19. Supplemental Condensed Consolidating Financial Information

Pursuant to the indentures governing Arch Coal, Inc.'s senior notes, certain wholly-owned subsidiaries of the Company have fully and unconditionally guaranteed the senior notes on a joint and several basis. The following tables present unaudited condensed consolidating financial information for (i) the Company, (ii) the issuer of the senior notes, (iii) the guarantors under the senior notes, and (iv) the entities which are not guarantors under the senior notes (Arch Western Resources, LLC and its subsidiaries, Arch Receivable Company, LLC and the Company's subsidiaries outside the U.S.):


Condensed Consolidating Statements of Income
Three Months Ended September 30, 2011
					(unaudited)
					Guarantor			Non-Guarantor
	Parent/Issuer				Subsidiaries			Subsidiaries			Eliminations			Consolidated
								(In thousands)
Revenues	$	–		$	651,326		$	547,347			$ –		$	1,198,673

Costs, expenses and other
Cost of sales		7,442			522,636			448,680			(25,908	)		952,850
Depreciation, depletion and amortization		718			83,775			38,533			–			123,026
Amortization of acquired sales contracts, net		–			(15,989	)		3,803			–			(12,186	)
Selling, general and administrative expenses		20,263			5,058			9,751			(1,796	)		33,276
Change in fair value of coal derivatives and coal
trading activities, net		–			8,360			–			–			8,360
Acquisition and transition costs related to ICG		4,694			–			–			–			4,694
Other operating (income) expense, net		(6,063	)		(30,509	)		5,255			27,704			(3,613	)
		27,054			573,331			506,022			-			1,106,407
Income from investment in subsidiaries		121,210			–			–			(121,210	)		–

Income from operations		94,156			77,995			41,325			(121,210	)		92,266

Interest expense, net:
Interest expense		(84,045	)		(942	)		(10,657	)		17,950			(77,694	)
Interest income		3,593			108			15,089			(17,950	)		840
		(80,452	)		(834	)		4,432			–			(76,854	)

Other non-operating expense
Net loss resulting from early retirement of debt		–			(1,708	)		-			–			(1,708	)
		–			(1,708	)		-			–			(1,708	)

Income before income taxes		13,704			75,453			45,757			(121,210	)		13,704
Benefit from income taxes		(5,583	)		–			–			–			(5,583	)

Net income		19,287			75,453			45,757			(121,210	)		19,287
Less: Net income attributable to noncontrolling
interest		(231	)		–			–			–			(231	)

Net income attributable to Arch Coal	$	19,056		$	75,453		$	45,757		$	(121,210	)	$	19,056


Condensed Consolidating Statements of Income
Three Months Ended September 30, 2010
(unaudited)
					Guarantor		Non-Guarantor
	Parent/Issuer				Subsidiaries		Subsidiaries				Eliminations			Consolidated
							(In thousands)

Revenues	$	–		$	324,507		$	550,198		$	–		$	874,705

Costs, expenses and other
Cost of sales		3,578			229,731			445,814			(27,270	)		651,853
Depreciation, depletion and amortization		794			52,302			39,761			–			92,857
Amortization of acquired sales contracts, net		–			–			10,038			–			10,038
Selling, general and administrative expenses		18,245			1,858			8,818			(1,922	)		26,999
Change in fair value of coal derivatives and
coal trading activities, net		–			1,832			–			–			1,832
Other operating (income) expense, net		(3,346	)		(35,107	)		2,040			29,192			(7,221	)
		19,271			250,616			506,471			–			776,358
Income from investment in subsidiaries		108,974			–			–			(108,974	)		–

Income from operations		89,703			73,891			43,727			(108,974	)		98,347

Interest expense, net:
Interest expense		(38,041	)		(745	)		(16,738	)		17,826			(37,698	)
Interest income		3,138			119			15,496			(17,826	)		927
		(34,903	)		(626	)		(1,242	)		–			(36,771	)

Other non-operating expense
Net loss resulting from early retirement of debt		–			–			(6,776	)		–			(6,776	)
		–			–			(6,776	)		–			(6,776	)

Income before income taxes		54,800			73,265			35,709			(108,974	)		54,800
Provision for income taxes		7,941						–			–			7,941

Net income		46,859			73,265			35,709			(108,974	)		46,859
Less: Net income attributable to
noncontrolling interest		(181	)		–			–			–			(181	)

Net income attributable to Arch Coal	$	46,678		$	73,265		$	35,709		$	(108,974	)	$	46,678


