##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-Q
  þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2010
 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 number: 333-107569-03
 Arch Western Resources, LLC
  Delaware
    
    43-1811130(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification Number)One CityPlace Drive, Suite 300, St. Louis, Missouri
    
    63141(Address of principal executive offices)
    
    (Zip code)
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



Table of Contents
 PagePart I FINANCIAL INFORMATION
    
    
    1Item 1. Financial Statements
    
    
    1Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    23Part II OTHER INFORMATION
    
    
    23Item 1. Legal Proceedings
    
    
    23Item 1A. Risk Factors
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3. Defaults Upon Senior Securities
    
    
    23Item 4. Reserved
    
    
    23Item 5. Other Information
    
    
    23Item 6. Exhibits
    
    
    25EX-31.1EX-31.2EX-32.1EX-32.2
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##### Table of Contents



PART I
FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 Arch Western Resources, LLC and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands)
 Three Months Ended September 30
    
    
    Nine Months Ended September 302010
    
    
    2009
    
    
    2010
    
    
    2009(unaudited)RevenuesCoal sales
    
    $
    550,198
    
    
    $
    390,313
    
    
    $
    1,504,523
    
    
    $
    1,167,369Costs, expenses and otherCost of coal sales
    
    
    445,814
    
    
    
    323,973
    
    
    
    1,239,893
    
    
    
    1,005,640Depreciation, depletion and amortization
    
    
    39,756
    
    
    
    38,290
    
    
    
    123,883
    
    
    
    113,058Amortization of acquired sales contracts, net
    
    
    10,038
    
    
    
    78
    
    
    
    26,005
    
    
    
    (92
    )Selling, general and administrative expenses
    
    
    8,172
    
    
    
    12,654
    
    
    
    27,421
    
    
    
    29,722Other operating income, net
    
    
    (1,093
    )
    
    
    (3,492
    )
    
    
    (3,597
    )
    
    
    (5,363
    )502,687
    
    
    
    371,503
    
    
    
    1,413,605
    
    
    
    1,142,965Income from operations
    
    
    47,511
    
    
    
    18,810
    
    
    
    90,918
    
    
    
    24,404Interest expense, net:Interest expense
    
    
    (15,892
    )
    
    
    (16,915
    )
    
    
    (50,966
    )
    
    
    (50,264
    )Interest income, primarily from Arch Coal, Inc.
    
    
    13,714
    
    
    
    11,318
    
    
    
    39,732
    
    
    
    34,684(2,178
    )
    
    
    (5,597
    )
    
    
    (11,234
    )
    
    
    (15,580
    )Other non-operating expenseLoss on early extinguishment of debt
    
    
    (6,776
    )
    
    
    
    
    
    
    (6,776
    )
    
    
    (6,776
    )
    
    
    
    
    
    
    (6,776
    )
    
    
    Net income
    
    $
    38,557
    
    
    $
    13,213
    
    
    $
    72,908
    
    
    $
    8,824Net income (loss) attributable to redeemable
membership interest
    
    $
    181
    
    
    $
    31
    
    
    $
    325
    
    
    $
    (11
    )Net income attributable to non-redeemable
membership interest
    
    $
    38,376
    
    
    $
    13,182
    
    
    $
    72,583
    
    
    $
    8,835
  1




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Arch Western Resources, LLC and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
 September 30,
    
    
    December 31,2010
    
    
    2009(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    61,911
    
    
    $
    6,819Receivables
    
    
    2,234
    
    
    
    8,379Inventories
    
    
    140,878
    
    
    
    165,650Other
    
    
    17,151
    
    
    
    23,350Total current assets
    
    
    222,174
    
    
    
    204,198Property, plant and equipment, net
    
    
    1,487,723
    
    
    
    1,548,300Other assets:Receivable from Arch Coal, Inc.
    
    
    1,440,112
    
    
    
    1,541,243Other
    
    
    11,509
    
    
    
    14,172Total other assets
    
    
    1,451,621
    
    
    
    1,555,415Total assets
    
    $
    3,161,518
    
    
    $
    3,307,913LIABILITIES AND MEMBERSHIP INTERESTSCurrent liabilities:Accounts payable
    
    $
    98,486
    
    
    $
    74,508Accrued expenses
    
    
    129,200
    
    
    
    144,432Commercial paper
    
    
    55,716
    
    
    
    49,452Total current liabilities
    
    
    283,402
    
    
    
    268,392Long-term debt
    
    
    451,780
    
    
    
    954,782Note payable
to Arch Coal, Inc.
    
    
    225,000
    
    
    
    Asset retirement obligations
    
    
    291,756
    
    
    
    274,914Accrued postretirement benefits other than pension
    
    
    29,473
    
    
    
    28,819Accrued pension benefits
    
    
    35,745
    
    
    
    34,523Accrued workers compensation
    
    
    3,848
    
    
    
    4,067Other noncurrent liabilities
    
    
    52,391
    
    
    
    26,744Total liabilities
    
    
    1,373,395
    
    
    
    1,592,241Redeemable membership interest
    
    
    10,173
    
    
    
    8,962Non-redeemable membership interest
    
    
    1,777,950
    
    
    
    1,706,710Total liabilities and membership interests
    
    $
    3,161,518
    
    
    $
    3,307,913
  2




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Arch Western Resources, LLC and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
 Nine Months Ended September 302010
    
    
    2009(unaudited)OPERATING ACTIVITIESNet income
    
    $
    72,908
    
    
    $
    8,824Adjustments to reconcile net income to cash provided by operating activities:Depreciation, depletion and amortization
    
    
    123,883
    
    
    
    113,058Amortization of acquired sales contracts, net
    
    
    26,005
    
    
    
    (92
    )Loss on early extinguishment of debt
    
    
    6,776
    
    
    
    Changes in:Receivables
    
    
    6,145
    
    
    
    (2,006
    )Inventories
    
    
    24,772
    
    
    
    (17,818
    )Accounts payable and accrued expenses
    
    
    12,142
    
    
    
    (42,529
    )Other
    
    
    50,529
    
    
    
    47,279Cash provided by operating activities
    
    
    323,160
    
    
    
    106,716INVESTING ACTIVITIESCapital expenditures
    
    
    (66,828
    )
    
    
    (106,766
    )Change in receivable from Arch Coal, Inc.
    
