SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
 
 (Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015

OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from           to

Commission File No. 001-32331

ALPHA NATURAL RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
42-1638663
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)
 
 
 
One Alpha Place, P.O. Box 16429, Bristol, Virginia
 
24209
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code:
(276) 619-4410

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes   ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes   ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
o Large accelerated filer
x Accelerated filer
o Non-accelerated filer
o Smaller reporting company
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes   x   No

Number of shares of the registrant’s Common Stock, $0.01 par value, outstanding as of July 31, 2015 - 222,511,210


TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Table of Contents



Item 1.
Financial Statements

ALPHA NATURAL RESOURCES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Amounts in thousands, except share and per share data)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2015
 
2014
 
2015
 
2014
Revenues:
 
 
 
 
 
 
 
Coal revenues
$
674,068

 
$
919,253

 
$
1,400,135

 
$
1,872,073

Freight and handling revenues
79,739

 
116,338

 
179,898

 
250,540

Other revenues
11,260

 
18,507

 
27,023

 
43,258

Total revenues
765,067

 
1,054,098

 
1,607,056

 
2,165,871

Costs and expenses:
 
 
 
 
 
 
 
Cost of coal sales (exclusive of items shown separately below)
713,111

 
827,948

 
1,464,435

 
1,724,532

Freight and handling costs
79,739

 
116,338

 
179,898

 
250,540

Other expenses
6,376

 
6,691

 
11,361

 
21,885

Depreciation, depletion and amortization
170,700

 
191,072

 
329,131

 
391,367

Amortization of acquired intangibles, net
7,472

 
9,464

 
19,917

 
18,743

Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above)
27,353

 
43,757

 
52,315

 
84,954

Asset impairment and restructuring
238,606

 
2,590

 
242,726

 
12,089

Goodwill impairment
—

 
308,651

 
—

 
308,651

Total costs and expenses
1,243,357

 
1,506,511

 
2,299,783

 
2,812,761

Loss from operations
(478,290
)
 
(452,413
)
 
(692,727
)
 
(646,890
)
Other income (expense):
 
 
 
 
 
 
 
Interest expense
(72,386
)
 
(71,012
)
 
(149,092
)
 
(135,974
)
Interest income
619

 
540

 
1,279

 
1,156

Gain (loss) on early extinguishment of debt
—

 
(218
)
 
364,153

 
(2,022
)
Gain on sale of equity method investment
—

 
—

 
—

 
250,331

Miscellaneous income, net
2,332

 
958

 
1,862

 
2,114

Total other income (expense), net
(69,435
)
 
(69,732
)
 
218,202

 
115,605

Loss before income taxes
(547,725
)
 
(522,145
)
 
(474,525
)
 
(531,285
)
Income tax benefit (expense)
79,535

 
9,518

 
74,546

 
(37,040
)
Net loss
$
(468,190
)
 
$
(512,627
)
 
$
(399,979
)
 
$
(568,325
)
Basic loss per common share
$
(2.11
)
 
$
(2.32
)
 
$
(1.80
)
 
$
(2.57
)
Diluted loss per common share
$
(2.11
)
 
$
(2.32
)
 
$
(1.80
)
 
$
(2.57
)
Weighted average shares - basic
222,371,939

 
221,376,721

 
222,080,002

 
221,266,066

Weighted average shares - diluted
222,371,939

 
221,376,721

 
222,080,002

 
221,266,066

    

See accompanying Notes to Condensed Consolidated Financial Statements.


1
Table of Contents

ALPHA NATURAL RESOURCES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(Amounts in thousands)

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2015
 
2014
 
2015
 
2014
Net loss
$
(468,190
)
 
$
(512,627
)
 
$
(399,979
)
 
$
(568,325
)
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Amortization of and adjustments to employee benefit costs, net of income tax of ($30,062) and $2,814, and ($30,623) and $3,158 for the three and six months ended June 30, 2015 and 2014, respectively
49,792

 
(4,162
)
 
50,711

 
(4,716
)
Settlement of cash flow hedges, net of income tax of ($100) and $439, and ($166) and $1,039 for the three and six months ended June 30, 2015 and 2014, respectively
159

 
(667
)
 
265

 
(1,577
)
Change in fair value of marketable securities, net of income tax of $2,063 and ($15,353), and $194 and ($35,707) for the three and six months ended June 30, 2015 and 2014, respectively
(3,288
)
 
23,320

 
(309
)
 
54,235

Total other comprehensive income, net of tax
46,663

 
18,491

 
50,667

 
47,942

Total comprehensive loss
$
(421,527
)
 
$
(494,136
)
 
$
(349,312
)
 
$
(520,383
)

See accompanying Notes to Condensed Consolidated Financial Statements.
ALPHA NATURAL RESOURCES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share and per share data)
 
June 30,
2015
 
December 31,
2014
 
(Unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
698,236

 
$
741,186

Trade accounts receivable, net
254,288

 
314,015

Inventories, net
237,466

 
237,945

Short-term investments
416,722

 
405,169

Prepaid expenses and other current assets
149,809

 
177,999

Total current assets
1,756,521

 
1,876,314

Property, equipment and mine development costs, net
1,262,460

 
1,425,667

Owned and leased mineral rights and land (net of accumulated depletion of $1,355,037 and $1,265,901, respectively)
6,608,042

 
6,916,307

Other acquired intangibles (net of accumulated amortization of $402,221 and $378,413, respectively)
73,362

 
97,169

Other non-current assets
270,298

 
324,009

Total assets
$
9,970,683

 
$
10,639,466

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
3,690,391

 
$
178,251

Trade accounts payable
184,522

 
216,098

Accrued expenses and other current liabilities
533,103

 
615,200

Total current liabilities
4,408,016

 
1,009,549

Long-term debt
34,439

 
3,622,837

Pension and postretirement medical benefit obligations
1,166,958

 
1,236,986

Asset retirement obligations
582,608

 
538,008

Deferred income taxes
729,034

 
773,466

Other non-current liabilities
409,889

 
471,820

Total liabilities
7,330,944

 
7,652,666

 
 
 
 
Commitments and Contingencies (Note 19)
 
 
 
Stockholders’ Equity
 
 
 
Preferred stock - par value $0.01, 10.0 million shares authorized, none issued
—

 
—

Common stock - par value $0.01, 600.0 million shares authorized, 235.1 million issued and 222.5 million outstanding at June 30, 2015 and 233.7 million issued and 221.6 million outstanding at December 31, 2014
2,351

 
2,337

Additional paid-in capital
8,213,778

 
8,211,122

Accumulated other comprehensive loss
(241,034
)
 
(291,701
)
Treasury stock, at cost: 12.6 million and 12.1 million shares at June 30, 2015 and December 31, 2014, respectively
(273,617
)
 
(273,198
)
Accumulated deficit
(5,061,739
)
 
(4,661,760
)
Total stockholders’ equity
2,639,739

 
2,986,800

Total liabilities and stockholders’ equity
$
9,970,683

 
$
10,639,466


See accompanying Notes to Condensed Consolidated Financial Statements.

2
Table of Contents

ALPHA NATURAL RESOURCES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Amounts in thousands)
 
Six Months Ended
June 30,
 
2015
 
2014
Operating activities:
 
 
 
Net loss
$
(399,979
)
 
$
(568,325
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation, depletion, accretion and amortization
399,885

 
447,802

Amortization of acquired intangibles, net
19,917

 
18,743

Mark-to-market adjustments for derivatives
3,442

 
(4,010
)
Stock-based compensation
2,319

 
11,997

Goodwill impairment
—

 
308,651

Asset impairment and restructuring
242,726

 
12,089

Employee benefit plans, net
26,293

 
28,047

(Gain) loss on early extinguishment of debt
(364,153
)
 
2,022

Gain on sale of equity method investment
—

 
(250,331
)
Gain on sales of marketable equity securities
(3,380
)
 
—

Deferred income taxes
(75,285
)
 
41,761

Other, net
5,199

 
8,980

Changes in operating assets and liabilities:
 
 
 
Trade accounts receivable, net
58,197

 
(19,622
)
Inventories, net
(4,361
)
 
(10,198
)
Prepaid expenses and other current assets
(7,775
)
 
76,102

Other non-current assets
1,646

 
8,145

Trade accounts payable
(35,257
)
 
28,242

Accrued expenses and other current liabilities
(89,551
)
 
(345,589
)
Pension and postretirement medical benefit obligations
(17,066
)
 
(18,549
)
Asset retirement obligations
(19,948
)
 
(25,989
)
Other non-current liabilities
(19,162
)
 
(20,977
)
Net cash used in operating activities
(276,293
)
 
(271,009
)
Investing activities:
 
 
 
Capital expenditures
(66,451
)
 
(82,833
)
Purchases of investments
(379,687
)
 
(333,497
)
Sales of investments
413,404

 
298,180

Proceeds from exchange of equity method investment, net
—

 
96,732

Proceeds from sale of property, plant and equipment
7,986

 
3,271

Net cash used in investing activities
(24,748
)
 
(18,147
)
Financing activities:
 
 
 
Proceeds from borrowings on long-term debt
658,646

 
500,000

Principal repayments of long-term debt
(379,509
)
 
(34,431
)
Principal repayments of capital lease obligations
(12,992
)
 
(8,574
)
Debt issuance and modification costs
(6,815
)
 
(16,494
)
Common stock repurchases
(420
)
 
(1,162
)
Other
(819
)
 
(1,326
)
Net cash provided by financing activities
258,091

 
438,013

Net (decrease) increase in cash and cash equivalents
(42,950
)
 
148,857

Cash and cash equivalents at beginning of period
741,186

 
619,644

Cash and cash equivalents at end of period
$
698,236

 
$
768,501

Supplemental disclosure of non-cash investing and financing activities:
Accrued capital expenditures
$
28,837

 
$
20,260


See accompanying Notes to Condensed Consolidated Financial Statements.

3
Table of Contents

ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

(1) Chapter 11 Reorganization Filings

Business

Alpha Natural Resources, Inc. and its consolidated subsidiaries (the “Company” or “Alpha”) are primarily engaged in the business of extracting, processing and marketing steam and metallurgical coal from surface and deep mines, and mainly sell to electric utilities, steel and coke producers, and industrial customers. The Company, through its subsidiaries, is also involved in marketing coal produced by others to supplement its own production and, through blending, provides its customers with coal qualities beyond those available from its own production.

Chapter 11 Reorganization Filings

On August 3, 2015 (the “Petition Date”), Alpha Natural Resources, Inc. and each of its wholly-owned domestic subsidiaries other than ANR Second Receivables Funding LLC (together with the Company, the “Debtors”) filed voluntary petitions for relief (the “Bankruptcy Filing”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Eastern District of Virginia (the “Bankruptcy Court”), thereby commencing the Chapter 11 cases captioned as In re Alpha Natural Resources, Inc., et al., Case No. 15‑33895 (Bankr. E.D. Va.). The Company’s foreign subsidiaries (collectively, the “Non-Filing Entities”) were not part of the Bankruptcy Filing. The Debtors will continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. The Non-Filing Entities will continue to operate in the ordinary course of business.

The Bankruptcy Filing is intended to permit the Debtors to restructure their debts and reorganize their businesses while under the various protections afforded by the Bankruptcy Code. The Company’s goal is to develop and implement a plan of reorganization that meets the standards for confirmation under the Bankruptcy Code. Confirmation of a plan of reorganization could materially alter the classifications and amounts reported in the Company’s consolidated financial statements, which do not give effect to any adjustments to the carrying values of assets or amounts of liabilities that might be necessary as a consequence of a confirmation of a plan of reorganization or other arrangement or the effect of any operational changes that may be implemented.

Operation and Implication of the Bankruptcy Filing

Under Section 362 of the Bankruptcy Code, the filing of voluntary bankruptcy petitions by the Debtors automatically stayed most actions against the Debtors, including most actions to collect indebtedness incurred prior to the Petition Date or to exercise control over the Debtors’ property. Accordingly, although the Bankruptcy Filing triggered defaults and acceleration of repayment obligations for substantially all of the Debtors’ debt obligations, and also triggered defaults under various other contracts, creditors are stayed from taking any actions as a result of such defaults. Absent an order of the Bankruptcy Court, substantially all of the Debtors’ pre-petition liabilities are subject to compromise and settlement pursuant to a confirmed plan of reorganization. As a result of the Bankruptcy Filing, the realization of assets and the satisfaction of liabilities are subject to uncertainty. The Debtors, operating as debtors-in-possession under the Bankruptcy Code, may, subject to approval of the Bankruptcy Court, sell or otherwise dispose of assets and liquidate, compromise or settle liabilities for amounts other than those reflected in the consolidated financial statements. Further, a confirmed plan of reorganization or other arrangement may materially change the amounts and classifications in the Company’s consolidated financial statements.

On the Petition Date, the Debtors filed a number of motions with the Bankruptcy Court generally designed to stabilize their operations and make the transition into Chapter 11 as seamless as possible. Certain of these motions seek authority from the Bankruptcy Court for the Debtors to make payments upon, or otherwise honor, certain pre-petition obligations (e.g., obligations related to certain employee wages, salaries and benefits and certain vendors and other providers essential to the Debtors' businesses). On the Petition Date, the Debtors also filed applications and motions, as applicable, seeking approval of the proposed retention of certain legal and financial professionals to advise them in connection with the Bankruptcy Filing and certain other professionals to provide services and advice in the ordinary course of business, which motions and applications will be considered by the Bankruptcy Court at a future hearing. From time to time, the Debtors may seek Bankruptcy Court approval to retain additional professionals.

Description of Financing

4
Table of Contents


The Debtors also filed a motion (the “DIP Motion”) seeking authorization to use cash collateral and to approve financing (the “DIP Financing”) under a debtor-in-possession financing agreement (the “DIP Credit Agreement”) with certain lenders, including certain of the Debtors’ prepetition lenders to provide additional liquidity in the Debtors’ chapter 11 cases. The proposed DIP Financing pending before the Bankruptcy Court for approval consists of (i) a term loan not to exceed $300,000, secured by substantially all of the assets of the Debtors, which would be used to fund operations and to cash collateralize certain existing letters of credit (the “DIP Term Loan Facility”), (ii) a term letter of credit facility in an amount up to $100,000 (the “DIP Term LC Facility”), and (iii) a bonding facility in an amount up to $100,000 (which may be increased with the consent of certain of the lenders) (the “DIP Bonding Facility”). The DIP Bonding Facility, if approved, would provide the Debtors the ability to satisfy bonding requests by governmental agencies under state reclamation laws in the form of either an allowed “superpriority” administrative expense claim under Section 364 of the Bankruptcy Code in the chapter 11 cases, or the posting of a cash collateralized letter of credit.

To the extent the DIP Credit Agreement is approved by the Bankruptcy Court and becomes effective by its terms, the DIP Credit Agreement would allow the Debtors, on a single occasion, to request the addition to the DIP Financing of an asset based revolving credit facility having aggregate commitments not to exceed $200,000 (a “Future DIP ABL Facility”). Any Future DIP ABL Facility would have the same maturity date as the DIP Term Loan Facility and liquidity would be made available thereunder based on eligibility criteria and borrowing base calculations (including advance rates and reserves) as set forth therein. The Future DIP ABL Facility would include such other customary terms and conditions as are agreed by the parties, and the effectiveness of the Future DIP ABL Facility would be subject to documentation of an amendment to the DIP Credit Agreement, the entry of an appropriate order of the Bankruptcy Court approving the facility, and other customary conditions precedent.

The DIP Financing also contemplates a last-out letter of credit replacement facility in an aggregate undrawn amount of approximately $192,000 (the “DIP LC Roll-Up Facility”). The letters of credit under the DIP LC Roll-Up Facility, if approved, would be used to “roll-up” certain letters of credit that were outstanding under the Debtors’ existing prepetition secured credit facility as of the Petition Date. In the DIP Motion, the Debtors have sought authorization from the Bankruptcy Court to enter into the DIP LC Roll-Up Facility, subject to court approval and documentation.
    
The DIP Financing has not been approved by the Bankruptcy Court at this time, and the Debtors’ ability to access liquidity under the DIP Financing is subject to Bankruptcy Court approval. Additionally, the proposed terms of the DIP Financing set forth herein may change prior to any approval by the Bankruptcy Court. There can be no certainty that the Bankruptcy Court will approve the DIP Financing.

Plan of Reorganization

For the Debtors to emerge successfully from Chapter 11, they must obtain the Bankruptcy Court’s approval of a plan of reorganization, which will enable them to transition from Chapter 11 into ordinary course operations as reorganized entities outside of bankruptcy. A plan of reorganization determines the rights and treatment of claims of various creditors and security holders, and is subject to the ultimate outcome of negotiations and Bankruptcy Court decisions ongoing through the date on which the plan of reorganization is confirmed.

Although the Debtors' goal is to file a plan of reorganization, they may determine that it is in the best interests of their Chapter 11 estates and stakeholders to seek Bankruptcy Court approval of a sale of all or a portion of their assets pursuant to Section 363 of the Bankruptcy Code (or to seek confirmation of a plan of reorganization providing for such a sale or other arrangement).

The Debtors intend to propose a plan of reorganization on or prior to the applicable date required under the Bankruptcy Code, as the same may be extended with approval of the Bankruptcy Court. The Debtors presently expect that any proposed plan of reorganization will provide, among other things, for mechanisms for the settlement of claims against the Debtors’ estates, treatment of the Debtors' existing equity and debt holders, and certain corporate governance and administrative matters pertaining to the reorganized Debtors. A proposed plan of reorganization filed with the Bankruptcy Court likely will incorporate provisions arising out of the Debtors' discussions with their creditors and other interested parties, and likely will be further revised thereafter in response to creditor claims and objections, the requirements of the Bankruptcy Code or the direction or orders of the Bankruptcy Court. There can be no assurance that the Debtors will be able to secure approval for their proposed plan of reorganization from the Bankruptcy Court.

Going Concern


5
Table of Contents

The Company incurred a net loss for the years ended 2014, 2013 and, 2012 and had an accumulated deficit as of December 31, 2014 and 2013. To improve the Company’s performance and address market challenges, the Company is developing a strategic plan for the ongoing operation of the Company’s business. Successful implementation of the Company’s plan, however, is subject to numerous risks and uncertainties. In addition, the increasingly challenging market and regulatory conditions under which the Company operates have negatively impacted the Company’s results of operations and cash flows and may continue to do so in the future. These factors raise substantial doubt about the Company’s ability to continue as a going concern within the next 12 months.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The Company’s ability to continue as a going concern is contingent upon the Company’s ability to comply with the financial and other covenants contained in the DIP Credit Agreement, the Bankruptcy Court’s approval of the Debtors' plan of reorganization and the reorganized Debtors' ability to successfully implement their plan and obtain any necessary exit financing, among other factors. As a result of the Bankruptcy Filing, the realization of assets and the satisfaction of liabilities are subject to uncertainty. While operating as debtors-in-possession under Chapter 11, the Debtors may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business (and subject to restrictions and mandatory prepayment provisions contained in the DIP Credit Agreement), for amounts other than those reflected in the accompanying consolidated financial statements. Further, the Debtors' plan of reorganization could materially change the amounts and classifications of assets and liabilities reported in the consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern or as a consequence of the Bankruptcy Filing.

(2) Basis of Presentation

The accompanying interim Condensed Consolidated Financial Statements of the Company are unaudited and prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for Form 10-Q. Such rules and regulations allow the omission of certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America as long as the financial statements are not misleading. In the opinion of management, these interim Condensed Consolidated Financial Statements reflect all normal and recurring adjustments necessary for a fair presentation of the results for the periods presented. Results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015 or any other period. These interim Condensed Consolidated Financial Statements should be read in conjunction with the consolidated financial statements of the Company included in its Annual Report on Form 10-K for the year ended December 31, 2014.

The Company’s Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the Company’s Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include inventories; mineral reserves; allowance for non-recoupable advanced mining royalties; asset impairments; reclamation obligations; pensions, postemployment, postretirement medical and other employee benefit obligations; useful lives for depreciation; reserves for workers’ compensation and black lung claims; current and deferred income taxes; reserves for contingencies and litigation and fair value of financial instruments. Estimates are based on facts and circumstances believed to be reasonable at the time; however, actual results could differ from those estimates.

New Accounting Pronouncements

On April 7, 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, Interest - Imputation of Interest (“ASU 2015-03”). The standard requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts or premiums. ASU 2015-03 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early adoption was permitted and the Company adopted ASU 2015-03 during the three months ended March 31, 2015. Amounts reported as of December 31, 2014 have been reclassed to conform to the current year presentation. See Note 11.

(3) Asset Impairment and Restructuring


6
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

U.S. GAAP requires that long-lived asset groups that are held and used should be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset groups might not be recoverable. During the
three months ended June 30, 2015, given significant weakening in coal markets combined with the additional idling of coal mines, the Company determined that indicators of impairment were present for its coal related long-lived asset groups and performed impairment tests as of June 1, 2015. The impairment testing indicated that undiscounted cash flows were less than the carrying value for certain asset groups. The Company estimated the fair value of these asset groups generally using a discounted cash flow analysis utilizing market-participant assumptions. The carrying values of these asset groups exceeded their fair value and accordingly, the Company recorded asset impairment charges totaling $228,222 of which $227,698 was recorded for asset groups in our Eastern Coal Operations and $524 was recorded for an asset group in the Company's All Other category. The asset impairment charges reduced the carrying values of mineral reserves by $209,802 and property, plant and equipment by $18,420. The asset impairments established a new cost basis on which future depreciation, depletion and amortization will be based.

During the three and six months ended June 30, 2015, the Company recorded severance expenses of $4,458 and $8,578, respectively. Additionally, the Company recorded impairment expenses of $5,926 related to certain other non-current assets during the three and six months ended June 30, 2015.

The Company recorded severance expenses of $1,664 and $2,398, and impairment expenses of $926 and $9,723 related to certain other non-current assets within the Company’s All Other category during the three and six months ended June 30, 2014, respectively. Additionally, the Company recorded other expenses of ($32) during the six months ended June 30, 2014.

(4) Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes to accumulated other comprehensive income (loss) during the six months ended June 30, 2015 and 2014:

Balance December 31, 2014
 
Other comprehensive
income (loss) before reclassifications
 
Amounts reclassified
from accumulated other comprehensive income (loss)
 
Balance
June 30, 2015
Employee benefit costs
$
(291,118
)
 
$
50,737

 
$
(26
)
 
$
(240,407
)
Cash flow hedges
(400
)
 
—

 
265

 
(135
)
Available-for-sale marketable securities
(183
)
 
1,768

 
(2,077
)
 
(492
)

$
(291,701
)
 
$
52,505

 
$
(1,838
)
 
$
(241,034
)

 
Balance December 31, 2013
 
Other comprehensive
income (loss) before reclassifications
 
Amounts reclassified
from accumulated other comprehensive income (loss)
 
Balance
June 30, 2014
Employee benefit costs
$
(59,102
)
 
$
(3,603
)
 
$
(1,113
)
 
$
(63,818
)
Cash flow hedges
1,941

 
—

 
(1,577
)
 
364

Available-for-sale marketable securities
13

 
54,236

 
(1
)
 
54,248

 
$
(57,148
)
 
$
50,633

 
$
(2,691
)
 
$
(9,206
)

The following tables summarize the amounts reclassified from accumulated other comprehensive income (loss) and the statement of operations line items affected by the reclassifications during the three and six months ended June 30, 2015 and 2014:


7
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

Details about accumulated other comprehensive income (loss) components
Amounts reclassified from accumulated other comprehensive income (loss)
 
Affected line item in the Condensed Consolidated Statements of Operations
Three Months Ended June 30, 2015
 
Three Months Ended June 30, 2014
 
 
 
Employee benefit costs:
 
 
 
 
 
     Amortization of actuarial loss
$
790

 
$
35

 
(1) 
     Amortization of prior service credit
(1,356
)
 
(939
)
 
(1) 
     Other
(933
)
 
—

 
(1) 
Total before income tax
(1,499
)
 
(904
)
 
 
Tax benefit
554

 
345

 
Income tax benefit (expense)
Total, net of tax
$
(945
)
 
$
(559
)
 
 
 
 
 
 
 
 
Cash flow hedges:


 
 
 

     Commodity swaps-coal
$
—

 
$
(1,087
)
 
Coal revenues
     Commodity swaps-diesel fuel
259

 
(19
)
 
Cost of coal sales
Total before income tax
259

 
(1,106
)
 

Tax (expense) benefit
(100
)
 
439

 
Income tax benefit (expense)
Total, net of tax
$
159

 
$
(667
)
 



 
 
 

Available-for-sale marketable securities:


 
 
 

     Realized losses
$
(3,380
)
 
$
—

 
Interest income, Miscellaneous income, net
Tax benefit
1,303

 
—

 
Income tax benefit (expense)
Total, net of tax
$
(2,077
)
 
$
—

 



8
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

Details about accumulated other comprehensive income (loss) components
Amounts reclassified from accumulated other comprehensive income (loss)
 
Affected line item in the Condensed Consolidated Statements of Operations
Six Months Ended June 30, 2015
 
Six Months Ended June 30, 2014
 
 
 
Employee benefit costs:
 
 
 
 
 
     Amortization of actuarial loss
$
3,651

 
$
92

 
(1) 
     Amortization of prior service credit
(2,737
)
 
(1,894
)
 
(1) 
     Other
(933
)
 
—

 
(1) 
Total before income tax
(19
)
 
(1,802
)
 
 
Tax (expense) benefit
(7
)
 
689

 
Income tax benefit (expense)
Total, net of tax
$
(26
)
 
$
(1,113
)
 
 
 
 
 
 
 
 
Cash flow hedges:
 
 
 
 
 
     Commodity swaps-coal
$
—

 
$
(2,240
)
 
Coal revenues
     Commodity swaps-diesel fuel
431

 
(376
)
 
Cost of coal sales
Total before income tax
431

 
(2,616
)
 
 
Tax (expense) benefit
(166
)
 
1,039

 
Income tax benefit (expense)
Total, net of tax
$
265

 
$
(1,577
)
 
 
 
 
 
 
 
 
Available-for-sale marketable securities:
 
 
 
 
 
     Realized losses
$
(3,380
)
 
$
(1
)
 
Interest income, Miscellaneous income, net
Tax benefit
1,303

 
—

 
Income tax benefit (expense)
Total, net of tax
$
(2,077
)
 
$
(1
)
 
 

(1) These accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit costs for pension, other postretirement benefit plans and black lung. See Note 17.

(5) Earnings Per Share

The number of shares used to calculate basic earnings per common share is based on the weighted average number of the Company’s outstanding common shares during the respective periods. The number of shares used to calculate diluted earnings per common share is based on the number of common shares used to calculate basic earnings per share plus the dilutive effect of stock options and other stock-based instruments held by the Company’s employees and directors during each period, the Company’s 2.375% convertible senior notes due 2015 (the “2.375% Convertible Notes”) which were outstanding until April 15, 2015 when the notes matured and the outstanding principal amount was repaid, the 3.25% convertible senior notes due 2015 issued by Alpha Appalachia Holdings, Inc. (the “3.25% Convertible Notes”), the Company’s 3.75% convertible senior notes due 2017 (the “3.75% Convertible Notes”), and the Company’s outstanding 4.875% convertible senior notes due 2020 (the “4.875% Convertible Notes”). The 2.375% Convertible Notes (matured and repaid as of April 15, 2015), 3.25% Convertible Notes, 3.75% Convertible Notes, and 4.875% Convertible Notes become dilutive for earnings per common share calculations in certain circumstances and in specified periods. The shares that would be issued to settle the conversion or conversion spread are included in the diluted earnings per common share calculation when the conversion option is in the money or the notes are otherwise convertible, and the effect is dilutive. In periods of net loss, the number of shares used to calculate diluted earnings per share is the same as basic earnings per share.

(6) Inventories, net

Inventories, net consisted of the following:

9
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

 
June 30,
2015
 
December 31,
2014
Raw coal
$
35,051

 
$
38,301

Saleable coal
128,021

 
121,590

Materials, supplies and other, net
74,394

 
78,054

Total inventories, net
$
237,466

 
$
237,945


(7) Investments

Short-term investments consist of certificates of deposit of $51,864 and $25,451 as of June 30, 2015 and December 31, 2014, respectively, and short-term marketable securities. During the three months ended March 31, 2014, the Company agreed to transfer its 50% interest in Alpha Shale JV to Rice Energy Inc. (“Rice Energy”) in exchange for 9,523,810 shares of Rice Energy common stock and $100,000 of cash. The exchange resulted in a gain of $250,331 in the first quarter of 2014.

Short-term marketable securities consisted of the following:
 
June 30, 2015
 
 
 
Unrealized
 
 
 
Cost
 
Gain
 
Loss
 
Fair value
Short-term marketable securities:
 
 
 
 
 
 
 
U.S. treasury and agency securities (a)
$
63,762

 
$
11

 
$
(3
)
 
$
63,770

Corporate debt securities (a)
301,218

 
14

 
(144
)
 
301,088

Total short-term marketable securities
$
364,980

 
$
25

 
$
(147
)
 
$
364,858

 
 
 
 
 
 
 
 
 
December 31, 2014
 
 
 
Unrealized
 
 
 
Cost
 
Gain
 
Loss
 
Fair value
Short-term marketable securities:
 
 
 
 
 
 
 
U.S. treasury and agency securities (a)
$
80,087

 
$
13

 
$
(7
)
 
$
80,093

Corporate debt securities (a)
299,751

 
5

 
(131
)
 
299,625

Total short-term marketable securities
$
379,838

 
$
18

 
$
(138
)
 
$
379,718

(a) 
Unrealized gains and losses are recorded as a component of stockholders’ equity.

Long-term marketable securities included in other non-current assets, consisted of the following:
 
June 30, 2015
 
 
 
Unrealized
 
 
 
Cost
 
Gain
 
Loss
 
Fair value
Long-term marketable securities:
 
 
 
 
 
 
 
Corporate equity securities (a)
$
84,339

 
$
—

 
$
(683
)
 
$
83,656

Mutual funds held in Rabbi Trust (b)
6,931

 
5,054

 
(2,005
)
 
9,980

Total long-term marketable securities
$
91,270

 
$
5,054

 
$
(2,688
)
 
$
93,636

 
 
 
 
 
 
 
 
 
December 31, 2014
 
 
 
Unrealized
 
 
 
Cost
 
Gain
 
Loss
 
Fair value
Long-term marketable securities:
 
 
 
 
 
 
 
Corporate equity securities (a)
$
127,001

 
$
—

 
$
(181
)
 
$
126,820

Mutual funds held in rabbi trust (b)
7,433

 
4,661

 
(1,987
)
 
10,107

Total long-term marketable securities
$
134,434

 
$
4,661

 
$
(2,168
)
 
$
136,927


10
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

(a) 
Unrealized gains and losses are recorded as a component of stockholders’ equity.
(b) 
Unrealized gains and losses are recorded in earnings.

(8) Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:
 
June 30,
2015
 
December 31,
2014
Prepaid insurance
$
13,504

 
$
11,445

Insurance and indemnification receivables (1)
5,381

 
41,283

Notes and other receivables
13,137

 
6,771

Deferred income taxes - current
54,711

 
54,451

Deferred long wall move expenses
13,370

 
9,309

Refundable income taxes
9,598

 
13,532

Prepaid freight
13,195

 
20,417

Deposits
16,662

 
8,834

Other prepaid expenses
10,251

 
11,957

Total prepaid expenses and other current assets
$
149,809

 
$
177,999

(1) 
See Note 10.

(9) Property, Equipment and Mine Development Costs, net

Property, equipment and mine development costs consisted of the following:

 
June 30,
2015
 
December 31,
2014
Plant and mining equipment
$
3,307,951

 
$
3,351,521

Mine development
260,131

 
281,594

Office equipment, software and other
49,800

 
49,784

Construction in progress
43,572

 
64,212

Total property, equipment and mine development costs
3,661,454

 
3,747,111

Less accumulated depreciation and amortization
2,398,994

 
2,321,444

Total property, equipment and mine development costs, net
$
1,262,460

 
$
1,425,667


During the six months ended June 30, 2015, the Company incurred impairment charges which reduced the carrying values of property, plant, and equipment by $18,420. See Note 3.

(10) Accrued Expenses and Other Current Liabilities
 
Accrued expenses and other current liabilities consisted of the following:

11
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

 
June 30,
2015
 
December 31,
2014
Wages and employee benefits
$
91,564

 
$
111,627

Current portion of asset retirement obligations
98,702

 
102,493

Taxes other than income taxes
100,202

 
108,504

Interest payable
38,365

 
45,612

Current portion of postretirement medical benefit obligations
46,076

 
46,678

Deferred revenue
12,894

 
27,488

Litigation (1)
11,556

 
51,280

Transportation contract-related obligations
51,275

 
9,635

Other
82,469

 
111,883

Total accrued expenses and other current liabilities
$
533,103

 
$
615,200

(1) The Company has recorded related receivables of $5,381 and $41,283 from insurance coverage and indemnifications in prepaid expenses and other current assets as of June 30, 2015 and December 31, 2014, respectively.
 
(11) Long-Term Debt

Long-term debt consisted of the following:
 
June 30,
2015
 
December 31,
2014
2.375% convertible senior notes due 2015
$
—

 
$
44,458

3.25% convertible senior notes due 2015
109,201

 
109,201

3.75% convertible senior notes due 2017
262,683

 
345,000

9.75% senior notes due 2018
392,584

 
500,000

6.00% senior notes due 2019
576,874

 
800,000

4.875% convertible senior notes due 2020
276,740

 
345,000

7.50% senior secured second lien notes due 2020
713,647

 
500,000

Term loan due 2020
610,937

 
614,062

6.25% senior notes due 2021
584,929

 
700,000

Revolving credit facility (1)
445,000

 
—

Other
48,205

 
61,344

Debt discount
(214,690
)
 
(121,295
)
Debt issuance costs
(81,280
)
 
(96,682
)
Total long-term debt
3,724,830

 
3,801,088

Less current portion
(3,690,391
)
 
(178,251
)
Long-term debt, net of current portion
$
34,439

 
$
3,622,837

(1) 
$137,292 of this amount matures on June 30, 2016, and $307,708 of this amount matures on September 30, 2017.


Revolving Credit Facility Draw

The Company is party to the Fifth Amended and Restated Credit Agreement, dated September 24, 2014, by and among the Company, the lenders party thereto and Citicorp North America, Inc., as administrative agent and collateral agent (the “Credit Agreement”). During the three months ended June 30, 2015, the Company borrowed $445,000 under the revolving credit facility of the Credit Agreement. Approximately $137,292 of this amount carries an interest rate of 5.25% and originally matured on June 30, 2016, which is the expiration date of the revolving credit facility commitments of the associated lenders. The remaining approximately $307,708 in borrowings carries an interest rate of 6.25% and originally matured on September 30, 2017, which is the maturity date of the revolving credit facility. See below regarding the effects of the Bankruptcy Filings on these borrowings.

12
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)


Acceleration of Debt Obligations; Automatic Stay

In connection with the Bankruptcy Filing and noncompliance with the terms of the Company’s debt instruments and borrowing arrangements, including its Fifth Amended and Restated Credit Agreement, the accompanying condensed consolidated balance sheet as of June 30, 2015 reflects the reclassification of $3,424,023 of the Company’s outstanding long-term debt, net of debt discount and issuance costs, to current liabilities. The Bankruptcy Filing constituted an event of default that accelerated the obligations of the Company and certain of its affiliates under the following debt instruments:

•
Fifth Amended and Restated Credit Agreement dated as of September 24, 2014 by and among Alpha Natural Resources, Inc., as Borrower, the Lenders party thereto, the Issuing Banks party thereto and Citicorp North America, Inc., as Administrative Agent and as Collateral Agent (as of the Petition Date, outstanding letters of credit of approximately $191,168, revolving facility borrowings in an aggregate principal amount of $445,000 and term loan borrowings in an aggregate principal amount of $610,937, plus accrued and unpaid interest thereon);

•
Indenture dated as of May 20, 2014 by and among Alpha Natural Resources, Inc., Wilmington Trust, National Association, as Trustee and Wilmington Trust, National Association, as Collateral Agent governing 7.50% Senior Secured Second Lien Notes due 2020 (aggregate principal amount as of the Petition Date of $500,000 plus accrued and unpaid interest thereon);

•
Indenture dated as of March 23, 2015 by and among Alpha Natural Resources, Inc., Wilmington Trust, National Association, as Trustee and Wilmington Trust, National Association as Series B Collateral Agent governing 7.50% Senior Secured Second Lien Notes due 2020 (Series B) (aggregate principal amount as of the Petition Date of $213,647 plus accrued and unpaid interest thereon);

•
Base Senior Indenture dated as of August 12, 2008 by and among Massey Energy Company and the Guarantors Party thereto and Wilmington Trust Company, as Trustee;

•
First Supplemental Indenture dated as of August 12, 2008 to Base Senior Indenture dated as of August 12, 2008, by and among Massey Energy Company and the Guarantors party thereto and Wilmington Trust Company, as Trustee, governing 3.25% Convertible Senior Notes due 2015 (aggregate principal amount as of the Petition Date of $109,201 plus accrued and unpaid interest thereon);

•
Base Indenture dated as of June 1, 2011 by and among Alpha Natural Resources, Inc. and Union Bank, N.A., as Trustee;

•
Supplemental Indenture No. 1 dated as of June 1, 2011 to Base Indenture dated as of June 1, 2011, by and among Alpha Natural Resources, Inc. and Union Bank, N.A., as Trustee, governing 6.00% Senior Notes due 2019 and 6.25% Senior Notes due 2021 (aggregate principal amounts as of the Petition Date of $576,874 of 6.00% Senior Notes due 2019 and $584,929 of 6.25% Senior Notes due 2021, plus, in each case, accrued and unpaid interest thereon);

•
Supplemental Indenture No. 3 dated as of October 11, 2012 to Base Indenture dated as of June 1, 2011, by and among Alpha Natural Resources, Inc. and Union Bank, N.A., as Trustee, governing 9.75% Senior Notes due 2018 (aggregate principal amount as of the Petition Date of $392,584 plus accrued and unpaid interest thereon);

•
Supplemental Indenture No. 4 dated as of May 13, 2013 to Base Indenture dated as of June 1, 2011, by and among Alpha Natural Resources, Inc. and Union Bank, N.A., as Trustee, governing 3.75% Convertible Senior Notes due 2017 (aggregate principal amount as of the Petition Date of $262,683 plus accrued and unpaid interest thereon);

•
Supplemental Indenture No. 5 dated as of December 18, 2013 to Base Indenture dated as of June 1, 2011, by and among Alpha Natural Resources, Inc. and Union Bank, N.A., as Trustee, governing 4.875% Convertible Senior Notes due 2020 (aggregate principal amount as of the Petition Date of $276,740 plus accrued and unpaid interest thereon).

Pursuant to the Bankruptcy Code, the Bankruptcy Filing automatically stayed most actions against the Debtors, including most actions to collect indebtedness incurred prior to the Bankruptcy Filing or to exercise control over the Debtors’ property.

13
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

Accordingly, although the Bankruptcy Filing triggered defaults under the debt instruments listed above, creditors are stayed from taking action as a result of these defaults.

Repurchase of Senior Notes and Issuance of 7.50% Senior Secured Second Lien Notes due 2020

During the three months ended March 31, 2015, the Company entered into a series of privately negotiated transactions in which it repurchased $223,126 principal amount of its 6.00% senior notes due 2019, $115,071 principal amount of its 6.25% senior notes due 2021, $107,416 principal amount of its 9.75% senior notes due 2018, $82,317 principal amount of its 3.75% Convertible Notes, and $68,260 principal amount of its 4.875% Convertible Notes and issued $213,647 principal amount of its 7.50% senior secured second lien notes due 2020. The transactions resulted in net cash paid of $144,942 during the three months ended March 31, 2015 and the Company recognized a gain on early extinguishment of debt of $364,153. The Company received $26,663 on April 1, 2015 that was an outstanding receivable as of March 31, 2015 related to the issuance of the 7.50% senior secured second lien notes due 2020, resulting in net cash paid of $118,279 for the transactions. The 7.50% senior secured second lien notes have identical terms to the 7.50% senior secured second lien notes that were issued in May 2014.

Repurchases of 2.375% and 3.25% Convertible Senior Notes due 2015

During the three and six months ended June 30, 2014, the Company completed the repurchase of approximately $2,832 and $21,431, respectively, of its outstanding 2.375% Convertible Notes and approximately $2,930 and $18,981, respectively, of its outstanding 3.25% Convertible Notes and recorded a loss on early extinguishment of debt of $218 and $2,022, respectively.

In April 2015, the 2.375% Convertible Notes matured and the Company paid $44,458 to retire the remaining outstanding principal balance.

(12) Asset Retirement Obligations

The following table summarizes the changes in asset retirement obligations for the six months ended June 30, 2015:
Total asset retirement obligations at December 31, 2014
$
640,501

Accretion for the period
40,476

Revisions in estimated cash flows
20,281

Expenditures for the period
(19,948
)
Total asset retirement obligations at June 30, 2015
$
681,310

Less current portion
(98,702
)
Long-term portion
$
582,608

    
(13) Other Non-current Liabilities
 
Other non-current liabilities consisted of the following:


14
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

 
June 30,
2015
 
December 31,
2014
Self insured workers’ compensation obligations
$
140,869

 
$
137,824

Black lung obligations
139,108

 
144,894

Below-market and other contract-related obligations, net
58,937

 
109,908

Deferred revenue
25,195

 
23,021

Other
45,780

 
56,173

Total other non-current liabilities
$
409,889

 
$
471,820


(14) Fair Value of Financial Instruments and Fair Value Measurements

The estimated fair values of financial instruments are determined based on relevant market information. These estimates involve uncertainty and cannot be determined with precision.

The carrying amounts for cash and cash equivalents, trade accounts receivable, net, prepaid expenses and other current assets, trade accounts payable, and accrued expenses and other current liabilities approximate fair value due to the short maturity of these instruments.

The following tables set forth by level, within the fair value hierarchy, the Company’s current debt at fair value as of June 30, 2015 and long-term debt at fair value as of December 31, 2014, respectively.


June 30, 2015

Carrying
Amount (1)
 
Total Fair
Value
 
Quoted Prices
in Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
3.25% convertible senior notes due 2015
$
109,060

 
$
40,950

 
$
40,950

 
$
—

 
$
—

3.75% convertible senior notes due 2017
230,919

 
21,671

 
21,671

 
—

 
—

9.75% senior notes due 2018
387,497

 
26,499

 
26,499

 
—

 
—

6.00% senior notes due 2019
570,274

 
46,505

 
46,505

 
—

 
—

4.875% convertible senior notes due 2020
217,572

 
19,372

 
19,372

 
—

 
—

7.50% senior secured second lien notes due 2020
568,036

 
174,139

 
174,139

 
—

 
—

Term loan due 2020
574,879

 
460,158

 
—

 
460,158

 
—

6.25% senior notes due 2021
576,842

 
40,685

 
40,685

 
—

 
—

Revolving credit facility
445,000

 
408,356

 
—

 
408,356

 
—

Long-term debt
$
3,680,079

 
$
1,238,335

 
$
369,821

 
$
868,514

 
$
—



December 31, 2014

Carrying
Amount (1)
 
Total Fair
Value
 
Quoted Prices
in Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
2.375% convertible senior notes due 2015
$
43,462

 
$
43,368

 
$
43,368

 
$
—

 
$
—

3.25% convertible senior notes due 2015
108,225

 
104,014

 
104,014

 
—

 
—

3.75% convertible senior notes due 2017
295,544

 
172,500

 
172,500

 
—

 
—

9.75% senior notes due 2018
492,129

 
233,430

 
233,430

 
—

 
—

6.00% senior notes due 2019
789,679

 
240,000

 
240,000

 
—

 
—

4.875% convertible senior notes due 2020
265,874

 
125,494

 
125,494

 
—

 
—

7.50% senior secured second lien notes due 2020
488,974

 
320,000

 
320,000

 
—

 
—

Term loan due 2020
570,361

 
499,424

 
—

 
499,424

 
—

6.25% senior notes due 2021
689,504

 
208,950

 
208,950

 
—

 
—

Long-term debt
$
3,743,752

 
$
1,947,180

 
$
1,447,756

 
$
499,424

 
$
—

(1) 
Net of debt discounts and debt issuance costs.

The following tables set forth by level, within the fair value hierarchy, the Company’s financial and non-financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2015 and December 31, 2014, respectively. Financial and non-financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the determination of fair value for assets and liabilities and their placement within the fair value hierarchy levels.

