alpha10qthirdquarter093007.htm



 
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
 
 
 
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2007
OR
 
 
 
o
 
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. 1-32423
ALPHA NATURAL RESOURCES, INC.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
02-0733940
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification Number)
 
 
 
One Alpha Place, P.O. Box 2345, Abingdon, VA
 
24212
(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. þ Yes ¨ No

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

þ Large accelerated filer      o Accelerated filer      ¨ Non-accelerated filer

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

     Number of shares of the registrant’s Common Stock, $0.01 par value, outstanding as of October 30, 2007 — 65,612,827




 

TABLE OF CONTENTS
 
 
 
 
 
 
 
Page
 
 
PART I
 
 
 
 
 
 
 
 
 
Item 1. Financial Statements
 
 
 
 
 
2
 
 
 
3
 
 
 
4
 
 
 
6
 
 
 
22
 
 
 
32
 
 
 
33
 
 
 
 
 
 
 
PART II
 
 
 
 
 
 
 
 
 
 
33
   
 
33
 
 
 
33
 
 
 
 


























 Item 1. Financial Statements
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands, except share and per share amounts)
 
 
September 30,
 
 
December 31,
 
 
 
2007
 
 
2006
 
Assets
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
16,267
 
 
33,256
 
Trade accounts receivable, net
 
 
194,599
 
 
 
171,195
 
Notes and other receivables
 
 
5,959
 
 
 
6,466
 
Inventories
 
 
76,718
 
 
 
76,844
 
Prepaid expenses and other current assets
 
 
29,843
 
 
 
50,893
 
Total current assets
 
 
323,386
 
 
 
338,654
 
 
 
 
 
 
 
 
 
 
Property, plant, and equipment, net
 
 
665,034
 
 
 
637,136
 
Goodwill
 
 
20,547
 
 
 
20,547
 
Other intangibles, net
 
 
9,882
 
 
 
11,720
 
Deferred income taxes
 
 
95,555
 
 
 
94,897
 
Other assets
 
 
57,147
 
 
 
42,839
 
Total assets
 
$
1,171,551
 
 
1,145,793
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
Current portion of long-term debt
 
$
3,154
 
 
3,254
 
Note payable
 
 
 
 
 
20,941
 
Bank overdraft
 
 
582
 
 
 
23,814
 
Trade accounts payable
 
 
91,368
 
 
 
75,986
 
Deferred income taxes
 
 
6,012
 
 
 
7,601
 
Accrued expenses and other current liabilities
 
 
89,810
 
 
 
90,594
 
Total current liabilities
 
 
190,926
 
 
 
222,190
 
 
 
 
 
 
 
 
 
 
Long-term debt, net of current portion
 
 
427,574
 
 
 
421,456
 
Workers’ compensation benefits
 
 
9,553
 
 
 
7,169
 
Postretirement medical benefits
 
 
55,654
 
 
 
50,712
 
Asset retirement obligation
 
 
84,058
 
 
 
69,495
 
Deferred gains on sale of property interests
 
 
3,215
 
 
 
3,885
 
Other liabilities
 
 
27,024
 
 
 
26,837
 
Total liabilities
 
 
798,004
 
 
 
801,744
 
Minority interest 
 
 
1,255
 
 
 
 
Commitments and contingencies
               
Stockholders’ equity:
 
 
 
 
 
 
 
 
Preferred stock — par value $0.01, 10,000,000 shares authorized, none issued
 
 
 
 
 
 
Common stock — par value $0.01, 100,000,000 shares authorized, 65,537,896 and 64,964,287 shares issued and outstanding at September 30, 2007 and December 31, 2006, respectively
 
 
655
 
 
 
650
 
Additional paid-in capital
 
 
221,327
 
 
 
215,020
 
Accumulated other comprehensive loss
 
 
(19,133
)
 
 
(19,019
Retained earnings
 
 
169,443
 
 
 
147,398
 
Total stockholders’ equity
 
 
372,292
 
 
 
344,049
 
 
 
 
 
 
 
 
 
 
Total liabilities and stockholders’ equity
 
$
1,171,551
 
 
1,145,793
 
                See accompanying notes to condensed consolidated financial statements.








ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except share and per share amounts)
 
 
 
   
 
   
 
   
 
 
 
 
Three months ended
   
Nine months ended
 
 
 
September 30,
   
September 30,
 
 
 
2007
   
2006
   
2007
   
2006
 
Revenues:
 
 
   
 
   
 
   
 
 
Coal revenues
  $
438,618
    $
420,179
    $
1,201,678
    $
1,282,0332
 
Freight and handling revenues
   
58,384
     
45,805
     
143,183
     
143,132
 
Other revenues
   
10,137
     
9,134
     
23,915
     
28,604
 
Total revenues
   
507,139
     
475,118
     
1,368,776
     
1,453,769
 
Costs and expenses:
                               
Cost of coal sales (exclusive of items shown separately below)
   
361,704
     
340,440
     
991,766
     
1,016,831
 
Freight and handling costs
   
58,384
     
45,805
     
143,183
     
143,132
 
Cost of other revenues
   
7,860
     
5,774
     
18,256
     
19,170
 
Depreciation, depletion and amortization
   
43,926
     
36,422
     
117,570
     
104,263
 
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately above)
   
14,466
     
16,837
     
41,687
     
51,489
 
Total costs and expenses
   
486,340
     
445,278
     
1,312,462
     
1,334,885
 
 
                               
Income from operations
   
20,799
     
29,840
     
56,314
     
118,884
 
 
                               
Other income (expense):
                               
Interest expense
    (10,101 )     (10,735 )     (30,124 )     (31,798 )
Interest income
   
265
     
156
     
1,359
     
514
 
Miscellaneous income, net
   
281
     
27
     
835
     
323
 
Total other income (expense), net
    (9,555 )     (10,552 )     (27,930 )     (30,961 )
Income before income taxes and minority interest
   
11,244
     
19,288
     
28,384
     
87,923
 
Income tax expense
   
2,363
     
4,744
     
6,494
     
23,040
 
Minority interest
    (68 )    
      (155 )    
 
Net Income
  $
8,949
    $
14,544
    $
22,045
    $
64,883
 
 
                               
Net income per share
                               
Basic and diluted:
  $
0.14
    $
0.23
    $
0.34
    $
1.01
 
                See accompanying notes to condensed consolidated financial statements.







ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
 
 
 
 
 
 
 
 
 
 
 
Nine months ended
 
 
 
September 30,
 
 
 
2007
 
 
2006
 
Operating activities:
 
 
 
 
 
 
 
 
Net income
 
$
22,045
 
 
64,883
 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
   
Depreciation, depletion and amortization
 
 
117,570
 
 
 
104,263
 
Amortization of debt issuance costs
 
 
1,725
 
 
 
1,712
 
Accretion of asset retirement obligation
 
 
4,960
 
 
 
3,472
 
Change in fair value of derivative instruments
 
 
(2,253
 
 
(2,277
)
Share based compensation
 
 
6,747
 
 
 
15,815
 
Amortization of deferred gains on sales of property interests
 
 
(707
)
 
 
(745
)
Amortization of deferred gain on railroad incentives
 
 
 
 
 
(154
)
Gain on sale of fixed assets, net
 
 
(2,200
)
 
 
(621
)
Loss on settlement of asset retirement obligation
 
 
634
 
 
 
322
 
Provision for non-recoupable advance royalties
 
 
562
 
 
 
469
 
Minority interest
 
 
(155
 
 
 
Deferred income taxes
 
 
(2,211
 
 
7,189
 
Other
 
 
267
 
 
 
628
 
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
Trade accounts receivable
 
 
(23,562
)
 
 
(25,307
)
Notes and other receivables
 
 
(1,429
 
 
3,664
 
Inventories
 
 
9,605
 
 
 
15,620
 
Prepaid expenses and other current assets
 
 
18,376
 
 
 
5,848
 
Other assets
 
 
(15,787
)
 
 
(3,162
)
Trade accounts payable
 
 
16,400
 
 
 
(33,154
Accrued expenses and other current liabilities
 
 
5,215
 
 
 
(17,284
)
Workers’ compensation benefits
 
 
2,262
 
 
 
1,038
 
Postretirement medical benefits
 
 
6,274
 
 
 
6,683
 
Asset retirement obligation
 
 
(4,915
 
 
(1,837
)
Other liabilities
 
 
3,829
 
 
 
1,252
 
Net cash provided by operating activities
 
 
163,252
 
 
 
148,317
 







ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited) — (Continued)
(In thousands)
 
 
 
Nine months ended
 
 
 
September 30,
 
 
 
2007
 
 
2006
 
Investing activities:
 
 
 
 
 
 
 
 
Capital expenditures
 
$
(101,491
)
 
(110,538
)
Proceeds from disposition of property, plant, and equipment
 
 
3,734
 
 
 
1,060
 
Purchase of equity investment
 
 
(403
)
 
 
(228
)
Purchase of net assets of acquired companies
 
 
(43,908
)
 
 
(28,273
)
Collections on note receivable from coal supplier
 
 
 
 
 
3,000
 
Other
 
 
(612
 
 
(501
)
 
 
 
 
 
 
 
 
 
Net cash used in investing activities
 
 
(142,680
)
 
 
(135,480
)
 
 
 
 
 
 
 
 
 
Financing activities:
 
 
 
 
 
 
 
 
Repayments of notes payable
 
 
(20,941
)
 
 
(55,477
)
Proceeds from issuance of long-term debt
 
 
21,400
 
 
 
287,000
 
Repayments on long-term debt
 
 
(15,382
)
 
 
(289,585
)
Increase (decrease) in bank overdraft
 
 
(23,232
)
 
 
18,574
 
Distributions to prior members of ANR Holdings, LLC subsequent to Internal Restructuring
 
 
 
 
 
(2,400
)
Proceeds from exercise of stock options
 
 
594
 
 
 
953
 
 
 
 
 
 
 
 
 
 
Net cash used by financing activities
 
 
(37,561
)
 
 
(40,935
 
 
 
 
 
 
 
 
 
Net decrease in cash and cash equivalents
 
 
(16,989
)
 
 
(28,098
 
 
 
 
 
 
 
 
 
Cash and cash equivalents at beginning of period
 
 
33,256
 
 
 
39,622
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents at end of period
 
$
16,267
 
 
11,524
 
                See accompanying notes to condensed consolidated financial statements.








ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
September 30, 2007
 (In thousands, except percentages and share data)

(1) Business and Basis of Presentation

Organization and Business

Alpha Natural Resources, Inc. and its operating subsidiaries (the “Company”) are engaged in the business of extracting, processing and marketing coal from deep and surface mines, located in the Central and Northern Appalachian regions of the United States, for sale to utility and steel companies in the United States and in international markets.

Basis of Presentation

The accompanying interim condensed consolidated financial statements have been prepared in accordance with U.S generally accepted accounting principles for interim financial reporting. Accounting measurements at interim dates inherently rely on estimates more than at year-end; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Results of operations for the nine months ended September 30, 2007 are not necessarily indicative of the results to be expected for the year ending December 31, 2007. Certain prior period amounts have been reclassified to conform to the current period presentation. These financial statements should be read in conjunction with the audited financial statements and related notes as of and for the year ended December 31, 2006 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission.

