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UNITED STATES
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 1934For the Quarterly Period Ended March 31, 2005
 OR o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _______to ________Commission file number _____________
 ARCH WESTERN RESOURCES, LLC (Exact name of registrant as specified in its charter)
 Delaware
    
    43-1811130(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 One CityPlace Drive, Suite 300, St. Louis, Missouri 63141(Address of principal executive offices)(Zip Code) Registrants telephone number, including area code:(314) 994-2700 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2
of the Exchange Act). Yes o No þ At May 1, 2005, 99.5% of the registrants common equity was held by Arch Western Acquisition
Corporation and the remaining .5 percent was held by BP p.l.c.




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INDEX PAGEPART I. FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheets as of March 31, 2005 and December 31, 2004
    
    
    3Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2005 and 2004
    
    
    4Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2004
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    32Item 4. Controls and Procedures
    
    
    33PART II. OTHER INFORMATION
    
    
    33Item 1. Legal Proceedings
    
    
    33Item 6. Exhibits
    
    
    33Certification of Principal Executive OfficerCertification of Principal Financial OfficerStatement Under Oath of Principal Executive OfficerStatement Under Oath of Principal Financial Officer
  2




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PART I - FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS ARCH WESTERN RESOURCES, LLC 
 CONDENSED CONSOLIDATED
BALANCE SHEETS
(IN THOUSANDS)
 March 31,
    
    
    December 31,2005
    
    
    2004(Unaudited)AssetsCurrent assetsCash and cash equivalents
    
    $
    344
    
    
    $
    1,351Trade receivables
    
    
    114,649
    
    
    
    83,230Other receivables
    
    
    5,235
    
    
    
    5,691Inventories
    
    
    77,207
    
    
    
    78,372Prepaid royalties
    
    
    12,176
    
    
    
    7,792Other
    
    
    12,109
    
    
    
    11,529Total current assets
    
    
    221,720
    
    
    
    187,965Property, plant and equipment, net
    
    
    1,095,186
    
    
    
    1,101,674Other assetsReceivable from Arch Coal, Inc.
    
    
    679,055
    
    
    
    677,934Other
    
    
    43,038
    
    
    
    45,863Total other assets
    
    
    722,093
    
    
    
    723,797Total assets
    
    $
    2,038,999
    
    
    $
    2,013,436Liabilities and members equityCurrent liabilitiesAccounts payable
    
    $
    63,663
    
    
    $
    56,612Accrued expenses
    
    
    116,446
    
    
    
    129,435Total current liabilities
    
    
    180,109
    
    
    
    186,047Long-term debt
    
    
    961,272
    
    
    
    961,613Accrued postretirement benefits other than pension
    
    
    24,652
    
    
    
    24,643Asset retirement obligations
    
    
    129,103
    
    
    
    128,184Accrued workers compensation
    
    
    12,115
    
    
    
    12,749Other noncurrent liabilities
    
    
    40,815
    
    
    
    42,770Total liabilities
    
    
    1,348,066
    
    
    
    1,356,006Minority interest
    
    
    112,128
    
    
    
    109,401Redeemable equity interests
    
    
    5,125
    
    
    
    4,971Non-redeemable members equity
    
    
    573,680
    
    
    
    543,058Total liabilities, redeemable equity interests and non-redeemable members equity
    
    $
    2,038,999
    
    
    $
    2,013,436
 The accompanying notes are an integral part of the condensed consolidated financial statements. 3




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ARCH WESTERN RESOURCES, LLC 
 CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS

(IN THOUSANDS)

(UNAUDITED)
 Three Months EndedMarch 31,2005
    
    
    2004RevenuesCoal sales
    
    $
    277,416
    
    
    $
    139,848Costs and expensesCost of coal sales
    
    
    209,105
    
    
    
    111,092Depreciation, depletion and amortization
    
    
    25,519
    
    
    
    16,636Selling, general and administrative expenses
    
    
    5,690
    
    
    
    4,211240,314
    
    
    
    131,939Other operating incomeIncome from equity investment
    
    
    
    
    
    
    1,272Other operating income
    
    
    2,293
    
    
    
    4,3272,293
    
    
    
    5,599Income from operations
    
    
    39,395
    
    
    
    13,508Interest expense, net:Interest expense
    
    
    (15,989
    )
    
    
    (12,900
    )Interest income primarily from Arch Coal, Inc.
    
    
    8,781
    
    
    
    3,702(7,208
    )
    
    
    (9,198
    )Other non-operating income (expense):Expenses resulting from early debt extinguishment and
termination of hedge accounting for interest rate swaps
    
    
    (3,388
    )
    
    
    (3,388
    )Income before minority interest
    
    
    28,799
    
    
    
    922Minority interest
    
    
    (2,728
    )
    
    
    Net income
    
    $
    26,071
    
    
    $
    922Net income attributable to redeemable equity interests
    
    
    130
    
    
    
    5Net income attributable to non-redeemable equity interests
    
    $
    25,941
    
    
    $
    917
 The accompanying notes are an integral part of the condensed consolidated financial statements. 4




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ARCH WESTERN RESOURCES, LLC 
 CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)
 Three Months EndedMarch 31,2005
    
    
    2004Operating activitiesNet income
    
    $
    26,071
    
    
    $
    922Adjustments to reconcile to cash provided by operating activities:Depreciation, depletion and amortization
    
    
    25,519
    
    
    
    16,636Prepaid royalties expensed
    
    
    5,617
    
    
    
    5,682Accretion on asset retirement obligations
    
    
    2,854
    
    
    
    2,077Net gain on disposition of assets
    
    
    (1,646
    )
    
    
    (3
    )Income from equity investment
    
    
    
    
    
    
    (1,272
    )Net distributions from equity investment
    
    
    
    
    
    
    832Minority interest
    
    
    2,728
    
    
    
    Other nonoperating expense
    
    
    3,388
    
    
    
    3,388Changes in:Receivables
    
    
    (30,963
    )
    
    
    4,491Inventories
    
    
    1,165
    
    
    
    (2,275
    )Accounts payable and accrued expenses
    
    
    (5,855
    )
    
    
    (9,998
    )Note receivable from Arch Coal, Inc.
    
    
    (1,227
    )
    
    
    (31,487
    )Accrued postretirement benefits other than pension
    
    
    10
    
    
    
    581Asset retirement obligations
    
    
    (1,936
    )
    
    
    (1,383
    )Accrued workers compensation benefits
    
    
    (634
    )
    
    
    (34
    )Other
    
    
    3,933
    
    
    
    3,812Cash provided by (used in) operating activities
    
    
    29,024
    
    
    
    (8,031
    )Investing activitiesCapital expenditures
    
    
    (21,913
    )
    
    
    (16,955
    )Proceeds from dispositions of property, plant and equipment
    
    
    1,933
    
    
    
    6Additions to prepaid royalties
    
    
    (10,000
    )
    
    
    (10,000
    )Cash (used in) investing activities
    
    
    (29,980
    )
    
    
    (26,949
    )Financing activitiesDebt financing costs
    
    
    (51
    )
    
    
    (97
    )Cash (used in) financing activities
    
    
    (51
    )
    
    
    (97
    )Decrease in cash and cash equivalents
    
    
    (1,007
    )
    
    
    (35,077
    )Cash and cash equivalents, beginning of period
    
    
    1,351
    
    
    
    35,171Cash and cash equivalents, end of period
    
    $
    344
    
    
    $
    94
 The accompanying notes are an integral part of the condensed consolidated financial statements. 5




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ARCH WESTERN RESOURCES, LLC 
 NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2005

(UNAUDITED)
 Note A - General The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in
accordance with generally accepted accounting principles for interim financial reporting and
Securities and Exchange Commission regulations, but are subject to any year-end adjustments that
may be necessary. In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. Results of operations
for the period ended March 31, 2005 are not necessarily indicative of results to be expected for
the year ending December 31, 2005. These financial statements should be read in conjunction with
the audited financial statements and related notes thereto as of and for the year ended December
31, 2004 included in Arch Western Resources, LLCs Form 10-K as filed with the Securities and
Exchange Commission. Arch Western Resources, LLC (the Company) was formed as a joint venture on June 1, 1998 when Arch
Coal, Inc. (Arch Coal) acquired the United States coal operations of Atlantic Richfield Company
and combined these operations with Arch Coals western operations. Arch Westerns membership
interests are owned 99% by Arch Coal and 1% by an affiliate of BP Amoco (BP), the successor to
Atlantic Richfield Company. Arch Coals ownership is comprised entirely of common membership
interests, while BPs ownership is comprised of a 0.5% common membership interest and a 0.5%
preferred membership interest. Under the terms of the Companys membership agreement, net profits and losses are allocated only to
the common membership interests on the basis of 99.5% to Arch Coal and 0.5% to BP. No profit or
loss is allocated to the preferred membership interest of BP. Except for a Preferred Return,
distributions to members are allocated on the basis of 99.5% to Arch Coal and 0.5% to BP. The
Preferred Return entitles BP to receive an annual distribution from the common membership interests
equal to 4% of the preferred capital account balance at the end of the year. The Preferred Return
is payable at the Companys discretion. The Company mines and markets steam coal from surface and deep mines for sale to utility and
industrial customers in the United States and certain export markets. The Companys principal
subsidiaries are Thunder Basin Coal Company, L.L.C., which operates a surface coal mine and owns
one idle mine in the Powder River Basin in Wyoming; Mountain Coal Company, L.L.C., which operates
one underground coal mine in Colorado; and Arch of Wyoming LLC, which operated two surface coal
mines in the Hanna Basin in Wyoming. Both Arch of Wyoming mines were put into reclamation mode in
2004. In addition to these wholly owned operating units, the Company has a 65% interest in Canyon
Fuel Company, LLC (Canyon Fuel). Canyon Fuel operates three underground mines in Utah. Through
July 31, 2004, the Companys interest in Canyon Fuel was accounted for on the equity method as a
result of certain super-majority voting rights in the Canyon Fuel joint venture agreement. On July
31, 2004, Arch Coal purchased the remaining 35% interest in Canyon Fuel not owned by the Company.
Upon Arch Coals acquisition of the 35% interest, Canyon Fuels joint venture agreement was amended
to eliminate the super-majority voting rights. As a result, for periods subsequent to July 31,
2004, the Company has consolidated 100% of the results of Canyon Fuel in its financial statements
and recorded minority interest for Arch Coals 35% interest in Canyon Fuel. Note B - Recent Accounting Pronouncements On March 30, 2005, the Financial Accounting Standards Board (FASB) ratified the consensus reached
by the Emerging Issues Task Force (EITF) on issue No. 04-06, Accounting for Stripping Costs in
the Mining Industry. This issue applies to stripping costs incurred in the production phase of a
mine for the removal of overburden or waste materials for the purpose of obtaining access to coal
which will be extracted. Under the new rule, stripping costs incurred during the production phase
of the mine are variable production costs that are included in the cost of inventory produced and
extracted during the period the stripping costs are incurred. The guidance in this EITF consensus
is effective for fiscal years beginning after December 15, 2005. The Company is evaluating what
impact, if any, this guidance will have on its consolidated financial statements. In March 2005, the FASB issued FASB Interpretation (FIN) 47, Accounting for Conditional Asset
Retirement Obligations, an interpretation of FASB Statement No. 143. This interpretation clarifies
that the term, conditional asset retirement obligation, as used in FASB Statement No. 143, refers
to a legal obligation to perform an asset retirement activity in which the timing and/or method of
settlement are conditional on a future event that may or may not be within the control of the
entity. The obligation to perform the asset retirement activity is unconditional even though
uncertainty exists about the timing and/or method of settlement. Thus, the timing and/or method of
settlement may be conditional on a future event. Accordingly, an entity is required to recognize a
liability for the fair 6




