UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2019

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-34547

Cloud Peak Energy Inc.

(Exact name of registrant as specified in its charter)

Delaware		26-3088162
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
748 T-7 Road, Gillette, Wyoming		82718
(Address of principal executive offices)		(Zip Code)

748 T-7 Road, Gillette, Wyoming		82718
(Address of principal executive offices)		(Zip Code)

(307) 687-6000

(Registrant’s telephone number, including area code)

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

Title of each class		Trading Symbol(s)		Name of each Exchange on which registered

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.

x Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company o x o ox o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes x No

Number of shares outstanding of Cloud Peak Energy Inc.’s common stock, as of the latest practicable date: Common stock, $0.01 par value per share, 76,508,294 shares outstanding as of ~~September~~October 611, 2019.

Table of Contents

CLOUD PEAK ENERGY INC.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
		Page
	PART I — FINANCIAL INFORMATION
Item 1	Financial Statements —
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2019 and 2018	1
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2019 and 2018	1
	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018	2
	Unaudited Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018	2
	Unaudited Condensed Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2019 and 2018	3
	Unaudited Condensed Consolidated Statements of Equity for the Three and Nine Months Ended September 30, 2019 and 2018	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018	5
	Notes to Unaudited Condensed Consolidated Financial Statements	56
Cautionary Notice Regarding Forward-Looking Statements		5557
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5961
Item 3	Quantitative and Qualitative Disclosures About Market Risk	8891
Item 4	Controls and Procedures	8992
~~PART II — OTHER INFORMATION~~	PART II — OTHER INFORMATION
Item 1	Legal Proceedings	9194
Item 1A	Risk Factors	9194
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	9699
Item 3	Defaults Upon Senior Securities	9699
Item 4	Mine Safety Disclosures	97100
Item 5	Other Information	97100
Item 6	Exhibits	97100

Unless the context indicates otherwise, the terms “Cloud Peak Energy,” the “Company,” “we,” “us,” and “our” refer to Cloud Peak Energy Inc. (“CPE Inc.”) and its subsidiaries.

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

CLOUD PEAK ENERGY INC. (DEBTOR-IN-POSSESSION)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (~~DEBTOR-IN-POSSESSION~~LOSS)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data)

	Three Months Ended						~~Six~~Nine Months Ended
	June 30,						June 30,
	September 30,						September 30,
	2019			2018			2019			2018
Revenue (Note 3)	$	~~168~~220,~~451~~227		$	~~205~~233,~~698~~080		$	~~313~~533,~~528~~755		$	~~422~~655,~~007~~087
Costs and expenses
Cost of product sold (exclusive of depreciation, depletion, and accretion)	~~162~~194,~~847~~999			~~196~~208,~~410~~504			~~322~~517,~~806~~805			~~388~~597,~~944~~448
Depreciation and depletion	11(2,~~897~~488		)	1417,~~401~~392			2220,~~583~~095			2946,~~396~~788
Accretion	1,~~493~~699			1,~~706~~947			34,~~097~~796			35,~~411~~359
(Gain) loss on derivative financial instruments	—			—(730		)	(1,809		)	—(730		)
Selling, general and administrative expenses	147,~~963~~971			125,~~975~~101			3341,~~535~~507			2025,~~292~~393
Impairments (Note 6)	~~620,901~~—			~~800~~—			621,005			800
Other operating costs	~~111~~101			55149			~~351~~451			~~183~~331
Total costs and expenses	~~812~~202,~~212~~282			~~226~~232,~~347~~363			1,~~001~~203,~~568~~850			~~443~~675,~~026~~389
Operating income (loss)	~~(643~~17,~~761~~945		)	~~(20,649~~717		)	(~~688~~670,~~040~~095		)	(2120,~~019~~302		)
Other income (expense)
Net periodic postretirement benefit income (cost), excluding service cost	1,755			120,~~617~~016			35,~~510~~264			323,~~235~~251
Interest income	~~106~~241			~~274~~304			~~393~~634			~~538~~841
Interest expense (contractual interest of $11 million and $20.6 million for the three and six months ended June 30, 2019, respectively)	(5,081		)	(10,541		)	(12,773		)	(19,729		)
Interest expense (contractual interest of $11.4 million and $32 million for the three and nine months ended September 30, 2019, respectively)	(2,027		)	(8,411		)	(14,801		)	(28,141		)
Reorganization items, net (Note 7)	37(13,~~190~~152		)	—			3724,~~190~~038			—
Other, net	(~~483~~8		)	~~(334~~67		)	(~~498~~505		)	(~~604~~535		)
Total other income (expense)	33(13,~~487~~191		)	(811,~~984~~976		)	2714,~~822~~630			(164,~~560~~584		)
Income (loss) before income tax provision and earnings from unconsolidated affiliates	~~(610~~4,~~274~~754		)	~~(29~~12,~~633~~693		)	(~~660~~655,~~218~~465		)	(3724,~~579~~886		)
Income tax benefit (expense)	(3512		)	(~~234~~5		)	(7485		)	(~~297~~302		)
Income (loss) from unconsolidated affiliates, net of tax	~~630~~24			(53		)	~~866~~890			~~266~~269
Net income (loss)	~~(609~~4,~~679~~766		)	~~(29~~12,~~872~~691		)	(~~659~~654,~~426~~660		)	(3724,~~610~~919		)
Other comprehensive income (loss)
Postretirement medical plan amortization of prior service costs	—			(~~1,837~~612		)	—			(34,~~675~~287		)
Postretirement medical plan termination	(1,755		)	—			(3,510		)	—
Postretirement medical plan change	—			24,659			—			24,659
Other comprehensive income (loss)	(1,755		)	(1,837		)	(3,510		)	(3,675		)
Postretirement medical plan termination	(1,755		)	(19,477		)	(5,264		)	(19,477		)
Total comprehensive income (loss)	$	(611,434	)	$	(31,709	)	$	(662,936	)	$	(41,285	)
Other comprehensive income (loss)	(1,755		)	4,570			(5,264		)	895
Total comprehensive income (loss)	$	3,011		$	17,261		$	(659,924	)	$	(24,024	)
Income (loss) per common share:
Basic and Diluted	$	(7.97	)	$	(0.39	)	$	(8.65	)	$	(0.50	)
Basic	$	0.06		$	0.17		$	(8.57	)	$	(0.33	)
Weighted-average shares outstanding - basic and diluted	76,508			75,756			76,265			75,544
Diluted	$	0.06		$	0.16		$	(8.57	)	$	(0.33	)
Weighted-average shares outstanding - basic	76,508			75,778			76,347			75,623
Weighted-average shares outstanding - diluted	77,017			77,283			76,347			75,623

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

Table of Contents

CLOUD PEAK ENERGY INC. (DEBTOR-IN-POSSESSION)

(DEBTOR-IN-POSSESSION)

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	June 30,			December 31,
	September 30,			December 31,
	2019			2018
ASSETS
Current assets
Cash and cash equivalents	$	6484,~~425~~760		$	91,196
Accounts receivable, net	44,937			33,527
Restricted cash	40,023			725
Due from related parties	108			—
Accounts receivable, net	41,676			33,527
Inventories, net (Notes 6 and 13)	16,961			70,040
Due from related parties	111			—
Income tax receivable	7,944			15,808
Inventories, net (Notes 6 and 13)	16,946			70,040
Other prepaid and deferred charges	25,798			27,527
Income tax receivable	7,934			15,808
Other assets	6,810			4,205
Other prepaid and deferred charges	28,349			27,527
Total current assets	166,983			242,303
Other assets	78			3,480
Total current assets	219,877			242,303
Noncurrent assets
Property, plant and equipment, net (Note 6)	6867,~~468~~454			654,372
Income tax receivable	7,884			15,768
Other assets	31,~~476~~447			16,213
Total assets	$	~~274~~326,~~811~~662		$	928,656
LIABILITIES AND EQUITY
Liabilities not subject to compromise
Current liabilities
Accounts payable	$	3143,~~780~~536		$	34,210
Royalties and production and property taxes (Note 19)	1322,~~974~~194			53,232
Accrued expenses	1427,~~610~~732			26,385
Due to related parties	—			71
Current portion of federal coal lease obligations (Notes 15 and 19)	—			379
Debtor-in-possession financing	1165,~~313~~884			—
Other liabilities	1,~~556~~205			4,019
Total current liabilities	73160,~~233~~551			118,296
Noncurrent liabilities
Senior notes (Notes 14 and 19)	—			396,373
Federal coal lease obligations, net of current portion (Notes 15 and 19)	—			1,404
Asset retirement obligations, net of current portion	~~100~~96,~~939~~940			92,591
Royalties and production and property taxes (Note 19)	310,~~124~~232			20,587
Other liabilities	~~181~~76			5,731
Total liabilities not subject to compromise	~~177~~267,~~477~~799			634,982
Liabilities subject to compromise (Note 19)	~~464~~421,~~369~~798			—
Total liabilities	~~641~~689,~~846~~597			634,982
Commitments and Contingencies (Notes 5 and 20)
Equity
Common stock ($0.01 par value; 200,000 shares authorized; 76,985 and 76,283 shares issued and 76,508 and 75,806 outstanding as of June 30, 2019 and December 31, 2018, respectively)	765			758
Common stock ($0.01 par value; 200,000 shares authorized; 76,985 and 76,283 shares issued and 76,508 and 75,806 outstanding as of September 30, 2019 and December 31, 2018, respectively)	765			758
Treasury stock, at cost (477 shares as of both June 30, 2019 and December 31, 2018)	(6,498		)	(6,498		)
Treasury stock, at cost (477 shares as of both September 30, 2019 and December 31, 2018)	(6,498		)	(6,498		)
Additional paid-in capital	~~658~~659,~~899~~989			656,925
Retained earnings (accumulated deficit)	(1,~~029~~025,~~975~~210		)	(370,795		)
Accumulated other comprehensive income (loss)	98,~~774~~019			13,284
Total equity	(367,035		)	293,674
Total equity (deficit)	(362,935		)	293,674
Total liabilities and equity	$	~~274~~326,~~811~~662		$	928,656

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

Table of Contents

CLOUD PEAK ENERGY INC. (DEBTOR-IN-POSSESSION)

(DEBTOR-IN-POSSESSION)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(in thousands)

	Six Months Ended June 30, 2019
	Nine Months Ended September 30, 2019
											Retained			Accumulated
								Additional			Earnings/			Other
	Common Stock			Treasury Stock				Paid-In			(Accumulated			Comprehensive
	Shares	Amount		Shares	Amount			Capital			Deficit)			Income (Loss)			Total
Balances as of January 1, 2019	75,806	$	758	477	$	(6,498	)	$	656,925		$	(370,795	)	$	13,284		$	293,674
Net income (loss)	—	—		—	—			—			(49,748		)	—			(49,748		)
Adoption of new accounting standard	—	—		—	—			—			246			—			246
Postretirement benefit adjustment, net of tax	—	—		—	—			—			—			(1,755		)	(1,755		)
Equity-based compensation expense	—	—		—	—			1,106			—			—			1,106
Employee common stock withheld to cover withholding taxes	701	7		—	—			(232		)	—			—			(225		)
Balances as of March 31, 2019	76,507	$	765	477	$	(6,498	)	$	657,799		$	(420,297	)	$	11,529		$	243,298
Net income (loss)	—	—		—	—			—			(609,679		)	—			(609,679		)
Postretirement benefit adjustment, net of tax	—	—		—	—			—			—			(1,755		)	(1,755		)
Equity-based compensation expense	—	—		—	—			1,100			—			—			1,100
Employee common stock withheld to cover withholding taxes	1	—		—	—			—			—			—			—
Balances as of June 30, 2019	76,508	$	765	477	$	(6,498	)	$	658,899		$	(1,029,975	)	$	9,774		$	(367,035	)
Net income (loss)	—	—		—	—			—			4,766			—			4,766
Postretirement benefit adjustment, net of tax	—	—		—	—			—			—			(1,755		)	(1,755		)
Equity-based compensation expense	—	—		—	—			1,090			—			—			1,090
Balances as of September 30, 2019	76,508	$	765	477	$	(6,498	)	$	659,989		$	(1,025,210	)	$	8,019		$	(362,935	)

	Six Months Ended June 30, 2018
											Retained			Accumulated
								Additional			Earnings/			Other
	Common Stock			Treasury Stock				Paid-In			(Accumulated			Comprehensive
	Shares	Amount		Shares	Amount			Capital			Deficit)			Income (Loss)			Total
Balances as of January 1, 2018	75,167	$	752	477	$	(6,498	)	$	652,702		$	347,046		$	13,807		$	1,007,809
Net income (loss)	—	—		—	—			—			(7,738		)	—			(7,738		)
Adoption of new accounting standard	—	—		—	—			—			121			—			121
Postretirement benefit adjustment, net of tax	—	—		—	—			—			—			(1,837		)	(1,837		)
Equity-based compensation expense	—	—		—	—			1,644			—			—			1,644
Restricted stock issuance, net of forfeitures	502	5		—	—			(5		)	—			—			—
Employee common stock withheld to cover withholding taxes	—	—		—	—			(1,165		)	—			—			(1,165		)
Balances as of March 31, 2018	75,669	$	757	477	$	(6,498	)	$	653,176		$	339,429		$	11,970		$	998,834
Net income (loss)	—	—		—	—			—			(29,872		)	—			(29,872		)
Postretirement benefit adjustment, net of tax	—	—		—	—			—			—			(1,837		)	(1,837		)
RSU/PSU terminations & retirements	109	1		—	—			—			—			—			1
Restricted stock issuance, net of forfeitures	—	—		—	—			1,235			—			—			1,235
Exercise of stock options	—	—		—	—			(218		)	—			—			(218		)
Balances as of June 30, 2018	75,778	$	758	477	$	(6,498	)	$	654,193		$	309,557		$	10,133		$	968,143

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

Table of Contents

CLOUD PEAK ENERGY INC. (DEBTOR-IN-POSSESSION)

~~(DEBTOR-IN-POSSESSION)~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended
	Nine Months Ended September 30, 2018
	June 30,
													Retained			Accumulated
	2019			2018
										Additional			Earnings/			Other
Cash flows from operating activities
	Common Stock					Treasury Stock				Paid-In			(Accumulated			Comprehensive
Net income (loss)	$	(659,426	)	$	(37,610	)
	Shares		Amount			Shares	Amount			Capital			Deficit)			Income (Loss)			Total
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Balances as of January 1, 2018	75,167		$	752		477	$	(6,498	)	$	652,702		$	347,046		$	13,807		$	1,007,809
Depreciation and depletion	22,583			29,396
Net income (loss)	—		—			—	—			—			(7,738		)	—			(7,738		)
Accretion	3,097			3,411
Adoption of new accounting standard	—		—			—	—			—			121			—			121
Impairments	621,005			800
Postretirement benefit adjustment, net of tax	—		—			—	—			—			—			(1,837		)	(1,837		)
Loss (income) from unconsolidated affiliates, net of tax	(866		)	(266		)
Equity-based compensation expense	—		—			—	—			1,644			—			—			1,644
Distributions of income from unconsolidated affiliates	1,250			1,000
Restricted stock issuance, net of forfeitures	502		5			—	—			(5		)	—			—			—
Gain on sale of assets	(1,056		)	—
Employee common stock withheld to cover withholding taxes	—		—			—	—			(1,165		)	—			—			(1,165		)
Equity-based compensation expense	2,206			1,878
Balances as of March 31, 2018	75,669		$	757		477	$	(6,498	)	$	653,176		$	339,429		$	11,970		$	998,834
Settlement of completed derivatives	(1,809		)	—
Net income (loss)	—		—			—	—			—			(29,872		)	—			(29,872		)
Non-cash interest expense related to refinancings	216			1,611
Postretirement benefit adjustment, net of tax	—		—			—	—			—			—			(1,837		)	(1,837		)
Non-cash reorganization items	(44,327		)	—
RSU/PSU terminations & retirements	109		1			—	—			—			—			—			1
Payment of deferred financing costs	—			(3,621		)
Restricted stock issuance, net of forfeitures	—		—			—	—			1,235			—			—			1,235
Net periodic postretirement benefit cost (credit)	(3,510		)	(2,841		)
Exercise of stock options	—		—			—	—			(218		)	—			—			(218		)
Payments for logistics contracts	(5,000		)	(5,000		)
Balances as of June 30, 2018	75,778		$	758		477	$	(6,498	)	$	654,193		$	309,557		$	10,133		$	968,143
Logistics throughput contract amortization expense	7,554			8,322
Net income (loss)	—		—			—	—			—			12,691			—			12,691
Other	1,576			3,773
Postretirement benefit adjustment, net of tax	—		—			—	—			—			—			4,569			4,569
Accounts receivable	(11,410		)	8,097
Equity-based compensation expense	—		—			—	—			1,412			—			—			1,412
Inventories, net	3,544			2,307
Balances as of September 30, 2018	75,778		$	758		477	$	(6,498	)	$	655,605		$	322,248		$	14,702		$	986,815
Due to or from related parties	(179		)	(574		)
Other assets	1,786			2,995
AMT tax refund	15,768			—
Accounts payable and accrued expenses	38,888			(9,628		)
Asset retirement obligations	(5,772		)	(482		)
Net cash provided by (used in) operating activities	(13,882		)	3,568
Investing activities
Purchases of property, plant and equipment	(1,299		)	(4,831		)
Investment in development projects	—			(1,894		)
Proceeds from the sale of assets	3,208			69
Net cash provided by (used in) investing activities	1,909			(6,656		)
Financing activities
Principal payments on federal coal leases	(379		)	(574		)
Principal payments on finance leases	(768		)	(648		)
Borrowings on debtor-in-possession financing	10,000			—
Payment of deferred financing costs	(500		)	(907		)
Payment amortized to deferred gain	—			(6,298		)
Other	—			(652		)
Net cash provided by (used in) financing activities	8,353			(9,079		)
Net increase (decrease) in cash, cash equivalents, and restricted cash	(3,620		)	(12,167		)
Cash, cash equivalents, and restricted cash at beginning of period	92,128			108,673
Cash, cash equivalents, and restricted cash at end of period	$	88,508		$	96,506

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

Table of Contents

CLOUD PEAK ENERGY INC. (DEBTOR-IN-POSSESSION)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine Months Ended
	September 30,
	2019			2018
Cash flows from operating activities
Net income (loss)	$	(654,660	)	$	(24,919	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and depletion	20,095			46,788
Accretion	4,796			5,359
Impairments	621,005			800
Loss (income) from unconsolidated affiliates, net of tax	(890		)	(269		)
Distributions of income from unconsolidated affiliates	2,250			1,000
Gain on sale of assets	(962		)	—
Equity-based compensation expense	3,295			(1,648		)
(Gain) loss on derivative financial instruments	(1,809		)	(730		)
Non-cash interest expense related to refinancings	216			1,611
Non-cash reorganization items	(44,615		)	—
Payment of deferred financing costs	—			(3,640		)
Net periodic postretirement benefit cost (credit)	(5,264		)	(22,792		)
Payments for logistics contracts	(7,500		)	(7,500		)
Logistics throughput contract amortization expense	11,331			12,099
Other	1,655			5,296
Changes in operating assets and liabilities:
Accounts receivable	(8,149		)	(12,192		)
Inventories, net	3,559			3,398
Due to or from related parties	(183		)	(1,488		)
Other assets	(1,590		)	8,698
AMT tax refund	15,768			—
Accounts payable and accrued expenses	61,468			15,013
Asset retirement obligations	(1,098		)	(816		)
Net cash provided by (used in) operating activities	18,718			24,068

Investing activities
Purchases of property, plant and equipment	(3,338		)	(7,165		)
Investment in development projects	—			(1,894		)
Proceeds from the sale of assets	3,208			69
Net cash provided by (used in) investing activities	(130		)	(8,990		)

Financing activities
Principal payments on federal coal leases	(379		)	(574		)
Principal payments on finance leases	(1,224		)	(1,952		)
Borrowings on debtor-in-possession financing	35,000			—
Payment of deferred financing costs	(500		)	(936		)
Payment amortized to deferred gain	—			(6,298		)
Net cash provided by (used in) financing activities	32,897			(9,760		)

Net increase (decrease) in cash, cash equivalents, and restricted cash	51,485			5,318
Cash, cash equivalents, and restricted cash at beginning of period	92,128			108,673
Cash, cash equivalents, and restricted cash at end of period	$	143,613		$	113,991

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Business

Organization

In connection with Cloud Peak Energy Inc.’s and substantially all of its wholly owned domestic subsidiaries’ ongoing cases under Chapter 11 (“Chapter 11”) of Title 11 of the U.S. Code (the “Bankruptcy Code”), on October 2, 2019, the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) entered an Order (I) Approving Sale of the Debtors’ Assets Free and Clear of Liens, (II) Approving Assumption and Assignment of Executory Contracts and Unexpired Leases, and (III) Granting Related Relief [Docket No. 674] (the “Sale Order”), pursuant to which the Bankruptcy Court approved the sale of substantially all of the Company’s operating assets, including the Company’s Spring Creek, Cordero Rojo and Antelope mines, to Navajo Transitional Energy Company, LLC (“NTEC”) pursuant to that certain Asset Purchase Agreement dated as of August 19, 2019 (as amended, the “Asset Purchase Agreement”).

Subject to the satisfaction of certain closing conditions, the transactions contemplated by the Asset Purchase Agreement are expected to close in October 2019.

On October 4, 2019, the Debtors (as defined below) filed the Joint Chapter 11 Plan of Cloud Peak Energy Inc. and Certain of its Debtor Affiliates [Docket No. 680]. On October 14, 2019, the Debtors filed the First Amended Joint Chapter 11 Plan of Cloud Peak Energy Inc, and Certain of its Debtor Affiliates [Docket No. 711] (the “Plan”). The Debtors anticipate seeking confirmation of the Plan by the Bankruptcy Court at a hearing to be held with the Bankruptcy Court on December 5, 2019 at 9:30 a.m. (Eastern Time). See “History of Filing under Chapter 11 of the United States Bankruptcy Code” for further discussion on the Debtors’ bankruptcy filing, the Asset Purchase Agreement, and the Plan.

These financial statements and disclosures have been prepared on a going concern basis. The results of the operations for the three and nine month periods are provided. See “Liquidity and Ability to Continue as a Going Concern” below for more detail.

Since the Company will sell substantially all of its operating assets to NTEC, it was concluded that neither Assets Held for Sale nor Discontinued Operations presentation in these financial statements would be appropriate.

Business

We produce coal in the United States of America (“U.S.”) and the Powder River Basin (“PRB”). We operate some of the safest mines in the coal industry. According to the most current Mine Safety and Health Administration (“MSHA”) data, we have one of the lowest employee all injury incident rates among the largest U.S. coal producing companies. We currently operate solely in the PRB, the lowest cost region of the major coal producing regions in the U.S., where we own and operate three surface coal mines: the Antelope Mine, the Cordero Rojo Mine, and the Spring Creek Mine.

Our Antelope Mine and Cordero Rojo Mine are located in Wyoming and our Spring Creek Mine is located in Montana. Our mines produce subbituminous thermal coal with low sulfur content, and we sell our coal primarily to domestic and foreign electric utilities. Thermal coal is primarily consumed by electric utilities and industrial consumers as fuel for electricity generation. In 2018, the coal we produced generated approximately 2% of the electricity produced in the U.S. We do not produce any metallurgical coal. Our Cordero Rojo Mine was impaired down to the estimated fair value of associated land and certain mining equipment in the fourth quarter of 2018. We also impaired our Antelope Mine assets during the second quarter of 2019 as a result of the Winning Bid (as defined below) received during the sale process that is part of our Chapter 11 filing. See Note 6 of this Form 10-Q and Note 7 of Notes to Consolidated Financial Statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2018 (our “2018 Form 10-K”) for further details.

In addition, we have two development projects, both located in the Northern PRB. For purposes of this report, the term “Northern PRB” refers to the area in the PRB that lies within Montana and the northern part of Sheridan County, Wyoming. The Youngs Creek project is an undeveloped surface mine project located in Wyoming, seven miles south of our Spring Creek Mine and contiguous with the Wyoming-Montana state line. The Big Metal project is located near the Youngs Creek project on the Crow Indian Reservation in southeast Montana. Any future development and coal production from these two projects remains subject to significant risk and uncertainty. These two development projects were fully impaired in the fourth quarter of 2018, other than the estimated fair value of associated land. Our Spring Creek Mine assets were also significantly impaired in the second quarter of 2019 as a result of the Winning Bid (defined below) received during the sale process that is part of our Chapter 11 filing. See Note 6 ~~of this Form 10-Q and Note 7 of Notes to Consolidated Financial Statements in Item 8 of our 2018 Form 10-K for further details.~~

Our logistics business provides a variety of services designed to facilitate the sale and delivery of coal. These services include the purchase of coal from third parties or from our owned and operated mines, coordination of the transportation and delivery of purchased coal, negotiation of take-or-pay rail agreements and take-or-pay port agreements and demurrage settlement with vessel operators. See Note 5 for further discussion.

Filing under Chapter 11 of the United States Bankruptcy Code

During the fourth quarter of 2018 and through the filing date of our Quarterly Report on Form 10-Q for the period ended March 31, 2019, we made a number of announcements regarding our engagement of various advisors to assist in reviewing alternatives including the potential sale of the Company and/or its assets and to assist in reviewing our capital structure and strategic restructuring alternatives. During that time, we experienced a number of adverse events that negatively impacted our financial results, liquidity and future prospects, which raised substantial doubt about our ability to continue as a going concern, and resulted in our decision to seek Chapter 11 bankruptcy protection.

On May 10, 2019 (the “Petition Date”), Cloud Peak Energy Inc. (“CPE,” the “Company” or “we”) and substantially all of its wholly owned domestic subsidiaries (the “Filing Subsidiaries” and, together with CPE, the “Debtors”) filed voluntary petitions (collectively, the “Bankruptcy Petitions”) under Chapter 11 (“Chapter 11”) of Title 11 of the U.S. Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). Pursuant to an order entered by the Bankruptcy Court the Chapter 11 cases (collectively, the “Chapter 11 Cases”) are being jointly administered under the caption In re Cloud Peak Energy

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Inc.~~In addition, etwe alhave two development projects, both located in the Northern PRB. For purposes of this report, ~~Case~~the Noterm “Northern PRB” refers to the area in the PRB that lies within Montana and the northern part of Sheridan County, Wyoming. 19 The Youngs Creek project is an undeveloped surface mine project located in Wyoming, seven miles south of our Spring Creek Mine and contiguous with the Wyoming-~~11047~~Montana state line. ~~Each~~The ~~Debtor~~Big ~~continues~~Metal toproject ~~operate~~is ~~its~~located ~~business~~near asthe aYoungs ~~“debtor~~Creek project on the Crow Indian Reservation in ~~possession”~~southeast ~~(“DIP”)~~Montana. Any ~~under~~future development and coal production from these two projects remains subject to significant risk and uncertainty. These two development projects were fully impaired in the ~~jurisdiction~~fourth quarter of 2018, other than the ~~Bankruptcy~~estimated ~~Court~~fair ~~and~~value inof ~~accordance~~associated ~~with~~land. Our Spring Creek Mine assets were also significantly impaired in the ~~applicable~~second ~~provisions~~quarter of 2019 as a result of the ~~Bankruptcy~~Winning ~~Code~~Bid ~~and~~(as defined below) received during the ~~orders~~sale process that is part of ~~the~~our ~~Bankruptcy~~Chapter ~~Court~~11 filing. See Note 6 of this Form 10-Q and Note 7 of Notes to Consolidated Financial Statements in Item 8 of our 2018 Form 10-K for further details.

History of Filing under Chapter 11 of the United States Bankruptcy Code

On May 10, 2019 (the “Petition Date”), Cloud Peak Energy Inc. (“CPE,” the “Company” or “we”) and substantially all of its wholly owned domestic subsidiaries (the “Filing Subsidiaries” and, together with CPE, the “Debtors”) filed voluntary petitions (collectively, the “Bankruptcy Petitions”) under Chapter 11 in the Bankruptcy Court. Pursuant to an order entered by the Bankruptcy Court the Chapter 11 cases (collectively, the “Chapter 11 Cases”) are being jointly administered under the caption In re Cloud Peak Energy Inc., et al., Case No. 19-11047. Each Debtor continues to operate its business as a “debtor in possession” (“DIP”) under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court.

The filing of the Bankruptcy Petitions constituted an event of default that accelerated our obligations under the documents governing each of our 12.00% second lien senior notes due 2021 (the “2021 Notes”) and the 6.375% senior notes due 2024 (the “2024 Notes” and together with the 2021 Notes, the “Notes”). Immediately after filing the Bankruptcy Petitions, the Company began notifying all known current or potential creditors of the Debtors of the bankruptcy filings.

Pursuant to Section 362 of the Bankruptcy Code, the filing of the Bankruptcy Petitions automatically stayed most actions against the Debtors, including actions to collect indebtedness incurred prior to the Petition Date or to exercise control over the Debtors’ property. Subject to certain exceptions under the Bankruptcy Code, the filing of the Debtors’ Chapter 11 Cases also automatically stayed the continuation of most legal proceedings or the filing of other actions against or on behalf of the Debtors or their property to recover on, collect or secure a claim arising prior to the Petition Date or to exercise control over property of the Debtors’ bankruptcy estates, unless the Bankruptcy Court modifies or lifts the automatic stay as to any such claim. Notwithstanding the general application of the automatic stay described above, governmental authorities may determine to continue actions brought under their police and regulatory powers.

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On the Petition Date, the Debtors filed a number of motions with the Bankruptcy Court generally designed to stabilize their operations and facilitate the Debtors’ transition into Chapter 11. Certain of these motions seek authority from the Bankruptcy Court for the Debtors to make payments upon, or otherwise honor, certain obligations that arose prior to the Petition Date, including obligations related to employee wages, salaries and benefits, taxes, and certain vendors and other providers essential to the Debtors’ businesses. On May 14, 2019, the Bankruptcy Court approved the relief sought in these motions on an interim basis.

The Debtors sought to sell all or substantially all of their operating assets pursuant to Section 363 of the Bankruptcy Code. To facilitate their marketing and sales process, the Debtors conducted an auction (the “Auction”) on August 15, 2019 and August 16, 2019, pursuant to bidding procedures approved by the Bankruptcy Court. Following the completion of the Auction, on August 16, 2019, the Debtors announced that the bid submitted by Navajo Transitional Energy Company, LLC (“NTEC”) was the winning bid (the “Winning Bid”), and the bid submitted by Aspen Coal & Energy, LLC was the backup bid. On August 19, 2019, the Debtors and NTEC entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) providing for the acquisition by NTEC of substantially all of the Debtors’ operating assets, including the Spring Creek, Cordero Rojo and Antelope mines (the “Assets”), in exchange for the payment of $15.7 million of cash at closing, a $40.0 million first lien promissory note secured by a first lien on all assets of NTEC (including the Assets), but subordinated to collateral for certain permitted senior lien debt (not to exceed $120 million) (the “Purchaser Take-Back Note”) and a $0.15/ton royalty, payable quarterly for a period of five years, on all tons produced and sold at the Antelope and Spring Creek mines, and on all tons produced and sold in excess of 10 million tons per year at the Cordero Rojo mine (the “Royalty”), as well as the assumption of coal production-related pre- and post-petition tax liabilities and coal royalty payments in an amount ~~projected~~estimated to be approximately $9487.5 million as of September 30, 2019, all reclamation obligations, up to $20 million in post-petition accounts payables, and cash to fund approximately $1.1 million in cure costs. ~~The~~Following ~~Assets~~the dosale ~~not~~of ~~include~~substantially ~~certain~~all ~~immaterial~~of ~~non-~~its operating assets, the Company will have certain real estate assets, expected proceeds from the Royalty, and certain debts not settled by the sale. In connection with the closing of the sale, the Company isagreed ~~evaluating~~to terminate substantially all of its ~~options~~employees, and NTEC agreed to ~~sell~~make ~~these~~offers ~~assets~~of employment to substantially all of the terminated employees of the Company.

On August 19, 2019, the Bankruptcy Court approved the transactions contemplated by the Asset Purchase Agreement, subject to the Debtors finalizing and submitting a proposed sale order under Section 363 of the Bankruptcy Code that must be entered by the Bankruptcy Court ~~(the “Sale Order”)~~. AsOn ~~part~~September 30, of2019, the ~~finalization~~Asset ofPurchase ~~the~~Agreement ~~proposed~~was ~~Sale~~amended ~~Order~~to, ~~the~~among ~~U.S.~~other ~~Justice~~things, ~~Department~~provide ~~has~~for ~~asserted~~NTEC ~~that~~to ~~the~~acquire ~~Sale~~certain ~~Order~~additional ~~should~~assets ~~expressly~~and ~~require~~assume certain additional liabilities, to modify NTEC’s assumption and rejection of certain contracts and leases, to ~~assume~~provide ~~any~~that ~~potential~~the ~~exposure~~Company bear certain expenses, including with respect to certain ~~open~~cure ~~federal~~costs ~~royalty~~and ~~audits~~administrative liabilities related to the Purchaser Take-Back Note, and ato ~~related~~modify ~~appeal~~certain negative covenant terms of the Purchaser Take-Back Note. ~~The~~On ~~parties~~October 2, to2019, the ~~Asset~~Bankruptcy ~~Purchase~~Court ~~Agreement~~entered ~~are~~the inSale ~~discussion~~Order, ~~with~~pursuant ~~respect~~ to ~~this~~which ~~asserted~~the ~~requirement. The~~Bankruptcy ~~Justice~~Court ~~Department~~approved ~~represents~~ the ~~interests~~sale of substantially all of the ~~U.S.~~Company’s ~~Government~~operating inassets, ~~Chapter~~including 11the Company’s Spring Creek, Cordero Rojo and Antelope mines, to NTEC pursuant to the Asset Purchase Agreement.

6Subject to the satisfaction of certain closing conditions, the transactions contemplated by the Asset Purchase Agreement are expected to close in October 2019.

On October 4, 2019, the Debtors filed the Joint Chapter 11 Plan of Cloud Peak Energy Inc. and Certain of its Debtor Affiliates [Docket No. 680]. On October 14, 2019, the Debtors filed the First Amended Joint Chapter 11 Plan of Cloud Peak Energy Inc, and Certain of its Debtor Affiliates [Docket No. 711]. The Debtors anticipate seeking confirmation of the Plan at a hearing to be held with the Bankruptcy Court on December 5, 2019 at 9:30 a.m. (Eastern Time).