 (2) Earnings Per Share

Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share are computed using the treasury method by dividing net income by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the period. Common stock equivalents include the number of shares issuable upon exercise of outstanding options less the number of shares that could have been purchased with the proceeds from the exercise of the options based on the average price of common stock during the period. Restricted shares which have not vested at the end of the reporting period are excluded from the calculation of basic earnings per share. The number of stock options which were not included in the calculation of diluted earnings per share, because to do so would have been antidilutive, in the nine months ended September  30, 2007 and 2006 was 983,890 and 1,118,976, respectively. The number of restricted shares which were not included in the calculation of diluted earnings per share because to do so would have been antidilutive in the nine months ended September  30, 2007 and 2006 was 639,172 and 554,876, respectively.

  The computations of basic and diluted net income per share are set forth below:

 
 
Three Months Ended September 30,
 
 
Nine Months Ended September 30,
 
 
 
2007
 
 
2006
 
 
2007
 
 
2006
 
Numerator:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
8,949
 
 
$
14,544
 
 
$
22,045
 
 
$
64,883
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares — basic
 
 
64,602,4144
 
 
 
64,191,811
 
 
 
64,590,052
 
 
 
64,003,215
 
Dilutive effect of stock options and restricted stock awards
 
 
393,111
 
 
 
22,921
 
 
 
244,987
 
 
 
105,551
 
Weighted average shares — diluted
 
 
64,995,525
 
 
 
64,214,732
 
 
 
64,835,039
 
 
 
64,108,766
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per basic and diluted share:
 
$
0.14
 
 
$
0.23
 
 
$
0.34
 
 
$
1.01
 
 

(3) Inventories
   
Inventories consisted of the following:

 
 
September 30,
   
December 31,
 
 
 
2007
   
2006
 
Raw coal
  $
8,917
    $
8,868
 
Saleable coal
   
53,602
     
53,428
 
Equipment for resale
   
1,719
     
1,774
 
Materials and supplies
   
12,480
     
12,774
 
 
               
Total inventories
  $
76,718
    $
76,844
 



(4) Long-Term Debt
   
  Long-term debt consisted of the following:
 
 
 
September 30,
   
December 31,
 
 
 
2007
   
2006
 
Term loan
  $
245,625
    $
247,500
 
10% Senior notes due 2012
   
175,000
     
175,000
 
Capital lease obligations
   
903
     
1,510
 
Gallatin project financing
   
8,500
     
 
Other
   
700
     
700
 
Total long-term debt
   
430,728
     
424,710
 
Less current portion
   
3,154
     
3,254
 
Long-term debt, net of current portion
  $
427,574
    $
421,456
 

    On June 28, 2007, the Company’s subsidiaries, Alpha NR Holding, Inc. (“Holdings”) and Alpha Natural Resources, LLC (“ANR LLC”), entered into an amendment and consent (the “Amendment”) to the Credit Agreement, dated as of October 26, 2005 (as amended, the “Credit Agreement”), among Holdings, ANR LLC (as borrower), the lenders and issuing banks party thereto from time to time, and Citicorp North America, Inc., as administrative agent and as collateral agent for the lenders and issuing banks. The Amendment amended the Credit Agreement to, among other things, permit the merger of Holdings into its direct parent, the Company.  The Company assumed the obligations of Holdings under the Credit Agreement and related guaranty and collateral agreement and became a parent guarantor of the $175,000 10% Senior Notes due 2012 co-issued by ANR LLC and Alpha Natural Resources Capital Corp in 2004 (the “Senior Notes”). The Amendment also increased the maximum amount of permitted receivables financing from $75,000 to $150,000.

The Credit Agreement and the Senior Notes each place restrictions on the ability of ANR LLC and its subsidiaries to make distributions or loans to the Company. At September 30, 2007, ANR LLC had net assets of $358,958 and, except for allowable distributions for the payment of income taxes, administrative expenses and, in certain circumstances, dividends or repurchases of common stock of the Company, the net assets of ANR LLC are restricted.

All of the Company borrowings under the Credit Agreement are at a variable rate, so the Company is exposed to the effect of rising interest rates. As of September 30, 2007, the Company has a $245,625 term loan outstanding with a variable interest rate based upon the 3-month London Interbank Offered Rate (“LIBOR”) (5.23% at September 30, 2007) plus the applicable margin (1.75%, at September 30, 2007). To reduce the Company's exposure to rising interest rates, effective May 22, 2006, the Company entered into a pay-fixed, receive variable interest rate swap on the notional amount of $233,125 for a period of approximately six and one-half years. In effect, this swap converted the variable interest rates based on LIBOR to a fixed interest rate of 5.59% plus the applicable margin defined in the debt agreement for a portion of our term loan. The Company accounts for the interest rate swap as a cash flow hedge and changes in fair value of the swap are recorded to other comprehensive income (loss). The critical terms of the swap and the underlying debt instrument that it hedges coincide, resulting in no hedge ineffectiveness being recognized in the income statement during the quarter ended September 30, 2007.  The fair value of the swap at September 30, 2007 is an obligation of $8,740 ($6,577 net of tax) and is reflected in other liabilities in the consolidated balance sheet. As interest expense is accrued on the debt obligation, amounts in accumulated other comprehensive loss related to the derivative hedging instrument are reclassified into earnings to obtain a net cost on the debt obligation of 5.59% plus the applicable margin.

Gallatin Materials, LLC (“Gallatin”), the Company’s subsidiary, entered into a non-recourse senior loan agreement with Nedbank on December 28, 2006 to provide phase one project financing for the construction of assets in the amount of $20,600 at an interest rate based upon the 3-month London Interbank Offered Rate (“LIBOR”) plus an applicable margin of 3.5% at September 30, 2007.  The final maturity date is April 30, 2016. During the third quarter Gallatin borrowed $8,500 under this credit agreement.

