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Alpha Appalachia Holdings, Inc. – ‘424B4’ on 8/6/03

On:  Wednesday, 8/6/03, at 3:16pm ET   ·   Accession #:  1193125-3-29975   ·   File #:  333-107173

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 8/06/03  Alpha Appalachia Holdings, Inc.   424B4                  1:1.0M                                   RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 424B4       Prospectus                                          HTML    927K 

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Filed pursuant to Rule 424(b)(4)

Registration No. 333-107173

PROSPECTUS

$132,000,000

Massey Energy Company

4.75% Convertible Senior Notes due 2023

On May 29, 2003, we issued $132,000,000 of 4.75% Convertible Senior Notes due 2023 in a private placement. Selling securityholders will use this prospectus to resell the notes and the shares of common stock issuable upon conversion of the notes as described in the “Plan of Distribution” Section beginning on page 73 of this prospectus.

The notes bear interest at the rate of 4.75% per year. Interest on the notes is payable on May 15 and November 15 of each year, beginning on November 15, 2003. The notes are convertible during certain periods by holders into shares of our common stock initially at a conversion rate of 51.573 shares of common stock per $1,000 principal amount of notes (subject to adjustment in certain events) under the following circumstances: (1) if the price of our common stock issuable upon conversion reaches specified thresholds described in this prospectus; (2) if we call the notes for redemption; (3) upon the occurrence of specified corporate transactions described in this prospectus; or (4) if the credit ratings assigned to the notes decline below the levels specified in this prospectus.

The notes will mature on May 15, 2023. We may redeem some or all of the notes at any time on or after May 20, 2009. The redemption prices are described under the caption “Description of the Notes—Optional Redemption.”

The notes are our unsecured obligations and rank equally with all of our other unsecured senior indebtedness. The notes are guaranteed by our wholly owned subsidiary, A.T. Massey Coal Company, Inc., which, together with its subsidiaries, accounts for substantially all of our assets and all of our revenues. The guarantee is the unsecured senior obligation of A.T. Massey, ranks equally with all of its other senior unsecured indebtedness and terminates under certain conditions, including if A.T. Massey is no longer the primary obligor under or a guarantor of our existing or future revolving credit facilities or other long-term debt.

Holders may require us to purchase all or a portion of their notes on May 15, 2009, May 15, 2013 and May 15, 2018. We will pay cash for all notes so purchased on May 15, 2009. For purchases on May 15, 2013 or May 15, 2018, we may at our option choose to pay the purchase price for any such notes in cash or in shares of our common stock (valued as described herein) or any combination thereof. In addition, if we experience specified types of fundamental changes on or before May 15, 2009, holders may require us to purchase the notes for cash at a price equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest to the repurchase date.

Our common stock is listed on the New York Stock Exchange under the symbol “MEE.” The last reported sale price of our common stock on August 1, 2003, was $11.31 per share.

The notes issued in the initial private placement are eligible for trading on the Private Offerings, Resales and Trading through Automatic Linkages Market, commonly referred to as the Portal Market. Notes sold using this prospectus, however, will no longer be eligible for trading in the Portal Market. We do not intend to list the notes on any other national securities exchange or automated quotation system.

Investing in the notes involves risks. See “ Risk Factors” beginning on page 6.

Neither the Securities Exchange Commission (“SEC”) nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is August 4, 2003

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You should rely only on the information contained in or incorporated by reference in this prospectus. We have not authorized anyone to provide you with information that is different. We are not making an offer to sell the notes and the common stock issuable upon conversion of the notes in any jurisdiction where the offer is not permitted. You should not assume that the information provided by or incorporated by reference in this prospectus is accurate as of any date other than the date of the document containing the information.

In this prospectus, we rely on and refer to information regarding the coal industry in the United States from the World Coal Institute, Resource Data International, Inc., the United States Department of Energy and Energy Ventures Analysis, who are not affiliated with Massey Energy and are not aware of and have not consented to being named in this prospectus. Although we believe that this information is reliable, we have not independently verified the accuracy or completeness of this information.

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SUMMARY

This summary does not contain all of the information that is important to you. You should read this entire prospectus, including the information set forth in “Risk Factors” and all the information incorporated by reference in this prospectus, before making an investment decision. Unless the context otherwise indicates, references to “Massey Energy,” “we,” “us,” “our” and “our company” in this prospectus refer to Massey Energy Company and its subsidiaries, and references to “A.T. Massey” are to A.T. Massey Coal Company, Inc., the guarantor, and its subsidiaries.

Massey Energy Company

We produce, process and sell high quality, low sulfur coal of steam and metallurgical grades through our 19 processing and shipping centers, called “resource groups.” These resource groups support our 29 underground mines and 14 surface mines in West Virginia, Kentucky and Virginia. Steam coal, which accounts for approximately 65% of our produced coal sales volume, is primarily purchased by public utilities as fuel for electricity generation. Approximately 9% of our produced coal sales volume is generated by sales to industrial customers that use coal with certain quality characteristics for generation of electricity or for process steam. Metallurgical coal, which accounts for approximately 26% of our produced coal sales volume, is used primarily to make coke for use in the manufacture of steel and can also be marketed as an ultra high quality, low sulfur steam coal for electricity generation. Metallurgical coal generally sells at a premium over steam coal because of its unique quality characteristics. During our fiscal year ended December 31, 2002, we sold 42.1 million tons of coal, generating produced coal revenues of $1.3 billion, loss from operations of $26.7 million, and EBITDA of $181.0 million. For an explanation of EBITDA, please see footnote 2 in “Selected Consolidated Financial and Operating Data.”

We are one of the premier coal producers in the United States by several measures:

Coal is one of the most abundant, efficient and affordable natural resources, and is primarily used to generate electricity and make coke for the manufacturing of steel. The United States is the world’s second largest producer of coal and is the largest holder of coal reserves in the world, with approximately 250 years of supply based on current production rates. In 2002, total U.S. coal production as estimated by the United States Department of Energy was 1.1 billion tons. We believe that the use of coal to generate electricity will grow as the demand for power increases and that Central Appalachian coal will be instrumental in filling that demand.

Competitive Strengths

We believe that our competitive strengths will enable us to enhance our position as one of the premier coal producers in the United States.

We are the leading coal producer in Central Appalachia. We are the leading coal producer in the Central Appalachian region with a proven reputation as a skilled, long-term operator. We believe our regional focus leads to operating efficiencies and provides us with an in-depth knowledge of the area’s coal reserves, mining conditions, customers, property owners and employee base.

We have a large, high quality, diverse reserve base. We control approximately 2.2 billion tons of proven and probable coal reserves. Our reserves include both high quality, low sulfur steam coal desired by public utility and industrial customers and metallurgical coal demanded by steel manufacturers. Approximately 44% of our reserves are made up of compliance coal that complies with the low sulfur requirements of the Clean Air Act.

We have a low level of long-term liabilities. Our employee related legacy liabilities are significantly lower than those of our coal industry peers. As of December 31, 2002, we had pension trust assets with a fair market value of $174 million, which were in excess of our plan liabilities of $169 million, despite three years of poor market returns. We do not expect to have to fund our pension plan until 2006 at the earliest. Our healthcare benefit liability (OPEB) of $121 million at December 31, 2002, was significantly lower than that of our coal industry peers.

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We have strong, long-term relationships with a broad base of customers. We have strong relationships with a broad base of over 125 customers. The majority of these customers purchase coal under long-term contracts with terms of one year or longer. Approximately 94% of our produced coal sales volume in 2002 was derived from these long-term contracts. We believe that a similar amount of our produced coal sales volume in 2003 will be derived from these long-term contracts. We believe these contracts provide us with stable and predictable cash flow. Many of our customers are well-established public utilities who have been customers of ours for a number of years.

We have built a superior infrastructure and transportation system. Since 1998, we have expended over $1 billion to maintain, upgrade and expand our mining, processing and transporting capabilities. We believe these capital investments provide us with the necessary infrastructure to expand our production capacity with little or no additional investment to meet increases in demand for coal.

We have demonstrated our ability to grow our coal reserves and production through acquisitions and other strategic transactions. We have grown our reserve base and production capacity through the strategic acquisition and integration of coal operations as well as through reserve swaps and coal leases. We have utilized a disciplined acquisition strategy that has helped us to avoid the difficulties often associated with the integration of acquisitions.

Strategy

Our primary objective is to continue to build upon our competitive strengths to enhance our position as one of the premier coal producers in the United States by:

Enhancing profitability through continued safety improvements, productivity gains and cost measurement. We will seek to reduce operating costs and increase profitability at our mines through our safety, productivity and measurement initiatives. We continue to implement safety measures designed to improve our profitability. In addition, we seek to enhance productivity by applying best practices. We also manage costs by generating critical data in a timely manner to measure performance, cost and usage in our mining operations.

Adjusting production in response to changes in market conditions. We are committed to a strategy of aligning our production with the needs of the market. The capital investments we have made during the past five years position us to quickly expand our production to meet increases in demand for coal. Our goal is to maximize profits not volume; therefore, our strategy is to only sell our coal at prices that generate the appropriate level of profitability.