15
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

 
June 30, 2015
 
Total Fair
Value
 
Quoted Prices
in Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Financial assets (liabilities):
 
 
 
 
 
 
 
Certificates of deposit
$
51,864

 
$
51,864

 
$
—

 
$
—

U.S. treasury and agency securities
$
63,770

 
$
63,770

 
$
—

 
$
—

Mutual funds held in Rabbi Trust
$
9,980

 
$
9,980

 
$
—

 
$
—

Corporate equity securities
$
83,656

 
$
83,656

 
$
—

 
$
—

Corporate debt securities
$
301,088

 
$
—

 
$
301,088

 
$
—

Forward coal sales
$
865

 
$
—

 
$
865

 
$
—

Commodity swaps
$
(16,456
)
 
$
—

 
$
(16,456
)
 
$
—


 
December 31, 2014
 
Total Fair
Value
 
Quoted Prices
in Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Financial assets (liabilities):
 
 
 
 
 
 
 
Certificates of deposit
$
25,451

 
$
25,451

 
$
—

 
$
—

U.S. treasury and agency securities
$
80,093

 
$
80,093

 
$
—

 
$
—

Mutual funds held in Rabbi Trust
$
10,107

 
$
10,107

 
$
—

 
$
—

Corporate equity securities
$
126,820

 
$
126,820

 
$
—

 
$
—

Corporate debt securities
$
299,625

 
$
—

 
$
299,625

 
$
—

Forward coal sales
$
760

 
$
—

 
$
760

 
$
—

Commodity swaps
$
(23,614
)
 
$
—

 
$
(23,614
)
 
$
—


The following methods and assumptions were used to estimate the fair values of the assets and liabilities in the tables above. 

Level 1 Fair Value Measurements

U.S. Treasury and Agency Securities, Certificates of Deposit, Corporate Equity Securities and Mutual Funds Held in Rabbi Trust - The fair value is based on observable market data.

6.25% senior notes due 2021, 7.50% senior secured second lien notes due 2020, 6.00% senior notes due 2019, 9.75% senior notes due 2018 (collectively, the “Senior Notes”), 4.875% Convertible Notes, 3.75% Convertible Notes, 2.375% Convertible Notes, and 3.25% Convertible Notes (collectively, the “Convertible Notes”) - The fair value is based on observable market data.

Level 2 Fair Value Measurements

Corporate Debt Securities - The fair values of the Company’s corporate debt securities are obtained from a third-party pricing service provider. The fair values provided by the pricing service provider are estimated using pricing models, where the inputs to those models are based on observable market inputs including credit spreads and broker-dealer quotes, among other inputs. The Company classifies the prices obtained from the pricing services within Level 2 of the fair value hierarchy because the underlying inputs are directly observable from active markets. However, the pricing models used entail a certain amount of subjectivity and therefore differing judgments in how the underlying inputs are modeled which could result in different estimates of fair value.
 

16
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

Forward Coal Sales - The fair values of the forward coal sale contracts were estimated using discounted cash flow calculations based upon actual contract prices and forward commodity price curves. The curves were obtained from independent pricing services reflecting broker market quotes. The fair values are adjusted for counter-party credit risk, annually, when applicable.

Commodity Swaps - On an annual basis, the fair values of commodity swaps are estimated using valuation models which include assumptions about commodity prices based on those observed in the underlying markets. The fair values are adjusted for counter-party credit risk. On an interim basis, the fair values of commodity swaps are estimated using broker statement valuations.

Term Loan due 2020 - The fair value of the term loan due 2020 is estimated based on market rates of interest offered for debt of similar terms, maturities and risk.

Revolving Credit Facility - The fair value of the outstanding portion of the revolving credit facility was derived by discounting to present value the future expected cash flows. The discount rate was derived using the interest rate that similarly-secured debt instruments, within the Company’s debt profile, were yielding in observable market transactions on June 30, 2015.


17
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

(15) Derivative Financial Instruments
  
Forward Contracts

In some instances, the Company manages price risk for indexed coal sales and purchases through the use of coal hedge agreements. The Company evaluates each of its coal sales and coal purchase forward contracts to determine whether they meet the definition of a derivative and if so, whether they qualify for the normal purchase normal sale (“NPNS”) exception. For those contracts that do meet the definition of a derivative, certain contracts also qualify for the NPNS exception based on management’s intent and ability to physically deliver or take physical delivery of the coal. Contracts that meet the definition of a derivative and do not qualify for the NPNS exception are accounted for at fair value and, accordingly, the Company includes the unrealized gains and losses in current period earnings or losses.

Swap Agreements

Commodity Swaps

The Company uses diesel fuel in its production process and incurs significant expenses for its purchase. Diesel fuel expenses represented approximately 4% of cost of coal sales for the six months ended June 30, 2015. The Company is subject to the risk of price volatility for this commodity and as a part of its risk management strategy, the Company has entered into swap agreements with financial institutions to mitigate the risk of price volatility for diesel fuel. The terms of the swap agreements allow the Company to pay a fixed price and receive a floating price, which provides a fixed price per unit for the volume of purchases being hedged. As of June 30, 2015, the Company had swap agreements outstanding to hedge the variable cash flows related to 68% and 37% of anticipated diesel fuel usage for the remaining six months of 2015 and calendar year 2016, respectively. The average fixed price for these diesel fuel swaps is $2.49 per gallon and $2.28 per gallon for the remaining six months of 2015 and calendar year 2016, respectively. All cash flows associated with derivative instruments are classified as operating cash flows in the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014.

The following tables present the fair values and location of the Company’s derivative instruments within the Condensed Consolidated Balance Sheets:
 
 
 
Asset Derivatives
Derivatives not designated as
cash flow hedging instruments
Statement of Financial Position Location
 
June 30,
2015
 
December 31,
2014
Commodity swaps
Prepaid expenses and other current assets
 
$
—

 
$
429

Forward coal sales
Prepaid expenses and other current assets
 
865

 
760

Total asset derivatives
 
 
$
865

 
$
1,189


 
 
 
Liability Derivatives
Derivatives not designated as
cash flow hedging instruments
Statement of Financial Position Location
 
June 30,
2015
 
December 31,
2014
Commodity swaps
Other non-current liabilities
 
$
1,924

 
$
3,022

Commodity swaps
Accrued expenses and other current liabilities
 
14,532

 
21,021

Total liability derivatives
 
 
$
16,456

 
$
24,043


The following tables present the gains and losses from derivative instruments for the six months ended June 30, 2015 and 2014 and their location within the Condensed Consolidated Financial Statements:

Derivatives designated as
cash flow hedging instruments
 
Gain (loss) reclassified
from accumulated other
comprehensive income (loss) to earnings
 
2015
 
2014
Commodity swaps (1) (2)
 
$
(265
)
 
$
1,577


18
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

(1) 
Amounts included in cost of coal sales and coal revenues in the Condensed Consolidated Statements of Operations.
(2) 
Net of tax.

Derivatives not designated as
cash flow hedging instruments
 
Gain (loss) recorded in earnings
 
Three Months Ended June 30,
 
Six Months Ended
June 30,
 
2015
 
2014
 
2015
 
2014
Forward coal sales (1)
 
$
(256
)
 
$
(572
)
 
$
105

 
$
1,804

Forward coal purchases (1)
 
—

 
16

 
—

 
—

Commodity swaps (2)
 
(1,339
)
 
3,806

 
(3,547
)
 
2,206

 
 
$
(1,595
)
 
$
3,250

 
$
(3,442
)
 
$
4,010

(1) 
Amounts are recorded as a component of other revenues in the Condensed Consolidated Statements of Operations.
(2) 
Amounts are recorded as a component of coal revenues, cost of coal sales and other expenses in the Condensed Consolidated Statements of Operations.

Unrealized gains and losses recorded in accumulated other comprehensive income (loss) are reclassified to income or loss as the financial swaps settle and the Company purchases the underlying items that are being hedged. During the next twelve months, the Company expects to reclassify approximately $135, net of tax, to earnings.

(16) Income Taxes

For the six months ended June 30, 2015, the Company recorded income tax benefit of $74,546 on a loss before income taxes of $474,525. The income tax benefit differs from the expected statutory amount primarily due to an increase in the valuation allowance. For the six months ended June 30, 2014, the Company recorded income tax expense of $37,040 on a loss before income taxes of $531,285. The income tax expense differs from the expected statutory amount primarily due to an increase in the valuation allowance and non-deductible goodwill impairment expense.

As a result of generating a loss before income taxes during the six months ended June 30, 2015, the Company recorded an increase of $108,297 to its deferred tax asset valuation allowance. The change in valuation allowance results from an increase in net operating losses and other deferred tax assets for which the Company is unable to support realization. The Company currently is relying primarily on the reversal of taxable temporary differences, along with consideration of taxable income via carryback to prior years to support the realization of deferred tax assets. The Company updates its assessment regarding the realizability of its deferred tax assets including scheduling the reversal of its deferred tax liabilities to determine the amount of valuation allowance needed. Scheduling the reversal of deferred tax asset and liability balances requires judgment and estimation. The Company believes the deferred tax liabilities relied upon as future taxable income in its assessment will reverse in the same period and jurisdiction and are of the same character as the temporary differences giving rise to the deferred tax assets that will be realized. The valuation allowance recorded represents the portion of deferred tax assets for which the Company is unable to support realization through the methods described above. The Company has concluded that it is more likely than not that the remaining deferred tax assets, net of valuation allowances, are realizable.

(17) Employee Benefit Plans

The Company sponsors or participates in several benefit plans for its employees, including postretirement health care and life insurance, defined benefit and defined contribution pension plans, and provides black lung benefits.

Components of Net Periodic Pension Costs

The components of net periodic benefit cost (credit) are as follows:

19
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2015
 
2014
 
2015
 
2014
Interest cost
$
7,578

 
$
9,577

 
$
15,126

 
$
15,605

Expected return on plan assets
(8,691
)
 
(10,264
)
 
(17,409
)
 
(17,603
)
Amortization of net actuarial loss
523

 
89

 
1,062

 
89

Loss on settlement
702

 
—

 
702

 
—

Net periodic benefit cost (credit)
$
112

 
$
(598
)
 
$
(519
)
 
$
(1,909
)

Components of Net Periodic Costs of Other Postretirement Benefit Plans

The components of net periodic benefit cost are as follows:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2015
 
2014
 
2015
 
2014
Service cost
$
1,808

 
$
2,158

 
$
4,624

 
$
5,842

Interest cost
9,727

 
10,962

 
20,067

 
21,446

Amortization of prior service credit
(1,609
)
 
(939
)
 
(3,245
)
 
(1,894
)
Amortization of net actuarial (gain) loss
(34
)
 
—

 
1,947

 
—

Gain on curtailment
(1,665
)
 
—

 
(1,665
)
 
—

Net periodic benefit cost
$
8,227

 
$
12,181

 
$
21,728

 
$
25,394


Components of Net Periodic Costs of Black Lung

The components of net periodic benefit cost are as follows:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2015
 
2014
 
2015
 
2014
Service cost
$
433

 
$
382

 
$
987

 
$
1,076

Interest cost
1,453

 
1,875

 
3,068

 
3,599

Expected return on plan assets
(75
)
 
(92
)
 
(151
)
 
(116
)
Amortization of prior service cost
253

 
—

 
508

 
—

Amortization of net actuarial (gain) loss
301

 
(54
)
 
642

 
3

Loss on curtailment
30

 
—

 
30

 
—

Net periodic benefit cost
$
2,395

 
$
2,111

 
$
5,084

 
$
4,562


The Company idled mining operations during the six months ended June 30, 2015, which resulted in corresponding reductions to the workforce. In connection with these reductions, the Company remeasured its obligations under its retiree medical and black lung obligations. The discount rate was also updated for the retiree medical and black lung plans. The remeasured discount rates for the retiree medical and black lung plans are 4.15% and 4.12%, respectively. As a result, the Company reduced its liabilities retiree medical and black lung obligations by $30,598 and $4,863, respectively, with an offset recorded in accumulated other comprehensive income (loss).

(18) Stock-Based Compensation Awards

The Amended and Restated 2012 Long-Term Incentive Plan is currently authorized for the issuance of awards of up to 13,100,000 shares of common stock, and as of June 30, 2015, 4,314,987 shares of common stock were available for grant under the plan.


20
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

During the six months ended June 30, 2015, the Company awarded certain of its executives and key employees 3,460,612 time-based restricted share units under its existing stock plans. Additionally, during the six months ended June 30, 2015, the Company awarded certain of its executives and key employees 9,942,699 time-based restricted cash units which are accounted for as liability awards and subject to variable accounting. The Company’s liability for all outstanding liability awards totaled $469 as of June 30, 2015.

The time-based units granted during the six months ended June 30, 2015, subject to continued employment, cliff vest after two or three years from grant (with accelerated vesting upon a change of control and certain retirement scenarios).

At June 30, 2015, the Company had three types of stock-based awards outstanding: restricted share units (both time-based and performance-based), restricted cash units (both time-based and performance based), and stock options. Stock-based compensation expense totaled $2,728 and $7,811 for the three months ended June 30, 2015 and 2014, respectively. Stock-based compensation expense totaled $2,319 and $13,921 for the six months ended June 30, 2015 and 2014, respectively. For the three months ended June 30, 2015 and 2014, $2,279 and $5,935, respectively, of stock-based compensation expense was reported as selling, general and administrative expenses, and $449 and $1,876, respectively, of stock-based compensation expense was recorded as cost of coal sales. For the six months ended June 30, 2015 and 2014, $624 and $10,264, respectively, of stock-based compensation expense was reported as selling, general and administrative expenses, and $1,695 and $3,657, respectively, of stock-based compensation expense was recorded as cost of coal sales. There was a decrease in stock compensation expense for the three months ended March 31, 2015 related to the forfeiture of awards for an executive who left the company in January 2015.

The Company is authorized to repurchase common shares from employees (upon the election by the employee) to satisfy the employees’ minimum statutory tax withholdings upon the vesting of restricted stock and restricted share units (both time-based and performance-based). Shares that are repurchased to satisfy the employees’ minimum statutory tax withholdings are recorded in treasury stock at cost. During the six months ended June 30, 2015 and 2014, the Company repurchased 418,361 and 220,465, respectively, of common shares from employees at an average price paid per share of $1.00 and $5.27, respectively.

(19) Commitments and Contingencies

(a) General

Estimated losses from loss contingencies are accrued by a charge to income when information available indicates that it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the consolidated financial statements when it is at least reasonably possible that a loss may be incurred and that the loss could be material.

(b) Commitments and Contingencies

Commitments

The Company leases coal mining and other equipment under long-term capital and operating leases with varying terms. In addition, the Company leases mineral interests and surface rights from land owners under various terms and royalty rates. The Company also has obligations under certain coal transportation agreements that contain minimum quantities to be shipped each year.

 Contingencies
 
Extensive regulation of the impacts of mining on the environment and of maintaining workplace safety, and related litigation, has had or may have a significant effect on the Company’s costs of production and results of operations. Further regulations, legislation or litigation in these areas may also cause the Company’s sales or profitability to decline by increasing costs or by hindering the Company’s ability to continue mining at existing operations or to permit new operations.

During the normal course of business, contract-related matters arise between the Company and its customers. When a loss related to such matters is considered probable and can reasonably be estimated, the Company records a liability.
 
(c) Guarantees and Financial Instruments with Off-Balance Sheet Risk

21
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

 
In the normal course of business, the Company is a party to certain guarantees and financial instruments with off-balance sheet risk, such as bank letters of credit, performance or surety bonds, and other guarantees and indemnities related to the obligations of affiliated entities which are not reflected in the Company’s Condensed Consolidated Balance Sheets. As of June 30, 2015, we had outstanding surety bonds with a total face amount of $366,574 to secure various obligations and commitments and we had self bonding guarantees in the amount of $673,927.

The Company’s use of self-bonding guarantees requires it to maintain compliance with certain financial ratios. On May 26, 2015, Alpha Coal West, Inc., a wholly-owned direct subsidiary of the Company was notified by the Wyoming Department of Environmental Quality Division (“LQD”) that the LQD believes neither the Company nor Alpha Coal West, Inc. qualifies under the self-bonding program in the state. The Company has appealed this assessment. As of June 30, 2015, the Company believes that it was not in compliance with the financial ratios required by each of the jurisdictions in which it utilizes self-bonding. The Company nonetheless plans to pursue all available alternatives to permit the continued use of self-bonding. In the event that our self-bonding capacity or additional surety bonds become unavailable or our surety bond providers require additional collateral, however, we would seek to secure our obligations with letters of credit, cash deposits or other suitable forms of collateral. Our failure to maintain, or inability to acquire, surety bonds or to provide a suitable alternative would have a material adverse effect on our liquidity. These failures could result from a variety of factors including lack of availability, higher cost or unfavorable market terms of new surety bonds, and the exercise by third-party surety bond issuers of their right to refuse to renew the surety.

As of June 30, 2015, as collateral for various obligations and commitments, we had $173,703 of letters of credit in place under our Fifth Amended and Restated Credit Agreement and $102,791 of letters of credit in place under our accounts receivable securitization facility.
 
(d) Legal Proceedings
The Company’s legal proceedings range from cases brought by a single plaintiff to purported class actions. These legal proceedings, as well as governmental examinations, involve various business units and a variety of claims including, but not limited to, contract disputes, personal injury claims, property damage claims (including those resulting from blasting, trucking and flooding), environmental and safety issues, and employment matters. While some matters pending against the Company or its subsidiaries specify the damages claimed by the plaintiffs, many seek an unquantified amount of damages or are at very early stages of the legal process. Even when the amount of damages claimed against the Company or its subsidiaries is stated, (i) the claimed amount may be exaggerated or unsupported; (ii) the claim may be based on a novel legal theory or involve a large number of parties; (iii) there may be uncertainty as to the likelihood of a class being certified or the ultimate size of the class; (iv) there may be uncertainty as to the outcome of pending appeals or motions; and/or (v) there may be significant factual issues to be resolved. As a result, the Company may be unable to estimate a range of possible loss for matters that have not yet progressed sufficiently through discovery and development of important factual information and legal issues. Other matters have progressed sufficiently that the Company is able to estimate a range of possible loss. Accordingly, for those legal proceedings and governmental examinations disclosed below as to which a loss is reasonably possible in future periods and for which the Company is able to estimate a range of possible loss, the current estimated range is up to $100,000 in excess of the accrued liability (if any) related to those matters. This aggregate range represents the Company’s estimate of additional possible loss in excess of the accrued liability (if any) with respect to these matters and net of third party indemnification arrangements (if any, other than insurance) as described below related to those matters, based on currently available information, including any damages claimed by the plaintiffs, and is subject to significant judgment and a variety of assumptions and inherent uncertainties. For example, at the time of making an estimate, the Company may have only preliminary, incomplete, or inaccurate information about the facts underlying a claim; its assumptions about the future rulings of the court or other tribunal on significant issues, or the behavior and incentives of adverse parties, regulators, indemnitors or co-defendants, may prove to be wrong; and the outcomes it is attempting to predict are often not amenable to the use of statistical or other quantitative analytical tools. In addition, from time to time an outcome may occur that the Company had not accounted for in its estimate because it had considered that outcome to be remote. Furthermore, as noted above, the aggregate range does not include any matters for which the Company is not able to estimate a range of possible loss. Accordingly, the estimated aggregate range of possible loss does not represent the Company’s maximum loss exposure. The legal proceedings and governmental examinations underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate. The Company intends to defend these legal proceedings vigorously, litigating or settling cases where in the Company’s judgment it would be in the best interest of shareholders to do so.


22
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

For purposes of FASB ASC Topic 450 (“ASC 450”), an event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely” and an event is “remote” if “the chance of the future event or events occurring is slight.” ASC 450 requires accrual for a liability when it is (a) “probable that one or more future events will occur confirming the fact of loss” and (b) “the amount of loss can be reasonably estimated.” If a range of loss is estimated, the best estimate within the range is required to be accrued. If no amount within the range is a better estimate, the minimum amount of the range is required to be accrued.
 
The Company evaluates, on a quarterly basis, developments in legal proceedings and governmental examinations that could cause an increase or decrease in the amount of the reserves previously recorded. Excluding fees paid to external legal counsel, the Company recognized (income) expense, net of expected insurance recoveries, associated with litigation-related reserves of $2,107 and ($17,980) during the three months ended June 30, 2015 and 2014, respectively.

Chapter 11 Filing

On August 3, 2015, Alpha Natural Resources, Inc. and each of its wholly-owned domestic subsidiaries other than ANR Second Receivables Funding LLC filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code. See Note 1 for additional information. As a result of the Bankruptcy Filing, much of the pending litigation against the Debtors is stayed. Subject to certain exceptions and approval by the Bankruptcy Court, no party can take further actions to recover pre-petition claims against the Debtors.
 
UBB Explosion and Related Investigations and Litigation
 
On April 5, 2010, prior to the acquisition of Massey Energy Company by the Company (the “Massey Acquisition”), an explosion occurred at Massey’s Upper Big Branch (“UBB”) mine, resulting in the deaths of twenty-nine miners. The Federal Mine Safety and Health Administration (“MSHA”), the Office of Miner’s Health, Safety, and Training of the State of West Virginia (“State”), and the Governor’s Independent Investigation Panel (“GIIP”) initiated investigations into the cause of the UBB explosion and related issues. Additionally, the United States Attorney for the Southern District of West Virginia (the “Office”) commenced a grand jury investigation. The GIIP published its final report on May 19, 2011; MSHA released its final report on December 6, 2011; and the State released its final report on February 23, 2012. The Company cannot predict whether or not any individual will become subject to possible criminal and civil penalties or enforcement actions as a result of these investigations. 

The UBB mine was idled in order to accommodate these investigations. On April 20, 2012, the Company was authorized by regulatory authorities to close the UBB mine permanently, and on June 19, 2012, the sealing of the mine was completed.

Non-Prosecution Agreement

On December 6, 2011, the Company, the Office and the United States Department of Justice entered into a Non-Prosecution Agreement (the “Agreement”) resolving the criminal investigation against Massey and its affiliates relating to the UBB explosion and other health and safety related issues at Massey, and the Company also reached a comprehensive settlement with MSHA resolving outstanding civil citations, violations, and orders related to MSHA’s investigation arising from the UBB explosion and other non-UBB related matters involving legacy Massey entities prior to the Massey Acquisition. The Agreement did not resolve individual responsibilities related to the UBB explosion.

Under the terms of the Agreement and MSHA settlement, the Company agreed to pay outstanding MSHA fines, and agreed to invest in additional measures designed to improve miner health and safety, provide restitution to the families of the fallen miners and two individuals injured in the UBB explosion, and create a charitable organization to research mine safety. The Company further agreed to cooperate fully with all governmental agencies in all continuing investigations and prosecutions against any individuals that arise out of the UBB explosion and related conduct described in the Agreement until such investigations and prosecutions are concluded.

On February 10, 2014, the Company announced that it had fully complied with the terms of the Agreement and that the Office and the United States Department of Justice had closed the Agreement.
Wrongful Death and Personal Injury Suits

23
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

Twenty of the twenty-nine families of the deceased miners filed wrongful death suits against Massey and certain of its subsidiaries in West Virginia, in Boone County Circuit Court and Wyoming County Circuit Court. In addition, two seriously injured employees filed personal injury claims against Massey and certain of its subsidiaries in Boone County Circuit Court seeking damages for physical injuries and/or alleged psychiatric injuries, and thirty-nine employees filed lawsuits against Massey and certain of its subsidiaries in Boone County Circuit Court and Wyoming County Circuit Court alleging emotional distress or personal injuries due to their proximity to the explosion. 
 
Through mediation ordered by the Boone County Circuit Court, the Company reached agreements to settle with all twenty-nine families of the deceased miners, the two employees who were seriously injured and thirty-nine employees who filed lawsuits for emotional distress or personal injuries. The settlements reached with the families of the deceased miners were approved by the court, and the other settlements did not require court approval.

On April 5, 2012, the family of one of the deceased miners filed a class action suit in Boone County Circuit Court, purportedly on behalf of the families that settled their claims prior to the mediation, alleging fraudulent inducement into a contract, naming as defendants Massey, the Company and certain of its subsidiaries, the Company’s CEO and the Company’s Board of Directors.
On June 17, 2013 and August 29, 2013, two complaints were filed in Boone County Circuit Court alleging personal injury claims relating to the UBB explosion. In July 2014, the Circuit Court granted the Company’s motion to dismiss in one of the two cases. The second motion was denied in October 2014.

On July 17, 2013, the administrators for the estates of three miners who died in the UBB explosion filed an action against Alpha and Alpha Appalachia in the United States District Court for the Southern District of West Virginia claiming they are entitled to “criminal restitution” under the Agreement, which defendants moved to dismiss. In October 2013, the court granted defendants’ motion to dismiss the complaint with prejudice. The plaintiffs appealed this dismissal order. In September 2014, the Court of Appeals determined that the plaintiffs had failed to establish that the District Court had jurisdiction over the case. Accordingly, the Court of Appeals vacated the District Court’s dismissal of the case and remanded the case with instructions to dismiss the case without prejudice for lack of jurisdiction. On October 22, 2014, the District Court entered an order dismissing the plaintiffs’ complaint without prejudice and terminating all pending motions as moot.

Plaintiffs filed a new complaint on November 7, 2014. Defendants subsequently filed a motion to dismiss and plaintiffs filed a motion for leave to file a surreply memorandum. On April 6, 2015, the District Court granted the defendants’ motion to dismiss, and the plaintiffs filed a notice of appeal with the Court of Appeals for the Fourth Circuit, which is now reviewing the parties’ initial briefs.

Delaware Chancery Court Derivative Suit
 
In a case filed on April 23, 2010 in Delaware Chancery Court, In re Massey Energy Company Derivative and Class Action Litigation (“In re Massey”), a number of purported former Massey stockholders (the “Delaware Plaintiffs”) allege, purportedly on behalf of Massey, that certain former Massey directors and officers breached their fiduciary duties by failing to monitor and oversee Massey’s employees, allegedly resulting in fines against Massey and the explosion at UBB, and by wasting corporate assets by paying allegedly excessive and inflated amounts to former Massey Chairman and Chief Executive Officer Don L. Blankenship as part of his retirement package. The Delaware Plaintiffs also allege, on behalf of a purported class of former Massey stockholders, that certain former Massey directors breached their fiduciary duties by agreeing to the Massey Acquisition. The Delaware Plaintiffs allege that defendants breached their fiduciary duties by failing to secure the best price possible, by failing to secure any downside protection for the acquisition consideration, and by purportedly eliminating the possibility of a superior proposal by agreeing to a “no shop” provision and a termination fee. In addition, the Delaware Plaintiffs allege that defendants agreed to the Massey Acquisition to eliminate the liability that defendants faced on the Delaware Plaintiffs’ derivative claims. Finally, the Delaware Plaintiffs allege that defendants failed to fully disclose all material information necessary for Massey stockholders to cast an informed vote on the Massey Acquisition.

The Delaware Plaintiffs also name the Company and Mountain Merger Sub, Inc. (“Merger Sub”), the Company’s wholly-owned subsidiary created for purposes of effecting the Massey Acquisition, which, at the effective time of the Massey Acquisition, was merged with and into Massey, as defendants. The Delaware Plaintiffs allege that the Company and Merger Sub aided and abetted the former Massey directors’ alleged breaches of fiduciary duty and agreed to orchestrate the Massey Acquisition for the purpose of eliminating the former Massey directors’ potential liability on the derivative claims. Two

24
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

additional putative class actions were brought against Massey, certain former Massey directors and officers, the Company and Merger Sub in the Delaware Court of Chancery following the announcement of the Massey Acquisition, which were consolidated for all purposes with In re Massey in February 2011.

The Delaware Plaintiffs seek an award against each defendant for restitution and/or compensatory damages, plus pre-judgment interest; an order establishing a litigation trust to preserve the derivative claims asserted in the complaint; and an award of costs, disbursements and reasonable allowances for fees incurred in this action. The Delaware Plaintiffs also sought to enjoin consummation of the Massey Acquisition. The court denied their motion for a preliminary injunction in May 2011.
 
In June 2011, Massey moved to dismiss the Delaware Plaintiffs’ derivative claims on the ground that the Delaware Plaintiffs, as former Massey stockholders, lacked the legal right to pursue those claims, and the Company and Alpha Appalachia Merger Sub moved to dismiss the purported class action claim against them for failure to state a claim upon which relief may be granted. In June 2011, certain former Massey director and officer defendants moved to dismiss the derivative claims and filed answers to the remaining direct claims.
 
In September 2011, the parties submitted a Stipulation Staying Proceedings, which stayed the matter until March 2012, without prejudice to the parties’ right to seek an extension or a termination of the stay by application to the court. The court approved the stipulation and entered the stay that same day. The court extended the stay several times and the most recent stay expired on October 31, 2014.

On October 17, 2014, the Delaware Plaintiffs filed an amended complaint which maintains claims against Massey and certain former Massey directors and officers but no longer asserts claims against the Company or Mountain Merger Sub, Inc. Defendants moved to dismiss on December 5, 2014, and the motion remains pending.

West Virginia State Court Derivative Suit
In a case filed on April 15, 2010 in West Virginia state court, three purported former Massey stockholders (the “West Virginia Plaintiffs”) allege, purportedly on behalf of Massey, that certain former Massey directors and officers breached their fiduciary duties by failing to monitor and oversee Massey’s employees, allegedly resulting in fines against Massey and the explosion at UBB. The West Virginia Plaintiffs seek an award against each defendant and in favor of Massey for the amount of damages sustained by Massey as a result of defendants’ alleged breaches of fiduciary duty and an award to the West Virginia Plaintiffs of the costs and disbursements of the action, including reasonable attorneys’ fees, accountants’ and experts’ fees, costs, and expenses.

In May 2011, the West Virginia Plaintiffs moved for leave to amend their complaint to add Alpha and Merger Sub as additional defendants and to add claims allegedly arising out of the then-proposed Massey Acquisition. In their proposed amended complaint, the West Virginia Plaintiffs allege that certain former Massey directors breached their fiduciary duties by failing to obtain the highest price reasonably available for Massey and by failing to disclose material information to Massey’s then-stockholders in connection with the stockholder vote on the Massey Acquisition. The West Virginia Plaintiffs also allege that Massey, Merger Sub and the Company aided and abetted the former Massey directors’ breaches of fiduciary duty. The West Virginia Plaintiffs further allege that certain former Massey directors wasted corporate assets by failing to maintain sufficient internal controls over Massey’s safety and environmental reporting; failing to properly consider the interests of Massey and its stockholders, including the value of the derivative claims asserted by the West Virginia Plaintiffs in the Massey Acquisition; failing to conduct proper supervision; paying undeserved incentive compensation to certain Massey executive directors, particularly former Massey Chairman and CEO Don L. Blankenship during Massey’s alleged years of noncompliance with safety regulations and more recently as part of Blankenship’s retirement package; incurring millions of dollars in fines due to safety and environmental violations; and incurring potentially hundreds of millions of dollars of legal liability and/or legal costs to defend defendants’ allegedly unlawful actions. Finally, the West Virginia Plaintiffs’ proposed amended complaint alleges that certain former Massey directors were unjustly enriched by their compensation as directors.

In June 2011, the defendants moved to dismiss the West Virginia Plaintiffs’ original complaint, or, alternatively, to stay the case in favor of In re Massey, described above. Defendants also filed an opposition to the West Virginia Plaintiffs’ motion to amend. In November 2013, the court denied the West Virginia Plaintiffs’ motion to amend and granted defendants’ motion to dismiss. The West Virginia Plaintiffs appealed the denial of motion to amend and dismissal to the Supreme Court of Appeals of West Virginia, which remanded the action to the Circuit Court. On November 20, 2014, the Circuit Court entered an order dismissing the suit with prejudice as to the individual defendants and nominal defendant Massey Energy Company (n/k/a Alpha

25
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

Appalachia Holdings, Inc.). On December 22, 2014, plaintiffs appealed the order to the West Virginia Supreme Court of Appeals, and the appeal remains pending.

Advancement Action

On February 5, 2015, Donald Blankenship, former Massey Chief Executive Officer and Chairman of the Massey Board of Directors, filed an action in Delaware Chancery Court against Alpha and its affiliate Alpha Appalachia Holdings, Inc. (“Alpha Appalachia”) to contest the decision to terminate further advancement of legal fees for Mr. Blankenship in connection with his pending criminal trial in the Southern District of West Virginia. On May 28, 2015, the Court found that Alpha and Alpha Appalachia must continue to advance Mr. Blankenship’s legal fees. A final order was filed on June 5, 2015.

Mine Water Discharge Suits

Selenium Suits

Various affiliates of the Company were previously parties to suits alleging violations of the affiliates’ water discharge permits with regard to selenium. Each of these matters has been settled. These settlements involved immaterial payments by the Company affiliates and undertakings regarding compliance over time with applicable discharge limits.

Other Matters

On December 31, 2012 and January 2, 2013, two separate environmental groups filed citizen’s suits in federal court in the Western District of Pennsylvania against Emerald Coal Resources, L.P., and other of the Company’s subsidiaries, alleging violations of the terms of the subsidiaries’ water discharge permits. The first of these cases was voluntarily dismissed by the plaintiffs in January 2013 and the second case was closed by the Court in June 2014.

On March 27, 2013, the Company’s subsidiary Alex Energy, Inc. (“Alex Energy”) was served with a complaint from the Sierra Club and others alleging improper discharges by Alex Energy into Spruce Run and Road Fork of Robinson Creek in Nicholas County, West Virginia. This case was voluntarily dismissed in July 2014.

Nicewonder Litigation

Affiliated Construction Trades Foundation Litigation

In December 2004, prior to the Company’s acquisition of Nicewonder in October 2005, the Affiliated Construction Trades Foundation (“ACTF”), a division of the West Virginia State Building and Construction Trades Council, brought an action against the West Virginia Department of Transportation, Division of Highways (“WVDOH”) and Nicewonder Contracting, Inc. (“NCI”), which became the Company’s wholly-owned indirect subsidiary as a result of the Nicewonder acquisition, in the Circuit Court of Kanawha County, West Virginia, which was removed to the United States District Court for the Southern District of West Virginia (the “ACTF Litigation”). The plaintiff sought a declaration that the contract between NCI and the State of West Virginia related to NCI’s road construction project for the Red Jacket section of the King Coal Highway (the “Red Jacket Contract”) was illegal as a violation of applicable West Virginia and federal competitive bidding and prevailing wage laws.
 
On September 30, 2009, the District Court issued an order that dismissed for lack of standing all of ACTF’s claims under federal law and remanded the remaining state claims to the Circuit Court of Kanawha County, West Virginia for resolution. On May 7, 2010, the Circuit Court of Kanawha County entered summary judgment in favor of NCI. On June 22, 2011, the West Virginia Supreme Court of Appeals reversed the Circuit Court order granting summary judgment in favor of NCI, and remanded the case back to the Circuit Court for further proceedings. Following remand, ACTF filed a motion for summary judgment, which the Circuit Court denied on November 9, 2011. ACTF challenged the order denying its summary judgment motion to the West Virginia Supreme Court of Appeals.

On June 21, 2012, the West Virginia Supreme Court of Appeals issued an opinion finding that ACTF had standing to pursue its claims and remanded the case back to the Circuit Court of Kanawha County, West Virginia for further proceedings.


26
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

A settlement between NCI and ACTF was agreed upon in early January 2013, prior to the January 14, 2013 trial date, and the Circuit Court subsequently dismissed the case as to NCI, with prejudice. The Company did not incur any out-of-pocket expenditures in connection with that settlement.

A bench trial proceeded among the remaining parties to the ACTF Litigation and, on February 26, 2013, the Circuit Court of Kanawha County entered an order that ruled against WVDOH in finding that the Red Jacket Contract, as well as the awarding and implementation of that contract, were in violation of West Virginia law because the Red Jacket Contract did not contain a provision whereby WVDOH required payment by NCI of statutory prevailing wages to employees; and WVDOH did not conduct a public bidding process before awarding the Red Jacket Contract to NCI. The time to appeal the order has passed without an appeal having been filed, and the order has become final.

NCI Employee Litigation

On February 7, 2013, the Company received notice of a putative class action lawsuit against NCI filed in the Circuit Court of Mingo County, West Virginia by a former NCI employee (the “NCI Employee Litigation”). The plaintiff in the NCI Employee Litigation is represented by the same attorney who represented the plaintiff in the ACTF Litigation, and the complaint’s allegations raise issues similar to those in the ACTF Litigation and arise from the same Red Jacket Contract that was at issue in the ACTF Litigation. The Company believes that NCI has meritorious defenses to the claims asserted in the NCI Employee Litigation.

NCI filed its answer to the complaint in the NCI Employee Litigation on March 4, 2013. On April 23, 2013, the Circuit Court of Kanawha County, West Virginia, granted NCI’s motion to transfer and entered an agreed order transferring the NCI Employee Litigation from the Circuit Court of Mingo County to the Circuit Court of Kanawha County.

On November 14, 2013, the Circuit Court of Kanawha County granted NCI’s Motion to Certify Questions of Law to the Supreme Court of Appeals of West Virginia, but on June 17, 2014, the Supreme Court declined to review the submitted questions in the absence of a more developed factual record in the lower court. Proceedings in the Circuit Court of Kanawha County, West Virginia therefore resumed. The Circuit Court has scheduled the trial for April 25-29 and May 2-6, 2016.

On October 14, 2014, NCI filed and served a third party complaint against WVDOH seeking a declaration of rights and obligations of the parties. Specifically, the complaint seeks a determination as to whether NCI is entitled to indemnification for any liability it may incur in the NCI Employee Litigation. The complaint also seeks a declaration that the Red Jacket Contract obligates WVDOH to enter into a supplemental agreement with NCI to reimburse NCI for any additional costs incurred, or to be incurred, as a result of the changes to the Red Jacket Contract arising from the February 26, 2013 order entered against WVDOH in the ACTF Litigation, including without limitation any costs and expenses incurred, or to be incurred, by NCI related to the wage and benefit rates for work on the project, including to the extent any such additional costs, damages, statutory penalties, and/or attorney fees are awarded against NCI in the NCI Employee Litigation. WVDOH moved to dismiss the third party complaint on grounds of sovereign immunity and exclusive jurisdiction of the West Virginia Court of Claims.

On February 20, 2015, the Circuit Court of Kanawha County held a hearing on pending matters, including the WVDOH motion to dismiss the third party complaint filed against it by NCI and ruled from the bench that it would grant WVDOH’s motion to dismiss NCI’s third party complaint and thereby dismiss WVDOH from this action. A formal written dismissal order was entered on March 31, 2015. The Company is reviewing this development and evaluating its options.

Fluor Litigation

Alpha Appalachia and certain of its subsidiaries were parties to a number of lawsuits and other legal proceedings related to certain non-coal businesses (the “Prior Business”) previously conducted by its former affiliate Fluor Corporation. Under the terms of the Distribution Agreement entered into by Alpha Appalachia and Fluor as of November 30, 2000 in connection with the spin-off of Fluor by Massey, Fluor agreed to indemnify Massey with respect to all such legal proceedings and assumed defense of the proceedings.

In January 2015, Fluor entered into a settlement agreement with plaintiffs of these proceedings, settling the pending cases on behalf of itself, Alpha Appalachia and its Alpha Appalachia’s subsidiaries. This settlement was funded by Fluor. The Company expects that Fluor will continue to indemnify the Alpha entities with respect to any similar cases not covered by the settlement or that may be asserted in the future.

27
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)


Harman Litigation

In December 1997, Wellmore Coal Corporation (“Wellmore”), then a subsidiary of A. T. Massey Coal Company (“A. T. Massey”), which is now a subsidiary of the Company, declared force majeure under its coal supply agreement with Harman Mining Corporation (“Harman”) and reduced the amount of coal to be purchased from Harman. In October 1998, Harman and several entities affiliated with it, as well as their ultimate sole shareholder (together “Harman plaintiffs”), sued A.T. Massey and five of its subsidiaries (the “Massey Defendants”) in the Circuit Court of Boone County, West Virginia, alleging that the Massey Defendants tortiously interfered with Wellmore’s agreement with Harman, causing Harman to go out of business. In August 2002, the jury awarded the plaintiffs $50,000 in compensatory and punitive damages.

In October 2006, the Massey Defendants appealed the case to the Supreme Court of Appeals of West Virginia (“WV Supreme Court”). In November 2007, the WV Supreme Court issued a 3-2 majority opinion reversing the judgment against the Massey Defendants and remanding the case to the Circuit Court of Boone County with directions to enter an order dismissing the case, with prejudice, in its entirety. On motion by the Harman plaintiffs, the WV Supreme Court agreed to rehear the case but, in April 2008, it again reversed the judgment against the Massey Defendants and remanded the case with direction to enter an order dismissing the case, with prejudice, in its entirety.

In July 2008, the Harman plaintiffs petitioned the United States Supreme Court (the “U.S. Supreme Court”) to review the WV Supreme Court’s dismissal of their claims. In December 2008, the U.S. Supreme Court agreed to review the case based on the question of whether a justice of the WV Supreme Court should have recused himself from the appeal. The U.S. Supreme Court found that the justice should have recused himself and ruled in June 2009 that the matter should be reheard by the WV Supreme Court.

The WV Supreme Court heard oral arguments on the matter in September 2009, and in November 2009 reversed the lower court’s decision, ruling that all claims brought in connection with the parties dealings must be brought in Virginia. The Harman plaintiffs subsequently requested that the WV Supreme Court reconsider its decision; the WV Supreme Court denied that request.

In November 2010, Harman plaintiffs re-filed their claims in the Circuit Court of Buchanan County, Virginia, this time solely against A.T. Massey, seeking compensatory damages of approximately $44,000, plus pre- and post-judgment interest and punitive damages. A. T. Massey filed a plea of res judicata, and in December 2011 the Buchanan County Circuit Court granted the plea and dismissed the Harman plaintiffs’ claims. The Harman plaintiffs appealed that decision to the Virginia Supreme Court, and on April 18, 2013, the Virginia Supreme Court reversed the decision of the Buchanan County Circuit Court, finding that res judicata did not bar the Harman plaintiffs’ claims. The matter was remanded to the Buchanan County Circuit Court for further proceedings.

On May 23, 2014, a jury in Buchanan County Circuit Court found for the Harman plaintiffs and awarded them $5,000 in damages, plus prejudgment interest of approximately $1,120. On June 13, 2014, the Harman plaintiffs filed motions seeking a new trial on damages and attorneys’ fees, and A.T. Massey filed a motion to set aside the damages verdict. The Circuit Court has not yet ruled on these motions. On January 7, 2015, the Circuit Court granted the Harman plaintiffs a new trial regarding damages. The trial date has been set for February 2016.

Emerald Purported Securities Class Action

On July 13, 2012, a purported class action brought on behalf of a putative class of former Massey stockholders was filed in Boone County, West Virginia Circuit Court. The complaint asserts claims under the Securities Act of 1933, as amended, against the Company and certain of its officers and current and former directors, and generally asserts that the defendants made false statements about the Company’s Emerald mine in its public filings associated with the Massey Acquisition. The plaintiff seeks, among other relief, an award of compensatory damages in an amount to be proven at trial. The plaintiff filed an amended complaint in the Boone County Circuit Court on February 6, 2013. The defendants filed motions to dismiss the amended complaint on March 22, 2013 and March 29, 2013. On January 8, 2015, the Boone County Circuit Court dismissed all claims in the plaintiff’s amended complaint. The plaintiffs did not appeal the dismissal.

On April 25, 2014, the named plaintiff in the West Virginia Circuit Court action described above filed a second complaint in Greene County, Pennsylvania, Court of Common Pleas, again asserting claims under the Securities Act of 1933, as amended,

28
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

against the Company and certain of its officers and current and former directors, and generally asserts that the defendants made false statements about the Company’s Emerald mine in its public filings associated with the Massey Acquisition. The plaintiff seeks, among other relief, an award of compensatory damages in an amount to be proven at trial. By agreement of the parties, the defendants’ time to answer, move or otherwise respond to the Pennsylvania complaint was extended until May 7, 2015.

On April 24, 2015, the parties reached agreement on definitive terms for settlement of the Greene County, Pennsylvania litigation. On July 23, 2015, the parties executed definitive settlement documentation. The settlement remains subject to court approval. The Company expects that proceeds from its insurance policies will fund the settlement.

Other Legal Proceedings 

In addition to the matters disclosed above, the Company and its subsidiaries are involved in a number of legal proceedings and governmental examinations incident to its normal business activities. While the Company cannot predict the outcome of these proceedings, the Company does not believe that any liability arising from these matters individually or in the aggregate should have a material impact upon its consolidated cash flows, results of operations or financial condition. 