(5) Asset Retirement Obligation

     At September 30, 2007 and December 31, 2006, the Company has recorded asset retirement obligation accruals for mine reclamation and closure costs totaling $91,870 and $77,292, respectively. The portion of the costs expected to be incurred within a year in the amounts of $7,812 and $7,797 at September 30, 2007 and December 31, 2006, respectively, are included in accrued expenses and other current liabilities. On June 29, 2007, the Company acquired certain coal mining assets and assumed certain obligations in West Virginia from Arch Coal, which included asset retirement obligations of $12,107.
 
  These regulatory obligations are secured by surety bonds in the amount of $145,602 at September 30, 2007 and $138,013 at December 31, 2006. Changes in the reclamation obligation were as follows:

 
 
 
 
 
Total asset retirement obligation at December 31, 2006
 
$
77,292
 
Accretion for the period
 
 
4,961
 
Sites added during the period
 
 
1,828
 
Expenditures for the period
 
 
(4,916
)
Change in estimates during the period
 
 
598
 
Acquisition during the period
 
 
12,107
 
Total asset retirement obligation at September  30, 2007
 
$
91,870
 

 
(6) Share-Based Compensation Awards

      Stock option activity for the nine months ended September 30, 2007 is summarized in the following table:

 
 
 
 
 
 
 
 
 
 
Weighted-
 
 
 
 
 
 
 
Weighted-
 
 
Average
 
 
 
 
 
 
 
Average
 
 
Remaining
 
 
 
Number of
 
 
Exercise
 
 
Contract
 
 
 
Shares
 
 
Price
 
 
Life (Years)
 
Outstanding at December 31, 2006
 
 
1,137,398
 
 
$
16.64
 
 
 
 
 
Forfeited/Cancelled
 
 
(114,841
)
 
 
15.57
 
 
 
 
 
Exercised
   
(36,639
)
   
16.15
         
Outstanding at September  30, 2007
 
 
985,918
 
 
$
16.78
 
 
 
7.30
 
                         
Exercisable at September  30, 2007
 
 
358,955
 
 
$
16.89
 
 
 
7.30
 

    The aggregate intrinsic value of options outstanding at September 30, 2007 was $6,359 and the aggregate intrinsic value of exercisable options was $2,276. The total intrinsic value of options exercised during the three months ended September 30, 2007 and 2006 was $130 and $0, respectively, and for the nine months ended September 30, 2007 and 2006 was $200 and $243, respectively.  Cash received from the exercise of stock options during the three months ended September 30, 2007 and 2006 was $473 and $0, respectively, and $592 and $953 during the nine months ended September 30, 2007 and 2006, respectively. As of September 30, 2007, $3,485 of unrecognized compensation cost related to stock options is expected to be recognized as expense over a weighted-average period of 2.27 years.
 
    
Restricted Stock Awards

 Non-vested share award activity for the nine months ended September 30, 2007 is summarized in the following table:

 
 
 
 
 
 
Weighted-
 
 
 
 
 
 
 
Average
 
 
 
Number of
 
 
Grant Date
 
 
 
Shares
 
 
Fair Value
 
Non-vested shares outstanding at December 31, 2006
 
 
471,341
 
 
$
21.34
 
Granted
 
 
610,102
 
 
 
12.79
 
Vested
 
 
(125,925
)
 
 
21.04
 
Forfeited
 
 
(73,387
 
 
15.60
 
Non-vested shares outstanding at September  30, 2007
 
 
882,131
 
 
$
15.92
 

The fair value of non-vested share awards is estimated based on the average of the high and low market stock price on the date of grant, and, for purposes of expense recognition, the total number of awards expected to vest is adjusted for estimated forfeitures. As of September 30, 2007, there was $9,675 of unamortized compensation cost related to non-vested shares, which is expected to be recognized as expense over a weighted-average period of 1.86 years.
 
Performance Units

2007 Award
 
The Company granted 377,247 performance share awards during the first nine months of 2007, of which 334,344 remain outstanding as of September 30, 2007. Recipients of these awards can receive shares of the Company's common stock at the end of a performance period which ends on December 31, 2009, based on the Company's actual performance against pre-established operating income goals, strategic goals, and total shareholder return goals. In order to receive the shares, the recipient must also be employed by the Company on the vesting date. The performance share awards represent the number of shares of common stock to be awarded based on the achievement of targeted performance and may range from 0 percent to 150 percent of the targeted amount. The grant date fair value of the awards related to operating income targets is based on the closing price of the Company's common stock on the New York Stock Exchange on the grant date of the award and is being amortized over the performance period. The awards related to strategic goals do not meet the criteria for grant date pursuant to SFAS No. 123R and the Company has assessed the likelihood of achieving the performance goal as not probable at September 30, 2007. The fair value of the awards related to total shareholder return targets is based upon a Monte Carlo simulation and is being amortized over the performance period. The Company reassesses at each reporting date whether achievement of each of the performance conditions is probable, as well as estimated forfeitures, and adjusts the accruals of compensation expense as appropriate. At September 30, 2007, the Company has assessed the operating income and total shareholder return targets as probable of achievement. As of September 30, 2007, there was $3,615 of unamortized compensation cost related to the 2007 performance share awards which is expected to be recognized over the period ending December 31, 2009.

Share-based compensation expense measured in accordance with SFAS No. 123R totaled $2,683 ($2,019 on a net-of-tax basis, or $0.03 per basic and diluted share) and $5,870 ($5,138 on a net-of-tax basis, or $0.08 per basic and diluted share) for the three months ended September 30, 2007 and 2006, respectively.  Share-based compensation expense measured in accordance with SFAS No. 123R totaled $6,748 ($5,079 on a net-of-tax basis, or $0.08 per basic and diluted share) and $15,815 ($14,143 on a net-of-tax basis, or $0.22 per basic and diluted share) for the nine months ended September 30, 2007 and 2006, respectively.

Approximately 60% of share-based compensation expense is reported as selling, general and administrative expenses, approximately 40% is reported as a component of cost of sales, and both are included in the Corporate and Eliminations category for segment reporting purposes (Note 10).  At September 30, 2007, approximately $127 of stock-based compensation costs was capitalized as a component of inventories. Under SFAS No. 123R, the Company is required to report the benefits of income tax deductions that exceed recognized compensation as cash flow from financing activities. Such excess tax benefits were insignificant for the periods ended September 30, 2007 and 2006.
-8-

 
(7) Derivative Financial Instruments

Derivative financial instruments are accounted for in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 requires all derivative financial instruments to be reported on the balance sheet at fair value. Changes in fair value are recognized either in earnings or equity, depending on whether the transaction qualifies for hedge accounting and if so, the nature of the underlying exposure being hedged and how effective the derivatives are at offsetting price movements in the underlying exposure.

The Company accounts for certain forward sale and forward purchase contracts that do not qualify under the “normal purchase and normal sale” exception of SFAS No. 133 as derivatives and records these contracts as assets or liabilities at fair value. These contracts do not currently qualify for hedge accounting. Accordingly, changes in fair value for forward sales and forward purchase contracts have been recorded in revenue and cost of sales, respectively. At September 30, 2007, the Company had unrealized gains (losses) on open sales and open purchase contracts of $2,012 and ($431), respectively. These amounts are recorded in prepaid expenses and other current assets and accrued expenses and other current liabilities, respectively.

The Company has utilized interest rate swap agreements to modify the interest characteristics of a portion of the Company's outstanding debt. The swap agreements essentially convert variable-rate debt to fixed-rate debt and have been designated as cash flow hedges.

The Company is also exposed to the risk of fluctuations in cash flows related to its purchase of diesel fuel. The Company has entered into two financial diesel fuel swap agreements to reduce the volatility in the price of diesel fuel for its operations for the last six months of 2007. The diesel fuel swap agreements are not designated as a hedge for accounting purposes, and therefore the changes in the fair value for these contracts have been recorded in cost of sales. The unrealized gain or loss is recorded in other current assets or other current liabilities, respectively, depending upon the market value of the swap agreement.

Approximately 2,000 gallons or 29 percent of the Company's remaining anticipated 2007 fuel usage has been fixed with the swap agreements.  At September 30, 2007, the Company had unrealized gains on open purchased contracts of $1,069. This amount was recorded in other current assets in the consolidated balance sheet at September 30, 2007.

 (8) Postretirement Benefits Other Than Pensions

The following table details the components of the net periodic benefit cost for the Company’s retiree medical plan (the Plan):

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
Nine Months Ended
 
 
 
September 30,
 
 
September 30,
 
 
 
2007
 
 
2006
 
 
2007
 
 
2006
 
Service cost
 
$
835
 
 
$
960
 
 
$
2,331
 
 
$
2,880
 
Interest cost
 
 
763
 
 
 
706
 
 
 
2,289
 
 
 
2,119
 
Amortization of net actuarial (gain) or loss
 
 
 
 
 
47
 
 
 
 
 
 
140
 
Amortization of prior service cost
 
 
583
 
 
 
568
 
 
 
1,750
 
 
 
1,704
 
Net periodic benefit cost
 
$
2,181
 
 
$
2,281
 
 
$
6,370
 
 
$
6,843
 

Employer contributions for postretirement medical benefits paid for the nine months ended September 30, 2007 and 2006 were $95 and $0, respectively. Employee contributions are not expected to be made and the Plan is unfunded.

Two of the Company’s subsidiaries are required to make contributions to the 1974 UMWA Pension Plan and Trust and/or the 1993 UMWA Benefit Plan.  The contributions that the Company made to these plans were $345 and $7 for the quarters ended September 30, 2007 and 2006, respectively, and $1,080 and $22 for the nine months ended September 30, 2007 and 2006, respectively.
 
(9) Related Party Transactions as of December 31, 2006

The Company had the following receivable balances from affiliated parties as of December 31, 2006:

 
 
 
 
 
 
 
 
 
December 31,
 
 
 
 
2006
 
AMCI
 
 
$
5,097
 
Robindale Energy & Subsidiary
 
 
 
11
 
Total
 
 
$
5,108
 

AMCI is no longer a related party. During 2006, AMCI sold a significant number of shares of Company common stock to reduce its holdings to below five percent and its designee on the Company's Board of Directors resigned effective January 3, 2007. Also, Robindale Energy is no longer a related party since its 50% owner is no longer the Company's Executive Vice President. As of December 31, 2006, $5,097 of receivables from AMCI is included in trade accounts receivable, net. The majority of the AMCI receivables as of December 31, 2006 relate to coal sales transactions in the normal course of business.

 
(10) 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 the Central Appalachian and Northern Appalachian regions. The Company has one reportable segment: Coal Operations, which as of September 30, 2007, consisted of 33 underground mines and 25 surface mines located in Central Appalachia and Northern Appalachia. Coal Operations also includes the Company's coal sales function, which markets the Company's Appalachian coal to domestic and international customers. The All Other category includes the Company's equipment sales and repair operations, as well as other ancillary business activities, including terminal services, coal and environmental analysis services, leasing of mineral rights, road construction and lime processing businesses.  Also included in the All Other category are minimal rights owned by our subsidiaries which are leased to subsidiaries in the Coal Operations segment and to third parties.  The Corporate and Eliminations category includes general corporate overhead and the elimination of intercompany transactions. The revenue elimination amount represents inter-segment revenues. The Company evaluates the performance of its segment based on EBITDA, which the Company defines as net income plus interest expense, income tax expense, depreciation, depletion and amortization, less interest income.
Operating segment results for the three months ended September 30, 2007 and segment assets as of September 30, 2007 were as follows:

 
 
 
 
 
 
 
 
 
 
Corporate
 
 
 
 
Coal
 
All
 
and
 
 
 