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~bankruptcy cases. Subject to the satisfaction of closing conditions, the transactions contemplated by the Asset Purchase Agreement are expected to close in October 2019.~~ The ~~Company~~Plan ~~anticipates~~contemplates ~~filing with and seeking confirmation from~~ the ~~Bankruptcy~~following ~~Court~~treatment of aclaims ~~Chapter~~against 11and ~~plan~~interests in the ~~near term.~~Debtors:

~~For~~· Holders ~~the duration~~ of ~~the~~priority ~~Chapter~~claims ~~11 Cases, the Company’s operations~~ and ~~its~~secured ~~ability~~claims to(other ~~develop~~than ~~and~~those ~~execute~~arising ~~its~~under ~~business plan are subject to risks and uncertainties associated with~~ the ~~Chapter~~prepetition 112021 ~~Cases. As a result of these risks and uncertainties~~Notes), ~~the~~including ~~Company’s~~amounts ~~assets,~~outstanding ~~liabilities,~~under ~~officers and/or directors could be significantly different following~~ the ~~outcome~~DIP ofCredit ~~the~~Agreement ~~Chapter~~(as 11defined ~~Cases~~below), ~~and~~will the description of its operations, properties and capital plans included in these financial statements may not accurately reflect its operations, properties and capital plans following the Chapter 11 Cases. If we are not able to confirm a Chapter 11 plan, we could be ~~forced to liquidate under Chapter 7 of the Bankruptcy Code.~~unimpaired;

As· Holders ~~previously~~of ~~disclosed,~~claims weunder ~~were notified by~~ the ~~New~~prepetition ~~York~~2021 ~~Stock~~Notes ~~Exchange~~will ~~(“NYSE”)~~be ~~that~~impaired ~~they~~and ~~had~~will ~~determined~~receive ~~our~~their ~~common~~pro ~~stock~~rata ~~was~~proportionate noshare ~~longer~~of ~~suitable for listing on~~ (i) the ~~NYSE~~Purchaser ~~based~~Take-Back ~~on “abnormally low” price levels~~Note, ~~pursuant to Section~~(ii) ~~802.01D of~~ the ~~NYSE~~New ~~Listed~~Parent ~~Company~~Equity ~~Manual,~~(as ~~and~~defined ~~commenced proceedings to delist our common stock. Trading~~ in ~~our~~the ~~common~~Plan), ~~stock~~representing ~~was~~100% ~~suspended~~of ~~immediately. Our~~the common stock ~~began~~in ~~trading on~~ the ~~OTC~~reorganized ~~Pink on March 27~~Company, ~~2019, and trades under the symbol “CLDPQ”~~(iii) $34. We5 ~~expect~~million ~~that~~in ~~our~~reinstated ~~existing~~prepetition ~~common~~2021 ~~stock~~Notes, ~~will~~as beamended ~~extinguished~~pursuant ~~following~~to ~~confirmation~~an ofamended ~~a Chapter 11 plan~~indenture, and ~~existing~~(iv) a ~~equity~~cash ~~holders are unlikely to receive any consideration in respect of their equity interests.~~distribution;

· Holders of general unsecured claims will be impaired and will receive their pro rata share of an aggregate cash distribution of up to $1.25 million; and

· Holders of the Company’s existing common stock will be impaired and will not receive any recovery. All of the Company’s existing common stock with be extinguished by the Plan.

Unless otherwise specified, the treatment set forth in the Plan will be in full satisfaction of all claims against and interests in the Debtors, which will be discharged on the effective date of the Plan.

Under the Bankruptcy Code, only holders of claims or interests in “impaired” classes are entitled to vote on a plan. Under section 1124 of the Bankruptcy Code, a class of claims or interests is deemed to be “impaired” under a plan unless (i) the plan leaves unaltered the legal, equitable, and contractual rights to which such claim or interest entitles the holder thereof or (ii) notwithstanding any legal right to an accelerated payment of such claim or interest, the plan cures all existing defaults (other than defaults resulting from the occurrence of events of bankruptcy) and reinstates the maturity of such claim or interest as it existed before the default. If, however, the holder of an impaired claim or interest will not receive or retain any distribution under the plan on account of such claim or interest, the Bankruptcy Code deems such holder to have rejected the plan, and, accordingly, holders of such claims and interests do not actually vote on the plan. If a claim or interest is not impaired by the plan, the Bankruptcy Code deems the holder of such claim or interest to have accepted the plan and, accordingly, holders of such claims and interests are not entitled to vote on the plan. A vote may be disregarded if the Bankruptcy Court determines, pursuant to section 1126(e) of the Bankruptcy Code, that it was not solicited or procured in good faith or in accordance with the provisions of the Bankruptcy Code. The Bankruptcy Code defines “acceptance” of a plan by a class of claims as acceptance by creditors in that class that hold at least two-thirds (2/3) in dollar amount and more than one-half (1/2) in number of the claims that cast ballots for acceptance or rejection of the plan. Only the holders of claims under the prepetition 2021 Notes and general unsecured claims (the “Voting Classes”) are entitled to vote to accept or reject the Plan. The holders of claims in the Voting Classes are impaired under the Plan and may, in certain circumstances, receive a distribution under the Plan. Accordingly, holders of claims in the Voting Classes have the right to vote to accept or reject the Plan.

The Plan provides certain releases and exculpations in favor of, among others, (i) the Debtors and each of their respective directors, officers, and managers as of the Petition Date and at any time thereafter through the effective date of the Plan, (ii) the DIP Lenders (as defined in the Plan), (iii) the DIP Agent (as defined in the Plan), (iv) the consenting noteholders, (v) the Committee (as defined in the Plan) and the members thereof, (vi) the general unsecured claims administrator, (vii) the prepetition 2021 Notes Indenture Trustee (as defined in the Plan), (viii) the prepetition Unsecured Notes Indenture Trustee (as defined in the Plan), and (ix) with respect to each of the foregoing, such entity and its Associated Entities (as defined in the Plan). The Debtors intend to present evidence at the confirmation hearing to demonstrate the basis for and propriety of the release and exculpation provisions pursuant to section 1123(b) of the Bankruptcy Code and Bankruptcy Rule 9019.

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of these risks and uncertainties, the Company’s assets, liabilities, officers and/or directors are expected to be significantly different following the sale pursuant to the Asset Purchase Agreement and the outcome of the Chapter 11 Cases, and the description of its operations, properties and capital plans included in these financial statements is not expected to accurately reflect its operations, properties and capital plans following the sale pursuant to the Asset Purchase Agreement and the Chapter 11 Cases. If we are not able to confirm a Chapter 11 plan, we could be forced to liquidate under Chapter 7 of the Bankruptcy Code.

As previously disclosed, we were notified by the New York Stock Exchange (“NYSE”) that they had determined our common stock was no longer suitable for listing on the NYSE based on “abnormally low” price levels, pursuant to Section 802.01D of the NYSE Listed Company Manual, and commenced proceedings to delist our common stock. Trading in our common stock was suspended immediately. Our common stock began trading on the OTC Pink on March 27, 2019, and trades under the symbol “CLDPQ”. Under the terms of the Plan submitted to the Bankruptcy Court, our existing common stock will be extinguished following confirmation of a Chapter 11 plan, and existing equity holders will not receive any consideration in respect of their equity interests.

For periods subsequent to filing the Bankruptcy Petitions, the Company will apply the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 852, “Reorganizations”, in preparing its consolidated financial statements. ASC 852 requires that financial statements distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain revenues, expenses, realized gains and losses and provisions for losses that are realized or incurred in the bankruptcy proceedings have been recorded in Reorganization items, net on the Unaudited Condensed Consolidated Statement of Operations. In addition, the Unaudited Condensed Consolidated Balance Sheet has distinguished pre-petition liabilities subject to compromise from those that are not and post-petition liabilities. Obligations that may be impacted by the bankruptcy reorganization process have been classified as Liabilities subject to compromise. These liabilities are reported at the amounts expected to be allowed by the Bankruptcy Court, even if they may be settled for lesser amounts.

Potential Claims

The Debtors have filed with the Bankruptcy Court schedules and statements setting forth, among other things, the assets and liabilities of each of the Debtors, subject to certain assumptions filed in connection therewith. These schedules and statements remain subject to further amendment or modification after filing. Certain holders of pre-petition claims that are not governmental units were required to file proofs of claim by the deadline for general claims, which was on August 1, 2019 (the “Bar Date”). The Debtors’ have received approximately ~~431~~442 proofs of claim as of ~~September~~October 611, 2019 for an amount of approximately $1.8 billion. Such amount includes duplicate claims across multiple debtor legal entities. These claims will be reconciled to amounts recorded in the Company’s accounting records. Differences in amounts recorded and claims filed by creditors will be investigated and resolved, including through the filing of objections with the Bankruptcy Court, where appropriate. The Bankruptcy Court does not allow for claims that have been acknowledged as duplicates. In addition, the Company may ask the Bankruptcy Court to disallow claims that the Company believes have been later amended or superseded, are without merit, are overstated or should be disallowed for other reasons. In addition, as a result of this process, the Company may identify additional liabilities that will need to be recorded or reclassified to Liabilities subject to compromise. In light of the substantial number of claims filed, and expected to be filed, the claims resolution process may take considerable time to complete and likely will continue after the effective date of any Chapter 11 plan.

7Sale and Plan Support Agreement

Prior to filing the Bankruptcy Petitions, on May 6, 2019, the Company and the Filing Subsidiaries entered into the Sale and Plan Support Agreement (the “Support Agreement”) with holders of approximately 62% in principal amount of the 2021 Notes and holders of more than 50% in principal amount of the 2024 Notes. The Support Agreement provides that the holders of Notes party thereto will, among other things, support a marketing

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Sale~~and sale process to be conducted by the Company in Chapter 11 and ~~Plan~~vote in favor of an orderly plan of liquidation that complies with certain provisions of the Support Agreement.

Subsequently, on May 9, 2019, the Company and the Filing Subsidiaries entered into an Amended and Restated Sale and Plan Support Agreement (the “Amended and Restated Support Agreement”) with holders of approximately 62% in principal amount of the 2021 Notes and holders of more than 50% in principal amount of the 2024 Notes.

The Amended and Restated Support Agreement provides, among other things, that:

· the holders of the Notes party thereto (the “Noteholders”) will support the sale process the Debtors will conduct during their Chapter 11 Cases;

· the Noteholders will vote in favor of an orderly plan of liquidation that complies with certain provisions of the Amended and Restated Support Agreement;

· the holders of 2021 Notes will consent to priming liens and the use of cash collateral in connection with the DIP Credit Agreement (described below);

· certain of the Noteholders have provided the DIP Credit Agreement;

· the Noteholders consent to receiving distributions of any sale proceeds after the payment of certain administrative and priority claims;

· the Company and the subsidiary guarantors under the indenture governing the 2021 Notes reaffirm the guarantees under the 2021 Notes and stipulate to the validity of liens held by the secured parties under the 2021 Notes; and

· the Company and the subsidiary guarantors under the indenture governing the 2024 Notes reaffirm the guarantees under the 2024 Notes.

On July 16, 2019, the Company and the Filing Subsidiaries and holders of approximately 62% in principal amount of the 2021 Notes and holders of more than 50% in principal amount of the 2024 Notes entered into Amendment No. 1 to the Support Agreement (“Support Agreement Amendment”).

The Support Agreement Amendment amended the definition of “Plan” (i.e., the Chapter 11 plan of liquidation that the parties to the Support Agreement agree to support) to include (i) a release of avoidance actions against holders of general unsecured claims, (ii) the payment of fees of the 2024 Notes trustee, (iii) the appointment of a general unsecured claims administrator and (iv) the effectuation of the Unsecured Creditor Sharing Agreement (as defined below).

The Support Agreement Amendment also provides consent by the parties thereto of certain uses of cash on hand by the Company and certain of its subsidiaries prior to any sale, including to pay “Critical Vendor Payments” (as defined in the Support Agreement Amendment), certain administrative expense and priority claims, expenses arising under certain executory contracts and unexpired leases in connection with a sale, and certain professional fees and expenses relating to key employee incentive and retention plans.

8The Support Agreement Amendment also provides that the Plan shall include an agreement to share certain proceeds between the holders of Contingent Roll-Up Loans (as defined in the DIP Credit Agreement) under the DIP Credit Agreement and holders of 2021 Notes, on the one hand, and holders of unsecured claims, on the other (the “Unsecured Creditor Sharing Agreement”). The Unsecured Creditor Sharing Agreement provides that, upon recovery by the holders of 2021 Notes and Contingent Roll-Up Loans of at least 50% of their

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~The~~total ~~Support~~claims, ~~Agreement~~excess ~~Amendment~~amounts ~~also~~up ~~provides~~to ~~that~~75% ~~the~~of ~~Plan~~such ~~shall~~total ~~include~~claims anwill ~~agreement~~be todistributed ~~share~~90% ~~certain~~to ~~proceeds~~holders ~~between~~of ~~the~~such ~~holders~~claims ofand ~~Contingent~~10% ~~Roll-Up~~to ~~Loans~~holders ~~(as~~of ~~defined~~unsecured claims. Distributions in ~~the~~excess ~~DIP~~of ~~Credit~~75% ~~Agreement)~~of ~~under~~ the ~~DIP~~total ~~Credit~~claims ~~Agreement~~of ~~and~~the holders of 2021 Notes, onand ~~the~~Contingent ~~one~~Roll-Up ~~hand,~~Loans ~~and~~will be paid 80% to holders of ~~unsecured~~such claims, onand ~~the~~20% ~~other~~to ~~(the~~holders ~~“Unsecured~~of ~~Creditor~~unsecured ~~Sharing Agreement”)~~claims. ~~The~~Following ~~Unsecured~~the ~~Creditor~~Auction ~~Sharing~~and ~~Agreement~~entry ~~provides~~of ~~that,~~the ~~upon~~Sale ~~recovery~~Order byapproving the ~~holders~~NTEC ofsale, ~~2021~~the ~~Notes~~Official ~~and~~Unsecured ~~Contingent~~Creditors’ ~~Roll-Up~~Committee ~~Loans~~agreed ofto ata ~~least~~compromise ~~50%~~and ~~of their total claims~~settlement, ~~excess~~as ~~amounts~~set upforth toin ~~75%~~the ofPlan ~~such~~as ~~total~~filed ~~claims~~on ~~will~~October 4, be2019, ~~distributed~~under ~~90%~~which to holders of ~~such~~Allowed ~~claims~~General ~~and~~Unsecured ~~10%~~Claims to(as ~~holders~~defined ofin ~~unsecured~~the ~~claims. Distributions~~Plan) inwill ~~excess~~be ofentitled ~~75%~~to ofshare ~~the~~pro ~~total~~rata ~~claims~~in of the ~~holders~~“General ofUnsecured ~~2021~~Claims ~~Notes~~Cash ~~and~~Distribution ~~Contingent~~Amount” ~~Roll-Up~~(as ~~Loans~~defined ~~will~~in bethe ~~paid~~Plan), ~~80%~~which tois ~~holders~~an amount of ~~such~~$1.25 ~~claims~~million, ~~and~~in ~~20%~~full toand ~~holders~~final satisfaction of ~~unsecured~~such claims. As a result of the satisfaction of the Specified Tax Condition (as defined in the DIP Credit Agreement) prior to the date of the Second Borrowing (as defined in the DIP Credit Agreement), no Contingent Roll-Up Loans were issued pursuant to the DIP Credit Agreement.

On July 18, 2019, the Bankruptcy Court entered an Order (Approving) (I) Authorizing the Debtors to Assume the Amended and Restated Sale and Plan Support Agreement, (II) Approving the Lien and Guaranty Settlement Contained in the Amended and Restated Sale and Support Agreement, (III) Modifying the Automatic Stay, and (IV) Granting Related Relief [Docket No. 478] pursuant to which the Bankruptcy Court approved the Support Agreement, as amended.

Debtor-In-Possession Financing

On May 15, 2019, the Debtors entered into a Superpriority Senior Secured Priming Debtor-in-Possession Credit Agreement (the “DIP Credit Agreement”) by and among Cloud Peak Energy Inc. and the other Debtors, as borrowers, the various lenders from time to time party thereto (the “Lenders”) and Ankura Trust Company, LLC, as administrative agent and collateral agent providing for a debtor-in-possession term loan facility in an amount not to exceed (i) $35 million (as may be increased to give effect to any fees or interest that are paid in kind and to give effect to any incremental loans described below) (the “New Money Loans”) plus (ii) subject to the entry of a final order of the Bankruptcy Court approving the financing under the DIP Credit Agreement (the “Final DIP Order”), Roll-Up Loans (as defined below) on terms and conditions set forth in the DIP Credit Agreement. On May 15, 2019, the Bankruptcy Court granted interim approval of the motion to approve the DIP Credit Agreement (the “Interim DIP Order”) and borrowing of up to $10 million of the New Money Loans thereunder.

The Debtors’ obligations under the DIP Credit Agreement are secured by first priority priming liens on substantially all of the Debtors’ assets, subject to certain permitted liens and agreed exclusions, including the exclusion of assets that secure obligations under the A/R Securitization Program. The DIP Credit Agreement terminates on the earliest of: (a) February 15, 2020; (b) the date that without prior written consent of the requisite Lenders, any of the Chapter 11 Cases are converted to cases under chapter 7 of the Bankruptcy Code; (c) the date of dismissal of any of the Chapter 11 Cases without the prior written consent of the requisite Lenders; (d) the date of appointment in any Chapter 11 Case of a trustee without the prior written consent of the requisite Lenders; (e) the date of appointment in any of the Chapter 11 Cases of an examiner with expanded powers without prior written consent of the requisite Lenders; (f) consummation of a sale of all or substantially all of the Debtors’ assets, whether under Section 363 of the Bankruptcy Code or otherwise; (g) the consummation date of any plan under Chapter 11; (h) the termination in whole of the commitments following an event of default under the DIP Credit Agreement; or (i) thirty-five days after entry of the Interim DIP Order (or such later date as agreed by the Lenders), if the Final DIP Order has not been entered.

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~~satisfaction of certain conditions, including the absence of defaults, that the draw is in accordance with the~~ approved budget, that the SAPSA (as defined in the DIP Credit Agreement) remain in full force and effect and other customary conditions. Amounts that remain in the escrow account upon termination of the DIP Credit Agreement are returned to the collateral agent to pay off obligations outstanding in respect of the DIP Credit Agreement in the order provided therein. The Debtors borrowed $10 million for the first borrowing and $25 million for the second borrowing under the DIP Credit Agreement on May 16, 2019 and August 1, 2019, respectively, which were funded into the escrow account. There was no third borrowing as the Specified Tax Condition was satisfied at the time of the Second Borrowing.

On June 12, 2019, the Company launched a tender offer providing eligible holders of 2021 Notes the opportunity to participate as a lender under the DIP Credit Agreement on a pro rata basis up to such holder’s percentage ownership of the outstanding 2021 Notes, and to exchange, or “roll-up” a principal amount of their 2021 Notes equal to 80% of the $35 million New Money Loans provided by such Lender for an equal amount of loans incurred under the DIP Credit Agreement (all such loans, the “Roll-Up Loans”). The transactions contemplated by the tender offer closed on August 1, 2019. The tender offer participants that were not existing lenders under the DIP Credit Agreement (the “Non-Backstop Lenders”) subscribed for the assignment from the existing lenders (the “Backstop Lenders”) of approximately $3.8 million of New Money Loans, and the Non-Backstop Lenders and Backstop Lenders exchanged a total of $28 million of their 2021 Notes for Roll-Up Loans.

New Money Loans bear interest at a rate equal to, at our option, (a) the alternate base rate (subject to a 2% floor) plus 8% per annum or (b) the adjusted LIBOR rate (subject to a 1% floor) plus 9% annum. Roll-Up Loans bear interest at the adjusted LIBOR rate (subject to a 1% floor) plus 9% per annum rate. The Debtors will pay certain other agreed fees to the Lenders and the agents under the DIP Credit Agreement. Fees and interest are paid-in-kind and added to the principal amount of loans outstanding under the DIP Credit Agreement.

The DIP Credit Agreement contains usual and customary affirmative and negative covenants and events of default for transactions of this type. In addition, the Debtors are required to maintain a minimum liquidity of $12 million at all times, $6 million of which must be held at all times in a segregated escrow account.

On June 19, 2019, the DIP Credit Agreement was amended to extend the date by which the DIP Credit Agreement would otherwise terminate if the Final DIP Order were not entered and other milestone dates.

On June 25, 2019, the DIP Credit Agreement was further amended to, among other things, provide that upon entry of the Final DIP Order, the DIP Credit Agreement will be amended to accommodate and provide for the borrowing and roll-up mechanics described in the tender offer documentation.

On July 16, 2019, the Debtors entered into a Limited Waiver and Amendment No. 3 to the DIP Credit Agreement (the “DIP Limited Waiver”). The DIP Limited Waiver, among other things, waived the events of default arising under the DIP Credit Agreement as a result of the non-commencement of an auction for substantially all assets of the Debtors and the non-occurrence of a sale order under Section 363 of Title 11 of the U.S. Code by the Bankruptcy Court by the respective milestone dates set forth in the DIP Credit Agreement and amends the milestones for these and other events in the auction process.

On July 18, 2019, the Bankruptcy Court entered a Final Order (I) Authorizing the Debtors to (A) Obtain Postpetition Financing Secured by Senior Priming Liens and (B) Use Cash Collateral, (II) Granting Liens and Providing Superpriority Administrative Expense Status, (III) Granting Adequate Protection, (IV) Modifying the Automatic Stay and (V) Granting Related Relief [Docket No. 407] pursuant to which the Bankruptcy Court approved the DIP Credit Agreement, as amended.

On August 8, 2019, the DIP Credit Agreement was further amended to, among other things extend the milestone dates by which (i) an auction must commence for substantially all assets of the Debtors and (ii) a sale order under Section 363 of the Bankruptcy Code by the Bankruptcy Court must be entered.

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On August 19, 2019, August 23, 2019, August 29, 2019, and September 6, 2019, the DIP Credit Agreement was further amended to, among other things, extend the milestone dates by which a sale order under Section 363 of the Bankruptcy Code by the Bankruptcy Court must be entered.

On September 13, 2019, the DIP Credit Agreement was further amended to, among other things, (i) extend the milestone dates set forth in the DIP Credit Agreement by which a sale order under Section 363 of the Bankruptcy Code by the Bankruptcy Court must be entered and (ii) waive the event of default ~~arising,~~that ~~and~~had ~~which~~occurred ~~continues~~and ~~arising~~was continuing, under the DIP Credit Agreement as a result of non-compliance with the Approved Budget (as defined in the DIP Credit Agreement) due to an Unpermitted Variance (as defined in the DIP Credit Agreement) with respect to receipts for the week ending on September 6, 2019.

On September 20, 2019 and September 27, 2019, the DIP Credit Agreement was further amended to, among other things, extend the milestone dates by which a sale order under Section 363 of the Bankruptcy Code by the Bankruptcy Court must be entered.

Amendment to A/R Securitization Program

Cloud Peak Energy Resources LLC (“CPE Resources”), a wholly owned subsidiary of the Company, is party to an Accounts Receivable Securitization Program (the “A/R Securitization Program”) with PNC Bank, National Association, as administrator. On May 15, 2019, we entered into a Second Amended and Restated Receivables Purchase Agreement (the “Receivables Purchase Agreement Amendment”), by and among Cloud Peak Energy Receivables LLC (“CPE Receivables”), CPE Resources, the various Conduit Purchasers and Related Committed Purchasers (collectively, the “Purchasers”), LC Participants and Purchaser Agents from time to time party thereto, PNC Bank, National Association, as Administrator (the “Administrator”), and PNC Capital Markets LLC, as Structuring Agent. Prior to entering into the Receivables Purchase Agreement Amendment, it was approved by the Bankruptcy Court on May 14, 2019.

Under the terms of the A/R Securitization Program, eligible trade receivables consist of certain trade receivables from certain of the Company’s operating subsidiaries. The amount available with respect to the receivables sold into the A/R Securitization Program is subject to customary limits and reserves, including reserves based on customer concentration and prior past due balances. Of the eligible pool of receivables sold to CPE Receivables, undivided interests in only a portion of the pool are sold to the Purchasers under the facility, subject to a $35 million purchase limit, which was reduced from $70 million under the A/R Securitization Program prior to the Receivables Purchase Agreement Amendment. Although the Purchasers in the program bear the risk of non-payment of purchased receivables, CPE Resources has agreed to indemnify the Purchasers, Purchaser Agents, Administrator and other secured parties with respect to various matters, including any defaults by CPE Resources or its operating subsidiaries under the documents relating to the A/R Securitization Program, and may be required to repurchase receivables which do not comply with the requirements of the program. CPE Resources services the receivables sold into the A/R Securitization Program.

The Purchasers under the A/R Securitization Program will be entitled to receive payments reflecting a specified discount on amounts funded thereunder calculated on the basis of the commercial paper rate or alternate rate, as applicable. The commercial paper rate, which is applicable to the extent a Purchaser issues commercial paper to fund its purchases of receivables, is a rate equivalent to the weighted average cost incurred in connection with the issuance of such commercial paper. If the commercial paper rate is not applicable, the alternate rate will apply. The alternate rate is equal to 2.00% plus (i) one month LIBOR (subject to a 0% floor) or, (ii) if LIBOR is unavailable, the daily average base rate which is defined as the higher of either the prime rate or the federal funds rate plus 50 basis points. CPE Receivables will pay fees to the Administrator and Purchaser, including paying (i) the Administrator a structuring fee, (ii) each of the Purchasers facility fees and program fees and (iii) letter of credit fees to each letter of credit participants.

The Receivables Purchase Agreement Amendment contains representations and warranties and affirmative, negative and financial covenants customary for financings of this type. The Receivables Purchase Agreement Amendment includes customary termination events for facilities of this type (with customary grace periods, if applicable), including termination events that relate specifically to certain aspects of the Chapter 11 Cases.14

Liquidity and Ability to Continue as a Going Concern

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~~reroute trains and repair and rebuild significant portions of their infrastructure.~~ The ~~impacts~~Receivables ofPurchase ~~these~~Agreement ~~conditions~~Amendment ~~carried~~contains ~~over~~representations ~~into~~and ~~the~~warranties ~~second quarter of 2019~~ and ~~were exacerbated by further flooding. Further~~affirmative, ~~lower~~negative ~~export prices~~ and ~~lower~~financial ~~demand~~covenants ~~overall,~~customary ~~are~~for ~~expected~~financings toof ~~result~~this intype. ~~significantly~~The ~~lower~~Receivables ~~levels~~Purchase ofAgreement ~~cash~~Amendment ~~flow~~includes ~~from~~customary ~~operating~~termination ~~activities~~events infor ~~the~~facilities ~~future~~of ~~and~~this ~~have~~type ~~limited~~(with ~~our~~customary ~~ability~~grace toperiods, ~~access~~if ~~capital~~applicable), ~~markets. These~~including ~~factors~~termination ~~raise~~events ~~substantial~~that ~~doubt~~relate ~~about~~specifically ~~our~~to ~~ability~~certain toaspects ~~continue~~of asthe aChapter ~~going~~11 ~~concern~~Cases.

Liquidity and Ability to Continue as a Going Concern

Our liquidity outlook has continued to decline since the fourth quarter of 2018, which included the termination of our Amended Credit Agreement in November 2018. Severe weather and train unavailability further compounded operational issues in the first quarter of 2019, affecting production at all three of our mines. As a result of severe weather and flooding in the first quarter of 2019, the railroads serving the PRB were forced to reroute trains and repair and rebuild significant portions of their infrastructure. The impacts of these conditions carried over into the second quarter of 2019 and were exacerbated by further flooding. Further, lower export prices and lower demand overall, are expected to result in significantly lower levels of cash flow from operating activities in the future and have limited our ability to access capital markets. These factors raise substantial doubt about our ability to continue as a going concern.

Our consolidated financial statements have been prepared assuming we will continue as a going concern, which contemplates continuity of operations, realization of assets and the satisfaction of liabilities in the normal course of business. As such, the accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amounts, or the amount and classification of liabilities that may result should we be unable to continue as a going concern. See “Filing under Chapter 11 of the United States Bankruptcy Code” above for information on our Bankruptcy Petitions.

Principles of Consolidation

The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In accordance with U.S. GAAP for interim financial statements, these Unaudited Condensed Consolidated Financial Statements do not include certain information and footnote disclosures that are required to be included in annual financial statements prepared in conformity with U.S. GAAP. The year-end Unaudited Condensed Consolidated Balance Sheet data was derived from the Audited Consolidated Financial Statements. Accordingly, these Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Audited Consolidated Financial Statements as of December 31, 2018 and 2017, and for each of the three years ended December 31, 2018, included in our 2018 Form 10-K. In the opinion of management, the accompanying Unaudited Condensed Consolidated Financial Statements contain all adjustments, which are of a normal and recurring nature, necessary for a fair statement of our financial position as of ~~June~~September 30, 2019, and the results of our operations, comprehensive income (loss), equity, and cash flows for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, in conformity with U.S. GAAP. Our results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2019 are not necessarily indicative of the results that may be expected for future quarters or for the year ending December 31, 2019.

The preparation of our Unaudited Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Significant estimates in these Unaudited Condensed Consolidated Financial Statements include: assumptions about the amount and timing of future cash flows and related discount rates used in determining asset retirement obligations (“AROs”) and in testing long-lived assets for impairment; the fair value of derivative financial instruments; the calculation of mineral reserves; equity-based compensation expense; workers’ compensation claims; reserves for contingencies and litigation; useful lives of long-lived assets; postretirement employee benefit obligations; the recognition and measurement of income tax benefits and related deferred tax asset valuation allowances; and allowances for inventory obsolescence and net realizable value. Actual results could differ materially from those estimates.

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measurement of income tax benefits and related deferred tax asset valuation allowances; and allowances for inventory obsolescence and net realizable value. Actual results could differ materially from those estimates.

Certain prior period amounts have been reclassified to conform to the current year presentation. Such reclassifications had no impact on our reported net income, current assets, total assets, current liabilities, total liabilities or equity.

Due to the tabular presentation of rounded amounts, certain tables reflect insignificant rounding differences.

2. Accounting Policies and Standards Update

Recently Issued Accounting Pronouncements

From time to time, the FASB or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”).

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Recently Adopted Accounting Pronouncements

In February 2018, the FASB issued ASU 2018-02, Income Statement — Reporting Comprehensive Income - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”), which allows companies to make a one-time reclassification of the stranded tax effects (as defined by ASU 2018-02) from accumulated other comprehensive income to retained earnings as a result of the tax legislation enacted in December 2017, commonly known as the “Tax Cuts and Jobs Act” (“TCJA”), and requires certain disclosures about stranded tax effects. The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The amendments in this update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effects of the change in the U.S. federal corporate income tax rate in the TCJA is recognized. We adopted this standard as of January 1, 2019. As a result of our full valuation allowance on our net deferred tax asset, there was no revaluation impact due to the TCJA. As such, there was no stranded tax impact to accumulated other comprehensive income (loss) (“AOCI”) as a result of the change in tax law.

From February 2016 through March 2019, the FASB issued several ASUs related to Leases (“ASC 842”), which required the lessee to recognize the assets and liabilities on all leases that may have not been recognized in the past, specifically, leases classified as operating leases under current U.S. GAAP (“ASC 840”). The core principle of ASC 842 is that a lessee should recognize both a lease liability for its obligation to make lease payments to the lessor and a right-of-use asset reflecting its right to use the underlying asset during the term of the lease. Under ASC 842, a lessee recognizes either an operating or a finance lease, with the pattern of expense recognition in the income statement differing depending on classification of the lease. There are also additional disclosure requirements under ASC 842, including expanded quantitative disclosures regarding the location and amounts related to operating and finance leases included in the financial statements, as well as qualitative disclosures about the nature of an entity’s leases.

The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We adopted the new standard effective January 1, 2019 and elected the optional transition practical expedient, which allows us to adopt the standard on the adoption date by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We will not retrospectively adjust prior periods, which will continue to be reported under ASC 840. Further, disclosures related to prior periods will also be reported under ASC 840. We also elected the transitional package of practical expedients available within the new standard, which, among other things, allows a lessee to carry forward existing lease classification. ASC 842 also includes an accounting policy election whereby a lessee may choose not to apply ASC 842 to leases with terms of one year or less. Instead, a lessee recognizes the lease payments in the statement of operations on a straight-line basis over the term of the lease. We have made this policy election and leases of this nature will not be included on our Unaudited Condensed Consolidated Balance Sheets. Lastly, we elected the practical expedient whereby a lessee may include both lease and non-lease components in the calculation of the lease liability and right-of-use asset.

During 2017 and 2018, we evaluated our contracts with vendors under ASC 842. Based upon our review, the adoption of this standard did not have a material impact on our results of operations, financial position, and cash flows. The impact of ASC 842 is not material to our results due to our ownership of substantially all of our equipment and the fact that we have entered into very few operating leases. Additionally, the result of our review of our contracts with vendors yielded no change to our initial conclusion that these contracts did not contain a lease, as there were either no identified assets, or we did not obtain the right to control the use of an identified asset over a period of time. The adoption of ASC 842 did not have an impact on our accounting for capital leases, which are classified as finance leases under ASC 842. In addition, the adoption of ASC 842 did not have an impact on our liquidity.16

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The following table reflects the adoption of ASC 842 on our Condensed Consolidated Balance Sheets as of January 1, 2019 (in thousands):

	Balance as of December 31, 2018			Adjustment Due to ASC 842			Balance as of January 1, 2019
Assets
Other assets (noncurrent)	$	16,213		$	1,785		$	17,998

Liabilities
Accrued expenses	$	26,385		$	(106	)	$	26,279
Other liabilities (current)	—			937			937
Other liabilities (noncurrent)	5,731			708			6,439

Equity
Retained earnings	$	(370,795	)	$	246		$	(370,549	)

3. Revenue

Disaggregation of Revenue

In the following table, Revenue is disaggregated by primary geographic markets, as we believe this best depicts how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors (in thousands):

Three Months Ended

~~Six~~Nine Months Ended

June 30,

September 30,

2019

2018

2019

2018

United States (1)

~~135~~156,~~343~~103

~~128~~143,~~864~~963

~~243~~399,~~161~~488

~~267~~411,~~097~~060

South Korea (2)

3258,~~884~~951

7073,~~513~~642

64123,~~706~~657

~~136~~210,~~533~~176

Other (2)

~~224~~5,173

615,~~321~~475

510,~~661~~610

1833,~~377~~851

Total revenue from external customers

~~168~~220,~~451~~227

~~205~~233,~~698~~080

~~313~~533,~~528~~755

~~422~~655,~~007~~087

(1) The majority of our domestic revenue is attributable to the Owned and Operated Mines segment.

(2) All South Korean revenue and the majority of Other geographical revenue is attributable to our Logistics and Related Activities segment.