Expanding use of more productive mining methods. Currently, we engage in four principal coal mining methods: underground “room and pillar” mining, underground longwall mining, highwall mining and surface mining. Because underground longwall mining, highwall mining and surface mining are high-productivity, low-cost mining methods, we will seek to increase production from our use of those methods to the extent permissible and cost-effective.

Pursuing strategic acquisitions. We believe that the coal industry will undergo increasing consolidation over the coming years. We plan to build on our position as the largest producer in Central Appalachia by pursuing growth through the opportunistic acquisition of additional coal reserves and mining facilities.

Forming strategic contractual arrangements with major customers. We will continue to seek contractual arrangements with customers to provide services in addition to coal. These initiatives strengthen our relationships with our customers and provide opportunities to increase sales.

Refinancing

Our prior $400 million revolving credit facilities that we entered into on November 26, 2002, were to expire on November 25, 2003. On May 29, 2003, we issued the $132 million of notes covered by this prospectus in a private placement. The private placement of the notes was the first step in our initiative to refinance our prior revolving credit facilities, as the proceeds were used to repay outstanding borrowings, which permanently reduced our commitments, in a like amount, under those facilities.

On July 2, 2003, we completed the refinancing of our prior $400 million revolving credit facilities. A.T. Massey executed a $355 million secured financing package consisting of a $105 million revolving credit facility and a $250 million term loan. For more information about the refinancing of our prior credit facilities, see “Refinancing” on page 24.

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On November 30, 2000, we completed a reverse spin-off, or the “spin-off,” that divided our operations into two companies: Fluor Corporation, or “New Fluor,” and Massey Energy Company. New Fluor retained all of the then-existing businesses except for the coal-related business conducted by A.T. Massey. We retained all of the coal-related business conducted by A.T. Massey.

Our primary executive offices are located at 4 North 4th Street, Richmond, Virginia 23219 and our telephone number is (804) 788-1800.

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The Notes

The following is a brief summary of certain terms of the notes. For a more complete description of the terms of the notes, see “Description of the Notes.” Capitalized terms used but not defined in this summary shall have the meanings given to such terms elsewhere in this prospectus.

For each $1,000 principal amount of notes surrendered for conversion you will receive 51.573 shares of our common stock. This represents an initial conversion price of $19.39 per share of common stock based on the issue price per note. As described in this prospectus, the conversion rate may be adjusted upon the

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occurrence of certain events, but it will not be adjusted for accrued and unpaid interest. You will not receive any cash payment representing accrued and unpaid interest upon conversion of a note. Notes called for redemption may be surrendered for conversion prior to the close of business on the second business day immediately preceding the redemption date.

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RISK FACTORS

Investing in the notes will be subject to risks, including risks inherent in our business. The value of your investment may decline and could result in a loss. You should carefully consider the following factors as well as other information contained and incorporated by reference in this prospectus before deciding to invest in the notes.

Risks Related to Our Business

For our liquidity needs, we currently rely primarily on borrowings under our credit facilities, which depend upon our compliance with the financial covenants contained in our credit facilities.

For our liquidity needs, we currently rely primarily on borrowings under our credit facilities. These facilities contain financial covenants requiring us to maintain specified financial ratios and to limit our capital expenditures to specified amounts. These financial covenants are described in “Refinancing” on page 24. Our ability to meet these financial covenants can be affected by a deterioration in our operating results, as well as by events beyond our control, including economic conditions, and we cannot assure you that we will meet the financial covenants. In the event we violate any of the financial covenants and do not affect a timely cure or receive a waiver from the lenders under our credit facilities, the credit facilities provide that the administrative agent under such facilities shall, if requested by holders of at least 50% of the aggregate amount of the revolver and 50% of the aggregate amount of the term loan, terminate the credit facilities and declare the loans immediately due and payable.

Our prior credit facilities contained similar financial covenants and we were in compliance with all material covenants at March 31, 2003 and during other periods reflected herein, other than at December 31, 2001, when we were not in compliance with the covenant related to the leverage ratio, but for which we subsequently obtained an amendment from lenders effective March 29, 2002.

Our indebtedness could adversely affect our ability to grow and compete and prevent us from fulfilling our obligations under the notes and our other indebtedness.

As of March 31, 2003, after giving effect to the offering of the notes and the use of the net proceeds thereof, we would have had approximately $593.4 million of total indebtedness outstanding, including $136.2 million of borrowings outstanding under our prior revolving credit facilities, $283 million aggregate principal amount of 6.95% Senior Notes due 2007, $42.2 million outstanding under an accounts receivable-based financing program, and $132 million aggregate principal amount of the notes. As of March 31, 2003, our indebtedness, as adjusted to give effect to the offering of the notes, represented 42.9% of our total book capitalization. Our indebtedness could adversely affect our ability to grow and compete and prevent us from fulfilling our obligations under the notes and our other indebtedness. For information about the refinancing of our prior credit facilities, see “Refinancing” on page 24.

We may not be able to maintain our competitive position because coal markets are affected by factors beyond our control.

Continued demand for our coal and the prices that we will be able to obtain will primarily depend upon coal consumption patterns of the domestic electric utility and steel industries. Consumption by the domestic utility industry is affected by the demand for electricity, environmental and other governmental regulations, technological developments and the price and availability of competing coal and alternative fuel supplies including nuclear, natural gas, oil and renewable energy sources. Consumption by the domestic steel industry is primarily affected by the demand for U.S. steel.

Approximately 26% of our production is metallurgical coal. As the largest supplier of metallurgical coal to the United States steel industry, we are subject to being adversely affected by any decline in the financial condition or production volume of United States steel producers. In recent years, United States steel producers experienced a substantial decline in the prices received for their products, due at least in part to a heavy volume of foreign steel imported into this country. The United States government determined that some steel producers in some foreign countries were selling steel products in the United States at below cost and has imposed tariffs on products from various foreign countries. The imposition of the tariffs has led to a moderate increase in the price of some steel products in the United States. However, several large United States producers filed for bankruptcy protection both before and after the tariffs were imposed, including two of our substantial customers: Wheeling-Pittsburgh Steel Corporation (“Wheeling”), which filed for bankruptcy protection in late 2000, accounted for approximately 3% of our produced coal revenue in 2002; and Bethlehem Steel Corporation, which filed for bankruptcy protection in mid-2001 and whose operations and assets were purchased by International Steel Group, Inc. in May 2003, accounted for approximately 2% of our produced coal revenue in 2002. In addition, Algoma Steel, Inc. (“Algoma”), a Canadian steel producer and one of our customers, filed for bankruptcy protection under Canadian law. Sales to Algoma accounted for approximately 2% of our produced coal revenue for 2002. We continue to sell to Wheeling and Algoma on very restrictive terms. Further deterioration in conditions in the steel industry could reduce the demand for our metallurgical coal and impact the collectibility of our accounts

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receivable from steel industry customers. Since our metallurgical grade coal can also be marketed as a high-Btu steam coal for use by utilities, a decline in the metallurgical market could result in coal being switched from the metallurgical market to the utility market.

As noted above, on March 5, 2002, President Bush announced a decision imposing tariffs on certain steel imports under Section 201 of the Trade Act of 1974. These tariffs are intended to provide protection against imports from certain countries; however, there are products and countries not covered by the tariffs. Imports of these exempt products or products from these countries may still have an adverse effect on United States steel producers. These tariffs may prompt other countries to impose tariffs or other trade restrictions on United States steel products. These actions could have an adverse effect on United States steel producers and reduce the demand for our metallurgical coal and thus adversely affect our cash flows, financial condition or results of operations. In May 2003, the World Trade Organization issued an interim ruling against the Section 201 remedies. On July 11, 2003, the World Trade Organization issued its final ruling that the Section 201 remedies violate global trade rules. President Bush’s administration has indicated that it will keep the tariffs in place and will appeal the ruling. If the ruling is appealed, a decision on the appeal is expected by the end of 2003. We cannot predict whether the administration will appeal the ruling or the likelihood of success of any appeal.

In addition, the steel industry is increasingly relying on electric arc furnaces or pulverized coal processes to make steel. These processes do not use coke. If this trend continues, the amount of metallurgical coal that we sell could further decrease. Since metallurgical coal is generally priced higher than steam coal, some of our mines may only operate profitably if all or a portion of their production is sold as metallurgical coal. If they are unable to sell metallurgical coal, these mines may not be economically viable and may close.

We may not be able to maintain our competitive position because the coal industry is highly competitive.

We compete with coal producers in various regions of the United States for domestic sales and with both domestic and foreign producers for sales to international markets. We compete with other producers primarily on the basis of price, coal quality, transportation cost and reliability of supply. Generally, the relative competitiveness of coal vis-à-vis other fuels or other coals is evaluated on a delivered cost per heating value unit basis. In addition to competition from other fuels, coal quality, the marginal cost of producing coal in various regions of the country and transportation costs are major determinants of the price for which we can sell coal. Factors that directly influence production cost include geological characteristics (including seam thickness), overburden ratios, depth of underground reserves, transportation costs and labor availability and cost.

Central Appalachian coal is more expensive to mine than western coal due to thinner coal seams and greater reliance on underground mining, which typically has higher costs. In recent years, increased development of large surface mining operations, particularly in the western United States, and more efficient mining equipment and techniques have contributed to excess coal production capacity in the United States.