    
    75,383
    
    
    
    21,760Proceeds from dispositions of property, plant and equipment
    
    
    74
    
    
    
    80Additions to prepaid royalties
    
    
    (2,835
    )
    
    
    (2,409
    )Reimbursement of deposits on equipment
    
    
    
    
    
    
    3,209Cash provided by (used in) investing activities
    
    
    5,794
    
    
    
    (84,126
    )FINANCING ACTIVITIESRepayment of long-term debt, including redemption premium
    
    
    (505,627
    )
    
    
    Loan from Arch Coal, Inc.
    
    
    225,000
    
    
    
    Net proceeds from (repayments on) commercial paper
    
    
    6,264
    
    
    
    (22,059
    )Debt financing costs
    
    
    (390
    )
    
    
    (140
    )Contribution from non-redeemable membership interest
    
    
    891
    
    
    
    Cash used in financing activities
    
    
    (273,862
    )
    
    
    (22,199
    )Increase in cash and cash equivalents
    
    
    55,092
    
    
    
    391Cash and cash equivalents, beginning of period
    
    
    6,819
    
    
    
    2,851Cash and cash equivalents, end of period
    
    $
    61,911
    
    
    $
    3,242
  3




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Arch Western Resources, LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
 1. Basis of Presentation
   2. Accounting Policies
  3. Debt
 Refinancing of senior notes
   Amendments to agreements
  4




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4. Inventories
  September 30,
    
    
    December 31,2010
    
    
    2009(In thousands)Coal
    
    $
    33,070
    
    
    $
    42,316Repair parts and supplies, net of allowance
    
    
    107,808
    
    
    
    123,334$
    140,878
    
    
    $
    165,650
  5. Fair Values of Financial Instruments
  Cash and cash equivalents:
 Debt:
 6. Comprehensive Income
   Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)Net income
    
    $
    38,557
    
    
    $
    13,213
    
    
    $
    72,908
    
    
    $
    8,824Other comprehensive income:Pension, postretirement
and other post-employment
benefits 
reclassifications into net
income
    
    
    (425
    )
    
    
    14,387
    
    
    
    (1,276
    )
    
    
    14,680Total comprehensive income
    
    $
    38,132
    
    
    $
    27,600
    
    
    $
    71,632
    
    
    $
    23,504
 7. Related Party Transactions
    5




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8. Contingencies
  9. Segment Information
    6




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Corporate,Other andPRB
    
    
    WBIT
    
    
    Eliminations
    
    
    Consolidated(In thousands)Three months ended September 30, 2010Coal sales
    
    $
    412,165
    
    
    $
    138,033
    
    
    $
    
    
    
    $
    550,198Income from operations
    
    
    39,450
    
    
    
    15,190
    
    
    
    (7,129
    )
    
    
    47,511Depreciation, depletion and amortization
    
    
    21,752
    
    
    
    18,004
    
    
    
    
    
    
    
    39,756Amortization of acquired sales contracts, net
    
    
    10,038
    
    
    
    
    
    
    
    
    
    
    
    10,038Capital expenditures
    
    
    7,922
    
    
    
    20,703
    
    
    
    
    
    
    
    28,625Three months ended September 30, 2009Coal sales
    
    $
    242,022
    
    
    $
    148,291
    
    
    $
    
    
    
    $
    390,313Income from operations
    
    
    11,112
    
    
    
    17,083
    
    
    
    (9,385
    )
    
    
    18,810Depreciation, depletion and amortization
    
    
    17,434
    
    
    
    20,856
    
    
    
    
    
    
    
    38,290Amortization of acquired sales contracts, net
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    78Capital expenditures
    
    
    7,518
    
    
    
    13,871
    
    
    
    
    
    
    
    21,389Nine months ended September 30, 2010Coal sales
    
    $
    1,101,700
    
    
    $
    402,823
    
    
    $
    
    
    
    $
    1,504,523Income from operations
    
    
    74,311
    
    
    
    41,500
    
    
    
    (24,893
    )
    
    
    90,918Total assets
    
    
    1,037,767
    
    
    
    649,791
    
    
    
    1,473,960
    
    
    
    3,161,518Depreciation, depletion and amortization
    
    
    67,452
    
    
    
    56,431
    
    
    
    
    
    
    
    123,883Amortization of acquired sales contracts, net
    
    
    26,005
    
    
    
    
    
    
    
    
    
    
    
    26,005Capital expenditures
    
    
    12,321
    
    
    
    54,507
    
    
    
    
    
    
    
    66,828Nine months ended September 30, 2009Coal sales
    
    $
    786,117
    
    
    $
    381,252
    
    
    $
    
    
    
    $
    1,167,369Income from operations
    
    
    45,834
    
    
    
    5,781
    
    
    
    (27,211
    )
    
    
    24,404Total assets
    
    
    835,601
    
    
    
    708,157
    
    
    
    1,512,800
    
    
    
    3,056,558Depreciation, depletion and amortization
    
    
    54,038
    
    
    
    59,020
    
    
    
    
    
    
    
    113,058Amortization of acquired sales contracts, net
    
    
    219
    
    
    
    (311
    )
    
    
    
    
    
    
    (92
    )Capital expenditures
    
    
    49,389
    
    
    
    57,377
    
    
    
    
    
    
    
    106,766
  Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)Income from operations
    
    $
    47,511
    
    
    $
    18,810
    
    
    $
    90,918
    
    
    $
    24,404Interest expense
    
    
    (15,892
    )
    
    
    (16,915
    )
    
    
    (50,966
    )
    
    
    (50,264
    )Interest income
    
    
    13,714
    
    
    
    11,318
    
    
    
    39,732
    
    
    
    34,684Loss on early extinguishment of debt
    
    
    (6,776
    )
    
    
    
    
    
    
    (6,776
    )
    
