SEC Info℠

Home

Search

My Interests

Help

Sign In

Please Sign In

Alpha Appalachia Holdings, Inc. – ‘10-K’ for 12/31/05

On:  Thursday, 3/16/06, at 3:39pm ET   ·   For:  12/31/05   ·   Accession #:  1193125-6-56614   ·   File #:  1-07775

Previous ‘10-K’:  ‘10-K’ on 3/16/05 for 12/31/04   ·   Next:  ‘10-K’ on 3/1/07 for 12/31/06   ·   Latest:  ‘10-K/A’ on 4/19/11 for 12/31/10

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

 Text Wildcards:  ? (any letter/digit),  * (many).  Search Logic:  for Documents:  & (and),  | (or);  for Text:  | (anywhere),  "(&)" (near).  Details... 

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

 3/16/06  Alpha Appalachia Holdings, Inc.   10-K       12/31/05    9:2.0M                                   RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Massey Energy Company                               HTML   1.31M 
 2: EX-10.4     Amendment to Credit Agreement                       HTML      7K 
 3: EX-21       Subsidiaries                                        HTML     81K 
 4: EX-23       Consent of Ernst & Young                            HTML     13K 
 5: EX-24       Power of Attorney                                   HTML     27K 
 6: EX-31.1     Certification per Sarbanes-Oxley Act (Section 302)  HTML     14K 
 7: EX-31.2     Certification per Sarbanes-Oxley Act (Section 302)  HTML     14K 
 8: EX-32.1     Certification per Sarbanes-Oxley Act (Section 906)  HTML      8K 
 9: EX-32.2     Certification per Sarbanes-Oxley Act (Section 906)  HTML      8K 

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2005

OR

For the transition period from              to             

Commission File No. 1-7775

MASSEY ENERGY COMPANY

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (804) 788-1800

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check One):.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The aggregate market value of the Common Stock held by non-affiliates of the registrant on June 30, 2005, was $2,899,253,651 based on the last sales price reported that date on the New York Stock Exchange of $37.72 per share. In determining this figure, the Registrant has assumed that all of its directors and executive officers are affiliates. Such assumptions should not be deemed to be conclusive for any other purpose.

Common Stock, $0.625 par value, outstanding as of February 28, 2006 — 81,976,239 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates certain information by reference from the registrant’s definitive proxy statement for the 2006 annual meeting of shareholders, which proxy statement will be filed no later than 120 days after the close of the registrant’s fiscal year ended December 31, 2005.

Table of Contents

Forward Looking Statements

From time to time, Massey Energy Company (except as the context otherwise requires, the terms “Massey” or the “Company” as used herein shall include Massey Energy Company, its wholly owned subsidiary, A.T. Massey Coal Company, Inc. (“A.T. Massey”) and A.T. Massey’s subsidiaries) makes certain comments and disclosures in reports, including this report, or through statements made by its officers which may be forward-looking in nature. Examples include statements related to the Company’s future outlook, anticipated capital expenditures, projected cash flows and borrowings, and sources of funding. These forward-looking statements could also involve, among other things, statements regarding the Company’s intent, belief or expectation with respect to:

Any forward-looking statements are subject to the risks and uncertainties that could cause actual cash flows, results of operations, financial condition, cost reductions, acquisitions, dispositions, financing transactions, operations, expansion, consolidation and other events to differ materially from those expressed or implied in such forward-looking statements. Any forward-looking statements are also subject to a number of assumptions regarding, among other things, future economic, competitive and market conditions generally. 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 the Company’s control.

The Company cautions readers that forward-looking statements, including disclosures which use words such as the Company “believes,” “anticipates,” “expects,” “estimates,” “intends,” “plans,” “projects” and similar statements, are subject to certain risks, trends 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 the Company about its businesses, including without limitation the risk factors more specifically described below in Item 1A, Risk Factors.

i

Table of Contents

2005 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

Annual Shareholders Meeting

Massey’s 2006 Annual Meeting of Shareholders will be held at 9:00 a.m. EDT on Tuesday, May 16, 2006 at The Jefferson Hotel, 101 West Franklin Street, Richmond, Virginia 23220.

ii

Table of Contents

Part I

Because certain terms used in the coal industry may be unfamiliar to many investors, the Company has provided a Glossary of Selected Terms beginning on page 17 at the end of Item 1, Business.

Item 1. Business

Massey produces, processes and sells bituminous coal of steam and metallurgical grades, primarily of a low sulfur content, through its 22 processing and shipping centers, called “Resource Groups,” many of which receive coal from multiple coal mines. Massey currently operates 31 underground mines (four of which employ both room and pillar and longwall mining) and 16 surface mines (with seven highwall miners in operation) in West Virginia, Kentucky and Virginia. The number of mines that Massey operates may vary from time to time depending on a number of factors, including the existing demand for and price of coal, exhaustion of economically recoverable reserves and availability of experienced labor. Massey’s steam coal is primarily purchased by utilities and industrial clients as fuel for power plants. Its metallurgical coal is used primarily to make coke for use in the manufacture of steel. As measured by 2005 revenue, Energy Ventures Analysis, Inc. (“EVA”) ranks Massey as the fourth largest coal company in the United States (the “U.S.”), and the largest in the Central Appalachian region.

A.T. Massey was originally incorporated in Richmond, Virginia in 1920 as a coal brokering business. In the late 1940s, A.T. Massey expanded its business to include coal mining and processing. In 1974, St. Joe Minerals acquired a majority interest in A.T. Massey. In 1981, St. Joe Minerals was acquired by Fluor Corporation. A.T. Massey was wholly owned by Fluor Corporation from 1987 until November 30, 2000, when the Company completed a reverse spin-off (the “Spin-Off”), which divided it into the spun-off corporation, “new” Fluor Corporation (“New Fluor”), and Fluor Corporation, subsequently renamed Massey Energy Company, which retained the Company’s coal-related businesses.

During 2005, Massey’s produced coal revenues increased by 22% to $1.78 billion on produced coal sales of 42.3 million tons. Exports decreased 21% to 5.3 million tons. In 2005, the Company recorded a net loss of $101.6 million or $1.33 per share, including pre-tax charges of $219.0 million ($216.2 million after-tax or $2.83 per basic share) related to Massey’s debt repurchase and exchange offer discussed below. Net income in 2005 also included pre-tax gains totaling approximately $84.1 million ($57.3 million after-tax or $0.74 per basic share) related to the sale of the Company’s ownership interest in the property known as Big Elk Mining Company and a non-cash exchange of coal reserves.

In an effort to capitalize on historically high coal prices due to increased market demand, continuing in 2005 Massey focused on building capacity, mainly by expanding its lower cost surface mine operations and purchasing additional surface and underground equipment. Total capital spending for 2005 was $346.6 million, including approximately $13.8 million in operating lease buyouts. The Company’s total workforce was 5,709 employees at the end of 2005.

On March 31, 2005, the Company sold its ownership interest in Big Elk Mining Company to a privately held coal company for total consideration of $52.5 million in cash and non-interest bearing notes, plus the assumption of reclamation liabilities associated with the property of approximately $10.1 million. The Big Elk operations included a preparation plant, rail loadout and approximately 12 million tons of coal reserves. Included in the sale were approximately 5 million tons of coal reserves in Mingo and McDowell counties in West Virginia held by two separate subsidiaries of the Company. The Company received $22.5 million in cash at closing and $27.0 million in December from the early collection of a note receivable. The total realized gain on the sale in 2005 was $34.0 million (after-tax).

During the third quarter of 2005, the Company recognized a gain of $23.3 million (after-tax) from the exchange of coal reserves.

On December 21, 2005, the Company completed the initial private placement of $760.0 million of 6.875% senior notes due 2013, which were issued at a discount price of $992.43 per $1,000 note (the “6.875% Notes”). The Company used approximately $562.6 million of the net proceeds of the new notes to fund the tender offer and subsequent redemption of the Company’s 6.95% senior notes due 2007 (the “6.95% Notes”), the tender offer for the Company’s 4.75% convertible senior notes due 2023 (the “4.75% Notes”), and the incentivized conversion, through an exchange offer, of the Company’s 2.25% convertible senior notes due 2024 (the “2.25% Notes”), including premiums, consent payments and related expenses.

On December 21, 2005, the Company retired $189.5 million of the 6.95% Notes from holders who had tendered their notes. Pursuant to the redemption provisions of the 6.95% Notes, Massey redeemed the remaining $30.6 million of the 6.95% Notes on December 27, 2005. On December 28, 2005, Massey retired $131.3 million of the 4.75% Notes from holders who had tendered their notes, effectively reducing the diluted share count of the Company’s common stock, $0.625 par value (“Common Stock”) by 6,768,956 shares. On December 28, 2005, Massey exchanged shares of its Common Stock with and made a cash payment to holders of $165.4 million of the 2.25% Notes that had been tendered. The exchange resulted in the issuance of an additional 4,921,186 shares of Common Stock.

1

Table of Contents

Industry Overview

A major contributor to the world energy supply, coal represents approximately 24.4% of the world’s primary energy consumption according to the World Coal Institute (“WCI”). The primary use for coal is to fuel electric power generation. In calendar year 2005, it is estimated that coal generated 52% of the electricity produced in the U.S. according to Platts Analytics and Forecasting (“Platts”).

The U.S. is the second largest coal producer in the world, exceeded only by China. Other leading coal producers include India, Australia, Russia and Indonesia. The U.S. is the largest holder of coal reserves in the world, with over 250 years supply at current production rates. U.S. coal reserves are more plentiful than oil or natural gas, with coal representing approximately 70% of the nation’s fossil fuel reserves according to EVA. EVA compares the total probable heat value (British thermal units per pound) of the demonstrated coal reserve tonnage to the heat value of other fossil fuel energy resources using information prepared by the Energy Information Administration, a statistical agency of the U.S. Department of Energy (“EIA”).

U.S. coal production has more than doubled during the last 30 years. In 2005, total coal production as estimated by the EIA was 1.1 billion tons. The primary producing regions by tons were the Powder River Basin (40%), Central Appalachia (21%), Midwest (11%), Northern Appalachia (12%), West (other than the Powder River Basin) (13%) and other (3%). All of the Company’s coal production comes from the Central Appalachian region. The EIA estimates that approximately 67% of U.S. coal is produced by surface mining methods. The remaining 33% is produced by underground mining methods that include room and pillar mining and longwall mining (more fully described in Item 1, Business, under the heading “Mining Methods”).

Coal is used in the U.S. by utilities to generate electricity, by steel companies to make products with blast furnaces, and by a variety of industrial users to heat and power foundries, cement plants, paper mills, chemical plants and other manufacturing and processing facilities. Significant quantities of coal are also exported from both East and West Coast terminals. The breakdown of 2004 U.S. coal consumption, as estimated by the EIA, is as follows:

Coal has long been favored as an electricity generating fuel by regulated utilities because of its basic economic advantage. The largest cost component in electricity generation is fuel. This fuel cost is typically lower for coal than competing fuels such as oil and natural gas on a Btu-comparable basis. Platts estimated the average total production costs of electricity, using coal and competing generation alternatives in 2005 as follows:

There are factors other than fuel cost that influence each utility’s choice of electricity generation mode, including facility construction cost, access to fuel transportation infrastructure, environmental restrictions, and other factors. The breakdown of U.S. electricity generation by fuel source in 2005, as estimated by Platts, is as follows:

2

Table of Contents

Demand for electricity has historically been driven by U.S. economic growth. Because coal-fired generation is used in most cases to meet base load requirements, coal consumption has generally grown at the pace of electricity demand growth.

