiliate | (1,323 | ) | — | |||||||||
Prepaid expenses and other current assets | 6,333 | 3,384 | ||||||||||
Other assets | (2,739 | ) | (23 | ) | ||||||||
Trade accounts payable | 21,209 | 2,302 | ||||||||||
Accrued expenses and other current liabilities | 1,268 | 7,576 | ||||||||||
Workers’ compensation benefits | (295 | ) | 1,608 | |||||||||
Postretirement medical benefits | 2,163 | 348 | ||||||||||
Asset retirement obligation | (874 | ) | (492 | ) | ||||||||
Other liabilities | 458 | 219 | ||||||||||
Net cash provided by operating activities | 2,447 | 16,024 | ||||||||||
Investing activities: | ||||||||||||
Capital expenditures | $ | (30,268 | ) | $ | (16,269 | ) | ||||||
Proceeds from disposition of property, plant, and equipment | 501 | 214 | ||||||||||
Purchase of net assets of acquired companies | (389 | ) | — | |||||||||
Purchase of equity investment | (500 | ) | — | |||||||||
Collections on note receivable from coal supplier | 1,223 | — | ||||||||||
Payment of additional consideration on prior acquisition | (5,000 | ) | — | |||||||||
Net cash used in investing activities | (34,433 | ) | (16,055 | ) | ||||||||
Financing activities: | ||||||||||||
Repayments of notes payable | (4,092 | ) | (5,230 | ) | ||||||||
Proceeds from issuance of long-term debt | 24,500 | — | ||||||||||
Repayments on long-term debt | (440 | ) | (3,435 | ) | ||||||||
Increase in bank overdraft | 10,918 | 6,635 | ||||||||||
Distributions to prior members of ANR Holdings, LLC prior to Internal Restructuring | (7,732 | ) | (24 | ) | ||||||||
Reimbursement of deferred common stock offering costs by parent | 1,655 | — | ||||||||||
Debt issuance costs | — | (647 | ) | |||||||||
Net cash provided by (used in) financing activities | 24,809 | (2,701 | ) | |||||||||
Net decrease in cash and cash equivalents | (7,177 | ) | (2,732 | ) | ||||||||
Cash and cash equivalents at beginning of period | 7,391 | 11,246 | ||||||||||
Cash and cash equivalents at end of period | $ | 214 | $ | 8,514 | ||||||||
F-6
Table of Contents
(1) | Business and Basis of Presentation |
Organization and Business |
• | ACM was dissolved and liquidated, after which (1) the interests in ANR Holdings previously held by ACM were distributed to and held directly by the Company’s officers and employees who were owners of ACM prior to its dissolution and (2) outstanding options to purchase units in ACM were automatically converted into options to purchase up to 596,985 shares of Alpha Natural Resources, Inc. common stock at an exercise price of $12.73 per share, and Alpha Natural Resources, Inc. assumed the obligations of ACM under the Alpha Coal Management, LLC 2004 Long-Term Incentive Plan. | |
• | Alpha Natural Resources, Inc. assumed the obligations of ANR Holdings to make distributions to (1) affiliates of AMCI in an aggregate amount of $6,000, 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 $4,500, representing the approximate value of tax attributes conveyed as a result of the Internal Restructuring (collectively, the Tax Distributions). The Tax Distributions to affiliates of AMCI are payable 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 Tax Distributions to First Reserve Fund IX, L.P. are payable in three installments of approximately $2,100, $2,100 and $300 on December 15, 2007, 2008 and 2009, respectively. The Tax Distributions will be payable in | |
F-7
Table of Contents
cash or, to the extent Alpha Natural Resources, Inc. is not permitted by the terms of the senior credit facility or the indenture governing the senior notes to pay the Tax Distributions in cash, in shares of Alpha Natural Resources, Inc. common stock. | ||
• | First Reserve Fund IX, L.P., the direct parent of Alpha NR Holding, Inc. prior to the Internal Restructuring, contributed all of the outstanding common stock of Alpha NR Holding, Inc. to Alpha Natural Resources, Inc. in exchange for 12,462,992 shares of Alpha Natural Resources, Inc. common stock and demand promissory notes in an aggregate adjusted principal amount of $206,734. | |
• | ANR Fund IX Holdings, L.P., Madison Capital Funding, LLC and affiliates of AMCI contributed all of their membership interests in ANR Holdings to Alpha Natural Resources, Inc. in exchange for 13,052,431 shares of Alpha Natural Resources, Inc. common stock and demand promissory notes in an aggregate adjusted principal amount of $310,958. | |
• | The officers and employees who were the members of ACM contributed all of their interests in ANR Holdings to Alpha Natural Resources, Inc in exchange for 2,772,157 shares of Alpha Natural Resources, Inc. common stock. | |
• | The Board of Directors of Alpha Natural Resources, Inc. declared a pro rata distribution to the former members of ANR Holdings in an aggregate amount of $78,610 equal to the net proceeds Alpha Natural Resources, Inc. received upon the exercise by the underwriters of their over-allotment option with respect to the public offering described below. | |
• | Alpha NR Holding, Inc. recorded a change of $25,729 in net deferred income taxes (an estimated increase of $132,637 in gross deferred tax assets, less an estimated increase of $106,908 in the valuation allowance for deferred tax assets) recognized upon the completion of the Internal Restructuring. | |
• | Alpha Natural Resources, Inc. and certain of its subsidiaries, the FR Affiliates and affiliates of AMCI amended certain of the post-closing arrangements previously entered into as part of the Company’s acquisition of the U.S. coal production and marketing operations of AMCI (U.S. AMCI) that was completed on March 11, 2003. | |
• | Alpha Natural Resources, Inc. contributed the membership interests in ANR Holdings received in the Internal Restructuring to Alpha NR Holding, Inc. and Alpha NR Ventures, Inc., another indirect wholly-owned subsidiary of Alpha Natural Resources, Inc. | |
F-8
Table of Contents
Basis of Presentation |
(2) | Pro Forma Financial Information |
Three Months Ended | ||||||||
March 31 | ||||||||
2005 | 2004 | |||||||
Pro forma revenues | $ | 315,773 | $ | 246,738 | ||||
Pro forma net loss | (23,343 | ) | (403 | ) |
F-9
Table of Contents
2005 | 2004 | |||||||
Reported net income (loss) | $ | (25,430 | ) | $ | 1,237 | |||
Deduct: Pro forma effects of the 2004 Financings, net of income taxes and minority interest | — | (1,334 | ) | |||||
Deduct: Income tax effects of ANR Fund IX Holdings, L.P. income prior to Internal Restructuring | (89 | ) | (65 | ) | ||||
Add: Elimination of minority interest, net of income tax effects | 2,176 | (241 | ) | |||||
Pro forma net loss | $ | (23,343 | ) | $ | (403 | ) | ||
Three Months | ||||
Ended | ||||
March 31, | ||||
2005 | ||||
Pro forma net loss | $ | (23,343 | ) | |
Add: Stock-based compensation expense included in pro forma net loss, net of income taxes | 135 | |||
Deduct: Total stock-based compensation expense determined under fair value based method, net of income taxes | (279 | ) | ||
Pro forma net loss, adjusted for effect of fair value of stock options | $ | (23,487 | ) | |
Expected life (years) | 4.0 | |||
Expected volatility | 38.0 | % | ||
Risk-free interest rate | 3.38 | % | ||
Expected annual dividend | $ | 0.10 |
F-10
Table of Contents
(3) | Inventories |
March 31, | December 31, | |||||||
2005 | 2004 | |||||||
Raw coal | $ | 2,510 | $ | 3,888 | ||||
Saleable coal | 82,156 | 42,899 | ||||||
Materials and supplies | 6,196 | 7,782 | ||||||
Total inventories | $ | 90,862 | $ | 54,569 | ||||
(4) | Property, Plant, and Equipment |
March 31, | December 31, | |||||||
2005 | 2004 | |||||||
Land | $ | 5,424 | $ | 5,380 | ||||
Mineral rights | 85,245 | 85,245 | ||||||
Plant and mining equipment | 211,821 | 188,891 | ||||||
Vehicles | 2,602 | 2,058 | ||||||
Mine development | 18,827 | 11,205 | ||||||
Office equipment and software | 7,410 | 7,264 | ||||||
Construction in progress | 1,096 | 1,769 | ||||||
332,425 | 301,812 | |||||||
Less accumulated depreciation, depletion, and amortization | 99,623 | 83,848 | ||||||
Property, plant, and equipment, net | $ | 232,802 | $ | 217,964 | ||||
F-11
Table of Contents
(5) | Long-Term Debt |
March 31, | December 31, | |||||||
2005 | 2004 | |||||||
10% Senior notes due 2012 | $ | 175,000 | $ | 175,000 | ||||
Revolving credit facility | 32,500 | 8,000 | ||||||
Variable rate term notes | 1,173 | 1,466 | ||||||
Capital lease obligation | 1,875 | 1,995 | ||||||
Other | 44 | 16 | ||||||
Total long-term debt | 210,592 | 186,477 | ||||||
Less current portion | 1,707 | 1,693 | ||||||
Long-term debt, net of current portion | $ | 208,885 | $ | 184,784 | ||||
F-12
Table of Contents
(6) | Asset Retirement Obligation |
Total asset retirement obligation at December 31, 2004 | $ | 39,579 | ||
Accretion for the quarter ended March 31, 2005 | 808 | |||
Sites added in first quarter of 2005 | 1,156 | |||
Expenditures for the quarter ended March 31, 2005 | (874 | ) | ||
Total asset retirement obligation at March 31, 2005 | $ | 40,669 | ||
(7) | Stock-Based Compensation Awards |
F-13
Table of Contents
Weighted Average | ||||||||||||
Remaining Life | ||||||||||||
Number of | Exercise | (in Years) at | ||||||||||
Shares | Price | March 31, 2005 | ||||||||||
Outstanding at January 1, 2005 | 596,985 | $ | 12.73 | 4.6 | ||||||||
Granted at initial public offering | 692,905 | 19.00 | 4.9 | |||||||||
Exercised | — | — | — | |||||||||
Forfeited | — | — | — | |||||||||
Outstanding at March 31, 2005 | 1,289,890 | $ | 16.10 | 4.7 | ||||||||
F-14
Table of Contents
(8) | Employee Benefit Plans |
Postretirement Benefits Other Than Pensions |
Three Months | ||||||||
Ended March 31, | ||||||||
2005 | 2004 | |||||||
Service cost | $ | 944 | $ | 199 | ||||
Interest cost | 538 | 156 | ||||||
Amortization of net (gain) or loss | (6 | ) | (6 | ) | ||||
Amortization of prior service cost | 698 | — | ||||||
Net periodic benefit cost | $ | 2,174 | $ | 349 | ||||
(9) | Workers’ Compensation Benefits |
F-15
Table of Contents
(10) | Related Party Transactions |
(11) | Acquisition |
Black Dog Coal Corporation |
(12) | Segment Information |
F-16
Table of Contents
Corporate | ||||||||||||||||
Coal | and | |||||||||||||||
Operations | All Other | Eliminations | Consolidated | |||||||||||||
Revenues | $ | 311,066 | $ | 9,718 | $ | (5,011 | ) | $ | 315,773 | |||||||
Depreciation, depletion, and amortization | 13,452 | 427 | 601 | 14,480 | ||||||||||||
EBITDA, as adjusted | 45,545 | 1,129 | (46,788 | ) | (114 | ) | ||||||||||
Capital expenditures | 29,790 | 282 | 196 | 30,268 | ||||||||||||
Total assets | 465,047 | 70,752 | 11,613 | 547,412 |
Corporate | ||||||||||||||||
Coal | and | |||||||||||||||
Operations | All Other | Eliminations | Consolidated | |||||||||||||
Revenues | $ | 241,981 | $ | 7,709 | $ | (2,952 | ) | $ | 246,738 | |||||||
Depreciation, depletion, and amortization | 11,160 | 259 | 510 | 11,929 | ||||||||||||
EBITDA, as adjusted | 27,977 | 581 | (11,770 | ) | 16,788 | |||||||||||
Capital expenditures | 15,863 | 104 | 302 | 16,269 | ||||||||||||
Total assets | 356,749 | 69,604 | (36,601 | ) | 389,752 |
Three Months Ended | ||||||||
March 31, | ||||||||
2005 | 2004 | |||||||
Total segment EBITDA, as adjusted(1) | $ | (114 | ) | $ | 16,788 | |||
Interest expense | (5,827 | ) | (2,051 | ) | ||||
Interest income | 294 | 21 | ||||||
Income tax expense | (2,457 | ) | (310 | ) | ||||
Depreciation, depletion and amortization | (14,480 | ) | (11,929 | ) | ||||
Minority interest | (2,846 | ) | (1,282 | ) | ||||
Net income (loss) | $ | (25,430 | ) | $ | 1,237 | |||
(1) | EBITDA, as adjusted, is defined as net income (loss) plus interest expense, income tax expense (benefit), depreciation, depletion and amortization, less interest income, and adjusted for minority interest. |
F-17
Table of Contents
(13) | Contingencies |
(a) | Guarantees and Financial Instruments with Off-balance Sheet Risk |
(b) | Litigation |
(c) | Other Contingencies |
(14) | Supplemental Cash Flow Disclosures |
• | Increase of $18,011 in deferred tax assets, decrease of $7,718 in deferred tax liabilities, and an increase in stockholder’s equity of $25,729 as a result of the Internal Restructuring. | |
• | Distribution to FR Affiliates of $2,184 for refundable income taxes and receivables from affiliates. | |
F-18
Table of Contents
(15) | Income Taxes |
F-19
Table of Contents
Three Months | ||||||||
Ended March 31, | ||||||||
2005 | 2004 | |||||||
Current tax expense: | ||||||||
Federal | $ | 1,906 | $ | 146 | ||||
State | 360 | 4 | ||||||
2,266 | 150 | |||||||
Deferred tax expense: | ||||||||
Federal | 180 | 117 | ||||||
State | 11 | 43 | ||||||
191 | 160 | |||||||
Total income tax expense: | ||||||||
Federal | 2,086 | 263 | ||||||
State | 371 | 47 | ||||||
$ | 2,457 | $ | 310 | |||||
Three Months | ||||||||
Ended March 31, | ||||||||
2005 | 2004 | |||||||
Federal statutory income tax expense (benefit) | $ | (7,044 | ) | $ | 990 | |||
Increases (reductions) in taxes due to: | ||||||||