Condensed Consolidating Statements of Income
Nine Months Ended September 30, 2011
			(unaudited)

						Guarantor			Non-Guarantor
	Parent/Issuer					Subsidiaries			Subsidiaries			Eliminations			Consolidated
									(In thousands)
Revenues	$		–		$	1,409,755		$	1,647,384			$ –		$	3,057,139

Costs, expenses and other
Cost of sales			15,661			1,062,692			1,319,711			(75,940	)		2,322,124
Depreciation, depletion and amortization			2,050			181,059			118,637			–			301,746
Amortization of acquired sales contracts, net			–			(20,102	)		15,349			–			(4,753	)
Selling, general and administrative expenses			59,198			10,112			28,768			(5,328	)		92,750
Change in fair value of coal derivatives and
coal trading activities, net			–			9,248			–			–			9,248
Acquisition and transition costs related to ICG			53,360			–			–			–			53,360
Other operating (income) expense, net			(15,461	)		(87,210	)		12,384			81,268			(9,019	)
			114,808			1,155,799			1,494,849			-			2,765,456
Income from investment in subsidiaries			413,406			–			–			(413,406	)		–

Income from operations			298,598			253,956			152,535			(413,406	)		291,683

Interest expense, net:
Interest expense			(172,700	)		(3,793	)		(32,599	)		54,569			(154,523	)
Interest income			11,645			540			44,725			(54,569	)		2,341
			(161,055	)		(3,253	)		12,126			–			(152,182	)

Other non-operating expense
Bridge financing costs related to ICG			(49,490	)		-			-			-			(49,490	)
Net loss resulting from early retirement of
debt			–			(1,958	)		-			–			(1,958	)
			(49,490	)		(1,958	)		-			–			(51,448	)

Income before income taxes			88,053			248,745			164,661			(413,406	)		88,053
Provision for income taxes			5,103			–			–			–			5,103

Net income			82,950			248,745			164,661			(413,406	)		82,950
Less: Net income attributable to noncontrolling interest			(822	)		–			–			–			(822	)

Net income attributable to Arch Coal		$	82,128		$	248,745		$	164,661		$	(413,406	)	$	82,128


Condensed Consolidating Statements of Income
	Nine Months Ended September 30, 2010
		(unaudited)

					Guarantor			Non-Guarantor
	Parent/Issuer				Subsidiaries			Subsidiaries			Eliminations			Consolidated
								(In thousands)

Revenues	$	–		$	846,351		$	1,504,523		$	–		$	2,350,874

Costs, expenses and other
Cost of sales		8,554			591,692			1,239,893			(66,675	)		1,773,464
Depreciation, depletion and amortization		2,270			142,961			123,904			–			269,135
Amortization of acquired sales contracts, net		–			–			26,005			–			26,005
Selling, general and administrative expenses		60,139			5,500			29,226			(5,356	)		89,509
Change in fair value of coal derivatives and
coal trading activities, net		–			12,296			–			–			12,296
Gain on Knight Hawk transaction		–			(41,577	)		–			–			(41,577	)
Other operating (income) expense, net		(8,124	)		(84,031	)		5,120			72,031			(15,004	)
		62,839			626,841			1,424,148			–			2,113,828
Income from investment in subsidiaries		282,794			–			–			(282,794	)		–

Income from operations		219,955			219,510			80,375			(282,794	)		237,046

Interest expense, net:
Interest expense		(102,996	)		(2,104	)		(53,241	)		50,435			(107,906	)
Interest income		7,293			283			44,747			(50,435	)		1,888
		(95,703	)		(1,821	)		(8,494	)		–			(106,018	)

Other non-operating expense
Net loss resulting from early retirement of debt		–			–			(6,776	)		–			(6,776	)
		–			–			(6,776	)		–			(6,776	)

Income before income taxes		124,252			217,689			65,105			(282,794	)		124,252
Provision for income taxes		12,889			–			–			–			12,889

Net income		111,363			217,689			65,105			(282,794	)		111,363
Less: Net income attributable to
noncontrolling interest		(325	)		–			–			–			(325	)

Net income attributable to Arch Coal	$	111,038		$	217,689		$	65,105		$	(282,794	)	$	111,038


		Condensed Consolidating Balance Sheets
		September 30, 2011
					(unaudited)