    
    Net income
    
    $
    38,557
    
    
    $
    13,213
    
    
    $
    72,908
    
    
    $
    8,824
 10. Supplemental Condensed Consolidating Financial Information
  7




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Condensed Consolidating Statements of Income
Three Months Ended September 30, 2010
(in thousands)
 Guarantor
    
    
    Non-GuarantorParent Company
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCoal sales
    
    $
    
    
    
    $
    
    
    
    $
    451,092
    
    
    $
    99,106
    
    
    $
    
    
    
    $
    550,198Cost of coal sales
    
    
    (995
    )
    
    
    
    
    
    
    368,282
    
    
    
    78,527
    
    
    
    
    
    
    
    445,814Depreciation, depletion and amortization
    
    
    
    
    
    
    
    
    
    
    28,664
    
    
    
    11,092
    
    
    
    
    
    
    
    39,756Amortization of acquired sales contracts, net
    
    
    
    
    
    
    
    
    
    
    10,038
    
    
    
    
    
    
    
    
    
    
    
    10,038Selling, general and administrative
expenses
    
    
    8,172
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,172Other operating income, net
    
    
    (47
    )
    
    
    
    
    
    
    (782
    )
    
    
    (264
    )
    
    
    
    
    
    
    (1,093
    )7,130
    
    
    
    
    
    
    
    406,202
    
    
    
    89,355
    
    
    
    
    
    
    
    502,687Income from investment in subsidiaries
    
    
    46,881
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (46,881
    )
    
    
    Income from operations
    
    
    39,751
    
    
    
    
    
    
    
    44,890
    
    
    
    9,751
    
    
    
    (46,881
    )
    
    
    47,511Interest expense
    
    
    (14,779
    )
    
    
    (14,132
    )
    
    
    
    
    
    
    (199
    )
    
    
    13,218
    
    
    
    (15,892
    )Interest income
    
    
    13,585
    
    
    
    13,218
    
    
    
    100
    
    
    
    29
    
    
    
    (13,218
    )
    
    
    13,714(1,194
    )
    
    
    (914
    )
    
    
    100
    
    
    
    (170
    )
    
    
    
    
    
    
    (2,178
    )Other nonoperating expenseLoss on early extinguishment of debt
    
    
    
    
    
    
    (6,776
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,776
    )Net income (loss)
    
    $
    38,557
    
    
    $
    (7,690
    )
    
    $
    44,990
    
    
    $
    9,581
    
    
    $
    (46,881
    )
    
    $
    38,557
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Condensed Consolidating Statements of Income
Three Months Ended September 30, 2009
(in thousands)
 Guarantor
    
    
    Non-GuarantorParent Company
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCoal sales
    
    $
    
    
    
    $
    
    
    
    $
    272,170
    
    
    $
    118,143
    
    
    $
    
    
    
    $
    390,313Cost of coal sales
    
    
    (220
    )
    
    
    
    
    
    
    242,086
    
    
    
    82,508
    
    
    
    (401
    )
    
    
    323,973Depreciation, depletion and amortization
    
    
    
    
    
    
    
    
    
    
    23,277
    
    
    
    15,013
    
    
    
    
    
    
    
    38,290Amortization of acquired sales contracts, net
    
    
    
    
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    78Selling, general and administrative
expenses
    
    
    12,654
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,654Other operating income, net
    
    
    (3,049
    )
    
    
    
    
    
    
    (440
    )
    
    
    (404
    )
    
    
    401
    
    
    
    (3,492
    )9,385
    
    
    
    
    
    
    
    265,001
    
    
    
    97,117
    
    
    
    
    
    
    
    371,503Income from investment in subsidiaries
    
    
    28,064
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,064
    )
    
    
    Income from operations
    
    
    18,679
    
    
    
    
    
    
    
    7,169
    
    
    
    21,026
    
    
    
    (28,064
    )
    
    
    18,810Interest expense
    
    
    (16,745
    )
    
    
    (15,940
    )
    
    
    1
    
    
    
    (262
    )
    
    
    16,031
    
    
    
    (16,915
    )Interest income
    
    
    11,279
    
    
    
    16,031
    
    
    
    1
    
    
    
    38
    
    
    
    (16,031
    )
    
    
    11,318(5,466
    )
    
    
    91
    
    
    
    2
    
    
    
    (224
    )
    
    
    
    
    
    
    (5,597
    )Net income
    
    $
    13,213
    
    
    $
    91
    
    
    $
    7,171
    
    
    $
    20,802
    
    
    $
    (28,064
    )
    
    $
    13,213
 9




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##### Table of Contents



Condensed Consolidating Statements of Income
Nine Months Ended September 30, 2010
(in thousands)
 Guarantor
    
    
    Non-GuarantorParent Company
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCoal sales
    
    $
    
    
    
    $
    
    
    
    $
    1,216,688
    
    
    $
    287,835
    
    
    $
    
    
    
    $
    1,504,523Cost of coal sales
    
    
    (2,116
    )
    
    
    
    
    
    
    1,018,475
    
    
    
    226,098
    
    
    
    (2,564
    )
    
    
    1,239,893Depreciation, depletion and amortization
    
    
    
    
    
    
    
    
    
    
    87,358
    
    
    
    36,525
    
    
    
    
    
    
    
    123,883Amortization of acquired sales contracts, net
    
    
    
    
    
    
    
    
    
    
    26,005
    
    
    
    
    
    
    
    
    
    
    
    26,005Selling, general and administrative
expenses
    
    
    27,421
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,421Other operating income, net
    
    
    (412
    )
    
    
    
    
    
    
    (2,314
    )
    
    
    (3,435
    )
    
    
    2,564
    
    
    
    (3,597
    )24,893
    
    
    
    
    
    
    
    1,129,524
    
    
    
    259,188
    
    
    
    
    
    
    
    1,413,605Income from investment in subsidiaries
    
    
    107,456
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (107,456
    )
    
    
    Income from operations
    
    
    82,563
    
    
    
    
    
    
    
    87,164
    
    
    
    28,647
    
    
    
    (107,456
    )
    
