##### 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 March 31, 2009
 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
(State or other jurisdiction 
of incorporation or organization)
    
    43-1811130
(I.R.S. Employer
Identification Number)One CityPlace Drive, Suite 300, St. Louis, Missouri
(Address of principal executive offices)
    
    63141
(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
    
    
    13Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    17Item 4T.
    
    Controls and Procedures
    
    
    17Part II Other Information
    
    
    17Item 1.
    
    Legal Proceedings
    
    
    17Item 1A.
    
    Risk Factors
    
    
    17Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    17Item 3.
    
    Defaults Upon Senior Securities
    
    
    17Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    17Item 5.
    
    Other Information
    
    
    17Item 6.
    
    Exhibits
    
    
    18EX-31.1EX-31.2EX-32.1EX-32.2
  ii




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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 March 312009
    
    
    2008(unaudited)RevenuesCoal sales
    
    $
    416,250
    
    
    $
    437,209Costs, expenses and otherCost of coal sales
    
    
    361,372
    
    
    
    336,723Depreciation, depletion and amortization
    
    
    38,237
    
    
    
    39,656Selling, general and administrative expenses
    
    
    9,828
    
    
    
    7,557Other operating income, net
    
    
    (949
    )
    
    
    (951
    )408,488
    
    
    
    382,985Income from operations
    
    
    7,762
    
    
    
    54,224Interest income (expense), net:Interest expense
    
    
    (17,518
    )
    
    
    (17,475
    )Interest income, primarily from Arch Coal, Inc.
    
    
    11,800
    
    
    
    21,845(5,718
    )
    
    
    4,370Net income
    
    $
    2,044
    
    
    $
    58,594Net income (loss) attributable to redeemable membership interest
    
    $
    (7
    )
    
    $
    274Net income attributable to non-redeemable membership interest
    
    $
    2,051
    
    
    $
    58,320
  1




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Arch Western Resources, LLC and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
 March 31,
    
    
    December 31,2009
    
    
    2008(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    585
    
    
    $
    2,851Receivables
    
    
    1,688
    
    
    
    2,930Inventories
    
    
    139,465
    
    
    
    133,726Other
    
    
    18,674
    
    
    
    21,617Total current assets
    
    
    160,412
    
    
    
    161,124Property, plant and equipment, net
    
    
    1,379,405
    
    
    
    1,391,841Other assets:Receivable from Arch Coal, Inc.
    
    
    1,486,446
    
    
    
    1,528,068Other
    
    
    23,954
    
    
    
    24,051Total other assets
    
    
    1,510,400
    
    
    
    1,552,119Total assets
    
    $
    3,050,217
    
    
    $
    3,105,084LIABILITIES AND MEMBERSHIP INTERESTSCurrent liabilities:Accounts payable
    
    $
    87,392
    
    
    $
    113,611Accrued expenses
    
    
    116,436
    
    
    
    134,540Commercial paper
    
    
    32,936
    
    
    
    65,671Total current liabilities
    
    
    236,764
    
    
    
    313,822Long-term debt
    
    
    955,807
    
    
    
    956,148Asset retirement obligations
    
    
    232,445
    
    
    
    227,397Accrued postretirement benefits other than pension
    
    
    38,533
    
    
    
    37,491Accrued pension benefits
    
    
    38,171
    
    
    
    36,616Accrued workers compensation
    
    
    3,759
    
    
    
    3,681Other noncurrent liabilities
    
    
    38,421
    
    
    
    25,551Total liabilities
    
    
    1,543,900
    
    
    
    1,600,706Redeemable membership interest
    
    
    8,878
    
    
    
    8,765Non-redeemable membership interest
    
    
    1,497,439
    
    
    
    1,495,613Total liabilities and membership interests
    
    $
    3,050,217
    
    
    $
    3,105,084
  2




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Arch Western Resources, LLC and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
 Three Months Ended March 312009
    
    
    2008(unaudited)OPERATING ACTIVITIESNet income
    
    $
    2,044
    
    
    $
    58,594Adjustments to reconcile net income to cash provided by operating activities:Depreciation, depletion and amortization
    
    
    38,237
    
    
    
    39,656Net gain on dispositions of property, plant and equipment
    
    
    
    
    
    
    (150
    )Changes in:Receivables
    
    
    1,242
    
    
    
    1,689Inventories
    
    
    (5,739
    )
    
    
    (5,772
    )Accounts payable and accrued expenses
    
    
    (23,614
    )
    
    
    (6,272
    )Other
    
    
    23,347
    
    
    
    22,416Cash provided by operating activities
    
    
    35,517
    
    
    
    110,161INVESTING ACTIVITIESCapital expenditures
    
    
    (49,873
    )
    
    
    (98,495
    )Change in receivable from Arch Coal, Inc.
    