Percentage depletion allowance | (1,596 | ) | (197 | ) | ||||
Extraterritorial income exclusion | (176 | ) | — | |||||
Deduction for domestic production activities | (74 | ) | — | |||||
State taxes, net of federal tax impact | 287 | 30 | ||||||
Stock-based compensation not deductible | 12,054 | — | ||||||
Change in valuation allowance, excluding allowance recorded in the Internal Restructuring | 125 | (13 | ) | |||||
Taxes not provided for minority interest | (996 | ) | (462 | ) | ||||
Taxes not provided for pass-through entity | (132 | ) | (47 | ) | ||||
Other, net | 9 | 9 | ||||||
Actual income tax expense | $ | 2,457 | $ | 310 | ||||
F-20
Table of Contents
March 31, | December 31, | |||||||
2005 | 2004 | |||||||
Deferred tax assets: | ||||||||
Investment in limited liability company subsidiary | $ | 126,037 | $ | — | ||||
Net operating loss carryforwards | 4,557 | 5,598 | ||||||
Charitable contribution carryforwards | 197 | 207 | ||||||
Alternative minimum tax credit carryforward | 2,416 | 1,249 | ||||||
Gross deferred tax assets | 133,207 | 7,054 | ||||||
Less valuation allowance | (108,524 | ) | (1,374 | ) | ||||
Total net deferred tax assets | 24,683 | 5,680 | ||||||
Deferred tax liabilities: | ||||||||
Investment in limited liability company subsidiary | — | (6,869 | ) | |||||
Virginia tax credit | (2,189 | ) | (1,855 | ) | ||||
Total deferred tax liabilities | (2,189 | ) | (8,724 | ) | ||||
Net deferred tax asset (liability) | $ | 22,494 | $ | (3,044 | ) | |||
ANR Fund IX Holdings, L.P. and Alpha NR Holding, Inc. and Subsidiaries: | ||||
Deferred tax liability balance at December 31, 2004 | $ | (3,044 | ) | |
Deferred tax benefit recorded in period from January 1, 2005 to February 11, 2005 | 192 | |||
Deferred tax liability balance at February 11, 2005 | $ | (2,852 | ) | |
Alpha NR Holding, Inc.: | ||||
Deferred tax liability balance acquired on February 12, 2005 | $ | (2,852 | ) | |
Estimated deferred tax asset generated from the Internal Restructuring | 132,637 | |||
Valuation allowance established at the time of the Internal Restructuring | (106,908 | ) | ||
Net deferred taxes recorded as part of Internal Restructuring, with offsetting increase to additional paid-in capital | 25,729 | |||
Deferred tax expense recorded in February 12, 2005 to March 31, 2005 period | (383 | ) | ||
Net deferred tax asset at March 31, 2005 | $ | 22,494 | ||
F-21
Table of Contents
March 31, | December 31, | |||||||||
2005 | 2004 | |||||||||
Current asset | $ | 909 | $ | 4,674 | ||||||
Current liability | — | — | ||||||||
Net current asset | 909 | 4,674 | ||||||||
Noncurrent asset | 23,774 | 1,006 | ||||||||
Noncurrent liability | (2,189 | ) | (8,724 | ) | ||||||
Net noncurrent asset (liability) | 21,585 | (7,718 | ) | |||||||
Total net deferred tax asset (liability) | $ | 22,494 | $ | (3,044 | ) | |||||
(16) | New Accounting Pronouncements |
F-22
Table of Contents
(17) | Subsequent Event |
F-23
Table of Contents
F-24
Table of Contents
Pro Forma | December 31, | |||||||||||||
December 31, | ||||||||||||||
2004 | 2004 | 2003 | ||||||||||||
(Unaudited) | ||||||||||||||
(In thousands) | ||||||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 7,391 | $ | 7,391 | $ | 11,246 | ||||||||
Trade accounts receivable, net | 95,828 | 95,828 | 70,205 | |||||||||||
Notes and other receivables | 10,835 | 10,835 | 4,742 | |||||||||||
Inventories | 54,569 | 54,569 | 33,113 | |||||||||||
Due from affiliate | 323 | 323 | 3,770 | |||||||||||
Deferred income taxes | — | 4,674 | 489 | |||||||||||
Prepaid expenses and other current assets | 28,915 | 28,915 | 19,256 | |||||||||||
Total current assets | 197,861 | 202,535 | 142,821 | |||||||||||
Property, plant, and equipment, net | 217,964 | 217,964 | 198,147 | |||||||||||
Goodwill | 18,641 | 18,641 | 17,121 | |||||||||||
Other intangibles, net | 1,155 | 1,155 | 2,896 | |||||||||||
Deferred income taxes | 22,685 | — | — | |||||||||||
Other assets | 36,826 | 36,826 | 18,351 | |||||||||||
Total assets | $ | 495,132 | $ | 477,121 | $ | 379,336 | ||||||||
LIABILITIES AND STOCKHOLDER’S EQUITY AND PARTNERS’ CAPITAL | ||||||||||||||
Current liabilities: | ||||||||||||||
Current portion of long-term debt | $ | 1,693 | $ | 1,693 | $ | 13,329 | ||||||||
Note payable | 15,228 | 15,228 | 14,425 | |||||||||||
Bank overdraft | 10,024 | 10,024 | 5,854 | |||||||||||
Trade accounts payable | 51,050 | 51,050 | 41,357 | |||||||||||
Accrued expenses and other current liabilities | 68,283 | 68,283 | 35,142 | |||||||||||
Total current liabilities | 146,278 | 146,278 | 110,107 | |||||||||||
Long-term debt, net of current portion | 184,784 | 184,784 | 57,210 | |||||||||||
Workers’ compensation benefits | 4,678 | 4,678 | 1,660 | |||||||||||
Postretirement medical benefits | 15,637 | 15,637 | 10,662 | |||||||||||
Asset retirement obligation | 32,888 | 32,888 | 32,607 | |||||||||||
Deferred gains on sale of property interests | 5,516 | 5,516 | 6,934 | |||||||||||
Deferred income taxes | — | 7,718 | 823 | |||||||||||
Other liabilities | 4,911 | 4,911 | 6,486 | |||||||||||
Total liabilities | 394,692 | 402,410 | 226,489 | |||||||||||
Minority interest | — | 28,778 | 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 | 100,440 | 22,153 | 75,710 | |||||||||||
Retained earnings | — | 18,828 | 1,442 | |||||||||||
Total Alpha NR Holding, Inc. stockholder’s equity | 100,440 | 40,981 | 77,152 | |||||||||||
Alpha Fund IX Holdings, L.P.: | ||||||||||||||
Partners’ capital | — | 4,952 | 9,215 | |||||||||||
Total stockholder’s equity and partners’ capital | 100,440 | 45,933 | 86,367 | |||||||||||
Total liabilities and stockholder’s equity and partners’ capital | $ | 495,132 | $ | 477,121 | $ | 379,336 | ||||||||
F-25
Table of Contents
Company | Predecessor | ||||||||||||||||||
Period from | Period from | ||||||||||||||||||
December 14, | January 1, | ||||||||||||||||||
Year Ended December 31, | 2002 to | 2002 to | |||||||||||||||||
December 31, | December 13, | ||||||||||||||||||
2004 | 2003 | 2002 | 2002 | ||||||||||||||||
(In thousands) | |||||||||||||||||||
Revenues: | |||||||||||||||||||
Coal revenues | $ | 1,089,992 | $ | 701,262 | $ | 6,260 | $ | 154,715 | |||||||||||
Freight and handling revenues | 146,166 | 73,800 | 1,009 | 17,001 | |||||||||||||||
Other revenues | 33,560 | 17,504 | 101 | 6,031 | |||||||||||||||
Total revenues | 1,269,718 | 792,566 | 7,370 | 177,747 | |||||||||||||||
Costs and expenses: | |||||||||||||||||||
Cost of coal sales (exclusive of items shown separately below) | 931,585 | 632,979 | 6,268 | 158,924 | |||||||||||||||
Freight and handling costs | 146,166 | 73,800 | 1,009 | 17,001 | |||||||||||||||
Cost of other revenues | 25,064 | 16,750 | 120 | 7,973 | |||||||||||||||
Depreciation, depletion and amortization | 56,012 | 36,054 | 274 | 6,814 | |||||||||||||||
Asset impairment charge | 5,100 | — | — | — | |||||||||||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately above) | 43,881 | 21,949 | 471 | 8,797 | |||||||||||||||
Costs to exit business | — | — | — | 25,274 | |||||||||||||||
Total costs and expenses | 1,207,808 | 781,532 | 8,142 | 224,783 | |||||||||||||||
Refund of federal black lung excise tax | — | — | — | 2,049 | |||||||||||||||
Gain on sale of fixed assets, net | 671 | — | — | — | |||||||||||||||
Other operating income, net | — | — | — | 1,430 | |||||||||||||||
Income (loss) from operations | 62,581 | 11,034 | (772 | ) | (43,557 | ) | |||||||||||||
Other income (expense): | |||||||||||||||||||
Interest expense | (20,041 | ) | (7,848 | ) | (203 | ) | (35 | ) | |||||||||||
Interest income | 531 | 103 | 6 | 2,072 | |||||||||||||||
Miscellaneous income | 734 | 575 | — | — | |||||||||||||||
Total other income (expense), net | (18,776 | ) | (7,170 | ) | (197 | ) | 2,037 | ||||||||||||
Income (loss) before income taxes and minority interest | 43,805 | 3,864 | (969 | ) | (41,520 | ) | |||||||||||||
Income tax expense (benefit) | 3,960 | 668 | (334 | ) | (17,198 | ) | |||||||||||||
Income (loss) before minority interest | 39,845 | 3,196 | (635 | ) | (24,322 | ) | |||||||||||||
Minority interest | 19,830 | 934 | — | — | |||||||||||||||
Net income (loss) | $ | 20,015 | $ | 2,262 | $ | (635 | ) | $ | (24,322 | ) | |||||||||
F-26
Table of Contents
Retained | Net | Deferred | |||||||||||||||||||||||
Earnings | Receivables | Taxes | |||||||||||||||||||||||
Capital | (Accumulated | Company | from | Receivable | |||||||||||||||||||||
Predecessor | Contributions | Deficit) | Equity | Affiliates | from Parent | Total | |||||||||||||||||||
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 | Total | ||||||||||||||||||||||||
Retained | Alpha NR | Stockholder’s | |||||||||||||||||||||||
Additional | Earnings | 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 | — | — | 17,386 | 17,386 | 2,629 | 20,015 | |||||||||||||||||||
Noncash distribution of Virginia Tax Credit | — | — | — | — | (292 | ) | (292 | ) | |||||||||||||||||
Distributions | — | (53,557 | ) | — | (53,557 | ) | (6,600 | ) | (60,157 | ) | |||||||||||||||
Balances, December 31, 2004 | $ | — | $ | 22,153 | $ | 18,828 | $ | 40,981 | $ | 4,952 | $ | 45,933 | |||||||||||||
F-27
Table of Contents
Company | Predecessor | |||||||||||||||||||
Period from | Period from | |||||||||||||||||||
December 14, | January 1, | |||||||||||||||||||
Year Ended December 31, | 2002 to | 2002 to | ||||||||||||||||||
December 31, | December 13, | |||||||||||||||||||
2004 | 2003 | 2002 | 2002 | |||||||||||||||||
(In thousands) | ||||||||||||||||||||
Operating activities: | ||||||||||||||||||||
Net income (loss) | $ | 20,015 | $ | 2,262 | $ | (635 | ) | $ | (24,322 | ) | ||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||||||
Depreciation, depletion and amortization | 56,012 | 36,054 | 274 | 6,814 | ||||||||||||||||
Amortization and write-off of debt issuance costs | 4,474 | 1,276 | 59 | — | ||||||||||||||||
Minority interest | 19,830 | 934 | — | — | ||||||||||||||||
Accretion of asset retirement obligation | 3,301 | 2,699 | 57 | — | ||||||||||||||||
Virginia tax credit | (4,872 | ) | (4,313 | ) | — | — | ||||||||||||||
Stock-based compensation | 91 | — | — | — | ||||||||||||||||
Bad debt provision | 152 | 68 | 5 | 1,296 | ||||||||||||||||
Net pension credit | — | — | — | (928 | ) | |||||||||||||||
Loss on settlement of asset retirement obligation | 762 | — | — | — | ||||||||||||||||
Asset impairment charge | 5,100 | — | — | — | ||||||||||||||||
Provision for non-recoupable advance mining royalties | 758 | — | — | — | ||||||||||||||||
Amortization of deferred gains on sales | ||||||||||||||||||||
of property interests | (959 | ) | (618 | ) | — | — | ||||||||||||||
Gain on sale of fixed assets, net | (671 | ) | — | — | — | |||||||||||||||
Deferred income taxes | 2,711 | 668 | (334 | ) | (8,023 | ) | ||||||||||||||
Other, net | — | — | — | 11 | ||||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||
Trade accounts receivable | (25,775 | ) | (21,056 | ) | (7,472 | ) | 5,244 | |||||||||||||
Notes and other receivables | (1,062 | ) | (2,358 | ) | — | — | ||||||||||||||
Inventories | (21,040 | ) | 13,014 | 549 | — | |||||||||||||||
Prepaid expenses and other current assets | 5,568 | 793 | (138 | ) | (5,418 | ) | ||||||||||||||
Other assets | 805 | (3,051 | ) | — | (1,850 | ) | ||||||||||||||
Trade accounts payable | 9,742 | 12,234 | 4,057 | (3,925 | ) | |||||||||||||||
Accrued expenses and other current liabilities | 27,243 | 16,392 | 4,706 | (15,115 | ) | |||||||||||||||
Workers’ compensation benefits | 3,018 | 1,660 | — | 1,879 | ||||||||||||||||
Postretirement medical benefits | 4,975 | 1,236 | 36 | 6,710 | ||||||||||||||||
Asset retirement obligation expenditures | (3,306 | ) | (2,252 | ) | — | (1,270 | ) | |||||||||||||
Other liabilities | (96 | ) | (1,538 | ) | (1,459 | ) | 25,081 | |||||||||||||
Net cash provided by (used in) operating activities | $ | 106,776 | $ | 54,104 | $ | (295 | ) | $ | (13,816 | ) | ||||||||||
F-28
Table of Contents
Company | Predecessor | |||||||||||||||||
Period from | Period from | |||||||||||||||||
December 14, | January 1, | |||||||||||||||||
Year Ended December 31, | 2002 to | 2002 to | ||||||||||||||||
December 31, | December 13, | |||||||||||||||||
2004 | 2003 | 2002 | 2002 | |||||||||||||||
(In thousands) | ||||||||||||||||||
Investing activities: | ||||||||||||||||||
Capital expenditures | $ | (72,046 | ) | (27,719 | ) | (960 | ) | (21,866 | ) | |||||||||
Proceeds from disposition of property, plant, and equipment | 1,096 | 65,174 | — | 76 | ||||||||||||||
Purchase of net assets of acquired companies | (2,891 | ) | (133,757 | ) | (37,202 | ) | — | |||||||||||
Purchase of equity investment | (4,500 | ) | — | — | — | |||||||||||||
Issuance of note receivable to coal supplier, net of collections of $1,519 | (8,481 | ) | — | — | — | |||||||||||||
Deferred acquisition costs | — | — | (731 | ) | — | |||||||||||||
Decrease (increase) in due from affiliate | 620 | (3,770 | ) | — | — | |||||||||||||