We attribute revenue to individual countries based on the location of the physical delivery of the coal. All of our revenue for the six months ended June 30, 2019 and 2018 originated in the United States.17

Performance Obligations

In our Owned and Operated Mines segment, we have remaining performance obligations relating to fixed priced contracts of approximately $807 million, which represents the average fixed prices on our committed contracts as of June 30, 2019. We expect to recognize approximately 81% of this revenue through 2020, with the remainder recognized thereafter. We have remaining performance obligations relating to index priced contracts or contracts with price reopeners of approximately $162 million, which represents the average re-opener/indexed price on committed contracts as of June 30, 2019. We expect to recognize approximately 44% of this revenue

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~~through~~We ~~2020,~~attribute ~~with~~revenue ~~the~~to ~~remainder~~individual ~~recognized~~countries ~~thereafter. In~~based ~~our~~on ~~Logistics~~the ~~and~~location ~~Related~~of ~~Activities~~the ~~segment,~~physical wedelivery ~~have~~of ~~remaining~~the ~~performance~~coal. All ~~obligations~~of ~~relating to~~ our ~~fixed~~revenue ~~price~~for ~~contracts of approximately $99 million, which represents~~ the ~~average~~nine ~~fixed~~months ~~prices~~ended ~~on our committed contracts as of June~~September 30, 2019~~. We~~ ~~expect~~and to2018 ~~recognize~~originated ~~approximately 90% of this revenue~~ in ~~2019, and~~ the ~~remainder~~United ~~in 2020~~States.

Performance Obligations

In our Owned and Operated Mines segment, we have remaining performance obligations relating to fixed priced contracts of approximately $719 million, which represents the average fixed prices on our committed contracts as of September 30, 2019. We expect to recognize approximately 74% of this revenue through 2020, with the remainder recognized thereafter. We have remaining performance obligations relating to index priced contracts or contracts with price reopeners of approximately $162 million, which represents the average re-opener/indexed price on committed contracts as of September 30, 2019. We expect to recognize approximately 44% of this revenue through 2020, with the remainder recognized thereafter. In our Logistics and Related Activities segment, we have remaining performance obligations relating to our fixed price contracts of approximately $49 million, which represents the average fixed prices on our committed contracts as of September 30, 2019. We expect to recognize approximately 80% of this revenue in 2019, and the remainder in 2020.

The tons used to determine the remaining performance obligations are subject to adjustment in instances of force majeure and exercise of customer options to either take additional tons, or reduce tonnage, if such option exists in the customer contract. Furthermore, export tons are subject to adjustment upon loading of vessels at the port and therefore represent the estimated tons we anticipate shipping. The elimination of the purchase and sale of coal between reportable segments is not reflected above.

Contract Balances

Accounts receivable, net consisted of the following (in thousands):

	June 30,		December 31,
	September 30,		December 31,
	2019		2018
Trade accounts receivable	$	4441,~~184~~201	$	33,062
Other receivables	~~753~~475		464
Accounts receivable, net	$	4441,~~937~~676	$	33,527

4. Segment Information

We have two reportable segments: our Owned and Operated Mines segment and our Logistics and Related Activities segment.

Our Owned and Operated Mines segment is characterized by the predominant focus on thermal coal production where the sale occurs at the mine site and where title and risk of loss generally pass to the customer at that point. This segment includes our Antelope Mine, Cordero Rojo Mine, and Spring Creek Mine. Sales in this segment are primarily to domestic electric utilities and some industrials, although a portion may be made to our Logistics and Related Activities segment. Sales between reportable segments are priced based on prevailing market prices for arm’s length transactions. Our mines utilize surface mining extraction processes and are all located in the PRB. The gains and losses resulting from any domestic coal futures contracts and WTI derivative financial instruments are reported within this segment.

Our Logistics and Related Activities segment is characterized by the services we provide to our international and certain of our domestic customers where we deliver coal to the customer at a terminal or the customer’s plant or other delivery point, remote from our mine site. Services provided include the purchase of coal from third parties or from our Owned and Operated Mines segment, at market prices, as well as the contracting and coordination of the transportation and other handling services from third-party operators, which are typically rail and terminal companies and may include chartering of a vessel. Title and risk of loss are retained by the Logistics and Related Activities segment through the transportation and delivery process. Title and risk of loss pass to the customer in accordance with the contract and typically occur at a vessel loading terminal, a vessel unloading terminal or an end use facility. Risk associated with rail and terminal take-or-pay agreements is also borne by the Logistics and Related Activities segment. The gains and losses resulting from any international coal forward contracts and international coal put options are reported within this segment. Amortization related to the amended port and rail take-or-pay agreements are also included in this segment. See Note 5 for additional information about the amended transportation agreements. Incremental production taxes and royalties associated with the sales made by our Logistics and Related Activities segment are also included in this segment.

1518

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retained by the Logistics and Related Activities segment through the transportation and delivery process. Title and risk of loss pass to the customer in accordance with the contract and typically occur at a vessel loading terminal, a vessel unloading terminal or an end use facility. Risk associated with rail and terminal take-or-pay agreements is also borne by the Logistics and Related Activities segment. The gains and losses resulting from any international coal forward contracts and international coal put options are reported within this segment. Amortization related to the amended port and rail take-or-pay agreements are also included in this segment. See Note 5 for additional information about the amended transportation agreements. Incremental production taxes and royalties associated with the sales made by our Logistics and Related Activities segment are also included in this segment.

Our business activities that are not considered operating segments are included in Other, although they are not required to be included in this footnote. They are provided for reconciliation purposes and include Selling, general and administrative expenses (“SG&A”) as well as results relating to broker activity.

Eliminations represent the purchase and sale of coal between reportable segments and the associated elimination of intercompany profit or loss in inventory and are provided for reconciliation purposes.

Revenue

The following table presents Revenue (in thousands):

	Three Months Ended						~~Six~~Nine Months Ended
	June 30,						June 30,
	September 30,						September 30,
	2019			2018			2019			2018
Owned and Operated Mines	$	~~142~~173,~~294~~693		$	~~143~~161,~~940~~977		$	~~257~~431,~~937~~630		$	~~297~~459,~~593~~570
Logistics and Related Activities	3565,~~766~~831			7990,~~333~~982			74140,~~900~~731			~~158~~249,~~969~~951
Other	—			3			—			68
Eliminations	(919,~~609~~297		)	(1719,~~578~~882		)	(1938,~~309~~606		)	(3454,~~561~~442		)
Consolidated	$	~~168~~220,~~451~~227		$	~~205~~233,~~698~~080		$	~~313~~533,~~528~~755		$	~~422~~655,~~007~~087

Total Assets

The following table presents Total assets (in thousands):

	June 30,			December 31,
	September 30,			December 31,
	2019			2018
Owned and Operated Mines	$	97104,~~378~~039		$	735,022
Logistics and Related Activities	2631,~~961~~863			29,327
Other	~~150~~192,~~779~~413			164,879
Eliminations	(~~307~~1,653		)	(572		)
Consolidated	$	~~274~~326,~~811~~662		$	928,656

As of ~~June~~September 30, 2019 and December 31, 2018, all of our long-lived assets were located in the U.S. The change in Total assets, from December 31, 2018 to ~~June~~September 30, 2019, is primarily due to the impairment charge as described in Note 6.

~~Capital Expenditures~~19

The following table presents purchases of property, plant and equipment, investment in development projects, and capital expenditures included in Property, plant and equipment, net, Other assets, and Accounts payable (in thousands):

	Six Months Ended
	June 30,
	2019		2018
Owned and Operated Mines	$	1,395	$	11,693
Logistics and Related Activities	—		—
Other	108		108
Consolidated	$	1,503	$	11,801

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Capital Expenditures

The following table presents purchases of property, plant and equipment, investment in development projects, and capital expenditures included in Property, plant and equipment, net, Other assets, and Accounts payable (in thousands):

	Nine Months Ended
	September 30,
	2019		2018
Owned and Operated Mines	$	3,434	$	14,224
Logistics and Related Activities	—		—
Other	108		299
Consolidated	$	3,542	$	14,523

Adjusted EBITDA

EBITDA represents net income (loss) before: (1) interest income (expense) net, (2) income tax provision, (3) depreciation and depletion, and (4) amortization. Adjusted EBITDA represents EBITDA as further adjusted for accretion, which represents non-cash increases in asset retirement obligation liabilities resulting from the passage of time, and specifically identified items that management believes do not directly reflect our core operations. The specifically identified items that we routinely adjust for are: (1) adjustments to exclude non-cash impairment charges, (2) adjustments for derivative financial instruments, excluding fair value mark-to-market gains or losses and including derivative settlements, (3) adjustments to exclude debt restructuring costs, (4) non-cash amortization expense related to transportation agreements with BNSF and Westshore, and (5) reorganization items incurred since our filing for Chapter 11.

Adjusted EBITDA is an additional tool intended to assist our management in comparing our performance on a consistent basis for purposes of business decision making by removing the impact of certain items that management believes do not directly reflect our core operations. Adjusted EBITDA is a metric intended to assist management in evaluating operating performance, compensation decisions, comparing performance across periods, planning and forecasting future business operations and helping determine levels of operating and capital investments.

The following table reconciles segment Adjusted EBITDA to Income (loss) before income tax provision and earnings from unconsolidated affiliates (in thousands):

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	Three Months Ended						~~Six~~Nine Months Ended
	June 30,						June 30,
	September 30,						September 30,
	2019			2018			2019			2018
Adjusted EBITDA
Owned and Operated Mines	$	1431,~~547~~499		$	532,~~290~~289		$	637,~~167~~665		$	2356,~~906~~195
Logistics and Related Activities	(62,~~582~~679		)	710,~~290~~471			(811,~~538~~217		)	1424,~~388~~858
Total Adjusted EBITDA for reportable segments	728,~~965~~820			1242,~~580~~760			(226,~~371~~448		)	3881,~~294~~053
Unallocated net expenses	(148,~~244~~605		)	(132,~~354~~059		)	(3241,~~528~~133		)	(1921,~~430~~487		)
Adjustments to Income (loss) before income tax provision and earnings from unconsolidated affiliates
Depreciation and depletion	~~(11~~2,~~897~~488		)	(1417,~~401~~392		)	(2220,~~583~~095		)	(2946,~~396~~788		)
Accretion	(1,~~493~~699		)	(1,~~706~~947		)	(34,~~097~~796		)	(35,~~411~~359		)
Impairments	~~(620,901~~—		)	~~(800~~—		)	(621,005		)	(800		)
Reorganization items, net	37(13,~~190~~152		)	—			3724,~~190~~038			—
Derivative financial instruments:
Gain (loss) on derivative financial instruments (1)	—			—730			1,809			—730
Settlement of derivative financial instruments	—			—			(1,809		)	—
Total derivative financial instruments	—			—730			—			—730
Interest expense, net	(41,~~975~~787		)	(108,~~267~~107		)	(1214,~~380~~167		)	(1927,~~191~~300		)
(Income) loss from unconsolidated affiliates, net of tax	(~~630~~24		)	5(3		)	(~~866~~890		)	(~~266~~269		)
Non-cash throughput amortization expense and contract termination payments	(1,~~289~~288		)	(1,~~690~~288		)	(23,~~578~~865		)	(34,~~379~~668		)
Income (loss) before income tax provision and earnings from unconsolidated affiliates	$	~~(610~~4,~~274~~753	)	$	~~(29~~12,~~633~~693	)	$	(~~660~~655,~~218~~466	)	$	(3724,~~579~~886	)

(1) (Gain) loss on derivative financial instruments reflected in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

5. Transportation Agreements

To ensure export terminal and rail capacity for export sales, we enter into multi-year throughput agreements with export terminal companies and railroads. These types of take-or-pay agreements require us to pay for a minimum quantity of coal to be transported on the railway or through the terminal regardless of whether we sell any coal. If we fail to make sufficient export sales to meet our minimum obligations under the take-or-pay agreements, we are still obligated to make payments to the export terminal company and railroad.

We have a throughput agreement with Westshore Terminals Limited Partnership (“Westshore”) for our export sales through their export terminal in Vancouver, British Columbia, and a complementary agreement with Burlington Northern Santa Fe Railroad (“BNSF”).

Current Agreements

Our current agreement with Westshore extends through 2022 and allows for greater capacity in 2021 and 2022 to 10.5 million total annual throughput tons. We retain the right to terminate our commitments at any time in exchange for a buyout payment. The termination payment varies throughout the period based upon an agreed schedule. Additionally, after this Westshore agreement terminates and through 2024, if we ship to export customers, we are required to offer to ship through Westshore up to a specified annual tonnage on terms similar

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to the agreement before shipping through any other export terminal. Westshore has the right to accept or reject our offer in its sole discretion.

Our current agreement with BNSF extends through the end of 2020 with minimum payment commitments for each year. We have the right to terminate our commitments for the remaining years at any time in exchange for buyout payments. We have initiated discussions with BNSF regarding an extension through December 2022 to support our increased port capacity for our Asian export business.

In arriving at our current agreements, certain termination payments were made in prior years related to prior agreements. These termination payments have been deferred and are being amortized over the remaining life of the current agreements. As of ~~June~~September 30, 2019, there was $1412.7 million recorded as a deferred asset for these agreements, of which $1211.49 million and $10.68 million, were included in Other prepaid and deferred charges and Other assets, respectively, in the Unaudited Condensed Consolidated Balance Sheets. As of December 31, 2018, there was $16.6 million recorded as a deferred asset for these agreements, of which $13.4 million and $3.2 million, were included in Other prepaid and deferred charges and Other assets, respectively, in the Unaudited Condensed Consolidated Balance Sheets. We incurred $3248.51 million and $5058.4 million in costs under our export logistics agreements with Westshore and BNSF, including amortization of $93.67 million and $43.28 million, during the three months ended ~~June~~September 30, 2019 and 2018, respectively. We incurred $61110.80 million and $~~102~~161.71 million in costs under our export logistics agreements with Westshore and BNSF, including amortization of $1317.31 million and $812.31 million, during the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively. These costs are included in Cost of product sold in the Unaudited Condensed Statements of Operations and Comprehensive Income (Loss).

We had outstanding purchase commitments related to transportation agreements consisting of the following (in thousands):

	June 30,		December 31,
	September 30,		December 31,
	2019		2018
Services
Transportation agreements (1)(2)	$	71,632	$	80,768

(1) Includes undiscounted port take-or-pay commitments as agreed to in July 2018 for 2019-2022. We have the right to terminate our commitments at any time in exchange for a buyout payment. These amounts are considered minimum payments on services. The per tonne loading charges reflect these advance payments.

(2) Includes undiscounted rail take-or-pay commitments as agreed to in January 2018 for 2019-2020. We have the right to terminate our commitments at any time in exchange for a buyout payment. If we do not meet the required portion of our future nominated tons, there would be incremental liquidated damages due under the agreement.

6. Impairments

To facilitate the sale of all or substantially all of their operating assets pursuant to Section 363 of the Bankruptcy Code, the Debtors filed a motion with the Bankruptcy Court to approve a marketing and bidding procedures process, including milestones by which interested parties were required to submit indications of interest and bids for all or a portion of the Debtors’ assets.

This motion was approved by the Bankruptcy Court in June 2019 and during July 2019, the Debtors received indicative bids, all of which indicated that the market value of the Debtor’s assets were significantly lower than their current book value. On August 15, 2019 and August 16, 2019, the Auction was held, and on August 19, 2019, the Bankruptcy Court approved the sale to NTEC subject to the Debtors finalizing and submitting a proposed sale order. See Note 241 for details of the Asset Purchase Agreement and the Winning Bid.

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As a result of the Winning Bid, which was the primary basis for estimating the forecasted cash flows under the income approach to determine the fair market value of our assets, we recorded an impairment of approximately $621 million. $618.4 million of the impairment is related to the Owned and Operated Mines segment, while the Logistics and Related Activities segment accounted for $0.5 million of the impairment. The remaining $2.1 million is related to Other. The impairment was comprised of $568 million of long-lived assets and mineral rights, primarily at our Antelope and Spring Creek mines as well as $49.5 million in materials and supplies inventory. The remaining $3.5 million is related to project development costs and right-of-use assets.

7. Reorganization items, net

In accordance with ASC 852, the statement of operations shall portray the results of operations of the reporting entity while it is in Chapter 11. Revenues, expenses (including professional fees), realized gains and losses, and provisions for losses resulting from reorganization and restructuring of the business shall be reported separately as reorganization items.

	Three Months			Six Months
	Ended			Ended
	June 30,			June 30,
	2019			2019
Write-off of deferred gain on 2021 Notes(1)	$	53,455		$	53,455
Gain on settlement of liabilities subject to compromise (2)	77			77
Interest income	6			6
Write-off of debt issuance costs on debt subject to compromise	(9,203		)	(9,203		)
Professional fees	(7,087		)	(7,087		)
Other reorganization expenses	(58		)	(58		)
Reorganization items, net	$	37,190		$	37,190

The following table presents Reorganization items, net (in thousands):

	Three Months			Nine Months
	Ended			Ended
	September 30,			September 30,
	2019			2019
Write-off of deferred gain on 2021 Notes(1)	$	—		$	53,455
Gain on settlement of liabilities subject to compromise (2)	286			363
Interest income	67			73
Write-off of debt issuance costs on debt subject to compromise	—			(9,203		)
Professional fees	(12,066		)	(19,153		)
Other reorganization expenses	(1,439		)	(1,497		)
Reorganization items, net	$	(13,152	)	$	24,038

(1) See Note 14 for information on the deferred gain.

(2) See Note 19 for information on liabilities subject to compromise.

During the third quarter of 2019, we identified and recorded an out-of-period adjustment related to the accounting for US Trustee fees. We concluded that this adjustment was not material to our consolidated financial statements for any of the current or prior periods presented. The adjustment was reflected as a $0.7 million increase of our Reorganization Items, net in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended September 30, 2019.

8. Income Taxes

Our statutory income tax rate including state income taxes, for the three and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018 was approximately 23%. Our effective tax rate for the three months ended ~~June~~September 30, 2019 and 2018 was 0.03% and (0.8)0%, respectively. Our effective tax rate for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018 was 0.0% and (01.82)%, respectively. The difference between our statutory income tax rates and our effective income tax rates for the three and ~~six~~nine months ended ~~June~~September 30, 2019 and 2018 is primarily the result of the impact of percentage depletion, income tax in the states in which we do business and changes in our valuation allowance.

The elimination of the Alternative Minimum Tax (“AMT”) and the ability to offset our regular tax liability or claim refunds for taxable years 2018 through 2021 for our AMT credits carried forward from prior periods, was a material impact of the TCJA. In May 2019, we received $15.8 million in AMT credit refunds. We currently anticipate receipt of an additional approximately $15.8 million in AMT credit refunds over the next three years with approximately half of this value realized in 2020.23

As of June 30, 2019, we had deferred tax assets principally arising from: AROs, postretirement benefits, contract rights, property, plant, equipment, mineral rights, and net operating loss carry-forwards. As of December 31, 2018, we had deferred tax assets principally arising from: AROs, postretirement benefits, contract rights, interest deduction carry-forwards, and net operating loss carry-forwards. As management cannot determine that

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itThe iselimination ~~more~~of ~~likely~~the ~~than~~Alternative ~~not~~Minimum ~~that~~Tax we(“AMT”) ~~will~~and ~~realize~~ the ~~benefit~~ability ofto ~~the~~offset ~~deferred~~our regular tax ~~assets~~liability or claim refunds for taxable years 2018 through 2021 for our AMT credits carried forward from prior periods, was a ~~valuation~~material ~~allowance~~impact ~~equal~~of tothe TCJA. In May 2019, we received $15.8 million in AMT credit refunds. We currently anticipate receipt of an additional approximately $15.8 million in AMT credit refunds over the ~~net~~next ~~deferred~~three ~~tax~~years ~~asset~~with ~~has~~approximately ~~been~~half ~~established~~of this value realized in 2020.

As of ~~June~~September 30, 2019 ~~and December 31~~, ~~2018,~~ we had nodeferred ~~uncertain~~ tax ~~positions~~assets ~~that~~principally wearising ~~expect~~from: toAROs, ~~have~~postretirement abenefits, ~~material~~contract ~~impact~~rights, onproperty, ~~the~~plant ~~Unaudited~~and ~~Condensed~~equipment, ~~Consolidated~~mineral ~~Financial~~rights, ~~Statements~~and asnet aoperating ~~result~~loss carry-forwards. As of ~~tax~~December 31, ~~deductions~~2018, ~~taken~~we ~~during~~had ~~the~~deferred ~~year~~tax orassets inprincipally ~~prior~~arising ~~periods~~from: orAROs, ~~due~~postretirement tobenefits, ~~settlements~~contract ~~with~~rights, ~~taxing~~interest ~~authorities~~deduction orcarry-forwards, ~~lapses~~and ofnet ~~applicable~~operating ~~statues~~loss ~~of limitations~~carry-forwards. WeAs ~~are~~management ~~open~~cannot todetermine ~~federal~~that ~~and~~it ~~state~~is ~~tax~~more ~~audits~~likely ~~until~~than ~~the~~not ~~applicable~~that ~~statutes~~we ofwill ~~limitations~~realize ~~expire. The~~the ~~statute~~benefit of ~~limitations~~the ~~has~~deferred ~~expired~~tax ~~for~~assets, ~~all~~a ~~federal~~valuation ~~and~~allowance ~~state~~equal ~~returns~~to ~~filed~~the ~~for~~net ~~periods~~deferred ~~ending~~tax ~~before~~asset ~~2012~~has been established.

As of September 30, 2019 and December 31, 2018, we had no uncertain tax positions that we expect to have a material impact on the Unaudited Condensed Consolidated Financial Statements as a result of tax deductions taken during the year or in prior periods or due to settlements with taxing authorities or lapses of applicable statues of limitations. We are open to federal and state tax audits until the applicable statutes of limitations expire. The statute of limitations has expired for all federal and state returns filed for periods ending before 2012.

9. Equity Method Investments

Equity method investments include our 50% equity investment in Venture Fuels Partnership, a coal marketing company. We have received distributions of $12.3 million and $1.0 million from the Venture Fuels Partnership during the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, respectively. Our equity method investments are included in noncurrent Other assets on the Unaudited Condensed Consolidated Balance Sheets and had a carrying amount of the following (in thousands):

	June 30,		December 31,
	September 30,		December 31,
	2019		2018
Venture Fuels Partnership	$	21,~~651~~671	$	3,040
Other	~~988~~991		982
Total equity method investments	$	32,~~639~~662	$	4,022

10. Common Stock and Earnings (Loss) per Share

Common Stock

Under the terms of the Plan submitted to the Bankruptcy Court, our existing common stock will be extinguished following confirmation of the Plan, and existing equity holders will not receive any consideration in respect of their equity interests.

On March 26, 2019, we were notified by the NYSE that they had determined our common stock was no longer suitable for listing on the NYSE based on “abnormally low” price levels, pursuant to Section 802.01D of the NYSE Listed Company Manual, and commenced proceedings to delist our common stock. Trading in our common stock was suspended immediately. Our common stock began trading on the OTC Pink on March 27, 2019 and trades under the symbol “CLDPQ”.

To be quoted on the OTC Pink, a market maker must have sponsored the security and comply with SEC Rule 15c2-11 before it can initiate a quote in a specific security. The OTC Pink is a significantly more limited market than the NYSE, and the quotation of our common stock on the OTC Pink may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock. This could further depress the trading price of our common stock and could also have a long-term adverse effect on our ability to raise capital. There can be no assurance that any public market for our common stock will exist in the future or that we will be able to relist our common stock on a national securities exchange. In connection with the delisting of our common stock, there may also be other negative implications, including the potential loss of confidence in the Company by suppliers, customers and employees and the loss of institutional investor interest in our common stock.

We expect that our existing common stock will be extinguished following confirmation of a Chapter 11 plan, and existing equity holders are unlikely to receive any consideration in respect of their equity interests.24

Earnings (Loss) per Share

Potential dilutive shares of common stock may include restricted stock units, options, and performance share units issued under our Long Term Incentive Plan (“LTIP”). See Note 18. We apply the treasury stock method to determine dilution from restricted stock units, options, and performance share units.

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the trading price of our common stock and could also have a long-term adverse effect on our ability to raise capital. There can be no assurance that any public market for our common stock will exist in the future or that we will be able to relist our common stock on a national securities exchange. In connection with the delisting of our common stock, there may also be other negative implications, including the potential loss of confidence in the Company by suppliers, customers and employees and the loss of institutional investor interest in our common stock.

Earnings (Loss) per Share

The following table summarizes the calculation of basic and diluted earnings (loss) per share (in thousands, except per share amounts):

	Three Months Ended						~~Six~~Nine Months Ended
	June 30,						June 30,
	September 30,						September 30,
	2019			2018			2019			2018
Numerator for calculation of diluted earnings (loss) per share:
Net income (loss)	$	~~(609~~4,~~678~~766	)	$	~~(29~~12,~~872~~691	)	$	(~~659~~654,~~426~~660	)	$	(3724,~~610~~919	)
Denominator for basic income (loss) per share — weighted-average shares outstanding	76,508			75,~~756~~778			76,~~265~~347			75,~~544~~623
Dilutive effect of stock equivalents	—509			—1,505			—			—
Denominator for diluted earnings (loss) per share	7677,~~508~~017			7577,~~756~~283			76,~~265~~347			75,~~544~~623
Basic earnings (loss) per share	$	(70.9706	)	$	(0.3917	)	$	(8.6557	)	$	(0.5033	)
Diluted earnings (loss) per share	$	(70.9706	)	$	(0.3916	)	$	(8.6557	)	$	(0.5033	)

For the periods presented, the following items were excluded from the diluted earnings (loss) per share calculation because they were anti-dilutive (in thousands):

	Three Months Ended		Six Months Ended
	Three Months Ended September 30,		Nine Months Ended September 30,
	June 30,		June 30,
	2019	2018	2019	2018
Anti-dilutive stock equivalents	2,~~450~~446	32,~~852~~075	2,~~816~~681	43,~~048~~239

11. Fair Value of Financial Instruments

We use a three-level fair value hierarchy that categorizes assets and liabilities measured at fair value based on the observability of the inputs utilized in the valuation. The levels of the hierarchy, as defined below, give the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

· Level 1 is defined as observable inputs such as quoted prices in active markets for identical assets. Our Level 1 assets currently include money market funds.

· Level 2 is defined as observable inputs other than Level 1 prices, including quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Our Level 2 assets and liabilities include derivative financial instruments with fair values derived from quoted prices in over-the-counter markets or from prices received from direct broker quotes.

· Level 3 is defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. We had no Level 3 financial instruments as of June 30, 2019 or December 31, 2018.25

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that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Our Level 2 assets and liabilities include derivative financial instruments with fair values derived from quoted prices in over-the-counter markets or from prices received from direct broker quotes.

The tables below set forth, by level, our financial assets and liabilities that are recorded at fair value in the accompanying Unaudited Condensed Consolidated Balance Sheets (in thousands):

	Fair Value as of June 30, 2019
	Fair Value as of September 30, 2019
	Level 1		Level 2		Total
Assets
Money market funds (1)	$	4,~~927~~936	$	—	$	4,~~927~~936

	Fair Value as of December 31, 2018
	Level 1		Level 2		Total
Assets
Money market funds (1)	$	28,740	$	—	$	28,740
Liabilities
Derivative financial instruments (2)	$	—	$	2,386	$	2,386

(1) Included in Cash and cash equivalents in the Unaudited Condensed Consolidated Balance Sheets along with $5979.58 million and $62.5 million of demand deposits as of ~~June~~September 30, 2019 and December 31, 2018, respectively.

(2) See Note 12 for information on the (Gain) loss on derivative financial instruments recognized in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

12. Derivative Financial Instruments

WTI Derivatives

We use derivative financial instruments, such as swaps and collars, to help manage our exposure to market changes in diesel fuel prices. The derivatives are indexed to the West Texas Intermediate (“WTI”) crude oil price as quoted on the New York Mercantile Exchange. As such, the nature of the derivatives did not directly offset market changes to our diesel costs.

Under a swap agreement, if the monthly average index price is higher than the swap price, we receive the difference and if the monthly average index price is lower than the swap price, we pay the difference. We currently do not hold any swap agreements.

In July 2018, we entered into collar agreements to fix a portion of our forecasted diesel costs for the remainder of 2018 and all of 2019. Under a collar agreement, we pay the difference between the monthly average index price and a floor price if the index price is below the floor, and we receive the difference between the ceiling price and the monthly average index price if the index price is above the ceiling price. No amounts are paid or received if the index price is between the floor and ceiling prices. While we would not receive the full benefit of price decreases beyond the floor price, the collars mitigate the risk of crude oil price increases and thereby increased diesel costs that would otherwise have a negative impact on our cash flow. During the first quarter of 2019, we closed out our collar agreements. We currently do not hold any collar agreements.

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Offsetting and Balance Sheet Presentation

June 30, 2019

September 30, 2019

Gross Amounts Recognized

Gross Amounts Offset in the Consolidated Balance Sheet

Net Amounts Presented in the Consolidated Balance Sheet

Assets

Liabilities

Assets

Liabilities

Assets

Liabilities

WTI derivative financial instruments

—

	December 31, 2018
	Gross Amounts Recognized				Gross Amounts Offset in the Consolidated Balance Sheet				Net Amounts Presented in the Consolidated Balance Sheet
	Assets		Liabilities		Assets		Liabilities		Assets		Liabilities
WTI derivative financial instruments	$	—	$	2,642	$	—	$	—	$	—	$	2,642

Derivative Gains and Losses

(Gain) loss on derivative financial instruments recognized in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) were as follows (in thousands):

	Three Months Ended					Six Months Ended
	Three Months Ended September 30,					Nine Months Ended September 30,
	June 30,					June 30,
	2019		2018			2019			2018
WTI derivative financial instruments	$	—	$	—(730	)	$	(1,809	)	$	—(730	)

See Note 11 for a discussion related to the fair value of derivative financial instruments.

13. Inventories, Net

Inventories, net consisted of the following (in thousands):

	June 30,			December 31,
	September 30,			December 31,
	2019			2018
Materials and supplies	$	6664,~~611~~424		$	68,519
Less: Obsolescence allowance	(5049,~~750~~154		)	(1,089		)
Material and supplies, net	15,~~861~~270			67,430
Coal inventory	1,~~100~~676			2,610
Inventories, net	$	16,~~961~~946		$	70,040

During the second quarter of 2019, we increased our obsolescence allowance to reflect the fair value of our inventory as determined under the income approach based primarily on cash flows from the Winning Bid. The increase in this allowance was recorded as part of the overall asset impairment taken during the second quarter of 2019. See Note 6 for further details on the asset impairment.

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14. Senior Notes

Senior notes consisted of the following (in thousands):

	June 30, 2019
	September 30, 2019
	Carrying Value(1)		Unamortized Discount and Debt Issuance Costs		Unamortized Deferred Gain on Forgiven Debt(2)		Principal		Fair Value (3)
	Carrying Value (1)		Unamortized Discount and Debt Issuance Costs		Unamortized Deferred Gain on Forgiven Debt (2)		Principal (3)		Fair Value (4)
12.00% second lien senior notes due 2021	$	~~290~~262,366	$	—	$	—	$	~~290~~262,366	$	4070,~~651~~839
6.375% senior notes due 2024	56,408		—		—		56,408		1,~~974~~692
Total senior notes	$	~~346~~318,774	$	—	$	—	$	~~346~~318,774	$	4272,~~625~~531

	December 31, 2018
	Carrying Value		Unamortized Discount and Debt Issuance Costs		Unamortized Deferred Gain on Forgiven Debt			Principal		Fair Value (34)
12.00% second lien senior notes due 2021	$	340,688	$	9,845	$	(60,167	)	$	290,366	$	177,123
6.375% senior notes due 2024	55,685		723		—			56,408		13,538
Total senior notes	$	396,373	$	10,568	$	(60,167	)	$	346,774	$	190,661

(1) The carrying value of our senior notes has been reclassified to Liabilities subject to compromise in the Unaudited Condensed Consolidated Balance ~~Sheets~~Sheet as of ~~June~~September 30, 2019.

(2) The deferred gain of $60.2 million relating to the 2021 Notes was written off reducing the carrying value to the principal amount. An additional $6.7 million in interest was accrued to reflect interest payable at the stated rate of 12%, rather than the troubled debt effective rate of 6.46% ~~as of June 30, 2019~~. The net amount of $53.5 million was recorded as Reorganization items, net in the ~~three~~second ~~and~~quarter ~~six~~of ~~month ended June 30,~~ 2019.

(3) ~~The~~On ~~fair~~August 1, ~~value~~2019, of the ~~senior~~principal ~~notes~~balance ~~was~~of ~~based~~the on2021 ~~observable~~Notes ~~market~~was ~~inputs,~~reduced ~~which~~by ~~are~~$28 ~~considered~~million ~~Level~~as 2a inresult of the ~~fair~~Roll-Up ~~value~~Loans ~~hierarchy. See~~described ~~Note 11 for further information on Level 2 fair value measurements~~below.

(4) The fair value of the senior notes was based on observable market inputs, which are considered Level 2 in the fair value hierarchy. See Note 11 for further information on Level 2 fair value measurements.

CPE Resources, a wholly owned subsidiary of the Company, elected not to make an interest payment under its 2024 Notes of approximately $1.8 million, which was due on March 15, 2019. The 2024 Notes Indenture provided a 30-day grace period that extended the last date to make the interest payment to April 14, 2019 before an event of default would occur under the 2024 Notes Indenture. As a result of CPE Resources’ decision not to make the interest payment by April 14, 2019, an event of default occurred under the 2024 Notes Indenture.

CPE Resources elected not to make an interest payment obligation under the 2021 Notes of approximately $17.4 million, which was due on May 1, 2019. The 2021 Notes Indenture provided a 30-day grace period that extended the latest date for making this interest payment to May 31, 2019, before an event of default would occur under the 2021 Notes Indenture.

The filing of the Bankruptcy Petitions on May 10, 2019, constituted an event of default that accelerated our obligations under the documents governing each of our 2024 Notes and 2021 Notes.

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Date or to exercise control over the Debtors’ property. Subject to certain exceptions under the Bankruptcy Code, the filing of the Debtors’ Chapter 11 Cases also automatically stayed the continuation of most legal proceedings or the filing of other actions against or on behalf of the Debtors or their property to recover on, collect or secure a claim arising prior to the Petition Date or to exercise control over property of the Debtors’ bankruptcy estates, unless the Bankruptcy Court modifies or lifts the automatic stay as to any such claim. Notwithstanding the general application of the automatic stay described above, governmental authorities may determine to continue actions brought under their police and regulatory powers.