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value of a conditional asset retirement obligation if the fair value of the liability can be
reasonably estimated. The fair value of a liability for the conditional asset retirement obligation
should be recognized when incurred, generally upon acquisition, construction, or development and/or
through the normal operation of the asset. Uncertainty about the timing and/or method of settlement
of a conditional asset retirement obligation should be factored into the measurement of the
liability when sufficient information exists. SFAS No. 143 acknowledges that, in some cases,
sufficient information may not be available to reasonably estimate the fair value of an asset
retirement obligation. The Company does not expect this guidance to have a material impact on its
financial statements. Note C - Contribution of North Rochelle Mine On August 20, 2004, Arch Coal acquired (1) Vulcan Coal Holdings, L.L.C., which owns all of the
common equity of Triton Coal Company, LLC (Triton), and (2) all of the preferred units of Triton
for a total purchase price of $382.1 million. Upon acquisition, Arch Coal contributed the assets
and liabilities of Tritons North Rochelle mine (excluding coal reserves) to the Company. Upon
contribution the North Rochelle mine was integrated with the Companys Black Thunder mine in the
Powder River Basin. Concurrently with the contribution, the Company entered into a sublease transaction with Arch Coal
for the right to mine the former North Rochelle coal reserves. Under the terms of the sublease
agreement, the Company pays a production royalty of $0.05 per ton to Arch Coal for tons mined on
the North Rochelle property. For the three months ended March 31, 2005, the Company paid royalties
of $0.3 million to Arch Coal under this sublease. Arch Coals depletion expense related to the
North Rochelle reserves totaled $4.3 million in the quarter ended March 31, 2005. The Company and
Arch Coal will amend the sublease upon final valuation of the North Rochelle reserves. The Company
expects the amended royalty rate to be higher than that currently being charged. The effects of the contribution have been recorded in the accompanying consolidated financial
statements as of and for the periods subsequent to August 20, 2004. The contributed assets and
liabilities have been recorded at their estimated fair value. The final valuation of the assets
acquired and liabilities assumed is expected to be finalized once third-party appraisals are
completed. The Company expects the completion of these appraisals in the second quarter of 2005. The following table summarizes the preliminary estimated fair values of the assets acquired and the
liabilities assumed at the date of contribution (dollars in thousands): Cash
    
    $
    407Accounts receivable
    
    
    14,233Materials and supplies
    
    
    4,161Coal inventory
    
    
    4,874Other current assets
    
    
    3,792Property, plant, equipment and mine development
    
    
    81,059Coal supply agreements
    
    
    8,486Accounts payable and accrued expenses
    
    
    (72,326
    )Other non-current assets and liabilities, net
    
    
    (18,236
    )Total contribution
    
    $
    26,450
 Amounts preliminarily allocated to coal supply agreements noted in the table above represent the
value attributed to the net above-market coal supply agreements to be amortized over the remaining
terms of the contracts. The amortization period on these acquired coal supply agreements ranges
from nine to 21 months. Included in the amounts allocated to accounts payable and accrued expenses noted in the table above
are $5.5 million of liabilities incurred in connection with terminating Vulcan employees upon
acquisition. Upon acquisition, the Company identified 24 employees of Vulcan who were terminated as
part of the integration of the North Rochelle mine into the Companys Black Thunder mine. All
amounts accrued for severance were paid as of December 31, 2004. Pro Forma Financial Information If the North Rochelle mining operations and Canyon Fuel (net of Arch Coals minority interest) had
been included in the Companys results of operations during the three months ended March 31, 2004,
its unaudited pro forma revenues would have been $233.8 million and the unaudited pro forma net
loss would have been $2.4 million. 7




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Note D-Transactions or Events Affecting Comparability of Reported Results During the quarter ended March 31, 2005, the Company recognized a gain of $1.6 million from the
sale of equipment. The gain is reported as other operating income. During the quarter ended March 31, 2004, the Office of Surface Mining completed an audit of certain
of the Companys federal reclamation fee filings for the period from 1998 through 2003. The audit
resulted in an assessment of additional fees of $1.3 million and interest of $0.2 million. The
additional fees have been recorded as a component of cost of coal sales, while the interest portion
has been reflected as interest expense. During the first quarter of 2004, Canyon Fuel, while accounted for under the equity method, began
the process of temporarily idling its Skyline Mine, and incurred severance costs of $1.9 million.
The Companys share of these costs totals $1.2 million and is reflected in income from equity
investment in the Condensed Consolidated Statements of Operations. On June 25, 2003, the Company repaid its term loans with the proceeds from the offering of senior
notes. The Company had designated certain interest rate swaps as hedges of the variable rate
interest payments due under the term loans. Pursuant to the requirements of Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities(FAS
133), historical mark-to-market adjustments related to these swaps through June 25, 2003 were
deferred as a component of Accumulated Other Comprehensive Loss. Subsequent to the repayment of the
term loans, these deferred amounts will be amortized as additional expense over the contractual
terms of the swap agreements. For the three months ending March 31, 2005 and 2004, the Company
recognized $3.4 million of expense related to the amortization of previously deferred
mark-to-market adjustments. Note E - Investment in Canyon Fuel As of March 31, 2005, the Company held no equity investments. Arch Coal purchased the remaining 35%
interest in Canyon Fuel on July 31, 2004. Prior to July 31, 2004, the Company accounted for its
investment in Canyon Fuel on the equity method. The following table presents unaudited summarized
financial information for Canyon Fuel, for periods in which it was accounted for on the equity
method: Three Months EndedMarch 31,Condensed Income Statement Information
    
    2005
    
    
    2004(in thousands)Revenues
    
    $
    
    
    
    $
    53,382Total costs and expenses
    
    
    
    
    
    
    52,808Net income
    
    $
    
    
    
    $
    57465% of Canyon Fuel net income
    
    $
    
    
    
    $
    373Effect of purchase adjustments
    
    
    
    
    
    
    899Arch Westerns income from its equity
investment in Canyon Fuel
    
    $
    
    
    
    $
    1,272
 Through July 31, 2004, the Companys income from its equity investment in Canyon Fuel represents
65% of Canyon Fuels net income after adjusting for the effect of purchase adjustments related to
its investment in Canyon Fuel. The Companys investment in Canyon Fuel reflects purchase
adjustments primarily related to the reduction in amounts assigned to sales contracts, mineral
reserves and other property, plant and equipment. The purchase adjustments are amortized consistent
with the underlying assets of the joint venture. Note F - Other Comprehensive Income Other comprehensive income items under FAS 130, Reporting Comprehensive Income,are transactions
recorded in members equity during the year, excluding net income and transactions with members.
The following table presents comprehensive income: Three Months EndedMarch 31,2005
    
    
    2004(in thousands)Net income
    
    $
    26,071
    
    
    $
    922Other comprehensive income
    
    
    4,726
    
    
    
    4,895Total comprehensive income
    
    $
    30,797
    
    
    $
    5,817
 8




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Other comprehensive income for the quarters ended March 31, 2005 and 2004 consists primarily of
the reclassification of previously deferred mark-to-market adjustments from other comprehensive
income to net income. Note G - Employee Benefit Plans Defined Benefit Pension and Other Postretirement Benefit Plans The Company has non-contributory defined benefit pension plans covering its salaried and non-union
hourly employees. Benefits are generally based on the employees age and compensation. The Company
funds the plans in an amount not less than the minimum statutory funding requirements nor more than
the maximum amount that can be deducted for federal income tax purposes. The Company also currently provides certain postretirement medical/life insurance coverage for
eligible employees. Generally, covered employees who terminate employment after meeting eligibility
requirements are eligible for postretirement coverage for themselves and their dependents. The
salaried employee postretirement medical/life plans are contributory, with retiree contributions
adjusted periodically, and contain other cost-sharing features such as deductibles and coinsurance.
The Companys current funding policy is to fund the cost of all postretirement medical/life
insurance benefits as they are paid. Components of Net Periodic Benefit Cost The following table details the components of pension and other postretirement benefit costs. Other postretirementPension benefits
    
    
    benefitsQuarter Ended March 31,
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004(In thousands)Service cost
    
    $
    1,606
    
    
    $
    775
    
    
    $
    505
    
    
    $
    240Interest cost
    
    
    863
    
    
    
    953
    
    
    
    440
    
    
    
    263Expected return on plan assets*
    
    
    (1,097
    )
    
    
    (1,020
    )
    
    
    
    
    
    
    Other amortization and deferral
    
    
    816
    
    
    

    375
    
    
    
    81
    
    
    
    3$
    2,188
    
    
    $
    1,083
    
    
    $
    1,026
    
    
    $
    506
  *
    
    The Company does not fund its other postretirement liabilities. Employer Contributions While the Company did not make any contributions to the pension plan during the quarter ended March
31, 2005, it is currently considering a contribution to the plan in 2005 but has not yet made a
determination as to the timing and the amount of the potential contribution. Note H - Inventories Inventories consist of the following: March 31,
    
    
    December 31,2005
    
    
    2004(in thousands)Coal
    
    $
    41,806
    
    
    $
    46,538Repair parts and supplies
    
    
    35,401
    
    
    
    31,834$
    77,207
    
    
    $
    78,372
 Note I - Debt On October 22, 2004, the Company issued $250.0 million of 6.75% Senior Notes due 2013 at a price of
104.75% of par. Interest on the notes is payable on January 1 and July 1 of each year, beginning on
January 1, 2005. The debt offering was issued under an 9




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indenture dated June 25, 2003, under which
the Company previously issued $700.0 million of 6.75% Senior Notes due 2013. The senior notes are
guaranteed by the Company and certain of the Companys subsidiaries and are secured by a security
interest in the Companys receivable from Arch Coal. The terms of the senior notes contain
restrictive covenants that limit the Companys ability to, among other things, incur additional
debt, sell or transfer assets, and make investments. The net proceeds were used to repay $100.0
million in borrowings under the Companys term loan facility maturing in 2007, with the remainder
loaned to Arch Coal. Note J - Related Party Transactions The Company pays selling, general and administrative services fees to Arch Coal. Expenses are
allocated based on Arch Coals best estimates of proportional or incremental costs, whichever is
more representative of costs incurred by Arch Coal on behalf of the Company. Amounts allocated to
the Company by Arch Coal were $5.7 million and $4.2 million for the quarters ended March 31, 2005
and 2004, respectively. These amounts are reported as selling, general and administrative expenses
in the accompanying Condensed Consolidated Statements of Operations. Note K -  Segment Information The Company produces steam and metallurgical coal from surface and deep mines for sale to utility,
industrial and export markets. The Company operates only in the United States, with mines in the
major western low-sulfur coal basins. The Company has two reportable segments, which are based on
the coal basins in which the Company operates. Coal quality, coal seam height, transportation
methods and regulatory issues are generally consistent within a basin. Accordingly, market and
contract pricing have developed by coal basin. The Company manages its coal sales by coal basin,
not by individual mine complex. Mine operations are evaluated based on their per-ton operating
costs (which include all mining costs but exclude pass-through transportation expenses). The
Companys reportable segments are Powder River Basin (PRB) and Western Bituminous (WBIT). The
Companys operations in the Powder River Basin are located in Wyoming and include one operating
surface mine and one idle surface mine. The Companys operations in the Western Bituminous region
are located in southern Wyoming, Colorado and Utah and include four underground mines and two
surface mines (which were both put into reclamation mode in 2004). Operating segment results for the quarters ending March 31, 2005 and 2004 are presented below.
Results for the operating segments include all direct costs of mining. Corporate, Other and
Eliminations includes overhead, other support functions, and the elimination of intercompany
transactions. March 31, 2005
    
    
    
    
    
    
    
    
    
    Corporate,Other and(Amounts in thousands, except per ton amounts)
    