    
    41,616
    
    
    
    (9,038
    )Proceeds from dispositions of property, plant and equipment
    
    
    
    
    
    
    150Reimbursement of deposits on equipment
    
    
    3,209
    
    
    
    Cash used in investing activities
    
    
    (5,048
    )
    
    
    (107,383
    )FINANCING ACTIVITIESNet repayments on commercial paper
    
    
    (32,735
    )
    
    
    (54
    )Cash used in financing activities
    
    
    (32,735
    )
    
    
    (54
    )Increase (decrease) in cash and cash equivalents
    
    
    (2,266
    )
    
    
    2,724Cash and cash equivalents, beginning of period
    
    
    2,851
    
    
    
    248Cash and cash equivalents, end of period
    
    $
    585
    
    
    $
    2,972
  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
 New Accounting Pronouncements
 Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51
 3. Inventories
  March 31,
    
    
    December 31,2009
    
    
    2008(In thousands)Coal
    
    $
    30,140
    
    
    $
    26,989Repair parts and supplies, net of allowance
    
    
    109,325
    
    
    
    106,737$
    139,465
    
    
    $
    133,726
 4. Commercial Paper
  4




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5. Comprehensive Income
   Three Months Ended March 312009
    
    
    2008(In thousands)Net income
    
    $
    2,044
    
    
    $
    58,594Other comprehensive income:Net pension, postretirement
and other post-employment
benefits adjustments
reclassified to income
    
    
    (82
    )
    
    
    138Total comprehensive income
    
    $
    1,962
    
    
    $
    58,732
 6. Related Party Transactions
      7. Contingencies
  8. Segment Information
  5




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Corporate,Other andPRB
    
    WBIT
    
    Eliminations
    
    Consolidated(In thousands)Three months ended March 31, 2009Coal sales
    
    $
    295,310
    
    
    $
    120,940
    
    
    $
    
    
    
    $
    416,250Income (loss) from operations
    
    
    25,392
    
    
    
    (7,037
    )
    
    
    (10,593
    )
    
    
    7,762Total assets
    
    
    1,866,855
    
    
    
    2,056,827
    
    
    
    (873,465
    )
    
    
    3,050,217Depreciation, depletion and amortization
    
    
    18,826
    
    
    
    19,411
    
    
    
    
    
    
    
    38,237Capital expenditures
    
    
    33,779
    
    
    
    16,094
    
    
    
    
    
    
    
    49,873Three months ended March 31, 2008Coal sales
    
    $
    275,688
    
    
    $
    161,521
    
    
    $
    
    
    
    $
    437,209Income (loss) from operations
    
    
    28,787
    
    
    
    33,961
    
    
    
    (8,524
    )
    
    
    54,224Total assets
    
    
    1,751,366
    
    
    
    1,965,108
    
    
    
    (794,577
    )
    
    
    2,921,897Depreciation, depletion and amortization
    
    
    18,223
    
    
    
    21,433
    
    
    
    
    
    
    
    39,656Capital expenditures
    
    
    38,177
    
    
    
    60,318
    
    
    
    
    
    
    
    98,495
  Three Months EndedMarch 312009
    
    
    2008(In thousands)Income from operations
    
    $
    7,762
    
    
    $
    54,224Interest expense
    
    
    (17,518
    )
    
    
    (17,475
    )Interest income
    
    
    11,800
    
    
    
    21,845Net income
    
    $
    2,044
    
    
    $
    58,594
 9. Supplemental Condensed Consolidating Financial Information
  6




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CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Three Months Ended March 31, 2009
(in thousands)
 Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-GuarantorCompany
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCoal sales
    
    $
    
    
    
    $
    
    
    
    $
    325,944
    
    
    $
    90,306
    
    
    $
    
    
    
