1037676--3/14/2006--ARCH_COAL

related topics

{gas, price, oil}

{cost, regulation, environmental}

{customer, product, revenue}

{loss, insurance, financial}

{debt, indebtedness, cash}

{cost, contract, operation}

{operation, natural, condition}

{cost, operation, labor}

{acquisition, growth, future}

{investment, property, distribution}

{capital, credit, financial}

Risks Related to Our Business A substantial or extended decline in coal prices could reduce our revenue and the value of our coal reserves. Any change in coal demand by U.S. electric power generators that results in a decrease in the use of coal could result in lower prices for our coal, which would reduce our revenue and adversely impact our earnings and the value of our coal reserves. Our coal mining production is subject to conditions and events beyond our control, which could result in higher operating expenses or decreased production and adversely affect our operating results. Increases in the price of steel and petroleum products and a shortage of tires used in our mining operations could significantly affect our operating profitability. There is a shortage of skilled coal mining workers, and as a result we are facing significantly higher labor costs as well as competition for workers from other coal producers. Disruption in supplies of coal produced by our contract mine operators could temporarily impair our ability to fill customers orders or increase our costs. We face numerous uncertainties in estimating our economically recoverable coal reserves, and inaccuracies in our estimates could result in decreased profitability from lower than expected revenue or higher than expected costs. Defects in title or loss of any leasehold interests in our properties could limit our ability to mine these properties or result in significant unanticipated costs. Fluctuations in transportation costs and the availability and reliability of transportation facilities could affect the demand for our coal or temporarily impair our ability to supply coal to our customers. Acquisitions that we may undertake would involve a number of inherent risks, any of which could cause us not to realize the benefits anticipated to result. Our business will be adversely affected if we are unable to develop or acquire additional coal reserves that are economically recoverable. Our profitability may be adversely affected by our commitments under long-term coal supply contracts and changes in purchasing patterns in the coal industry may make it difficult for us to extend existing contracts or to enter into long-term supply contracts. The loss of, or significant reduction in, purchases by our largest customers could adversely affect our revenues. Certain provisions in our long-term supply agreements may provide limited protection during adverse economic conditions or may result in economic penalties upon the failure to meet specifications. We have a significant amount of debt relative to our total capitalization, which limits our flexibility and imposes restrictions on us, and a downturn in economic or industry conditions may materially affect our ability to meet our future financial commitments and liquidity needs. If our assumptions regarding our likely future expenses related to benefits for non-active employees are incorrect, then expenditures for these benefits could be materially higher than we have predicted. Increased consolidation and competition within the coal industry may adversely affect our ability to sell coal, and excess production capacity in the industry could put downward pressure on coal prices. We may be unable to comply with restrictions imposed by our credit facilities and other financing arrangements which could result in a default under these agreements. Changes in our credit ratings could adversely affect our costs and expenses. Failure to obtain or renew surety bonds on acceptable terms could affect our ability to secure reclamation and coal lease obligations, which could adversely affect our ability to mine or lease coal. Terrorist attacks and threats, escalation of military activity in response to such attacks or acts of war may negatively affect our business, financial condition and results of operations. Risks Related to Environmental and Other Regulation Federal and state governments extensively regulate our mining operations, which imposes significant costs on us, and future regulations could increase those costs or limit our ability to produce and sell coal. We may be unable to obtain and renew permits necessary for our operations, which would reduce our production, cash flow and profitability. The Clean Air Act affects us and our customers, and could increase the cost of coal production and/or reduce the demand for coal as a fuel source and thereby cause our sales and profitability to decline. We have significant reclamation and mine closure obligations. If the assumptions underlying our accruals are materially inaccurate, we could be required to expend greater amounts than anticipated. Our operations may impact the environment or cause exposure to hazardous substances, and our properties may have environmental contamination, which could result in material liabilities to us.

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1037676--3/14/2006--ARCH_COAL_INC