    PRB
    
    
    WBIT
    
    
    Eliminations
    
    
    ConsolidatedCoal sales
    
    $
    179,706
    
    
    $
    97,710
    
    
    $
    
    
    
    $
    277,416Income from operations
    
    
    33,660
    
    
    
    12,360
    
    
    
    (6,625
    )
    
    
    39,395Total assets
    
    
    1,200,686
    
    
    
    1,657,317
    
    
    
    (819,004
    )
    
    
    2,038,999Depreciation, depletion and amortization
    
    
    17,189
    
    
    
    8,330
    
    
    
    
    
    
    
    25,519Capital expenditures
    
    
    8,494
    
    
    
    13,419
    
    
    
    
    
    
    
    21,913Operating cost per ton
    
    
    6.37
    
    
    
    15.20
 March 31, 2004
    
    
    
    
    
    
    
    
    
    Corporate,Other and(Amounts in thousands, except per ton amounts)
    
    PRB
    
    
    WBIT
    
    
    Eliminations
    
    
    ConsolidatedCoal sales
    
    $
    110,245
    
    
    $
    29,603
    
    
    $
    
    
    
    $
    139,848Income from equity investments
    
    
    
    
    
    
    1,272
    
    
    
    
    
    
    
    1,272Income from operations
    
    
    15,066
    
    
    
    2,520
    
    
    
    (4,078
    )
    
    
    13,508Total assets
    
    
    1,001,701
    
    
    
    926,903
    
    
    
    (520,300
    )
    
    
    1,408,304Equity investments
    
    
    
    
    
    
    146,846
    
    
    
    
    
    
    
    146,846Depreciation, depletion and amortization
    
    
    12,551
    
    
    
    4,085
    
    
    
    
    
    
    
    16,636Capital expenditures
    
    
    16,240
    
    
    
    715
    
    
    
    
    
    
    
    16,955Operating cost per ton
    
    
    6.01
    
    
    
    16.86
 Reconciliation of segment income from operations to consolidated income before minority interest: 10




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##### Table of Contents



Three Months Ended2005
    
    
    2004(in thousands)Total segment income from operations
    
    $
    39,395
    
    
    $
    13,508Interest expense
    
    
    (15,989
    )
    
    
    (12,900
    )Interest income
    
    
    8,781
    
    
    
    3,702Other non-operating expense
    
    
    (3,388
    )
    
    
    (3,388
    )Income before minority interest
    
    $
    28,799
    
    
    $
    922
 Note L-Reclassifications Certain amounts in the 2004 financial statements have been reclassified to conform with the
classifications in the 2005 financial statements with no effect on previously reported net income
or members equity Note M  Supplemental Condensed Consolidating Financial Information In accordance with the indenture governing the Arch Western Finance senior notes, certain
wholly-owned subsidiaries of the Company have fully and unconditionally guaranteed the senior notes
on a joint and several basis. The following tables present condensed consolidating financial
information for (i) the Company, (ii) the issuer of the senior notes (Arch Western Finance, LLC, a
wholly-owned subsidiary of the Company), (iii) the Companys wholly-owned subsidiaries (Thunder
Basin Coal Company, L.L.C., Mountain Coal Company, L.L.C., and Arch of Wyoming, LLC), on a combined
basis, which are guarantors under the Notes, and (iv) its majority owned subsidiary (Canyon Fuel
Company, LLC) which is not a guarantor under the Notes. Amounts included in the following
consolidating condensed financial statements for Canyon Fuel represent amounts recorded by the
Company under the equity method of accounting through July 31, 2004 and amounts consolidated by the
Company subsequent to that date. 11




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##### Table of Contents



12




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##### Table of Contents



BALANCE SHEETS
March 31, 2005
(in thousands of dollars)
(Unaudited) Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-GuarantorCompany
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash and cash equivalents
    
    $
    
    
    
    $
    
    
    
    $
    336
    
    
    $
    8
    
    
    $
    
    
    
    $
    344Trade accounts receivable
    
    
    97,852
    
    
    
    
    
    
    
    538
    
    
    
    16,259
    
    
    
    
    
    
    
    114,649Other receivables
    
    
    
    
    
    
    
    
    
    
    1,292
    
    
    
    3,943
    
    
    
    
    
    
    
    5,235Inventories
    
    
    
    
    
    
    
    
    
    
    61,217
    
    
    
    15,990
    
    
    
    
    
    
    
    77,207Prepaid royalties
    
    
    
    
    
    
    
    
    
    
    7,082
    
    
    
    5,094
    
    
    
    
    
    
    
    12,176Other current assets
    
    
    4,769
    
    
    
    
    
    
    
    3,341
    
    
    
    3,999
    
    
    
    
    
    
    
    12,109Total current assets
    
    
    102,621
    
    
    
    
    
    
    
    73,806
    
    
    
    45,293
    
    
    
    
    
    
    
    221,720Property, plant and equipment, net
    
    
    
    
    
    
    
    
    
    
    827,279
    
    
    
    267,907
    
    
    
    
    
    
    
    1,095,186Investment in subsidiaries
    
    
    1,440,479
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,440,479
    )
    
    
    Receivable from Arch Coal, Inc.
    
    
    679,055
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    679,055Intercompanies
    
    
    (1,493,939
    )
    
    
    956,228
    
    
    
    505,845
    
    
    
    31,866
    
    
    
    
    
    
    
    Other
    
    
    319
    
    
    
    17,669
    
    
    
    25,050
    
    
    
    
    
    
    
    
    
    
    
    43,038Total other assets
    
    
    625,914
    
    
    
    973,897
    
    
    
    530,895
    
    
    
    31,866
    
    
    
    (1,440,479
    )
    
    
    722,093Total assets
    
    $
    728,535
    
    
    $
    973,897
    
    
    $
    1,431,980
    
    
    $
    345,066
    
    
    $
    (1,440,479
    )
    
    $
    2,038,999Accounts payable
    
    
    8,218
    
    
    
    
    
    
    
    43,474
    
    
    
    11,971
    
    
    
    
    
    
    
    63,663Accrued expenses
    
    
    3,893
    
    
    
    16,031
    
    
    
    90,102
    
    
    
    6,420
    
    
    
    
    
    
    
    116,446Total current liabilities

    
    
    12,111
    
    
    
    16,031
    
    
    
    133,576
    
    
    
    18,391
    
    
    
    
    
    
    
    180,109Long-term debt
    
    
    
    
    
    
    961,272
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    961,272Accrued postretirement benefits other than pension
    
    
    14,535
    
    
    
    
    
    
    
    2,485
    
    
    
    7,632
    
    
    
    
    
    
    
    24,652Asset retirement obligations
    
    
    
    
    
    
    
    
    
    
    117,280
    
    
    
    11,823
    
    
    
    
    
    
    
    129,103Accrued workers compensation
    
    
    6,125
    
    
    
    
    
    
    
    1,173
    
    
    
    4,817
    
    
    
    
    
    
    
    12,115Other noncurrent liabilities
    
    
    4,831
    
    
    
    
    
    
    
    5,129
    
    
    
    30,855
    
    
    
    
    
    
    
    40,815Total liabilities
    
    
    37,602
    
    
    
    977,303
    
    
    
    259,643
    
    
    
    73,518
    
    
    
    
    
    
    
    1,348,066Minority interest
    
    
    112,128
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112,128Redeemable equity interests
    
    
    5,125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,125Non-redeemable members equity
    
    
    573,680
    
    
    
    (3,406
    )
    
    
    1,172,337
    
    
    
    271,548
    
    
    
    (1,440,479
    )
    
    
    573,680Total liabilities, redeemable equity
interests and non-redeemable members
equity
    
    $
    728,535
    
    
    $
    973,897
    
    
    $
    1,431,980
    
    
    $
    345,066
    
    
    $
    (1,440,479
    )
    
    $
    2,038,999
 13




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##### Table of Contents



STATEMENTS OF OPERATIONS
Quarter ended March 31, 2005
(in thousands of dollars)
(Unaudited) Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-GuarantorCompany
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCoal sales revenues
    
    $
    
    
    
    $
    
    
    
    $
    218,774
    
    
    $
    58,642
    
    
    $
    
    
    
    $
    277,416Cost of coal sales
    
    
    939
    
    
    
    
    
    
    
    157,656
    
    
    
    50,510
    
    
    
    
    
    
    
    209,105Depreciation, depletion and amortization
    
    
    
    
    
    
    
    
    
    
    21,290
    
    
    
    4,229
    
    
    
    
    
    
    
    25,519Selling, general and administrative
    
    
    5,690
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,6906,629
    
    
    
    
    
    
    
    178,946
    
    
    
    54,739
    
    
    
    
    
    
    
    240,314Income from equity investment
    
    
    46,006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (46,006
    )
    
    
    Other operating income
    
    
    5
    
    
    
    
    
    
    
    1,951
    
    
    
    337
    
    
    
    
    
    
    
    2,29346,011
    
    
    
    
    
    
    
    1,951
    
    
    
    337
    
    
    
    (46,006
    )
    
    
    2,293Income from operations
    
    
    39,382
    
    
    
    
    
    
    
    41,779
    
    
    
    4,240
    
    
    
    (46,006
    )
    
    
    39,395Interest expense
    
    
    (15,976
    )
    
    
    (15,993
    )
    
    
    
    
    
    
    
    
    
    
    15,980
    
    
    
    (15,989
    )Interest income primarily from Arch Coal, Inc.
    
    
    8,781
    
    
    
    15,980
    
    
    
    
    
    
    
    
    
    
    
    (15,980
    )
    
    
    8,781(7,195
    )
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,208
    )Other non-operating expense
    
    
    (3,388
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,388
    )Minority interest
    
    
    (2,728
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,728
    )Net income (loss)
    
    $
    26,071
    
    
    $
    (13
    )
    
    $
    41,779
    
    
    $
    4,240
    
    
    $
    (46,006
    )
    
    $
    26,071
 14




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##### Table of Contents



STATEMENTS OF CASH FLOWS
Quarter Ended March 31, 2005
(in thousands of dollars)
(Unaudited) Parent
    
    
    
    
    
    

    Guarantor
    
    

    Non-GuarantorCompany
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    ConsolidatedOperating ActivitiesCash provided by operating activities
    
    $
    51
    
    
    $
    
    
    
    $
    21,425
    
    
    $
    7,548
    
    
    $
    29,024Investing ActivitiesCapital expenditures
    
    
    
    
    
    
    
    
    
    
    (14,207
    )
    
    
    (7,706
    )
    
    
    (21,913
    )Proceeds from dispositions of capital assets
    
    
    
    
    
    
    
    
    
    
    1,933
    
    
    
    
    
    
    
    1,933Additions to prepaid royalties
    
    
    
    
    
    
    
    
    
    
    (10,000
    )
    
    
    
    
    
    
    (10,000
    )Cash (used in) investing activities
    
    
    
    
    
    
    
    
    
    
    (22,274
    )
    
    
    (7,706
    )
    
    
    (29,980
    )Financing ActivitiesDebt financing costs
    
    
    (51
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )Cash (used in) financing activities
    
    
    (51
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )Decrease in cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    (849
    )
    
    
    (158
    )
    
    
    (1,007
    )Cash and cash equivalents, beginning of period
    
    
    
    
    
    
    
    
    
    
    1,185
    
    
    
    166
    
    
    
    1,351Cash and cash equivalents, end of period
    
    $
    
    
    
    $
    
    
    
    $
    336
    
    
    $
    8
    
    
    $
    344
 15




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##### Table of Contents



BALANCE SHEETS
December 31, 2004
(in thousands of dollars)
(Unaudited) Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-GuarantorCompany
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash and cash equivalents
    
    $
    
    
    
    $
    
    
    
    $
    1,185
    
    
    $
    166
    
    
    $
    
    
    
    $
    1,351Trade accounts receivable
    
    
    70,443
    
    
    
    
    
    
    
    449
    
    
    
    12,338
    
    
    
    
    
    
    
    83,230Other receivables
    
    
    
    
    
    
    
    
    
    
    1,040
    
    
    
    4,651
    
    
    
    
    
    
    
    5,691Inventories
    
    
    
    
    
    
    
    
    
    
    58,815
    
    
    
    19,557
    
    
    
    
    
    
    
    78,372Prepaid royalties
    
    
    
    
    
    
    
    
    
    
    2,660
    
    
    
    5,132
    
    
    
    
    
    
    
    7,792Other current assets
    
    
    4,894
    
    
    
    
    
    
    
    2,034
    
    
    
    4,601
    
    
    
    
    
    
    
    11,529Total current assets
    
    
    75,337
    
    
    
    
    
    
    
    66,183
    
    
    
    46,445
    
    
    
    
    
    
    
    187,965Property, plant and equipment, net
    
    
    
    
    
    
    
    
    
    
    834,265
    
    
    
    267,409
    
    
    
    
    
    
    
    1,101,674Investment in subsidiaries
    
    
    1,393,809
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,393,809
    )
    
    
    Receivable from Arch Coal, Inc.
    
