16. Supplemental Guarantor/Non-Guarantor Financial Information (CPE Resources only)

In accordance with the indenture governing the senior notes, certain wholly-owned U.S. subsidiaries of CPE Resources (the “Guarantor Subsidiaries”) have fully and unconditionally guaranteed these senior notes on a joint and several basis. These guarantees of either series of senior notes are subject to release in the following customary circumstances:

· a sale or other disposition (including by way of consolidation or merger or otherwise) of the Guarantor Subsidiary or the sale or disposition of all or substantially all the assets of the Guarantor Subsidiary (other than to the CPE Resources or a Restricted Subsidiary (as defined in the indenture) of CPE Resources) otherwise permitted by the indenture,

· a sale of the majority of the capital stock of a Guarantor Subsidiary to a third person otherwise permitted by the indenture, after which the applicable Guarantor Subsidiary is no longer a Restricted Subsidiary,

· upon a liquidation or dissolution of a Guarantor Subsidiary so long as no default under the indenture occurs as a result thereof,

· the designation by CPE Resources in accordance with the indenture of the Guarantor Subsidiary as an Unrestricted Subsidiary or the Guarantor Subsidiary otherwise ceases to be a Restricted Subsidiary of CPE Resources in accordance with the indenture,

· defeasance or discharge of such series of senior notes or

· the release, other than the discharge through payment by the Guarantor Subsidiary, of all other guarantees by such Restricted Subsidiary of Debt (as defined in the indenture) of CPE Resources or the co-issuer of the senior notes.

Separate financial statements and other disclosures concerning the Guarantor Subsidiaries are not presented because management believes that such information is not material to the senior note holders. The following historical financial statement information is provided for the Guarantor/Non-Guarantor Subsidiaries:

Supplemental Condensed Consolidating Statement of Operations and Comprehensive Income

(in thousands)

	Three Months Ended June 30, 2013
	Parent Company (CPE Resources)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	324,658		$	5,338		$	—		329,996
Costs and expenses
Cost of product sold (exclusive of depreciation, depletion, amortization and accretion, shown separately)	10			275,211			6,382			—			281,603
Depreciation and depletion	627			23,953			878			—			25,459
Accretion	—			2,924			1,202			—			4,126
Derivative mark-to-market gains	—			(12,284		)	—			—			(12,284		)
Selling, general and administrative expenses	155			12,679			—			—			12,834
Other operating costs	555			636			—			—			1,191
Total costs and expenses	1,347			303,119			8,462			—			312,929
Operating income (loss)	(1,347		)	21,539			(3,124		)	—			17,067
Other income (expense)
Interest income	63			—			—			—			63
Interest expense	(9,975		)	(238		)	(102		)	—			(10,315		)
Other, net	(165		)	43			165			—			43
Total other (expense) income	(10,077		)	(195		)	63			—			(10,209		)
Income (loss) before income tax provision and earnings (losses) from unconsolidated affiliates	(11,424		)	21,344			(3,061		)	—			6,858
Income tax benefit (expense)	3,204			(6,791		)	1,124			—			(2,462		)
Earnings from unconsolidated affiliates, net of tax	5			308			—			—			313
Earnings (losses) from consolidated affiliates, net of tax	12,924			(1,937		)	—			(10,987		)	—
Net income (loss)	4,709			12,924			(1,937		)	(10,987		)	4,709
Other comprehensive income
Retiree medical plan amortization of prior service cost	444			444			—			(444		)	444
Income tax on retiree medical plan adjustments	(160		)	(160		)	—			160			(160		)
Other comprehensive income	284			284			—			(284		)	284
Total comprehensive income (loss)	$	4,993		$	13,208		$	(1,937	)	$	(11,271	)	$	4,993

Supplemental Condensed Consolidating Statement of Operations and Comprehensive Income

(in thousands)