The 2021 Notes were issued with joint and several guarantees by CPE Inc. and by all of our existing and future domestic restricted subsidiaries, and secured by second-priority liens on substantially all of our assets. The 2024 Notes were issued with joint and several guarantees by CPE Inc. and by all of our existing and future domestic restricted subsidiaries. The termination of the Amended Credit Agreement in November 2018 may have resulted in a release of the guarantees granted under the 2024 Notes Indenture and the guarantees and security interests granted under the 2021 Notes Indenture, in each case by all of our existing and future domestic restricted subsidiaries. In connection with the Amended and Restated Support Agreement, the Company agreed to reaffirm the liens and guarantees under the 2021 Notes and the guarantees under the 2024 Notes.

In conjunction with the filing of the Debtors’ Chapter 11 Cases, debt issuance costs of $9.2 million were written off and recorded to Reorganization items, net on the Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the ~~three~~nine ~~and six~~ months ended ~~June~~September 30, 2019.

On June 12, 2019, the Company launched a tender offer providing eligible holders of 2021 Notes the opportunity to participate as a lender under the DIP Credit Agreement on a pro rata basis up to such holder’s percentage ownership of the outstanding 2021 Notes, and to exchange, or “roll-up” a principal amount of their 2021 Notes equal to 80% of their $35 million commitments as a lender under the DIP Credit Agreement for an equal amount of Roll-Up Loans under the DIP Credit Agreement. The transactions contemplated by the tender offer closed on August 1, 2019. The Non-Backstop Lenders subscribed for the assignment from the Backstop Lenders of approximately $3.8 million of New Money Loans, and the Non-Backstop Lenders and Backstop Lenders exchanged a total of $28 million of their 2021 Notes for Roll-Up Loans.

15. Leases

Leasing Activities

We have operating leases related to office space, railcars, and land with remaining lease terms ranging from less than two years to approximately 27 years. In total, our operating leases were not material to our Unaudited Condensed Consolidated Balance Sheets, and required no significant judgments. As these leases do not provide an implicit discount rate, we calculated the discount rate using various inputs such as the interest rate on our 2021 Notes adjusted for fair value, and the credit curve for CCC rated companies. Some of our leases have renewal options. For purposes of calculating the right-of-use asset and lease liability, we have assumed we will not exercise those renewal options. Our office space lease includes common area maintenance, which is considered a non-lease component. These costs are variable in nature and as such we have excluded them from the calculation of the right-of-use asset and lease liability. Our leases related to office space and land are included in the Owned and Operated Mines segment, while the railcar lease is part of our Logistics and Related Activities segment.

We lease various equipment for use in our mining operations. This equipment was previously classified as a capital lease under ASC 840, and capitalized on the Unaudited Condensed Consolidated Balance Sheets. Under ASC 842, these leases are classified as finance leases as ownership transfers at the end of the lease term. These leases are included in the Owned and Operated Mines segment.

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Weighted-average information related to our operating and finance leases as of ~~June~~September 30, 2019 was as follows:

Lease Term
Weighted-average remaining lease term - finance leases	1.1 years	~~years~~
Weighted-average remaining lease term - operating leases	3.36 years	~~years~~
Discount Rate
Weighted-average discount rate - finance leases	4.30	%
Weighted-average discount rate - operating leases	18.4	%

The components of our expenses related to our leases for the three and ~~six~~nine months ended ~~June~~September 30, 2019 were as follows (in thousands):

	Three Months		~~Six~~Nine Months
	Ended		Ended
	June 30,		June 30,
	September 30,		September 30,
	2019		2019
Finance Lease Cost
Amortization of right-of-use assets	$	~~280~~—	$	~~563~~544
Interest expense on finance lease liabilities	1921		4666
Impairment of right-of-use asset	—		3,702
Operating Lease Cost
Lease expense	259		~~531~~790
Impairment of right-of-use asset	—		~~104~~1,418
Short-term Lease Cost
Short-term lease cost	3221		6487
Total lease cost	$	~~590~~301	$	~~1,308~~6.607

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Supplemental balance sheet information related to our leases as of ~~June~~September 30, 2019 were as follows (in thousands):

Operating Leases
Other assets (noncurrent)(1)	$	—
Liabilities subject to compromise (current portion)	$	~~943~~946
Liabilities subject to compromise (noncurrent portion)	~~481~~282
Total operating lease liabilities	$	1,~~424~~228
Finance Leases
Property, plant, and equipment	$	13,967
Accumulated amortization	(10,265		)
Property, plant and equipment, net	$	3,702
Impairment	(3,702		)
Other liabilities (current)	$	1,556
Property, plant and equipment, net	$	—
Other liabilities (noncurrent)	181
Other liabilities (current)	$	1,205
Total finance lease liabilities	$	1,737
Other liabilities (noncurrent)	76
Total finance lease liabilities	$	1,281

(1) During the second quarter of 2019, we recorded an impairment of our right-of-use assets to reflect the fair value as determined under the income approach based primarily on cash flows from the Winning Bid. See Note 6 for further details on the asset impairment.

Maturity of our lease liabilities as of ~~June~~September 30, 2019 were as follows (in thousands):

	Operating Leases		Finance Leases
2019	$	~~515~~257	$	~~846~~420
2020	937		~~871~~856
2021	109		6329
2022	13		—
2023	13		—
Thereafter	370		—
Total	1,~~957~~699		1,~~780~~305
Less: interest	~~533~~471		4324
Total principal payments	1,~~424~~228		1,~~737~~281
Less: current portion	~~943~~946		1,~~556~~205
Lease obligations, net of current portion	$	~~481~~282	$	~~181~~76

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As we adopted ASC 842 as of January, 1, 2019, prior period information continues to be reported under ASC 840. As such, information regarding balances related to our leasing activities in these prior periods is included below.

Operating Leases

The minimum rental commitments under non-cancelable operating leases, with lease terms in excess of one year subsequent to December 31, 2018, were as follows (in thousands):

2019	$	1,525
2020	1,446
2021	201
2022	13
2023	13
Thereafter	370

Finance Leases

Assets under finance lease consisted of the following as of December 31, 2018 (in thousands):

Property, plant and equipment	$	13,967
Accumulated amortization	(8,987		)
Property, plant and equipment, net	$	4,980

Our finance equipment lease obligations are included in Other liabilities. Future payments for these obligations as of December 31, 2018 were as follows (in thousands):

2019	$	1,711
2020	858
2021	28
2022	—
2023	—
Total	2,597
Less: interest	91
Total principal payments	2,505
Less: current portion	1,633
Lease obligations, net of current portion	$	872

Interest on the variable rate finance leases is imputed based on the one-month LIBOR plus 1.95% for a rate of 4.41% as of December 31, 2018. Due to the variable nature of the imputed interest, fair value is equal to carrying value.

Federal Coal Lease Obligations

Our federal coal lease obligations consist of obligations payable to the Bureau of Land Management of the U.S. Department of the Interior for the West Antelope II South lease modification. Leases of this nature are

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excluded from the scope of ASC 842 as they represent a lease for natural resources. The future payments for our federal coal lease obligations are $0.6 million per year through 2022. The balance of our federal coal lease obligations is $1.4 million as of ~~June~~September 30, 2019, and has been reclassified to Liabilities subject to compromise in the Unaudited Condensed Consolidated Balance Sheets as of ~~June~~September 30, 2019.

16. Other Obligations

Debtor-in-Possession Financing

See Note 1 for a description of our DIP Credit Agreement. There was $1035.0 million funded to the escrow account under the DIP Credit Agreement as of ~~June~~September 30, 2019. As of ~~June~~September 30, 2019, the Debtors had drawn on $4.0 million of this balance, leaving $631.0 million remaining in escrow. As of ~~June~~September 30, 2019, there was $1165.39 million outstanding under the DIP Credit Agreement, including interest, fees and ~~fees~~Roll-Up Loans.

A/R Securitization Program

On May 24, 2018, the A/R Securitization Program was amended to extend the term of the A/R Securitization Program to May 24, 2021 from January 23, 2020. All other terms of the program remained substantially the same. The A/R Securitization Program allows for a maximum borrowing capacity of $70 million. The borrowing capacity is limited by eligible accounts receivable (as defined under the terms of the A/R Securitization Program), calculated on a daily basis, and will fluctuate from day to day. The borrowing capacity is reduced by the undrawn face amount of letters of credit issued and outstanding under the A/R Securitization Program. As of June 30, 2019, we had $23.1 million of borrowing capacity under the A/R Securitization Program, which was less than the undrawn face amount of letters of credit outstanding under the A/R Securitization Program of $25.7 million. The $2.6 million difference between the borrowing capacity and the undrawn face amount of the letters of credit outstanding was cash-collateralized into a restricted cash account in early July 2019, thus bringing the borrowing capacity to zero as of June 30, 2019. As of December 31, 2018, there was a $4.4 million deficit between the borrowing capacity and the undrawn face amount of letters of credit, which was cash-collateralized into a restricted cash account in early January 2019. There were no borrowings outstanding under the A/R Securitization Program as of June 30, 2019 or December 31, 2018.

Our A/R Securitization Program supports the current collateral requirements associated with outstanding third-party surety bonds that primarily secure the performance of our reclamation and lease obligations.

On March 14, 2019, the Company entered into a Forbearance Agreement (the “Forbearance Agreement”) by and among Cloud Peak Energy Receivables LLC, CPE Resources and PNC Bank, National Association, as administrator, relating to the A/R Securitization Program, which provided that PNC Bank, National Association would not exercise any of its remedies upon a default under the A/R Securitization Program based on the existence of substantial doubt regarding our ability to continue as a going concern. Pursuant to the Forbearance Agreement, the forbearance period would have terminated on the earlier of (i) April 14, 2019 and (ii) the date on which any additional events of default may occur, as specified therein.

On May 15, 2019, we entered into a Second Amended and Restated Receivables Purchase Agreement (the “Receivables Purchase Agreement Amendment”), by and among Cloud Peak Energy Receivables LLC (“CPE Receivables”), CPE Resources, the various Conduit Purchasers and Related Committed Purchasers (collectively, the “Purchasers”), LC Participants and Purchaser Agents from time to time party thereto, PNC Bank, National Association, as Administrator (the “Administrator”), and PNC Capital Markets LLC, as Structuring Agent. Prior to entering into the Receivables Purchase Agreement Amendment, it was approved by the Bankruptcy Court on May 14, 2019.

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receivables sold into the A/R Securitization Program is subject to customary limits and reserves, including reserves based on customer concentration and prior past due balances. Of the eligible pool of receivables sold to CPE Receivables, undivided interests in only a portion of the pool are sold to the Purchasers under the facility, subject to a $35 million purchase limit, which was reduced from $70 million under the A/R Securitization Program prior to the Receivables Purchase Agreement Amendment. Although the Purchasers in the program bear the risk of non-payment of purchased receivables, CPE Resources ~~has agreed to indemnify the Purchasers, Purchaser Agents, Administrator and other secured parties with respect to various matters, including any defaults by CPE Resources~~ or its operating subsidiaries under the documents relating to the A/R Securitization Program, and may be required to repurchase receivables which do not comply with the requirements of the program. CPE Resources services the receivables sold into the A/R Securitization Program.

As of September 30, 2019, we had $19.8 million of borrowing capacity under the A/R Securitization Program, which was less than the undrawn face amount of letters of credit outstanding under the A/R Securitization Program of $25.7 million. The $5.9 million difference between the borrowing capacity and the undrawn face amount of the letters of credit outstanding was cash-collateralized into a restricted cash account in early October 2019, bringing the available borrowing capacity to zero as of September 30, 2019. As of December 31, 2018, there was a $4.4 million deficit between the borrowing capacity and the undrawn face amount of letters of credit, which was cash-collateralized into a restricted cash account in early January 2019. There were no borrowings outstanding under the A/R Securitization Program as of September 30, 2019 or December 31, 2018.

Liquidity

We had no availability for borrowing under the A/R Securitization Program as of ~~June~~September 30, 2019. Our total liquidity, which includes cash and cash equivalents and undrawn funding under the DIP Credit Agreement, was $70115.48 million as of ~~June~~September 30, 2019.

Debt Issuance Costs

There were $1.10 million and $1.0 million of unamortized debt issuance costs as of ~~June~~September 30, 2019 and December 31, 2018, respectively, related to the A/R Securitization Program (part of a non-debtor subsidiary) included in noncurrent Other assets. Debt issuance costs of $0.2 million were written off in the ~~six~~nine months ended ~~June~~September 30, 2019 related to the Receivable Purchase Agreement Amendment.

17. Postretirement Medical Plan

We maintain an unfunded postretirement medical plan to provide certain postretirement medical benefits to eligible employees. In August 2018, we communicated the termination of our postretirement medical plan, effective January 1, 2019, to our employees. Employees who retire on, or after, January 1, 2019 will not be eligible for postretirement benefits. As part of the postretirement termination, we provided contributions for the remainder of 2018 and a lump-sum contribution for 2019 benefits to all eligible retirees. An additional non-cash

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gain of $31.57 million will be released ratably through the plan termination date of December 31, 2019. Net periodic postretirement benefit costs included the following components (in thousands):

	Three Months Ended						~~Six~~Nine Months Ended
	June 30,						June 30,
	September 30,						September 30,
	2019			2018			2019			2018
Service cost	$	—		$	~~197~~66		$	—		$	~~394~~459
Interest cost	—			~~220~~73			—			~~440~~513
Amortization of prior service cost (credit)	—			(~~1,837~~612		)	—			(34,~~675~~287		)
Postretirement medical plan termination (gain) loss	(1,755		)	—(19,477		)	(35,~~510~~265		)	—(19,477		)
Net periodic benefit cost (credit)	$	(1,755	)	$	(119,~~420~~950	)	$	(35,~~510~~265	)	$	(222,~~841~~792	)

18. Equity-Based Compensation

Our LTIP permits awards to our employees and eligible non-employee directors, which we generally grant in the first quarter of each year. No LTIP awards were granted during the ~~six~~nine months ended ~~June~~September 30, 2019. The LTIP allows for the issuance of equity-based compensation in the form of restricted stock, restricted stock units, options, stock appreciation rights, dividend equivalent rights, performance awards, and share awards. AsUnder the terms of ~~June 30,~~the ~~2019~~Plan submitted to the Bankruptcy Court, ~~shares~~our ~~available~~existing ~~for~~equity-based ~~issuance~~compensation ~~under~~will be extinguished following confirmation of the ~~LTIP~~Plan, ~~were~~and ~~approximately~~existing ~~3.7~~holders ~~million~~will ~~shares~~not receive any consideration in respect of their equity interests.

Generally, each form of equity-based compensation awarded to eligible employees cliff vests on the third anniversary of the grant date, subject to meeting any applicable performance criteria for the award. However, the awards will pro-rata vest sooner if an employee terminates employment with or stops providing services to us because of death, “disability,” “redundancy” or “retirement” (as such terms are defined in the award agreement or the LTIP, as applicable), or if an employee subject to an employment agreement is terminated by us for any reason other than for “cause” or leaves for “good reason” (as such terms are defined in the relevant employment agreement). In addition, the awards will fully vest if an employee is terminated without cause (or leaves for good reason, if the employee is subject to an employment agreement) within two years after a “change in control” (as such term is defined in the LTIP) occurs.

The restricted stock units granted to our directors generally vest upon their resignation or retirement (except for a removal for cause) or upon certain events constituting a “change in control” (as such term is defined in the award agreement). They will pro-rata vest if a director resigns or retires within one year of the date of grant.

~~Restricted Stock Units~~35

We have granted restricted stock units under the LTIP to eligible employees and non-employee directors. A summary of restricted stock unit award activity is as follows (in thousands, except per share amounts):

	Number of Shares		Weighted- Average Grant-Date Fair Value
			(per share)
Non-vested units as of January 1, 2019	2,861		$	3.34
Granted	—		$	—
Forfeited	(57	)	$	3.46
Vested	(1,181	)	$	2.00
Non-vested units as of June 30, 2019	1,623		$	4.31

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AsRestricted ofStock June 30, 2019, unrecognized compensation cost related to restricted stock awards was $1.5 million, which will be recognized over a weighted-average period of 1.4 years prior to vesting, which is included within Additional paid-in capital in our Unaudited Condensed Consolidated Balance Sheets. These awards are ultimately delivered in common stock and are classified as equity awards.Units

			Weighted-
			Average
	Number of		Grant-Date
	Shares		Fair Value
			(per share)
Non-vested units as of January 1, 2019	2,861		$	3.34
Granted	—		$	—
Forfeited	(69	)	$	3.51
Vested	(1,181	)	$	2.00
Non-vested units as of September 30, 2019	1,611		$	4.31

As of September 30, 2019, unrecognized compensation cost related to restricted stock awards was $1.2 million, which will be recognized over a weighted-average period of 1.2 years prior to vesting, which is included within Additional paid-in capital in our Unaudited Condensed Consolidated Balance Sheets. These awards are ultimately delivered in common stock and are classified as equity awards.

Performance Share Units

Performance share units represent the right to receive a number of shares of common stock (or the equivalent cash value thereof) based on the achievement of targeted performance levels related to pre-established total stockholder return goals over a three-year period, and pay out may range from 0% to 200% of the targeted share number.

In previous years, the performance share units were settled in shares of common stock and the grant date fair value of the awards was calculated using a Monte Carlo simulation and amortized over the performance period. The 2016 grants were expected to be settled in cash upon any vesting in March 2019, and therefore, were accounted for as a liability award and were included within Accrued expenses in the Unaudited Condensed Consolidated Balance Sheets and marked to market on a quarterly basis. This award did not achieve its performance target related to total shareholder return and therefore the payout was zero. As such, all compensation expense associated with the 2016 PSUs was reversed in December 2018.

The weighted-average grant date fair values of the performance share units granted during the year ended December 31, 2018 was $4.05 per share. As of ~~June~~September 30, 2019, $2.92 million of unrecognized compensation cost, which represents the unvested portion of the fair market value of performance share units granted, is expected to be recognized over a weighted-average vesting period of 1.42 years.

~~A summary of performance share unit award activity is as follows (in thousands, except per share amounts):~~36

	Number of Shares		Weighted- Average Grant-Date Fair Value
			(per share)
Non-vested units as of January 1, 2019	3,928		$	3.33
Granted	—		$	—
Forfeited	(78	)	$	4.29
Canceled	(2,075	)	$	1.95
Non-vested units as of June 30, 2019	1,775		$	4.90

19. Liabilities Subject to Compromise

Liabilities subject to compromise (“LSTC”) represent liabilities incurred prior to the Chapter 11 filing that are unsecured or under-secured. These liabilities are reported at the estimated allowed claim amount, but are subject to adjustment through the Chapter 11 bankruptcy process and therefore have at least a possibility of not being repaid at the full claim amount. Furthermore, as the bankruptcy process continues, circumstances may arise that may change the classification of LSTC to liabilities not subject to compromise or vice versa. Generally, actions to enforce or otherwise effect payment of pre-petition liabilities are stayed.

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A summary of performance share unit award activity is as follows (in thousands, except per share amounts):

			Weighted-
			Average
	Number of		Grant-Date
	Shares		Fair Value
			(per share)
Non-vested units as of January 1, 2019	3,928		$	3.33
Granted	—		$	—
Forfeited	(94	)	$	4.37
Canceled	(2,075	)	$	1.95
Non-vested units as of September 30, 2019	1,759		$	4.91

19. Liabilities Subject to Compromise

Liabilities subject to compromise (“LSTC”) represent liabilities incurred prior to the Chapter 11 filing that are unsecured or under-secured. These liabilities are reported at the estimated allowed claim amount, but are subject to adjustment through the Chapter 11 bankruptcy process and therefore have at least a possibility of not being repaid at the full claim amount. Furthermore, as the bankruptcy process continues, circumstances may arise that may change the classification of LSTC to liabilities not subject to compromise or vice versa. Generally, actions to enforce or otherwise effect payment of pre-petition liabilities are stayed.

Liabilities subject to compromise consist of the following (in thousands):

	June 30,
	September 30,
	2019
Senior notes	$	~~346~~318,774
Accounts payable	2218,~~949~~653
Royalties and production and property taxes	5955,~~328~~481
Accrued expenses	2822,~~445~~052
Federal coal lease obligations	1,404
Other liabilities	5,~~469~~434
Total Liabilities subject to compromise	$	~~464~~421,~~369~~798

20. Commitments and Contingencies

Commitments

Purchase Commitments (1)

We had outstanding purchase commitments consisting of the following (in thousands):

	June 30,		December 31,
	September 30,		December 31,
	2019		2018
Capital Commitments
Equipment	$	34,~~689~~123	$	1,861

(1) See Note 5 for information regarding Transportation Commitments.

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Contingencies

Litigation

Administrative Appeals of the BLM’s Approval of the West Antelope II South Lease Modification

Background—On February 1, 2, and 5, 2018, the Powder River Basin Resource Council (“PRBRC”), the Sierra Club, and WildEarth Guardians (“WildEarth”), respectively, filed separate appeals with the Interior Board of Land Appeals (“IBLA”) challenging the Deputy State Wyoming BLM Director’s November 11, 2017 decision, which was publicly noticed on Bureau of Land Management’s (“BLM”) website on January 5, 2018 (“2018 BLM Decision”), to approve Antelope Coal LLC’s (“Antelope Coal”) proposed modification of Antelope Coal’s West Antelope II South (“WAII South”) lease. Antelope Coal is a 100% owned subsidiary of Cloud Peak Energy. The 2018 BLM Decision that is the subject of all three appeals approves the proposed amendment of WAII South lease. This lease modification, which was entered into on February 1, 2018, by BLM and Antelope Coal, adds coal underlying nearly 857 surface acres to Antelope Coal’s existing federal leases. PRBRC, the Sierra Club, and WildEarth have asked the IBLA to vacate the 2018 BLM Decision and direct the BLM to prepare additional environmental analysis on the impacts of the lease modification.

The 2018 BLM Decision was issued after a previous August 15, 2014 decision (“2014 BLM Decision”) had been set aside by the IBLA following previous administrative appeals filed by PRBRC, WildEarth, and the Sierra Club. On February 7, 2017, the IBLA issued a decision setting aside the 2014 BLM Decision to issue the WAII South lease modification and remanding that decision to BLM on the narrow ground that the Wyoming High Plains District Manager lacked the appropriate delegation of authority to approve such a leasing decision. The IBLA specifically declined to address the merits of WildEarth’s and PRBRC’s claims challenging whether BLM’s underlying environmental analysis was sufficient to support the agency’s lease modification decision. On April 10, 2017, BLM filed a petition with the Director of the Department of Interior’s Office of Hearings and Appeals (the “OHA Director”) asking the OHA Director to reverse the IBLA’s February 7, 2017 decision and remand to the IBLA with instructions to decide the merits of the underlying WildEarth and PRBRC appeals. On September 11, 2017, after full briefing by the parties, the OHA Director denied BLM’s Petition for OHA Director Review thereby concluding the appeals and giving full force and effect to the IBLA’s February 7, 2017 order remanding the matter to BLM and providing BLM with broad discretion on how to proceed. Upon remand, the BLM reapproved the WAII South lease modification through the 2018 BLM Decision.

34Intervention by Cloud Peak Energy and State of Wyoming—On February 16 and March 5, 2018, Antelope Coal and the State of Wyoming, respectively, moved to intervene in the PRBRC, WildEarth, and Sierra Club appeals as respondents to defend the 2018 BLM Decision. On April 10, 2018, the IBLA granted both motions to intervene.

Current Schedule. On March 21, 2018, BLM filed a Motion to Dismiss the Sierra Club appeal due to the Sierra Club’s failure to file a Statement of Reasons by the briefing deadline. On February 27 and March 5, 2018, PRBRC and WildEarth, respectively, each filed a Statement of Reasons in their appeals. On March 29, March 30, and April 2, 2018, the State of Wyoming, BLM, and Antelope Coal, respectively, filed Answer briefs in the PRBRC appeal. On April 3, 5, and 9, 2018, the State of Wyoming, BLM, and Antelope Coal, respectively, filed Answer briefs in the WildEarth appeal. On April 11, 2018, PRBRC filed a reply brief and on April 12, 2018, BLM filed a clarification to PRBRC’s Reply Brief. On June 6, 2018, the IBLA denied BLM’s motion to dismiss Sierra Club’s appeal and instead rejected Sierra Club’s appeal on the merits and affirmed the underlying 2018 BLM Decision. The IBLA has not yet ruled on the PRBRC or WildEarth appeals.

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WAII South lease modification and remanding that decision to BLM on the narrow ground that the Wyoming High Plains District Manager lacked the appropriate delegation of authority to approve such a leasing decision. The IBLA specifically declined to address ~~the~~alleged ~~merits~~deficiencies ofin ~~WildEarth’s~~complying ~~and PRBRC’s claims challenging whether BLM’s underlying environmental analysis was sufficient to support the agency’s lease modification decision. On April 10, 2017, BLM filed a petition~~ with ~~the~~applicable ~~Director~~regulatory ofand ~~the~~legal ~~Department~~requirements ~~of Interior’s Office of Hearings~~ and ~~Appeals~~ (~~the “OHA Director”~~3) ~~asking the OHA Director to reverse the IBLA’s February~~ 7,even ~~2017~~if ~~decision and remand to~~ the ~~IBLA~~challenges ~~with~~are ~~instructions~~successful toin ~~decide~~whole ~~the~~or ~~merits~~in ~~of the underlying WildEarth and PRBRC appeals. On September 11~~part, ~~2017, after full briefing by~~ the ~~parties, the OHA Director denied BLM’s Petition for OHA Director Review thereby concluding the appeals and giving full force and effect to the~~ IBLA’s ~~February 7,~~has ~~2017 order remanding the matter to BLM and providing BLM with~~ broad discretion onin ~~how~~determining ~~to proceed. Upon remand,~~ the ~~BLM~~nature ~~reapproved~~of the ~~WAII~~relief ~~South~~ultimately ~~lease modification through the 2018 BLM Decision~~granted.

Intervention by Cloud Peak Energy and State of Wyoming—On February 16 and March 5, 2018, Antelope Coal and the State of Wyoming, respectively, moved to intervene in the PRBRC, WildEarth, and Sierra Club appeals as respondents to defend the 2018 BLM Decision. On April 10, 2018, the IBLA granted both motions to intervene.

Current Schedule. On March 21, 2018, BLM filed a Motion to Dismiss the Sierra Club appeal due to the Sierra Club’s failure to file a Statement of Reasons by the briefing deadline. On February 27 and March 5, 2018, PRBRC and WildEarth, respectively, each filed a Statement of Reasons in their appeals. On March 29, March 30, and April 2, 2018, the State of Wyoming, BLM, and Antelope Coal, respectively, filed Answer briefs in the PRBRC appeal. On April 3, 5, and 9, 2018, the State of Wyoming, BLM, and Antelope Coal, respectively, filed Answer briefs in the WildEarth appeal. On April 11, 2018, PRBRC filed a reply brief and on April 12, 2018, BLM filed a clarification to PRBRC’s Reply Brief. On June 6, 2018, the IBLA denied BLM’s motion to dismiss Sierra Club’s appeal and instead rejected Sierra Club’s appeal on the merits and affirmed the underlying 2018 BLM’s Decision. The IBLA has not yet ruled on the PRBRC or WildEarth appeals.

We believe the PRBRC and WildEarth pending appeals challenging the BLM’s West Antelope II South lease modification Decision Record are without merit. Nevertheless, if the appellants’ claims are successful, the timing and ability of Cloud Peak Energy to mine the coal underlying the lease modification surface acres could be materially adversely impacted. We are unable to estimate a loss or range of loss for this contingency because (1) the challenges do not seek monetary relief, (2) the nature of the relief sought is to require the regulatory agency to address alleged deficiencies in complying with applicable regulatory and legal requirements and (3) even if the challenges are successful in whole or in part, the IBLA has broad discretion in determining the nature of the relief ultimately granted.

WildEarth’s Regulatory Challenge to OSM’s Approval Process for Antelope Mine Plan

Background—On September 15, 2015, WildEarth filed a complaint in the Colorado District Court challenging the Department of Interior’s and Office of Surface Mining Reclamation and Enforcement’s (collectively, “OSM”) approvals of mine plans for four different coal mines, one of which is located in Colorado and three of which are located in Wyoming. The challenged approvals included one mine plan modification that was issued to Antelope Coal for the Antelope Mine in Wyoming. The plaintiff seeks to vacate existing, required regulatory approvals and to enjoin mining operations at Antelope Mine.

Intervention by Cloud Peak Energy and Others—In November and December of 2015, the State of Wyoming and all the operators of the mines whose mine plans are being challenged—Antelope Coal, New Mexico Coal Resources, LLC, Bowie Resources, LLC, and Thunder Basin Coal, L.L.C., —moved to intervene as Defendants to defend the challenged mine plans. On February 18, 2016, the Colorado District Court granted all the parties’ intervention motions.

Current Schedule—On November 25, 2015, the OSM filed a motion to sever WildEarth’s complaint and transfer those claims against the two Wyoming mines (Antelope and Black Thunder) to the District of Wyoming and the New Mexico mine (El Segundo) to the District of New Mexico. Each of the prospective intervenors filed conditional responses in support of OSM’s transfer motion, and WildEarth filed an opposition to OSM’s transfer motion. On June 17, 2016, the Colorado District Court granted OSM’s motion to sever and transfer WildEarth’s claims against the Antelope and Black Thunder mine plans to the District of Wyoming and the El Segundo mine plan to the District of New Mexico. The challenges against the Antelope and Black Thunder mine plans, which are docketed as separate cases, have both been assigned to Judge Johnson of the District of Wyoming. Because Antelope Coal and Wyoming had each been granted intervention by the Colorado District Court, the Wyoming District Court acknowledged both parties as Intervenor-Defendants after WildEarth’s challenge to the Antelope Mine was transferred to the District of Wyoming. On October 7, 2016, OSM filed its administrative record for the case challenging the Antelope mine plan. On October 21, 2016, WildEarth filed a motion to supplement the administrative record with three administrative documents prepared by other federal agencies. On November 4, 2016, OSM and Antelope Coal each filed opposition briefs. On December 1, 2016, after full briefing, the court denied WildEarth’s motion to supplement the record. WildEarth filed its opening merits brief on January 27, 2017. Opposition briefs by OSM, Antelope Coal, and the State of Wyoming were filed April 5, 2017. On June 2, 2017, WildEarth filed its reply brief. On August 22, 2017 and September 20, 2017, WildEarth filed two separate notices of supplemental authority. OSM and Antelope Coal each filed responses to WildEarth’s first notice on September 6, 2017 and September 21, 2017, respectively. Antelope Coal and the State of Wyoming filed a joint response to WildEarth’s second notice on October 27, 2017. The merits briefing has been completed and the parties are awaiting a decision from the court. On May 21, 2019, Antelope Coal filed a Suggestion of Bankruptcy informing the court that Antelope Coal had filed a voluntary petition in the Bankruptcy Court on May 10, 2019 seeking relief under Chapter 11 of the Bankruptcy Code and, as a result, the case was automatically stayed under section 362(a) of the Bankruptcy Code.

35We believe WildEarth’s challenge is without merit. Nevertheless, if WildEarth’s claims against OSM’s approval of the Antelope mine plan modification are successful, any court order granting the requested relief could have a material adverse impact on our shipments, financial results and liquidity, and could result in claims from third parties if we are unable to meet our commitments under pre-existing commercial agreements as a result of any required reductions or modifications to our mining activities. We are unable to estimate a loss or range of loss for this contingency because (1) the challenge does not seek monetary relief, (2) the nature of the relief sought is to require the regulatory agency to address alleged deficiencies in complying with applicable regulatory and legal requirements and (3) even if the challenges are successful in whole or in part, the court has broad discretion in determining the nature of the relief ultimately granted.

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and the New Mexico mine (El Segundo) to the District of New Mexico. Each of the prospective intervenors filed conditional responses in support of OSM’s transfer motion, and WildEarth filed an opposition to OSM’s transfer motion. On June 17, 2016, the Colorado District Court granted OSM’s motion to sever and transfer WildEarth’s claims against the Antelope and Black Thunder mine plans to the District of Wyoming and the El Segundo mine plan to the District of New Mexico. The challenges against the Antelope and Black Thunder mine plans, which are docketed as separate cases, have both been assigned to Judge Johnson of the District of Wyoming. Because Antelope Coal and Wyoming had each been granted intervention by the Colorado District Court, the Wyoming District Court acknowledged both parties as Intervenor-Defendants after WildEarth’s challenge to the Antelope Mine was transferred to the District of Wyoming. On October 7, 2016, OSM filed its administrative record for the case challenging the Antelope mine plan. On October 21, 2016, WildEarth filed a motion to supplement the administrative record with three administrative documents prepared by other federal agencies. On November 4, 2016, OSM and Antelope Coal each filed opposition briefs. On December 1, 2016, after full briefing, the court denied WildEarth’s motion to supplement the record. WildEarth filed its opening merits brief on January 27, 2017. Opposition briefs by OSM, Antelope Coal, and the State of Wyoming were filed April 5, 2017. On June 2, 2017, WildEarth filed its reply brief. On August 22, 2017 and September 20, 2017, WildEarth filed two separate notices of supplemental authority. OSM and Antelope Coal each filed responses to WildEarth’s first notice on September 6, 2017 and September 21, 2017, respectively. Antelope Coal and the State of Wyoming filed a joint response to WildEarth’s second notice on October 27, 2017. The merits briefing has been completed and the parties are awaiting a decision from the court. On May 21, 2019, Antelope Coal filed a Suggestion of Bankruptcy informing the court that Antelope Coal had filed a voluntary petition in the Bankruptcy Court on May 10, 2019 seeking relief under Chapter 11 of the Bankruptcy Code and, as a result, the case was automatically stayed under section 362(a) of the Bankruptcy Code.

We believe WildEarth’s challenge is without merit. Nevertheless, if WildEarth’s claims against OSM’s approval of the Antelope mine plan modification are successful, any court order granting the requested relief could have a material adverse impact on our shipments, financial results and liquidity, and could result in claims from third parties if we are unable to meet our commitments under pre-existing commercial agreements as a result of any required reductions or modifications to our mining activities. We are unable to estimate a loss or range of loss for this contingency because (1) the challenge does not seek monetary relief, (2) the nature of the relief sought is to require the regulatory agency to address alleged deficiencies in complying with applicable regulatory and legal requirements and (3) even if the challenges are successful in whole or in part, the court has broad discretion in determining the nature of the relief ultimately granted.

WildEarth’s Regulatory Challenge to OSM’s Approval Process for Spring Creek Mine Plan

Background—On June 8, 2017, WildEarth and the Montana Environmental Information Center (“MEIC”) filed a complaint in the Montana District Court challenging OSM’s re-approval of a mine plan modification that was issued to Cloud Peak Energy for the Spring Creek Mine in Montana. WildEarth and MEIC seek to vacate existing, required regulatory approvals and to enjoin mining operations at the Spring Creek Mine.