    
    677,934
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    677,934Intercompanies
    
    
    (1,451,422
    )
    
    
    973,310
    
    
    
    449,449
    
    
    
    28,663
    
    
    
    
    
    
    
    Other
    
    
    1,225
    
    
    
    18,246
    
    
    
    26,392
    
    
    
    
    
    
    
    
    
    
    
    45,863Total other assets
    
    
    621,546
    
    
    
    991,556
    
    
    
    475,841
    
    
    
    28,663
    
    
    
    (1,393,809
    )
    
    
    723,797Total assets
    
    $
    696,883
    
    
    $
    991,556
    
    
    $
    1,376,289
    
    
    $
    342,517
    
    
    $
    (1,393,809
    )
    
    $
    2,013,436Accounts payable
    
    
    8,854
    
    
    
    
    
    
    
    35,942
    
    
    
    11,816
    
    
    
    
    
    
    
    56,612Accrued expenses
    
    
    4,482
    
    
    
    33,360
    
    
    
    84,660
    
    
    
    6,933
    
    
    
    
    
    
    
    129,435Total current liabilities
    
    
    13,336
    
    
    
    33,360
    
    
    
    120,602
    
    
    
    18,749
    
    
    
    
    
    
    
    186,047Long-term debt
    
    
    
    
    
    
    961,613
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    961,613Accrued postretirement benefits other than pension
    
    
    14,576
    
    
    
    
    
    
    
    2,485
    
    
    
    7,582
    
    
    
    
    
    
    
    24,643Asset retirement obligations
    
    
    
    
    
    
    
    
    
    
    116,627
    
    
    
    11,557
    
    
    
    
    
    
    
    128,184Accrued workers compensation.
    
    
    6,018
    
    
    
    
    
    
    
    1,527
    
    
    
    5,204
    
    
    
    
    
    
    
    12,749Other noncurrent liabilities
    
    
    5,523
    
    
    
    
    
    
    
    5,128
    
    
    
    32,119
    
    
    
    
    
    
    
    42,770Total liabilities
    
    
    39,453
    
    
    
    994,973
    
    
    
    246,369
    
    
    
    75,211
    
    
    
    
    
    
    
    1,356,006Minority interest
    
    
    109,401
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109,401Redeemable equity interests
    
    
    4,971
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,971Non-redeemable members equity
    
    
    543,058
    
    
    
    (3,417
    )
    
    
    1,129,920
    
    
    
    267,306
    
    
    
    (1,393,809
    )
    
    
    543,058Total liabilities, redeemable equity
interests and non-redeemable members
equity
    
    $
    696,883
    
    
    $
    991,556
    
    
    $
    1,376,289
    
    
    $
    342,517
    
    
    $
    (1,393,809
    )
    
    $
    2,013,436
 16




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##### Table of Contents



STATEMENTS OF OPERATIONS
Quarter ended March 31, 2004
(in thousands of dollars)
(Unaudited) Parent
    
    
    
    
    
    
    Guarantor
    
    
    Non-GuarantorCompany
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCoal sales revenues
    
    $
    
    
    
    $
    
    
    
    $
    139,848
    
    
    $
    
    
    
    $
    
    
    
    $
    139,848Cost of coal sales
    
    
    2,536
    
    
    
    
    
    
    
    108,556
    
    
    
    
    
    
    
    
    
    
    
    111,092Depreciation, depletion and amortization
    
    
    
    
    
    
    
    
    
    
    16,636
    
    
    
    
    
    
    
    
    
    
    
    16,636Selling, general and administrative
    
    
    4,211
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,2116,747
    
    
    
    
    
    
    
    125,192
    
    
    
    
    
    
    
    
    
    
    
    131,939Income from equity investment
    
    
    16,386
    
    
    
    
    
    
    
    
    
    
    
    1,272
    
    
    
    (16,386
    )
    
    
    1,272Other operating income
    
    
    3,290
    
    
    
    
    
    
    
    1,037
    
    
    
    
    
    
    
    
    
    
    
    4,32719,676
    
    
    
    
    
    
    
    1,037
    
    
    
    1,272
    
    
    
    (16,386
    )
    
    
    5,599Income from operations
    
    
    12,929
    
    
    
    
    
    
    
    15,693
    
    
    
    1,272
    
    
    
    (16,386
    )
    
    
    13,508Interest expense
    
    
    (12,321
    )
    
    
    (12,483
    )
    
    
    
    
    
    
    
    
    
    
    11,904
    
    
    
    (12,900
    )Interest income primarily from Arch Coal, Inc.
    
    
    3,702
    
    
    
    11,904
    
    
    
    
    
    
    
    
    
    
    
    (11,904
    )
    
    
    3,702(8,619
    )
    
    
    (579
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,198
    )Other non-operating expense
    
    
    (3,388
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,388
    )Net income (loss)
    
    $
    922
    
    
    $
    (579
    )
    
    $
    15,693
    
    
    $
    1,272
    
    
    $
    (16,386
    )
    
    $
    922
 17




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##### Table of Contents



STATEMENTS OF CASH FLOWS
Quarter Ended March 31, 2004
(in thousands of dollars)
(Unaudited) Guarantor
    
    


    Non-GuarantorParent Company
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    ConsolidatedOperating ActivitiesCash provided by (used in) operating activities
    
    $
    (734
    )
    
    $
    
    
    
    $
    (8,128
    )
    
    $
    831
    
    
    $
    (8,031
    )Investing ActivitiesCapital expenditures
    
    
    
    
    
    
    
    
    
    
    (16,955
    )
    
    
    
    
    
    
    (16,955
    )Proceeds from dispositions of capital assets
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    6Additions to prepaid royalties
    
    
    
    
    
    
    
    
    
    
    (10,000
    )
    
    
    
    
    
    
    (10,000
    )Cash (used in) investing activities
    
    
    
    
    
    
    
    
    
    
    (26,949
    )
    
    
    
    
    
    
    (26,949
    )Financing ActivitiesDebt financing costs
    
    
    (97
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (97
    )Transactions with affiliates
    
    
    831
    
    
    
    
    
    
    
    
    
    
    
    (831
    )
    
    
    Cash provided by (used in) financing activities
    
    
    734
    
    
    
    
    
    
    
    
    
    
    
    (831
    )
    
    
    (97
    )Decrease in cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    (35,077
    )
    
    
    
    
    
    
    (35,077
    )Cash and cash equivalents, beginning of period
    
    
    
    
    
    
    
    
    
    
    35,171
    
    
    
    
    
    
    
    35,171Cash and cash equivalents, end of period
    
    $
    
    
    
    $
    
    
    
    $
    94
    
    
    $
    
    
    
    $
    94
 18




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS In this quarterly report, statements that are not reported financial results or other historical
information are forward-looking statements. Forward-looking statements give current expectations
or forecasts of future events and are not guarantees of future performance. They are based on our
managements expectations that involve a number of business risks and uncertainties, any of which
could cause actual results to differ materially from those expressed in or implied by the
forward-looking statements. Forward-looking statements can be identified by the fact that they do not relate strictly to
historic or current facts. They use words such as anticipate, estimate, project, intend,
plan, believe and other words and terms of similar meaning in connection with any discussion of
future operating or financial performance. In particular, these include statements relating to:  
    our expectation of continued growth in the demand for our coal by the domestic
electric generation industry;
    our belief that legislation and regulations relating to the Clean Air Act and
other proposed environmental initiatives and the relatively higher costs of
competing fuels will increase demand for our compliance and low sulfur coal;
    our expectations regarding incentives to generators of electricity to minimize
their fuel costs as a result of electric utility deregulation;
    our expectation that we will continue to have adequate liquidity from cash flow from operations;
    a variety of market, operational, geologic, permitting, labor and weather related factors;
    our expectations regarding any synergies to be derived from the Triton acquisition; and
    the other risks and uncertainties which are described below under Contingencies
and Certain Trends and Uncertainties, including, but not limited to, the
following:  o
    Due to the significant amount of our debt, a downturn in
economic or industry conditions could materially affect our ability to meet
our future financial and liquidity obligations.o
    A reduction in consumption by the domestic electric
generation industry may cause our profitability to decline.o
    Extensive environmental laws and regulations could cause the
volume of our sales to decline.o
    The coal industry is highly regulated, which restricts our
ability to conduct mining operations and may cause our profitability to
decline.o
    We may not be able to obtain or renew our surety bonds on acceptable terms.o
    Unanticipated mining conditions may cause profitability to fluctuate.o
    Intense competition and excess industry capacity in the coal
producing regions has adversely affected our revenues and may continue to do
so in the future.o
    Deregulation of the electric utility industry may cause
customers to be more price-sensitive, resulting in a potential decline in our
profitability.o
    Our profitability may be adversely affected by the status of our long-term coal supply contracts.o
    Decreases in purchases of coal by our largest customers could adversely affect our revenues.o
    An unavailability of coal reserves would cause our profitability to decline.o
    Disruption in, or increased costs of, transportation services could adversely affect our profitability.o
    Numerous uncertainties exist in estimating our economically
recoverable coal reserves, and inaccuracies in our estimates could result in
lower revenues, higher costs or decreased profitability.o
    Title defects or loss of leasehold interests in our
properties could result in unanticipated costs or an inability to mine these
properties.o
    All acquisitions involve a number of inherent risks, any of
which could cause us not to realize the benefits anticipated to result.o
    Our expenditures for postretirement medical and pension
benefits have increased since 2002 and could further increase in the future.o
    Any inability to comply with restrictions imposed by the
Indenture governing our debt could result in a default under
this agreement. 19




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##### Table of Contents



We cannot guarantee that any forward-looking statements will be realized, although we believe that
we have been prudent in our plans and assumptions. Achievement of future results is subject to
risks, uncertainties and assumptions that may prove to be inaccurate. Should known or unknown risks
or uncertainties materialize, or should underlying assumptions prove to be inaccurate, actual
results could vary materially from those anticipated, estimated or projected. We undertake no obligation to publicly update forward-looking statements, whether as a result of
new information, future events or otherwise, except as may be required by law. You are advised,
however, to consider any additional disclosures that we may make on related subjects in future
filings with the SEC. You should understand that it is not possible to predict or identify all
factors that could cause our actual results to differ. Consequently, you should not consider any
such list to be a complete set of all potential risks or uncertainties. RESULTS OF OPERATIONS Quarter Ended March 31, 2005, Compared to Quarter Ended March 31, 2004 Items Affecting Comparability of Reported Results The comparison of our operating results for the quarters ending March 31, 2005 and 2004 are
affected by the following significant items: Quarter ended March 31(Amounts in millions)
    
