Business Combinations

12 Months Ended

Dec. 31, 2011

Business Combinations [Abstract]

Business Combinations

3. Business Combinations

On June 15, 2011, the Company completed its acquisition of ICG, a leading coal producer, adding 12 mining complexes in Appalachia, one complex in the Illinois Basin and one mine under development in Appalachia, along with other coal reserves not currently in development. The Company acquired all of ICG's outstanding shares of common stock. The acquisition was financed with the proceeds from the Company's sale of common stock and issuance of senior notes. See Note 5, "Debt and Financing Arrangements" and Note 17, "Capital Stock" for further information about these transactions.

The following table summarizes the consideration paid for ICG and the recognized amounts of assets acquired and liabilities assumed at the acquisition date:

	(In millions)
Consideration paid, net of cash acquired	$	2,894.4
Recognized amounts of net tangible and intangible assets acquired and liabilities assumed:
Restricted cash	15.5
Receivables	113.2
Inventories	91.0
Net property, plant and equipment, including mineral rights	4,582.6
Goodwill	480.3
Other assets	35.9
Accounts payable	(86.0		)
Other accrued expenses and current liabilities	(59.1		)
Debt	(604.8		)
Litigation accrual	(108.9		)
Accrued postretirement benefits	(47.7		)
Asset retirement obligation	(112.7		)
Coal supply agreements, net	(91.0		)
Deferred income taxes, net	(1,278.9		)
Other	(35.0		)
Net tangible and intangible assets acquired	$	2,894.4

The Company is awaiting the receipt of the final valuation report from a third party valuation services firm. As a result the fair values for mineral rights, goodwill and deferred taxes may not be final.

The revenues and income before income taxes related to the acquired operations reflected in the consolidated statements of income since the date of acquisition were $606.9 million and $14.6 million, respectively.

The following unaudited pro forma information has been prepared for illustrative purposes and assumes that the business combination occurred on January 1, 2010. The unaudited pro forma results have been prepared based upon ICG's historical results and estimates of the ongoing effects of the transactions that the Company believes are reasonable and supportable. The results are not necessarily reflective of the consolidated results of operations had the acquisition actually occurred on January 1, 2010, nor are they indicative of future operating results.

The unaudited supplemental pro forma financial information of the combined entity follows:

		Year Ended December 31,
		2011				2010
			(In millions)
Total revenues
As reported	$	4,285.9		$	3,186.3
Pro forma	$	4,825.6		$	4,299.9
Net income attributable to Arch Coal
As reported	$	141.7		$	158.9
Pro forma	$	113.5		$	(1.2)

The pro forma income before income taxes includes adjustments to operating costs to reflect the new basis in assets acquired and interest expense to reflect the debt incurred to finance the acquisition. In addition, the following pre-tax costs and expenses reflected in the accompanying consolidated statement of income for the year ended December 31, 2011 are reflected in the pro forma results above as of January 1, 2010.

		(In millions)
Costs of completing the acquisition	$	31.6
Severance costs		15.8
Write off of acquired assets		7.3
Bridge financing fees		49.5
	$	104.2

Severance costs represent both change in control payments to executives and severance for employees terminated after the acquisition. The acquired asset write-off relates to a preparation plant and loadout of an acquired ICG mining operation. The acquired operation was combined with an existing operation of the Company, and utilizes an existing facility.

Synergies from the acquisition are not reflected in the pro forma results.

In conjunction with the acquisition, the Company had $10.3 million of restricted cash at December 31, 2011 to fund change in control payments for executives.

On October 1, 2009 the Company purchased the Jacobs Ranch mining operations for a purchase price of $768.8 million. The acquired operations included approximately 345 million tons of coal reserves. The acquired mining operations were integrated into the Company's Black Thunder mining operations in its Powder River Basin segment. To finance the acquisition, the Company sold shares of its common stock and issued senior notes. See Note 5, "Debt and Financing Arrangements" and Note 17 "Capital Stock" for further information about these transactions.