(20) Segment Information

The Company extracts, processes and markets steam and metallurgical coal from surface and deep mines for sale to electric utilities, steel and coke producers, and industrial customers. The Company operates only in the United States with mines in Northern and Central Appalachia and the Powder River Basin. The Company has two reportable segments: Western Coal Operations, which consists of two Powder River Basin surface mines as of June 30, 2015, and Eastern Coal Operations, which consists of 41 underground mines and 11 surface mines in Northern and Central Appalachia as of June 30, 2015, as well as coal brokerage activities.

In addition to the two reportable segments, the All Other category includes an idled underground mine in Illinois; expenses associated with certain closed mines; Dry Systems Technologies (assets were sold in April 2015); revenues and royalties from the sale of natural gas; equipment sales and repair operations; terminal services; the leasing of mineral rights; general corporate overhead and corporate assets and liabilities. The Company evaluates the performance of its segments based on EBITDA, which the Company defines as net income (loss) plus interest expense, income tax expense, amortization of acquired intangibles, net, and depreciation, depletion and amortization, less interest income and income tax benefit.

Segment operating results and capital expenditures for the three months ended June 30, 2015 were as follows:
 
Eastern
Coal
Operations
 
Western
Coal
Operations
 
All
Other
 
Consolidated
Total revenues
$
662,780

 
$
97,198

 
$
5,089

 
$
765,067

Depreciation, depletion, and amortization
$
152,877

 
$
14,920

 
$
2,903

 
$
170,700

Amortization of acquired intangibles, net
$
7,472

 
$
—

 
$
—

 
$
7,472

EBITDA(1)
$
(276,582
)
 
$
4,320

 
$
(25,524
)
 
$
(297,786
)
Capital expenditures
$
32,938

 
$
3,147

 
$
747

 
$
36,832


(1)Amounts for Eastern Coal Operations, Western Coal Operations and All Other include asset impairment and restructuring expenses of $231,423, $93 and $7,090, respectively. See Note 3 for further information.

Segment operating results and capital expenditures for the three months ended June 30, 2014 were as follows:
 
Eastern
Coal
Operations
 
Western
Coal
Operations
 
All
Other
 
Consolidated
Total revenues
$
949,110

 
$
94,858

 
$
10,130

 
$
1,054,098

Depreciation, depletion, and amortization
$
172,398

 
$
12,819

 
$
5,855

 
$
191,072

Amortization of acquired intangibles, net
$
9,908

 
$
(488
)
 
$
44

 
$
9,464

EBITDA(1)
$
(241,558
)
 
$
(5,191
)
 
$
(4,388
)
 
$
(251,137
)
Capital expenditures
$
35,608

 
$
6,338

 
$
1,169

 
$
43,115



29
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

(1)Amounts for Eastern Coal Operations and All Other include asset impairment and restructuring expenses of $2,330 and $260, respectively. Additionally, EBITDA for Eastern Coal Operations includes a goodwill impairment charge of $308,651.

Segment operating results and capital expenditures for the six months ended June 30, 2015 were as follows:
 
Eastern
Coal
Operations
 
Western
Coal
Operations
 
All
Other
 
Consolidated
Total revenues
$
1,381,025

 
$
215,013

 
$
11,018

 
$
1,607,056

Depreciation, depletion, and amortization
$
290,663

 
$
32,009

 
$
6,459

 
$
329,131

Amortization of acquired intangibles, net
$
19,917

 
$
—

 
$
—

 
$
19,917

EBITDA(1)
$
(325,461
)
 
$
11,965

 
$
335,832

 
$
22,336

Capital expenditures
$
58,948

 
$
6,070

 
$
1,433

 
$
66,451


(1)Amounts for Eastern Coal Operations, Western Coal Operations and All Other include asset impairment and restructuring expenses of $234,168, $93 and $8,465, respectively. See Note 3 for further information.

Segment operating results and capital expenditures for the six months ended June 30, 2014 were as follows:
 
Eastern
Coal
Operations
 
Western
Coal
Operations
 
All
Other
 
Consolidated
Total revenues
$
1,929,800

 
$
212,443

 
$
23,628

 
$
2,165,871

Depreciation, depletion, and amortization
$
353,111

 
$
26,291

 
$
11,965

 
$
391,367

Amortization of acquired intangibles, net
$
20,130

 
$
(1,475
)
 
$
88

 
$
18,743

EBITDA(1)
$
34,919

 
$
11,199

 
$
(32,475
)
 
$
13,643

Capital expenditures
$
73,380

 
$
7,020

 
$
2,433

 
$
82,833


(1)Amounts for Eastern Coal Operations and All Other include asset impairment and restructuring expenses of $2,650 and $9,439, respectively. Additionally, EBITDA for Eastern Coal Operations includes a goodwill impairment charge of $308,651.

The following table presents a reconciliation of EBITDA to net loss:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2015
 
2014
 
2015
 
2014
EBITDA
$
(297,786
)
 
$
(251,137
)
 
$
22,336

 
$
13,643

Interest expense
(72,386
)
 
(71,012
)
 
(149,092
)
 
(135,974
)
Interest income
619

 
540

 
1,279

 
1,156

Income tax benefit (expense)
79,535

 
9,518

 
74,546

 
(37,040
)
Depreciation, depletion and amortization
(170,700
)
 
(191,072
)
 
(329,131
)
 
(391,367
)
Amortization of acquired intangibles, net
(7,472
)
 
(9,464
)
 
(19,917
)
 
(18,743
)
Net loss
$
(468,190
)
 
$
(512,627
)
 
$
(399,979
)
 
$
(568,325
)

The following table presents total assets as of June 30, 2015 and December 31, 2014:
 
Total Assets
 
June 30,
2015
 
December 31,
2014
Eastern Coal Operations
$
8,050,584

 
$
8,648,678

Western Coal Operations
622,943

 
657,971

All Other
1,297,156

 
1,332,817

Total
$
9,970,683

 
$
10,639,466



30
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

The Company markets produced, processed, and purchased coal to customers in the United States and in international markets. Export revenues totaled $270,948 and $599,393, or approximately 35% and 37%, respectively, of total revenues for the three and six months ended June 30, 2015, respectively. Export revenues totaled $408,013 and $871,973, or approximately 39% and 40%, respectively, of total revenues for the three and six months ended June 30, 2014, respectively.

(21) Guarantor and Non-Guarantor Information

The Company has issued senior notes and convertible senior notes that are fully and unconditionally guaranteed, jointly and severally, on a senior or subordinated, secured or unsecured basis by certain of the Company’s 100% owned subsidiaries (the “New Notes Guarantor Subsidiaries”).

Presented below are Condensed Consolidating Financial Statements as of June 30, 2015 and December 31, 2014 and for the three months ended June 30, 2015 and 2014, respectively, based on the guarantor structure of the Company’s Senior Notes and Convertible Notes. The tables below refer to the Company as issuer of the Senior Notes. “Non-Guarantor Subsidiaries” refers, for the tables below, to ANR Receivables Funding, LLC, Gray Hawk Insurance Company, Shannon-Pocahontas Mining Company, Alpha Coal Sales International Limited, Alpha Natural Resources Singapore Private Limited, ANR Second Receivables Funding, LLC, Alpha Coal India Private Limited, Alpha Sub Eight, LLC, Alpha Sub Nine, LLC, Alpha Sub Ten, Inc., and Alpha Sub Eleven, Inc. which were not guarantors of the Senior Notes or the Convertible Notes.






31
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

Alpha Natural Resources, Inc. and Subsidiaries
Supplemental Condensed Consolidating Balance Sheet
June 30, 2015
 
Parent
(Issuer)
 

Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Total
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
462

 
$
696,394

 
$
1,380

 
$
—

 
$
698,236

Trade accounts receivable, net
—

 
16,317

 
237,971

 
—

 
254,288

Inventories, net
—

 
237,466

 
—

 
—

 
237,466

Short-term investments
—

 
416,722

 
—

 
—

 
416,722

Prepaid expenses and other current assets
—

 
147,271

 
2,538

 
—

 
149,809

Total current assets
462

 
1,514,170

 
241,889

 
—

 
1,756,521

Property, equipment and mine development costs, net
—

 
1,262,460

 
—

 
—

 
1,262,460

Owned and leased mineral rights and land, net
—

 
6,608,042

 
—

 
—

 
6,608,042

Other acquired intangibles, net
—

 
73,362

 
—

 
—

 
73,362

Other non-current assets
7,579,839

 
7,839,815

 
10,322

 
(15,159,678
)
 
270,298

Total assets
$
7,580,301

 
$
17,297,849

 
$
252,211

 
$
(15,159,678
)
 
$
9,970,683

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
$
3,571,019

 
$
122,826

 
$
(3,454
)
 
$
—

 
$
3,690,391

Trade accounts payable
—

 
184,522

 
—

 
—

 
184,522

Accrued expenses and other current liabilities
—

 
532,872

 
231

 
—

 
533,103

Total current liabilities
3,571,019

 
840,220

 
(3,223
)
 
—

 
4,408,016

Long-term debt
—

 
34,439

 
—

 
—

 
34,439

Pension and postretirement medical benefit obligations
—

 
1,166,958

 
—

 
—

 
1,166,958

Asset retirement obligations
—

 
582,608

 
—

 
—

 
582,608

Deferred income taxes
—

 
729,034

 
—

 
—

 
729,034

Other non-current liabilities
1,369,543

 
1,546,205

 
233,223

 
(2,739,082
)
 
409,889

Total liabilities
4,940,562

 
4,899,464

 
230,000

 
(2,739,082
)
 
7,330,944

 Stockholders’ Equity
 
 
 
 
 
 
 
 
 
Total stockholders’ equity
2,639,739

 
12,398,385

 
22,211

 
(12,420,596
)
 
2,639,739

Total liabilities and stockholders’ equity
$
7,580,301

 
$
17,297,849

 
$
252,211

 
$
(15,159,678
)
 
$
9,970,683



32
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

Alpha Natural Resources, Inc. and Subsidiaries
Supplemental Condensed Consolidating Balance Sheet
December 31, 2014
 
Parent
(Issuer)
 

Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiary
 
Eliminations
 
Total
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
830

 
$
738,700

 
$
1,656

 
$
—

 
$
741,186

Trade accounts receivable, net
—

 
43,784

 
270,231

 
—

 
314,015

Inventories, net
—

 
237,945

 
—

 
—

 
237,945

Short-term investments
—

 
405,169

 
—

 
—

 
405,169

Prepaid expenses and other current assets
—

 
175,221

 
2,778

 
—

 
177,999

Total current assets
830

 
1,600,819

 
274,665

 
—

 
1,876,314

Property, equipment and mine development costs, net
—

 
1,425,667

 
—

 
—

 
1,425,667

Owned and leased mineral rights and land, net
—

 
6,916,307

 
—

 
—

 
6,916,307

Other acquired intangibles, net
—

 
97,169

 
—

 
—

 
97,169

Other non-current assets
8,050,042

 
8,363,729

 
10,321

 
(16,100,083
)
 
324,009

Total assets
$
8,050,872

 
$
18,403,691

 
$
284,986

 
$
(16,100,083
)
 
$
10,639,466

Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
$
49,752

 
$
128,499

 
$
—

 
$
—

 
$
178,251

Trade accounts payable
—

 
215,972

 
126

 
—

 
216,098

Accrued expenses and other current liabilities
3,130

 
611,833

 
237

 
—

 
615,200

Total current liabilities
52,882

 
956,304

 
363

 
—

 
1,009,549

Long-term debt
3,585,775

 
41,070

 
(4,008
)
 
—

 
3,622,837

Pension and postretirement medical benefit obligations
—

 
1,236,986

 
—

 
—

 
1,236,986

Asset retirement obligations
—

 
538,008

 
—

 
—

 
538,008

Deferred income taxes
—

 
773,466

 
—

 
—

 
773,466

Other non-current liabilities
1,425,415

 
1,630,041

 
267,195

 
(2,850,831
)
 
471,820

Total liabilities
5,064,072

 
5,175,875

 
263,550

 
(2,850,831
)
 
7,652,666

Stockholders’ Equity
 
 
 
 
 
 
 
 
 
Total stockholders’ equity
2,986,800

 
13,227,816

 
21,436

 
(13,249,252
)
 
2,986,800

Total liabilities and stockholders’ equity
$
8,050,872

 
$
18,403,691

 
$
284,986

 
$
(16,100,083
)
 
$
10,639,466


33
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

Alpha Natural Resources, Inc. and Subsidiaries
Supplemental Condensed Consolidating Statement of Operations
Three Months Ended June 30, 2015
 
Parent
(Issuer)
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiary
 
Eliminations
 
Total
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
Coal revenues
$
—

 
$
674,068

 
$
—

 
$
—

 
$
674,068

Freight and handling revenues
—

 
79,739

 
—

 
—

 
79,739

Other revenues
—

 
9,643

 
1,617

 
—

 
11,260

Total revenues
—

 
763,450

 
1,617

 
—

 
765,067

Cost and expenses:
 
 
 
 
 
 
 
 
 
Cost of coal sales (exclusive of items shown separately below)
—

 
713,111

 
—

 
—

 
713,111

Freight and handling costs
—

 
79,739

 
—

 
—

 
79,739

Other expenses
—

 
6,418

 
(42
)
 
—

 
6,376

Depreciation, depletion, and amortization
—

 
170,700

 
—

 
—

 
170,700

Amortization of acquired intangibles, net
—

 
7,472

 
—

 
—

 
7,472

Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above)
—

 
26,377

 
976

 
—

 
27,353

Asset impairment and restructuring
—

 
238,606

 
—

 
—

 
238,606

Total costs and expenses
—

 
1,242,423

 
934

 
—

 
1,243,357

Income (loss) from operations
—

 
(478,973
)
 
683

 
—

 
(478,290
)
Other income (expense):
 
 
 
 
 
 
 
 
 
Interest expense
(71,850
)
 
633

 
(1,169
)
 
—

 
(72,386
)
Interest income
—

 
618

 
1

 
—

 
619

Miscellaneous income, net
—

 
2,325

 
7

 
—

 
2,332

Total other income (expense), net
(71,850
)
 
3,576

 
(1,161
)
 
—

 
(69,435
)
Loss before income taxes and equity in earnings of investments in Issuer and Guarantor Subsidiaries
(71,850
)
 
(475,397
)
 
(478
)
 
—

 
(547,725
)
Income tax benefit
28,022

 
51,327

 
186

 
—

 
79,535

Equity in earnings of investments in Issuer and Guarantor Subsidiaries
(424,362
)
 
—

 
—

 
424,362

 
—

Net income (loss)
$
(468,190
)
 
$
(424,070
)
 
$
(292
)
 
$
424,362

 
$
(468,190
)

34
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

Alpha Natural Resources, Inc. and Subsidiaries
Supplemental Condensed Consolidating Statement of Operations
Three Months Ended June 30, 2014
 
Parent
(Issuer)
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiary
 
Eliminations
 
Total
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
Coal revenues
$
—

 
$
919,253

 
$
—

 
$
—

 
$
919,253

Freight and handling revenues
—

 
116,338

 
—

 
—

 
116,338

Other revenues
—

 
18,031

 
476

 
—

 
18,507

Total revenues
—

 
1,053,622

 
476

 
—

 
1,054,098

Cost and expenses:
 
 
 
 
 
 
 
 
 
Cost of coal sales (exclusive of items shown separately below)
—

 
827,948

 
—

 
—

 
827,948

Freight and handling costs
—

 
116,338

 
—

 
—

 
116,338

Other expenses
(3,036
)
 
9,727

 
—

 
—

 
6,691

Depreciation, depletion, and amortization
—

 
191,072

 
—

 
—

 
191,072

Amortization of acquired intangibles, net
—

 
9,464

 
—

 
—

 
9,464

Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above)
—

 
43,647

 
110

 
—

 
43,757

Asset impairment and restructuring
—

 
2,590

 
—

 
—

 
2,590

Goodwill impairment
—

 
308,651

 
—

 
—

 
308,651

Total costs and expenses
(3,036
)
 
1,509,437

 
110

 
—

 
1,506,511

Income (loss) from operations
3,036

 
(455,815
)
 
366

 
—

 
(452,413
)
Other income (expense):
 
 
 
 
 
 
 
 
 
Interest expense
(71,475
)
 
463

 
—

 
—

 
(71,012
)
Interest income
—

 
535

 
5

 
—

 
540

Loss on early extinguishment of debt
(176
)
 
(42
)
 
—

 
—

 
(218
)
Miscellaneous income (expense), net
—

 
1,057

 
(99
)
 
—

 
958

Total other income (expense), net
(71,651
)
 
2,013

 
(94
)
 
—

 
(69,732
)
Income (loss) before income taxes and equity in earnings of investments in Issuer and Guarantor Subsidiaries
(68,615
)
 
(453,802
)
 
272

 
—

 
(522,145
)
Income tax benefit (expense)
26,760

 
(17,136
)
 
(106
)
 
—

 
9,518

Equity in earnings of investments in Issuer and Guarantor Subsidiaries
(470,772
)
 
—

 
—

 
470,772

 
—

Net income (loss)
$
(512,627
)
 
$
(470,938
)
 
$
166

 
$
470,772

 
$
(512,627
)




35
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

Alpha Natural Resources, Inc. and Subsidiaries
Supplemental Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2015
 
Parent
(Issuer)
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiary
 
Eliminations
 
Total
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
Coal revenues
$
—

 
$
1,400,135

 
$
—

 
$
—

 
$
1,400,135

Freight and handling revenues
—

 
179,898

 
—

 
—

 
179,898

Other revenues
—

 
23,558

 
3,465

 
—

 
27,023

Total revenues
—

 
1,603,591

 
3,465

 
—

 
1,607,056

Cost and expenses:
 
 
 
 
 
 
 
 
 
Cost of coal sales (exclusive of items shown separately below)
—

 
1,464,435

 
—

 
—

 
1,464,435

Freight and handling costs
—

 
179,898

 
—

 
—

 
179,898

Other expenses
—

 
11,361

 
—

 
—

 
11,361

Depreciation, depletion, and amortization
—

 
329,131

 
—

 
—

 
329,131

Amortization of acquired intangibles, net
—

 
19,917

 
—

 
—

 
19,917

Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above)
—

 
50,388

 
1,927

 
—

 
52,315

Asset impairment and restructuring
—

 
242,726

 
—

 
—

 
242,726

Total costs and expenses
—

 
2,297,856

 
1,927

 
—

 
2,299,783

Income (loss) from operations
—

 
(694,265
)
 
1,538

 
—

 
(692,727
)
Other income (expense):
 
 
 
 
 
 
 
 
 
Interest expense
(148,160
)
 
1,058

 
(1,990
)
 
—

 
(149,092
)
Interest income
—

 
1,274

 
5

 
—

 
1,279

Gain on early extinguishment of debt
364,153

 
—

 
—

 
—

 
364,153

Miscellaneous income (expense), net
—

 
1,890

 
(28
)
 
—

 
1,862

Total other income (expense), net
215,993

 
4,222

 
(2,013
)
 
—

 
218,202

Income (loss) before income taxes and equity in earnings of investments in Issuer and Guarantor Subsidiaries
215,993

 
(690,043
)
 
(475
)
 
—

 
(474,525
)
Income tax (expense) benefit
(84,238
)
 
158,599

 
185

 
—

 
74,546

Equity in earnings of investments in Issuer and Guarantor Subsidiaries
(531,734
)
 
—

 
—

 
531,734

 
—

Net (loss) income
$
(399,979
)
 
$
(531,444
)
 
$
(290
)
 
$
531,734

 
$
(399,979
)

36
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

Alpha Natural Resources, Inc. and Subsidiaries
Supplemental Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2014
 
Parent
(Issuer)
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiary
 
Eliminations
 
Total
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
Coal revenues
$
—

 
$
1,872,073

 
$
—

 
$
—

 
$
1,872,073

Freight and handling revenues
—

 
250,540

 
—

 
—

 
250,540

Other revenues
—

 
41,675

 
1,583

 
—

 
43,258

Total revenues
—

 
2,164,288

 
1,583

 
—

 
2,165,871

Cost and expenses:
 
 
 
 
 
 
 
 
 
Cost of coal sales (exclusive of items shown separately below)
—

 
1,724,532

 
—

 
—

 
1,724,532

Freight and handling costs
—

 
250,540

 
—

 
—

 
250,540

Other expenses
(3,036
)
 
24,921

 
—

 
—

 
21,885

Depreciation, depletion, and amortization
—

 
391,367

 
—

 
—

 
391,367

Amortization of acquired intangibles, net
—

 
18,743

 
—

 
—

 
18,743

Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above)
—

 
84,575

 
379

 
—

 
84,954

Asset impairment and restructuring
—

 
12,089

 
—

 
—

 
12,089

Goodwill impairment
—

 
308,651

 
—

 
—

 
308,651

Total costs and expenses
(3,036
)
 
2,815,418

 
379

 
—

 
2,812,761

Income (loss) from operations
3,036

 
(651,130
)
 
1,204

 
—

 
(646,890
)
Other income (expense):
 
 
 
 
 
 
 
 
 
Interest expense
(133,172
)
 
(2,802
)
 
—

 
—

 
(135,974
)
Interest income
—

 
1,150

 
6

 
—

 
1,156

Loss on early extinguishment of debt
(1,630
)
 
(392
)
 
—

 
—

 
(2,022
)
Gain on sale of equity method investment
—

 
250,331

 
—

 
—

 
250,331

Miscellaneous income (expense), net
—

 
2,208

 
(94
)
 
—

 
2,114

Total other (expense) income, net
(134,802
)
 
250,495

 
(88
)
 
—

 
115,605

(Loss) income before income taxes and equity in earnings of investments in Issuer and Guarantor Subsidiaries
(131,766
)
 
(400,635
)
 
1,116

 
—

 
(531,285
)
Income tax benefit (expense)
51,389

 
(87,994
)
 
(435
)
 
—

 
(37,040
)
Equity in earnings of investments in Issuer and Guarantor Subsidiaries
(487,948
)
 
—

 
—

 
487,948

 
—

Net (loss) income
$
(568,325
)
 
$
(488,629
)
 
$
681

 
$
487,948

 
$
(568,325
)



37
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

Alpha Natural Resources, Inc. and Subsidiaries
Supplemental Condensed Consolidating Statements of Comprehensive Income (Loss)
Three Months Ended June 30, 2015
 
Parent
(Issuer)
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Total
Consolidated
Net income (loss)
$
(468,190
)
 
$
(424,070
)
 
$
(292
)
 
$
424,362

 
$
(468,190
)
Total comprehensive income (loss)
$
(421,527
)
 
$
(377,407
)
 
$
(292
)
 
$
377,699

 
$
(421,527
)

Alpha Natural Resources, Inc. and Subsidiaries
Supplemental Condensed Consolidating Statements of Comprehensive Income (Loss)
Three Months Ended June 30, 2014
 
Parent
(Issuer)
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Total
Consolidated
Net income (loss)
$
(512,627
)
 
$
(470,938
)
 
$
166

 
$
470,772

 
$
(512,627
)
Total comprehensive income (loss)
$
(494,136
)
 
$
(452,447
)
 
$
166

 
$
452,281

 
$
(494,136
)

Alpha Natural Resources, Inc. and Subsidiaries
Supplemental Condensed Consolidating Statements of Comprehensive Income (Loss)
Six Months Ended June 30, 2015
 
Parent
(Issuer)
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Total
Consolidated
Net income (loss)
$
(399,979
)
 
$
(531,444
)
 
$
(290
)
 
$
531,734

 
$
(399,979
)
Total comprehensive income (loss)
$
(349,312
)
 
$
(480,777
)
 
$
(290
)
 
$
481,067

 
$
(349,312
)

Alpha Natural Resources, Inc. and Subsidiaries
Supplemental Condensed Consolidating Statements of Comprehensive Income (Loss)
Six Months Ended June 30, 2014
 
Parent
(Issuer)
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Total
Consolidated
Net income (loss)
$
(568,325
)
 
$
(488,629
)
 
$
681

 
$
487,948

 
$
(568,325
)
Total comprehensive income (loss)
$
(520,383
)
 
$
(440,687
)
 
$
681

 
$
440,006

 
$
(520,383
)


38
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

Alpha Natural Resources, Inc. and Subsidiaries
Supplemental Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2015
 
Parent
(Issuer)
 

Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiary
 
Total
Consolidated
Net cash used in operating activities
$
—

 
$
(276,137
)
 
$
(156
)
 
$
(276,293
)
 
 
 
 
 
 
 
 
Investing activities:
 
 
 
 
 
 
 
Capital expenditures
—

 
(66,451
)
 
—

 
(66,451
)
Purchases of investments
—

 
(379,687
)
 
—

 
(379,687
)
Sales of investments
—

 
413,404

 
—

 
413,404

Proceeds from sale of property, plant and equipment
—

 
7,986

 
—

 
7,986

Net cash used in investing activities
—

 
(24,748
)
 
—

 
(24,748
)
 
 
 
 
 
 
 
 
Financing activities:
 
 
 
 
 
 
 
Principal repayments of long-term debt
(379,509
)
 
—

 
—

 
(379,509
)
Principal repayments of capital lease obligations
—

 
(12,992
)
 
—

 
(12,992
)
Proceeds from borrowings on long-term debt
658,646

 
—

 
—

 
658,646

Debt issuance and modification costs
(6,815
)
 
—

 
—

 
(6,815
)
Common stock repurchases
(420
)
 
—

 
—

 
(420
)
Other
—

 
(819
)
 
—

 
(819
)
Transactions with affiliates
(272,270
)
 
272,390

 
(120
)
 
—

Net cash provided by (used in) financing activities
(368
)
 
258,579

 
(120
)
 
258,091

 
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
(368
)
 
(42,306
)
 
(276
)
 
(42,950
)
Cash and cash equivalents at beginning of period
830

 
738,700

 
1,656

 
741,186

Cash and cash equivalents at end of period
$
462

 
$
696,394

 
$
1,380

 
$
698,236


39
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

Alpha Natural Resources, Inc. and Subsidiaries
Supplemental Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2014
 
Parent
(Issuer)
 

Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiary
 
Total
Consolidated
Net cash provided by (used in) operating activities
$
102

 
$
(271,061
)
 
$
(50
)
 
$
(271,009
)
 
 
 
 
 
 
 
 
Investing activities:
 
 
 
 
 
 
 
Capital expenditures
—

 
(82,833
)
 
—

 
(82,833
)
Purchases of investments
—

 
(333,497
)
 
—

 
(333,497
)
Sales of investments
—

 
298,180

 
—

 
298,180

Proceeds from exchange of equity method investment, net
—

 
96,732

 
—

 
96,732

Proceeds from sale of property, plant and equipment
—

 
3,271

 
—

 
3,271

Net cash used in investing activities
—

 
(18,147
)
 
—

 
(18,147
)
 
 
 
 
 
 
 
 
Financing activities:
 
 
 
 
 
 
 
Principal repayments of long-term debt
(24,510
)
 
(9,921
)
 
—

 
(34,431
)
Principal repayments of capital lease obligations
—

 
(8,574
)
 
—

 
(8,574
)
Proceeds from borrowings on long-term debt
500,000

 
—

 
—

 
500,000

Debt issuance and modification costs
(16,494
)
 
—

 
—

 
(16,494
)
Common stock repurchases
(1,162
)
 
—

 
—

 
(1,162
)
Other
—

 
(1,326
)
 
—

 
(1,326
)
Transactions with affiliates
(457,936
)
 
457,914

 
22

 
—

Net cash (used in) provided by financing activities
(102
)
 
438,093

 
22

 
438,013

 
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
—

 
148,885

 
(28
)
 
148,857

Cash and cash equivalents at beginning of period
467

 
617,952

 
1,225

 
619,644

Cash and cash equivalents at end of period
$
467

 
$
766,837

 
$
1,197

 
$
768,501



40
Table of Contents
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
NOTES to CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, amounts in thousands except share and per share data)

(22) Subsequent Events

Chapter 11 Filing

On August 3, 2015, Alpha Natural Resources, Inc. and each of its wholly owned domestic subsidiaries other than ANR Second Receivables Funding, LLC filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. The Bankruptcy Filing constituted an event of default that accelerated the obligations of the Company and certain of its affiliates. Pursuant to the Bankruptcy Code, the Bankruptcy Filing automatically stayed most actions against the Debtors, including most actions to collect indebtedness incurred prior to the Bankruptcy Filing or to exercise control over the Debtors’ property. Accordingly, although the Bankruptcy Filing triggered defaults under the debt instruments listed in Note 11, creditors are stayed from taking action as a result of these defaults. In addition, the Company’s accounts receivable securitization facility terminated as a result of the Bankruptcy Filing. The letters of credit outstanding under that facility are expected to be replaced by letters of credit under the DIP Term LC Facility, if and when approved by the Bankruptcy Court. See Note 1 for more information.

Notice of Delisting - NYSE

On April 16, 2015, the Company was notified by the New York Stock Exchange (the “NYSE”) that the 30 consecutive trading day average closing price of the Company’s common stock had fallen below $1.00 per share which is the minimum average share price required by the NYSE under Section 802.01C of the NYSE Listed Company Manual (“Section 802.01C”).

On July 16, 2015, the Company received notice from the NYSE that the staff of NYSE Regulation, Inc. (“NYSE Regulation”) has determined to commence proceedings to delist the common stock of the Company (symbol “ANR”) from the NYSE. Trading of the Company’s common stock on the NYSE was suspended at the market open on July 16, 2015. NYSE Regulation determined that the Company is no longer suitable for listing pursuant to Section 802.01D of the NYSE Listed Company Manual, based on a finding that the trading price of the Company’s common stock was “abnormally low.” NYSE Regulation has informed the Company that its application to the U.S. Securities and Exchange Commission (the “SEC”) to delist the Company’s common stock is pending, subject to completion of applicable procedures. Subsequent to our voluntary petitions for relief under Chapter 11 of the Bankruptcy Code, we expect our common stock to trade on the OTC Pink market under the ticker symbol “ANRZQ”.

Purchase of Pennsylvania Land Resources Holding Company, LLC

On July 1, 2015, Pennsylvania Services Corporation (“PSC”), a wholly-owned, indirect subsidiary of the Company, entered into a Membership Interest Purchase Agreement (the “Agreement”) with EDF Trading Resources, LLC (“EDFTR”), PSC’s 50% ownership partner in Pennsylvania Land Resources Holding Company, LLC (“PLR”), a natural gas exploration and production joint venture. Pursuant to the Agreement, PSC acquired the remaining 50% membership interest in PLR owned by EDFTR for approximately $126,000 in cash, subject to customary post-closing adjustments. The Agreement makes PSC the sole owner and operator of PLR. The Agreement contains customary representations, warranties, covenants and indemnification provisions for both PSC and EDFTR.

Divestiture of Mining Operations

On July 31, 2015, several operating affiliates of the Company divested the assets of certain mining operations and related coal interests located in Kentucky and southwest Virginia. In consideration for the sale, the affiliates will receive certain payments, and the acquirer assumes certain liabilities. The Company estimates the loss on disposal to be in the range of $275,000 to $300,000.

Also on July 31, 2015, an affiliate of the Company divested certain coal interests located in southwest Pennsylvania. In consideration for the sale, the affiliate will receive cash. The Company estimates the loss on disposal to be approximately$20,000.

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations


41
Table of Contents

You should read the following discussion and analysis in conjunction with our Condensed Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our Consolidated Financial Statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2014.

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This report includes statements of our expectations, intentions, plans and beliefs that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are intended to come within the safe harbor protection provided by those sections. These statements, which involve risks and uncertainties, relate to analysis and other information that are based on forecasts of future results and estimates of amounts not yet determinable and may also relate to our future prospects, developments and business strategies. We have used the words “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “should” and similar terms and phrases, including references to assumptions, in this report to identify forward-looking statements. These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements.
The following factors are among those that may cause actual results to differ materially from our forward-looking statements:
•
our ability to continue as a going concern, including our ability to successfully confirm a plan of reorganization that would restructure certain of our debt obligations to address our liquidity issues and allow the Debtors to emerge from the Chapter 11 proceedings, or to execute one or more strategic transactions either as part of such a plan of reorganization or otherwise;
•
our liquidity, results of operations and financial condition;
•
sustained depressed levels or further declines in coal prices;
•
worldwide market demand for coal, electricity and steel, including demand for U.S. coal exports;
•
utilities switching to alternative energy sources such as natural gas, renewables and coal from basins where we do not operate;
•
reductions or increases in customer coal inventories and the timing of those changes;
•
our production capabilities and costs;
•
inherent risks of coal mining beyond our control, and our ability to utilize our coal assets fully and replace reserves as they are depleted;
•
changes in environmental laws and regulations, including those directly affecting our coal mining and production, and those affecting our customers’ coal usage, including potential climate change initiatives;
•
changes in safety and health laws and regulations and their implementation, and the ability to comply with those changes;
•
competition in coal markets;
•
future legislation, regulatory and court decisions and changes in regulations, governmental policies or taxes or changes in interpretation thereof;
•
global economic, capital market or political conditions, including a prolonged economic downturn in the markets in which we operate and disruptions in worldwide financial markets;
•
the outcome of pending or potential litigation or governmental investigations;
•
our relationships with, and other conditions affecting, our customers, including the inability to collect payments from our customers if their creditworthiness declines;
•
changes in, renewal or acquisition of, terms of and performance of customers under coal supply arrangements and the refusal by our customers to receive coal under agreed contract terms;
•
our ability to obtain, maintain or renew any necessary permits or rights, and our ability to mine properties due to defects in title on leasehold interests;
•
attracting and retaining key personnel and other employee workforce factors, such as labor relations;
•
the geological characteristics of the Powder River Basin, Central and Northern Appalachian coal reserves;
•
funding for and changes in postretirement benefit obligations, pension obligations, including multi-employer pension plans, and federal and state black lung obligations;
•
cybersecurity attacks or failures, threats to physical security, extreme weather conditions or other natural disasters;
•
increased costs and obligations potentially arising from the Patient Protection and Affordable Care Act;
•
reclamation and mine closure obligations;
•
our assumptions concerning economically recoverable coal reserve estimates;

42
Table of Contents

•
our ability to negotiate new United Mine Workers of America (“UMWA”) wage agreements on terms acceptable to us, increased unionization of our workforce in the future, and any strikes by our workforce;
•
disruptions in delivery or changes in pricing from third party vendors of key equipment and materials that are necessary for our operations, such as diesel fuel, steel products, explosives and tires;
•
inflationary pressures on supplies and labor and significant or rapid increases in commodity prices;
•
railroad, barge, truck and other transportation availability, performance and costs;
•
disruption in third party coal supplies;
•
our ability to integrate successfully operations that we may acquire, invest or develop in the future, or the risk that any such integration could be more difficult, time-consuming or costly than expected;
•
the consummation of financing or refinancing transactions, acquisitions or dispositions and the related effects on our business and financial position;
•
indemnification of certain obligations not being met;
•
long-lived asset impairment charges;
•
fair value of derivative instruments not accounted for as hedges that are being marked to market;
•
our substantial indebtedness and potential future indebtedness;
•
our ability to generate sufficient cash or obtain financing to fund our business operations;
•
our ability to obtain or renew surety bonds on acceptable terms or maintain self-bonding status; and
•
other factors, including the other factors discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and “Risk Factors” sections of this Quarterly Report on Form 10-Q for the three months ended June 30, 2015, the Quarterly Report on Form 10-Q for the three months ended March 31, 2015, and our Annual Report on Form 10-K for the year ended December 31, 2014 and in filings made by the Debtors with the Bankruptcy Court.

When considering these forward-looking statements, you should keep in mind the cautionary statements in this report and the documents incorporated by reference. We do not undertake any responsibility to release publicly any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events, which may cause actual results to differ from those expressed or implied by the forward-looking statements contained in this report.

Overview

We are one of America’s premier coal suppliers, operating 54 mines and 22 coal preparation and load-out facilities as of June 30, 2015 in Northern and Central Appalachia and the Powder River Basin (“PRB”), with approximately 8,300 employees. Our affiliated companies produce, process, and sell thermal coal, also known as “steam” coal, and metallurgical coal from operations located in Virginia, West Virginia, Kentucky, Pennsylvania, and Wyoming. We also sell coal produced by others, the majority of which is processed and/or blended with coal produced from our affiliates’ mines prior to resale, providing us with a higher overall margin for the blended product than if we had sold the coal separately.

On August 3, 2015, Alpha Natural Resources, Inc. and each of its wholly owned domestic subsidiaries other than ANR Second Receivables Funding, LLC filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. The Bankruptcy Filing is intended to permit the Debtors to restructure their debts and reorganize their businesses while under the various protections afforded by the Bankruptcy Code. The Debtors’ goal is to develop and implement a plan of reorganization that meets the standards for confirmation under the Bankruptcy Code. Confirmation of a plan of reorganization could materially alter the classifications and amounts reported in the Company’s consolidated financial statements, which do not give effect to any adjustments to the carrying values of assets or amounts of liabilities that might be necessary as a consequence of a confirmation of a plan of reorganization or other arrangement or the effect of any operational changes that may be implemented.

For the three and six months ended June 30, 2015, sales of steam coal were 13.3 million tons and 28.7 million tons, respectively, and accounted for approximately 76% and 78% of our coal sales volume. Comparatively, for the three and six months ended June 30, 2014, sales of steam coal were 15.4 million tons and 32.4 million tons, respectively, and accounted for approximately 77% and 78% of our coal sales volume. For the three and six months ended June 30, 2015, sales of metallurgical coal, which generally sells at a premium over steam coal, were 4.2 million tons and 8.2 million tons, respectively, and accounted for approximately 24% and 22% of our coal sales volume. Comparatively, for the three and six months ended June 30, 2014, sales of metallurgical coal were 4.5 million tons and 8.9 million tons, respectively, and accounted for approximately 23% and 22% of our coal sales volume.

Our sales of steam coal for the three and six months ended June 30, 2015 and 2014 were made primarily to large utilities and industrial customers throughout the United States, and our sales of metallurgical coal were made primarily to steel

43
Table of Contents

companies in the Northeastern and Midwestern regions of the United States and in several countries in Europe, Asia and South America. For the three and six months ended June 30, 2015, approximately 35% and 37%, respectively, of our total revenues were derived from coal sales made to customers outside the United States, compared to 39% and 40%, respectively, for the three and six months ended June 30, 2014.

We have two reportable segments, Eastern Coal Operations and Western Coal Operations. Eastern Coal Operations consists of our operations in Northern and Central Appalachia and our coal brokerage activities. Western Coal Operations consists of two PRB mines in Wyoming. Our All Other category includes an idled underground mine in Illinois; expenses associated with certain closed mines; Dry Systems Technologies (whose assets were sold in April 2015); revenues and royalties from the sale of natural gas; equipment sales and repair operations; terminal services; the leasing of mineral rights; general corporate overhead and corporate assets and liabilities.

In March 2015, we entered into a series of privately negotiated transactions which resulted in our repurchasing $596.2 million aggregate principal amount of outstanding senior notes and issuing $213.6 million aggregate principal amount of 7.5% senior secured second lien notes due 2020. As a result of the transactions, net cash paid was approximately $118.3 million (inclusive of $26.7 million received on April 1, 2015), and we recognized a gain of $364.2 million on early extinguishment of debt.

On May 29, 2015, Alpha Coal West, Inc., a wholly-owned direct subsidiary of the Company, was notified by the Wyoming Department of Environmental Quality Division (“LQD”) that the LQD believes neither the Company nor Alpha Coal West, Inc. qualifies under the self-bonding program in the state. The Company has appealed this assessment. See Note 19 to our Condensed Consolidated Financial Statements for further discussion.

As previously reported, the Company is party to the Fifth Amended and Restated Credit Agreement, dated September 24, 2014, by and among the Company, the lenders party thereto and Citicorp North America, Inc., as administrative agent and collateral agent (the “Credit Agreement”). On June 30, 2015, the Company borrowed $445 million under the revolving credit facility of the Credit Agreement. Approximately $138 million of this amount carried an interest rate of 5.25% and was to mature on June 30, 2016, which is the expiration date of the revolving credit facility commitments of the associated lenders. The remaining approximately $307 million in borrowings carried an interest rate of 6.25% and was to mature on September 30, 2017, the maturity date of the revolving credit facility. Approximately $126 million of the borrowed amount anticipated the need to replenish funds expended in connection with the July 1, 2015 acquisition of the ownership interest of a third party in Pennsylvania Land Resources Holding Company, LLC (discussed further below), a natural gas exploration and production venture. The Company intends to utilize the remaining borrowings for general corporate purposes, including for working capital. See Note 11 to our Condensed Consolidated Financial Statements for more information.

On July 1, 2015, Pennsylvania Services Corporation (“PSC”), a wholly-owned, indirect subsidiary of the Company, entered into a Membership Interest Purchase Agreement (the “Agreement”) with EDF Trading Resources, LLC (“EDFTR”), PSC’s 50% ownership partner in Pennsylvania Land Resources Holding Company, LLC (“PLR”), a natural gas exploration and production joint venture. Pursuant to the Agreement, PSC acquired the remaining 50% membership interest in PLR owned by EDFTR for approximately $126 million in cash, subject to customary post-closing adjustments. The Agreement makes PSC the sole owner and operator of PLR. The Agreement contains customary representations, warranties, covenants and indemnification provisions for both PSC and EDFTR.

During the six months ended June 30, 2015, we idled six additional mines located in Central Appalachia and announced plans to further reduce overhead and general and administrative expenses to optimize our mine portfolio and reduce our cost structure.

Coal Pricing Trends, Uncertainties and Outlook
 
Metallurgical Coal

Metallurgical coal market conditions deteriorated further during the second quarter, resulting in a decline of the Australian metallurgical coal benchmark, now set at $93.00 per tonne for the third quarter, down from $109.50 per tonne in the prior quarter. The primary reason for declining prices during 2015 has been reduced global demand, particularly reduced Chinese imports. While Indian metallurgical coal imports have increased 3.4 million tonnes, or 18% year-to-date, they have not been enough to offset an 9.4 million tonne, or 30% year-to-date, decline in Chinese imports.

Australian producers have benefited from the strengthening U.S. dollar since the beginning of the year with the Australian dollar declining more than 10% relative to the U.S. dollar during that time. This trend has allowed Australians to continue

44
Table of Contents

aggressive pricing, pushing global metallurgical coal prices further below already depressed levels. While the exchange rate declines in Australia and Canada have helped producer costs in these countries, it has not been enough to offset price declines.

According to the World Steel Association (WSA), June global steel production declined 2.4% compared to last year, while June year-to-date production was down 17 million tonnes, or 2.0%, to 813 million tonnes. China was the largest contributor to declining production with approximately five million tonnes, followed by North America and Ukraine with four million tonnes each. European year-to-date steel production through June was up less than a million tonnes.

While there have reportedly been production cuts among the global metallurgical coal producers, they have not offset declining demand, especially in China. Given the continued oversupply, we believe the uneconomic price environment will continue until production and demand are more balanced globally.

Thermal Coal

The domestic thermal market has also experienced continued challenges, with inventories above normal levels, natural gas prices below $3 per mmbtu, and increased inter-basin competition. During the second quarter, coal burn across all regions was below last year’s and normal levels, further pressuring prices. Request for proposal (RFP) activity continues to be anemic in most basins, implying protracted challenges for the domestic thermal coal industry.

RFP activity in the Powder River Basin is relatively normal with typical contract periods. However, prices remain depressed, primarily due to low natural gas prices, oversupply and high coal inventories, which are more than 20% above normal levels, based on days of coal burn.

In Northern Appalachia (NAPP), RFP activity has been very weak over the last few months with prices reflecting the activity level. Above normal inventories, low natural gas prices and competition, especially from Illinois Basis, continue pressuring NAPP prices.

In Central Appalachia (CAPP), RFP activity has been relatively weak with contract periods trending towards the very short term. Prices are approximately 10% lower since mid-April, reflecting competition from low-priced natural gas and a shift away from CAPP thermal.

In the thermal seaborne market, spot API2 pricing in the upper $50s remains well below breakeven for all U.S. producers. While the strong U.S. dollar has helped producers in Colombia, South Africa and Russia, the market conditions are difficult for coal producers.

Results of Operations

Three Months Ended June 30, 2015 Compared to the Three Months Ended June 30, 2014

Summary

Total revenues decreased $289.0 million, or 27%, for the three months ended June 30, 2015 compared to the prior year period. The decrease in total revenues was due to decreased coal revenues of $245.2 million, decreased freight and handling revenues of $36.6 million, and decreased other revenues of $7.2 million. The decrease in coal revenues was due to lower average coal sales realization per ton and lower sales volumes for metallurgical and eastern steam coal. The decrease in coal revenues consisted of decreased steam coal revenues of $173.8 million, or 33% and decreased metallurgical coal revenues of $71.3 million, or 18%. The decrease in freight and handling revenues was due primarily to a decline in export steam coal shipments and freight rates. The decrease in other revenues was due primarily to the sale of the assets of the Company’s indirect wholly-owned subsidiary Dry Systems Technologies, Inc. and a reduction in royalties from third parties.