    2005
    
    
    2004Operating IncomeGain from equipment sale
    
    $
    1.6
    
    
    $
    Reclamation fee assessment
    
    
    
    
    
    
    (1.3
    )Severance costs  Skyline Mine
    
    
    
    
    
    
    (1.2
    )Net increase (decrease) in operating income
    
    $
    1.6
    
    
    $
    (2.5
    )OtherExpenses resulting from early debt extinguishment and termination of hedge
accounting for interest rate swaps
    
    
    (3.4
    )
    
    
    (3.4
    )Reclamation fee assessment  interest portion
    
    
    
    
    
    
    (0.2
    )Net (decrease) in pre-tax income
    
    $
    (1.8
    )
    
    $
    (6.1
    )
 Gain from equipment sale During the quarter ended March 31, 2005, we recognized a gain of $1.6 million from the sale of
equipment. The gain is reported as other operating income. Reclamation fee assessment During the quarter ended March 31, 2004, the Office of Surface Mining completed an audit of certain
of our federal reclamation fee filings for the period from 1998 through 2003. The audit resulted in
an assessment of additional fees of $1.3 million and interest of $0.2 million. The additional fees
have been recorded as a component of cost of coal sales in the accompanying Condensed Consolidated
Statements of Operations, while the interest portion has been reflected as interest expense. Severance costs  Skyline Mine During the first quarter of 2004, Canyon Fuel, while accounted for under the equity method, began
the process of idling its Skyline Mine, and incurred severance costs of $1.9 million. Our share of
these costs totals $1.2 million and is reflected in income from equity investments. Expenses resulting from early debt extinguishment and termination of hedge accounting for interest
rate swaps 20




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##### Table of Contents



On June 25, 2003, we repaid our term loan with the proceeds from the offering of senior notes.
Prior to the repayment, we had designated certain interest rate swaps as hedges of the variable
rate interest payments due under the term loans. Pursuant to the requirements of Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities(FAS 133), historical mark-to-market adjustments related to these swaps through June
25, 2003 were deferred as a component of Accumulated Other Comprehensive Loss. Subsequent to the
repayment of the term loans, these deferred amounts will be amortized as additional expense over
the contractual terms of the swap agreements. For the quarters ending March 31, 2005 and 2004, we
recognized expense of $3.4 million for both periods, related to the amortization of previously
deferred mark-to-market adjustments. Revenues Three Months EndedMarch 31,
    
    
    Increase (Decrease)2005
    
    
    2004
    
    
    $
    
    
    %(Amounts in thousands, except per ton data)Coal sales
    
    $
    277,416
    
    
    $
    139,848
    
    
    $
    137,568
    
    
    
    98.4
    %Tons sold
    
    
    27,916
    
    
    
    17,903
    
    
    
    10,013
    
    
    
    55.9
    %Coal sales realization per ton sold
    
    $
    9.94
    
    
    $
    7.81
    
    
    $
    2.13
    
    
    
    27.3
    %
 Tons sold by operating segment Tons Sold
    
    
    % of TotalMarch 31, 2005
    
    
    March 31, 2004
    
    
    March 31, 2005
    
    
    March 31, 2004(Amounts in thousands)Powder River Basin
    
    
    23,117
    
    
    
    16,159
    
    
    
    82.8
    %
    
    
    90.3
    %Western Bituminous Region
    
    
    4,799
    
    
    
    1,744
    
    
    
    17.2
    %
    
    
    9.7
    %Total operating regions
    
    
    27,916
    
    
    
    17,903
    
    
    
    100.0
    %
    
    
    100.0
    %
 Coal sales.The increase in coal sales resulted from the combination of higher pricing and
increased volumes primarily from the addition of the North Rochelle mining operations and the
consolidation of Canyon Fuel. Volumes increased dramatically in both the Powder River Basin (an increase of 43.1%) and at our
Western Bituminous operations (an increase 175.2%). These increases were primarily due to
additional volumes from the Black Thunder mine following the contribution of the North Rochelle
assets and to the consolidation of Canyon Fuel volumes in the current quarter. Per ton realizations increased due primarily to higher contract prices in both regions. In the
Powder River Basin, per ton realization increased 13.9%, including above-market pricing on certain
contracts that were contributed to us through Arch Coals acquisition of the North Rochelle
operations. The Western Bituminous regions per ton realization increased 19.9%. In addition to
higher contract pricing, per ton realizations in the Western Bituminous Basin were also affected by
the consolidation of Canyon Fuel during the third quarter of 2004. Costs and Expenses Three Months EndedMarch 31,
    
    
    Increase (Decrease)2005
    
    
    2004
    
    
    $
    
    
    %(Amounts in thousands)Cost of coal sales
    
    $
    209,105
    
    
    $
    111,092
    
    
    $
    98,013
    
    
    
    88.2
    %Depreciation, depletion and amortization
    
    
    25,519
    
    
    
    16,636
    
    
    
    8,883
    
    
    
    53.4
    %Selling, general and administrative expenses
    
    
    5,690
    
    
    
    4,211
    
    
    
    1,479
    
    
    
    35.1
    %$
    240,314
    
    
    $
    131,939
    
    
    $
    108,375
    
    
    
    82.1
    %
 Cost of coal sales.The increase in cost of coal sales is primarily due to the increase in coal
sales revenues discussed above. Specific factors contributing to the increase are as follows (note
that the increases discussed below are partially due to the addition of the North Rochelle
operations and the consolidation of Canyon Fuel during the third quarter of 2004):  
    Production taxes and coal royalties (which are incurred as a percentage of coal sales realization) increased $24.2 million.
    Repairs and maintenance costs increased $13.1 million.
    Costs for diesel fuel and utilities increased $5.6 million and $2.5 million, respectively. 21




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##### Table of Contents




    Costs for operating supplies increased $13.7 million due partially to increased
commodity and steel prices during the current quarter compared to the prior years
comparable quarter. Depreciation, depletion and amortization.The increase in depreciation, depletion and amortization
is due primarily to the property additions resulting from the consolidation of Canyon Fuel and the
contribution of North Rochelle during the third quarter of 2004. Regional Analysis: Our operating costs (reflected below on a per-ton basis) are defined as including all mining costs,
which consist of all amounts classified as cost of coal sales (except pass-through transportation
costs) and all depreciation, depletion and amortization attributable to mining operations. Three Months Ended March 31,
    
    
    Increase (Decrease)2005
    
    
    2004
    
    
    $
    
    
    %Powder River Basin
    
    $
    6.37
    
    
    $
    6.01
    
    
    $
    0.36
    
    
    
    6.0
    %Western Bituminous Region
    
    $
    15.20
    
    
    $
    16.86
    
    
    $
    (1.66
    )
    
    
    (9.8
    )%
 Powder River Basin  On a per-ton basis, operating costs increased in the Powder River Basin
primarily due to increased production taxes and coal royalties ($0.17 per ton) and repairs and
maintenance charges ($0.14 per ton) and to the utilities and diesel fuel costs discussed above.
Additionally, average costs were higher due to the integration of the acquired North Rochelle mine
into our Black Thunder mine in the third quarter of 2004. Western Bituminous Region  Operating cost per ton decreased primarily due to increased production
activity as a result of the consolidation of Canyon Fuel during the third quarter of 2004. Canyon
Fuels mines in the aggregate have a lower operating cost per ton than the West Elk mine. Selling, general and administrative expenses.Selling, general and administrative expenses
represent expenses allocated to us from Arch Coal. The increase is due primarily to increases in
compensation-related expenses at Arch Coal. Other Operating Income Three Months EndedMarch 31,
    
    
    Increase (Decrease)2005
    
    
    2004
    
    
    $
    
    
    %(Amounts in thousands)Income from equity investment
    
    $
    
    
    
    $
    1,272
    
    
    $
    (1,272
    )
    
    
    (100.0
    )%Other operating income
    
    
    2,293
    
    
    
    4,327
    
    
    
    (2,034
    )
    
    
    (47.1
    )%$
    2,293
    
    
    $
    5,599
    
    
    $
    (3,306
    )
    
    
    (59.0
    )%
 Other operating income.The decrease in other operating income is primarily due to $2.0 million in
administration charges and production payments received from Canyon Fuel in the first quarter of
2004 (these payments ceased as of the July 31, 2004 consolidation of Canyon Fuel in our financial
statements). Interest Expense, Net Three Months EndedMarch 31,
    
    
    Increase (Decrease)2005
    
    
    2004
    
    
    $
    
    
    %(Amounts in thousands)Interest expense
    
    $
    (15,989
    )
    
    $
    (12,900
    )
    
    $
    (3,089
    )
    
    
    23.9
    %Interest income
    
    
    8,781
    
    
    
    3,702
    
    
    
    5,079
    
    
    
    137.2
    %$
    (7,208
    )
    
    $
    (9,198
    )
    
    $
    1,990
    
    
    
    (21.6
    )%
 Interest expense.The increase in interest expense results from a higher amount of average
borrowings in first three months of 2005 as compared to the same period in 2004. 22




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##### Table of Contents



Interest Income. Our cash transactions are managed by Arch Coal. Cash paid to or from us that is
not considered a distribution or a contribution is recorded as a receivable from Arch Coal. The
receivable balance earns interest from Arch Coal at the prime interest rate. The increase in
interest income results primarily from a higher average receivable balance in the first three
months of 2005 as compared to the same period in 2004. Other Non-operating Income and Expense Three Months EndedMarch 31,
    
    
    Increase (Decrease)2005
    
    
    2004
    
    
    $
    
    
    %(Amounts in thousands)Expenses
resulting from
early debt
extinguishment and
termination of
hedge accounting
for interest rate
swaps
    
    $
    (3,388
    )
    
    $
    (3,388
    )
    
    $
    
    
    
    
    N/A
 Amounts reported as non-operating consist of income or expense resulting from the Companys
financing activities other than interest. As described above, the Companys results of operations
for the quarters ended March 31, 2005 and 2004 include expenses of $3.4 million for both periods,
related to the termination of hedge accounting and resulting amortization of amounts that had
previously been deferred. Income before minority interest Three Months EndedMarch 31,
    
    
    Increase (Decrease)2005
    
    
    2004
    
    
    $
    
    
    %(Amounts in thousands)Income before minority interest
    
    $
    28,799
    
    
    $
    922
    
    
    $
    27,877
    
    
    N/A
 The increase in net income is primarily due to higher operating margins resulting from higher coal
sales revenues and the effects of the North Rochelle contribution. DISCLOSURE AND INTERNAL CONTROLS An evaluation was performed under the supervision and with the participation of our management,
including the CEO and CFO, of the effectiveness of the design and operation of our disclosure
controls and procedures as of March 31, 2005. Based on that evaluation, our management, including
the CEO and CFO, concluded that the disclosure controls and procedures were effective as of such
date. There have been no changes in our internal controls or in other factors that could
significantly affect internal controls subsequent to March 31, 2005. OUTLOOK Railroad Transportation Disruptions.During 2004 and again in early 2005, rail service disruptions
resulted in missed shipments in both of our operating regions. In addition, we were periodically
forced to curtail production at the West Elk mine in Colorado and the Black Thunder mine in Wyoming
due to high inventory levels stemming from insufficient rail service. The railroad disruptions, which initially resulted from inadequate staffing at the railroads,
equipment shortages and an unexpected increase in overall rail shipments, improved in both of our
operating regions during the latter part of the first quarter of 2005. We anticipate continued
improvement with rail service in the second quarter of 2005. Expenses Related to Interest Rate Swaps.We had designated certain interest rate swaps as hedges of
the variable rate interest payments due under Arch Westerns term loans. Pursuant to the
requirements of FAS 133, historical mark-to-market adjustments related to these swaps through June
25, 2003 of $44.0 million were deferred as a component of Accumulated Other Comprehensive Loss.
Subsequent to the repayment of the term loans, these deferred amounts will be amortized as
additional expense over the original contractual terms of the swap agreements. As of December 31,
2004, the remaining deferred amounts will be recognized as expense in the following periods: $12.7
million in 2005 ($3.4 million was recognized in the first quarter of 2005); $7.9 million in 2006;
and $3.1 million in 2007. 23