Intervention by Spring Creek Coal—On August 31, 2017, Spring Creek Coal LLC moved to intervene in the WildEarth and MEIC’s challenge to the mine plan. On September 26, 2017, the court granted Spring Creek Coal’s intervention motion.

Current Schedule— OSM answered the plaintiffs’ complaint on August 24, 2017. OSM lodged the administrative record with the court and served the record on all parties on January 17, 2018. Plaintiffs filed their motion for summary judgment on April 6, 2018. Federal Defendants filed their response and cross motion for summary judgment on June 1, 2018; and Spring Creek filed its opposition and cross motion on June 6, 2018. Plaintiffs filed their reply brief on June 29, 2018 and the reply briefs for the Federal Defendants and Spring Creek were filed on July 23, 2018 and July 25, 2018, respectively. On February 11, 2019, Magistrate Judge Cavan issued his Findings of Fact and Recommendations of Law (“Magistrate’s Order”) finding that OSM had failed to fully analyze the environmental impacts of approving the Spring Creek mining plan. He did not recommend vacatur of the current mine plan, but instead recommended that OSM be given 240 days to prepare a supplemental environmental analysis to address several alleged deficiencies while the current mine plan remains in effect. On March 21, 2019, the parties filed their briefs with objections to the Magistrate’s Order with District Judge Watters. The parties all filed their responses to the other parties’ objections with District Judge Watters on April 22, 2019. The briefing is now completed and the parties are awaiting a decision from the court. On May 21, 2019, Spring Creek filed a Suggestion of Bankruptcy informing the court that Spring Creek had filed a voluntary petition in the Bankruptcy Court on May 10, 2019 seeking relief under Chapter 11 of the Bankruptcy Code and, as a result, the case was automatically stayed under section 362(a) of the Bankruptcy Code. On June 17, 2019, Judge Watters issued an order staying the case.

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recommend vacatur of the current mine plan, but instead recommended that OSM be given 240 days to prepare a supplemental environmental analysis to address several alleged deficiencies while the current mine plan remains in effect. On March 21, 2019, the parties filed their briefs with objections to the Magistrate’s Order with District Judge Watters. The parties all filed their responses to the other parties’ objections with District Judge Watters on April 22, 2019. The briefing is now completed and the parties are awaiting a decision from the court. On May 21, 2019, Spring Creek filed a Suggestion of Bankruptcy informing the court that Spring Creek had filed a voluntary petition in the Bankruptcy Court on May 10, 2019 seeking relief under Chapter 11 of the Bankruptcy Code and, as a result, the case was automatically stayed under section 362(a) of the Bankruptcy Code. On June 17, 2019, Judge Watters issued an order staying the case.

We believe WildEarth’s and MEIC’s challenge is without merit. Nevertheless, if WildEarth’s and MEIC’s claims against OSM’s approval of the Spring Creek mine plan modification are successful, any court order granting the requested relief could have a material adverse impact on our shipments, financial results and liquidity, and could result in claims from third parties if we are unable to meet our commitments under pre-existing commercial agreements as a result of any required reductions or modifications to our mining activities. We are unable to estimate a loss or range of loss for this contingency because (1) the challenge does not seek monetary relief, (2) the nature of the relief sought is to require the regulatory agency to address alleged deficiencies in complying with applicable regulatory and legal requirements and (3) even if the challenges are successful in whole or in part, the court has broad discretion in determining the nature of the relief ultimately granted, including whether to adopt in whole or in part Magistrate Judge Cavan’s recommendation that the current mine plan should remain in place while OSM prepares a supplemental environmental analysis.

WildEarth’s Appeal of OSM Decision Denying Request for Informal Review of Inspection Request at Spring Creek Mine.

Background—On April 23, 2019, WildEarth filed an appeal with the IBLA challenging OSM’s denial of WildEarth’s request that OSM inspect and issue a cessation order to Spring Creek Mine alleging that OSM should not permit Spring Creek to continue mining coal from a federal lease that WildEarth believes was improperly issued by the BLM ten years ago. OSM had previously denied two previous requests by WildEarth (one to the local OSM office and another to the Western Regional OSM Director) asking for the same relief. OSM rejected WildEarth’s request on the basis that there was no reason to believe any violation had occurred at the Spring Creek Mine.

Current Schedule—On May 13, 2019, WildEarth filed its Statement of Reasons setting forth the factual and legal basis for its appeal. On May 21, 2019, Spring Creek filed a Notice of Automatic Stay informing the IBLA that Spring Creek had filed a voluntary petition in the Bankruptcy Court on May 10, 2019 seeking relief under Chapter 11 of the Bankruptcy Code and, as a result, the appeal was automatically stayed under section 362(a) of the Bankruptcy Code. On June 3, 2019, WildEarth filed a Response to Spring Creek’s Notice in which WildEarth maintained that the automatic stay did not apply to this appeal. On July 1, 2019, Spring Creek filed a reply to WildEarth’s Response. On July 19, 2019, the IBLA issued an Order holding that the appeal was exempt from the automatic stay and directing all respondents (including Spring Creek) to file their Answers (response briefs) to WildEarth’s Statement of Reasons by August 8, 2019. On August 8, 2019, the IBLA extended the deadline for all respondents to file their Answers until August 23, 2019. All the respondents (including Spring Creek) filed their Answers on August 23, 2019.40

We believe the WildEarth appeal challenging OSM’s denial of WildEarth’s inspection and cessation request are without merit. Nevertheless, if WildEarth’s appeal is successful, the timing and ability of Cloud Peak Energy to mine the coal underlying the affected lease at the Spring Creek Mine could be materially adversely impacted. We are unable to estimate a loss or range of loss for this contingency because (1) WildEarth has not yet set forth the factual and legal basis of its appeal and has not yet pled any specific request for relief, (2) the

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Current Schedule—On May 13, 2019, WildEarth filed its Statement of Reasons setting forth the factual and legal basis for its appeal. On ~~does~~May 21, ~~not~~2019, ~~seek~~Spring ~~monetary~~Creek ~~relief~~filed a Notice of Automatic Stay informing the IBLA that Spring Creek had filed a voluntary petition in the Bankruptcy Court on May 10, 2019 seeking relief under Chapter 11 of the Bankruptcy Code and, as a result, the appeal was automatically stayed under section 362(3a) ~~even~~of ifthe Bankruptcy Code. On June 3, 2019, WildEarth filed a Response to Spring Creek’s Notice in which WildEarth maintained that the automatic stay did not apply to this appeal. On isJuly 1, ~~successful~~2019, inSpring ~~whole~~Creek orfiled ina ~~part~~reply to WildEarth’s Response. On July 19, 2019, the IBLA ~~has~~issued ~~broad~~an ~~discretion~~Order inholding ~~determining~~that the ~~nature~~appeal was exempt from the automatic stay and directing all respondents (including Spring Creek) to file their Answers (response briefs) to WildEarth’s Statement of Reasons by August 8, 2019. On August 8, 2019, the ~~relief~~IBLA ~~ultimately~~extended ~~granted~~the deadline for all respondents to file their Answers until August 23, 2019. All the respondents (including Spring Creek) filed their Answers on August 23, 2019.

California Climate Change Litigation

Background—On July 17, 2017, three California local governments filed separate but largely identical complaints in California Superior Court, naming numerous fossil fuel companies as defendants (together, the “California Climate Change Litigation”). The Plaintiffs are the County of San Mateo, the County of Marin, and the City of Imperial Beach. Defendants include Rio Tinto PLC, Rio Tinto LTD, Rio Tinto Energy America Inc., Rio Tinto Minerals Inc., Rio Tinto Services Inc., Chevron Corp., Chevron U.S.A. Inc., ExxonMobil Corp, BP P.L.C., BP America, Inc., Royal Dutch Shell Company LLC, Citgo Petroleum Corp., ConocoPhillips, ConocoPhillips Company, Phillips 66, Peabody Energy Corp., Total E&P USA Inc., Total Specialties USA Inc., Arch Coal, Inc., ENI S.p.A., ENI Oil & Gas Inc., Statoil ASA, Anadarko Petroleum Corp., Occidental Petroleum Corp., Repsol S.A., Repsol Energy North America Corp., Repsol Trading USA Corp., Marathon Oil Company, Marathon Oil Corporation, Marathon Petroleum Corp., Hess Corp., Devon Energy Corp., Devon Energy Production Company, L.P., Encana Corp., and Apache Corp. Cloud Peak Energy is not a named defendant.

By way of summary only, Plaintiffs allege that defendants knowingly contributed to GHG emissions through the production and sale of fossil fuels that have adversely impacted the environment, thereby creating financial liabilities for the plaintiffs. Plaintiffs also allege that defendants engaged in a coordinated effort to conceal and deny their own knowledge of those climate change threats, discredit scientific evidence and create doubt in the minds of customers, consumers, regulators, the media, journalists, teachers and the public about the consequences of the impacts of their fossil fuel pollution. Based on these allegations, plaintiffs assert that defendants are liable under various causes of action including public nuisance, failure to warn, design defect, private nuisance, negligence, and trespass. Plaintiffs seek unspecified compensatory damages, equitable relief to abate the alleged nuisances, attorneys’ fees, punitive damages, disgorgement of profits, costs of suit and other relief as the court may deem proper.

Indemnity Sought From Cloud Peak Energy by Rio Tinto—In August 2017, Cloud Peak Energy received a notice from various Rio Tinto entities, including Rio Tinto Energy America Inc., Rio Tinto Minerals Inc., and Rio Tinto Services Inc., seeking indemnification from Cloud Peak Energy for liabilities in connection with the California Climate Change Litigation. Cloud Peak Energy entered into various agreements with Rio Tinto and its affiliates in connection with the 2009 IPO and separation from Rio Tinto. Under the Master Separation Agreement, Cloud Peak Energy agreed to indemnify Rio Tinto for certain liabilities relating to Cloud Peak Energy’s business conducted prior to and after the closing of our separation from Rio Tinto, which may potentially include liabilities in connection with the California Climate Change Litigation.

Current Schedule — On July 17, 2017, Plaintiffs filed their lawsuits in the Superior Court of the State of California for the County of San Mateo, the Superior Court of the State of California for the County of Marin, and the Superior Court for the County of Contra Costa, respectively. On August 24, 2017, the cases were removed to the U.S. District Court for the Northern District of California (the “Court”), where they were deemed related and assigned to Judge Vince Chhabria. Plaintiffs indicated that they intended to move to remand the cases back to state court, and the parties stipulated that Defendants would not be required to respond to the complaints until the Court ruled on the motion to remand. The Court signed that Stipulation and Order on September 22, 2017. On September 25, 2017, Plaintiffs filed their motion to remand. The Court granted Plaintiffs’ motion to remand on March 16, 2018. On March 26, 2018, Defendants filed (1) a Notice of Appeal to the U.S. Court of Appeals for the Ninth Circuit relating to the District Court’s order granting remand, and (2) a motion to stay the remand order pending appeal. On April 9, 2018, Judge Chhabria granted Defendants’ motion to stay the remand order pending appeal. On June 6, 2018, Plaintiffs filed a motion to partially dismiss Defendants’ appeal, arguing the Court of Appeals lacked jurisdiction to consider certain aspects of the remand order. Defendants opposed the motion. On August 20, 2018, the Ninth Circuit motions panel referred Plaintiffs’ motion to partially dismiss to the merits panel for decision, and set a schedule for briefing on the merits. Defendants’ filed their opening brief on November 21, 41

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If the Plaintiffs were to prevail in the California Climate Change Litigation and if we are required to indemnify Rio Tinto for any portion of the resulting liabilities, those amounts could be significant and could have a material adverse impact on our financial condition, results and liquidity. We are unable to estimate a loss or range of loss for this contingency because of the broad claims and unspecified damages alleged by the plaintiffs against a significant number of defendants and because of the early stage of the California Climate Change Litigation.

Challenge to BLM’s Approval of Revised Resource Management Plans for MT and WY

Background—On March 15, 2016, a group of environmental plaintiffs—Western Organization of Resource Councils, Montana Environmental Information Center, Powder River Basin Resource Council, Northern Plains Resource Council, Sierra Club, and Natural Resources Defense Council—filed a complaint in the U.S. District Court for Montana challenging the BLM’s September 2015 approval of the Miles City, MT and Buffalo, WY, revised Resource Management Plans (“RMPs”). The Plaintiffs seek to vacate the 2015 RMPs, require BLM to undertake supplemental environmental analysis under the National Environmental Policy Act (“NEPA”), and enjoin BLM and the federal defendants from approving any new leases or project permits for coal or oil and gas resources within the two planning areas until BLM prepares a new NEPA analysis and revises its RMPs.

Intervention by Cloud Peak Energy and Others—In February, March, and April, 2017, Cloud Peak Energy, the State of Wyoming, and Peabody Caballo Mining, LLC and BTU Western Resources, Inc. (“Peabody”), respectively, moved to intervene in the case. The court granted all the parties intervention motions in March (Cloud Peak) and April (Wyoming and Peabody), 2017.

Current Schedule—On March 26, 2018, the court issued an Amended Opinion and Order (revising the court’s March 23, 2018 Order) granting the Plaintiffs’ Cross-Motion for Summary Judgment on three claims and granting Defendants’ and Defendant-Intervenors’ Cross-Motions for Summary Judgment on three claims. The court held that BLM must prepare supplemental environmental impact statements for both the Miles City and Buffalo RMPs. The court also directed BLM to incorporate the court’s conclusions in any pending or future coal or oil and gas leases or permits in the Miles City and Buffalo planning areas until BLM completes the supplemental NEPA analysis for both RMPs. The court further ordered the parties to meet and confer in good faith in an attempt to reach an agreement regarding the appropriate remedy. The parties were ordered to submit separate briefs to the court by May 25, 2018 recommending appropriate remedies in light of the court’s March 26th Order if they could not reach a voluntary agreement on remedy.

The parties were unable to reach agreement on the appropriate remedy and each filed a separate remedy brief on May 25, 2018. On June 14, 2018, Federal Defendants and Defendant- Intervenors each filed a motion seeking the court’s leave to file a brief in response to Plaintiffs’ remedies brief. Plaintiffs filed a joint opposition brief to these motions on June 28, 2018. On July 31, 2018, the court issued a final remedy order that directed BLM to complete a new remedial environmental analysis (and related coal screening) by November 29, 2019. During the pendency of that supplemental analysis, BLM is also ordered to undertake a comprehensive environmental analysis for any new coal or oil & gas leasing decision in compliance with the court’s March 26, 2018 Order. The court rejected Plaintiffs request for injunctive relief that would have impacted mining operations during the completion of BLM’s supplemental environmental analysis.42

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~~Peak~~The ~~and~~parties ~~Peabody~~were unable to reach agreement on the appropriate remedy and each filed ~~notices~~a ofseparate ~~appeal.~~remedy brief on May 25, 2018. On ~~January~~June 214, ~~2019~~2018, ~~the~~Federal ~~Ninth~~Defendants ~~Circuit~~and ~~issued~~Defendant- anIntervenors ~~order~~each ~~granting~~filed ~~the~~a ~~Federal~~motion ~~Defendants~~seeking the court’s ~~and~~leave ~~other~~to ~~parties’~~file ~~motions~~a brief in response to ~~dismiss~~Plaintiffs’ ~~each~~remedies ofbrief. Plaintiffs ~~their~~filed ~~appeals,~~a ~~thereby~~joint ~~concluding~~opposition ~~all~~brief ~~the~~to ~~parties’~~these ~~appeals.~~motions Onon ~~November~~June 28, 2018. On July 31, ~~BLM~~2018, ~~published~~the incourt ~~the~~issued ~~Federal~~a ~~Register~~final ~~administrative~~remedy ~~notices~~order ofthat ~~intent~~directed BLM to ~~prepare~~complete a new remedial environmental analysis (and related coal screening) by November 29, 2019. During the pendency of that supplemental analysis, BLM is also ordered to undertake a comprehensive environmental ~~analyses~~analysis for any new coal or oil & gas leasing decision in compliance with the ~~Buffalo~~court’s March 26, WY2018 ~~and~~Order. The ~~Miles~~court ~~City,~~rejected MTPlaintiffs ~~RMPs~~request asfor ~~directed~~injunctive byrelief that would have impacted mining operations during the ~~Montana~~completion ~~District~~of ~~Court~~BLM’s supplemental environmental analysis.

On August 1, 2018, the court entered judgment for the Plaintiffs on Claims 1, 3, and 5 of their complaint, and for Defendants and Defendant-Intervenors (including Cloud Peak Energy) on Claims 2, 4, and 6 of Plaintiffs’ complaint. The court’s judgment also implemented the court’s July 31, 2018 remedy order. On October 1, 2018, BLM filed a protective notice of appeal in the Montana District Court appealing that court’s August 1, 2018 judgment to the U.S. Court of Appeals for the Ninth Circuit. On October 11, 2018, the State of Wyoming filed a notice of appeal. On October 12, 2018, Plaintiffs filed a notice of cross-appeal. On October 15, 2018, Cloud Peak and Peabody each filed notices of appeal. On January 2, 2019, the Ninth Circuit issued an order granting the Federal Defendants’ and other parties’ motions to dismiss each of their appeals, thereby concluding all the parties’ appeals. On November 28, 2018, BLM published in the Federal Register administrative notices of intent to prepare the supplemental environmental analyses for the Buffalo, WY and Miles City, MT RMPs as directed by the Montana District Court.

We believe the Plaintiffs’ challenge is without merit. While the court ordered BLM to prepare supplemental environmental analyses for each RMP, it declined to grant any remedy that would disrupt or adversely impact the operations at any of the coal mines (including our mines) within the two planning areas. Nevertheless, if Plaintiffs decided to challenge any subsequent planning decisions by BLM, and if they were successful in obtaining remedies adversely impacting the operations at any of our mines, the timing and our ability to obtain leases and permit approvals could be materially adversely impacted.

Other Legal Proceedings

We are involved in other legal proceedings arising in the ordinary course of business and may become involved in additional proceedings from time to time. We believe that there are no other legal proceedings pending that are likely to have a material adverse effect on our consolidated financial condition, results of operations or cash flows. Nevertheless, we cannot predict the impact of future developments affecting our claims and lawsuits, and any resolution of a claim or lawsuit or an accrual within a particular fiscal period may materially and adversely impact our results of operations for that period. In addition to claims and lawsuits against us, our leases by application, leases by modification, permits, and other industry regulatory processes and approvals, including those applicable to the utility and coal logistics and transportation industries, may also continue to be subject to legal challenges that could materially and adversely impact our mining operations, results, and liquidity. These regulatory challenges may seek to vacate prior regulatory decisions and authorizations that are legally required for some or all of our current or planned mining activities. If we are required to reduce or modify our mining activities as a result of these challenges, the impact could have a material adverse effect on our shipments, financial results and liquidity, and could result in claims from third parties if we are unable to meet our commitments under pre-existing commercial agreements as a result of any such required reductions or modifications to our mining activities.

Most of our pending legal proceedings have been stayed as a result of filing the Bankruptcy Petitions on May 10, 2019 and the effect of the automatic stay.

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Effect of Automatic Stay

Subject to certain exceptions under the Bankruptcy Code, the filing of the Debtors’ Chapter 11 Cases automatically stayed the continuation of most legal proceedings or the filing of other actions against or on behalf of the Debtors or their property to recover on, collect or secure a claim arising prior to the Petition Date or to exercise control over property of the Debtors’ bankruptcy estates, unless the Bankruptcy Court modifies or lifts the automatic stay as to any such claim. Notwithstanding the general application of the automatic stay described above, governmental authorities may determine to continue actions brought under their police and regulatory powers.

Tax Contingencies

Our income tax calculations are based on application of the respective U.S. federal or state tax laws. Our tax filings, however, are subject to audit by the respective tax authorities. Accordingly, we recognize tax benefits when it is more likely than not a position will be upheld by the tax authorities. To the extent the final tax liabilities are different from the amounts originally accrued, the increases or decreases are recorded as income tax expense.

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Several non-income based production tax audits related to federal and state royalties and severance taxes are currently in progress. The financial statements reflect our best estimate of taxes and related interest and penalties due for potential adjustments that may result from the resolution of such tax audits. From time to time, we receive audit assessments and engage in settlement discussions with applicable tax authorities, which may result in adjustments to our estimates of taxes and related interest and penalties.

Concentrations of Risk and Major Customers

For the ~~six~~nine months ended ~~June~~September 30, 2019, there ~~was~~were ~~one~~two ~~customer~~customers that represented 10% or more of consolidated revenue. For the ~~six~~nine months ended ~~June~~September 30, 2018, there was noone ~~single~~ customer that represented 10% or more of consolidated revenue. We generally do not require collateral or other security on accounts receivable because our customers are comprised primarily of investment grade electric utilities. Credit risk is controlled through credit approvals and monitoring procedures.

Guarantees and Off-Balance Sheet Risk

In the normal course of business, we are party to guarantees and financial instruments with off-balance sheet risk, such as bank letters of credit, performance or surety bonds and indemnities, which are not reflected on the Unaudited Condensed Consolidated Balance Sheets. In our past experience, virtually no claims have been made against these financial instruments. Management does not expect any material losses to result from these guarantees or off-balance sheet instruments.

U.S. federal and state laws require we secure certain of our obligations to reclaim lands used for mining and to secure coal lease obligations. The primary method we have used to meet these reclamation obligations and to secure coal lease obligations is to provide a third-party surety bond, typically through an insurance company. Specific bond amounts may change over time, depending on the activity at the respective site and any specific requirements by federal or state laws. As of ~~June~~September 30, 2019, we had $~~395~~394.17 million of reclamation and lease bonds backed by collateral of $25.7 million in the form of letters of credit under our A/R Securitization Program used for mining, securing coal lease obligations, and for other operating requirements. We have self-bonded, by cash collateralizing, an additional $1.7 million in April 2019. If we are unable to obtain or retain required surety bonds, we may be unable to satisfy legal requirements necessary to conduct our mining operations.

~~21. Accumulated Other Comprehensive Income (Loss)~~44

The changes in AOCI related to our postretirement medical plan by component, net of tax are as follows (in thousands):

	Six Months Ended
	June 30,
	2019			2018
Beginning balance, January 1,	$	13,284		$	13,807
Amounts reclassified from accumulated other comprehensive income (loss)	(2,702		)	(2,829		)
Tax expense (benefit)	(808		)	(846		)
Net current period other comprehensive income (loss)	(3,510		)	(3,675		)
Ending balance, June 30,	$	9,774		$	10,132

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

21. Accumulated Other Comprehensive Income (Loss)

The changes in AOCI related to our postretirement medical plan by component, net of tax are as follows (in thousands):

	Nine Months Ended
	September 30,
	2019			2018
Beginning balance, January 1,	$	13,284		$	13,807
Amounts reclassified from accumulated other comprehensive income (loss)	(4,054		)	(18,298		)
Postretirement medical plan change	—			24,659
Tax expense (benefit)	(1,211		)	(5,466		)
Net current period other comprehensive income (loss)	(5,265		)	895
Ending balance, September 30,	$	8,019		$	14,702

The reclassifications out of AOCI are as follows (in thousands):

	Three Months Ended						~~Six~~Nine Months Ended
	June 30,						June 30,
	September 30,						September 30,
	2019			2018			2019			2018
Postretirement Medical Plan (1)
Amortization of prior service costs (credits), before tax	$	—		$	(1,837	)	$	—		$	(3,675	)
Amortization of prior service costs (credits), before tax (2)	$	—		$	(612	)	$	—		$	(4,287	)
Postretirement medical plan termination (2)	(1,755		)	—(19,477		)	(35,~~510~~265		)	—(19,477		)
Total before tax	(1,755		)	(120,~~837~~089		)	(35,~~510~~265		)	(323,~~675~~764		)
Tax benefit (expense)	404			~~423~~4,620			~~808~~1,211			~~846~~5,466
Amounts reclassified from AOCI	$	(1,351	)	$	(115,~~414~~469	)	$	(24,~~702~~054	)	$	(218,~~829~~298	)

(1) See Note 17 for the components of our net periodic postretirement benefit costs.

(2) Presented on the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

~~22. Supplemental Cash Flow Information~~45

Restricted Cash

The following table provides a reconciliation of Cash and cash equivalents and restricted cash reported in the Unaudited Condensed Consolidated Balance Sheets as of June 30, 2019 and 2018 that sum to the total of such amounts in the Unaudited Condensed Consolidated Statements of Cash Flows:

	June 30,
	2019		2018
Cash and cash equivalents	$	64,425	$	90,174
Restricted cash in other current assets	6,731		725
Restricted cash in other noncurrent assets	17,352		5,607
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	88,508	$	96,506

The restricted cash in other current assets includes $6 million in an escrow account as of June 30, 2019, related to the undrawn funding under the DIP Credit Agreement

The restricted cash in other noncurrent assets represents the difference between the borrowing capacity of the A/R Securitization Program and the undrawn face amount of the letters of credit that was cash-collateralized as of June 30, 2019 based on the prior business day’s calculation.

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Other~~22. Supplemental Cash Flow Information

	Six Months Ended
	June 30,
	2019			2018
Supplemental cash flow disclosures
Interest paid	$	1,050		$	14,979
Income taxes paid (refunded)	$	(15,573	)	$	220
Reorganization items, net paid	$	1,023		$	—
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	(525	)	$	—
Operating cash flows from finance leases	$	(46	)	$	—
Supplemental non-cash investing and financing activities
Capital expenditures included in accounts payable	$	204		$	2,720
Assets acquired under federal coal lease	$	—		$	2,356
Operating right-of-use assets recognized	$	1,785		$	—
Impairment of right-of-use asset	$	(1,418	)	$	—

Restricted Cash

43The following table provides a reconciliation of Cash and cash equivalents and restricted cash reported in the Unaudited Condensed Consolidated Balance Sheets as of September 30, 2019 and 2018 that sum to the total of such amounts in the Unaudited Condensed Consolidated Statements of Cash Flows (in thousands):

	September 30,
	2019		2018
Cash and cash equivalents	$	84,760	$	109,459
Restricted cash - current	40,023		725
Restricted cash in other noncurrent assets	18,830		3,807
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	143,613	$	113,991

The current Restricted cash includes $31 million in an escrow account as of September 30, 2019, related to the undrawn funding under the DIP Credit Agreement, and $8.2 million in bidder deposits related to the Auction process.

The restricted cash in other noncurrent assets represents the difference between the borrowing capacity of the A/R Securitization Program and the undrawn face amount of the letters of credit that was cash-collateralized as of September 30, 2019 based on the prior business day’s calculation.

Other Cash Flow Information (in thousands)

	Nine Months Ended
	September 30,
	2019			2018
Supplemental cash flow disclosures
Interest paid	$	1,088		$	17,190
Income taxes paid (refunded)	$	(15,673	)	$	220
Reorganization items, net paid	$	12,342		$	—

Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	(782	)	$	—
Operating cash flows from finance leases	$	(66	)	$	—

Supplemental non-cash investing and financing activities
Capital expenditures included in accounts payable	$	204		$	3,108
Assets acquired under federal coal lease	$	—		$	2,356
Operating right-of-use assets recognized	$	1,785		$	—
Impairment of right-of-use asset	$	(1,418	)	$	—
Refinance and discharge of senior note	$	(28,000	)	$	—
Senior note roll-up to DIP financing	$	28,000		$	—

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

23. Supplemental Guarantor/Non-Guarantor Financial Information

In accordance with the indentures governing the senior notes outstanding as of ~~June~~September 30, 2019, CPE Inc. and certain of our 100% owned U.S. subsidiaries (the “Guarantor Subsidiaries”) have fully and unconditionally guaranteed the 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 other disposition of all or substantially all the assets of the Guarantor Subsidiary (other than to CPE Inc. or a Restricted Subsidiary (as defined in the applicable indenture) of CPE Inc.) otherwise not in violation of the applicable indenture;

· a disposition of the majority of the capital stock of a Guarantor Subsidiary to a third person otherwise not in violation of the applicable 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 applicable indenture occurs as a result thereof;

· the designation in accordance with the applicable indenture of the Guarantor Subsidiary as an Unrestricted Subsidiary or the Guarantor Subsidiary otherwise ceases to be a Restricted Subsidiary of CPE Inc. in accordance with the applicable indenture;

· defeasance or discharge of such series of senior notes;

· 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 applicable indenture) of either issuer of the senior notes or the debt of another Guarantor Subsidiary under the Amended Credit Agreement; or

· in the case of the indenture for the 2021 Notes, as set forth in the First Lien/Second Lien Intercreditor Agreement, dated October 17, 2016, among CPE Resources, Cloud Peak Energy Finance Corp., PNC Bank, National Association, as Senior Representative for the First Lien Credit Agreement Secured Parties and Wilmington Trust, National Association, as the Second Priority Representative for the Second Lien Indenture Secured Parties.

· The combination of the Parent Guarantor (CPE Inc.), Issuing Company (CPE Resources), and Guarantor Subsidiaries columns in the tables below represent the Debtors’ Statement of Operations and Comprehensive Income (Loss) for the three and ~~six~~nine months ended ~~June~~September 30, 2019, the Debtors’ Balance Sheet as of ~~June~~September 30, 2019, and the Debtors’ Statement of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2019. Entities included in the Non-Guarantor columns in the tables below are not included in the Chapter 11 Cases.

4447

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following historical financial statement information is provided for CPE Inc., CPE Resources, and the Guarantor/Non-Guarantor Subsidiaries:

Supplemental Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)

(Debtor-in-Possession)

(in thousands)

	Three Months Ended June 30, 2019
	Three Months Ended September 30, 2019
	Parent Guarantor (CPE Inc.) (Debtor)			Issuing Company (CPE Resources) (Debtor)			Guarantor Subsidiaries (Debtor)			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	1,~~478~~413		$	—		$	~~168~~220,~~451~~227		$	—		$	(1,~~478~~413	)	$	~~168~~220,~~451~~227
Costs and expenses
Cost of product sold (exclusive of depreciation, depletion, and accretion)	—			138			~~162~~194,~~779~~726			55265			—			~~162~~194,~~847~~999
Depreciation and depletion	—			~~276~~—			11(2,~~621~~488		)	—			—			11(2,~~897~~488		)
Accretion	—			—			1,~~493~~699			—			—			1,~~493~~699
Selling, general and administrative expenses	—			169,~~441~~384			—			—			(1,~~478~~413		)	147,~~963~~971
Impairments	—			1,977			618,924			—			—			620,901
Other operating costs	—			—			101			—			—			101
Other operating costs	—			—			111			—			—			111
Total costs and expenses	—			9,392			194,038			265			(1,413		)	202,282
Total costs and expenses	—			18,707			794,928			55			(1,478		)	812,212
Operating income (loss)	1,413			(9,392		)	26,189			(265		)	—			17,945
Operating income (loss)	1,478			(18,707		)	(626,477		)	(55		)	—			(643,761		)
Other income (expense)
Net periodic postretirement benefit income (cost), excluding service cost	—			294			1,461			—			—			1,755
Interest income	—			~~102~~241			4—			—			—			~~106~~241
Interest expense	(1,~~313~~571		)	~~(3,101~~—		)	(~~120~~141		)	(~~547~~315		)	—			(52,~~081~~027		)
Reorganization items, net	667			37(13,~~107~~480		)	77261			—			—			37(13,~~190~~152		)
Other, net	—			(~~143~~136		)	(~~507~~6		)	~~167~~134			—			(~~483~~8		)
Total other income (expense)	(1,~~308~~504		)	34(13,~~260~~081		)	~~915~~1,575			(~~380~~181		)	—			33(13,~~487~~191		)
Income (loss) before income tax provision and earnings from unconsolidated affiliates	~~170~~(91		)	15(22,~~553~~473		)	~~(625~~27,~~562~~764		)	(~~435~~446		)	—			~~(610~~4,~~274~~754		)
Income tax benefit (expense)	(3512		)	—			—			—			—			(3512		)
Income (loss) from unconsolidated affiliates, net of tax	—			24			~~628~~20			—			—			~~630~~24
Income (loss) from consolidated affiliates, net of tax	~~(609~~4,~~814~~869		)	~~(625~~27,~~369~~338		)	(~~436~~446		)	—			1(31,~~235,619~~761		)	—
Net income (loss)	~~(609~~4,~~679~~766		)	~~(609~~4,~~814~~869		)	~~(625~~27,~~370~~338		)	(~~435~~446		)	1(31,~~235,619~~761		)	~~(609~~4,~~679~~766		)
Other comprehensive income (loss)
Postretirement medical plan termination	(1,755		)	(1,755		)	(1,755		)	—			3,510			(1,755		)
Other comprehensive income (loss)	(1,755		)	(1,755		)	(1,755		)	—			3,510			(1,755		)
Total comprehensive income (loss)	$	~~(611~~3,~~434~~011	)	$	~~(611~~3,~~569~~114	)	$	~~(627~~25,~~125~~583	)	$	(~~435~~446	)	$	1(28,~~239,129~~251	)	$	~~(611~~3,~~434~~011	)

4548

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)

(Debtor-in-Possession)

(in thousands)

