2005 Financial Review

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

Other Potential Use of Credit

Surety Bonds

The Company is required by various state and federal laws to provide security with regard to its obligations to pay workers’ compensation, to reclaim lands used for mining by the Company’s former coal operations and to satisfy other obligations. As of December 31, 2005, the Company had outstanding surety bonds with third parties totaling approximately $71.8 million that it has arranged in order to satisfy various security requirements. Most of these bonds provide financial security for previously recorded liabilities. The Company expects $9.4 million of the outstanding surety bonds to be replaced with surety bonds provided by the purchaser of BAX Global. Surety bonds are typically renewable on a yearly basis; however, there can be no assurance the bonds will be renewed or that premiums in the future will not increase.

If the remaining surety bonds are not renewed, the Company believes that it has adequate available borrowing capacity under its Letter of Credit Facility and its Revolving Facility to provide letters of credit or other collateral to secure its obligations.

The Company has issued letters of credit under its Letter of Credit Facility, described in “Debt” above, to satisfy a portion of its security requirements. At December 31, 2005, $135.8 million of the $144.1 million issued letters of credit were used to satisfy security requirements.