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES The following is a summary of cash provided by or used in each of the indicated types of activities
during the three months ended March 31, 2005 and 2004: 2005
    
    
    2004(in thousands)Cash provided by (used in):Operating activities
    
    $
    29,024
    
    
    $
    (8,031
    )Investing activities
    
    
    (29,980
    )
    
    
    (26,949
    )Financing activities
    
    
    (51
    )
    
    
    (97
    )
 Cash provided by operating activities increased in the quarter ended March 31, 2005 as compared to
the same period in 2004 primarily as a result of improved operating performance and the change in
the receivable from Arch Coal, which remained relatively flat during the three months ended March
31, 2005 compared to a $31.5 million increase in the prior years comparable quarter. Cash used in investing activities in the first quarter of 2005 reflects capital expenditures and
advance royalty payments of $21.9 million and $10.0 million, respectively, offset partially by
proceeds from the sale of equipment of $1.9 million. Cash provided by investing activities in the
first quarter of 2004 reflects capital expenditures and advance royalty payments of $17.0 million
and $10.0 million, respectively. Capital expenditures were $21.9 million and $17.0 million for the three months ended March 31, 2005
and 2004, respectively. Capital expenditures are made to improve and replace existing mining
equipment, expand existing mines, develop new mines and improve the overall efficiency of mining
operations. We estimate that our capital expenditures will be approximately $140.0 million in total
for 2005. This estimate includes capital expenditures related to development work at the North
Lease mine in Utah at the currently idled Skyline complex. Also, this estimate assumes no other
acquisitions, significant expansions of our existing mining operations or additions to our reserve
base. We anticipate that we will fund these capital expenditures with cash generated from
operations. We generally satisfy our working capital requirements and fund our capital expenditures and
debt-service obligations with cash generated from operations and, if necessary cash from Arch Coal.
We believe that cash generated from operations will be sufficient to meet our working capital
requirements and anticipated capital expenditures for the next several years. Our ability to fund
planned capital expenditures and meet our debt-service obligations will depend upon our future
operating performance, which will be affected by prevailing economic conditions in the coal
industry, and by financial, business and other factors, some of which are beyond our control. On October 22, 2004, Arch Western Finance issued $250 million of 6-3/4% senior notes due 2013 at a
price of 104.75% of par. The
notes form a single series with Arch Western Finances existing $700 million, 6-3/4% senior notes
due 2013. The net proceeds of the offering were used to repay and retire the outstanding
indebtedness under our $100.0 million term loan maturing in 2007, with the remainder loaned to Arch
Coal. The terms of our LLC Agreement provide for a preferred return distribution in an amount equal to 4%
of the preferred capital balance, which was $2.4 million as of December 31, 2004. Except for the
preferred return distribution, distributions may generally be made at such times and in such
amounts as Arch Coal, as the managing member, determines. We have historically made no
distributions other than the preferred return. We are exposed to market risk associated with interest rates due to our existing level of
indebtedness. At March 31, 2005, all of our outstanding debt bore interest at fixed rates. We are also exposed to commodity price risk related to our purchase of diesel fuel. We enter into
forward purchase contracts and heating oil swaps to reduce volatility in the price of diesel fuel
for our operations. The swap agreements essentially fix the price paid for diesel fuel by requiring
us to pay a fixed heating oil price and receive a floating heating oil price. The changes in the
floating heating oil price highly correlate to changes in diesel fuel prices. The discussion below presents the sensitivity of the market value of our financial instruments to
selected changes in market rates and prices. The range of changes reflects our view of changes that
are reasonably possible over a one-year period. Market values are the present value of projected
future cash flows based on the market rates and prices chosen. The major accounting policies for
these 24




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##### Table of Contents



instruments are described in Note 2 to our consolidated financial statements as of and for the year
ended December 31, 2004 as filed on our Annual Report on Form 10-K with the Securities and Exchange
Commission. At March 31, 2005, our debt portfolio consisted entirely of fixed rate debt. A change in interest
rates on the fixed rate debt impacts the net financial instrument position but has no impact on
interest incurred or cash flows. The sensitivity analysis related to our fixed rate debt assumes an
instantaneous 100-basis point move in interest rates from their levels at March 31, 2005, with all
other variables held constant. A 100-basis point increase in market interest rates would result in
a $57.2 million decrease in the fair value of the Companys fixed rate debt at March 31, 2005. At
March 31, 2005, a $.05 per gallon increase in the price of heating oil would result in a $0.2
million increase in the fair value of the financial position of the heating oil swap agreements. CONTINGENCIES Reclamation The federal Surface Mining Control and Reclamation Act of 1977 (SMCRA) and similar state statutes
require that mine property be restored in accordance with specified standards and an approved
reclamation plan. We accrue for the costs of reclamation in accordance with the provisions of
Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations
(FAS 143), which was adopted as of January 1, 2003. These costs relate to reclaiming the pit and
support acreage at surface mines and sealing portals at deep mines. Other costs of reclamation
common to surface and underground mining are related to reclaiming refuse and slurry ponds,
eliminating sedimentation and drainage control structures, and dismantling or demolishing equipment
or buildings used in mining operations. The establishment of the asset retirement obligation
liability is based upon permit requirements and requires various estimates and assumptions,
principally associated with costs and productivities. We review our entire environmental liability periodically and make necessary adjustments, including
permit changes and revisions to costs and productivities to reflect current experience. Our
management believes it is making adequate provisions for all expected reclamation and other
associated costs. Legal Contingencies. We are a party to numerous other claims and lawsuits with respect to various matters. We provide
for costs related to contingencies, including environmental matters, when a loss is probable and
the amount is reasonably determinable. After conferring with counsel, it is the opinion of
management that the ultimate resolution of these claims, to the extent not previously provided for,
will not have a material adverse effect on our consolidated financial condition, results of
operations or liquidity. Certain Trends and Uncertainties Substantial Leverage  Covenants As of March 31, 2005, we had outstanding consolidated indebtedness of $961.3 million, representing
approximately 62% of our capital employed. We also have significant lease and royalty obligations.
Our ability to satisfy our debt, lease and royalty obligations, and our ability to refinance our
indebtedness, will depend upon our future operating performance, which will be affected by
prevailing economic conditions in the markets that we serve and financial, business and other
factors, many of which are beyond our control. We may be unable to generate sufficient cash flow
from operations and future borrowings or other financing may be unavailable in an amount sufficient
to enable us to fund our future financial obligations or our other liquidity needs. The amount and
terms of our debt could have material consequences to our business, including, but not limited to:  
    making it more difficult for us to satisfy our debt covenants and debt service, lease payment and other obligations;
    increasing our vulnerability to general adverse economic and industry conditions;
    limiting our ability to obtain additional financing to fund future acquisitions, working
capital, capital expenditures or other general operating requirements;
    reducing the availability of cash flow from operations to fund acquisitions, working
capital, capital expenditures or other general operating purposes;
    limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and
    placing us at a competitive disadvantage when compared to competitors with less relative amounts of debt. 25




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The indenture governing our Senior Notes contains covenants that, among other things, limit our
ability and the ability of our subsidiaries to:  
    incur more debt;
    make distributions;
    make investments;
    create liens;
    issue and sell capital stock of subsidiaries;
    sell assets;
    enter into restrictions affecting the ability of restricted subsidiaries to make distributions, loans or advances to us;
    engage in transactions with affiliates;
    enter into sale and leasebacks; and
    merge or consolidate or transfer and sell assets. These restrictions on operations and financings, as well as those that may be contained in future
debt agreements, may limit our ability to execute preferred business strategies. Profitability Our mining operations are inherently subject to changing conditions that can affect levels of
production and production costs at particular mines for varying lengths of time and can result in
decreases in our profitability. We are exposed to commodity price risk related to our purchase of
diesel fuel, explosives and steel. In addition, weather conditions, equipment replacement or
repair, fires, variations in thickness of the layer, or seam, of coal, amounts of overburden, rock
and other natural materials and other geological conditions have had, and can be expected in the
future to have, a significant impact on our operating results. Prolonged disruption of production
at any of our principal mines, particularly our Black Thunder mine, would result in a decrease in
our revenues and profitability, which could be material. Other factors affecting the production and
sale of our coal that could result in decreases in our profitability include:  
    continued high pricing environment for our raw materials, including, among other things,
diesel fuel, explosives and steel;
    expiration or termination of, or sales price redeterminations or suspension of deliveries under, coal supply agreements;
    disruption or increases in the cost of transportation services;
    changes in laws or regulations, including permitting requirements;
    litigation;
    work stoppages or other labor difficulties;
    labor shortages;
    mine worker vacation schedules and related maintenance activities; and
    changes in coal market and general economic conditions. Environmental and Regulatory Factors The coal mining industry is subject to regulation by federal, state and local authorities on
matters such as:  
    the discharge of materials into the environment;
    employee health and safety;
    mine permits and other licensing requirements;
    reclamation and restoration of mining properties after mining is completed;
    management of materials generated by mining operations;
    surface subsidence from underground mining;
    water pollution; 26




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
    air quality standards;
    protection of wetlands;
    endangered plant and wildlife protection;
    limitations on land use;
    storage of petroleum products and substances that are regarded as hazardous under applicable laws; and
    management of electrical equipment containing polychlorinated biphenyls, or PCBs. In addition, the electric generating industry, which is the most significant end-user of coal, is
subject to extensive regulation regarding the environmental impact of its power generation
activities, which could affect demand for our coal. The possibility exists that new legislation or
regulations may be adopted or that the enforcement of existing laws could become more stringent,
either of which may have a significant impact on our mining operations or our customers ability to
use coal and may require us or our customers to significantly change operations or to incur
substantial costs. While it is not possible to quantify the expenditures we incur to maintain compliance with all
applicable federal and state laws, those costs have been and are expected to continue to be
significant. We post performance bonds pursuant to federal and state mining laws and regulations
for the estimated costs of reclamation and mine closing, including the cost of treating mine water
discharge when necessary. Compliance with these laws has substantially increased the cost of coal
mining for all domestic coal producers. Clean Air Act.The federal Clean Air Act and similar state and local laws, which regulate
emissions into the air, affect coal mining and processing operations primarily through permitting
and emissions control requirements. The Clean Air Act also indirectly affects coal mining
operations by extensively regulating the emissions from coal-fired industrial boilers and power
plants, which are the largest end-users of our coal. These regulations can take a variety of forms,
as explained below. The Clean Air Act imposes obligations on the Environmental Protection Agency, or EPA, and the
states to implement regulatory programs that will lead to the attainment and maintenance of
EPA-promulgated ambient air quality standards, including standards for sulfur dioxide, particulate
matter, nitrogen oxides and ozone. Owners of coal-fired power plants and industrial boilers have
been required to expend considerable resources in an effort to comply with these ambient air
standards. Significant additional emissions control expenditures will be needed in order to meet
the current national ambient air standard for ozone. In particular, coal-fired power plants will be
affected by state regulations designed to achieve attainment of the ambient air quality standard
for ozone. Ozone is produced by the combination of two precursor pollutants: volatile organic
compounds and nitrogen oxides. Nitrogen oxides are a by-product of coal combustion. Accordingly,
emissions control requirements for new and expanded coal-fired power plants and industrial boilers
will continue to become more demanding in the years ahead. In July 1997, the EPA adopted more stringent ambient air quality standards for particulate matter
and ozone. In a February 2001 decision, the U.S. Supreme Court largely upheld the EPAs position,
although it remanded the EPAs ozone implementation policy for further consideration. On remand,
the Court of Appeals for the D.C. Circuit affirmed the EPAs adoption of these more stringent
ambient air quality standards. As a result of the finalization of these standards, states that are
not in attainment for these standards will have to revise their State Implementation Plans to
include provisions for the control of ozone precursors and/or particulate matter. In April 2004,
the EPA issued final nonattainment designations for the eight-hour ozone standard, and, in December
2004, issued the final nonattainment standard for PM25. States will
have to revise their State
Implementation Plans to require electric power generators to further reduce nitrogen oxide and
particulate matter emissions, particularly in designated nonattainment areas. The potential need to
achieve such emissions reductions could result in reduced coal consumption by electric power
generators. Thus, future regulations regarding ozone, particulate matter and other pollutants could
restrict the market for coal and our development of new mines. This in turn may result in decreased
production and a corresponding decrease in our revenues. Although the future scope of these ozone
and particulate matter regulations cannot be predicted, future regulations regarding these and
other ambient air standards could restrict the market for coal and the development of new mines. The EPA has also initiated a regional haze program designed to protect and to improve visibility at
and around National Parks, National Wilderness Areas and International Parks. This program
restricts the construction of new coal-fired power plants whose operation may impair visibility at
and around federally protected areas. Moreover, this program may require certain existing
coal-fired 27