During the mid-1970s and early 1980s, increased demand for coal attracted new investors to the coal industry, spurred the development of new mines and resulted in additional production capacity throughout the industry, all of which led to increased competition and lower coal prices. Increases in coal prices could encourage the development of expanded capacity by new or existing coal producers. Any resulting overcapacity could reduce coal prices and therefore reduce our revenues.

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. This competition could adversely affect our business and results of operations.

Depending on the relative strength of the U.S. dollar versus currencies in other coal producing regions of the world, we may export more or less coal into foreign countries as we compete on price with other foreign coal producing sources. Additionally, the domestic coal market may be impacted due to the relative strength of the U.S. dollar to other currencies, as foreign sources could be cost advantaged based on a coal producing region’s relative currency position.

A significant decline in coal prices could adversely affect our operating results and cash flows.

Our results of operations are highly dependent upon the prices we receive for our coal and our ability to improve productivity and control costs. While recent demand for coal has increased due to the recent severe winter weather in 2002-2003, there is no assurance this demand will continue. Any decreased demand would cause spot prices to decline and require us to increase productivity and decrease costs in order to maintain our margins. If we are not able to maintain our margins, our operating results could be adversely affected. Price declines may adversely affect operating results for future periods and our ability to generate cash flows necessary to improve productivity and expand operations.

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Coal mining is subject to unexpected disruptions, which could cause our quarterly or annual results to fluctuate.

Our mining operations are subject to certain events and operating conditions that could disrupt operations and affect production at particular mines for varying lengths of time. These events and conditions include:

We maintain property and general liability insurance policies that provide limited coverage for some, but not all, of these risks. Even where insurance coverage applies, there can be no assurance that these risks would be fully covered by our insurance policies. Any disruption of our operations could adversely affect our business and revenues.

Government laws, regulations and other legal requirements relating to protection of the environment increase our costs of doing business and may restrict our operations.

We incur substantial costs and liabilities under increasingly strict federal, state and local environmental, health and safety and endangered species laws, including regulations and governmental enforcement policies. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of cleanup and site restoration costs and liens, the issuance of injunctions to limit or cease operations, the suspension or revocation of permits and other enforcement measures that could have the effect of limiting production from our operations. We may also incur costs and liabilities resulting from claims for damages to property or injury to persons arising from our operations.

New legislation and new regulations may be adopted that could materially adversely affect our mining operations, cost structure or our customers’ ability to use coal. New legislation and new regulations may also require us or our customers to change operations significantly or incur increased costs. The United States Environmental Protection Agency, or the “EPA,” has undertaken broad initiatives aimed at increasing compliance with emissions standards and providing incentives to customers for decreasing emissions, often by switching to an alternative fuel source.

SMCRA Litigation. On March 29, 2002, the U.S. District Court for the District of Columbia issued a ruling that could restrict underground mining activities conducted in the vicinity of public roads, within a variety of federally protected lands, within national forests and within certain proximity to occupied dwellings. The lawsuit, Citizens Coal Council v. Norton, was filed in February 2000 to challenge regulations issued by the Department of the Interior providing, among other things, that subsidence and underground activities that may lead to subsidence are not surface mining activities within the meaning of the Surface Mining Control and Reclamation Act or “SMCRA.” SMCRA generally contains restrictions and certain prohibitions on the locations where surface mining activities can be conducted. The District Court entered summary judgment upon the plaintiff’s claims that the Secretary of the Interior’s determination violated SMCRA. By order dated April 9, 2002, the court remanded the regulations to the Secretary of the Interior for reconsideration. The Department of the Interior and the National Mining Association, a trade group that intervened in this action, appealed the order to the U.S. Court of Appeals for the District of Columbia Circuit. On June 3, 2003, the Court of Appeals overturned the District Court’s order and upheld the Department of Interior’s regulations. The timeframe for appeal of the Court of Appeal’s decision has not yet lapsed. If the Department of Interior’s regulations ultimately are not upheld, there could be a material adverse effect on all of our coal mine operations that utilize underground mining techniques. While it still might be possible to obtain permits for underground mining operations in these areas, the time and expense of that permitting process would likely increase significantly. It would be likely that room and pillar and longwall mining near certain structures would be more difficult and expensive for all coal producers and continued mining at some mines might no longer be practicable.

Show Cause Orders. Regulatory authorities implementing SMCRA may order surface mining permit holders to “show cause” why their permits should not be suspended or revoked because of alleged patterns of violations. A pattern of violations can be found when there are two or more violations of a same or similar type within a 12-month period. Under these “show cause orders,” if a pattern of violations is found and determined to have been caused by willful or unwarranted conduct under the surface mining laws, our surface mining permits may either be suspended or revoked. Some of our subsidiaries have been issued show cause orders that are currently unresolved. The outcome of each of these actions remains uncertain, so the eventual cost to us, if any, cannot presently be reasonably estimated.

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As of the date of this prospectus, show cause orders have been issued by the West Virginia Department of Environmental Protection, or the “WVDEP” with respect to active permits at our Marfork Coal Company, Independence Coal Company, Omar Mining Company, Bandmill Coal Corporation and Alex Energy subsidiaries. These orders have either been issued or are currently under appeal. A suspension of these operations could adversely affect our financial results to the extent we are unable to generate the lost production from our other operations. In addition, the WVDEP and Kentucky Natural Resources and Environment Protection Cabinet have issued show cause orders to certain of our subsidiaries with idled permits.

The potential impact on operations from a permit suspension in the show cause proceedings varies. For example, some of the operations are not currently mining or processing coal; therefore, a suspension at those operations would not impact earnings. At the active operations, suspensions could impact earnings to the extent that downtime cannot be offset by increases in production and/or coal sales at other times or at other operations. The impact of suspensions at these operations could also vary depending on when the suspensions are served. For example, suspensions served over weekends or during scheduled maintenance periods would have lesser impacts. We do not believe the impact of the suspensions or the cost of defending these matters is likely to be material.

If we are unsuccessful in defending or reaching an acceptable resolution of these orders, there is a possibility that a suspension of operations could have a significant effect on our overall operations. If a pattern of violations is found with respect to show cause orders that have not proceeded to a hearing, one or more of the permits for these operations could be revoked. If one or more of our permits are revoked, we could be prohibited from obtaining additional permits. In the event of future violations at these or other properties, the existence of these orders may increase the gravity of any sanctions sought in the event that the state decides to pursue any enforcement. For more detailed information concerning the show cause orders, see the documents incorporated by reference in this prospectus listed under “Documents Incorporated by Reference.”

Martin County Impoundment Discharge. On October 11, 2000, a partial failure of the coal refuse impoundment at Martin County Coal Corporation, one of our subsidiaries, released approximately 230 million gallons of coal slurry into adjacent underground mine workings. The slurry then discharged into two tributary streams of the Big Sandy River in eastern Kentucky. No one was injured in the discharge. Clean up efforts began immediately and are complete. Martin County Coal began processing coal again on April 2, 2001. We are continuing to seek approval from the applicable agencies for alternate refuse disposal options related to operations of Martin County Coal’s preparation plant. As of March 31, 2003, we had incurred a total of approximately $58.8 million of cleanup costs in connection with the spill, $52.5 million of which have been paid directly or reimbursed by insurance companies. We continue to seek insurance reimbursement of any and all covered costs. Most of the claims, fines, penalties and lawsuits from the impoundment failure have been satisfied or settled. Remaining issues (none of which we consider material) include:

We believe that we have insurance coverage applicable to these items, at least with respect to civil liabilities other than governmental penalties, such as those assessed by MSHA, and punitive damages, if any. One of our carriers has stated that it believes its policy does not provide coverage for governmental penalties or punitive damages.

Water Claims Litigation. Two cases were filed in the Circuit Court of Mingo County, West Virginia, alleging that our Delbarton Mining Company subsidiary’s mining activities destroyed nearby resident plaintiffs’ water supplies. One case was filed

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on behalf of 134 plaintiffs on July 1, 2002, and the other was filed on behalf of 54 plaintiffs on July 26, 2002 (an amended complaint, filed May 1, 2003, added 42 plaintiffs). The plaintiffs seek to recover compensatory and punitive damages, but their alleged damages have not been quantified. Delbarton has already provided many of the plaintiffs with a replacement water source. Each case is in the very early procedural stages and trial is scheduled for October 2003 in the first case and February 2004 in the second case.

West Virginia Flooding Cases. Five of our subsidiaries have been named, among others, in 17 separate complaints filed in the Circuit Courts of Boone, Fayette, Kanawha, McDowell, Mercer, Raleigh and Wyoming Counties, West Virginia. These cases collectively include numerous plaintiffs who filed suit on behalf of themselves and others similarly situated, seeking damages for property damage and personal injuries arising out of flooding that occurred in southern West Virginia in July 2001. The plaintiffs have sued coal, timber, railroad and land companies under the theory that mining, construction of haul roads and removal of timber caused natural surface waters to be diverted and interrupted in an unnatural way, thereby causing damage to the plaintiffs. The West Virginia Supreme Court of Appeals ruled that these cases, including several additional flood damage cases not involving our subsidiaries, will be handled pursuant to the Court’s mass litigation rules. As a result of this ruling, the cases have been transferred to the Circuit Court of Raleigh County, West Virginia and will be handled by a panel of three circuit court judges. The panel will, among other things, determine whether the individual cases should be consolidated or returned to their original circuit courts. While the plaintiffs’ alleged damages have not been quantified and the outcome of this litigation is subject to uncertainties, based on our preliminary evaluation of the issues and the potential impact on us, we believe this matter will be resolved without a material adverse effect on our cash flows, financial condition or results of operations.