Net loss decreased by $44.4 million for the three months ended June 30, 2015 compared to the prior year period. The decrease was largely due to a decrease in certain operating costs and expenses, which are described below, of $153.9 million, an increase of $70.0 million of income tax benefit and a decrease in goodwill and asset impairments and restructurings of $72.6 million, partially offset by decreased coal and other revenues discussed above.

The decrease in certain operating costs and expenses of $153.9 million consisted of decreased cost of coal sales of $114.8 million, or 14%, decreased depreciation, depletion and amortization expenses of $20.4 million, or 11%, decreased selling, general and administrative expenses of $16.4 million, or 37%, decreased amortization of acquired intangibles, net of $2.0 million, or 21% and a decrease in other expenses of $0.3 million, or 5%.

45
Table of Contents


Coal sales volumes decreased 2.4 million tons, or 12%, compared to the prior year period. The decrease in coal sales volumes was primarily due to decreases of 2.7 million tons, or 36%, and 0.3 million tons, or 6%, for eastern steam and metallurgical coal, respectively, partially offset by an increase of 0.6 million tons, or 7%, in western steam coal. The decrease in eastern steam and metallurgical coal volumes was due primarily to the impacts of weak market conditions and production curtailments. The increase in western steam coal was primarily due to prior year weather related issues and transportation delays.

The average coal sales realization per ton for metallurgical coal and eastern steam coal was $75.20 and $54.94, respectively, for the three months ended June 30, 2015 compared to $86.31 and $58.53 in the prior year period. The average coal sales realization per ton for western steam coal was $11.24 for the three months ended June 30, 2015 compared to $11.81 in the prior year period.

Coal margin percentage for our reportable segments is calculated as coal revenues of our reportable segments less cost of coal sales of our reportable segments divided by coal revenues of our reportable segments. Coal revenues for our Eastern Operations include steam and metallurgical coal revenues. Coal margin percentage is not shown for our All Other Category since it has no coal sales or coal production. Coal margin percentage for our Eastern and Western Coal Operations was (5%) and 7%, respectively, for the three months ended June 30, 2015 compared to 12% and (2%) in the prior year period. Coal margin per ton for our reportable segments is calculated as coal sales realization per ton for our reportable segments less cost of coal sales per ton for our reportable segments. Coal margin per ton is not shown for our All Other Category since it has no coal sales or coal production. Coal margin per ton for our Eastern and Western Coal Operations was ($3.34) and $0.80, respectively, for the three months ended June 30, 2015 compared to $8.30 and ($0.25) in the prior year period. The decrease in coal margin percentage and coal margin per ton in Eastern Coal Operations was primarily due to lower average coal sales realization.
 
Three Months Ended
June 30,
 
Increase (Decrease)
 
2015
 
2014
 
$ or Tons
 
%
 
(in thousands, except per ton data)
 
 
Revenues:
 
 
 
 
 
 
 
Coal revenues:
 
 
 
 
 
 
 
Eastern steam
$
262,172

 
$
438,144

 
$
(175,972
)
 
(40
)%
Western steam
95,514

 
93,391

 
2,123

 
2
 %
Metallurgical
316,382

 
387,718

 
(71,336
)
 
(18
)%
Freight and handling revenues
79,739

 
116,338

 
(36,599
)
 
(31
)%
Other revenues
11,260

 
18,507

 
(7,247
)
 
(39
)%
Total revenues
$
765,067

 
$
1,054,098

 
$
(289,031
)
 
(27
)%
Tons sold:
 
 
 
 
 
 
 
Eastern steam
4,772

 
7,486

 
(2,714
)
 
(36
)%
Western steam
8,500

 
7,908

 
592

 
7
 %
Metallurgical
4,207

 
4,492

 
(285
)
 
(6
)%
Total
17,479

 
19,886

 
(2,407
)
 
(12
)%
Coal sales realization per ton:
 
 
 
 
 
 
 
Eastern steam
$
54.94

 
$
58.53

 
$
(3.59
)
 
(6
)%
Western steam
$
11.24

 
$
11.81

 
$
(0.57
)
 
(5
)%
Metallurgical
$
75.20

 
$
86.31

 
$
(11.11
)
 
(13
)%
Average
$
38.56

 
$
46.23

 
$
(7.67
)
 
(17
)%

Coal revenues. Coal revenues decreased $245.2 million, or 27%, for the three months ended June 30, 2015 compared to the prior year period. Total eastern steam coal revenues decreased $176.0 million, or 40%, which consisted of decreased export coal revenues of $66.3 million, or a 99% decrease, and decreased domestic coal revenues of $109.7 million, or a 30% decrease, compared to the prior year period. The decrease in eastern steam coal revenues was due to lower coal sales volumes and realization per ton for domestic shipments and lower volumes for export shipments. Eastern steam coal shipments decreased 2.7 million tons, or 36%, which consisted of decreased domestic shipments of 1.4 million tons and decreased export shipments of 1.3 million tons compared to the prior year period due primarily to weak market conditions and the impacts of production

46
Table of Contents

curtailments. Coal sales realization per ton for eastern steam domestic sales was $54.94 per ton compared to $59.93 per ton in the prior year period and coal sales realization per ton for eastern steam export sales was $55.00 per ton compared to $51.84 per ton in the prior year period. Coal sales realization per ton has been negatively impacted by competition from coal sourced from other basins, primarily the Illinois basin, and competition from other energy sources, primarily natural gas.

Total metallurgical coal revenues decreased $71.3 million, or an 18% decrease, which consisted of decreased export coal revenues of $38.3 million, or a 16% decrease, and decreased domestic coal revenues of $33.0 million, or a 22% decrease, compared to the prior year period. The decrease in export metallurgical coal revenues was largely due to lower average coal sales realization per ton, which was impacted by weak market conditions as increases in supply have outpaced demand growth in the seaborne markets. The decrease in domestic metallurgical coal revenues was largely due to decreases in domestic shipments and lower average coal sales realization per ton. Metallurgical coal shipments decreased 0.3 million tons, or 6%, which consisted primarily of decreased domestic shipments compared to the prior year period. Coal sales realization per ton for metallurgical export sales was $69.44 per ton compared to $79.94 per ton in the prior year period and coal sales realization per ton for metallurgical domestic sales was $88.16 per ton compared to $99.19 per ton in the prior year period.

The increase in western steam coal revenues of $2.1 million was primarily due to an increase in shipments of 0.6 million tons, or 7%, offset partially by a decrease in coal sales realization of $0.57 per ton, or 5%. The increased coal shipments were due primarily to the impacts of rail transportation delays and weather related issues on the prior year.

Our sales mix of metallurgical coal and steam coal based on volume was 24% and 76%, respectively, for the three months ended June 30, 2015 compared with 23% and 77% in the prior year period. Our sales mix of metallurgical coal and steam coal based on coal revenues was 47% and 53%, respectively, for the three months ended June 30, 2015 compared with 42% and 58%, respectively, in the prior year period.

Freight and handling. Freight and handling revenues and costs were $79.7 million for the three months ended June 30, 2015, a decrease of $36.6 million, or 31%, compared to the prior year period. The decrease was primarily due to decreased export shipments and decreased freight rates compared to the prior year period.

Other. Other revenues decreased $7.2 million, or 39%, and other expenses decreased $0.3 million, or 5%, for the three months ended June 30, 2015 compared to the prior year period, resulting in a net decrease to income from operations of $6.9 million. The net decrease was due primarily to sale of the assets of the Company’s indirect wholly-owned subsidiary Dry Systems Technologies, Inc. and a reduction in third party royalties.


47
Table of Contents

 
Three Months Ended
June 30,
 
Increase (Decrease)
 
2015
 
2014
 
$
 
%
 
(in thousands, except per ton data)
 
 
Cost of coal sales (exclusive of items shown separately below)
$
713,111

 
$
827,948

 
$
(114,837
)
 
(14
)%
Freight and handling costs
79,739

 
116,338

 
(36,599
)
 
(31
)%
Other expenses
6,376

 
6,691

 
(315
)
 
(5
)%
Depreciation, depletion and amortization
170,700

 
191,072

 
(20,372
)
 
(11
)%
Amortization of acquired intangibles, net
7,472

 
9,464

 
(1,992
)
 
(21
)%
Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above)
27,353

 
43,757

 
(16,404
)
 
(37
)%
Asset impairment and restructuring
238,606

 
2,590

 
236,016

 
9,113
 %
Goodwill impairment
—

 
308,651

 
(308,651
)
 
(100
)%
Total costs and expenses
$
1,243,357

 
$
1,506,511

 
$
(263,154
)
 
(17
)%
 
 
 
 
 
 
 
 
Cost of coal sales:
 
 
 
 
 
 
 
Eastern Coal Operations
$
608,498

 
$
726,499

 
$
(118,001
)
 
(16
)%
Western Coal Operations
88,712

 
95,396

 
(6,684
)
 
(7
)%
All Other Category
15,901

 
6,053

 
9,848

 
163
 %
Total cost of coal sales
$
713,111

 
$
827,948

 
$
(114,837
)
 
(14
)%
 
 
 
 
 
 
 
 
Cost of coal sales per ton (1)
 
 
 
 
 
 
 
Eastern Coal Operations (2)
$
67.77

 
$
60.65

 
$
7.12

 
12
 %
Western Coal Operations
$
10.44

 
$
12.06

 
$
(1.62
)
 
(13
)%
 
 
 
 
 
 
 
 
EBITDA:
 
 
 
 
 
 
 
Eastern Coal Operations
$
(276,582
)
 
$
(241,558
)
 
$
(35,024
)
 
14
 %
Western Coal Operations
$
4,320

 
$
(5,191
)
 
$
9,511

 
(183
)%
1 Our All Other Category, which has no coal sales or coal production, is not presented.
2 Cost of coal sales per ton for Eastern Coal Operations and Western Coal Operations is calculated by dividing tons sold into cost of coal sales. Tons sold for Eastern Coal Operations includes metallurgical and eastern steam coal tons sold.

Cost of coal sales. Cost of coal sales decreased $114.8 million, or 14%, for the three months ended June 30, 2015 compared to the prior year period. The decrease in cost of coal sales was due primarily to decreased labor and benefit expenses and decreased supplies and maintenance expenses primarily related to our cost reduction measures, decreased sales-related variable costs associated with decreased metallurgical and steam coal revenues, and decreased expenses related to production curtailments.

Depreciation, depletion and amortization. Depreciation, depletion, and amortization decreased $20.4 million, or 11%, for the three months ended June 30, 2015 compared to the prior year period. The decrease was primarily due to decreased spending related to continued constrained capital spending and the impact of production curtailments.

Amortization of acquired intangibles, net. Amortization expense of acquired intangibles, net decreased $2.0 million for the three months ended June 30, 2015 compared to the prior year period. The decrease in expense for amortization of acquired intangibles, net, was primarily due to lower amortization of above-market contracts assumed in prior acquisitions due to the completion of shipments under many of the contracts assumed.

Selling, general and administrative. Selling, general and administrative expenses decreased $16.4 million, or 37%, for the three months ended June 30, 2015 compared to the prior year period. The decrease in selling, general and administrative expenses was due primarily to decreased employee compensation and benefits as a result of our cost reduction measures and decreased legal fees.

48
Table of Contents


Asset impairment and restructuring. Asset impairment and restructuring expenses were $238.6 million for the three months ended June 30, 2015 and consisted of long-lived asset impairments of $228.2 million related to mineral rights and other property, plant and equipment, impairment of a cost method investment of $5.0 million, employee severance payments of $4.5 million and an impairment of a note receivable due from a third party of $0.9 million.

Interest expense. Interest expense increased $1.4 million, or 2%, during the three months ended June 30, 2015 compared to the prior year period due primarily to the issuance of $500 million in 7.50% senior secured second lien notes in May 2014 and the issuance of an additional $213.6 million in 7.5% senior secured second lien notes in March 2015, partially offset by the repurchase of various outstanding senior notes in March 2015 as discussed above.

Income taxes. Income tax benefit of $79.5 million was recorded for the three months ended June 30, 2015 on a loss before income taxes of $547.7 million. The income tax benefit rate differs from the federal statutory rate of 35% primarily due to an increase in the valuation allowance of $137.4 million, partially offset by the percentage depletion allowance and state income taxes, net of federal benefit. The change in valuation allowance results from an increase in net operating losses and other deferred tax assets for which we are unable to support realization.

Income tax benefit of $9.5 million was recorded for the three months ended June 30, 2014 on a loss before income taxes of $522.1 million. The income tax rate differs from the federal statutory rate of 35% primarily due to the impact of a change in the valuation allowance of $87.5 million, and the impact of non-deductible goodwill impairment expense. The change in valuation allowance results from an increase in net operating losses and other deferred tax assets for which we are unable to support realization.

Segment EBITDA

Eastern Coal Operations - EBITDA decreased $35.0 million for the three months ended June 30, 2015 compared to the prior year period. The decrease in EBITDA was largely due to a decrease in coal margin per ton of $11.64, or 140%, coupled with the impact of reduced volumes, partially offset by decreased goodwill and asset impairment and restructuring expenses of $79.6 million and a decrease in selling, general and administrative expenses of $16.3 million, or 44%. The decrease in coal margin per ton was due primarily to lower coal sales realizations amid a weak pricing environment. The decrease in coal margin per ton consisted of decreased average coal sales realization per ton of $4.51, or 7%, and increased cost of coal sales per ton of $7.12, or 12%.

Western Coal Operations - EBITDA increased $9.5 million, or 183%, for the three months ended June 30, 2015 compared to the prior year period. The increase in EBITDA was primarily due to an increased coal margin per ton of $1.05, or 420%, and a reduction in selling, general, and administrative expenses of $0.9 million, or 23%. The increase in coal margin per ton consisted of decreased cost of coal sales per ton of $1.62, or 13%, due to the impact of weather related issues and rail transportation delays on the prior year, partially offset by a decreased average coal sales realization per ton of $0.57, or 5%.

Six Months Ended June 30, 2015 Compared to the Six Months Ended June 30, 2014

Summary

Total revenues decreased $558.8 million, or 26%, for the six months ended June 30, 2015 compared to the prior year period. The decrease in total revenues was due to decreased coal revenues of $471.9 million, decreased freight and handling revenues of $70.7 million, and decreased other revenues of $16.2 million. The decrease in coal revenues was due to lower average coal sales realization per ton and lower sales volumes for metallurgical and eastern steam coal. The decrease in coal revenues consisted of decreased steam coal revenues of $314.8 million, or 29% and decreased metallurgical coal revenues of $157.1 million, or 20%. The decrease in freight and handling revenues was due primarily to a decline in export steam coal shipments and freight rates. The decrease in other revenues was due primarily to decreased revenues related to contractual settlements and the sale of the assets of the Company’s indirect wholly-owned subsidiary Dry Systems Technologies, Inc.

Net loss decreased $168.3 million for the six months ended June 30, 2015 compared to the prior year period. The decrease was largely due to an increase of $366.2 million for gain (loss) on early extinguishment of debt, decreases in certain operating costs and expenses of $364.3 million, which are described below, increased income tax benefit of $111.6 million, and decreases in combined goodwill and asset impairment and restructuring expenses of $78.0 million, partially offset by decreased coal and other revenues discussed above, increased interest expense of $13.1 million and a gain of $250.3 million on the sale of our 50% interest in the Alpha Shale joint venture in the prior year period.

49
Table of Contents


The decrease in certain operating costs and expenses of $364.3 million consisted of decreased cost of coal sales of $260.1 million, or 15%, decreased depreciation, depletion and amortization expenses of $62.2 million, or 16%, decreased selling, general and administrative expenses of $32.6 million, or 38%, and decreased other expenses of $10.5 million, or 48%, partially offset by increased expenses for amortization of acquired intangibles, net of $1.1 million, or 6%.

Coal sales volumes decreased 4.3 million tons, or 10%, compared to the prior year period. The decrease in coal sales volumes was primarily due to decreases of 4.8 million tons, or 32%, and 0.6 million tons, or 7%, for eastern steam and metallurgical coal, respectively, partially offset by an increase of 1.1 million tons, or 7%, in western steam coal. The decrease in eastern steam coal volumes was due primarily to weather related issues, an extended longwall move at our Emerald mine, and the impacts of production curtailments. The decrease in metallurgical coal volumes was due primarily to the impacts of production curtailments and weak market conditions. The increase in western steam coal was primarily due to prior year weather related issues and transportation delays.

The average coal sales realization per ton for metallurgical coal and eastern steam coal was $75.97 and $55.08, respectively, for the six months ended June 30, 2015 compared to $88.13 and $58.39 in the prior year period. The average coal sales realization per ton for western steam coal was $11.40 for the six months ended June 30, 2015 compared to $12.05 in the prior year period.

Coal margin percentage for our reportable segments is calculated as coal revenues of our reportable segments less cost of coal sales of our reportable segments divided by coal revenues of our reportable segments. Coal revenues for our Eastern Operations include steam and metallurgical coal revenues. Coal margin percentage is not shown for our All Other Category since it has no coal sales or coal production. Coal margin percentage for our Eastern and Western Coal Operations was (4%) and 9%, respectively, for the six months ended June 30, 2015 compared to 9% and 8% in the prior year period. Coal margin per ton for our reportable segments is calculated as coal sales realization per ton for our reportable segments less cost of coal sales per ton for our reportable segments. Coal margin per ton is not shown for our All Other Category since it has no coal sales or coal production. Coal margin per ton for our Eastern and Western Coal Operations was ($2.69) and $0.99, respectively, for the six months ended June 30, 2015 compared to $6.22 and $0.99 in the prior year period. The decrease in coal margin percentage and coal margin per ton in Eastern Coal Operations was primarily due to lower average coal sales realization, the impact of weather related issues on production and shipments, and a longwall move at our Emerald mine.

 
Six Months Ended
June 30,
 
Increase (Decrease)
 
2015
 
2014
 
$ or Tons
 
%
 
(in thousands, except per ton data)
 
 
Revenues:
 
 
 
 
 
 
 
Coal revenues:
 
 
 
 
 
 
 
Eastern steam
$
563,214

 
$
880,005

 
$
(316,791
)
 
(36
)%
Western steam
211,201

 
209,176

 
2,025

 
1
 %
Metallurgical
625,720

 
782,892

 
(157,172
)
 
(20
)%
Freight and handling revenues
179,898

 
250,540

 
(70,642
)
 
(28
)%
Other revenues
27,023

 
43,258

 
(16,235
)
 
(38
)%
Total revenues
$
1,607,056

 
$
2,165,871

 
$
(558,815
)
 
(26
)%
Tons sold:
 
 
 
 
 
 
 
Eastern steam
10,226

 
15,071

 
(4,845
)
 
(32
)%
Western steam
18,519

 
17,355

 
1,164

 
7
 %
Metallurgical
8,237

 
8,883

 
(646
)
 
(7
)%
Total
36,982

 
41,309

 
(4,327
)
 
(10
)%
Coal sales realization per ton:
 
 
 
 
 
 
 
Eastern steam
$
55.08

 
$
58.39

 
$
(3.31
)
 
(6
)%
Western steam
$
11.40

 
$
12.05

 
$
(0.65
)
 
(5
)%
Metallurgical
$
75.97

 
$
88.13

 
$
(12.16
)
 
(14
)%
Average
$
37.86

 
$
45.32

 
$
(7.46
)
 
(16
)%

50
Table of Contents


Coal revenues. Coal revenues decreased $471.9 million, or 25%, for the six months ended June 30, 2015 compared to the prior year period. Total eastern steam coal revenues decreased $316.8 million, or 36%, which consisted of decreased export coal revenues of $127.4 million, or 82%, and decreased domestic coal revenues of $189.4 million, or 26%, compared to the prior year period. The decrease in eastern steam coal revenues was largely due to lower coal sales realization per ton for both domestic and export shipments. Eastern steam coal shipments decreased 4.8 million tons, or 32%, which consisted of decreased domestic shipments of 2.5 million tons and decreased export shipments of 2.3 million tons compared to the prior year period due primarily to weather related issues, an extended longwall move at our Emerald mine, the impacts of production curtailments and weak market conditions. Coal sales realization per ton for eastern steam domestic sales was $55.75 per ton compared to $59.79 per ton in the prior year period and coal sales realization per ton for eastern steam export sales was $44.50 per ton compared to $52.59 per ton in the prior year period. Coal sales realization per ton has been negatively impacted by competition from coal sourced from other basins, primarily the Illinois basin, and competition from other energy sources, primarily natural gas.

Total metallurgical coal revenues decreased $157.1 million, or 20%, which consisted of decreased export coal revenues of $77.6 million, or 16%, and decreased domestic coal revenues of $79.5 million, or 28%, compared to the prior year period. The decrease in export metallurgical coal revenues was largely due to lower average coal sales realization per ton, which was impacted by weak market conditions as increases in supply have outpaced demand growth in the seaborne markets. The decrease in domestic metallurgical coal revenues was largely due to decreases in domestic shipments and lower average coal sales realization per ton. Metallurgical coal shipments decreased 0.6 million tons, or 7%, which consisted primarily of decreased domestic shipments compared to the prior year period. Coal sales realization per ton for metallurgical export sales was $70.75 per ton compared to $82.54 per ton in the prior year period and coal sales realization per ton for metallurgical domestic sales was $89.42 per ton compared to $99.94 per ton in the prior year period.

The increase in western steam coal revenues of $2.0 million was primarily due to increased shipments of 1.1 million tons, or 7% , partially offset by a decrease in average coal sales realization per ton of $0.65, or 5%. The increased coal shipments were due primarily to the impacts of prior year rail transportation delays and weather related issues.

Our sales mix of metallurgical coal and steam coal based on volume was 22% and 78%, respectively, for the six months ended June 30, 2015 compared with 22% and 78% in the prior year period. Our sales mix of metallurgical coal and steam coal based on coal revenues was 45% and 55%, respectively, for the six months ended June 30, 2015 compared with 42% and 58%, respectively, in the prior year period.

Freight and handling. Freight and handling revenues and costs were $179.9 million for the six months ended June 30, 2015, a decrease of $70.6 million, or 28%, compared to the prior year period. The decrease was primarily due to decreased export shipments and decreased freight rates compared to the prior year period.

Other. Other revenues decreased $16.2 million, or 38%, and other expenses decreased $10.5 million, or 48%, for the six months ended June 30, 2015 compared to the prior year period, resulting in a net decrease to income from operations of $5.7 million. The net decrease was due primarily to decreased revenues related to contractual settlements and the sale of the assets of the Company’s indirect wholly-owned subsidiary Dry Systems Technologies, Inc.


51
Table of Contents

 
Six Months Ended
June 30,
 
Increase (Decrease)
 
2015
 
2014
 
$
 
%
 
(in thousands, except per ton data)
 
 
Cost of coal sales (exclusive of items shown separately below)
$
1,464,435

 
$
1,724,532

 
$
(260,097
)
 
(15
)%
Freight and handling costs
179,898

 
250,540

 
(70,642
)
 
(28
)%
Other expenses
11,361

 
21,885

 
(10,524
)
 
(48
)%
Depreciation, depletion and amortization
329,131

 
391,367

 
(62,236
)
 
(16
)%
Amortization of acquired intangibles, net
19,917

 
18,743

 
1,174

 
6
 %
Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above)
52,315

 
84,954

 
(32,639
)
 
(38
)%
Asset impairment and restructuring
242,726

 
12,089

 
230,637

 
1,908
 %
Goodwill impairment
—

 
308,651

 
(308,651
)
 
(100
)%
Total costs and expenses
$
2,299,783

 
$
2,812,761

 
$
(512,978
)
 
(18
)%
 
 
 
 
 
 
 
 
Cost of coal sales:
 
 
 
 
 
 
 
Eastern Coal Operations
$
1,238,709

 
$
1,514,036

 
$
(275,327
)
 
(18
)%
Western Coal Operations
192,735

 
192,025

 
710

 
—
 %
All Other Category
32,991

 
18,471

 
14,520

 
79
 %
Total cost of coal sales
$
1,464,435

 
$
1,724,532

 
$
(260,097
)
 
(15
)%
 
 
 
 
 
 
 
 
Cost of coal sales per ton (1)
 
 
 
 
 
 
 
Eastern Coal Operations (2)
$
67.09

 
$
63.20

 
$
3.89

 
6
 %
Western Coal Operations
$
10.41

 
$
11.06

 
$
(0.65
)
 
(6
)%
 
 
 
 
 
 
 
 
EBITDA:
 
 
 
 
 
 
 
Eastern Coal Operations
$
(325,461
)
 
$
34,919

 
$
(360,380
)
 
(1,032
)%
Western Coal Operations
$
11,965

 
$
11,199

 
$
766

 
7
 %
1 Our All Other Category, which has no coal sales or coal production, is not presented.
2 Cost of coal sales per ton for Eastern Coal Operations and Western Coal Operations is calculated by dividing tons sold into cost of coal sales. Tons sold for Eastern Coal Operations includes metallurgical and eastern steam coal tons sold.

Cost of coal sales. Cost of coal sales decreased $260.1 million, or 15%, for the six months ended June 30, 2015 compared to the prior year period. The decrease in cost of coal sales was due primarily to decreased labor and benefit expenses and decreased supplies and maintenance expenses primarily related to our cost reduction measures, decreased sales-related variable costs associated with decreased metallurgical and steam coal revenues, and decreased expenses related to production curtailments.

Depreciation, depletion and amortization. Depreciation, depletion, and amortization decreased $62.2 million, or 16%, for the six months ended June 30, 2015 compared to the prior year period. The decrease was primarily due to decreased spending related to continued constrained capital spending and the impact of production curtailments.

Amortization of acquired intangibles, net. Amortization expense of acquired intangibles, net increased $1.2 million for the six months ended June 30, 2015 compared to the prior year period. The increase in expense for amortization of acquired intangibles, net, was primarily due to lower amortization of below-market contracts assumed in prior acquisitions due to the completion of shipments under many of the contracts assumed.

Selling, general and administrative. Selling, general and administrative expenses decreased $32.6 million, or 38%, for the six months ended June 30, 2015 compared to the prior year period. The decrease in selling, general and administrative expenses was due primarily to lower stock compensation expense, decreased employee compensation and benefits as a result of our cost reduction measures and decreased legal fees.

52
Table of Contents


Asset impairment and restructuring. Asset impairment and restructuring expenses were $242.7 million for the six months ended June 30, 2015 and consisted of long-lived asset impairments of $228.2 million related to mineral rights and other property, plant and equipment, employee severance payments of $8.6 million, impairment of a cost method investment of $5.0 million and impairment of a note receivable due from a third party of $0.9 million.

Interest expense. Interest expense increased $13.1 million, or 10%, during the six months ended June 30, 2015 compared to the prior year period due primarily to the issuance of $500 million in 7.50% senior secured second lien notes in May 2014 and the issuance of an additional $213.6 million in 7.5% senior secured second lien notes in March 2015, partially offset by the repurchase of various outstanding senior notes in March 2015 as discussed above.

Income taxes. Income tax benefit of $74.5 million was recorded for the six months ended June 30, 2015 on a loss before income taxes of $474.5 million. The income tax benefit rate differs from the federal statutory rate of 35% primarily due to an increase in the valuation allowance of $108.3 million, partially offset by the percentage depletion allowance and state income taxes, net of federal benefit. The change in valuation allowance results from an increase in net operating losses and other deferred tax assets for which we are unable to support realization.

Income tax expense of $37.0 million was recorded for the six months ended June 30, 2014 on a loss before income taxes of $531.3 million. The income tax rate differs from the federal statutory rate of 35% primarily due to the impact of a change in the valuation allowance of $137.6 million and non-deductible goodwill impairment expense, partially offset by the impact of the percentage depletion allowance. The change in valuation allowance results from an increase in net operating losses and other deferred tax assets for which we are unable to support realization.

Segment EBITDA

Eastern Coal Operations - EBITDA decreased $360.4 million for the six months ended June 30, 2015 compared to the prior year period. The decrease in EBITDA was largely due to a prior year gain of $250.3 million on the sale of our 50% interest in the Alpha Shale joint venture and decreased coal margin per ton of $8.91, or 143%, partially offset by decreased decreased goodwill and asset impairment and restructuring expenses of $77.1 million, and a decrease in selling, general, and administrative expenses of $16.4 million, or 24%. The decrease in coal margin per ton was due primarily to lower coal sales realizations and volumes amid a weak pricing environment, weather related issues and an extended longwall move at our Emerald mine which hindered production. The decrease in coal margin per ton consisted of decreased average coal sales realization per ton of $5.02, or 7%, and increased cost of coal sales per ton of $3.89, or 6%.

Western Coal Operations - EBITDA increased $0.8 million, or 7%, for the six months ended June 30, 2015 compared to the prior year period. The increase in EBITDA was primarily due to an increase in shipment volumes of 1.2 million. The increase in volumes was primarily due to the impact of weather related issues and rail transportation delays on the prior year. Coal margin was constant with both average coal realization per ton and cost of coal sales per ton decreasing by $0.65, or 5% and 6% respectively.

Liquidity and Capital Resources

Our primary liquidity and capital resource requirements stem from the cost of our coal production and purchases, our capital expenditures, our debt service, our reclamation obligations, our litigation and regulatory costs and settlements and associated costs. Our primary sources of liquidity have been from sales of coal, our credit facility and debt arrangements and to a lesser extent, cash from sales of non-core assets and miscellaneous revenues.

As noted above, the Debtors filed a motion with the Bankruptcy Court seeking authorization for DIP Financing. The DIP Financing has not been approved by the Bankruptcy Court at this time, and the Debtors’ ability to access liquidity under the DIP Financing is subject to Bankruptcy Court approval. Additionally, the proposed terms of the DIP Financing set forth herein may change prior to any approval by the Bankruptcy Court. There can be no certainty that the Bankruptcy Court will approve the DIP Financing. See Note 1 to our Condensed Consolidated Financial Statements for more information about the DIP Financing motion.

The Bankruptcy Filing is intended to permit the Debtors to restructure their debts and reorganize their businesses while under the various protections afforded by the Bankruptcy Code. The Debtors’ goal is to develop and implement a plan of reorganization that meets the standards for confirmation under the Bankruptcy Code. We believe that we will have sufficient

53
Table of Contents

amounts available under the DIP Credit Agreement to the extent approved, plus cash and cash equivalents on hand as of the Petition Date and cash generated through continuing operations to fund anticipated cash requirements through the end of 2015.

The Bankruptcy Filing constituted an event of default for certain of the Debtors' debt obligations and triggered acceleration of repayment obligations under substantially all of the Debtors’ debt obligations. However, payment obligations under the instruments underlying such debt, as well as creditors' related rights of enforcement, are stayed as a result of the Bankruptcy Filing and subject to the applicable provisions of the Bankruptcy Code.

There can be no assurance that cash on hand, cash generated through continuing operations, and other available funds will be sufficient to meet all of the Debtors’ obligations. As a result, the Company may be required to consider other alternatives to maximize the potential recovery for the various creditor constituencies, including, but not limited to, a possible sale of the Debtors or certain of the Debtors’ material assets pursuant to Section 363 of the Bankruptcy Code.

Weak market conditions and depressed coal prices have resulted in operating losses and cash outflows from operations. If market conditions do not improve, we expect to continue to experience operating losses and cash outflows in the coming quarters, which would adversely affect our liquidity. In particular, we expect a decrease in cash and cash equivalents to the extent that capital expenditures and other cash obligations exceed cash generated from our operations. These issues bring potential liquidity risks for us, including risks of declines in our cash and cash equivalents, restrictions to or the loss of our self-bonding capability and requests for additional collateral by surety providers, and potential counterparty defaults and failures.

With respect to global economic events, there continues to be uncertainty in the financial markets and weakness in the coal industry. We constantly monitor the creditworthiness of our customers. We believe that the creditworthiness of our current group of customers is sound and represents no abnormal business risk.

During the three months ended March 31, 2015, we entered into a series of privately negotiated transactions in which we repurchased $223.1 million principal amount of our 6.00% senior notes due 2019, $115.1 million principal amount of our 6.25% senior notes due 2021, $107.4 million principal amount of our 9.75% senior notes due 2018, $82.3 million principal amount of our 3.75% convertible senior notes due 2017, and $68.3 million principal amount of our 4.875% convertible senior notes due 2020 and issued $213.6 million principal amount of 7.50% senior secured second lien notes due 2020. The transactions resulted in net cash paid of $144.9 million during the three months ended March 31, 2015 and the Company recognized a gain on early extinguishment of debt of $364.2 million. The Company received $26.7 million on April 1, 2015 that was an outstanding receivable as of March 31, 2015 related to the issuance of the 7.50% senior secured second lien notes due 2020, resulting in net cash paid of $118.3 million for the transactions. The 7.50% senior secured second lien notes issued have identical terms to the 7.50% senior secured second lien notes that were issued in May 2014. Additionally, in April 2015, the 2.375% senior convertible notes matured and we paid $44.5 million.

On June 30, 2015, the Company borrowed $445 million under the revolving credit facility of the Credit Agreement. Approximately $137.3 million of this amount carries an interest rate of 5.25% and matures on June 30, 2016, which is the expiration date of the revolving credit facility commitments of the associated lenders. The remaining approximately $307.7 million in borrowings carries an interest rate of 6.25% and matures on September 30, 2017, which is the maturity date of the revolving credit facility. As noted above, the Bankruptcy Filing resulted in the acceleration of repayment obligations such as these. See Note 11 to our Condensed Consolidated Financial Statements for more information.

At June 30, 2015, we had cash and cash equivalents of $698.2 million, and investments of $500.4 million, which include the Rice Energy common stock.

On April 16, 2015, the Company was notified by the NYSE that the 30 consecutive trading day average closing price of the Company’s common stock had fallen below $1.00 per share which is the minimum average share price required by the NYSE under Section 802.01C of the NYSE Listed Company Manual.

On July 16, 2015 the Company received notice from the NYSE that the staff of NYSE Regulation has determined to commence proceedings to delist the common stock of the Company (symbol “ANR”) from the NYSE. Trading of the Company’s common stock on the NYSE was suspended at the market open on July 16, 2015. NYSE Regulation determined that the Company is no longer suitable for listing pursuant to Section 802.01D of the NYSE Listed Company Manual, based on a finding that the trading price of the Company’s common stock was “abnormally low.” NYSE Regulation has informed the Company that its application to the U.S. Securities and Exchange Commission to delist the Company’s common stock is pending. Subsequent to our voluntary petitions for relief under Chapter 11 of the Bankruptcy Code, we expect that our common stock will trade on the OTC Pink market under the ticker symbol “ANRZQ”.


54
Table of Contents

The Company’s use of self-bonding guarantees requires it to maintain compliance with certain financial ratios. On May 26, 2015, Alpha Coal West, Inc., a wholly-owned direct subsidiary of the Company was notified by the Wyoming Department of Environmental Quality Division (“LQD”) that the LQD believes neither the Company nor Alpha Coal West, Inc. qualifies under the self-bonding program in the state. The Company has appealed this assessment. As of June 30, 2015, the Company believes that it was not in compliance with the financial ratios required by each of the jurisdictions in which it utilizes self-bonding. The Company nonetheless plans to pursue all available alternatives to permit the continued use of self-bonding. In the event that our self-bonding capacity or additional surety bonds become unavailable or our surety bond providers require additional collateral, however, we would seek to secure our obligations with letters of credit, cash deposits or other suitable forms of collateral. Our failure to maintain, or inability to acquire, surety bonds or to provide a suitable alternative would have a material adverse effect on our liquidity. These failures could result from a variety of factors including lack of availability, higher cost or unfavorable market terms of new surety bonds, and the exercise by third-party surety bond issuers of their right to refuse to renew the surety.

On July 1, 2015, Pennsylvania Services Corporation (“PSC”), a wholly-owned, indirect subsidiary of the Company, entered into a Membership Interest Purchase Agreement (the “Agreement”) with EDF Trading Resources, LLC (“EDFTR”), PSC’s 50% ownership partner in Pennsylvania Land Resources Holding Company, LLC (“PLR”), a natural gas exploration and production joint venture. Pursuant to the Agreement, PSC acquired the remaining 50% membership interest in PLR owned by EDFTR for approximately $126 million in cash, subject to customary post-closing adjustments. The Agreement makes PSC the sole owner and operator of PLR. The Agreement contains customary representations, warranties, covenants and indemnification provisions for both PSC and EDFTR.

We sponsor pension plans in the United States for salaried and non-union hourly employees. For these plans, the Pension Protection Act of 2006 (“PPA”) requires a funding target of 100% of the present value of accrued benefits. Generally, any such plan with a funding ratio of less than 80% will be deemed at risk and will be subject to additional funding requirements under the PPA. Annual funding contributions to the plans are made as recommended by consulting actuaries based upon the Employee Retirement Income Security Act (“ERISA”) funding standards. Plan assets consist of cash and cash equivalents, an investment in a group annuity contract, equity and fixed income funds, and private equity funds. We are required to measure plan assets and benefit obligations as of the date of our fiscal year-end balance sheet, or sooner under certain circumstances, and recognize the overfunded or underfunded status of our defined benefit pension and other postretirement plans (other than a multi-employer plan) as an asset or liability in our balance sheet and recognize changes in that funded status in the year in which the changes occur through other comprehensive income (loss). We may be required to increase the amount of cash contributions into the pension trust in order to comply with the funding requirements of the PPA. Our plans are not currently deemed to be at risk and subject to additional funding requirements under the PPA. We made pension plan contributions of $0.9 million during the six months ended June 30, 2015 and expect to make a similar amount of contributions over the remainder of 2015.

Cash Flows

Cash and cash equivalents decreased by $43.0 million for the six months ended June 30, 2015. The net change in cash and cash equivalents was attributable to the following:
 
Six Months Ended
June 30,
 
2015
 
2014
Cash Flows (in thousands):
 
 
 
Net cash used in operating activities
$
(276,293
)
 
$
(271,009
)
Net cash used in investing activities
(24,748
)
 
(18,147
)
Net cash provided by financing activities
258,091

 
438,013

Net (decrease) increase in cash and cash equivalents
$
(42,950
)
 
$
148,857


Net cash used in operating activities for the six months ended June 30, 2015 was $276.3 million compared to $271.0 million for the six months ended June 30, 2014. The increase in cash used in operating activities in the first six months of 2015 as compared to the prior year period is primarily due to an increase in our loss from operations, after adjusting for the gain on early extinguishment of debt, offset partially by changes in working capital.

Net cash used in investing activities for the six months ended June 30, 2015 was $24.7 million compared to cash used in investing activities of $18.1 million in the prior year period. The primary use of cash for investing activities for the six months ended June 30, 2015 included capital expenditures of $66.5 million, partially offset by net sales of investments of $33.7 million

55
Table of Contents

The primary use of cash for the six months ended June 30, 2014 was related to capital expenditures of $82.8 million and net purchases of investments of $35.3 million, partially offset by net proceeds of $96.7 million from the sale of our 50% interest in the Alpha Shale joint venture.

Net cash provided by financing activities for the six months ended June 30, 2015 was $258.1 million compared to $438.0 million in the prior year period. The primary use of cash for financing activities for the six months ended June 30, 2015 included $379.5 million in principal repayments of long-term debt, $13.0 million in principal payments for capital lease obligations and $6.8 million of payments for debt issuance costs, which was more than offset by proceeds of $213.6 million from the issuance of our 7.5% senior secured second lien notes due 2020 in March 2015 and the $445 million in proceeds from the revolving credit facility in June 2015. Net cash provided by financing activities for the six months ended June 30, 2014 was comprised of $500 million in proceeds from the issuance of our 7.5% senior secured second lien notes due 2020, offset partially by $34.4 million in payments related to the repurchase of 2.375% and 3.25% convertible notes and principal payments of long-term debt, $16.5 million in payments for debt issuance and modification costs and capital lease payments of $8.6 million.

Long-Term Debt

As of June 30, 2015, our total long-term indebtedness consisted of the following (in thousands):
 
June 30, 2015
3.25% convertible senior notes due 2015
109,201

3.75% convertible senior notes due 2017
262,683

9.75% senior notes due 2018
392,584

6.00% senior notes due 2019
576,874

4.875% convertible senior notes due 2020
276,740

7.50% senior secured second lien notes due 2020
713,647

Term loan due 2020
610,937

6.25% senior notes due 2021
584,929

Revolving credit facility (1)
445,000

Other
48,205

Debt discount
(214,690
)
Debt issuance costs
(81,280
)
Total long-term debt
$
3,724,830

Less current portion
(3,690,391
)
Long-term debt, net of current portion
$
34,439

(1) Prior to the Bankruptcy filing, $137,292 of this amount matured on June 30, 2016, and $307,708 of this amount matured on September 30, 2017.

Off-Balance Sheet Arrangements

In the normal course of business, we are a party to certain off-balance sheet arrangements. These arrangements include
guarantees, operating leases, indemnifications and financial instruments with off-balance sheet risk, such as bank letters of
credit and performance or surety bonds. Obligations related to these arrangements are not reflected in our Condensed
Consolidated Balance Sheets. However, the underlying liabilities that they secure, such as asset retirement obligations, self-insured workers’ compensation liabilities, royalty obligations and certain retiree medical obligations, are reflected in our
Condensed Consolidated Balance Sheets.

We are required to provide financial assurance in order to perform the post-mining reclamation required by our mining permits, pay our federal production royalties, pay workers’ compensation claims under self-insured workers’ compensation laws in various states, pay federal black lung benefits, pay retiree health care benefits to certain retired UMWA employees and perform certain other obligations. In order to provide the required financial assurance, we generally use surety bonds and self-bonding for post-mining reclamation and bank letters of credit for self-insured workers’ compensation obligations and UMWA retiree health care obligations. Federal black lung benefits are paid from a dedicated trust fund to which future contributions will be required. Bank letters of credit are also used to collateralize a portion of the surety bonds.


56
Table of Contents

As of June 30, 2015, we had outstanding surety bonds with a total face amount of $366.6 million to secure various obligations and commitments and we had self bonding guarantees in the amount of $673.9 million. In addition, as collateral for various obligations and commitments, we had $173.7 million of letters of credit in place under our Fifth Amended and Restated Credit Agreement and $102.8 million of letters of credit in place under our accounts receivable securitization facility. These outstanding letters of credit served as collateral for workers’ compensation bonds, reclamation surety bonds, secured UMWA retiree health care obligations, secured workers’ compensation obligations and other miscellaneous obligations. The Company’s accounts receivable securitization facility terminated as a result of the Bankruptcy Filing. The letters of credit outstanding under that facility are expected to be replaced by letters of credit under the DIP Term LC Facility, if and when approved by the Bankruptcy Court. See Note 1 for more information.

We meet frequently with our surety providers and have discussions with certain providers regarding the extent of and the terms of their participation in the program. These discussions may cause us to shift surety bonds between providers or to alter the terms of their participation in our program. In the event that our self-bonding capacity or additional surety bonds become unavailable or our surety bond providers require additional collateral, we would seek to secure our obligations with letters of credit, cash deposits or other suitable forms of collateral. Our failure to maintain, or inability to acquire, surety bonds or to provide a suitable alternative would have a material adverse effect on our liquidity. These failures could result from a variety of factors including lack of availability, higher cost or unfavorable market terms of new surety bonds, and the exercise by third-party surety bond issuers of their right to refuse to renew the surety.

The Company’s use of self-bonding guarantees requires it to maintain compliance with certain financial ratios. On May 26, 2015, Alpha Coal West, Inc., a wholly-owned direct subsidiary of the Company was notified by the Wyoming Department of Environmental Quality Division (“LQD”) that the LQD believes neither the Company nor Alpha Coal West, Inc. qualifies under the self-bonding program in the state. The Company has appealed this assessment. As of June 30, 2015, the Company believes that it was not in compliance with the financial ratios required by each of the jurisdictions in which it utilizes self-bonding. The Company nonetheless plans to pursue all available alternatives to permit the continued use of self-bonding. In the event that our self-bonding capacity or additional surety bonds become unavailable or our surety bond providers require additional collateral, however, we would seek to secure our obligations with letters of credit, cash deposits or other suitable forms of collateral. Our failure to maintain, or inability to acquire, surety bonds or to provide a suitable alternative would have a material adverse effect on our liquidity. These failures could result from a variety of factors including lack of availability, higher cost or unfavorable market terms of new surety bonds, and the exercise by third-party surety bond issuers of their right to refuse to renew the surety.