					Guarantor		Non-Guarantor
		Parent/Issuer			Subsidiaries		Subsidiaries				Eliminations				Consolidated
							(In thousands)
Assets
Cash and cash equivalents	$	57,778		$	280			$	100,451		$–			$	158,509
Restricted cash		21,428			-				-		–				21,428
Receivables		63,111			130,884				233,855		(1,550	)			426,300
Inventories		–			173,564				172,767		–				346,331
Other		35,413			102,729				16,873		–				155,015
Total current assets		177,730			407,457				523,946		(1,550	)			1,107,583
Property, plant and equipment, net		13,685			6,234,786				1,454,809		–				7,703,280
Investment in subsidiaries		8,632,002			–				–		(8,632,002	)			–
Intercompany receivables		(2,243,557	)		813,061				1,430,496		–				–
Note receivable from Arch Western		225,000			-				-		(225,000	)			–
Other		456,885			574,038				13,475		–				1,044,398
Total other assets		7,070,330			1,387,099				1,443,971		(8,857,002	)			1,044,398

Total assets	$	7,261,745		$	8,029,342			$	3,422,726	$	(8,858,552	)	$		9,855,261

Liabilities and Stockholders' Equity
Accounts payable	$	33,646		$	151,826		$		107,974	$	–		$		293,446
Accrued expenses and other current
liabilities		108,442			132,785				145,854		(1,550	)			385,531
Current maturities of debt and short-term
borrowings		4,357			2,799				40,000		–				47,156
Total current liabilities		146,445			287,410				293,828		(1,550	)			726,133
Long-term debt		3,388,496			1,702				451,132						3,841,330
Note payable to Arch Coal		-			–				225,000		(225,000	)			-
Asset retirement obligations		548			107,002				308,327		–				415,877
Accrued pension benefits		7,057			(489	)			9,667		–				16,235
Accrued postretirement benefits other
than pension		15,276			50,241				23,303		–				88,820
Accrued workers' compensation		14,866			42,850				6,705		–				64,421
Deferred income taxes		(4,162	)		884,649				-		–				880,487
Other noncurrent liabilities		148,751			75,565				53,174		–				277,490
Total liabilities		3,717,277			1,448,930				1,371,136		(226,550	)			6,310,793
Redeemable noncontrolling interest		11,261			–				–		–				11,261

Stockholders' equity		3,533,207			6,580,412				2,051,590		(8,632,002	)			3,533,207
Total liabilities and stockholders'
equity	$	7,261,745		$	8,029,342		$		3,422,726	$	(8,858,552	)	$		9,855,261


Condensed Consolidating Balance Sheets
December 31, 2010
(unaudited)

					Guarantor		Non-Guarantor
		Parent/Issuer			Subsidiaries		Subsidiaries			Eliminations			Consolidated
							(In thousands)
Assets
Cash and cash equivalents	$	13,713			$	64	$	79,816	$	—		$	93,593
Receivables		31,458			12,740			210,075		(1,953	)		252,320
Inventories		—			85,196			150,420		—			235,616
Other		29,575			102,375			21,435		—			153,385
Total current assets		74,746			200,375			461,746		(1,953	)		734,914
Property, plant and equipment, net		9,817			1,800,578			1,498,497		—			3,308,892
Investment in subsidiaries		4,555,233				—		—		(4,555,233	)		—
Intercompany receivables		(1,807,902	)		508,624			1,299,278		—			—
Note receivable from Arch Western		225,000				—		—		(225,000	)		—
Other		481,345			344,698			10,920		—			836,963
Total other assets		3,453,676			853,322			1,310,198		(4,780,233	)		836,963
Total assets	$	3,538,239		$	2,854,275		$	3,270,441	$	(4,782,186	)	$	4,880,769

Liabilities and Stockholders' Equity
Accounts payable	$	10,753		$	65,793		$	121,670	$	—		$	198,216
Accrued expenses and other current liabilities		75,746			31,123			153,217		(1,953	)		258,133
Current maturities of debt and short-term
borrowings		14,093				—		56,904		—			70,997
Total current liabilities		100,592			96,916			331,791		(1,953	)		527,346
Long-term debt		1,087,126				—		451,618		—			1,538,744
Note payable to Arch Coal		—				—		225,000		(225,000	)		—
Asset retirement obligations		873			32,029			301,355		—			334,257
Accrued pension benefits		20,843				4,407		23,904		—			49,154
Accrued postretirement benefits other than
pension		14,284				—		23,509		—			37,793
Accrued workers' compensation		15,383			13,805			6,102		—			35,290
Other noncurrent liabilities		51,187			22,135			36,912		—			110,234
Total liabilities		1,290,288			169,292			1,400,191		(226,953	)		2,632,818
Redeemable noncontrolling interest		10,444				—		—		—			10,444
Stockholders' equity		2,237,507			2,684,983			1,870,250		(4,555,233	)		2,237,507
Total liabilities and stockholders' equity	$	3,538,239		$	2,854,275		$	3,270,441	$	(4,782,186	)	$	4,880,769