Other, net | — | — | — | (264 | ) | |||||||||||||
Net cash used in investing activities | (86,202 | ) | (100,072 | ) | (38,893 | ) | (22,054 | ) | ||||||||||
Financing activities: | ||||||||||||||||||
Repayments of notes payable | (14,425 | ) | (15,600 | ) | — | — | ||||||||||||
Proceeds from issuance of long-term debt | 175,000 | 58,518 | — | — | ||||||||||||||
Repayments on long-term debt | (61,422 | ) | (30,054 | ) | — | — | ||||||||||||
Increase in bank overdraft | 4,170 | 5,854 | — | — | ||||||||||||||
Debt issuance costs | (10,525 | ) | (5,181 | ) | (340 | ) | — | |||||||||||
Deferred common stock offering costs | (1,655 | ) | — | — | — | |||||||||||||
Advances from affiliates | — | 20,047 | 23,953 | 35,783 | ||||||||||||||
Capital contributions | — | 3,118 | 2,635 | — | ||||||||||||||
Issuance of common stock | — | 15,153 | 21,384 | — | ||||||||||||||
Distributions to owners | (60,156 | ) | — | — | — | |||||||||||||
Distributions to minority interest | (55,416 | ) | (3,085 | ) | — | — | ||||||||||||
Net cash provided by (used in) financing activities | (24,429 | ) | 48,770 | 47,632 | 35,783 | |||||||||||||
Net increase (decrease) in cash and cash equivalents | (3,855 | ) | 2,802 | 8,444 | (87 | ) | ||||||||||||
Cash and cash equivalents at beginning of period | 11,246 | 8,444 | — | 175 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 7,391 | $ | 11,246 | $ | 8,444 | $ | 88 | ||||||||||
F-29
Table of Contents
(1) | Business and Basis of Presentation |
Organization and Business |
Operating Subsidiaries of Alpha Natural Resources, LLC: |
• | 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 |
• | Alpha Coal Sales Co., LLC | |
• | Alpha Natural Resources Capital Corp. | |
• | Alpha Natural Resources Services, LLC |
F-30
Table of Contents
• | Maxxim Rebuild Co., LLC | |
• | Maxxim Shared Services, LLC |
• | Maxxum Carbon Resources, LLC | |
• | Esperanza Coal Co., LLC |
Principles of Combination |
Predecessor |
The Company |
Subsequent Internal Restructuring and Initial Public Offering of Parent Company |
• | Alpha Coal Management, LLC (ACM) was dissolved and liquidated, after which (1) the interests in ANR Holdings previously held by ACM were distributed to and held directly by the Company’s officers and employees who were owners of ACM prior to its dissolution and (2) outstanding options to purchase units in ACM were automatically converted into options to purchase up to 596,985 shares of Alpha Natural Resources, Inc. common stock at an exercise price of $12.73 per |
F-31
Table of Contents
share, and Alpha Natural Resources, Inc. assumed the obligations of ACM under the Alpha Coal Management, LLC 2004 Long-Term Incentive Plan. | ||
• | Alpha Natural Resources, Inc. assumed the obligations of ANR Holdings to make distributions to (1) affiliates of AMCI in an aggregate amount of $6,000, 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 $4,500, representing the approximate value of tax attributes conveyed as a result of the Internal Restructuring (collectively, the Tax Distributions). The Tax Distributions to affiliates of AMCI are payable 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 Tax Distributions to First Reserve Fund IX, L.P. are payable in three installments of approximately $2,100, $2,100 and $300 on December 15, 2007, 2008 and 2009, respectively. The Tax Distributions will be payable in cash or, to the extent Alpha Natural Resources, Inc. is not permitted by the terms of the senior credit facility or the indenture governing the senior notes to pay the Tax Distributions in cash, in shares of Alpha Natural Resources, Inc. common stock. | |
• | First Reserve Fund IX, L.P., the direct parent of Alpha NR Holding, Inc., contributed all of the outstanding common stock of Alpha NR Holding, Inc. to Alpha Natural Resources, Inc. in exchange for 12,462,992 shares of Alpha Natural Resources, Inc. common stock and demand promissory notes in an aggregate adjusted principal amount of $206,734. | |
• | ANR Fund IX Holdings, L.P., Madison Capital Funding, LLC and affiliates of AMCI contributed all of their membership interests in ANR Holdings to Alpha Natural Resources, Inc. in exchange for 13,052,431 shares of Alpha Natural Resources, Inc. common stock and demand promissory notes in an aggregate adjusted principal amount of $310,958. | |
• | The officers and employees who were the members of ACM contributed all of their interests in ANR Holdings to Alpha Natural Resources, Inc. in exchange for 2,772,157 shares of Alpha Natural Resources, Inc. common stock. | |
• | The Board of Directors of Alpha Natural Resources, Inc. declared a pro rata distribution to the former members of ANR Holdings in an aggregate amount equal to the net proceeds Alpha Natural Resources, Inc. received upon the exercise by the underwriters of their over-allotment option with respect to the public offering described below. | |
• | Alpha NR Holding, Inc. recorded a change of $25,729 in net deferred income taxes (an estimated increase of $132,637 in gross deferred tax assets, less an estimated increase of $106,908 in the valuation allowance for deferred tax assets) recognized upon the completion of the Internal Restructuring. | |
• | The Company, the FR Affiliates and affiliates of AMCI amended certain of the post-closing arrangements previously entered into as part of the Company’s acquisition of U.S. AMCI. | |
• | Alpha Natural Resources, Inc. contributed the membership interests in ANR Holdings received in the Internal Restructuring to Alpha NR Holding, Inc. and Alpha NR Ventures, Inc., another indirect wholly- owned subsidiary of Alpha Natural Resources, Inc. |
F-32
Table of Contents
Unaudited Pro Forma Financial Information |
Year Ended December 31, | ||||||||
2004 | 2003 | |||||||
Pro forma revenues | $ | 1,269,718 | $ | 902,766 | ||||
Pro forma net income | 29,637 | 536 |
F-33
Table of Contents
Year Ended | ||||||||
December 31, | ||||||||
2004 | 2003 | |||||||
Reported net income | $ | 20,015 | $ | 2,262 | ||||
Add: Pro forma results of operations related to the 2003 Acquisitions, net of income taxes | — | 3,507 | ||||||
Deduct: Pro forma effects of the 2004 Financings, net of income taxes | (1,672 | ) | (7,728 | ) | ||||
Add: Elimination of minority interest, net of income tax effects of Internal Restructuring | 11,294 | 2,495 | ||||||
Pro forma net income | $ | 29,637 | $ | 536 | ||||
(2) | Summary of Significant Accounting Policies and Practices |
(a) | Cash and Cash Equivalents |
(b) | Trade Accounts Receivable and Allowance for Doubtful Accounts |
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 | 152 | |||
Bad debt write-offs | (132 | ) | ||
Balance as of December 31, 2004 | $ | 93 | ||
(c) | Inventories |
F-34
Table of Contents
(d) | Property, Plant, and Equipment |
(e) | Impairment of Long-Lived Assets |
(f) | Goodwill and Other Intangible Assets |
(g) | Health Insurance Programs |
(h) | Income Taxes |
F-35
Table of Contents
(i) | Asset Retirement Obligation |
(j) | Royalties |
Balance as of December 31, 2003 and 2002 | $ | — | ||
Provision for non-recoupable advance mining royalties | 758 | |||
Write-offs of advance mining royalties | (11 | ) | ||
Balance as of December 31, 2004 | $ | 747 | ||
F-36
Table of Contents
(k) | Revenue Recognition |
(l) | Deferred Financing Costs |
(m) | Virginia Coalfield Employment Enhancement Tax Credit |
(n) | Workers’ Compensation and Pneumoconiosis (Black Lung) Benefits |
Workers’ Compensation |
F-37
Table of Contents
Black Lung Benefits |
(o) | Postretirement Benefits Other Than Pensions |
(p) | Equity Investments |
(q) | Equity-Based Compensation Awards |
F-38
Table of Contents
For the Year Ended | ||||
December 31, 2004 | ||||
Reported net income | $ | 20,015 | ||
Add: Equity-based compensation expense included in reported net income, net of income taxes and minority interest | 50 | |||
Deduct: Total equity-based compensation expense determined under fair-value based method, net of income taxes and minority interest | (72 | ) | ||
Pro forma net income | $ | 19,993 | ||
Expected life (years) | 4.0 | |||
Expected volatility | 38.0 | % | ||
Risk-free interest rate | 3.38 | % | ||
Expected annual dividend | $ | 0.10 |
(r) | New Accounting Pronouncements |
F-39
Table of Contents
(s) | Use of Estimates |
(t) | Reclassifications |
(3) | Notes and Other Receivables |
December 31, | |||||||||
2004 | 2003 | ||||||||
Notes receivable | $ | 5,986 | $ | 577 | |||||
Other receivables | 4,849 | 4,165 | |||||||
Total notes and other receivables | $ | 10,835 | $ | 4,742 | |||||
F-40
Table of Contents
(4) | Inventories |
December 31, | |||||||||
2004 | 2003 | ||||||||
Raw coal | $ | 3,888 | $ | 4,710 | |||||
Saleable coal | 42,899 | 23,629 | |||||||
Materials and supplies | 7,782 | 4,774 | |||||||
Total inventories | $ | 54,569 | $ | 33,113 | |||||
(5) | Prepaid Expenses and Other Current Assets |
December 31, | |||||||||
2004 | 2003 | ||||||||
Prepaid insurance | $ | 16,577 | $ | 15,643 | |||||
Advance mining royalties | 4,831 | 1,928 | |||||||
Refundable income taxes | 2,798 | — | |||||||
Other prepaid expenses | 4,709 | 1,685 | |||||||
Total prepaid expenses and other current assets | $ | 28,915 | $ | 19,256 | |||||
(6) | Property, Plant, and Equipment |
December 31, | |||||||||
2004 | 2003 | ||||||||
Land | $ | 5,380 | $ | 4,514 | |||||
Mineral rights | 85,245 | 89,652 | |||||||
Plant and mining equipment | 188,891 | 121,442 | |||||||
Vehicles | 2,058 | 1,976 | |||||||
Mine development | 11,205 | 2,333 | |||||||
Office equipment and software | 7,264 | 5,865 | |||||||
Construction in progress | 1,769 | 2,592 | |||||||
301,812 | 228,374 | ||||||||
Less accumulated depreciation, depletion, and amortization | 83,848 | 30,227 | |||||||
Property, plant, and equipment, net | $ | 217,964 | $ | 198,147 | |||||
F-41
Table of Contents
(7) | Goodwill |
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 December 31, 2004 | $ | 18,641 | ||
(8) | Other Intangibles |
December 31, | |||||||||||||
Estimated | |||||||||||||
Remaining Life | 2004 | 2003 | |||||||||||
Sales contracts | 3 years | $ | 3,248 | $ | 3,937 | ||||||||
Noncompete agreements | 2 years | 250 | 200 | ||||||||||
Other | — | — | 13 | ||||||||||
3,498 | 4,150 | ||||||||||||
Less accumulated amortization | 2,343 | 1,254 | |||||||||||
Total other intangibles, net | $ | 1,155 | $ | 2,896 | |||||||||
Years ending December 31: | ||||||
2005 | $ | 581 | ||||
2006 | 436 | |||||
2007 | 138 | |||||
Total | $ | 1,155 | ||||
F-42
Table of Contents
(9) | Other Assets |
December 31, | |||||||||
2004 | 2003 | ||||||||
Advance mining royalties, net | $ | 8,841 | $ | 9,638 | |||||
Deferred loan costs, net | 10,237 | 3,460 | |||||||
Deferred common stock offering costs | 3,665 | — | |||||||
Notes receivable | 3,451 | — | |||||||
Investment in terminaling facility | 1,005 | 1,005 | |||||||
Investment in Excelven Pty Ltd | 4,500 | — | |||||||
Virginia tax credit receivable | 4,806 | 2,434 | |||||||
Other | 321 | 1,814 | |||||||
Total other assets | $ | 36,826 | $ | 18,351 | |||||
(10) | Note Payable |
(11) | Accrued Expenses and Other Current Liabilities |
December 31, | |||||||||
2004 | 2003 | ||||||||
Wages and employee benefits | $ | 20,201 | $ | 12,770 | |||||
Current portion of asset retirement obligation | 6,691 | 7,820 | |||||||
Taxes other than income taxes | 6,136 | 6,243 | |||||||
Freight | 12,376 | 1,974 | |||||||
Contractor escrow | 1,615 | 1,499 | |||||||
Deferred gains on sales of property interests | 808 | 355 | |||||||
Deferred revenues | 1,086 | — | |||||||
Current portion of self-insured workers’ compensation benefits | 1,612 | 450 | |||||||
Workers’ compensation insurance premium payable | 3,567 | 773 | |||||||
Interest payable | 1,632 | 210 | |||||||
Additional consideration on acquisition | 5,000 | — | |||||||
Accrued common stock offering costs | 2,010 | — | |||||||
Other | 5,549 | 3,048 | |||||||
Total accrued expenses and other current liabilities | $ | 68,283 | $ | 35,142 | |||||
F-43
Table of Contents
(12) | Long-Term Debt |
December 31, | ||||||||||
2004 | 2003 | |||||||||
10% Senior notes due 2012 | $ | 175,000 | $ | — | ||||||
Revolving credit facility | 8,000 | 10,000 | ||||||||
Variable rate term loan | — | 45,000 | ||||||||
Seller financing (El Paso CGP Company) | — | 8,000 | ||||||||
8.75% term notes | — | 4,664 | ||||||||
Variable rate term notes | 1,466 | 2,679 | ||||||||
Capital lease obligation | 1,995 | — | ||||||||
Other | 16 | 196 | ||||||||
Total long-term debt | 186,477 | 70,539 | ||||||||
Less current portion | 1,693 | 13,329 | ||||||||
Long-term debt, net of current portion | $ | 184,784 | $ | 57,210 | ||||||
F-44
Table of Contents
F-45
Table of Contents
Year ending December 31: | ||||||
2005 | $ | 1,693 | ||||
2006 | 736 | |||||
2007 | 500 | |||||
2008 | 316 | |||||
2009 | 8,232 | |||||
Thereafter | 175,000 | |||||
Total long-term debt | $ | 186,477 | ||||