	Three Months Ended June 30, 2018
	Three Months Ended September 30, 2018
	Parent Guarantor (CPE Inc.) (Debtor)			Issuing Company (CPE Resources) (Debtor)			Guarantor Subsidiaries (Debtor)			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	21,~~615~~650		$	—		$	~~205~~233,~~698~~080		$	—		$	(21,~~615~~650	)	$	~~205~~233,~~698~~080
Costs and expenses
Cost of product sold (exclusive of depreciation, depletion, and accretion)	—			~~(12~~11		)	~~196~~208,~~382~~493			40—			—			~~196~~208,~~410~~504
Depreciation and depletion	—			~~284~~305			1417,~~117~~087			—			—			1417,~~401~~392
Accretion	—			—			1,~~706~~947			—			—			1,~~706~~947
Selling, general and administrative expenses	—			15,590			—			—			(2,615		)	12,975
(Gain) loss on derivative financial instruments	—			—			(730		)	—			—			(730		)
Impairments	—			—			800			—			—			800
Selling, general and administrative expenses	—			6,751			—			—			(1,650		)	5,101
Other operating costs	—			—			55149			—			—			55149
Total costs and expenses	—			157,~~862~~067			~~213~~226,~~060~~946			40—			(21,~~615~~650		)	~~226~~232,~~347~~363
Operating income (loss)	21,~~615~~650			(157,~~862~~067		)	(76,~~362~~134		)	~~(40~~—		)	—			~~(20,649~~717		)
Other income (expense)
Net periodic postretirement benefit income (cost), excluding service cost	—			~~271~~3,354			116,~~346~~662			—			—			120,~~617~~016
Interest income	—			~~274~~301			—3			—			—			~~274~~304
Interest expense	—			(107,~~177~~975		)	(~~105~~103		)	(~~259~~333		)	—			(108,~~541~~411		)
Other, net	—			(75101		)	~~(334~~67		)	75101			—			~~(334~~67		)
Total other income (expense)	—			(94,~~707~~421		)	~~907~~16,629			(~~184~~232		)	—			(811,~~984~~976		)
Income (loss) before income tax provision and earnings from unconsolidated affiliates	21,~~615~~650			(2511,~~569~~488		)	(622,~~455~~763		)	(~~224~~232		)	—			~~(29~~12,~~633~~693		)
Income tax benefit (expense)	(~~234~~5		)	—			—			—			—			(~~234~~5		)
Income (loss) from unconsolidated affiliates, net of tax	—			46			(93		)	—			—			(53		)
Income (loss) from consolidated affiliates, net of tax	~~(32~~11,~~252~~046		)	(622,~~688~~528		)	(~~224~~232		)	—			39(33,~~164~~342		)	—
Net income (loss)	~~(29~~12,~~872~~691		)	~~(32~~11,~~252~~046		)	(622,~~688~~528		)	(~~224~~232		)	39(33,~~164~~342		)	~~(29~~12,~~872~~691		)
Other comprehensive income (loss)
Postretirement medical plan amortization of prior service cost	(~~1,837~~612		)	(~~1,837~~612		)	(~~1,837~~612		)	—			31,~~674~~224			(~~1,837~~612		)
Other comprehensive income (loss)	(1,837		)	(1,837		)	(1,837		)	—			3,674			(1,837		)
Postretirement medical plan change	24,659			24,659			24,659			—			(49,318		)	24,659
Total comprehensive income (loss)	$	(31,709	)	$	(34,089	)	$	(8,525	)	$	(224	)	$	42,838		$	(31,709	)
Postretirement medical plan termination	(19,477		)	(19,477		)	(19,477		)	—			38,954			(19,477		)
Other comprehensive income (loss)	4,570			4,570			4,570			—			(9,140		)	4,570
Total comprehensive income (loss)	$	17,261		$	15,616		$	27,098		$	(232	)	$	(42,482	)	$	17,261

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)

(Debtor-in-Possession)

(in thousands)

	Six Months Ended June 30, 2019
	Nine Months Ended September 30, 2019
	Parent Guarantor (CPE Inc.) (Debtor)			Issuing Company (CPE Resources) (Debtor)			Guarantor Subsidiaries (Debtor)			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	35,~~637~~050		$	—		$	~~313~~533,~~528~~755		$	—		$	(35,~~637~~050	)	$	~~313~~533,~~528~~755
Costs and expenses
Cost of product sold (exclusive of depreciation, depletion, and accretion)	—			1826			~~322~~517,~~692~~418			96361			—			~~322~~517,~~806~~805
Depreciation and depletion	—			545			2219,~~038~~550			—			—			2220,~~583~~095
Accretion	—			—			34,~~097~~796			—			—			34,~~097~~796
(Gain) loss on derivative financial instruments	—			—			(1,809		)	—			—			(1,809		)
Selling, general and administrative expenses	—			3746,~~172~~557			—			—			(35,~~637~~050		)	3341,~~535~~507
Impairments	—			1,977			619,028			—			—			621,005
Other operating costs	—			—			~~351~~451			—			—			~~351~~451
Total costs and expenses	—			3949,~~712~~105			~~965~~1,~~397~~159,434			96361			(35,~~637~~050		)	1,~~001~~203,~~568~~850
Operating income (loss)	35,~~637~~050			(3949,~~712~~105		)	(~~651~~625,~~869~~679		)	(96361		)	—			(~~688~~670,~~040~~095		)
Other income (expense)
Net periodic postretirement benefit income (cost), excluding service cost	—			~~588~~882			24,~~922~~382			—			—			35,~~510~~264
Interest income	—			~~383~~624			10			—			—			~~393~~634
Interest expense	(12,~~313~~884		)	(10,309		)	(~~259~~401		)	(~~892~~1,207		)	—			(1214,~~773~~801		)
Reorganization items, net	673			3723,~~107~~627			77338			—			—			3724,~~190~~038
Other, net	—			(~~257~~392		)	(~~521~~528		)	~~280~~415			—			(~~498~~505		)
Total other income (expense)	(12,~~308~~811		)	2714,~~513~~432			23,~~229~~801			(~~612~~792		)	—			2714,~~822~~630
Income (loss) before income tax provision and earnings from unconsolidated affiliates	2,~~329~~239			(1234,~~199~~673		)	(~~649~~621,~~640~~878		)	(~~708~~1,153		)	—			(~~660~~655,~~218~~465		)
Income tax benefit (expense)	(7485		)	—			—			—			—			(7485		)
Income (loss) from unconsolidated affiliates, net of tax	—			59			~~861~~881			—			—			~~866~~890
Income (loss) from consolidated affiliates, net of tax	(~~661~~656,~~681~~814		)	(~~649~~622,~~486~~150		)	(~~707~~1,153		)	—			1,~~311~~280,~~874~~117			—
Net income (loss)	(~~659~~654,~~426~~660		)	(~~661~~656,~~681~~814		)	(~~649~~622,~~486~~150		)	(~~708~~1,153		)	1,~~311~~280,~~874~~117			(~~659~~654,~~426~~660		)
Other comprehensive income (loss)
Postretirement medical plan termination	(35,~~510~~264		)	(35,~~510~~264		)	(35,~~510~~264		)	—			710,~~020~~528			(35,~~510~~264		)
Other comprehensive income (loss)	(35,~~510~~264		)	(35,~~510~~264		)	(35,~~510~~264		)	—			710,~~020~~528			(35,~~510~~264		)
Total comprehensive income (loss)	$	(~~662~~659,~~936~~924	)	$	(~~665~~662,~~191~~078	)	$	(~~652~~627,~~996~~414	)	$	(~~708~~1,153	)	$	1,~~318~~290,~~894~~645		$	(~~662~~659,~~936~~924	)

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)

(Debtor-in-Possession)

(in thousands)

	Six Months Ended June 30, 2018
	Nine Months Ended September 30, 2018
	Parent Guarantor (CPE Inc.) (Debtor)			Issuing Company (CPE Resources) (Debtor)			Guarantor Subsidiaries (Debtor)			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	46,~~403~~053		$	—		$	~~422~~655,~~007~~087		$	—		$	(46,~~403~~053	)	$	~~422~~655,~~007~~087
Costs and expenses
Cost of product sold (exclusive of depreciation, depletion, and accretion)	—			(83		)	~~388~~597,~~911~~404			41			—			~~388~~597,~~944~~448
Depreciation and depletion	—			~~555~~859			2845,~~841~~929			—			—			2946,~~396~~788
Accretion	—			—			35,~~411~~359			—			—			35,~~411~~359
Selling, general and administrative expenses	—			24,695			—			—			(4,403		)	20,292
(Gain) loss on derivative financial instruments	—			—			(730		)	—			—			(730		)
Selling, general and administrative expenses	—			31,446			—			—			(6,053		)	25,393
Impairments	—			—			800			—			—			800
Other operating costs	—			—			~~183~~331			—			—			~~183~~331
Total costs and expenses	—			2532,~~242~~308			~~422~~649,~~146~~093			41			(46,~~403~~053		)	~~443~~675,~~026~~389
Operating income (loss)	46,~~403~~053			(2532,~~242~~308		)	~~(139~~5,994		)	(41		)	—			(2120,~~019~~302		)
Other income (expense)
Net periodic postretirement benefit income (cost), excluding service cost	—			~~540~~3,894			219,~~695~~357			—			—			323,~~235~~251
Interest income	32			~~535~~836			—3			—			—			~~538~~841
Interest expense	—			(1927,~~039~~014		)	(~~213~~317		)	(~~477~~810		)	—			(1928,~~729~~141		)
Other, net	—			(~~222~~323		)	(~~604~~535		)	~~222~~323			—			(~~604~~535		)
Total other income (expense)	32			(1822,~~186~~607		)	118,~~878~~508			(~~255~~487		)	—			(164,~~560~~584		)
Income (loss) before income tax provision and earnings from unconsolidated affiliates	46,~~406~~055			(4354,~~428~~915		)	124,~~739~~502			(~~296~~528		)	—			(3724,~~579~~886		)
Income tax benefit (expense)	(~~297~~302		)	—			—			—			—			(~~297~~302		)
Income (loss) from unconsolidated affiliates, net of tax	—			815			~~258~~254			—			—			~~266~~269
Income (loss) from consolidated
Income (loss) from consolidated affiliates, net of tax	(30,673		)	24,228			(528		)	—			6,973			—
affiliates, net of tax	(41,719		)	1,701			(296		)	—			40,314			—
Net income (loss)	(24,919		)	(30,673		)	24,228			(528		)	6,973			(24,919		)
Net income (loss)	(37,610		)	(41,719		)	1,701			(296		)	40,314			(37,610		)
Other comprehensive income (loss)
Postretirement medical plan amortization of prior service cost	(34,~~675~~287		)	(34,~~675~~287		)	(34,~~675~~287		)	—			78,~~350~~574			(34,~~675~~287		)
Other comprehensive income (loss)	(3,675		)	(3,675		)	(3,675		)	—			7,350			(3,675		)
Postretirement medical plan change	24,659			24,659			24,659			—			(49,318		)	24,659
Total comprehensive income (loss)	$	(41,285	)	$	(45,394	)	$	(1,974	)	$	(296	)	$	47,664		$	(41,285	)
Postretirement medical plan termination	(19,477		)	(19,477		)	(19,477		)	—			38,954			(19,477		)
Other comprehensive income (loss)	895			895			895			—			(1,790		)	895
Total comprehensive income (loss)	$	(24,024	)	$	(29,778	)	$	25,123		$	(528	)	$	5,183		$	(24,024	)

4851

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Balance Sheet

(Debtor-in-Possession)

(in thousands)

	June 30, 2019
	September 30, 2019
	Parent Guarantor (CPE Inc.) (Debtor)			Issuing Company (CPE Resources) (Debtor)			Guarantor Subsidiaries (Debtor)			Non- Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	—		$	6484,~~266~~700		$	~~159~~60		$	—	$	—		$	6484,~~425~~760
Accounts receivable	—			—			11,863			33,074		—			44,937
Restricted cash	31,073			—			8,950			—		—			40,023
Due from related parties	—			76,854			28,908			—		(105,654		)	108
Accounts receivable	—			—			11,913			29,763		—			41,676
Inventories, net	—			—			16,961			—		—			16,961
Due from related parties	—			5,909			66,432			—		(72,230		)	111
Income tax receivable	7,944			—			—			—		—			7,944
Inventories, net	—			—			16,946			—		—			16,946
Other prepaid and deferred charges	3,620			—			22,178			—		—			25,798
Income tax receivable	7,934			—			—			—		—			7,934
Other assets	6,005			—			805			—		—			6,810
Other prepaid and deferred charges	2,678			—			25,671			—		—			28,349
Total current assets	17,569			141,120			80,874			33,074		(105,654		)	166,983
Other assets	—			—			78			—		—			78
Total current assets	41,685			90,609			130,050			29,763		(72,230		)	219,877
Noncurrent assets
Property, plant and equipment, net	—			322			6867,~~146~~132			—		—			6867,~~468~~454
Income tax receivable	7,884			—			—			—		—			7,884
Other assets	—			—			1816,~~521~~655			1819,~~410~~798		(5,~~455~~006		)	31,~~476~~447
Total assets	$	2549,~~453~~569		$	~~141~~90,~~442~~931		$	~~167~~213,~~541~~837		$	5149,~~484~~561	$	(~~111~~77,~~109~~236	)	$	~~274~~326,~~811~~662
LIABILITIES AND MEMBER’S EQUITY
Liabilities not subject to compromise
Current liabilities
Accounts payable	$	2—		$	6—		$	3143,~~699~~463		$	73	$	—		$	3143,~~780~~536
Royalties and production and property taxes	—			—			1322,~~974~~194			—		—			1322,~~974~~194
Accrued expenses	~~209~~1,042			—			1426,~~401~~690			—		—			1427,~~610~~732
Due to related parties	6028,~~662~~717			71			—			4443,~~920~~443		(~~105~~72,~~653~~231		)	—
Debtor-in-possession financing	1165,~~313~~884			—			—			—		—			1165,~~313~~884
Other liabilities	—			—			1,~~556~~205			—		—			1,~~556~~205
Total current liabilities	7295,~~186~~643			7771			6193,~~630~~552			4443,~~993~~516		(~~105~~72,~~653~~231		)	73160,~~233~~551
Noncurrent liabilities
Asset retirement obligations, net of current portion	—			—			~~100~~96,~~939~~940			—		—			~~100~~96,~~939~~940
Royalties and production and property taxes	—			—			310,~~124~~232			—		—			310,~~124~~232
Other liabilities	~~319~~316,~~699~~587			9368,~~651~~065			~~181~~76			—		(~~413~~384,~~350~~652		)	~~181~~76
Total liabilities not subject to compromise	~~391~~412,~~885~~230			9368,~~728~~136			~~165~~200,~~874~~800			4443,~~993~~516		(~~519~~456,~~003~~883		)	~~177~~267,~~477~~799
Liabilities subject to compromise	~~603~~274			~~367~~339,~~461~~430			9682,~~305~~094			—		—			~~464~~421,~~369~~798
Total liabilities	~~392~~412,~~488~~504			~~461~~407,~~189~~566			~~262~~282,~~179~~894			4443,~~993~~516		(~~519~~456,~~003~~883		)	~~641~~689,~~846~~597
Total equity	(367,035		)	(319,747		)	(94,638		)	6,491		407,894			(367,035		)
Total equity (deficit)	(362,935		)	(316,635		)	(69,057		)	6,045		379,647			(362,935		)
Total liabilities and equity	$	2549,~~453~~569		$	~~141~~90,~~442~~931		$	~~167~~213,~~541~~837		$	5149,~~484~~561	$	(~~111~~77,~~109~~236	)	$	~~274~~326,~~811~~662

4952

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Balance Sheet

(Debtor-in-Possession)

(in thousands)

	December 31, 2018
	Parent Guarantor (CPE Inc.) (Debtor)		Issuing Company (CPE Resources) (Debtor)		Guarantor Subsidiaries (Debtor)		Non- Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	—	$	91,083	$	113	$	—	$	—		$	91,196
Restricted cash	—		—		725		—		—			725
Accounts receivable	—		55		5,048		28,424		—			33,527
Due from related parties	—		61,960		35,025		—		(96,985		)	—
Inventories, net	—		—		70,040		—		—			70,040
Income tax receivable	15,808		—		—		—		—			15,808
Other prepaid and deferred charges	281		—		27,246		—		—			27,527
Other assets	1		—		43,~~204~~479		—		—			43,~~205~~480
Total current assets	16,090		153,096		141,678		28,424		(96,985		)	242,303
Noncurrent assets
Property, plant and equipment, net	—		2,735		651,637		—		—			654,372
Income tax receivable	15,768		—		—		—		—			15,768
Other assets	338,229		583,793		21,202		1,179		(928,190		)	16,213
Total assets	$	370,087	$	739,626	$	814,515	$	29,603	$	(1,025,175	)	$	928,656
LIABILITIES AND MEMBER’S EQUITY
Current liabilities
Accounts payable	$	—	$	—	$	34,080	$	130	$	—		$	34,210
Royalties and production and property taxes	—		—		53,232		—		—			53,232
Accrued expenses	1,703		5,001		19,681		—		—			26,385
Due to related parties	74,710		71		—		22,275		(96,985		)	71
Current portion of federal coal lease obligations	—		—		379		—		—			379
Other liabilities	—		—		4,019		—		—			4,019
Total current liabilities	76,413		5,072		111,391		22,405		(96,985		)	118,296
Noncurrent liabilities
Senior notes	—		396,373		—		—		—			396,373
Federal coal lease obligations, net of current portion	—		—		1,404		—		—			1,404
Asset retirement obligations, net of current portion	—		—		92,591		—		—			92,591
Royalties and production and property taxes	—		—		20,587		—		—			20,587
Other liabilities	—		—		5,731		—		—			5,731
Total liabilities	76,413		401,445		231,704		22,405		(96,985		)	634,982
Total equity	293,674		338,181		582,811		7,198		(928,190		)	293,674
Total equity (deficit)	293,674		338,181		582,811		7,198		(928,190		)	293,674
Total liabilities and equity	$	370,087	$	739,626	$	814,515	$	29,603	$	(1,025,175	)	$	928,656

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Cash Flows

(Debtor-in-Possession)

(in thousands)

	Six Months Ended June 30, 2019
	Nine Months Ended September 30, 2019
	Parent Guarantor (CPE Inc.) (Debtor)		Issuing Company (CPE Resources) (Debtor)			Guarantor Subsidiaries (Debtor)			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Net cash provided by (used in) operating activities	$	631,~~005~~073	$	(3641,~~709~~275	)	$	~~(823~~9,797	)	$	1719,~~645~~123		$	—	$	~~(13~~18,~~882~~718	)
Investing activities
Purchases of property, plant and equipment	—		(108		)	(13,~~191~~230		)	—			—		(13,~~299~~338		)
Proceeds from the sale of assets	—		—			3,208			—			—		3,208
Net cash provided by (used in) investing activities	—		(108		)	~~2,017~~(22		)	—			—		~~1,909~~(130		)
Financing activities
Principal payments of federal coal leases	—		—			(379		)	—			—		(379		)
Principal payments on finance leases	—		—			(~~768~~1,224		)	—			—		(~~768~~1,224		)
Borrowings on debtor-in-possession financing	—		1035,000			—			—			—		1035,000
Payment of deferred financing costs	—		—			—			(500		)	—		(500		)
Net cash provided by (used in) financing activities	—		1035,000			(1,~~147~~603		)	(500		)	—		832,~~353~~897
Net increase (decrease) in cash, cash equivalents, and restricted cash	631,~~005~~073		(266,~~817~~383		)	478,172			1718,~~145~~623			—		(351,~~620~~485		)
Cash, cash equivalents, and restricted cash at beginning of period	—		91,083			~~838~~837			207			—		92,128
Cash, cash equivalents, and restricted cash at the end of period	$	631,~~005~~073	$	6484,~~266~~700		$	~~885~~9,010		$	1718,~~352~~830		$	—	$	88143,~~508~~613

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Cash Flows

(Debtor-in-Possession)

(in thousands)

	Six Months Ended June 30, 2018
	Nine Months Ended September 30, 2018
	Parent Guarantor (CPE Inc.) (Debtor)		Issuing Company (CPE Resources) (Debtor)			Guarantor Subsidiaries (Debtor)			Non- Guarantor Subsidiaries			Eliminations		Consolidated
Net cash provided by (used in) operating activities	$	—	$	~~(11~~7,~~680~~928	)	$	811,~~734~~397		$	64,~~514~~743		$	—	$	324,~~568~~068
Investing activities
Purchases of property, plant and equipment	—		(60114		)	(47,~~771~~051		)	—			—		(47,~~831~~165		)
Investment in development projects	—		—			(1,894		)	—			—		(1,894		)
Proceeds from the sale of assets	—		13			56			—			—		69
Net cash provided by (used in) investing activities	—		(47101		)	(68,~~609~~889		)	—			—		(68,~~656~~990		)
Financing activities
Principal payments of federal coal leases	—		—			(574		)	—			—		(574		)
Principal payments on finance leases	—		—			(~~648~~1,952		)	—			—		(~~648~~1,952		)
Payment of deferred financing costs	—		—			—			(~~907~~936		)	—		(~~907~~936		)
Payment amortized to deferred gain	—		(6,298		)	—			—			—		(6,298		)
Other	—		—			(652		)	—			—		(652		)
Net cash provided by (used in) financing activities	—		(6,298		)	(2,526		)	(936		)	—		(9,760		)
Net cash provided by (used in) financing activities	—		(6,298		)	(1,874		)	(907		)	—		(9,079		)
Net increase (decrease) in cash,
Net increase (decrease) in cash, cash equivalents, and restricted cash	—		(18,025		)	251			5,607			—		(12,167		)
cash equivalents, and restricted cash	—		1,529			(18		)	3,807			—		5,318
Cash, cash equivalents, and restricted cash at beginning of period	—		107,818			856			—			—		108,673
Cash, cash equivalents, and restricted cash at the end of period	$	—	$	89109,~~792~~347		$	~~1,107~~838		$	53,~~607~~807		$	—	$	96113,~~506~~991

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

24. Subsequent Events

~~DIP~~In ~~Credit~~connection with the Debtors’ ongoing cases under Chapter 11, on October 2, 2019, the Bankruptcy Court entered the Sale Order [Docket No. 674], pursuant to which the Bankruptcy Court approved the sale of substantially all of the Company’s operating assets, including the Company’s Spring Creek, Cordero Rojo and Antelope mines, to NTEC pursuant to the Asset Purchase Agreement. Subject to the satisfaction of certain closing conditions, the transactions contemplated by the Asset Purchase Agreement are expected to close in October 2019.

On ~~June~~October 1214, 2019, the Company ~~launched~~filed ~~a tender offer providing eligible holders of 2021 Notes~~ the ~~opportunity~~Plan to[Docket ~~participate~~No. 711], asamended afrom ~~lender under~~ the ~~DIP~~original ~~Credit~~filed ~~Agreement~~ on aOctober 4, ~~pro~~2019 ~~rata~~[Docket ~~basis~~No. 680]. The upCompany toanticipates ~~such~~seeking ~~holder’s~~confirmation ~~percentage ownership~~ of the ~~outstanding~~Plan ~~2021~~at ~~Notes, and to exchange, or “roll-up”~~ a ~~principal~~hearing ~~amount of their 2021 Notes equal~~ to ~~80%~~be ofheld ~~their~~before ~~commitments as a lender under~~ the ~~DIP~~Bankruptcy ~~Credit~~Court ~~Agreement for an equal amount of Roll-Up Loans under the DIP Credit Agreement. The transactions contemplated by the tender offer closed~~ on ~~August~~December 15, 2019~~. The~~ ~~Non-Backstop~~at ~~Lenders~~9:30 ~~subscribed for the assignment from the Backstop Lenders of approximately $3~~a.8m. (Eastern ~~million of New Money Loans, and the Non-Backstop Lenders and Backstop Lenders exchanged a total of $28 million of their 2021 Notes for Roll-Up Loans~~Time).

The Debtors borrowed $25 million under the DIP Credit Agreement on August 1, 2019. On July 16, 2019, the Debtors entered into the DIP Limited Waiver. The DIP Limited Waiver, among other things, waived the events of default arising under the DIP Credit Agreement as a result of the non-commencement of an auction for substantially all assets of the Debtors and the non-occurrence of a sale order under Section 363 of Title 11 of the U.S. Code by the Bankruptcy Court by the respective milestone dates set forth in the DIP Credit Agreement and amends the milestones for these and other events in the auction process.56

On August 8, 2019, the DIP Credit Agreement was further amended to among other things extend the milestone dates by which (i) an auction must commence for substantially all assets of the Debtors and (ii) a sale order under Section 363 of the Bankruptcy Code by the Bankruptcy Court must be entered.

On September 13, 2019, the DIP Credit Agreement was further amended to, among other things, (i) extend the milestone dates set forth in the DIP Credit Agreement by which a sale order under Section 363 of the Bankruptcy Code by the Bankruptcy Court must be entered and (ii) waive the event of default arising, and which continues arising, under the DIP Credit Agreement as a result of non-compliance with the Approved Budget (as defined in the DIP Credit Agreement) due to an Unpermitted Variance (as defined in the DIP Credit Agreement) with respect to receipts for the week ending on September 6, 2019.

There was $35 million funded to the escrow account under the DIP Credit Agreement as of September 6, 2019. As of September 6,2019, the Debtors had drawn on $4 million of this balance, leaving $31 million remaining in escrow. As of September 6, 2019, there was $65.4 million outstanding under the DIP Credit Agreement, including interest, fees and Roll-Up Loans.

Asset Purchase Agreement

The Debtors sought to sell all or substantially all of their assets pursuant to Section 363 of the Bankruptcy Code. To facilitate their marketing and sales process, the Debtors conducted and auction on August 15, 2019 and August 16, 2019, pursuant to bidding procedures approved by the Bankruptcy Court. Following the completion of the Auction, on August 16, 2019, the Debtors announced that the bid submitted by NTEC was the Winning Bid, and the bid submitted by Aspen Coal & Energy, LLC was the backup bid. On August 19, 2019, the Debtors and NTEC entered into the Asset Purchase Agreement providing for the acquisition by NTEC of substantially all of the Debtors’ assets, including the Spring Creek, Cordero Rojo and Antelope mines, in exchange for the payment of $15.7 million of cash at closing, a $40 million Purchase Take-Back Note and a $0.15/ton royalty, payable quarterly for a period of five years, on all tons produced and sold at the Antelope and Spring Creek mines, and on all tons produced and sold in excess of 10 million tons per year at the Cordero Rojo mine, as well as the assumption of coal production-related pre- and post-petition tax liabilities and coal royalty

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

payments in an amount projected to be approximately $94 million as of September 30, 2019, all reclamation obligations, up to $20 million in post-petition accounts payables, and cash to fund approximately $1.1 million in cure costs. The Assets do not include certain immaterial non-operating real estate assets, and the Company is evaluating its options to sell these assets.

On August 19, 2019, the Bankruptcy Court approved the transactions contemplated by the Asset Purchase Agreement, subject to the finalization of a form of the Sale Order. As part of the finalization of the proposed Sale Order, the U.S. Justice Department has asserted that the Sale Order should expressly require NTEC to assume any potential exposure with respect to certain open federal royalty audits and a related appeal. The parties to the Asset Purchase Agreement are in discussion with respect to this asserted requirement. The Justice Department represents the interests of the U.S. Government in Chapter 11 bankruptcy cases. Subject to the satisfaction of closing conditions, the transactions contemplated by the Asset Purchase Agreement are expected to close in October 2019. The Company anticipates filing with and seeking confirmation from the Bankruptcy Court of a Chapter 11 plan in the near term.

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CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will,” “would,” or similar words. You should read statements that contain these words carefully because they discuss our current plans, strategies, prospects, and expectations concerning our business, operating results, financial condition, and other similar matters. While we believe that these forward-looking statements are reasonable as and when made, there may be events in the future that we are not able to predict accurately or control, and there can be no assurance that future developments affecting our business will be those that we anticipate. Additionally, all statements concerning our expectations regarding future operating results are based on current forecasts for our existing operations and do not include the potential impact of the transactions contemplated by the Asset Purchase Agreement or any other future acquisitions, divestitures, or other transactions. The factors listed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 (our “2018 Form 10-K”) and Item 1A of Part II of this report, as well as any cautionary language in this report, describe the known material risks, uncertainties, and events that may cause our actual results to differ materially and adversely from the expectations we describe in our forward-looking statements. Additional factors or events that may emerge from time to time, or those that we currently deem to be immaterial, could cause our actual results to differ, and it is not possible for us to predict all of them. You are cautioned not to place undue reliance on the forward-looking statements contained herein. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. The following factors are among those that may cause actual results to differ materially and adversely from our forward-looking statements:

· substantial doubt about our ability to continue as a going concern;

· our ability to successfully complete aour sale process under Chapter 11 (as defined below);

· the substantial changes in our business resulting from the pending sale of substantially all of our operating assets under the Asset Purchase Agreement (as defined below) and the related termination of substantially all of our employees;

· potential adverse effects of the Chapter 11 Cases (as defined below) on our liquidity and results of operations;

· our ability to obtain timely approval by the Bankruptcy Court (as defined below) with respect to the motions filed in the Chapter 11 Cases;

· objections to our sale process, plan confirmation, or other pleadings filed that could protract the Chapter 11 Cases;

· employee attrition and our ability to retain senior management and other key personnel due to the distractions and uncertainties, including our ability to provide adequate compensation and benefits during the Chapter 11 Cases;

· our ability to comply with the restrictions imposed by our A/R Securitization Program (as defined below), DIP Credit Agreement (as defined below), and other financing arrangements;

· our ability to maintain relationships with suppliers, customers, employees and other third parties and regulatory authorities as a result of our Chapter 11 filing;

· the effects of the Bankruptcy Petitions (as defined below) on us and on the interests of various constituents, including holders of our outstanding common stock (which will be extinguished following confirmation of the Plan submitted to the Bankruptcy Court);

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· the Bankruptcy Court’s rulings in the Chapter 11 Cases, and the outcome of the Chapter 11 Cases generally;

· the length of time that we will operate under Chapter 11 protection and the continued availability of operating capital during the pendency of the proceedings;

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· risks associated with third party motions in the Chapter 11 Cases, which may interfere with our ability to consummate a sale;

· our ability to maintain, obtain and comply with the terms of required surety bonds;

· the terms and restrictions of our indebtedness;

· our level of indebtedness;

· liquidity constraints, access to capital and credit markets and availability and costs of credit, surety bonds, letters of credit, and insurance, including risks resulting from the cost or unavailability of financing due to debt and equity capital and credit market conditions for the coal sector or in general, changes in our credit rating, our compliance with the covenants in our debt agreements, the credit pressures on our industry due to depressed conditions, and demands for increased collateral by our surety bond providers;

· our liquidity, results of operations, and financial condition generally, including amounts of working capital that are available;

· the timing and extent of any sustained recovery of the currently depressed PRB (as defined below) thermal coal industry and the impact of ongoing or further depressed PRB thermal coal industry conditions on our financial performance, liquidity, and any financial covenant compliance;

· the prices we receive for our coal and logistics services, our ability to effectively execute our forward sales strategy, and changes in utility purchasing patterns resulting in decreased long-term purchases of coal;

· the timing of reductions or increases in customer coal inventories;

· our ability to obtain new coal sales agreements on favorable terms, to resolve customer requests for reductions or deferrals of coal deliveries, and to respond to any cancellations of their committed volumes on terms that preserve the amount and timing of our forecasted economic value;

· the impact of increasingly variable and less predictable demand for thermal coal based on natural gas prices, summer cooling demand, winter heating demand, economic growth rates, and other factors that impact overall demand for electricity;

· our ability to comply with minimum production requirements under our coal leases and avoid advanced royalty obligations;

· our ability to efficiently and safely conduct our mining operations and to adjust our planned production levels to respond to market conditions and effectively manage the costs of our operations;

· competition with other producers of coal and with traders and re-sellers of coal, including the current oversupply of thermal coal, the impacts of currency exchange rate fluctuations and the strong U.S. dollar, and government environmental, energy and tax policies and regulations that make foreign coal producers more competitive for international transactions;

· the impact of coal industry bankruptcies on our competitive position relative to other companies who have emerged from bankruptcy with reduced leverage and potentially reduced operating costs;

· competition with natural gas, wind, solar, and other non-coal energy resources, which may continue to increase as a result of low domestic natural gas prices, the declining cost of renewables and due to environmental, energy and tax policies, regulations, subsidies, and other government actions that encourage or mandate use of alternative energy sources;58

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· coal-fired power plant capacity and utilization, including the impact of climate change and other environmental regulations and initiatives, energy policies, political pressures, NGO activities, international treaties or agreements and other factors that may cause domestic and international electric utilities to continue to phase out or close existing coal-fired power plants, reduce or eliminate construction of any new coal-fired power plants, or reduce consumption of coal from the PRB;

· the failure of economic, commercially available carbon capture technology to be developed and adopted by utilities in a timely manner;

· the impact of “keep coal in the ground” campaigns and other well-funded, anti-coal initiatives by environmental activist groups and others targeting substantially all aspects of our industry;

· our ability to offset declining U.S. demand for coal and achieve longer term growth in our business through our logistics revenue and export sales, including the significant impact of Chinese and Indian thermal coal import demand and production levels from other countries and basins on overall seaborne coal prices;

· the impact of any “trade wars” on our export business;

· railroad, export terminal and other transportation performance, costs and availability, including the availability of sufficient and reliable rail capacity to transport PRB coal, any development of future export terminal capacity and our ability to access capacity on commercially reasonable terms;

· the impact of our rail and terminal take-or-pay commitments if we do not meet our required export shipment obligations;

· weather conditions and weather-related damage that impact our mining operations, our customers, or transportation infrastructure, including the adverse impact on our costs and production volumes of the heavy rain experienced during the second quarter of 2018, particularly at our Antelope Mine;

· operational, geological, equipment, permit, labor, and other risks inherent in surface coal mining;

· future development or operating costs for our development projects exceeding our expectations or other factors adversely impacting our development projects;

· our ability to successfully acquire coal and appropriate land access rights at economic prices and in a timely manner and our ability to effectively resolve issues with conflicting mineral development that may impact our mine plans;

· the impact of additional asset impairment charges if required as a result of challenging industry conditions or other factors;

· our plans and objectives for future operations and the development of additional coal reserves;

· the impact of current and future environmental, health, safety, endangered species and other laws, regulations, treaties, executive orders, court decisions or governmental policies, or changes in interpretations thereof and third-party regulatory challenges, including additional requirements, uncertainties, costs, liabilities or restrictions adversely affecting the use, demand or price for coal, our mining operations or the logistics, transportation, or terminal industries;

· the impact of required regulatory processes and approvals to lease coal and obtain, maintain, and renew permits for coal mining operations or to transport coal to domestic and foreign customers, including third-party legal challenges to regulatory approvals that are required for some or all of our current or planned mining activities;59

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· any increases in rates or changes in regulatory interpretations or assessment methodologies with respect to royalties or severance and production taxes and the potential impact of associated interest and penalties;

· inaccurately estimating the costs or timing of our reclamation and mine closure obligations and our assumptions underlying reclamation and mine closure obligations;

· the availability of, disruptions in delivery or increases in pricing from third-party vendors of raw materials, capital equipment and consumables which are necessary for our operations, such as explosives, petroleum-based fuel, tires, steel, and rubber;

· our assumptions concerning coal reserve estimates;

· our relationships with, and other conditions affecting, our customers (including our largest customers who account for a significant portion of our total revenue) and other counterparties, including economic conditions and the credit performance and credit risks associated with our customers and other counterparties, such as traders, brokers, and lenders under any credit agreement and financial institutions with whom we maintain accounts or enter hedging arrangements;

· the results of our hedging programs and changes in the fair value of derivative financial instruments that are not accounted for as hedges;

· the negative impacts of the delisting of our common stock on March 26, 2019, including ~~the~~our ~~likelihood~~expectation that our existing common stock will be extinguished following confirmation of a Chapter 11 plan and that existing equity holders will not receive any consideration in respect of their equity interest, the possibility that any public market for our common stock will not exist in the future or that we will be able to relist our common stock on a national securities exchange, long-term adverse effects on our ability to raise capital, loss of confidence in the Company by suppliers, customers and employees, and the loss of institutional investor interest in our common stock, among other negative impacts;

· litigation and other contingencies;

· the authority of federal and state regulatory authorities to order any of our mines to be temporarily or permanently closed under certain circumstances; and

· other risk factors or cautionary language described from time to time in the reports and registration statements we file with the Securities and Exchange Commission, including those in Item 1A - Risk Factors in our 2018 Form 10-K and any updates thereto in our Forms 10-Q and Forms 8-K, including Item 1A of Part II of this report.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Explanatory Note

This Item 2 may contain forward-looking statements that involve substantial risks and uncertainties. When considering these forward-looking statements, you should keep in mind the cautionary statements in this report and our other Securities and Exchange Commission (“SEC”) filings, including the Risk Factors in Item 1A of our 2018 Form 10-K and Item 1A of Part II of this report. See also “Cautionary Notice Regarding Forward-Looking Statements” in Item 1 above.