    
    90,918Interest expense
    
    
    (49,030
    )
    
    
    (46,592
    )
    
    
    
    
    
    
    (625
    )
    
    
    45,281
    
    
    
    (50,966
    )Interest income
    
    
    39,375
    
    
    
    45,281
    
    
    
    287
    
    
    
    70
    
    
    
    (45,281
    )
    
    
    39,732(9,655
    )
    
    
    (1,311
    )
    
    
    287
    
    
    
    (555
    )
    
    
    
    
    
    
    (11,234
    )Other nonoperating expenseLoss on early extinguishment of debt
    
    
    
    
    
    
    (6,776
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,776
    )Net income (loss)
    
    $
    72,908
    
    
    $
    (8,087
    )
    
    $
    87,451
    
    
    $
    28,092
    
    
    $
    (107,456
    )
    
    $
    72,908
 10




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##### Table of Contents



Condensed Consolidating Statements of Income
Nine Months Ended September 30, 2009
(in thousands)
 Guarantor
    
    
    Non-GuarantorParent Company
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCoal sales
    
    $
    
    
    
    $
    
    
    
    $
    881,317
    
    
    $
    286,052
    
    
    $
    
    
    
    $
    1,167,369Cost of coal sales
    
    
    644
    
    
    
    
    
    
    
    789,371
    
    
    
    217,493
    
    
    
    (1,868
    )
    
    
    1,005,640Depreciation, depletion and amortization
    
    
    
    
    
    
    
    
    
    
    72,424
    
    
    
    40,634
    
    
    
    
    
    
    
    113,058Amortization of acquired sales contracts, net
    
    
    
    
    
    
    
    
    
    
    (92
    )
    
    
    
    
    
    
    
    
    
    
    (92
    )Selling, general and administrative
expenses
    
    
    29,722
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,722Other operating income, net
    
    
    (3,181
    )
    
    
    
    
    
    
    (1,652
    )
    
    
    (2,398
    )
    
    
    1,868
    
    
    
    (5,363
    )27,185
    
    
    
    
    
    
    
    860,051
    
    
    
    255,729
    
    
    
    
    
    
    
    1,142,965Income from investment in subsidiaries
    
    
    52,203
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (52,203
    )
    
    
    Income from operations
    
    
    25,018
    
    
    
    
    
    
    
    21,266
    
    
    
    30,323
    
    
    
    (52,203
    )
    
    
    24,404Interest expense
    
    
    (50,647
    )
    
    
    (47,977
    )
    
    
    983
    
    
    
    (717
    )
    
    
    48,094
    
    
    
    (50,264
    )Interest income
    
    
    34,453
    
    
    
    48,094
    
    
    
    30
    
    
    
    201
    
    
    
    (48,094
    )
    
    
    34,684(16,194
    )
    
    
    117
    
    
    
    1,013
    
    
    
    (516
    )
    
    
    
    
    
    
    (15,580
    )Net income
    
    $
    8,824
    
    
    $
    117
    
    
    $
    22,279
    
    
    $
    29,807
    
    
    $
    (52,203
    )
    
    $
    8,824
 11




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##### Table of Contents



Condensed Consolidating Balance Sheets
September 30, 2010
(in thousands)
 Guarantor
    
    
    Non-GuarantorParent Company
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash and cash equivalents
    
    $
    1,769
    
    
    $
    
    
    
    $
    60,060
    
    
    $
    82
    
    
    $
    
    
    
    $
    61,911Receivables
    
    
    826
    
    
    
    
    
    
    
    849
    
    
    
    559
    
    
    
    
    
    
    
    2,234Inventories
    
    
    
    
    
    
    
    
    
    
    106,660
    
    
    
    34,218
    
    
    
    
    
    
    
    140,878Other
    
    
    3,133
    
    
    
    1,008
    
    
    
    4,849
    
    
    
    8,161
    
    
    
    
    
    
    
    17,151Total current assets
    
    
    5,728
    
    
    
    1,008
    
    
    
    172,418
    
    
    
    43,020
    
    
    
    
    
    
    
    222,174Property, plant and equipment, net
    
    
    
    
    
    
    
    
    
    
    1,217,491
    
    
    
    270,232
    
    
    
    
    
    
    
    1,487,723Investment in subsidiaries
    
    
    2,730,081
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,730,081
    )
    
    
    Receivable from Arch Coal, Inc.
    
    
    1,422,379
    
    
    
    
    
    
    
    
    
    
    
    17,733
    
    
    
    
    
    
    
    1,440,112Intercompanies
    
    
    (2,072,038
    )
    
    
    462,995
    
    
    
    1,313,682
    
    
    
    295,361
    
    
    
    
    
    
    
    Other
    
    
    1,293
    
    
    
    1,775
    
    
    
    4,163
    
    
    
    4,278
    
    
    
    
    
    
    
    11,509Total other assets
    
    
    2,081,715
    
    
    
    464,770
    
    
    
    1,317,845
    
    
    
    317,372
    
    
    
    (2,730,081
    )
    
    
    1,451,621Total assets
    
    $
    2,087,443
    
    
    $
    465,778
    
    
    $
    2,707,754
    
    
    $
    630,624
    
    
    $
    (2,730,081
    )
    
    $
    3,161,518Accounts payable
    
    $
    1,864
    
    
    $
    
    
    
    $
    82,423
    
    
    $
    14,199
    
    
    $
    
    
    
    $
    98,486Accrued expenses
    
    
    3,052
    
    
    
    7,594
    
    
    
    106,991
    
    
    
    11,563
    
    
    
    
    
    
    
    129,200Commercial paper
    
    
    55,716
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,716Total current liabilities
    
    
    60,632
    
    
    
    7,594
    
    
    
    189,414
    
    
    
    25,762
    
    
    
    
    
    
    
    283,402Long-term debt
    
    
    
    
    
    
    451,780
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    451,780Note payable
to Arch Coal, Inc.
    