Contractual Obligations
 
Our contractual obligations for equipment purchases increased $29.3 million during the six months ended June 30, 2015. Additionally, in connection with the Bankruptcy Filing and noncompliance with the terms of the Company’s debt instruments and borrowing arrangements, including its Fifth Amended and Restated Credit Agreement, the accompanying condensed consolidated balance sheet as of June 30, 2015 reflects the reclassification of $3,424 million of the Company’s outstanding long-term debt, net of debt discount and issuance costs, to current liabilities. Actions to enforce such payment obligations are stayed as a result of filing the Bankruptcy Filing.

Other than normal payments and servicing of our obligations, there have been, as of June 30, 2015, no other significant changes to our contractual obligations previously reported in our Annual Report on Form 10-K for the year ended December 31, 2014, as amended by our Annual Report on Form 10-K/A, filed on February 27, 2015.

Critical Accounting Policies and Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts. These estimates and assumptions are based on information available as of the date of the financial statements. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end. The results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of results that can be expected for the full year. Please refer to the section entitled “Critical Accounting Policies and Estimates” of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2014 for a discussion of our critical accounting policies and estimates.

Asset Impairment. U.S. GAAP requires that a long-lived asset group that is held and used should be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset group might not be recoverable. During the three months ended June 30, 2015, we determined that indicators of impairment were present for our coal related long-lived asset groups and performed impairment tests as of June 1, 2015. Testing long-lived assets for impairment after indicators of impairment have been identified is a two-step process. Step one compares the net undiscounted cash flows of an asset group to its carrying value. If the carrying value of an asset group exceeds the net undiscounted cash flows of that asset group, step two is performed whereby the fair value of the asset group is estimated and compared to its carrying amount. The amount of impairment, if any, is equal to the excess of the carrying value of an asset group over its estimated fair value. The amount of impairment, if any, is allocated to the long-lived assets on a pro-rata basis, except that the carrying value of the individual long-lived assets are not reduced below their estimated fair value. Long-lived assets located in a close geographic area are grouped together for purposes of impairment testing when, after considering revenue and cost interdependencies, circumstances indicate the assets are used together to produce future cash flows. Our asset groups generally consist of the assets and applicable liabilities of one or more mines and preparation plants and associated coal reserves for which cash flows are largely independent of cash flows of other mines, preparation plants and associated reserves.

During the three months ended June 30, 2015, given weakening in coal markets, we determined that undiscounted cash flows were less than carrying values for four of our coal related assets groups in our Eastern Coal Operations and one asset group in our All Other category. The fair values of the asset groups were generally estimated using an income approach utilizing market-place participant assumptions. The income approach is based on a discounted cash flow methodology in which

57
Table of Contents

expected future net cash flows are discounted to present value, using an appropriate after-tax weighted average cost of capital (discount rate). Our estimates of expected future net cash flows are dependent upon a number of significant management estimates about future performance including sales volumes and prices, costs to produce, income taxes, capital spending, working capital changes, among others. Our forecasts of coal prices generally reflect a long-term outlook of market prices expected to be received for our coal. Our forecasts of costs to produce coal are based on our operating forecasts and an assumed inflation rate for materials and supplies. Changes in any of these assumptions could materially impact estimated cash flows and as a result the fair value of our asset groups. The carrying values of the five asset groups exceeded their estimated fair values and accordingly, we recorded asset impairment charges of $228 million which are discussed in more detail in Note 3 to our Condensed Consolidated Financial Statements.

In addition, although three assets groups in our Eastern Coal Operations and one asset group in our Western Coal Operations which had combined carrying values totaling approximately $5 billion and $300 million, respectively, were considered recoverable, these asset groups are considered at risk as estimates of undiscounted cash flows may change in the near term which could result in the need to write down these asset groups to fair value. Our remaining asset groups were determined to have undiscounted cash flows which exceeded, by a substantial margin, their respective carrying values and therefore are less sensitive to changes in assumptions.

Item 3.
Quantitative and Qualitative Disclosures about Market Risk

Commodity Price Risk

We manage our commodity price risk for coal sales through the use of coal supply agreements. As of July 16, 2015, we had sales commitments for approximately 38 million tons of western steam coal for 2015, all of which is priced, nearly 20 million tons of eastern steam coal for 2015, 98% of which is priced and 13 million tons of metallurgical coal for 2015, 95% of which is priced. The discussion below presents the sensitivity of the market value of selected financial instruments to selected changes in market rates and prices. The range of changes reflects our view of changes that are reasonably possible over a one-year period. Market values are the present value of projected future cash flows based on the market rates and prices chosen.
We have exposure to price risk for supplies that are used directly or indirectly in the normal course of production such as diesel fuel, steel and other items such as explosives. We manage our risk for these items through strategic sourcing contracts in normal quantities with our suppliers and may use derivative instruments from time to time, primarily swap contracts with financial institutions, for a certain percentage of our monthly requirements. Swap agreements essentially fix the price paid for our diesel fuel by requiring us to pay a fixed price and receive a floating price.

We expect to use approximately 20.3 million gallons of diesel fuel for the remaining six months of 2015 and 43.3 million gallons of diesel fuel for 2016. Through our derivative swap contracts, we have fixed prices for approximately 68% and 37% of our expected diesel fuel needs for the remaining six months of 2015 and for the year of 2016, respectively. If the price of diesel fuel were to decrease during the remaining six months of 2015, our expense resulting from our diesel fuel derivative swap contracts would increase, which would be offset by a decrease in the cost of our physical diesel fuel purchases.

Credit Risk

Our credit risk is primarily with electric power generators and steel producers. Our policy is to independently evaluate each customer’s creditworthiness prior to entering into transactions and to monitor outstanding accounts receivable against established credit limits. When appropriate (as determined by our credit management function), we have taken steps to reduce our credit exposure to customers that do not meet our credit standards or whose credit has deteriorated. These steps include obtaining letters of credit or cash collateral, obtaining credit insurance, requiring prepayments for shipments or establishing customer trust accounts held for our benefit in the event of a failure to pay.

Interest Rate Risk

We have exposure to changes in interest rates through our Fifth Amended and Restated Credit Agreement, which has a variable interest rate at LIBOR plus a margin of 2.75% (subject to LIBOR floor of 0.75%), subject, in the case of the revolving credit line, to adjustment based on leverage ratios. As of June 30, 2015, amounts borrowed under the Fifth Amended and

58
Table of Contents

Restated Credit Agreement included $610.9 million of our term loan due 2020 and $445 million borrowed under the revolving facility. A 50 basis point increase or decrease in interest rates would increase or decrease our annual interest expense by $5.3 million. See Note 11 to our Condensed Consolidated Financial Statements for more information about the effects of the Bankruptcy filing on our debt instruments.

Item 4.
Controls and Procedures

Our Disclosure Committee has responsibility for ensuring that there is an adequate and effective process for establishing, maintaining and evaluating disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in our SEC reports is timely recorded, processed, summarized and reported. In addition, we have established a Code of Business Ethics designed to provide a statement of the values and ethical standards to which we require our employees and directors to adhere. The Code of Business Ethics provides the framework for maintaining the highest possible standards of professional conduct. We also maintain an ethics hotline for use by employees, vendors and others. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act, as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this report, in ensuring that material information relating to Alpha Natural Resources, Inc., required to be disclosed in reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the requisite time periods and is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.

There have not been any significant changes in our internal control over financial reporting during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.
Legal Proceedings

For a description of the Company’s legal proceedings, see Note 19, part (d), to the unaudited Condensed Consolidated Financial Statements, which is incorporated herein by reference.

Item 1A.
Risk Factors
In addition to the risk factors set forth below and other information set forth in this report, you should carefully consider the factors discussed in the “Risk Factors” sections in the Annual Report on Form 10-K for the year ended December 31, 2014, together with the cautionary statement under the caption “Cautionary Note Regarding Forward Looking Statements” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report. These described risks are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

The Debtors' filing of voluntary petitions for relief under Chapter 11 of the Bankruptcy Code and the Debtors' ability to successfully emerge as a stronger, leaner enterprise may be affected by a number of risks and uncertainties.


59
Table of Contents

The Company is subject to a number of risks and uncertainties associated with the filing of voluntary petitions for relief under Chapter 11 of the Bankruptcy Code, which may lead to potential adverse effects on the Company's liquidity, results of operations, brand or business prospects. We cannot assure you of the outcome of the Debtors' Chapter 11 cases. The Company’s outstanding securities, and in particular the Company’s common stock, may have little or no value, and trading prices may be very volatile and bear little or no relationship to the actual recovery, if any, by holders under any eventual plan of reorganization. Risks associated with the Chapter 11 filing may impact all entities, including the non-filing entities, and include the following:

•
the ability of the Company to continue as a going concern;

•
the Debtors’ ability to obtain Bankruptcy Court approval of relief sought in the Chapter 11 cases and the provisions of orders entered by the Bankruptcy Court generally;

•
the length of time the Debtors will operate within Chapter 11 and their ability to successfully emerge;

•
the ability of the Debtors to develop, obtain confirmation of, and consummate one or more plans of reorganization within the Chapter 11 cases, which ability may be impacted by, among other things, alternative proposals, views and objections of creditors, official committees and representatives;

•
the Debtors’ ability to conclude debtor-in-possession financing;

•
risks associated with third party motions or objections in the Chapter 11 cases, which may interfere with the Debtors’ plan of reorganization and restructuring generally;

•
the ability to maintain sufficient liquidity throughout the Chapter 11 proceedings;

•
increased costs related to the Bankruptcy Filing and other litigation commenced in the Chapter 11 cases;

•
the Debtors’ ability to manage contracts that are critical to their operation and to obtain and maintain appropriate terms with customers, suppliers and service providers;

•
the Debtors’ ability to obtain fair value of their assets in the event that their assets are sold;

•
whether the Debtors’ non-U.S. subsidiaries are able to continue to operate their businesses in the normal course and invest in these businesses;

•
the Debtors’ ability to fairly resolve legacy liabilities in alignment with their plan of reorganization;

•
the Debtor’s ability to self-bond or obtain adequate surety bonds;

•
the treatment of prepetition claims against the Debtors;

•
the Debtors’ ability to retain key personnel; and

•
the Debtors’ ability to maintain existing customers.


Failure to obtain or renew surety bonds on acceptable terms or maintain self-bonding status could affect our ability to secure reclamation and coal lease obligations, which could adversely affect our ability to mine or lease coal.

Federal and state laws require us to obtain surety bonds to secure payment of certain long-term obligations such as mine closure or reclamation costs, federal and state workers’ compensation costs, coal leases and other obligations. These bonds are typically renewable annually. Surety bond issuers and holders may not continue to renew the bonds, may demand less favorable terms upon renewal or may impose new or increased collateral requirements. In addition, if the financial markets experience the instability and volatility that they did in the recent past, our current surety bond providers may experience difficulties in providing new surety bonds to us, maintaining existing surety bonds, or satisfying liquidity requirements under existing surety bond contracts.


60
Table of Contents

We also maintain self-bonding in certain states, subject to meeting certain financial measures, the elements of which are subject to interpretation. The relevant state regulators may determine that we are no longer eligible for self-bonding status, which would require us to acquire additional surety bonds from third parties. Those events could result from a variety of factors including, without limitation:
        
•
a decline in our actual or perceived financial position or creditworthiness;

•
the lack of availability, higher expense or unfavorable market terms of new bonds;

•
restrictions on the availability of collateral for current and future third-party surety bond issuers under the indentures governing our outstanding debt and under our credit agreements;

•
the exercise by third-party surety bond issuers of their right to refuse to renew the surety or to require collateral for new or existing bonds; and

•
a determination by state regulators that a change to our self-bonding status is necessary to protect the state’s interests.

The Company’s use of self-bonding guarantees requires it to maintain compliance with certain financial ratios, and we have discussions from time to time, including recently, with state regulators regarding our self-bonding status and with surety bond providers regarding our existing and current surety bonds. On May 26, 2015, Alpha Coal West, Inc., a wholly-owned direct subsidiary of the Company was notified by the Wyoming Department of Environmental Quality Division (“LQD”) that the LQD believes neither the Company nor Alpha Coal West, Inc. qualifies under the self-bonding program in the state. The Company has appealed this assessment. As of June 30, 2015, the Company believes that it was not in compliance with the financial ratios required by each of the jurisdictions in which it utilizes self-bonding. In the event that our self-bonding capacity or additional surety bonds become unavailable or our surety bond providers require additional collateral, however, we would seek to secure our obligations with letters of credit, cash deposits or other suitable forms of collateral. Our failure to maintain, or inability to acquire, surety bonds or to provide a suitable alternative would have a material adverse effect on our liquidity. These failures could result from a variety of factors including lack of availability, higher cost or unfavorable market terms of new surety bonds, and the exercise by third-party surety bond issuers of their right to refuse to renew the surety.

We may be unable to obtain and renew permits necessary for our operations, which would reduce our production, cash flows and profitability.

Mining companies must obtain numerous regulatory permits that impose strict conditions on various environmental and safety matters in connection with coal mining. The permitting rules are complex and change over time, potentially in ways that may make our ability to comply with the applicable requirements more difficult or impractical or even preclude the continuation of ongoing operations or the development of future mining operations. The public, including special interest groups and individuals, have certain rights under various statutes to comment upon, submit objections to and otherwise engage in the permitting process, including bringing citizens’ lawsuits to challenge permits or mining activities. In recent years, the permitting required for coal mining has been the subject of increasingly stringent regulatory and administrative requirements and extensive litigation by environmental groups.

As a result, the permitting process is costly and time-consuming, required permits may not be issued or renewed in a timely fashion (or at all), and permits that are issued may be conditioned in a manner that may restrict our ability to conduct our mining activities efficiently. In some circumstances, regulators could seek to revoke permits previously issued. We may also be required under certain permits to provide authorities data on the impact on the environment of proposed exploration for or production of coal.

In particular, certain of our activities require a Clean Water Act Section 404 dredge and fill permit from the Army Corps of Engineers (the “COE”). In recent years, the Section 404 permitting process has been subject to increasingly stringent regulatory and administrative requirements and a series of court challenges, which have resulted in increased costs and delays in the permitting process. The COE has taken action to restrict the availability of its Nationwide Permit 21 and the United States Court of Appeals for the Sixth Circuit has invalidated the Nationwide Permit 21 permits issued in 2007. In addition, on June 29, 2015, the U.S. Environmental Protection Agency (“EPA”) and the COE jointly published their final “Clean Water Rule: Definition of ‘Waters of the United States.’” When the final rule, which becomes effective on August 28, 2015, is applied in practice, it is likely that certain previously non-jurisdictional waters, particularly so-called “nearby waters,” will become subject to Clean Water Act requirements. The final rule will likely add delays to the Section 404 permitting process and lead to additional mitigation costs, as the ability of our operations to avoid regulated jurisdictional waters will become more limited.


61
Table of Contents

Our operations also require mine permits issued under the Surface Mining Control and Reclamation Act (“SMCRA”). Since the initial regulatory program under SMCRA, the Office of Surface Mining Reclamation and Enforcement (“OSM”) has provided for a 100-foot buffer zone around streams, with variances allowing for disposal of excess spoil within the buffer zone in certain circumstances. In December 2014, pursuant to a court order, the OSM vacated its 2008 Stream Buffer Zone Rule that had revised the standards for disposal within the buffer zone, and restored its prior regulations. On July 16, 2015, OSM issued a new proposed revision to its Stream Buffer Zone Rule that would require more extensive baseline data on hydrology, geology and aquatic biology in permit applications, specifically define the “material damage” that would be prohibited outside permitted areas, require additional monitoring during mining and reclamation and expand restoration and stream protection requirements. If finalized, which OSM plans to do in 2016, the proposed rule would likely add costs and delays to the SMCRA permitting process and add costs to our operations and reclamation activities.

Increasingly stringent requirements governing coal mining also are being considered or implemented under the National Pollution Discharge Elimination System permit process and various other environmental programs. It is unclear what impact these and other developments may have on the types of conditions or restrictions that will be imposed on our future applications for surface coal mining permits and surface facilities at underground mines.

Many of our permits are subject to renewal from time to time, and renewed permits may contain more restrictive conditions than our existing permits. For example, many of our permits governing surface stream and groundwater discharges and impacts will be subject to new and more stringent conditions to address various new water quality requirements upon renewal over the next several years. To obtain renewed permits, we may have to petition to have stream quality designations changed based on available data, and if we are unsuccessful, we may not be able to continue to operate the facility as planned or at all. Although we have no estimates at this time, our costs to satisfy these conditions could be substantial.

Future changes or challenges to the permitting process could cause additional increases in the costs, time, and difficulty associated with obtaining and complying with the permits, and could delay or prevent commencing or continuing exploration or production operations, and as a result, adversely affect our coal production, cash flows and profitability.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

 
Total Number of Shares Purchased (1)
 
Average Price Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Share Repurchase Program
 
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (000’s omitted)
April 1, 2015 through April 30, 2015
—

 
$
—

 
—

 
—

May 1, 2015 through May 31, 2015
13,267

 
$
0.98

 
—

 
—

June 1, 2015 through June 30, 2015
23,869

 
$
0.40

 
—

 
—

 
37,136

 
 
 
—

 
—

(1) 
In November 2008, the Board of Directors authorized the Company to repurchase common shares from employees to satisfy the employees’ minimum statutory tax withholdings upon the vesting of restricted stock and performance shares. During the three months ended June 30, 2015, the Company issued 255,960 shares of common stock to employees upon vesting of restricted stock and restricted stock units and repurchased 37,136 shares of common stock to satisfy the employees’ minimum statutory tax withholdings.

Item 4. Mine Safety Disclosures

Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Quarterly Report on Form 10-Q.

Item 6.
Exhibits
See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q.

62
Table of Contents

SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
ALPHA NATURAL RESOURCES, INC.
Date: August 3, 2015
By:
/s/ Philip J. Cavatoni
 
Name:
Philip J. Cavatoni
 
Title:
 Executive Vice President - Chief Financial and Strategy Officer
        (Principal Financial Officer)


63
Table of Contents

Exhibit No.
Description of Exhibit
3.1
Amended and Restated Certificate of Incorporation of Alpha Natural Resources, Inc. (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on August 5, 2009).
 
 
 
3.2
Certificate of Amendment of the Restated Certificate of Incorporation of Alpha Natural Resources, Inc. (Incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on June 1, 2011).
 
 
 
3.3
Amended and Restated Bylaws of Alpha Natural Resources, Inc. (Incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on August 26, 2014).
 
 
 
10.1*
Membership Interest Purchase Agreement, dated as of July 1, 2015, between EDF Trading Resources, LLC and Pennsylvania Services Corporation.
 
 
 
12.1*
Computation of Ratio of Earnings to Fixed Charges
 
 
 
31(a)*
Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
 
 
 
31(b)*
Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
 
 
 
32(a)*
Certification Pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
 
 
 
32(b)*
Certification Pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
 
 
 
95*
Mine Safety Disclosure Exhibit
 
 
 
101.INS*
XBRL instance document
 
 
 
101.SCH*
XBRL taxonomy extension schema
 
 
 
101.CAL*
XBRL taxonomy extension calculation linkbase
 
 
 
101.DEF*
XBRL taxonomy extension definition linkbase
 
 
 
101.LAB*
XBRL taxonomy extension label linkbase
 
 
 
101.PRE*
XBRL taxonomy extension presentation linkbase
* Filed herewith




64
ANR-2015.6.30.10QExhibit10.1
Exhibit 10.1

Execution Version



MEMBERSHIP INTEREST PURCHASE AGREEMENT
BETWEEN
EDF TRADING RESOURCES, LLC
AS SELLER,
AND
PENNSYLVANIA SERVICES CORPORATION
AS PURCHASER,
Dated as of July 1, 2015


TABLE OF CONTENTS




 
 
 
Page
ARTICLE I
PURCHASE AND SALE
1
 
Section 1.1
Purchase and Sale
1
 
Section 1.2
Defined Terms
1
ARTICLE II
PURCHASE PRICE
1
 
Section 2.1
Purchase Price
1
 
Section 2.2
Adjustments to Purchase Price
2
 
Section 2.3
Allocation and Proration of Revenues and Expenses
3
 
Section 2.4
Allocation of Purchase Price
4
ARTICLE III
ASSIGNMENT AND DUE DILIGENCE ACKNOWLEDGEMENTS
4
 
Section 3.1
Assignment of Membership Interests
4
 
Section 3.2
Title Information and Agreed Adjustment
4
 
Section 3.3
Title Waiver
4
 
Section 3.4
Environmental Acknowledgments
5
 
Section 3.5
Consents to Assignment and Preferential Rights to Purchase
6


-i-
TABLE OF CONTENTS
(continued)


 
 
 
Page
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
6
 
Section 4.1
Seller
6
 
Section 4.2
The Company
7
 
Section 4.3
The Subsidiaries
9
 
Section 4.4
Litigation
10
 
Section 4.5
Taxes and Assessments
10
 
Section 4.6
Compliance with Laws; Permits
11
 
Section 4.7
Material Contracts
12
 
Section 4.8
Payments for Production
12
 
Section 4.9
Production Imbalances
13
 
Section 4.10
Required Consents and Preferential Purchase Rights
13
 
Section 4.11
Liability for Brokers’ Fees
13
 
Section 4.12
Outstanding Capital Commitments
13
 
Section 4.13
Royalties
13
 
Section 4.14
Bankruptcy
13
 
Section 4.15
Bonds
13
 
Section 4.16
Environmental
13
 
Section 4.17
Absence of Certain Changes
14
 
Section 4.18
Suspended Funds
15
 
Section 4.19
Inter-Company Accounts
15
 
Section 4.20
Title
15
 
Section 4.21
Limitations
15
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
17
 
Section 5.1
Existence and Qualification
17
 
Section 5.2
Power
17
 
Section 5.3
Authorization and Enforceability
17
 
Section 5.4
No Conflicts
17
 
Section 5.5
Consents, Approvals or Waivers
17
 
Section 5.6
Litigation
18
 
Section 5.7
Financing
18
 
Section 5.8
Investment Intent
18
 
Section 5.9
Independent Investigation
18
 
Section 5.10
Liability for Brokers’ Fees
18
 
Section 5.11
Financial Status
18



-ii-
TABLE OF CONTENTS
(continued)


 
 
 
Page
ARTICLE VI
COVENANTS OF THE PARTIES
19
 
Section 6.1
Press Releases
19
 
Section 6.2
Governmental Reviews
19
 
Section 6.3
Intercompany Accounts
20
 
Section 6.4
Further Assurances
20
 
Section 6.5
JV Employees
20
 
Section 6.6
Other Preferential Rights
21
 
Section 6.7
Non-Compete
21
ARTICLE VII
CLOSING
22
 
Section 7.1
Time and Place of Closing
22
 
Section 7.2
Obligations of Seller at Closing
22
 
Section 7.3
Obligations of Purchaser at Closing
23
 
Section 7.4
Closing Payment and Post-Closing Purchase Price Adjustments
24
ARTICLE VIII
TAX MATTERS
25
 
Section 8.1
Apportionment of Asset Taxes
25
 
Section 8.2
Refunds
25
 
Section 8.3
Amendment of Tax Returns
26
ARTICLE IX
INDEMNIFICATION; LIMITATIONS
26
 
Section 9.1
Indemnification
26
 
Section 9.2
Indemnification Actions
28
 
Section 9.3
Limitation on Actions
30



-iii-
TABLE OF CONTENTS
(continued)


 
 
 
Page
ARTICLE X
MISCELLANEOUS
31
 
Section 10.1
Counterparts
31
 
Section 10.2
Notices
32
 
Section 10.3
A Sales or Use Tax, Recording Fees and Similar Taxes and Fees
32
 
Section 10.4
Expenses
32
 
Section 10.5
Records and Post-Closing Access
33
 
Section 10.6
Governing Law
34
 
Section 10.7
Jurisdiction; Service of Process; and Venue
34
 
Section 10.8
Captions
34
 
Section 10.9
Waivers
34
 
Section 10.10
Assignment
34
 
Section 10.11
Entire Agreement
34
 
Section 10.12
Amendment
35
 
Section 10.13
No Third-Person Beneficiaries
35
 
Section 10.14
References
35
 
Section 10.15
Construction
35
 
Section 10.16
LIMITATION ON DAMAGES
35




-iv-


SCHEDULES
Schedule 1.2
Defined Terms




-v-


MEMBERSHIP INTEREST PURCHASE AGREEMENT
This Membership Interest Purchase Agreement (this “Agreement”), is dated as of July 1, 2015, by and between EDF Trading Resources, LLC, a Delaware limited liability company (“Seller”), and Pennsylvania Services Corporation, a Delaware corporation (“Purchaser”). Seller and Purchaser are sometimes referred to collectively as the “Parties” and individually as a “Party.”
RECITALS
WHEREAS, Seller owns 1000 Units (the “Interests”) in Pennsylvania Land Resources Holding Company, LLC, a Delaware limited liability company (the “Company”), which Units represent fifty percent (50%) of the issued and outstanding membership interests of the Company;
WHEREAS, Purchaser owns the remaining fifty percent (50%) of the issued and outstanding membership interests of the Company, represented by 1000 Units held by Purchaser (“Purchaser’s Original Interests”); and
WHEREAS, Seller desires to sell and Purchaser desires to purchase the Interests, on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual promises, representations, warranties, covenants, conditions and agreements contained herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I
PURCHASE AND SALE
Section 1.1    Purchase and Sale. On the terms and conditions contained in this Agreement, Seller agrees to sell to Purchaser and Purchaser agrees to purchase, accept and pay Seller for the Interests.
Section 1.2    Defined Terms. Capitalized terms used herein shall have the meanings ascribed to them in Schedule 1.2.
ARTICLE II
PURCHASE PRICE
Section 2.1    Purchase Price. The purchase price for the Interests (the “Purchase Price”) shall be One Hundred Twenty-Seven Million Forty-Four Thousand Four Hundred and Eighty-Six 0/100 Dollars ($127,044,486) (the “Unadjusted Purchase Price”), which amount is inclusive of Seller’s estimates of Seller’s indirect fifty percent (50%) share of (i) the Acquired Companies’ working capital, and (ii) all infrastructure costs incurred by or on behalf of the Acquired Companies during Seller’s ownership of the Interests, in each case that have been calculated in accordance with the methodology set forth on Schedule 2.1. The Unadjusted Purchase Price shall be adjusted as provided in Section 2.2.




Section 2.2    Adjustments to Purchase Price. The Unadjusted Purchase Price shall be adjusted as follows:
(a)    Upward Adjustments. The Unadjusted Purchase Price shall be adjusted upward by the following, without duplication:
(i)    An amount equal to the aggregate amount of capital contributions, made in accordance with the LLC Agreement and Contribution Agreement, made by Seller or any of its Affiliates (other than the Acquired Companies) to the Company or any Subsidiary attributable to periods from and after the Effective Time and on or prior to Closing;
(ii)    An amount equal to the total estimated amount to be paid to Seller by the Acquired Companies under the Seller Management Services Agreements for services performed from the Effective Time through the Closing Date that are not paid under such agreements;
(iii)    An amount equal to all reasonable costs and expenses incurred by the Acquired Companies (or incurred by Seller or any of its Affiliates (other than the Acquired Companies) for the account of the Acquired Companies) paid by Seller attributable to periods after the Effective Time and on or prior to Closing from Seller’s or its Affiliates’ (other than then Acquired Companies) own funds, excluding amounts accounted for in Section 2.2(a)(i);
(iv)    An amount equal to fifty percent (50%) of all 2015 Qualified Bonus Amounts that are allocated and paid by Seller to non-executive employees performing services to the Acquired Companies pursuant to the Bonus Program;
(v)    An amount equal to the aggregate of all income, proceeds, receipts and credits earned with respect to the Assets to which Seller is entitled under Section 2.3(b), provided such amounts are held and retained by any Acquired Company or Purchaser and are (A) not recorded as an account receivable on the books of the Acquired Companies as of the Effective Time; or (B) recorded as an account receivable on the books of the Acquired Companies as of the Effective Time, but the amount recorded is only an estimation or was not included in the working capital estimate on Schedule 2.1;
(vi)    Without duplication of Section 2.2(a)(v), any amount attributable to under-estimates in working capital and/or infrastructure costs set forth on Schedule 2.1 with respect to the Assets, as determined in a manner consistent with the methodology set forth on Schedule 2.1; and
(vii)    Any other amount agreed upon by Seller and Purchaser in writing prior to Closing.


2


(b)    Downward Adjustments. The Unadjusted Purchase Price shall be adjusted downward by the following, without duplication:
(i)    Any amount for unpaid Asset Taxes assessed for the current tax period apportioned to Seller pursuant to Article VIII;
(ii)    Any amount attributable to over-estimates in working capital and/or infrastructure costs set forth on Schedule 2.1 with respect to the Assets, as determined in a manner consistent with the methodology set forth on Schedule 2.1;
(iii)    The adjustment required under Section 3.2; and
(iv)    Any other amount agreed upon by Seller and Purchaser.
Section 2.3    Allocation and Proration of Revenues and Expenses.
(a)    Allocation of Production. For purposes of allocating production (and accounts receivable with respect thereto), under Section 2.2 and Section 2.3(b), (i) liquid Hydrocarbons shall be deemed to be “from or attributable to” the Properties when they pass through the pipeline flange connecting into the storage facilities located on the lands subject to the applicable Lease, Well or Leasehold Unit or, if there are no such storage facilities, when they pass through the LACT meters or similar meters at the point of entry into the pipelines through which they are transported from those lands, and (ii) gaseous Hydrocarbons shall be deemed to be “from or attributable to” the Properties when they pass through the delivery point sales meters or similar meters at the point of entry into the pipelines through which they are transported from the lands subject to the applicable Lease, Well or Leasehold Unit. Seller shall utilize reasonable interpolative procedures to arrive at an allocation of production when exact meter readings (including gas production meters or sales meters) or gauging and strapping data is not available.
(b)    Entitlement to Production and Income. Except as accounted for in the adjustments to the Unadjusted Purchase Price, effective as of the Closing, all production from or attributable to the Assets (and all products and proceeds attributable thereto) and all other income, proceeds, receipts and credits earned with respect to the Assets in each case from and after the Effective Time be the sole property and entitlement of the Acquired Companies, and, to the extent received by Seller after the Closing, Seller shall fully disclose, account for and remit the same to the Acquired Companies within ten (10) days. Effective as of the Closing, to the extent the following are held and retained by any Acquired Company or Purchaser and are not recorded as an account receivable on the books of the Acquired Companies as of the Effective Time, fifty percent (50%) of all production from or attributable to the Assets (and all products and proceeds attributable thereto) and fifty percent (50%) of all other income, proceeds, receipts and credits earned with respect to the Assets in each case before the Effective Time shall be the sole entitlement and property of Seller and, to the extent received by or held by Purchaser or any Acquired Company after Closing, Purchaser shall (or shall cause any Acquired Company to) fully disclose, account for and remit the same to Seller within ten (10) days.


3


Section 2.4    Allocation of Purchase Price. Seller and Purchaser agree that for Tax purposes, the Unadjusted Purchase Price and any other amounts treated as consideration paid by Purchaser for Tax purposes shall be allocated among the Assets, consistent with the allocated values set forth on Schedule 2.4 (the “Purchase Price Allocation”; with respect to each Asset, as applicable, the “Allocated Value”). The Purchase Price Allocation shall be prepared in accordance with the principals set forth in Section 1060 and 338 of the Code.
ARTICLE III
ASSIGNMENT AND DUE DILIGENCE ACKNOWLEDGEMENTS
Section 3.1    Assignment of Membership Interests. The assignment of the Interests to be delivered by Seller to Purchaser at Closing shall be in the form of Exhibit C (the “Assignment of Membership Interests”).
Section 3.2    Title Information and Agreed Adjustment. Prior to the date hereof, Purchaser acknowledges and represents that it has received all requested and desired access to and sufficiently reviewed the Records relating to the Acquired Companies’ title to the Assets, and to any other title records relating to the Assets (collectively, the “Title Information”). Purchaser acknowledges and represents that it has made all such independent reviews and inspections of the Title Information as it has deemed necessary or desirable in making the decision to enter into this Agreement, each document and instrument to be executed pursuant hereto, and to consummate the transactions contemplated hereby and thereby. In conducting the review, Purchaser has identified certain defects in the Acquired Companies’ title to certain Assets (the “Identified Defects”). Except for the warranty in Section 4.20 and the rights and remedies for breach thereof under Article IX, as its sole and exclusive remedy for the Identified Defects, and for any other defects, failures, deficiencies, liens, encumbrances, covenants, obligations or matters affecting title, Purchaser shall receive a downward adjustment to the Unadjusted Purchase Price equal to $343,242.48. Except for (a) the foregoing adjustment, and (b) the warranty in Section 4.20 and the rights and remedies for breach thereof under Article IX, Purchaser acknowledges and agrees that Seller makes no representation, warranty or covenant relating to the title to the Assets, including any failure of title, defect in title, or other lien, encumbrance, covenant, obligation, or deficiency affecting title, and acknowledges and agrees that it has not relied upon any such representations, warranties, or covenants of Seller, or other statements of Seller or any member of the Seller Group (whether contained herein or made outside this Agreement). Except for (i) the adjustment provided in this Section 3.2, and (ii) the warranty in Section 4.20 and the rights and remedies in Article IX, nothing in this Agreement (or in any document or instrument delivered in connection herewith) shall be construed as containing such a representation, warranty or covenant.
Section 3.3    Title Waiver. SUBJECT ONLY TO (A) Section 4.20 AND THE RIGHTS AND REMEDIES FOR BREACH THEREOF UNDER Article IX, AND (B) THE ADJUSTMENT PROVIDED IN SECTION 3.2, PURCHASER, ON BEHALF OF ITSELF AND THE PURCHASER GROUP, RELEASES, REMISES AND FOREVER DISCHARGES THE SELLER GROUP FROM ANY AND ALL DAMAGES, SUITS, LEGAL OR ADMINISTRATIVE PROCEEDINGS, CLAIMS, DEMANDS, DAMAGES, LOSSES, COSTS, LIABILITIES, INTEREST OR CAUSES OF ACTION WHATSOEVER, IN LAW OR IN EQUITY, KNOWN OR


4


UNKNOWN, WHICH PURCHASER OR ANY MEMBER OF PURCHASER GROUP MIGHT NOW OR SUBSEQUENTLY MAY HAVE, BASED ON, RELATING TO OR ARISING OUT OF, ANY DEFECT IN TITLE, FAILURE OF TITLE, OR OTHER LIEN, ENCUMBRANCE, COVENANT, OBLIGATION, OR DEFICIENCY AFFECTING TITLE TO ANY ASSET.
Section 3.4    Environmental Acknowledgements.
(a)    Satisfactory Access to Lands and Environmental Information. Prior to the date hereof, Purchaser acknowledges and represents that it has received all requested access to the Properties and Assets (including visual inspections and interviews), and to the Records relating to Environmental Laws, liabilities under Environmental Laws, the environmental condition of the assets, or other environmental matters. Purchaser’s review was conducted at its sole cost, risk and expense, and Purchaser acknowledges and represents that, except for the representation in Section 4.16, it has relied solely upon its own investigation with respect to the foregoing environmental matters in making the decision to enter into this Agreement, each document and instrument to be executed pursuant hereto, and to consummate the transactions contemplated hereby and thereby. Purchaser represents that it and its Affiliates and/or consultants have abided by the safety rules, regulations, and operating policies of Seller, any Acquired Company or any Third Party operator while conducting its due diligence evaluation of the Interests and Assets. Purchaser acknowledges and agrees that, except for the representation in Section 4.16, Seller makes no representation, warranty or covenant relating to the presence of absence of liabilities under Environmental Laws, compliance with Environmental Laws, the release of materials into the environment, the protection of the environment or health or the environmental condition of the Assets, and acknowledges and agrees that it has not relied upon any such representations, warranties, or covenants or Seller, or other statements of Seller or any member of the Seller Group. Except for the representation in Section 4.16, nothing in Article III or elsewhere in this Agreement (or in any document or instrument delivered in connection herewith) shall be construed as containing such a representation, warranty or covenant.
(b)    NORM. Purchaser acknowledges the following:
(i)    Certain Assets have been used for exploration, development, and production of oil and gas and that there may be petroleum, produced water, wastes, or other materials associated with the exploration, development and operation of the Assets and the production of Hydrocarbons, located on or under the Properties or associated with the Assets.
(ii)    Equipment and sites included in the Assets may contain asbestos, Hazardous Substances, or NORM associated with the exploration, development and operation of the Assets and the production of Hydrocarbons.
(iii)    NORM associated with the exploration, development and operation of the Assets and production of Hydrocarbons may affix or attach itself to the inside of Wells, materials, and equipment as scale, or in other forms.


5


(iv)    The Wells, materials, and equipment located on the Properties or included in the Assets may contain NORM and other wastes or Hazardous Substances associated with the exploration, development and operation of the Assets and production of Hydrocarbons.
(v)    Such NORM containing material and other wastes or Hazardous Substances may have come in contact with the soil.
(vi)    Special procedures may be required for the remediation, removal, transportation, or disposal of soil, wastes, asbestos, Hazardous Substances, and NORM from the Assets.
Section 3.5    Consents to Assignment and Preferential Rights to Purchase. With respect to any Required Consents or any preferential rights to purchase any Asset or similar preferential rights held by a Third Party (excluding the Acquired Companies) that would be triggered by the purchase and sale of the Interests contemplated by this Agreement, Seller and Purchaser shall cooperate to promptly prepare and send notices to the relevant Third Parties (excluding Required Consents customarily obtained after Closing) to request the applicable Required Consents or waivers of preferential rights to this transaction. Seller and Purchaser shall cooperate and use commercially reasonable efforts to cause such applicable Required Consents and waivers of preferential rights (or the exercise thereof) to be obtained and delivered prior to Closing, provided Seller shall not be obligated to make any payment or provide other consideration to (or for the behalf of) the holders of such Required Consents or preferential rights to obtain and/or waive them. Except as provided in the preceding sentence, Seller shall have no liability for the failure to obtain such Required Consents or waivers. To the extent a Required Consent is not obtained prior to Closing, Seller shall reasonably cooperate with Purchaser in attempts to obtain such Required Consents for a period of sixty (60) days after the Closing. If the waiver of any such preferential purchase right is not obtained prior to Closing, then the provisions of Section 6.6 shall apply.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser the following:
Section 4.1    Seller.
(a)    Existence and Qualification. Seller is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Delaware.
(b)    Power. Seller has the limited liability company power to enter into and perform this Agreement (and all documents required to be executed and delivered by Seller at Closing) and to consummate the transactions contemplated by this Agreement (and such documents).
(c)    Authorization and Enforceability. The execution, delivery and performance of this Agreement (and all documents required to be executed and delivered by Seller at


6


Closing), and the consummation of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary limited liability company action on the part of Seller. This Agreement has been duly executed and delivered by Seller (and all documents required to be executed and delivered by Seller at Closing shall be duly executed and delivered by Seller) and this Agreement constitutes, and at the Closing such documents shall constitute, the valid and binding obligations of Seller, enforceable in accordance with their terms except as such enforceability may be limited by applicable bankruptcy or other similar Laws affecting the rights and remedies of creditors generally as well as to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
(d)    No Conflicts. Except as indicated in Schedule 4.1(d), the execution, delivery and performance of this Agreement by Seller, and the consummation of the transactions contemplated by this Agreement shall not (i) violate any provision of the certificate of formation or the limited liability company agreement of Seller, (ii) result in a breach or default or the creation of any lien or encumbrance or give rise to any right of termination, cancellation or acceleration under any material note, bond, mortgage, indenture, or other financing instrument to which Seller is a party or by which it is bound, (iii) violate any judgment, order, ruling, or decree applicable to Seller as a party in interest or (iv) violate any Laws applicable to Seller or which is applicable to the Interests, or (v) result in a breach of, in any material respect, or termination or acceleration of any Material Contract.
Section 4.2    The Company.
(a)    Existence and Qualification. The Company is a limited liability company duly organized, validly existing, and in good standing under the Laws of the State of Delaware.
(b)    Power. The Company has the limited liability company power and authority to own, lease or otherwise hold its assets and conduct its business in the manner consistent with recent practice.
(c)    No Conflicts. Except as set forth on Schedule 4.10 and assuming the effectuation of all filings and registrations with, the termination or expiration of any applicable waiting periods imposed by, and the receipt of all authorizations and orders of, Governmental Authorities indicated as required in Schedule 4.1(d), the consummation of transactions contemplated by this Agreement shall not (i) violate any provision of the certificate of formation or the LLC Agreement, (ii) result in default (with due notice or lapse of time or both) or the creation of any lien or encumbrance or give rise to any right of termination, cancellation or acceleration under any material note, bond, mortgage, indenture, or other financing instrument to which the Company is a party or by which it is bound, (iii) violate any judgment, order, ruling, or decree applicable to the Company as a party in interest, or (iv) violate any Laws applicable to the Company, or any of its Assets, except any matters described in Clauses (ii), (iii), or (iv) above which would not have a Material Adverse Effect; provided, however, that with respect to Clause (ii) for any Loan documents,


7


guarantees or Hedges to which any Acquired Company is a party the above representations and warranties shall only be true as of the Closing Date.
(d)    Title to Interests. Seller has good and valid title to the Interests, free and clear of any liens, claims, encumbrances, security interests, options, charges and restrictions of any kind other than restrictions on transfer that may be imposed by applicable federal or state securities laws or in the LLC Agreement. Other than this Agreement and the LLC Agreement, the Interests are not subject to any voting agreement or other contract, agreement, arrangement, commitment or understanding, including any such agreement, arrangement, commitment or understanding restricting or otherwise relating to the voting, distribution rights or disposition of the Interests.
(e)    The Interests. The Interests are duly authorized and validly issued and outstanding, fully paid, non-assessable (except as expressly authorized by the terms of the applicable LLC Agreement of the Company and except as such nonassessability may be affected by Section 18-607 of the Delaware Limited Liability Company Act) and have not been issued in violation of any preemptive rights.
(f)    Financial Statements.
(i)    Seller has made available to Purchaser the Financial Statements.
(ii)    The Financial Statements have been prepared in accordance with the books and records of the Acquired Companies and have been prepared in accordance with the Accounting Principles applied on a consistent basis throughout the periods covered (subject, in the case of the unaudited Financial Statements, to normal year-end adjustments, the absence of notes or other textual disclosures required under the Accounting Principles) except for, in the case of the unaudited Financial Statements, normal year-end adjustments, the absence of notes or other textual disclosures required under the Accounting Principles.
(g)    Subsidiaries. Neither the Company nor any Subsidiary directly or indirectly owns any capital stock or other equity interest in any Person except in Subsidiaries as set forth in Exhibit B.
(h)    Labor Matters. There are no employment agreements with any individuals who are employed by the Company or any Subsidiary and neither the Company or any Subsidiary has, or has ever had, any employees. To Seller’s knowledge, each Acquired Company has complied in all material respects with all Laws relating to employment practices, terms and conditions of employment, equal employment opportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining and other requirements under applicable laws, the payment of all employment Taxes, including social security and similar Taxes, and occupational safety and health. During the past two (2) years, the Company has not been involved in or subject to, nor been threatened in writing with, any collective labor dispute, arbitration, strike, work stoppage, lock-out, lawsuit or administrative proceeding arising from federal, state, or local labor or employment laws


8


involving its employees, including, but not limited to, any WARN Act claims or potential claims. The Company has not received any notice of any claims regarding any violations by the Company of any minimum wage and overtime requirements with respect to or that may eventually involve its employees, including, but not limited to, the Fair Labor Standards Act and compliance with standards for exempt and non-exempt employees.
(i)    Employee Benefits. Neither the Company nor any Subsidiary has established, maintained or contributed to (and has not otherwise been required to contribute to) any Employee Plans. To Seller’s knowledge, all Employee Plans covering employees are in compliance with ERISA (to the extent subject to ERISA), the Code, and all other applicable Laws and the terms of such Employee Plans. Each Employee Plan which is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA and which is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter or favorable opinion letter from the Internal Revenue Service, and neither the Company nor any Subsidiary is aware of any circumstances likely to result in revocation of any such favorable determination letter. Seller has properly classified all of its employees who have provided services for the Acquired Companies as its common law employees for all purposes, including under each employee benefit plan sponsored, maintained, contributed to or required to be contributed to by the Seller or its Affiliates (“Seller Benefit Plans”).
Section 4.3    The Subsidiaries.
(a)    Existence and Qualification. Each Subsidiary is a limited liability company duly organized and validly existing under the Laws of its respective jurisdiction of formation as described in Exhibit B and is duly qualified to do business as a foreign limited liability company in each jurisdiction where its assets are located, except where the failure to so qualify would not, individually or in the aggregate have a Material Adverse Effect.
(b)    Power. Each Subsidiary has the limited liability company power and authority to own, lease or otherwise hold its assets and conduct its business in the manner consistent with recent practice.
(c)    No Conflicts. Except as set forth on Schedule 4.10, the consummation of transactions contemplated by this Agreement shall not (i) violate any provision of the certificate of formation or the limited liability company agreement (or equivalent certificates and governing instruments) of any Subsidiary, (ii) result in default (with due notice or lapse of time or both) or the creation of any lien or encumbrance or give rise to any right of termination, cancellation or acceleration under any material note, bond, mortgage, indenture, or other financing instrument to which any Subsidiary is a party or by which it is bound, (iii) violate any judgment, order, ruling, or decree applicable to any Subsidiary as a party in interest, or (iv) violate any Laws applicable to the Subsidiary, or any of its Assets, except any matters described in clauses (ii), (iii), or (iv) above which would not have a Material Adverse Effect; provided, however, that with respect to Clause (ii) for any Loan documents, guarantees or Hedges to which any Acquired Company is a party the above representations and warranties shall only be true as of the Closing Date.