We are subject to the Clean Water Act and corresponding state laws that restrict how we conduct our business and may expose us to substantial penalties for failures to comply.

The Federal Clean Water Act and corresponding state laws affect coal mining operations by imposing restrictions on discharging of pollutants into waters and on dredging and filling of wetlands. Regular monitoring, as well as compliance with reporting requirements and performance standards, are preconditions for the issuance and renewal of permits governing the discharge of pollutants into water. In addition, we may become subject to fines and other penalties, including suspension or revocation of our permits, for failure to comply with these statutes. In December 2002, Independence Coal and Omar Coal each pled guilty to charges that it had negligently violated the Clean Water Act. Each company has paid $200,000 in fees and agreed to a five-year probation period. We, along with Independence Coal and Omar Coal, have also agreed to an environmental training and compliance program and to independent environmental audits.

We cannot assure you that compliance with the requirements of the Clean Water Act and corresponding state laws will not cause us to incur significant additional costs or that we will not become subject to fines or other penalties for failures to comply with these statutes.

Anti-degradation Litigation. In January 2002, a number of environmental groups and individuals filed suit in the U.S. District Court for the Southern District of West Virginia to challenge the EPA’s approval of West Virginia’s anti-degradation implementation policy. Under the Clean Water Act, state regulatory authorities must conduct an antidegradation review before approving permits for the discharge of pollutants to waters that have been designated as high quality by the state. Anti-degradation review involves public and intergovernmental scrutiny of permits and requires permittees to demonstrate that the proposed activities are justified in order to accommodate significant economic or social development in the area where the waters are located. The plaintiffs in this lawsuit, Ohio Valley Environmental Coalition v. Whitman, challenge provisions in West Virginia’s antidegradation implementation policy that exempt current holders of National Pollutant Discharge Elimination System, or “NPDES”, permits and permits under Section 404 of the Clean Water Act, among other parties, from the anti-degradation-review process. We are exempt from antidegradation review under these provisions. Revoking this exemption and subjecting us to the anti-degradation review process could delay the issuance or reissuance of Clean Water Act permits to us or cause these permits to be denied. If the plaintiffs are successful and if we discharge into waters that have been designated as high-quality by the state, the costs, time and difficulty associated with obtaining and complying with Clean Water Act permits for surface mining could increase.

We must obtain governmental permits and approvals for mining operations, which can be a costly and time-consuming process and result in restrictions on our operations.

Our operations are principally regulated under surface mining permits issued pursuant to the SMCRA and state counterpart laws. Such permits are issued for terms of five years with the right of successive renewal. We currently have over 400 surface mining permits. In conjunction with the surface mining permits, most operations hold NPDES permits pursuant to the Clean Water Act and state counterpart water pollution control laws for the discharge of pollutants to waters. These permits are issued for terms of five years and also are renewed in conjunction with the surface mining permit renewals. Additionally, the Clean Water Act requires permits for operations that fill waters of the United States. Valley fills and refuse impoundments are typically authorized under Nationwide Permits that are revised and renewed periodically by the U.S. Corps of Engineers. Additionally,

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certain surface mines and preparation plants have permits issued pursuant to the Clean Air Act and state counterpart clean air laws allowing and controlling the discharge of air pollutants. These permits are primarily permits allowing initial construction (not operation) and they do not have expiration dates.

Regulatory authorities exercise considerable discretion in the timing of permit issuance. Requirements imposed by these authorities may be costly and time-consuming and may result in delays in the commencement or continuation of exploration or production operations. We often are required to prepare and present to federal, state and local authorities data pertaining to the effect or impact that proposed exploration for or production of coal may have on the environment. For example, the WVDEP is involved in litigation regarding its alleged failure to consider the hydrologic effects of mining operations in issuing mining permits. This suit could result in West Virginia imposing additional requirements on us and other mining companies relating to the assessment of potential hydrologic risks.

Further, 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 may not be issued, or if issued, may not be issued in a timely fashion, or may involve requirements which restrict our ability to conduct our mining operations or to do so profitably.

We are the subject of various legal proceedings.

We are the subject of the following legal proceedings:

Harman Case. On July 31, 1997, we acquired United Coal Company and its subsidiary, Wellmore Coal Corporation. Wellmore was party to a coal supply agreement with Harman Mining Corporation and certain of its affiliates, pursuant to which Harman sold coal to Wellmore. In December 1997, Wellmore declared force majeure under the coal supply agreement and reduced the amount of coal to be purchased from Harman as a result thereof. Wellmore declared force majeure because its major customer for the coal purchased under the coal supply agreement was forced to close its Pittsburgh, Pennsylvania coke plant due to regulatory action. We subsequently sold Wellmore, but retained responsibility for any claims relating to this declaration of force majeure. On October 29, 1998, Harman and its sole shareholder, Hugh Caperton, filed an action against us and certain of our subsidiaries in the Circuit Court of Boone County, West Virginia, alleging that we and our subsidiaries tortiously interfered with Harman’s contract with Wellmore and, as a result, caused Harman to go out of business. On August 1, 2002, the jury in the case awarded the plaintiffs $50 million in compensatory and punitive damages. We are vigorously pursuing post-judgment remedies, and various motions filed in the trial court have been fully briefed and argued. We will appeal to the West Virginia Supreme Court of Appeals, if necessary. On July 17, 2003, the Circuit Court ruled on one of the post trial motions regarding the posting of an appeal bond requiring us to post with the Circuit Court a surety bond or letter of credit in the amount of $55 million (including interest) within thirty (30) days. We have a liability with respect to this case of $25 million, excluding interest, included in Other current liabilities, which we believe is a fair estimate of the eventual total payout in this case.

Preparation Plant Employees Litigation. Several of our subsidiaries, along with several other coal companies and several chemical companies, are defendants in an action styled Denver Pettry, et al. v. Peabody Holding Company, et al., filed April 17, 2002 in the Circuit Court of Boone County, West Virginia, in which the plaintiffs allege that they were excessively exposed to chemicals used in the coal preparation plants of the defendant coal companies, which were manufactured by the defendant chemical companies. The plaintiffs are attempting to attain class action status, and seek to recover unquantified compensatory and punitive damages. We believe we have significant defenses to the claims, and we are defending the case vigorously. The case is in the early stages of discovery. On July 25, 2002, one of our insurers filed a declaratory judgment action in the U.S. District Court for the Eastern District of Virginia, seeking a declaration that it has no duty to defend or indemnify us in the Pettry action. On October 2, 2002, we filed suit seeking a declaratory judgment in the Circuit Court of Boone County, West Virginia, against that insurer and other insurers who provided policies to us that may cover the Pettry claims, and filed a motion to dismiss the action filed in Virginia. On February 25, 2003, the U.S. District Court for the Eastern District of Virginia entered an order dismissing the Virginia case. The insurer appealed the dismissal of the Virginia case to the United States Court of Appeals for the Fourth Circuit, and filed a motion in the West Virginia case seeking a stay of that proceeding until its appeal of the Virginia case is decided. By order entered May 2, 2003, the court in the West Virginia case granted that motion.

Shareholder derivative suit. On August 5, 2002, a shareholder derivative complaint was filed in the Circuit Court of Boone County, West Virginia, naming us, each of our directors and certain of our current and former officers. The complaint alleges (1) breach of fiduciary duties against all of the defendants for refusing to cause us to comply with environmental, labor and securities laws, and (2) improper insider trading by Don L. Blankenship, Jeffrey M. Jarosinski, Madeleine M. Curle and Bennett K. Hatfield. The plaintiff makes these allegations derivatively, and seeks to recover damages on behalf of our company. The damages claimed by the plaintiff have not been quantified. We and the other defendants removed the case to Federal District Court in Charleston, West Virginia, but the case has now been remanded to the Circuit Court of Boone County. The case is still in a very early procedural stage.

Dotco Energy Litigation. On June 14, 1999, Dotco Energy Company, Inc. filed suit against our subsidiary, Rawl Sales & Processing Co., in the Circuit Court of Pike County, Kentucky, alleging that Rawl miscalculated the payment that should have been made to Dotco for coal delivered to Rawl from years 1980 through 1996, when Dotco was a contract miner for Rawl. The

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complaint alleged that the wrongful calculations resulted in nonpayment for 263,117 tons of coal, for which allegedly $4,736,109 was due. The dispute has been settled and an order dismissing the lawsuit, with prejudice, was entered by the Court on July 9, 2003. The settlement will not have a material impact upon our consolidated financial position, cash flows or results of operations.