    
    225,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    225,000Asset retirement obligations
    
    
    
    
    
    
    
    
    
    
    281,115
    
    
    
    10,641
    
    
    
    
    
    
    
    291,756Accrued postretirement benefits
other
than pension
    
    
    6,363
    
    
    
    
    
    
    
    15,005
    
    
    
    8,105
    
    
    
    
    
    
    
    29,473Accrued pension benefits
    
    
    7,152
    
    
    
    
    
    
    
    20,573
    
    
    
    8,020
    
    
    
    
    
    
    
    35,745Accrued workers compensation
    
    
    (1,470
    )
    
    
    
    
    
    
    1,240
    
    
    
    4,078
    
    
    
    
    
    
    
    3,848Other noncurrent liabilities
    
    
    1,643
    
    
    
    
    
    
    
    50,683
    
    
    
    65
    
    
    
    
    
    
    
    52,391Total liabilities
    
    
    299,320
    
    
    
    459,374
    
    
    
    558,030
    
    
    
    56,671
    
    
    
    
    
    
    
    1,373,395Redeemable membership interest
    
    
    10,173
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,173Non-redeemable membership interest
    
    
    1,777,950
    
    
    
    6,404
    
    
    
    2,149,724
    
    
    
    573,953
    
    
    
    (2,730,081
    )
    
    
    1,777,950Total liabilities and
membership
interests
    
    $
    2,087,443
    
    
    $
    465,778
    
    
    $
    2,707,754
    
    
    $
    630,624
    
    
    $
    (2,730,081
    )
    
    $
    3,161,518
 12




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##### Table of Contents



Condensed Consolidating Balance Sheets
December 31, 2009
(in thousands)
 Guarantor
    
    
    Non-GuarantorParent Company
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash and cash equivalents
    
    $
    6,714
    
    
    $
    
    
    
    $
    61
    
    
    $
    44
    
    
    $
    
    
    
    $
    6,819Receivables
    
    
    5,536
    
    
    
    
    
    
    
    2,123
    
    
    
    720
    
    
    
    
    
    
    
    8,379Inventories
    
    
    
    
    
    
    
    
    
    
    127,907
    
    
    
    37,743
    
    
    
    
    
    
    
    165,650Other
    
    
    10,423
    
    
    
    2,153
    
    
    
    3,892
    
    
    
    6,882
    
    
    
    
    
    
    
    23,350Total current assets
    
    
    22,673
    
    
    
    2,153
    
    
    
    133,983
    
    
    
    45,389
    
    
    
    
    
    
    
    204,198Property, plant and equipment, net
    
    
    
    
    
    
    
    
    
    
    1,258,695
    
    
    
    289,605
    
    
    
    
    
    
    
    1,548,300Investment in subsidiaries
    
    
    2,621,530
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,621,530
    )
    
    
    Receivable from Arch Coal, Inc
    
    
    1,509,032
    
    
    
    
    
    
    
    
    
    
    
    32,211
    
    
    
    
    
    
    
    1,541,243Intercompanies
    
    
    (2,364,534
    )
    
    
    993,857
    
    
    
    1,141,474
    
    
    
    229,203
    
    
    
    
    
    
    
    Other
    
    
    1,785
    
    
    
    5,325
    
    
    
    2,543
    
    
    
    4,519
    
    
    
    
    
    
    
    14,172Total other assets
    
    
    1,767,813
    
    
    
    999,182
    
    
    
    1,144,017
    
    
    
    265,933
    
    
    
    (2,621,530
    )
    
    
    1,555,415Total assets
    
    $
    1,790,486
    
    
    $
    1,001,335
    
    
    $
    2,536,695
    
    
    $
    600,927
    
    
    $
    (2,621,530
    )
    
    $
    3,307,913Accounts payable
    
    $
    4,176
    
    
    $
    
    
    
    $
    55,514
    
    
    $
    14,818
    
    
    $
    
    
    
    $
    74,508Accrued expenses
    
    
    2,885
    
    
    
    32,063
    
    
    
    97,649
    
    
    
    11,835
    
    
    
    
    
    
    
    144,432Commercial paper
    
    
    49,452
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,452Total current liabilities
    
    
    56,513
    
    
    
    32,063
    
    
    
    153,163
    
    
    
    26,653
    
    
    
    
    
    
    
    268,392Long-term debt
    
    
    
    
    
    
    954,782
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    954,782Asset retirement obligations
    
    
    
    
    
    
    
    
    
    
    264,873
    
    
    
    10,041
    
    
    
    
    
    
    
    274,914Accrued postretirement benefits
other
than pension
    
    
    6,346
    
    
    
    
    
    
    
    14,858
    
    
    
    7,615
    
    
    
    
    
    
    
    28,819Accrued pension benefits
    
    
    11,307
    
    
    
    
    
    
    
    16,936
    
    
    
    6,280
    
    
    
    
    
    
    
    34,523Accrued workers compensation
    
    
    (1,199
    )
    
    
    
    
    
    
    1,217
    
    
    
    4,049
    
    
    
    
    
    
    
    4,067Other noncurrent liabilities
    
    
    1,847
    
    
    
    
    
    
    
    24,864
    
    
    
    33
    
    
    
    
    
    
    
    26,744Total liabilities
    
    
    74,814
    
    
    
    986,845
    
    
    
    475,911
    
    
    
    54,671
    
    
    
    
    
    
    
    1,592,241Redeemable membership interest
    
    
    8,962
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,962Non-redeemable membership interest
    
    
    1,706,710
    
    
    
    14,490
    
    
    
    2,060,784
    
    
    
    546,256
    
    
    
    (2,621,530
    )
    
    
    1,706,710Total liabilities and
membership
interests
    
    $
    1,790,486
    
    
    $
    1,001,335
    
    
    $
    2,536,695
    
    
    $
    600,927
    
    
    $
    (2,621,530
    )
    
    $
    3,307,913
 13




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##### Table of Contents



Condensed Consolidating Statements of Cash Flows
Nine Months Ended September 30, 2010
(in thousands)
 Guarantor
    
    
    Non-GuarantorParent Company
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    ConsolidatedCash provided by (used in) operating
activities
    
    $
    (30,882
    )
    
    
    (25,220
    )
    
