Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies Note 2 - Segment Information Note 3 - Earnings Per Share Note 4 - Employee and Retiree Benefits Note 5 - Investments Held by VEBA Trust Note 6 - Former Natural Resource Operations Note 7 - Costs Associated With Exit Activities Note 8 - Property and Equipment Note 9 - Impairment of Long-Lived Assets Note 10 - Other Assets Note 11 - Accrued Liabilities Note 12 - Other Liabilities Note 13 - Long-Term Debt Note 14 - Accounts Receivable and Asset Securitization Note 15 - Operating Leases Note 16 - Equity-Based Compensation Plans Note 17 - Capital Stock Note 18 - Income Taxes Note 19 - Supplemental Cash Flow Information Note 20 - Other Operating Income, Net Note 21 - Other Nonoperating Income (Expense), Net Note 22 - Risk Management Note 23 - Other Commitments and Contingencies Note 24 - Selected Quarterly Financial Data (unaudited)

Note 6 – Former Natural Resource Operations

The Company disposed of essentially all of its natural resources interests in 2002, 2003, and early 2004.

Summary of Proceeds from Sales of Natural Resource Interests

(a) Liabilities in this column are primarily reclamation liabilities and exclude working capital liabilities.
(b) The Company settled the royalty agreement and collected the notes receivables in 2003 for $26.0 million in cash.

Discontinued Operations

(a) Coal’s loss was recognized under APB No. 30, “Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” in which future losses are estimated and accrued in advance of the period in which losses occur.

Gain (loss) on Sale

During 2000, an $85.9 million estimated loss on the sale of the coal business was recorded, and during 2001 the estimated loss was increased by $15.9 million. A $13.2 million reversal of the previously estimated loss on sale was recorded during 2002 to reflect the amount of actual proceeds and values of assets and liabilities at the dates of sale. The assets disposed of in 2002 primarily consisted of operations including coal reserves, property, plant and equipment, the Company’s economic interest in Dominion Terminal Associates and inventory. Certain liabilities, primarily reclamation costs related to properties disposed of, were assumed by the purchasers.

In August 2003, the Company sold its natural gas business and received $81.2 million in cash and recognized a $56.2 million gain in discontinued operations.

In December 2003, the Company sold a portion of its timber business for $5.4 million in cash and recognized a $4.8 million pretax gain in discontinued operations. The Company received an additional $31.8 million from escrow in January 2004 for most of the remaining portion of its timber business. An additional $1.9 million of cash is being held in escrow until June 2004 pending the completion of certain remaining title work by the buyer. The Company paid $6.2 million in January 2004 to settle operating leases for equipment purchased by the buyer. The Company expects to recognize approximately $19 million of additional pretax gains in the first quarter of 2004 and up to a $1.9 million pretax gain in the second quarter of 2004 in discontinued operations.

In February 2004, the Company sold its gold operations for approximately $1.1 million in cash plus the assumption of liabilities. The Company recognized pretax impairment losses related to its gold business of $1.7 million in 2003 and $5.7 million in 2002. Impairment charges were triggered by the Company’s negotiations to sell its gold operations during the last two years. The Company also recognized $1.4 million (pretax) in 2002 of previously deferred losses on certain of its gold forward sales contracts that had been accounted for as hedges since the hedged transactions were no longer deemed probable as a result of the potential transfer. Fair value was estimated using projected weighted-average discounted cash flows.

In 2003, $0.1 million of interest expense was allocated to discontinued operations. No interest expense was allocated to discontinued operations in 2002 and 2001.

Results of Operations

The following tables show selected financial information for the results from operations for discontinued operations for the three years ended December 31, 2003.

Continuing Operations

In October 2003, the Company sold its 23.3% equity interest in MPI Mines Ltd., an Australian exploration and development company with interests in gold and nickel, for $18.8 million in cash and recognized a $10.4 million pretax gain in continuing operations.

In November 2003, the Company sold substantially all of its remaining coal-related assets for $14 million in cash plus the assumption of reclamation and other liabilities for total proceeds of $28.8 million. A gain is expected to be recognized in 2004 as liabilities related to reclamation are formally transferred to the buyer.

Classification of Ongoing Expenses in the Statements of Operations

The classification of income statement items related to the Company’s former coal business during the last three years is set forth in the following table. After the disposal of the coal business, certain expenses began to be classified within continuing operations, while adjustments to coal-related contingent assets and liabilities continue to be reported within discontinued operations. The classification of expenses in 2004 and beyond is expected to be the same as in 2003:

(a) Includes contingent reclamation liabilities of closed mines, Health Benefit Act liabilities, withdrawal liabilities from multi-employer pension plans, workers’ compensation liabilities, and Federal Black Lung Excise Tax contingent assets.

Costs of Former Operations Included in Continuing Operations