We are parties to a number of other legal proceedings incident to our normal business activities. While we cannot predict the outcome of these proceedings, in our opinion, any liability arising from these matters individually and in the aggregate should not have a material adverse effect upon our consolidated financial position, cash flows or results of operations.

Please refer to the documents incorporated by reference in this prospectus under “Documents Incorporated by Reference” for a description of other legal proceedings to which we are subject.

We have significant reclamation and mine closure obligations. If the assumptions underlying our accruals are materially inaccurate, we could be required to expend greater amounts than anticipated.

SMCRA establishes operational, reclamation and closure standards for all aspects of surface mining as well as most aspects of deep mining. Estimates of our total reclamation and mine-closing liabilities are based upon permit requirements and our engineering expertise related to these requirements. The estimate of ultimate reclamation liability is reviewed periodically by our management and engineers. The estimated liability can change significantly if actual costs vary from assumptions or if governmental regulations change significantly. We adopted Statement of Financial Accounting Standard No. 143, “Accounting for Asset Retirement Obligations” (“Statement 143”) effective January 1, 2003. Statement 143 requires that retirement obligations be recorded as a liability based on fair value, which is calculated as the present value of the estimated future cash flows. In estimating future cash flows, we considered the estimated current cost of reclamation and applied inflation rates and a third-party profit, as necessary. The third-party profit is an estimate of the approximate markup that would be charged by contractors for work performed on behalf of us. The resulting estimated liability could change significantly if actual amounts change significantly from our assumptions.

New regulations have generally made it easier for claimants to assert and prosecute black lung claims, which could increase our liability for black lung benefits.

Under federal black lung benefits legislation, each coal mine operator is required to make payments of black lung benefits or contributions to: (1) current and former coal miners totally disabled from black lung disease; (2) certain survivors of a miner who dies from black lung disease; and (3) a trust fund for the payment of medical expenses to claimants whose last mine employment was before January 1, 1970, where no responsible coal mine operator has been identified for claims (where a miner’s last coal employment was after December 31, 1969), or where the responsible coal mine operator has defaulted on the payment of such benefits. In recent years, legislation on black lung reform has been introduced but not enacted in Congress. It is possible that such legislation will be reintroduced for consideration by Congress. If any of the proposals included in such or similar legislation is passed, the number of claimants who are awarded benefits could significantly increase. There can be no assurance that any such changes in black lung legislation, if approved, will not have a material adverse effect on our business, financial condition and results of operations. In addition to federal acts, we are also liable under various state statutes for black lung claims.

In addition, the United States Department of Labor issued a final rule, effective January 19, 2001, amending the regulations implementing federal black lung laws. The amendments give greater weight to the opinion of the claimant’s treating physician, expand the definition of black lung disease and limit the amount of medical evidence that can be submitted by claimants and respondents. The amendments also alter administrative procedures for the adjudication of claims, which, according to the Department of Labor, result in streamlined procedures that are less formal, less adversarial and easier for participants to understand. These and other changes to the black lung regulations could potentially increase our exposure to black lung benefits liabilities. We, with the help of our consulting actuaries, intend to monitor claims activity very closely and will modify the assumptions underlying the projection of our black lung liability should the results of such monitoring indicate that it is appropriate to do so.

The characteristics of coal may make it difficult for coal users to comply with various environmental standards related to coal combustion. As a result, they may switch to other fuels, which would affect the volume of our sales.

Coal contains impurities, including sulfur, mercury, chlorine, nitrogen oxide and other elements or compounds, many of which are released into the air when coal is burned. The Clean Air Act and corresponding state laws extensively regulate emissions into the air of particulate matter and other substances, including sulfur dioxide, nitrogen oxides and mercury. Although these regulations apply directly to impose certain requirements for the permitting and operation of our mining facilities, by far their greatest impact on us and the coal industry generally is the effect of emission limitations on utilities and our other customers. 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

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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. The EPA has imposed or attempted to impose tighter emission restrictions in a number of areas, some of which are currently subject to litigation. The general effect of such tighter restrictions could be to reduce demand for coal. In July 1997, the EPA adopted new, more stringent National Ambient Air Quality Standards for very fine particulate matter and ozone. The Court of Appeals for the District of Columbia issued an opinion in May 1999 limiting the manner in which the EPA can enforce these standards. After a request by the federal government for a rehearing by the Court of Appeals was denied, the Supreme Court agreed in January 2000 to review the case. On February 27, 2001, the Supreme Court found in favor of the EPA in material part and remanded the case to the Court of Appeals. 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. Revised state implementation plans could require electric power generators to further reduce nitrogen oxide and particulate matter emissions. 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 the development of new mines by the Company. This in turn may result in decreased production by us and a corresponding decrease in our revenue. 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.

Furthermore, in October 1998, the EPA finalized a rule that will require 19 states in the Eastern United States that have ambient air quality problems to make substantial reductions in nitrogen oxide emissions by the year 2004. The final rule was largely upheld by the United States Court of Appeals for the District of Columbia Circuit. To achieve reductions in nitrogen oxide emissions by 2004, many power plants would be required to install additional control measures such as capital-intensive selective catalytic reduction (SCR) devices. The installation of these measures would make it more costly to operate coal-fired power plants and, depending on the requirements of individual state implementation plans, could make coal a less attractive fuel. In addition, reductions in nitrogen oxide emissions can be achieved at a low capital cost through a combination of low nitrogen oxide burners and coal produced in Western U.S. coal mines. As a result, changes in current emissions standards could also impact the economic incentives for Eastern U.S. coal-fired power plants to consider using more coal produced in Western U.S. coal mines.

Along with these regulations addressing ambient air quality, the EPA has 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 power plants to install additional control measures designed to limit haze-causing emissions, such as sulfur dioxide, nitrogen oxides and particulate matter. The EPA’s final rule concerning best available retrofit technology (BART) is currently on remand to the EPA from the United States Court of Appeals for the District of Columbia Circuit. 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 and brought an administrative action against one government-owned electric utility 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 our other 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.

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:

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Specific emissions sources receive these credits that 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.

In addition to emissions control requirements designed to control acid rain and to attain the national ambient air quality standards, the Clean Air Act also imposes standards on sources of hazardous air pollutants. Although these standards have not yet been extended to coal mining operations, the EPA recently announced that it will regulate hazardous air pollutants from coal-fired power plants. Under the Clean Air Act, coal-fired power plants will be required to control hazardous air pollution emissions by no later than 2009. These controls are likely to require significant new improvements in controls by power plant owners. The most prominently targeted pollutant is mercury, although other by-products of coal combustion may be covered by future hazardous air pollutant standards for coal combustion sources. However, the introduction of mercury emissions limits could place coal produced in Western U.S. mines at a competitive disadvantage to coal produced in Eastern U.S. mines, as current mercury-removal technology is more effective on Eastern U.S. coal. The EPA has announced that it intends to issue a proposed rule concerning maximum achievable control technology (MACT) for utilities by December 2003.

Other proposed initiatives may have an effect upon coal operations. Several so-called multi-pollutant bills, which could regulate a variety of air emissions, including carbon dioxide and mercury, have been proposed. One such proposal is the Bush Administration’s recently announced Clear Skies initiative. As proposed, this initiative is designed to reduce emissions of sulfur dioxide, nitrogen oxides and mercury from power plants. Senator James Jeffords has also introduced a bill that would place tight caps on coal-fired emissions, including mandatory limits on carbon dioxide emissions, and require shorter implementation time frames. While the details of these proposed initiatives vary, there is clearly a movement towards increased regulation of air emissions, including carbon dioxide and mercury, which could cause power plants to shift away from coal as a fuel source.

The Bush administration recently pledged $2 billion to the Clean Coal Technology (CCT) Program. The CCT Program is a government and industry co-funded effort to demonstrate a new generation of innovative coal-utilization processes in a series of “showcase” facilities built across the country. These projects are carried out in sufficiently large scale to prove commercial worthiness and generate data for design, construction, operation, and technical/economic evaluation of full-scale commercial applications. The goal of the CCT Program is to furnish the U.S. energy marketplace with advanced, more efficient coal-based technologies, technologies that are capable of mitigating some of the economic and environmental impediments that inhibit the use of coal as an energy source.

The passage of legislation responsive to the Framework Convention on Global Climate Change or similar governmental initiatives could result in restrictions on coal use.

The United States has not implemented the 1992 Framework Convention on Global Climate Change, or the “Kyoto Protocol”, which is intended to limit or reduce emissions of greenhouse gases, such as carbon dioxide. Under the terms of the Kyoto Protocol, which specific emission targets vary from country to country, the United States would be required to reduce emissions to 93% of 1990 levels over a five-year period from 2008 through 2012. Although the United States has not ratified the emission targets and no comprehensive regulations focusing on greenhouse gas emissions are in place, these restrictions, whether through ratification of the emission targets or other efforts to stabilize or reduce greenhouse gas emissions, could adversely affect the price and demand for coal. In March 2001, President Bush reiterated his opposition to the Kyoto Protocol and further stated that he did not believe that the government should impose mandatory carbon dioxide emission reductions on power plants. In February 2002, President Bush announced a new approach to climate change, confirming the Administration’s opposition to the Kyoto Protocol and proposing voluntary actions to reduce the greenhouse gas intensity of the United States. Greenhouse gas intensity measures the ratio of greenhouse gas emissions, such as carbon dioxide, to economic output. The President’s climate change initiative calls for a reduction in greenhouse gas intensity over the next 10 years which is approximately equivalent to the reduction that has occurred over each of the past two decades. If this or other comprehensive legislation focusing on greenhouse gas emissions is enacted by the United States, it would have the effect of restricting the use of coal. Other efforts to reduce emissions of greenhouse gases and federal initiatives to encourage the use of natural gas also may affect the use of coal as an energy source.