According to the WCI, the U.S. ranks seventh among worldwide exporters of coal. Australia is the largest exporter, with other major exporters including Indonesia, China, South Africa, Russia, Columbia and Canada. According to the EIA, U.S. exports, which had decreased by over 61% between 1992 and 2002 as a result of increased international competition and the U.S. dollar’s historic strength in comparison to foreign currencies, increased by 21% from 2002 to 2004. The usage breakdown for 2004 U.S. exports of 48 million tons was 44% for electricity generation and 56% for steel making. In 2004, U.S. coal exports were shipped to more than 30 countries. As the international coal markets continue to expand, primarily as a result of economic growth in China, the U.S. acts as a “swing supplier” to buyers in Asia. In 2004, buyers of both steam and metallurgical coal from South Korea, Japan, India and Taiwan increased purchases of U.S. coal. However, the largest purchaser of U.S. exported utility coal in 2004 continued to be Canada, which took 14.0 million tons or 66% of total utility coal exports. The largest purchasers of U.S. exported metallurgical coal were Canada, which imported 3.6 million tons, or 14%, and Brazil, which imported 3.4 million tons, or 13%. Utility coal exports to Ontario, Canada, however, will be negatively impacted as the government makes progress toward shutting down all five of Ontario’s coal plants, which accounted for approximately 25% of the province’s generating capacity. The first of the five coal-fired plants was closed in April of 2005 and the remainder are scheduled for closure over the next several years.

Depending on the relative strength of the U.S. dollar versus currencies in other coal producing regions of the world, U.S. producers may export more or less coal into foreign countries as they 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. In 2004, according to the EIA, coal imported into the U.S. reached a record level of 27 million tons, while still representing less than 3% of total U.S. coal consumption. Columbia continued to dominate as the source for coal imported into the U.S., accounting for 61% of imports, followed by Venezuela, Canada and Indonesia. During 2005, the U.S. dollar weakened somewhat, making imported coal more competitive with U.S. produced coal, and negatively impacting the competitiveness of U.S. exports in some overseas markets.

Since 2003, a significant demand/supply imbalance of coal has developed, resulting in record high prices for coal producers in the U.S. Increased worldwide demand has primarily been driven by significantly higher prices for oil and natural gas and economic expansion, particularly in China and elsewhere in Asia. At the same time, infrastructure and regulatory limitations in China have contributed to a tightening of worldwide coal supply, affecting global prices of coal. China’s growth has caused an increase in worldwide demand for raw materials and a disruption of expected coal exports to Japan, Korea, India and other countries. Demand has also been impacted by the rapid rise in pricing for alternative sources of energy, primarily natural gas and oil. Both of these fuel sources remain substantially higher priced than coal on a heating value (Btu) basis.

Metallurgical grade coal is distinguished by special quality characteristics that include high carbon content, volatile matter, low expansion pressure, low sulfur content, and various other chemical attributes. High vol met coal is also high in heat content (as measured in Btus), and therefore is desirable to utilities as fuel for electricity generation. Consequently, high vol met coal producers have the ongoing opportunity to select the market that provides maximum revenue. The premium price offered by steel makers for the metallurgical quality attributes is typically higher than the price offered by utility coal buyers that value only the heat content. The primary concentration of U.S. metallurgical coal reserves is located in the Central Appalachian region. EVA estimates that the Central Appalachian region supplied 82% of domestic metallurgical coal and 71% of U.S. exported metallurgical coal during 2005.

For utility coal buyers, the primary goal is to maximize heat content, with other specifications like ash content, sulfur content, and size varying considerably among different customers. In 2005, low sulfur coals such as those produced in the western U.S. and in Central Appalachia, were highly sought after due to significantly increased SO₂ allowance prices. SO₂ allowances permit utilities to emit a higher level of SO₂ than otherwise required under the Clean Air Act regulations. Industrial users of coal typically purchase high Btu products with the same type of quality focus as utility coal buyers. Because most industrial coal consumers use considerably less tonnage than electric generating stations, they typically prefer to purchase coal that is screened and sized to specifications that streamline coal handling processes. Due to the more stringent size and quality specifications, industrial customers often pay a 10% to 15% premium above utility coal pricing (on comparable quality). The largest regional supplier to the industrial market sector has historically been Central Appalachia, which, according to EVA, supplied approximately 34% of all U.S. industrial coal demand in 2005.

3

Table of Contents

Coal shipped for North American consumption is typically sold at the mine loading facility with transportation costs being borne by the purchaser. Offshore export shipments are normally sold at the ship-loading terminal, with the purchaser paying the ocean freight. According to the National Mining Association (“NMA”), approximately two-thirds of U.S. coal production in recent years was shipped via railroads. Final delivery to consumers often involves more than one transportation mode. A significant portion of U.S. production is delivered to customers via barges on the inland waterway system and ships loaded at Great Lakes ports.

Neither Massey nor any of its subsidiaries is affiliated with or has any investment in the EIA, EVA, Platts or WCI. Massey is a member of the NMA.

Mining Methods

Massey produces coal using four distinct mining methods: underground room and pillar, underground longwall, surface and highwall mining, which are explained as follows.

In the underground room and pillar method of mining, continuous mining machines cut three to nine entries into the coal bed and connect them by driving crosscuts, leaving a series of rectangular pillars, or columns of coal, to help support the mine roof and control the flow of air. Generally, openings are driven 20 feet wide and the pillars are 40 to 100 feet wide. As mining advances, a grid-like pattern of entries and pillars is formed. When mining advances to the end of a panel, retreat mining may begin. In retreat mining, as much coal as is feasible is mined from the pillars that were created in advancing the panel, allowing the roof to fall. When retreat mining is completed to the mouth of the panel, the mined panel is abandoned.

In longwall mining (which is a type of underground mining), a shearer (cutting head) moves back and forth across a panel of coal typically about 1,000 feet in width, cutting a slice approximately 3.5 feet deep. The cut coal falls onto a flexible conveyor for removal. Longwall mining is performed under hydraulic roof supports (shields) that are advanced as the seam is cut. The roof in the mined out areas falls as the shields advance.

Surface mining is used when coal is found close to the surface. This method involves the removal of overburden (earth and rock covering the coal) with heavy earth moving equipment and explosives, loading of the coal, replacing the overburden and topsoil after the coal has been excavated, reestablishing vegetation and plant life, and making other improvements that have local community benefit.

Highwall mining is used in connection with surface mining. A highwall mining system consists of a remotely controlled continuous mining machine, which extracts coal and conveys it via augers or belt conveyors to the portal. The cut is typically a rectangular, horizontal opening in the highwall (the unexcavated face of exposed overburden and coal in a surface mine) 11-feet wide and reaching depths of up to 1,000 feet. Multiple, parallel openings are driven into the highwall, separated by narrow pillars that extend the full depth of the hole.

Use of continuous mining machines in the room and pillar method of underground mining represented approximately 39% of Massey’s 2005 coal production. Production from underground longwall mining operations constituted approximately 12% of Massey’s 2005 production. Surface mining represented approximately 43% of Massey’s 2005 coal production. Massey has established large-scale surface mines in Boone and Nicholas Counties, West Virginia. Other Massey surface mines are smaller in scale. Massey surface mines also use highwall mining systems to produce coal from high overburden areas. Highwall mining represented approximately 6% of Massey’s 2005 coal production.

Mining Operations

Massey currently has 22 distinct Resource Groups, including 16 in West Virginia, five in Kentucky and one in Virginia. These complexes blend, process and ship coal that is produced from one or more mines, with a single complex handling the coal production of as many as eight distinct underground or surface mines. These mines have been developed at strategic locations in close proximity to the Massey preparation plants and rail shipping facilities. Coal is transported from Massey’s mining complexes to customers by means of railroad cars, trucks or barges, with rail shipments representing approximately 91% of 2005 coal shipments.

4

Table of Contents

The following table provides key operational information on Massey’s Resource Groups in 2005.

The following descriptions of the Company’s Resource Groups are current as of February 28, 2006.

West Virginia Resource Groups

Black Castle. The Black Castle complex includes a large surface mine, a highwall miner, the Homer III direct-ship loadout, a stoker plant, and the Omar preparation plant. In prior year reporting, the Omar preparation plant was reflected as part of the Omar Resource Group, which is now included within the Black Castle Resource Group. Some of the surface mine coal is trucked to the stoker plant where the coal is crushed and screened. The stoker product is trucked to river docks for barge delivery or trucked directly to customers. A portion of the coal is transported to the Omar plant via an underground belt conveyor system, where it is crushed and shipped to customers or, if the coal needs processing, it is trucked to the preparation plant at the Independence Resource Group for processing and shipment. The Omar preparation plant was not utilized for processing coal in 2005. The direct-ship facility at the preparation plant can crush 500 tons per hour and the preparation plant can process 800 tons per hour. The Omar preparation plant serves CSX rail system customers with unit train shipments of up to 110 railcars. Coal is also trucked to the Homer III loadout where it is crushed and shipped to customers by rail, trucked to river docks for barge delivery, or trucked directly to customers. The Homer III loadout serves CSX rail system customers with unit train shipments of up to 100 railcars.

5

Table of Contents

Delbarton. The Delbarton complex includes one underground room and pillar mine and a preparation plant. Production from the mine is transported to the Delbarton preparation plant via overland conveyor. The Delbarton preparation plant also processes coal from two surface mines of the Logan County Resource Group. The Delbarton preparation plant can process 600 tons per hour. The clean coal product is shipped to customers via the Norfolk Southern railway in unit trains of up to 110 railcars.

Eagle Energy. The Eagle Energy complex is currently inactive, but historically processed coal production from an adjacent underground longwall mine. The economically recoverable reserves in this mine were depleted in January 2000 and the operation was idled. The Eagle Energy preparation plant has a rated feed capacity of 750 tons per hour. Customers are served via CSX railway in unit trains of up to 90 railcars. Plans are under review to re-activate this complex using production from new mines on Massey controlled properties adjacent to the preparation plant.

Edwight. The Edwight complex includes two underground room and pillar mines, a surface mine, a highwall miner and the Goals preparation plant. In prior year reporting, one of the underground mines was reflected in the Independence Resource Group, the surface mine was reflected in the Progress Resource Group and the preparation plant was reflected in the Performance Resource Group. Production from all of the mines is transported via conveyor system to the Goals preparation plant. The Goals preparation plant can process 800 tons per hour. The rail loading facility serves CSX railway customers with unit trains of up to 100 railcars.

Elk Run. The Elk Run complex produces coal from three underground room and pillar mines, which deliver coal to its preparation plant by belt. Additionally, Elk Run processes coal for shipment that is produced by surface mines of the Progress Resource Group. Coal from these mines is transported via underground conveyor system. The Elk Run preparation plant has a processing capacity of 2,200 tons per hour. Elk Run also operates a 200 ton per hour stoker facility which produces screened, small dimension coal for certain of Massey’s industrial customers. Customer shipments are loaded on the CSX rail system in unit trains of up to 150 railcars.

Endurance. The Endurance complex includes a surface mine and a direct-ship loadout. In prior year reporting, the surface mine and direct-ship loadout were reflected in the Progress Resource Group. A portion of the production from the surface mine is loaded for shipment to customers at the direct ship loadout and the remainder is trucked to a conveyor belt, which transports the coal to the preparation plant at the Independence Resource Group for processing.

Green Valley. The Green Valley complex includes two underground room and pillar mines and a preparation plant. The Green Valley preparation plant receives coal from the two mines via truck and has a processing capacity of 600 tons per hour. The rail loading facility services customers on the CSX rail system with unit train shipments of up to 75 railcars.

Independence. The Independence complex includes the Revolution longwall mine, one underground room and pillar mine and a preparation plant. Production from the underground mine is transported via underground conveyor system to a stockpile, where it is transferred to trucks for processing at the Independence preparation plant. The Black Castle surface mine and highwall miner, the surface mine at the Endurance Resource Group, and the highwall miner at the Progress Resource Group transport coal requiring processing to the Independence preparation plant via conveyor belt and truck. The Independence plant has a processing capacity of 2,200 tons per hour. Customers are served via rail shipments on the CSX rail system in unit trains of up to 150 railcars.

