The following balance sheet illustrates the impacts of the implementation of the Plan and the application of fresh start accounting, which results in the opening balance sheet of the Successor company.



As of October 1, 2016 (In thousands)	Predecessor (a)			Effect of Plan (b)				Fresh Start Adjustments (c)				Successor
Assets
Current assets
Cash and cash equivalents	$	400,205		$	(199,718	)	(d)	$	—			$	200,487
Short term investments	111,451			—				—				111,451
Restricted cash	81,563			—				—				81,563
Trade accounts receivable	165,522			—				—				165,522
Other receivables	17,227			—				779			(j)	18,006
Inventories	159,410			—				(21,078		)	(k)	138,332
Prepaid royalties	4,805			—				—				4,805
Deferred income taxes	—			—				—				—
Coal derivative assets	2,180			—				—				2,180
Other current assets	36,960			6,367				53,851			(l)	97,178
Total current assets	979,323			(193,351		)		33,552				819,524

Property, plant and equipment, net	3,434,941			—				(2,363,829		)	(m)	1,071,112
Other assets
Prepaid royalties	20,997			—				(20,997		)	(n)	—
Equity investments	164,232			—				(61,606		)	(o)	102,626
Other noncurrent assets	58,569			34,495			(e)	37,503			(p)	130,567
Total other assets	243,798			34,495				(45,100		)		233,193
Total assets	$	4,658,062		$	(158,856	)		$	(2,375,377	)		$	2,123,829

Liabilities and Stockholders’ Equity (Deficit)
Liabilities not subject to compromise
Accounts payable	$	74,595		$	—			$	(250	)	(q)	$	74,345
Accrued expenses and other current liabilities	225,739			(36,331		)	(f)	26,644			(r)	216,052
Current maturities of debt	3,397			3,265			(g)	—				6,662
Total current liabilities	303,731			(33,066		)		26,394				297,059
Long-term debt	30,037			323,235			(g)	—				353,272
Asset retirement obligations	394,699			—				(60,570		)	(s)	334,129
Accrued pension benefits	23,716			—				24,565			(t)	48,281
Accrued other postretirement benefits	87,123			—				24,836			(t)	111,959
Accrued workers’ compensation	119,828			—				74,520			(u)	194,348
Deferred income taxes	—			—				—				—
Other noncurrent liabilities	96,410			—				888			(v)	97,298
Total liabilities not subject to compromise	1,055,544			290,169				90,633				1,436,346

Liabilities subject to compromise	5,278,612			(5,278,612		)	(h)	—				—

Total liabilities	6,334,156			(4,988,443		)		90,633				1,436,346

Stockholders’ equity (deficit)
Common stock, predecessor	2,145			(2,145		)	(i)	—				—
Common stock, successor	—			250			(b)	—				250
Paid-in capital, predecessor	3,056,307			(3,056,307		)	(i)	—				—
Paid-in capital, successor	—			687,233			(b)	—				687,233
Treasury stock, at cost	(53,863		)	53,863			(i)	—				—
Accumulated earnings (deficit)	(4,678,977		)	7,146,693			(i)	(2,467,716		)		—
Accumulated other comprehensive income (loss)	(1,706		)	—				1,706				—
Total stockholders’ equity (deficit)	(1,676,094		)	4,829,587				(2,466,010		)		687,483
Total liabilities and stockholders’ equity (deficit)	$	4,658,062		$	(158,856	)		$	(2,375,377	)		$	2,123,829


(a)	Represents the Predecessor consolidated balance sheet as of October 1, 2016.


(b)	Represents amounts recorded for the implementation of the Plan on the Effective Date. This includes the settlement of liabilities subject to compromise through a combination of cash payments, the issuance of new common stock and warrants and the issuance of new debt. The following is the calculation of the total pre-tax gain on the settlement of the liabilities subject to compromise:



	In thousands
Liabilities subject to compromise	$	5,278,612
Less amounts issued to settle claims:
Common stock (at par) Successor	(250		)
Warrants Successor	(14,822		)
Paid-in capital Successor	(672,411		)
Issuance of Term Loan Successor	(326,500		)
Cash payment to settle claims and professional fees	(122,525		)

Total pre-tax gain on plan effects	$	4,142,104


(c)	Represents the fresh start accounting adjustments required to record the assets and liabilities of the Company at fair value.


(d)	The following table reflects the use of cash at emergence:



	In thousands
Payment to secured lenders	$	43,496
Payments to unsecured creditors	42,399
Final adequate protection payment	36,331
Collateral requirements	31,665
Professional fees	31,630
Other	14,197

Total cash outflow at emergence	$	199,718


(e)	Represents amounts paid for required collateral deposits.


(f)	Represents the final adequate protection payments made to the secured lenders.


(g)	Represents the fair value of the $326.5 million new term loan of which $3.3 million is shown within current maturities of debt.


(h)	Liabilities subject to compromise include unsecured or under-secured liabilities incurred prior to the Chapter 11 filing; and consists of the following:



Previously Reported Balance Sheet Line	In thousands
Debt	$	5,026,806
Accrued expenses and other current liabilities	136,295
Accounts payable	106,297
Other noncurrent liabilities	9,214

Total liabilities subject to compromise	$	5,278,612


(i)	Reflects the impacts of the reorganization adjustments:



	In thousands
Total pre-tax gain on settlement of claims	$	4,142,104
Cancellation of predecessor common stock	2,145
Cancellation of predecessor paid-in capital	3,056,307
Cancellation of predecessor treasury stock	(53,863		)

Net impact on accumulated earnings (deficit)	$	7,146,693


(j)	Represents adjustments to record other receivables at fair value which includes an $0.8 million short-term receivable related to insurance coverage for self-insured workers’ compensation obligations.