9


(d)    Certificate of Formation and Limited Liability Company Agreement. Seller has delivered to Purchaser true and complete copies of the certificates of formation and the limited liability company agreements, each as amended to date, of each Subsidiary.
(e)    Title to Equity Interests of the Subsidiaries. The issued and outstanding membership interests in each Subsidiary are owned of record as described in Exhibit B. In the case of such issued and outstanding membership interests owned of record by the Company or any Subsidiary as shown on Exhibit B (the “Equity Interests”), such interests or interest are also owned beneficially and free and clear of any liens, claims, encumbrances, security interests, options, charges and restrictions of any kind other than restrictions on transfers that may be imposed by applicable federal or state securities laws, or in the applicable Subsidiary’s limited liability company agreement, similar governing instruments or the LLC Agreement. Other than this Agreement and, in the case of Subsidiaries, their respective limited liability company agreements, similar governing instruments or the LLC Agreement, the Equity Interests are not subject to any voting agreement or other contract, agreement, arrangement, commitment or understanding, including any such agreement, arrangement, commitment or understanding restricting or otherwise relating to the voting, dividend rights or disposition of the Equity Interests.
(f)    The Equity Interests. The entire equity ownership of each Subsidiary consists of the membership interests as set forth in Exhibit B attached hereto. In each case, all the Equity Interests are duly authorized and validly issued and outstanding, fully paid, non-assessable (except as expressly authorized by the terms of the applicable operating agreements or limited liability company agreements of the Subsidiaries and except as such nonassessability may be affected by Section 18-607 of the Delaware Limited Liability Company Act) and have not been issued in violation of any preemptive rights. Except for the membership interests shown on Exhibit B, there are no outstanding interests, units or other equity interests in any Subsidiary, or any contractual arrangements giving any Person a right to receive any benefits or rights similar to the rights enjoyed by or accruing to the holders of any Equity Interests of any Subsidiary. Other than pursuant to this Agreement, the limited liability company agreements of the Subsidiaries or similar governing instruments, or the LLC Agreement, there are no outstanding warrants, options, rights, convertible or exchangeable securities or other commitments pursuant to which the Company or any Subsidiary is or may become obligated to issue or sell any capital stock or other equity interests in such Subsidiary.
Section 4.4    Litigation. Except as disclosed on Schedule 4.4, there are (a) no claims or investigations pertaining to the Assets by a Governmental Authority made in connection with an alleged non-compliance with Laws of which Seller or any of its Affiliates has knowledge, or (b) no actions, suits or proceedings pending, or to Seller’s knowledge, threatened, before any Governmental Authority or arbitrator against the Company or any of the Subsidiaries or affecting the Assets.
Section 4.5    Taxes and Assessments. Except as disclosed on Schedule 4.5:
(a)    to Seller’s knowledge, the Company and the Subsidiaries have paid all ad valorem, property, production, severance, excise and similar Taxes and assessments of the


10


Company or any Subsidiary based on or measured by the ownership of the Assets, the production of Hydrocarbons, or the receipt of proceeds therefrom, but exclusive of Income Taxes (collectively, the “Asset Taxes”) that have become due and payable during the Seller Ownership Period, and all Tax Returns with respect to such Taxes have been duly and timely filed. The Company has not elected to be treated as a corporation for any Tax purpose, and each Subsidiary is treated as an entity disregarded as a separate entity from its owner for federal Income Tax purposes;
(b)    the Company and the Subsidiaries have paid all Taxes (other than Asset Taxes addressed immediately above) to which they or the Assets are subject that have become due and payable for all taxable periods (or portions thereof) ending during the Seller Ownership Period and all Tax Returns with respect to such Taxes have been duly and timely filed;
(c)    to Seller’s knowledge, there is not currently in effect any extension or waiver of any statute of limitations of any jurisdiction regarding the assessment or collection of any Tax to which the Company, any of the Subsidiaries or the Assets are subject;
(d)    no Asset is subject to inclusion as part of any arrangement that constitutes a partnership for U.S. federal Income Tax purposes;
(e)    neither Seller nor any of its Affiliates has received written notice of any pending claim against the Company or any Subsidiary (which remains outstanding) from any applicable Governmental Authority for assessment of Taxes applicable to the Company, any Subsidiary or any of their respective Assets, and there are no proceedings, assessments, reassessments, deficiency claims, or other claims of which Seller has received written notice with respect to any such Taxes that have been commenced or are presently pending with any applicable Governmental Authority;
(f)    there are no liens for Taxes on the Interests or any of the Assets other than liens for current period Taxes that are not yet due and payable;
(g)    none of the Company nor any of the Subsidiaries is a party to or bound by any Tax allocation, sharing or indemnity agreements or arrangements that will be binding on any of the Acquired Companies after the Closing Date; and
(h)    Seller is not a “foreign person” within the meaning of Section 1445 of the Code.
Section 4.6    Compliance with Laws; Permits. Except with respect to Environmental Laws (which are treated under Section 4.16), except as disclosed on Schedule 4.6, and excluding operational non-compliance matters arising on or before May 28, 2013, (a) to Seller’s knowledge, the Acquired Companies are presently in compliance with all applicable Laws, (b) to Seller’s Knowledge, the Assets have been operating in compliance with the provisions and requirements of all applicable Laws, except for instances of non-compliance that have been fully and finally resolved to the satisfaction of all Governmental Authorities with jurisdiction over such matters, (c) to Seller’s Knowledge, there is no uncured violation of any Laws applicable to the ownership or operation of


11


the Interests or Assets, and (d) neither Seller nor any of its Affiliates has received written notice of any violation of Law that would reasonably be expected to prevent, restrict, delay or otherwise interfere with the development or operation of the Assets or would reasonably be expected to result in any common law or other Claims. Seller and the Acquired Companies have all material permits, licenses and other governmental authorizations (collectively the “Permits”) necessary to own, use, enjoy, lease or otherwise hold their respective properties and assets or to conduct the business of the Acquired Companies as currently conducted. To Seller’s knowledge, all accrued fees and charges with respect to such Permits have been paid in full. Schedule 4.6 lists all current Permits issued to the Acquired Companies or Seller and which are related to the conduct of their business as currently conducted or the ownership and use of the Assets, including the names of the Permits and their respective dates of issuance and expiration. To Seller’s Knowledge, no event has occurred that would reasonably be expected to result in premature revocation or suspension of any Permit set forth in Schedule 4.6 and none of Seller or any of its Affiliates has received written notice of any violation of any such Permit that remains uncured.
Section 4.7    Material Contracts. Schedule 4.7 lists all Material Contracts, as set out in the defined term “Material Contracts.” To the Seller’s knowledge, none of Seller, the Company or the Subsidiaries, nor to the knowledge of Seller, any other Person, is in breach or default in any material respect under (or is alleged to be in breach of or default in any material respect under), or has provided or received any notice of any intention to terminate, any Material Contract, except as disclosed on Schedule 4.7. Except as set forth in Schedule 4.7, to Seller’s knowledge all Material Contracts are valid and binding on the Acquired Companies or one of its Affiliates, as applicable, in accordance with its terms and in full force and effect. Except as disclosed on Schedule 4.7, there are no Contracts with Affiliates of Seller (other than the Company and Subsidiaries) that will be binding on the Company or any Subsidiary or the Assets after Closing. No notice of material default or material breach has been received or delivered by Seller, the Company or any Subsidiary under any Material Contract, the resolution of which is currently outstanding, and no currently effective notices have been received by Seller, the Company or any Subsidiary of the exercise of any premature termination, price redetermination, market-out or curtailment of any Material Contracts. To Seller’s knowledge, no event or circumstance has occurred that, with notice or lapse of time or both, would constitute an event of default under any Material Contract or result in a termination thereof or would cause or permit the acceleration or other changes of any material right or obligation or the loss of material any benefit thereunder. To Seller’s knowledge, complete and correct copies of each Material Contract (including all modifications, amendments and supplements thereto and waivers thereunder) have been made available to Purchaser prior to the date hereof. There are no material disputes pending or threatened under any Material Contract and none of Seller or any of its Affiliates has received or given any unresolved written notice of default, material amendment, waiver, price redetermination, market out, curtailment or termination with respect to any Material Contract.
Section 4.8    Payments for Production. Except as disclosed on Schedule 4.8, none of Seller, the Company or the Subsidiaries are obligated by virtue of a take or pay payment, advance payment or other similar payment (other than royalties, overriding royalties and similar burdens on or measured by the production of Hydrocarbons from the Assets), to Hydrocarbons, or proceeds from the sale thereof, attributable to the Company’s or any Subsidiary’s interest in the Assets at some future time without receiving payment therefor at or after the time of delivery.


12


Section 4.9    Production Imbalances. Except as set forth on Schedule 4.9, as of the Effective Time, there were no Imbalances with respect to the Assets.
Section 4.10    Required Consents and Preferential Purchase Rights. As of the date hereof, to Seller’s knowledge, there are no Required Consents, except for (i) consents and approvals of Governmental Authorities that are customarily obtained after Closing or (ii) as set forth on Schedule 4.10. As of the date hereof, except as set forth on Schedule 4.10, to Seller’s knowledge, there are no preferential rights to purchase any Asset that would be triggered by the purchase and sale of the Interests contemplated by this Agreement.
Section 4.11    Liability for Brokers’ Fees. Except as set forth on Schedule 4.11, Purchaser and the Acquired Companies shall not directly or indirectly have any responsibility, liability or expense, as a result of undertakings or agreements of Seller prior to Closing, for brokerage fees, finder’s fees, agent’s commissions or other similar forms of compensation to an intermediary in connection with the negotiation, execution or delivery of this Agreement or any agreement or transaction contemplated hereby.
Section 4.12    Outstanding Capital Commitments. There is no single outstanding authority for expenditure which is binding on the Company, any Subsidiary or the Assets the value of which Seller reasonably anticipates exceeds One Hundred Thousand Dollars ($100,000) to the Company’s or any Subsidiary’s interests participating in the operation covered by such authority for expenditure, other than those shown on Schedule 4.12.
Section 4.13    Royalties. To Seller’s Knowledge, during the Seller Ownership Period, the Acquired Companies have paid all rentals, delay rentals, shut-in royalties, royalties, overriding royalties, net profits interests, non-participating royalty interests, non-participating mineral interests, and similar burdens on, measured by or payable out of the production of Hydrocarbons to the proper party entitled thereto, in accordance with the terms of the applicable Lease or Contract, but solely to the extent the Acquired Companies received the Hydrocarbons or proceeds thereof from which such burdens (excluding rentals) are required to be paid.
Section 4.14    Bankruptcy. There are no bankruptcy, reorganization or receivership proceedings pending, being contemplated by or, to Seller’s Knowledge, threatened against Seller or any of its Affiliates and neither Seller nor any of its Affiliates is insolvent or generally not paying its debts as they become due or will be rendered insolvent or unable to pay its debts as they become due as a result of the transactions contemplated by this Agreement and the transaction documents.
Section 4.15    Bonds. To Seller’s Knowledge, Schedule 4.15 lists all bonds, letters of credit and other similar credit support instruments maintained by Seller with respect to the Interests, true and complete copies of which have been made available to Purchaser
Section 4.16    Environmental.
(a)    None of Seller or any of its Affiliates has entered into, or is subject to, any agreements, consents, orders, decrees, judgments, license or permit conditions, or other binding arrangements or commitments, in each case with a Governmental Authority or that


13


arises from any of the foregoing instruments with a Governmental Authority, pursuant to Environmental Laws that relate to limitations on the future use of any of the Assets beyond requirements generally applicable to all operators of similar assets, that prevent or seek to prevent the development or operation of such Assets, or that require any physical remediation of the present conditions of any of the lands covered or occupied by the Assets.
(b)    Except as set forth in Schedule 4.16 neither Seller nor any of its Affiliates has received written notice from any Person of any (i) release or threatened release of any Hazardous Substance at or from any of the Assets, or (ii) violation of any Environmental Law or environmental permit, in each case that has not been resolved in compliance with Environmental Laws and would reasonably be expected to prevent, restrict, delay or otherwise interfere with the development or operation of the Assets in any material respect or would reasonably be expected to result in any material common law or other liability to the Company or the Subsidiaries.
(c)    To Seller’s knowledge, Seller has made available to Purchaser prior to the date hereof complete and accurate copies of all material reports, studies, audits, written notices from Governmental Authorities, tests, analyses, and other documents addressing or referring to environmental matters related to the Assets or relating to potential liabilities or obligations under Environmental Laws with respect to the ownership or operation of the Assets, in each case which are in the possession or control of the Acquired Companies or Seller or its Affiliates.
(d)    Except as set forth in Schedule 4.16, to Seller’s Knowledge, there are no uncured material violations of any applicable Environmental Laws with respect to the Assets.
Section 4.17    Absence of Certain Changes. Since the Effective Time:
(a)    there has not been any casualty loss or condemnation with respect to the Assets;
(b)    Seller has operated the Assets and the business of the Acquired Companies with respect to the Assets, in the ordinary course in accordance with recent past practice and with the JV Agreements, including any valid and outstanding budgets issued thereunder;
(c)    Seller has not transferred, sold, mortgaged, pledged, hypothecated, encumbered or otherwise disposed of any of the Assets, except for (i) sales and dispositions of Hydrocarbons in the ordinary course of business, (ii) sales and dispositions of equipment and materials that are surplus, obsolete or replaced, and (iii) other sales and dispositions of personal property individually not exceeding One Hundred Thousand Dollars ($100,000);
(d)    Seller has maintained, and if the operator thereof, operated the Assets in accordance with the JV Agreements, consistent with past practice;
(e)    except those listed on Schedule 4.17(d), Seller has not committed to any single operation, or series of related operations, reasonably anticipated by Seller to require


14


future capital expenditures by the owner of the Assets in excess of One Hundred Thousand dollars ($100,000) (net to Seller’s interest) or make any capital expenditures related to the Assets in excess of One Hundred Thousand Dollars ($100,000) (net to Seller’s interest);
(f)    Seller has maintained insurance coverage on the Assets, in the amounts and of the types currently in force;
(g)    Seller has given prompt written notice to Purchaser of any material damage to or destruction of the any of the Assets; and
(h)    Except with respect to four Qualified JV Employees, the information for which has been provided by Seller to Purchaser, Seller has not increased the compensation or benefits of any Qualified JV Employees that Purchaser has the right to offer employment.
Section 4.18    Suspended Funds. Seller and the Acquired Companies do not hold any suspended funds with respect to any of the Interests.
Section 4.19    Inter-Company Accounts. Schedule 4.19 sets out all Inter-Company Accounts, as of the date of this Agreement, including the applicable contract under which such Inter-Company Accounts are controlled.
Section 4.20    Title. None of the Assets is subject to any mortgages, deeds of trust, other security interests imposed in connection with a financing or investment, or other recorded security interests or liens (including mechanics’ and materialmen’s liens) arising solely by, through or under Seller or its Affiliates.
Section 4.21    Limitations.
(a)    EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN ARTICLE IV, (I) WITH RESPECT TO THE ASSETS AND THE TRANSACTIONS CONTEMPLATED HEREBY (I) SELLER MAKES NO REPRESENTATIONS OR WARRANTIES, STATUTORY, EXPRESS OR IMPLIED, AND (II) PURCHASER HAS NOT RELIED UPON, AND SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO PURCHASER OR ANY OF ITS ADVISORS OR ANY MEMBER OF PURCHASER GROUP (INCLUDING ANY OPINION, INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE BEEN PROVIDED TO PURCHASER BY ANY MEMBER OF SELLER GROUP OR ANY ADVISOR THERETO).
(b)    EXCEPT AS EXPRESSLY REPRESENTED IN ARTICLE IV, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, WITH RESPECT TO THE TRANSACTION CONTEMPLATED IN THIS AGREEMENT, SELLER EXPRESSLY DISCLAIMS, AND PURCHASER ACKNOWLEDGES AND AGREES THAT IT HAS NOT RELIED UPON, ANY REPRESENTATION OR WARRANTY, STATUTORY, EXPRESS OR IMPLIED, AS TO (I) TITLE TO ANY OF THE ASSETS OR INTERESTS,


15


(II) THE CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, OR ANY REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT, OR ANY GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE ASSETS, (III) THE QUANTITY, QUALITY OR RECOVERABILITY OF PETROLEUM SUBSTANCES IN OR FROM THE ASSETS, (IV) THE EXISTENCE OF ANY PROSPECT, RECOMPLETION, INFILL OR STEP-OUT DRILLING OPPORTUNITIES, (V) THE PRODUCTION OF PETROLEUM SUBSTANCES FROM THE ASSETS, WHETHER PRODUCTION HAS BEEN CONTINUOUS, OR IN PAYING QUANTITIES, OR ANY PRODUCTION OR DECLINE RATES, (VI) ANY ESTIMATES OF OPERATING COSTS AND CAPITAL REQUIREMENTS FOR ANY WELL, OPERATION, OR PROJECT, AND ANY ESTIMATES OF THE VALUE OF THE INTERESTS OR THE ASSETS OR FUTURE REVENUES GENERATED BY THE INTERESTS OR THE ASSETS, (VII) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE ASSETS, (VIII) THE CONTENT, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY THIRD PARTIES, (IX) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT, TRADEMARK, TRADE DRESS, TRADE SECRET OR OTHER INTELLECTUAL PROPERTY INFRINGEMENT, OR (X) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE OR COMMUNICATED TO PURCHASER, ANY MEMBER OF PURCHASER GROUP OR ANY OF THEIR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO, AND FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, STATUTORY, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY EQUIPMENT, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETO THAT PURCHASER SHALL BE DEEMED TO BE OBTAINING THE INTERESTS (AND INDIRECTLY THE ASSETS, INCLUDING THE EQUIPMENT), IN THEIR PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS AND THAT PURCHASER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS PURCHASER DEEMS APPROPRIATE.
(c)    Any representation “to the knowledge of Seller,” “to Seller’s knowledge,” “to the knowledge of the Company” or “to Company’s knowledge” is limited to matters within the actual knowledge of the individuals identified on Schedule 4.21(c).
(d)    Inclusion of a matter on a Schedule to a representation or warranty which addresses matters having a Material Adverse Effect shall not be deemed an indication that such matter does, or may, have a Material Adverse Effect. Matters may be disclosed on a Schedule to this Agreement for purposes of information only. Matters disclosed in each Schedule shall qualify the representation and warranty in which such Schedule is referenced and any other representation and warranty to which the matters disclosed reasonably relate.


16


The fact that any item of information is disclosed in a Schedule to this Agreement shall not constitute an admission by such Party that such item is material, that such item has had or would have a Material Adverse Effect or a material adverse effect, as applicable, or that the disclosure of such be construed to mean that such information is required to be disclosed by this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller the following:
Section 5.1    Existence and Qualification. Purchaser is a corporation organized, validly existing and in good standing under the Laws of the State of Delaware.
Section 5.2    Power. Purchaser has the corporate power to enter into and perform its obligations under this Agreement (and all documents required to be executed and delivered by Purchaser at Closing) and to consummate the transactions contemplated by this Agreement (and such documents).
Section 5.3    Authorization and Enforceability. The execution, delivery and performance of this Agreement (and all documents required to be executed and delivered by Purchaser at Closing), and the consummation of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary corporate action on the part of Purchaser. This Agreement has been duly executed and delivered by Purchaser (and all documents required to be executed and delivered by Purchaser at Closing will be duly executed and delivered by Purchaser) and this Agreement constitutes, and at the Closing such documents will constitute, the valid and binding obligations of Purchaser, enforceable in accordance with their terms except as such enforceability may be limited by applicable bankruptcy or other similar Laws affecting the rights and remedies of creditors generally as well as to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
Section 5.4    No Conflicts. The execution, delivery and performance of this Agreement by Purchaser, and the consummation of the transactions contemplated by this Agreement, will not (i) violate any provision of the bylaws (or other governing instruments) of Purchaser, (ii) result in a material default (with due notice or lapse of time or both) or the creation of any lien or encumbrance or give rise to any right of termination, cancellation or acceleration under any material note, bond, mortgage, indenture, or other financing instrument to which Purchaser is a party or by which it is bound, (iii) violate any judgment, order, ruling, or regulation applicable to Purchaser as a party in interest or (iv) violate any Law applicable to Purchaser, except any matters described in Clauses (ii), (iii) or (iv) above which would not have a material adverse effect on Purchaser or its properties.
Section 5.5    Consents, Approvals or Waivers. The execution, delivery and performance of this Agreement by Purchaser will not be subject to any consent, approval or waiver applicable to Purchaser from any Governmental Authority or other Third Party, except as set forth on Schedule 5.5.


17


Section 5.6    Litigation. There are no actions, suits or proceedings pending, or to Purchaser’s knowledge, threatened in writing before any Governmental Authority or arbitrator against Purchaser or any Affiliate of Purchaser which are reasonably likely to impair or delay materially Purchaser’s ability to perform its obligations under this Agreement.
Section 5.7    Financing. Purchaser has sufficient cash, available lines of credit or other sources of immediately available funds (in United States dollars) to enable it to pay the Closing Payment to Seller at the Closing.
Section 5.8    Investment Intent. Purchaser is acquiring the Interests for its own account and not with a view to their sale or distribution in violation of the Securities Act of 1933, as amended, the rules and regulations thereunder, any applicable state blue sky Laws, or any other applicable securities Laws. Purchaser acknowledges that it can bear the economic risk of an investment in the Interests, and has such knowledge and experience that it is capable of evaluating its investment in the Interests. Purchaser understands that neither the offer nor sale of the Interests has or will have been registered pursuant to the Securities Act of 1933, as amended, the rules and regulations thereunder, or any applicable state securities Laws. Purchaser is an “accredited investor,” as such term is defined in Regulation D of the Securities Act of 1933, as amended, and the rules and regulation thereunder, any applicable state blue sky Laws, or any other applicable securities Laws.
Section 5.9    Independent Investigation. Purchaser is (or its advisors are) experienced and knowledgeable in the oil and gas business (and other businesses conducted with the Assets) and aware of the risks of that business. Purchaser acknowledges and affirms as of the Closing Date that (i) it will have completed its independent investigation, verification, analysis and evaluation of the Acquired Companies, the Interests and the Assets, and (ii) it will have made all such reviews and inspections of the Assets and the business, books and records, results of operations, conditions (financial or otherwise) and prospects of the Acquired Companies as it has deemed necessary or appropriate. Except for the representations and warranties expressly made by Seller in Article IV, Purchaser acknowledges that there are no, and that Purchaser has not relied upon any, representations or warranties, statutory, express or implied, as to the financial condition, the Assets, Interests, Equity Interests, liabilities, operations, business or prospects of the Company or the Subsidiaries and that Purchaser is acquiring the Interests (and indirectly, a fifty percent (50%) interest in the Assets) on an as-is where-is basis with all faults and that in making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, Purchaser has relied solely upon its own independent investigation, verification, analysis and evaluation.
Section 5.10    Liability for Brokers’ Fees. Seller, and, prior to Closing, the Acquired Companies, shall not directly or indirectly have any responsibility, liability or expense, as a result of undertakings or agreements of Purchaser prior to Closing, for brokerage fees, finder’s fees, agent’s commissions or other similar forms of compensation to an intermediary in connection with the negotiation, execution or delivery of this Agreement or any agreement or transaction contemplated hereby.
Section 5.11    Financial Status. There are no bankruptcy, reorganization or receivership proceedings pending against, or, to Purchaser’s knowledge, threatened against Purchaser or its Affiliates. Immediately after giving effect to the transactions contemplated by this


18


Agreement, Purchaser shall be solvent and shall: (a) be able to pay its debts as they become due; (b) own property that has a fair saleable value greater than the amounts required to pay its debts (including a reasonable estimate of the amount of all contingent liabilities); and (c) have adequate capital to carry on its business. No transfer of property is being made and no obligation is being incurred in connection with the transactions contemplated hereby with the intent to hinder, delay or defraud either present or future creditors of any of Purchaser and its Affiliates.
ARTICLE VI
COVENANTS OF THE PARTIES
Section 6.1    Press Releases. The Parties acknowledge and agree that no press release or other public announcement, or public statement or comment in response to any inquiry, or other disclosure that is reasonably expected to result in a press release or public announcement, relating to the subject matter of this Agreement shall be issued or made by Seller or Purchaser, or their respective Affiliates, without the joint written approval of Seller and Purchaser, each of which may withhold its approval in its sole discretion; provided that, a press release or other public announcement, or public statement or comment in response to any inquiry, made without such joint approval shall not be in violation of this Section if it is made in order for the disclosing Party or any of its Affiliates to comply with applicable Laws or stock exchange rules or regulations and provided (a) it is limited to those disclosures that are required to so comply and (b) the disclosing Party provides the other Party with prior written notice of the disclosure and a reasonable opportunity to provide comments thereon. Notwithstanding the foregoing, this Section shall not restrict either Party or its Affiliates from making disclosures that are required pursuant to Contracts, Leases or Surface Rights that are in effect on or prior to Closing, or from complying with any disclosure requirements of Governmental Authorities that are applicable to the change in beneficial ownership of the Assets through the transfer of the Interests. Notwithstanding anything to the contrary contained elsewhere in this Agreement, no Purchaser press release or disclosure shall, without the prior written consent of Seller, contain the name of, mention, or make reference to any Affiliates of Seller other than the Company and Subsidiaries. Seller and Purchaser shall each be liable for the compliance of their respective Affiliates with the terms of this Section.
Section 6.2    Governmental Reviews.
(a)    Seller and Purchaser shall each in a timely manner make (or cause its applicable Affiliate to make) (i) all required filings, including if applicable any filings required under the Hart-Scott-Rodino Act, and prepare applications to and conduct negotiations with, each Governmental Authority as to which such filings, applications or negotiations are necessary or appropriate in the consummation of the transactions contemplated hereby and (ii) all required filings, prepare such applications and conduct such negotiations with each Governmental Authority as to which such filing, applications or negotiations are necessary or appropriate in the consummation of the transactions contemplated hereby. Each Party shall cooperate with and use all reasonable efforts to assist the other with respect to such filings, applications and negotiations. Purchaser and Seller shall each bear one half of the cost of all filing or application fees payable to any Governmental Authority with respect to the transactions contemplated by this Agreement,


19


regardless of whether Purchaser, Seller, the Company, any Subsidiary, or any Affiliate of any of them is required to make the payment.
(b)    Purchaser shall indemnify, reimburse, defend and hold harmless the Seller Group from and against any and all Damages based upon, arising out of or otherwise in respect of any employment action or practice of Purchaser, the Acquired Companies or any of Purchaser’s Affiliates after Closing in connection with Persons employed by or seeking to be employed by Purchaser, the Acquired Companies or any of Purchaser’s Affiliates, including claims, suits, actions or proceedings relating to or arising under the WARN Act. This indemnity shall survive Closing in accordance with Article IX.
Section 6.3    Intercompany Accounts. Except to the extent accounted for in the adjustments to the Unadjusted Purchase Price, as of the Closing, all unsettled intercompany accounts between the Company or any Subsidiary, on the one hand, and Seller or any Affiliate of Seller (other than the Company and Subsidiaries) on the other hand (the “Intercompany Accounts”), are settled in accordance with the terms of the JV Agreements and any applicable Contracts and Surface Rights, including through the payment by the Acquired Companies to Seller of all amounts due and payable to Seller under the Seller Management Services Agreements and the payment by Seller of all amounts due and payable to the Acquired Company under the applicable Seller Management Services Agreement(s).
Section 6.4    Further Assurances. After Closing, Seller and Purchaser each agree to take such further actions and to execute, acknowledge and deliver all such further documents as are reasonably requested by the other for carrying out the purposes of this Agreement or of any document delivered pursuant to this Agreement.
Section 6.5    JV Employees.
(a)    Certain employees of Seller that are primarily dedicated to providing services to the Acquired Companies and that are eligible to be hired by Purchaser pursuant to this Section 6.5 are set forth on Schedule 6.5 (“Qualified JV Employees”). From and after the Closing Date, Purchaser may interview Qualified JV Employees during normal business hours, provided that all contact and communication shall be coordinated through Seller’s designated human resources personnel. At its sole discretion, Purchaser may make offers of employment to Qualified JV Employees, provided no employment by Purchaser may be effective prior to August 1, 2015, or other date mutually agreed by the Parties. Seller shall retain responsibility for the payment of any employee benefits or entitlement, including severance pay, accrued vacation, sick or holiday pay, to any Qualified JV Employee or any other employee of Seller pursuant to any Seller Benefit Plans as a result of or in connection with the consummation of the transactions contemplated hereby.
(b)    Purchaser covenants and agrees to comply with all applicable Laws with respect to the hiring of any of Seller’s employees, including Laws concerning anti-discrimination in employment and federal and state background checking laws. Purchaser shall indemnify, reimburse, defend and hold harmless the Seller Group from and against any and all Damages based upon, arising out of or otherwise in respect of any employment


20


action or practice of Purchaser, the Acquired Companies or any of Purchaser’s Affiliates after Closing in connection with Persons employed by or seeking to be employed by Purchaser, the Acquired Companies or any of Purchaser’s Affiliates, including claims, suits, actions or proceedings relating to or arising under the WARN Act. This indemnity shall survive Closing in accordance with Article IX.
(c)    Nothing in this Agreement, whether express or implied, shall: (i) obligate the Purchaser to assume, continue, or maintain any Seller Benefit Plan; (ii) no liabilities of the Seller Benefits Plans shall be transferred to, or assumed by, the Company, the Purchaser, the Employee Benefit Plans or the Purchaser’s employee benefit plans; (iii) the Seller and its affiliates shall be solely responsible for funding and/or paying any benefits under any of the Seller Benefit Plans, including any termination benefits and other employee entitlements accrued under such plans by or attributable to employees or former employees of the Company and its Subsidiaries; (iv) confer upon any employee of Seller or its affiliates, or any representative of any such employee, any rights or remedies, including any right to employment or continued employment for any period or terms of employment, of any nature whatsoever, or (v) be interpreted to prevent or restrict the Purchaser or its affiliates from modifying or terminating the employment or terms of employment of any Qualified JV Employees, including the amendment or termination of any employee benefit or compensation plan, program or arrangement, after the Closing Date.
Section 6.6    Other Preferential Rights. If a Third Party holds a preferential right to purchase any portion of an Asset that is triggered by the purchase and sale of the Interests contemplated by this Agreement, and such Person fails to exercise said right prior to Closing, and the time for exercise or waiver has not yet expired, the following procedures shall be applicable. If one or more of the holders of any such preferential right to purchase notifies Seller or any of the Acquired Companies subsequent to the Closing that it intends to assert its preferential purchase right, the Acquired Companies shall (and Purchaser shall cause the Acquired Companies to) satisfy all such preferential purchase right obligations to such holders and shall indemnify and hold harmless the Seller Group from and against any and all Damages in connection therewith and the Acquired Companies shall be entitled to retain all proceeds received from such holders in connection with such preferential rights to purchase. This indemnity shall survive Closing in accordance with Article IX.
Section 6.7    Non-Compete.
(a)    Seller shall not, and shall cause its Affiliates (excluding the Acquired Companies) to not, directly or indirectly, acquire in any capacity during the period from and after Closing and ending on the fifth anniversary of the Effective Time, any interest in any Restricted Opportunity, whether alone or as a partner, joint venturer, or lender to any other Person acquiring such interest.
(b)    As used herein “Restricted Opportunity” means any opportunity for, including an opportunity to finance, the leasing, acquisition, farm-in, exploration, development, production, transportation, gathering or marketing or any combination of the foregoing, of Hydrocarbons produced from or that may be produced from or attributable to


21


lands lying within the Project Area. In the event Seller acquires an interest in derogation of this Section, Purchaser shall have the option to require Seller to automatically assign such interest to Purchaser or its designee without any remuneration on behalf of Purchaser.
(c)    The Parties agree that the limitations contained in this Section 6.7 with respect to time, geographical area and scope of activity are reasonable. However, if any court shall determine that the time, geographical area or scope of activity of any restriction contained in this Section 6.7 is unenforceable, it is the intention of the Parties that such restrictive covenant set forth herein shall not thereby be terminated but shall be deemed amended to the extent required to render it valid and enforceable.
(d)    Notwithstanding any provision of this Section 6.7 to the contrary, this Section 6.7 shall not apply to, limit or restrict in any way, any direct or indirect investment made by Seller Group (i) in any debt or equity securities of any Person (including without limitation any options, warrants or derivatives relating thereto) listed on a national securities exchange or actively trading in the public over-the-counter market or otherwise offered to the public in compliance with federal or state securities laws to the extent such investment constitutes a passive investment, or (ii) in any non-convertible debt (including without limitation any options, warrants or derivatives relating thereto) of any person listed on a national securities exchange, or actively traded in the public over-the-counter market; provided, that such Restricted Opportunity was not acquired by the grantor in violation of this Section 6.7.
ARTICLE VII
CLOSING
Section 7.1    Time and Place of Closing. The consummation of the purchase and sale of the Interests contemplated by this Agreement (the “Closing”) shall take place at the offices of DLA Piper LLP (US) located at 1000 Louisiana St., Suite 2800, Houston, Texas, at 10:00 a.m., local time, on July 1, 2015 (the “Closing Date”).
Section 7.2    Obligations of Seller at Closing. At the Closing, Seller shall deliver or cause to be delivered to Purchaser, among other things, the following:
(a)    A duly executed counterpart of the Assignment of Membership Interests;
(b)    Resignations of the managers of the Company and the Subsidiaries that were appointed by Seller under the LLC Agreement from their position as manager of such Company or any such Subsidiary, effective on or before the Closing with mutual releases of all claims against one another; provided, that such release by the managers shall exclude (i) rights to indemnification under any provisions of the limited liability company agreement, certificate of formation, or other governing documents of the Acquired Companies, (ii) payment and other benefits to which such manager is entitled to as an employee under agreements, at-will arrangements or any Employee Plan; and (iii) rights relating to any other terms of employment, or to director and officer insurance;


22


(c)    A duly executed counterpart of the agreement in the form and substance attached hereto as Exhibit D, which shall terminate or otherwise modify certain JV Agreements, (the “Termination Agreement”);
(d)    An executed certificate described in Treasury Regulation § 1.1445-2(b)(2) certifying that Seller is not a foreign person within the meaning of the Code;
(e)    A certificate duly executed by an officer of Seller, dated as of the Closing, (i) attaching and certifying on behalf of Seller complete and correct copies of the written consents or resolutions of the board of managers and/or managing member of Seller authorizing the execution, delivery, and performance of this Agreement and the transactions contemplated hereby, and (ii) certifying on behalf of Seller the incumbency of each officer of Seller executing this Agreement or any document delivered in connection with the Closing;
(f)    A duly executed counterpart of a Restated Management Services Agreement in the form of Exhibit F;
(g)    An executed termination statement that terminates and/or cancels the UCC Financing Statement filed on May 28, 2013, with the Delaware Department of State in favor of Seller; and
(h)    All other documents and instruments reasonably required from Seller to transfer the Interests to Purchaser.
Section 7.3    Obligations of Purchaser at Closing. At the Closing, Purchaser shall deliver or cause to be delivered to Seller, among other things, the following:
(a)    A wire transfer of the Closing Payment in same-day funds;
(b)    A certificate duly executed by the secretary or any assistant secretary of Purchaser, dated as of the Closing, (i) attaching and certifying on behalf of Purchaser complete and correct copies of the resolutions of the Alpha Board authorizing the execution, delivery, and performance by Purchaser of this Agreement and the transactions contemplated hereby, and (ii) certifying on behalf of Purchaser the incumbency of each officer of Purchaser executing this Agreement or any document delivered in connection with the Closing;
(c)    A duly executed counterpart of the Termination Agreement;
(d)    A duly executed counterpart of a Restated Management Services Agreement in the form of Exhibit F; and
(e)    A duly executed counterpart of the Assignment of Membership Interests.


23


Section 7.4    Closing Payment and Post-Closing Purchase Price Adjustments.
(a)    Prior to the Closing Date, Seller delivered to Purchaser, using and based upon actual amounts then available (or if actual amounts are not available, Seller’s reasonable best estimate of the actual amounts), a preliminary settlement statement estimating the Purchase Price for the Interests after setting forth each adjustment to the Unadjusted Purchase Price set forth in Section 2.2. Purchaser and Seller agree that the estimates delivered in accordance with this Section 7.4(a) constitute the collective dollar amount to be payable by Purchaser to Seller at the Closing (the “Closing Payment”).
(b)    As soon as reasonably practicable after the Closing but not later than one-hundred and twenty (120) days following the Closing Date, Seller shall prepare and deliver to Purchaser a statement setting forth the final calculation of the Purchase Price and showing the calculation of each adjustment, based, to the extent possible on actual credits, charges, receipts and other items before and after the Effective Time and taking into account all adjustments provided for in this Agreement. Seller shall supply reasonable documentation available to support any credit, charge, receipt or other item. As soon as reasonably practicable but not later than the 30th day following receipt of Seller’s statement hereunder, Purchaser shall deliver to Seller a written report containing any changes that Purchaser proposes be made to such statement. Purchaser may not later contest or submit to the Independent Expert any amounts or adjustments that were not contested in Purchaser’s written report, which amounts or adjustments Purchaser will be deemed to have accepted. If Purchaser does not timely deliver such written report within such 30-day period, Purchaser shall be deemed to agree with the adjustments set forth in Seller’s statement. The Parties shall undertake to agree on the final statement of the Purchase Price no later than one hundred and fifty (150) days after the Closing Date (such final statement, the “Final Settlement Statement”). In the event that the Parties cannot agree on the final Purchase Price within one hundred and fifty (150) days after the Closing Date, the specific disputed items will be automatically referred to an independent expert of the Parties’ choosing with at least ten (10) years of oil and gas accounting experience for arbitration (the “Independent Expert”). If the Parties are unable to agree upon an Independent Expert, then such Independent Expert shall be selected by any Federal District Court or State District Court Judge in Houston, Texas. The Independent Expert shall conduct the arbitration proceedings in English in Houston, Texas in accordance with the Commercial Arbitration Rules of the American Arbitration Association, including procedures to expedite such arbitration proceedings, to the extent such rules do not conflict with the terms of this Section. The Independent Expert’s determination shall be made within thirty (30) days after submission of the matters in dispute (or as soon as possible thereafter) and shall be final and binding on both Parties, without right of appeal. In determining the proper amount of any adjustment to the Purchase Price, the Independent Expert shall not increase the Purchase Price more than the increase proposed by Seller nor decrease the Purchase Price more than the decrease proposed by Purchaser, as applicable. The Independent Expert shall act as an expert for the limited purpose of determining the specific disputed matters submitted by either Party and may not award damages or penalties to either Party with respect to any matter. Each Party shall each bear its own legal fees and other costs of presenting its case. Seller shall bear one-half of the


24


costs and expenses of the Independent Expert and the Purchaser shall bear one-half of such costs and expenses. Within five (5) Business Days after the date on which the Parties agree (or are deemed to agree) on the Final Settlement Statement or the Independent Expert finally determines the disputed matters, as applicable, (i) Purchaser shall pay to Seller the amount by which the Purchase Price exceeds the Closing Payment, or (ii) Seller shall pay to Purchaser the amount by which the Closing Payment exceeds the Purchase Price, as applicable.
(c)    All payments made or to be made under this Agreement to Seller shall be made by electronic transfer of immediately available funds to Seller to such bank and account as may be specified by Seller in writing, for the credit of Seller. All payments made or to be made hereunder to Purchaser shall be by electronic transfer or immediately available funds to a bank and account specified by Purchaser in writing to Seller, for the credit of Purchaser.
ARTICLE VIII
TAX MATTERS
Section 8.1    Apportionment of Asset Taxes. The payment to the appropriate Governmental Authority of all Asset Taxes, and the filing of all Tax Returns or reports in respect of such Asset Taxes, shall be handled or made by the Acquired Companies in accordance with applicable Law. Purchaser shall be responsible for all Asset Taxes for any period that begins on or after the Effective Time. If such Asset Taxes are assessed for any period that includes the Effective Time, they shall be apportioned (1) between the portion of the period occurring prior to the Effective Time and the portion of the period occurring after the Effective Time based on the number of days in the applicable period falling before the Effective Time and on the number of days in the applicable period falling on or after the Effective Time, (2) with respect to the portion of the period occurring after the Effective Time, 100% to Purchaser, and (3) with respect to the portion of the period occurring prior to the Effective Time, fifty percent (50%) to Purchaser and its Affiliates, on the one hand, and fifty percent (50%) to Seller, on the other hand; provided that production, severance, excise and similar Taxes shall be apportioned based on the number of units actually produced, purchased or sold or proceeds of sale, as applicable, before, or at and after, the Effective Time. For purposes of this Section 8.1, ad valorem and real property Taxes assessed for a particular time period shall be deemed attributable to such time period, even if such assessment is valued based (in whole or in part) upon production or other data for prior Tax periods. The actual amounts associated with the above, if any, shall be accounted for to the extent known in the adjustments to the Purchase Price at Closing and finally reconciled in the Final Settlement Statement based on then-current information.
Section 8.2    Refunds. Purchaser agrees to pay to Seller fifty percent (50%) of any refund received (whether by payment, credit, offset or otherwise, and together with any interest thereon) after the Closing by Purchaser or its Affiliates, including the Company and Subsidiaries, in respect of any Asset Taxes assessed for any period prior to the Effective Time. With respect to a refund for any Asset Tax period that includes the Effective Time, such refund shall be apportioned (1) between the portion of such period prior to the Effective Time, and the portion of such period after the Effective Time, in the same manner as Asset Taxes assessed for a period in Section 8.1,


25


and (2) with respect to the portion of the refund apportioned to the period prior to the Effective Time, fifty percent (50%) to Purchaser and its Affiliates, on the one hand, and fifty percent (50%) to Seller, on the other hand. Purchaser shall cooperate with Seller and Seller’s Affiliates in order to take all necessary steps to claim any such refund. Any such refund received by Purchaser or its Affiliates or the Company or Subsidiaries shall be paid to Seller within thirty (30) days after such refund is received. Purchaser agrees to notify Seller within ten (10) days following the discovery of a right to claim any such refund and upon receipt of any such refund. Purchaser agrees to claim any such refund as soon as possible after the discovery of a right to claim a refund and to furnish to Seller all information, records and assistance necessary to verify the amount of the refund or overpayment.
Section 8.3    Amendment of Tax Returns. Except to the extent required by applicable Laws, after Closing Purchaser shall not and shall not permit its Affiliates, including the Company and Subsidiaries, to amend any Tax Return with respect to a taxable period for which Seller may be liable for Taxes.
ARTICLE IX
INDEMNIFICATION; LIMITATIONS
Section 9.1    Indemnification.
(a)    Except for Damages against which Seller would be required to indemnify Purchaser under Section 9.1(b) at the time the Claim Notice is presented to Purchaser by Seller, Purchaser and the Acquired Companies, jointly and severally, shall indemnify, defend and hold harmless Seller Group from and against all Damages incurred or suffered by Seller Group:
(i)    caused by, arising out of or resulting from (x) the ownership, use or operation of the Assets, or (y) the ownership, management or operation of the Company or any Subsidiary, in each case only if arising and attributable to the period after the Closing Date;
(ii)    caused by or arising out of or resulting from Purchaser’s breach of any of Purchaser’s covenants or agreements contained in this Agreement; or
(iii)    caused by or arising out of or resulting from any breach of any representation or warranty made by Purchaser contained in Article V;
EVEN IF SUCH DAMAGES ARE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, SIMPLE, JOINT, CONCURRENT, ACTIVE OR PASSIVE), STRICT LIABILITY OR OTHER LEGAL FAULT OF ANY INDEMNIFIED PERSON, or a pre-existing condition. As used herein, “Seller Group” means, collectively, Seller, its Affiliates, and its and their respective officers, managers, directors, employees, attorneys, agents, partners, representatives, members, shareholders, successors, assigns and insurers of Seller or such Affiliates.