Year ending December 31: | ||||||
2005 | $ | 720 | ||||
2006 | 600 | |||||
2007 | 600 | |||||
2008 | 360 | |||||
2009 | 240 | |||||
Total future minimum lease payments | 2,520 | |||||
Less amount representing interest | (525 | ) | ||||
Present value of future minimum lease payments | 1,995 | |||||
Less current portion | (505 | ) | ||||
Long-term capital lease obligation | $ | 1,490 | ||||
F-46
Table of Contents
(13) | Asset Retirement Obligation |
Pittston Coal Company acquisition | $ | 15,050 | |||
Accretion for 2002 | 57 | ||||
Total asset 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 asset retirement obligation at December 31, 2003 | 40,427 | ||||
Accretion for 2004 | 3,301 | ||||
2004 acquisitions | 1,189 | ||||
Sites added in 2004 | 3,657 | ||||
Revisions in estimated cash flows | (5,689 | ) | |||
Expenditures in 2004 | (3,306 | ) | |||
Total asset retirement obligation at December 31, 2004 | $ | 39,579 | |||
(14) | Deferred Gains on Sales of Property Interests |
F-47
Table of Contents
(15) | Fair Value of Financial Instruments |
December 31, | |||||||||
2004 | 2003 | ||||||||
10% Senior notes | $ | 209,970 | $ | — | |||||
Variable rate term loan | — | 45,000 | |||||||
Revolving credit facility | 8,000 | 10,000 | |||||||
8.75% term notes | — | 4,725 | |||||||
Variable rate term notes | 1,466 | 2,679 | |||||||
Seller financing | — | 10,100 | |||||||
Capital lease obligation | 2,196 | — | |||||||
Other | 16 | 196 | |||||||
Total long-term debt | $ | 221,648 | $ | 72,700 | |||||
(16) | Employee Benefit Plans |
The Company |
(a) Postretirement Benefits Other Than Pensions |
F-48
Table of Contents
Period from | ||||||||||||||
December 14, | ||||||||||||||
Year Ended December 31, | 2002 to | |||||||||||||
December 31, | ||||||||||||||
2004 | 2003 | 2002 | ||||||||||||
Change in benefit obligation: | ||||||||||||||
Accumulated benefit obligation-beginning of period: | $ | 11,532 | $ | 5,951 | $ | — | ||||||||
Service cost | 2,266 | 656 | 19 | |||||||||||
Interest cost | 1,375 | 580 | 17 | |||||||||||
Actuarial (gain) or loss | 1,526 | (15 | ) | — | ||||||||||
Benefits paid | (38 | ) | — | — | ||||||||||
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 | $ | 43,783 | $ | 11,532 | $ | 5,951 | ||||||||
Funded status | $ | (43,783 | ) | $ | (11,532 | ) | $ | (5,951 | ) | |||||
Unrecognized prior service cost | 25,725 | — | — | |||||||||||
Unrecognized net actuarial loss | 2,421 | 870 | — | |||||||||||
Accrued postretirement medical benefits | $ | (15,637 | ) | $ | (10,662 | ) | $ | (5,951 | ) | |||||
Period from | |||||||||||||
Year Ended | December 14, | ||||||||||||
December 31, | 2002 to | ||||||||||||
December 31, | |||||||||||||
2004 | 2003 | 2002 | |||||||||||
Service cost | $ | 2,266 | $ | 656 | $ | 19 | |||||||
Interest cost | 1,375 | 580 | 17 | ||||||||||
Amortization of net (gain) or loss | (24 | ) | — | — | |||||||||
Amortization of prior service cost | 1,396 | — | — | ||||||||||
Net periodic benefit cost | $ | 5,013 | $ | 1,236 | $ | 36 | |||||||
F-49
Table of Contents
One | One | |||||||
Percentage | Percentage | |||||||
Point | Point | |||||||
Increase | Decrease | |||||||
Effect on accumulated postretirement benefit obligation | $ | 2,626 | $ | (1,964 | ) | |||
Effect on total service and interest cost components | 301 | (235 | ) |
Year ending December 31: | ||||||
2005 | $ | 39 | ||||
2006 | 67 | |||||
2007 | 126 | |||||
2008 | 388 | |||||
2009 | 690 | |||||
2010-2014 | 9,709 | |||||
Total | $ | 11,019 | ||||
(b) Savings Plan |
F-50
Table of Contents
(c) Self-Insured Medical Plan |
(d) Multi-Employer Pension Plan |
(e) Equity-Based Compensation Awards |
F-51
Table of Contents
Predecessor |
(a) Pension Plans |
Period from | |||||
January 1, | |||||
2002 to | |||||
December 13, | |||||
2002 | |||||
Service cost | $ | 2,504 | |||
Interest cost on Projected Benefit Obligation (PBO) | 8,547 | ||||
Return on assets — expected | (12,617 | ) | |||
Other amortization, net | 638 | ||||
Net pension credit | $ | (928 | ) | ||
F-52
Table of Contents
Period from | ||||
January 1, | ||||
2002 to | ||||
December 13, | ||||
2002 | ||||
Discount rate-expense | 7.25% | |||
Discount rate-funded status | 6.75% | |||
Expected long-term rate of return on assets (expense) | 10.00% | |||
Expected long-term rate of return on assets (funded status) | 8.75% | |||
Average rate of increase in salaries (expense and funded status)(1) | 4.00% |
(1) | Salary scale assumptions varied by age and approximated 4% per annum. |
Period from | ||||
January 1, | ||||
2002 to | ||||
December 13, | ||||
2002 | ||||
PBO at beginning of period | $ | 121,760 | ||
Service cost | 2,504 | |||
Interest cost | 8,547 | |||
Benefits paid | (7,735 | ) | ||
Actuarial loss | 2,679 | |||
PBO at end of period | $ | 127,755 | ||
Fair value of plan assets at beginning of period | $ | 111,438 | ||
Return on assets — actual | (11,780 | ) | ||
Employer contributions | 3,294 | |||
Benefits paid | (7,735 | ) | ||
Fair value of plan assets at end of period | $ | 95,217 | ||
Funded status | $ | (32,538 | ) | |
Unrecognized experience loss | 59,329 | |||
Net prepaid pension assets | 26,791 | |||
Noncurrent pension liability | 1,319 | |||
Prepaid pension asset | $ | 28,110 | ||
F-53
Table of Contents
(b) Savings Plan |
(c) Postretirement Benefits Other Than Pensions |
Period from | ||||
January 1, | ||||
2002 to | ||||
December 13, | ||||
2002 | ||||
Service cost | $ | 540 | ||
Interest cost on APBO | 14,888 | |||
Amortization of loss | 4,413 | |||
Net periodic postretirement benefit expense | $ | 19,841 | ||
F-54
Table of Contents
Period from | ||||
January 1, | ||||
2002 to | ||||
December 13, | ||||
2002 | ||||
APBO at beginning of period | $ | 211,974 | ||
Service cost | 540 | |||
Interest cost | 14,888 | |||
Benefits paid | (13,132 | ) | ||
Actuarial loss | 13,103 | |||
APBO and funded status at end of period | 227,373 | |||
Unrecognized experience loss | (95,542 | ) | ||
Accrued postretirement benefit cost at end of period | $ | 131,831 | ||
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 | ) |
F-55
Table of Contents
(17) | Workers’ Compensation Benefits |
(18) | Related Party Transactions |
Company |
F-56
Table of Contents
F-57
Table of Contents
Predecessor |
F-58
Table of Contents
(19) | Commitments |
Operating Leases |
Equipment | Coal | |||||||||||||||||
Facility | and Other | Royalties | Total | |||||||||||||||
Year ending December 31: | ||||||||||||||||||
2005 | $ | 481 | $ | 3,826 | $ | 9,212 | $ | 13,519 | ||||||||||
2006 | 279 | 3,767 | 8,616 | 12,662 | ||||||||||||||
2007 | 211 | 2,206 | 8,752 | 11,169 | ||||||||||||||
2008 | 168 | 524 | 7,770 | 8,462 | ||||||||||||||
2009 | 77 | — | 7,739 | 7,816 | ||||||||||||||
Thereafter | 261 | — | 30,031 | 30,292 | ||||||||||||||
Total | $ | 1,477 | $ | 10,323 | $ | 72,120 | $ | 83,920 | ||||||||||
F-59
Table of Contents
Other Commitments |
(20) | Mergers and Acquisitions |
2002 Acquisition |
Pittston Coal Company |
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 |
F-60
Table of Contents
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. |
F-61
Table of Contents
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. |
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. |
F-62
Table of Contents
Cooney Bros. Coal Company |
Pro Forma Information |
Revenues | $ | 902,766 | ||
Net income | 5,769 |
(21) | Concentrations and Major Customers |
(22) | Segment Information |
F-63
Table of Contents
Corporate | ||||||||||||||||
Coal | and | |||||||||||||||
Operations | All Other | Eliminations | Combined | |||||||||||||
Revenues | $ | 1,249,965 | $ | 30,262 | $ | (10,509 | ) | $ | 1,269,718 | |||||||
Depreciation, depletion, and amortization | 52,441 | 1,477 | 2,094 | 56,012 | ||||||||||||
EBITDA, as adjusted | 160,788 | 2,416 | (43,877 | ) | 119,327 | |||||||||||
Capital expenditures | 70,487 | 392 | 1,167 | 72,046 | ||||||||||||
Total assets | 396,935 | 105,727 | (25,541 | ) | 477,121 |
Corporate | ||||||||||||||||
Coal | and | |||||||||||||||
Operations | All Other | Eliminations | Combined | |||||||||||||
Revenues | $ | 778,462 | $ | 22,323 | $ | (8,219 | ) | $ | 792,566 | |||||||
Depreciation, depletion, and amortization | 33,062 | 1,895 | 1,097 | 36,054 | ||||||||||||
EBITDA, as adjusted | 69,043 | 493 | (21,873 | ) | 47,663 | |||||||||||
Capital expenditures | 21,819 | 690 | 5,210 | 27,719 | ||||||||||||
Total assets | 342,019 | 70,797 | (33,480 | ) | 379,336 |
Corporate | ||||||||||||||||
Coal | and | |||||||||||||||
Operations | All Other | Eliminations | Combined | |||||||||||||
Revenues | $ | 7,269 | $ | 101 | $ | — | $ | 7,370 | ||||||||
Depreciation, depletion, and amortization | 273 | 1 | — | 274 | ||||||||||||
EBITDA, as adjusted | (10 | ) | (17 | ) | (471 | ) | (498 | ) | ||||||||
Capital expenditures | 564 | — | 396 | 960 | ||||||||||||
Total assets | 80,706 | 27,340 | 396 | 108,442 |
F-64
Table of Contents
Period from | ||||||||||||
December 14, | ||||||||||||
Year Ended December 31, | 2002 to | |||||||||||
December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Total segment EBITDA, as adjusted(1) | $ | 119,327 | $ | 47,663 | $ | (498 | ) | |||||
Interest expense | (20,041 | ) | (7,848 | ) | (203 | ) | ||||||
Interest income | 531 | 103 | 6 | |||||||||
Income tax (expense) benefit | (3,960 | ) | (668 | ) | 334 | |||||||
Depreciation, depletion and amortization | (56,012 | ) | (36,054 | ) | (274 | ) | ||||||
Minority interest | (19,830 | ) | (934 | ) | 0 | |||||||
Net income (loss) | $ | 20,015 | $ | 2,262 | $ | (635 | ) | |||||
(1) | EBITDA, as adjusted, is defined as net income (loss) plus interest expense, income tax expense (benefit), depreciation, depletion and amortization, less interest income, and adjusted for minority interest. |
(23) | Contingencies |
(a) | Guarantees and Financial Instruments with Off-balance Sheet Risk |
(b) | Litigation |
F-65
Table of Contents
(c) | Other Contingencies |
(24) | Asset Impairment Charge |
(25) | Supplemental Cash Flow Disclosures |
Company |
• | Increase in other assets of $2,372 for the Virginia Coalfield Employment Enhancement Tax Credit receivable. This represents the portion of the tax credit allocated to Alpha NR Holding, Inc. | |
• | Increase in deferred common stock offering costs and accrued expenses of $2,010 for accrued common stock offering costs. | |
• | Increase in asset retirement obligation and fixed assets of $3,657 for new sites added in 2004. Net decrease in asset retirement obligation and fixed assets of $2,937, and increase in deferred gains on sales of property interests and decrease in asset retirement obligation of $3,514 as a result of revisions in estimated cash flows underlying the asset retirement obligation. | |
• | The short-term financing of prepaid insurance premiums in the amount of $15,228. | |
• | 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. |
F-66
Table of Contents
• | 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 $5,000 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 $1,597 recorded in accounts payable. |
• | Increase in other assets of $2,434 for the Virginia Coalfield Employment Enhancement Tax Credit receivable. This represents the portion of the tax credit allocated to Alpha NR Holding, Inc. | |
• | 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. |
• | Seller financing of acquired entities of $25,743. |
Predecessor |
(26) | Minority Interest |
• | 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. | |
F-67
Table of Contents
(27) | Investments |
Dominion Terminal Associates |
Excelven Pty Ltd |
F-68
Table of Contents
(28) | Income Taxes |
The Company |
Period from | |||||||||||||
Year Ended | December 14, | ||||||||||||
December 31, | 2002 to | ||||||||||||
December 31, | |||||||||||||
2004 | 2003 | 2002 | |||||||||||
Current tax expense: | |||||||||||||
Federal | $ | 1,249 | $ | — | $ | — | |||||||
State | — | — | �� | ||||||||||
1,249 | — | — | |||||||||||
Deferred tax expense (benefit): | |||||||||||||
Federal | 2,244 | 665 | (284 | ) | |||||||||
State | 467 | 3 | (50 | ) | |||||||||
2,711 | 668 | (334 | ) | ||||||||||
Total income tax expense (benefit): | |||||||||||||
Federal | 3,493 | 665 | (284 | ) | |||||||||
State | 467 | 3 | (50 | ) | |||||||||
$ | 3,960 | $ | 668 | $ | (334 | ) | |||||||
F-69
Table of Contents
Period from | ||||||||||||||
Year Ended | December 14, | |||||||||||||
December 31, | 2002 to | |||||||||||||
December 31, | ||||||||||||||
2004 | 2003 | 2002 | ||||||||||||
Federal statutory income tax expense (benefit) | $ | 15,332 | $ | 1,352 | $ | (339 | ) | |||||||
Increases (reductions) in taxes due to: | ||||||||||||||
Percentage depletion allowance | (3,376 | ) | (1,087 | ) | (33 | ) | ||||||||
Extraterritorial income exclusion | (1,225 | ) | — | — | ||||||||||
State taxes, net of federal tax impact | 304 | 2 | — | |||||||||||
Change in valuation allowance | 559 | 815 | — | |||||||||||