	Three Months Ended June 30, 2012
	Parent Company (CPE Resources)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	337,085		$	6,098		$	—		$	343,183
Costs and expenses
Cost of product sold (exclusive of depreciation, depletion, amortization and accretion, shown separately)	(3		)	258,580			7,497			—			266,073
Depreciation and depletion	463			21,101			720			—			22,285
Accretion	—			2,330			1,092			—			3,422
Derivative mark-to-market gains	—			(20,183		)	—			—			(20,183		)
Selling, general and administrative expenses	205			12,350			—			—			12,556
Other operating costs	—			308			—			—			308
Total costs and expenses	665			274,486			9,309			—			284,461
Operating income (loss)	(665		)	62,599			(3,211		)	—			58,722
Other income (expense)
Interest income	312			—			—			—			312
Interest expense	(7,397		)	(524		)	(16		)	—			(7,936		)
Other, net	—			(110		)	—			—			(110		)
Total other expense	(7,085		)	(634		)	(16		)	—			(7,735		)
Income (loss) before income tax provision and earnings (losses) from unconsolidated affiliates	(7,750		)	61,965			(3,227		)	—			50,987
Income tax benefit (expense)	7,702			(27,654		)	1,145			—			(18,806		)
Earnings from unconsolidated affiliates, net of tax	6			1,491			—			—			1,497
Earnings (losses) from consolidated affiliates, net of tax	33,720			(2,082		)	—			(31,638		)	—
Net income (loss)	33,678			33,720			(2,082		)	(31,638		)	33,678
Other comprehensive income
Retiree medical plan amortization of prior service cost	394			394			—			(394		)	394
Other postretirement plan adjustments	—			—			—			—			—
Income tax on retiree medical plan adjustments	(142		)	(142		)	—			142			(142		)
Other comprehensive income	252			252			—			(252		)	252
Total comprehensive income (loss)	$	33,930		$	33,972		$	(2,082	)	$	(31,890	)	$	33,930

Supplemental Condensed Consolidating Statement of Operations and Comprehensive Income

(in thousands)

	Six Months Ended June 30, 2013
	Parent Company (CPE Resources)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	1		$	660,223		$	7,824		$	—		668,048
Costs and expenses
Cost of product sold (exclusive of depreciation, depletion, amortization and accretion, shown separately)	19			547,666			9,947			—			557,631
Depreciation and depletion	1,280			47,201			190			—			48,671
Accretion	—			5,862			2,391			—			8,253
Derivative mark-to-market gains	—			(25,936		)	—			—			(25,936		)
Selling, general and administrative expenses	420			26,022			—			—			26,442
Other operating costs	554			747			—			—			1,301
Total costs and expenses	2,273			601,562			12,528			—			616,362
Operating income (loss)	(2,272		)	58,661			(4,704		)	—			51,686
Other income (expense)
Interest income	188			—			—			—			188
Interest expense	(20,123		)	(514		)	(162		)	—			(20,799		)
Other, net	(323		)	(240		)	365			—			(198		)
Total other (expense) income	(20,258		)	(754		)	203			—			(20,809		)
Income (loss) before income tax provision and earnings (losses) from unconsolidated affiliates	(22,530		)	57,907			(4,501		)	—			30,877
Income tax benefit (expense)	4,205			(17,108		)	1,607			—			(11,297		)
Earnings from unconsolidated affiliates, net of tax	9			515			—			—			524
Earnings (losses) from consolidated affiliates, net of tax	38,420			(2,894		)	—			(35,526		)	—
Net income (loss)	20,104			38,420			(2,894		)	(35,526		)	20,104
Other comprehensive income
Retiree medical plan amortization of prior service cost	888			888			—			(888		)	888
Other postretirement plan adjustments	30			30			—			(30		)	30
Income tax on retiree medical plan adjustments	(330		)	(330		)	—			330			(330		)
Other comprehensive income	588			588			—			(588		)	588
Total comprehensive income (loss)	$	20,692		$	39,008		$	(2,894	)	$	(36,114	)	$	20,692

Supplemental Condensed Consolidating Statement of Operations and Comprehensive Income

(in thousands)

	Six Months Ended June 30, 2012
	Parent Company (CPE Resources)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	—		$	706,313		$	9,773		$	—		$	716,086
Costs and expenses
Cost of product sold (exclusive of depreciation, depletion, amortization and accretion, shown separately)	3			535,398			13,617			—			549,018
Depreciation and depletion	1,020			42,745			1,910			—			45,675
Accretion	—			4,660			1,411			—			6,070
Derivative mark-to-market gains	—			(18,127		)	—			—			(18,127		)
Selling, general and administrative expenses	419			26,878			—			—			27,298
Other operating costs	—			401			—			—			401
Total costs and expenses	1,442			591,955			16,938			—			610,335
Operating income (loss)	(1,442		)	114,358			(7,165		)	—			105,751
Other income (expense)
Interest income	758			—			—			—			758
Interest expense	(13,062		)	(692		)	(32		)	—			(13,786		)
Other, net	—			(53		)	—			—			(53		)
Total other expense	(12,304		)	(745		)	(32		)	—			(13,081		)
Income (loss) before income tax provision and earnings (losses) from unconsolidated affiliates	(13,746		)	113,613			(7,198		)	—			92,670
Income tax benefit (expense)	14,852			(51,320		)	2,560			—			(33,908		)
Earnings from unconsolidated affiliates, net of tax	12			1,522			—			—			1,534
Earnings (losses) from consolidated affiliates, net of tax	59,178			(4,638		)	—			(54,540		)	—
Net income (loss)	60,296			59,177			(4,638		)	(54,539		)	60,296
Other comprehensive income
Retiree medical plan amortization of prior service cost	788			788			—			(788		)	788
Other postretirement plan adjustments	90			90			90			(180		)	90
Income tax on retiree medical plan adjustments	(316		)	(316		)	(32		)	348			(316		)
Other comprehensive income	562			562			58			(620		)	562
Total comprehensive income (loss)	$	60,858		$	59,739		$	(4,580	)	$	(55,159	)	$	60,858