This Item 2 is intended to help the reader understand our results of operations and financial condition. This discussion should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report and our other SEC filings, including our Audited Consolidated Financial Statements in Part I, Item 8 of our 2018 Form 10-K.

Recent Developments

~~Restructuring~~Reorganization

~~During~~In ~~the~~connection ~~fourth~~with ~~quarter~~Cloud Peak Energy Inc.’s and substantially all of ~~2018~~its direct and ~~through~~indirect ~~the~~subsidiaries’ ~~filing~~ongoing ~~date~~cases under Chapter 11 (“Chapter 11”) of ~~our~~Title ~~Quarterly~~11 ~~Report~~of onthe ~~Form 10-Q~~U.S. ~~for~~Code (the ~~period~~“Bankruptcy ~~ended~~Code”), ~~March~~on October 312, 2019, wethe ~~made~~United aStates ~~number~~Bankruptcy ofCourt ~~announcements~~for ~~regarding~~the ~~our~~District ~~engagement~~ of ~~various~~Delaware ~~advisors~~(the to“Bankruptcy ~~assist~~Court”) inentered ~~reviewing~~an ~~alternatives~~Order ~~including~~(I) Approving ~~the~~Sale ~~potential sale~~ of the ~~Company~~Debtors’ ~~and~~Assets toFree ~~assist~~and inClear ~~reviewing~~of ~~our~~Liens, ~~capital~~(II) Approving ~~structure~~Assumption and ~~strategic~~Assignment ~~restructuring~~of ~~alternatives. During~~Executory ~~that~~Contracts ~~time~~and Unexpired Leases, weand ~~experienced~~(III) Granting aRelated ~~number~~Relief of[Docket ~~adverse~~No. 674] ~~events~~(the ~~that~~“Sale ~~negatively~~Order”), ~~impacted~~pursuant ~~our~~to ~~financial~~which ~~results,~~the ~~liquidity~~Bankruptcy ~~and~~Court ~~future~~approved ~~prospects,~~the ~~which~~sale ~~raised~~of ~~substantial~~substantially ~~doubt~~all ~~about~~of ~~our~~the ~~ability~~Company’s tooperating ~~continue~~assets, asincluding athe ~~going~~Company’s ~~concern~~Spring Creek, ~~and~~Cordero ~~resulted~~Rojo inand ~~our~~Antelope ~~decision~~mines, to ~~seek~~Navajo ~~Chapter~~Transitional 11Energy ~~bankruptcy~~Company, ~~protection. See~~LLC ~~Item 7~~ (“~~Management’s~~NTEC”) ~~Discussion~~pursuant ~~and~~to ~~Analysis~~that ofcertain ~~Financial~~Asset ~~Condition~~Purchase ~~and~~Agreement ~~Results~~dated as of ~~Operations~~August 19, —2019 ~~Recent~~(as ~~Developments”~~amended, inthe ~~our~~“Asset ~~2018~~Purchase ~~Form 10-K~~Agreement”).

AsSubject ~~previously~~to ~~disclosed,~~the wesatisfaction ~~announced~~of acertain ~~Strategic~~closing ~~Alternatives~~conditions, ~~Review~~the intransactions ~~November 2018. Our~~contemplated ~~Board~~by ofthe ~~Directors,~~Asset ~~working~~Purchase ~~together~~Agreement ~~with~~are ~~its~~expected ~~management~~to ~~team~~close ~~and~~in ~~legal~~October 2019. Following ~~and~~the ~~financial~~sale ~~advisors,~~of ~~commenced~~substantially aall ~~review~~ of ~~strategic~~its ~~alternatives~~operating assets, ~~including a potential sale of~~ the Company~~. We~~ ~~engaged~~will ~~J.P.~~have ~~Morgan~~certain ~~Securities~~real ~~LLC~~estate asassets, ~~our~~expected ~~financial~~proceeds ~~advisor~~from ~~and~~the ~~Allen &~~Royalty ~~Overy LLP~~ (as ~~our~~defined ~~legal~~below) ~~counsel~~and incertain ~~connection~~debts ~~with our review of strategic alternatives. This fourth quarter 2018 process did~~ not ~~result~~settled inby athe ~~transaction~~sale. In ~~January 2019,~~connection wewith ~~announced~~ the ~~retention~~closing of ~~Centerview~~the ~~Partners~~sale, ~~LLC~~the asCompany ~~our~~agreed ~~investment~~to ~~banker,~~terminate ~~Vinson &~~substantially ~~Elkins~~all ~~LLP~~of asits ~~our legal advisor~~employees, and ~~FTI~~NTEC ~~Consulting, Inc.~~agreed ~~as our financial advisor~~ to ~~assist~~make usoffers ~~in our review~~ of ~~capital~~employment ~~structure~~to ~~and~~substantially ~~restructuring~~all ~~alternatives. We~~of ~~will~~the ~~continue~~terminated toemployees ~~work~~of ~~with our advisors throughout~~ the ~~Chapter 11 process~~Company.

On ~~May~~October 104, 2019 ~~(the “Petition Date”)~~, ~~Cloud Peak Energy Inc. (“CPE,”~~ the ~~“Company,”~~Debtors ~~or “we”) and substantially all of its wholly owned domestic subsidiaries~~ (~~the~~as ~~“Filing~~defined ~~Subsidiaries” and, together with CPE, the “Debtors”~~below) filed ~~voluntary petitions (collectively,~~ the ~~“Bankruptcy~~Joint ~~Petitions”) under~~ Chapter 11 ~~(“Chapter~~Plan ~~11”)~~ of ~~Title~~Cloud 11Peak ofEnergy ~~the U~~Inc.S. ~~Code~~and ~~(the~~Certain ~~“Bankruptcy Code”) in the United States Bankruptcy Court for the District~~ of ~~Delaware~~its ~~(the~~Debtor ~~“Bankruptcy~~Affiliates ~~Court”)~~[Docket No. 680]. ~~Pursuant~~On toOctober 14, an2019, ~~order entered by~~ the ~~Bankruptcy~~Debtors ~~Court,~~filed the ~~Chapter~~First 11Amended ~~cases~~Joint ~~(collectively, the “~~Chapter 11 ~~Cases”)~~Plan ~~are~~of ~~being jointly administered under the caption In re~~ Cloud Peak Energy Inc., etand ~~al.,~~Certain ~~Case~~of ~~No. 19-11047. Each~~its Debtor ~~continues~~Affiliates to[Docket ~~operate~~No. 711] ~~its~~(the ~~business as a~~ “~~debtor in possession~~Plan” ~~(“DIP”~~). The ~~under~~Debtors ~~the~~anticipate ~~jurisdiction~~seeking confirmation of the ~~Bankruptcy~~Plan ~~Court~~at ~~and~~a inhearing ~~accordance~~to ~~with~~be ~~the~~held ~~applicable~~before ~~provisions of~~ the Bankruptcy ~~Code~~Court ~~and~~on ~~the~~December 5, ~~orders~~2019 ofat ~~the~~9:30 ~~Bankruptcy~~a.m. (Eastern ~~Court~~Time).

OnHistory ~~the Petition Date, the Debtors filed a number~~ of motions with the Bankruptcy Court generally designed to stabilize their operations and facilitate the Debtors’ transition into Chapter 11. Certain of these motions seek authority from the Bankruptcy Court for the Debtors to make payments upon, or otherwise honor, certain obligations that arose prior to the Petition Date, including obligations related to employee wages, salaries and benefits, taxes, and certain vendors and other providers essential to the Debtors’ businesses. On or before June 17, 2019, the Bankruptcy Court approved the relief sought in these motions on a final basis.Restructuring

~~The~~During ~~Debtors~~the ~~sought~~fourth toquarter ~~sell~~of ~~all~~2018 orand ~~substantially~~through ~~all~~the filing date of ~~their~~our ~~assets~~Quarterly ~~pursuant~~Report toon ~~Section~~Form ~~363~~10-Q for the period ended March 31, 2019, we made a number of announcements regarding our engagement of various advisors to assist in reviewing alternatives including the ~~Bankruptcy~~potential ~~Code~~sale of the Company and to assist in reviewing our capital structure and strategic restructuring alternatives. ToDuring ~~facilitate~~that ~~their~~time, ~~marketing~~we experienced a number of adverse events that negatively impacted our financial results, liquidity and ~~sales~~future ~~process~~prospects, ~~the~~which ~~Debtors~~raised ~~conducted~~substantial andoubt ~~auction~~about ~~(the~~our ability to continue as a going concern, and resulted in our decision to seek Chapter 11 bankruptcy protection. See Part II, Item 7 “~~Auction~~Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments”) onin our 2018 Form 10-K.

59As previously disclosed, we announced a Strategic Alternatives Review in November 2018. Our Board of Directors, working together with its management team and legal and financial advisors, commenced a review of strategic alternatives, including a potential sale of the Company. We engaged J.P. Morgan Securities LLC as our

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~~August 15,~~financial ~~2019~~advisor and ~~August~~Allen ~~16,~~& ~~2019,~~Overy ~~pursuant~~LLP toas ~~bidding~~our ~~procedures~~legal ~~approved~~counsel byin ~~the~~connection ~~Bankruptcy~~with ~~Court. Following~~our ~~the~~review ~~completion~~ of ~~the~~strategic ~~Auction,~~alternatives. This onfourth ~~August 16,~~quarter ~~2019,~~2018 ~~the~~process ~~Debtors~~did ~~announced~~not ~~that~~result ~~the~~in ~~bid~~a ~~submitted by Navajo Transitional Energy Company, LLC (“NTEC”) was the winning bid (the “Winning Bid”), and the bid submitted by Aspen Coal & Energy, LLC was the backup bid~~transaction. OnIn ~~August~~January ~~19,~~ 2019, ~~the~~we ~~Debtors~~announced ~~and NTEC entered into an Asset Purchase Agreement (~~the ~~“Asset~~retention ~~Purchase Agreement”) providing for the acquisition by NTEC~~ of ~~substantially~~Centerview ~~all~~Partners ofLLC ~~the~~as ~~Debtors’~~our ~~assets,~~investment ~~including the Spring Creek~~banker, ~~Cordero~~Vinson & ~~Rojo~~Elkins ~~and~~LLP ~~Antelope~~as ~~mines~~our ~~(the~~legal ~~“Assets”)~~advisor, inand ~~exchange~~FTI ~~for the payment of $15.7 million of cash at closing~~Consulting, ~~a $40~~ Inc.0 ~~million~~as ~~first~~our ~~lien~~financial ~~promissory~~advisor ~~note secured by a first lien on all assets of NTEC (including the Assets), but subordinated~~ to ~~collateral~~assist ~~for~~us certain permitted senior lien debt (not to exceed $120 million) (the “Purchaser Take-Back Note”) and a $0.15/ton royalty, payable quarterly for a period of five years, on all tons produced and sold at the Antelope and Spring Creek mines, and on all tons produced and sold in ~~excess~~our ofreview ~~10 million tons per year at the Cordero Rojo mine, as well as the assumption~~ of ~~coal~~capital ~~production-related~~structure ~~pre-~~ and ~~post-petition~~restructuring tax liabilities and coal royalty payments in an amount projected to be approximately $94 million as of September 30, 2019, all reclamation obligations, up to $20 million in post-petition accounts payables, and cash to fund approximately $1alternatives.~~1 million in cure costs.~~ ~~The~~We ~~terms~~will ofcontinue ~~the Purchaser Take-Back Note are described in a term sheet attached as Exhibit E~~ to ~~the~~work ~~Asset~~with ~~Purchase~~our ~~Agreement~~advisors ~~filed~~throughout ~~as an exhibit to~~ the ~~Current~~Chapter ~~Report~~11 ~~on Form 8-K on August 20, 2019~~process. ~~The Assets do not include certain immaterial non-operating real estate assets, and the Company is evaluating its options to sell these assets.~~

On May 10, 2019 (the “Petition Date”), Cloud Peak Energy Inc. (“CPE,” the “Company,” or “we”) and substantially all of its wholly owned domestic subsidiaries (the “Filing Subsidiaries” and, together with CPE, the “Debtors”) filed voluntary petitions (collectively, the “Bankruptcy Petitions”) under Chapter 11 the Bankruptcy Code in the Bankruptcy Court. Pursuant to an order entered by the Bankruptcy Court, the Chapter 11 cases (collectively, the “Chapter 11 Cases”) are being jointly administered under the caption In re Cloud Peak Energy Inc., et al., Case No. 19-11047. Each Debtor continues to operate its business as a “debtor in possession” (“DIP”) under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court.

On the Petition Date, the Debtors filed a number of motions with the Bankruptcy Court generally designed to stabilize their operations and facilitate the Debtors’ transition into Chapter 11. Certain of these motions seek authority from the Bankruptcy Court for the Debtors to make payments upon, or otherwise honor, certain obligations that arose prior to the Petition Date, including obligations related to employee wages, salaries and benefits, taxes, and certain vendors and other providers essential to the Debtors’ businesses. On or before June 17, 2019, the Bankruptcy Court approved the relief sought in these motions on a final basis.

The Debtors sought to sell all or substantially all of their operating assets pursuant to Section 363 of the Bankruptcy Code. To facilitate their marketing and sales process, the Debtors conducted an auction (the “Auction”) on August 15, 2019 and August 16, 2019, pursuant to bidding procedures approved by the Bankruptcy Court. Following the completion of the Auction, on August 16, 2019, the Debtors announced that the bid submitted by Navajo Transitional Energy Company, LLC (“NTEC”) was the winning bid (the “Winning Bid”), and the bid submitted by Aspen Coal & Energy, LLC was the backup bid. On August 19, 2019, the Debtors and NTEC entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) providing for the acquisition by NTEC of substantially all of the Debtors’ assets, including the Spring Creek, Cordero Rojo and Antelope mines (the “Assets”), in exchange for the payment of $15.7 million of cash at closing, a $40.0 million first lien promissory note secured by a first lien on all assets of NTEC (including the Assets), but subordinated to collateral for certain permitted senior lien debt (not to exceed $120 million) (the “Purchaser Take-Back Note”) and a $0.15/ton royalty, payable quarterly for a period of five years, on all tons produced and sold at the Antelope and Spring Creek mines, and on all tons produced and sold in excess of 10 million tons per year at the Cordero Rojo mine (the “Royalty”), as well as the assumption of coal production-related pre- and post-petition tax liabilities and coal royalty payments in an amount estimated to be approximately $87.5 million as of September 30, 2019, all reclamation obligations, up to $20 million in post-petition accounts payables, and cash to fund approximately $1 million in cure costs. The terms of the Purchaser Take-Back Note are described in a term sheet attached as Exhibit E to the Asset Purchase Agreement filed as an exhibit to the Current Report on Form 8-K on August 20, 2019. Following the sale of substantially all of its operating assets, the Company will have certain real estate assets, the Royalty, and certain debts not settled by the sale. In connection with the closing of the sale, the Company agreed to terminate substantially all of its employees, and NTEC agreed to make offers of employment to substantially all of the terminated employees of the Company.

NTEC and the Company have made customary representations, warranties and covenants in the Asset Purchase Agreement. The closing of the transactions contemplated by the Asset Purchase Agreement are subject to a number of closing conditions, including (i) the entry of an order by the Bankruptcy Court approving the sale of the Assets (the “Sale Order”); (ii) the material accuracy of the representations and warranties of the parties; (iii) material compliance with the obligations of each party set forth in the Asset Purchase Agreement; (iv) the release of all liens and encumbrances pursuant to the Sale Order; (v) to the extent applicable, the waiting period applicable to the transactions contemplated by the Asset Purchase Agreement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall have expired; and (vi) NTEC shall have put in place with the appropriate governmental body the applicable reclamation bonds, letters of credit and other sources of collateral and financial assurance necessary to transfer the permits and licenses of the Company and its affiliates to NTEC.

On August 19, 2019, the Bankruptcy Court approved the transactions contemplated by the Asset Purchase Agreement, subject to the Debtors finalizing and submitting a proposed Sale Order. As part of the finalization of the proposed Sale Order, the U.S. Justice Department has asserted that the Sale Order should expressly require NTEC to assume any potential exposure with respect to certain open federal royalty audits and a related appeal. The parties to the Asset Purchase Agreement are in discussion with respect to this asserted requirement. The Justice Department represents the interests of the U.S. Government in Chapter 11 bankruptcy cases. Subject to the satisfaction of closing conditions, the transactions contemplated by the Asset Purchase Agreement are expected to close in October 2019. The Company anticipates filing with and seeking confirmation from the Bankruptcy Court of a Chapter 11 plan in the near term.62

The filing of the Bankruptcy Petitions constituted an event of default that accelerated our obligations under the indentures governing each of the 6.375% Senior Notes due 2024 (the “2024 Notes”) and 12.00% Second Lien Senior Secured Notes due 2021 (the “2021 Notes”, and together with the 2024 Notes, the “Notes”) all as further described in Note 24, “Subsequent Events” to the Unaudited Condensed Consolidated Financial Statements in Item 1.

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~~For~~On August 19, 2019, the ~~duration~~Bankruptcy ofCourt approved the ~~Chapter~~transactions 11contemplated ~~Cases~~by the Asset Purchase Agreement, subject to the ~~Company’s~~Debtors ~~operations~~finalizing and ~~its~~submitting ~~ability~~a toproposed ~~develop~~Sale ~~and~~Order. On ~~execute~~September 30, ~~its~~2019, ~~business~~the ~~plan~~Asset ~~are~~Purchase ~~subject~~Agreement was amended to, ~~risks~~among other things, provide for NTEC to acquire certain additional assets and ~~uncertainties~~assume ~~associated~~certain ~~with~~additional ~~the~~liabilities, ~~Chapter~~to 11modify ~~Cases. As~~NTEC’s aassumption ~~result~~and rejection of ~~these~~certain ~~risks~~contracts and ~~uncertainties~~leases, to provide that the Company’s ~~assets,~~bear ~~liabilities~~certain expenses, ~~officers~~including ~~and/or~~with ~~directors~~respect ~~could~~to becertain ~~significantly~~cure ~~different~~costs ~~following~~and administrative liabilities related to the ~~outcome~~Purchaser Take-Back Note, and to modify certain negative covenant terms of the ~~Chapter~~Purchaser 11Take-Back ~~Cases~~Note. On October 2, ~~and~~2019, the ~~description~~Bankruptcy Court entered an Order (I) Approving Sale of ~~its~~the ~~operations~~Debtors’ Assets Free and Clear of Liens, ~~properties~~(II) Approving Assumption and ~~capital~~Assignment ~~plans~~of ~~included~~Executory inContracts ~~this~~and ~~Form~~Unexpired Leases, and (III) ~~10-Q~~Granting ~~may~~Related ~~not~~Relief ~~accurately~~[Docket ~~reflect~~No. 674], ~~its~~pursuant ~~operations~~to which the Bankruptcy Court approved the sale of substantially all of the Company’s operating assets, ~~properties~~including the Company’s Spring Creek, Cordero Rojo and ~~capital~~Antelope ~~plans~~mines, ~~following~~to NTEC pursuant to the ~~Chapter~~Asset 11Purchase ~~Cases~~Agreement. Subject to the satisfaction of certain closing conditions, the transactions contemplated by the Asset Purchase Agreement are expected to close in October 2019.

WeOn ~~expect~~October 14, ~~our~~2019 ~~mining~~the ~~operations~~Debtors ~~and~~filed ~~reclamation~~the ~~activities~~Plan to[Docket ~~continue~~No. 711], inamended from the ~~ordinary~~original ~~course~~filed on October 4, 2019 [Docket No. 680]. The Debtors anticipate seeking confirmation of ~~business~~the Plan at a hearing to be held before the Bankruptcy Court on December 5, 2019 at 9:30 a.m. (Eastern Time).

AsThe aPlan ~~result~~contemplates of the ~~Chapter~~following 11treatment ~~Cases,~~of weclaims ~~currently~~against ~~expect~~and tointerests ~~delay~~in ~~our~~the ~~2019 annual stockholders meeting.~~Debtors:

· Holders of priority claims and secured claims (other than those arising under the prepetition 2021 Notes (as defined below)), including amounts outstanding under the DIP Credit Agreement (as defined below), will be unimpaired;

· Holders of claims under the prepetition 2021 Notes will be impaired and will receive their pro rata proportionate share of (i) the Purchaser Take-Back Note, (ii) the New Parent Equity (as defined in the Plan), representing 100% of the common stock in the reorganized Company, (iii) $34.5 million in reinstated prepetition 2021 Notes, as amended pursuant to an amended indenture, and (iv) a cash distribution;

· Holders of general unsecured claims will be impaired and will receive their pro rata share of an aggregate cash distribution of up to $1.25 million; and

· Holders of the Company’s existing common stock will be impaired and will not receive any recovery. All of the Company’s existing common stock with be extinguished by the Plan.

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are impaired under the Plan and may, in certain circumstances, receive a distribution under the Plan. Accordingly, holders of claims in the Voting Classes have the right to vote to accept or reject the Plan.

The filing of the Bankruptcy Petitions constituted an event of default that accelerated our obligations under the indentures governing each of the 6.375% Senior Notes due 2024 (the “2024 Notes”) and 12.00% Second Lien Senior Secured Notes due 2021 (the “2021 Notes”, and together with the 2024 Notes, the “Notes”) all as further described in Note 1, “Organization and Business” to the Unaudited Condensed Consolidated Financial Statements in Item 1.

For the duration of the Chapter 11 Cases, the Company’s operations and its ability to develop and execute its business plan are subject to risks and uncertainties associated with the Chapter 11 Cases. As a result of these risks and uncertainties, the Company’s assets, liabilities, officers and/or directors are expected to be significantly different following the sale pursuant to the Asset Purchase Agreement and the outcome of the Chapter 11 Cases, and the description of its operations, properties and capital plans included in this Form 10-Q is not expected to accurately reflect its operations, properties and capital plans following the sale pursuant to the Asset Purchase Agreement and the Chapter 11 Cases.

We expect our mining operations and reclamation activities to continue in the ordinary course of business, pending the sale under the Asset Purchase Agreement.

Sale and Plan Support Agreement

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The Amended and Restated Support Agreement provides, among other things, that:

· the holders of the Notes party thereto (the “Noteholders”) will support the sale process the Debtors will conduct during their Chapter 11 Cases;

· the Noteholders will vote in favor of an orderly plan of liquidation that complies with certain provisions of the Amended and Restated Support Agreement;

· the holders of 2021 Notes will consent to priming liens and the use of cash collateral in connection with the DIP Credit Agreement (described below);

· certain of the Noteholders have provided the DIP Credit Agreement;

· the Noteholders consent to receiving distributions of any sale proceeds after the payment of certain administrative and priority claims;

· the Company and the subsidiary guarantors under the indenture governing the 2024 Notes reaffirm the guarantees under the 2024 Notes.

61The Support Agreement Amendment also provides consent by the parties thereto of certain uses of cash on hand by the Company and certain of its subsidiaries prior to any sale, including to pay “Critical Vendor Payments” (as defined in the Support Agreement Amendment), certain administrative expense and priority claims, expenses arising under certain executory contracts and unexpired leases in connection with a sale, and certain professional fees and expenses relating to key employee incentive and retention plans.

The Support Agreement Amendment also provides that the Plan shall include an agreement to share certain proceeds between the holders of Contingent Roll-Up Loans (as defined in the DIP Credit Agreement) under the DIP Credit Agreement and holders of 2021 Notes, on the one hand, and holders of unsecured claims, on the other (the “Unsecured Creditor Sharing Agreement”). The Unsecured Creditor Sharing Agreement provides that, upon recovery by the holders of 2021 Notes and Contingent Roll-Up Loans of at least 50% of their total claims, excess amounts up to 75% of such total claims will be distributed 90% to holders of such claims and 10% to holders of unsecured claims. Distributions in excess of 75% of the total claims of the holders of 2021 Notes and Contingent Roll-Up Loans will be paid 80% to holders of such claims and 20% to holders of unsecured claims. Following the Auction and entry of the Sale Order approving the NTEC sale, the Official Unsecured Creditors’ Committee agreed to a compromise and settlement, as set forth in the Plan as filed on October 4, 2019, under which holders of Allowed General Unsecured Claims (as defined in the Plan) will be entitled to share pro rata in the “General Unsecured Claims Cash Distribution Amount” (as defined in the Plan), which is an amount of $1.25 million, in full and final satisfaction of such claims. As a result of the satisfaction of the Specified Tax Condition (as defined in the DIP Credit Agreement) prior to the date of the Second Borrowing (as defined in the DIP Credit Agreement), no Contingent Roll-Up Loans were issued pursuant to the DIP Credit Agreement.

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actions against holders of general unsecured claims, (ii) the payment of fees of the 2024 Notes trustee, (iii) the appointment of a general unsecured claims administrator and (iv) the effectuation of the Unsecured Creditor Sharing Agreement (as defined below).

The Support Agreement Amendment also provides consent by the parties thereto of certain uses of cash on hand by the Company and certain of its subsidiaries prior to any sale, including to pay “Critical Vendor Payments” (as defined in the Support Agreement Amendment), certain administrative expense and priority claims, expenses arising under certain executory contracts and unexpired leases in connection with a sale, certain professional fees and expenses relating to key employee incentive and retention plans.

Debtor-In-Possession Financing

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Proceeds of the New Money Loans are used only in connection with an approved budget (adjusted for agreed variances), for the purposes of: (i) general corporate and working capital purposes; (ii) costs of the administration of the Chapter 11 Cases; and (iii) payment of transaction costs, fees and expenses with respect to the DIP Credit Agreement. New Money Loans were made available in two or, if the Specified Tax Condition was not satisfied at the time of the Second Borrowing, three draws, each subject to the satisfaction of certain conditions under the DIP Credit Agreement, including compliance with a Borrowing Base (as defined in the DIP Credit Agreement). The Debtors may request draws of funds from the escrow account on a weekly basis, subject to satisfaction of certain conditions, including the absence of defaults, that the draw is in accordance with the approved budget, that the SAPSA (as defined in the DIP Credit Agreement) remain in full force and effect and other customary conditions. Amounts that remain in the escrow account upon termination of the DIP Credit Agreement are returned to the collateral agent to pay off obligations outstanding in respect of the DIP Credit Agreement in the order provided therein. The Debtors borrowed $10 million for the first borrowing and $25 million for the second borrowing under the DIP Credit Agreement on May 16, 2019 and August 1, 2019, respectively, which were funded into the escrow account. There was no third borrowing as the Specified Tax Condition was satisfied at the time of the Second Borrowing.

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existing lenders (the “Backstop Lenders”) of approximately $3.8 million of New Money Loans, and the Non-Backstop Lenders and Backstop Lenders exchanged a total of $28 million of their 2021 Notes for Roll-Up Loans.

The DIP Credit Agreement also provides for up to $10 million in uncommitted incremental term loans. Roll-Up Loans would also be incurred in an amount of up to 80% of such incremental loans if they are provided.

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Automatic Stay and (V) Granting Related Relief [Docket No. 407] pursuant to which the Bankruptcy Court approved the DIP Credit Agreement, as amended.

On August 8, 2019, the DIP Credit Agreement was further amended to, among other things, extend the milestone dates by which (i) an auction must commence for substantially all assets of the Debtors and (ii) a sale order under Section 363 of the Bankruptcy Code by the Bankruptcy Court must be entered.

On September 13, 2019, the DIP Credit Agreement was further amended to, among other things, (i) extend the milestone dates set forth in the DIP Credit Agreement by which a sale order under Section 363 of the Bankruptcy Code by the Bankruptcy Court must be entered and (ii) waive the event of default ~~arising,~~that ~~and~~had ~~which~~occurred ~~continues~~and ~~arising,~~was continuing under the DIP Credit Agreement as a result of non-compliance with the Approved Budget (as defined in the DIP Credit Agreement) due to an Unpermitted Variance (as defined in the DIP Credit Agreement) with respect to receipts for the week ending on September 6, 2019.

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Amendment to A/R Securitization Program

As previously disclosed, Cloud Peak Energy Resources LLC (“CPE Resources”), a wholly owned subsidiary of the Company, is party to an Accounts Receivable Securitization Program (the “A/R Securitization Program”) with PNC Bank, National Association, as administrator. On May 15, 2019, we entered into a Second Amended and Restated Receivables Purchase Agreement (the “Receivables Purchase Agreement Amendment”), by and among Cloud Peak Energy Receivables LLC (“CPE Receivables”), CPE Resources, the various Conduit Purchasers and Related Committed Purchasers (collectively, the “Purchasers”), LC Participants and Purchaser Agents from time to time party thereto, PNC Bank, National Association, as Administrator (the “Administrator”), and PNC Capital Markets LLC, as Structuring Agent. Prior to entering into the Receivables Purchase Agreement Amendment, it was approved by the Bankruptcy Court on May 14, 2019.

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Nonpayment of Interest Due Under the Senior Notes

CPE Resources elected not to make an interest payment under the 2024 Notes of approximately $1.8 million, which was due on March 15, 2019. The indenture governing the 2024 Notes (the “2024 Notes Indenture”) provided a 30-day grace period that extended the last date to make the interest payment to April 14, 2019 before an event of default would occur under the 2024 Notes Indenture. As a result of CPE Resources’ decision not to make the interest payment by April 14, 2019, an event of default occurred under the 2024 Notes Indenture.

CPE Resources elected not to make an interest payment obligation under the 2021 Notes of approximately $17.4 million, which was due on May 1, 2019. The indenture governing the 2021 Notes (the “2021 Notes Indenture”) provides a 30-day grace period that extended the latest date for making this interest payment to May 31, 2019, before an event of default would occur under the 2021 Notes Indenture. As a result of CPE ~~Resources’ decision not to make the interest payment by May 31, 2019, an event of default occurred under the 2024 Notes Indenture.~~

~~The filing of the Bankruptcy Petitions on May 10, 2019, constituted an event of default that accelerated our obligations under the documents governing each of our 2024 Notes and 2021 Notes.~~68

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Resources’ decision not to make the interest payment by May 31, 2019, an event of default occurred under the 2024 Notes Indenture.

The filing of the Bankruptcy Petitions on May 10, 2019 constituted an event of default that accelerated our obligations under the documents governing each of our 2024 Notes and 2021 Notes.

As of ~~June~~September 30, 2019, CPE Resources had $~~290~~262.4 million in outstanding indebtedness under the 2021 Notes and $56.4 million in outstanding indebtedness under the 2024 Notes.

Noncompliance with the NYSE’s Continued Listing Requirements and Delisting of our Common Stock

As disclosed in our Current Report on Form 8-K on March 26, 2019, we were notified by the NYSE that they had determined our common stock was no longer suitable for listing on the NYSE based on “abnormally low” price levels, pursuant to Section 802.01D of the NYSE Listed Company Manual, and commenced proceedings to delist our common stock. Trading in our common stock was suspended immediately. Our common stock began trading on the OTC Pink on March 27, 2019 and trades under the symbol “CLDPQ”. WeUnder ~~expect~~the ~~that~~terms of the Plan submitted to the Bankruptcy Court, our existing common stock will be extinguished following confirmation of a Chapter 11 plan, and existing equity holders ~~are~~will ~~unlikely~~not to receive any consideration in respect of their equity interests.

Overview

Our Antelope Mine and Cordero Rojo Mine are located in Wyoming and our Spring Creek Mine is located in Montana. Our mines produce subbituminous thermal coal with low sulfur content, and we sell our coal primarily to domestic and foreign electric utilities. Thermal coal is primarily consumed by electric utilities and industrial consumers as fuel for electricity generation. In 2018, the coal we produced generated approximately 2% of the electricity produced in the U.S. As of December 31, 2018, we controlled approximately 1.0 billion tons of proven and probable reserves. We do not produce any metallurgical coal. Our Cordero Rojo Mine was impaired down to the fair value of associated land and certain mining equipment in the fourth quarter of 2018. We also impaired our Antelope Mine assets during the second quarter of 2019 as a result of the bid we received during the sale process that is part of our Chapter 11 filing. See Note 6 of Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and Note 7 of Notes to Consolidated Financial Statements in Part II, Item 8 of our 2018 Form 10-K for further details.

65In addition, we have two development projects, both located in the Northern PRB. For purposes of this report, the term “Northern PRB” refers to the area within the PRB that lies within Montana and the northern part of Sheridan County, Wyoming. The Youngs Creek project is an undeveloped surface mine project located in Wyoming, seven miles south of our Spring Creek Mine and contiguous with the Wyoming-Montana state line. The Big Metal project is located near the Youngs Creek project on the Crow Indian Reservation in southeast Montana. Any future development and coal production from these two projects remains subject to significant risk

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and ~~probable reserves~~uncertainty. WeThese dotwo ~~not~~development ~~produce~~projects ~~any~~were ~~metallurgical~~fully ~~coal. Our~~impaired ~~Cordero~~in ~~Rojo~~the ~~Mine~~fourth ~~was~~quarter ~~impaired~~of ~~down~~2018, toother than the fair value of associated land. Our ~~and~~Spring ~~certain~~Creek ~~mining~~Mine ~~equipment~~assets inwere ~~the fourth quarter of 2018. We~~ also significantly impaired ~~our Antelope Mine assets~~ during the second quarter ~~of 2019~~ as a result of the bid we received during the sale process that is part of our Chapter 11 filing. See Note 6 of Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and Note 7 of Notes to Consolidated Financial Statements in Part II, Item 8 of our 2018 Form 10-K for further details.

In addition, we have two development projects, both located in the Northern PRB. For purposes of this report, the term “Northern PRB” refers to the area within the PRB that lies within Montana and the northern part of Sheridan County, Wyoming. The Youngs Creek project is an undeveloped surface mine project located in Wyoming, seven miles south of our Spring Creek Mine and contiguous with the Wyoming-Montana state line. The Big Metal project is located near the Youngs Creek project on the Crow Indian Reservation in southeast Montana. Any future development and coal production from these two projects remains subject to significant risk and uncertainty. These two development projects were fully impaired in the fourth quarter of 2018, other than the fair value of associated land. Our Spring Creek Mine assets were also significantly impaired during the second quarter as a result of the bid received during the sale process that is part of our Chapter 11 filing. See Note 6 of Notes to Unaudited Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q and Note 7 of Notes to Consolidated Financial Statements in Item 8 of our 2018 Form 10-K for further details.