    $
    416,250Cost of coal sales
    
    
    834
    
    
    
    
    
    
    
    289,002
    
    
    
    72,381
    
    
    
    (845
    )
    
    
    361,372Depreciation, depletion and amortization
    
    
    
    
    
    
    
    
    
    
    24,947
    
    
    
    13,290
    
    
    
    
    
    
    
    38,237Selling, general and administrative expenses
    
    
    9,828
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,828Other operating income, net
    
    
    (69
    )
    
    
    
    
    
    
    (641
    )
    
    
    (1,084
    )
    
    
    845
    
    
    
    (949
    )10,593
    
    
    
    
    
    
    
    313,308
    
    
    
    84,587
    
    
    
    
    
    
    
    408,488Income from investment in subsidiaries
    
    
    18,079
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,079
    )
    
    
    Income from operations
    
    
    7,486
    
    
    
    
    
    
    
    12,636
    
    
    
    5,719
    
    
    
    (18,079
    )
    
    
    7,762Interest expense
    
    
    (17,095
    )
    
    
    (16,033
    )
    
    
    (169
    )
    
    
    (252
    )
    
    
    16,031
    
    
    
    (17,518
    )Interest income
    
    
    11,653
    
    
    
    16,031
    
    
    
    27
    
    
    
    120
    
    
    
    (16,031
    )
    
    
    11,800(5,442
    )
    
    
    (2
    )
    
    
    (142
    )
    
    
    (132
    )
    
    
    
    
    
    
    (5,718
    )Net income (loss)
    
    $
    2,044
    
    
    $
    (2
    )
    
    $
    12,494
    
    
    $
    5,587
    
    
    $
    (18,079
    )
    
    $
    2,044
 7




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CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Three Months Ended March 31, 2008
(in thousands)
 Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-GuarantorCompany
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCoal sales
    
    
    
    
    
    
    
    
    
    $
    340,134
    
    
    $
    97,075
    
    
    
    
    
    
    $
    437,209Cost of coal sales
    
    
    998
    
    
    
    
    
    
    
    266,521
    
    
    
    69,835
    
    
    
    (631
    )
    
    
    336,723Depreciation, depletion and amortization
    
    
    
    
    
    
    
    
    
    
    22,740
    
    
    
    16,916
    
    
    
    
    
    
    
    39,656Selling, general and administrative expenses
    
    
    7,557
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,557Other operating income, net
    
    
    (31
    )
    
    
    
    
    
    
    (775
    )
    
    
    (776
    )
    
    
    631
    
    
    
    (951
    )8,524
    
    
    
    
    
    
    
    288,486
    
    
    
    85,975
    
    
    
    
    
    
    
    382,985Income from investment in subsidiaries
    
    
    64,466
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (64,466
    )
    
    
    Income from operations
    
    
    55,942
    
    
    
    
    
    
    
    51,648
    
    
    
    11,100
    
    
    
    (64,466
    )
    
    
    54,224Interest expense
    
    
    (18,782
    )
    
    
    (14,157
    )
    
    
    (105
    )
    
    
    (462
    )
    
    
    16,031
    
    
    
    (17,475
    )Interest income
    
    
    21,434
    
    
    
    16,031
    
    
    
    88
    
    
    
    323
    
    
    
    (16,031
    )
    
    
    21,8452,652
    
    
    
    1,874
    
    
    
    (17
    )
    
    
    (139
    )
    
    
    
    
    
    
    4,370Net income
    
    $
    58,594
    
    
    $
    1,874
    
    
    $
    51,631
    
    
    $
    10,961
    
    
    $
    (64,466
    )
    
    $
    58,594
 8




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CONDENSED CONSOLIDATING BALANCE SHEETS
March 31, 2009
(in thousands)
 Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-GuarantorCompany
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash and cash equivalents
    
    $
    481
    
    
    $
    
    
    
    $
    64
    
    
    $
    40
    
    
    $
    
    
    
    $
    585Receivables
    
    
    278
    
    
    
    
    
    
    
    1,137
    
    
    
    273
    
    
    
    
    
    
    
    1,688Inventories
    
    
    
    
    
    
    
    
    
    
    106,009
    
    
    
    33,456
    
    
    
    
    
    
    
