424B4
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PROSPECTUS
File Pursuant to Rule 424(b)(4)
Registration No. 333-129030
12,316,110 Shares
(ALPHA NATURAL RESOURCES LOGO)
Alpha Natural Resources, Inc.
Common Stock
 
        The selling stockholders named in this prospectus are selling 12,316,110 shares of our common stock. We will not receive any proceeds from the sale of the shares in this offering.
      Our common stock is listed on the New York Stock Exchange under the symbol “ANR.” On January 18, 2006, the reported last sale price of our common stock on the New York Stock Exchange was $21.03 per share.
      To the extent that the underwriters sell more than 12,316,110 shares of common stock, the underwriters have the option for a period of 30 days after the date of this prospectus to purchase up to an additional 1,847,417 shares of common stock from the selling stockholders at the public offering price less the underwriting discounts and commissions.
      Investing in our common stock involves risks. See “Risk Factors” beginning on page 20.
                         
            Proceeds, before
    Public offering   Underwriting   expenses, to the
    price   discount   selling stockholders
             
Per Share
  $ 21.03     $ 0.8938     $ 20.1362  
Total
  $ 259,007,793     $ 11,008,139     $ 247,999,654  
      Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
      The underwriters expect to deliver the shares to purchasers on January 24, 2006.
 
Morgan Stanley                                       Citigroup                                UBS Investment Bank

Bear, Stearns & Co. Inc.
  Lehman Brothers
Merrill Lynch & Co.
Davenport & Company LLC
January 18, 2006


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(MAP OF APPALACHIAN COALFIELD)


 

      You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. The selling stockholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted.
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      No action is being taken in any jurisdiction outside the United States to permit a public offering of the common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to those jurisdictions.
      Unless indicated otherwise, the information included in this prospectus assumes no exercise by the underwriters of their over-allotment option to purchase up to 1,847,417 additional shares from the selling stockholders.

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PROSPECTUS SUMMARY
      This summary does not contain all of the information you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire document, including our combined historical and pro forma financial statements and accompanying notes included elsewhere in this prospectus. You should also carefully consider, among other things, the matters discussed under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  
 
      Unless the context otherwise indicates, as used in this prospectus, the terms “Alpha,” “we,” “our,” “us” and similar terms refer to (1) the majority of the Virginia coal operations of Pittston Coal Company, a subsidiary of The Brink’s Company (our “Predecessor”) with respect to periods on and prior to December 13, 2002, (2) ANR Fund IX Holdings, L.P. and Alpha NR Holding, Inc. and subsidiaries on a combined basis with respect to periods from and after December 14, 2002 until the completion of our Internal Restructuring as defined and described below, and (3) Alpha Natural Resources, Inc. and its consolidated subsidiaries with respect to periods from and after the completion of our Internal Restructuring.  
 
      All references to Alpha Natural Resources, Inc., including the business description, operating data and financial data, exclude the former Colorado operations of our NatCoal, LLC and GTTC, LLC subsidiaries (collectively, “NKC”), which were sold to a third party on April 14, 2005 and are accounted for herein as discontinued operations. References to pro forma financial information reflect (1) for statement of operations and other data, the consummation of our Internal Restructuring, 2004 Financings and IPO, as defined and described below under “— Alpha Summary Historical and Pro Forma Financial Data,” and the 2005 Financing and Nicewonder Acquisition as defined and described below under “— Nicewonder Acquisition,” in each case as if these events had occurred on January 1, 2004 and (2) for balance sheet data, the consummation of the 2005 Financing and Nicewonder Acquisition, in each case as if these events had occurred on September 30, 2005. See “Unaudited Pro Forma Financial Information.”  
Alpha Natural Resources
      We are a leading Appalachian coal producer. Our reserves primarily consist of high Btu, low sulfur steam coal that is currently in high demand in U.S. coal markets and metallurgical coal that is currently in high demand in both U.S. and international coal markets. We produce, process and sell steam and metallurgical coal from eight regional business units, which, as of November 1, 2005, are supported by 44 active underground mines, 25 active surface mines and 11 preparation plants located throughout Virginia, West Virginia, Kentucky and Pennsylvania. We are also actively involved in the purchase and resale of coal mined by others, the majority of which we blend with coal produced from our mines, allowing us to realize a higher overall margin for the blended product than we would be able to achieve selling these coals separately.  
 
      Steam coal, which is primarily purchased by large utilities and industrial customers as fuel for electricity generation, accounted for approximately 62% of our coal sales volume in the first nine months of 2005 and 63% of our 2004 coal sales volume. The majority of our steam coal sales volume in the first nine months of 2005 and during 2004 consisted of high Btu (above 12,500 Btu content per pound), low sulfur (sulfur content of 1.5% or less) coal, which typically sells at a premium to lower-Btu, higher-sulfur steam coal. Metallurgical coal, which is used primarily to make coke, a key component in the steel making process, accounted for approximately 38% of our coal sales volume in the first nine months of 2005 and 37% of our 2004 coal sales volume. Metallurgical coal generally sells at a premium over steam coal because of its higher quality and its value in the steelmaking process as the raw material for coke. Under current market conditions, we are able to market a significant portion of our higher quality steam coal as metallurgical coal.  
 
      During the first nine months of 2005, we sold a total of 18.9 million tons of steam and metallurgical coal and generated revenues of $1,127.5 million, EBITDA of $88.4 million and net income of $8.8 million.  

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We define and reconcile EBITDA, and explain its importance, in note (1) to the table under “— Alpha Summary Historical and Pro Forma Financial Data.” In 2004, we sold a total of 25.3 million tons of steam and metallurgical coal and generated revenues of $1,252.7 million, EBITDA of $99.5 million and net income of $20.0 million. Our coal sales during the first nine months of 2005 consisted of 14.9 million tons of produced and processed coal, including 1.0 million tons purchased from third parties and processed at our processing plants or loading facilities prior to resale, and 4.0 million tons of purchased coal that we resold without processing. Our coal sales during 2004 consisted of 18.9 million tons of produced and processed coal, including 0.9 million tons purchased from third parties and processed at our processing plants or loading facilities prior to resale, and 6.4 million tons of purchased coal that we resold without processing. We sold a total of 5.0 million tons of purchased coal during the first nine months of 2005 and 7.3 million tons in 2004, of which approximately 70% and 81%, respectively, was blended with coal produced from our mines prior to resale. Approximately 44% of our sales revenue in the first nine months of 2005 and 47% of our sales revenue in 2004 was derived from sales made outside the United States, primarily in Japan, Canada, Brazil, Korea and several countries in Europe.  
      As of July 31, 2005, on a pro forma basis giving effect to the Nicewonder Acquisition described below, we owned or leased 518.9 million tons of proven and probable coal reserves. Of our total proven and probable reserves, approximately 90% are low sulfur reserves, with approximately 60% having sulfur content below 1.0%. Approximately 92% of our total proven and probable reserves have a high Btu content. We believe that our total proven and probable reserves will support current production levels for more than 20 years.
Nicewonder Acquisition
      On October 26, 2005, we completed the acquisition of certain privately held coal reserves and operations in southern West Virginia and southwestern Virginia (the “Nicewonder Acquisition”) for an aggregate purchase price of $315.2 million, consisting of cash at closing in the amount of $35.2 million, a cash tax payment of $1.9 million to be made to the sellers in April 2006, estimated transaction costs of $3.9 million, $221.0 million principal amount of promissory installment notes of one of our indirect, wholly owned subsidiaries, of which $181.1 million was paid on November 2, 2005 and $39.9 million was paid on January 13, 2006, and 2,180,233 shares of our common stock valued at approximately $53.2 million for accounting purposes. For this purpose, the value of the common stock issued was based on the average closing prices of our common stock for the five trading days surrounding October 20, 2005, the date the number of shares to be issued under the terms of the acquisition agreement became fixed without subsequent revision. The final cash purchase price is subject to certain working capital and other adjustments. The Nicewonder Acquisition consisted of the purchase of the outstanding capital stock of White Flame Energy, Inc., Twin Star Mining, Inc. and Nicewonder Contracting, Inc., the equity interests of Powers Shop, LLC and Buchanan Energy, LLC and substantially all of the assets of Mate Creek Energy of W. Va., Inc. and Virginia Energy Company, and the acquisition of Premium Energy, Inc. by merger (together referred to as the “Nicewonder Coal Group”). In connection with the Nicewonder Acquisition, we also agreed to make royalty payments to the former owners of the acquired companies in the amount of $0.10 per ton of coal mined and sold from White Flame Energy’s surface mine no. 10.
      For the fiscal year ended December 31, 2004 and the nine months ended September 30, 2005, the Nicewonder Coal Group produced approximately 3.8 million and 2.9 million tons of coal, respectively. For the fiscal year ended December 31, 2004 and the nine months ended September 30, 2005, the Nicewonder Coal Group generated revenues of approximately $144.6 million and $156.9 million, respectively, and EBITDA of $37.4 million and $51.9 million, respectively. EBITDA for the Nicewonder Coal Group is reconciled in note (1) under “— Nicewonder Summary Historical Financial Data.”
      The assets of the Nicewonder Coal Group include approximately 26.7 million tons of proven and probable reserves as of July 31, 2005, three surface mines and related equipment, as well as a road construction and coal recovery business. As of September 30, 2005, the Nicewonder Coal Group had 394 employees, all of whom were employed on a union-free basis. Don Nicewonder, the former principal owner of the Nicewonder Coal Group, entered into a three-year consulting agreement with Alpha upon closing of

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the acquisition. The operations acquired from the Nicewonder Coal Group constitute a new eighth business unit, although we may eventually integrate these operations into our seven other existing business units.
      On October 26, 2005, in connection with the Nicewonder Acquisition, we entered into a new $525.0 million credit facility (the “2005 Financing”) consisting of a $250.0 million term loan facility and a $275.0 million revolving credit facility. We used the net proceeds of the term loan facility and a portion of the proceeds from drawings under the revolving credit facility to finance the Nicewonder Acquisition and to refinance our then-existing $175.0 million credit facility, which we refer to in this prospectus as our prior credit facility.  
Competitive Strengths
      We believe that the combination of the following competitive strengths distinguishes us from our competitors.  
 
      We provide a comprehensive range of steam and metallurgical coal products that are in high demand. Our reserves enable us to provide customers with coal products that are in high demand — including high Btu, low sulfur steam coal, and low, medium and high volatile metallurgical coal. Steam coal customers value high Btu coal because it fuels electricity generation more efficiently than lower energy content coal. In addition, the demand for clean burning, low sulfur coal has grown significantly since the implementation of sulfur emission restrictions mandated by the Clean Air Act. Metallurgical coal customers require precise coal characteristics to meet their coke production specifications and generally value low volatile metallurgical coal more highly than other categories of metallurgical coal.  
 
      Our flexible mining operations and diversified asset base allow us to manage costs while capitalizing on market opportunities. Our 69 active mines, 11 preparation plants and eight regional business units are supported by flexible and cost-effective use of our mining equipment and personnel. Our mining equipment is interchangeable and can be redirected easily at a relatively low cost, providing us with flexibility to respond to changing geologic, operating and market conditions. The diversity of our portfolio of mines and preparation plants allows us to move resources between existing or new operations and limits our mine concentration risk.  
 
      Our ability to provide customized product offerings creates valuable market opportunities, strengthens our customer relationships and improves profitability. We have a “customer-focused” marketing strategy that, combined with our comprehensive range of coal product offerings and established marketing network, enables us to customize our coal deliveries to a customer’s precise needs and specifications. The products we sell to our customers will often be a blend of internally produced coal and coal we have purchased from third parties, in contrast to the more traditional approach of only offering coal produced from captive mines. We believe our commitment to providing high quality coal products designed to our customers’ specifications enables us to maintain strong customer relationships while maximizing the value of our coal reserves.  
 
      Our primary operating focus is the Appalachian region, the region with the most producer-favorable coal supply and demand dynamics in the United States. Our operations are focused on Central and Northern Appalachia, which accounted for approximately 72% and 28%, respectively, of the coal produced from our mines during 2004. The Appalachian region has produced declining supplies of coal in recent years while regional demand, already the highest in the United States based on tons consumed, is expected to increase due to growth in regional demand for electricity. We believe these trends in Appalachian coal supply and demand, the high quality of Appalachian coal and the lower transportation costs that result from the proximity of Appalachian producers and customers create favorable pricing dynamics that provide us with an advantage over producers from other regions.  
      Our Central Appalachian mining expertise provides us with significant regional growth opportunities. Our focus on the Appalachian region has allowed us to develop expertise in efficiently mining Central

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Appalachian reserves. Furthermore, we have developed both a good understanding of the region’s transportation infrastructure and a favorable reputation with the region’s property owners, coal industry operators and employee base.
      Our comparatively low amount of long-term reclamation and employee-related liabilities provides us with financial flexibility. As of September 30, 2005, on a pro forma basis giving effect to the Nicewonder Acquisition, we had total accrued reclamation liabilities of $48.9 million, self-insured workers’ compensation liabilities of $6.5 million and post-retirement obligations of $22.2 million, and we had no pension liabilities and minimal black lung liabilities. We believe the amount of these liabilities are among the lowest of the publicly-traded U.S. coal producers. In addition, because over 91% of our approximately 3,240 employees are employed by our subsidiaries on a union-free basis as of November 1, 2005, and approximately 95% of our coal production during 2004 was produced from mines operated by union-free employees, we are better able to minimize the types of employee-related liabilities commonly associated with union-represented mines.
      Our management team has extensive coal industry experience and has successfully integrated a number of acquisitions. Our senior executives have, on average, more than 20 years of experience in the coal industry, largely in the Appalachian region, and they have substantial experience in increasing productivity, reducing costs, implementing our marketing strategy and coal blending capabilities, improving safety, and developing and maintaining strong customer and employee relationships. In addition to their operating strengths, the majority of our senior executives have significant experience in identifying, acquiring and integrating acquired coal companies into existing organizations.
Business Strategy
      We believe that we are well-positioned to enhance our position as a leading Appalachian coal producer by continuing to implement our strategy, which consists of the following key components:
      Achieve premium pricing and optimum efficiency in contract fulfillment. We intend to continue to use our diversified operating strategy, coal blending capabilities, market knowledge and strong marketing organization to identify and capitalize on opportunities to generate premium pricing for our coal and to achieve optimum efficiency in fulfillment of coal contracts. As of December 31, 2005, approximately 12%, 54% and 77%, respectively, of our planned production for 2006, 2007 and 2008, including production from the operations we acquired in the Nicewonder Acquisition, was uncommitted and was not yet priced, which we believe provides us with significant price certainty in the short-term while maintaining uncommitted planned production that allows us to take an opportunistic approach to selling our coal.
      Maximize profitability of our mining operations. We continuously reassess our reserves, mines and processing and loading facilities in an effort to determine the optimum operating configuration that maximizes our profitability, efficient use of operating assets and return on invested capital. We intend to continue to optimize the profitability of our mining operations through a series of initiatives that include:
  •  increasing production levels where we determine that such increased production can be profitably achieved;
 
  •  leveraging our product offerings, blending capabilities and marketing organization to realize higher margins from our sales;
 
  •  deploying our resources against the most profitable opportunities available in our asset portfolio;
 
  •  consolidating regional operations and increasing the utilization of our existing preparation plants and loading facilities;
 
  •  maintaining our focus on safety and implementing safety measures designed to keep our workforce injury free; and

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  •  coordinating company-wide purchasing activities with major vendors to provide materials and supplies at lower overall cost.
      Pursue strategic value-creating acquisitions. We have successfully acquired and integrated businesses into our operations, and we intend to continue to expand our business and coal reserves through acquisitions of attractive, strategically positioned assets. Although we intend to concentrate our efforts in Appalachia, where we believe there remain attractive acquisition opportunities, we will continue to evaluate opportunities in other regions that meet our acquisition criteria. We employ what we believe is a disciplined acquisition strategy focused on acquiring coal and coal-related operations and assets at attractive valuations. We believe that our recent acquisition of the Nicewonder Coal Group is consistent with this strategy.
      Maintain a strong safety, labor relations and environmental record. One of our core values is protecting the health and welfare of our employees by designing and implementing high safety standards in the workplace. We also aim to preserve the positive relationship we have developed with our employees. Similarly, we aim to adhere to high standards in protecting and preserving the environment in which we operate.
Risks Related to our Business and Strategy
      Our ability to execute our strategy is subject to the risks that are generally associated with the coal industry. For example, our profitability could decline due to changes in coal prices or coal consumption patterns, as well as unanticipated mine operating conditions, loss of customers, changes in our ability to access our coal reserves and other factors that are not within our control. Furthermore, the heavily regulated nature of the coal industry imposes significant actual and potential costs on us, and future regulations could increase those costs or limit our ability to produce coal.
      We are also subject to a number of risks related to our competitive position and business strategies. For example, our acquisitive business strategy exposes us to the risks involved in consummating and integrating acquisitions, including the risk that in a future acquisition we could assume more long-term liabilities relative to the value of the acquired assets than we have assumed in our previous acquisitions, thereby reducing our competitive strength with regard to our level of long-term liabilities. In addition, our focus on the Central and Northern Appalachian regions exposes us to the risks of operating in these regions, including higher costs of production as compared to other coal-producing regions and more costly and restrictive permitting, licensing and other environmental and regulatory requirements. For additional risks relating to our business and this offering, see “Risk Factors” beginning on page 20 of this prospectus.
Coal Market Outlook
      According to traded coal indices and reference prices, U.S. and international coal demand is currently strong. Coal pricing increased in 2004 and has remained at historically high levels since then in each of our coal production markets. We believe that the current strong fundamentals in the U.S. coal industry result primarily from:
  •  stronger industrial demand following a recovery in the U.S. manufacturing sector, evidenced by the most recent estimate of 3.8% real GDP growth in the third quarter of 2005, as reported by the Bureau of Economic Analysis;
 
  •  relatively low customer stockpiles, estimated by the U.S. Energy Information Administration (“EIA”) to be approximately 105.6 million tons at the end of July, 2005, down 5.8% from the same period in the prior year;

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  •  declining coal production in Central Appalachia, including an average annual decline of 4.9% in Central Appalachian coal production volume from January 1, 2001 through December 31, 2004;
 
  •  capacity constraints of U.S. nuclear-powered electricity generators, which operated at an average utilization rate of 90.5% in 2004, up from 73.8% in 1994, as estimated by the EIA;
 
  •  high current and forward prices for natural gas and heating oil, the primary fuels for electricity generation, with spot prices as of January 5, 2006, for natural gas and heating oil at $9.29 per million Btu and $1.76 per gallon, respectively, as reported by Bloomberg L.P.; and
 
  •  increased international demand for U.S. coal for steelmaking, driven by global economic growth, high ocean freight rates and the weak U.S. dollar.
      U.S. spot steam coal prices have increased significantly since mid-2003, particularly for coals sourced in the eastern United States. The table below describes the percentage increase in year-over-year average year-to-date reference prices for coal as of November 21, 2005, according to Platts Research and Consulting (“Platts”), in the regions where we produce our coal, and the percentage of our produced and processed coal sales volume during 2004 by region:
                 
    Increase in Average   Percentage of Produced and
    Reference Prices   Processed Coal Sales in 2004
         
Central Appalachia
    8.5%       72.2%  
Northern Appalachia
    13.5%       27.8%  
      We expect near-term volume growth in U.S. coal consumption to be driven by greater utilization at existing coal-fired electricity generating plants, which operated at an estimated 72% of capacity in 2004, according to Platts. If existing U.S. coal fueled plants operate at estimated potential utilization rates of 85%, we believe they would consume approximately 185 million additional tons of coal per year, which represents an increase of approximately 16% over current coal consumption.
      We expect longer-term volume growth in U.S. coal consumption to be driven by the construction of new coal-fired plants. The National Energy Technology Laboratory (“NETL”), an arm of the U.S. Department of Energy (the “DOE”), projects that more than 100,000 megawatts of new coal-fired electric generation capacity will be constructed in the United States by 2025. The NETL has identified 124 coal-fired plants, representing 73,000 megawatts of electric generation capacity, that have been proposed and are currently in various stages of development. The DOE projects that approximately 70 of these proposed coal-fired plants, representing approximately 43,000 megawatts of electric generation capacity, will be completed and will begin consuming coal to produce electricity by the end of 2010.
      The current pricing environment for U.S. metallurgical coal is also strong in both the domestic and seaborne export markets. Demand for metallurgical coal in the United States has increased due to a recovery in the U.S. steel industry. In addition to increased demand for metallurgical coal in the United States, demand for metallurgical coal has increased in international markets. According to the International Iron and Steel Institute, global steel consumption increased by 8.8% during 2004 over the 2003 level, Chinese steel consumption increased approximately 11% in 2004 over 2003, and global apparent steel demand is projected to have increased by 2.7% in 2005, with 2005 apparent steel demand in China increasing by 10.3%. BHP Billiton, a major Australian producer, reported a 53% increase in average realized metallurgical coal prices for fiscal year 2005 over the prior fiscal year, and Fording Canadian Coal Trust, a major Canadian producer, reported an increase of approximately 83% in average metallurgical coal sales price for the nine months ended September 30, 2005 over the same period in 2004. The tightening supply of metallurgical coal in global markets has been due in part to supply disruptions in Australia, the world’s largest coal exporter, and the decision by China, the world’s second largest coal exporter, to restrict its metallurgical coal exports in order to satisfy domestic demand. The table below describes average sale prices, according to Platts, for low volatile metallurgical coal at the Hampton Roads, Virginia export terminals, through which we ship the great majority of our metallurgical coal exports and which

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collectively constitute the highest volume export facility for U.S. metallurgical coal production, and the percentage increase or decrease in prices year-over-year:
                                 
Average Sale Prices per Ton for Low Volatile Metallurgical Coal    
at Hampton Roads, Virginia Export Terminals    
     
    Percentage)
    IncreaseYear-Over-Year
    (decrease
     
September 30, 2004
  $ 135.00       September 30, 2005     $ 130.00       (4 )%
April 5, 2004
  $ 135.00       April 1, 2005     $ 135.00       0 %
January 12, 2004
  $ 71.50       January 3, 2005     $ 137.50       92 %
October 6, 2003
  $ 52.00       October 4, 2004     $ 135.00       160 %
Recent Developments
      On December 9, 2005, we announced a downward adjustment to our outlook with respect to our expected results for 2005. Based on recent developments, we expect revenue for the fourth quarter of 2005 to be negatively impacted by delays in certain exports of metallurgical coal as a result of late-arriving vessels and customer deferrals. Limited rail capacity and customer changes to delivery schedules have also curtailed shipments to utilities in the north central and southeastern United States and Canada as well as to our export facility in Norfolk, Virginia. These and other factors are expected to result in net income for 2005 to be in the range of $10.0 million to $20.0 million and EBITDA for 2005 to be in the range of $128.0 million to $138.0 million. We expect our net income and EBITDA for 2005 to include a charge for minority interest of approximately $3.0 million and a charge for stock-based compensation expense related to our initial public offering of approximately $46.6 million. Our earnings expectations assume that interest expense, net, will be approximately $29.0 million, income tax expense will be approximately $18.0 million, and depreciation, depletion and amortization will be approximately $72.0 million. Our expectations for 2005 are based on our unaudited results for the nine months ended September 30, 2005, our preliminary unaudited monthly results for October and November, which are subject to review procedures and final reconciliations and adjustments in connection with our year-end audit, and on management’s projections for December which may differ materially from actual results. We also announced on December 9, 2005 that we anticipate that cost pressures will persist in 2006, including higher costs for purchased coal, contractor mining, trucking and general mining supplies. Variable costs such as royalties and severance taxes are also expected to rise in 2006 in parallel with rising sales volumes. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Coal Pricing Trends and Uncertainties.” Our expected results for 2005 and our expectations with respect to cost pressures in 2006 are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are intended to come within the safe harbor protection provided by those sections. See “Special Note Regarding Forward-Looking Statements.”

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The Offering
Shares of common stock offered by the selling stockholders: 12,316,110 shares
 
Shares of common stock outstanding after this offering 64,420,414 shares
 
Use of proceeds We will not receive any of the proceeds from the sale of shares by the selling stockholders. The selling stockholders will receive all the net proceeds from the sale of shares of common stock offered by this prospectus.
 
New York Stock Exchange symbol “ANR”
      Unless we specifically state otherwise, all information in this prospectus:
  •  assumes no exercise by the underwriters of their option to purchase up to 1,847,417 additional shares from the selling stockholders; and
 
  •  excludes 3,837,529 shares of our common stock reserved for issuance and not yet issued under our existing long-term incentive plans as of January 1, 2006, of which 1,253,593 shares of our common stock are issuable upon the exercise of outstanding options as of January 1, 2006.
Additional Information
      Our principal executive office is located at One Alpha Place, P.O. Box 2345, Abingdon, Virginia 24212 and our telephone number is (276) 619-4410.
Risk Factors
      Investing in our common stock involves substantial risks. You should carefully consider the information in the “Risk Factors” section and all other information included in this prospectus before investing in our common stock.

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Alpha Summary Historical and Pro Forma Financial Data
      ANR Holdings, LLC (“ANR Holdings”) was formed in December 2002 by First Reserve Fund IX, L.P. and ANR Fund IX Holdings, L.P. (referred to as the “First Reserve Stockholders” or collectively with their affiliates, “First Reserve”) and our management to serve as the top-tier holding company of the Alpha Natural Resources organization. On December 13, 2002, we acquired a majority of the Virginia coal operations of Pittston Coal Company, a subsidiary of The Brink’s Company, our Predecessor. On January 31, 2003, we acquired the membership interests of Coastal Coal Company, LLC and certain affiliates (“Coastal Coal Company”). On March 11, 2003, we acquired American Metals & Coal International, Inc.’s (“AMCI”) U.S. coal production and marketing operations. We refer to the U.S. coal operations and marketing assets we acquired from AMCI as “U.S. AMCI”. On November 17, 2003, we acquired the assets of Mears Enterprises, Inc. and affiliated entities (collectively, “Mears”) for $38.0 million. On May 18, 2004, our subsidiary, Alpha Natural Resources, LLC and its wholly-owned subsidiary, Alpha Natural Resources Capital Corp., issued $175.0 million principal amount of 10% senior notes due 2012, and on May 28, 2004, we entered into a $175.0 million credit facility (together referred to as the “2004 Financings”). On February 11, 2005, Alpha Natural Resources, Inc. succeeded to the business and became the indirect parent entity of ANR Holdings in a series of internal restructuring transactions which we refer to collectively as the “Internal Restructuring,” and on February 18, 2005, Alpha Natural Resources, Inc. completed the initial public offering of 33,925,000 shares of its common stock for an aggregate offering price of $644.6 million, which we refer to herein as the “IPO.”
      The following summary historical financial data as of December 31, 2004 and 2003, for the years ended December 31, 2004 and 2003 and for the period from December 14, 2002 through December 31, 2002, have been derived from the combined financial statements of ANR Fund IX Holdings, L.P. and Alpha NR Holding, Inc. and subsidiaries (the owners of a majority of the membership interests of ANR Holdings prior to the Internal Restructuring), and the related notes, included elsewhere in this prospectus, which have been audited by KPMG LLP (“KPMG”), an independent registered public accounting firm. The summary historical financial data as of December 31, 2002 have been derived from the audited combined balance sheet of ANR Fund IX Holdings, L.P. and Alpha NR Holding, Inc. and subsidiaries not included in this prospectus. The summary historical financial data for the period from January 1, 2002 through December 13, 2002 have been derived from our Predecessor’s combined financial statements and related notes thereto, included elsewhere in this prospectus, which have been audited by KPMG. The summary historical financial data as of September 30, 2005 and for the nine months ended September 30, 2005 and 2004, have been derived from the unaudited condensed consolidated financial statements of Alpha Natural Resources, Inc. and subsidiaries, and the related notes, included elsewhere in this prospectus.
      On October 26, 2005, we consummated the Nicewonder Acquisition and the 2005 Financing. The aggregate purchase price for the acquisition was $315.2 million, consisting of cash at closing in the amount of $35.2 million, a cash tax payment of $1.9 million to be made to the sellers in April 2006, estimated transaction costs of $3.9 million, promissory notes payable to the sellers in the aggregate principal amount of $221.0 million, of which $181.1 million was paid on November 2, 2005 and $39.9 million was paid on January 13, 2006, and 2,180,233 shares of our common stock valued at approximately $53.2 million for accounting purposes. For this purpose, the value of the common stock issued was based on the average closing prices of our common stock for the five trading days surrounding October 20, 2005, the date the number of shares to be issued under the terms of the acquisition agreement became fixed without subsequent revision. The summary pro forma balance sheet data as of September 30, 2005, give pro forma effect to the Nicewonder Acquisition and the 2005 Financing, including payment of the first installment of the notes issued to the sellers, in each case as if they had occurred on September 30, 2005, and the summary pro forma statement of operations data for the year ended December 31, 2004 and the nine months ended September 30, 2005, give pro forma effect to the 2004 Financings, the Internal Restructuring, the IPO, the Nicewonder Acquisition and the 2005 Financing, including payment of the first installment of the notes issued to the sellers, in each case as if they had occurred on January 1, 2004. The summary pro forma financial data are for informational purposes only and should not be considered indicative of actual results that would have been achieved had these events actually been consummated on the dates indicated and do not purport to indicate results of operations as of any future date or for any future period.
      The following data should be read in conjunction with “Unaudited Pro Forma Financial Information,” “Selected Historical Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our Predecessor’s and our financial statements and related notes thereto included elsewhere in this prospectus.

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Table of Contents

     
                                                                     
            Alpha Natural Resources, Inc. and
        ANR Fund IX Holdings, L.P. and   Subsidiaries
        Alpha NR Holding, Inc. and Subsidiaries    
    Predecessor           Pro Forma
    January 1,   December 14,       Nine Months   Pro Forma   Nine Months   Nine Months
    2002 to   2002 to   Year Ended   Year Ended   Ended   Year Ended   Ended   Ended
    December 13,   December 31,   December 31,   December 31,   September 30,   December 31,   September 30,   September 30,
    2002   2002   2003   2004   2004   2004(1)   2005   2005(1)
                                 
                    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
    (In thousands, except per share and per ton data)
Statement of Operations Data:
                                                               
Revenues:
                                                               
 
Coal revenues
  $ 154,715     $ 6,260     $ 694,591     $ 1,079,733     $ 801,021     $ 1,215,288     $ 982,383     $ 1,123,754  
 
Freight and handling revenues
    17,001       1,009       73,800       141,100       102,846       141,100       126,650       126,650  
 
Other revenues
    6,031       101       13,458       31,869       20,440       40,927       18,447       33,931  
                                                 
   
Total revenues
    177,747       7,370       781,849       1,252,702       924,307       1,397,315       1,127,480       1,284,335  
                                                 
Costs and expenses:
                                                               
 
Cost of coal sales (exclusive of items shown separately below)
    158,924       6,268       626,265       920,359       668,887       1,017,580       818,299       907,214  
 
Freight and handling costs
    17,001       1,009       73,800       141,100       102,846       141,100       126,650       126,650  
 
Cost of other revenues
    7,973       120       12,488       22,994       14,942       30,194       16,327       30,092  
 
Depreciation, depletion and amortization
    6,814       274       35,385       55,261       38,883       106,261       45,521       83,781  
 
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately above)
    8,797       471       21,926       43,881       35,786       46,854       74,924       77,592  
 
Costs to exit business
    25,274                                            
                                                 
   
Total costs and expenses
    224,783       8,142       769,864       1,183,595       861,344       1,341,989       1,081,721       1,225,329  
                                                 
Refund of federal black lung excise tax
    2,049                                            
Other operating income, net
    1,430                                            
                                                 
   
Income (loss) from operations
    (43,557 )     (772 )     11,985       69,107       62,963       55,326       45,759       59,006  
                                                 
Other income (expense):
                                                               
 
Interest expense
    (35 )     (203 )     (7,848 )     (20,041 )     (14,497 )     (37,897 )     (19,400 )     (30,860 )
 
Interest income
    2,072       6       103       531       331       692       675       977  
 
Miscellaneous income (expense)
                574       722       517       444       40       132  
                                                 
   
Total other income (expense), net
    2,037       (197 )     (7,171 )     (18,788 )     (13,649 )     (36,761 )     (18,685 )     (29,751 )
                                                 
   
Income (loss) from continuing operations before income taxes and minority interest
    (41,520 )     (969 )     4,814       50,319       49,314       18,565       27,074       29,255  
Income tax expense (benefit)
    (17,198 )     (334 )     898       5,150       5,852       2,889       15,141       16,748  
Minority Interest
                1,164       22,781       22,335             2,918        
                                                 
   
Income (loss) from continuing operations
    (24,322 )     (635 )     2,752       22,388       21,127       15,676       9,015       12,507  
Discontinued operations
                (490 )     (2,373 )     (2,227 )     (4,054 )     (214 )     (267 )
                                                 
   
Net income (loss)
  $ (24,322 )   $ (635 )   $ 2,262     $ 20,015     $ 18,900     $ 11,622     $ 8,801     $ 12,240  
                                                 

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Table of Contents

     
                                                                     
            Alpha Natural Resources, Inc. and
        ANR Fund IX Holdings, L.P. and   Subsidiaries
        Alpha NR Holding, Inc. and Subsidiaries    
    Predecessor           Pro Forma
    January 1,   December 14,       Nine Months   Pro Forma   Nine Months   Nine Months
    2002 to   2002 to   Year Ended   Year Ended   Ended   Year Ended   Ended   Ended
    December 13,   December 31,   December 31,   December 31,   September 30,   December 31,   September 30,   September 30,
    2002   2002   2003   2004   2004   2004(1)   2005   2005(1)
                                 
                    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
    (In thousands, except per share and per ton data)
Earnings per share data(2):
                                                               
 
Basic and diluted:
                                                               
 
Net income (loss) per share, as adjusted:
                                                               
   
Income from continuing operations
                  $ 0.19     $ 1.52     $ 1.43             $ 0.17          
   
Loss from discontinued operations
                    (0.04 )     (0.16 )     (0.15 )             (0.01 )        
                                                 
   
Net income per basic and diluted share
                  $ 0.15     $ 1.36     $ 1.28             $ 0.16          
                                                 
 
Pro forma net income (loss) per basic share:
                                                               
   
Income from continuing operations
                  $ 0.02     $ 0.55     $ 0.53             $ 0.18          
   
Loss from discontinued operations
                    (0.01 )     (0.06 )     (0.06 )                      
                                                 
   
Net income per basic share
                  $ 0.01     $ 0.49     $ 0.47             $ 0.18          
                                                 
 
Pro forma net income (loss) per diluted share:
                                                               
   
Income from continuing operations
                  $ 0.02     $ 0.54     $ 0.52             $ 0.18          
   
Loss from discontinued operations
                    (0.01 )     (0.07 )     (0.06 )                      
                                                 
   
Net income per diluted share
                  $ 0.01     $ 0.47     $ 0.46             $ 0.18          
                                                 
 
Pro forma, as adjusted, net income per basic share:
                                                               
   
Income from continuing operations
                                          $ 0.25             $ 0.20  
   
Loss from discontinued operations
                                            (0.06 )              
                                                 
   
Net income per basic share
                                          $ 0.19             $ 0.20  
                                                 
 
Pro forma, as adjusted, net income per diluted share:
                                                               
   
Income from continuing operations
                                          $ 0.24             $ 0.20  
   
Loss from discontinued operations
                                            (0.06 )             (0.01 )
                                                 
   
Net income per diluted share
                                          $ 0.18             $ 0.19  
                                                 

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Table of Contents

     
                                                                   
            Alpha Natural Resources, Inc. and
        ANR Fund IX Holdings, L.P. and   Subsidiaries
        Alpha NR Holding, Inc. and Subsidiaries    
    Predecessor           Pro Forma
    January 1,   December 14,       Nine Months   Pro Forma   Nine Months   Nine Months
    2002 to   2002 to   Year Ended   Year Ended   Ended   Year Ended   Ended   Ended
    December 13,   December 31,   December 31,   December 31,   September 30,   December 31,   September 30,   September 30,
    2002   2002   2003   2004   2004   2004(1)   2005   2005(1)
                                 
                    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
    (In thousands, except per share and per ton data)
Balance sheet data (at period end):
                                                               
Cash and cash equivalents
  $ 88     $ 8,444     $ 11,246     $ 7,391                     $ 111     $ 111  
Operating and working capital
    (4,268 )     (12,223 )     32,714       56,257                       125,600       89,900  
Total assets
    156,328       108,442       379,336       477,121                       622,098       963,209  
Total debt
            25,743       84,964       201,705                       261,024       525,200  
Stockholders’ equity and partners’ capital (deficit)
    (132,997 )     23,384       86,367       45,933                       134,473       186,158  
Statement of cash flows data:
                                                               
Net cash provided by (used in) continuing operations:
                                                               
 
Operating activities
  $ (13,816 )   $ (295 )   $ 54,104     $ 106,776     $ 99,247             $ 21,624          
 
Investing activities
    (22,054 )     (38,893 )     (100,072 )     (86,202 )     (67,235 )             (93,390 )        
 
Financing activities
    35,783       47,632       48,770       (24,429 )     (27,447 )             64,486          
Capital expenditures
    21,866       960       27,719       72,046       52,984               95,919          
Other financial data (unaudited):
                                                               
EBITDA(3)
  $ (36,743 )   $ (498 )   $ 46,729     $ 99,497     $ 77,150     $ 156,268     $ 88,378     $ 142,823  
Other Data (unaudited):
                                                               
Tons sold
    4,283       186       21,613       25,327       19,062       29,042       18,937       21,904  
Tons produced and processed
    4,508       87       17,199       19,068       14,518       22,904       15,062       18,003  
Average coal sales realization (per ton)
  $ 36.12     $ 33.66     $ 32.14     $ 42.63     $ 42.02     $ 41.85     $ 51.88     $ 51.30  
 
(1)  The unaudited pro forma statement of operations data give pro forma effect to the 2004 Financings, Internal Restructuring, IPO, Nicewonder Acquisition, and 2005 Financing, including payment of the first installment on the notes issued to the Nicewonder Coal Group sellers, as if they had occurred on January 1, 2004.
 
(2)  Basic earnings per share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the periods. Diluted earnings per share is computed by dividing net income or loss by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the periods. Common stock equivalents include the number of shares issuable on 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.
  We have disclosed for informational purposes three sets of earnings per share data:
 
  Net Income (Loss) Per Share, as Adjusted
 
  The first set of earnings per share data is labeled “net income (loss) per share, as adjusted.” The numerator for purposes of computing basic and diluted net income (loss) per share, as adjusted, includes the reported net income (loss) and a pro forma adjustment for income taxes to reflect the pro forma income taxes for ANR Fund IX Holdings, L.P.’s portion of reported pre-tax income (loss), which would have been recorded if the issuance of the shares of common stock received by the First Reserve Stockholders in exchange for their ownership in ANR Holdings in connection with the Internal Restructuring had occurred as of January 1, 2003. For purposes of the computation of basic and diluted net income (loss) per share, as adjusted, the pro forma adjustment for income taxes only applies to the percentage interest owned by ANR Fund IX Holding, L.P., the non-taxable First Reserve Stockholder. No pro forma adjustment for income taxes is required for the percentage interest owned by Alpha NR Holding, Inc., the taxable First Reserve Stockholder, because income taxes have already been recorded in the historical results of operations. Furthermore, no pro forma adjustment to reported net income (loss) is necessary subsequent to February 11, 2005 because Alpha Natural Resources, Inc. is subject to income taxes.

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  The denominator for purposes of computing basic net income (loss) per share, as adjusted, reflects the retroactive impact of the common shares received by the First Reserve Stockholders in exchange for their ownership in ANR Holdings in connection with the Internal Restructuring on a weighted-average outstanding share basis as being outstanding as of January 1, 2003. The common shares issued to the minority interest owners of ANR Holdings in connection with the Internal Restructuring, including the immediately vested shares granted to management, have been reflected as being outstanding as of February 11, 2005 for purposes of computing the basic net income (loss) per share, as adjusted. The unvested shares granted to management on February 11, 2005 that vest monthly over the two-year period from January 1, 2005 to December 31, 2006 are included in the basic net income (loss) per share, as adjusted, computation as they vest on a weighted-average outstanding share basis starting on February 11, 2005. The 33,925,000 new shares issued in connection with the IPO have been reflected as being outstanding since February 14, 2005, the date of the IPO, for purposes of computing the basic net income (loss) per share, as adjusted.
 
  The unvested shares issued to management are considered options for purposes of computing diluted net income (loss) per share, as adjusted. Therefore, for diluted purposes, all remaining unvested shares granted to management are added to the denominator subsequent to February 11, 2005 using the treasury stock method, if the effect is dilutive. In addition, the treasury stock method is used for outstanding stock options, if dilutive, beginning with the November 10, 2004 grant of options to management to purchase units in Alpha Coal Management that were automatically converted into options to purchase up to 596,985 shares of our common stock at an exercise price of $12.73 per share.
 
  The computations of basic and diluted net income (loss) per share, as adjusted, are set forth below:
                                         
        Nine Months Ended
    Years Ended December 31,   September 30,
         
    2003   2004   2004   2005
                 
    (In thousands, except share and per share data)
Numerator:
                               
 
Reported income from continuing operations
  $ 2,752     $ 22,388     $ 21,127     $ 9,015  
 
Deduct: Income tax effect of ANR Fund IX Holdings, L.P. income from continuing operations prior to Internal Restructuring
    (138 )     (1,149 )     (1,124 )     (91 )
                         
       
Income from continuing operations, as adjusted
    2,614       21,239       20,003       8,924  
                         
 
Reported loss from discontinued operations
  $ (490 )   $ (2,373 )   $ (2,227 )   $ (214 )
 
Add: Income tax effect of ANR Fund IX Holdings, L.P. income from discontinued operations prior to Internal Restructuring
    27       149       139       2  
                         
       
Loss from discontinued operations, as adjusted
    (463 )     (2,224 )     (2,088 )     (212 )
                         
   
Net income, as adjusted
  $ 2,151     $ 19,015     $ 17,915     $ 8,712  
                         
Denominator:
                               
   
Weighted average shares — basic
    13,998,911       13,998,911       13,998,911       53,184,066  
   
Dilutive effect of stock options and restricted stock grants
                      382,403  
     
Weighted average shares — diluted
    13,998,911       13,998,911       13,998,911       53,566,469  
                         
Net income per basic and diluted share, as adjusted:
                               
     
Income from continuing operations
  $ 0.19     $ 1.52     $ 1.43     $ 0.17  
     
Income (loss) from discontinued operations
    (0.04 )     (0.16 )     (0.15 )     (0.01 )
                         
     
Net income
  $ 0.15     $ 1.36     $ 1.28     $ 0.16  
                         
  Pro Forma Net Income (Loss) Per Share
 
  The second set of earnings per share data is labeled “pro forma net income (loss) per share.” The numerator for purposes of computing basic and diluted pro forma net income (loss) per share is based on “net income, as adjusted” (as calculated above) and pro forma adjustments to reflect the impact of:
  (i)  the add back of minority interest for each period presented, because the ownership held by the minority interest owners of ANR Holdings were exchanged for shares of our common stock as part of the Internal Restructuring;
 
  (ii)  the additional income taxes that would have been incurred by us on the minority interest added back; and
 
  (iii)  the issuance of $175,000 principal amount of 10% senior notes due 2012 by our subsidiaries Alpha Natural Resources, LLC and Alpha Natural Resources Capital Corp. and the entry by Alpha Natural Resources, LLC into a $175,000 credit facility in May 2004, in connection with the 2004 Financings, as if these transactions had occurred on January 1, 2003.
  No pro forma adjustment to reported net income (loss) is necessary subsequent to February 11, 2005.

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  The denominator for purposes of computing basic pro forma net income (loss) per share reflects:
  (i)  the retroactive impact of the common shares received by the First Reserve Stockholders in exchange for their ownership in ANR Holdings in connection with the Internal Restructuring on a weighted-average outstanding share basis as being outstanding as of January 1, 2003;
 
  (ii)  the retroactive impact of the common shares issued to the minority interest owners of ANR Holdings in connection with the Internal Restructuring, including the immediately vested shares granted to management, on a weighted-average outstanding share basis as being outstanding as of January 1, 2003;
 
  (iii)  the unvested shares granted to management that vest over the two-year period from January 1, 2005 to December 31, 2006, which have been included in the basic computation on a weighted-average outstanding share basis based on the monthly vesting beginning as of January 1, 2005; and
 
  (iv)  the retroactive impact of the 33,925,000 new shares issued in connection with the IPO on a weighted-average outstanding share basis as being outstanding as of January 1, 2003 since 100% of the net proceeds from the IPO was distributed to the previous owners of ANR Holdings.
  The unvested shares issued to management are considered options for purposes of computing diluted pro forma net income (loss) per share. Therefore, for diluted purposes, all remaining unvested shares granted to management would be added to the denominator as of January 1, 2003 using the treasury stock method, if the effect is dilutive. In addition, the treasury stock method would be used for outstanding stock options, if dilutive, beginning with the November 10, 2004 grant of options to management to purchase units in Alpha Coal Management that were automatically converted into options to purchase up to 596,985 shares of our common stock at an exercise price of $12.73 per share.
 
  The computations of basic and diluted pro forma net income (loss) per share, are set forth below:
                                         
        Nine Months Ended
    Years Ended December 31,   September 30,
         
    2003   2004   2004   2005
                 
    (In thousands, except share and per share data)
Numerator:
                               
 
Income from continuing operations, as adjusted
  $ 2,614     $ 21,239     $ 20,003     $ 8,924  
 
Add: Minority interest in income from continuing operations, net of income tax effect
    2,822       14,124       13,848       2,231  
 
Add: Pro forma effects related to the 2003 Acquisitions, net of income taxes(1)
    3,507                    
 
Deduct: Pro forma effects of the 2004 Financings, net of income taxes
    (7,728 )     (1,672 )     (1,614 )      
                         
       
Pro forma income from continuing operations
    1,215       33,691       32,237       11,155  
                         
 
Loss from discontinued operations, as adjusted
  $ (463 )   $ (2,224 )   $ (2,088 )   $ (212 )
 
Add: Minority interest in income (loss) from discontinued operations, net of income tax effect
    (216 )     (1,830 )     (1,719 )     (55 )
                         
       
Pro forma loss from discontinued operations
    (679 )     (4,054 )     (3,807 )     (267 )
                         
 
Pro forma net income
  $ 536     $ 29,637     $ 28,430     $ 10,888  
                         
Denominator:
                               
   
Weighted average shares — basic
    60,867,650       60,867,650       60,867,650       61,092,832  
   
Dilutive effect of stock options and restricted stock grants
    1,541,936       1,541,936       379,183       584,389  
                         
     
Weighted average shares — diluted
    62,409,586       62,409,586       61,246,833       61,677,221  
                         
Pro forma net income per basic share:
                               
     
Income from continuing operations
  $ 0.02     $ 0.55     $ 0.53     $ 0.18  
     
Income (loss) from discontinued operations
    (0.01 )     (0.06 )     (0.06 )      
                         
     
Net income
  $ 0.01     $ 0.49     $ 0.47     $ 0.18  
                         
Pro forma net income per diluted share:
                               
     
Income from continuing operations
  $ 0.02     $ 0.54     $ 0.52     $ 0.18  
     
Income (loss) from discontinued operations
    (0.01 )     (0.07 )     (0.06 )      
                         
     
Net income
  $ 0.01     $ 0.47     $ 0.46     $ 0.18  
                         
 
  (1)  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — Predecessor and 2003 Acquisitions” for a definition and explanation of the “2003 Acquisitions.”

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  Pro Forma Net Income (Loss) Per Share, As Adjusted
 
  The third set of earnings per share data is labeled “pro forma net income (loss) per share, as adjusted.” The numerator for purposes of computing basic and diluted pro forma net income (loss) per share, as adjusted, is based on “pro forma net income (loss)” (as calculated above) and pro forma adjustments to reflect the impact of the Nicewonder Acquisition and the 2005 Financing, as if these transactions had occurred on January 1, 2004.
 
  The denominator for purposes of computing pro forma net income (loss) per share, as adjusted, is based on the weighted average shares outstanding for purposes of “net income (loss) per share, as adjusted” (as calculated above) plus 2.2 million shares to be issued in connection with the Nicewonder Acquisition, assuming such issuance had occurred on January 1, 2004.
 
  The computations of basic and diluted pro forma net income (loss) per share, as adjusted, are set forth below:
                         
    Year Ended   Nine Months Ended
    December 31, 2004   September 30, 2005
         
Numerator:
               
 
Pro forma income from continuing operations
  $ 33,691     $ 11,155  
 
Add: Pro forma income (loss) related to the Nicewonder Acquisition, net of income taxes
    (9,454 )     7,470  
 
Deduct: Pro forma effects of the 2005 Financing, net of income taxes
    (8,561 )     (6,118 )
             
       
Pro forma income from continuing operations, as adjusted
    15,676       12,507  
             
 
Pro forma loss from discontinued operations
  $ (4,054 )   $ (267 )
 
Adjustments
           
             
       
Pro forma loss from discontinued operations, as adjusted
    (4,054 )     (267 )
             
 
Pro forma net income, as adjusted
  $ 11,769     $ 12,240  
             
Denominator:
               
   
Weighted average shares — basic
    63,047,883       63,273,065  
   
Dilutive effect of stock options and restricted stock grants
    1,541,936       584,389  
             
     
Weighted average shares — diluted
    64,589,819       63,857,454  
             
Pro forma net income per basic share, as adjusted:
               
     
Income from continuing operations
  $ 0.25     $ 0.20  
     
Income (loss) from discontinued operations
    (0.06 )      
             
     
Net income
  $ 0.19     $ 0.20  
             
Pro forma net income per diluted share, as adjusted:
               
     
Income from continuing operations
  $ 0.24     $ 0.20  
     
Income (loss) from discontinued operations
    (0.06 )     (0.01 )
             
     
Net income
  $ 0.18     $ 0.19  
             
(3)  EBITDA, a measure used by management to measure operating performance, is defined as net income (loss) plus interest expense, income tax expense (benefit) and depreciation, depletion, and amortization, less interest income. We have presented EBITDA because our management believes that it is frequently used by securities analysts, investors, and other interested parties in the evaluation of coal companies. We regularly evaluate our performance as compared to other coal companies that have different financing and capital structures and/or tax rates by using EBITDA. We believe that EBITDA allows for meaningful company-to-company performance comparisons by adjusting for factors such as interest expense, depreciation, depletion, amortization and taxes, which can vary from company to company. In addition, we use EBITDA in evaluating acquisition targets. EBITDA is not a recognized term under GAAP and does not purport to be an alternative to net income, operating income or any other performance measures derived in accordance with GAAP or an alternative to cash flow from operating activities as a measure of operating liquidity. Because not all companies use identical calculations, this presentation of EBITDA may not be comparable to other similarly titled measures of other companies. Additionally, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not reflect certain cash requirements such as tax payments, interest payments and other debt service requirements. The amounts presented for EBITDA differ from the amounts calculated under the definition of EBITDA used in our debt covenants. The definition of EBITDA used in our debt covenants is further adjusted for certain cash and non-cash charges and is used to determine compliance with financial covenants and our ability to engage in certain activities such as incurring debt and making certain payments. Adjusted EBITDA as it is used and defined in our debt covenants is described and reconciled to net income (loss) in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Analysis of Material Debt Covenants.”

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  EBITDA is calculated and reconciled to net income (loss) in the table below:
                                                                 
            Alpha Natural Resources, Inc. and
        ANR Fund IX Holdings, L.P. and   Subsidiaries
        Alpha NR Holding, Inc. and Subsidiaries    
                Pro Forma
    January 1,   December 14,       Nine Months   Pro Forma   Nine Months   Nine Months
    2002 to   2002 to   Year Ended   Year Ended   Ended   Year Ended   Ended   Ended
    December 13,   December 31,   December 31,   December 31,   September 30,   December 31,   September 30,   September 30,
    2002   2002   2003   2004   2004   2004   2005   2005
                                 
                    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
    (In thousands)
Net income (loss)
  $ (24,322 )   $ (635 )   $ 2,262     $ 20,015     $ 18,900     $ 11,622     $ 8,801     $ 12,240  
Interest expense
    35       203       7,848       20,041       14,497       37,897       19,400       30,860  
Interest income
    (2,072 )     (6 )     (103 )     (531 )     (331 )     (692 )     (675 )     (977 )
Income tax expense (benefit)(a)
    (17,198 )     (334 )     668       3,960       4,732       429       15,048       16,636  
Depreciation, depletion and amortization(b)
    6,814       274       36,054       56,012       39,352       107,012       45,804       84,064  
                                                 
EBITDA
  $ (36,743 )   $ (498 )   $ 46,729     $ 99,497     $ 77,150     $ 156,268     $ 88,378     $ 142,823  
                                                 
 
(a)  Includes income tax expense (benefit) from continuing and discontinued operations.
(b)  Includes depreciation, depletion and amortization from continuing and discontinued operations.

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Nicewonder Summary Historical Financial Data
      The following summary historical financial data of the Nicewonder Coal Group as of December 31, 2004, 2003 and 2002 and for the years ended December 31, 2004, 2003 and 2002, have been derived from the combined financial statements of the Nicewonder Coal Group, and the related notes, included elsewhere in this prospectus, which have been audited by KPMG LLP, independent accountants. The summary historical financial data as of September 30, 2005 and for the nine months ended September 30, 2004 and 2005, have been derived from the unaudited combined financial statements of the Nicewonder Coal Group, and the related notes, included elsewhere in this prospectus.
                                             
    The Combined Entities of The Nicewonder Coal Group
     
        Nine Months   Nine Months
    Year Ended   Year Ended   Year Ended   Ended   Ended
    December 31,   December 31,   December 31,   September 30,   September 30,
    2002   2003   2004   2004   2005
                     
                (Unaudited)   (Unaudited)
    (In thousands, except per ton data)
Statement of Operations Data:
                                       
Revenues:
                                       
 
Coal revenues
  $ 96,793     $ 103,600     $ 135,555     $ 101,663     $ 141,371  
 
Other revenues
    1,744       2,128       9,058       4,533       15,484  
                               
   
Total revenues
    98,537       105,728       144,613       106,196       156,855  
                               
Costs and expenses:
                                       
 
Cost of coal sales (exclusive of items shown separately below)
    79,713       83,818       96,758       72,402       88,568  
 
Cost of other revenues
    1,490       1,419       7,200       3,204       13,765  
 
Depreciation, depletion and amortization
    10,812       11,855       11,336       8,508       10,340  
 
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately above)
    2,458       2,310       2,973       2,402       2,668  
                               
   
Total costs and expenses
    94,473       99,402       118,267       86,516       115,341  
                               
   
Income from operations
    4,064       6,326       26,346       19,680       41,514  
                               
Other income (expense):
                                       
 
Interest expense
    (1,798 )     (1,487 )     (1,351 )     (964 )     (1,593 )
 
Interest income
    545       246       161       66       302  
 
Net realized gain on sale of marketable securities
    971                          
 
Miscellaneous income (loss)
    74       (15 )     (278 )     (42 )     92  
                               
   
Total other income (expense), net
    (208 )     (1,256 )     (1,468 )     (940 )     (1,199 )
                               
   
Income before cumulative effect of accounting change
    3,856       5,070       24,878       18,740       40,315  
Cumulative effect of accounting change
          (460 )                        
                               
   
Net income
  $ 3,856     $ 4,610     $ 24,878     $ 18,740     $ 40,315  
                               

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    The Combined Entities of The Nicewonder Coal Group
     
        Nine Months   Nine Months
    Year Ended   Year Ended   Year Ended   Ended   Ended
    December 31,   December 31,   December 31,   September 30,   September 30,
    2002   2003   2004   2004   2005
                     
                (Unaudited)   (Unaudited)
    (In thousands, except per ton data)
Balance sheet data (at period end):                                
Cash and cash equivalents
  $ 3,823     $ 1,787     $ 12,707             $ 22,998  
Operating and working capital
    (4,551 )     (5,491 )     7,956               16,169  
Total assets
    74,620       70,701       105,557               130,796  
Notes payable and long-term debt, including current portion
    30,462       23,438       34,729               43,870  
Stockholders’ equity and members’ equity
    33,998       31,779       49,293               62,449  
Statement of cash flows data:
                                       
Net cash provided by (used in):
                                       
 
Operating activities
  $ 15,857     $ 17,802     $ 36,963     $ 28,072     $ 51,269  
 
Investing activities
    (2,245 )     (463 )     (1,639 )     (922 )     (2,636 )
 
Financing activities
    (14,392 )     (19,375 )     (24,403 )     (18,452 )     (38,342 )
Capital expenditures
    3,436       2,723       1,704       845       3,101  
Other financial data (Unaudited):
                                       
 
EBITDA(1)
  $ 15,921     $ 17,706     $ 37,404     $ 28,146     $ 51,946  
Other data (Unaudited):
                                       
 
Tons sold
    3,255       3,406       3,715       2,862       2,967  
 
Tons produced and processed
    3,292       3,374       3,836       3,024       2,941  
 
Average coal sales realization (per ton)
  $ 29.74     $ 30.42     $ 36.49     $ 35.52     $ 47.65  
 
(1)  EBITDA, a measure used by management to measure operating performance, is defined as net income (loss) plus interest expense, income tax expense (benefit) and depreciation, depletion, and amortization, less interest income. We have presented EBITDA because our management believes that it is frequently used by securities analysts, investors, and other interested parties in the evaluation of coal companies. We regularly evaluate our performance as compared to other coal companies that have different financing and capital structures and/or tax rates by using EBITDA. We believe that EBITDA allows for meaningful company-to-company performance comparisons by adjusting for factors such as interest expense, depreciation, depletion, amortization and taxes, which can vary from company to company. In addition, we use EBITDA in evaluating acquisition targets. EBITDA is not a recognized term under GAAP and does not purport to be an alternative to net income, operating income or any other performance measures derived in accordance with GAAP or an alternative to cash flow from operating activities as a measure of operating liquidity. Because not all companies use identical calculations, this presentation of EBITDA may not be comparable to other similarly titled measures of other companies. Additionally, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not reflect certain cash requirements such as tax payments, interest payments and other debt service requirements.

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      EBITDA is calculated and reconciled to net income in the table below:
                                         
    The Combined Entities of The Nicewonder Coal Group
     
        Nine Months   Nine Months
    Year Ended   Year Ended   Year Ended   Ended   Ended
    December 31,   December 31,   December 31,   September 30,   September 30,
    2002   2003   2004   2004   2005
                     
                (Unaudited)   (Unaudited)
    (In thousands)
Net income
  $ 3,856     $ 4,610     $ 24,878     $ 18,740     $ 40,315  
Interest expense
    1,798       1,487       1,351       964       1,593  
Interest income
    (545 )     (246 )     (161 )     (66 )     (302 )
Depreciation, depletion and amortization
    10,812       11,855       11,336       8,508       10,340  
                               
EBITDA
  $ 15,921     $ 17,706     $ 37,404     $ 28,146     $ 51,946  
                               

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RISK FACTORS
      Investing in our common stock involves risks. You should carefully consider the risks described below as well as the other information contained in this prospectus before investing in our common stock.
Risks Relating to Our Business
A substantial or extended decline in coal prices could reduce our revenues and the value of our coal reserves.
      Our results of operations are substantially dependent upon the prices we receive for our coal. The prices we receive for coal depend upon factors beyond our control, including:
  •  the supply of and demand for domestic and foreign coal;
 
  •  the demand for electricity;
 
  •  domestic and foreign demand for steel and the continued financial viability of the domestic and/or foreign steel industry;
 
  •  the proximity to, capacity of, and cost of transportation facilities;
 
  •  domestic and foreign governmental regulations and taxes;
 
  •  air emission standards for coal-fired power plants;
 
  •  regulatory, administrative, and judicial decisions;
 
  •  the price and availability of alternative fuels, including the effects of technological developments; and
 
  •  the effect of worldwide energy conservation measures.
      Declines in the prices we receive for our coal could adversely affect our operating results and our ability to generate the cash flows we require to improve our productivity and invest in our operations.
Our coal mining production and delivery is subject to conditions and events beyond our control, which could result in higher operating expenses and/or decreased production and sales and adversely affect our operating results.
      Our coal mining operations are conducted, in large part, in underground mines and, to a lesser extent, at surface mines. The level of our production at these mines is subject to operating conditions and events beyond our control that could disrupt operations, affect production and the cost of mining at particular mines for varying lengths of time and have a significant impact on our operating results. Adverse operating conditions and events that we or our Predecessor have experienced in the past include:
  •  delays and difficulties in acquiring, maintaining or renewing necessary permits or mining or surface rights;
 
  •  changes or variations in geologic conditions, such as the thickness of the coal deposits and the amount of rock embedded in or overlying the coal deposit;
 
  •  mining and processing equipment failures and unexpected maintenance problems;
 
  •  limited availability of mining and processing equipment and parts from suppliers;
 
  •  interruptions due to transportation delays;
 
  •  adverse weather and natural disasters, such as heavy rains and flooding;
 
  •  accidental mine water discharges;
 
  •  the termination of material contracts by state or other governmental authorities;

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  •  the unavailability of qualified labor;
 
  •  strikes and other labor-related interruptions; and
 
  •  unexpected mine safety accidents, including fires and explosions from methane and other sources.
      If any of these conditions or events occur in the future at any of our mines or affect deliveries of our coal to customers, they may increase our cost of mining and delay or halt production at particular mines or sales to our customers either permanently or for varying lengths of time, which could adversely affect our operating results. For example, in 2004 we experienced mine roof stability issues at our Kingwood underground mine, which resulted in a 23% decrease in production at this mine for 2004 as compared to 2003 full-year production (including production in 2003 prior to our acquisition of the mine). In addition, Hurricanes Katrina and Rita, which struck the Gulf Coast in August and September 2005, resulted in delayed shipments of our coal to our customers, and Hurricane Katrina also damaged a portion of 330,000 tons of metallurgical coal inventory that we had stockpiled in New Orleans to meet 2005 sales commitments. We recorded a pre-tax charge of $0.7 million in the third quarter of 2005 for such inventory loss, representing the estimated total loss in the amount of $1.2 million, less the portion of the loss expected to be recovered by insurance claims of $0.5 million. The actual amount of the inventory loss and the insurance recovery may be different than our estimates. We expect to determine the final amounts of the inventory loss and insurance recovery during the process of preparing our financial statements for the fourth quarter of 2005.
Any change in coal consumption patterns by steel producers or North American electric power generators resulting in a decrease in the use of coal by those consumers could result in lower prices for our coal, which would reduce our revenues and adversely impact our earnings and the value of our coal reserves.
      Steam coal accounted for approximately 62% of our coal sales volume during the first nine months of 2005 and approximately 63% of our 2004 coal sales volume. The majority of our sales of steam coal for the first nine months of 2005 and for 2004 was to U.S. and Canadian electric power generators. Domestic electric power generation accounted for approximately 92% of all U.S. coal consumption in 2004, according to the EIA. The amount of coal consumed for U.S. and Canadian electric power generation is affected primarily by the overall demand for electricity, the location, availability, quality and price of competing fuels for power such as natural gas, nuclear, fuel oil and alternative energy sources such as hydroelectric power, technological developments, and environmental and other governmental regulations. We expect many new power plants will be built to produce electricity during peak periods of demand, when the demand for electricity rises above the “base load demand,” or minimum amount of electricity required if consumption occurred at a steady rate. However, we also expect that many of these new power plants will be fired by natural gas because they are cheaper to construct than coal-fired plants and because natural gas is a cleaner burning fuel. In addition, the increasingly stringent requirements of the Clean Air Act may result in more electric power generators shifting from coal to natural gas-fired power plants. Any reduction in the amount of coal consumed by North American electric power generators could reduce the price of steam coal that we mine and sell, thereby reducing our revenues and adversely impacting our earnings and the value of our coal reserves.
      We produce metallurgical coal that is used in both the U.S. and foreign steel industries. Metallurgical coal accounted for approximately 38% of our coal sales volume during the first nine months of 2005 and approximately 37% of our 2004 coal sales volume. In recent years, U.S. steel producers have experienced a substantial decline in the prices received for their products, due at least in part to a heavy volume of foreign steel imported into the United States. Although prices for some U.S. steel products increased moderately after the Bush administration imposed steel import tariffs and quotas in March 2002, those tariffs and quotas were lifted in December 2003. Furthermore, recent reports by the American Iron and Steel Institute indicate that the volume of shipments by U.S. steel mills in September 2005 was down 3.4% from the previous month and 6.5% from September 2004 and that, based on preliminary data for October 2005, U.S. steel imports for October 2005 and the ten months ended October 31, 2005 were approximately 28% and 10% lower, respectively, than in the applicable prior year periods, which may be

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leading indicators of declining demand in the U.S. steel industry generally. Any deterioration in conditions in the U.S. steel industry would reduce the demand for our metallurgical coal and impact the collectibility of our accounts receivable from U.S. steel industry customers. In addition, the U.S. steel industry increasingly relies on electric arc furnaces or pulverized coal processes to make steel. These processes do not use coke. If this trend continues, the amount of metallurgical coal that we sell and the prices that we receive for it could decrease, thereby reducing our revenues and adversely impacting our earnings and the value of our coal reserves. In the international market for metallurgical coal, there are indications that coal prices may have begun to level off or decline from their current, historically high levels. In a report issued at the end of November, the EIA reported that 2005 steel production in China has been well above projections, resulting in a glut of steel despite China’s current position as the world’s largest consumer of steel. Despite the restrictions on metallurgical coal exports announced by China in 2003, the EIA noted reports of Chinese producers offering coke for export at Chinese ports. If the demand and pricing for metallurgical coal in international markets decreases in the future, the amount of metallurgical coal that we sell and the prices that we receive for it could decrease, thereby reducing our revenues and adversely impacting our earnings and the value of our coal reserves.
A decline in demand for metallurgical coal would limit our ability to sell our high quality steam coal as higher-priced metallurgical coal and could affect the economic viability of certain of our mines that have higher operating costs.
      Portions of our coal reserves possess quality characteristics that enable us to mine, process and market them as either metallurgical coal or high quality steam coal, depending on the prevailing conditions in the metallurgical and steam coal markets. We decide whether to mine, process and market these coals as metallurgical or steam coal based on management’s assessment as to which market is likely to provide us with a higher margin. We consider a number of factors when making this assessment, including the difference between the current and anticipated future market prices of steam coal and metallurgical coal, the lower volume of saleable tons that results from producing a given quantity of reserves for sale in the metallurgical market instead of the steam market, the increased costs incurred in producing coal for sale in the metallurgical market instead of the steam market, the likelihood of being able to secure a longer-term sales commitment by selling coal into the steam market and our contractual commitments to deliver different types of coals to our customers. During 2004, we believe that we sold approximately 8% of our produced and processed coal as metallurgical coal that we would have sold as steam coal in the market conditions prevalent during 2003. We believe that we generated approximately $65.0 million in additional revenues by selling this production as metallurgical coal rather than steam coal during 2004, based on a comparison of the actual sales price and volume versus the then-prevailing market price for steam coal and the volume of coal that we would have sold if the coal had been mined, processed and marketed as steam coal. A decline in the metallurgical market relative to the steam market could cause us to shift coal from the metallurgical market to the steam market, thereby reducing our revenues and profitability.
      Most of our metallurgical coal reserves possess quality characteristics that enable us to mine, process and market them as high quality steam coal. However, some of our mines operate profitably only if all or a portion of their production is sold as metallurgical coal to the steel market. If demand for metallurgical coal declined to the point where we could earn a more attractive return marketing the coal as steam coal, these mines may not be economically viable and may be subject to closure. Such closures would lead to accelerated reclamation costs, as well as reduced revenue and profitability.

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Acquisitions that we have completed since our formation, as well as acquisitions that we may undertake in the future, involve a number of risks, any of which could cause us not to realize the anticipated benefits.
      Since our formation and the acquisition of our Predecessor in December 2002, we have completed four significant acquisitions and several smaller acquisitions and investments. We continually seek to expand our operations and coal reserves through acquisitions. If we are unable to successfully integrate the companies, businesses or properties we are able to acquire, our profitability may decline and we could experience a material adverse effect on our business, financial condition, or results of operations. Acquisition transactions involve various inherent risks, including:
  •  uncertainties in assessing the value, strengths, and potential profitability of, and identifying the extent of all weaknesses, risks, contingent and other liabilities (including environmental or mine safety liabilities) of, acquisition candidates;
 
  •  the potential loss of key customers, management and employees of an acquired business;
 
  •  the ability to achieve identified operating and financial synergies anticipated to result from an acquisition;
 
  •  problems that could arise from the integration of the acquired business; and
 
  •  unanticipated changes in business, industry or general economic conditions that affect the assumptions underlying our rationale for pursuing the acquisition.
      Any one or more of these factors could cause us not to realize the benefits anticipated to result from an acquisition. For example, in combining our Predecessor and acquired companies, we have incurred significant expenses to develop unified reporting systems and standardize our accounting functions. Additionally, we were unable to profitably operate NKC, which we acquired in connection with our acquisition of AMCI. In September 2004, we recorded an impairment charge of $5.1 million to reduce the carrying value of the assets of NKC to their estimated fair value, and we sold the assets of NKC on April 14, 2005.
      The recently completed Nicewonder Acquisition has increased the size of our operations. Our ability to integrate the operations of the Nicewonder Coal Group with our own is important to our future success. If we are unable to realize the anticipated benefits of the Nicewonder Acquisition due to our inability to address the challenges of integrating the Nicewonder Coal Group or for any other reason, it could have a material adverse effect on our business and financial and operating results and require significant additional time on the part of our senior management dedicated to resolving integration issues.
      Moreover, any acquisition opportunities we pursue could materially affect our liquidity and capital resources and may require us to incur indebtedness, seek equity capital or both. For instance, in connection with the Nicewonder Acquisition, we issued $221.0 million principal amount of promissory installment notes of one of our indirect, wholly owned subsidiaries, we issued 2,180,233 shares of our common stock valued at approximately $53.2 million, and we entered into a new $525.0 million credit facility, a portion of the net proceeds of which we used to pay the cash purchase price, acquisition expenses and the first installment of principal due on the promissory notes. In addition, future acquisitions could result in our assuming more long-term liabilities relative to the value of the acquired assets than we have assumed in our previous acquisitions.
The inability of the sellers of our Predecessor and acquired companies to fulfill their indemnification obligations to us under our acquisition agreements could increase our liabilities and adversely affect our results of operations and financial position.
      In the acquisition agreements we entered into with the sellers of our Predecessor and acquired companies, including the acquisition agreements we entered into related to the Nicewonder Acquisition, the respective sellers and, in some of our acquisitions, their parent companies, agreed to retain responsibility for and indemnify us against damages resulting from certain third-party claims or other

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liabilities, such as workers’ compensation liabilities, black lung liabilities, postretirement medical liabilities and certain environmental or mine safety liabilities. The failure of any seller and, if applicable, its parent company, to satisfy their obligations with respect to claims and retained liabilities covered by the acquisition agreements could have an adverse effect on our results of operations and financial position if claimants successfully assert that we are liable for those claims and/or retained liabilities. The obligations of the sellers and, in some instances, their parent companies, to indemnify us with respect to their retained liabilities will continue for a substantial period of time, and in some cases indefinitely. The sellers’ indemnification obligations with respect to breaches of their representations and warranties in the acquisition agreements will terminate upon expiration of the applicable indemnification period (generally 18-24 months from the acquisition date for most representations and warranties, and from two to five years from the acquisition date for environmental representations and warranties), are subject to deductible amounts and will not cover damages in excess of the applicable coverage limit. The assertion of third-party claims after the expiration of the applicable indemnification period or in excess of the applicable coverage limit, or the failure of any seller to satisfy its indemnification obligations with respect to breaches of its representations and warranties, could have an adverse effect on our results of operations and financial position. See “— If our assumptions regarding our likely future expenses related to benefits for non-active employees are incorrect, then expenditures for these benefits could be materially higher than we have predicted.”
Our inability to continue or expand the existing road construction and mining business of the Nicewonder Companies could adversely affect the expected benefits from the Nicewonder Acquisition.
      One of our subsidiaries acquired the business of Nicewonder Contracting, Inc. (“NCI”) pursuant to the Nicewonder Acquisition. NCI operates a highway construction business under a contract with the State of West Virginia. Pursuant to the contract, NCI is building approximately 11 miles of rough grade highway in West Virginia over the next six years and, in exchange NCI will be compensated by West Virginia based on the number of cubic yards of material excavated and/or filled to create a road bed, as well as for certain other cost components. In the course of the road construction, NCI will recover any coal encountered and sell the coal to its customers, subject to certain costs including coal loading, transportation, coal royalty payments and applicable taxes and fees.
      This road construction operation is in its early stages and the State of West Virginia has only approved funding for the first phases of highway construction. If West Virginia does not fund the remaining sections of the highway project, it would adversely affect NCI’s earnings. Even if West Virginia funds the remainder of this project through the next six years, we are uncertain whether the state will fund any similar projects in the future. In addition, we have no current experience conducting and completing road projects and will rely on the expertise of the existing employees of NCI in order to operate the project, and other road projects we may undertake, profitably. Furthermore, litigation has been filed against NCI and the State of West Virginia claiming that the project violated competitive bidding and prevailing wage laws and regulations. If successful, the litigation could make the project considerably less advantageous to NCI or restrict or prohibit NCI from completing the project.
The loss of, or significant reduction in, purchases by our largest customers could adversely affect our revenues and profitability.
      Our largest customer during 2004 accounted for approximately 8% of our total revenues. We derived approximately 39% of our 2004 total revenues from sales to our ten largest customers. The sales of the Nicewonder Coal Group are highly concentrated, with approximately 78% of the Nicewonder Coal Group’s coal revenues during the year ended December 31, 2004 generated from sales to three customers. On a pro forma basis as if the Nicewonder Acquisition had occurred on January 1, 2004, our largest customer during 2004 would have accounted for approximately 8% of our total revenues and we would have derived approximately 37% of our 2004 total revenues from sales to our ten largest customers. These customers may not continue to purchase coal from us under our current coal supply agreements, or at all. If these customers were to significantly reduce their purchases of coal from us, or if we were unable to sell coal to

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them on terms as favorable to us as the terms under our current agreements, our revenues and profitability could suffer materially.
Changes in purchasing patterns in the coal industry may make it difficult for us to extend existing supply contracts or enter into new long-term supply contracts with customers, which could adversely affect the capability and profitability of our operations.
      We sell a significant portion of our coal under long-term coal supply agreements, which are contracts with a term greater than 12 months. The execution of a satisfactory long-term coal supply agreement is frequently the basis on which we undertake the development of coal reserves required to be supplied under the contract. We believe that approximately 73% of our 2004 sales volume was sold under long-term coal supply agreements. At November 1, 2005, our long-term coal supply agreements had remaining terms of up to 11 years and an average remaining term of approximately two years. When our current contracts with customers expire or are otherwise renegotiated, our customers may decide to purchase fewer tons of coal than in the past or on different terms, including pricing terms less favorable to us. As of December 31, 2005, approximately 12%, 54% and 77%, respectively, of our planned production for 2006, 2007 and 2008, including production from the operations we acquired in the Nicewonder Acquisition, was uncommitted. We may not be able to enter into coal supply agreements to sell this production on terms, including pricing terms, as favorable to us as our existing agreements. For additional information relating to our long-term coal supply contracts, see “Business — Marketing, Sales and Customer Contracts.”
      As electric utilities continue to adjust to frequently changing regulations, including the Acid Rain regulations of the Clean Air Act, the Clean Air Mercury Rule, the Clean Air Interstate Rule and the possible deregulation of their industry, they are becoming increasingly less willing to enter into long-term coal supply contracts and instead are purchasing higher percentages of coal under short-term supply contracts. The industry shift away from long-term supply contracts could adversely affect us and the level of our revenues. For example, fewer electric utilities will have a contractual obligation to purchase coal from us, thereby increasing the risk that we will not have a market for our production. The prices we receive in the spot market may be less than the contractual price an electric utility is willing to pay for a committed supply. Furthermore, spot market prices tend to be more volatile than contractual prices, which could result in decreased revenues.
Certain provisions in our long-term supply contracts may reduce the protection these contracts provide us during adverse economic conditions or may result in economic penalties upon our failure to meet specifications.
      Price adjustment, “price reopener” and other similar provisions in long-term supply contracts may reduce the protection from short-term coal price volatility traditionally provided by these contracts. Price reopener provisions are particularly common in international metallurgical coal sales contracts. Some of our coal supply contracts contain provisions that allow for the price to be renegotiated at periodic intervals. Price reopener provisions may automatically set a new price based on the prevailing market price or, in some instances, require the parties to agree on a new price, sometimes between a pre-set “floor” and “ceiling.” In some circumstances, failure of the parties to agree on a price under a price reopener provision can lead to termination of the contract. Any adjustment or renegotiation leading to a significantly lower contract price could result in decreased revenues. Accordingly, supply contracts with terms of one year or more may provide only limited protection during adverse market conditions.
      Coal supply agreements also typically contain force majeure provisions allowing temporary suspension of performance by us or the customer during the duration of specified events beyond the control of the affected party. Most of our coal supply agreements contain provisions requiring us to deliver coal meeting quality thresholds for certain characteristics such as Btu, sulfur content, ash content, grindability and ash fusion temperature. Failure to meet these specifications could result in economic penalties, including price adjustments, the rejection of deliveries or termination of the contracts. Moreover, some of our agreements where the customer bears transportation costs permit the customer to terminate the contract if the transportation costs borne by them increase substantially. In addition, some of these contracts allow our

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customers to terminate their contracts in the event of changes in regulations affecting our industry that increase the price of coal beyond specified limits.
      Due to the risks mentioned above with respect to long-term supply contracts, we may not achieve the revenue or profit we expect to achieve from these sales commitments.
Disruption in supplies of coal produced by contractors and other third parties could temporarily impair our ability to fill customers’ orders or increase our costs.
      In addition to marketing coal that is produced by our subsidiaries’ employees, we utilize contractors to operate some of our mines. Operational difficulties at contractor-operated mines, changes in demand for contract miners from other coal producers, and other factors beyond our control could affect the availability, pricing, and quality of coal produced for us by contractors. For example, during the third quarter of 2005, production at our contractor operations was running approximately 28% behind plan, primarily due to shortages in the supply of labor. As a result of this shortfall, we have been forced to purchase coal at a higher cost than planned so that we can meet commitments to customers. To meet customer specifications and increase efficiency in fulfillment of coal contracts, we also purchase and resell coal produced by third parties from their controlled reserves. The majority of the coal that we purchase from third parties is blended with coal produced from our mines prior to resale and we also process (which includes washing, crushing or blending coal at one of our preparation plants or loading facilities) a portion of the coal that we purchase from third parties prior to resale. We sold 7.3 million tons of coal purchased from third parties during 2004, representing 28% of our total sales during 2004. We believe that approximately 81% of our purchased coal sales in 2004 was blended with coal produced from our mines prior to resale, and approximately 3% of our total sales in 2004 consisted of coal purchased from third parties that we processed before resale. The availability of specified qualities of this purchased coal may decrease and prices may increase as a result of, among other things, changes in overall coal supply and demand levels, consolidation in the coal industry and new laws or regulations. Disruption in our supply of contractor-produced coal and purchased coal could temporarily impair our ability to fill our customers’ orders or require us to pay higher prices in order to obtain the required coal from other sources. Any increase in the prices we pay for contractor-produced coal or purchased coal could increase our costs and therefore lower our earnings. Although increases in market prices for coal generally benefit us by allowing us to sell coal at higher prices, those increases also increase our costs to acquire purchased coal, which lowers our earnings.
Competition within the coal industry may adversely affect our ability to sell coal, and excess production capacity in the industry could put downward pressure on coal prices.
      We compete with numerous other coal producers in various regions of the United States for domestic and international sales. During the mid-1970s and early 1980s, increased demand for coal attracted new investors to the coal industry, spurred the development of new mines and resulted in additional production capacity throughout the industry, all of which led to increased competition and lower coal prices. Recent increases in coal prices could encourage the development of expanded capacity by new or existing coal producers. Any resulting overcapacity could reduce coal prices and therefore reduce our revenues.
      Coal with lower production costs shipped east from western coal mines and from offshore sources has resulted in increased competition for coal sales in the Appalachian region. In addition, coal companies with larger mines that utilize the long-wall mining method typically have lower mine operating costs than we do and may be able to compete more effectively on price, particularly if the current favorable market weakens. This competition could result in a decrease in our market share in this region and a decrease in our revenues.
      Demand for our low sulfur coal and the prices that we can obtain for it are also affected by, among other things, the price of emissions allowances. Decreases in the prices of these emissions allowances could make low sulfur coal less attractive to our customers. In addition, more widespread installation by electric utilities of technology that reduces sulfur emissions (which could be accelerated by increases in the prices

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of emissions allowances), may make high sulfur coal more competitive with our low sulfur coal. This competition could adversely affect our business and results of operations.
      We also compete in international markets against coal produced in other countries. Measured by tons sold, exports accounted for approximately 32% of our sales in 2004. The demand for U.S. coal exports is dependent upon a number of factors outside of our control, including the overall demand for electricity in foreign markets, currency exchange rates, the demand for foreign-produced steel both in foreign markets and in the U.S. market (which is dependent in part on tariff rates on steel), general economic conditions in foreign countries, technological developments, and environmental and other governmental regulations. For example, if the value of the U.S. dollar were to rise against other currencies in the future, our coal would become relatively more expensive and less competitive in international markets, which could reduce our foreign sales and negatively impact our revenues and net income. In addition, if the amount of coal exported from the United States were to decline, this decline could cause competition among coal producers in the United States to intensify, potentially resulting in additional downward pressure on domestic coal prices.
Fluctuations in transportation costs and the availability or reliability of transportation could affect the demand for our coal or temporarily impair our ability to supply coal to our customers.
      Transportation costs represent a significant portion of the total cost of coal for our customers. Increases in transportation costs, such as those experienced during the first nine months of 2005, could make coal a less competitive source of energy or could make our coal production less competitive than coal produced from other sources. On the other hand, significant decreases in transportation costs could result in increased competition from coal producers in other parts of the country. For instance, coordination of the many eastern loading facilities, the large number of small shipments, terrain and labor issues all combine to make shipments originating in the eastern United States inherently more expensive on a per-mile basis than shipments originating in the western United States.
      Historically, high coal transportation rates from the western coal producing areas into Central Appalachian markets limited the use of western coal in those markets. More recently, however, lower rail rates from the western coal producing areas to markets served by eastern U.S. producers have created major competitive challenges for eastern producers. This increased competition could have a material adverse effect on our business, financial condition and results of operations.
      We depend upon railroads, trucks, beltlines, ocean vessels and barges to deliver coal to our customers. Disruption of these transportation services due to weather-related problems, mechanical difficulties, strikes, lockouts, bottlenecks, and other events could temporarily impair our ability to supply coal to our customers, resulting in decreased shipments. Certain shipments of our coal to customers were delayed by the recent hurricanes in the Gulf Coast. In some cases, this delay will affect the timing of our recognition of revenue from these sales. Decreased performance levels over longer periods of time could cause our customers to look to other sources for their coal needs, negatively affecting our revenues and profitability.
      In 2004, 79% of our produced and processed coal volume was transported from the preparation plant to the customer by rail. Beginning in the Spring of 2004, we have experienced a general deterioration in the reliability of the service provided by rail carriers, which increased our internal coal handling costs. If there are continued disruptions of the transportation services provided by the railroad companies we use and we are unable to find alternative transportation providers to ship our coal, our business could be adversely affected.
      We have investments in mines, loading facilities, and ports that in most cases are serviced by a single rail carrier. Our operations that are serviced by a single rail carrier are particularly at risk to disruptions in the transportation services provided by that rail carrier, due to the difficulty in arranging alternative transportation. If a single rail carrier servicing our operations does not provide sufficient capacity, revenue from these operations and our return on investment could be adversely impacted.

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      The states of West Virginia and Kentucky have recently increased enforcement of weight limits on coal trucks on their public roads. It is possible that other states in which our coal is transported by truck could undertake similar actions to increase enforcement of weight limits. Such stricter enforcement actions could result in shipment delays and increased costs. An increase in transportation costs could have an adverse effect on our ability to increase or to maintain production on a profit-making basis and could therefore adversely affect revenues and earnings.
Our business will be adversely affected if we are unable to develop or acquire additional coal reserves that are economically recoverable.
      Our profitability depends substantially on our ability to mine coal reserves possessing quality characteristics desired by our customers in a cost-effective manner. As of July 31, 2005, on a pro forma basis giving effect to the Nicewonder Acquisition, we owned or leased 518.9 million tons of proven and probable coal reserves that we believe will support current production levels for more than 20 years, which is less than the publicly reported amount of proven and probable coal reserves and reserve lives (based on current publicly reported production levels) of the other large publicly traded coal companies. We have not yet applied for the permits required, or developed the mines necessary, to mine all of our reserves. Permits are becoming increasingly more difficult and expensive to obtain and the review process continues to lengthen. In addition, we may not be able to mine all of our reserves as profitably as we do at our current operations.
      Because our reserves decline as we mine our coal, our future success and growth depend, in part, upon our ability to acquire additional coal reserves that are economically recoverable. If we are unable to replace or increase our coal reserves on acceptable terms, our production and revenues will decline as our reserves are depleted. Exhaustion of reserves at particular mines also may have an adverse effect on our operating results that is disproportionate to the percentage of overall production represented by such mines. Our ability to acquire additional coal reserves through acquisitions in the future also could be limited by restrictions under our existing or future debt agreements, competition from other coal companies for attractive properties, or the lack of suitable acquisition candidates.
We face numerous uncertainties in estimating our recoverable coal reserves, and inaccuracies in our estimates could result in decreased profitability from lower than expected revenues or higher than expected costs.
      Forecasts of our future performance are based on, among other things, estimates of our recoverable coal reserves. We base our estimates of reserve information on engineering, economic and geological data assembled and analyzed by our internal engineers and which is periodically reviewed by third-party consultants. There are numerous uncertainties inherent in estimating the quantities and qualities of, and costs to mine, recoverable reserves, including many factors beyond our control. Estimates of economically recoverable coal reserves and net cash flows necessarily depend upon a number of variable factors and assumptions, any one of which may, if incorrect, result in an estimate that varies considerably from actual results. These factors and assumptions include:
  •  future coal prices, operating costs, capital expenditures, severance and excise taxes, royalties and development and reclamation costs;
 
  •  future mining technology improvements;
 
  •  the effects of regulation by governmental agencies; and
 
  •  geologic and mining conditions, which may not be fully identified by available exploration data and may differ from our experiences in areas we currently mine.
      As a result, actual coal tonnage recovered from identified reserve areas or properties, and costs associated with our mining operations, may vary from estimates. Any inaccuracy in our estimates related to our reserves could result in decreased profitability from lower than expected revenues or higher than expected costs.

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Defects in title of any leasehold interests in our properties could limit our ability to mine these properties or result in significant unanticipated costs.
      We conduct a significant part of our mining operations on properties that we lease. Title to most of our leased properties and mineral rights is not thoroughly verified until a permit to mine the property is obtained, and in some cases title with respect to leased properties is not verified at all. Our right to mine some of our reserves may be materially adversely affected by defects in title or boundaries. In order to obtain leases or mining contracts to conduct our mining operations on property where these defects exist, we may in the future have to incur unanticipated costs, which could adversely affect our profitability.
Mining in Central and Northern Appalachia is more complex and involves more regulatory constraints than mining in other areas of the United States, which could affect our mining operations and cost structures in these areas.
      The geological characteristics of Central and Northern Appalachian coal reserves, such as depth of overburden and coal seam thickness, make them complex and costly to mine. As mines become depleted, replacement reserves may not be available when required or, if available, may not be capable of being mined at costs comparable to those characteristic of the depleting mines. In addition, as compared to mines in other regions, permitting, licensing and other environmental and regulatory requirements are more costly and time consuming to satisfy. These factors could materially adversely affect the mining operations and cost structures of, and our customers’ ability to use coal produced by, our mines in Central and Northern Appalachia.
Our work force could become increasingly unionized in the future, which could adversely affect the stability of our production and reduce our profitability.
      Approximately 95% of our 2004 coal production came from mines operated by union-free employees. As of November 1, 2005, over 91% of our subsidiaries’ approximately 3,240 employees are union-free. However, our subsidiaries’ employees have the right at any time under the National Labor Relations Act to form or affiliate with a union. Any further unionization of our subsidiaries’ employees, or the employees of third-party contractors who mine coal for us, could adversely affect the stability of our production and reduce our profitability.
Our unionized work force could strike in the future, which could disrupt production and shipments of our coal and increase costs.
      One of our subsidiaries has two negotiated wage agreements with the United Mine Workers of America (“UMWA”). These agreements, covering approximately 243 employees as of November 1, 2005, expire on December 31, 2009. Two of our other subsidiaries have negotiated wage agreements with the UMWA covering an aggregate of 30 employees as of November 1, 2005 that will expire in December 2006. Some or all of the affected employees at each location could strike, which would adversely affect our productivity, increase our costs, and disrupt shipments of coal to our customers.
Our ability to collect payments from our customers could be impaired if their creditworthiness deteriorates.
      Our ability to receive payment for coal sold and delivered depends on the continued creditworthiness of our customers. During 2004, we had $152,000 of bad debt expense. Our customer base is changing with deregulation as utilities sell their power plants to their non-regulated affiliates or third parties that may be less creditworthy, thereby increasing the risk we bear on payment default. These new power plant owners may have credit ratings that are below investment grade. In addition, competition with other coal suppliers could force us to extend credit to customers and on terms that could increase the risk we bear on payment default.
      We have contracts to supply coal to energy trading and brokering companies under which those companies sell coal to end users. If the creditworthiness of the energy trading and brokering companies

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declines, this would increase the risk that we may not be able to collect payment for all coal sold and delivered to or on behalf of these energy trading and brokering companies.
The government extensively regulates our mining operations, which imposes significant costs on us, and future regulations could increase those costs or limit our ability to produce and sell coal.
      The coal mining industry is subject to increasingly strict regulation by federal, state and local authorities with respect to matters such as:
  •  employee health and safety;
 
  •  mandated benefits for retired coal miners;
 
  •  mine permitting and licensing requirements;
 
  •  reclamation and restoration of mining properties after mining is completed;
 
  •  air quality standards;
 
  •  water pollution;
 
  •  plant and wildlife protection;
 
  •  the discharge of materials into the environment;
 
  •  surface subsidence from underground mining; and
 
  •  the effects of mining on groundwater quality and availability.
      The costs, liabilities and requirements associated with these regulations may be costly and time-consuming and may delay commencement or continuation of exploration or production operations. Failure to comply with these regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of cleanup and site restoration costs and liens, the issuance of injunctions to limit or cease operations, the suspension or revocation of permits and other enforcement measures that could have the effect of limiting production from our operations. We may also incur costs and liabilities resulting from claims for damages to property or injury to persons arising from our operations. If we are pursued for these sanctions, costs and liabilities, our mining operations and, as a result, our profitability could be adversely affected.
      The possibility exists that new legislation and/or regulations and orders may be adopted that may materially adversely affect our mining operations, our cost structure and/or our customers’ ability to use coal. New legislation or administrative regulations (or new judicial interpretations or administrative enforcement of existing laws and regulations), including proposals related to the protection of the environment that would further regulate and tax the coal industry, may also require us or our customers to change operations significantly or incur increased costs. These regulations, if proposed and enacted in the future, could have a material adverse effect on our financial condition and results of operations.
Extensive environmental regulations affect our customers and could reduce the demand for coal as a fuel source and cause our sales to decline.
      The Clean Air Act and similar state and local laws extensively regulate the amount of sulfur dioxide, particulate matter, nitrogen oxides, and other compounds emitted into the air from electric power plants, which are the largest end-users of our coal. Such regulations will require significant emissions control expenditures for many coal-fired power plants to comply with applicable ambient air quality standards. As a result, these generators may switch to other fuels that generate less of these emissions or install more effective pollution control equipment, possibly reducing future demand for coal and the construction of coal-fired power plants.
      Various new and proposed laws and regulations may require further reductions in emissions from coal-fired utilities. For example, under the new Clean Air Interstate Rule issued on March 10, 2005, the EPA

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will further regulate sulfur dioxide and nitrogen oxides from coal-fired power plants. When fully implemented, this rule is expected to reduce sulfur dioxide emissions in affected states by over 70% and nitrogen oxides emissions by over 60% from 2003 levels. The stringency of this cap may require many coal-fired sources to install additional pollution control equipment, such as wet scrubbers, to comply. Installation of additional pollution control equipment required by this rule could result in a decrease in the demand for low sulfur coal (because sulfur would be removed by the new emissions control equipment), potentially driving down prices for low sulfur coal. In addition, under the Clean Air Act, coal-fired power plants will be required to control hazardous air pollution emissions by no later than 2009, which likely will require significant new investment in pollution-control devices by power plant operators. Further, on March 15, 2005, the EPA finalized the Clean Air Mercury Rule intended to control mercury emissions from power plants, which could require coal-fired power plants to install new pollution controls or comply with a mandatory, declining cap on the total mercury emissions allowed from coal-fired power plants nationwide. Both the Clean Air Mercury Rule and the Clean Air Interstate Rule are subject to administrative reconsideration and judicial challenge. These standards and future standards could have the effect of making coal-fired plants unprofitable, thereby decreasing demand for coal. The majority of our coal supply agreements contain provisions that allow a purchaser to terminate its contract if legislation is passed that either restricts the use or type of coal permissible at the purchaser’s plant or results in specified increases in the cost of coal or its use.
      Several proposals are pending in Congress and various states that are designed to further reduce emissions of sulfur dioxide, nitrogen oxides and mercury from power plants, and certain ones could regulate additional air pollutants. If such initiatives are enacted into law, power plant operators could choose fuel sources other than coal to meet their requirements, thereby reducing the demand for coal. Current and possible future governmental programs are or may be in place to require the purchase and trading of allowances associated with the emission of various substances such as sulfur dioxide, nitrous oxide, mercury and carbon dioxide. Changes in the markets for and prices of allowances could have a material effect on demand for and prices received for our coal.
      A regional haze program initiated by the EPA to protect and to improve visibility at and around national parks, national wilderness areas and international parks restricts the construction of new coal-fired power plants whose operation may impair visibility at and around federally protected areas, and may require some existing coal-fired power plants, and certain thermal dryers, to install additional control measures designed to limit haze-causing emissions.
      One major by-product of burning coal is carbon dioxide, which is considered a greenhouse gas and is a major source of concern with respect to global warming. In November 2004, Russia ratified the Kyoto Protocol to the 1992 Framework Convention on Global Climate Change (the “Protocol”), which establishes a binding set of emission targets for greenhouse gases. With Russia’s accedence, the Protocol now has sufficient support and became binding on all those countries that have ratified it on February 16, 2005. Four industrialized nations have refused to ratify the Protocol — Australia, Liechtenstein, Monaco, and the United States. Although the targets vary from country to country, if the United States were to ratify the Protocol, our nation would be required to reduce greenhouse gas emissions to 93% of 1990 levels in a series of phased reductions from 2008 to 2012. Canada, which accounted for approximately 6% of our 2004 sales volume, ratified the Protocol in 2002. Under the Protocol, Canada will be required to cut greenhouse gas emissions to 6% below 1990 levels in a series of phased reductions from 2008 to 2012, either in direct reductions in emissions or by obtaining credits through the Protocol’s market mechanisms. This could result in reduced demand for coal by Canadian electric power generators.
      Future regulation of greenhouse gases in the United States could occur pursuant to future U.S. treaty obligations, statutory or regulatory changes under the Clean Air Act, or otherwise. The Bush Administration has proposed a package of voluntary emission reductions for greenhouse gases reduction targets which provide for certain incentives if targets are met. Some states, such as Massachusetts, have already issued regulations regulating greenhouse gas emissions from large power plants. Further, in 2002, the Conference of New England Governors and Eastern Canadian Premiers adopted a Climate Change Action Plan, calling for reduction in regional greenhouse emissions to 1990 levels by 2010, and a further

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reduction of at least 10% below 1990 levels by 2020. Increased efforts to control greenhouse gas emissions, including the future ratification of the Protocol by the United States, could result in reduced demand for our coal. See “Environmental and Other Regulatory Matters.”
Our operations may impact the environment or cause exposure to hazardous substances, and our properties may have environmental contamination, which could result in material liabilities to us.
      Our operations currently use hazardous materials and generate limited quantities of hazardous wastes from time to time. Our Predecessor and acquired companies also utilized certain hazardous materials and generated similar wastes. We may be subject to claims under federal and state statutes and/or common law doctrines for toxic torts, natural resource damages and other damages as well as for the investigation and clean up of soil, surface water, groundwater, and other media. Such claims may arise, for example, out of current or former conditions at sites that we own or operate currently, as well as at sites that we or our Predecessor and acquired companies owned or operated in the past, and at contaminated sites that have always been owned or operated by third parties. Our liability for such claims may be joint and several, so that we may be held responsible for more than our share of the contamination or other damages, or even for the entire share. We have not been subject to claims arising out of contamination at our facilities, and are not aware of any such contamination, but may incur such liabilities in the future.
      We maintain extensive coal slurry impoundments at a number of our mines. Such impoundments are subject to extensive regulation. Slurry impoundments maintained by other coal mining operations have been known to fail, releasing large volumes of coal slurry. Structural failure of an impoundment can result in extensive damage to the environment and natural resources, such as streams or bodies of water that the coal slurry reaches, as well as liability for related personal injuries and property damages, and injuries to wildlife. Some of our impoundments overlie mined out areas, which can pose a heightened risk of failure and of damages arising out of failure. If one of our impoundments were to fail, we could be subject to substantial claims for the resulting environmental contamination and associated liability, as well as for fines and penalties.
      These and other similar unforeseen impacts that our operations may have on the environment, as well as exposures to hazardous substances or wastes associated with our operations, could result in costs and liabilities that could materially and adversely affect us.
We may be unable to obtain and renew permits necessary for our operations, which would reduce our production, cash flow and profitability.
      Mining companies must obtain numerous permits that impose strict regulations on various environmental and safety matters in connection with coal mining. These include permits issued by various federal and state agencies and regulatory bodies. The permitting rules are complex and may change over time, making our ability to comply with the applicable requirements more difficult or even impossible, thereby precluding continuing or future mining operations. Private individuals and the public have certain rights to comment upon, submit objections to, and otherwise engage in the permitting process, including through court intervention. Accordingly, the permits we need may not be issued, maintained or renewed, or may not be issued or renewed in a timely fashion, or may involve requirements that restrict our ability to conduct our mining operations. An inability to conduct our mining operations pursuant to applicable permits would reduce our production, cash flow, and profitability.
      Permits under Section 404 of the Clean Water Act are required for coal companies to conduct dredging or filling activities in jurisdictional waters for the purpose of creating slurry ponds, water impoundments, refuse areas, valley fills or other mining activities. The Army Corps of Engineers (the “COE”) is empowered to issue “nationwide” permits for specific categories of filling activity that are determined to have minimal environmental adverse effects in order to save the cost and time of issuing individual permits under Section 404. Nationwide Permit 21 authorizes the disposal of dredge-and-fill material from mining activities into the waters of the United States. On October 23, 2003, several citizens groups sued the COE in the U.S. District Court for the Southern District of West Virginia seeking to

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invalidate “nationwide” permits utilized by the COE and the coal industry for permitting most in-stream disturbances associated with coal mining, including excess spoil valley fills and refuse impoundments. Although the lower court enjoined the issuance of Nationwide 21 permits, that decision was overturned by the Fourth Circuit Court of Appeals, which concluded that the COE complied with the Clean Water Act in promulgating this permit. Although we had no operations that were immediately impacted or interrupted, the lower court’s decision required us to convert certain current and planned applications for Nationwide 21 permits to applications for individual permits. A similar lawsuit was filed on January 27, 2005 in the U.S. District Court for the Eastern District of Kentucky remains pending, and other lawsuits may be filed in other states where we operate. Although it is not possible to predict the results of the Kentucky litigation, it could adversely affect our Kentucky operations.
We may not be able to implement required public-company internal controls over financial reporting in the required time frame or with adequate compliance, and implementation of the controls will increase our costs.
      Our current operations consist primarily of the assets of our Predecessor and the other operations we have acquired, each of which had different historical operating, financial, accounting and other systems. Due to our rapid growth and limited history operating our acquired operations as an integrated business, our internal control over financial reporting does not currently meet all the standards contemplated by Section 404 of the Sarbanes-Oxley Act that we will eventually be required to meet. Areas of deficiency in our internal control over financial reporting requiring improvement include: documentation of controls and procedures; segregation of duties; timely reconciliation of accounts; methods of reconciling fixed asset accounts; the structure of our general ledger, security systems and testing of our disaster recovery plan for our information technology systems; and the level of experience in public company accounting and periodic reporting matters among our financial and accounting staff. Certain of these deficiencies have resulted in out-of-period adjustments to our financial statements. Although we have determined that such adjustments have been immaterial, continued deficiencies in our internal control over financial reporting may result in future out-of-period adjustments, which could be material and require us to restate our financial statements. In addition, in connection with our integration of the Nicewonder Coal Group’s operations, we will also be required to assess and make any necessary adjustments to the Nicewonder Coal Group’s internal controls and procedures. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, our independent auditors may not be able to certify as to the adequacy of our internal controls over financial reporting. This result may subject us to adverse regulatory consequences, and there could also be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. We could also suffer a loss of confidence in the reliability of our financial statements if our auditors report a material weakness in our internal controls. We will incur incremental costs in order to comply with Section 404, including increased auditing and legal fees and costs associated with hiring additional accounting and administrative staff with experience managing public companies.
Our ability to operate our company effectively could be impaired if we fail to attract and retain key personnel.
      Our ability to operate our business and implement our strategies depends, in part, on the efforts of our executive officers and other key employees. In addition, our future success will depend on, among other factors, our ability to attract and retain other qualified personnel. The successful integration of the Nicewonder Coal Group also requires us to, among other things, retain key employees. Our future performance depends, in part, on our ability to successfully integrate these new employees into our company. The loss of the services of any of our executive officers or other key employees or the inability to attract or retain other qualified personnel in the future could have a material adverse effect on our business or business prospects.
      Certain of our subsidiaries have entered into employment agreements with two of our executive officers — Michael J. Quillen, our Chief Executive Officer, and D. Scott Kroh, one of our Executive Vice

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Presidents. Each of our other executive officers are employed on an at-will basis. Unless extended, the employment agreements between Messrs. Quillen and Kroh and our subsidiaries terminate on March 11, 2006. When the terms of these agreements expire, we may not be able to renew or extend these employment agreements on terms acceptable to us. In addition, the employment agreements with Mr. Quillen and Mr. Kroh provide that if either executive resigns for “employee cause” (as defined in the applicable agreement), we will be required to pay the executive his earned but unpaid salary through the date of termination, and to continue to pay his then current base salary for the following twelve months, and the executive would be entitled to receive any bonuses payable for prior years, plus the pro rata bonus payable for the current year, at the same time as bonuses are paid to similarly situated employees. The employment agreements with Mr. Quillen and Mr. Kroh provide that a resignation by either executive for “employee cause” includes, among other things, the executive’s resignation during the period beginning three months, and ending nine months following the liquidation or sale by First Reserve of more than 75% of its ownership in ANR Holdings and its affiliates, which would result from First Reserve holding less than approximately 8,460,921 shares of our common stock after such a sale or liquidation.
A shortage of skilled labor in the Appalachian region could pose a risk to achieving improved labor productivity and competitive costs and could adversely affect our profitability.
      Efficient coal mining using modern techniques and equipment requires skilled laborers, preferably with at least a year of experience and proficiency in multiple mining tasks. In recent years, a shortage of trained coal miners in the Appalachian region has caused us to operate certain units without full staff, which decreases our productivity and increases our costs. For example, during the third quarter of 2005, production at our contractor operations was running approximately 28% behind plan, primarily due to shortages in the supply of labor. If the shortage of experienced labor continues or worsens, it could have an adverse impact on our labor productivity and costs and our ability to expand production in the event there is an increase in the demand for our coal, which could adversely affect our profitability.
Our significant indebtedness could harm our business by limiting our available cash and our access to additional capital and could force us to sell material assets or take other actions to attempt to reduce our indebtedness.
      We are a highly leveraged company. Our financial performance could be affected by our significant indebtedness. At September 30, 2005, we had approximately $261.0 million of indebtedness outstanding, representing 66% of our total capitalization. This indebtedness consisted of $175.0 million principal of our 10% senior notes due 2012, $81.0 million of borrowings under our prior revolving credit facility and $5.0 million of other indebtedness, including $1.6 million of capital lease obligations extending through March 2009, $0.6 million principal amount in variable rate term notes maturing in April 2006 that we incurred in connection with equipment financing and $2.8 million payable to an insurance premium finance company. In addition, under our prior credit facility we had $53.0 million of letters of credit outstanding at September 30, 2005.
      In connection with the Nicewonder Acquisition, we refinanced all outstanding indebtedness under our prior credit facility with a new credit facility, which provides for up to $525.0 million of borrowings, including a $275.0 million revolving credit facility and a $250.0 million term loan. In addition, under the terms of the Nicewonder Acquisition, one of our indirect, wholly-owned subsidiaries issued $221.0 million in promissory installment notes, payable in two installments of which $181.1 million was paid on November 2, 2005 and $39.9 million was paid on January 13, 2006. We may also incur additional indebtedness in the future. On a pro forma basis giving effect to the Nicewonder Acquisition and 2005 Financing, including payment of the first installment of the notes issued to the Nicewonder Coal Group sellers, we would have had approximately $525.2 million of indebtedness outstanding as of September 30, 2005, representing 74% of our total capitalization, approximately $65.5 million of letters of credit outstanding and additional borrowing availability of approximately $154.2 million.

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      This level of indebtedness could have important consequences to our business. For example, it could:
  •  increase our vulnerability to general adverse economic and industry conditions;
 
  •  make it more difficult to self-insure and obtain surety bonds or letters of credit;
 
  •  limit our ability to enter into new long-term sales contracts;
 
  •  make it more difficult for us to pay interest and satisfy our debt obligations, including our obligations with respect to the notes;
 
  •  require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate activities;
 
  •  limit our ability to obtain additional financing to fund future working capital, capital expenditures, research and development, debt service requirements or other general corporate requirements;
 
  •  limit our flexibility in planning for, or reacting to, changes in our business and in the coal industry;
 
  •  place us at a competitive disadvantage compared to less leveraged competitors; and
 
  •  limit our ability to borrow additional funds.
      If our cash flows and capital resources are insufficient to fund our debt service obligations or our requirements under our other long-term liabilities, we may be forced to sell assets, seek additional capital or seek to restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations, including our obligations with respect to the notes, or our requirements under our other long term liabilities. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to sell material assets or operations to attempt to meet our debt service and other obligations. Our new credit facility and the indenture under which our senior notes were issued restrict our ability to sell assets and use the proceeds from the sales. We may not be able to consummate those sales or to obtain the proceeds which we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due. Furthermore, substantially all of our material assets secure our indebtedness under our new credit facility.
Despite our current leverage, we may still be able to incur substantially more debt. This could further exacerbate the risks associated with our significant indebtedness.
      We may be able to incur substantial additional indebtedness in the future. The terms of our new credit facility and the indenture governing our senior notes do not prohibit us from doing so. Our new credit facility provides for a revolving line of credit of up to $275.0 million, of which approximately $154.2 million was available as of September 30, 2005, on a pro forma basis after giving effect to the Nicewonder Acquisition and 2005 Financing, including payment of the first installment of the notes issued to the Nicewonder Coal Group sellers. The addition of new debt to our current debt levels, could increase the related risks that we now face. For example, the spread over the variable interest rate applicable to loans under our credit facility is dependent on our leverage ratio, and it would increase if our leverage ratio increases. Additional drawings under our revolving line of credit could also limit the amount available for letters of credit in support of our bonding obligations, which we will require as we develop and acquire new mines.
The covenants in our credit facility and the indenture governing the notes impose restrictions that may limit our operating and financial flexibility.
      Our new credit facility and the indenture governing our senior notes contain a number of significant restrictions and covenants that limit our ability and our subsidiaries’ ability to, among other things, incur additional indebtedness or enter into sale and leaseback transactions, pay dividends, make redemptions and

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repurchases of certain capital stock, make loans and investments, create liens, engage in transactions with affiliates and merge or consolidate with other companies or sell substantially all of our assets.
      These covenants could adversely affect our ability to finance our future operations or capital needs or to execute preferred business strategies. In addition, if we violate these covenants and are unable to obtain waivers from our lenders, our debt under these agreements would be in default and could be accelerated by our lenders. If our indebtedness is accelerated, we may not be able repay our debt or borrow sufficient funds to refinance it. Even if we were able to obtain new financing, it may not be on commercially reasonable terms, on terms that are acceptable to us, or at all. If our debt is in default for any reason, our business, financial condition and results of operations could be materially and adversely affected.
Failure to obtain or renew surety bonds on acceptable terms 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 or may demand additional collateral or other less favorable terms upon those renewals. The ability of surety bond issuers and holders to demand additional collateral or other less favorable terms has increased as the number of companies willing to issue these bonds has decreased over time. Our failure to maintain, or our inability to acquire, surety bonds that are required by state and federal law would affect our ability to secure reclamation and coal lease obligations, which could adversely affect our ability to mine or lease coal. That failure could result from a variety of factors including, without limitation:
  •  lack of availability, higher expense or unfavorable market terms of new bonds;
 
  •  restrictions on availability of collateral for current and future third-party surety bond issuers under the terms of our credit facility or the indenture governing our senior notes; and
 
  •  the exercise by third-party surety bond issuers of their right to refuse to renew the surety.
Failure to maintain capacity for required letters of credit could limit our available borrowing capacity under our credit facility, limit our ability to obtain or renew surety bonds and negatively impact our ability to obtain additional financing to fund future working capital, capital expenditure or other general corporate requirements.
      At September 30, 2005, on a pro forma basis giving effect to the Nicewonder Acquisition and 2005 Financing, we would have had approximately $65.5 million of letters of credit in place, of which $60.7 million would have served as collateral for reclamation surety bonds and $4.8 million would have secured miscellaneous obligations. Our new credit facility provides for revolving commitments of up to $275.0 million, all of which can be used to issue additional letters of credit. In addition, obligations secured by letters of credit may increase in the future. Any such increase would limit our available borrowing capacity under our current or future credit facilities and could negatively impact our ability to obtain additional financing to fund future working capital, capital expenditure or other general corporate requirements. Moreover, if we do not maintain sufficient borrowing capacity under our revolving credit facility for additional letters of credit, we may be unable to obtain or renew surety bonds required for our mining operations.
If our assumptions regarding our likely future expenses related to benefits for non-active employees are incorrect, then expenditures for these benefits could be materially higher than we have predicted.
      At the times that we acquired the assets of our Predecessor and acquired companies, the Predecessor and acquired operations were subject to long-term liabilities under a variety of benefit plans and other arrangements with active and inactive employees. We assumed a portion of these long-term obligations. The current and non-current accrued portions of these long-term obligations, as reflected in our

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consolidated financial statements as of September 30, 2005, included $22.2 million of postretirement medical obligations and $6.5 million of self-insured workers’ compensation obligations, and our accumulated postretirement benefit obligation at December 31, 2004 is $43.8 million. These obligations have been estimated based on assumptions that are described in the notes to our consolidated financial statements included elsewhere in this prospectus. However, if our assumptions are incorrect, we could be required to expend greater amounts than anticipated.
      Several states in which we operate consider changes in workers’ compensation laws from time to time, which, if enacted, could adversely affect us. In addition, if any of the sellers from whom we acquired our operations fail to satisfy their indemnification obligations to us with respect to postretirement claims and retained liabilities, then we could be required to expend greater amounts than anticipated. See “— The inability of the sellers of our Predecessor and acquired companies to fulfill their indemnification obligations to us under our acquisition agreements could increase our liabilities and adversely affect our results of operations.” Moreover, under certain acquisition agreements, we agreed to permit responsibility for black lung claims related to the sellers’ former employees who are employed by us for less than one year after the acquisition to be determined in accordance with law (rather than specifically assigned to one party or the other in the agreements). We believe that the sellers remain liable as a matter of law for black lung benefits for their former employees who work for us for less than one year; however, an adverse ruling on this issue could increase our exposure to black lung benefit liabilities.
Demand for our coal changes seasonally and could have an adverse effect on the timing of our cash flows and our ability to service our existing and future indebtedness.
      Our business is seasonal, with operating results varying from quarter to quarter. We have historically experienced lower sales during winter months primarily due to the freezing of lakes that we use to transport coal to some of our customers. As a result, our first quarter cash flow and profits have been, and may continue to be, negatively impacted. Lower than expected sales by us during this period could have a material adverse effect on the timing of our cash flows and therefore our ability to service our obligations with respect to our existing and future indebtedness.
Our earnings will be reduced in future periods as a result of our issuance of shares of our common stock to members of management as part of the Internal Restructuring.
      As part of the Internal Restructuring, our executive officers and certain other key employees exchanged their interests in ANR Holdings for shares of our common stock and the right to participate in a distribution of the proceeds received by us from the underwriters as a result of the underwriters’ exercise of their over-allotment option in connection with the IPO. As a result, we recorded stock-based compensation expense equal to the fair value of the vested shares issued and distributions paid in the amount of $42.6 million for the nine months ended September 30, 2005. In addition, as a result of the conversion of outstanding options held by members of our management to purchase units of Alpha Coal Management into options to purchase up to 596,985 shares of our common stock in connection with the Internal Restructuring (the “ACM Converted Options”), we recorded stock-based compensation of $0.6 million for the first nine months of 2005. The aggregate amount of stock-based compensation expense and stock-based compensation we recorded in the first nine months of 2005 was $43.2 million, equal to the $42.6 million of expense associated with distributions paid and the vested portions of shares issued in the Internal Restructuring and amortization expense from the unvested portions of shares issued in the Internal Restructuring, and $0.6 million of amortization expense from the ACM Converted Options. In addition, we had deferred stock-based compensation at September 30, 2005 of $18.6 million, including $16.0 million and $2.6 million associated with the unvested portions of shares issued in the Internal Restructuring and the ACM Converted Options, respectively, that we will record as non-cash stock-based compensation expense over the remaining term of the applicable two-year and five-year vesting periods, respectively. The amortization of the deferred stock-based compensation relating to the unvested shares issued in the Internal Restructuring and the ACM converted options over the applicable two-year and five-

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year vesting periods will result in a non-cash amortization expense in these periods, thereby reducing our earnings in those periods.
Our Sponsors may have significant influence on our company and may have conflicts of interest with us or you in the future.
      The First Reserve Stockholders and persons affiliated with AMCI beneficially own approximately 39% of our outstanding common stock as of January 1, 2006. We refer to First Reserve and to AMCI and its affiliates, collectively, as our “Sponsors.” After this offering, the First Reserve Stockholders will beneficially own approximately 2.87% of our common stock and persons affiliated with AMCI will beneficially own approximately 17.62% of our common stock. If the underwriters exercise in full their option to purchase additional shares, the First Reserve Stockholders will not beneficially own any shares of our common stock and persons affiliated with AMCI will beneficially own approximately 17.62% of our common stock. Our Sponsors are in the business of making investments in companies and they may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. For example, our Sponsors hold a combined 12.6% ownership interest in Foundation Coal Holdings, Inc. (“Foundation”) as of September 30, 2005. These other investments may create competing financial demands on our Sponsors, potential conflicts of interest and require efforts consistent with applicable law to keep the other businesses separate from our operations. Our Sponsors may also pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. Additionally, our amended and restated certificate of incorporation provides that our Sponsors may compete with us. The designees of the persons affiliated with AMCI on our board of directors, as well as the remaining designee of the First Reserve Stockholders on our board of directors for so long as he continues to serve as a director, will not be required to offer corporate opportunities to us and may take any such opportunities for themselves, other than any opportunities offered to the designees solely in their capacity as one of our directors. So long as our Sponsors continue to own a significant amount of our equity, even if such amount is less than 50%, they will continue to be able to strongly influence or effectively control our decisions. For example, our Sponsors could cause us to make acquisitions that increase our amount of indebtedness or sell revenue-generating assets.
Terrorist attacks and threats, escalation of military activity in response to such attacks or acts of war may negatively affect our business, financial condition and results of operations.
      Terrorist attacks and threats, escalation of military activity in response to such attacks or acts of war may negatively affect our business, financial condition, and results of operations. Our business is affected by general economic conditions, fluctuations in consumer confidence and spending, and market liquidity, which can decline as a result of numerous factors outside of our control, such as terrorist attacks and acts of war. Future terrorist attacks against U.S. targets, rumors or threats of war, actual conflicts involving the United States or its allies, or military or trade disruptions affecting our customers may materially adversely affect our operations and those of our customers. As a result, there could be delays or losses in transportation and deliveries of coal to our customers, decreased sales of our coal and extension of time for payment of accounts receivable from our customers. Strategic targets such as energy-related assets may be at greater risk of future terrorist attacks than other targets in the United States. In addition, disruption or significant increases in energy prices could result in government-imposed price controls. It is possible that any of these occurrences, or a combination of them, could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to the Offering
Future sales of our shares could depress the market price of our common stock.
      The market price of our common stock could decline as a result of sales of a large number of shares of common stock in the market after the offering or the perception that such sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

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      We, each of the selling stockholders and our directors and executive officers have agreed with the underwriters not to sell, dispose of or hedge any shares of our common stock or securities convertible into or exchangeable for shares of our common stock, subject to specified exceptions, during the period from the date of this prospectus continuing through the date that is 90 days after the date of this prospectus, except with the prior written consent of Morgan Stanley & Co. Incorporated, Citigroup Global Markets Inc. and UBS Securities LLC.
      As of January 1, 2006, we had outstanding 64,420,414 shares of common stock. Of those shares, the 14,163,527 shares being offered hereby (including shares subject to the underwriters’ option), plus the 33,925,000 shares previously sold in our initial public offering, as well as shares that have been resold since the IPO pursuant to Rules 144 or 701 of the Securities Act or issued by us pursuant to our registration statement on Form S-8, are freely tradeable without restriction or further registration under the Securities Act, except that any shares held by our “affiliates,” as that term is defined under Rule 144, may be sold only in compliance with the limitations of Rule 144. In addition, 13,147,040 shares (assuming the underwriters’ option is exercised in full) will be eligible for resale from time to time after the expiration of the 90-day lock-up period, subject to Securities Act restrictions, including those relating to the volume, manner of sale and other conditions of Rule 144, and, in the case of certain shares owned by management, the conditions of Rule 701 and certain vesting agreements. After the expiration of the 90-day lock-up period, the Sponsors and their affiliates, which will collectively beneficially own 13,199,313 shares after this offering assuming the underwriters’ option is not exercised, will have the ability to cause us to register the resale of their remaining shares.
The market price of our common stock may be volatile, which could cause the value of your investment to decline.
      Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market or potential conditions, could reduce market price of our common stock in spite of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors, and in response, the market price of our common stock could decrease significantly. You may be unable to resell your shares of our common stock at or above the offering price.
      Our ability to pay regular dividends to our stockholders is subject to the discretion of our board of directors and may be limited by our holding company structure, the covenants in our debt instruments and applicable provisions of Delaware law.
      As discussed under “Dividend Policy,” we expect to consider a policy of paying quarterly dividends beginning sometime in 2006. Our board of directors may, in its discretion, decide not to adopt this dividend policy or, if adopted, may decrease the level of dividends or subsequently discontinue the payment of dividends entirely. In addition, as a holding company, we will be dependent upon the ability of our direct and indirect subsidiaries to generate earnings and cash flows and distribute them to intermediate parent companies and to us so that we can pay dividends to our stockholders, as well as our obligations and expenses. Our subsidiaries’ ability to make such distributions will be subject to their operating results, cash requirements and financial condition, the applicable laws of the State of Delaware (which may limit the amount of funds available for distribution to equity interest holders), compliance with covenants and financial ratios related to existing or future indebtedness, and other agreements with third parties. If, as a consequence of these various limitations and restrictions, we are unable to generate sufficient distributions from our business, we may not be able to make, or may have to reduce or eliminate, the payment of dividends on our shares.

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Provisions in our certificate of incorporation and bylaws may discourage a takeover attempt even if doing so might be beneficial to our shareholders.
      Provisions contained in our certificate of incorporation and bylaws could impose impediments to the ability of a third party to acquire us even if a change of control would be beneficial to our existing shareholders. Provisions of our certificate of incorporation and bylaws impose various procedural and other requirements, which could make it more difficult for stockholders to effect certain corporate actions. For example, our certificate of incorporation authorizes our board of directors to determine the rights, preferences, privileges and restrictions of unissued series of preferred stock, without any vote or action by our stockholders. Thus, our board of directors can authorize and issue shares of preferred stock with voting or conversion rights that could adversely affect the voting or other rights of holders of our common stock. These rights may have the effect of delaying or deterring a change of control of our company, and could limit the price that certain investors might be willing to pay in the future for shares of our common stock. See “Description of Capital Stock.”

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
      This prospectus contains 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 and Section 21E of the Securities Exchange Act of 1934 and are intended to come within the safe harbor protection provided by those sections. These statements, which involve risks and uncertainties, relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements 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” and similar terms and phrases, including references to assumptions, in this prospectus 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.
      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 prospectus. 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 prospectus.
      The following factors are among those that may cause actual results to differ materially from our forward-looking statements:
  •  market demand for coal, electricity and steel;
 
  •  future economic or capital market conditions;
 
  •  weather conditions or catastrophic weather-related damage;
 
  •  our production capabilities;
 
  •  the consummation of financing, acquisition or disposition transactions and the effect thereof on our business;
 
  •  our ability to successfully integrate the operations we acquired in the Nicewonder Acquisition with our existing operations, and to successfully operate NCI’s highway construction business;
 
  •  our plans and objectives for future operations and expansion or consolidation;
 
  •  our relationships with, and other conditions affecting, our customers;
 
  •  timing of reductions in customer coal inventories;
 
  •  long-term coal supply arrangements;
 
  •  inherent risks of coal mining beyond our control;
 
  •  environmental laws, including those directly affecting our coal mining and production, and those affecting our customers’ coal usage;
 
  •  competition in coal markets;
 
  •  railroad, barge, truck and other transportation performance and costs;
 
  •  availability of mining and processing equipment and parts;
 
  •  our assumptions concerning economically recoverable coal reserve estimates;
 
  •  employee workforce factors;

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  •  regulatory and court decisions;
 
  •  future legislation and changes in regulations, governmental policies or taxes;
 
  •  changes in post-retirement benefit obligations;
 
  •  our liquidity, results of operations and financial condition; and
 
  •  other factors, including those discussed in “Risk Factors.”
MARKET AND INDUSTRY DATA AND FORECASTS
      In this prospectus, we refer to information regarding the coal industry in the United States and internationally that is available from the American Iron and Steel Institute, the World Coal Institute, the U.S. Department of Energy, the National Energy Technology Laboratory, the U.S. Energy Information Administration, Platts Research and Consulting, the International Iron and Steel Institute, Bloomberg L.P., the Bureau of Economic Analysis, Global Energy Advisors and BP Statistical Review. These organizations are not affiliated with us. They are not aware of and have not consented to being named in this prospectus. We believe that this information is reliable. In addition, in many cases we have made statements in this prospectus regarding our industry and our position in the industry based on our experience in the industry and our own investigation of market conditions.
USE OF PROCEEDS
      We will not receive any of the proceeds from the sale of common stock in this offering.
DIVIDEND POLICY
      We do not presently pay dividends on our common stock. We expect to consider a policy of paying quarterly dividends beginning sometime in 2006, initially of between $.02 and $.03 per share, to the holders of our common stock. If adopted, we would expect our board to commence and continue this dividend policy for the foreseeable future subject to (1) our results of operations and the amount of our surplus available to be distributed, (2) dividend availability and restrictions under our credit facility and indenture, (3) the dividend rate being paid by comparable companies in the coal industry, (4) our liquidity needs and financial condition, (5) the level of cash investments we may make in connection with potential future acquisitions and (6) other factors that our board of directors may deem relevant. The terms of our new credit facility and the indenture governing our senior notes restrict our ability to pay dividends to our stockholders. See “Risk Factors — Our ability to pay regular dividends to our stockholders is subject to the discretion of our board of directors and may be limited by our holding company structure, the covenants in our debt instruments and applicable provisions of Delaware law,” and “Risk Factors — The covenants in our credit facility and the indenture governing our senior notes impose restrictions that may limit our operating and financial flexibility.”
PRICE RANGE OF OUR COMMON STOCK
      Trading in our common stock commenced on the New York Stock Exchange on February 15, 2005 under the symbol “ANR”. The following table sets forth, for the periods indicated, the high and low sales prices per share of our common stock reported in the New York Stock Exchange consolidated tape.
                 
2005   High   Low
         
First Quarter
  $ 30.50     $ 21.65  
Second Quarter
    29.50       22.00  
Third Quarter
    32.73       23.83  
Fourth Quarter
    30.47       18.70  
2006
               
First Quarter (through January 18, 2006)
    21.85       19.25  

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CAPITALIZATION
      The following table sets forth our cash and cash equivalents and consolidated capitalization as of September 30, 2005 on an actual basis and on a pro forma basis giving effect to the Nicewonder Acquisition and the 2005 Financing, including our repayment on November 2, 2005 of the $181.1 million first installment of the promissory notes we issued to the Nicewonder Coal Group sellers. You should read the information in this table in conjunction with “Unaudited Pro Forma Financial Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto, each included elsewhere in this prospectus.
                     
    As of September 30, 2005
     
    Actual   Pro Forma
         
    (In millions)
Cash and cash equivalents
  $ 0.1     $ 0.1  
Debt:
               
 
Prior credit facility(1)
    81.0        
 
New credit facility(2)
          305.3  
 
10% senior notes due 2012
    175.0       175.0  
 
Promissory notes(3)
          39.9  
 
Other debt(4)
    5.0       5.0  
             
   
Total debt
    261.0       525.2  
             
Stockholders’ equity:
               
 
Preferred stock — par value $0.01, 10,000,000 shares authorized, no shares issued
           
 
Common stock — par value $0.01, 100,000,000 shares authorized, 62,212,580 shares issued and 64,392,813 shares issued pro forma(5)
    0.6       0.6  
Additional paid-in-capital
    146.4       199.6  
Unearned Stock-Based Compensation
    (18.6 )     (18.6 )
Retained Earnings
    6.1       4.6  
             
 
Total stockholders’ equity
    134.5       186.2  
             
Total capitalization
  $ 395.5     $ 711.4  
             
 
(1)  Our prior credit facility provided for a $50.0 million funded letter of credit facility and a revolving credit facility of up to $125.0 million (under which $50.0 million was available for additional letters of credit). As of September 30, 2005, we had $81.0 million of indebtedness and an additional $53.0 million of letters of credit outstanding under our prior credit facility.
 
(2)  In connection with the closing of the Nicewonder Acquisition, we consummated the 2005 Financing and terminated our prior credit facility. As of September 30, 2005, on a pro forma basis giving effect to the Nicewonder Acquisition and 2005 Financing, including our repayment on November 2, 2005 of the $181.1 million first installment of the promissory notes we issued to the Nicewonder Coal Group sellers, we would have had approximately $305.3 million of indebtedness and an additional $65.5 million of letters of credit outstanding under our new credit facility, resulting in availability under the new revolving credit facility of approximately $154.2 million. See “Description of Indebtedness — Credit Facility.”
 
(3)  Includes the second installment of the promissory installment notes issued to the sellers pursuant to the Nicewonder Acquisition by one of our indirect, wholly owned subsidiaries, which was paid on January 13, 2006. The first installment of the promissory notes, in the principal amount of $181.1 million, was paid on November 2, 2005.
 
(4)  Includes $1.6 million of capital lease obligations extending through March 2009, $0.6 million principal amount in variable rate term notes maturing in April 2006 that we incurred in connection with equipment financing and $2.8 million payable to an insurance premium finance company in installments of approximately $1.4 million per month through November of 2005.
 
(5)  As part of the Nicewonder Acquisition, we issued 2,180,233 shares of our common stock valued at approximately $53.2 million for accounting purposes. For this purpose, the value of the common stock issued was based on the average closing prices of our common stock for the five trading days surrounding October 20, 2005, the date the number of shares to be issued under the terms of the acquisition agreement became fixed without subsequent revision.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION
      The following unaudited pro forma financial information has been derived by application of pro forma adjustments to the audited combined financial statements of ANR Fund IX Holdings, L.P. and Alpha NR Holding, Inc. and subsidiaries and to the unaudited interim consolidated condensed financial statements of Alpha Natural Resources, Inc. and subsidiaries included elsewhere in this prospectus. The unaudited pro forma condensed balance sheet data as of September 30, 2005, give effect to the Nicewonder Acquisition and the 2005 Financing, as if each had occurred on September 30, 2005. The unaudited pro forma condensed statement of operations data for the year ended December 31, 2004 and the nine months ended September 30, 2005, give effect to the following events, in each case as if they had occurred on January 1, 2004:
  •  the issuance by Alpha Natural Resources, LLC and its wholly-owned subsidiary, Alpha Natural Resources Capital Corp. on May 18, 2004, of $175.0 million principal amount of 10% senior notes due 2012, and our entry into a $175.0 million credit facility on May 28, 2004 (together referred to as the “2004 Financings”);
 
  •  the Internal Restructuring described in Note (1) to the audited combined financial statements of ANR Fund IX Holdings, L.P. and Alpha NR Holding, Inc. and subsidiaries included elsewhere in this prospectus;
 
  •  the IPO;
 
  •  the Nicewonder Acquisition; and
 
  •  the 2005 Financing, including our use of a portion of the proceeds therefrom to repay in full indebtedness outstanding under our prior credit facility and to pay the first installment of the promissory notes we issued to the Nicewonder Coal Group sellers.
      The pro forma adjustments, which are based upon available information and upon assumptions that management believes to be reasonable, are described in the accompanying notes.
      The unaudited pro forma consolidated financial information is for informational purposes only, should not be considered indicative of actual results that would have been achieved had the transactions actually been consummated on the dates indicated and do not purport to be indicative of results of operations or financial position as of any future date or for any future period. The unaudited pro forma consolidated financial information should be read in conjunction with “Selected Historical Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our financial statements and the related notes included elsewhere in this prospectus.

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ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DATA
September 30, 2005
                                       
        Nicewonder   2005    
    Historical(1)   Acquisition   Financing   Pro Forma
                 
    (In thousands, except share and per share amounts)
ASSETS
Current assets
  $ 280,095     $ 21,526 (2)   $     $ 301,621  
Property, plant and equipment, net
    267,481       280,094 (2)           547,575  
Goodwill
    18,641       6,885 (2)           25,526  
Other intangibles, net
    560       26,106 (2)           26,666  
Deferred income taxes
    19,616       (9)           19,616  
Other assets
    35,705             8,000 (7)     42,205  
                  (1,500 )(7)      
                         
     
Total assets
  $ 622,098     $ 334,611     $ 6,500     $ 963,209  
                         
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
  $ 154,495     $ 11,526 (2)   $     $ 211,721  
              5,800 (3)                
              221,000 (5)     (181,100 )(8)        
Long-term debt, net of current portion
    257,163       35,200 (4)     189,100 (8)     481,463  
Workers’ compensation benefits
    5,113                   5,113  
Postretirement medical benefits
    22,226                   22,226  
Asset retirement obligation
    34,284       7,900 (2)           42,184  
Deferred gains on sale of property interests
    5,166                   5,166  
Deferred income taxes
          (9)            
Other liabilities
    9,178                   9,178  
                         
     
Total liabilities
    487,625       281,426       8,000       777,051  
                         
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, 62,212,580 shares issued and outstanding, 64,392,813 shares issued and outstanding pro forma
    622       22 (6)           644  
 
Additional paid-in capital
    146,372       53,163 (6)           199,535  
 
Unearned stock-based compensation
    (18,623 )                 (18,623 )
 
Retained earnings
    6,102             (1,500 )(7)     4,602  
                         
   
Total stockholders’ equity
    134,473       53,815       (1,500 )     186,158  
                         
   
Total liabilities and stockholders’ equity
  $ 622,098     $ 334,611     $ 6,500       963,209  
                         
 
(1)  Reflects the consolidated condensed balance sheet of Alpha Natural Resources, Inc. and subsidiaries as of September 30, 2005.
 
(2)  Reflects the estimated fair value of the net assets acquired from The Combined Entities of The Nicewonder Coal Group as shown in the table below. The Nicewonder Coal Group had equipment financing indebtedness of $41.3 million as of September 30, 2005, all of which was repaid prior to the closing of the Nicewonder Acquisition. The aggregate purchase price of the Nicewonder Acquisition was $315.2 million, consisting of cash at closing in the amount of $35.2 million, a cash tax payment

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of $1.9 million to be made to the sellers in April 2006, estimated transaction costs of $3.9 million, installment promissory notes issued to the sellers in the aggregate principal amount of $221.0 million, $181.1 million of which was paid on November 2, 2005, with the remaining $39.9 million paid on January 13, 2006, and 2,180,233 shares of our common stock valued at approximately $53.2 million for accounting purposes.
           
    (In thousands)
Current assets
  $ 21,526  
Property, plant and equipment
    280,094  
Other intangibles
    26,106  
Goodwill
    6,885  
       
 
Total assets acquired
    334,611  
       
Current liabilities
    11,526  
Asset retirement obligation
    7,900  
       
 
Total liabilities assumed
    19,426  
       
 
Net assets acquired
  $ 315,185  
       
The purchase price allocation is based on preliminary estimates of the fair values of the assets acquired and liabilities assumed, and we have initiated a study to evaluate the fair values of the assets and liabilities. Fair market value adjustments reflected in the pro forma financial statements may be subject to revisions and adjustments pending finalization of the evaluation.
 
(3) Reflects a cash tax payment of $1.9 million to be made to the sellers in April 2006 and estimated transaction costs of $3.9 million.
 
(4) Reflects borrowings under our new credit facility revolver to pay the $35.2 million of cash paid to the sellers at the closing of the Nicewonder Acquisition.
 
(5) Reflects the issuance of notes payable to the Nicewonder Coal Group sellers.
 
(6) Reflects the issuance of 2,180,233 shares to the Nicewonder Coal Group sellers at a value of $24.39 per share. For this purpose, the value was based on the average closing prices of our common stock for the five trading days surrounding October 20, 2005, the date the number of shares to be issued under the terms of the acquisition agreement became fixed without subsequent revision.
 
(7) Reflects $8.0 million of estimated deferred financing costs associated with the 2005 Financings and the write-off of $1.5 million of the unamortized balance of the deferred financing costs related to our existing revolver.
 
(8) Reflects the issuance of the $250.0 million seven-year term loan, the draw on our new revolver of $55.3 million, the repayment of the first installment of the seller notes in the amount of $181.1 million, the repayment of $81.0 million of our prior revolver, and the payment of $35.2 million due to the sellers at the closing of the Nicewonder Acquisition.
 
(9) The pro forma balance sheet reflects a pro forma adjustment to record a deferred tax liability of $22.0 million due to the excess of financial accounting basis for the assets of the acquired companies over their tax basis. The pro forma balance sheet also reflects an adjustment to reverse previously recorded valuation allowance of $22.0 million due to changes in the estimate of the future realizability of our existing deferred tax assets, which offsets the net deferred tax liability recorded on the acquisition. The change in the estimate of the future realizability of the existing deferred tax assets is based upon the expectation of future taxable income from the reversal of the acquired deferred tax liability. We are completing a comprehensive analysis of the recoverability of our deferred tax assets, and such analysis may result in adjustments to the valuation allowance with an offsetting adjustment to goodwill.

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ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
For the year ended December 31, 2004
                                                               
        2004   Internal       Nicewonder   2005    
        Financings   Restructuring   Subtotal   Acquisition   Financing   Total
    Historical   Pro Forma   Pro Forma   Pro Forma   Pro Forma   Pro Forma   Pro Forma
                             
    (1)   (2)   (3)       (4)   (5)    
    (In thousands, except share and per share amounts)
Total revenues
  $ 1,252,702     $     $     $ 1,252,702     $ 144,613     $     $ 1,397,315  
                                           
Costs and expenses:
                                                       
 
Operating costs (exclusive of items shown separately below(6)
    1,084,453                   1,084,453       104,421             1,188,874  
 
Depreciation, depletion and amortization
    55,261                   55,261       51,000             106,261  
 
Selling, general and administrative expenses
    43,881                   43,881       2,973             46,854  
                                           
     
Total costs and expenses
    1,183,595                   1,183,595       158,394             1,341,989  
                                           
     
Income (loss) from operations
    69,107                   69,107       (13,781 )           55,326  
                                           
Other income (expense):
                                                       
 
Interest expense
    (20,041 )     (2,697 )           (22,738 )     (1,351 )     (13,808 )     (37,897 )
 
Interest income
    531                   531       161             692  
 
Miscellaneous income (expense), net
    722                   722       (278 )           444  
                                           
   
Total other income (expense), net
    (18,788 )     (2,697 )           (21,485 )     (1,468 )     (13,808 )     (36,761 )
                                           
   
Income (loss) from continuing operations before income taxes and minority interest
    50,319       (2,697 )           47,622       (15,249 )     (13,808 )     18,565  
Income tax expense (benefit)
    5,150       (1,025 )     9,806       13,931       (5,795 )     (5,247 )     2,889  
Minority interest
    22,781             (22,781 )                          
                                           
   
Income (loss) from continuing operations
  $ 22,388       (1,672 )     12,975       33,691       (9,454 )     (8,561 )     15,676  
                                           
Pro forma income from continuing operations per share:
                                                       
 
Basic
                          $ 0.55 (7)                   $ 0.25 (8)
 
Diluted
                          $ 0.54 (7)                   $ 0.24 (8)
Weighted average shares outstanding:
                                                       
 
Basic
                            60,867,650 (7)                     63,047,883 (8)
 
Diluted
                            62,409,586 (7)                     64,589,819 (8)
 
(1)  Reflects the combined results of operations of ANR Fund IX Holdings, L.P. and Alpha NR Holdings, Inc. and subsidiaries for the year ended December 31, 2004.
 
(2)  Represents pro forma interest expense, net of income taxes at the statutory rate of 38%, resulting from the 2004 Financings as shown in the table below (In thousands):
             
Notes payable
  $ 228     Reflects interest at a fixed rate of 3.55% on an average balance of $7.2 million.
Equipment financing
    101     Reflects pro forma interest expense at a fixed rate of 4.79% on an estimated average balance of $2.1 million.
Senior notes
    17,500     Reflects pro forma interest expense at a fixed rate of 10% on our senior notes.

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Funded revolver
    1,111     Reflects pro forma interest at LIBOR of 1.52% plus 2.75% on an estimated average balance of $26.0 million.
Letter of credit fees
    1,563     Reflects fees at the fixed rate of 3.1% on $50.0 million letters of credit outstanding under our funded letter of credit facility.
Commitment fees
    495     Reflects commitment fees at 0.50% on an estimated $99.0 million average available balance.
           
 
Total cash interest expense
    20,998      
Amortization of deferred loan costs
    1,740     Reflects deferred financing costs of $11.7 million amortized over approximately 7 years.
           
 
Total pro forma interest expense
    22,738      
Less: historical interest expense
    (20,041 )    
           
 
Adjustment to interest expense
  $ 2,697      
           
(3)  Reflects the elimination of minority interest and related income tax effects as a result of the Internal Restructuring.
 
(4)  Represents the pro forma results of operations of The Nicewonder Coal Group for the year ended December 31, 2004 as if the Nicewonder Acquisition had occurred on January 1, 2004 (In thousands):
                               
    Nicewonder       Nicewonder
    Coal Group   Pro Forma   Coal Group
    Historical(a)   Adjustments   Pro Forma
             
Total revenues
  $ 144,613     $     $ 144,613  
                   
Costs and expenses:
                       
 
Operating costs (exclusive of items shown separately below)
    103,958       463 (b)     104,421  
 
Depreciation, depletion and amortization
    11,336       39,664 (c)     51,000  
 
Selling, general and administrative expenses
    2,973             2,973  
                   
     
Total costs and expenses
    118,267       40,127       158,394  
                   
     
Income (loss) from operations
    26,346       (40,127 )     (13,781 )
                   
Other income (expense):
                       
 
Interest expense
    (1,351 )           (1,351 )
 
Interest income
    161             161  
 
Miscellaneous income (expense), net
    (278 )           (278 )
                   
   
Total other income (expense), net
    (1,468 )           (1,468 )
                   
   
Income (loss) from continuing operations before income taxes
    24,878       (40,127 )     (15,249 )
Income tax expense (benefit)
          (5,795 )(d)     (5,795 )
                   
   
Income (loss) from continuing operations
  $ 24,878     $ (34,332 )   $ (9,454 )
                   
 
 
(a) Reflects the results of operations of The Combined Entities of The Nicewonder Coal Group for the year ended December 31, 2004.
(b) Reflects the estimated cost of providing retiree medical coverage to the production employees under Alpha’s employee benefit plan.
(c) Reflects the additional charge for depreciation, depletion and amortization arising from purchase accounting.
(d) Reflects the benefit of income taxes computed at the combined federal and state statutory rate of 38% on pro forma net loss of $15.2 million. The Combined Entities of the Nicewonder Coal Group were all pass-through entities for income tax purposes before the acquisition. Accordingly, the pro forma presentation computes income taxes on the pro forma loss before income taxes.

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(5)  Represents pro forma interest expense, net of income taxes at the statutory rate of 38%, resulting from the 2005 Financing as shown in the table below (In thousands):
               
Notes payable
  $ 228     Reflects interest on an average balance of $7.2 million.
Equipment financing
    101     Reflects interest on an estimated average balance of $2.0 million.
Senior notes
    17,500     Reflects interest at a fixed rate of 10% on our senior notes.
Funded revolver
    615     Reflects interest at a variable rate of 6.15% on an estimated balance of $10.0 million.
Term loan
    14,250     Reflects interest at a variable rate of 5.7% on a balance of $250.0 million.
Letter of credit fees
    1,860     Reflects fees at the fixed rate of 3.1% on an estimated $60.0 million stated amount of letters of credit outstanding.
Commitment fees
    1,025     Reflects commitment fees at the fixed rate of 0.50% on a estimated average available balance of $205.0 million.
           
 
Total cash interest expense
    35,579      
Amortization of deferred loan costs
    2,318      
           
 
Total pro forma interest
    37,897      
Less: historical interest expense
    (24,089 )    
           
 
Adjustment to interest expense
  $ 13,808      
           
(6)  Operating expenses include cost of coal sales, freight and handling costs and the costs of other revenues.
 
(7)  Earnings per share and the related weighted shares outstanding reflect the additional pro forma effect of our issuance of 33,925,000 shares of our common stock in our IPO on February 18, 2005 as if that occurred at the beginning of 2004. See footnote (2) in “Prospectus Summary — Alpha Summary Historical and Pro Forma Financial Data” for an explanation of the calculation of our earnings per share and the related weighted shares outstanding.
 
(8)  Earnings per share and the related weighted shares outstanding reflect the additional pro forma, as adjusted effect of our issuance of 33,925,000 shares of our common stock in our IPO on February 18, 2005 as if that occurred at the beginning of 2004. See footnote (2) in “Prospectus Summary — Alpha Summary Historical and Pro Forma Financial Data” for an explanation of the calculation of our earnings per share and the related weighted shares outstanding.

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ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
For the nine months ended September 30, 2005
                                                     
                Nicewonder   2005    
        Internal       Acquisition   Financing    
    Historical   Restructuring   Subtotal   Pro Forma   Pro Forma   Total
    (1)   (2)   Pro Forma   (3)   (4)   Pro Forma
                         
    (In thousands, except share and per share amounts)
Total revenues
  $ 1,127,480             $ 1,127,480     $ 156,855     $     $ 1,284,335  
                                     
Costs and expenses:
                                               
 
Operating costs (exclusive of items shown separately below)(5)
    961,276             961,276       102,680             1,063,956  
 
Depreciation, depletion and amortization
    45,521             45,521       38,260             83,781  
 
Selling, general and administrative expenses
    74,924             74,924       2,668             77,592  
                                     
   
Total costs and expenses
    1,081,721             1,081,721       143,608             1,225,329  
                                     
   
Income from operations
    45,759             45,759       13,247             59,006  
                                     
Other income (expense):
                                               
 
Interest expense
    (19,400 )           (19,400 )     (1,593 )     (9,867 )     (30,860 )
 
Interest income
    675             675       302             977  
 
Miscellaneous income, net
    40             40       92             132  
                                     
   
Total other income (expense), net
    (18,685 )           (18,685 )     (1,199 )     (9,867 )     (29,751 )
                                     
   
Income from continuing operations before income taxes and minority interest
    27,074             27,074       12,048       (9,867 )     29,255  
Income tax expense (benefit)
    15,141       778       15,919       4,578       (3,749 )     16,748  
Minority interest
    2,918       (2,918 )                          
                                     
   
Income from continuing operations
  $ 9,015     $ 2,140     $ 11,155     $ 7,470     $ (6,118 )   $ 12,507  
                                     
Net income from continuing operations per share, as adjusted:
                                               
 
Basic and diluted:
                                               
   
Income from continuing operations
  $ 0.17 (6)           $ 0.18 (6)                   $ 0.20 (7)
                                     
 
Weighted average shares outstanding
                                               
 
Basic
    53,184,066 (6)             61,092,832 (6)                     63,273,065 (7)
 
Diluted
    53,566,469 (6)             61,677,221 (6)                     63,857,454 (7)
 
(1)  Reflects the consolidated results of operations of Alpha Natural Resources, Inc. and subsidiaries for the nine months ended September 30, 2005.

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(2)  Reflects the elimination of minority interest and related income tax effects as a result of the Internal Restructuring.
 
(3)  Represents the pro forma results of operations of the Nicewonder Coal Group for the nine months ended September 30, 2005, as if the Nicewonder Acquisition had occurred on January 1, 2004 (in thousands):
                               
    Historical   Pro forma    
    (a)   Adjustments   Pro forma
             
Total revenues
  $ 156,855     $     $ 156,855  
                   
Costs and expenses:
                       
 
Operating costs (exclusive of items shown separately below)
    102,333       347 (b)     102,680  
 
Depreciation, depletion and amortization
    10,340       27,920 (c)     38,260  
 
Selling, general and administrative expenses
    2,668             2,668  
                   
     
Total costs and expenses
    115,341       28,267       143,608  
                   
     
Income from operations
    41,514       (28,267 )     13,247  
                   
Other income (expense):
                       
 
Interest expense
    (1,593 )           (1,593 )
 
Interest income
    302             302  
 
Miscellaneous income, net
    92             92  
                   
   
Total other income (expense), net
    (1,199 )           (1,199 )
                   
   
Income from continuing operations before income taxes
    40,315       (28,267 )     12,048  
Income tax expense
          4,578 (d)     4,578  
                   
   
Income from continuing operations
  $ 40,315     $ (32,845 )   $ 7,470  
                   
 
 
          (a) Reflects the results of operations of The Combined Entities of The Nicewonder Coal Group for the nine months ended September 30, 2005
 
          (b) Reflects the estimated cost of providing retiree medical coverage to the production employees under Alpha’s employee benefit plan.
 
          (c) Reflects the additional charge for depreciation, depletion and amortization arising from purchase accounting.
 
          (d) The Combined Entities of The Nicewonder Coal Group were all pass-through entities for income tax purposes before the acquisition. Accordingly, the pro forma presentation reflects income taxes computed at the combined federal and state statutory rate of 38% on pro forma pre-tax income.

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(4) Represents pro forma interest expense for the nine months ended September 30, 2005, net of income taxes at the statutory rate of 38%, resulting from our 2005 Refinancing as shown in the table below (in thousands):
               
Notes payable
  $ 256     Reflects interest on an average balance of $9.0 million.
Equipment financing
    215     Reflects interest on an average balance of $2.8 million.
Senior notes
    13,375     Reflects interest expense at a fixed rate of 10% on our senior notes.
Funded revolver
    2,491     Reflects interest at a variable rate of 6.15% on an estimated balance of $54.0 million.
Term loan
    10,688     Reflects interest at a variable rate of 5.7% on a balance of $250.0 million.
Letter of credit fees
    1,511     Reflects fees at the fixed rate of 3.1% on an estimated balance of $65.0 million.
Commitment fees
    585     Reflects fees at the fixed rate of .5% on an estimated $156.0 million average available balance.
           
 
Total cash interest expense
    29,121      
Amortization of deferred loan costs
    1,739      
           
 
Total pro forma interest
    30,860      
Less: interest as recorded
    (20,993 )    
           
 
Adjustment to interest expense
  $ 9,867      
           
(5) Operating expenses include cost of coal sales, freight and handling costs and the costs of other revenues.
 
(6) Earnings per share and the related weighted shares outstanding reflect the additional pro forma effect of our issuance of 33,925,000 shares of our common stock in our IPO on February 18, 2005 as if that occurred at the beginning of 2004. See footnote (2) in “Prospectus Summary — Alpha Summary Historical and Pro Forma Financial Data” for an explanation of the calculation of our earnings per share and the related weighted shares outstanding.
 
(7) Earnings per share and the related weighted shares outstanding reflect the additional pro forma, as adjusted effect of our issuance of 33,925,000 shares of our common stock in our IPO on February 18, 2005 as if that occurred at the beginning of 2004. See footnote (2) in “Prospectus Summary — Alpha Summary Historical and Pro Forma Financial Data” for an explanation of the calculation of our earnings per share and the related weighted shares outstanding.

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SELECTED HISTORICAL FINANCIAL DATA
      The following table presents selected financial and other data about us and our Predecessor for the most recent five fiscal years and the first six months of 2005 and 2004. The selected historical financial data as of December 31, 2004 and 2003, for the years ended December 31, 2004 and 2003, and for the period from December 14, 2002 to December 31, 2002, have been derived from the combined financial statements of ANR Fund IX Holdings, L.P. and Alpha NR Holding, Inc. and subsidiaries and the related notes, included elsewhere in this prospectus, which have been audited by KPMG, an independent registered public accounting firm. The selected historical financial data as of December 31, 2002 have been derived from the audited combined balance sheet of ANR Fund IX Holdings, L.P. and Alpha NR Holding, Inc. and subsidiaries not included in this prospectus. The selected historical financial data for the period from January 1, 2002 through December 13, 2002 (the “Predecessor Period”) have been derived from our Predecessor’s combined financial statements included elsewhere in this prospectus, which have been audited by KPMG. The selected historical financial data as of December 31, 2001 and 2000, and for the years ended December 31, 2001 and 2000 have been derived from our Predecessor’s audited combined financial statements not included in this prospectus. The selected historical financial data as of September 30, 2005 and for the nine months ended September 30, 2005 and 2004, have been derived from the unaudited consolidated condensed interim financial statements of Alpha NR Holding, Inc. and subsidiaries, and the related notes, included elsewhere in this prospectus. Our historical financial statements have been restated to report the disposition of NKC as discontinued operations. You should read the following table in conjunction with the financial statements, the related notes to those financial statements, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

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                    Alpha Natural
        ANR Fund IX Holdings, L.P. and Alpha NR Holding, Inc.   Resources, Inc. and
    Predecessor   and Subsidiaries   Subsidiaries
             
    Years Ended   January 1,   December 14,       Nine Months   Nine Months
    December 31,   2002 to   2002 to   Year Ended   Year Ended   Ended   Ended
        December 13,   December 31,   December 31,   December 31,   September 30,   September 30,
    2000   2001   2002   2002   2003   2004   2004   2005
                                 
                            (Unaudited)   (Unaudited)
      (In thousands, except per share amounts)
Statement of Operations Data:
                                                               
Revenues:
                                                               
 
Coal revenues
  $ 226,653     $ 227,237     $ 154,715     $ 6,260     $ 694,591     $ 1,079,733     $ 801,021     $ 982,383  
 
Freight and handling revenues
    25,470       25,808       17,001       1,009       73,800       141,100       102,846       126,650  
 
Other revenues
    5,601       8,472       6,031       101       13,458       31,869       20,440       18,447  
                                                 
   
Total revenues
    257,724       261,517       177,747       7,370       781,849       1,252,702       924,307       1,127,480  
                                                 
Costs and expenses:
                                                               
 
Cost of coal sales (exclusive of items shown separately below)
    224,230       219,545       158,924       6,268       626,265       920,359       668,887       818,299  
 
Freight and handling costs
    25,470       25,808       17,001       1,009       73,800       141,100       102,846       126,650  
 
Cost of other revenues
    4,721       8,156       7,973       120       12,488       22,994       14,942       16,327  
 
Depreciation, depletion and amortization
    7,890       7,866       6,814       274       35,385       55,261       38,883       45,521  
 
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately above)
    8,543       9,370       8,797       471       21,926       43,881       35,786       74,924  
 
Costs to exit business
    26,937       3,500       25,274                                
                                                 
   
Total costs and expenses
    297,791       274,245       224,783       8,142       769,864       1,183,595       861,344       1,081,721  
                                                 
Refund of federal black lung excise tax
          16,213       2,049                                
Other operating income, net
    57       94       1,430                                
                                                 
   
Income (loss) from operations
    (40,010 )     3,579       (43,557 )     (772 )     11,985       69,107       62,963       45,759  
                                                 
Other income (expense):
                                                               
 
Interest expense
                (35 )     (203 )     (7,848 )     (20,041 )     (14,497 )     (19,400 )
 
Interest income
    2,263       1,993       2,072       6       103       531       331       675  
 
Miscellaneous income
    4,215       1,250                   574       722       517       40  
                                                 
   
Total other income (expense), net
    6,478       3,243       2,037       (197 )     (7,171 )     (18,788 )     (13,649 )     (18,685 )
                                                 
   
Income (loss) before income taxes and minority interest
    (33,532 )     6,822       (41,520 )     (969 )     4,814       50,319       49,314       27,074  
Income tax expense (benefit)
    (13,545 )     (1,497 )     (17,198 )     (334 )     898       5,150       15,852       15,141  
Minority interest
                            1,164       22,781       22,335       2,918  
                                                 
   
Income (loss) from continuing operations
    (19,987 )     8,319       (24,322 )     (635 )     2,752       22,388       21,127       9,015  
Discontinued operations
                            (490 )     (2,373 )     (2,227 )     (214 )
                                                 
   
Net income (loss)
  $ (19,987 )   $ 8,319     $ (24,322 )   $ (635 )   $ 2,262     $ 20,015     $ 18,900     $ 8,801  
                                                 

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                    Alpha Natural
        ANR Fund IX Holdings, L.P. and Alpha NR Holding,   Resources, Inc.
    Predecessor   Inc. and Subsidiaries   and Subsidiaries
             
    Years Ended   January 1,   December 14,       Nine Months   Nine Months
    December 31,   2002 to   2002 to   Year Ended   Year Ended   Ended   Ended
        December 13,   December 31,   December 31,   December 31,   September 30,   September 30,
    2000   2001   2002   2002   2003   2004   2004   2005
                                 
                            (Unaudited)   (Unaudited)
     (In thousands, except per share amounts)
Earnings per share data(1):
                                                               
 
Net income (loss) per share, as adjusted
                                                               
   
Basic and diluted:
                                                               
     
Income from continuing operations
                                  $ 0.19     $ 1.52     $ 1.43     $ 0.17  
     
Loss from discontinued operations
                                    (0.04 )     (0.16 )     (0.15 )     (0.01 )
                                                 
     
Net income per basic and diluted share
                                  $ 0.15     $ 1.36     $ 1.28     $ 0.16  
                                                 
 
Pro forma net income (loss) per share
                                                               
   
Income from continuing operations
                                  $ 0.02     $ 0.55     $ 0.53     $ 0.18  
   
Loss from discontinued operations
                                    (0.01 )     (0.06 )     (0.06 )      
                                                 
   
Net income (loss) per basic share
                                  $ 0.01     $ 0.49     $ 0.47     $ 0.18  
                                                 
 
Pro forma net income (loss) per diluted share
                                                               
   
Income from continuing operations
                                  $ 0.02     $ 0.54     $ 0.52     $ 0.18  
   
Loss from discontinued operations
                                    (0.01 )     (0.07 )     (0.06 )      
                                                 
   
Net income (loss) per basic share
                                  $ 0.01     $ 0.47     $ 0.46     $ 0.18  
                                                 
Balance sheet data (at period end):
                                                               
Cash and cash equivalents
  $ 185     $ 175     $ 88     $ 8,444     $ 11,246     $ 7,391             $ 111  
Operating and working capital
    (26,634 )     (22,958 )     (4,268 )     (12,223 )     32,714       56,257               125,600  
Total assets
    130,608       139,467       156,328       108,442       379,336       477,121               622,098  
Notes payable and long-term debt, including current portion
                      25,743       84,964       201,705               261,024  
Stockholders’ equity and partners’ capital (deficit)
    (142,067 )     (136,593 )     (132,997 )     23,384       86,367       45,933               134,473  
Statement of cash flows data:
                                                               
Net cash provided by (used in):
                                                               
 
Operating activities
  $ 20,659     $ 10,655     $ (13,816 )   $ (295 )   $ 54,104     $ 106,776     $ 99,247     $ 21,624  
 
Investing activities
    (8,564 )     (9,203 )     (22,054 )     (38,893 )     (100,072 )     (86,202 )     (67,235 )     (93,390 )
 
Financing activities
    (12,106 )     (1,462 )     35,783       47,632       48,770       (24,429 )     (27,447 )     64,486  
Capital expenditures
    9,127       10,218       21,866       960       27,719       72,046       52,984       95,919  
 
(1)  Basic earnings per share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding during the periods. Diluted earnings per share is computed by dividing net income or loss by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the periods. Common stock equivalents include the number of shares issuable on 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.
  We have disclosed for informational purposes two sets of earnings per share data:
 
  Net Income (Loss) Per Share, as Adjusted
 
  The first set of earnings per share data is labeled “net income (loss) per share, as adjusted.” The numerator for purposes of computing basic and diluted net income (loss) per share, as adjusted, includes the reported net income (loss) and a pro forma adjustment for income taxes to reflect the pro forma income taxes for ANR Fund IX Holdings, L.P.’s portion of reported pre-tax income (loss), which would have been recorded if the issuance of the shares of common stock received by the First Reserve Stockholders in exchange for their ownership in ANR Holdings in connection with the Internal Restructuring had occurred as of January 1, 2003. For purposes of the computation of basic and diluted net income (loss) per share, as adjusted, the pro forma adjustment for income taxes only applies to the percentage interest owned by ANR Fund IX Holding, L.P., the non-taxable First Reserve Stockholder. No pro forma adjustment for income taxes is required for the percentage interest owned by Alpha NR Holding, Inc., the taxable First Reserve Stockholder, because income taxes have already been recorded in the historical results of operations. Furthermore, no pro forma adjustment to reported net income (loss) is necessary subsequent to February 11, 2005 because Alpha Natural Resources, Inc. is subject to income taxes.
 
  The denominator for purposes of computing basic net income (loss) per share, as adjusted, reflects the retroactive impact of the common shares received by the First Reserve Stockholders in exchange for their ownership in ANR Holdings in connection with the Internal Restructuring on a weighted-average outstanding share basis as being outstanding as of January 1, 2003. The common shares issued to the minority interest owners of ANR Holdings in connection with the Internal Restructuring, including the immediately vested shares granted to management, have been reflected as being outstanding as of February 11, 2005 for purposes of computing the basic net income (loss) per share, as adjusted. The unvested shares granted to management on February 11, 2005 that vest monthly over the two-year period from January 1, 2005 to December 31, 2006 are included in the

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  basic net income (loss) per share, as adjusted, computation as they vest on a weighted-average outstanding share basis starting on February 11, 2005. The 33,925,000 new shares issued in connection with the IPO have been reflected as being outstanding since February 14, 2005, the date of the IPO, for purposes of computing the basic net income (loss) per share, as adjusted.
 
  The unvested shares issued to management are considered options for purposes of computing diluted net income (loss) per share, as adjusted. Therefore, for diluted purposes, all remaining unvested shares granted to management are added to the denominator subsequent to February 11, 2005 using the treasury stock method, if the effect is dilutive. In addition, the treasury stock method is used for outstanding stock options, if dilutive, beginning with the November 10, 2004 grant of options to management to purchase units in Alpha Coal Management that were automatically converted into options to purchase up to 596,985 shares of our common stock at an exercise price of $12.73 per share.
 
  The computations of basic and diluted net income (loss) per share, as adjusted, are set forth below:
                                         
        Nine Months Ended
    Years Ended December 31,   September 30,
         
    2003   2004   2004   2005
                 
    (In thousands, except share and per share data)
Numerator:
                               
 
Reported income from continuing operations
  $ 2,752     $ 22,388     $ 21,127     $ 9,015  
 
Deduct: Income tax effect of ANR Fund IX Holdings, L.P. income from continuing operations prior to Internal Restructuring
    (138 )     (1,149 )     (1,124 )     (91 )
                         
       
Income from continuing operations, as adjusted
    2,614       21,239       20,003       8,924  
                         
 
Reported loss from discontinued operations
  $ (490 )   $ (2,373 )   $ (2,227 )   $ (214 )
 
Add: Income tax effect of ANR Fund IX Holdings, L.P. income from discontinued operations prior to Internal Restructuring
    27       149       139       2  
                         
       
Loss from discontinued operations, as adjusted
    (463 )     (2,224 )     (2,088 )     (212 )
                         
   
Net income, as adjusted
  $ 2,151     $ 19,015     $ 17,915     $ 8,712  
                         
Denominator:
                               
   
Weighted average shares — basic
    13,998,911       13,998,911       13,998,911       53,184,066  
   
Dilutive effect of stock options and restricted stock grants
                      382,403  
     
Weighted average shares — diluted
    13,998,911       13,998,911       13,998,911       53,566,469  
                         
Net income per basic share, as adjusted:
                               
     
Income from continuing operations
  $ 0.19     $ 1.52     $ 1.43     $ 0.17  
     
Income (loss) from discontinued operations
    (0.04 )     (0.16 )     (0.15 )     (0.01 )
                         
     
Net income
  $ 0.15     $ 1.36     $ 1.28     $ 0.16  
                         
Net income per diluted share, as adjusted:
                               
     
Income from continuing operations
  $ 0.19     $ 1.52     $ 1.43     $ 0.17  
     
Income (loss) from discontinued operations
    (0.04 )     (0.16 )     (0.15 )     (0.01 )
                         
     
Net income
  $ 0.15     $ 1.36     $ 1.28     $ 0.16  
                         
  Pro Forma Net Income (Loss) Per Share
 
  The second set of earnings per share data is labeled “pro forma net income (loss) per share.” The numerator for purposes of computing basic and diluted pro forma net income (loss) per share is based on “net income, as adjusted” (as calculated above) and pro forma adjustments to reflect the impact of:
  (i)   the add back of minority interest for each period presented, because the ownership held by the minority interest owners of ANR Holdings were exchanged for shares of our common stock as part of the Internal Restructuring;
 
  (ii)   the additional income taxes that would have been incurred by us on the minority interest added back; and
 
  (iii)  the issuance of $175,000 principal amount of 10% senior notes due 2012 by our subsidiaries Alpha Natural Resources, LLC and Alpha Natural Resources Capital Corp. and the entry by Alpha Natural Resources, LLC into a $175,000 credit facility in May 2004, in connection with the 2004 Financings, as if these transactions had occurred on January 1, 2003.
  No pro forma adjustment to reported net income (loss) is necessary subsequent to February 11, 2005.

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  The denominator for purposes of computing basic pro forma net income (loss) per share reflects:
  (i)   the retroactive impact of the common shares received by the First Reserve Stockholders in exchange for their ownership in ANR Holdings in connection with the Internal Restructuring on a weighted-average outstanding share basis as being outstanding as of January 1, 2003;
 
  (ii)   the retroactive impact of the common shares issued to the minority interest owners of ANR Holdings in connection with the Internal Restructuring, including the immediately vested shares granted to management, on a weighted-average outstanding share basis as being outstanding as of January 1, 2003;
 
  (iii)  the unvested shares granted to management that vest over the two-year period from January 1, 2005 to December 31, 2006, which have been included in the basic computation on a weighted-average outstanding share basis based on the monthly vesting beginning as of January 1, 2005; and
 
  (iv)   the retroactive impact of the 33,925,000 new shares issued in connection with the IPO on a weighted-average outstanding share basis as being outstanding as of January 1, 2003 since 100% of the net proceeds from the IPO was distributed to the previous owners of ANR Holdings.
  The unvested shares issued to management are considered options for purposes of computing diluted pro forma net income (loss) per share. Therefore, for diluted purposes, all remaining unvested shares granted to management would be added to the denominator as of January 1, 2003 using the treasury stock method, if the effect is dilutive. In addition, the treasury stock method would be used for outstanding stock options, if dilutive, beginning with the November 10, 2004 grant of options to management to purchase units in Alpha Coal Management that were automatically converted into options to purchase up to 596,985 shares of our common stock at an exercise price of $12.73 per share.
 
  The computations of basic and diluted pro forma net income (loss) per share, are set forth below:
                                         
        Nine Months Ended
    Years Ended December 31,   September 30,
         
    2003   2004   2004   2005
                 
    (In thousands, except share and per share data)
Numerator:
                               
 
Income from continuing operations, as adjusted
  $ 2,614     $ 21,239     $ 20,003     $ 8,924  
 
Add: Minority interest in income from continuing operations, net of income tax effect
    2,822       14,124       13,848       2,231  
 
Add: Pro forma effects related to the 2003 Acquisitions, net of income taxes(1)
    3,507                    
 
Deduct: Pro forma effects of the 2004 Financings, net of income taxes
    (7,728 )     (1,672 )     (1,614 )      
                         
       
Pro forma income from continuing operations
    1,215       33,691       32,237       11,155  
                         
 
Loss from discontinued operations, as adjusted
  $ (463 )   $ (2,224 )   $ (2,088 )   $ (212 )
 
Add: Minority interest in income (loss) from discontinued operations, net of income tax effect
    (216 )     (1,830 )     (1,719 )     (55 )
                         
       
Pro forma loss from discontinued operations
    (679 )     (4,054 )     (3,807 )     (267 )
                         
 
Pro forma net income
  $ 536     $ 29,637     $ 28,430     $ 10,888  
                         
Denominator:
                               
   
Weighted average shares — basic
    60,867,650       60,867,650       60,867,650       61,092,832  
   
Dilutive effect of stock options and restricted stock grants
    1,541,936       1,541,936       379,183       584,389  
                         
     
Weighted average shares — diluted
    62,409,586       62,409,586       61,246,833       61,677,221  
                         
Pro forma net income per basic share:
                               
   
Income from continuing operations
  $ 0.02     $ 0.55     $ 0.53     $ 0.18  
     
Income (loss) from discontinued operations
    (0.01 )     (0.06 )     (0.06 )      
                         
     
Net income
  $ 0.01     $ 0.49     $ 0.47     $ 0.18  
                         
Pro forma net income per diluted share:
                               
     
Income from continuing operations
  $ 0.02     $ 0.54     $ 0.52     $ 0.18  
     
Income (loss) from discontinued operations
    (0.01 )     (0.07 )     (0.06 )      
                         
     
Net income
  $ 0.01     $ 0.47     $ 0.46     $ 0.18  
                         
 
 
  (1)  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — Predecessor and 2003 Acquisitions” for a definition and explanation of the “2003 Acquisitions.”

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      You should read the following discussion and analysis in conjunction with our financial statements and related notes, our “Unaudited Pro Forma Financial Information,” and our “Selected Historical Financial Data” included elsewhere in this prospectus. The historical financial information discussed below for periods prior to the completion of our Internal Restructuring on February 11, 2005, is for ANR Fund IX Holdings, L.P. and Alpha NR Holding, Inc. and subsidiaries, which prior to the completion of our Internal Restructuring were the owners of a majority of the membership interests of ANR Holdings, our top-tier holding company, and for Alpha NR Holding, Inc. and subsidiaries for periods from and after the completion of our Internal Restructuring.
Overview
      We produce, process and sell steam and metallurgical coal from seven regional business units, which, as of November 1, 2005, are supported by 44 active underground mines, 25 active surface mines and 11 preparation plants located throughout Virginia, West Virginia, Kentucky, and Pennsylvania. We also sell coal produced by others, the majority of which we process and/or blend with coal produced from our mines prior to resale, providing us with a higher overall margin for the blended product than if we had sold the coals separately. For the first nine months of 2005 and in 2004, sales of steam coal accounted for approximately 62% and 63%, respectively, of our coal sales volume during such periods. Sales of metallurgical coal, which generally sells at a premium over steam coal, accounted for approximately 38% and 37%, respectively, of our coal sales volume during such periods. Our sales of steam coal during 2004 and the first nine months of 2005 were made primarily to large utilities and industrial customers in the Eastern region of the United States, and our sales of metallurgical coal were made primarily to steel companies in the Northeastern and Midwestern regions of the United States and in several countries in Europe, Asia and South America. Approximately 44% of our sales revenue in the first nine months of 2005 and 47% of our sales revenue in 2004 was derived from sales made outside the United States, primarily in Japan, Canada, Brazil, Korea and several countries in Europe.
      In addition, we generate other revenues from equipment and parts sales, equipment repair income, rentals, royalties, commissions, coal handling, terminal and processing fees, and coal and environmental analysis fees. We also record revenue for freight and handling charges incurred in delivering coal to our customers, which we treat as being reimbursed by our customers. However, these freight and handling revenues are offset by equivalent freight and handling costs and do not contribute to our profitability.
      Our business is seasonal, with operating results varying from quarter to quarter. We generally experience lower sales and hence build coal inventory during the winter months primarily due to the freezing of lakes that we use to transport coal to some of our customers.
      Our primary expenses are for wages and benefits, supply costs, repair and maintenance expenditures, cost of purchased coal, royalties, freight and handling costs, and taxes incurred in selling our coal. Historically, our cost of coal sales per ton is lower for sales of our produced and processed coal than for sales of purchased coal that we do not process prior to resale.
      We have one reportable segment, Coal Operations, which includes all of our revenues and costs from coal production and sales, freight and handling, rentals, commissions and coal handling and processing operations. We report the revenues and costs from rentals, commissions and coal handling and processing operations in our other revenues and cost of other revenues, respectively.
      Predecessor and 2003 Acquisitions. On December 13, 2002, we acquired our Predecessor, the majority of the Virginia coal operations of Pittston Coal Company, from The Brink’s Company (formerly known as The Pittston Company), for $62.9 million. On January 31, 2003, we acquired Coastal Coal Company for $67.8 million. In connection with our acquisition of Coastal Coal Company, we acquired an overriding royalty interest in certain properties located in Virginia and West Virginia owned by El Paso CPG Company for $11.0 million in cash. Effective February 1, 2003, we sold the overriding royalty

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interest to affiliates of Natural Resource Partners, L.P. (“NRP”) for $11.8 million in cash. Effective April 1, 2003, we also sold substantially all of our fee-owned Virginia mineral properties to NRP for approximately $53.6 million in cash in a sale/leaseback transaction. On March 11, 2003, we acquired AMCI for $121.3 million and on November 17, 2003, we acquired the assets of Mears for $38.0 million in cash. We refer to the acquisitions of Coastal Coal Company, AMCI and Mears, collectively, as the “2003 Acquisitions.”
      Internal Restructuring and Our Initial Public Offering. On February 11, 2005, we completed a series of transactions in connection with the Internal Restructuring for the purpose of transitioning our top-tier holding company from a limited liability company to a corporation, and on February 18, 2005, we completed the initial public offering of our common stock. Further information regarding our Internal Restructuring and our initial public offering can be found in note 1 to our combined financial statements included in this prospectus. As a result of our initial public offering and our Internal Restructuring, we have incurred during the period after the initial public offering and Internal Restructuring and will continue to incur additional expenses that we have not incurred in prior periods, including expenses associated with compliance with corporate governance and periodic financial reporting requirements for public companies. Moreover, all of our income is now subject to income tax and therefore the effective tax rates reflected in our financial statements for periods prior to the Internal Restructuring are not indicative of our effective tax rates after our Internal Restructuring.
      As part of our Internal Restructuring, our executive officers and certain other key employees exchanged their interests in ANR Holdings for shares of our common stock and the right to participate in a distribution of the proceeds we received from the underwriters as a result of the underwriters’ exercise of their over-allotment option in connection with the initial public offering. As a result, we recorded stock-based compensation expense equal to the fair value of the unrestricted shares issued and distributions paid in the amount of $42.6 million for the nine months ended September 30, 2005. In addition, as a result of the conversion of outstanding options held by members of our management to purchase units of Alpha Coal Management into the ACM Converted Options, we recorded stock-based compensation of $0.6 million in the first nine months of 2005. The aggregate amount of stock-based compensation expense and stock-based compensation we recorded in the first nine months of 2005 was $43.2 million, equal to the $42.6 million of expense associated with distributions paid and the vested portions of shares issued in the Internal Restructuring and amortization expense from the unvested portions of shares issued in the Internal Restructuring, and $0.6 million of amortization expense from the ACM Converted Options. In addition, we had deferred stock-based compensation at September 30, 2005 of $18.6 million, including $16.0 million and $2.6 million related to our Internal Restructuring and the ACM Converted Options, respectively, that we will record as non-cash stock-based compensation expense over the remaining term of the applicable two-year and five-year vesting periods, respectively, thereby reducing our earnings in those periods.
      In connection with our Internal Restructuring, we assumed the obligation of ANR Holdings to make distributions to (1) affiliates of AMCI in an aggregate amount of $6.0 million, representing the approximate incremental tax resulting from the recognition of additional tax liability resulting from our Internal Restructuring, and (2) First Reserve Fund IX, L.P. in an aggregate amount of approximately $4.5 million, representing the approximate value of tax attributes conveyed as a result of the Internal Restructuring (collectively, the “Tax Distributions”). The Tax Distributions to affiliates of AMCI are payable in five equal installments on the dates for which estimated income tax payments are due in each of April 2005, June 2005, September 2005, January 2006 and April 2006. The first three of these payments were made on April 15, 2005, June 15, 2005, and September 15, 2005, in the amount of $1.2 million each in cash. The Tax Distributions to First Reserve Fund IX, L.P. will be paid in three installments of approximately $2.1 million, $2.1 million and $0.3 million on December 15, 2007, 2008 and 2009, respectively. We will pay the Tax Distributions in cash or, to the extent our subsidiaries are not permitted by the terms of our credit facility or the indenture governing our senior notes to distribute cash to us to pay the Tax Distributions, in shares of our common stock.

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      NKC Disposition. On April 14, 2005, we sold the assets of NKC to an unrelated third party for cash in the amount of $4.4 million, plus an amount in cash equal to the fair market value of NKC’s coal inventory, and the assumption by the buyer of certain liabilities of NKC. For the six months ended June 30, 2005, NKC contributed revenues of $4.5 million, an after-tax and minority interest loss of $0.2 million on 0.1 million tons of steam coal sold. In connection with the closing of the transaction, National King Coal, LLC was renamed NatCoal LLC, and Gallup Transportation and Transloading Company, LLC was renamed GTTC LLC. Giving effect to this disposition as if it had occurred on January 1, 2005, our revenues would have been reduced by $4.5 million and our net income would have increased by $0.2 million. We recorded a gain on this sale of $0.7 million and are reporting NKC as discontinued operations for all periods presented herein. Our historical financial statements have been restated to report the disposition of NKC as discontinued operations and the components of the operating results included in discontinued operations are shown in footnote 30 to our consolidated financial statements and footnote 11 to our condensed consolidated financial statements included elsewhere in this prospectus.
      Nicewonder Acquisition and 2005 Financing. On October 26, 2005, we completed the acquisition of certain privately held coal reserves and operations of the Nicewonder Coal Group in southern West Virginia and southwestern Virginia for an aggregate purchase price of $315.2 million, consisting of cash at closing in the amount of $35.2 million, a cash tax payment of $1.9 million to be made to the sellers in April 2006, estimated transaction costs of $3.9 million, $221.0 million principal amount of promissory installment notes of one of our indirect, wholly owned subsidiaries, of which $181.1 million was paid on November 2, 2005 and $39.9 million was paid on January 13, 2006, and 2,180,233 shares of our common stock valued at approximately $53.2 million for accounting purposes. For this purpose, the value of the common stock issued was based on the average closing prices of our common stock for the five trading days surrounding October 20, 2005, the date the number of shares to be issued under the terms of the acquisition agreement became fixed without subsequent revision. In connection with the Nicewonder Acquisition, we also agreed to make royalty payments to the former owners of the acquired companies in the amount of $0.10 per ton of coal mined and sold from White Flame Energy’s surface mine no. 10. The final cash purchase price is subject to certain working capital and other adjustments. The Nicewonder Acquisition consisted of the purchase of the outstanding capital stock of White Flame Energy, Inc., Twin Star Mining, Inc. and Nicewonder Contracting, Inc., the equity interests of Powers Shop, LLC and Buchanan Energy, LLC and substantially all of the assets of Mate Creek Energy of W. Va., Inc. and Virginia Energy Company, and the business of Premium Energy, Inc.
      Also on October 26, 2005, in connection with our acquisition of the Nicewonder Coal Group, we entered into a new $525.0 million credit facility consisting of a $250.0 term loan facility and a $275.0 revolving credit facility. We used the net proceeds of the term loan facility and a portion of the proceeds from drawings under the revolving credit facility to finance the Nicewonder Acquisition and to refinance our $175.0 million prior credit facility.
      As a result of the Nicewonder Acquisition, based on our preliminary estimates of the fair values and lives assigned to the assets and liabilities acquired we expect to record approximately $6.9 million of goodwill which will be subject to annual impairment testing, and approximately $306.2 million of property plant and equipment and intangibles that will be depreciated over the useful life of the assets, resulting in approximately $51.0 million of additional depreciation, depletion and amortization expense per year for the approximately five-year average useful life of the property, plant and equipment and intangibles. We are in the process of completing an evaluation of the fair values and the lives of the assets. Fair value adjustments reflected in the pro forma financial statements included in our “Unaudited Pro Forma Financial Information” elsewhere in this prospectus may be subject to material revisions and adjustments pending finalization of the evaluation. We expect that our average cost of coal sales per ton including the Nicewonder Coal Group operations will be lower than it would be without the Nicewonder Coal Group operations, because all of the Nicewonder Coal Group mining operations are surface mines, which historically have a lower cost of coal sales per ton than underground mining operations. We also expect that our average coal sales realization per ton including the Nicewonder Coal Group operations will be

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lower than it would be without the Nicewonder Coal Group operations, because our existing operations market a higher percentage of our produced tons as higher-priced metallurgical coal than the Nicewonder Coal Group operations. As a result of the Nicewonder Acquisition and the 2005 Financing, we have incurred and expect to continue to incur additional debt and increased interest expense. If the Nicewonder Acquisition and 2005 Financing had occurred on January 1, 2004, we would have incurred additional interest expense of $15.2 million and $11.5 million during the year ended December 31, 2004 and the nine months ended September, 2005, respectively.
      On a pro forma basis as if the 2004 Financings, Internal Restructuring, IPO and Nicewonder Acquisition and 2005 Financing had each occurred on January 1, 2004, our revenues would have been $1,397.3 million and $1,284.3 million and our income from continuing operations would have been $15.7 million and $12.5 million, respectively, for the year ended December 31, 2004 and the nine months ended September 30, 2005.
      Coal Pricing Trends and Uncertainties. During 2004 and the nine months ended September 30, 2005, prices for our coal increased due to a combination of conditions in the United States and internationally, including an improving U.S. economy and robust economic growth in Asia, relatively low customer stockpiles, limited availability of high-quality coal from competing producers in Central Appalachia, capacity constraints of U.S. nuclear-powered electricity generators, high current and forward prices for natural gas and oil, and increased international demand for U.S. coal. This strong coal pricing environment has contributed to our growth in revenues during 2004 and the nine months ended September 30, 2005. While our outlook on coal pricing remains positive, future coal prices are subject to factors beyond our control and we cannot predict whether and for how long this strong coal pricing environment will continue. As of December 31, 2005, approximately 12%, 54% and 77%, respectively, of our planned production for 2006, 2007 and 2008, including production from the operations we acquired in the Nicewonder Acquisition, was uncommitted and was not yet priced. For the tons for which we have firm commitments in 2006, the average price for steam coal is $46.79 per ton and the average price for metallurgical coal is $73.91 per ton.
      During 2004 and the first nine months of 2005, we experienced increased costs for purchased coal which have risen with coal prices generally, and increased operating costs for steel manufactured equipment and supplies, employee wages and salaries and contract mining and trucking. We anticipate that cost pressures will persist in 2006, including higher costs for purchased coal, contractor mining, trucking and general mining supplies. Variable costs such as royalties and severance taxes are also expected to rise in 2006 in parallel with rising sales volumes. We also experienced disruptions in railroad service beginning in the second half of 2004 and continuing through 2005, which caused delays in delivering products to customers and increased our internal coal handling costs at our operations. We expect disruptions in railroad service to continue during 2006. Conditions affecting railroad service are subject to factors beyond our control and we cannot predict whether and for how long these railroad-related costs will continue to increase in the future.
      We experienced a tight market for supplies of mining and processing equipment and parts during 2004 and the first nine months of 2005, due to increased demand by coal producers attempting to increase production in response to the strong market demand for coal. Although we are attempting to obtain adequate supplies of mining and processing equipment and parts to meet our production forecasts, continued limited availability of equipment and parts could prevent us from meeting those forecasts. The supply of mining and processing equipment and parts is subject to factors beyond our control and we cannot predict whether and for how long this supply market will remain limited.
      We are also experiencing a tight market for skilled mining employees and certified supervisors, due to increased demand by coal producers attempting to increase production in response to the strong market demand for coal, and demographic changes as existing miners in Appalachia retire at a faster rate than new miners are added to the Appalachian mining workforce. Although we have initiated training programs to create new skilled miners and raise the skill levels of existing miners, continued limited availability of skilled miners could prevent us from being able to meet our production and sales forecasts. The supply of

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skilled mining employees is subject to factors beyond our control and we cannot predict whether and for how long this employee market will remain limited.
      Due to Hurricane Katrina, we recorded a net pre-tax charge of $0.7 million in the third quarter of 2005 for loss of tonnage at a coal loading facility in New Orleans, representing the estimated total loss less the portion of the loss expected to be recovered through insurance claims. We expect to make a final determination of the loss during the process of preparing our financial statements for the fourth quarter of 2005.
      For additional information regarding some of the risks and uncertainties that affect our business, see “Risks Factors — Risks Related to our Business.”
Results of Operations
      For purposes of the following discussion and analysis of our operating results, the revenues and costs and expenses of ANR Fund IX Holdings, L.P. and Alpha NR Holding, Inc. and subsidiaries for the period from December 14, 2002 to December 31, 2002 have been combined with the revenues and costs and expenses of our Predecessor for the period from January 1, 2002 to December 13, 2002, as reflected in the table below. We believe this presentation facilitates the ability of the reader to more meaningfully compare our revenues, costs and expenses in 2002 with other periods. Our operating results from and after December 14, 2002, including our recorded depreciation, depletion and amortization expense, are not comparable to the Predecessor Periods as a result of the application of purchase accounting. The combining of the Predecessor and successor accounting periods in the year ended December 31, 2002 is not permitted by U.S. generally accepted accounting principles.

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Combined Statement of Operations Data
For the Year Ended December 31, 2002
                             
        ANR Fund IX    
        Holdings, L.P. and    
        Alpha NR   (Non-
        Holding, Inc. and   GAAP)
    Predecessor   Subsidiaries   Combined
             
    January 1,   December 14,   January 1,
    2002 to   2002 to   2002 to
    December 13,   December 31,   December 31,
    2002   2002   2002
             
    (In thousands, except per ton data)
Statement of Operations Data:
                       
Revenues:
                       
 
Coal revenues
  $ 154,715     $ 6,260     $ 160,975  
 
Freight and handling revenues
    17,001       1,009       18,010  
 
Other revenues
    6,031       101       6,132  
                   
   
Total revenues
    177,747       7,370       185,117  
                   
Costs and expenses:
                       
 
Cost of coal sales (exclusive of items shown separately below)
    158,924       6,268       165,192  
 
Freight and handling costs
    17,001       1,009       18,010  
 
Cost of other revenues
    7,973       120       8,093  
 
Depreciation, depletion and amortization
    6,814       274       7,088  
 
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately above)
    8,797       471       9,268  
 
Costs to exit business
    25,274             25,274  
                   
   
Total costs and expenses
    224,783       8,142       232,925  
                   
Refund of federal black lung excise tax
    2,049             2,049  
Other operating income, net
    1,430             1,430  
                   
   
Income (loss) from operations
  $ (43,557 )   $ (772 )   $ (44,329 )
                   
Other Data:
                       
Tons sold
    4,283       186       4,469  
Coal sales realization per ton sold
  $ 36.12     $ 33.66     $ 36.02  
Cost of coal sales per ton sold
  $ 37.11     $ 33.70     $ 36.96  
      The 2003 Acquisitions also affect comparability with the Predecessor Periods and, therefore, the results of operations for the Predecessor Periods are not comparable to the results of operations for the periods from and after December 14, 2002. In addition, the results of operations for the year ended December 31, 2004 are not directly comparable to the same period in 2003 due to the 2003 Acquisitions.
Nine months Ended September 30, 2005 Compared to the Nine months Ended September 30, 2004
      Summary
      For the nine months ended September 30, 2005, our total revenues were $1.127 billion compared to $924.3 million for the nine months ended September 30, 2004, an increase of $203.2 million. Net income decreased from $18.9 million in the 2004 period to $8.8 million for the 2005 period. Included in net income for the nine months ended September 30, 2005, was a stock-based compensation charge in the amount of $43.2 million ($40.5 million after-tax) and gains associated with the settlement of a funded reclamation settlement and the sale of NKC totaling $2.5 million ($1.8 million after-tax). EBITDA, as adjusted and as reconciled to our net income or loss in the table above, was $91.2 million in the first nine

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months of 2005, including the non-cash portion of the stock-based compensation charge in the amount of $35.7 million and was $5.5 million less than the same period in 2004. Our pro forma earnings per diluted share were $0.18 for the first nine months 2005, a $0.28 per share decrease over pro forma earnings per share for the 2004 period (see footnote 2 in our financial statements included herein). The combination of the stock-based compensation charge and the gains discussed above had a negative $0.63 effect on our pro forma earnings per share for the first nine months of 2005.
      We sold 18.9 million tons of coal during the first nine months of 2005, 0.1 million less than the comparable period in 2004. Coal margin increased from 16.5% in 2004 to 16.7% in 2005. Coal margin per ton was $8.67 in the nine months ended September 30, 2005, an increase of 25% over the nine months ended September 30, 2004 as increases in realization per ton outpaced increases in cost of coal sales per ton.
Revenues
                                 
    Nine Months Ended   Increase
    September 30,   (Decrease)
         
    2005   2004   $ or Tons   %
                 
    (In thousands, except per ton data)
Coal revenues
  $ 982,383     $ 801,021     $ 181,362       23 %
Freight and handling revenues
    126,650       102,846       23,804       23 %
Other revenues
    18,447       20,440       (1,993 )     (10 )%
                         
Total revenues
  $ 1,127,480     $ 924,307     $ 203,173       22 %
                         
Tons Sold:
                               
Steam
    11,700       11,801       (101 )     (1 )%
Metallurgical
    7,237       7,261       (24 )     0 %
                         
Total
    18,937       19,062       (125 )     (1 )%
                         
Coal sales realization per ton:
                               
Steam
  $ 40.05     $ 31.93     $ 8.12       25 %
Metallurgical
    70.99       58.43       12.56       21 %
Total
    51.88       42.02       9.86       23 %
      Coal Revenues. Coal revenues increased by $181.4 million during the nine months ended September 30, 2005 over the comparable period of 2004, or 23% mainly driven by a 23% increase in coal sales realization per ton from $42.02 per ton in the first nine months of 2004 to $51.88 per ton in the comparable 2005 period. Our met coal realization per ton increased from $58.43 per ton in the nine months ended September 30, 2004, to $70.99 per ton in the 2005 nine month period, or 21%, and steam coal realization per ton increased from $31.93 to $40.05 or 25%. Met coal sales accounted for 38% of our coal sales volume in the nine months ended September 30, 2005 and September 30, 2004. Total tons sold during the first nine months of 2005 were 18.9 million, including 7.2 million tons of met coal and 11.7 million of steam coal. Sales for the comparable periods last year were 19.1 million tons of which 7.3 million tons were met coal and 11.8 million tons were steam coal.
      Freight and Handling Revenues. Freight and handling revenues increased by $23.8 million during the nine months ended September 30, 2005 over the year ago period mainly due to higher freight rates partially offset by lower overseas export volumes. However, these revenues are offset by equivalent costs and do not contribute to our profitability.
      Other Revenues. Other revenues decreased by $2.0 million during the first nine months of this year from the corresponding period last year mainly due to a $2.4 million decrease in net sales commissions and lower used equipment sales by Maxxim Rebuild in the approximate amount of $1.2 million. Also, the nine months ended September 30, 2004 included revenue from contract reclamation in the amount of

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$1.2 million and no income in the current period. These decreases were partially offset by higher coal processing and handling fees.
Costs and Expenses
                                   
    Nine Months Ended   Increase
    September 30.   (Decrease)
         
    2005   2004   $   %
                 
    (In thousands, except per ton data)
Cost of coal sales (exclusive of items shown separately below)
  $ 818,299     $ 668,887     $ 149,412       22%  
Freight and handling costs
    126,650       102,846       23,804       23%  
Cost of other revenues
    16,327       14,942       1,385       9%  
Depreciation, depletion and amortization
    45,521       38,883       6,638       17%  
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately above and including stock-based compensation expense in the amount of $43,169 for the nine months ended September 30, 2005)
    74,924       35,786       39,138       109%  
                         
Total costs and expenses
  $ 1,081,721     $ 861,344     $ 220,377       26%  
                         
Cost of coal sales per ton:
                               
Company mines
  $ 36.49     $ 29.95     $ 6.54       22%  
Contract mines (including purchased and processed)
    50.54       39.97       10.57       26%  
 
Total produced and processed
    39.46       32.22       7.24       22%  
Purchased and sold without processing
    57.30       43.71       13.59