    $
    310,083
    
    
    $
    69,179
    
    
    $
    323,160Investing ActivitiesCapital expenditures
    
    
    
    
    
    
    
    
    
    
    (49,664
    )
    
    
    (17,164
    )
    
    
    (66,828
    )Change in receivable from Arch Coal, Inc
    
    
    60,905
    
    
    
    
    
    
    
    
    
    
    
    14,478
    
    
    
    75,383Proceeds from dispositions of property, plant and
equipment
    
    
    
    
    
    
    
    
    
    
    45
    
    
    
    29
    
    
    
    74Additions to prepaid royalties
    
    
    
    
    
    
    
    
    
    
    (2,509
    )
    
    
    (326
    )
    
    
    (2,835
    )Cash provided by (used in) investing activities
    
    
    60,905
    
    
    
    
    
    
    
    (52,128
    )
    
    
    (2,983
    )
    
    
    5,794Financing ActivitiesRepayment of long-term debt, including redemption
premium
    
    
    
    
    
    
    (505,627
    )
    
    
    
    
    
    
    
    
    
    
    (505,627
    )Loan from Arch Coal, Inc
    
    
    225,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    225,000Net proceeds from commercial paper
    
    
    6,264
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,264Debt financing costs
    
    
    (375
    )
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    (390
    )Contribution from non-redeemable membership
interest
    
    
    891
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    891Transactions with affiliates, net
    
    
    (266,748
    )
    
    
    530,862
    
    
    
    (197,956
    )
    
    
    (66,158
    )
    
    
    Cash provided by (used in) financing
activities
    
    
    (34,968
    )
    
    
    25,220
    
    
    
    (197,956
    )
    
    
    (66,158
    )
    
    
    (273,862
    )Increase (decrease) in cash and cash equivalents
    
    
    (4,945
    )
    
    
    
    
    
    
    59,999
    
    
    
    38
    
    
    
    55,092Cash and cash equivalents, beginning of
period
    
    
    6,714
    
    
    
    
    
    
    
    61
    
    
    
    44
    
    
    
    6,819Cash and cash equivalents, end of period
    
    $
    1,769
    
    
    $
    
    
    
    $
    60,060
    
    
    $
    82
    
    
    $
    61,911
 14




---



##### Table of Contents



Condensed Consolidating Statements of Cash Flows
Nine Months Ended September 30, 2009
(in thousands)
 Guarantor
    
    
    Non-GuarantorParent Company
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    ConsolidatedCash provided by (used in) operating
activities
    
    $
    (67,736
    )
    
    $
    (15,319
    )
    
    $
    120,076
    
    
    $
    69,695
    
    
    $
    106,716Investing ActivitiesCapital expenditures
    
    
    
    
    
    
    
    
    
    
    (86,665
    )
    
    
    (20,101
    )
    
    
    (106,766
    )Change in receivable from Arch Coal, Inc
    
    
    24,372
    
    
    
    
    
    
    
    
    
    
    
    (2,612
    )
    
    
    21,760Proceeds from dispositions of property,
plant and equipment
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    25
    
    
    
    80Additions to prepaid royalties
    
    
    
    
    
    
    
    
    
    
    (2,209
    )
    
    
    (200
    )
    
    
    (2,409
    )Reimbursement of deposits on equipment
    
    
    
    
    
    
    
    
    
    
    3,209
    
    
    
    
    
    
    
    3,209Cash provided by (used in) investing
activities
    
    
    24,372
    
    
    
    
    
    
    
    (85,610
    )
    
    
    (22,888
    )
    
    
    (84,126
    )Financing ActivitiesNet payments on commercial paper
    
    
    (22,059
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,059
    )Debt financing costs
    
    
    (125
    )
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    (140
    )Transactions with affiliates, net
    
    
    66,022
    
    
    
    15,334
    
    
    
    (34,491
    )
    
    
    (46,865
    )
    
    
    Cash provided by (used in) financing
activities
    
    
    43,838
    
    
    
    15,319
    
    
    
    (34,491
    )
    
    
    (46,865
    )
    
    
    (22,199
    )Increase (decrease) in cash and cash
equivalents
    
    
    474
    
    
    
    
    
    
    
    (25
    )
    
    
    (58
    )
    
    
    391Cash and cash equivalents, beginning of
period
    
    
    2,690
    
    
    
    
    
    
    
    84
    
    
    
    77
    
    
    
    2,851Cash and cash equivalents, end of period
    
    $
    3,164
    
    
    $
    
    
    
    $
    59
    
    
    $
    19
    
    
    $
    3,242
 15




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 This document contains forward-looking statements  that is, statements related to future,
not past, events. In this context, forward-looking statements often address our expected future
business and financial performance, and often contain words such as expects, anticipates,
intends, plans, believes, seeks, or will. Forward-looking statements by their nature
address matters that are, to different degrees, uncertain. For us, particular uncertainties arise
from changes in the demand for our coal by the domestic electric generation industry; from
legislation and regulations
relating to the Clean Air Act and other environmental initiatives; from regulations relating
to mine safety; from operational, geological, permit, labor and weather-related factors; from
fluctuations in the amount of cash we generate from operations; from future integration of acquired
businesses; and from numerous other matters of national, regional and global scale, including those
of a political, economic, business, competitive or regulatory nature. These uncertainties may
cause our actual future results to be materially different than those expressed in our
forward-looking statements. We do not undertake to update our forward-looking statements, whether
as a result of new information, future events or otherwise, except as may be required by law. For
a description of some of the risks and uncertainties that may affect our future results, see Risk
Factors under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2009.
 Overview
      16




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##### Table of Contents



Results of Operations
 Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009
 Summary
 Revenues.
 Three Months Ended September 30
    
    
    Increase (Decrease)2010
    
    
    2009
    
    
    Amount
    
    
    %(Amounts in thousands, except per ton data and percentages)Coal sales
    
    $
    550,198
    
    
    $
    390,313
    
    
    $
    159,885
    
    
    
    41.0
    %Tons sold
    
    
    38,786
    
    
    
    24,703
    
    
    
    14,083
    
    
    