Condensed Consolidating Statements of Cash Flows
Nine Months Ended September 30, 2011
(unaudited)

					Guarantor			Non-Guarantor
		Parent/Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated
								(In thousands)
Cash provided by (used in) operating
activities	$	(444,664	)	$	613,179		$	302,852		$	-		$	471,367
Investing Activities
Acquisition of ICG, net of cash acquired		(2,894,339	)		-			-			-			(2,894,339	)
Increase in restricted cash		(5,939	)		-			-			-			(5,939	)
Capital expenditures		(5,137	)		(135,640	)		(75,122	)		-			(215,899	)
Proceeds from dispositions of property, plant
and equipment		–			25,010			123			-			25,133
Purchases of investments and advances to
affiliates		(777,341	)		(29,872	)		–			750,386			(56,827	)
Additions to prepaid royalties		–			(22,163	)		(3,972	)		–			(26,135	)
Cash used in investing activities		(3,682,756	)		(162,665	)		(78,971	)		750,386			(3,174,006	)

Financing Activities

Proceeds from the issuance of senior notes		2,000,000			–			-			-			2,000,000
Proceeds from the issuance of common stock,
net		1,267,776			–			-			-			1,267,776
Contributions from parent		-			750,386			-			(750,386	)		–
Payments to retire debt		-			(604,096	)		-			-			(604,096	)
Net increase (decrease) in borrowings under
lines of credit and commercial paper program		340,000			–			(56,904	)		-			283,096
Net payments on other debt		(8,792	)		–			–			-			(8,792	)
Debt financing costs		(114,563	)		–			(24	)		-			(114,587	)
Dividends paid		(57,470	)		–			–			-			(57,470	)
Issuance of common stock under incentive
plans		1,628			–			–			-			1,628
Transactions with affiliates, net		742,906			(596,588	)		(146,318	)		-			–
Cash provided by (used in) financing
activities		4,171,485			(450,298	)		(203,246	)		(750,386	)		2,767,555
Increase in cash and cash equivalents		44,065			216			20,635			-			64,916
Cash and cash equivalents, beginning of
period		13,713			64			79,816			-			93,593
Cash and cash equivalents, end of period	$	57,778		$	280		$	100,451		$	-		$	158,509


Condensed Consolidating Statements of Cash Flows
Nine Months Ended September 30, 2010
					(unaudited)

					Guarantor			Non-Guarantor
		Parent/Issuer			Subsidiaries			Subsidiaries			Consolidated
					(In thousands)
Cash provided by (used in) operating
activities	$	(224,066	)	$	404,836		$	275,910		$	456,680
Investing Activities
Capital expenditures		(3,942	)		(141,825	)		(75,816	)		(221,583	)
Proceeds from dispositions of property, plant and
equipment		–			178			74			252
Purchases of investments and advances to affiliates		(12,671	)		(4,069	)		–			(16,740	)
Additions to prepaid royalties		–			(20,880	)		(2,835	)		(23,715	)
Cash used in investing activities		(16,613	)		(166,596	)		(78,577	)		(261,786	)

Financing Activities
Proceeds from the issuance of senior notes		500,000			–			–			500,000
Payments to retire debt		–			–			(505,627	)		(505,627	)
Net increase (decrease) in borrowings under lines of
credit and commercial paper program		(120,000	)		–			1,663			(118,337	)
Net payments on other debt		(9,794	)		–			–			(9,794	)
Debt financing costs		(11,901	)		–			(729	)		(12,630	)
Dividends paid		(47,121	)		–			–			(47,121	)
Issuance of common stock under incentive plans		339			–			–			339
Contribution from noncontrolling interest		–			–			891			891
Transactions with affiliates, net		(123,309	)		(238,252	)		361,561			–
Cash provided by (used in) financing
activities		188,214			(238,252	)		(142,241	)		(192,279	)
Increase (decrease) in cash and cash equivalents		(52,465	)		(12	)		55,092			2,615
Cash and cash equivalents, beginning of
period		54,255			64			6,819			61,138
Cash and cash equivalents, end of period	$	1,790		$	52		$	61,911		$	63,753