Logan County. The Logan County complex includes five surface mines, two highwall miners, one underground room and pillar mine and the Aracoma longwall mine, plus the Bandmill preparation plant and the Feats loadout, all on the CSX rail system. Three surface mines and a highwall miner deliver coal to the Bandmill plant via truck and conveyor system, while both underground mines belt coal directly to this plant. Two surface mines deliver direct-ship coal to the Feats loadout by truck and conveyor system. The Feats loadout services customers via the CSX rail system with unit train shipments of up to 80 cars. A portion of the coal from two of the surface mines and all of the coal from one highwall miner is delivered by truck to the Delbarton preparation plant, which is on the Norfolk Southern rail system. The Bandmill preparation plant has a processing capacity of 1,800 tons per hour. The Bandmill rail loading facility services customers via the CSX rail system with unit train shipments of up to 150 cars.

Mammoth. The Mammoth complex operates two underground room and pillar mines and a preparation plant. The coal is transported to the preparation plant, with one mine using on-highway trucks and one using off-highway trucks to transport the coal to a conveyor system for further transport to the plant. The plant has a 1,200 tons per hour processing facility capacity with barge loading capabilities on the upper Kanawha River.

6

Table of Contents

Marfork. The Marfork complex includes five underground room and pillar mines, the Upper Big Branch longwall mine and a preparation plant. In prior year reporting, the Upper Big Branch longwall mine was reflected in the Performance Resource Group, which is now included within the Marfork Resource Group. Production from the longwall and three of the room and pillar mines is belted directly to the preparation plant via conveyor while the remainder is trucked on private haul roads. The Marfork preparation plant has a capacity of 2,400 tons per hour. Customers are served via the CSX rail system with unit trains of up to 150 railcars.

Nicholas Energy. The Nicholas Energy complex includes a large surface mine, a highwall miner and a preparation plant. Coal from the highwall miner and the portion of surface mined coal requiring processing is transported to the preparation plant using off-road trucks. Coal not requiring processing is transported via off road trucks to a conveyor system that moves the coal directly to a loadout at the plant. The plant has a processing capacity of 1,200 tons per hour. All coal shipments are loaded into rail cars for delivery via the Norfolk Southern railway in unit trains of up to 140 railcars.

Progress. The Progress complex includes the large Twilight MTR surface mine and a highwall miner. Production from the Twilight MTR surface mine is transported via underground conveyor to the Elk Run Resource Group for processing and rail shipment.

Rawl. The Rawl complex includes two underground room and pillar mines and a preparation plant. Production from one of the mines is transported to the plant via truck, while the other mine transports coal via truck to the preparation plant of the Stirrat Resource Group. The Rawl plant has a throughput capacity of 1,450 tons per hour. Customers are served via the Norfolk Southern railway with unit trains of up to 150 railcars.

Republic Energy. The Republic Energy complex consists of one surface mine. Direct-ship coal is trucked to various docks on the Kanawha River for barge delivery to customers.

Stirrat. The Stirrat complex includes one surface mine, a preparation plant and the Superior loadout. The surface mine belts coal directly to a 12,500 ton silo at the Superior loadout. The Superior loadout serves CSX railway customers with unit trains of up to 100 railcars. The Stirrat preparation plant was restarted in December of 2005 and cleans coal from an adjacent underground room and pillar mine of the Rawl Resource Group. The plant has a rated capacity of 600 tons per hour. Customers are served via the CSX rail system with unit trains of up to 100 railcars.

Kentucky Resource Groups

Coalgood Energy. The Coalgood Energy complex includes one surface mine and a direct-ship loadout. The coal is trucked off-road to the loadout, which serves CSX railway customers with unit trains of up to 75 railcars.

Long Fork. The Long Fork preparation plant processes coal produced by an underground room and pillar mine and the Rockhouse longwall mine of the Sidney Resource Group. All production is transported via conveyor system to the Long Fork preparation plant for processing and shipping to customers. The Long Fork plant has a rated capacity of 1,500 tons per hour. The rail loading facility services customers on the Norfolk Southern railway with unit trains of up to 150 railcars.

Martin County. The Martin County complex includes one underground mine, a surface mine and a preparation plant. The direct-ship coal production from the surface mine is shipped to river docks via truck. The balance of the coal production is transported by conveyor belt to the preparation plant for processing. Martin County’s preparation plant has a throughput capacity of 1500 tons per hour, although the throughput capacity has been limited since the impoundment failure in October 2000 due to decreased impoundment availability. The coal from the preparation plant is shipped either via the Norfolk Southern railway in unit trains of up to 125 railcars or to river docks via truck.

New Ridge. The New Ridge complex loads clean coal that is transported via truck from the preparation plant of Massey’s Sidney Resource Group. The New Ridge preparation plant has a capacity of 800 tons per hour. The preparation plant is currently idle but may be reactivated from time to time during 2006 as needed. All coal is loaded for shipment to customers via the CSX rail system in unit trains of up to 100 railcars.

Sidney. The Sidney complex includes six underground room and pillar mines, the Rockhouse longwall mine, two surface mines, a highwall miner, a preparation plant and a direct-ship loadout facility. The loadout facility, which is currently idle, services customers on the Norfolk Southern system with unit trains of up to 110 railcars. Two of the underground mines, including the Rockhouse longwall mine, transport coal via underground conveyor to the Long Fork Resource Group for processing and shipment, and the remainder of the underground mines transport production via underground conveyor or truck to Sidney’s preparation plant. A portion of the coal from Sidney’s preparation plant and the coal from the surface mines are trucked to the New Ridge Resource Group for loading into railroad cars. Sidney’s preparation plant has a capacity of 1,500 tons per hour. The rail loading facility at the preparation plant serves customers on the Norfolk Southern rail system with unit trains of up to 140 railcars.

7

Table of Contents

Virginia Resource Group

Knox Creek. The Knox Creek complex includes one underground room and pillar mine and a preparation plant. Production from the mine is belted directly to the preparation plant. The plant has a feed capacity of 650 tons per hour. The preparation plant serves customers on the Norfolk Southern rail system with unit trains of up to 100 railcars.

Active Mines

The following chart lists the active mines, by type, at the Company’s Resource Groups as of February 28, 2006.

Other Related Operations

Massey has other related operations and activities in addition to its normal coal production and sales business. The following business activities are included in this category:

Synfuel Plant. One of Massey’s subsidiaries, Marfork Coal Company, manages a synthetic fuel manufacturing facility located adjacent to the Marfork complex in Boone County, West Virginia. This facility converts coal products to synthetic fuel. Appalachian Synfuel, LLC (“Appalachian Synfuel”), the entity that owns the facility, became a wholly owned subsidiary of the Company in connection with the Spin-Off. Appalachian Synfuel obtained a private letter ruling from the Internal Revenue Service (“IRS”) providing that production from this synfuel facility qualifies the owner for tax credits pursuant to Section 29 of the Internal Revenue Code of 1986, as amended (“IRC”). These tax credits are scheduled to expire December 31, 2007.

The ownership interest in Appalachian Synfuel is divided into three tranches, Series A, Series B and Series C. In 2001 and 2002, the Company sold a total of 99% of its Series A and Series B interests, respectively, contingent upon favorable IRS rulings that were obtained. The Company received cash of $7.2 million, a recourse promissory note for $34.6 million that is being paid in quarterly installments of $1.9 million including interest, and a contingent promissory note that is paid on a cents per Section 29 credit dollar earned based on synfuel tonnage shipped. Deferred gains of $9.5 million and $14.3 million as of December 31, 2005 and December 31, 2004, respectively, are included in Other noncurrent liabilities to be recognized ratably through 2007. See Note 16 to the Notes to Consolidated Financial Statements for further information regarding Appalachian Synfuel.

8

Table of Contents

Coal Handling Facilities. In 2004, Massey sold a 50% interest in a joint venture that owns and operates end-user coal handling facilities, to Penn Virginia Resource Partners, L.P. for approximately $28.5 million in cash. The joint venture currently owns coal handling facilities that stockpile and manage coal for Mead/Westvaco Corporation, Eastman Chemical Company, and Carmeuse Lime and Stone, Inc. The sale resulted in a pre-tax gain of approximately $13.0 million, of which $10.7 million and $11.6 million were deferred and included in Other noncurrent liabilities as of December 31, 2005 and December 31, 2004, respectively, to be recognized in future periods. Massey subsidiaries currently operate the coal handling facilities for the joint venture.

Gas Operations. The Company holds interests in operations that produce, gather and market natural gas from shallow reservoirs in the Appalachian Basin. In the eastern U.S., conventional natural gas reservoirs are located in various types of sedimentary formations at depths ranging from 2,000 to 15,000 feet. The depths of the reservoirs drilled and operated by Massey range from 2,500 to 5,600 feet.

Nearly all of the Company’s gas production is from operations in southern West Virginia. In this region, the Company owns and operates approximately 164 wells, 190 miles of gathering line, and various small compression facilities. The Company’s southern West Virginia operations control approximately 27,000 acres of drilling rights. In addition, it owns a majority working interest in 46 wells operated by others, and minority working interests in approximately 30 wells operated by others. The December 2005 average daily production, from the 210 wells owned or controlled, was 1.7 million cubic feet per day. The Company does not consider its current gas production level to be material to the Company’s cash flows, results of operations or financial condition.

Other. From time to time, Massey also engages in the sale of certain non-strategic assets such as timber, oil and gas rights, surface properties and reserves. In addition, Massey has established several contractual arrangements with customers where services other than coal supply are provided on an ongoing basis. None of these contractual arrangements is considered to be material. Examples of such other services include arrangements with several metallurgical and industrial customers to coordinate shipment of coal to their stockpiles, maintain ownership of the coal inventory on their property and sell tonnage to them as it is consumed. The Company works closely with its customers to provide other services in response to the current needs of each individual customer.

Marketing and Sales

The Massey marketing and sales force, based in the corporate office in Richmond, Virginia, includes sales managers, distribution/traffic managers and administrative personnel.

During the year ended December 31, 2005, Massey sold 42.3 million tons of produced coal for total produced coal revenue of $1.8 billion. The breakdown of produced tons sold by market served was 69% utility, 22% metallurgical and 9% industrial. Sales were concluded with over 125 customers. Export shipment revenue totaled approximately $265 million, representing approximately 15% of 2005 produced coal revenue. Massey’s 2005 export shipments serviced customers in 12 countries across the globe, which included Brazil, Canada, Egypt, Finland, Germany, India, Japan, Italy, Netherlands, South Korea, Spain and Sweden. Almost all sales are made in U.S. dollars, which eliminates foreign currency risk.

Distribution

Massey employs transportation specialists who negotiate freight and terminal agreements with various providers, including railroads, barge lines, steamship lines, bulk motor carriers and terminal facilities. Transportation specialists also coordinate with customers, mining facilities and transportation providers to establish shipping schedules that meet each customer’s needs.

Massey’s 2005 shipments of 42.3 million tons were loaded from 22 mining complexes. Rail shipments constituted 91% of total shipments, with 28% loaded on Norfolk Southern trains and 63% loaded on CSX trains. The balance was shipped from Massey mining complexes via truck or barge.

Approximately 19% of Massey’s production was ultimately delivered via the inland waterway system. Coal is loaded directly into barges, or is transported by rail or truck to docks on the Ohio, Big Sandy and Kanawha Rivers and then ultimately transported by barge to electric utilities, integrated steel producers and industrial consumers served by the inland waterway system. Massey also moved approximately 9% of its production to Great Lakes Ports for transport to various U.S. and Canadian customers.

9

Table of Contents

Customers and Coal Contracts

Massey has coal supply commitments with a wide range of electric utilities, steel manufacturers, industrial customers and energy traders and brokers. By offering coal of both steam and metallurgical grades, Massey is able to serve a diverse customer base. This market diversity allows Massey to adjust to changing market conditions and sustain high sales volumes. The majority of Massey’s customers purchase coal for terms of one year or longer, but Massey also supplies coal on a spot basis for some of its customers. Massey’s two biggest customers, affiliates of American Electric Power Company, Inc. and affiliates of DTE Energy Corporation, accounted for 12.9% and 12.0%, respectively, of Massey’s total fiscal year 2005 produced coal revenue.