    139,465Other
    
    
    7,178
    
    
    
    2,149
    
    
    
    4,181
    
    
    
    5,166
    
    
    
    
    
    
    
    18,674Total current assets
    
    
    7,937
    
    
    
    2,149
    
    
    
    111,391
    
    
    
    38,935
    
    
    
    
    
    
    
    160,412Property, plant and equipment, net
    
    
    
    
    
    
    
    
    
    
    1,063,860
    
    
    
    315,545
    
    
    
    
    
    
    
    1,379,405Investment in subsidiaries
    
    
    2,381,444
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,381,444
    )
    
    
    Receivable from Arch Coal
    
    
    1,454,874
    
    
    
    
    
    
    
    
    
    
    
    31,572
    
    
    
    
    
    
    
    1,486,446Intercompanies
    
    
    (2,242,848
    )
    
    
    977,214
    
    
    
    1,098,305
    
    
    
    167,329
    
    
    
    
    
    
    
    Other
    
    
    1,170
    
    
    
    6,935
    
    
    
    11,505
    
    
    
    4,344
    
    
    
    
    
    
    
    23,954Total other assets
    
    
    1,594,640
    
    
    
    984,149
    
    
    
    1,109,810
    
    
    
    203,245
    
    
    
    (2,381,444
    )
    
    
    1,510,400Total assets
    
    $
    1,602,577
    
    
    $
    986,298
    
    
    $
    2,285,061
    
    
    $
    557,725
    
    
    $
    (2,381,444
    )
    
    $
    3,050,217Accounts payable
    
    $
    3,443
    
    
    $
    
    
    
    $
    67,600
    
    
    $
    16,349
    
    
    $
    
    
    
    $
    87,392Accrued expenses
    
    
    1,620
    
    
    
    16,031
    
    
    
    91,114
    
    
    
    7,671
    
    
    
    
    
    
    
    116,436Commercial paper
    
    
    32,936
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,936Total current liabilities
    
    
    37,999
    
    
    
    16,031
    
    
    
    158,714
    
    
    
    24,020
    
    
    
    
    
    
    
    236,764Long-term debt
    
    
    
    
    
    
    955,807
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    955,807Asset retirement obligations
    
    
    
    
    
    
    
    
    
    
    219,160
    
    
    
    13,285
    
    
    
    
    
    
    
    232,445Accrued postretirement benefits other than pension
    
    
    24,152
    
    
    
    
    
    
    
    2,485
    
    
    
    11,896
    
    
    
    
    
    
    
    38,533Accrued pension benefits
    
    
    33,692
    
    
    
    
    
    
    
    (1
    )
    
    
    4,480
    
    
    
    
    
    
    
    38,171Accrued workers compensation
    
    
    (917
    )
    
    
    
    
    
    
    643
    
    
    
    4,033
    
    
    
    
    
    
    
    3,759Other noncurrent liabilities
    
    
    1,334
    
    
    
    
    
    
    
    37,079
    
    
    
    8
    
    
    
    
    
    
    
    38,421Total liabilities
    
    
    96,260
    
    
    
    971,838
    
    
    
    418,080
    
    
    
    57,722
    
    
    
    
    
    
    
    1,543,900Redeemable membership interest
    
    
    8,878
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,878Non-redeemable membership interest
    
    
    1,497,439
    
    
    
    14,460
    
    
    
    1,866,981
    
    
    
    500,003
    
    
    
    (2,381,444
    )
    
    
    1,497,439Total liabilities and membership interests
    
    $
    1,602,577
    
    
    $
    986,298
    
    
    $
    2,285,061
    
    
    $
    557,725
    
    
    $
    (2,381,444
    )
    
    $
    3,050,217
 9




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##### Table of Contents



CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2008
(in thousands)
 Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-GuarantorCompany
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash and cash equivalents
    
    $
    2,690
    
    
    $
    
    
    
    $
    84
    
    
    $
    77
    
    
    $
    
    
    
    $
    2,851Receivables
    
    
    1,250
    
    
    
    
    
    
    
    1,138
    
    
    
    542
    
    
    
    
    
    
    
    2,930Inventories
    
    
    
    
    
    
    
    
    
    
    102,216
    
    
    
    31,510
    
    
    
    
    
    
    
    133,726Other
    
    
    10,330
    
    
    