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power plants to install additional control measures designed to limit haze-causing emissions, such
as sulfur dioxide, nitrogen oxides and particulate matter. By imposing limitations upon the
placement and construction of new coal-fired power plants, the EPAs regional haze program could
affect the future market for coal. Additionally, the U.S. Department of Justice, on behalf of the EPA, has filed lawsuits against
several investor-owned electric utilities for alleged violations of the Clean Air Act. The EPA
claims that these utilities have failed to obtain permits required under the Clean Air Act for
alleged major modifications to their power plants. We supply coal to some of the currently affected
utilities, and it is possible that other of our customers will be sued. These lawsuits could
require the utilities to pay penalties and install pollution control equipment or undertake other
emission reduction measures, which could adversely impact their demand for coal. New regulations concerning the routine maintenance provisions of the New Source Review program were
published in October 2003. Fourteen states, the District of Columbia and a number of municipalities
filed lawsuits challenging these regulations, and in December 2003 the Court stayed the
effectiveness of these rules. Oral argument was heard on this matter in January 2005. In January
2004, the EPA Administrator announced that the EPA would be taking new enforcement actions against
utilities for violations of the existing New Source Review requirements, and shortly thereafter,
the EPA issued enforcement notices to several electric utility companies. In March 2005, the EPA issued (i) the Clean Air Interstate Rule (CAIR), which permanently caps
emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx) in the eastern United States; and (ii)
the Clean Air Mercury Rule (CAMR) to permanently cap and reduce mercury emissions from coal-fired
power plants. CAIR requires reductions of SO2 and/or NOx emissions across 28 eastern states and the
District of Columbia and, when fully implemented in 2015, CAIR will reduce SO2 emissions in these
states by over 70 percent and NOx emissions by over 60 percent from 2003 levels. Under the new
mercury emissions rule, which takes effect in May 2005, coal-fired power plants have until 2010 to
cut mercury emission levels to 38 tons a year from 48 tons. Plants then have until 2018 to bring
that level down to 15 tons, a 69 percent reduction. Utility analysts have estimated meeting those
goals will cost power generators approximately $50 billion to install the required filtration
systems, or scrubbers, on their smokestacks. Both rules also provide power plant operators a
market-based system (cap and trade program) in which plants that exceed federal requirements can
sell pollution credits to plant operators who need more time to comply with the stricter rules. The
additional costs that may be associated with operating coal-fired power generation facilities due
to the implementation of these new rules may render coal a less attractive fuel source. Other Clean Air Act programs are also applicable to power plants that use our coal. For example,
the acid rain control provisions of Title IV of the Clean Air Act require a reduction of sulfur
dioxide emissions from power plants. Because sulfur is a natural component of coal, required sulfur
dioxide reductions can affect coal mining operations. Title IV imposes a two phase approach to the
implementation of required sulfur dioxide emissions reductions. Phase I, which became effective in
1995, regulated the sulfur dioxide emissions levels from 261 generating units at 110 power plants
and targeted the highest sulfur dioxide emitters. Phase II, implemented January 1, 2000, made the
regulations more stringent and extended them to additional power plants, including all power plants
of greater than 25 megawatt capacity. Affected electric utilities can comply with these
requirements by:  
    burning lower sulfur coal, either exclusively or mixed with higher sulfur coal;
    installing pollution control devices such as scrubbers, which reduce the emissions from high sulfur coal;
    reducing electricity generating levels; or
    purchasing or trading emissions credits. Specific emissions sources receive these credits, which electric utilities and industrial concerns
can trade or sell to allow other units to emit higher levels of sulfur dioxide. Each credit allows
its holder to emit one ton of sulfur dioxide. Mine Health and Safety Laws.Stringent safety and health standards have been imposed by federal
legislation since the adoption of the Mine Safety and Health Act of 1969. The Mine Safety and
Health Act of 1977, which significantly expanded the enforcement of health and safety standards of
the Mine Safety and Health Act of 1969, imposes comprehensive safety and health standards on all
mining operations. In addition, as part of the Mine Safety and Health Acts of 1969 and 1977, the
Black Lung Act requires payments of benefits by all businesses conducting current mining operations
to coal miners with black lung and to some survivors of a miner who dies from this disease. Surface Mining Control and Reclamation Act.SMCRA establishes operational, reclamation and closure
standards for all aspects of surface mining as well as many aspects of deep mining. SMCRA requires
that comprehensive environmental protection and reclamation standards be met during the course of
and upon completion of mining activities. In conjunction with mining the property, we are
contractually obligated under the terms of our leases to comply with all laws, including SMCRA and
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laws. These obligations include reclaiming and restoring the mined areas by grading, shaping,
preparing the soil for seeding and by seeding with grasses or planting trees for use as pasture or
timberland, as specified in the approved reclamation plan. SMCRA also requires us to submit a bond or otherwise financially secure the performance of our
reclamation obligations. The earliest a reclamation bond can be completely released is five years
after reclamation has been achieved. Federal law and some states impose on mine operators the
responsibility for repairing the property or compensating the property owners for damage occurring
on the surface of the property as a result of mine subsidence, a consequence of longwall mining and
possibly other mining operations. In addition, the Abandoned Mine Lands Act, which is part of
SMCRA, imposes a tax on all current mining operations, the proceeds of which are used to restore
mines closed before 1977. The maximum tax is $0.35 per ton of coal produced from surface mines and
$0.15 per ton of coal produced from underground mines. We also lease some of our coal reserves to third party operators. Under SMCRA, responsibility for
unabated violations, unpaid civil penalties and unpaid reclamation fees of independent mine lessees
and other third parties could potentially be imputed to other companies that are deemed, according
to the regulations, to have owned or controlled the mine operator. Sanctions against the
owner or controller are quite severe and can include civil penalties, reclamation fees and
reclamation costs. We are not aware of any currently pending or asserted claims against us
asserting that we own or control any of our lessees operations. Framework Convention on Global Climate Change.The United States and more than 160 other nations
are signatories to the 1992 Framework Convention on Global Climate Change, commonly known as the
Kyoto Protocol, that is intended to limit or capture emissions of greenhouse gases such as carbon
dioxide and methane. The U.S. Senate has neither ratified the treaty commitments, which would
mandate a reduction in U.S. greenhouse gas emissions, nor enacted any law specifically controlling
greenhouse gas emissions and the Bush Administration has withdrawn support for this treaty.
Nonetheless, future regulation of greenhouse gases could occur either pursuant to future U.S.
treaty obligations or pursuant to statutory or regulatory changes under the Clean Air Act. Efforts
to control greenhouse gas emissions could result in reduced demand for coal if electric power
generators switch to lower carbon sources of fuel. Comprehensive Environmental Response, Compensation and Liability Act.CERCLA and similar state
laws affect coal mining operations by, among other things, imposing cleanup requirements for
threatened or actual releases of hazardous substances that may endanger public health or welfare or
the environment. Under CERCLA and similar state laws, joint and several liability may be imposed on
waste generators, site owners and lessees and others regardless of fault or the legality of the
original disposal activity. Although the EPA excludes most wastes generated by coal mining and
processing operations from the hazardous waste laws, such wastes can, in certain circumstances,
constitute hazardous substances for the purposes of CERCLA. In addition, the disposal, release or
spilling of some products used by coal companies in operations, such
as chemicals, could trigger the liability provisions of the statute. Thus, coal mines that we currently own or have previously
owned or operated, and sites to which we sent waste materials, may be subject to liability under
CERCLA and similar state laws. In particular, we may be liable under CERCLA or similar state laws
for the cleanup of hazardous substance contamination at sites where we own surface rights. Mining Permits and Approvals.Mining companies must obtain numerous permits that strictly regulate
environmental and health and safety matters in connection with coal mining, some of which have
significant bonding requirements. In connection with obtaining these permits and approvals, we may
be required to prepare and present to federal, state or local authorities data pertaining to the
effect or impact that any proposed production of coal may have upon the environment. The
requirements imposed by any of these authorities may be costly and time consuming and may delay
commencement or continuation of mining operations. Regulations also provide that a mining permit
can be refused or revoked if an officer, director or a shareholder with a 10% or greater interest
in the entity is affiliated with another entity that has outstanding permit violations. Thus, past
or ongoing violations of federal and state mining laws could provide a basis to revoke existing
permits and to deny the issuance of additional permits. Regulatory authorities exercise considerable discretion in the timing of permit issuance. Also,
private individuals and the public at large possess rights to comment on and otherwise engage in
the permitting process, including through intervention in the courts. Accordingly, the permits we
need for our mining operations may not be issued, or, if issued, may not be issued in a timely
fashion, or may involve requirements that may be changed or interpreted in a manner which restricts
our ability to conduct our mining operations or to do so profitably. In order to obtain mining permits and approvals from state regulatory authorities, mine operators,
including us, must submit a reclamation plan for restoring, upon the completion of mining
operations, the mined property to its prior condition, productive use or other permitted condition.
Typically we submit the necessary permit applications several months before we plan to begin mining
a new area. In our experience, permits generally are approved several months after a completed
application is submitted. In the past, we 29