As is customary in the coal industry, Massey enters into long-term contracts (one year or more in duration) with many of its customers. These arrangements allow customers to secure a supply for their future needs and provide Massey with greater predictability of sales volume and sales prices. The terms of Massey’s long-term contracts are a result of extensive negotiations with customers. As a result, the terms of these contracts vary with respect to price adjustment mechanisms, pricing terms, permitted sources of supply, force majeure provisions, quality adjustments and other parameters. Some of the contracts contain price adjustment mechanisms that allow for changes to prices based on statistics from the U.S. Department of Labor. Coal quality specifications may be especially stringent for steel customers.

For the year ended December 31, 2005, approximately 96% of Massey’s coal sales volume was pursuant to long-term contracts. The Company believes that in 2006, its coal sales volume percentage pursuant to long-term arrangements will be comparable to 2005. As of February 28, 2006, the Company had contractual sales commitments of approximately 118 million tons, including commitments subject to price reopener and/or optional tonnage provisions. Remaining contractual terms range from one to 14 years with an average volume-weighted remaining term of approximately 2.7 years. Eighty-two percent of the contracted sales tons are currently priced. For 2006, the Company has committed most of its expected production. In addition, the Company purchases coal from third-party coal producers from time to time to supplement production and resells this coal to its customers. As of February 28, 2006, the Company had commitments to purchase 1.4 million tons of coal during 2006.

Competition

The coal industry in the U.S. and overseas is highly competitive. Massey competes with both domestic and foreign producers for sales to both domestic and international markets. The NMA estimated that in 2004 there were 24 coal companies in the U.S. with annual production in excess of 5 million tons, which together account for approximately 83% of U.S. production. According to the NMA, Massey was the sixth largest coal company in terms of tons produced in 2004, exceeded by Peabody Energy Corporation (“Peabody”), Kennecott Energy Company, Arch Coal, Inc. (“Arch”), Foundation Coal Holdings Inc. (“Foundation”) and CONSOL Energy Inc. (“CONSOL”). However, according to EVA, Massey was the fourth largest U.S. coal company in terms of revenue in 2004, exceeded by Peabody, CONSOL and Arch. In addition, Massey competes with a wide variety of coal producers located outside of the United States, notably companies in Australia, Canada, Columbia, Russia and Venezuela.

Massey is the largest producer in Central Appalachia according to EVA, with an estimated 18% of the region’s production in 2005. Many small producers still compete in the region. Other significant producers in Central Appalachia include Arch, CONSOL, Foundation, James River Coal Company, Peabody, Alpha Natural Resources and International Coal Group.

Massey competes with other producers primarily on the basis of price, coal quality, transportation cost and reliability of supply. Continued demand for coal is also dependent on factors outside Massey’s control, including demand for electricity, environmental and governmental regulations, weather, technological developments, the availability and cost of alternative fuel sources and general economic conditions.

Since 2003, a significant demand/supply imbalance of coal has developed, resulting in record high prices for coal producers in the U.S. Increased demand has primarily been driven by worldwide economic expansion, particularly in China and elsewhere in Asia. At the same time, infrastructure and regulatory limitations have contributed to a tightening of worldwide coal supply, affecting global prices of coal. China’s growth has caused an increase in worldwide demand for raw materials and a disruption of expected coal exports to Japan, Korea, India and other countries.

Increased demand and prices may encourage coal producers around the world to attempt to expand supplies of coal and eventually result in increased competition and/or reduced prices in future years. A number of coal producers in the United States, Canada, Australia and elsewhere have announced plans to increase production of utility and metallurgical grade coal between now and the end of the decade. Port and rail infrastructure limitations make it unclear how rapidly these production increases will impact the world markets and coal prices.

10

Table of Contents

The Company sells coal under long-term contracts and on the spot market. See the “Customers and Coal Contracts” section above. Generally, the relative competitiveness of coal vis-à-vis other fuels or other coals is evaluated on a delivered cost per heating value unit (Btu) basis. In addition to the price of alternative sources of 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 the Company’s production can be sold.

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. The Company’s Central Appalachian coal is more expensive to mine than western coal because there is a high percentage of underground coal in the east and eastern surface coal tends to have thinner coal seams. Additionally, underground mining has higher costs for labor (including reserves for future costs associated with labor benefits and health care) and capital (including modern mining equipment and construction of extensive ventilation systems) than those of surface mining. The lower production costs in the western mines are offset somewhat by the higher quality of many eastern coals and higher transportation costs from western mines to many coal-fired power plants in the country. Demand for the Company’s coal and the prices that the Company will be able to obtain for it are also affected by the price and availability of high sulfur coal, which can be marketed in tandem with emissions allowances. In addition, more widespread installation by electric utilities of technology that reduces sulfur emissions may make high sulfur coal more competitive with low sulfur coal. The intraregional and interregional landscape of U.S. coal companies is highly competitive as producers seek to position themselves as the low-cost producer and supplier of choice to the electricity generating industry.

Transportation costs are another fundamental factor affecting coal industry competition. Coordination of the many eastern coal loadouts, the large number of small shipments, terrain and labor issues all combine to make shipments originating in the eastern U.S. inherently more expensive on a per-mile basis than shipments originating in the western U.S. However, the total cost and availability of coal transportation from the western coal producing areas into Central Appalachian markets has historically limited the use of western coal in those markets. Barge transportation is the lowest cost method of transporting coal long distances in the eastern U.S., and the large numbers of eastern producers with river access help keep coal prices competitive. The ability of utilities to blend western and eastern coal has created a new, dynamic fuel procurement environment that will place eastern and western coals in even greater competition.

The cost of ocean transportation and the valuation of the U.S. dollar in relation to foreign currencies significantly impact the relative attractiveness of Massey’s coal as it competes on price with other foreign coal producing sources. These factors, as well as rail rates and availability in the U.S. also impact the competitiveness of imported coal to U.S. utilities.

Historically, 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 can lead to increased competition and lower coal prices. Increases in coal prices continue to encourage the development of expanded capacity by new or existing coal producers, which could reduce coal prices and therefore decrease the Company’s margins. However, in recent years, capacity expansion has been limited by the increased costs of mining, high capital requirements, coal seam degradation, labor shortages, transportation issues related to rail, barge and truck shipments, higher costs related to compliance with new regulations and the difficulty of obtaining permits and bonding.

Employees and Labor Relations

As of December 31, 2005, Massey had 5,709 employees, including 173 employees affiliated with the United Mine Workers of America (“UMWA”). Relations with employees are generally good, and there have been no material work stoppages in the past ten years.

11

Table of Contents

Executive Officers of the Company

The current executive officers of Massey are:

Don L. Blankenship, Age 56

Mr. Blankenship has been a Director since 1996 and the Chairman, Chief Executive Officer and President of Massey since 1992. He was formerly the President and Chief Operating Officer of the Company from 1990 and President of the Company’s subsidiary, Massey Coal Services, Inc., from 1989. He joined the Company’s subsidiary, Rawl Sales & Processing Co., in 1982. He is a director of the National Mining Association and the U.S. Chamber of Commerce.

Baxter F. Phillips, Jr., Age 59

Mr. Phillips has been Executive Vice President and Chief Administrative Officer of Massey since November 2004. Mr. Phillips previously served as Senior Vice President and Chief Financial Officer since September 2003, and as Vice President and Treasurer since 2000. Mr. Phillips joined the Company in 1981 and has served in the roles of Corporate Treasurer, Manager of Export Sales and Corporate Human Resources Manager, among others. Prior to joining Massey, Mr. Phillips’ background included banking and investments.

J. Christopher Adkins, Age 42

Mr. Adkins has been Senior Vice President and Chief Operating Officer of Massey since July 2003. Mr. Adkins joined the Company’s subsidiary, Rawl Sales & Processing Co., in 1985 to work in underground mining. Since that time, he has served as section foreman, plant supervisor, President of Massey’s Eagle Energy subsidiary, Director of Production of Massey Coal Services and, most recently, Vice President of Underground Production.

H. Drexel Short, Jr., Age 49

Mr. Short has been Senior Vice President, Group Operations of Massey since 1995. Mr. Short was formerly Chairman of the Board and Chief Coordinating Officer of Massey Coal Services from 1991 to 1995. Mr. Short joined the Company in 1981 and has served in a variety of capacities.

Thomas J. Dostart, Age 50

Mr. Dostart has been Vice President, General Counsel & Secretary of Massey since May 2003. He served from 1997 to May 2003 as General Counsel & Assistant Secretary for Alliance Coal, LLC. Mr. Dostart previously served as Vice President, General Counsel & Secretary for National Auto Credit, Inc., and as an attorney with oil and gas companies Amoco Corporation and Diamond Shamrock, Inc., and the law firms of Jones, Day, Reavis & Pogue and Arter & Hadden.

Jeffrey M. Jarosinski, Age 46

Mr. Jarosinski has been Vice President, Finance of Massey since 1998 and Chief Compliance Officer of Massey since December 2002. From 1998 through December 2002, Mr. Jarosinski was Chief Financial Officer of Massey. Mr. Jarosinski was formerly Vice President, Taxation of Massey from 1997 to 1998 and Assistant Vice President, Taxation of the Company from 1993 to 1997. Mr. Jarosinski joined the Company in 1988. Prior to joining Massey, Mr. Jarosinski held various positions in public accounting.

John M. Poma, Age 41

Mr. Poma has been Vice President, Human Resources of Massey since April 2003. Mr. Poma served as Corporate Counsel of the Company from 1996 until 2000 and as Senior Corporate Counsel from 2000 through March 2003. Prior to joining Massey in 1996, Mr. Poma practiced law with Midkiff & Hiner in Richmond, Virginia and Jenkins, Fenstermaker, Krieger, Kayes & Farrell in Huntington, West Virginia.

Eric B. Tolbert, Age 38

Mr. Tolbert has been Vice President and Chief Financial Officer of Massey since November 2004. Mr. Tolbert previously served as Corporate Controller since 1999. He joined the Company in 1992 as a financial analyst and subsequently served as Director of Financial Reporting. Prior to joining Massey, Mr. Tolbert held various positions in public accounting.

12

Table of Contents

David W. Owings, Age 32

Mr. Owings has been Corporate Controller and Massey’s principal accounting officer since November 2004. Mr. Owings previously served as Manager of Financial Reporting since joining Massey in 2001. Prior to joining Massey, Mr. Owings worked at Ernst & Young LLP, the Company’s independent registered public accounting firm, serving as a senior auditor in the Assurance and Advisory Business Services group from October 1998 through January 2001 and as a manager in the Assurance and Advisory Business Services group from January 2001 through September 2001.

Environmental, Safety and Health Laws and Regulations

Massey and its customers are subject to federal, state and local laws and regulations that are revised and amended from time to time relating to environmental protection and plant and mine safety and health, including, but not limited to, the Federal Surface Mining Control and Reclamation Act of 1977 (the “SMCRA”); Occupational Safety and Health Act of 1970; Mine Safety and Health Act of 1977; Water Pollution Control Act of 1972 (commonly known as the Clean Water Act); Clean Air Act of 1963; Black Lung Benefits Revenue Act of 1977; and Black Lung Benefits Reform Act of 1977. Massey is seldom subject to permitting or enforcement under the Federal Resource Conservation and Recovery Act of 1976 or the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 and does not consider the effects of those statutes on its operations to be material for purposes of disclosure.

In 2005, Massey spent approximately $17.4 million to comply with environmental laws and regulations, of which $6.1 million was for reclamation. None of these expenditures was capitalized. Massey anticipates spending approximately $28.9 million in such non-capital expenditures in both 2006 and 2007. Of these expenditures, $17.3 million and $17.1 million for 2006 and 2007, respectively, are anticipated to be for reclamation.