Supplemental Condensed Consolidating Balance Sheet

(in thousands)

	June 30, 2013
	Parent Company (CPE Resources)		Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	198,394	$	208	$	1,145		$	—		$	199,747
Investments in marketable securities	80,501		—		—			—			80,501
Accounts receivable	—		17,392		78,494			—			95,886
Due from related parties	—		492,762		—			(491,926		)	836
Inventories, net	5,880		72,658		4,121			—			82,659
Deferred income taxes	—		19,550		—			(27		)	19,523
Derivative financial instruments	—		37,252		—			—			37,252
Other assets	—		21,183		150			—			21,333
Total current assets	284,775		661,005		83,910			(491,953		)	537,737
Noncurrent assets
Property, plant and equipment, net	9,458		1,667,437		2,836			—			1,679,731
Goodwill	—		35,634		—			—			35,634
Deferred income taxes	27,143		11,711		18,116			—			56,970
Other assets	1,732,560		—		—			(1,688,350		)	44,210
Total assets	$	2,053,936	$	2,375,787	$	104,862		$	(2,180,303	)	$	2,354,282

LIABILITIES AND MEMBER’S EQUITY
Current liabilities
Accounts payable	$	3,004	$	56,383	$	3,310		$	—		$	62,697
Royalties and production taxes	—		127,725		1,742			—			129,467
Accrued expenses	2,101		49,178		5,380			—			56,659
Due to related parties	432,105		—		66,120			(491,926		)	6,299
Current deferred income taxes	27		—		—			(27		)	—
Current portion of federal coal lease obligations	—		54,339		—			—			54,339
Other liabilities	51		2,837		966			—			3,854
Total current liabilities	437,288		290,462		77,518			(491,953		)	313,315
Noncurrent liabilities
Senior notes	596,735		—		—			—			596,735
Federal coal lease obligations, net of current portion	—		122,928		—			—			122,928
Asset retirement obligations, net of current portion	—		167,884		71,691			—			239,576
Other liabilities	31		79,134		5,899			(23,217		)	61,846
Total liabilities	1,034,054		660,408		155,108			(515,170		)	1,334,400
Commitments and Contingencies (Note 9)
Total member’s equity	1,019,882		1,715,379		(50,246		)	(1,665,133		)	1,019,882
Total liabilities and member’s equity	$	2,053,936	$	2,375,787	$	104,862		$	(2,180,303	)	$	2,354,282

Supplemental Condensed Consolidating Balance Sheet

(in thousands)

	December 31, 2012
	Parent Company (CPE Resources)		Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	195,076	$	—	$	2,615		$	—		$	197,691
Investments in marketable securities	80,341		—		—			—			80,341
Accounts receivable	—		74,008		2,108			—			76,117
Due from related parties	—		385,102		42			(383,582		)	1,561
Inventories, net	6,741		71,312		3,622			—			81,675
Deferred income taxes	—		21,124		—			(28		)	21,096
Derivative financial instruments	138		13,647		—			—			13,785
Other assets	7		16,100		117			—			16,224
Total current assets	282,303		581,293		8,504			(383,610		)	488,490
Noncurrent assets
Property, plant and equipment, net	9,239		1,666,020		3,035			—			1,678,294
Goodwill	—		35,634		—			—			35,634
Deferred income taxes	22,807		24,650		18,679			—			66,136
Other assets	1,682,267		—		4,470			(1,646,259		)	40,478
Total assets	$	1,996,616	$	2,307,597	$	34,688		$	(2,029,869	)	$	2,309,032