    2,154
    
    
    
    4,669
    
    
    
    4,464
    
    
    
    
    
    
    
    21,617Total current assets
    
    
    14,270
    
    
    
    2,154
    
    
    
    108,107
    
    
    
    36,593
    
    
    
    
    
    
    
    161,124Property, plant and equipment, net
    
    
    
    
    
    
    
    
    
    
    1,065,064
    
    
    
    326,777
    
    
    
    
    
    
    
    1,391,841Investment in subsidiaries
    
    
    2,362,717
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,362,717
    )
    
    
    Receivable from Arch Coal
    
    
    1,498,201
    
    
    
    
    
    
    
    
    
    
    
    29,867
    
    
    
    
    
    
    
    1,528,068Intercompanies
    
    
    (2,238,175
    )
    
    
    993,048
    
    
    
    1,090,674
    
    
    
    154,453
    
    
    
    
    
    
    
    Other
    
    
    700
    
    
    
    7,471
    
    
    
    11,474
    
    
    
    4,406
    
    
    
    
    
    
    
    24,051Total other assets
    
    
    1,623,443
    
    
    
    1,000,519
    
    
    
    1,102,148
    
    
    
    188,726
    
    
    
    (2,362,717
    )
    
    
    1,552,119Total assets
    
    $
    1,637,713
    
    
    $
    1,002,673
    
    
    $
    2,275,319
    
    
    $
    552,096
    
    
    $
    (2,362,717
    )
    
    $
    3,105,084Accounts payable
    
    $
    7,167
    
    
    $
    
    
    
    $
    88,938
    
    
    $
    17,506
    
    
    $
    
    
    
    $
    113,611Accrued expenses
    
    
    4,293
    
    
    
    32,063
    
    
    
    90,605
    
    
    
    7,579
    
    
    
    
    
    
    
    134,540Commercial paper
    
    
    65,671
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,671Total current liabilities
    
    
    77,131
    
    
    
    32,063
    
    
    
    179,543
    
    
    
    25,085
    
    
    
    
    
    
    
    313,822Long-term debt
    
    
    
    
    
    
    956,148
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    956,148Asset retirement obligations
    
    
    
    
    
    
    
    
    
    
    214,388
    
    
    
    13,009
    
    
    
    
    
    
    
    227,397Accrued postretirement benefits
other
than pension
    
    
    23,492
    
    
    
    
    
    
    
    2,485
    
    
    
    11,514
    
    
    
    
    
    
    
    37,491Accrued pension benefits
    
    
    32,671
    
    
    
    
    
    
    
    
    
    
    
    3,945
    
    
    
    
    
    
    
    36,616Accrued workers compensation
    
    
    (1,045
    )
    
    
    
    
    
    
    642
    
    
    
    4,084
    
    
    
    
    
    
    
    3,681Other noncurrent liabilities
    
    
    1,086
    
    
    
    
    
    
    
    24,465
    
    
    
    
    
    
    
    
    
    
    
    25,551Total liabilities
    
    
    133,335
    
    
    
    988,211
    
    
    
    421,523
    
    
    
    57,637
    
    
    
    
    
    
    
    1,600,706Redeemable membership interest
    
    
    8,765
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,765Non-redeemable membership interest
    
    
    1,495,613
    
    
    
    14,462
    
    
    
    1,853,796
    
    
    
    494,459
    
    
    
    (2,362,717
    )
    
    
    1,495,613Total liabilities and membership
interests
    
    $
    1,637,713
    
    
    $
    1,002,673
    
    
    $
    2,275,319
    
    
    $
    552,096
    
    
    $
    (2,362,717
    )
    
    $
    3,105,084
 10




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##### Table of Contents



CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2009
(in thousands)
 Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-GuarantorCompany
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    ConsolidatedCash provided by (used in) operating
activities
    
    $
    (17,468
    )
    
    $
    (15,834
    )
    
    $
    51,906
    
    
    $
    16,913
    
    
    $
    35,517Investing ActivitiesCapital expenditures
    
    
    
    
    
    
    
    
    
    
    (47,504
    )
    
    
    (2,369
    )
    
    
    (49,873
    )Change in receivable from Arch Coal, Inc.
    