SMCRA

The SMCRA, which is administered by the Office of Surface Mining Reclamation and Enforcement (“OSM”), establishes mining, environmental protection and reclamation standards for all aspects of surface mining as well as many aspects of deep mining. The SMCRA and similar state statutes require, among other things, the restoration of mined property in accordance with specified standards and an approved reclamation plan. In addition, the Abandoned Mine Land Fund, which is part of the SMCRA, imposes a fee on all current mining operations, the proceeds of which are used to restore mines closed before 1977. The maximum tax is $0.35 per ton on surface-mined coal and $0.15 per ton on deep-mined coal. A mine operator must submit a bond or otherwise secure the performance of its reclamation obligations. Mine operators must receive permits and permit renewals for surface mining operations from the OSM or, where state regulatory agencies have adopted federally approved state programs under the act, the appropriate state regulatory authority. The Company accrues for reclamation and mine-closing liabilities in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations” (“SFAS 143”) (see Note 3 to the Notes to Consolidated Financial Statements).

Clean Water Act

Section 301 of the Clean Water Act prohibits the discharge of a pollutant from a point source into navigable waters except in accordance with a permit issued under either Section 402 or Section 404 of the Clean Water Act. Navigable waters are broadly defined to include streams, even those that are not navigable in fact, and may include wetlands. All mining operations in Appalachia generate excess material, which must be placed in fills in adjacent valleys and hollows. Likewise, coal refuse disposal areas and coal processing slurry impoundments are located in valleys and hollows. Almost all of these areas contain intermittent or perennial streams, which are considered navigable waters under the Clean Water Act. An operator must secure a Clean Water Act permit before filling such streams. For approximately the past twenty-five years, operators have secured Section 404 fill permits that authorize the filling of navigable waters with material from various forms of coal mining. Operators have also obtained permits under Section 404 for the construction of slurry impoundments although the use of these impoundments, including discharges from them, requires permits under Section 402. Section 402 discharge permits are generally not suitable for authorizing the construction of fills in navigable waters.

Clean Air Act

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 oxide and mercury. Although these regulations apply directly to impose certain requirements for the permitting and operation of Massey’s mining facilities, by far their greatest impact on Massey and the coal industry generally is the effect of emission limitations on utilities and other customers. Owners of coal-fired power plants and industrial boilers have been required to expend

13

Table of Contents

considerable resources in an effort to comply with these air pollution standards. The U.S. Department of Environmental Protection (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. This in turn may result in decreased production by the Company and a corresponding decrease in the Company’s revenue and profits.

National Ambient Air Quality Standards. In July 1997, the EPA adopted more stringent National Ambient Air Quality Standards (“NAAQS”) for very fine particulate matter and ozone. Ozone is produced by a combination of two precursor pollutants: volatile organic compounds and nitrogen oxide, a by-product of coal combustion. States that are not in compliance with these more stringent standards will have until 2007 to revise their State Implementation Plans (“SIPs”) to include provisions for the control of ozone precursors and/or particulate matter. Revised SIPs could require electric power generators to further reduce nitrogen oxide and sulfur dioxide emissions.

Acid Rain Control Provisions. 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 have an adverse affect on coal mining operations. All power plants of greater than 25 megawatt capacity must reduce sulfur dioxide emissions by: (i) burning lower sulfur coal, either exclusively or mixed with higher sulfur coal; (ii) installing pollution control devices such as scrubbers, which reduce the emissions from high sulfur coal; (iii) switching to fuels other than coal; (iv) reducing electricity generating levels; or (v) purchasing or trading emission credits. 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.

Regional Haze Program. Along with 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 requires certain existing coal-fired power plants to install additional control measures designed to limit haze-causing emissions, such as sulfur dioxide, nitrogen oxide and particulate matter. EPA’s final rule concerning best available retrofit technology is currently on remand to the EPA from the U.S. Court of Appeals for the D.C. 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. States will be given until 2007 to submit revised SIPs to address regional haze.

New Source Review Program. Under the Clean Air Act, new and modified sources of air pollution must meet certain new source standards (the “New Source Review Program”). In the late 1990s, the EPA filed lawsuits against many coal-fired plants in the eastern United States alleging that the owners performed non-routine maintenance, causing increased emissions that should have triggered the application of these new source standards. Some of these lawsuits have been settled, with the owners agreeing to install additional pollution control devices in their coal-fired plants. The remaining litigation and the uncertainty around the New Source Review Program rules could adversely impact utilities’ demand for coal in general or coal with certain specifications, including the coal produced by the Company.

Multi-Pollutant Strategies. In March 2005, the EPA issued two closely related rules designed to significantly reduce levels of sulfur dioxide, nitrogen oxide and mercury: the Clean Air Interstate Rule and the Clean Air Mercury Rule. The Clean Air Interstate Rule sets a cap-and-trade program in 28 states and the District of Columbia to establish emissions limits for sulfur dioxide and nitrogen oxide, by allowing utilities to buy and sell credits at a rate that will cut sulfur dioxide emissions over 70% and nitrogen oxide emissions over 60% by 2015, to assist in achieving compliance with the NAAQS for 8-hour ozone and fine particulates. The Clean Air Mercury Rule will cut mercury emissions nearly 70% by 2018 through a cap-and-trade program. Environmentalists have criticized both rules and challenged the legality of the rules in numerous lawsuits. These rules will directly affect coal producers, suppliers and utilities in the eastern and western regions of the U.S., by requiring revisions to the SIPs in many eastern states. The Clean Air Mercury Rule sets emissions limits based on coal rank, potentially giving the users of western sub-bituminous coal a significant competitive advantage over eastern bituminous coal users.

Alternative bills have been introduced in the past that would place tighter caps on coal-fired emissions, including mandatory limits on carbon dioxide emissions, and shorter implementation time frames. While the details of these proposed initiatives vary, there is 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.

14

Table of Contents

1992 Framework Convention on Global Climate Change

The U.S. has not implemented the 1992 Framework Convention on Global Climate Change (the “Kyoto Protocol”), which became effective for many countries on February 16, 2005. The Kyoto Protocol is intended to limit or reduce emissions of greenhouse gases, such as carbon dioxide. Under the terms of the Kyoto Protocol, with specific emission targets that vary from country to country, the U.S. would be required to reduce emissions to 93% of 1990 levels over a five-year period from 2008 through 2012. Although the U.S. 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. If the U.S. were to enact comprehensive legislation focused on the mandatory reduction of greenhouse gas emissions, it could force a large reduction in coal-fired electricity generation, as technologies for carbon dioxide sequestration are not yet commercially available.

Permitting and Compliance

Massey’s 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. Massey currently has over 400 surface mining permits. In conjunction with the surface mining permits, most operations hold national pollutant discharge elimination system 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 U.S. Valley fills and refuse impoundments are typically authorized under nationwide permits that are revised and renewed periodically by the U.S. Army Corps of Engineers. Additionally, 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.

Massey believes it has obtained all the permits required for its current operations under the SMCRA, Clean Water Act and Clean Air Act and corresponding state laws. Massey believes that it is in compliance in all material respects with such permits, and routinely corrects in a timely fashion violations of which it receives notice in the normal course of operations. The expiration dates of the permits are largely immaterial as the law provides for a right of successive renewal. The cost of obtaining surface mining, clean water and air permits can vary widely depending on the scientific and technical demonstrations that must be made to obtain the permits. However, the cost of obtaining a permit is rarely more than $500,000 and the cost of obtaining a renewal is rarely more than $5,000. It is impossible to predict the full impact of future judicial, legislative or regulatory developments on Massey’s operations because the standards to be met, as well as the technology and length of time available to meet those standards, continue to develop and change.

The Company believes, based upon present information available to it, that its accruals with respect to future environmental costs are adequate. For further discussion on costs, see Note 3 to the Notes to Consolidated Financial Statements. However, the imposition of more stringent requirements under environmental laws or regulations, new developments or changes regarding site cleanup costs or the allocation of such costs among potentially responsible parties, or a determination that the Company is potentially responsible for the release of hazardous substances at sites other than those currently identified, could result in additional expenditures or the provision of additional accruals in expectation of such expenditures.

Mine Safety and Health

Safety. Stringent health and safety standards have been in effect since Congress enacted the Federal Coal Mine Health and Safety Act of 1969. The Federal Mine Safety and Health Act of 1977 significantly expanded the enforcement of safety and health standards and imposed safety and health standards on all aspects of mining operations.

All of the states in which Massey operates have state programs for mine safety and health regulation and enforcement. Collectively, federal and state safety and health regulation in the coal mining industry is perhaps the most comprehensive and pervasive system for protection of employee health and safety affecting any segment of U.S. industry. While regulation has a significant effect on Massey’s operating costs, its U.S. competitors are subject to the same degree of regulation.

In January 2006, West Virginia passed legislation, which was later modified in March 2006, requiring enhanced safety evacuation and communication equipment for use in mine emergencies. Similar legislation was proposed in Kentucky and other coal producing states and in Congress in early 2006. Rules fully implementing the West Virginia legislation have not been completed and it is unclear what other state or federal legislation may be passed. The Federal Mine Safety and Health Administration (“MSHA”) issued an emergency temporary standard on March 9, 2006 to improve protection of miners involved in underground coal mine accidents and during evacuations.

15

Table of Contents

Massey’s goal is to achieve excellent safety and health performance. Massey measures its success in this area primarily through the use of accident frequency rates. Massey believes that a superior safety and health regime is inherently tied to achieving productivity and financial goals. Massey seeks to implement this goal by: training employees in safe work practices; openly communicating with employees; establishing, following and improving safety standards; involving employees in establishing safety standards; and recording, reporting and investigating all accidents, incidents and losses to avoid reoccurrence.

Black Lung. Under federal black lung benefits legislation, each coal mine operator is required to make payments of black lung benefits or contributions to: (i) current and former coal miners totally disabled from black lung disease; and (ii) certain survivors of a miner who dies from black lung disease. The Black Lung Disability Trust Fund, to which the Company must make certain tax payments based on tonnage sold, provides for the payment of medical expenses to claimants whose last mine employment was before January 1, 1970 and to claimants employed after such date, where no responsible coal mine operator has been identified for claims or where the responsible coal mine operator has defaulted on the payment of such benefits. In addition to federal acts, the Company is also liable under various state statutes for black lung claims. Federal benefits are offset by any state benefits paid.

Workers’ Compensation. The Company is liable for workers’ compensation benefits for traumatic injuries under state workers’ compensation laws in which it has operations. Workers’ compensation laws are administered by state agencies with each state having its own set of rules and regulations regarding compensation owed to an employee injured in the course of employment.

Coal Industry Retiree Health Benefit Act of 1992. The Coal Industry Retiree Health Benefit Act of 1992 (“Coal Act”) provides for the funding of health benefits for certain UMWA retirees. The Coal Act established the Combined Fund into which “signatory operators” and “related persons” are obligated to pay annual premiums for covered beneficiaries. The Coal Act also created a second benefit fund, the 1992 Benefit Plan, for miners who retired between July 21, 1992 and September 30, 1994 and whose former employers are no longer in business. In 1995, in a case filed by the predecessor to the NMA on behalf of its members, the U.S. District Court for the Northern District of Alabama ordered the Social Security Administration (“SSA”) to recalculate the per-beneficiary premium that the Combined Fund charges assigned operators. The SSA applied the recalculated, lower premium to all assigned operators, including subsidiaries of the Company. In 1996, the Combined Fund sued the SSA in the U.S. District Court for the District of Columbia seeking a declaration that the SSA’s original premium calculation was proper. On February 25, 2000, that Court ruled that the original, higher per beneficiary premium was proper. The SSA then retroactively applied the original, higher premium to various coal operators, including subsidiaries of the Company, for all plan years prior to October 1, 2003. However, the NMA and certain other coal operators, including subsidiaries of the Company, and the Combined Fund filed separate lawsuits in the U.S. District Courts for the Northern District of Alabama and the District of Columbia, respectively, seeking a determination regarding the SSA’s 2003 premium recalculation. Those lawsuits were transferred to the U.S. District Court for the District of Maryland. On August 12, 2005, that Court granted the plaintiff coal companies’ motion for summary judgment, holding the SSA’s June 10, 2003 decision unlawful in establishing a higher premium; however, the Court granted defendants a stay of payment recoupment pending appeal. Defendants appealed the case to the United States Court of Appeals for the Fourth Circuit. The Company does not believe this matter will have a material impact on its cash flows, results of operations or financial condition. See Note 13 to the Notes to Consolidated Financial Statements for further information.