    57.0
    %Coal sales realization per ton sold
    
    $
    14.18
    
    
    $
    15.80
    
    
    $
    (1.62
    )
    
    
    (10.3
    )%
  Costs, expenses and other.
 Increase (Decrease)Three Months Ended September 30
    
    
    in Net Income2010
    
    
    2009
    
    
    $
    
    
    %(Amounts in thousands, except percentages)Cost of coal sales
    
    $
    445,814
    
    
    $
    323,973
    
    
    $
    (121,841
    )
    
    
    (37.6
    )%Depreciation, depletion and amortization
    
    
    39,756
    
    
    
    38,290
    
    
    
    (1,466
    )
    
    
    (3.8
    )Amortization of acquired sales contracts, net
    
    
    10,038
    
    
    
    78
    
    
    
    (9,960
    )
    
    
    N/ASelling, general and administrative expenses
    
    
    8,172
    
    
    
    12,654
    
    
    
    4,482
    
    
    
    35.4Other operating income, net
    
    
    (1,093
    )
    
    
    (3,492
    )
    
    
    (2,399
    )
    
    
    (68.7
    )$
    502,687
    
    
    $
    371,503
    
    
    $
    (131,184
    )
    
    
    (35.3
    )%
 Cost of coal sales.
 Depreciation, depletion and amortization and amortization of acquired sales contracts, net.
 Selling, general and administrative expenses.
 17




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##### Table of Contents



Operating segment results
 Three Months Ended September 30
    
    
    Increase (Decrease)2010
    
    
    2009
    
    
    $
    
    
    %Powder River BasinTons sold (in thousands)
    
    
    34,762
    
    
    
    20,142
    
    
    
    14,620
    
    
    
    72.6
    %Coal sales realization per ton sold (1)
    
    $
    11.79
    
    
    $
    11.84
    
    
    $
    (0.05
    )
    
    
    (0.4
    )%Operating margin per ton sold (2)
    
    $
    1.12
    
    
    $
    0.53
    
    
    $
    0.59
    
    
    
    111.3
    %Western BituminousTons sold (in thousands)
    
    
    4,024
    
    
    
    4,561
    
    
    
    (537
    )
    
    
    (11.8
    )%Coal sales realization per ton sold (1)
    
    $
    30.66
    
    
    $
    29.07
    
    
    $
    1.59
    
    
    
    5.5
    %Operating margin per ton sold (2)
    
    $
    3.70
    
    
    $
    3.66
    
    
    $
    0.04
    
    
    
    1.1
    %
 
 (1)
    
    Coal sales prices per ton exclude certain transportation costs that we pass
through to our customers. We use these financial measures because we believe the amounts as
adjusted better represent the coal sales prices we achieved within our operating segments.
Since other companies may calculate coal sales prices per ton differently, our calculation may
not be comparable to similarly titled measures used by those companies. For the three months
ended September 30, 2010, transportation costs per ton were $0.07 for the Powder River Basin
and $3.64 for the Western Bituminous region. For the three months ended September 30, 2009,
transportation costs per ton were $0.18 for the Powder River Basin and $3.44 for the Western
Bituminous region.(2)
    
    Operating margin per ton sold is calculated as coal sales revenues less cost of coal
sales and depreciation, depletion and amortization divided by tons sold. Powder River Basin 
 Western Bituminous
 Net interest expense
 Three Months Ended September 30
    
    
    Increase in Net Income2010
    
    
    2009
    
    
    $
    
    
    %(Amounts in thousands, except percentages)Interest expense
    
    $
    (15,892
    )
    
    $
    (16,915
    )
    
    $
    1,023
    
    
    
    6.0
    %Interest income
    
    
    13,714
    
    
    
    11,318
    
    
    
    2,396
    
    
    
    21.2$
    (2,178
    )
    
    $
    (5,597
    )
    
    $
    3,419
    
    
    
    61.1
    %
  18




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##### Table of Contents



Other non-operating expense.
 Three Months Ended September 30
    
    
    Decrease in Net Income2010
    
    
    2009
    
    
    $
    
    
    %(Amounts in thousands, except percentages)Loss on early extinguishment of debt
    
    $
    (6,776
    )
    
    $
    
    
    
    $
    (6,776
    )
    
    
    (100
    )%
  Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009
 Summary
 Revenues.
 Nine Months Ended September 30
    
    
    Increase (Decrease)2010
    
    
    2009
    
    
    Amount
    
    
    %(Amounts in thousands, except per ton data and percentages)Coal sales
    
    $
    1,504,523
    
    
    $
    1,167,369
    
    
    $
    337,154
    
    
    
    28.9
    %Tons sold
    
    
    106,516
    
    
    
    74,608
    
    
    
    31,908
    
    
    
    42.8
    %Coal sales realization per ton sold
    
    $
    14.12
    
    
    $
    15.65
    
    
    $
    (1.53
    )
    
    
    (9.8
    )%
  Costs, expenses and other.
 Increase (Decrease)Nine Months Ended September 30
    
    
    in Net Income2010
    
    
    2009
    
    
    $
    
    
    %(Amounts in thousands, except percentages)Cost of coal sales
    
    
    1,239,893
    
    
    
    1,005,640
    
    
    $
    (234,253
    )
    
    
    (23.3
    )%Depreciation, depletion and amortization
    
    
    123,883
    
    
    
    113,058
    
    
    
    (10,825
    )
    
    
    (9.6
    )Amortization of acquired sales contracts, net
    
    
    26,005
    
    
    
    (92
    )
    
    
    (26,097
    )
    
    
    N/ASelling, general and administrative expenses
    
    
    27,421
    
    
    
    29,722
    
    
    
    2,301
    
    
    
    7.7Other operating income, net
    
    
    (3,597
    )
    
    
    (5,363
    )
    
    
    (1,766
    )
    
    
    (32.9
    )1,413,605
    
    
    
    1,142,965
    
    
    $
    (270,640
    )
    
    
    (23.7
    )%
 19




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##### Table of Contents



Cost of coal sales.
 Depreciation, depletion and amortization and amortization of acquired sales contracts, net.
 Selling, general and administrative expenses.
 Operating segment results
 Nine Months Ended September 30
    