Taxes not provided for minority interest | (7,129 | ) | (501 | ) | — | |||||||||
Taxes not provided for pass-through entity | (678 | ) | 73 | 37 | ||||||||||
Other, net | 173 | 14 | 1 | |||||||||||
Actual income tax expense (benefit) | $ | 3,960 | $ | 668 | $ | (334 | ) | |||||||
December 31, | |||||||||||
2004 | 2003 | ||||||||||
Deferred tax assets: | |||||||||||
Net operating loss carryforwards | $ | 5,598 | $ | 1,956 | |||||||
Charitable contribution carryforwards | 207 | 118 | |||||||||
Alternative minimum tax credit carryforward | 1,249 | — | |||||||||
Gross deferred tax assets | 7,054 | 2,074 | |||||||||
Less valuation allowance | (1,374 | ) | (815 | ) | |||||||
Total net deferred tax assets | 5,680 | 1,259 | |||||||||
Deferred tax liabilities: | |||||||||||
Investment in limited liability company subsidiary | (6,869 | ) | (653 | ) | |||||||
Virginia tax credit | (1,855 | ) | (940 | ) | |||||||
Total deferred tax liabilities | (8,724 | ) | (1,593 | ) | |||||||
Net deferred tax liability | $ | (3,044 | ) | $ | (334 | ) | |||||
F-70
Table of Contents
December 31, | ||||||||||
2004 | 2003 | |||||||||
Current asset | $ | 4,674 | $ | 489 | ||||||
Current liability | — | — | ||||||||
Net current asset | 4,674 | 489 | ||||||||
Noncurrent asset | 1,006 | 770 | ||||||||
Noncurrent liability | (8,724 | ) | (1,593 | ) | ||||||
Net noncurrent liability | (7,718 | ) | (823 | ) | ||||||
Total net deferred tax liability | $ | (3,044 | ) | $ | (334 | ) | ||||
Predecessor |
Period from | ||||
January 1, | ||||
2002 to | ||||
December 31, | ||||
2002 | ||||
Current | $ | 9,175 | ||
Deferred | 8,023 | |||
Total | $ | 17,198 | ||
F-71
Table of Contents
December 13, | ||||||
2002 | ||||||
Tax (benefit) expense computed at statutory rate | $ | (14,532 | ) | |||
Increase (reductions) in taxes due to: | ||||||
Percentage depletion | (1,302 | ) | ||||
Adjustment resulting from favorable appeal relating to prior years | (1,678 | ) | ||||
Miscellaneous | 314 | |||||
Actual income tax benefit | $ | (17,198 | ) | |||
(29) | Federal Black Lung Excise Tax |
Predecessor |
(30) | Event (Unaudited) Subsequent to the Date of the Report of Independent Registered Public Accounting Firm |
F-72
Table of Contents
F-73
Table of Contents
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 | ||||
F-74
Table of Contents
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 (exclusive of items shown separately below) | 18,159,578 | 270,548,861 | ||||||||
Depreciation, depletion and amortization | 1,150,516 | 15,082,381 | ||||||||
Administrative and general (exclusive of depreciation and amortization shown separately above) | 1,092,602 | 11,546,250 | ||||||||
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 | ) | ||||||
F-75
Table of Contents
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 | |||||||||||
F-76
Table of Contents
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 |
F-77
Table of Contents
(1) | Summary of Significant Accounting Policies and Practices |
(a) | Description of Business |
(b) | Principles of Consolidation |
• | Brooks Run Mining Company | |
• | Enterprise Mining Company | |
• | Virginia Iron, Coal and Coke (VICC) Mining Company | |
• | Kingwood Mining Company | |
• | Greenbrier Mining Company (Inactive) |
• | Coastal Coal Administration | |
• | Coastal Coal Sales Company |
• | Coastal Coal Company, LLC | |
• | Coastal Coal-West Virginia, LLC |
(c) | Cash and Cash Equivalents |
(d) | Accounts Receivable and Allowance for Doubtful Accounts |
F-78
Table of Contents
(e) | Inventories |
(f) | Property, Plant, and Equipment |
(g) | Impairment of Long-Lived Assets |
(h) | Reclamation |
F-79
Table of Contents
(i) | Advance Mining Royalties |
(j) | Postretirement Benefits Other Than Pensions |
(k) | Black Lung Benefits |
(l) | Pension Plan |
(m) | Health Insurance Programs |
F-80
Table of Contents
(n) | Revenue Recognition |
(o) | Freight Costs |
(p) | Income Taxes |
(q) | Fair Value of Financial Instruments |
(r) | Use of Estimates |
(2) | Accounts Receivable |
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 | |||
F-81
Table of Contents
(3) | Inventories |
Coal | $ | 8,284,715 | ||
Mining supplies | 3,619,395 | |||
$ | 11,904,110 | |||
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 | |||||||
(5) | Employees’ Termination Benefits |
F-82
Table of Contents
(6) | Other Current and Noncurrent Liabilities |
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 | |||||||||
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 | |||
F-83
Table of Contents
(7) | Virginia Coalfield Employment Enhancement Tax Credit |
(8) | Workers’ Compensation and Pneumoconiosis Benefit Obligations |
(9) | Pension, Postretirement, and Postemployment Benefits |
F-84
Table of Contents
Period from January 1, | ||||||||
2003 to January 31, 2003 | ||||||||
Pension | Postretirement | |||||||
Benefits | Benefits | |||||||
Net periodic benefit cost | $ | 70,572 | 175,000 | |||||
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-85
Table of Contents
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 | % | — |
F-86
Table of Contents
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 |
(10) | Related Party Transactions |
(11) | Commitments and Contingencies |
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 | |||
F-87
Table of Contents
(12) | Risks and Uncertainties |
(13) | Subsequent Sale of the Company |
F-88
Table of Contents
F-89
Table of Contents
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 | ||||
F-90
Table of Contents
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 (exclusive of items shown separately below) | 34,225,178 | 248,757,082 | ||||||||
Coal purchases and operating costs and expenses — affiliates (exclusive of items shown separately below) | 6,049,170 | 47,345,992 | ||||||||
Depreciation, depletion, and amortization | 1,791,838 | 8,577,532 | ||||||||
Selling and administrative expenses (exclusive of depreciation and amortization shown separately above) | 2,406,605 | 11,471,505 | ||||||||
Selling and administrative expenses — affiliates (exclusive of depreciation and amortization shown separately above) | 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 | ) | ||||
F-91
Table of Contents
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 | |||||||||||||||||||
F-92
Table of Contents
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 |
F-93
Table of Contents
(1) | Basis of Presentation and Organization |
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-94
Table of Contents
Administrative Support: |
Consulting and Coal Service, Inc. Laurel Mountain Management, Inc. |
(2) | Summary of Significant Accounting Policies |
(a) Principles of Presentation |
(b) Cash and Cash Equivalents |
(c) Accounts and Notes Receivable |
(d) Materials and Supplies Inventory |
(e) Coal Inventory |
(f) Property, Plant, and Equipment |
F-95
Table of Contents
(g) Impairment of Long-Lived Assets |
(h) Asset Retirement Obligations |
(i) Advance Mining Royalties |
(j) Revenue Recognition |
F-96
Table of Contents
(k) Shipping and Handling Costs |
(l) Workers’ Compensation and Pneumoconiosis (Black Lung) Benefits |
(m) Insurance Programs |
(n) Benefit Plans |
(o) Income Taxes |
F-97
Table of Contents
(p) | Risks and Uncertainties |
(q) | Estimates |
(3) | Notes Receivable |
(4) | Prepaid Expenses |
Insurance | $ | 573,497 | ||
Advance royalties | 513,066 | |||
Other | 123,883 | |||
$ | 1,210,446 | |||
(5) | Other Current Assets |
Receivables from contract miners for equipment purchased | $ | 1,040,559 | ||
Refundable deposits | 216,789 | |||
Other | 585,872 | |||
$ | 1,843,220 | |||
F-98
Table of Contents
(6) | Property, Plant, and Equipment |
Estimated | ||||||||
lives | ||||||||
(in years) | ||||||||
Land | $ | 2,239,638 | ||||||
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 |
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 |
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 |
F-99
Table of Contents
(10) | Revolving Credit Commitments |
F-100
Table of Contents
(11) | Long-Term Debt |
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 | |||
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-101
Table of Contents
(12) | Other Long-Term Liabilities |
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 |
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 | |||||
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-102
Table of Contents
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 | ||||
(14) | Leased Mineral Interests |
F-103
Table of Contents
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 | ||||||
(15) | Related Party Transactions |
F-104
Table of Contents
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 | |||||
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-105
Table of Contents
(16) | Workers’ Compensation and Pneumoconiosis (Black Lung) Benefits |
(17) | Employee Benefit Plans |
F-106
Table of Contents
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 | ) | |||||
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 | ) | |||
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 | |||
F-107
Table of Contents
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 |
(b) | Guarantees |
(c) | Litigation |
(d) | Supply contracts |
(19) | Subsequent Event |
F-108
Table of Contents
F-109
Table of Contents
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 | |||||||
F-110
Table of Contents
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 (exclusive of items shown separately below) | 25,480,439 | 22,322,677 | 23,425,162 | |||||||||||
Depreciation, depletion, and amortization | 872,213 | 737,778 | 549,307 | |||||||||||
Selling and administrative expenses (exclusive of depreciation and amortization shown separately above) | 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 | ||||||||
F-111
Table of Contents
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 | ||||||||||||||
F-112
Table of Contents
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 |
F-113
Table of Contents
(1) | Basis of Presentation and Organization |
Mears, Inc. (S-Corporation) DLR Coal Company (General Partnership) S&M Mining (General Partnership) |
Mears, Inc. (S-Corporation) DLR Mining, Inc. (C-Corporation) S&M Mining, Inc. (S-Corporation) |
(2) | Summary of Significant Accounting Policies and Practices |
(a) Basis of Presentation |
(b) Cash and Cash Equivalents |
(c) Trade Accounts Receivable and Allowance for Doubtful Accounts |
F-114
Table of Contents
(d) Coal Inventory |
(e) Shipping and Handling Costs |
(f) Property, Plant, and Equipment |
(g) Asset Retirement Obligations |
F-115
Table of Contents
(h) Advance Mining Royalties |
(i) Revenue Recognition |
(j) Impairment of Long-Lived Assets |
(k) Income Taxes |
(l) Risks and Uncertainties |
F-116
Table of Contents
(n) | Use of Estimates |
(3) | Prepaid Expenses |
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 |
December 31 | |||||||||
2002 | 2001 | ||||||||
Land | $ | 655,015 | $ | 655,015 | |||||
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-117
Table of Contents
(5) | Accrued Expenses |
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 |
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 |
F-118
Table of Contents
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 |
(9) | Retirement Plan |
(10) | Leased Mineral Interests |
F-119
Table of Contents
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 |
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 |
F-120
Table of Contents
Table of Contents
• | eliminates the liability of Alpha’s managers and officers for monetary damages or losses sustained or liabilities incurred as a result of any act or omission constituting a breach of such manager’s or officer’s fiduciary duty, except: (i) for a breach of such person’s duty of loyalty to Alpha or its member; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; or (iii) for any transaction from which the manager or officer derived an improper personal benefit and except to the extent such manager or officer is otherwise compensated for by insurance carried for the benefit of Alpha; and | |
• | requires Alpha to indemnify to the fullest extent permitted by the DLLCA each of its managers and officers who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, against and from any personal loss, liability or damage incurred as a result of any act or omission that the Board of Managers of Alpha believes in good faith to be within the scope of authority conferred by the Alpha Company Agreement. | |
• | requires Alpha to advance or reimburse its managers and officers for all legal and other expenses and attorneys’ fees reasonably incurred by him or her in connection with any claim or liability described in the preceding bullet point. |
II-1
Table of Contents
ITEM 21. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. |
Exhibit | ||
No. | Description of Exhibit | |