Available Information

Massey files its annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, proxy statements and other information with the Securities and Exchange Commission (“SEC”). Massey’s SEC filings are available to the public over the Internet at the SEC’s website at www.sec.gov. You may also read and copy any document Massey files at the SEC’s public reference room at 450 Fifth Street, NW, Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Massey makes available, free of charge through its Internet website, www.masseyenergyco.com, its annual report, quarterly reports, current reports, proxy statements, section 16 reports and other information and any amendments thereto as soon as practicable after filing or furnishing the material to the SEC in addition to the Company’s Corporate Governance Guidelines, codes of ethics and the charters of the Audit, Compensation, Executive, Governance and Nominating, and Safety, Environmental, and Public Policy Committees. Materials may be requested at no cost by telephone at (866) 814-6512 or by mail at: Massey Energy Company, Post Office Box 26765, Richmond, Virginia 23261, Attention: Investor Relations.

16

Table of Contents

GLOSSARY OF SELECTED TERMS

Ash. Impurities consisting of iron, aluminum and other incombustible matter that are contained in coal. Since ash increases the weight of coal, it adds to the cost of handling and can affect the burning characteristics of coal.

Bituminous coal. The most common type of coal with moisture content less than 20% by weight and heating value of 10,500 to 14,000 Btu per pound. It is dense and black and often has well-defined bands of bright and dull material.

British thermal unit, or “Btu.” A measure of the thermal energy required to raise the temperature of one pound of pure liquid water one degree Fahrenheit at the temperature at which water has its greatest density (39 degrees Fahrenheit).

Central Appalachia. Coal producing states and regions of eastern Kentucky, eastern Tennessee, western Virginia and southern West Virginia.

Coal seam. Coal deposits occur in layers. Each layer is called a “seam.”

Coke. A hard, dry carbon substance produced by heating coal to a very high temperature in the absence of air. Coke is used in the manufacture of iron and steel. Its production results in a number of useful byproducts.

Continuous miner. A mining machine used in underground and highwall mining to cut coal from the seam and load it onto conveyors or into shuttle cars in a continuous operation.

Direct-ship coal. Coal that is shipped without first being processed.

Deep mine. An underground coal mine.

Fossil fuel. Fuel such as coal, petroleum or natural gas formed from the fossil remains of organic material.

Highwall Mining. Described in Item 1, Business, under the heading “Mining Methods.”

High vol met coal. Coal that averages approximately 35% volatile matter. Volatile matter refers to the impurities that become gaseous when heated to certain temperatures.

Industrial coal. Coal used by industrial steam boilers to produce electricity or process steam. It generally is lower in Btu heat content and higher in volatile matter than metallurgical coal.

Long-term contracts. Contracts with terms of one year or longer.

Longwall mining. Described in Item 1, Business, under the heading “Mining Methods.”

Low vol met coal. Coal that averages approximately 20% volatile matter. Volatile matter refers to the impurities that become gaseous when heated to certain temperatures.

Metallurgical coal. The various grades of coal suitable for carbonization to make coke for steel manufacture. Also known as “met” coal, it possesses four important qualities: volatility, which affects coke yield; the level of impurities, which affects coke quality; composition, which affects coke strength; and basic characteristics, which affect coke oven safety. Met coal has a particularly high Btu heat content, but low ash content.

Nitrogen oxide (NOx). Nitrogen oxide is produced as a gaseous by-product of coal combustion.

Overburden. Layers of earth and rock covering a coal seam. In surface mining operations, overburden is removed prior to coal extraction.

Overburden ratio. The amount of overburden that must be removed to excavate a given quantity of coal. It is commonly expressed in cubic yards per ton of coal or as a ratio comparing the thickness of the overburden with the thickness of the coal bed.

Pillar. An area of coal left to support the overlying strata in a mine; sometimes left permanently to support surface structures.

Preparation plant. Usually located on a mine site, although one plant may serve several mines. A preparation plant is a facility for crushing, sizing and washing coal to prepare it for use by a particular customer. The washing process has the added benefit of removing some of the coal’s sulfur content.

Probable reserves. Described in Item 2, Properties, under the heading “Coal Reserves.”

17

Table of Contents

Proven reserves. Described in Item 2, Properties, under the heading “Coal Reserves.”

Reclamation. The process of restoring land and the environment to their approximate original state following mining activities. The process commonly includes “recontouring” or reshaping the land to its approximate original appearance, restoring topsoil and planting native grass and ground covers. Reclamation operations are usually underway before the mining of a particular site is completed. Reclamation is closely regulated by both state and federal law.

Reserve. Described in Item 2, Properties, under the heading “Coal Reserves.”

Roof. The stratum of rock or other mineral above a coal seam; the overhead surface of a coal working place. Same as “top.”

Room and pillar mining. Described in Item 1, Business, under the heading “Mining Methods.”

Scrubber (flue gas desulfurization unit). Any of several forms of chemical/physical devices that operate to neutralize sulfur compounds formed during coal combustion. These devices combine the sulfur in gaseous emissions with other chemicals to form inert compounds, such as gypsum, that must then be removed for disposal. Although effective in substantially reducing sulfur from combustion gases, scrubbers require about 6% to 7% of a power plant’s electrical output and thousands of gallons of water to operate.

Steam coal. Coal used by power plants and industrial steam boilers to produce electricity or process steam. It generally is lower in Btu heat content and higher in volatile matter than metallurgical coal.

Stoker coal. Coal that is sized to a specific, standard range. Stoker coal is typically one quarter inch by one and one quarter to one and three quarter inch.

Sulfur. One of the elements present in varying quantities in coal that reacts with air when coal is burned to form sulfur dioxide.

Sulfur content. Coal is commonly described by its sulfur content due to the importance of sulfur in environmental regulations. “Low sulfur” coal has a variety of definitions but typically is used to describe coal consisting of 1.0% or less sulfur. A majority of the Company’s Appalachian reserves are of low sulfur grades.

Sulfur dioxide (SO₂). Sulfur dioxide is produced as a gaseous by-product of coal combustion.

Surface mining. Described in Item 1, Business, under the heading “Mining Methods.”

Tons. A “short” or net ton is equal to 2,000 pounds. A “long” or British ton is 2,240 pounds; a “metric” tonne is approximately 2,205 pounds. The short ton is the unit of measure referred to in this Form 10-K.

Underground mine. Also known as a “deep” mine. Usually located several hundred feet below the earth’s surface, an underground mine’s coal is removed mechanically and transferred by shuttle car or conveyor to the surface.

Unit train. A train of a specified number of cars carrying only coal. A typical unit train can carry at least 10,000 tons of coal in a single shipment.

Utility coal. Coal used by power plants to produce electricity or process steam. It generally is lower in Btu heat content and higher in volatile matter than metallurgical coal.

18

Table of Contents

Item 1A. Risk Factors

Massey is subject to a variety of risks, including, but not limited to, those risk factors set forth below and those referenced herein to other Items contained in this Annual Report on Form 10-K, including Item 1, Business, under the headings “Customers and Coal Contracts,” “Competition,” “Environmental, Safety and Health Laws and Regulations,” Item 3, Legal Proceedings and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), under the headings “Critical Accounting Estimates and Assumptions,” “Certain Trends and Uncertainties” and elsewhere in MD&A.

Massey is impacted by the competitiveness of the markets in which it competes and market demand for coal.

Massey competes with coal producers in various regions of the U.S. and overseas for domestic and international sales. Continued domestic demand for Massey’s coal and the prices that it will be able to obtain primarily will depend upon coal consumption patterns of the domestic electric utility industry and the domestic steel industry. Consumption by the domestic utility industry is affected by the demand for electricity, environmental and other governmental regulations, technological developments and the price of competing coal and alternative fuel supplies including nuclear, natural gas, oil and renewable energy sources, including hydroelectric power. Consumption by the domestic steel industry is primarily affected by economic growth and the demand for steel used in construction as well as appliances and automobiles. In recent years, the competitive environment for coal has been impacted by sustained growth in a number of the largest markets in the world, including the U.S., China, Japan and India, where demand for both electricity and steel have supported high pricing for steam and metallurgical coal. The cost of ocean transportation and the valuation of the U.S. dollar in relation to foreign currencies significantly impact the relative attractiveness of Massey’s coal as it competes on price with other foreign coal producing sources. See Item 1, Business, under the heading “Competition,” for further discussion.

Demand for Massey’s coal depends on its price and quality and the cost of transporting its coal to its customers.

Coal prices are influenced by a number of factors and may vary dramatically by region. The two principal components of the price of coal are the price of coal at the mine, which is influenced by mine operating costs and coal quality, and the cost of transporting coal from the mine to the point of use. The cost of mining the coal is influenced by geologic characteristics such as seam thickness, overburden ratios and depth of underground reserves. Underground mining is generally more expensive than surface mining as a result of higher costs for labor (including reserves for future costs associated with labor benefits and health care) and capital costs (including costs for mining equipment and construction of extensive ventilation systems). The Company presently operates 31 active underground mines, including 4 longwall mines, and 16 active surface mines, with 7 highwall miners. See Item 1, Business, under the headings “Mining Methods,” “Mining Operations” and “Competition” for further discussion. Increases in transportation costs could make coal a less competitive source of energy. Such increases could have a material impact on Massey’s ability to compete with other energy sources and on its cash flows, results of operations or financial condition. On the other hand, significant decreases in transportation costs could result in increased competition from coal producers in other parts of the country. See Item 1, Business, under the heading “Competition,” for further discussion.

A significant decline in coal prices in general could adversely affect Massey’s operating results and cash flows.

Massey’s results are highly dependent upon the prices the Company receives for its coal. Decreased demand for coal, both domestically and internationally, could cause spot prices and the prices the Company is able to negotiate on long-term contracts to decline. The lower prices could negatively affect the Company’s cash flows, results of operations or financial condition, if the Company is unable to increase productivity and/or decrease costs in order to maintain the Company’s margins.

Massey depends on continued demand from its customers.

Reduced demand from or the loss of Massey’s largest customers could have an adverse impact on Massey’s ability to achieve its projected revenue. Decreases in demand may result from, among other things, a reduction in consumption by the electric generation industry and/or the steel industry, the availability of other sources of fuel at cheaper costs and a general slow-down in the economy. When Massey’s contracts with its customers reach expiration, there can be no assurance that the customers either will extend or enter into new long-term contracts or, in the absence of long-term contracts, that they will continue to purchase the same amount of coal as they have in the past or on terms, including pricing terms, as favorable as under existing arrangements. In the event that a large customer account is lost or a long-term contract is not renewed, profits could suffer if alternative buyers are not willing to purchase the Company’s coal on comparable terms. See Item 1, Business, under the heading “Customers and Coal Contracts” for further discussion.

19

Table of Contents

The level of Massey’s indebtedness could adversely affect its ability to grow and compete and prevent it from fulfilling its obligations under its contracts and agreements.