    
    43,321
    
    
    
    
    
    
    
    
    
    
    
    (1,705
    )
    
    
    41,616Reimbursement of deposits on equipment
    
    
    
    
    
    
    
    
    
    
    3,209
    
    
    
    
    
    
    
    3,209Cash provided by (used in) investing
activities
    
    
    43,321
    
    
    
    
    
    
    
    (44,295
    )
    
    
    (4,074
    )
    
    
    (5,048
    )Financing ActivitiesNet payments on commercial paper
    
    
    (32,735
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,735
    )Transactions with affiliates, net
    
    
    4,673
    
    
    
    15,834
    
    
    
    (7,631
    )
    
    
    (12,876
    )
    
    
    Cash provided by (used in) financing
activities
    
    
    (28,062
    )
    
    
    15,834
    
    
    
    (7,631
    )
    
    
    (12,876
    )
    
    
    (32,735
    )Decrease in cash and cash equivalents
    
    
    (2,209
    )
    
    
    
    
    
    
    (20
    )
    
    
    (37
    )
    
    
    (2,266
    )Cash and cash equivalents, beginning of
period
    
    
    2,690
    
    
    
    
    
    
    
    84
    
    
    
    77
    
    
    
    2,851Cash and cash equivalents, end of period
    
    $
    481
    
    
    $
    
    
    
    $
    64
    
    
    $
    40
    
    
    $
    585
 11




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##### Table of Contents



CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2008
(in thousands)
 Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-GuarantorCompany
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    ConsolidatedCash provided by (used in) operating activities
    
    $
    141
    
    
    $
    (13,958
    )
    
    $
    101,249
    
    
    $
    22,729
    
    
    $
    110,161Investing ActivitiesCapital expenditures
    
    
    
    
    
    
    
    
    
    
    (94,539
    )
    
    
    (3,956
    )
    
    
    (98,495
    )Increase in receivable from Arch Coal
    
    
    (12,098
    )
    
    
    
    
    
    
    (112
    )
    
    
    3,172
    
    
    
    (9,038
    )Proceeds from dispositions of property, plant
and
equipment
    
    
    
    
    
    
    
    
    
    
    150
    
    
    
    
    
    
    
    150Cash used in investing activities
    
    
    (12,098
    )
    
    
    
    
    
    
    (94,501
    )
    
    
    (784
    )
    
    
    (107,383
    )Financing ActivitiesNet payments on commercial paper
    
    
    (54
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54
    )Transactions with affiliates, net
    
    
    14,844
    
    
    
    13,958
    
    
    
    (6,720
    )
    
    
    (22,082
    )
    
    
    Cash provided by (used in) financing
activities
    
    
    14,790
    
    
    
    13,958
    
    
    
    (6,720
    )
    
    
    (22,082
    )
    
    
    (54
    )Increase (decrease) in cash and cash
equivalents
    
    
    2,833
    
    
    
    
    
    
    
    28
    
    
    
    (137
    )
    
    
    2,724Cash and cash equivalents, beginning of period
    
    
    78
    
    
    
    
    
    
    
    16
    
    
    
    154
    
    
    
    248Cash and cash equivalents, end of period
    
    $
    2,911
    
    
    
    
    
    
    $
    44
    
    
    $
    17
    
    
    $
    2,972
 12




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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
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, 2008.
 Overview
    Results of Operations
 Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008
 Summary
 13




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##### Table of Contents



Revenues.
 Three Months Ended March 31
    
    Increase (Decrease)2009
    
    2008
    
    Amount
    
    %(Amounts in thousands, except per ton data and percentages)Coal sales
    
    $
    416,250
    
    
    $
    437,209
    
    
    $
    (20,959
    )
    
    
    (4.8
    )%Tons sold
    
    
    26,256
    
    
    
    30,185
    
    
    
    (3,929
    )
    
    
    (13.0
    )%Coal sales realization per ton sold
    
    $
    15.85
    
    
    $
    14.48
    
    
    $
    1.37
    
    
    
    9.5
    %
  Costs, expenses and other.
 Increase (Decrease)Three Months Ended March 31
    
    
    in Net Income2009
    
    
    2008
    
    
    $
    
    
    %(Amounts in thousands, except percentages)Cost of coal sales
    
    $
    361,372
    
    
    $
    336,723
    
    
    $
    (24,649
    )
    