26


(b)    Seller shall indemnify, defend and hold harmless the Purchaser Group against and from all Damages incurred or suffered by Purchaser Group:
(i)    caused by or arising out of or resulting from Seller’s breach of any of Seller’s covenants or agreements contained in this Agreement; or
(ii)    caused by or arising out of or resulting from any breach of any representation or warranty made by Seller contained in Article IV.
EVEN IF SUCH DAMAGES ARE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, SIMPLE, JOINT, CONCURRENT, ACTIVE OR PASSIVE), STRICT LIABILITY OR OTHER LEGAL FAULT OF ANY INDEMNIFIED PERSON, OR A PRE-EXISTING CONDITION. As used herein, the “Purchaser Group” means, collectively, Purchaser, its Affiliates, and its and their respective officers, managers, directors, employees, attorneys, agents, partners, representatives, members, shareholders, successors, assigns and insurers of Purchaser or such Affiliates.
(c)    Notwithstanding anything to the contrary contained in this Agreement, from and after Closing, except for the rights of the Parties under Article VI, Seller’s and Purchaser’s exclusive remedy against each other with respect to (i) breaches of the representations and warranties herein (excluding the Fundamental Representations with respect to breaches of which the Parties shall also have whatever rights and remedies are available to them at law or in equity), and (ii) the ownership, operation, condition, quality or value of the Assets, including the environmental condition, in all cases is limited to the indemnification provisions set forth in this Section 9.1 and if no such right to indemnification is expressly provided, then such claims and other remedies available at Law or in equity (including rights to contribution under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, and under other Environmental Laws, breaches of statutory or implied warranties, nuisance or other tort actions, rights to punitive damages and common law rights of contribution) are hereby irrevocably released and waived by the Parties on behalf of themselves and their Indemnified Persons, EVEN IF CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT, BUT EXCLUDING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT), OF ANY RELEASED PERSON, OR A PRE-EXISTING CONDITION, excluding, however, any existing contractual rights (subject to the Termination Agreement) between (i) Purchaser or any of Purchaser’s Affiliates and (ii) Seller or any of Seller’s Affiliates under contracts between them relating to the Assets or Interests, other than this Agreement.
(d)    “Damages” shall mean the amount of any actual liability, loss, cost, expense, fine, penalty, claim, damage, settlement, award or judgment, whether attributable to personal injury or death, property damage, contract claims, torts or otherwise, including reasonable fees and expenses of attorneys, consultants, accountants or other agents and experts reasonably incident to matters indemnified against, and the costs of investigation and/or monitoring of such matters, and the costs of enforcement of the indemnity. Notwithstanding the foregoing, Damages shall not include, loss of profits, whether actual or consequential,


27


and all other consequential, indirect, and special damages except to the extent such losses and damages are payable to a Third Party pursuant to a Claim.
(e)    Any claim for indemnity under Article VIII or this Section 9.1 by any Person in Seller Group must be brought and administered by Seller or by any Person in Purchaser Group must be brought and administered by Purchaser. No Indemnified Person other than Seller and Purchaser shall have any rights against either Seller or Purchaser under the terms of Article VIII or this Section 9.1 except as may be exercised on its behalf by Purchaser or Seller, as applicable, pursuant to this Section 9.1(e). Each of Seller and Purchaser may elect to exercise or not exercise indemnification rights under this Section on behalf of the other Indemnified Persons affiliated with it in its sole discretion and shall have no liability to any such other Indemnified Person for any action or inaction under this Section.
(f)    Without prejudice to those Sections, this Section 9.1 shall not apply in respect of matters related to Asset Taxes other than Section 4.5, which are exclusively covered by Article II and Article VIII. The Parties shall treat, for Tax purposes, any amounts paid under this Article IX as an adjustment to the Purchase Price in the same manner as provided in Section 2.2.
Section 9.2    Indemnification Actions. All claims for indemnification under Section 9.1 shall be asserted and resolved as follows:
(a)    For purposes of this Article IX, the term “Indemnifying Person” when used in connection with particular Damages shall mean the Person having an obligation to indemnify another Person or Persons with respect to such Damages pursuant to this Article IX, and the term “Indemnified Person” when used in connection with particular Damages shall mean a Person having the right to be indemnified with respect to such Damages pursuant to this Article IX (solely including, for the avoidance of doubt, any member of Purchaser Group or Seller Group, as applicable).
(b)    To make a claim for indemnification under Section 9.1, an Indemnified Person shall notify the Indemnifying Person of its claim, including the specific details of and specific basis under this Agreement for its claim (the “Claim Notice”). In the event that the claim for indemnification is based upon a claim by a Third Party against the Indemnified Person (a “Claim”), the Indemnified Person shall provide its Claim Notice not later than ten (10) days after the Indemnified Person has actual knowledge of the Claim and shall enclose a copy of all papers (if any) served with respect to the Claim. In the event that the claim for indemnification is based upon an inaccuracy or breach of a representation, warranty, covenant or agreement, the Claim Notice shall specify the representation, warranty, covenant or agreement that was inaccurate or breached.
(c)    In the case of a claim for indemnification based upon a Claim, the Indemnifying Person shall have thirty (30) days from its receipt of the Claim Notice to notify the Indemnified Person whether it admits or denies its obligation to defend the Indemnified Person against such Claim under this Article IX. If the Indemnifying Person does not notify the Indemnified Person within such thirty (30) day period regarding whether the


28


Indemnifying Person admits or denies its obligation to defend the Indemnified Person, it shall be deemed to have denied its obligation to defend the Indemnified Person against such Claim under this Article IX. The Indemnified Person is authorized, prior to and during such thirty (30) day period, to file any motion, answer or other pleading that it shall deem necessary or appropriate to protect its interests or those of the Indemnifying Person and that is not prejudicial to the Indemnifying Person.
(d)    If the Indemnifying Person admits its obligation, it shall have the right and obligation to defend, at its sole cost and expense, the Claim. The Indemnifying Person shall have full control of such defense and proceedings, including any compromise or settlement thereof. If requested by the Indemnifying Person, the Indemnified Person agrees to cooperate in contesting any Claim which the Indemnifying Person elects to contest (provided, however, that the Indemnified Person shall not be required to bring any counterclaim or cross-complaint against any Person). The Indemnified Person may at its sole cost which shall not be covered by this indemnity, participate in, but not control, any defense or settlement of any Claim controlled by the Indemnifying Person pursuant to this Section 9.2(d); provided, that the Indemnified Person may file initial pleadings as described in the last sentence of paragraph (c) above if required by court or procedural rules to do so within the thirty (30) day period in paragraph (c) above. An Indemnifying Person shall not, without the written consent of the Indemnified Person, settle any Claim or consent to the entry of any judgment with respect thereto that (i) does not result in a final resolution of the Indemnified Person’s liability with respect to the Claim (including, in the case of a settlement, an unconditional written release of the Indemnified Person from all further liability in respect of such Claim) or (ii) may materially and adversely affect the Indemnified Person (other than as a result of money damages covered by the indemnity).
(e)    If the Indemnifying Person does not admit its obligation or admits its obligation but fails to diligently defend or settle the Claim, then the Indemnified Person shall have the right to defend against the Claim (at the sole cost and expense of the Indemnifying Person, if the Indemnified Person is entitled to indemnification hereunder), with counsel of the Indemnified Person’s choosing, subject to the right of the Indemnifying Person to admit its obligation to indemnify the Indemnified Person and assume the defense of the Claim at any time prior to settlement or final determination thereof. If the Indemnifying Person has not yet admitted its obligation to indemnify the Indemnified Person, the Indemnified Person shall send written notice to the Indemnifying Person of any proposed settlement but the Indemnified Person shall not settle, compromise, admit or make any acknowledgement that would give rise to liability on the part of any Indemnifying Person without the prior written consent of such Indemnifying Person. If the Indemnified Person settles any Claim over the objection of the Indemnifying Person whether before or after the Indemnifying Person has timely admitted its obligation for indemnification in writing and assumed the defense of the Claim, the Indemnified Person shall be deemed to have waived any right to indemnity with respect to the Claim. Notwithstanding the foregoing, if the Indemnifying Person has denied (or is deemed to have denied) its obligation to defend the Indemnified Person against such Claim under this Article IX, such Indemnifying Person shall nonetheless be entitled to participate at its own expense in the defense of the Claim,


29


and the Indemnified Person shall provide to the Indemnifying Person access to all pleadings and discovery relating to such Claim.
(f)    In the case of a claim for indemnification not based upon a Claim, the Indemnifying Person shall have thirty (30) days from its receipt of the Claim Notice to (i) cure the Damages complained of, (ii) admit its obligation to provide indemnification with respect to such Damages or (iii) dispute the claim for such Damages. If the Indemnifying Person does not notify the Indemnified Person within such thirty (30) day period that it has cured the Damages or that it disputes the claim for such Damages, the Indemnifying Person shall be deemed to dispute the claim for such Damages.
Section 9.3    Limitation on Actions.
(a)    All representations and warranties of Seller in Article IV and Purchaser in Article V shall survive until the day that is one (1) year counted from and after the Closing Date and expire thereafter; provided, however, that the Fundamental Representations shall survive until the expiration of the applicable statute of limitations period. The covenants and other agreements of Seller and Purchaser set forth in this Agreement shall survive the Closing until fully performed in accordance with their terms and expire thereafter. Representations, warranties, covenants and agreements shall terminate and be of no further force and effect after the respective date of their expiration, after which time no claim may be asserted thereunder by any Person, provided that there shall be no termination of any bona fide claim asserted pursuant to this Agreement with respect to such a representation, warranty, covenant or agreement prior to its expiration or termination date. The remainder of this Agreement shall survive the Closing without time limit except as may otherwise be expressly provided herein.
(b)    The indemnities in Sections 9.1(a)(ii), 9.1(a)(iii), 9.1(b)(i) and 9.1(b)(ii) shall terminate with respect to a representation, warranty, covenant or agreement as of the termination date of such representation, warranty, covenant or agreement that is subject to indemnification, except in each case as to matters for which a specific written claim for indemnity has been delivered to the Indemnifying Person on or before such termination date. The indemnities in Section 9.1(a)(i), and all disclaimers, express acknowledgements, waivers and releases herein, continue without time limit.
(c)    The indemnity obligations under Section 9.1(b)(ii), as applicable, except the Fundamental Representations, shall apply as follows:
(i)    Seller shall not be required to indemnify any Person under Section 9.1(b)(ii) for any individual liability, loss, cost, expense, claim, award or judgment that does not exceed Seventy-Five Thousand Dollars ($75,000) in the aggregate, and such individual Damages may not be applied towards the Indemnity Deductible;
(ii)    Seller shall not have any liability for indemnification under Section 9.1(b)(ii) until and unless the aggregate amount of the liability for all Damages for which Claim Notices are timely delivered by Purchaser exceeds a


30


deductible amount equal to one and a half percent (1.5%) of the Purchase Price (the “Indemnity Deductible”), after which point Purchaser or Purchaser Indemnified Persons shall be entitled to claim Damages in excess of the Indemnity Deductible; and
(iii)    Seller shall not be required to indemnify Purchaser under Section 9.1(b)(ii) for aggregate Damages in excess of fifteen percent (15%) of the Purchase Price.
(d)    The amount of any Damages for which an Indemnified Person is entitled to indemnity under Article IX shall be reduced by the amount of insurance proceeds actually received by the Indemnified Person or its Affiliates with respect to such Damages (net of any collection costs and excluding the proceeds of any insurance policy issued or underwritten by the Indemnified Person or its Affiliates); provided, however, no Party shall be required to seek recovery under any policy of insurance as a condition to indemnification hereunder. Upon the request of the Indemnifying Person, the Indemnified Person shall provide the Indemnifying Person with information sufficient to allow the Indemnifying Person to calculate the amount of the indemnity payment in accordance with this Agreement. An Indemnified Person shall take all reasonable steps to mitigate damages in respect of any Damages for which it is seeking indemnification and shall use commercially reasonable efforts to avoid costs or expenses associated with such Damages and, if such costs and expenses cannot be avoided, to minimize the amount thereof.
(e)    Notwithstanding any provision of Section 9.1(b) to the contrary, if Seller is required to provide indemnification under Section 9.1(b)(ii) for any Damages incurred or suffered by an Acquired Company or that otherwise arise from or are based on such Damages, Seller’s liability to provide such indemnification shall in all respects be limited to fifty percent (50%) of such Damages, subject to any other limitations imposed on Seller’s liability under this Article IX (including Section 9.3(c) and Section 9.3(d)). In addition, Seller shall have no obligation to provide indemnification to Purchaser Group under this Article IX for any Damage to the extent Seller, through affirmative evidence, demonstrates that it arises from or is caused by the ownership or operation of the Alpha Contributed Assets prior to the Seller Ownership Period.
(f)    In no event shall any Indemnified Person be entitled to duplicate compensation with respect to the same Damage, liability, loss, cost, expense, claim, award or judgment under more than one provision of this Agreement and the various documents delivered in connection with the Closing.
ARTICLE X
MISCELLANEOUS
Section 10.1    Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original instrument, but all such counterparts together shall constitute but one agreement.


31


Section 10.2    Notices. All notices that are required or may be given pursuant to this Agreement shall be sufficient in all respects if given in writing, in English and delivered personally, by telecopy, facsimile, or by recognized courier service, as follows:
(a) If to the Seller:
EDF Trading Resources, LLC
1001 Westbank Drive
Austin, Texas 78746
Attention: B. Brad Watson
Facsimile: 512.328.8189

With a copy to (which shall not constitute notice):
DLA Piper LLP (US)
1251 Avenue of the Americas
New York, New York 10020-1104
Attention: Robert Gruendel
Facsimile: 212.884.8536

(b) If to Purchaser:
Alpha Natural Resources, Inc.
One Alpha Place
P.O. Box 16429
Bristol, Virginia 24209
Attention: General Counsel
Facsimile: 276.285.3747

With a copy to (which shall not constitute notice):
Morgan, Lewis & Bockius LLP
1000 Louisiana Street, Suite 4000
Houston, Texas 77002
Attention: William Parish
Facsimile: 713.890.5001

Either Party may change its address for notice by notice to the other in the manner set forth above. All notices shall be deemed to have been duly given at the time of receipt by the Party to which such notice is addressed.
Section 10.3    A Sales or Use Tax, Recording Fees and Similar Taxes and Fees. Notwithstanding anything to the contrary herein, Purchaser shall bear any sales, use, excise, real property transfer or gain, gross receipts, goods and services, registration, capital, documentary, stamp or transfer Taxes, recording fees and similar Taxes and fees incurred and imposed upon, or with respect to, the transfers or other transactions contemplated hereby. Should Seller, Company or Subsidiary or Affiliate of any of them pay prior to Closing, or should Seller or any continuing Affiliate of Seller pay after Closing, any amount for which Purchaser is liable under this Section 10.3, Purchaser shall, promptly following receipt of Seller’s invoice, reimburse the amount paid. If such transfers or transactions are exempt from any such Taxes or fees upon the filing of an appropriate certificate or other evidence of exemption, Purchaser shall timely furnish to Seller such certificate or evidence.
Section 10.4    Expenses. Except as provided in Section 10.3, all expenses incurred by Seller in connection with or related to the authorization, preparation or execution of this


32


Agreement, and the Exhibits and Schedules hereto and thereto, and all other matters related to the Closing, including without limitation, all fees and expenses of counsel, accountants and financial advisers employed by Seller, shall be borne solely and entirely by Seller, and all such expenses incurred by Purchaser shall be borne solely and entirely by Purchaser.
Section 10.5    Records and Post-Closing Access.
(a)    Within ten (10) days after the Closing Date, Seller shall deliver or cause to be delivered to Purchaser any Records, except for the Excluded Records and copies of other Records retained by Seller, that are in the possession of Seller or its Affiliates (other than the Acquired Companies).
(b)    Purchaser, for a period of seven (7) years following the Closing, shall, or shall cause the Acquired Companies to:
(i)    retain the Records;
(ii)    provide Seller, their Affiliates, and their respective officers, employees and representatives with access to the Records during normal business hours for review and copying at Seller’s expense, including Records pertaining to the calculation of the adjustments to the Unadjusted Purchase Price;
(iii)    provide Seller, their Affiliates, and their respective officers, employees and representatives with access, during normal business hours, to materials received or produced after Closing to the extent relating to (A) any claim for indemnification made under Section 9.1 of this Agreement and elsewhere in this Agreement (excluding, however, attorney work product and attorney-client communications with respect to any such claim being brought by Purchaser under this Agreement) or (B) Taxes of Seller and its Affiliates (including any Taxes allocated to Seller under this Agreement), in each case, for review and copying at Seller’s expense and to the Company’s, the Subsidiaries’ and their Affiliates’ personnel for the purpose of discussing any such matter or claim, provided, that Purchaser’s obligation to provide access to such information following the Closing shall continue until the final resolution of such claim; and
(iv)    provide Seller, their Affiliates, and their respective officers, employees and representatives with access, during normal business hours, to the employees of the Acquired Companies or of any Affiliate of the Acquired Companies to the extent such employees have knowledge of facts relating to (A) any amount, item of income, cost, credit, debit or deduction to be accounted for in the adjustments to the Unadjusted Purchase Price or the Final Settlement Statement, or (B) Taxes of Seller and its Affiliates (including any Taxes allocated to Seller under this Agreement), and Purchaser shall cause such employees to reasonably assist Seller during normal business hours, at Seller’s request, in preparing final Tax Returns or the Final Settlement Statement.


33


Section 10.6    Governing Law. This Agreement and the legal relations between the Parties relating to this Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to principles of conflicts of laws that would direct the application of the laws of another jurisdiction.
Section 10.7    Jurisdiction; Service of Process; and Venue. Each Party consents to personal jurisdiction in any action brought in the United States federal courts located in Harris County, Texas (or, if jurisdiction is not available in the United States federal courts, to personal jurisdiction in any action brought in the state courts located in Harris County, Texas) with respect to any dispute, claim or controversy arising out of or in relation to or in connection with this Agreement, and each of the Parties hereto agrees that any action instituted by it against the other with respect to any such dispute, controversy or claim will be instituted exclusively in the United States District Court for the Southern District of Texas, Houston Division (or, if jurisdiction is not available in the United States District Court for the Southern District of Texas, Houston Division, then exclusively in the state courts located in Harris County, Texas). The Parties hereby waive trial by jury in any action, proceeding or counterclaim brought by any Party against another in any matter whatsoever arising out of or in relation to or in connection with this Agreement.
Section 10.8    Captions. The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.
Section 10.9    Waivers. Any failure by any Party to comply with any of its obligations, agreements or conditions herein contained may be waived by the Party to whom such compliance is owed by an instrument signed by the Party to whom compliance is owed and expressly identified as a waiver, but not in any other manner. No waiver of, or consent to a change in, any of the provisions of this Agreement shall be deemed or shall constitute a waiver of, or consent to a change in, other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.
Section 10.10    Assignment. No Party shall assign or otherwise transfer all or any part of this Agreement, nor shall any Party delegate any of its rights or duties hereunder, without the prior written consent of the other Party and any transfer or delegation made without such consent shall be void. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and assigns.
Section 10.11    Entire Agreement. The extension of the Third Party Disposition Notice Period from thirty days to seventy-five days after the date of the Second Anniversary as provided for in Section 11 of that certain Letter of Intent, this Agreement and the documents to be executed hereunder and the Exhibits and Schedules attached hereto constitute the entire agreement among the Parties pertaining to the subject matter hereof, and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties pertaining to the subject matter hereof.


34


Section 10.12    Amendment. This Agreement may be amended or modified only by an agreement in writing signed by Seller and Purchaser and expressly identified as an amendment or modification.
Section 10.13    No Third-Person Beneficiaries. Nothing in this Agreement shall entitle any Person other than Purchaser and Seller to any claim, cause of action, remedy or right of any kind, except the rights expressly provided to the Purchaser Group or the Seller Group.
Section 10.14    References. In this Agreement:
(a)    References to any gender includes a reference to all other genders;
(b)    References to the singular includes the plural, and vice versa;
(c)    Reference to any Article, Section or Clause means an Article, Section or Clause of this Agreement;
(d)    Reference to any Exhibit or Schedule means an Exhibit or Schedule to this Agreement, all of which are incorporated into and made a part of this Agreement;
(e)    Unless expressly provided to the contrary, “hereunder”, “hereof”, “herein” and words of similar import are references to this Agreement as a whole and not any particular Section or other provision of this Agreement;
(f)    References to “$” or “Dollars” means United States dollars;
(g)    Where applicable, references to “earned”, “incurred” and “attributable to”, as used in this Agreement, shall be interpreted in accordance with the Accounting Principles and COPAS; and
(h)    “Include” and “including” shall mean include or including without limiting the generality of the description preceding such term.
Section 10.15    Construction. Purchaser is capable of making such investigation, inspection, review and evaluation of the Company, Subsidiaries and Assets as a prudent purchaser would deem appropriate under the circumstances, including with respect to all matters relating to the Company, Subsidiaries and Assets, their value, operation and suitability. Each of Seller and Purchaser has had the opportunity to exercise business discretion in relation to the negotiation of the details of the transaction contemplated hereby. This Agreement is the result of arm’s-length negotiations from equal bargaining positions. It is expressly agreed that this Agreement shall not be construed against any Party and no consideration shall be given or presumption made, on the basis of who drafted this Agreement or any particular provision thereof.
Section 10.16    LIMITATION ON DAMAGES. NONE OF THE PURCHASER GROUP OR THE SELLER GROUP SHALL BE ENTITLED TO RECOVER ANY INDIRECT, CONSEQUENTIAL, PUNITIVE, SPECIAL, OR EXEMPLARY DAMAGES OR DAMAGES FOR LOST PROFITS OF ANY KIND ARISING UNDER OR IN CONNECTION WITH THIS


35


AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, EXCEPT TO THE EXTENT ANY SUCH PARTY SUFFERS SUCH DAMAGES (INCLUDING COSTS OF DEFENSE AND REASONABLE ATTORNEY’S FEES INCURRED IN CONNECTION WITH DEFENDING OF SUCH DAMAGES) TO A THIRD PARTY PURSUANT TO A CLAIM, WHICH DAMAGES (INCLUDING COSTS OF DEFENSE AND REASONABLE ATTORNEY’S FEES INCURRED IN CONNECTION WITH DEFENDING AGAINST SUCH DAMAGES) SHALL NOT BE EXCLUDED BY THIS PROVISION AS TO RECOVERY HEREUNDER.
[Remainder of Page Left Intentionally Blank; Signature Page Follows.]



36


IN WITNESS WHEREOF, this Agreement has been signed by each of the Parties as of the date first above written.
SELLER:
 
 
EDF TRADING RESOURCES, LLC

 
 
By:
/s/ John H. Rittenhouse
 
Name: John H. Rittenhouse
 
Title: CEO


PURCHASER:
 
 
PENNSYLVANIA SERVICES CORPORATION

 
 
By:
/s/ Philip J. Cavatoni
 
Name: Philip J. Cavatoni
 
Title: Vice President and Treasurer


SIGNATURE PAGE TO MEMBERSHIP INTEREST PURCHASE AGREEMENT


Schedule 1.2
Defined Terms
“2015 Qualified Bonus Amounts” means the bonuses to be allocated and paid by Seller to non-executive employees performing services to the Acquired Companies pursuant to the Bonus Program, excluding one-third of the 150% bonuses that are to be paid to those eligible employees who are hired by Purchaser or any of its Affiliates.
“Accounting Principles” shall mean in accordance with the United States generally accepted accounting principles, as applied by the Acquired Companies or Seller or Purchaser, as applicable, consistent with such Person’s past practices.
“Acquired Companies” shall mean the Company and all of the Subsidiaries.
“Affiliate” means, with respect to any Person, a Person that directly or indirectly controls, is controlled by or is under common control with such Person, with control in such context meaning the ability to direct the management or policies of a Person through ownership of voting interests or other securities, pursuant to a written agreement, or otherwise; provided, that for the period prior to Closing, the Acquired Companies shall be Affiliates of Seller and for the period from and after Closing, the Acquired Companies shall be Affiliates of Purchaser.
“After-Acquired Leases” shall have the meaning set forth in this Schedule 1.2.
“After-Acquired Properties” means the After-Acquired Leases and
(a)    All of the oil and gas rights that are held in fee that are described on Exhibit A-6, including any of PLR’s or the Company’s rights to royalties on production, executive rights to lease, overriding royalty interests, net profits interests, carried interest, reversionary interests relating to such fee properties, and, to the extent related to such fee properties but excluding any rights to coal bed methane, any and all other interests and rights of any kind or character in or to oil and gas in place in or near the Project Area;
(b)    The gas processing plants, gas gathering systems, pipelines, meters, pumps, compressors, dehydrators, interconnects, tanks, batteries, treaters, lines, separators, vessels, power lines, communications equipment, and other mid-stream equipment, or otherwise located on the lands covered by the After-Acquired Leases;
(c)    All currently existing contracts, agreements and instruments with respect to the After-Acquired Leases, including, but not limited to, operating agreements, unitization, pooling and communitization agreements, declarations and orders, area of mutual interest agreements, joint venture agreements, farmin and farmout agreements, exchange agreements, transportation agreements, agreements for the sale and purchase of oil and gas and processing agreements, provided that the defined term “contracts” shall not include the Leases;

Schedule-1.2


(d)    All surface fee interests, easements, Permits, licenses, rights-of-way, surface leases and other surface rights appurtenant to, and used or held for use in connection with, the After-Acquired Leases or Wells;
(e)    All office leases or buildings, furniture, equipment, machinery, tools, supplies, materials, inventory, vehicles, facilities, fixtures and other tangible personal property that relates to or is used or held for use by the Company or PLR or any of its and their Affiliates in connection with the Properties, and improvements, including pipelines and well equipment (both surface and subsurface), located on the Properties or used or held for use in connection with the operation of the Properties or the production, treating, storing, compressing, transportation, separating, or processing of Hydrocarbons from the Properties;
(f)    Originals (and, to the extent available, electronic copies) of all of the following records: After-Acquired Lease files; any geophysical, geologic, and other seismic and related technical data and information; land files; Contract and Surface Right files; gas processing files; division order files; abstracts; title opinions; land surveys; non-confidential logs; maps; engineering data and reports; and files and all other books, records, data, files, maps and accounting records to the extent related to the other Assets, or used or held for use primarily in connection with the ownership or operation of the After-Acquired Leases or Wells, but excluding the Excluded Records; and
(g)    All insurance benefits, including rights and proceeds, to the extent arising from or relating to acts, omissions, events or circumstances or damage to or destruction with respect to the After-Acquired Leases or Wells.
“Agreement” shall have the meaning set forth in the Preamble.
“Allocated Value” shall have the meaning set forth in Section 2.4.
“Alpha Board” means the board of directors of Alpha Natural Resources, Inc., parent company of Purchaser.
“Alpha Contributed Assets” has the meaning ascribed to it in the Contribution Agreement.
“Asset Taxes” shall have the meaning set forth in Section 4.5(a).
“Assets” means the PLR Assets and the CGR Assets.
“Assignment of Membership Interests” shall have the meaning set forth in Section 3.1.
“Bonus Program” means the bonus program for non-executive employees performing services for the Company described on Exhibit E.
“Business Day” means any day other than a Saturday, a Sunday, or a day on which banks are closed for business in New York, New York or Houston, Texas, United States of America.

Schedule-1.2
2


“CGR Assets” means all of the Company’s and CGR II’s right, title, and interest in and to the following, except for the Excluded Assets:
(a)    all geophysical, geologic and other seismic and related technical data and information relating to the CGR Business;
(b)    the existing coal bed methane wells set forth on Exhibit A-5 (“CGR Wells”);
(c)    all furniture, fixtures, equipment, machinery, tools, vehicles, supplies and other tangible personal property that relates to or is used or held for use by the Company or CGR II in connection with the CGR Business, and all facilities, including flow lines, pipelines, gathering systems, and central processing equipment, tools, and other personal property primarily used or held for use in the CGR Business or for producing, treating, storing, compressing, processing or transporting gas in connection therewith (“CGR Equipment”);
(d)    all owned intellectual property that is necessary for the conduct of the CGR Business;
(e)    all contracts and agreements used in the CGR Business or in which CGR II or the Company has an interest or is named a party thereto (“CGR Contracts”);
(f)    all Permits, including environmental permits, which are held by CGR II or the Company and required for the conduct of the CGR Business or for the ownership or use of the other CGR II assets;
(g)    all rights of CGR II and the Company under warranties and indemnities and all similar claims against third parties arising from or relating to the CGR Business; and
(h)    originals and, where originals are not available, copies of all books and records relating to the CGR Business, including machinery and equipment maintenance files, customer lists, customer purchasing histories, price lists, supplier lists, production data, quality control records and procedures, maps, information and other data relating to the CGR Business, whether written or electronic, including land and title records and related documents, contract files, and operations, environmental, production, accounting and other geologic, seismic and land data and records; information with respect to Asset Taxes, correspondence with Governmental Authorities, and documents relating to intellectual property of CGR II, but in all cases excluding Excluded Records (“CGR Records”).
“CGR Business” means the business of de-gasifying coal mines conducted by CGR II.
“CGR II” means Coal Gas Recovery II, LLC, a Delaware limited liability company and Subsidiary of the Company.
“CGR Contracts” shall have the meaning set forth in the definition of CGR Assets above in this Schedule 1.2.

Schedule-1.2
3


“CGR Equipment” shall have the meaning set forth in the definition of CGR Assets above in this Schedule 1.2.
“CGR Records” shall have the meaning set forth in the definition of CGR Assets above in this Schedule 1.2.
“CGR Wells” shall have the meaning set forth in the definition of CGR Assets above in this Schedule 1.2.
“Claim” shall have the meaning set forth in Section 9.2(b).
“Claim Notice” shall have the meaning set forth in Section 9.2(b).
“Closing” shall have the meaning set forth in Section 7.1.
“Closing Date” shall have the meaning set forth in Section 7.1.
“Closing Payment” shall have the meaning set forth in Section 7.4(a).
“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
“Code” means the United States Internal Revenue Code of 1986, as amended.
“Company” shall have the meaning set forth in the Recitals.
“Contracts” means the PLR Contracts and CGR Contracts.
“Contribution Agreement” means that certain Contribution Agreement between Purchaser and Seller dated as of May 28, 2013.
“COPAS” means the Council of Petroleum Accountants Society.
“Damages” shall have the meaning set forth in Section 9.1(d).
“EDFT Guaranty” means that certain Guaranty among EDF Trading Limited, Seller, and Purchaser dated as of May 28, 2013.
“Effective Time” means 7:00 a.m. local time where the Leases are located on June 1, 2015.
“Employee Plans” means employee benefit plans and programs, including, without limitation, (i) all retirement, savings and other pension plans; (ii) all health, severance, insurance, disability and other employee welfare plans; and (iii) all employment, incentive, perquisites, vacation and other similar plans, programs or practices whether or not subject to ERISA and whether covering one person or more than one person, in each case, that is sponsored, maintained, contributed to or required to be contributed to by the Company of any Subsidiary for the benefit of current or former employees of the Acquired Companies.

Schedule-1.2
4


“Environmental Laws” means, as the same have been amended to the Effective Time, any Law the purpose of which is to conserve or protect the environment, health and safety, wildlife or natural resources and any Law relating to the environment (including natural resources), health and safety, Hazardous Substances, industrial hygiene, the environmental conditions on, under, or about any of the Assets, including soil, groundwater, and indoor and ambient air conditions or the reporting or remediation of environmental contamination and includes, but is not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. § 1471 et seq.; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 through 2629; the Oil Pollution Act, 33 U.S.C. § 2701 et seq.; the Emergency Planning and Community Right to Know Act, 42 U.S.C. § 11001 et seq.; and the Safe Drinking Water Act, 42 U.S.C. §§ 300f through 300j, and all similar Laws as of the Effective Time of any Governmental Authority having jurisdiction over the ownership, development, use and operation of the Assets in question addressing pollution or protection of the environment (including natural resources) or biological or cultural resources and all regulations implementing the foregoing.
“Equipment” means the PLR Equipment and the CGR Equipment.
“Equity Interests” shall have the meaning set forth in Section 4.3(e).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Excluded Records” means:
(i)    all legal files, records and correspondence of Seller or its Affiliates (other than the Acquired Companies), including such items protected by or subject to attorney-client privilege, all engagements and similar letters and agreements with Seller’s or its Affiliates’ (other than the Acquired Companies) legal advisors, and all work product of Seller’s or its Affiliates’ (other than the Acquired Companies) legal counsel, it being agreed that neither Purchaser nor any Acquired Company shall have the right to waive any attorney-client or similar privilege in favor of Seller or any of its Affiliates (other than the Acquired Companies) with respect to the Interests or the Assets, including by reason of any joint representation of Seller, the Company, any Subsidiary and/or their respective Affiliates;
(j)    all financial, income and franchise Tax and legal records of Seller and its Affiliates (other than the Acquired Companies);
(k)    copies of any Company or Subsidiary records retained by Seller in its discretion; and
(l)    (A) records and correspondence prepared by or on behalf of Seller or its Affiliates relating to the presentation, offer, negotiation or consummation of the sale of the Interests, the Acquired Companies or the Assets or any material interest therein, or to the preparation or negotiation of this Agreement (or any similar transaction agreement) or any Exhibit, Schedule or document to be delivered pursuant hereto, including marketing

Schedule-1.2
5


materials, research, pricing or valuation information, bidding materials and bids, and correspondence and transaction documents exchanged with Third Parties, and (B) all agreements and engagements of Seller or any of their Affiliates with investment advisors, brokers or consultants in connection with the foregoing.
“Final Settlement Statement” shall have the meaning set forth in Section 7.4(b).
“Financial Statements” means (x) the audited consolidated balance sheets of the Company and its Subsidiaries and the related audited consolidated statements of operations, comprehensive (loss) income, member’s equity and cash flows of the Company and its Subsidiaries for the period of May 28, 2013 through December 31, 2014, together with the notes thereto; and (y) the unaudited consolidated balance sheet of the Company and its Subsidiaries and the related unaudited consolidated statements of operations, comprehensive (loss) income, member’s equity and cash flows for the January 1, 2015 period ended May 31, 2015.
“Fundamental Representations” means those representations and/or warranties provided in Section 4.1, Section 4.2, Section 4.3, and Section 4.11, and Section 4.20.
“Governmental Authority” means any national government and/or government of any political subdivision, and departments, courts, commissions, boards, bureaus, ministries, agencies or other instrumentalities of any of them.
“Hart-Scott-Rodino Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
“Hazardous Substances” means any toxic or hazardous material or substances; solid wastes, including asbestos, polychlorinated biphenyls, mercury, flammable or explosive materials; radioactive materials, including naturally occurring radioactive materials; and any other chemical, pollutant, contaminant, substance, or waste, including a petroleum or petroleum-derived substance or waste, that is regulated under any Environmental Laws, including any substance that would require remediation, clean-up, or other action if spilled or released.
“Hedge” means all futures, options, swaps and other derivatives.
“Hydrocarbons” means oil, gas, condensate, natural gas liquids, and other liquid or gaseous hydrocarbons or any combination thereof or products therefrom.
“Identified Defects” has the meaning set forth in Section 3.2.
“Imbalance” means any over-production, under-production, over-delivery, under-delivery or similar imbalance of Hydrocarbons produced from or allocated to the Assets, regardless of whether such imbalance arises at the platform, wellhead, pipeline, gathering system, transportation system, processing plant or other location.
“Income Taxes” shall mean Taxes determined on the basis of income or gross receipts, including franchise Taxes.

Schedule-1.2
6


“Indemnified Person” shall have the meaning set forth in Section 9.2(a).
“Indemnifying Person” shall have the meaning set forth in Section 9.2(a).
“Indemnity Deductible” shall have the meaning set forth in Section 9.3(c)(ii).
“Independent Expert” shall have the meaning set forth in Section 7.4(b).
“Intercompany Accounts” shall have the meaning set forth in Section 6.3.
“Interests” shall have the meaning set forth in the Recitals.
“JV Agreements” means the EDFT Guaranty, the Contribution Agreement, the Seller Management Services Agreements, LLC Agreement, and the Pledge Agreement.
“Laws” means any and all applicable laws, statutes, rules, regulations, ordinances, orders, codes, decrees, writs, injunctions, judgments, or principles of common law that are promulgated, issued, or enacted by Governmental Authorities.
“Leasehold Units” shall have the meaning set forth in the definition of Assets above in this Schedule 1.2.
“Leases” shall have the meaning set forth in the definition of Assets above in this Schedule 1.2.
“Letter of Intent” means that certain letter agreement between Alpha Natural Resources, Inc. and EDF Trading Resources, LLC, dated June 4, 2015.
“LLC Agreement” means the Limited Liability Company Agreement of the Company dated May 28, 2013, as may have been amended from time to time.
“Loan” means the incurrence or assumption of indebtedness for borrowed money.
“Material Adverse Effect” means a material adverse effect on the ownership, use, operation or value of the Assets, taken as a whole; provided, however, that, in determining whether a Material Adverse Effect has occurred, or would be reasonably be expected to occur, the following shall be disregarded: (a) general changes in oil and gas prices; (b) general changes in industry, economic or political conditions or markets; (c) acts of God, including hurricanes and storms; (d) civil unrest or similar disorders or terrorist acts; and (e) changes in Laws except, in the case of clauses (a), (b), (c) and (e), to the extent of any disproportionate effect the same has had or would reasonably be expected to have on the Assets compared to or relative to the effect on other assets similar to the Assets.
“Material Contract” means: (i) any agreement between Seller or any Affiliate (other than an Acquired Company) and any Acquired Company, other than those subject to the Termination Agreement; (ii) any agreement for the sale, exchange, or other disposition of, or transportation, gathering, processing, treatment, fractionation, or storage of, Hydrocarbons produced from or attributable to the Assets that is not cancelable without penalty or other material payment on not

Schedule-1.2
7


more than sixty (60) days prior written notice; (iii) any agreement of or binding upon any Acquired Company to sell, lease, farmout, or otherwise dispose of any interest in any of the Properties after the Effective Time, excluding (1) conventional rights of reassignment arising in connection with the actual surrender or release of any of the Properties and (2) preferential rights to purchase and similar preferential rights; (iv) joint operating agreements, unit agreements, unit operating agreements, contracts relating to an area of mutual interest or otherwise constituting an agreement purporting to restrict, limit, or prohibit the manner in which, or the locations in which, an Acquired Company or Seller, as applicable, may conduct business, joint venture agreements, exploration agreements, participation agreements, and farmout and farmin agreements; (v) any agreement that can reasonably be expected to result in aggregate payments or incurred liabilities by the Acquired Companies with respect to the Assets of more than Two Hundred Thousand Dollars ($200,000) during the current or any subsequent calendar year (based solely on the terms thereof and without regard to any expected increase in volumes or revenues); (vi) any agreement that provides for an area of mutual interest, non-competition covenant, or any provision substantially similar to the foregoing; (vii) any agreement providing for a commitment to use one or more drilling rigs, including any contract operating agreements, and all agreements related thereto; and (viii) any agreement relating to Loans or Hedges affecting any Acquired Company or any of the Assets.
“Midstream Assets” shall have the meaning set forth in the definition of Assets above in this Schedule 1.2.
“NORM” means naturally occurring radioactive material.
“Oil and Gas Fee Properties” shall have the meaning set forth in this Schedule 1.2.
“Party” and “Parties” shall have the meaning set forth in the Preamble.
“Permits” shall have the meaning set forth in Section 4.6.
“Person” means any individual, corporation, partnership, limited liability company, trust, estate, Governmental Authority or any other entity.
“Pledge Agreement” means that certain LLC Interest Pledge Agreement between Seller and Purchaser dated as of May 28, 2013.
“PLR” means Pennsylvania Land Resources, LLC, a Delaware limited liability company and Subsidiary of the Company.
“PLR Assets” means all of the Company’s and PLR’s right, title, and interest in and to the following:
(m)    The oil and gas leases, oil, gas and mineral leases and subleases, any oil and gas rights that are held in fee, royalties, overriding royalties, net profits interests, mineral fee interests, carried interests, and other rights to oil and gas in place, acquired on and after May 28, 2013 that are described on Exhibit A-7 , including any renewals or other extensions of such Leases and such rights as are appurtenant, necessary or convenient for the ownership,

Schedule-1.2
8


operation, or development of such Leases and all pooled, communitized or unitized acreage which includes all or a part of any Lease, and all tenements, hereditaments and appurtenances belonging to such leases and lands pooled communitized or unitized therewith (collectively, the “After-Acquired Leases”);
(n)    The oil and gas leases, oil, gas and mineral leases and subleases, royalties, overriding royalties, net profits interests, mineral fee interests, carried interests, and other rights to oil and gas in place, that are described on Exhibit A-1 (collectively with the After-Acquired Leases, the “Leases”), including any renewals or other extensions of such Leases and such rights as are appurtenant, necessary or convenient for the ownership, operation, or development of such Leases, and any and all oil, gas, water, CO2 or injection wells located on the property subject to the Leases and on the Oil and Gas Fee Properties or on the pooled, communitized or unitized acreage that includes all or any part of the Leases, including the interests in the wells shown on Exhibit A-2 attached hereto (the “PLR Wells”);
(o)    All of the oil and gas rights that are held in fee that are described on Exhibit A-1, including any of PLR’s or the Company’s rights to royalties on production, executive rights to lease, overriding royalty interests, net profits interests, carried interest, reversionary interests relating to such fee properties, and, to the extent related to such fee properties but excluding any rights to coal bed methane, any and all other interests and rights of any kind or character in or to oil and gas in place in the Project Area (“Oil and Gas Fee Properties”);
(p)    All pooled, communitized or unitized acreage which includes all or a part of any Lease (the “Leasehold Units”), and all tenements, hereditaments and appurtenances belonging to the Leases and Leasehold Units;
(q)    The gas processing plants, gas gathering systems, pipelines, meters, pumps, compressors, dehydrators, interconnects, tanks, batteries, treaters, lines, separators, vessels, power lines, communications equipment, and other mid-stream equipment, including that described on Exhibit A-3, or otherwise located on the lands covered by the Leases or Leasehold Units (the “Midstream Assets” and, together with the PLR Leases, Oil and Gas Fee Properties, PLR Wells and Leasehold Units, the “Properties”);
(r)    The contracts listed on Schedule 4.7 and all other currently existing contracts, agreements and instruments with respect to the Properties, to the extent applicable to the Properties, including but not limited to, operating agreements, unitization, pooling and communitization agreements, declarations and orders, area of mutual interest agreements, joint venture agreements, farmin and farmout agreements, exchange agreements, transportation agreements, agreements for the sale and purchase of oil and gas and processing agreements, provided that the defined term “contracts” shall not include the Leases (subject to such proviso, the “PLR Contracts”);
(s)    All surface fee interests, easements, Permits, licenses, rights-of-way, surface leases and other surface rights appurtenant to, and used or held for use in connection with, the Properties (the “Surface Rights”);

Schedule-1.2
9


(t)    All furniture, equipment, machinery, tools, supplies, facilities, fixtures and other tangible personal property that relates to or is used or held for use by the Company or PLR or any of its and their Affiliates in connection with the Properties, and improvements, including pipelines and well equipment (both surface and subsurface), located on the Properties or used or held for use in connection with the operation of the Properties or the production, treating, storing, compressing, transportation, separating, or processing of Hydrocarbons from the Properties, (the “PLR Equipment”);
(u)    The office leases or buildings, if any, described on Exhibit A-4 and the furniture, fixtures and equipment located therein;
(v)    The materials and equipment inventory, if any, used or held for use in connection with the Properties;
(w)    All vehicles used in connection with the Properties;
(x)    All Hydrocarbons produced from or attributable to the Leases, Leasehold Units, or PLR Wells attributable to the ownership of Company or the Subsidiaries, all oil, condensate and scrubber liquids inventories and ethane, propane, iso-butane, nor-butane and gasoline inventories of the Acquired Companies from the Properties in storage in tanks or pipelines attributable to the ownership of Company or the Subsidiaries, and all Imbalances of the PLR and the Company;
(y)    Originals (and, to the extent available, electronic copies) of all of the following records: Lease files; land files; PLR Well files; Contract and Surface Right files; gas processing files; division order files; abstracts; title opinions; land surveys; non-confidential logs; maps; engineering data and reports; and files and all other books, records, data, files, maps and accounting records to the extent related to the other Assets, or used or held for use primarily in connection with the ownership or operation of the Assets, but excluding the Excluded Records (the “PLR Records”);
(z)    All insurance benefits, including rights and proceeds, to the extent arising from or relating to acts, omissions, events or circumstances or damage to or destruction with respect to the Properties; and
(aa)    any geophysical, geologic, and other seismic and related technical data and information relating to the Properties.
“Project Area” shall have the meaning set forth in the LLC Agreement.
“Project Operator” shall have the meaning set forth in the LLC Agreement.
“Properties” shall have the meaning set forth in the definition of Assets above in this Schedule 1.2.
“Purchase Price” shall have the meaning set forth in Section 2.1.