Weather conditions may affect our business.

Severe weather, including flooding and excessive ice or snowfall, when it occurs, can adversely affect our ability to produce, load and transport coal. In addition, unseasonable weather can adversely affect the demand and price for coal, which could adversely affect our business, financial condition and results of operations.

Foreign currency fluctuations could adversely affect the competitiveness of our coal abroad.

We rely on customers in other countries for a portion of our sales, with shipments to countries in Europe, North America and South America. We compete in these international markets against coal produced in other countries. Coal is sold

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internationally in U.S. dollars. As a result, mining costs in competing coal producing countries may be less in U.S. dollar terms because of currency exchange rates, providing an advantage to foreign coal producers. Currency fluctuations in coal producing countries could adversely affect the competitiveness of U.S. coal in international markets.

We face numerous uncertainties in estimating our economically recoverable coal reserves, and inaccuracies in our estimates could result in lower than expected revenues, higher than expected costs and decreased profitability.

There are numerous uncertainties inherent in estimating quantities and values of economically recoverable coal reserves, including many factors beyond our control. As a result, estimates of economically recoverable coal reserves are by their nature uncertain. Information about our reserves consists of estimates based on engineering, economic and geological data assembled and analyzed by our staff.

Some of the factors and assumptions that impact economically recoverable reserve estimates include:

Each of these factors may in fact vary considerably from the assumptions used in estimating reserves. For these reasons, estimates of the economically recoverable quantities of coal attributable to a particular group of properties may vary substantially. Actual production, revenues and expenditures with respect to our reserves will likely vary from estimates, and these variances may be material. As a result, our estimates may not accurately reflect our actual reserves.

Our acquisition strategy may not be realized or may require us to raise capital by incurring substantial debt or issuing additional equity.

We intend to pursue growth through opportunistic acquisitions. The coal industry is experiencing rapid consolidation, with many companies seeking to consummate opportunistic acquisitions and increase their market share. We compete and will continue to compete with many other buyers for acquisitions. Acquisitions involve a number of risks, including the time associated with identifying and evaluating future acquisitions, the diversion of management’s attention to the integration of the operations and personnel of the acquired companies, possible adverse short-term effects on our operating results and the loss of key employees of the acquired companies. We cannot provide any assurance that future acquisitions will be available on terms acceptable to us. Our ability to consummate any acquisition will be subject to various conditions, including the negotiation of satisfactory agreements, obtaining necessary regulatory approvals and financing.

Transportation disruptions could impair our ability to sell coal.

We rely on transportation providers to provide access to markets. Disruption of transportation services because of weather-related problems, strikes, lockouts or other events could temporarily impair our ability to supply coal to customers. In 2002, rail shipments constituted approximately 91% of our total shipments, with approximately 33% loaded on Norfolk Southern trains and approximately 58% loaded on CSX trains. If there are disruptions of the transportation services provided by Norfolk Southern or CSX and we are unable to find alternative transportation providers to ship our coal, our business could be adversely affected.

The State of West Virginia has recently increased enforcement of weight limits on coal trucks on its public roads. Also, West Virginia legislation, which raised coal truck weight limits in West Virginia, includes provisions supporting enhanced enforcement. Although we have historically avoided public road trucking of coal when possible by transporting coal by rail, barge and conveyor systems, such stepped up enforcement actions could result in shipment delays and increased costs. An increase in transportation costs could have an adverse effect on our ability to increase or to maintain production and adversely affect revenues.

On January 7, 2003, Coal River Mountain Watch, an advocacy group representing local residents in the Counties of Boone, Raleigh and Kanawha, West Virginia, and other plaintiffs, filed suit in the Circuit Court of Kanawha County, West Virginia against certain of our subsidiaries and various other coal and transportation companies alleging that the defendants illegally transport coal in overloaded trucks causing damage to state roads and interfering with the plaintiffs’ use and enjoyment of their properties and their right to use the public roads, and seeking injunctive relief and unquantified compensatory and punitive damages. The plaintiffs alleged damages have not been quantified. The case is in the very early procedural stages and we intend to vigorously pursue the defense of this case.

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Fluctuations in transportation costs could adversely affect the demand for our coal and increase competition from coal producers in other parts of the country.

Transportation costs represent a significant portion of the delivered cost of coal and, as a result, are a critical factor in a customer’s purchasing decision. Increases in transportation costs could make coal a less competitive source of energy. Such increases could have a material adverse effect on our ability to compete with other energy sources and on our business, financial condition and results of operations. On the other hand, significant decreases in transportation costs could result in increased competition from coal producers in other parts of the country. For instance, coordination of the many eastern loading facilities, the large number of small shipments, terrain and labor issues all combine to make shipments originating in the Eastern United States inherently more expensive on a per-mile basis than shipments originating in the Western United States. Historically, coal transportation rates from the western coal producing areas into Central Appalachian markets limited the use of western coal in those markets. More recently, however, lower rail rates from the western coal producing areas to markets served by eastern producers have created major competitive challenges for eastern producers. This increased competition could have a material adverse effect on our business, financial condition and results of operations.

We may have difficulty in attracting and retaining skilled managers.

From time to time, we experience the loss of senior managers who choose for various reasons to pursue other interests. There can be no assurance that we will not experience further management changes in the future, or that we will be able to attract and retain capable and experienced managers on terms acceptable to us and consistent with our compensation practices.

We depend on a small number of customers for a significant portion of our revenues and the loss of any of those customers could adversely affect us.

During our fiscal year ended December 31, 2002, we derived approximately 33%, of our produced coal revenues from sales to our four largest customers. If we are unable to continue to sell coal to those customers on terms, including volume and pricing, under existing agreements, or if we are unable to find another customer to purchase such lost volume, our cash flows, financial condition and results of operations could be adversely affected.

If our customers do not extend existing contracts or enter into new long-term contracts for coal, the stability and profitability of our operations could be affected.

During our fiscal year ended December 31, 2002, approximately 94% of the coal we sold was under contracts with terms of one year or more. The profitability of our long-term coal supply contracts depends on a variety of factors, which vary from contract to contract and fluctuate during the contract term, and includes our production costs and other factors. Price changes, if any, provided in long-term supply contracts are not intended to reflect our cost increases, and therefore increases in our costs may reduce our profit margins. In addition, in periods of declining market prices, provisions for adjustment or renegotiation of prices and other provisions may increase our exposure to short-term coal price volatility.

In addition, some supply contracts contain provisions that allow the customer to suspend or terminate performance under the contract upon the occurrence or continuation of specified events. These events typically include:

If a substantial portion of our long-term contracts are terminated, we would be adversely affected to the extent that we are unable to find other customers at the same level of profitability.

As electric utilities adjust to the Phase II requirements of the Clean Air Act and the possible deregulation of their industry, they are becoming increasingly less willing to enter into coal supply contracts with terms of more than one year. Instead, these utilities are purchasing higher percentages of coal on the spot market. Spot market prices tend to be more volatile than contractual prices, which could make our results of operations more volatile.

Disputes with our customers concerning contracts can result in litigation, which could result in our paying substantial damages.

From time to time, we have disputes with our customers over the provisions of long-term contracts relating to, among other things, coal quality, pricing, quantity and delays in delivery. We may not be able to resolve all of these disputes in a satisfactory manner, which could result in our paying substantial damages or otherwise harm our relationships with our customers.

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On April 16, 2002, Appalachian Power Company, a subsidiary of American Electric Power, filed suit against us alleging that we improperly claimed force majeure with respect to a tonnage shortfall under our contracts with them in 2000 and 2001. The complaint sought to recover, among other things, the additional cost they incurred in purchasing substitute coal. The dispute has been settled and an order dismissing the lawsuit, with prejudice, was entered by the court on July 15, 2003. The settlement will not have a material impact upon our consolidated financial position, cash flows or results of operations.

We have significant obligations for long-term employee benefits for which we accrue based upon assumptions which, if inaccurate, could result in our being required to expend greater amounts than anticipated.

We provide various long-term employee benefits to inactive and retired employees. We accrue amounts for these obligations. The current and non-current portions of these obligations, as reflected in our consolidated financial statements at December 31, 2002, included:

These obligations have been estimated based on assumptions, which are described in the notes to our consolidated financial statements. However, if our assumptions are inaccurate, we could be required to expend greater amounts than anticipated. These obligations are not funded. In addition, several states in which we operate consider changes in workers’ compensation laws from time to time. Such changes, if enacted, could adversely affect us.