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 (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
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 (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) |
II-2
Table of Contents
Exhibit | ||
No. | Description of Exhibit | |
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 (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
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 (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
2.5 | Asset Purchase Agreement by and between Pittston Coal Company and Alpha Terminal Company, LLC, dated as of October 29, 2002, as amended (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
2.6 | Asset Purchase Agreement by and between Pittston Coal Company and Maxxim Rebuild Co., LLC, dated as of October 29, 2002, as amended (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
2.7 | Purchase and Sale Agreement by and among El Paso CGP Company and AMFIRE, LLC dated as of November 14, 2002, as amended (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
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 (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
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 (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
2.10 | Purchase and Sale Agreement dated as of April 9, 2003 by and between Alpha Land and Reserves, LLC and CSTL LLC (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
2.11 | Purchase and Sale Agreement dated as of April 9, 2003 by and between Dickenson-Russell Coal Company, LLC and WBRD LLC (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
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. (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
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 (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
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 (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
2.15 | Asset Purchase Agreement by and between Mears Enterprises, Inc. and AMFIRE Mining Company, LLC dated October 29, 2003, as amended (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) |
II-3
Table of Contents
Exhibit | ||
No. | Description of Exhibit | |
2.16 | Internal Restructuring Agreement dated as of February 11, 2005 by and among Alpha Natural Resources, Inc., Alpha NR Ventures, Inc., ANR Holdings, LLC, the FRC Parties named therein, the AMCI Parties named therein, Madison Capital Funding LLC, Alpha Coal Management, LLC and the Management Members named therein (Incorporated by reference to Exhibit 2.16 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32423) filed on March 30, 2005.) | |
2.17 | Sixth Amendment to Contribution Agreement by and among the FRC Parties, the AMCI Parties, ANR Holdings, LLC and Alpha Natural Resources, Inc. (Incorporated by reference to Exhibit 2.17 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32423) filed on March 30, 2005.) | |
2.18 | Asset Purchase Agreement dated April 14, 2005, by and among Gallup Transportation and Transloading Company, LLC, NATIONAL KING COAL LLC and NKC Acquisition, LLC (Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 1-32423) filed on April 15, 2005.) | |
3.1* | Certificate of Formation of Alpha Natural Resources, LLC | |
3.2* | Amended and Restated Limited Liability Company Agreement of Alpha Natural Resources, LLC, as amended | |
3.3* | Certificate of Formation of Alpha Coal Sales Co., LLC | |
3.4* | Amended and Restated Limited Liability Company Agreement of Alpha Coal Sales Co., LLC | |
3.5* | Certificate of Formation of Alpha Land and Reserves, LLC | |
3.6* | Amended and Restated Limited Liability Company Agreement of Alpha Land and Reserves, LLC | |
3.7* | Certificate of Incorporation of Alpha Natural Resources Capital Corp. | |
3.8* | Bylaws of Alpha Natural Resources Capital Corp. | |
3.9* | Certificate of Formation of Alpha Natural Resources Services, LLC | |
3.10* | Limited Liability Company Agreement of Alpha Natural Resources Services, LLC | |
3.11* | Restated Certificate of Incorporation of Alpha NR Holding, Inc. | |
3.12* | Bylaws of Alpha NR Holding, Inc. | |
3.13* | Certificate of Incorporation of Alpha NR Ventures, Inc. | |
3.14* | Bylaws of Alpha NR Ventures, Inc. | |
3.15* | Certificate of Formation of Alpha Terminal Company, LLC | |
3.16* | Amended and Restated Limited Liability Company Agreement of Alpha Terminal Company, LLC | |
3.17* | Certificate of Formation of AMFIRE, LLC | |
3.18* | Amended and Restated Limited Liability Company Agreement of AMFIRE, LLC | |
3.19* | Certificate of Incorporation of AMFIRE Holdings, Inc. | |
3.20* | Bylaws of AMFIRE Holdings, Inc. | |
3.21* | Certificate of Formation of AMFIRE Mining Company, LLC | |
3.22* | Limited Liability Company Agreement of AMFIRE Mining Company, LLC | |
3.23* | Certificate of Limited Partnership of AMFIRE WV, L.P. | |
3.24* | Limited Partnership Agreement of AMFIRE WV, L.P. | |
3.25* | Certificate of Formation of ANR Holdings, LLC | |
3.26* | Amended and Restated Limited Liability Company Agreement of ANR Holdings, LLC | |
3.27* | Certificate of Incorporation of Black Dog Coal Corp., as amended | |
3.28** | Second Amended and Restated Bylaws of Black Dog Coal Corp. | |
3.29* | Certificate of Formation of Brooks Run Mining Company, LLC, as amended | |
3.30* | Amended and Restated Limited Liability Company Agreement of Brooks Run Mining Company, LLC |
II-4
Table of Contents
Exhibit | ||
No. | Description of Exhibit | |
3.31* | Certificate of Formation of Dickenson-Russell Coal Company, LLC | |
3.32* | Amended and Restated Limited Liability Company Agreement of Dickenson-Russell Coal Company, LLC | |
3.33* | Certificate of Formation of Enterprise Mining Company, LLC, as amended | |
3.34* | Amended and Restated Limited Liability Company Agreement of Enterprise Mining Company, LLC | |
3.35* | Certificate of Formation of Esperanza Coal Co., LLC | |
3.36* | Amended and Restated Limited Liability Company Agreement of Esperanza Coal Co., LLC | |
3.37* | Articles of Organization of GTTC LLC, as amended | |
3.38* | Amended and Restated Operating Agreement of GTTC LLC | |
3.39* | Articles of Organization of Herndon Processing Company, LLC, as amended | |
3.40* | Amended and Restated Limited Liability Company Agreement of Herndon Processing Company, LLC | |
3.41* | Articles of Organization of Kepler Processing Company, LLC, as amended | |
3.42* | Amended and Restated Limited Liability Company Agreement of Kepler Processing Company, LLC | |
3.43* | Certificate of Formation of Kingwood Mining Company, LLC, as amended | |
3.44* | Amended and Restated Limited Liability Company Agreement of Kingwood Mining Company, LLC | |
3.45* | Articles of Organization of Litwar Processing Company, LLC, as amended | |
3.46* | Limited Liability Company Agreement of Litwar Processing Company, LLC | |
3.47* | Certificate of Formation of Maxxim Rebuild Co., LLC | |
3.48* | Amended and Restated Limited Liability Company Agreement of Maxxim Rebuild Co., LLC | |
3.49* | Certificate of Formation of Maxxim Shared Services, LLC | |
3.50* | Limited Liability Company Agreement of Maxxim Shared Services, LLC | |
3.51* | Certificate of Formation of Maxxum Carbon Resources, LLC | |
3.52* | Amended and Restated Limited Liability Company Agreement of Maxxum Carbon Resources, LLC | |
3.53* | Certificate of Formation of McDowell-Wyoming Coal Company, LLC | |
3.54* | Amended and Restated Limited Liability Company Agreement of McDowell-Wyoming Coal Company, LLC | |
3.55* | Articles of Organization of NatCoal LLC, as amended | |
3.56* | Amended and Restated Limited Liability Company Agreement of NatCoal LLC | |
3.57* | Certificate of Formation of Paramont Coal Company Virginia, LLC | |
3.58* | Amended and Restated Limited Liability Company Agreement of Paramont Coal Company Virginia, LLC | |
3.59* | Articles of Organization of Riverside Energy Company, LLC, as amended | |
3.60* | Amended and Restated Limited Liability Company Agreement of Riverside Energy Company, LLC | |
3.61* | Certificate of Incorporation of Solomons Mining Company, as amended | |
3.62* | Amended and Restated Bylaws of Solomons Mining Company | |
4.1 | 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 (Incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) |
II-5
Table of Contents
Exhibit | ||
No. | Description of Exhibit | |
4.2* | Registration Rights Agreement dated May 18, 2004 among Alpha Natural Resources, LLC, Alpha Natural Resources Capital Corp., the Guarantors and the Initial Purchasers | |
4.3 | First Supplemental Indenture dated as of February 1, 2005 among Alpha Natural Resources, LLC, Alpha Natural Resources Capital Corp., the Guarantors party thereto and Wells Fargo Bank, N.A., as Trustee (Incorporated by reference to Exhibit 4.3 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32423) filed on March 30, 2005.) | |
4.4 | Second Supplemental Indenture dated as of March 30, 2005 among Alpha Natural Resources, LLC, Alpha Natural Resources Capital Corp., Alpha NR Holding, Inc., Alpha NR Ventures, Inc., ANR Holdings, LLC, the Guarantors party thereto and Wells Fargo Bank, N.A., as Trustee (Incorporated by reference to Exhibit 4.4 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32423) filed on March 30, 2005.) | |
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”) (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
10.2 | First Amendment, dated as of August 6, 2004, to Credit Agreement (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
10.3 | Second Amendment, dated as of December 28, 2004, to Credit Agreement (Incorporated by reference to Exhibit 10.16 to Amendment No. 2 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on February 2, 2005.) | |
10.4 | Third Amendment, dated as of January 25, 2005, to Credit Agreement (Incorporated by reference to Exhibit 10.16 to Amendment No. 2 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on February 2, 2005.) | |
10.5 | Fourth Amendment, dated as of March 28, 2005, to Credit Agreement (Incorporated by reference to Exhibit 10.5 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32423) filed on March 30, 2005.) | |
10.6 | 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”) (Incorporated by reference to Exhibit 10.3 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
10.7 | First Amendment, dated as of August 6, 2004 to Guarantee and Collateral Agreement (Incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
10.8 | Second Amended and Restated Employment Agreement between Alpha Natural Resources Services, LLC and Michael J. Quillen dated January 28, 2005 (Incorporated by reference to Exhibit 10.6 to Amendment No. 2 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on February 2, 2005.) | |
10.9 | Employment Agreement between Alpha Natural Resources, LLC and D. Scott Kroh dated January 1, 2003, as amended (Incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) |
II-6
Table of Contents
Exhibit | ||
No. | Description of Exhibit | |
10.10 | Stockholder Agreement dated as of February 11, 2005 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 (the ‘Stockholder Agreement”) (Incorporated by reference to Exhibit 10.10 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32423) filed on March 30, 2005.) | |
10.11 | Letter agreement waiving certain provisions of the Stockholder Agreement dated March 28, 2005 by the FRC Parties and the AMCI Parties (Incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32423) filed on March 30, 2005.) | |
10.12 | Alpha Natural Resources Annual Incentive Bonus (AIB) Plan (the “AIB Plan”) (Incorporated by reference to Exhibit 10.9 to Amendment No. 2 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on February 2, 2005.) | |
10.13 | Amended and Restated Alpha Coal Management LLC 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.10 to Amendment No. 2 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on February 2, 2005.) | |
10.14 | Alpha Natural Resources, Inc. 2005 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.11 to Amendment No. 2 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on February 2, 2005.) | |
10.15 | Form of Alpha Natural Resources, Inc. Grantee Stock Option Agreement for Alpha Natural Resources, Inc. 2005 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.15 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32423) filed on March 30, 2005.) | |
10.16† | 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 (Incorporated by reference to Exhibit 10.12 to Amendment No. 1 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on January 12, 2005.) | |
10.17† | 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 (Incorporated by reference to Exhibit 10.13 to Amendment No. 1 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on January 12, 2005.) | |