(k)

Represents the following fair value adjustments: a $7.3 million increase related to coal inventory which was fair valued at estimated selling prices less the sum of selling costs, shipping costs and a reasonable profit allowance for the selling effort offset by a $28.4 million reduction in critical spare parts inventory. During fresh start accounting, the Company changed its accounting policy with respect to critical spare parts with long lead times; previously these items were valued within inventory, but prospectively, these items will be capitalized within property, plant and equipment when purchased and depreciated over the life of the related equipment.


(l)	Represents the short-term portion of above market coal sales contracts of $71.1 million offset by $11.3 million in reductions related to prepaid balances. The fair value of sales contracts was estimated using a discounted cash flow model and will be amortized into earnings as the coal is shipped throughout the term of the associated contracts.


(m)	Represents a $2.4 billion reduction in property, plant and equipment to estimated fair value as discussed below:



	Predecessor		Fresh Start Adjustments			Successor
(in thousands)
Net Coal Properties	$	2,358,779	$	(1,971,314	)	$	387,465
Net Plant & Equipment	812,888		(405,259		)	407,629
Net Deferred Charges	263,274		12,744			276,018

	$	3,434,941	$	(2,363,829	)	$	1,071,112

The fair value of coal properties was established at $387.5 million utilizing a discounted cash flow model and the market approach. The market approach was used to provide a starting value of the coal mineral reserves without consideration for economic obsolescence. The DCF model was based on assumptions market participants would use in the pricing of these assets as well as projections of revenues and expenditures that would be incurred to mine or maintain these coal reserves through the life of mine. The basis of the DCF analysis was the Company’s prepared projections which included a variety of estimates and assumptions, such as pricing and demand for coal. The Company’s pricing was based on its view of the market taking into account third party forward pricing curves adjusted for the quality of products sold by the Company.

The fair value of plant and equipment was set at $407.6 million utilizing both market and cost approaches. The market approach was used to estimate the value of assets where detailed information for the asset was available and an active market was identified with a sufficient number of sales of comparable property that could be independently verified through reliable sources. The cost approach was utilized where there were limitations in the secondary equipment market to derive values from. The first step in the cost approach is the estimation of the cost required to replace the asset via construction or purchasing a new asset with similar utility adjusting for depreciation due to physical deterioration, functional obsolescence due to technology changes and economic obsolescence due to external factors such as regulatory changes. Useful lives were assigned to all assets based on remaining future economic benefit of each asset.

The fair value of deferred charges represents the corresponding asset related to the asset retirement obligation discussed in item (q) below.


(n)	Represents a fair value adjustment to a long-term prepaid royalty balance that the Company has concluded should not be assigned value based on market conditions and after considering economic obsolescence.

(o)

Represents a fair value adjustment to the Company’s equity investments in Knight Hawk Holdings, LLC, a coal producer in the Illinois Basin; and Dominion Terminal Associates which operates a ground storage-to-vessel coal trans-loading facility in Newport News, Virginia. Equity investments were fair valued in a manner similar to the Company’s wholly-owned subsidiaries using a discounted cash flow model and comparable company approach. The discount rate selected was 14% and due to the unobservable nature of the inputs, the fair values are considered Level 3 in the fair value hierarchy.

(p)

Represents the long-term portion of above market coal sales contracts of $26.0 million and $18.6 million related to a long-term insurance receivable related to insurance coverage for self-insured workers’ compensation obligations partially offset by $13.2 million in reductions related to prepaid balances. The fair value of sales contracts was estimated using a discounted cash flow model and will be amortized into earnings as the coal is shipped throughout the term of the associated contracts.


(q)	Represents a fair value adjustment to miscellaneous accounts payable.

(r)

Represents fair value adjustments for the following: a $27.8 million increase related to the short-term portion of below market sales contracts offset by fair value adjustments to establish the current portion of pension, postretirement and workers’ compensation liabilities. The fair value of sales contracts was estimated using a discounted cash flow model and will be amortized into earnings as the coal is shipped throughout the term of the associated contracts.


(s)	Represents the fair value adjustment related to the Company’s asset retirement obligations which was calculated using discounted cash flow models based on current mine plans using the guidance provided within Accounting Standard Codification 410-20, “Asset Retirement Obligations.” The discount rates ranged from 7.06% to 9.08%.


(t)	Pension and postretirement benefits were fair valued based on plan assets and employee benefit obligations at October 1, 2016. The benefit obligations were computed using the applicable October 1, 2016 discount rates. In conjunction with fresh start accounting, the Company updated its mortality rate table assumptions and corridor assumption.

(u)

Represents fair value adjustments for workers’ compensation benefits, including occupational disease benefits, that were actuarially determined using the guidance provided within Accounting Standard Codification 712, “Non-retirement Post-employment Benefits.” Upon emergence, the Company’s accounting policy is to actuarially calculate this liability. Prior to emergence, the Company had accounted for its liability based on outstanding reserves calculated per third party administrators.

(v)

Represents the following fair value adjustments: $3.9 million increase related to the long-term portion of below market sales contracts partially offset by $3.1 million reduction in miscellaneous noncurrent liabilities. The fair value of sales contracts was estimated using a discounted cash flow model and will be amortized into earnings as the coal is shipped throughout the term of the associated contracts.