LIABILITIES AND MEMBER’S EQUITY
Current liabilities
Accounts payable	$	2,558	$	45,896	$	1,117		$	—		$	49,571
Royalties and production taxes	—		126,726		2,625			—			129,351
Accrued expenses	2,087		41,529		292			—			43,908
Due to related parties	396,137		—		—			(383,583		)	12,554
Current deferred income taxes	27		—		—			(27		)	—
Current portion of federal coal lease obligations	—		63,191		—			—			63,191
Other liabilities	49		1,754		966			—			2,769
Total current liabilities	400,858		279,096		5,001			(383,611		)	301,344
Noncurrent liabilities
Senior notes	596,506		—		—			—			596,506
Federal coal lease obligations, net of current portion	—		122,928		—			—			122,928
Asset retirement obligations, net of current portion	—		164,626		74,365			—			238,991
Other liabilities	61		77,655		5,806			(33,449		)	50,073
Total liabilities	997,425		644,305		85,172			(417,060		)	1,309,842
Commitments and Contingencies (Note 9)
Total member’s equity	999,190		1,663,293		(50,484		)	(1,612,809		)	999,190
Total liabilities and member’s equity	$	1,996,615	$	2,307,598	$	34,688		$	(2,029,869	)	$	2,309,032

Supplemental Condensed Consolidating Statement of Cash Flows

(in thousands)

	Six Months Ended June 30, 2013
	Parent Company (CPE Resources)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	4,977		$	48,408		$	(9,068	)	$	—		$	44,317

Investing activities
Purchases of property, plant and equipment	(1,499		)	(22,974		)	(2		)	—			(24,475		)
Cash paid for capitalized interest	—			(8,263		)	—			—			(8,263		)
Investments in marketable securities	(32,961		)	—			—			—			(32,961		)
Maturity and redemption of investments	32,801			—			—			—			32,801
Investment in project development	—			(4,087		)	—			—			(4,087		)
Return of partnership escrow deposit	—			—			4,468			—			4,468
Contributions made to subsidiary	—			(7,600		)	—			7,600			—
Distribution received from subsidiary	—			4,468			—			(4,468		)	—
Other	—			63			—			—			63
Net cash provided by (used in) investing activities	(1,659		)	(38,393		)	4,466			3,132			(32,454		)

Financing activities
Principal payments of federal coal leases	—			(8,852		)	—			—			(8,852		)
Contributions received from parent	—			—			7,600			(7,600		)	—
Distributions made to parent	—			—			(4,468		)	4,468			—
Other	—			(955		)	—			—			(955		)
Net cash provided by (used in) financing activities	—			(9,807		)	3,132			(3,132		)	(9,807		)

Net increase (decrease) in cash and cash equivalents	3,318			208			(1,470		)	—			2,056
Cash and cash equivalents at beginning of year	195,076			—			2,615			—			197,691
Cash and cash equivalents at the end of year	$	198,394		$	208		$	1,145		$	—		$	199,747

Supplemental Condensed Consolidating Statement of Cash Flows

(in thousands)

	Six Months Ended June 30, 2012
	Parent Company (CPE Resources)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(24,221	)	$	112,270		$	(6,768	)	$	—		$	81,282

Investing activities
Acquisition of Youngs Creek and CX Ranch coal and land assets	—			(300,259		)	—			—			(300,259		)
Purchases of property, plant and equipment	(3,755		)	(18,090		)	(30		)	—			(21,875		)
Cash paid for capitalized interest	—			(36,477		)	—			—			(36,477		)
Investments in marketable securities	(53,854		)	—			—			—			(53,854		)
Maturity and redemption of investments	28,887			—			—			—			28,887
Return of restricted cash	71,244			—			—			—			71,244
Partnership escrow deposit	—			—			(4,470		)	—			(4,470		)
Contributions made to subsidiary	(300,259		)	(10,570		)	—			310,829			—
Other	—			1,825			—			—			1,825
Net cash provided by (used in) investing activities	(257,736		)	(363,571		)	(4,501		)	310,829			(314,979		)

Financing activities
Principal payments of federal coal leases	—			(48,959		)	—			—			(48,959		)
Contributions received from parent	—			300,259			10,570			(310,829		)	—
Net cash provided by (used in) financing activities	—			251,300			10,570			(310,829		)	(48,959		)

Net increase (decrease) in cash and cash equivalents	(281,957		)	—			(699		)	—			(282,656		)
Cash and cash equivalents at beginning of year	401,087			2			3,151			—			404,240
Cash and cash equivalents at the end of year	$	119,131		$	2		$	2,451		$	—		$	121,584