10.18† | 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 (Incorporated by reference to Exhibit 10.14 to Amendment No. 1 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on January 12, 2005.) | |
10.19 | Cash bonus awards paid to certain executive officers of Alpha Natural Resources, Inc. who also serve as executive officers of Alpha Natural Resources, LLC with respect to fiscal 2004 as reported on Alpha Natural Resources, Inc.’s current report on Form 8-K filed on March 4, 2005 and incorporated by this reference | |
10.20 | Base salary amounts set for Alpha Natural Resources, Inc.’s named executive officers who also serve as executive officers of Alpha Natural Resources, LLC as reported on Alpha Natural Resources, Inc.’s current report on Form 8-K filed on March 4, 2005 and incorporated by this reference | |
10.21 | Performance goals and target bonuses set for 2005 under the AIB Plan for Alpha Natural Resources, Inc.’s executive officers who also serve as executive officers of Alpha Natural Resources, LLC as reported on Alpha Natural Resources, Inc.’s current report on Form 8-K filed on April 27, 2005 and incorporated by this reference. | |
10.22** | Amended and Restated Alpha Natural Resources, Inc. and Subsidiaries Deferred Compensation Plan |
II-7
Table of Contents
Exhibit | ||
No. | Description of Exhibit | |
12.1* | Statement re Computation of Ratios | |
21.1* | List of Subsidiaries | |
23.1* | Consent of Bartlit Beck Herman Palenchar & Scott LLP (included as part of its opinion filed as Exhibit 5.1 hereto) | |
23.2** | Consent of KPMG LLP | |
23.3** | Consent of KPMG LLP | |
23.4** | Consent of KPMG LLP | |
23.5** | Consent of KPMG LLP | |
24.1* | Powers of Attorney (included in signature page of this Registration Statement) | |
25.1* | Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Wells Fargo Bank, National Association, as Trustee | |
99.1** | Form of Letter of Transmittal | |
99.2** | Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees | |
99.3** | Form of Letter to Clients | |
99.4** | Form of Notice of Guaranteed Delivery |
† | Confidential treatment has been granted with respect to portions of the exhibit. Confidential portions have been omitted from this public filing and have been filed separately with the Securities and Exchange Commission. |
* | Previously filed. |
** | Filed herewith. |
ITEM 22. | UNDERTAKINGS. |
(1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act; | |
(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more that a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and | |
(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
II-8
Table of Contents
(2) that, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and | |
(3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
II-9
Table of Contents
Alpha Natural Resources, LLC |
By: | * |
Name: David C. Stuebe |
Title: | Vice President and Chief Financial Officer |
Signature | Title | |||
* | President, Chief Executive Officer and Manager (Principal Executive Officer) | |||
* | Vice President and Chief Financial Officer (Principal Financial Officer) | |||
* | Vice President, Secretary and Controller (Principal Accounting Officer) | |||
* /s/ Vaughn R. Groves Vaughn R. Groves Attorney-in-fact |
II-10
Table of Contents
Alpha Coal Sales Co., LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President and Manager (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
/s/ Vaughn R. Groves Attorney-in-fact |
II-11
Table of Contents
Alpha Land and Reserves, LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | President and Manager |
Signature | Title | |||
/s/ Vaughn R. Groves | President and Manager (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-12
Table of Contents
Alpha Natural Resources Capital Corp. |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President and Director (Principal Executive Officer) | |||
* | Vice President, Chief Financial Officer, Treasurer and Assistant Secretary (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-13
Table of Contents
Alpha Natural Resources Services, LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President, General Counsel and |
Assistant Secretary |
Signature | Title | |||
* | President and Manager (Principal Executive Officer) | |||
* | Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) | |||
* | Vice President, Secretary and Controller (Principal Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-14
Table of Contents
Alpha NR Holding, Inc. |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President, Secretary and General Counsel |
Signature | Title | |||
* | President, Chief Executive Officer and Director (Principal Executive Officer) | |||
* | Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) | |||
* | Vice President, Assistant Secretary and Controller (Principal Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-15
Table of Contents
Alpha NR Ventures, Inc. |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President, Secretary and General Counsel |
Signature | Title | |||
* | President, Chief Executive Officer and Director (Principal Executive Officer) | |||
* | Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) | |||
* | Vice President, Assistant Secretary and Controller (Principal Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-16
Table of Contents
Alpha Terminal Company, LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President and Manager (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-17
Table of Contents
AMFIRE, LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President and Manager (Principal Executive Officer) | |||
* | Secretary and Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-18
Table of Contents
AMFIRE Holdings, Inc. |
By: | /s/ Vaughn R. Groves |
Vaughn R. Groves | |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President and Director (Principal Executive Officer) | |||
* | Secretary and Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-19
Table of Contents
AMFIRE Mining Company, LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President and Manager (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-20
Table of Contents
AMFIRE WV, L.P. |
By: | AMFIRE Holdings, Inc. |
General Partner |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President and Director of the General Partner (Principal Executive Officer) | |||
* | Secretary and Treasurer of the General Partner (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-21
Table of Contents
ANR Holdings, LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President, General Counsel |
and Assistant Secretary |
Signature | Title | |||
* | President, Chief Executive Officer and Director (Principal Executive Officer) | |||
* | Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-22
Table of Contents
Black Dog Coal Corp. |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* �� David H. Decker | Director | |||
* | President (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-23
Table of Contents
Brooks Run Mining Company, LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
/s/ Randy L. McMillion | President and Manager (Principal Executive Officer) | |||
/s/ John W. Pearl | Treasurer (Principal Financial and Accounting Officer) |
II-24
Table of Contents
Dickenson-Russell Coal Company, LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President and Manager (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-25
Table of Contents
Enterprise Mining Company, LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President and Manager (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
/s/ Vaughn R. Groves Attorney-in-fact |
II-26
Table of Contents
Esperanza Coal Co., LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President and Manager (Principal Executive Officer) | |||
* | Secretary and Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-27
Table of Contents
GTTC LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President and Manager (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-28
Table of Contents
Herndon Processing Company, LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President, Secretary and Manager (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves | ||||
Attorney-in-fact |
II-29
Table of Contents
Kepler Processing Company, LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President, Secretary and Manager (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves | ||||
Attorney-in-fact |
II-30
Table of Contents
Kingwood Mining Company, LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President and Manager (Principal Executive Officer) | |||
/s/ John W. Pearl | Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves | ||||
Attorney-in-fact |
II-31
Table of Contents
Litwar Processing Company, LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President, Secretary and Manager (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-32
Table of Contents
Maxxim Rebuild Co., LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | Manager | |||
* | President (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-33
Table of Contents
Maxxim Shared Services, LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President and Manager (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-34
Table of Contents
Maxxum Carbon Resources, LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President and Manager (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-35
Table of Contents
McDowell-Wyoming Coal Company, LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President, Secretary and Manager (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-36
Table of Contents
NatCoal LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President and Manager (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-37
Table of Contents
Paramont Coal Company Virginia, LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President and Manager (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves Attorney-in-fact |
II-38
Table of Contents
Riverside Energy Company, LLC |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President and Manager (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves | ||||
Attorney-in-fact |
II-39
Table of Contents
Solomons Mining Company |
By: | /s/ Vaughn R. Groves |
Name: Vaughn R. Groves |
Title: | Vice President |
Signature | Title | |||
* | President and Director (Principal Executive Officer) | |||
* | Treasurer (Principal Financial and Accounting Officer) | |||
* /s/ Vaughn R. Groves | ||||
Attorney-in-fact |
II-40
Table of Contents
Exhibit | ||
No. | Description of Exhibit | |
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 (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
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 (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
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 (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
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 (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
2.5 | Asset Purchase Agreement by and between Pittston Coal Company and Alpha Terminal Company, LLC, dated as of October 29, 2002, as amended (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
2.6 | Asset Purchase Agreement by and between Pittston Coal Company and Maxxim Rebuild Co., LLC, dated as of October 29, 2002, as amended (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
2.7 | Purchase and Sale Agreement by and among El Paso CGP Company and AMFIRE, LLC dated as of November 14, 2002, as amended (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
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 (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
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 (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
2.10 | Purchase and Sale Agreement dated as of April 9, 2003 by and between Alpha Land and Reserves, LLC and CSTL LLC (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
2.11 | Purchase and Sale Agreement dated as of April 9, 2003 by and between Dickenson-Russell Coal Company, LLC and WBRD LLC (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
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. (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
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 (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) |
II-41
Table of Contents
Exhibit | ||
No. | Description of Exhibit | |
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 (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
2.15 | Asset Purchase Agreement by and between Mears Enterprises, Inc. and AMFIRE Mining Company, LLC dated October 29, 2003, as amended (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