    
    (7.3
    )%Depreciation, depletion and amortization
    
    
    38,237
    
    
    
    39,656
    
    
    
    1,419
    
    
    
    3.6Selling, general and administrative expenses
    
    
    9,828
    
    
    
    7,557
    
    
    
    (2,271
    )
    
    
    (30.1
    )Other operating income, net
    
    
    (949
    )
    
    
    (951
    )
    
    
    (2
    )
    
    
    (0.2
    )$
    408,488
    
    
    $
    382,985
    
    
    $
    (25,503
    )
    
    
    (6.7
    )%
 Cost of coal sales.
 Depreciation, depletion and amortization.
 Selling, general and administrative expenses.
 Operating segment results
 Three Months Ended March 31
    
    Increase (Decrease)2009
    
    2008
    
    $
    
    %Powder River BasinTons sold (in thousands)
    
    
    22,357
    
    
    
    25,151
    
    
    
    (2,794
    )
    
    
    (11.1
    )%Coal sales realization per ton sold (1)
    
    $
    13.00
    
    
    $
    10.90
    
    
    $
    2.10
    
    
    
    19.3
    %Operating margin per ton sold (2)
    
    $
    1.11
    
    
    $
    1.11
    
    
    $
    
    
    
    
    N/AWestern BituminousTons sold (in thousands)
    
    
    3,899
    
    
    
    5,034
    
    
    
    (1,135
    )
    
    
    (22.5
    )%Coal sales realization per ton sold (1)
    
    $
    28.09
    
    
    $
    26.74
    
    
    $
    1.35
    
    
    
    5.1
    %Operating margin per ton sold (2)\
    
    $
    (2.10
    )
    
    $
    6.59
    
    
    $
    (8.69
    )
    
    
    (131.9
    )%
 
 (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
March 31, 2009, transportation costs per ton were $0.21 for the Powder River Basin and $2.92
for the Western Bituminous region. Transportation costs per ton for the three months ended
March 31, 2008 were $0.06 for the Powder River Basin and $5.34 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. 14




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##### Table of Contents



Powder River Basin 
 Western Bituminous 
 Net interest expense
 Three Months Ended March 31
    
    
    Decrease in Net Income2009
    
    
    2008
    
    
    $
    
    
    %(Amounts in thousands, except percentages)Interest expense
    
    $
    (17,518
    )
    
    $
    (17,475
    )
    
    $
    (43
    )
    
    
    (0.3
    )%Interest income
    
    
    11,800
    
    
    
    21,845
    
    
    
    (10,045
    )
    
    
    (46.0
    )%$
    (5,718
    )
    
    $
    4,370
    
    
    $
    (10,088
    )
    
    
    (230.8
    )%
   Liquidity and Capital Resources
 Credit crisis and economic environment
  15




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##### Table of Contents



Liquidity and capital resources
       Three Months Ended March 312009
    
    2008(in thousands)Cash provided by (used in):Operating activities
    
    $
    35,517
    
    
    $
    110,161Investing activities
    
    
    (5,048
    )
    
    
    (107,383
    )Financing activities
    
    
    (32,735
    )
    
    
    (54
    )
   16




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4T. 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. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  17




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##### Table of Contents



Item 6. Exhibits.
  Exhibit
    
    Description3.1
    
    Certificate of Formation (incorporated herein by reference to
Exhibit 3.3 to the Form S-4 (File No. 333-107569) filed on August
1, 2003 by Arch Western Finance, LLC, Arch Western Resources, LLC,
Arch of Wyoming, LLC, Mountain Coal Company, L.L.C., and Thunder
Basin Coal Company, L.L.C.).3.2
    
    Limited Liability Company Agreement (incorporated herein by
reference to Exhibit 3.4 to the Form S-4 (File No. 333-107569)
filed on August 1, 2003 by Arch Western Finance, LLC, Arch Western
Resources, LLC, Arch of Wyoming, LLC, Mountain Coal Company,
L.L.C., and Thunder Basin Coal Company, L.L.C.).31.1
    
    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.
 18




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##### Table of Contents



Signatures
  Arch Western Resources, LLCBy:
    /s/ John T. DrexlerJohn T. DrexlerVice PresidentMay 13, 2009 19