    
    Increase (Decrease)2010
    
    
    2009
    
    
    $
    
    
    %Powder River BasinTons sold (in thousands)
    
    
    94,370
    
    
    
    62,675
    
    
    
    31,695
    
    
    
    50.6
    %Coal sales realization per ton sold (3)
    
    $
    11.59
    
    
    $
    12.39
    
    
    $
    (0.80
    )
    
    
    (6.5
    )%Operating margin per ton sold (4)
    
    $
    0.76
    
    
    $
    0.70
    
    
    $
    0.06
    
    
    
    8.6
    %Western BituminousTons sold (in thousands)
    
    
    12,146
    
    
    
    11,933
    
    
    
    213
    
    
    
    1.8
    %Coal sales realization per ton sold (3)
    
    $
    29.90
    
    
    $
    29.00
    
    
    $
    0.90
    
    
    
    3.1
    %Operating margin per ton sold (4)
    
    $
    3.13
    
    
    $
    0.28
    
    
    $
    2.85
    
    
    
    N/A
 
 (3)
    
    Coal sales prices per ton exclude certain transportation costs that we pass
through to our customers. We use these financial measures because we believe the amounts as
adjusted better represent the coal sales prices we achieved within our operating segments.
Since other companies may calculate coal sales prices per ton differently, our calculation may
not be comparable to similarly titled measures used by those companies. For the nine months
ended September 30, 2010, transportation costs per ton were $0.08 for the Powder River Basin
and $3.27 for the Western Bituminous region. For the nine months ended September 30, 2009,
transportation costs per ton were $0.15 for the Powder River Basin and $2.95 for the Western
Bituminous region.(4)
    
    Operating margin per ton sold is calculated as coal sales revenues less cost of coal
sales and depreciation, depletion and amortization divided by tons sold. Powder River Basin 
 Western Bituminous 
 20




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##### Table of Contents



Net interest expense
 Increase (Decrease) inNine Months Ended September 30
    
    
    Net Income2010
    
    
    2009
    
    
    $
    
    
    %(Amounts in thousands, except percentages)Interest expense
    
    $
    (50,966
    )
    
    $
    (50,264
    )
    
    $
    (702
    )
    
    
    (1.4
    )%Interest income
    
    
    39,732
    
    
    
    34,684
    
    
    
    5,048
    
    
    
    14.6
    %$
    (11,234
    )
    
    $
    (15,580
    )
    
    $
    4,346
    
    
    
    27.9
    %
   Other non-operating expense.
 Nine Months Ended September 30
    
    
    Decrease in Net Income2010
    
    
    2009
    
    
    $
    
    
    %(Amounts in thousands, except percentages)Loss on early extinguishment of debt
    
    $
    (6,776
    )
    
    $
    
    
    
    $
    (6,776
    )
    
    
    (100
    )%
  Liquidity and Capital Resources
 Liquidity and capital resources
    21




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##### Table of Contents



Nine  Months Ended September 302010
    
    
    2009(in thousands)Cash provided by (used in):Operating activities
    
    $
    323,160
    
    
    $
    106,716Investing activities
    
    
    5,794
    
    
    
    (84,126
    )Financing activities
    
    
    (273,862
    )
    
    
    (22,199
    )
    Critical Accounting Policies
  22




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
    
 Item 4. Controls and Procedures.
  
 PART II
OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Reserved
 
 Item 5. Other Information.
  23




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##### Table of Contents




    
    Section 104Citations: Total number of violations of mandatory health or safety
standards that could significantly and substantially contribute to the cause and effect of
a coal or other mine safety or health hazard under section 104 of the Mine Act for which we
have received a citation from MSHA;
 
    
    Section104(b)Orders: Total number of orders issued under section 104(b) of the Mine
Act;
 
    
    Section104(d)Citations/Orders: Total number of citations and orders for unwarrantable
failure of the mine operator to comply with mandatory health or safety standards under
Section 104(d) of the Mine Act;
 
    
    Section107(a)Orders: Total number of imminent danger orders issued under section
107(a) of the Mine Act; and
 
    
    Total Dollar Value of Proposed MSHA Assessments: Total dollar value of proposed
assessments from MSHA under the Mine Act.
 Total Dollar Value ofProposed MSHASection 104
    
    
    Section 104(b)
    
    
    Section 104(d)
    
    
    Section 107(a)
    
    
    AssessmentsMining complex(1)
    
    Citations
    
    
    Orders
    
    
    Citations/Orders
    
    
    Orders
    
    
    (in thousands)(2)Power River Basin:Black Thunder
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2Coal Creek
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    Western Bituminous:Arch of Wyoming
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1Dugout Canyon
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2Skyline
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    14Sufco
    
    
    5
    
    
    
    
    
    
    
    4
    
    
    
    1
    
    
    $
    1West Elk
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    78
 
 (1)
    
    MSHA assigns an identification number to each coal mine and may or may not assign
separate identification numbers to related facilities such as preparation plants. We are
providing the information in this table by mining complex rather than MSHA identification
number because we believe this format will be more useful to investors than providing
information based on MSHA identification numbers. For descriptions of each of these mining
operations, please refer to the descriptions under Item 1. Business, in Part I of our
Annual Report on Form 10-K for the fiscal year ended December 31, 2009.(2)
    
    Amounts included under the heading Total Dollar Value of Proposed MSHA
Assessments are the total dollar amounts for proposed assessments received from MSHA on or
before October 25, 2010, for citations and orders occurring during the three-month period
ended September 30, 2010.   24




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##### Table of Contents



Item 6. Exhibits.
  Exhibit
    
    Description31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Paul A. Lang.31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of John T. Drexler.32.1
    
    Section 1350 Certification of Paul A. Lang.32.2
    
    Section 1350 Certification of John T. Drexler.
 25




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##### Table of Contents



Signatures
  Arch Western Resources, LLCBy:
    /s/ John T. DrexlerJohn T. DrexlerVice President November 15, 2010 26