Schedule-1.2
10


“Purchase Price Allocation” shall have the meaning set forth in Section 2.4.
“Purchaser” shall have the meaning set forth in the Preamble.
“Purchaser Group” shall have the meaning set forth in Section 9.1(b).
“Purchaser Management Services Agreements” means collectively, (i) that certain Management Services Agreement between Purchaser and PLR dated as of May 28, 2103, and (ii) that certain Management Services Agreements between Purchaser and CGR II dated as of May 28, 2013.
“Purchaser’s Original Interests” shall have the meaning set forth in the Recitals.
“Qualified JV Employees” shall have the meaning set forth in Section 6.5.
“Records” means the PLR Records and CGR Records.
“Required Consent” means a consent by a Third Party that must be obtained pursuant to a change of control or similar provision triggered by the purchase and sale of the Interests contemplated by this Agreement that if not obtained, will result in a material breach of such agreement that makes Purchaser or Seller liable for a material amount of damages or will entitle the holder of the consent right to terminate a Lease.
“Restated Management Services Agreement” means that certain restated management services agreement in the form of Exhibit F, to be executed simultaneously with this Agreement, between the Parties hereto that amends and restates the Seller Management Services Agreements, pursuant to which Seller will provide mutually agreed services to Purchaser, and Purchaser will reimburse Seller in accordance with such restated management service agreement.
“Restricted Opportunity” shall have the meaning set forth in Section 6.7.
“Second Anniversary” has the meaning ascribed to it in the LLC Agreement.
“Seller” shall have the meanings set forth in the Preamble.
“Seller Benefit Plan” shall have the meaning set forth in Section 4.2(i).
“Seller Group” shall have the meaning set forth in Section 9.1(a).
“Seller Management Services Agreements” means collectively, (i) that certain Management Services Agreement between Seller and PLR dated as of May 28, 2013, and (ii) that certain Management Services Agreement between Seller and CGR II dated as of May 28, 2013.
“Seller Ownership Period” means the period of time commencing from and after the date that Seller acquired the Interests and was designated the Project Operator, and ending on the Effective Time.

Schedule-1.2
11


“Subsidiary” means each of the entities described on Exhibit B, which are direct or indirect subsidiaries of the Company.
“Surface Rights” shall have the meaning set forth in the definition of Assets above in this Schedule 1.2.
“Tax” or “Taxes” shall mean (i) all taxes, assessments, customs, duties, imposts, unclaimed property, fees and other governmental charges imposed by any Governmental Body, including any federal, state, local, and foreign income, profits, franchise, sales, use, ad valorem, property, severance, production, excise, stamp, documentary, real property transfer or gain, gross receipts, goods and services, registration, capital, transfer, or withholding taxes or other governmental fees or charges imposed by any taxing authority, (ii) any interest, fine, penalties or additional amounts which may be imposed with respect of any item described in clause (i), and (iii) any liability in respect of any item described in clauses (i) and (ii) that arises by reason of a contract, assumption, transferee or successor liability, operation of law or otherwise.
“Tax Return” means any report, return, statement (including an estimated report, return or statement), and other similar filing to declare or report Taxes.
“Termination Agreement” shall have the meaning set forth in Section 7.2(c).
“Third Party” means any Person other than a Party to this Agreement or an Affiliate of a Party to this Agreement.
“Third Party Disposition Notice Period” has the meaning ascribed to it in the LLC Agreement.
“Unadjusted Purchase Price” shall have the meaning set forth in Section 2.1.
“Units” shall have the meaning set forth for such term in the LLC Agreement.
“WARN Act” means Worker Adjustment and Retraining Notification Act of 1988, as amended.
“Wells” means the PLR Wells and CGR Wells.



Schedule-1.2
12
ANR-2015.6.30.10QExhibit12.1
Exhibit 12.1




Alpha Natural Resources, Inc. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(Amounts in thousands except ratio)

 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2015
 
2014
 
2015
 
2014
Earnings:
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
$
(547,725
)
 
$
(522,145
)
 
$
(474,525
)
 
$
(531,285
)
Adjustments:
 
 
 
 
 
 
 
 
Fixed charges
 
73,488
 
 
73,034
 
 
(212,748
)
 
142,394
 
Income (loss) from equity investees
 
(1,943
)
 
749
 
 
(2,850
)
 
884
 
Amortization of capitalized interest
 
71
 
 
71
 
 
140
 
 
286
 
Capitalized interest
 
3
 
 
—
 
 
3
 
 
—
 
 
 
$
(476,106
)
 
$
(448,291
)
 
$
(689,980
)
 
$
(387,721
)
 
 
 
 
 
 
 
 
 
Fixed Charges:
 
 
 
 
 
 
 
 
Interest expense
 
$
72,386

 
$
71,012

 
$
149,092

 
$
135,974

Loss (gain) on early extinguishment of debt
 

—

 
 
218

 
 
(364,153
)
 
 
2,022

Portion of rental expense representative of interest
 
1,099
 
 
1,804
 
 
2,310
 
 
4,398
 
Capitalized interest
 
3
 
 
—
 
 
3
 
 
—
 
 
 
$
73,488

 
$
73,034

 
$
(212,748
)
 
$
142,394

 
 
 
 
 
 
 
 
 
Ratio of earnings to fixed charges
 
N/A(1)
 
N/A(1)
 
3.24
 
N/A(1)


(1)
The ratio of earnings to fixed charges was less than one-to-one for the three months ended June 30, 2015 and June 30, 2014, and for the six months ended and June 30, 2014. Additional earnings of $549,594, $521,325 and $530,115, respectively, would be needed to have a one-to-one ratio of earnings to fixed charges.


ANR-2015.6.30-10QExhibit31A


EXHIBIT 31(a)

CERTIFICATIONS

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Kevin S. Crutchfield, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q (this “Report”) of Alpha Natural Resources, Inc. (the “Registrant”);
2.
Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3.
Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;
4.
The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
d.
Disclosed in this Report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and
5.
The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date: August 3, 2015
 
By: /s/ Kevin S. Crutchfield
Kevin S. Crutchfield
Chief Executive Officer
(Principal Executive Officer)



ANR-2015.6.30-10QExhibit31B


EXHIBIT 31(b)

CERTIFICATIONS

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Philip J. Cavatoni, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q (this “Report”) of Alpha Natural Resources, Inc. (the “Registrant”);
2.
Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3.
Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;
4.
The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
d.
Disclosed in this Report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and
5.
The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Date: August 3, 2015
 
By: /s/ Philip J. Cavatoni
Philip J. Cavatoni
Executive Vice President - Chief Financial and Strategy Officer
(Principal Financial Officer)



ANR-2015.6.30-10QExhibit32A


EXHIBIT 32(a)


CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (the “Registrant”) for the period ended June 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin S. Crutchfield, Chief Executive Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: August 3, 2015
By: /s/ Kevin S. Crutchfield
Kevin S. Crutchfield
Chief Executive Officer
 (Principal Executive Officer)



ANR-2015.6.30-10QExhibit32B


EXHIBIT 32(b)


CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (the “Registrant”) for the period ended June 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Philip J. Cavatoni, Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: August 3, 2015
By: /s/ Philip J. Cavatoni
Philip J. Cavatoni
Executive Vice President - Chief Financial and Strategy Officer
 (Principal Financial Officer)



ANR-2015.6.30-10QExhibit95


Exhibit 95

Mine Safety and Health Administration Data


Our subsidiaries' mining operations have consistently been recognized with numerous local, state and national awards over the years for outstanding safety performance.

Our Running Right safety process involves all employees in accident prevention and continuous improvement. Safety leadership and training programs are based upon the concepts of situational awareness and observation, changing behaviors and, most importantly, employee involvement. The core elements of our behavior-based safety training include identification of critical behaviors, frequency of those behaviors, employee feedback and removal of barriers for continuous improvement. 

The Running Right program empowers all employees to champion the safety process. Every person is challenged to identify hazards and initiate corrective actions. Reporting is anonymous, allowing hazards to be dealt with in a timely manner.

All levels of the organization are expected to be proactive and commit to perpetual improvement, implementing new safety processes that promote a safe and healthy work environment.

Our subsidiaries operate multiple mining complexes in six states and are regulated by both the U.S. Mine Safety and Health Administration (“MSHA”) and state regulatory agencies. As described in more detail in the “Environmental and Other Regulatory Matters” section of our Annual Report on Form 10-K for the year ended December 31, 2014, the Federal Mine Safety and Health Act of 1977, as amended (the “Mine Act”), among other federal and state laws and regulations, imposes stringent safety and health standards on all aspects of mining operations. Regulatory inspections are mandated by these agencies with thousands of inspection shifts at our properties each year. Citations and compliance metrics at each of our mines and coal preparation facilities vary due to the size and type of the operation. We endeavor to conduct our mining and other operations in compliance with all applicable federal, state and local laws and regulations. However, violations occur from time to time. None of the violations identified or the monetary penalties assessed upon us set forth in the tables below have been material.

































For purposes of reporting regulatory matters under Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), we include the following table that sets forth the total number of specific citations and orders and the total dollar value of the proposed civil penalty assessments that were issued by MSHA during the current reporting period for each of our subsidiaries that is a coal mine operator, by individual mine. None of the mines operated by our subsidiaries received written notice from MSHA during the current reporting period of a pattern of violations under Section 104(e) of the Mine Act.
MSHA Mine ID
 
Operator
 
Significant and
Substantial
Citations Issued
(Section 104 of
the Mine Act)
*Excludes 104(d)
citations/ orders
 
Failure to Abate
Orders (Section
104(b) of the
Mine Act)
 
Unwarrantable
Failure
Citations/
Orders Issued
(Section 104(d)
of the Mine Act)
 
Flagrant
Violations
(Section
110(b)(2) of the
Mine Act)
 
Imminent
Danger Orders
Issued (Section
107(a) of the
Mine Act)
 
Dollar Value of
Proposed Civil
Penalty
Assessments (in
Thousands)  (1) (3)
 
Mining Related
Fatalities
4606870
 
Alex Energy Inc
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608787
 
Alex Energy Inc
 
2
 
—
 
—
 
—
 
—
 
$
8.85
 
—
4608977
 
Alex Energy Inc
 
—
 
—
 
—
 
—
 
—
 
$
0.39
 
—
4607537
 
Alex Energy Inc.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608961
 
Alex Energy Inc.
 
—
 
—
 
—
 
—
 
—
 
$
0.20
 
—
4800732
 
Alpha Coal West, Inc.
 
—
 
—
 
—
 
—
 
—
 
$
4.52
 
—
4801078
 
Alpha Coal West, Inc.
 
—
 
—
 
—
 
—
 
—
 
$
10.03
 
—
4607897
 
Aracoma Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608019
 
Aracoma Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609299
 
Aracoma Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609361
 
Aracoma Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
3.44
 
—
4608224
 
Aracoma Coal Company Inc
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608801
 
Aracoma Coal Company Inc
 
15
 
—
 
—
 
—
 
—
 
$
49.83
 
—
4608802
 
Aracoma Coal Company Inc
 
1
 
—
 
—
 
—
 
—
 
$
16.16
 
—
4605086
 
Bandmill Coal Corp
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608263
 
Bandmill Coal Corp
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4605992
 
Black Castle Mining Company, Inc.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4607938
 
Black Castle Mining Company, Inc.
 
—
 
—
 
—
 
—
 
—
 
$
1.91
 
—
4606045
 
Brooks Run Mining Company LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4606213
 
Brooks Run Mining Company LLC
 
1
 
—
 
—
 
—
 
—
 
$
 
 
 
4608885
 
Brooks Run Mining Company LLC
 
—
 
—
 
—
 
—
 
—
 
$
2.74
 
—
4609036
 
Brooks Run Mining Company LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609133
 
Brooks Run Mining Company LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609353
 
Brooks Run Mining Company LLC
 
2
 
—
 
—
 
—
 
—
 
$
6.33
 
—
4609351
 
Brooks Run Mining Company LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609371
 
Brooks Run Mining Company, LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—




4606263
 
Brooks Run South Mining, LLC
 
2
 
—
 
—
 
—
 
—
 
$
6.73
 
—
4607985
 
Brooks Run South Mining, LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608730
 
Brooks Run South Mining, LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609066
 
Brooks Run South Mining, LLC
 
—
 
—
 
—
 
—
 
—
 
$
0.38
 
—
4609301
 
Brooks Run South Mining, LLC
 
—
 
—
 
—
 
—
 
—
 
$
3.21
 
—
4609348
 
Brooks Run South Mining, LLC
 
6
 
—
 
—
 
—
 
—
 
$
6.09
 
—
4609387
 
Brooks Run South Mining, LLC
 
3
 
—
 
—
 
—
 
—
 
$
5.96
 
—
4608829
 
Brooks Run South Mining,LLC
 
13
 
—
 
—
 
—
 
—
 
$
5.52
 
—
1510753
 
Clean Energy Mining Co.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
1517935
 
Clean Energy Mining Co.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
1519360
 
Coalgood Energy Co
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4607484
 
Cobra Natural Resources LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
3605018
 
Cumberland Coal Resources LP
 
35
 
—
 
1
 
—
 
—
 
$
25.73
 
—
4605649
 
Delbarton Mining Company
 
3
 
—
 
—
 
—
 
—
 
$
—
 
—
4406864
 
Dickenson-Russell Coal Co LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4407146
 
Dickenson-Russell Coal Co LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4405311
 
Dickenson-Russell Coal Co., LLC
 
3
 
—
 
—
 
—
 
—
 
$
0.39
 
—
4400271
 
Dickenson-Russell Coal Company LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4402277
 
Dickenson-Russell Coal Company, LLC
 
—
 
—
 
—
 
—
 
—
 
$
0.65
 
—
4406444
 
Dickenson-Russell Coal Company, LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609163
 
Elk Run Coal Company
 
18
 
—
 
—
 
—
 
—
 
$
165.94
 
—
4609293
 
Elk Run Coal Company
 
10
 
—
 
—
 
—
 
—
 
$
27.09
 
—
4606188
 
Elk Run Coal Company Inc
 
1
 
—
 
—
 
—
 
—
 
$
2.74
 
—
4607009
 
Elk Run Coal Company Inc
 
—
 
—
 
—
 
—
 
—
 
$
8.45
 
—
4608108
 
Elk Run Coal Company Inc
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608384
 
Elk Run Coal Company Inc
 
7
 
—
 
—
 
—
 
—
 
$
70.48
 
—
4608402
 
Elk Run Coal Company Inc
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608553
 
Elk Run Coal Company Inc
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
3605466
 
Emerald Coal Resources LP
 
20
 
—
 
—
 
2
 
—
 
$
511.31
 
—
1511121
 
Enterprise Mining Company LLC
 
—
 
—
 
—
 
—
 
—
 
$
0.38
 
—
1518507
 
Enterprise Mining Company LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
1519116
 
Enterprise Mining Company LLC
 
3
 
—
 
—
 
—
 
—
 
$
8.83
 
—
3609741
 
Freeport Mining, LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4605317
 
Goals Coal Company
 
2
 
—
 
—
 
—
 
—
 
$
0.61
 
—
4603202
 
Green Valley Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—




4607950
 
Greyeagle Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4604669
 
Highland Mining Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4606558
 
Highland Mining Company
 
—
 
—
 
—
 
—
 
—
 
$
0.50
 
—
4607165
 
Highland Mining Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608789
 
Highland Mining Company
 
—
 
—
 
—
 
—
 
—
 
$
1.20
 
—
4608838
 
Highland Mining Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609204
 
Highland Mining Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608645
 
Independence Coal Co.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4603755
 
Independence Coal Company Inc
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4607273
 
Independence Coal Company Inc
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608655
 
Independence Coal Company Incorporated
 
—
 
—
 
—
 
—
 
—
 
$
0.23
 
—
4603176
 
Independence Coal Company, Inc.
 
1
 
—
 
—
 
—
 
—
 
$
0.95
 
—
4608549
 
Independence Coal Company, Inc.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608683
 
Independence Coal Company, Inc.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4604637
 
Kepler Processing Company LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4604343
 
Kingston Mining Inc.
 
7
 
—
 
—
 
—
 
—
 
$
—
 
—
4608625
 
Kingston Mining, Inc.
 
24
 
—
 
—
 
—
 
—
 
$
151.14
 
—
4608932
 
Kingston Mining, Inc.
 
18
 
—
 
—
 
—
 
—
 
$
65.45
 
—
4608753
 
Kingwood Mining Company LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4407281
 
Knox Creek Coal Corp
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4405236
 
Knox Creek Coal Corporation
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4406804
 
Knox Creek Coal Corporation
 
13
 
—
 
—
 
—
 
—
 
$
46.15
 
—
4605872
 
Litwar Processing Company, LLC
 
—
 
—
 
—
 
—
 
—
 
$
1.86
 
—
1505375
 
Long Fork Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4607934
 
Mammoth Coal Co
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609148
 
Mammoth Coal Co
 
6
 
—
 
—
 
—
 
—
 
$
0.38
 
—
4603317
 
Mammoth Coal Co.
 
—
 
—
 
—
 
—
 
—
 
$
0.20
 
—
4607968
 
Mammoth Coal Co.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608110
 
Mammoth Coal Co.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608159
 
Mammoth Coal Co.
 
2
 
—
 
—
 
—
 
—
 
$
1.68
 
—
4609221
 
Mammoth Coal Co.
 
4
 
—
 
—
 
—
 
—
 
$
26.47
 
—
4609237
 
Mammoth Coal Co.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609091
 
Marfork Coal Company
 
14
 
—
 
—
 
—
 
—
 
$
101.29
 
—
4609092
 
Marfork Coal Company
 
2
 
—
 
—
 
—
 
—
 
$
73.81
 
—
4609176
 
Marfork Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—




4609376
 
Marfork Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608315
 
Marfork Coal Company Inc
 
7
 
—
 
—
 
—
 
—
 
$
28.41
 
—
4608374
 
Marfork Coal Company Inc
 
—
 
—
 
—
 
—
 
—
 
$
0.20
 
—
4608551
 
Marfork Coal Company Inc
 
1
 
—
 
—
 
—
 
—
 
$
11.34
 
—
4608837
 
Marfork Coal Company Inc
 
—
 
—
 
—
 
—
 
—
 
$
4.08
 
—
4609193
 
Marfork Coal Company Inc
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609355
 
Marfork Coal Company Inc.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609048
 
Marfork Coal Company, Inc.
 
23
 
1
 
—
 
—
 
—
 
$
147.44
 
—
1505106
 
Martin County Coal Corp
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
1519235
 
Martin County Coal Corp
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
1519615
 
Martin County Coal Corp
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4407087
 
Mill Branch Coal Corp
 
12
 
—
 
6
 
—
 
1
 
$
18.43
 
—
4407138
 
Mill Branch Coal Corp
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4407150
 
Mill Branch Coal Corp
 
12
 
—
 
—
 
—
 
—
 
$
104.83
 
—
4407262
 
Mill Branch Coal Corp
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4407052
 
Mill Branch Coal Corp.
 
17
 
—
 
—
 
—
 
—
 
$
34.29
 
—
4407186
 
Mill Branch Coal Corporation
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
1505215
 
New Ridge Mining Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
1519715
 
North Fork Coal Corp
 
1
 
—
 
—
 
—
 
—
 
$
6.83
 
—
1517165
 
North Fork Coal Corporation
 
—
 
—
 
—
 
—
 
—
 
$
0.20
 
—
1518198
 
North Fork Coal Corporation
 
1
 
—
 
—
 
—
 
—
 
$
0.90
 
—
1518732
 
North Fork Coal Corporation
 
1
 
—
 
—
 
—
 
—
 
$
6.91
 
—
4603141
 
Omar Mining Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4407123
 
Paramont Coal Company Virginia LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4407163
 
Paramont Coal Company Virginia LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4407223
 
Paramont Coal Company Virginia LLC
 
20
 
—
 
—
 
—
 
—
 
$
63.41
 
—
4407231
 
Paramont Coal Company Virginia LLC
 
2
 
—
 
—
 
—
 
—
 
$
18.46
 
—
4407257
 
Paramont Coal Company Virginia LLC
 
—
 
—
 
—
 
—
 
—
 
$
0.50
 
—
4405270
 
Paramont Coal Company Virginia, LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4406929
 
Paramont Coal Company Virginia, LLC
 
14
 
—
 
—
 
—
 
—
 
$
39.44
 
—
4407289
 
Paramont Coal Company Virginia, LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4407290
 
Paramont Coal Company Virginia, LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4407308
 
Paramont Coal Company Virginia, LLC
 
4
 
—
 
—
 
—
 
—
 
$
0.44
 
—




4407322
 
Paramont Coal Company Virginia, LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4407129
 
Paramont Coal Company Virginia, LLC.
 
19
 
—
 
—
 
—
 
—
 
$
11.99
 
—
4407272
 
Paramont Coal Company Virginia, LLC.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4602265
 
Peerless Eagle Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608155
 
Peerless Eagle Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4603430
 
Performance Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608539
 
Performance Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
1504020
 
Peter Cave Mining Co.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4403088
 
Pigeon Creek Processing Corporation
 
4
 
—
 
—
 
—
 
—
 
$
1.27
 
—
4609409
 
Pioneer Fuel Corporation  
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4606880
 
Power Mountain Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4607545
 
Premium Energy LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608632
 
Premium Energy LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609195
 
Premium Energy LLC
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609475
 
Republic Energy  
 
—
 
—
 
—
 
—
 
—
 
$
1.20
 
—
4609114
 
Republic Energy Inc
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609026
 
Republic Energy Inc.
 
1
 
—
 
—
 
—
 
—
 
$
0.56
 
—
4609054
 
Republic Energy, Inc
 
1
 
—
 
—
 
—
 
—
 
$
3.58
 
—
4603181
 
Republic Energy, INC.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
3608349
 
River Processing Corporation
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4605368
 
Road Fork Development Company Inc.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4605121
 
Rockspring Development Inc
 
21
 
—
 
—
 
—
 
—
 
$
89.33
 
—
4608030
 
Rockspring Development Inc
 
2
 
—
 
—
 
—
 
—
 
$
0.10
 
—
4608008
 
Rockspring Development, Inc.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609089
 
Rum Creek Coal Sales
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608279
 
Rum Creek Coal Sales, Inc.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
1509724
 
Sidney Coal Company Inc
 
—
 
—
 
—
 
—
 
—
 
$
0.81
 
—
1518381
 
Sidney Coal Company Inc
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
1511654
 
Sidney Coal Company, Inc.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
1519097
 
Sidney Coal Company, Inc.
 
9
 
—
 
—
 
—
 
—
 
$
33.69
 
—
1519180
 
Sidney Coal Company, Inc.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609269
 
Spartan Mining Co.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4608808
 
Spartan Mining Co., Inc.
 
4
 
—
 
—
 
—
 
—
 
$
19.53
 
—
4601544
 
Spartan Mining Company
 
23
 
—
 
—
 
—
 
—
 
$
16.06
 
—
4609391
 
Spartan Mining Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—




4603933
 
Spartan Mining Company Inc.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609238
 
Spartan Mining Company Inc.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609254
 
Spartan Mining Company Inc.
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4602515
 
Stirrat Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4001144
 
Tennessee Consolidated Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4003166
 
Tennessee Consolidated Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4606532
 
Trace Creek Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4403658
 
Twin Star Mining, Inc.
 
—
 
—
 
—
 
—
 
—
 
$
0.61
 
—
4403929
 
Twin Star Mining, Inc.
 
—
 
—
 
—
 
—
 
—
 
$
0.40
 
—
4608365
 
White Buck Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
—
 
—
4609266
 
White Buck Coal Company
 
—
 
—
 
—
 
—
 
—
 
$
0.22
 
—











































For purposes of reporting regulatory matters under Section 1503(a) of the Dodd-Frank Act, we include the following table that sets forth a list of legal actions pending before the Federal Mine Safety and Health Review Commission, including the Administrative Law Judges thereof, pursuant to the Mine Act, and other required information, for each of our subsidiaries that is a coal mine operator, by individual mine including legal actions and other required information.
MSHA Mine ID
 
Operator
 
MSHA
Pending
Legal
Actions (as
of last
day of
reporting
period) (2) (3)
 
New MSHA
Dockets
commenced
during
reporting
period (3)
 
MSHA
dockets
which
final
orders
where
entered 
(not
appealed)
during
reporting
period
 
Contests of
Citations/
Orders
referenced
in
Subpart B,
29CFR
Part 2700
 
Contests of
Proposed
Penalties
referenced
in
Subpart C,
29CFR
Part 2700 (3)
 
Complaints
for
compensation
referenced
in
Subpart D,
29CFR
Part 2700
 
Complaints
for
discharge,
discrimination,
or
interference
referenced
in
Subpart E,
29CFR
Part 2700
 
Applications
for
temporary
relief
referenced
in
Subpart F
29CFR
Part 2700
 
Appeals of
judges'
decisions
or
orders to
FMSHRC
referenced
in
Subpart H
29CFR
Part 2700
4606870
 
Alex Energy Inc
 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—

 
—

4608787
 
Alex Energy Inc
 
3

 
—

 
—

 
—

 
3

 
—

 
—

 
—

 
—

4608977
 
Alex Energy Inc
 
2

 
1

 
—

 
—

 
2

 
—

 
—

 
—

 
—

4609283
 
Alex Energy Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4607537
 
Alex Energy Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608961
 
Alex Energy Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609242
 
Alex Energy Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4800732
 
Alpha Coal West, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4801078
 
Alpha Coal West, Inc.
 
1

 
—

 
—

 
—

 
1

 
—

 
—

 
—

 
—

4607897
 
Aracoma Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608019
 
Aracoma Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609299
 
Aracoma Coal Company
 
2

 
—

 
—

 
—

 
2

 
—

 
—

 
—

 
—

4609361
 
Aracoma Coal Company
 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—

 
—

4608224
 
Aracoma Coal Company Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608801
 
Aracoma Coal Company Inc
 
10

 
—

 
9

 
—

 
10

 
—

 
—

 
—

 
—

4608802
 
Aracoma Coal Company Inc
 
2

 
—

 
1

 
—

 
2

 
—

 
—

 
—

 
—

4605086
 
Bandmill Coal Corp
 
1

 
—

 
—

 
—

 
1

 
—

 
—

 
—

 
—

4608263
 
Bandmill Coal Corp
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4605992
 
Black Castle Mining Company, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4607938
 
Black Castle Mining Company, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609244
 
Black Castle Mining Company, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4606045
 
Brooks Run Mining Company LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608218
 
Brooks Run Mining Company LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608885
 
Brooks Run Mining Company LLC
 
4

 
2

 
1

 
1

 
3

 
—

 
—

 
—

 
—

4609036
 
Brooks Run Mining Company LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609055
 
Brooks Run Mining Company LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609126
 
Brooks Run Mining Company LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609130
 
Brooks Run Mining Company LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609133
 
Brooks Run Mining Company LLC
 
1

 
1

 
—

 
—

 
1

 
—

 
—

 
—

 
—

4609134
 
Brooks Run Mining Company LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609247
 
Brooks Run Mining Company LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609351
 
Brooks Run Mining Company LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609353
 
Brooks Run Mining Company LLC
 
3

 
1

 
—

 
1

 
2

 
—

 
—

 
—

 
—

4606213
 
Brooks Run Mining Company LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609371
 
Brooks Run Mining Company, LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4606263
 
Brooks Run South Mining, LLC
 
19

 
—

 
10

 
12

 
7

 
—

 
—

 
—

 
—

4607985
 
Brooks Run South Mining, LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608730
 
Brooks Run South Mining, LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609066
 
Brooks Run South Mining, LLC
 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—

 
—

4609301
 
Brooks Run South Mining, LLC
 
1

 
—

 
—

 
—

 
1

 
—

 
—

 
—

 
—

4609348
 
Brooks Run South Mining, LLC
 
2

 
—

 
—

 
—

 
2

 
—

 
—

 
—

 
—

4609387
 
Brooks Run South Mining, LLC
 
3

 
—

 
1

 
1

 
2

 
—

 
—

 
—

 
—





4608829
 
Brooks Run South Mining,LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519446
 
Cave Spur Coal, LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1510753
 
Clean Energy Mining Co.
 
2

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
2

1517935
 
Clean Energy Mining Co.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1518423
 
Coalgood Energy Co
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519308
 
Coalgood Energy Co
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519360
 
Coalgood Energy Co
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4607484
 
Cobra Natural Resources LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

3609744
 
Coral Energy Services LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

3605018
 
Cumberland Coal Resources LP
 
31

 
4

 
6

 
10

 
20

 
—

 
1

 
—

 
—

4605649
 
Delbarton Mining Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4406864
 
Dickenson-Russell Coal Co LLC
 
33

 
2

 
—

 
20

 
13

 
—

 
—

 
—

 
—

4407146
 
Dickenson-Russell Coal Co LLC
 
1

 
—

 
—

 
—

 
1

 
—

 
—

 
—

 
—

4405311
 
Dickenson-Russell Coal Co., LLC
 
1

 
1

 
1

 
—

 
1

 
—

 
—

 
—

 
—

4400271
 
Dickenson-Russell Coal Company LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4402277
 
Dickenson-Russell Coal Company, LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4406444
 
Dickenson-Russell Coal Company, LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4607711
 
Eagle Energy Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609163
 
Elk Run Coal Company
 
58

 
12

 
6

 
48

 
10

 
—

 
—

 
—

 
—

4609293
 
Elk Run Coal Company
 
3

 
1

 
3

 
—

 
3

 
—

 
—

 
—

 
—

4606188
 
Elk Run Coal Company Inc
 
1

 
1

 
—

 
—

 
1

 
—

 
—

 
—

 
—

4607009
 
Elk Run Coal Company Inc
 
6

 
2

 
2

 
—

 
6

 
—

 
—

 
—

 
—

4608108
 
Elk Run Coal Company Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608384
 
Elk Run Coal Company Inc
 
13

 
2

 
1

 
3

 
10

 
—

 
—

 
—

 
—

4608402
 
Elk Run Coal Company Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608479
 
Elk Run Coal Company Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608553
 
Elk Run Coal Company Inc
 
3

 
1

 
5

 
—

 
3

 
—

 
—

 
—

 
—

4608599
 
Elk Run Coal Company Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608923
 
Elk Run Coal Company Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609022
 
Elk Run Coal Company, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

3605466
 
Emerald Coal Resources LP
 
15

 
6

 
23

 
4

 
7

 
—

 
2

 
—

 
2

1511121
 
Enterprise Mining Company LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1518507
 
Enterprise Mining Company LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519116
 
Enterprise Mining Company LLC
 
4

 
3

 
1

 
—

 
4

 
—

 
—

 
—

 
—

1507082
 
Freedom Energy Mining Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

3609741
 
Freeport Mining, LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4605317
 
Goals Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4603202
 
Green Valley Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4601602
 
Greyeagle Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4607950
 
Greyeagle Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4405815
 
Guest Mountain Mining Corporation
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4407251
 
Guest Mountain Mining Corporation
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609347
 
Hazy Ridge Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4603158
 
Herndon Processing Company LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4604669
 
Highland Mining Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4606558
 
Highland Mining Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4607165
 
Highland Mining Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608693
 
Highland Mining Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608789
 
Highland Mining Company
 
1

 
—

 
1

 
—

 
1

 
—

 
—

 
—

 
—

4608838
 
Highland Mining Company
 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—

 
—

4609204
 
Highland Mining Company
 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—

 
—

4608935
 
Independence Coal
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608645
 
Independence Coal Co.
 
3

 
—

 
—

 
3

 
—

 
—

 
—

 
—

 
—

4609328
 
Independence Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4603755
 
Independence Coal Company Inc
 
3

 
—

 
—

 
—

 
2

 
—

 
1

 
—

 
—

4607273
 
Independence Coal Company Inc
 
2

 
—

 
—

 
1

 
1

 
—

 
—

 
—

 
—

4608700
 
Independence Coal Company Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608735
 
Independence Coal Company Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608844
 
Independence Coal Company Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608933
 
Independence Coal Company Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—





4608655
 
Independence Coal Company Incorporated
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4603176
 
Independence Coal Company, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608549
 
Independence Coal Company, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608683
 
Independence Coal Company, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4604637
 
Kepler Processing Company LLC
 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—

 
—

4604343
 
Kingston Mining Inc.
 
1

 
—

 
—

 
—

 
1

 
—

 
—

 
—

 
—

4608625
 
Kingston Mining, Inc.
 
13

 
2

 
2

 
—

 
13

 
—

 
—

 
—

 
—

4608932
 
Kingston Mining, Inc.
 
23

 
6

 
6

 
4

 
14

 
—

 
5

 
—

 
—

4608751
 
Kingwood Mining Company LLC
 
1

 
—

 
—

 
—

 
1

 
—

 
—

 
—

 
—

4608753
 
Kingwood Mining Company LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4407281
 
Knox Creek Coal Corp
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4407180
 
Knox Creek Coal Corp.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4405236
 
Knox Creek Coal Corporation
 
1

 
—

 
2

 
—

 
1

 
—

 
—

 
—

 
—

4406804
 
Knox Creek Coal Corporation
 
29

 
5

 
2

 
10

 
18

 
—

 
1

 
—

 
—

4605872
 
Litwar Processing Company, LLC
 
1

 
—

 
1

 
—

 
1

 
—

 
—

 
—

 
—

1505375
 
Long Fork Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4607934
 
Mammoth Coal Co
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609148
 
Mammoth Coal Co
 
1

 
—

 
1

 
—

 
1

 
—

 
—

 
—

 
—

4609275
 
Mammoth Coal Co
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4603317
 
Mammoth Coal Co.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4606051
 
Mammoth Coal Co.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4607968
 
Mammoth Coal Co.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608110
 
Mammoth Coal Co.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608159
 
Mammoth Coal Co.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609108
 
Mammoth Coal Co.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609221
 
Mammoth Coal Co.
 
7

 
—

 
10

 
2

 
5

 
—

 
—

 
—

 
—

4609237
 
Mammoth Coal Co.
 
3

 
—

 
1

 
—

 
3

 
—

 
—

 
—

 
—

4609119
 
Mammoth Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609164
 
Mammoth Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609091
 
Marfork Coal Company
 
8

 
1

 
6

 
—

 
8

 
—

 
—

 
—

 
—

4609092
 
Marfork Coal Company
 
5

 
—

 
5

 
—

 
5

 
—

 
—

 
—

 
—

4609176
 
Marfork Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609212
 
Marfork Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609376
 
Marfork Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608297
 
Marfork Coal Company Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608315
 
Marfork Coal Company Inc
 
18

 
4

 
1

 
2

 
16

 
—

 
—

 
—

 
—

4608374
 
Marfork Coal Company Inc
 
4

 
1

 
—

 
—

 
4

 
—

 
—

 
—

 
—

4608551
 
Marfork Coal Company Inc
 
12

 
1

 
1

 
—

 
11

 
—

 
1

 
—

 
—

4608837
 
Marfork Coal Company Inc
 
4

 
—

 
3

 
—

 
4

 
—

 
—

 
—

 
—

4608856
 
Marfork Coal Company Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609193
 
Marfork Coal Company Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609240
 
Marfork Coal Company Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609355
 
Marfork Coal Company Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609048
 
Marfork Coal Company, Inc.
 
15

 
2

 
—

 
—

 
15

 
—

 
—

 
—

 
—

4609090
 
Marfork Coal Company, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609199
 
Marfork Coal Company, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1518452
 
Martin County Coal
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519193
 
Martin County Coal
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1505106
 
Martin County Coal Corp
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1511005
 
Martin County Coal Corp
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519235
 
Martin County Coal Corp
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519472
 
Martin County Coal Corp
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519553
 
Martin County Coal Corp
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519595
 
Martin County Coal Corp
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519615
 
Martin County Coal Corp
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519531
 
Martin County Coal Corp.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4407170
 
Meadow Branch Mining Corporation
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4405559
 
Mill Branch Coal Corp
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4407087
 
Mill Branch Coal Corp
 
12

 
6

 
3

 
2

 
10

 
—

 
—

 
—

 
—

4407127
 
Mill Branch Coal Corp
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4407138
 
Mill Branch Coal Corp
 
1

 
—

 
—

 
—

 
1

 
—

 
—

 
—

 
—

4407150
 
Mill Branch Coal Corp
 
11

 
4

 
6

 
—

 
11

 
—

 
—

 
—

 
—





4407262
 
Mill Branch Coal Corp
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4407052
 
Mill Branch Coal Corp.
 
15

 
3

 
6

 
—

 
15

 
—

 
—

 
—

 
—

4407186
 
Mill Branch Coal Corporation
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4407189
 
Mill Branch Coal Corporation
 
15

 
—

 
—

 
—

 
6

 
—

 
—

 
—

 
9

1519382
 
Mt. Sterling Energy Mining
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1505215
 
New Ridge Mining Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4407256
 
Nine Mile Spur, LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519715
 
North Fork Coal Corp
 
2

 
1

 
—

 
—

 
2

 
—

 
—

 
—

 
—

1517165
 
North Fork Coal Corporation
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1518198
 
North Fork Coal Corporation
 
1

 
—

 
—

 
—

 
1

 
—

 
—

 
—

 
—

1518340
 
North Fork Coal Corporation
 
1

 
—

 
1

 
—

 
—

 
—

 
1

 
—

 
1

1518732
 
North Fork Coal Corporation
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519666
 
North Fork Coal Corporation
 
1

 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—

1518241
 
North Fork Coal Corporation  
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519418
 
North Fork Coal Corporation  
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4603141
 
Omar Mining Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1516011
 
Panther Mining LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519063
 
Panther Mining, LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4406949
 
Paramont Coal Company Virginia LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4407123
 
Paramont Coal Company Virginia LLC
 
4

 
—

 
—

 
2

 
2

 
—

 
—

 
—

 
—

4407163
 
Paramont Coal Company Virginia LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4407190
 
Paramont Coal Company Virginia LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4407223
 
Paramont Coal Company Virginia LLC
 
13

 
4

 
4

 
1

 
12

 
—

 
—

 
—

 
—

4407231
 
Paramont Coal Company Virginia LLC
 
7

 
3

 
1

 
—

 
7

 
—

 
—

 
—

 
—

4407257
 
Paramont Coal Company Virginia LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4405270
 
Paramont Coal Company Virginia, LLC
 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—

 
—

4406929
 
Paramont Coal Company Virginia, LLC
 
26

 
3

 
3

 
17

 
9

 
—

 
—

 
—

 
—

4407232
 
Paramont Coal Company Virginia, LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4407289
 
Paramont Coal Company Virginia, LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4407290
 
Paramont Coal Company Virginia, LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4407308
 
Paramont Coal Company Virginia, LLC
 
2

 
1

 
—

 
1

 
1

 
—

 
—

 
—

 
—

4407322
 
Paramont Coal Company Virginia, LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4407092
 
Paramont Coal Company Virginia, LLC.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4407129
 
Paramont Coal Company Virginia, LLC.
 
7

 
5

 
1

 
1

 
6

 
—

 
—

 
—

 
—

4407272
 
Paramont Coal Company Virginia, LLC.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4602265
 
Peerless Eagle Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608155
 
Peerless Eagle Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4603430
 
Performance Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608436
 
Performance Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608539
 
Performance Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1504020
 
Peter Cave Mining Co.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4403088
 
Pigeon Creek Processing Corporation
 
3

 
2

 
3

 
—

 
3

 
—

 
—

 
—

 
—

4609409
 
Pioneer Fuel Corporation  
 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—

 
—

4606880
 
Power Mountain Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4607545
 
Premium Energy LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609195
 
Premium Energy LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608632
 
Premium Energy LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609475
 
Republic Energy  
 
1

 
1

 
—

 
—

 
1

 
—

 
—

 
—

 
—

4609114
 
Republic Energy Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609026
 
Republic Energy Inc.
 
1

 
—

 
—

 
—

 
1

 
—

 
—

 
—

 
—

4609054
 
Republic Energy, Inc
 
2

 
2

 
2

 
—

 
2

 
—

 
—

 
—

 
—

4603181
 
Republic Energy, INC.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

3608349
 
River Processing Corporation
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609356
 
Riverside Energy Company LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—





4608048
 
Riverside Energy Company, LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609251
 
Riverside Energy Company, LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519270
 
Road Fork Development Company Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4605368
 
Road Fork Development Company Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519453
 
Road Fork Development Company, Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1517651
 
Rockhouse Energy Mining
 
1

 
—

 
1

 
—

 
1

 
—

 
—

 
—

 
—

4605121
 
Rockspring Development Inc
 
21

 
4

 
9

 
7

 
14

 
—

 
—

 
—

 
—

4608030
 
Rockspring Development Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608008
 
Rockspring Development, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609089
 
Rum Creek Coal Sales
 
—

 
—

 
1

 
—

 
—

 
—

 
—

 
—

 
—

4609364
 
Rum Creek Coal Sales Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608279
 
Rum Creek Coal Sales, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1509724
 
Sidney Coal Company Inc
 
2

 
—

 
—

 
—

 
2

 
—

 
—

 
—

 
—

1518378
 
Sidney Coal Company Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1518381
 
Sidney Coal Company Inc
 
1

 
—

 
—

 
—

 
1

 
—

 
—

 
—

 
—

1518380
 
Sidney Coal Company, Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1518390
 
Sidney Coal Company, Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1511654
 
Sidney Coal Company, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1518950
 
Sidney Coal Company, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519097
 
Sidney Coal Company, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519180
 
Sidney Coal Company, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1519247
 
Sidney Coal Company, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1507475
 
Solid Energy Mining Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609085
 
Spartan Mining Co dba Mammoth Coal Co
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609269
 
Spartan Mining Co.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608808
 
Spartan Mining Co., Inc.
 
7

 
—

 
3

 
—

 
7

 
—

 
—

 
—

 
—

4601544
 
Spartan Mining Company
 
25

 
1

 
21

 
11

 
14

 
—

 
—

 
—

 
—

4608387
 
Spartan Mining Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608513
 
Spartan Mining Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608806
 
Spartan Mining Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609045
 
Spartan Mining Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609095
 
Spartan Mining Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609263
 
Spartan Mining Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609391
 
Spartan Mining Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608738
 
Spartan Mining Company Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609165
 
Spartan Mining Company Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4603933
 
Spartan Mining Company Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609238
 
Spartan Mining Company Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609254
 
Spartan Mining Company Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4609270
 
Spartan Mining Company Incorporated
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

1518869
 
Stillhouse Mining, LLC
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4602515
 
Stirrat Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4001144
 
Tennessee Consolidated Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4003166
 
Tennessee Consolidated Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4606532
 
Trace Creek Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4607302
 
Twin Star Mining Inc
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4403658
 
Twin Star Mining, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4403929
 
Twin Star Mining, Inc.
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

4608365
 
White Buck Coal Company
 
2

 
—

 
—

 
1

 
1

 
—

 
—

 
—

 
—

4609266
 
White Buck Coal Company
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—


(1) The MSHA proposed assessments issued during the current reporting period do not necessarily relate to the citations or orders issued by MSHA during the current reporting period or to the pending Legal Actions reported herein.

(2) The Legal Actions include matters which were initiated prior to the current reporting period and which do not necessarily relate to the citations, orders or proposed assessments issued by MSHA during the current reporting period. All of the Legal Actions, except those filed under Subparts E and F of 29 CFR Part 2700, were initiated by us to contest citations, orders or proposed assessments issued by MSHA, and if we are successful, may result in reduction or dismissal of those citations, orders or assessments.





(3) During the reporting period, mines operated by our subsidiary AMFIRE Mining Company, LLC (“AMFIRE”) received a combined total Dollar Value of Proposed Civil Penalty Assessments of $11,344. AMFIRE also had 7 MSHA pending Legal Actions (as of the last day of the reporting period), including 2 New MHSA Dockets commenced during the reporting period and 7 Contests of Proposed Penalties referenced in Subpart C, 29 CFR Part 2700. AMFIRE conveyed all of the subject mines to an unrelated party in December 2014 and was not the operator of these mines at any time during the reporting period.




anr-20150630.xml
Attachment: XBRL INSTANCE DOCUMENT

anr-20150630.xsd
Attachment: XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT

anr-20150630_cal.xml
Attachment: XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT

anr-20150630_def.xml
Attachment: XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT

anr-20150630_lab.xml
Attachment: XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT

anr-20150630_pre.xml
Attachment: XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT