----

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**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**Form 10-Q**

**(Mark      One)**

|   |   |                                                                                                                                     |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------|
| þ |   | **QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |

**For      the quarterly period ended March 31, 2007**

**OR**

|   |   |                                                                                                                                      |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|
| o      |   | **TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |

**For      the transition period from           to     Commission File No. 1-32423**

**ALPHA      NR HOLDING, INC.**

*(Exact      name of registrant as specified in its charter)*

|                                                                  |   |                                    |
|-----------------------------------------------------------------------|--------|-----------------------------------------|
| **Delaware**                                                          |   | **02-0590704**                          |
| *(State                or other jurisdiction of*                      |   | *(I.R.S.                Employer*       |
| *incorporation                or organization)*                       |   | *Identification                Number)* |
|                                                                  |   |                                    |
| **One                Alpha Place, P.O. Box 2345, Abingdon, Virginia** |   | **24212**                               |
| *(Address                of principal executive offices)*             |   | *(Zip                Code)*             |

**Registrant’s      telephone number, including area code:**

**(276) 619-4410**

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Table          of Contents

**TABLE      OF CONTENTS**

|                                                                                                                                             |   |     |     |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|----------|--------|--------|
|                                                                                                                                             |   | **Page** |     |   |
| **PART                I**                                                                                                                        |   |     |     |   |   |
| ITEM                1. FINANCIAL STATEMENTS                                                                                                      |   |     |     |   |   |
| Condensed                Consolidated Balance Sheets                (Unaudited)                                                                  |   |     | 2        |   |   |
| Condensed                Consolidated Statements of Income                (Unaudited)                                                            |   |     |  3  |   |   |
| Condensed                Consolidated Statements of Cash Flows                (Unaudited)                                                        |   |     |  4  |   |   |
| Notes                to Condensed Consolidated Financial Statements                (Unaudited)                                                   |   |     |  6  |   |   |
| ITEM                2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION                AND                RESULTS OF OPERATIONS |   |     |  21 |   |   |
| ITEM                3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET                RISK                                                 |   |     |  29 |   |   |
| ITEM                4. CONTROLS AND PROCEDURES                                                                                                   |   |     | 30       |   |   |
| **PART                II**                                                                                                                       |   |     |     |   |   |
| ITEM                1. LEGAL PROCEEDINGS                                                                                                         |   |     | 30       |   |   |
| ITEM                1A. RISK FACTORS                                                                                                             |   |     | 30       |   |   |
| ITEM                6. EXHIBITS                                                                                                                  |   |     | 30       |   |   |
|                                                                                                                                             |
|                                                                                                                                             |
|  EX-31.A:                CERTIFICATION                                                                                                      |
|  EX-31.B:                CERTIFICATION                                                                                                      |
|  EX-32.A:                CERTIFICATION                                                                                                      |
|  EX-32.B:                CERTIFICATION                                                                                                      |

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Table          of Contents

**Item 1.      Financial Statements**

**ALPHA      NR HOLDING, INC. AND SUBSIDIARIES**

**(A      Wholly-owned subsidiary of Alpha Natural Resources, Inc.)**

**Condensed      Consolidated Balance Sheets (Unaudited)**

**(In      thousands)**

|                                                            |   |  March                  31, |      |  December                  31, |   |
|-----------------------------------------------------------------|--------|----------------------------------|-----------|-------------------------------------|--------|
|                                                            |   |  2007                       |      |  2006                          |   |
| **Assets**                                                      |   |                             |      |                                |   |
| Current                  assets:                                |   |                             |      |                                |   |
| Cash                  and cash equivalents                      |   | $                                | 30,896    |                                | $      | 33,256 |   |
| Trade                  accounts receivable, net                 |   |                             | 156,738   |                                |   | 171,195 |   |
| Notes                  and other receivables                    |   |                             | 6,694     |                                |   | 6,466 |   |
| Inventories                                                     |   |                             | 84,780    |                                |   | 76,844 |   |
| Due                  from affiliates                            |   |                             | 3,544     |                                |   | 4,581 |   |
| Prepaid                  expenses and other current assets      |   |                             | 40,002    |                                |   | 50,891 |   |
| Total                  current assets                           |   |                             | 322,654   |                                |   | 343,233 |   |
| Property,                  plant, and equipment, net            |   |                             | 640,598   |                                |   | 637,136 |   |
| Goodwill                                                        |   |                             | 20,547    |                                |   | 20,547 |   |
| Other                  intangibles, net                         |   |                             | 11,228    |                                |   | 11,720 |   |
| Deferred                  income taxes                          |   |                             | 94,847    |                                |   | 94,897 |   |
| Other                  assets                                   |   |                             | 44,806    |                                |   | 42,839 |   |
| Total                  assets                                   |   | $                                | 1,134,680 |                                | $      | 1,150,372 |   |
|                                                            |   |                             |           |                                |   |  |   |
| **Liabilities                  and Stockholder's Equity**       |   |                             |           |                                |   |  |   |
| Current                  liabilities:                           |   |                             |           |                                |   |  |   |
| Current                  portion of long-term debt              |   | $                                | 3,274     |                                | $      | 3,254 |   |
| Note                  payable                                   |   |                             | 14,069    |                                |   | 20,941 |   |
| Bank                  overdraft                                 |   |                             | 21,076    |                                |   | 23,781 |   |
| Trade                  accounts payable                         |   |                             | 69,808    |                                |   | 75,986 |   |
| Deferred                  income taxes                          |   |                             | 7,151     |                                |   | 7,601 |   |
| Accrued                  expenses and other current liabilities |   |                             | 79,071    |                                |   | 88,459 |   |
| Total                  current liabilities                      |   |                             | 194,449   |                                |   | 220,022 |   |
| Long-term                  debt, net of current portion         |   |                             | 420,586   |                                |   | 421,456 |   |
| Workers’                  compensation benefits           |   |                             | 8,003     |                                |   | 7,169 |   |
| Postretirement                  medical benefits                |   |                             | 52,346    |                                |   | 50,712 |   |
| Asset                  retirement obligation                    |   |                             | 70,345    |                                |   | 69,495 |   |
| Deferred                  gains on sale of property interests   |   |                             | 3,657     |                                |   | 3,885 |   |
| Other                  liabilities                              |   |                             | 21,204    |                                |   | 24,489 |   |
| Total                  liabilities                              |   |                             | 770,590   |                                |   | 797,228 |   |
| Minority                  interest                              |   |                             | 363       |                                |   | (50 | ) |
| Commitments                  and contingencies                  |   |                             |      |                                |   |   |   |
| Stockholder's                  equity:                          |   |                             |           |                                |   |  |   |
| Additional                  paid-in capital                     |   |                             | 226,994   |                                |   | 224,815 |   |
| Accumulated                  other comprehensive loss           |   |                             | (19,014   | )                                   |   | (19,019 | ) |
| Retained                  earnings                              |   |                             | 155,747   |                                |   | 147,398 |   |
| Total                  stockholder's equity                     |   |                             | 363,727   |                                |   | 353,194 |   |
| Total                  liabilities and stockholder's equity     |   | $                                | 1,134,680 |                                | $      | 1,150,372 |   |

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Table          of Contents

**ALPHA      NR HOLDING, INC. AND SUBSIDIARIES**

**(A      Wholly-owned subsidiary of Alpha Natural Resources, Inc.)**

**Condensed      Consolidated Statements of Income (Unaudited)**

**(In      thousands)**

|                                                                                                                                                                |   | Three                  months ended March 31, |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|---------|
|                                                                                                                                                                |   | 2007                                          |    | 2006 |   |
| Revenues:                                                                                                                                                           |   |                                          |    |   |   |
| Coal                  sales revenues                                                                                                                                |   | $                                             | 376,930 |   | $ | 424,331 |   |
| Freight                  and handling revenues                                                                                                                      |   |                                          | 43,211  |   |   | 46,392 |   |
| Other                  revenues                                                                                                                                     |   |                                          | 7,230   |   |   | 11,417 |   |
| Total                  revenues                                                                                                                                     |   |                                          | 427,371 |   |   | 482,140 |   |
|                                                                                                                                                                |   |                                          |         |   |   |  |   |
| Costs                  and expenses:                                                                                                                                |   |                                          |         |   |   |  |   |
| Cost                  of coal sales (exclusive of items shown separately below)                                                                                     |   |                                          | 309,255 |   |   | 330,885 |   |
| Freight                  and handling costs                                                                                                                         |   |                                          | 43,211  |   |   | 46,392 |   |
| Cost                  of other revenues                                                                                                                             |   |                                          | 5,628   |   |   | 7,951 |   |
| Depreciation,                  depletion and amortization                                                                                                           |   |                                          | 35,789  |   |   | 33,634 |   |
| Selling,                  general and administrative expenses (exclusive of depreciation                  and                  amortization shown separately above) |   |                                          | 13,239  |   |   | 16,639 |   |
| Total                  costs and expenses                                                                                                                           |   |                                          | 407,122 |   |   | 435,501 |   |
|                                                                                                                                                                |   |                                          |         |   |   |  |   |
| Income                  from operations                                                                                                                             |   |                                          | 20,249  |   |   | 46,639 |   |
| Other                  income (expense):                                                                                                                            |   |                                          |         |   |   |  |   |
| Interest                  expense                                                                                                                                   |   |                                          | (9,993  | ) |   | (10,277 | ) |
| Interest                  income                                                                                                                                    |   |                                          | 637     |   |   | 188 |   |
| Miscellaneous                  income, net                                                                                                                          |   |                                          | 42      |   |   | 282 |   |
| Total                  other income (expense), net                                                                                                                  |   |                                          | (9,314  | ) |   | (9,807 | ) |
| Income                  before income taxes and minority interest                                                                                                   |   |                                          | 10,935  |   |   | 36,832 |   |
| Income                  tax expense                                                                                                                                 |   |                                          | 2,629   |   |   | 9,620 |   |
| Minority                  interest                                                                                                                                  |   |                                          | (43     | ) |   | — |   |
| Net                  Income                                                                                                                                         |   | $                                             | 8,349   |   | $ | 27,212 |   |

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Table          of Contents

**ALPHA      NR HOLDING, INC. AND SUBSIDIARIES**

**(A      Wholly-owned subsidiary of Alpha Natural Resources, Inc.)**

**Condensed      Consolidated Statements of Cash Flows (Unaudited)**

**(In      thousands)**

|                                                                                                                |   |                                    |   |     |   |
|---------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|----------|--------|
|                                                                                                                |   | **Three                  months ended** |   |
|                                                                                                                |   | **March                  31,**          |   |
|                                                                                                                |   | **2007**                                |   | **2006** |   |
| Operating                  activities:                                                                              |   |                                    |   |     |   |
| Net                  income                                                                                         |   | $                                       | 8,349  |     | $      | 27,212 |   |
| Adjustments                  to reconcile net income to net cash provided by operating                  activities: |   |                                    |        |     |   |  |   |
| Depreciation,                  depletion and amortization                                                           |   |                                    | 35,789 |     |   | 33,634 |   |
| Amortization                  of debt issuance costs                                                                |   |                                    | 570    |     |   | 566 |   |
| Accretion                  of asset retirement obligation                                                           |   |                                    | 1,556  |     |   | 1,077 |   |
| Stock-based                  compensation                                                                           |   |                                    | 2,634  |     |   | 3,833 |   |
| Change                  in fair value of derivative instruments                                                     |   |                                    | (449   | )        |   | — |   |
| Amortization                  of deferred gains on sales of property interests                                      |   |                                    | (228   | )        |   | (239 | ) |
| Gain                  on sale of fixed assets, net                                                                  |   |                                    | (282   | )        |   | (153 | ) |
| Minority                  interest                                                                                  |   |                                    | (43    | )        |   | — |   |
| Deferred                  income taxes                                                                              |   |                                    | (402   | )        |   | 1,975 |   |
| Other                                                                                                               |   |                                    | 86     |     |   | 384 |   |
| Changes                  in operating assets and liabilities:                                                       |   |                                    |        |     |   |  |   |
| Trade                  accounts receivable                                                                          |   |                                    | 14,457 |     |   | (16,333 | ) |
| Notes                  and other receivables                                                                        |   |                                    | (875   | )        |   | 4,679 |   |
| Inventories                                                                                                         |   |                                    | (7,936 | )        |   | 2,068 |   |
| Due                  from affiliates                                                                                |   |                                    | 1,037  |     |   | (645 | ) |
| Prepaid                  expenses and other current assets                                                          |   |                                    | 8,678  |     |   | (4,817 | ) |
| Other                  assets                                                                                       |   |                                    | (2,552 | )        |   | (980 | ) |
| Trade                  accounts payable                                                                             |   |                                    | (1,334 | )        |   | (16,693 | ) |
| Accrued                  expenses and other current liabilities                                                     |   |                                    | (6,128 | )        |   | (6,790 | ) |
| Workers’                  compensation benefits                                                               |   |                                    | 846    |     |   | 326 |   |
| Postretirement                  medical benefits                                                                    |   |                                    | 2,249  |     |   | 2,231 |   |
| Asset                  retirement obligation                                                                        |   |                                    | (1,321 | )        |   | 325 |   |
| Other                  liabilities                                                                                  |   |                                    | (2,091 | )        |   | 994 |   |
| Net                  cash provided by operating activities                                                          |   |                                    | 52,610 |     |   | 32,654 |   |

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Table          of Contents

**ALPHA      NR HOLDING, INC. AND SUBSIDIARIES**

**(A      Wholly-owned subsidiary of Alpha Natural Resources, Inc.)**

**Condensed      Consolidated Statements of Cash Flows (Unaudited) -      (Continued)**

**(In      thousands)**

|                                                                         |   |                                    |    |     |   |
|------------------------------------------------------------------------------|--------|-----------------------------------------|---------|----------|--------|
|                                                                         |   | **Three                  months ended** |    |
|                                                                         |   | **March                  31,**          |    |
|                                                                         |   | **2007**                                |    | **2006** |   |
| Investing                  activities:                                       |   |                                    |    |     |   |
| Capital                  expenditures                                        |   | $                                       | (44,577 | )        |   | (51,439 | ) |
| Proceeds                  from disposition of property, plant, and equipment |   |                                    | 508     |     |   | 182 |   |
| Investment                  in affiliate                                     |   |                                    | (71     | )        |   | (15 | ) |
| Collections                  on note receivable from coal supplier           |   |                                    | — |     |   | 1,432 |   |
| Other                                                                        |   |                                    | (404    | )        |   | — |   |
| Net                  cash used in investing activities                       |   |                                    | (44,544 | )        |   | (49,840 | ) |
|                                                                         |   |                                    |         |     |   |  |   |
| Financing                  activities:                                       |   |                                    |         |     |   |  |   |
| Repayments                  of notes payable                                 |   |                                    | (6,872  | )        |   | (45,457 | ) |
| Proceeds                  from issuance of long-term debt                    |   |                                    | — |     |   | 95,000 |   |
| Repayments                  on long-term debt                                |   |                                    | (850    | )        |   | (73,125 | ) |
| Increase                  (decrease) in bank overdraft                       |   |                                    | (2,704  | )        |   | 12,297 |   |
| Net                  cash used in financing activities                       |   |                                    | (10,426 | )        |   | (11,285 | ) |
| Net                  decrease in cash and cash equivalents              |   |                                    | (2,360  | )        |   | (28,471 | ) |
| Cash                  and cash equivalents at beginning of period            |   |                                    | 33,256  |     |   | 39,622 |   |
| Cash                  and cash equivalents at end of period                  |   | $                                       | 30,896  |     |   | 11,151 |   |

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Table          of Contents

**ALPHA      NR HOLDING, INC. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)**

**March 31,      2007**

**(In      thousands)**

| **(1)  ** | **Business                and Basis of Presentation** |
|---------------------|-------------------------------------------------------|

***Organization      and Business***

***Basis      of Presentation***

| **(2)  ** | **Inventories** |
|---------------------|-----------------|

|                                    |   |                           |   |                              |   |
|-----------------------------------------|--------|--------------------------------|--------|-----------------------------------|--------|
|                                    |   | **March                  31,** |   | **December                  31,** |   |
|                                    |   | **2007**                       |   | **2006**                          |   |
| Raw                  coal               |   | $                              | 6,018  |                              | $      | 8,868 |   |
| Saleable                  coal          |   |                           | 63,138 |                              |   | 53,428 |   |
| Equipment                  for resale   |   |                           | 2,526  |                              |   | 1,774 |   |
| Materials                  and supplies |   |                           | 13,098 |                              |   | 12,774 |   |
| Total                  inventories      |   | $                              | 84,780 |                              | $      | 76,844 |   |

| **(3)  ** | **Long-Term                Debt** |
|---------------------|-----------------------------------|

|                                                    |   |                           |    |                              |   |
|---------------------------------------------------------|--------|--------------------------------|---------|-----------------------------------|--------|
|                                                    |   | **March                  31,** |    | **December                  31,** |   |
|                                                    |   | **2007**                       |    | **2006**                          |   |
| Term                  loan                              |   | $                              | 246,875 |                              | $      | 247,500 |   |
| 10%                  Senior notes due 2012              |   |                           | 175,000 |                              |   | 175,000 |   |
| Capital                  lease obligation               |   |                           | 1,285   |                              |   | 1,510 |   |
| Other                                                   |   |                           | 700     |                              |   | 700 |   |
| Total                  long-term debt                   |   |                           | 423,860 |                              |   | 424,710 |   |
| Less                  current portion                   |   |                           | 3,274   |                              |   | 3,254 |   |
| Long-term                  debt, net of current portion |   | $                              | 420,586 |                              | $      | 421,456 |   |

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Table          of Contents

| **(4)  ** | **Asset                Retirement Obligation** |
|---------------------|------------------------------------------------|

| Total                  asset retirement obligation at December 31, 2006   |   | $      | 77,292 |   |
|--------------------------------------------------------------------------------|--------|--------|--------|--------|
|                                                                           |   |   |        |   |
| Accretion                  for the three months ended March 31, 2007      |   |   | 1,557  |   |
| Sites                  added during the three months ended March 31, 2007 |   |   | 402    |   |
| Expenditures                  for the three months ended March 31, 2007   |   |   | (1,322 | )      |
| Total                  asset retirement obligation at March 31, 2007      |   | $      | 77,929 |   |

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Table          of Contents

| **(5)  ** | **Stock-Based                Compensation Awards** |
|---------------------|----------------------------------------------------|

|                                                   |   | **Number                  of Shares** |      | **Weighted-Average                  Exercise Price** |   |  **Weighted-Average                  Remaining Contract Life(Years)** |   |
|--------------------------------------------------------|--------|---------------------------------------|-----------|------------------------------------------------------|--------|----------------------------------------------------------------------------|--------|
| Outstanding                  at December 31, 2006 |   |                                  | 1,137,398 |                                                 | $      | 16.64                                                                      |   |   |  |   |
| Forfeited/Cancelled                                    |   |                                  | (44,852   | )                                                    | $      | 16.36                                                                      |   |   |  |   |
| Outstanding                  at March 31, 2007    |   |                                  | 1,092,546 |                                                 | $      | 16.65                                                                      |   |   | 7.78 |   |
|                                                   |   |                                  |           |                                                 |   |                                                                            |   |   |  |   |
| Exercisable                  at March 31, 2007    |   |                                  | 392,360   |                                                 | $      | 16.59                                                                      |   |   | 7.78 |   |

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Table          of Contents

*Restricted      Stock Awards*

|                                                                |   |  **Number                  of Shares** |     |  **Weighted                  Average Grant Date Fair Value** |   |
|---------------------------------------------------------------------|--------|---------------------------------------------|----------|-------------------------------------------------------------------|--------|
|                                                                |   |                                   |     |                                                         |   |
| Non-vested                  shares outstanding at December 31, 2006 |   |                                        | 471,341  |                                                              | $      | 21.34 |   |
| Granted                                                             |   |                                        | 584,710  |                                                              |   | 12.58 |   |
| Vested                                                              |   |                                        | (107,761 | )                                                                 |   | 21.13 |   |
| Forfeited                                                           |   |                                        | (17,356  | )                                                                 |   | 16.36 |   |
| Non-vested                  shares outstanding at March 31, 2007    |   |                                        | 930,934  |                                                              |   | 15.95 |   |

*Performance      Units*

*2007      Award*

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**(6)      Derivative Financial Instruments**

*      Accounting for Derivative Instruments and Hedging Activities*

**(7)      Postretirement Benefits Other Than Pensions**

|                                                |   |                           |   |     |   |
|-----------------------------------------------------|--------|--------------------------------|--------|----------|--------|
|                                                |   | **March                  31,** |   |
|                                                |   | **2007**                       |   | **2006** |   |
| Service                  cost                       |   | $                              | 960    |     | $      | 1,053 |   |
| Interest                  cost                      |   |                           | 706    |     |   | 685 |   |
| Amortization                  of net actuarial loss |   |                           | 47     |     |   | 67 |   |
| Amortization                  of prior service cost |   |                           | 568    |     |   | 558 |   |
|                                                |   |                           |        |     |   |  |   |
| Net                  periodic benefit cost          |   | $                              | 2,281  |     | $      | 2,363 |   |

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**(8) Related      Party Transactions**

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

**(9) Segment      Information **

|                                                       |   |           |      |      |   |             |   |                   |     |
|------------------------------------------------------------|--------|----------------|-----------|-----------|--------|------------------|--------|------------------------|----------|
|                                                       |   |           |      |      |   | **Corporate**    |   |                   |     |
|                                                       |   | **Coal**       |      | **All**   |   | **and**          |   |                   |     |
|                                                       |   | **Operations** |      | **Other** |   | **Eliminations** |   |  **Consolidated** |     |
| Revenues                                                   |   | $              | 421,864   |      | $      | 14,856           |   | $                      | (9,349   | ) | $ | 427,371 |   |
| Depreciation,                  depletion, and amortization |   |           | 34,344    |      |   | 1,198            |   |                   | 247      |   |   | 35,789 |   |
| EBITDA                                                     |   |           | 67,263    |      |   | 2,096            |   |                   | (13,236  | ) |   | 56,123 |   |
| Capital                  expenditures                      |   |           | 43,597    |      |   | 568              |   |                   | 412      |   |   | 44,577 |   |
| Total                  assets                              |   |           | 1,180,013 |      |   | 107,578          |   |                   | (152,911 | ) |   | 1,134,680 |   |

|                                                       |   |           |    |      |   |             |   |                   |    |
|------------------------------------------------------------|--------|----------------|---------|-----------|--------|------------------|--------|------------------------|---------|
|                                                       |   |           |    |      |   | **Corporate**    |   |                   |    |
|                                                       |   | **Coal**       |    | **All**   |   | **and**          |   |                   |    |
|                                                       |   | **Operations** |    | **Other** |   | **Eliminations** |   |  **Consolidated** |    |
| Revenues                                                   |   | $              | 472,369 |      | $      | 19,486           |   | $                      | (9,715  | ) | $ | 482,140 |   |
| Depreciation,                  depletion, and amortization |   |           | 31,060  |      |   | 1,979            |   |                   | 595     |   |   | 33,634 |   |
| EBITDA                                                     |   |           | 94,713  |      |   | 2,685            |   |                   | (16,843 | ) |   | 80,555 |   |
| Capital                  expenditures                      |   |           | 44,442  |      |   | 5,965            |   |                   | 1,032   |   |   | 51,439 |   |
| Total                  assets                              |   |           | 990,254 |      |   | 87,373           |   |                   | (57,451 | ) |   | 1,020,176 |   |

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|                                                      |   | **Three                  Months Ended****March                  31,** |    |
|-----------------------------------------------------------|--------|-----------------------------------------------------------------------|---------|
|                                                      |   | **2007**                                                              |    | **2006** |   |
| Total                  segment EBITDA                     |   | $                                                                     | 56,123  |   | $ | 80,555 |   |
| Interest                  expense                         |   |                                                                  | (9,993  | ) |   | (10,277 | ) |
| Interest                  income                          |   |                                                                  | 637     |   |   | 188 |   |
| Income                  tax expense                       |   |                                                                  | (2,629  | ) |   | (9,620 | ) |
| Depreciation,                  depletion and amortization |   |                                                                  | (35,789 | ) |   | (33,634 | ) |
| Net                  income                               |   | $                                                                     | 8,349   |   | $ | 27,212 |   |

**(10) Contingencies**

| ***(a)  *** | ***Guarantees                and Financial Instruments with Off-Balance Sheet                Risk*** |
|-----------------------|------------------------------------------------------------------------------------------------------|

| ***(b)  *** | ***Litigation*** |
|-----------------------|------------------|

**(11) Income      Taxes **

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Table          of Contents

|                                                          |   | **Three                  Months Ended** |    |
|---------------------------------------------------------------|--------|-----------------------------------------|---------|
|                                                          |   | **March                  31,**          |    |
|                                                          |   |  2007                              |    | 2006 |   |
| Federal                  statutory income tax expense         |   | $                                       | 3,842   |   | $ | 12,891 |   |
| Increases                  (reductions) in taxes due to: |   |                                    |         |   |   |  |   |
| Percentage                  depletion allowance               |   |                                    | (2,125  | ) |   | (4,864 | ) |
| Extraterritorial                  income exclusion            |   |                                    | — |   |   | (413 | ) |
| Deduction                  for domestic production activities |   |                                    | (34     | ) |   | (165 | ) |
| State                  taxes, net of federal tax impact       |   |                                    | 194     |   |   | 965 |   |
| Non-deductible                  stock-based compensation      |   |                                    | 184     |   |   | 1,030 |   |
| Change                  in valuation allowance                |   |                                    | 491     |   |   | 3 |   |
| Other,                  net                                   |   |                                    | 77      |   |   | 173 |   |
| Actual                  income tax expense                    |   | $                                       | 2,629   |   | $ | 9,620 |   |

*Accounting          for Uncertainty in Income Taxes*

**(12) Comprehensive      Income**

| Net                  Income                                                                                                                                                                                                                            |   | $      | 8,349 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------|--------|
| Increase                  in fair value of cash flow hedge, net of tax effect of $153 for                  the three                  months ended March 31, 2007                                                                                      |   |   | 772   |   |
| Decrease                  in SFAS 158 adjustment related to post retiree medical and black                  lung                  obligations, net of tax effect of $(156) for the three months ended                  March                  31, 2007 |   |   | (471  | )      |
| Total                  comprehensive income                                                                                                                                                                                                            |   | $      | 8,650 |   |

----

Table          of Contents

| Fair                  value of cash flow hedge, net of tax effect of $1,940                                                                       |   | $      | 5,903  |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| SFAS                  158 adjustment related to black lung obligations, net of tax effect                  of                  $124               |   |   | 377    |   |
| SFAS                  158 adjustment related to postretirement medical obligations, net                  of tax                  effect of $4,185 |   |   | 12,734 |   |
| Total                  accumulated other comprehensive loss                                                                                       |   | $      | 19,014 |   |

**(13) New      Accounting Pronouncements**

----

Table          of Contents

**(14) Supplemental      Guarantor/Non-Guarantor Financial      Information**

| Unaudited                    Supplemental Condensed Consolidating Statement of Income for                    the Three                    Months Ended March 31, 2007: |   |   |   |        |   |        |   |           |    |          |   |          |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|------------------|--------|------------------|--------|---------------------|---------|--------------------|--------|--------------------|--------|
|                                                                                                                                                                   |   |   |   |        |   |        |   |           |    |          |   |          |   |
|                                                                                                                                                                   |   | Parent |   |  Co-Issuers |   |  Guarantors |   |  Non-Guarantor |    |  Eliminations |   |  Consolidated |   |
| Revenues:                                                                                                                                                              |   |   |   |        |   |        |   |           |    |          |   |          |   |
| Coal                    sales revenue                                                                                                                                  |   | $      | -      |             | $      | -                |   | $                   | 376,930 |               | $      | -                  |   | $ | - |   | $ | 376,930 |   |
| Freight                    and handling revenues                                                                                                                       |   |   | -      |             |   | -                |   |                | 43,211  |               |   | -                  |   |   | - |   |   | 43,211 |   |
| Other                    revenues                                                                                                                                      |   |   | -      |             |   | -                |   |                | 7,230   |               |   | -                  |   |   | - |   |   | 7,230 |   |
| Total                    revenue                                                                                                                                       |   |   | -      |             |   | -                |   |                | 427,371 |               |   | -                  |   |   | - |   |   | 427,371 |   |
| Cost                    and expenses:                                                                                                                                  |   |   |   |             |   |             |   |                |    |               |   |               |   |   |   |   |   |   |   |
| Cost                    of coal sales                                                                                                                                  |   |   | -      |             |   | -                |   |                | 309,255 |               |   | -                  |   |   | - |   |   | 309,255 |   |
| Freight                    and handling costs                                                                                                                          |   |   | -      |             |   | -                |   |                | 43,211  |               |   | -                  |   |   | - |   |   | 43,211 |   |
| Cost                    of other revenue                                                                                                                               |   |   | -      |             |   | -                |   |                | 4,885   |               |   | 743                |   |   | - |   |   | 5,628 |   |
| Depreciation,                    depletion and amortization                                                                                                            |   |   | -      |             |   | -                |   |                | 35,789  |               |   | -                  |   |   | - |   |   | 35,789 |   |
| Selling,                    general and administrative expenses                                                                                                        |   |   | 274    |             |   | 122              |   |                | 12,813  |               |   | 30                 |   |   | - |   |   | 13,239 |   |
| Total                    costs and expenses                                                                                                                            |   |   | 274    |             |   | 122              |   |                | 405,953 |               |   | 773                |   |   | - |   |   | 407,122 |   |
|                                                                                                                                                                   |   |   |   |             |   |             |   |                |    |               |   |               |   |   |   |   |   |   |   |
| Income                    from operations                                                                                                                              |   |   | (274   | )                |   | (122             | )      |                | 21,418  |               |   | (773               | )      |   | - |   |   | 20,249 |   |
| Other                    income (expenses):                                                                                                                            |   |   |   |             |   |             |   |                |    |               |   |               |   |   |   |   |   |   |   |
| Interest                    expense                                                                                                                                    |   |   | -      |             |   | (10,020          | )      |                | 27      |               |   | -                  |   |   | - |   |   | (9,993 | ) |
| Interest                    income                                                                                                                                     |   |   | 37     |             |   | 539              |   |                | 61      |               |   | -                  |   |   | - |   |   | 637 |   |
| Equity earnings                                                                                                                                                   |   |   | 11,215 |             |   | 20,816           |   |                | -       |               |   | -                  |   |   | (32,031 | ) |   | - |   |
| Miscellaneous                    income, net                                                                                                                           |   |   | -      |             |   | 2                |   |                | 40      |               |   | -                  |   |   | - |   |   | 42 |   |
| Total                    other income (expense), net                                                                                                                   |   |   | 11,252 |             |   | 11,337           |   |                | 128     |               |   | -                  |   |   | (32,031 | ) |   | (9,314 | ) |
| Income                    (loss) before income taxes and minority interest                                                                                             |   |   | 10,978 |             |   | 11,215           |   |                | 21,546  |               |   | (773               | )      |   | (32,031 | ) |   | 10,935 |   |
| Income                    tax expense                                                                                                                                  |   |   | (2,629 | )                |   | -                |   |                | -       |               |   | -                  |   |   | - |   |   | (2,629 | ) |
| Minority                    interest                                                                                                                                   |   |   | -      |             |   | -                |   |                | -       |               |   | (43                | )      |   | - |   |   | (43 | ) |
| Net                    income (loss)                                                                                                                                   |   | $      | 8,349  |             | $      | 11,215           |   | $                   | 21,546  |               | $      | (730               | )      | $ | (32,031 | ) | $ | 8,349 |   |

----

Table              of Contents

| Unaudited                  Supplemental Condensed Consolidating Statement of Income for the                  Three                  Months Ended March 31, 2006: |   |   |   |        |   |       |   |           |    |          |   |          |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|------------------|--------|-----------------|--------|---------------------|---------|--------------------|--------|--------------------|--------|
|                                                                                                                                                             |   |   |   |        |   |       |   |           |    |          |   |          |   |
|                                                                                                                                                             |   | Parent |   |  Co-Issuers |   |  Guarantor |   |  Non-Guarantor |    |  Eliminations |   |  Consolidated |   |
| Revenues:                                                                                                                                                        |   |   |   |        |   |       |   |           |    |          |   |          |   |
| Coal                  sales revenue                                                                                                                              |   | $      | -      |             | $      | -               |   | $                   | 424,331 |               | $      | -                  |   | $ | - |   | $ | 424,331 |   |
| Freight                  and handling revenues                                                                                                                   |   |   | -      |             |   | -               |   |                | 46,392  |               |   | -                  |   |   | - |   |   | 46,392 |   |
| Other                  revenues                                                                                                                                  |   |   | -      |             |   | -               |   |                | 11,417  |               |   | -                  |   |   | - |   |   | 11,417 |   |
| Total                  revenue                                                                                                                                   |   |   | -      |             |   | -               |   |                | 482,140 |               |   | -                  |   |   | - |   |   | 482,140 |   |
| Cost                  and expenses:                                                                                                                              |   |   |   |             |   |            |   |                |    |               |   |               |   |   |   |   |   |   |   |
| Cost                  of coal sales                                                                                                                              |   |   | -      |             |   | -               |   |                | 330,885 |               |   | -                  |   |   | - |   |   | 330,885 |   |
| Freight                  and handling costs                                                                                                                      |   |   | -      |             |   | -               |   |                | 46,392  |               |   | -                  |   |   | - |   |   | 46,392 |   |
| Cost                  of other revenue                                                                                                                           |   |   | -      |             |   | -               |   |                | 7,951   |               |   |               |   |   | - |   |   | 7,951 |   |
| Depreciation,                  depletion and amortization                                                                                                        |   |   | -      |             |   | (77             | )      |                | 33,711  |               |   | -                  |   |   | - |   |   | 33,634 |   |
| Selling,                  general and administrative expenses                                                                                                    |   |   | 411    |             |   | 4,243           |   |                | 11,985  |               |   | -                  |   |   | - |   |   | 16,639 |   |
| Total                  costs and expenses                                                                                                                        |   |   | 411    |             |   | 4,166           |   |                | 430,924 |               |   | -                  |   |   | - |   |   | 435,501 |   |
| Income                  from operations                                                                                                                          |   |   | (411   | )                |   | (4,166          | )      |                | 51,216  |               |   | -                  |   |   | - |   |   | 46,639 |   |
| Other                  income (expenses):                                                                                                                        |   |   |   |             |   |            |   |                |    |               |   |               |   |   |   |   |   |   |   |
| Interest                  expense                                                                                                                                |   |   | -      |             |   | (10,273         | )      |                | (4      | )                  |   | -                  |   |   | - |   |   | (10,277 | ) |
| Interest                  income                                                                                                                                 |   |   | 43     |             |   | 128             |   |                | 17      |               |   | -                  |   |   | - |   |   | 188 |   |
| Equity                  earnings                                                                                                                                 |   |   | 37,200 |             |   | 51,551          |   |                | -       |               |   | -                  |   |   | (88,751 | ) |   | - |   |
| Miscellaneous                  income, net                                                                                                                       |   |   | -      |             |   | (40             | )      |                | 322     |               |   | -                  |   |   | - |   |   | 282 |   |
| Total                  other income (expense), net                                                                                                               |   |   | 37,243 |             |   | 41,366          |   |                | 335     |               |   | -                  |   |   | (88,751 | ) |   | (9,807 | ) |
| Income                  (loss) before income taxes                                                                                                               |   |   | 36,832 |             |   | 37,200          |   |                | 51,551  |               |   | -                  |   |   | (88,751 | ) |   | 36,832 |   |
| Income                  tax expense                                                                                                                              |   |   | 9,620  |             |   | -               |   |                | -       |               |   | -                  |   |   | - |   |   | 9,620 |   |
|                                                                                                                                                             |   |   |   |             |   |            |   |                |    |               |   |               |   |   |   |   |   |   |   |
| Net                  income (loss)                                                                                                                               |   | $      | 27,212 |             | $      | 37,200          |   | $                   | 51,551  |               | $      | -                  |   | $ | (88,751 | ) | $ | 27,212 |   |

----

Table            of Contents

| Unaudited                  Supplemental Condensed Consolidating Balance Sheet at March 31,                  2007: |   |   |    |        |   |        |   |           |      |          |   |          |   |
|-------------------------------------------------------------------------------------------------------------------|--------|--------|---------|------------------|--------|------------------|--------|---------------------|-----------|--------------------|--------|--------------------|--------|
|                                                                                                              |   |   |    |        |   |        |   |           |      |          |   |          |   |
|                                                                                                              |   | Parent |    |  Co-Issuers |   |  Guarantors |   |  Non-Guarantor |      |  Eliminations |   |  Consolidated |   |
| Assets:                                                                                                           |   |   |    |        |   |        |   |           |      |          |   |          |   |
| Current                  assets:                                                                                  |   |   |    |        |   |        |   |           |      |          |   |          |   |
| Cash                  and cash equivalents                                                                        |   | $      | -       |             | $      | 23,314           |   | $                   | 6,694     |               | $      | 888                |   | $ | - |   | $ | 30,896 |   |
| Trade                  accounts receivable, net                                                                   |   |   | -       |             |   | -                |   |                | 156,738   |               |   | -                  |   |   | - |   |   | 156,738 |   |
| Notes                  and other receivables                                                                      |   |   | 2,568   |             |   | 67,915           |   |                | 3,723     |               |   | -                  |   |   | (67,512 | ) |   | 6,694 |   |
| Inventories                                                                                                       |   |   | -       |             |   | -                |   |                | 84,780    |               |   | -                  |   |   | - |   |   | 84,780 |   |
| Due                  from affiliates                                                                              |   |   | -       |             |   | -                |   |                | 289,989   |               |   | 20                 |   |   | (286,465 | ) |   | 3,544 |   |
| Prepaid                  expenses and other current assets                                                        |   |   | 789     |             |   | 1,568            |   |                | 38,561    |               |   | -                  |   |   | (916 | ) |   | 40,002 |   |
| Total                  current assets                                                                             |   |   | 3,357   |             |   | 92,797           |   |                | 580,485   |               |   | 908                |   |   | (354,893 | ) |   | 322,654 |   |
| Property,                  plant, and equipment, net                                                              |   |   | -       |             |   |             |   |                | 637,663   |               |   | 2,935              |   |   | - |   |   | 640,598 |   |
| Goodwill                                                                                                          |   |   | -       |             |   | -                |   |                | 20,547    |               |   | -                  |   |   | - |   |   | 20,547 |   |
| Other                  intangibles, net                                                                           |   |   | -       |             |   | -                |   |                | 7,294     |               |   | 3,934              |   |   | - |   |   | 11,228 |   |
| Deferred                  income taxes                                                                            |   |   | 88,598  |             |   | 6,249            |   |                | -         |               |   | -                  |   |   | - |   |   | 94,847 |   |
| Other                  assets                                                                                     |   |   | 344,414 |             |   | 936,326          |   |                | 26,715    |               |   | 9                  |   |   | (1,262,658 | ) |   | 44,806 |   |
| Total                  assets                                                                                     |   | $      | 436,369 |             | $      | 1,035,372        |   | $                   | 1,272,704 |               | $      | 7,786              |   | $ | (1,617,551 | ) | $ | 1,134,680 |   |
|                                                                                                              |   |   |    |             |   |             |   |                |      |               |   |               |   |   |   |   |   |   |   |
| Liabilities                  and Stockholder's/Member's Equity                                                    |   |   |    |             |   |             |   |                |      |               |   |               |   |   |   |   |   |   |   |
|                                                                                                              |   |   |    |             |   |             |   |                |      |               |   |               |   |   |   |   |   |   |   |
| Current                  liabilities:                                                                             |   |   |    |             |   |             |   |                |      |               |   |               |   |   |   |   |   |   |   |
| Current                  portion of long-term debt                                                                |   | $      | -       |             | $      | 14,200           |   | $                   | 56,586    |               |   | -                  |   | $ | (67,512 | ) | $ | 3,274 |   |
| Notes                  payable                                                                                    |   |   | -       |             |   | 14,069           |   |                | -         |               |   | -                  |   |   | - |   |   | 14,069 |   |
| Bank                  overdrafts                                                                                  |   |   | -       |             |   | -                |   |                | 21,076    |               |   | -                  |   |   | - |   |   | 21,076 |   |
| Due                  to affiliates                                                                                |   |   | 65,155  |             |   | 221,310          |   |                | -         |               |   | -                  |   |   | (286,465 | ) |   | - |   |
| Trade                  accounts payable                                                                           |   |   | -       |             |   | 33               |   |                | 69,194    |               |   | 581                |   |   | - |   |   | 69,808 |   |
| Deferred                  income tax                                                                              |   |   | 7,151   |             |   | -                |   |                | -         |               |   | -                  |   |   | - |   |   | 7,151 |   |
| Accrued                  expenses and other current liabilities                                                   |   |   | 336     |             |   | 6,976            |   |                | 72,524    |               |   | 151                |   |   | (916 | ) |   | 79,071 |   |
| Total                  current liabilities                                                                        |   |   | 72,642  |             |   | 256,588          |   |                | 219,380   |               |   | 732                |   |   | (354,893 | ) |   | 194,449 |   |
| Long-term                  debt, net of current portion                                                           |   |   | -       |             |   | 419,375          |   |                | 511       |               |   | 700                |   |   | - |   |   | 420,586 |   |
| Workers'                  compensation benefits                                                                   |   |   | -       |             |   | -                |   |                | 8,003     |               |   | -                  |   |   | - |   |   | 8,003 |   |
| Postretirement                  medical benefits                                                                  |   |   | -       |             |   | -                |   |                | 52,346    |               |   | -                  |   |   | - |   |   | 52,346 |   |
| Asset                  retirement obligation                                                                      |   |   | -       |             |   | -                |   |                | 70,345    |               |   | -                  |   |   | - |   |   | 70,345 |   |
| Deferred                  gains on sales of property interest                                                     |   |   | -       |             |   | -                |   |                | 3,657     |               |   | -                  |   |   | - |   |   | 3,657 |   |
| Other                  liabilities                                                                                |   |   | -       |             |   | 7,852            |   |                | 13,352    |               |   | -                  |   |   | - |   |   | 21,204 |   |
| Total                  liabilities                                                                                |   |   | 72,642  |             |   | 683,815          |   |                | 367,594   |               |   | 1,432              |   |   | (354,893 | ) |   | 770,590 |   |
| Minority                  interest                                                                                |   |   | -       |             |   | -                |   |                | -         |               |   | 363                |   |   | - |   |   | 363 |   |
| Stockholders/member's                  equity                                                                     |   |   | 363,727 |             |   | 351,557          |   |                | 905,110   |               |   | 5,991              |   |   | (1,262,658 | ) |   | 363,727 |   |
| Total                  liabilities and stockholders/members equity                                                |   | $      | 436,369 |             | $      | 1,035,372        |   | $                   | 1,272,704 |               | $      | 7,786              |   | $ | (1,617,551 | ) | $ | 1,134,680 |   |

----

Table            of Contents

| Unaudited                  Supplemental Condensed Consolidating Balance Sheet at December                  31,                  2006: |   |   |    |        |   |        |   |           |      |          |   |          |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|------------------|--------|------------------|--------|---------------------|-----------|--------------------|--------|--------------------|--------|
|                                                                                                                                  |   |   |    |        |   |        |   |           |      |          |   |          |   |
|                                                                                                                                  |   | Parent |    |  Co-Issuers |   |  Guarantors |   |  Non-Guarantor |      |  Eliminations |   |  Consolidated |   |
| Assets:                                                                                                                               |   |   |    |             |   |             |   |                |      |               |   |               |   |   |   |   |   |   |   |
| Current                  assets:                                                                                                      |   |   |    |             |   |             |   |                |      |               |   |               |   |   |   |   |   |   |   |
| Cash                  and cash equivalents                                                                                            |   | $      | -       |             | $      | 27,101           |   | $                   | 5,414     |               | $      | 741                |   | $ | - |   | $ | 33,256 |   |
| Trade                  accounts receivable, net                                                                                       |   |   | -       |             |   | -                |   |                | 171,195   |               |   | -                  |   |   | - |   |   | 171,195 |   |
| Notes                  and other receivables                                                                                          |   |   | 2,568   |             |   | 67,498           |   |                | 13,680    |               |   | 20                 |   |   | (77,300 | ) |   | 6,466 |   |
| Inventories                                                                                                                           |   |   | -       |             |   | -                |   |                | 76,844    |               |   | -                  |   |   | - |   |   | 76,844 |   |
| Due                  from affiliates                                                                                                  |   |   | -       |             |   | -                |   |                | 276,030   |               |   | -                  |   |   | (271,449 | ) |   | 4,581 |   |
| Prepaid                  expenses and other current assets                                                                            |   |   | 3,334   |             |   | 1,437            |   |                | 46,237    |               |   | -                  |   |   | (117 | ) |   | 50,891 |   |
| Total                  current assets                                                                                                 |   |   | 5,902   |             |   | 96,036           |   |                | 589,400   |               |   | 761                |   |   | (348,866 | ) |   | 343,233 |   |
| Property,                  plant, and equipment, net                                                                                  |   |   | -       |             |   |             |   |                | 637,136   |               |   | -                  |   |   | - |   |   | 637,136 |   |
| Goodwill                                                                                                                              |   |   | -       |             |   | -                |   |                | 20,547    |               |   | -                  |   |   | - |   |   | 20,547 |   |
| Other                  intangibles, net                                                                                               |   |   | -       |             |   | -                |   |                | 7,804     |               |   | 3,917              |   |   | - |   |   | 11,721 |   |
| Deferred                  income taxes                                                                                                |   |   | 88,644  |             |   | 6,252            |   |                | -         |               |   | -                  |   |   | - |   |   | 94,896 |   |
| Other                  assets                                                                                                         |   |   | 330,979 |             |   | 911,606          |   |                | 21,273    |               |   | -                  |   |   | (1,221,019 | ) |   | 42,839 |   |
| Total                  assets                                                                                                         |   | $      | 425,525 |             | $      | 1,013,894        |   | $                   | 1,276,160 |               | $      | 4,678              |   | $ | (1,569,885 | ) | $ | 1,150,372 |   |
|                                                                                                                                  |   |   |    |             |   |             |   |                |      |               |   |               |   |   |   |   |   |   |   |
| Liabilities                  and Stockholder's/Member's Equity                                                                        |   |   |    |             |   |             |   |                |      |               |   |               |   |   |   |   |   |   |   |
|                                                                                                                                  |   |   |    |             |   |             |   |                |      |               |   |               |   |   |   |   |   |   |   |
| Current                  liabilities:                                                                                                 |   |   |    |             |   |             |   |                |      |               |   |               |   |   |   |   |   |   |   |
| Current                  portion of long-term debt                                                                                    |   | $      | -       |             | $      | 12,300           |   | $                   | 68,254    |               |   | -                  |   | $ | (77,300 | ) | $ | 3,254 |   |
| Notes                  payable                                                                                                        |   |   | -       |             |   | 20,941           |   |                | -         |               |   | -                  |   |   | - |   |   | 20,941 |   |
| Bank                  overdrafts                                                                                                      |   |   | -       |             |   | -                |   |                | 23,781    |               |   | -                  |   |   | - |   |   | 23,781 |   |
| Due                  to affiliates                                                                                                    |   |   | 64,472  |             |   | 206,977          |   |                | -         |               |   | -                  |   |   | (271,449 | ) |   | - |   |
| Trade                  accounts payable                                                                                               |   |   | -       |             |   | 145              |   |                | 75,533    |               |   | 308                |   |   | - |   |   | 75,986 |   |
| Deferred                  income tax                                                                                                  |   |   | 7,601   |             |   | -                |   |                | -         |               |   | -                  |   |   | - |   |   | 7,601 |   |
| Accrued                  expenses and other current liabilities                                                                       |   |   | 258     |             |   | 6,696            |   |                | 81,622    |               |   | -                  |   |   | (117 | ) |   | 88,459 |   |
| Total                  current liabilities                                                                                            |   |   | 72,331  |             |   | 247,059          |   |                | 249,190   |               |   | 308                |   |   | (348,866 | ) |   | 220,022 |   |
| Long-term                  debt, net of current portion                                                                               |   |   | -       |             |   | 420,000          |   |                | 756       |               |   | 700                |   |   | - |   |   | 421,456 |   |
| Workers'                  compensation benefits                                                                                       |   |   | -       |             |   | -                |   |                | 7,169     |               |   | -                  |   |   | - |   |   | 7,169 |   |
| Postretirement                  medical benefits                                                                                      |   |   | -       |             |   | -                |   |                | 50,712    |               |   | -                  |   |   | - |   |   | 50,712 |   |
| Asset                  retirement obligation                                                                                          |   |   | -       |             |   | -                |   |                | 69,495    |               |   | -                  |   |   | - |   |   | 69,495 |   |
| Deferred                  gains on sales of property interest                                                                         |   |   | -       |             |   | -                |   |                | 3,885     |               |   | -                  |   |   | - |   |   | 3,885 |   |
| Other                  liabilities                                                                                                    |   |   | -       |             |   | 8,676            |   |                | 15,813    |               |   | -                  |   |   | - |   |   | 24,489 |   |
| Total                  liabilities                                                                                                    |   |   | 72,331  |             |   | 675,735          |   |                | 397,020   |               |   | 1,008              |   |   | (348,866 | ) |   | 797,228 |   |
| Minority                  interest                                                                                                    |   |   | -       |             |   | -                |   |                | -         |               |   | (50                | )      |   | - |   |   | (50 | ) |
| Stockholders/member's                  equity                                                                                         |   |   | 353,194 |             |   | 338,159          |   |                | 879,140   |               |   | 3,720              |   |   | (1,221,019 | ) |   | 353,194 |   |
| Total                  liabilities and stockholders/members equity                                                                    |   | $      | 425,525 |             | $      | 1,013,894        |   | $                   | 1,276,160 |               | $      | 4,678              |   | $ | (1,569,885 | ) | $ | 1,150,372 |   |

----

Table            of Contents

| Unaudited                    Supplemental Condensed Consolidating Statement of Cash Flows                    for the Three                    Months Ended March 31, 2007: |   |   |   |        |   |        |   |           |    |          |   |          |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|------------------|--------|------------------|--------|---------------------|---------|--------------------|--------|--------------------|--------|
|                                                                                                                                                                       |   |   |   |        |   |        |   |           |    |          |   |          |   |
|                                                                                                                                                                       |   | Parent |   |  Co-Issuers |   |  Guarantors |   |  Non-Guarantor |    |  Eliminations |   |  Consolidated |   |
|                                                                                                                                                                       |   |   |   |        |   |        |   |           |    |          |   |          |   |
| Net                    cash flows provided by operating activities                                                                                                    |   | $      | -      |             | $      | 2,233            |   | $                   | 47,278  |               | $      | 3,099              |   | $ | - |   | $ | 52,610 |   |
|                                                                                                                                                                       |   |   |   |             |   |             |   |                |    |               |   |               |   |   |   |   |   |   |   |
| ***Cash                    flows from investing activities:***                                                                                                             |   |   |   |             |   |             |   |                |    |               |   |               |   |   |   |   |   |   |   |
| Capital                    expenditures                                                                                                                                    |   |   | -      |             |   | -                |   |                | (41,642 | )                  |   | (2,935             | )      |   | - |   |   | (44,577 | ) |
| Proceeds                    from disposition of property, plant, & equipment                                                                                           |   |   | -      |             |   | -                |   |                | 508     |               |   | -                  |   |   | - |   |   | 508 |   |
| Equity                    investments                                                                                                                                      |   |   | -      |             |   | (36              | )      |                | (35     | )                  |   | -                  |   |   | - |   |   | (71 | ) |
| Other,                    net                                                                                                                                              |   |   | -      |             |   | (387             | )      |                | -       |               |   | (17                | )      |   | - |   |   | (404 | ) |
| Net                    cash flows from investing activities                                                                                                                |   |   | -      |             |   | (423             | )      |                | (41,169 | )                  |   | (2,952             | )      |   | - |   |   | (44,544 | ) |
|                                                                                                                                                                       |   |   |   |             |   |             |   |                |    |               |   |               |   |   |   |   |   |   |   |
| ***Cash                    flows from financing activities:***                                                                                                             |   |   |   |             |   |             |   |                |    |               |   |               |   |   |   |   |   |   |   |
| Net                    draws (repayments) of notes payable                                                                                                                 |   |   | -      |             |   | (6,872           | )      |                | -       |               |   | -                  |   |   | - |   |   | (6,872 | ) |
| Proceeds                    from issuance of long-term debt                                                                                                                |   |   | -      |             |   | 1,275            |   |                | (2,125  | )                  |   | -                  |   |   | - |   |   | (850 | ) |
| Change                    in bank overdraft                                                                                                                                |   |   | -      |             |   | -                |   |                | (2,704  | )                  |   | -                  |   |   | - |   |   | (2,704 | ) |
| Net                    cash flows from financing activities                                                                                                                |   |   | -      |             |   | (5,597           | )      |                | (4,829  | )                  |   | -                  |   |   | - |   |   | (10,426 | ) |
| **Increase                    (decrease) in cash**                                                                                                                         |   |   | -      |             |   | (3,787           | )      |                | 1,280   |               |   | 147                |   |   | - |   |   | (2,360 | ) |
|                                                                                                                                                                       |   |   |   |             |   |             |   |                |    |               |   |               |   |   |   |   |   |   |   |
| Cash                    and cash equivalents at beginning of period                                                                                                        |   |   | -      |             |   | 27,101           |   |                | 5,414   |               |   | 741                |   |   | - |   |   | 33,256 |   |
| Cash                      and cash equivalents at end of                      period                                                                             |   | $      | -      |             | $      | 23,314           |   | $                   | 6,694   |               | $      | 888                |   | $ | - |   | $ | 30,896 |   |

----

Table              of Contents

| Unaudited                    Supplemental Condensed Consolidating Statement of Cash Flows                    for the Three                    Months Ended March 31, 2006: |   |   |    |        |   |        |    |          |    |          |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|------------------|--------|------------------|---------|--------------------|---------|--------------------|--------|
|                                                                                                                                                                       |   |   |    |        |   |        |    |          |    |          |   |
|                                                                                                                                                                       |   | Parent |    |  Co-Issuers |   |  Guarantors |    |  Eliminations |    |  Consolidated |   |
|                                                                                                                                                                       |   |   |    |        |   |        |    |          |    |          |   |
| Net                    cash flows provided by (used in) operating                    activities                                                                  |   | $      | -       |             | $      | (18,980          | )       | $                  | 51,634  |               | $      | 0 |   | $ | 32,654 |   |
|                                                                                                                                                                       |   |   |    |             |   |             |    |               |    |               |   |   |   |   |   |   |
| ***Cash                    flows from investing activities:***                                                                                                             |   |   |    |             |   |             |    |               |    |               |   |   |   |   |   |   |
| Capital                    expenditures                                                                                                                                    |   |   | -       |             |   | -                |    |               | (51,439 | )                  |   | - |   |   | (51,439 | ) |
| Proceeds                    from disposition of property, plant, & equipment                                                                                           |   |   | -       |             |   | -                |    |               | 182     |               |   | - |   |   | 182 |   |
| Equity                    investments                                                                                                                                      |   |   | -       |             |   | (15              | )       |               | -       |               |   | - |   |   | (15 | ) |
| Other,                    net                                                                                                                                              |   |   | -       |             |   |             |    |               | 1,432   |               |   | - |   |   | 1,432 |   |
| Net                    cash flows from investing activities                                                                                                                |   |   | -  |             |   | (15              | )       |               | (49,825 | )                  |   | 0 |   |   | (49,840 | ) |
|                                                                                                                                                                       |   |   |    |             |   |             |    |               |    |               |   |   |   |   |   |   |
| ***Cash                    flows from financing activities:***                                                                                                             |   |   |    |             |   |             |    |               |    |               |   |   |   |   |   |   |
| Net                    draws (repayments) of notes payable                                                                                                                 |   |   | -       |             |   | (118,183         | )  |               | (399    | )                  |   | - |   |   | (118,582 | ) |
| Proceeds                    from issuance of long-term debt                                                                                                                |   |   | -       |             |   | 95,000           |    |               |    |               |   | - |   |   | 95,000 |   |
| Decrease                    in bank overdraft                                                                                                                              |   |   | -       |             |   | -                |    |               | 12,297  |               |   | 0 |   |   | 12,297 | ) |
| Net                    cash flows from financing activities                                                                                                                |   |   | -       |             |   | (23,183          | )       |               | 11,898  |               |   | 0 |   |   | (11,285 | ) |
|                                                                                                                                                                       |   |   |    |             |   |             |    |               |    |               |   |   |   |   |   |   |
| **Increase                    (decrease) in cash**                                                                                                                         |   |   | -  |             |   | (42,178          | )       |               | 13,707  |               |   | 0 |   |   | (28,471 | ) |
|                                                                                                                                                                       |   |   |    |             |   |             |    |               |    |               |   |   |   |   |   |   |
| Cash                      and cash equivalents at beginning of period                                                                                                      |   |   | -  |             |   | 46,669           |    |               | (24,107 | )                  |   | 0 |   |   | 39,622 |   |
| Cash                      and cash equivalents at end of                      period                                                                             |   | $      | -       |             | $      | 4,491            |    | $                  | (10,400 | )                  | $      | 0 |   | $ | 11,151 |   |

----

Table            of Contents

**Item 2.      Management’s Discussion and Analysis of Financial      Condition and Results of Operations**

**Cautionary      Note Regarding 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 have acquired                with our                existing operations, as well as our ability to successfully integrate                operations we may acquire in the                future; |
|--------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **·** | our                plans and objectives for future operations and expansion or                consolidation; |
|--------|------------|--------------------------------------------------------------------------------------------------------------|

|   | **·** | the                progress of project construction plans and marketing agreements relating                to Gallatin Materials, LLC; |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | **·** | our                relationships with, and other conditions affecting, our                customers; |
|--------|------------|------------------------------------------------------------------------------------------------------|

|   | **·** | timing                of changes in customer coal                inventories; |
|--------|------------|-------------------------------------------------------------------------------|

|   | **·** | changes                in, renewal of and acquiring new 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; |
|--------|------------|------------------------------------------------------------------------------------------------------|

|   | **·** | the                geological characteristics of Central and Northern Appalachian coal                reserves; |
|--------|------------|-----------------------------------------------------------------------------------------------------------------|

|   | **·** | availability                of mining and processing equipment and                parts; |
|--------|------------|------------------------------------------------------------------------------------------|

|   | **·** | our                assumptions concerning economically recoverable coal reserve                estimates; |
|--------|------------|-----------------------------------------------------------------------------------------------------------|

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Table          of Contents

|   | **·** | availability                of skilled employees and other employee workforce                factors; |
|--------|------------|-------------------------------------------------------------------------------------------------------|

|   | **·** | regulatory                and court decisions; |
|--------|------------|------------------------------------------------|

|   | **·** | future                legislation and changes in regulations, governmental policies or                taxes; |
|--------|------------|--------------------------------------------------------------------------------------------------------------|

|   | **·** | changes                in postretirement benefit                obligations; |
|--------|------------|------------------------------------------------------------------------------|

|   | **·** | our                liquidity, results of operations and financial                condition;  |
|--------|------------|---------------------------------------------------------------------------------------------------|

|   | **·** | decline                in coal prices; |
|--------|------------|----------------------------------------|

|   | **·** | forward                sales and purchase contracts not accounted for as a                hedge; |
|--------|------------|--------------------------------------------------------------------------------------------------|

|   | **·** | indemnification                of certain obligations not being                met; |
|--------|------------|-------------------------------------------------------------------------------------|

|   | **·** | continued                funding of the road construction                business; |
|--------|------------|------------------------------------------------------------------------------------|

|   | **·** | disruption                in coal supplies; and |
|--------|------------|------------------------------------------------------|

|   | **·** | other                factors, including the other factors discussed in “Overview - Coal Pricing                Trends and Uncertainties and Outlook” below, and the factors discussed in                Part I, Item 1A “Risk Factors” section of our annual report on Form 10-K                for the year ended December 31,                2006. |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Overview**

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Table          of Contents

***Coal      Pricing Trends and Uncertainties and Outlook.***

| ·   | The                Miner Act and various other state legislation continues to place                upward                cost pressure on mine operators as they attempt to comply with the                new                statutes. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                recent ratification of the Bituminous Coal Operators and Associates                new                contract will increase the cost structures of mine operators who                have                United Mine Workers of America representation which could impact                the cost                structures of non-represented                workforces. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A                recent court decision, initially impacting surface mining operations                in                the Huntington District of the U.S. Corps of Engineers, threatens                to                further slow the issuance of mining permits and constrain production.                This                decision could spread to other districts, even ones where we operate. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table          of Contents

**Reconciliation      of Non-GAAP Measures**

|                                                      |   | **Quarter                  ended** |   |
|-----------------------------------------------------------|--------|------------------------------------|--------|
|                                                      |   | **March                  31,**     |   |
|                                                      |   | **2007**                           |   | **2006** |   |
|                                                      |   | (In                  thousands)    |   |
| Net                  income                               |   | $                                  | 8,349  |   | $ | 27,212 |   |
| Interest                  expense                         |   |                               | 9,993  |   |   | 10,277 |   |
| Interest                  income                          |   |                               | (637   | ) |   | (188 |  ) |
| Income                  tax expense                       |   |                               | 2,629  |   |   | 9,620 |   |
| Depreciation,                  depletion and amortization |   |                               | 35,789 |   |   | 33,634 |   |
| EBITDA                  (1)                               |   | $                                  | 56,123 |   |  $ | 80,555 |   |

----

Table            of Contents

**Results      of Operations**

***Three      months Ended March 31, 2007 Compared to the Three months Ended      March 31, 2006***

*Summary*

*Revenues*

|                                           |   | **Three                  months ended**                  |    | **Increase**   |   |
|------------------------------------------------|--------|----------------------------------------------------------|---------|----------------|--------|
|                                           |   | **March                  31,**                           |    | **(Decrease)** |   |
|                                           |   | **2007**                                                 |    | **2006**       |   | **$                  or Tons** |   | **%** |   |
|                                           |   | **(in                  thousands, except per ton data)** |    |
| Coal                  sales revenues           |   | $                                                        | 376,930 |           | $      | 424,331 |   | $ | (47,401 | ) |   | (11 | %) |
| Freight                  and handling revenues |   |                                                     | 43,211  |           |   | 46,392 |   |   | (3,181 | ) |   | (7 | %) |
| Other                  revenues                |   |                                                     | 7,230   |           |   | 11,417 |   |   | (4,187 | ) |   | (37 | %) |
| Total                  revenues                |   | $                                                        | 427,371 |           | $      | 482,140 |   | $ | (54,769 | ) |   | (11 | %) |
|                                           |   |                                                     |         |           |   |  |   |   |   |   |   |   |   |
| Tons                  Sold:                    |   |                                                     |         |           |   |  |   |   |   |   |   |   |   |
|                                           |   |                                                     |         |           |   |  |   |   |   |   |   |   |   |
| Steam                                          |   |                                                     | 4,260   |           |   | 4,355 |   |   | (95 | ) |   | (2 | %) |
| Metallurgical                                  |   |                                                     | 2,368   |           |   | 2,768 |   |   | (400 | ) |   | (14 | %) |
| Total                                          |   |                                                     | 6,628   |           |   | 7,123 |   |   | (495 | ) |   | (7 | %) |
|                                           |   |                                                     |         |           |   |  |   |   |   |   |   |   |   |
| Coal                  sales revenue per ton:   |   |                                                     |         |           |   |  |   |   |   |   |   |   |   |
|                                           |   |                                                     |         |           |   |  |   |   |   |   |   |   |   |
| Steam                                          |   | $                                                        | 48.07   |           | $      | 49.00 |   | $ | (0.93 | ) |   | (2 | %) |
| Metallurgical                                  |   |                                                     | 72.70   |           |   | 76.22 |   |   | (3.52 | ) |   | (5 | %) |
| Total                                          |   | $                                                        | 56.87   |           | $      | 59.58 |   | $ | (2.71 | ) |   | (5 | %) |

*Coal      sales revenues.*

*Freight      and Handling Revenues.*

*Other      Revenues.*

*Costs      and Expenses*

|                                                                            |   | **Three                  months ended**                  |    | **Increase**   |   |
|---------------------------------------------------------------------------------|--------|----------------------------------------------------------|---------|----------------|--------|
|                                                                            |   | **March                  31,**                           |    | **(Decrease)** |   |
|                                                                            |   | **2007**                                                 |    |  **2006** |   |  $ |   | % |   |
|                                                                            |   | **(in                  thousands, except per ton data)** |    |
| Cost                  of coal sales (exclusive of items shown separately below) |   | $                                                        | 309,255 |           | $      | 330,885 |   | $ | (21,630 | ) |   | (7 | %) |
| Freight                  and handling costs                                     |   |                                                     | 43,211  |           |   | 46,392 |   |   | (3,181 | ) |   | (7 | %) |
| Cost                  of other revenues                                         |   |                                                     | 5,628   |           |   | 7,951 |   |   | (2,323 | ) |   | (29 | %) |
| Depreciation,                  depletion and amortization                       |   |                                                     | 35,789  |           |   | 33,634 |   |   | 2,155 |   |   | 6 | % |
| Selling,                  general and administrative expenses                   |   |                                                     | 13,239  |           |   | 16,639 |   |   | (3,400 | ) |   | (20 | %) |
| Total                  costs and expenses                                       |   | $                                                        | 407,122 |           | $      | 435,501 |   | $ | (28,379 | ) |   | (7 | %) |
|                                                                            |   |                                                     |         |           |   |  |   |   |   |   |   |   |   |
|                                                                            |   |                                                     |         |           |   |  |   |   |   |   |   |   |   |
| Cost                  of coal sales per ton:                                    |   |                                                     |         |           |   |  |   |   |   |   |   |   |   |
| Company                  mines                                                  |   | $                                                        | 45.46   |           | $      | 40.51 |   | $ | 4.95 |   |   | 12 | % |
| Contract                  mines (including purchased and processed)             |   |                                                     | 50.16   |           |   | 53.24 |   |   | (3.08 | ) |   | (6 | %) |
| Total                  produced and processed                                   |   |                                                     | 46.22   |           |   | 42.50 |   |   | 3.72 |   |   | 9 | % |
| Purchased                  and sold without processing                          |   |                                                     | 50.30   |           |   | 66.28 |   |   | (15.98 | ) |   | (24 | %) |
| Cost                  of coal sales per ton                                     |   | $                                                        | 46.66   |           | $      | 46.46 |   | $ | 0.20 |   |   | 1 | % |