2.16 | Internal Restructuring Agreement dated as of February 11, 2005 by and among Alpha Natural Resources, Inc., Alpha NR Ventures, Inc., ANR Holdings, LLC, the FRC Parties named therein, the AMCI Parties named therein, Madison Capital Funding LLC, Alpha Coal Management, LLC and the Management Members named therein (Incorporated by reference to Exhibit 2.16 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32423) filed on March 30, 2005.) | |
2.17 | Sixth Amendment to Contribution Agreement by and among the FRC Parties, the AMCI Parties, ANR Holdings, LLC and Alpha Natural Resources, Inc. (Incorporated by reference to Exhibit 2.17 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32423) filed on March 30, 2005.) | |
2.18 | Asset Purchase Agreement dated April 14, 2005, by and among Gallup Transportation and Transloading Company, LLC, NATIONAL KING COAL LLC and NKC Acquisition, LLC (Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 1-32423) filed on April 15, 2005.) | |
3.1* | Certificate of Formation of Alpha Natural Resources, LLC | |
3.2* | Amended and Restated Limited Liability Company Agreement of Alpha Natural Resources, LLC, as amended | |
3.3* | Certificate of Formation of Alpha Coal Sales Co., LLC | |
3.4* | Amended and Restated Limited Liability Company Agreement of Alpha Coal Sales Co., LLC | |
3.5* | Certificate of Formation of Alpha Land and Reserves, LLC | |
3.6* | Amended and Restated Limited Liability Company Agreement of Alpha Land and Reserves, LLC | |
3.7* | Certificate of Incorporation of Alpha Natural Resources Capital Corp. | |
3.8* | Bylaws of Alpha Natural Resources Capital Corp. | |
3.9* | Certificate of Formation of Alpha Natural Resources Services, LLC | |
3.10* | Limited Liability Company Agreement of Alpha Natural Resources Services, LLC | |
3.11* | Restated Certificate of Incorporation of Alpha NR Holding, Inc. | |
3.12* | Bylaws of Alpha NR Holding, Inc. | |
3.13* | Certificate of Incorporation of Alpha NR Ventures, Inc. | |
3.14* | Bylaws of Alpha NR Ventures, Inc. | |
3.15* | Certificate of Formation of Alpha Terminal Company, LLC | |
3.16* | Amended and Restated Limited Liability Company Agreement of Alpha Terminal Company, LLC | |
3.17* | Certificate of Formation of AMFIRE, LLC | |
3.18* | Amended and Restated Limited Liability Company Agreement of AMFIRE, LLC | |
3.19* | Certificate of Incorporation of AMFIRE Holdings, Inc. | |
3.20* | Bylaws of AMFIRE Holdings, Inc. | |
3.21* | Certificate of Formation of AMFIRE Mining Company, LLC | |
3.22* | Limited Liability Company Agreement of AMFIRE Mining Company, LLC | |
3.23* | Certificate of Limited Partnership of AMFIRE WV, L.P. | |
3.24* | Limited Partnership Agreement of AMFIRE WV, L.P. |
II-42
Table of Contents
Exhibit | ||
No. | Description of Exhibit | |
3.25* | Certificate of Formation of ANR Holdings, LLC | |
3.26* | Amended and Restated Limited Liability Company Agreement of ANR Holdings, LLC | |
3.27* | Certificate of Incorporation of Black Dog Coal Corp., as amended | |
3.28** | Second Amended and Restated Bylaws of Black Dog Coal Corp. | |
3.29* | Certificate of Formation of Brooks Run Mining Company, LLC, as amended | |
3.30* | Amended and Restated Limited Liability Company Agreement of Brooks Run Mining Company, LLC | |
3.31* | Certificate of Formation of Dickenson-Russell Coal Company, LLC | |
3.32* | Amended and Restated Limited Liability Company Agreement of Dickenson-Russell Coal Company, LLC | |
3.33* | Certificate of Formation of Enterprise Mining Company, LLC, as amended | |
3.34* | Amended and Restated Limited Liability Company Agreement of Enterprise Mining Company, LLC | |
3.35* | Certificate of Formation of Esperanza Coal Co., LLC | |
3.36* | Amended and Restated Limited Liability Company Agreement of Esperanza Coal Co., LLC | |
3.37* | Articles of Organization of GTTC LLC, as amended | |
3.38* | Amended and Restated Operating Agreement of GTTC LLC | |
3.39* | Articles of Organization of Herndon Processing Company, LLC, as amended | |
3.40* | Amended and Restated Limited Liability Company Agreement of Herndon Processing Company, LLC | |
3.41* | Articles of Organization of Kepler Processing Company, LLC, as amended | |
3.42* | Amended and Restated Limited Liability Company Agreement of Kepler Processing Company, LLC | |
3.43* | Certificate of Formation of Kingwood Mining Company, LLC, as amended | |
3.44* | Amended and Restated Limited Liability Company Agreement of Kingwood Mining Company, LLC | |
3.45* | Articles of Organization of Litwar Processing Company, LLC, as amended | |
3.46* | Limited Liability Company Agreement of Litwar Processing Company, LLC | |
3.47* | Certificate of Formation of Maxxim Rebuild Co., LLC | |
3.48* | Amended and Restated Limited Liability Company Agreement of Maxxim Rebuild Co., LLC | |
3.49* | Certificate of Formation of Maxxim Shared Services, LLC | |
3.50* | Limited Liability Company Agreement of Maxxim Shared Services, LLC | |
3.51* | Certificate of Formation of Maxxum Carbon Resources, LLC | |
3.52* | Amended and Restated Limited Liability Company Agreement of Maxxum Carbon Resources, LLC | |
3.53* | Certificate of Formation of McDowell-Wyoming Coal Company, LLC | |
3.54* | Amended and Restated Limited Liability Company Agreement of McDowell-Wyoming Coal Company, LLC | |
3.55* | Articles of Organization of NatCoal LLC, as amended | |
3.56* | Amended and Restated Limited Liability Company Agreement of NatCoal LLC | |
3.57* | Certificate of Formation of Paramont Coal Company Virginia, LLC | |
3.58* | Amended and Restated Limited Liability Company Agreement of Paramont Coal Company Virginia, LLC | |
3.59* | Articles of Organization of Riverside Energy Company, LLC, as amended | |
3.60* | Amended and Restated Limited Liability Company Agreement of Riverside Energy Company, LLC |
II-43
Table of Contents
Exhibit | ||
No. | Description of Exhibit | |
3.61* | Certificate of Incorporation of Solomons Mining Company, as amended | |
3.62* | Amended and Restated Bylaws of Solomons Mining Company | |
4.1 | 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 (Incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
4.2* | Registration Rights Agreement dated May 18, 2004 among Alpha Natural Resources, LLC, Alpha Natural Resources Capital Corp., the Guarantors and the Initial Purchasers | |
4.3 | First Supplemental Indenture dated as of February 1, 2005 among Alpha Natural Resources, LLC, Alpha Natural Resources Capital Corp., the Guarantors party thereto and Wells Fargo Bank, N.A., as Trustee (Incorporated by reference to Exhibit 4.3 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32423) filed on March 30, 2005.) | |
4.4 | Second Supplemental Indenture dated as of March 30, 2005 among Alpha Natural Resources, LLC, Alpha Natural Resources Capital Corp., Alpha NR Holding, Inc., Alpha NR Ventures, Inc., ANR Holdings, LLC, the Guarantors party thereto and Wells Fargo Bank, N.A., as Trustee (Incorporated by reference to Exhibit 4.4 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32423) filed on March 30, 2005.) | |
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”) (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
10.2 | First Amendment, dated as of August 6, 2004, to Credit Agreement (Incorporated by reference to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
10.3 | Second Amendment, dated as of December 28, 2004, to Credit Agreement (Incorporated by reference to Exhibit 10.16 to Amendment No. 2 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on February 2, 2005.) | |
10.4 | Third Amendment, dated as of January 25, 2005, to Credit Agreement (Incorporated by reference to Exhibit 10.16 to Amendment No. 2 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on February 2, 2005.) | |
10.5 | Fourth Amendment, dated as of March 28, 2005, to Credit Agreement (Incorporated by reference to Exhibit 10.5 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32423) filed on March 30, 2005.) | |
10.6 | 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”) (Incorporated by reference to Exhibit 10.3 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
10.7 | First Amendment, dated as of August 6, 2004 to Guarantee and Collateral Agreement (Incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
10.8 | Second Amended and Restated Employment Agreement between Alpha Natural Resources Services, LLC and Michael J. Quillen dated January 28, 2005 (Incorporated by reference to Exhibit 10.6 to Amendment No. 2 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on February 2, 2005.) |
II-44
Table of Contents
Exhibit | ||
No. | Description of Exhibit | |
10.9 | Employment Agreement between Alpha Natural Resources, LLC and D. Scott Kroh dated January 1, 2003, as amended (Incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on December 6, 2004.) | |
10.10 | Stockholder Agreement dated as of February 11, 2005 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 (the ‘Stockholder Agreement”) (Incorporated by reference to Exhibit 10.10 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32423) filed on March 30, 2005.) | |
10.11 | Letter agreement waiving certain provisions of the Stockholder Agreement dated March 28, 2005 by the FRC Parties and the AMCI Parties (Incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32423) filed on March 30, 2005.) | |
10.12 | Alpha Natural Resources Annual Incentive Bonus (AIB) Plan (the “AIB Plan”) (Incorporated by reference to Exhibit 10.9 to Amendment No. 2 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on February 2, 2005.) | |
10.13 | Amended and Restated Alpha Coal Management LLC 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.10 to Amendment No. 2 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on February 2, 2005.) | |
10.14 | Alpha Natural Resources, Inc. 2005 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.11 to Amendment No. 2 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on February 2, 2005.) | |
10.15 | Form of Alpha Natural Resources, Inc. Grantee Stock Option Agreement for Alpha Natural Resources, Inc. 2005 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.15 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32423) filed on March 30, 2005.) | |
10.16† | 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 (Incorporated by reference to Exhibit 10.12 to Amendment No. 1 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on January 12, 2005.) | |
10.17† | 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 (Incorporated by reference to Exhibit 10.13 to Amendment No. 1 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on January 12, 2005.) | |
10.18† | 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 (Incorporated by reference to Exhibit 10.14 to Amendment No. 1 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc. (File No. 333-121002) filed on January 12, 2005.) | |
10.19 | Cash bonus awards paid to certain executive officers of Alpha Natural Resources, Inc. who also serve as executive officers of Alpha Natural Resources, LLC with respect to fiscal 2004 as reported on Alpha Natural Resources, Inc.’s current report on Form 8-K filed on March 4, 2005 and incorporated by this reference | |
10.20 | Base salary amounts set for Alpha Natural Resources, Inc.’s named executive officers who also serve as executive officers of Alpha Natural Resources, LLC as reported on Alpha Natural Resources, Inc.’s current report on Form 8-K filed on March 4, 2005 and incorporated by this reference |
II-45
Table of Contents
Exhibit | ||
No. | Description of Exhibit | |
10.21 | Performance goals and target bonuses set for 2005 under the AIB Plan for Alpha Natural Resources, Inc.’s executive officers who also serve as executive officers of Alpha Natural Resources, LLC as reported on Alpha Natural Resources, Inc.’s current report on Form 8-K filed on April 27, 2005 and incorporated by this reference. | |
10.22** | Amended and Restated Alpha Natural Resources, Inc. and Subsidiaries Deferred Compensation Plan | |
12.1* | Statement re Computation of Ratios | |
21.1* | List of Subsidiaries | |
23.1* | Consent of Bartlit Beck Herman Palenchar & Scott LLP (included as part of its opinion filed as Exhibit 5.1 hereto) | |
23.2** | Consent of KPMG LLP | |
23.3** | Consent of KPMG LLP | |
23.4** | Consent of KPMG LLP | |
23.5** | Consent of KPMG LLP | |
24.1* | Powers of Attorney (included in signature page of this Registration Statement) | |
25.1* | Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Wells Fargo Bank, National Association, as Trustee | |
99.1** | Form of Letter of Transmittal | |
99.2** | Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees | |
99.3** | Form of Letter to Clients | |
99.4** | Form of Notice of Guaranteed Delivery |
† | Confidential treatment has been granted with respect to portions of the exhibit. Confidential portions have been omitted from this public filing and have been filed separately with the Securities and Exchange Commission. |
* | Previously filed. |
** | Filed herewith. |
II-46