 
Operations
 
Other
 
Eliminations
 
Consolidated
Revenues
 
$
500,823
 
 
$
15,367
 
 
$
(9,051
)
 
$
507,139
 
Depreciation, depletion, and amortization
 
 
42,175
 
 
 
1,337
 
 
 
414
 
 
 
43,926
 
EBITDA
 
 
76,931
 
 
 
2609
 
 
 
(14,466
)
 
 
65,074
 
Capital expenditures
 
 
20,908
 
 
 
8,856
 
 
 
72
 
 
 
29,836
 
Total assets
 
 
1,316,333
 
 
 
107,671
 
 
 
(252,453
)
 
 
1,171,551
 
 
Operating segment results for the nine months ended September 30, 2007 were as follows:

 
 
 
 
 
 
 
 
 
 
Corporate
 
 
 
 
Coal
 
All
 
and
 
 
 
 
Operations
 
Other
 
Eliminations
 
Consolidated
Revenues
 
$
1,353,143
 
 
$
43,913
 
 
$
(28,280
)
 
$
1,368,776
 
Depreciation, depletion, and amortization
 
 
113,023
 
 
 
3,599
 
 
 
948
 
 
 
117,570
 
EBITDA
 
 
210,989
 
 
 
5,576
 
 
 
(41,691
)
 
 
174,874
 
Capital expenditures
 
 
83,077
 
 
 
17,287
 
 
 
1,127
 
 
 
101,491
 

Operating segment results for the three months ended September 30, 2006 and segment assets as of September 30, 2006 were as follows:

 
 
 
 
 
 
 
 
 
 
Corporate
 
 
 
 
Coal
 
All
 
and
 
 
 
 
Operations
 
Other
 
Eliminations
 
Consolidated
Revenues
 
$
467,336
 
 
$
20,395
 
 
$
(12,613
)
 
$
475,118
 
Depreciation, depletion, and amortization
 
 
34,705
 
 
 
1,437
 
 
 
280
 
 
 
36,422
 
EBITDA
 
 
79,626
 
 
 
3,454
 
 
 
(16,791
)
 
 
66,289
 
Capital expenditures
 
 
26,355
 
 
 
183
 
 
 
 
 
 
26,538
 
Total assets
 
 
1,116,412
 
 
 
88,843
 
 
 
(157,596
 
 
1,047,659
 

 
Operating segment results for the nine months ended September 30, 2006 were as follows:

 
 
 
 
 
 
 
 
 
 
Corporate
 
 
 
 
Coal
 
All
 
and
 
 
 
 
Operations
 
Other
 
Eliminations
 
Consolidated
Revenues
 
$
1,429,510
 
 
$
55,220
 
 
$
(30,961
)
 
$
1,453,769
 
Depreciation, depletion, and amortization
 
 
97,837
 
 
 
4,851
 
 
 
1,575
 
 
 
104,263
 
EBITDA
 
 
267,337
 
 
 
8,348
 
 
 
(52,215
)
 
 
223,470
 
Capital expenditures
 
 
103,227
 
 
 
6,208
 
 
 
1,103
 
 
 
110,538
 
 
Reconciliation of total segment EBITDA to net income:
 
 
 
Three Months Ended
   
Nine Months Ended
 
 
 
September 30,
   
September 30,
 
 
 
2007
   
2006
   
2007
   
2006
 
Total segment EBITDA
  $
65,074
    $
66,289
    $
174,874
    $
223,470
 
Interest expense
    (10,101 )     (10,735 )     (30,124 )     (31,798 )
Interest income
   
265
     
156
     
1,359
     
514
 
Income tax expense
    (2,363 )     (4,744 )     (6,494 )     (23,040 )
Depreciation, depletion and amortization
    (43,926 )     (36,422 )     (117,570 )     (104,263 )
Net income
  $
8,949
    $
14,544
    $
22,045
    $
64,883
 

The Company markets produced, processed, and purchased coal to customers in the United States and in international markets. Export revenues totaled $207,743 and $507,612 or approximately 41% and 37%, respectively, of total revenues for each of the three months and nine months ended September 30, 2007. Export revenues were $164,828 and $523,277 or approximately 35% and 36%, respectively, of total revenues for the three and nine months ended September 30, 2006.

 
-11-

 
(11) Commitments and Contingencies
 
(a) Guarantees and Financial Instruments with Off-balance Sheet Risk

     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 and performance or surety bonds. No liabilities related to these arrangements are reflected in the Company's condensed consolidated balance sheets. Management does not expect any material losses to result from these guarantees or off-balance sheet financial instruments. The amount of bank letters of credit outstanding as of September 30, 2007 was $92,195. The amount of surety bonds currently outstanding related to the Company's reclamation obligations is presented in Note 5 to the condensed consolidated financial statements. The Company has provided guarantees for equipment financing obtained by certain of its contract mining operators totaling approximately $1,117. The estimated fair value of these guarantees is not significant.

 (b) Litigation

The Company is a party to a number of legal proceedings incident to its normal business activities. While we cannot predict the outcome of these proceedings, we do not believe that any liability arising from these matters individually or in the aggregate should have a material impact upon the consolidated cash flows, results of operations or financial condition of the Company.     

Nicewonder Litigation            

The Affiliated Construction Trades Foundation brought an action against the West Virginia Department of Transportation, Division of Highways (“WVDOH”) and our wholly-owned indirect subsidiary Nicewonder Contracting, Inc. ("NCI") in the United States District Court in the Southern District of West Virginia. The plaintiff sought a declaration that the contract between NCI and the State of West Virginia related to NCI's road construction project was illegal as a violation of applicable West Virginia and federal competitive bidding and prevailing wage laws.  The plaintiff also sought an injunction prohibiting performance of the contract but has not sought monetary damages. 