On June 14, 2003, the West Virginia legislature passed a workers’ compensation bill that was sponsored by the employer community to address growing issues surrounding the solvency of the state’s workers’ compensation program. The legislation is designed to improve practices within the Workers’ Compensation system by restructuring the Workers’ Compensation Division and limiting and tightening benefit payments. The legislation also authorizes additional funding to address solvency concerns. The legislature approved technical amendments to the workers’ compensation bill on June 30, 2003 and the governor approved the bill on July 17, 2003. This legislation should help to stabilize the workers’ compensation program and reduce costs for both self-insured employers and subscribing employers. However, it is difficult to predict the actual impact the legislation will have on either future costs or premiums.

Union-represented labor creates an increased risk of work stoppages and higher labor costs.

Seven of our coal processing plants and one of our smaller surface mines have a workforce that is represented by the United Mine Workers of America. While less than 5% of our total workforce at December 31, 2002 was represented by the United Mine Workers of America, these seven processing plants handled approximately 35% of our coal production in fiscal 2002. There could be an increased risk of strikes and other related work actions, in addition to higher labor costs, associated with these operations. We have also experienced some union organizing campaigns at some of our open shop facilities within the past five years. If some or all of our current open shop operations were to become union represented, we could incur additional risk of work stoppages and higher labor costs. Increased labor costs or work stoppages could adversely affect the stability of production and reduce our revenues.

A shortage of skilled labor in the Central Appalachian region could pose a risk to achieving high labor productivity and competitive costs.

Coal mining continues to be a labor-intensive industry. In 2001, a shortage of trained coal miners developed in the Central Appalachian region causing us to hire a large number of mine workers with less experience than our existing workforce. While we did not experience this shortage in 2002, if another shortage of skilled labor were to arise, our productivity could decrease and our costs could increase. Such a lack of skilled miners could have an adverse impact on our labor productivity and cost and our ability to expand production in the event there is an increase in the demand for coal.

Deregulation of the electric utility industry could lead to efforts to reduce coal prices.

Deregulation of the electric utility industry, when implemented, will enable industrial, commercial and residential customers to shop for the lowest cost supply of electricity. This fundamental change in the power industry may result in efforts to reduce coal prices.

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We are subject to being adversely affected by the potential inability to renew or obtain surety bonds.

Federal and state laws require bonds to secure our obligations to reclaim lands used for mining, to pay federal and state workers’ compensation, and to satisfy other miscellaneous obligations. These bonds are typically renewable annually. Surety bond issuers and holders may not continue to renew the bonds or may demand additional collateral upon those renewals. Our failure to maintain, or inability to acquire, surety bonds that are required by state and federal law would have a material adverse effect on us. That failure could result from a variety of factors including:

Risks Related to the Notes and our Common Stock

Because the notes rank below our senior secured debt, you may not receive full payment on your notes.

In the event of a default or our liquidation, before paying principal and interest on the notes, we must first make payments on our existing and future senior secured debt, including all outstanding amounts under our new credit facilities. As of March 31, 2003, after giving effect to the offering of the notes, we had approximately $136.2 million of senior secured indebtedness.

A.T. Massey is the borrower under our new credit facilities. Our new credit facilities are guaranteed by us and are secured by substantially all of our assets. If we are unable to repay amounts on our secured debt, the lenders could proceed against the collateral securing the debt and we may not have enough assets left to pay you. In addition, the credit facilities restrict dividends to us from our subsidiaries and prohibit us from receiving distributions to pay the notes, or from purchasing, redeeming or otherwise acquiring the notes if a default exists under our secured credit facilities. For further information about our refinancing activities, see “Refinancing” on page 24.

The notes are not secured by any of our assets. If we become insolvent or are liquidated, or if our debt under our credit facilities is accelerated as a result of a cross-default provision in our outstanding debt or otherwise, the lenders under such facilities would be entitled to exercise the remedies available to secured lenders under applicable law. Our bank lenders would have a claim on substantially all of our assets. Accordingly, there may be no assets remaining for you, or any remaining assets may be insufficient to pay you in full.

The guarantee may not be enforceable because of fraudulent conveyance laws.

The obligation of A.T. Massey, as the guarantor of the notes, may be subject to challenge under state, federal or foreign fraudulent conveyance or transfer laws. Under state and federal laws, if a court, in a lawsuit by an unpaid creditor or representative of creditors of A.T. Massey, such as a trustee in bankruptcy or A.T. Massey in its capacity as debtor-in-possession, were to find that, at the time such obligation was incurred, A.T. Massey, among other things:

a court could void A.T. Massey’s obligation under its guarantee, and direct the return of any payment made under the guarantee to A.T. Massey or to a fund for the benefit of its creditors.

Moreover, regardless of the factors identified above, such court could void A.T. Massey’s obligation, and direct such repayment, if it found that the obligation was incurred with the intent to hinder, delay, or defraud A.T. Massey’s creditors. In that event, the holder of the notes would not have the benefit of A.T. Massey’s guarantee and would have to look for payment solely from us.

The measure of insolvency for purposes of the above will vary depending upon the law of the jurisdiction being applied. Generally, however, an entity would be considered insolvent:

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If the guarantee is released, the notes will be our obligations exclusively and our ability to service the notes will depend upon us receiving distributions or similar payments from A. T. Massey through which we conduct all of our operations.

Generally, creditors of A.T. Massey will have claims to its assets and earnings that are superior to the claims of our creditors, except to the extent the claims of our creditors are guaranteed by A.T. Massey. In addition to the guarantee provided by A.T. Massey on the notes, A.T. Massey also guarantees our $283 million aggregate principal amount of 6.95% Senior Notes due 2007. In addition, A.T. Massey is the borrower under our new credit facilities. The new credit facilities restrict dividends to us from our subsidiaries and prohibit us from receiving distributions to pay the notes if a default exists under our secured credit facilities. The indenture governing the notes and the indenture governing the 6.95% Senior Notes provide for the release of the guarantee of the notes and the 6.95% Senior Notes by A.T. Massey in certain circumstances, including if A.T. Massey is no longer the primary obligor under or a guarantor of our existing or future revolving credit facilities or other long-term debt. Because all of our operations are conducted through A.T. Massey, our cash flow and therefore our ability to service debt, including the notes, primarily would depend upon the earnings of A.T. Massey and the distribution of those earnings or upon loans or other payments of funds by A.T. Massey, to us. A.T. Massey is a separate and distinct legal entity and has no obligation to pay any amounts due pursuant to the notes or to make any funds available to us to repay our obligations, whether by dividends, loans or other payments. In addition, the payment of dividends and the making of loans and advances to us by A.T. Massey may be subject to statutory or contractual restrictions other than those in our credit facilities and will be contingent upon the earnings of A.T. Massey and subject to various business considerations.

We may not have the ability to raise the funds necessary to purchase the notes upon a Fundamental Change or other Purchase Date, as required by the indenture governing the notes.

On May 20, 2009, holders of the notes may require us to purchase their notes for cash. In addition, holders of the notes also may require us to purchase their notes upon a Fundamental Change as described under “Description of the Notes—Fundamental Change Requires Purchase of the Notes by Us at the Option of the Holder.” A Fundamental Change also may constitute an event of default, and result in the acceleration of the maturity of our then existing indebtedness, under another indenture or other agreement. We cannot assure you that we would have sufficient financial resources, or would be able to arrange financing, to pay the purchase price for the notes tendered by holders. Failure by us to purchase the notes when required will result in an event of default with respect to the notes.

The trading prices for the notes will be directly affected by the trading prices of our common stock.

The trading prices of the notes in the secondary market will be directly affected by the trading prices of our common stock, our ratings with major credit rating agencies, the prevailing interest rates being paid by companies similar to us, and the overall condition of the financial and credit markets. It is impossible to predict the price of our common stock, the prevailing interest rates or the condition of the financial and credit markets. Trading prices of our common stock will be influenced by our operating results and prospects and by economic, financial and other factors. In addition, general market conditions, including the level of, and fluctuations in, the trading prices of stocks generally, and sales of substantial amounts of common stock by us in the market after the offering of the notes, or the perception that such sales could occur, could affect the price of our common stock. Credit rating agencies continually revise their ratings for companies that they follow, including us. Any ratings downgrade could adversely affect the trading price of the notes or the trading market for the notes to the extent a trading market for the notes develops. The condition of the financial and credit markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future. Fluctuations in interest rates may give rise to arbitrage opportunities based upon changes in the relative value of our common stock. Any trading by arbitrageurs could, in turn, affect the trading prices of the notes.

If you hold notes, you will not be entitled to any rights with respect to our common stock, but you will be subject to all changes made with respect to our common stock.

If you hold notes, you will not be entitled to any rights with respect to our common stock (including, without limitation, voting rights and rights to receive any dividends or other distributions on our common stock), but you will be subject to all changes affecting the common stock. You will only be entitled to rights on the common stock if and when we deliver shares of common stock to you in exchange for your notes and in limited cases under the anti-dilution adjustments of the notes. For example, in the event that an amendment is proposed to our restated certificate of incorporation or bylaws requiring stockholder approval and the record date for determining the stockholders of record entitled to vote on the amendment occurs prior to delivery of the common stock, you will not be entitled to vote on the amendment, although you will nevertheless be subject to any changes in the powers, preferences or special rights of our common stock.