*Cost      of Coal Sales. *

*Freight      and Handling Costs.*

*Cost      of Other Revenues*

----

Table          of Contents

*Depreciation,      Depletion and Amortization.*

*Selling,      General and Administrative Expenses*

*Interest      Expense.*

*Interest      Income.*

*Income      Tax Expense.*

**Liquidity      and Capital Resources**

***Cash      Flows***

----

Table          of Contents

***Credit      Facility and Long-term Debt***

|                                                    |   |   |    |
|---------------------------------------------------------|--------|--------|---------|
| Term                  loan                              |   | $      | 246,875 |   |
| 10%                  Senior notes due 2012              |   |   | 175,000 |   |
| Capital                  lease obligation               |   |   | 1,285   |   |
| Other                                                   |   |   | 700     |   |
| Total                  long-term debt                   |   |   | 423,860 |   |
| Less                  current portion                   |   |   | (3,274  | ) |
| Long-term                  debt, net of current portion |   | $      | 420,586 |   |

----

Table          of Contents

***Analysis      of Material Debt Covenants***

|   | **•** |   | We                must maintain a leverage ratio, defined as the ratio of consolidated                adjusted debt (consolidated debt less unrestricted cash and cash                equivalents) to Adjusted EBITDA (as defined in the credit agreement),                of                not more than 3.75 at March 31, June 30, September 30 and                December 31, 2007, and 3.50 at March 31, 2008 and each quarter end                thereafter, with Adjusted EBITDA being computed using the most recent                four                quarters; and |
|--------|-------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |        |
|   | **•** |   | We                must maintain an interest coverage ratio, defined as the ratio of                Adjusted                EBITDA to cash interest expense, of 2.50 or greater on the last day                of any                fiscal quarter.                                                                                                                                                                                                                                                                                                                                                |

|                                                               |   |  **Three                  Months****Ended                  June 30,****2006** |   | **Three                  Months****Ended                  September 30,****2006** |   | **Three                  Months****Ended                  December 31,****2006** |   | **Three                  Months****Ended                  March 31,****2007** |    | **Twelve Months****Ended                  March 31,****2007** |   |
|--------------------------------------------------------------------|--------|------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|---------|--------------------------------------------------------------------|--------|
|                                                               |   |  **(In                  thousands)**                                          |   |
| Net                  Income                                        |   | $                                                                                  | 23,128 |                                                                              | $      | 14,544                                                                           |   | $                                                                             | 63,284  |                                                               | $      | 8,349 |   | $ | 109,305 |   |
| Interest                  expense, net                             |   |                                                                               | 10,615 |                                                                              |   | 10,579                                                                           |   |                                                                          | 9,652   |                                                               |   | 9,356 |   |   | 40,202 |   |
| Income                  tax expense (benefit)                      |   |                                                                               | 8,676  |                                                                              |   | 4,744                                                                            |   |                                                                          | (53,559 | )                                                                  |   | 2,629 |   |   | (37,510 | ) |
| Depreciation,                  depletion, and amortization         |   |                                                                               | 34,207 |                                                                              |   | 36,422                                                                           |   |                                                                          | 36,588  |                                                               |   | 35,789 |   |   | 143,006 |   |
| EBITDA                                                             |   |                                                                               | 76,626 |                                                                              |   | 66,289                                                                           |   |                                                                          | 55,965  |                                                               |   | 56,123 |   |   | 255,003 |   |
| Fair                  value of forward purchase and sales contract |   |                                                                               | (4,336 | )                                                                                 |   | 2,060                                                                            |   |                                                                          | 2,126   |                                                               |   | (449 | ) |   | (599 | ) |
| Other                  allowable adjustments                       |   |                                                                               | 531    |                                                                              |   | (26                                                                              | )      |                                                                          | (1,144  | )                                                                  |   | (71 | ) |   | (710 | ) |
| Accretion                  expense                                 |   |                                                                               | 1,169  |                                                                              |   | 1,226                                                                            |   |                                                                          | 1,402   |                                                               |   | 1,556 |   |   | 5,353 |   |
| Amortization                  of deferred gains                    |   |                                                                               | (249   | )                                                                                 |   | (257                                                                             | )      |                                                                          | (97     | )                                                                  |   | (228 | ) |   | (831 | ) |
| Stock-based                  compensation charges                  |   |                                                                               | 6,112  |                                                                              |   | 5,814                                                                            |   |                                                                          | 4,623   |                                                               |   | 2,634 |   |   | 19,183 |   |
| Adjusted                  EBITDA                                   |   | $                                                                                  | 79,853 |                                                                              | $      | 75,106                                                                           |   | $                                                                             | 62,875  |                                                               | $      | 59,565 |   | $ | 277,399 |   |
| Leverage                  ratio(1)                                 |   |                                                                               |   |                                                                              |   |                                                                                  |   |                                                                          |         |                                                               |   |  |   |   | 1.54 |   |
| Interest                  coverage ratio(2)                        |   |                                                                               |   |                                                                              |   |                                                                                  |   |                                                                          |         |                                                               |   |  |   |   | 6.97 |   |

| (1) | Leverage                  ratio is defined in our credit facility as total debt divided by                  Adjusted                  EBITDA. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Interest                  coverage ratio is defined in our credit facility as Adjusted EBITDA                  divided by cash interest                  expense. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table          of Contents

***Other***

**Critical      Accounting Estimates and Assumptions**

**New      Accounting Pronouncements**

**Item 3.      Quantitative and Qualitative Disclosures About Market      Risk**

----

Table          of Contents

**Item 4.      Controls and Procedures **

*Evaluation        of disclosure controls and procedures.*

*Changes        in internal control over financial reporting.*

**PART      II**

**Item      1. Legal Proceedings**

*General.*

**Item 1A.      Risk Factors**

**Item 6.      Exhibits**

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Table          of Contents

**SIGNATURE**

|                              |   |                                                                        |
|-----------------------------------|--------|-----------------------------------------------------------------------------|
|                              |   | **ALPHA                NR HOLDING, INC.**                                   |
|                              |   |                                                                        |
|                              |   | By:                /s/ David C. Stuebe                                      |
|                              |   |                                                                        |
|                              |   | Name:                David C. Stuebe                                        |
|                              |   | Title:                Vice President, Treasurer and Chief Financial Officer |
|                              |   |                                                                        |
| Date:                May 15, 2007 |   |                                                                        |

----

Table          of Contents

**Table      of Contents**

**10-Q      EXHIBIT INDEX**

|                          |                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                      |
|-------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Exhibit                No** |                                                                                                                                                                                                                                                                                                                                                                             | **Description                of Exhibit**                                                                                                                                                                 |
|                          |                                                                                                                                                                                                                                                                                                                                                                             |
|                          |                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                      |
| 3.1                           |     Restated                  Certificate of Incorporation of Alpha NR Holding, Inc. (Incorporated                  by                  reference to Exhibit 3.11 to the Registration Statement on Form                  S-4 of                  Alpha NR Holding, Inc. (File No. 333-124319-17) filed on April                  26,                  2005). |
|                          |                                                                                                                                                                                                                                                                                                                                                                             |
|  3.2                     |      Bylaws              of Alpha NR Holding, Inc. (Incorporated by reference to Exhibit 3.12              to              the Registration Statement on Form S-4 of Alpha NR Holding, Inc. (File              No.              333-124319-17) filed on April 26, 2005).                                                                                |
|                          |                                                                                                                                                                                                                                                                                                                                                                             |
| 31(a)*                        |                                                                                                                                                                                                                                                                                                                                                                             | Certification                Pursuant to Rule 13a-14(a) under the                Securities Exchange Act of 1934, as adopted pursuant to § 302 of the                Sarbanes-Oxley Act of 2002 |
|                          |                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                      |
| 31(b)*                        |                                                                                                                                                                                                                                                                                                                                                                             | Certification                Pursuant to Rule 13a-14(a) under the                Securities Exchange Act of 1934, as adopted pursuant to § 302 of the                Sarbanes-Oxley Act of 2002 |
|                          |                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                      |
| 32(a)*                        |                                                                                                                                                                                                                                                                                                                                                                             | Certification                Pursuant to 18 U.S.C. § 1350, As Adopted                Pursuant to § 906 of the Sarbanes-Oxley Act of 2002                                                        |
|                          |                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                      |
| 32(b)*                        |                                                                                                                                                                                                                                                                                                                                                                             | Certification                Pursuant to 18 U.S.C. § 1350, As Adopted                Pursuant to § 906 of the Sarbanes-Oxley Act of                2002                                         |

|   |   |                           |
|--------|--------|--------------------------------|
| *      |   | Filed                herewith. |