On September 5, 2007, the Court ruled that the WVDOH and the Federal Highway Administration (who is now a party to the suit) could not exempt a contractor, like NCI, from paying the prevailing wages as required by the Davis-Bacon Act.  The most likely remedy is a directive that the contract be renegotiated for such payment.  In that renegotiation, the WVDOH has committed to agree and NCI has a contractual right to insist, that additional costs resulting from the order will be reimbursed by WVDOH and as such neither NCI nor the Company believe, at this time, that they have any monetary expense from this ruling.  As of September 30, 2007, the Company recorded a $5.9 million long-term receivable for the recovery of these costs from WVDOH and a $5.9 million long-term liability for the obligations under the ruling.

 
(12) Income Taxes

A reconciliation of the statutory federal income tax expense at 35% to income before income taxes and minority interest and the actual income tax expense is as follows:

 
 
Three Months Ended
 
 
Nine Months Ended
 
 
 
September 30,
 
 
September 30,
 
 
 
2007
 
 
2006
 
 
2007
 
 
2006
 
Federal statutory income tax expense
 
$
3,936
 
 
$
6,750
 
 
$
9,935
 
 
$
30,773
 
Increases (reductions) in taxes due to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage depletion allowance
 
 
(4,476
)
 
 
(5,728
)
 
 
(8,283
)
 
 
(15,669
)
Extraterritorial income exclusion
 
 
 
 
 
(536
)
 
 
 
 
 
(1,418
)
Deduction for domestic production activities
 
 
24
 
 
 
133
 
 
 
(4
)
 
 
(133
)
State taxes, net of federal tax impact
 
 
(34
 
 
840
 
 
 
254
 
 
 
2,611
 
Non-deductible share-based compensation
 
 
85
 
 
 
1,369
 
 
 
470
 
 
 
3,598
 
Change in valuation allowance
 
 
2,623
 
 
 
1,472
 
 
 
3,765
 
 
 
2,461
 
Other, net
 
 
205
 
 
 
444
 
 
 
357
 
 
 
817
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense
 
$
2,363
 
 
$
4,744
 
 
$
6,494
 
 
$
23,040
 

The Company has concluded that it is more likely than not that deferred tax assets, net of valuation allowances, currently recorded will be realized. The amount of the valuation allowance takes into consideration the Alternative Minimum Tax system as required by SFAS No. 109. The Company monitors the valuation allowance each quarter and makes adjustments to the allowance as appropriate.
 
The Company adopted the provisions of Financial Standards Accounting Board Interpretation No. 48 Accounting for Uncertainty in Income Taxes (“FIN 48”) an interpretation of FASB Statement No. 109 (“SFAS 109”) on January 1, 2007. As a result of the adoption of FIN 48, the Company recognized no adjustment in the unrecognized income tax benefits that existed at December 31, 2006. On January 1, 2007, the Company had approximately $1,754 of unrecognized tax benefits accrued and of this amount $1,437 would affect the effective tax rate if recognized. The Company does not anticipate that total unrecognized benefits recorded as of January 1, 2007 will significantly change during the twelve months following September 30, 2007.
 
The Company's policy is to classify interest and penalties related to uncertain tax positions as part of income tax expense. As of September 30, 2007, the Company had not recorded any accrued interest expense since no additional cash taxes are projected to be due as a result of the uncertain tax positions.

Tax years 2005 and 2006 remain open to federal and state examination. The Internal Revenue Service initiated a corporate income tax audit during first quarter 2007 for the Company's 2005 tax year.  The audit is still ongoing. No adjustments have been proposed to date, and the Company expects the examination to last through the first quarter of 2008.



(13) Comprehensive Income

 Total comprehensive income is as follows for the three months ended September 30, 2007:
 
Net Income
 
$
8,949
 
Change in fair value of cash flow hedge, net of tax effect of $(1,606) for the period
 
 
(4,885
)
Change in SFAS No. 158 adjustment related to postretirement medical and black lung obligations, net of tax effect of $44 for the period
 
 
133
 
Total comprehensive income
 
$
4,197
 

Total comprehensive income is as follows for the nine months ended September 30, 2007:
 
Net Income
 
$
22,045
 
Change in fair value of cash flow hedge, net of tax effect of $(375) for the period
 
 
(1,142
)
Change in SFAS No. 158 adjustment related to postretirement medical and black lung obligations, net of tax effect of $341 for the period
 
 
1,028
 
Total comprehensive income
 
$
21,931
 
 

The following table summarizes the components of accumulated other comprehensive loss at September 30, 2007:
 
Fair value of cash flow hedge, net of tax effect of $2,162
 
$
6,578
 
SFAS No. 158 adjustment related to black lung obligations, net of tax effect of $118
 
 
360
 
SFAS No. 158 adjustment related to postretirement medical obligations, net of tax effect of $4,006
 
 
12,195
 
Total accumulated other comprehensive loss
 
$
19,133
 


 (14) Mingo Logan Acquisition
 
    On June 29, 2007, the Company completed the acquisition of certain coal mining assets in western West Virginia from Arch Coal, Inc. known as Mingo Logan for $43,890 including working capital and assumed liabilities.  The Mingo Logan purchase consists of coal reserves, two mines and a load-out and processing plant and will be managed by Cobra Natural Resources, LLC, an indirect wholly-owned subsidiary of the Company.  The Company plans to finalize the purchase price allocation in the 4th quarter of 2007.
 
    The following table summarizes the current estimates of fair values of the assets acquired and liabilities assumed at the date of acquisition:

Current assets
  $
9,555
 
Property, plant, and equipment
   
42,324
 
Intangible assets
   
4,218
 
    Total assets acquired
   
56,097
 
Asset retirement obligation
    (12,107 )
Other liabilities
    (100 )
    Total liabilities assumed
    (12,207 )
    Net assets acquired
  $
43,890
 
 
    Estimates of fair value are subject to adjustment based upon completion of an independent third-party valuation.