At December 31, 2005, Massey had $1,113.3 million of total indebtedness outstanding, which represented 57.0% of its total book capitalization. The Company has significant debt, lease and royalty obligations. The Company’s ability to satisfy debt service, lease and royalty obligations and to effect any refinancing of its indebtedness will depend upon future operating performance, which will be affected by prevailing economic conditions in the markets that the Company serves as well as financial, business and other factors, many of which are beyond the Company’s control. The Company may be unable to generate sufficient cash flow from operations and future borrowings, or other financings may be unavailable in an amount sufficient to enable it to fund its debt service, lease and royalty payment obligations or its other liquidity needs.

The Company’s relative amount of debt could have material consequences to its business, including, but not limited to: (i) making it more difficult to satisfy debt covenants and debt service, lease payments and other obligations; (ii) making it more difficult to pay quarterly dividends as the Company has in the past; (iii) increasing the Company’s vulnerability to general adverse economic and industry conditions; (iv) limiting the Company’s ability to obtain additional financing to fund future acquisitions, working capital, capital expenditures or other general corporate requirements; (v) reducing the availability of cash flows from operations to fund acquisitions, working capital, capital expenditures or other general corporate purposes; (vi) limiting the Company’s flexibility in planning for, or reacting to, changes in the Company’s business and the industry in which the Company competes; or (vii) placing the Company at a competitive disadvantage with competitors with relatively lower amounts of debt.

The covenants in Massey’s credit facility and the indentures governing its debt instruments impose restrictions that may limit Massey’s operating and financial flexibility.

Massey’s asset based loan credit facility and the indentures governing its notes contain a number of significant restrictions and covenants that may limit the Company’s ability and its subsidiaries’ ability to, among other things: (i) incur liens and debt or provide guarantees in respect of obligations of any other person; (ii) increase Common Stock dividends above specified levels; (iii) make loans and investments; (iv) prepay, redeem or repurchase debt; (v) engage in mergers, consolidations and asset dispositions; (vi) engage in affiliate transactions; (vii) create any lien or security interest in any real property or equipment; (viii) engage in sale and leaseback transactions; and (ix) restrict distributions from subsidiaries.

Operating results below current levels or other adverse factors, including a significant increase in interest rates, could result in Massey being unable to comply with certain debt covenants. If Massey violates these covenants and is unable to obtain waivers from its lenders, Massey’s debt under these agreements would be in default and could be accelerated by the lenders. If the indebtedness is accelerated, Massey may not be able to repay its debt or borrow sufficient funds to refinance it. Even if Massey is able to obtain new financing, it may not be on commercially reasonable terms or on terms that are acceptable to Massey. If Massey’s debt is in default for any reason, its cash flows, results of operations or financial condition could be materially and adversely affected. In addition, complying with these covenants may also cause Massey to take actions that are not favorable to holders of the notes and may make it more difficult for Massey to successfully execute its business strategy and compete against companies that are not subject to such restrictions.

Massey depends on its ability to continue acquiring and developing economically recoverable coal reserves.

A key component to the future success of Massey is its ability to continue acquiring coal reserves for development that have the geological characteristics that allow them to be economically mined. Replacement reserves may not be available or, if available, may not be capable of being mined at costs comparable to those characteristics of the depleting mines. An inability to continue acquiring economically recoverable coal reserves could have a material impact on the Company’s cash flows, results of operations or financial condition.

Massey faces numerous uncertainties in estimating its economically recoverable coal reserves, and inaccuracies in its 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 Massey’s control. As a result, estimates of economically recoverable coal reserves are by their nature uncertain. Information about the Company’s reserves consists of estimates based on engineering, economic and geological data assembled and analyzed by the Company. Some of the factors and assumptions that impact economically recoverable reserve estimates include: (i) geological conditions; (ii) historical production from the area compared with production from other producing areas; (iii) the effects of regulations and taxes by governmental agencies; (iv) future prices; and (v) future operating costs.

20

Table of Contents

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. As a result, the Company’s estimates may not accurately reflect its actual reserves. Actual production, revenues and expenditures with respect to its reserves will likely vary from estimates, and these variances may be material.

If the coal industry experiences overcapacity in the future, the Company’s profitability could be impaired.

The current strong coal market and increased demand for coal have been attracting new investors to the coal industry, spurring the development of new mines, and resulting in added production capacity throughout the industry. The Company and several of its major competitors have announced plans for substantial increases in productive capacity over the next several years. A continuation of, or a further increase in, the current price levels of coal could further encourage the development of expanded capacity by new or existing coal producers. Any resulting increases in capacity could reduce coal prices and therefore reduce the Company’s margins. See Item 1, Business, under the heading “Competition,” for further discussion.

Transportation disruptions could impair Massey’s ability to sell coal.

Massey is dependent on its transportation providers to provide access to markets. Disruption of transportation services because of weather-related problems, strikes, lockouts or other events could temporarily impair Massey’s ability to supply coal to customers.

Throughout 2005, the Company’s ability to ship coal was negatively impacted by a reduction in available and timely rail service. Lack of sufficient resources to meet the rapid increase in demand, a greater demand for transportation to export terminals and rail line congestion all seem to have contributed to the disruption and slowdowns in rail service. Although the railroads have taken action to remedy these issues, including the purchase of new locomotives and railcars, and the hiring and training of additional crews, such actions may not be sufficient to cure the disruption and slowdowns in rail service.

Certain of Massey’s subsidiaries and other coal and transportation companies have been named as defendants in lawsuits in West Virginia. The suits allege that the defendants illegally transported 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 seek injunctive relief and damages. See Note 19 to the Notes to Consolidated Financial Statements for further discussion of this litigation.

Severe weather may affect Massey’s ability to mine and deliver coal.

Severe weather, including flooding and excessive ice or snowfall, when it occurs, can adversely affect Massey’s ability to produce, load and transport coal, which may negatively impact the Company’s cash flows, results of operations or financial condition. See Note 19 to the Notes to Consolidated Financial Statements for further discussion of this risk.

Federal and state government regulations applicable to Massey operations increase Massey’s costs and may make Massey’s coal less competitive than other coal producers.

Massey incurs 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 the Company’s operations. The Company may also incur costs and liabilities resulting from claims for damages to property or injury to persons arising from its operations. See Item 1, Business, under the heading “Environmental, Safety and Health Laws and Regulations” for further discussion.

New legislation and new regulations may be adopted which could materially adversely affect Massey’s mining operations, cost structure or its customers’ ability to use coal. New legislation and new regulations may also require Massey or its customers to change operations significantly or incur increased costs. The EPA has undertaken broad initiatives aimed at increasing compliance with emissions standards and to provide incentives to customers for decreasing emissions, often by switching to an alternative fuel source.

21

Table of Contents

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

Massey’s 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. 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. Army Corps of Engineers. Additionally, 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. 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. See Item 1, Business, under the heading “Environmental, Safety and Health Laws and Regulations” for further discussion.

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

At December 31, 2005, 3.0% of Massey’s total workforce was represented by the UMWA. Six of Massey’s coal preparation plants and one of its smaller surface mines have a workforce that is represented by a union. In fiscal 2005, these six preparation plants handled approximately 18% of Massey’s coal production. There may be an increased risk of strikes and other related work actions, in addition to higher labor costs, associated with these operations. Massey has experienced some union organizing campaigns at some of its open shop facilities within the past five years. If some or all of Massey’s current open shop operations were to become union represented, Massey could be subject to additional risk of work stoppages and higher labor costs, which could adversely affect the stability of production and reduce the Company’s net income.

Massey is subject to being adversely affected by a decline in the financial condition and creditworthiness of its customers.

In an effort to mitigate credit-related risks in all customer classifications, Massey maintains a credit policy, which requires scheduled reviews of customer creditworthiness and continuous monitoring of customer news events that might have an impact on their financial condition. Negative credit performance or events may trigger the application of tighter terms of sale, requirements for collateral or, ultimately, a suspension of credit privileges. The creditworthiness of customers can limit who the Company can do business with and at what price.

For example, Massey has contracts to supply coal to energy trading and brokering companies who resell the coal to the ultimate users. Massey is subject to being adversely affected by any decline in the financial condition and creditworthiness of these energy trading and brokering companies. In addition, as the largest supplier of metallurgical coal to the American steel industry, Massey is subject to being adversely affected by any decline in the financial condition or production volume of American steel producers. See Item 1, Business, under the heading “Customers and Coal Contracts” for further discussion.

Massey is subject to various legal proceedings, which may have a material effect on its business.

Massey and its subsidiaries are parties to a number of legal proceedings incident to the Company’s normal business activities. Some of the allegations brought against the Company are with merit, while others are not. There is always the potential that an individual matter or the aggregation of many matters could have an adverse effect on the Company’s cash flows results of operations or financial position. See Item 3, Legal Proceedings and Note 19 to the Notes to Consolidated Financial Statements for further discussion.

Massey has significant reclamation and mine closure obligations. If the assumptions underlying the Company’s accruals are materially inaccurate, the Company could be required to expend greater amounts than anticipated.

The SMCRA establishes operational, reclamation and closure standards for all aspects of surface mining as well as most aspects of deep mining. Estimates of the Company’s total reclamation and mine-closing liabilities are based upon permit requirements and the Company’s engineering expertise related to these requirements. The estimate of ultimate reclamation liability is reviewed periodically by the Company’s management and engineers. The estimated liability can change significantly if actual costs vary from assumptions or if governmental regulations change significantly. See Item 1, Business, under the heading “Environmental, Safety and Health Laws and Regulations” for further discussion.

22

Table of Contents

Foreign currency fluctuations could adversely affect the competitiveness of Massey’s coal abroad.

Massey relies on customers in other countries for a portion of its sales, with shipments to countries in North America, South America, Europe, Asia and Africa. Massey competes in these international markets against coal produced in other countries. Coal is sold internationally in U.S. dollars. As a result, mining costs in competing producing countries may be reduced in U.S. dollar terms based on currency exchange rates, providing an advantage to foreign coal producers. Currency fluctuations among countries purchasing and selling coal could adversely affect the competitiveness of Massey’s coal in international markets.

Terrorist attacks and threats, escalation of military activity in response to such attacks or acts of war may negatively affect the Company’s cash flows, results of operations or financial condition.

The Company’s business is affected by general economic conditions, fluctuations in consumer confidence and spending, and market liquidity, which can decline as a result of numerous factors outside of its control, such as terrorist attacks and acts of war. Future terrorist attacks against U.S. targets, rumors or threats of war, actual conflicts involving the U.S. or its allies, or military or trade disruptions affecting the Company’s customers may materially adversely affect its operations. As a result, there could be delays or losses in transportation and deliveries of coal to the Company’s customers, decreased sales of its coal and extension of time for payment of accounts receivable from its customers. Strategic targets such as energy-related assets may be at greater risk of future terrorist attacks than other targets in the U.S. In addition, such disruption may lead to significant increases in energy prices that could result in government-imposed price controls. It is possible that any, or a combination, of these occurrences could have a material impact on the Company’s cash flows, results of operations or financial condition.

Coal mining is subject to inherent risks.

Massey’s operations are subject to certain events and conditions that could disrupt operations, including fires and explosions, accidental minewater discharges, natural disasters, equipment failures, maintenance problems and flooding. Massey maintains 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 Massey’s insurance policies.

Item 1B. Unresolved Staff Comments

None.

23

Table of Contents

Item 2. Properties

Operations of Massey and its subsidiaries are conducted on both owned and leased properties totaling more than 968,000 acres in West Virginia, Kentucky, Virginia, Pennsylvania and Tennessee. In addition, certain owned or leased properties of Massey and its subsidiaries are leased or subleased to third party tenants. Massey’s current practice is to obtain a title review from a licensed attorney prior to purchasing or leasing property. It generally has not obtained title insurance in connection with acquisitions of coal reserves. In some cases, the seller or lessor warrants property title. Separate title confirmation sometimes is not required when leasing reserves where mining has occurred previously. Massey and its subsidiaries currently own or lease the equipment that is utilized in their mining operations. The following table describes the location and general character of the major existing facilities, exclusive of mines, coal preparation plants and their adjoining offices.