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We may issue additional shares of common stock and thereby materially and adversely affect the price of our common stock.

We are not restricted from issuing additional common stock during the life of the notes and have no obligation to consider your interests for any reason. If we issue additional shares of common stock, it may materially and adversely affect the price of our common stock and, in turn, the price of the notes.

There is no established trading market for the notes and no guarantee that a market will develop or that you will be able to sell your notes.

The notes sold using this prospectus will not be eligible for trading in the Private Offerings, Resales and Trading through Automatic Linkages Market, commonly referred to as the Portal Market, and we have not listed, and do not intend to list, the notes on any securities exchange or automated quotation system. Future trading prices of the notes will depend on many factors, including, among other things, prevailing interest rates, our operating results and the market for similar securities. Generally, the liquidity of, and trading market for, the notes may also be materially and adversely affected by declines in the market for similar debt securities. Such a decline may materially and adversely affect such liquidity and trading independent of our financial performance and prospects. At the time of the closing of the private placement of the notes by us, the initial purchasers advised us that they intended to make a market in the notes. However, the initial purchasers are not obligated to do so and any market-making activity may be discontinued at any time without notice. There can be no assurance that a market for the notes will develop.

Our charter documents and Delaware law may make it harder for others to obtain control of us even though some stockholders might consider such a development favorable, which may adversely affect our stock price.

Our charter documents and Delaware law may delay, inhibit or prevent someone from gaining control of us through a tender offer, business combination, proxy contest or some other method and for you to receive any takeover premium for our common stock even if some of our stockholders might believe a change in control is desirable. See “Description of Our Common Stock—Anti-Takeover Provisions of Our Restated Certificate of Incorporation and Bylaws and Delaware Law.”

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FORWARD-LOOKING STATEMENTS

We make certain comments and disclosures in this prospectus which may be forward-looking in nature. Examples include statements related to our growth, the adequacy of funds to service debt and our opinions about trends and factors that may impact future operating results. These forward-looking statements could also involve, among other things, statements regarding our intent, belief or expectation with respect to:

Any forward-looking statements are subject to the risks, uncertainties and assumptions that could cause actual results of operations, financial condition, or liquidity to differ materially from those expressed or implied in such forward-looking statements. These assumptions would be based on facts and conditions as they exist at the time such statements are made as well as predictions as to future facts and conditions, the accurate prediction of which may be difficult and involve the assessment of events beyond our control.

We wish to caution readers that forward-looking statements, including disclosures using words such as we “believe,” “anticipate,” “expect,” “estimate” and similar statements, are subject to certain risks and uncertainties, which could cause actual results to differ materially from expectations. Any forward-looking statements should be considered in context with the various disclosures made by us about our businesses, including without limitation the risk factors more specifically described under “Risk Factors.”

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USE OF PROCEEDS

We will not receive any of the proceeds of sales of any of the securities covered by this prospectus by the selling securityholders. See “Selling Securityholders” for a list of those entities receiving proceeds from the sale of notes.

PRICE RANGE OF COMMON STOCK; DIVIDENDS

Our common stock trades on the New York Stock Exchange, or NYSE, under the symbol “MEE.” The following table sets forth on a per share basis the high and low intra-day prices on the NYSE, based upon published financial sources for our common stock and the dividends declared on each share of common stock for the periods indicated.

For a more detailed discussion of our common stock, see “Description of Our Common Stock.”

The reported last sale price of our common stock on August 1, 2003 on the NYSE was $11.31 per share. As of June 30, 2003, there were 9,769 holders of record of our common stock and 75,315,148 shares of common stock outstanding.

Our current dividend policy anticipates the payment of quarterly dividends in the future. We are restricted by our credit facilities from declaring and paying cash dividends in excess of $0.16 per share (prior to giving effect to any stock split after July 2, 2003) in any fiscal year. There are no other restrictions, other than those set forth under Delaware law, our state of incorporation, on our ability to declare and pay dividends. The declaration and payment of dividends to holders of our common stock will be at the discretion of our board of directors and will be dependent upon our future earnings, financial condition, and capital requirements as well as the terms of our financing agreements.

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CAPITALIZATION

The following table sets forth our short-term debt and capitalization as of March 31, 2003 on an actual basis and on an as adjusted basis reflecting the issuance of the notes and the application of the net proceeds from the offering of the notes.

The information set forth below should be read in conjunction with “Selected Consolidated Financial and Operating Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Use of Proceeds” included elsewhere in this prospectus and our consolidated financial statements and related notes incorporated by reference in this prospectus.

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REFINANCING

Our prior $400 million revolving credit facilities that we entered into on November 26, 2002, were to expire on November 25, 2003. On May 29, 2003, we issued the $132 million of notes covered by this prospectus in a private placement. The private placement of the notes was the first step in our initiative to refinance our prior revolving credit facilities, as the proceeds were used to repay outstanding borrowings, which permanently reduced our commitments, in a like amount, under those facilities.

On July 2, 2003, we completed the refinancing of our prior revolving credit facilities. A.T. Massey executed a $355 million secured financing package consisting of a $105 million revolving credit facility and a $250 million term loan. The new revolving credit facility includes a $55 million sublimit for the issuance of letters of credit. We and A.T. Massey’s direct and indirect subsidiaries have guaranteed these new credit facilities. The revolver expires on January 1, 2007 and the term loan expires on July 2, 2008, with an early maturity of January 1, 2007 if our $283 million of 6.95% Senior Notes have not been refinanced by that date.

A portion of the proceeds from the sale of the notes, $127.5 million (net of expenses), and the $250 million from the term loan were used to repay all outstanding amounts under the prior revolving credit facilities and under our accounts receivable securitization program. Of the remaining proceeds, $100 million was placed in restricted, interest bearing accounts (“Restricted Cash”) to collateralize current and future surety bonds and letters of credit issued outside our credit facility. No drawings were made under the revolving credit facility and no letters of credit were issued under the sublimit.

The financing package provides the lenders with collateral for borrowings under the new facilities, including all capital stock of our subsidiaries and substantially all of our assets, now owned or at any time hereafter acquired by us, excluding among other things, Restricted Cash to the extent it collateralizes surety bonds and letters of credit issued outside of the new credit facilities, the value of properties that might exceed the lien sharing threshold established in the indentures related to the notes and the 6.95% Senior Notes, and certain other assets associated with our accounts receivable securitization program. Borrowings under these facilities bear interest based on either (1) the Eurodollar Base Rate or (2) the Base Rate (both as defined in the new credit facility agreement) plus a margin, which for the revolving credit facility is based on our leverage ratio, as defined in the financial covenants requirement of the facilities agreement, and for the term loan is equal to 3.50% for the Eurodollar Base Rate and 2.50% for the Base Rate. The initial borrowings under the term loan were under the Base Rate.

The new credit facilities contain financial covenants requiring that we meet certain financial tests. Our failure to comply with these covenants could result in an event of default, which, if not cured or waived, could have a material adverse effect on our company. The financial covenants consist of a maximum leverage ratio, a maximum secured leverage ratio, a minimum interest coverage ratio and a limitation on capital expenditures. The leverage ratio requires that we not permit the ratio of total financial covenant debt (as defined in the new credit facility agreement) at the end of any quarter to consolidated EBITDA (as defined in the credit facility agreement) for the four quarters then ended to exceed a specific amount. The secured leverage ratio requires that we not permit the ratio of total secured financial covenant debt (as defined in the new credit facility agreement) at the end of any quarter to consolidated EBITDA for the four quarters then ended to exceed a specific amount. The interest coverage ratio requires that we not permit the ratio of our consolidated EBITDA to interest expense for the four quarters then ended to be less than a specified amount. The capital expenditures covenant limits capital expenditures to a specified amount during each fiscal year. In the event we violate any of the financial covenants and do not affect a timely cure or receive a waiver from the lenders under our credit facilities, the credit facilities provide that the administrative agent under such facilities shall, if requested by holders of at least 50% of the aggregate amount of the revolver and 50% of the aggregate amount of the term loan, terminate the credit facilities and declare the loans immediately due and payable.

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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The following table presents our selected consolidated financial and operating data for, and as of the end of, each of the periods indicated. The selected consolidated financial data for, and as of the end of, each of the years ended December 31, 2002 and October 31, 2001, 2000, 1999 and 1998, and the two months ended December 31, 2001, are derived from our audited consolidated financial statements. The selected consolidated financial data for, and as of the end of, the three months ended March 31, 2003 and 2002, are derived from our unaudited consolidated financial statements, and in the opinion of management include all adjustments, consisting only of normal recurring accruals, that are necessary for a fair presentation of our financial position and operating results for these periods. The selected consolidated financial and operating data are not necessarily indicative of the results that may be expected for the entire year. The selected consolidated financial and operating data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes included or incorporated by reference in this prospectus.

Effective January 1, 2002, we changed our fiscal year end from October 31 to December 31 to enhance the financial community’s ability to analyze and compare our company to others within the coal industry. As a requirement of this change, we reported results for November and December 2001 as a separate transition period, with the results for the corresponding period of 2000 presented for comparative purposes. Certain amounts have been reclassified to conform with the 2003 presentation.

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