(15) New Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measures” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measures required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company is currently reviewing the provisions of SFAS 157 to determine the impact on the Company's financial statements.
 
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to expand the use of fair value measurements in accounting for financial instruments. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently reviewing the provisions of SFAS 159 to determine the impact on the Company's financial statements.

On January 1, 2007, the Company adopted the provisions of FIN 48, which clarifies the accounting for uncertainty in income tax positions. This interpretation requires the Company to recognize in the consolidated financial statements only those tax positions determined to be more likely than not of being sustained upon examination, based on the technical merits of the positions. The adoption of FIN 48 did not result in an adjustment to the Company's financial statements.




(16) Supplemental Guarantor/Non-Guarantor Financial Information

On June 28, 2007, Holdings was merged into the Company and the Company assumed the obligations of Holdings under the Credit Agreement and related guaranty and collateral agreement and became a parent guarantor of the Senior Notes. The payment obligations under the Senior Notes, issued jointly by our subsidiary Alpha Natural Resources, LLC and its wholly-owned subsidiary Alpha Natural Resource Capital Corp. in 2004, are unsecured, but are guaranteed fully and unconditionally on a joint and several basis by the Company and all its subsidiaries other than the issuers of the notes and our recently formed subsidiary, Gallatin Materials LLC.  The following financial information sets forth separate financial information with respect to the Company, the issuers, the guarantor subsidiaries and the non-guarantor subsidiary. The principal elimination entries eliminate investments in subsidiaries and certain intercompany balances and transactions.

    Unaudited Supplemental Condensed Consolidating Statement of Income for the Three Months Ended September 30, 2007:
 
   
Parent
   
Co-Issuers
   
Guarantors
   
Non-Guarantor
   
Eliminations
   
Consolidated
 
Revenues:
                                   
Coal revenues
  $
-
    $
-
    $
438,618
    $
-
    $
-
    $
438,618
 
Freight and handling revenues
   
-
     
-
     
58,384
     
-
     
-
     
58,384
 
Other revenues
   
-
     
-
     
10,137
     
-
     
-
     
10,137
 
  Total revenues
   
-
     
-
     
507,139
     
-
     
-
     
507,139
 
Cost and expenses:
                                               
Cost of coal sales
   
-
     
-
     
361,704
     
-
     
-
     
361,704
 
Freight and handling costs
   
-
     
-
     
58,384
     
-
     
-
     
58,384
 
Cost of other revenues
   
-
     
-
     
7,132
     
728
     
-
     
7,860
 
Depreciation, depletion and amortization
   
-
     
-
     
43,924
     
2
     
-
     
43,926
 
Selling, general and administrative expenses
   
177
     
1,693
     
12,566
     
30
     
-
     
14,466
 
  Total costs and expenses
   
177
     
1,693
     
483,710
     
760
     
-
     
486,340
 
                                                 
Income (loss) from operations
    (177 )     (1,693 )    
23,429
      (760 )    
-
     
20,799
 
Other income (expenses):
                                               
Interest expense
   
-
      (10,255 )     (41 )     (15 )    
210
      (10,101 )
Interest income
   
38
     
130
     
291
     
16
      (210 )    
265
 
Equity earnings
   
11,451
     
23,269
      (691 )    
-
      (34,029 )    
-
 
Miscellaneous income, net
   
-
     
-
     
281
     
-
     
-
     
281
 
  Total other income (expense), net
   
11,489
     
13,144
      (160 )    
1
      (34,029 )     (9,555 )
Income (loss) before income taxes
 and minority interest
   
11,312
     
11,451
     
23,269
      (759 )     (34,029 )    
11,244
 
Income tax expense
   
2,363
     
-
     
-
     
-
     
-
     
2,363
 
Minority interest
   
-
     
-
     
-
      (68 )    
-
      (68 )
Net income (loss)
  $
8,949
    $
11,451
    $
23,269
    $ (691 )   $ (34,029 )   $
8,949
 




 Unaudited Supplemental Condensed Consolidating Balance Sheet at September 30, 2007:
 
   
Parent
   
Co-Issuers
   
Guarantors
   
Non-Guarantor
   
Eliminations
   
Consolidated
 
Assets:
                                   
Current assets:
                                   
Cash and cash equivalents
  $
-
    $
43,669
    $ (30,847 )   $
3,445
    $
-
    $
16,267
 
Trade accounts receivable, net
   
-
     
-
     
194,599
     
-
     
-
     
194,599
 
Notes and other receivables
   
2,568
     
67,494
     
16,300
     
-
      (80,403 )    
5,959
 
Inventories
   
-
     
-
     
76,718
     
-
     
-
     
76,718
 
Due from affiliates
   
-
     
-
     
405,394
     
17
      (405,411 )    
-
 
Prepaid expenses and other current assets
   
3,276
     
757
     
25,746
     
64
           
29,843
 
      Total current assets
   
5,844
     
111,920
     
687,910
     
3,526
      (485,814 )    
323,386
 
Property, plant, and equipment, net
   
-
     
-
     
648,622
     
16,412
             
665,034
 
Goodwill
   
-
     
-
     
20,547
     
-
     
-
     
20,547
 
Other intangibles, net
   
-
     
-
     
6,638
     
3,244
     
-
     
9,882
 
Deferred income taxes
   
89,269
     
6,286
     
-
     
-
     
-
     
95,555
 
Other assets
   
365,776
     
1,016,385
     
34,779
     
899
      (1,360,692 )    
57,147
 
Total assets
  $
460,889
    $
1,134,591
    $
1,398,496
    $
24,081
    $ (1,846,506 )   $
1,171,551
 
                                                 
Liabilities and Stockholder's/Member's Equity
                                         
Current liabilities:
                                               
Current portion of long-term debt
  $
-
    $
14,500
    $
67,797