Administrative Offices:

For a description of Massey’s mining properties, see Item 1, Business, under the heading “Mining Operations.”

Coal Reserves

Massey estimates that, as of December 31, 2005, it had total recoverable reserves of approximately 2.3 billion tons consisting of both proven and probable reserves. “Reserves” are defined by the SEC Industry Guide 7 as that part of a mineral deposit, which could be economically and legally extracted or produced at the time of the reserve determination. “Recoverable” reserves means coal that is economically recoverable using existing equipment and methods under federal and state laws currently in effect. Approximately 1.5 billion tons of Massey’s reserves are classified as proven reserves. “Proven (measured) reserves” are defined by the SEC Industry Guide 7 as reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established. The remaining 0.8 billion tons of Massey’s reserves are classified as probable reserves. “Probable reserves” are defined by the SEC Industry Guide 7 as reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation.

Information about Massey’s reserves consists of estimates based on engineering, economic and geological data assembled and analyzed by its internal engineers, geologists and finance associates. Reserve estimates are updated annually using geologic data taken from drill holes, adjacent mine workings, outcrop prospect openings and other sources. Coal tonnages are categorized according to coal quality, seam thickness, mineability and location relative to existing mines and infrastructure. In accordance with applicable industry standards, proven reserves are those for which reliable data points are spaced no more than 2,700 feet apart. Probable reserves are those for which reliable data points are spaced 2,700 feet to 7,900 feet apart. Further scrutiny is applied using geological criteria and other factors related to profitable extraction of the coal. These criteria include seam height, roof and floor conditions, yield and marketability.

As with most coal-producing companies in Central Appalachia, the majority of Massey’s coal reserves are controlled pursuant to leases from third party landowners. These leases convey mining rights to the coal producer in exchange for a per ton or percentage of gross sales price royalty payment to the lessor. However, approximately 16% of Massey’s reserve holdings are owned and require no royalty or per ton payment to other parties. Royalty expense for coal reserves from the Company’s producing properties (owned and leased) was approximately 4.3% of Produced coal revenue for the year ended December 31, 2005.

24

Table of Contents

The following table provides proven and probable reserve data by “status” (i.e., location, owned or leased, assigned or unassigned, etc.) as of December 31, 2005:

25

Table of Contents

The categorization of the “quality” (i.e., sulfur content, Btu, coal type, etc.) of Massey’s coal reserves is as follows:

26

Table of Contents

27

Table of Contents

Item 3. Legal Proceedings

Environmental Show Cause Orders

Regulatory authorities implementing the 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 the willful or unwarranted conduct of the Company under the surface mining laws, its surface mining permits may be either suspended or revoked.

On December 30, 2005, the Company entered into a settlement agreement with the West Virginia Department of Environmental Protection (the “WVDEP”) to resolve all outstanding show cause orders with respect to active permits at the Company’s Alex Energy, Inc., Bandmill Coal Corporation (“Bandmill”), Elk Run Coal Company, Inc. Independence Coal Company, Inc. (“Independence”) and Marfork Coal Company, Inc. (“Marfork”) subsidiaries. The settlement agreement is subject to a regulatory public comment period and judicial approval. This settlement agreement will resolve all civil actions filed against the Company’s Independence, Omar Mining Company (“Omar”), Marfork and Bandmill subsidiaries, discussed below under the heading “WVDEP Litigation.” The settlement agreement calls for $1.5 million in payments by the Company and two, three consecutive day shutdowns at Marfork’s impoundment before March 31, 2006, which have been completed.

Additionally, on January 26, 2006, the Company’s Sidney Coal Company (“Sidney”) subsidiary resolved two outstanding show cause orders issued by the Kentucky Natural Resources and Environmental Cabinet by agreeing to pay $150,000 and to perform various remedial efforts at Sidney’s facilities.

WVDEP Litigation

On October 22, 2003, WVDEP brought suit against three Massey subsidiaries, Independence and Omar in the Circuit Court of Boone County, West Virginia, and Marfork in the Circuit Court of Raleigh County, West Virginia. The suits alleged various violations of waste and clean water laws in 2001 and 2002 and sought unspecified amounts in fines as well as injunctive relief to compel compliance.

On April 1, 2004, the WVDEP brought suit against two Massey subsidiaries, Bandmill and Independence in the Circuit Courts of Logan County and Boone County, West Virginia, respectively. The suits alleged various violations of waste and clean water laws for Bandmill (primarily in 2001 and 2002) and Independence (primarily in 2003 and 2004) and sought unspecified amounts in fines as well as injunctive relief to compel compliance.

All five suits filed by the WVDEP will be resolved by the December 30, 2005 settlement agreement upon receipt of final approval, as discussed above under the heading “Environmental Show Cause Orders.”

Martin County Impoundment Discharge

On October 11, 2000, a partial failure of the coal refuse impoundment of Martin County Coal Corporation, a subsidiary of the Company, released approximately 250 million gallons of coal slurry into two tributary streams of the Big Sandy River in eastern Kentucky. As of December 31, 2005, the Company had incurred a total of approximately $80.6 million of cleanup and other spill related costs, including claims, fines and other items, of which $76.8 million has been paid or reimbursed by insurance companies. Remaining matters include (i) seven suits in the Circuit Court of Martin County, Kentucky, asserting claims for property and other damages, and seeking unquantified compensatory and punitive damages (the Court ruled it would not allow punitive damages in one case or certify a class action in another case); and (ii) citations and penalties issued by the MSHA initially totaling approximately $110,000, subsequently reduced to $5,500, appealed by both the MSHA and the Company. The Company believes it has insurance coverage applicable to these items and that they will be resolved without a material impact on its cash flows, results of operations or financial condition. The Company does not view the remaining matters to be material and does not intend to report on them in the future, absent unexpected material developments.

28

Table of Contents

Nationwide Permit 21

On October 23, 2003, various environmental groups sued the U.S. Army Corps of Engineers (the “Corps”) in the United States District Court for the Southern District of West Virginia (“SDWV”), seeking to invalidate Nationwide Permit 21 (“NWP 21”). NWP 21 is a general permit issued by the Corps under Section 404 of the Clean Water Act, authorizing the discharge of fill material into streams for purposes such as the construction of valley fills and refuse impoundments. The Company’s subsidiary Green Valley Coal Company and five coal trade associations intervened in the litigation to protect coal company interests and to support the continued use of NWP 21. On July 8, 2004, the Court suspended certain NWP 21 authorizations for valley fills and surface impoundments in the SDWV if construction had not commenced as of that date. On August 13, 2004, the Court expanded its ruling to include all NWP 21 authorizations for valley fills and surface impoundments in the SDWV. The Corps and coal industry interveners appealed to the United States Court of Appeals for the Fourth Circuit. On January 27, 2005, various environmental groups filed a similar lawsuit in the United States District Court for the Eastern District of Kentucky. On November 23, 2005, a Fourth Circuit panel overturned the district court’s decision invalidating NWP 21 and lifted the suspension on the use of NWP 21 in the SDWV. Plaintiffs requested a rehearing by the entire Fourth Circuit, which was denied. The Company does not view these matters to be material and does not intend to report on them in the future, absent unexpected material developments.

Other Legal Proceedings

Certain information regarding other legal proceedings required by this Item 3 is contained in Note 19, “Contingencies and Commitments,” to the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K and is incorporated herein by reference.

Massey and its subsidiaries, incident to their normal business activities, are parties to a number of other legal proceedings. While Massey cannot predict the outcome of these proceedings, it does not believe that any liability arising from these matters individually or in the aggregate should have a material impact upon the consolidated cash flows, results of operations or financial condition of Massey.

The Company also is party to lawsuits and other legal proceedings related to the non-coal businesses previously conducted by Fluor Corporation (renamed Massey Energy Company) but now conducted by New Fluor. Under the terms of the Distribution Agreement entered into by the Company and New Fluor as of November 30, 2000, in connection with the Spin-Off of New Fluor by the Company, New Fluor agreed to indemnify the Company with respect to all such legal proceedings and has assumed their defense.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders of the Company through a solicitation of proxies or otherwise during the fourth quarter of the Company’s fiscal year ended December 31, 2005.

29

Table of Contents

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Stock

The Company’s Common Stock is listed on the New York Stock Exchange (“NYSE”) and trades under the symbol MEE. At February 28, 2006, there were 81,976,239 shares outstanding and approximately 8,000 shareholders of record of Massey’s Common Stock.

The following table sets forth the high and low sales prices per share of Common Stock on the NYSE for the past two years, based upon published financial sources, and the dividends declared on each share of Common Stock for the quarter indicated.

Dividends

On February 21, 2006, the Company’s board of directors declared a dividend of $0.04 per share, payable on April 11, 2006, to shareholders of record on March 28, 2006.

The Company’s current dividend policy anticipates the payment of quarterly dividends in the future. The Company is restricted by its asset based revolving credit facility, its 6.625% senior notes due 2010 (the “6.625% Notes”) and 6.875% Notes to paying dividends not in excess of $25 million annually so long as no default exists under the facility, the 6.625% Notes, or the 6.875% Notes, as the case may be, or would result thereunder from paying such dividend. There are no other restrictions, other than those set forth under the corporate laws of the State of Delaware, the Company’s state of incorporation, on the Company’s ability to declare and pay dividends. The declaration and payment of dividends to holders of Common Stock will be at the discretion of the Board of Directors and will be dependent upon the future earnings, financial condition, and capital requirements of the Company.

Convertible Debt Securities

The Company’s 4.75% Notes are convertible by holders into shares of Massey’s Common Stock during certain periods under certain circumstances. As of December 31, 2005, the price of Massey’s Common Stock had reached the specified threshold for conversion. Consequently, the 4.75% Notes are convertible until March 31, 2006, the last day of the Company’s first quarter. The 4.75% Notes may be convertible beyond this date if the specified threshold for conversion is met in subsequent quarters. To date, no holder has requested that the 4.75% Notes be converted to Massey’s common stock. If all of the notes outstanding at December 31, 2005 had been converted, the Company would have needed to issue 38,680 shares. In addition, holders of the Company’s 4.75% Notes may require Massey to purchase all or a portion of their 4.75% Notes on May 15, 2009, May 15, 2013, and May 15, 2018. For purchases on May 15, 2013 or May 15, 2018, the Company may, at its option, choose to pay the purchase price in cash or in shares of Massey’s Common Stock or any combination thereof. See Note 8 for further discussion of the conversion and redemption features of the 4.75% Notes.

The Company’s 2.25% Notes are convertible by holders into shares of Massey’s Common Stock during certain periods under certain circumstances. None of the 2.25% Notes were eligible for conversion at December 31, 2005. If all of the notes outstanding at December 31, 2005 had been eligible and were converted, the Company would have needed to issue 287,113 shares. See Note 8 for further discussion of conversion features of the 2.25% Notes.

30

Table of Contents

Repurchase Program

On November 14, 2005, the Board of Directors authorized a stock repurchase program (the “Repurchase Program”), authorizing the Company to repurchase shares of its Common Stock. The Company may repurchase its Common Stock from time to time, as determined by authorized officers of the Company, up to an aggregate amount not to exceed $500 million (excluding commissions). The stock repurchases may be conducted on the open market, through privately negotiated transactions, through derivative transactions or through purchases made in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, in compliance with the SEC’s regulations, the Company’s existing debt covenants, and other legal requirements. The Repurchase Program does not require the Company to acquire any specific number of shares and may be terminated at any time. No shares of Common Stock have been repurchased thus far.

Transfer Agent and Registrar

The transfer agent and registrar for the Massey Common Stock is Wells Fargo Shareowner Services, 161 North Concord Exchange, South St. Paul, Minnesota 55075, toll free (800) 689-8788.

31

Table of Contents

Item 6. Selected Financial Data

SELECTED FINANCIAL DATA⁽¹⁾