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have generally obtained our mining permits without significant delay. However, we cannot be sure
that we will not experience difficulty in obtaining mining permits in the future. Future legislation and administrative regulations may emphasize the protection of the environment
and, as a consequence, the activities of mine operators, including us, may be more closely
regulated. Legislation and regulations, as well as future interpretations of existing laws, may
also require substantial increases in equipment expenditures and operating costs, as well as
delays, interruptions or the termination of operations. We cannot predict the possible effect of
such regulatory changes. Under some circumstances, substantial fines and penalties, including revocation or suspension of
mining permits, may be imposed under the laws described above. Monetary sanctions and, in severe
circumstances, criminal sanctions may be imposed for failure to comply with these laws. Surety Bonds.Federal and state laws require us to obtain surety bonds to guarantee performance or
payment of certain long-term obligations including mine closure and reclamation costs, federal and
state workers compensation benefits, coal leases and other miscellaneous obligations. It has
become increasingly difficult for us to secure new surety bonds or retain existing bonds without
the posting of collateral. In addition, surety bond costs have increased and the market terms of
such bonds have generally become more unfavorable. We may be unable to maintain our surety bonds or
acquire new bonds in the future due to lack of availability, higher expense, unfavorable market
terms, or an inability to post sufficient collateral. Our failure to maintain, or inability to
acquire, surety bonds that are required by state and federal law would have a material adverse
impact on us. Endangered Species.The federal Endangered Species Act and counterpart state legislation protects
species threatened with possible extinction. Protection of endangered species may have the effect
of prohibiting or delaying us from obtaining mining permits and may include restrictions on timber
harvesting, road building and other mining or agricultural activities in areas containing the
affected species. A number of species indigenous to our properties are protected under the
Endangered Species Act. Based on the species that have been identified to date and the current
application of applicable laws and regulations, however, we do not believe there are any species
protected under the Endangered Species Act that would materially and adversely affect our ability
to mine coal from our properties in accordance with current mining plans. Other Environmental Laws Affecting Us.We are required to comply with numerous other federal,
state and local environmental laws in addition to those previously discussed. These additional laws
include, for example, the Resource Conservation and Recovery Act, the Safe Drinking Water Act, the
Toxic Substance Control Act and the Emergency Planning and Community Right-to-Know Act. We believe
that we are in substantial compliance with all applicable environmental laws. Competition The coal industry is intensely competitive, primarily as a result of the existence of numerous
producers in the coal-producing regions in which we operate, and some of our competitors may have
greater financial resources. We compete with several major and smaller coal producers. Electric Industry Factors Demand for coal and the prices that we will be able to obtain for our coal are closely linked to
coal consumption patterns of the domestic electric generation industry, which has accounted for
approximately 90% of domestic coal consumption in recent years. These coal consumption patterns are
influenced by factors beyond our control, including the demand for electricity (which is dependent
to a significant extent on summer and winter temperatures and the strength of the economy);
government regulation; technological developments and the location, availability, quality and price
of competing sources of coal; other fuels such as natural gas, oil and nuclear; and alternative
energy sources such as hydroelectric power. Demand for our low-sulfur coal and the prices that we
will be able to obtain for it will also be affected by the price and availability of high-sulfur
coal, which can be marketed in tandem with emissions allowances in order to meet federal Clean Air
Act requirements. Any reduction in the demand for our coal by the domestic electric generation
industry may cause a decline in profitability. Electric utility deregulation is expected to provide incentives to generators of electricity to
minimize their fuel costs and is believed to have caused electric generators to be more aggressive
in negotiating prices with coal suppliers. Deregulation may have an adverse effect on our
profitability to the extent it causes our customers to be more cost-sensitive. Terms of Long-Term Coal Supply Contracts 30




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During 2004, sales of coal under long-term contracts, which are contracts with a term greater than
12 months, accounted for 67% of our total revenues. The prices for coal shipped under these
contracts may be below the current market price for similar type coal at any given time. For the
three months ended March 31, 2005, the weighted average price of coal sold under our long-term
contracts was $10.36 per ton. As a consequence of the substantial volume of our sales which are
subject to these long-term agreements, we have less coal available with which to capitalize on
stronger coal prices if and when they arise. In addition, because long-term contracts may allow the
customer to elect volume flexibility, our ability to realize the higher prices that may be
available on the spot market may be restricted when customers elect to purchase higher volumes
under such contracts. Our exposure to market-based pricing may also be increased should customers
elect to purchase fewer tons. In addition, the increasingly short terms of sales contracts and the
consequent absence of price adjustment provisions in such contracts make it more likely that we
will not be able to recover inflation related increases in mining costs during the contract term. Reserve Depletion Our profitability depends substantially on our ability to mine coal reserves that have the
geological characteristics that enable them to be mined at competitive costs. Replacement reserves
may not be available when required or, if available, may not be capable of being mined at costs
comparable to those characteristic of the depleting mines. We have in the past acquired and will in
the future acquire coal reserves for our mine portfolio from third parties. We may not be able to
accurately assess the geological characteristics of any reserves that we acquire, which may
adversely affect our profitability and financial condition. Potential Fluctuations in Operating Results  Factors Routinely Affecting Results of Operations Our mining operations are inherently subject to changing conditions that can affect levels of
production and production costs at particular mines for varying lengths of time and can result in
decreases in profitability. Weather conditions, equipment replacement or repair, fuel and supply
prices, insurance costs, fires, variations in coal seam thickness, amounts of overburden rock and
other natural materials, and other geological conditions have had, and can be expected in the
future to have, a significant impact on operating results. A prolonged disruption of production at
any of our principal mines, particularly the Black Thunder mine in Wyoming, would result in a
decrease, which could be material, in our revenues and profitability. Other factors affecting the production and sale of our coal that could result in decreases in
profitability include: (i) expiration or termination of, or sales price redeterminations or
suspension of deliveries under, coal supply agreements; (ii) disruption or increases in the cost of
transportation services; (iii) changes in laws or regulations, including permitting requirements;
(iv) litigation; (v) work stoppages or other labor difficulties; (vi) mine worker vacation
schedules and related maintenance activities; and (vii) changes in coal market and general economic
conditions. Transportation The coal industry depends on rail, trucking and barge transportation to deliver shipments of coal
to customers, and transportation costs are a significant component of the total cost of supplying
coal. Disruption or insufficient availability of these transportation services could temporarily
impair our ability to supply coal to customers and thus adversely affect our business and the
results of our operations. In addition, increases in transportation costs associated with our coal,
or increases in our transportation costs relative to transportation costs for coal produced by our
competitors or of other fuels, could adversely effect our business and results of operations. Reserves  Title; Leasehold Interests We base our reserve information on geological data assembled and analyzed by our staff, which
includes various engineers and geologists, and periodically reviewed by outside firms. The reserve
estimates are annually updated to reflect production of coal from the reserves and new drilling or
other data received. There are numerous uncertainties inherent in estimating quantities of
recoverable reserves, including many factors beyond our control. Estimates of economically
recoverable coal reserves and net cash flows necessarily depend upon a number of variable factors
and assumptions, such as geological and mining conditions which may not be fully identified by
available exploration data or may differ from experience in current operations, historical
production from the area compared with production from other producing areas, the assumed effects
of regulation by governmental agencies, and assumptions concerning coal prices, operating costs,
severance and excise taxes, development costs, and reclamation costs, all of which may cause
estimates to vary considerably from actual results. 31




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For these reasons, estimates of the economically recoverable quantities attributable to any
particular group of properties, classifications of such reserves based on risk of recovery and
estimates of net cash flows expected therefrom, prepared by different engineers or by the same
engineers at different times, may vary substantially. Actual coal tonnage recovered from identified
reserve areas or properties, and revenues and expenditures with respect to our reserves, may vary
from estimates, and such variances may be material. These estimates thus may not accurately reflect
our actual reserves. The majority of our mining operations are conducted on properties we lease. The loss of any lease
could adversely affect our ability to develop the associated reserves. Because title to most of our
leased properties and mineral rights is not usually verified until we have made a commitment to
develop a property, which may not occur until after we have obtained necessary permits and
completed exploration of the property, our right to mine certain of our reserves may be adversely
affected if defects in title or boundaries exist. In order to obtain leases or mining contracts to
conduct mining operations on property where these defects exist, we have had to, and may in the
future have to, incur unanticipated costs. In addition, we may not be able to successfully
negotiate new leases or mining contracts for properties containing additional reserves or maintain
our leasehold interests in properties on which mining operations are not commenced during the term
of the lease. Acquisitions We continually seek to expand our operations and coal reserves in the regions in which we operate
through acquisitions of businesses and assets, including leases of coal reserves. Acquisition
transactions involve inherent risks, such as:  
    uncertainties in assessing the value, strengths, weaknesses, contingent and other
liabilities and potential profitability of acquisition or other transaction candidates;
    the potential loss of key personnel of an acquired business;
    the ability to achieve identified operating and financial synergies anticipated to
result from an acquisition or other transaction;
    problems that could arise from the integration of the acquired business;
    unanticipated changes in business, industry or general economic conditions that affect
the assumptions underlying the acquisition or other transaction rationale; and
    unexpected development costs, such as those related to the development of the Little
Thunder reserves, that adversely affect our profitability. Any one or more of these factors could cause us not to realize the benefits anticipated to result
from the acquisition of businesses or assets. Certain Contractual Arrangements The agreement under which we were formed provides that Arch Western Acquisition Corporation, as
managing member, generally has exclusive power and authority to conduct, manage and control our
business. However, consent of BP p.l.c., our other member would generally be required in the event
that we propose to make a distribution, incur indebtedness, sell properties or merge or consolidate
with any other entity if, at such time, we have a debt rating less favorable than specified ratings
with Moodys Investors Service or Standard & Poors or fail to meet specified indebtedness and
interest ratios. The membership interests in Canyon Fuel, which operates three coal mines in Utah, were owned 65% by
us and 35% by a subsidiary of ITOCHU Corporation of Japan until July 30, 2004 when Arch Coal
acquired ITOCHUs 35% interest in Canyon Fuel. The agreement that governed the management and
operations of Canyon Fuel prior to July 30, 2004 provided for a management board to manage its
business and affairs. Some major business decisions concerning Canyon Fuel required the vote of 70%
of the membership interests and therefore limited our ability to make these decisions. These
decisions include admission of additional members; approval of annual business plans; the making of
significant capital expenditures; sales of coal below specified prices; agreements between Canyon
Fuel and any member; the institution or settlement of litigation; a material change in the nature
of Canyon Fuels business or a material acquisition; the sale or other disposition, including by
merger, of assets other than in the ordinary course of business; incurrence of indebtedness; the
entering into of leases; and the selection and removal of officers. The Canyon Fuel agreement also
contained various restrictions on the transfer of membership interests in Canyon Fuel. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 32




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The information required by this Item is contained under the caption Managements Discussion and
Analysis of Financial Condition and Results of Operations in this report and is incorporated
herein by reference. 
 ITEM 4. CONTROLS AND PROCEDURES The information required by this Item is contained under the caption Managements Discussion and
Analysis of Financial Condition and Results of Operations in this report and is incorporated
herein by reference. 
 PART II  OTHER INFORMATION 
 ITEM 1. LEGAL PROCEEDINGS The information required by this Item is contained in the Contingencies  Legal Contingencies
section of Managements Discussion and Analysis of Financial Condition and Results of Operations
in this report and is incorporated herein by reference. 
 ITEM 6. EXHIBITS (a) 3.1
    
    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.).4.1
    
    Indenture, dated June 25, 2003, by and among Arch Western Finance, LLC,
Arch Western Resources, LLC, Arch of Wyoming, LLC, Mountain Coal Company,
L.L.C. Thunder Basin Coal Company, L.L.C. and The Bank of New York, as
trustee (incorporated herein by reference to Exhibit 4.1 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.).4.2
    
    First Supplemental Indenture, dated October 22, 2004, by and among Arch
Western Finance, LLC, Arch Western Resources, LLC, Arch Western
Bituminous Group, LLC, Arch of Wyoming, LLC, Mountain Coal Company,
L.L.C., Thunder Basin Coal Company, L.L.C., Triton Coal Company, LLC and
The Bank of New York, as trustee (incorporated herein by reference to
Exhibit 4.4 to the Current Report on Form 8-K filed by Arch Coal, Inc.
and Arch Western Resources, LLC on October 23, 2004).4.3
    
    Form of 6 3/4% Senior Notes due 2013 (included in Exhibit 4.1).4.4
    
    Form of Guarantee of 6 3/4% Senior Notes due 2013 (included in Exhibit 4.1).
 31.1
    
    Certification of Principal Executive Officer Pursuant to § 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Principal Financial Officer Pursuant to § 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Statement Under Oath of Principal Executive Officer Pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Statement Under Oath of Principal Financial Officer Pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002.
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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ARCH WESTERN RESOURCES, LLC
(Registrant)Date:
May 12, 2005
    
    /s/ Robert J. MesseyRobert J. MesseyVice President(Chief Accounting Officer)
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