Our logistics business provides a variety of services designed to facilitate the sale and delivery of coal. These services include the purchase of coal from third parties or from our owned and operated mines, coordination of the transportation and delivery of purchased coal, negotiation of take-or-pay rail agreements and take-or-pay port agreements, and demurrage settlement with vessel operators. For a discussion of our rail and port agreements, see Note 5 of Notes to Unaudited Condensed Consolidated Financial Statements in Item 1.

Segment Information

Our reportable segments include Owned and Operated Mines and Logistics and Related Activities. For a discussion of these segments, see Note 4 of Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1.

Core Business Operations

Our key business drivers include the following:

· the volume of coal sold by our Owned and Operated Mines segment;

· the price for which we sell our coal;

· the costs of mining, including labor, repairs and maintenance, fuel, explosives, depreciation of capital equipment, and depletion of coal leases;

· the amount of royalties, severance taxes, and other governmental levies that we pay;

· capital expenditures to acquire property, plant and equipment;

· the volume of deliveries coordinated by our Logistics and Related Activities segment to customer contracted destinations;

· the revenue we receive for our logistics services; and

· the costs for logistics services, rail and port charges for coal sales made on a delivered basis, including demurrage, and any take-or-pay charges.

66The volume of coal that we sell in any given year is driven by global and domestic demand for coal-generated electric power. Demand for coal-generated electric power may be affected by many factors including weather patterns, natural gas prices, railroad performance, the availability of coal-fired and alternative generating capacity and utilization, the closure of coal-fired power plants, environmental and legal challenges, political and regulatory factors, energy policies, international and domestic economic conditions, currency exchange rate fluctuations, and other factors discussed in this Part 1, Item 2 and in our 2018 Form 10-K.

The price at which we sell our coal is a function of the demand for coal relative to the supply. We typically seek to enter into multi-year contracts with our customers, which helps mitigate the risks associated with any short-term imbalance in supply and demand. We have historically entered each year with expected production related to domestic sales effectively fully sold. This strategy helped us run our mines at predictable production rates, which improved control of operating costs. In recent years, our business has become more variable and less predictable because utilities are adjusting their purchasing pattern based on natural gas prices, weather, and

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~~The~~other ~~volume~~factors ofand ~~coal~~have ~~that~~also webeen ~~sell~~increasingly inpurchasing ~~any~~coal ~~given year is driven by global and domestic demand~~ for ~~coal-generated~~shorter ~~electric power~~terms. ~~Demand~~As ~~for coal-generated electric power may be affected by many factors including weather patterns, natural gas prices, railroad performance, the availability~~ of ~~coal-fired and alternative generating capacity and utilization~~October 11, ~~the closure of coal-fired power plants~~2019, ~~environmental~~we ~~and~~had ~~legal~~current ~~challenges,~~commitments ~~political~~to ~~and~~sell ~~regulatory~~approximately ~~factors,~~48.6 ~~energy~~million ~~policies,~~tons ~~international~~for ~~and domestic economic conditions, currency exchange rate fluctuations, and other factors discussed in this Item 2 and in our 2018 Form 10-K~~2019.

As is common in the PRB, coal seams at our existing mines naturally deepen, resulting in additional overburden to be removed at additional cost. We have experienced increased operating costs for longer haul distances, maintenance and supplies, and employee wages and salaries. We have used derivative financial instruments to help manage our exposure to diesel fuel prices. In July 2018, we entered into West Texas Intermediate (“WTI”) derivative financial instruments to hedge our diesel fuel costs for the remainder of 2018 and all of 2019. We closed out these positions in March 2019, and no longer hold any derivative financial instruments.

We incur significant capital expenditures to maintain, update, and expand our mining equipment, surface land holdings, and coal reserves. As the costs of acquiring federal coal leases and associated surface rights increase, our depletion costs also increase.

The volume of coal sold on a delivered basis is influenced by international and domestic market conditions. Coal sold on a delivered basis to customer contracted destinations, including sales to Asian customers, involves us arranging and paying for logistics services, which can include rail, rail car hire, vessel chartering, and port charges, including any demurrage incurred and other costs. These logistics costs are affected by volume, various scheduling considerations, and negotiated rates for rail and port services. We have exposure to take-or-pay commitments for our rail and port committed capacities. For a discussion of our rail and port agreements, see Note 5 of Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1.

Current Considerations

Owned and Operated Mines Segment

Mine shipments to domestic customers of 11.3 million tons for the three months ended June 30, 2019 increased from 8.9 million tons in the three months ended March 31, 2019. Railroad performance improved in the second quarter, helping us increase shipments compared to the first quarter of this year when flooding in large sections of the Midwestern and Southern U.S. severely impacted rail operations. Despite setbacks caused by additional flooding later in the second quarter, the railroads’ efforts to reroute trains and repair damaged infrastructure significantly restored PRB deliveries by the end of June. We expect rail performance at our mines to continue to improve in the third quarter of 2019 as the railroads continue to bring their operations back into balance. The unexpected closure of two competitor PRB coal mines on July 1, 2019 enhanced train line-ups available for loading committed sales at our mines.

Energy Ventures Analysis estimates there were 49 million tons of PRB coal inventories on utility stockpiles at the end of July 2019, a decline of 7.1 million tons from July 2018 levels. Customers focused on rebuilding inventory in the second quarter by dispatching cheap natural gas over coal.

Natural gas prices were in the range of $2.50 per MMBtu for most of the second quarter of 2019. Natural gas production continued to grow in the second quarter, averaging a record 90.1 billion cubic feet per day. Coupled with weak power burn caused by a late start to summer, this production growth allowed for strong

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storage injections. As of August 16, 2019, U.S. Energy Information Administration data showed that natural gas inventories are now 15% above year ago levels and within the 5-year range.

Logistics and Related Activities Segment

Strong Indonesian coal exports, delayed summer heating demand, and Chinese import restrictions weakened international coal pricing during the second quarter. The international Newcastle thermal coal price index declined from around $90 per tonne to under $70 per tonne at the end of the second quarter, an approximate 20% drop from the first quarter of 2019. Prices were $63 as of August 23, 2019. The Kalimantan 5000 GAR index price, against which the Spring Creek Mine coal typically tracks, decreased 8% during the second quarter as compared to the first quarter of 2019. As of August 23, 2019, the Kalimantan 5000 GAR index price was below $47 per tonne. The Kalimantan to Newcastle spread is now again within its historical range.

Based on estimates through June 2019, year-to-date thermal imports into China increased 1.1 million tonnes, or 1%, compared to June 2018. China’s electricity generation increased by 5% through June with the largest portion of this increase coming from thermal coal generation.

Thermal coal imports to India increased by 16% through June compared to 2018. After a weak first quarter, power generation was strong in the second quarter. For the first half of 2019, power generation from coal increased 2% compared to 2018.

We exported 0.7 million tons during the three months ended June 30, 2019 compared to 1.3 million tons during the three months ended June 30, 2018. Uneconomic pricing and lower demand for coal in South Korea, our primary market, caused fewer tons to be sold during the second quarter. Sales have picked up for the second half of 2019 as customers bought tons for the summer heating season. We are fully sold for the third quarter and continue to layer in sales for the fourth quarter.

Asset Impairments

In the fourth quarter of 2018, we recorded an impairment of $681.6 million on the long-lived assets of our Cordero Rojo Mine as well as our two development projects. See Note 7 of Notes to Consolidated Financial Statements in Part II, Item 8 of our 2018 Form 10-K for further details. During the second quarter of 2019, we recorded an additional impairment of $621 million to reduce the carrying value of our remaining assets to their fair value as determined under the income approach based primarily on cash flows from the Winning Bid received as part of our Chapter 11 Bankruptcy auction process. See Note 6 of Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q. See Part1, Item 1A in our 2018 Form 10-K - “Risk Factors—Risks Related to Our Business and Industry—We may not recover our investments in our mining, exploration, port access rights, development projects, and other assets, which may require us to recognize impairment charges related to those assets.”

Environmental and Other Regulatory Matters

Federal, state, and local authorities regulate the U.S. coal mining industry with respect to various matters, including air quality standards, water pollution, plant and wildlife protection, the discharge of materials into the environment, and the effects of mining on surface and groundwater quality and availability. These laws and regulations have had, and will continue to have, a significant adverse effect on our production costs and our competitive position relative to certain other sources of electricity generation. Future laws, regulations, or orders, including those relating to global climate change, may cause coal to become a less attractive fuel source, thereby reducing coal’s share of the market for fuels and other energy sources used to generate electricity. See “Climate Change Regulatory Environment” below and Part I—Item I. Business—“Environmental and Other Regulatory Matters” in our 2018 Form 10-K for additional climate disclosures.

On July 1, 2016 the U.S. Department of the Interior (“DOI”) published the final Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation Reform Rule (“2016 Valuation Rule”). This rule was developed by the Office of Natural Resources Revenue to significantly change the manner in which non-arm’s length sales of natural resources from federal lands are valued for royalty purposed by mandating a net-back calculation from the first third-party sale and introducing a ‘default rule’ that will require substantial judgement. On February 27, 2017, the DOI postponed implementation of the 2016 Valuation Rule pending review of several petitions that were filed challenging the rule, including one from Cloud Peak Energy. On April 4, 2017, the DOI announced its intention to repeal the 2016 Valuation Rule and stated it would instead return to the valuation benchmarks which had been

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first third-party sale and introducing a ‘default rule’ that will require substantial judgement. On February 27, 2017, the DOI postponed implementation of the 2016 Valuation Rule pending review of several petitions that were filed challenging the rule, including one from Cloud Peak Energy. On April 4, 2017, the DOI announced its intention to repeal the 2016 Valuation Rule and stated it would instead return to the valuation benchmarks which had been consistently and successfully utilized by the energy industry since the late 1980’s to ensure that the royalty amount paid was based on the value of the coal severed while the DOI reconsidered whether the changes made by the 2016 Valuation Rule were warranted. Subsequently, the states of California and New Mexico filed suit against the DOI seeking to reinstate the 2016 Valuation Rule. On March 29, 2019, the Northern District of California ruled in favor of the Plaintiffs, thereby reinstating the 2016 Valuation Rule retroactively to January 1, 2017. Along with several other parties, we have reinstituted our initial suit against the DOI related to the 2016 Valuation Rule. Although we believe our lawsuit is meritorious, we cannot predict the outcome of our case. Additionally, we cannot predict how any replacement rule proposed by the DOI would affect our business. On October 8, 2019 the US District Court of Wyoming issued orders related to our request for a preliminary injunction granting a temporary stay of the enactment of the 2016 Valuation Rule pending litigation in that court. As such, at least until the full case is decided, we will continue valuing coal in accordance to the rules in effect prior to the 2016 Valuation Rule. We are continuing to work through the rest of the consequences of the order handed down on October 8, 2019.

Three Months Ended ~~June~~September 30, 2019 Compared to Three Months Ended ~~June~~September 30, 2018

Summary

The following table summarizes key results (in millions, except per share amounts and percentages):

	Three Months Ended
	June 30,						Change
	September 30,						Change
	2019			2018			Amount			Percent
Total tons sold	1213.08			1113.61			0.47			35.43
Total revenue	$	~~168~~220.52		$	~~205~~233.71		$	(3712.29	)	(185.15	)
Net income (loss)	$	~~(609~~4.78	)	$	~~(29~~12.97	)	$	(~~579~~7.89	)	(62.2	*)
Diluted EPS	$	(70.9706	)	$	(0.3916	)	$	(70.5810	)	(62.5	*)
Adjusted EBITDA (1)	$	(620.32	)	$	(040.87	)	$	(520.5	)	(50.4	*)

* Not meaningful

(1) EBITDA and Adjusted EBITDA are intended to provide additional information only and do not have any standard meaning prescribed by U.S. GAAP. A quantitative reconciliation of Net income (loss) to Adjusted EBITDA is found in “Non-GAAP Financial Measures” below.

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Results of Operations

Revenue

The following table presents Revenue and tons sold (in millions, except per ton amounts and percentages):

	Three Months Ended
	June 30,						Change
	September 30,						Change
	2019			2018			Amount			Percent
Owned and Operated Mines
Realized price per ton sold	$	1112.6331		$	12.1816		$	(0.5515	)	(41.52	)
Tons sold	1213.08			1113.61			0.47			35.43
Coal revenue	$	~~140~~170.13		$	~~140~~159.80		$	(011.73	)	(07.51	)
Other revenue	$	23.24		$	32.19		$	(0.95	)	~~(29~~17.02	)
Logistics and Related Activities
Total tons sold	01.74			1.35			(0.61		)	(466.27	)
Realized price per ton sold - Asian export	$	4745.9456		$	5960.7863		$	(1115.8407	)	(1924.89	)
Tons sold - Asian export	01.74			1.35			(0.61		)	(466.27	)
Realized price per ton sold - Domestic	$	6259.7699		$	5553.0028		$	76.7671		1412.16
Tons sold - Domestic (1)	—			—			—			—
Revenue	$	3565.8		$	7991.30		$	(4325.52	)	(5427.97	)
Eliminations of Intersegment Sales
Revenue	$	(919.63	)	$	(1719.58	)	$	70.95		452.15
Total Consolidated
Revenue	$	~~168~~220.52		$	~~205~~233.71		$	(3712.29	)	(185.15	)

(1) For the three months ended ~~June~~September 30, 2019 and 2018, the domestic logistics volumes were 4232,~~400~~200 tons and 4535,~~400~~000 tons, respectively.

Owned and Operated Mines Segment

The following table shows volume and price related changes to coal revenue for the three months ended ~~June~~September 30, 2019 compared to the three months ended ~~June~~September 30, 2018 (in millions):

Three months ended June 30, 2018	$	140.8
Three months ended September 30, 2018	$	159.0
Changes associated with volumes	5.9.3
Changes associated with prices	(62.60		)
Three months ended June 30, 2019	$	140.1
Three months ended September 30, 2019	$	170.3

Coal revenue ~~decreased~~increased ~~slightly~~ for the three months ended ~~June~~September 30, 2019 compared to the same period in 2018 primarily related ~~lower~~to ~~realized~~higher ~~prices,~~volumes ~~partially~~as ~~offset~~well byas ~~slightly~~ higher ~~volumes~~realized prices. ~~Realized~~Volumes ~~prices~~increased for the three months ended ~~June~~September 30, 2019 ~~decreased~~ compared to the same period in 2018 due to aimproved ~~lower~~performance ~~Black~~at ~~Lung~~the ~~tax~~Antelope ~~rate,~~Mine. Realized ~~which~~prices isfor ~~included~~the asthree ~~part~~months ofended September 30, 2019 increased compared to the ~~majority~~same ofperiod ~~our~~in ~~customers’~~2018 ~~sales~~primarily ~~price~~due ~~and~~to ~~lowered~~a year-to-date Black Lung tax rate adjustment, which increased the realized price by approximately $0.2650 per ton during the quarter. ~~Volumes~~Without ~~increased~~this ~~slightly for the three months ended June 30~~adjustment, ~~2019~~realized ~~compared~~prices todecreased ~~the~~quarter ~~same~~over ~~period in 2018~~quarter.

Logistics and Related Activities Segment

Revenue decreased for the three months ended ~~June~~September 30, 2019 compared to the same period in 2018 primarily due to less favorable pricing conditions in the export market. We shipped ~~six~~1.4 ~~vessels~~million ~~during~~tons ~~the~~on ~~three months~~11

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vessels during the three months ended ~~June~~September 30, 2019 compared to ~~nine~~1.5 million tons on 11 vessels during the same period in 2018. Realized prices for exports have decreased nearly 2025% for the three months ended ~~June~~September 30, 2019 compared to the same period in 2018.

Cost of Product Sold

The following table presents Cost of product sold (in millions, except per ton amounts and percentages):

	Three Months Ended
	June 30,						Change
	September 30,						Change
	2019			2018			Amount			Percent
Owned and Operated Mines
Average cost per ton sold	$	10.5817		$	11.9005		$	(10.3288	)	(118.10	)
Cost of product sold (produced coal)	$	~~127~~140.48		$	~~137~~144.65		$	(103.27	)	(72.46	)
Other cost of product sold	$	1.2.7		$	21.07		$	(01.80	)	~~(40~~58.08	)
Logistics and Related Activities
Average cost per ton sold - Asian export	$	5747.8979		$	5453.3257		$	3(5.5778	)	6(10.68	)
Average cost per ton sold - Domestic	$	5551.8901		$	4850.9689		$	60.9312		140.2
Cost of product sold	$	4369.68		$	7381.78		$	(3012.10	)	(4014.87	)
Other
Cost of product sold	$	0.3		$	—		$	0.3		—
Eliminations of Intersegment Sales
Cost of product sold	$	(918.56	)	$	(1619.95	)	$	70.49		434.86
Total Consolidated
Cost of product sold	$	~~162~~195.80		$	~~196~~208.45		$	(3313.65	)	(176.15	)

Owned and Operated Mines Segment

Cost of product sold decreased in the three months ended ~~June~~September 30, 2019 as compared to the same period in 2018 primarily due to decreases in ~~repairs and maintenance, production taxes and royalties, labor, and~~ fuel and lubes. ~~Repairs~~Fuel and maintenance decreased due to dragline and dipper repairs that were performed in the prior year. Production taxes and royalties decreased due to the lower Black Lung tax rate. Labor costs decreased due to decreased headcount and benefit costs. Finally, fuel and lubes decreased due to lower diesel fuel prices than in the prior year. The average cost per ton sold decreased primarily due to the ~~lower~~higher ~~costs,~~volumes ~~partially~~in ~~offset~~addition byto the ~~higher~~lower ~~volumes~~costs.

Logistics and Related Activities Segment

Cost of product sold decreased in the three months ended ~~June~~September 30, 2019 as compared to the same period in 2018 primarily due to a decrease in ~~the~~freight and handling costs and fewer tons sold. We shipped ~~six~~1.4 million tons on 11 vessels during the three months ended ~~June~~September 30, 2019 compared to ~~nine~~1.5 million tons on 11 vessels during the same period in 2018. ~~The~~This ~~average~~was ~~cost~~partially ~~per~~offset ~~ton~~by ~~sold~~higher ~~increased~~demurrage ~~due~~costs related to train delays earlier in the ~~lower~~year ~~tons~~impacting ~~sold~~the vessel loading schedule into the third quarter.

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Operating Income (Loss)

The following table presents Operating income (loss) (in millions, except for percentages):

	Three Months Ended
	June 30,						Change
	September 30,						Change
	2019			2018			Amount			Percent
Owned and Operated Mines
Operating income (loss)	$	~~(617~~31.70	)	$	(~~12.~~2.6	)	$	~~(605~~33.56	)	*	*
Logistics and Related Activities
Operating income (loss)	$	(8.4.0	)	$	59.62		$	(1413.02	)	(143.5	*)
Other
Operating income (loss)	$	(178.54	)	$	(135.45	)	$	(42.19	)	(3052.67	)
Eliminations of Intersegment Sales
Operating income (loss)	$	(0.37	)	$	(0.64	)	$	(0.3	)	50(75.0	)
Total Consolidated
Operating income (loss)	$	~~(643~~17.89	)	$	~~(20~~0.67	)	$	~~(623~~17.2	)	*	*

* Not meaningful

Owned and Operated Mines Segment

Operating income ~~decreased~~increased in the three months ended ~~June~~September 30, 2019 as compared to the same period in 2018 primarily due to ~~the~~a ~~$618.3~~decrease ~~million~~in ~~impairment~~Depreciation ~~recorded,~~and indepletion ~~the~~of ~~current~~$19.6 ~~period,~~million. This toincluded a decrease ~~the~~of ~~book~~$14 ~~value~~million ofrelated ~~long-lived~~to ~~assets,~~the ~~mineral~~impairment ~~rights,~~taken ~~materials~~in ~~and~~the ~~supply~~second ~~inventory,~~quarter ~~and~~of ~~project~~2019 ~~development~~resulting ~~costs~~in tofewer ~~their~~assets ~~fair~~with ~~value~~remaining asbook ~~determined~~value ~~under~~to ~~the~~depreciate. In ~~income~~addition, ~~approach~~there ~~based~~was ~~primarily~~a ondownward ~~cash~~adjustment ~~flows~~to ~~from~~ the ~~Winning~~ARO ~~Bid~~liability infor the ~~Auction~~Spring ~~that~~Creek ~~took~~Mine ~~place~~of on$5.4 ~~August 15~~million, ~~2019~~which ~~and~~resulted ~~August 16, 2019 and described further~~ in ~~Notes~~a 6credit ~~and~~to ~~24 of~~ the ~~Notes~~reclamation toasset ~~Unaudited Condensed Consolidated Financial Statements in Item 1~~depreciation. ~~In addition~~Finally, there was aan ~~decrease~~increase in Revenue asand ~~previously~~a ~~discussed. Partially offsetting this was the~~ decrease in Cost of product sold as previously discussed~~, as well as a $2~~.~~5 million decrease in Depreciation and depletion decreased primarily due to the decrease in production.~~

Logistics and Related Activities Segment

Operating income decreased during the three months ended ~~June~~September 30, 2019 as compared to the same period in 2018 primarily due to the factors previously discussed for Revenue~~. In~~ addition we recorded an impairment of $0.5 million, in the current period, on the right of use asset related to a rail car lease to decrease the book value to its fair value determined primarily based on cash flows from the Winning Bid in the Auction that took place on August 15, 2019 and ~~August 16, 2019 and described further in Notes 6 and 24 of the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1. Partially offsetting these factors was the decrease in~~ Cost of product sold~~, as previously discussed~~.

Other

Operating loss increased during the three months ended ~~June~~September 30, 2019 as compared to the same period in 2018~~. This~~, ~~increase was partially related to the $2.1 million impairment of long-lived assets to their fair value as determined under the income approach based~~ primarily ondue ~~cash flows from the Winning Bid in the Auction that took place on August 15, 2019 and August 16, 2019 and described further in Notes 6 and 24 of the Notes~~ to ~~Unaudited Condensed Consolidated Financial Statements in Item 1. In addition, there was~~ an increase in Selling, general and administrative expenses (“SG&A”) of $2.09 million. SG&A increased $65.60 million ~~primarily~~ due to higher ~~legal~~labor ~~and consulting~~ costs primarily related to ~~our~~stock ~~restructuring~~based ~~advisors prior to filing for Chapter 11 Bankruptcy protection~~compensation. This was partially offset by lower ~~labor~~outside ~~of $3~~services.~~6 million primarily due to lower stock based compensation.~~

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Other Income (Expense)

The following table presents Other income (expense) (in millions, except for percentages):

	Three Months Ended
	June 30,						Change
	September 30,						Change
	2019			2018			Amount			Percent
Other income (expense)	$	33(13.52	)	$	(912.0	)	$	42(25.52	)	~~472~~(210.20	)

Other income ~~increased~~decreased $4225.52 million for the three months ended ~~June~~September 30, 2019 as compared to the same period in 2018 primarily due to ~~$37.2~~a ~~million in Reorganization items, net, which includes~~ $5319.5 million ~~for the write-off of the deferred~~ gain on the ~~2021~~termination ~~Notes, partially offset by $9.2 million for the write-off~~ of ~~debt~~our ~~issuance~~postretirement ~~costs~~medical ~~related~~plan ~~to the Senior Notes and $7.1 million~~ in professional fees. For further information see Note 7 of the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1. In addition, interest expense decreased $5.5 million due to no longer accruing interest on the Senior Notes since filing for Chapter 11 Bankruptcy protection on May 10, 2019, as well as no longer amortizing the debt issuance costs related to the Senior Notes, partially offset by interest and fees of $1.3 million on the DIP Credit Agreement.

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the third quarter of 2018. In addition, we incurred $13.2 million in Reorganization items, net, for the three months ended September 30, 2019, which includes $12.1 million in professional fees. For further information see Note 7 of the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1. This is partially offset by a decrease in interest expense of $6.4 million primarily due to no longer accruing interest on the Senior Notes since filing for Chapter 11 Bankruptcy protection on May 10, 2019, as well as no longer amortizing the debt issuance costs related to the Senior Notes.

Income Tax Provision

Our statutory income tax rate, including state income taxes, for the three months ended ~~June~~September 30, 2019 and 2018 was approximately 23%. Our effective tax rate for the three months ended ~~June~~September 30, 2019 and 2018 was 0.03% and (0.8)0%, respectively. The difference between our statutory income tax rate and our effective income tax rate for the three months ended ~~June~~September 30, 2019 and 2018 is primarily the result of the impact of percentage depletion, income tax in the states in which we do business and changes in our valuation allowance.

As of ~~June~~September 30, 2019, we had deferred tax assets principally arising from: AROs, postretirement benefits, contract rights, property, plant, equipment, mineral rights, and net operating loss carry-forwards. As of December 31, 2018, we had deferred tax assets principally arising from: AROs, postretirement benefits, contract rights, interest deduction carry-forwards, and net operating loss carry-forwards. As management cannot determine that it is more likely than not that we will realize the benefit of the deferred tax assets, a valuation allowance equal to the net deferred tax asset has been established.

~~Six~~Nine Months Ended ~~June~~September 30, 2019 Compared to ~~Six~~Nine Months Ended ~~June~~September 30, 2018

Summary

The following table summarizes key results (in millions, except per share amounts and percentages):

	Six Months Ended
	Nine Months Ended
	June 30,						Change
	September 30,						Change
	2019			2018			Amount			Percent
Total tons sold	2135.75			2336.89			(2.1.4		)	(83.8	)
Total revenue	$	~~313~~533.58		$	~~422~~655.01		$	(~~108~~121.53	)	(2518.75	)
Net income (loss)	$	(~~659~~654.47	)	$	(3724.69	)	$	(~~621~~629.8	)	*	*
Diluted EPS	$	(8.6557	)	$	(0.5033	)	$	(8.1524	)	*	*
Adjusted EBITDA (1)	$	(3414.97	)	$	1859.96		$	(5374.83	)	(124.7	*)

* Not meaningful

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Results of Operations

Revenue

The following table presents Revenue and tons sold (in millions, except per ton amounts and percentages):

	Six Months Ended
	Nine Months Ended
	June 30,						Change
	September 30,						Change
	2019			2018			Amount			Percent
Owned and Operated Mines
Realized price per ton sold	$	11.6490		$	12.1918		$	(0.5528	)	(42.53	)
Tons sold	2135.75			2336.89			(2.1.4		)	(83.8	)
Coal revenue	$	~~252~~423.71		$	~~290~~449.34		$	(3726.63	)	(135.09	)
Other revenue	$	58.26		$	710.2		$	(21.06	)	(2715.87	)
Logistics and Related Activities
Total tons delivered	12.59			24.72			(1.23		)	(4431.40	)
Realized price per ton sold - Asian export	$	5048.5103		$	5859.4121		$	(711.9018	)	(1318.59	)
Tons sold - Asian export	12.48			24.71			(1.3		)	(4831.17	)
Realized price per ton sold - Domestic	$	59.7482		$	4547.4868		$	1412.2614		3125.45
Tons sold - Domestic	0.1			0.1			—			—
Revenue	$	74140.97		$	~~159~~250.0		$	(84109.13	)	(5243.97	)
Other
Eliminations of Intersegment Sales
Revenue	$	(1938.36	)	$	(3454.5	)	$	15.29		4429.12
Total Consolidated
Revenue	$	~~313~~533.58		$	~~422~~655.01		$	(~~108~~121.53	)	(2518.75	)

Owned and Operated Mines Segment

The following table shows volume and price related changes to coal revenue for the ~~six~~nine months ended ~~June~~September 30, 2019 compared to the ~~six~~nine months ended ~~June~~September 30, 2018 (in millions):

Six months ended June 30, 2018	$	290.3
Nine months ended September 30, 2018	$	449.4
Changes associated with volumes	(2516.85		)
Changes associated with prices	(119.8		)
Six months ended June 30, 2019	$	252.7
Nine months ended September 30, 2019	$	423.1

Coal revenue decreased for the ~~six~~nine months ended ~~June~~September 30, 2019 compared to the same period in 2018 primarily due to fewer tons sold. Volumes decreased due to excessive rain during the first quarter, which continued to impact production into the second quarter. All three mines experienced lower production during the first half of 2019 as compared to 2018. In addition, realized prices for the ~~six~~nine months ended ~~June~~September 30, 2019 were lower than those seen in the same period in 2018~~, in part due to a lower Black Lung tax rate, which is included as part of the majority of our customers’ sales price and lowered the realized price by approximately $0~~.~~26 per ton for the six months ended June 30, 2019.~~

Logistics and Related Activities Segment

Revenue decreased for the ~~six~~nine months ended ~~June~~September 30, 2019 compared to the same period in 2018 due to less favorable pricing conditions in the export market. We shipped 1223 vessels and a total of 12.48 million tons internationally in the first ~~six~~nine months of 2019 compared to 24.71 million tons on 2031 vessels in the first ~~six~~nine months of 2018. Realized prices on our export sales have decreased ~~13.5~~nearly 19% for the ~~six~~nine months ended ~~June~~September 30, 2019 compared to the same period in 2018.

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Cost of Product Sold

The following table presents Cost of product sold (in millions, except per ton amounts and percentages):

	Six Months Ended
	Nine Months Ended
	June 30,						Change
	September 30,						Change
	2019			2018			Amount			Percent
Owned and Operated Mines
Average cost per ton sold	$	11.6206		$	11.4128		$	(0.2122	)	1(2.80	)
Cost of product sold (produced coal)	$	~~252~~393.21		$	~~271~~416.72		$	(1923.51	)	(75.26	)
Other cost of product sold	36.41			35.96			(0.5		)	~~(12.~~8.9	)
Logistics and Related Activities
Average cost per ton sold - Asian export	$	5652.8530		$	53.1731		$	3(1.6801	)	6(1.9	)
Average cost per ton sold - Domestic	$	5554.8742		$	4043.0611		$	1511.8131		3926.52
Cost of product sold	$	86155.08		$	~~148~~229.08		$	(6274.0	)	(4132.92	)
Other
Cost of product sold	$	0.104		$	—		$	0.14		—
Eliminations of Intersegment Sales
Cost of product sold	$	(1837.96	)	$	(3454.72	)	$	1516.86		4530.56
Total Consolidated
Cost of product sold	$	~~322~~517.8		$	~~388~~597.94		$	(6679.16	)	(1713.03	)

Owned and Operated Mines Segment

Cost of product sold decreased in the ~~six~~nine months ended ~~June~~September 30, 2019 as compared to the same period in 2018 primarily due to the decrease in tons sold, which decreased production taxes and royalties. ~~The lower Black Lung tax rate also decreased production taxes and royalties. In addition, labor costs decreased due to decreased headcount and benefit costs.~~ Fuel and lubes decreased as a result of a decrease in the price of diesel and consumption rates. The average cost per ton sold ~~increased~~decreased primarily due to the lower ~~production and higher strip ratios, partially offset by the lower~~ costs.

Logistics and Related Activities Segment

Cost of product sold decreased in the ~~six~~nine months ended ~~June~~September 30, 2019 as compared to the same period in 2018 due to a decrease in tons sold as well as lower freight and handling costs. We shipped 12.48 million tons on 1223 vessels during the ~~six~~nine months ended ~~June~~September 30, 2019 compared to 24.71 million tons on 2031 vessels during the ~~six~~nine months ended ~~June~~September 30, 2018.

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Operating Income (Loss)

The following table presents Operating income (loss) (in millions, except for percentages):

	Six Months Ended
	Nine Months Ended
	June 30,						Change
	September 30,						Change
	2019			2018			Amount			Percent
Owned and Operated Mines
Operating income (loss)	$	(~~639~~608.6	)	$	(1113.06	)	$	(~~628~~595.60	)	*	*
Logistics and Related Activities
Operating income (loss)	$	(1115.6	)	$	1120.02		$	(2235.68	)	(177.2	*)
Other
Operating income (loss)	$	(3644.59	)	$	(2126.17	)	$	(1518.42	)	(7368.02	)
Eliminations of Intersegment Sales
Operating income (loss)	$	(01.30	)	$	(0.12	)	$	(0.48	)	*	*
Total Consolidated
Operating income (loss)	$	(~~688~~670.01	)	$	(2120.03	)	$	(~~667~~649.08	)	*	*

* Not meaningful

Owned and Operated Mines Segment

Operating income decreased in the ~~six~~nine months ended ~~June~~September 30, 2019 as compared to the same period in 2018 primarily due to the $618.4 million impairment recorded, in the ~~current~~second ~~period~~quarter of 2019, to decrease the book value of long-lived assets, mineral rights, materials and supply inventory, and project development costs to their fair value as determined under the income approach based primarily on cash flows from the Winning Bid in the Auction that took place on August 15, 2019 and August 16, 2019 and described further in Notes 61 and 246 of the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1. In addition, there was athe decrease in Revenue as previously discussed. Partially ~~and~~offsetting athis ~~mark-to-market~~was ~~gain~~a ~~on our WTI derivative financial instruments of~~ $126.84 million decrease in ~~the~~Depreciation ~~six~~and ~~months~~depletion ~~ended~~primarily ~~June 30,~~due ~~2019. Partially~~to ~~offsetting~~the ~~this~~impairments ~~was~~taken in the ~~decrease~~fourth inquarter ~~Cost~~ of ~~product~~2018 ~~sold~~and asthe ~~previously~~second ~~discussed~~quarter ~~and~~of a2019 ~~$6.8~~resulting ~~million decrease~~ in ~~Depreciation~~fewer ~~and~~assets ~~depletion~~with ~~primarily~~remaining ~~due~~book value to ~~the~~depreciate, ~~decrease~~as inwell as lower production. WeFinally, ~~had~~there nowas ~~mark-to~~a ~~market~~decrease ~~gains or losses~~ in ~~the~~Cost ~~six~~of ~~months~~product ~~ended~~sold ~~June 30,~~as ~~2018~~previously discussed.

Logistics and Related Activities Segment

Operating income decreased during the ~~six~~nine months ended ~~June~~September 30, 2019 as compared to the same period in 2018 primarily due to the factors previously discussed for Revenue~~. In~~ addition we recorded an impairment of $0.5 million, in the current period, on the right of use asset related to a rail car lease to decrease the book value to its fair value determined based primarily on cash flows from the Winning Bid in the Auction that took place on August 15, 2019 and ~~August 16, 2019 and described further in Notes 6 and 24 of the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1. Partially offsetting these factors was the decrease in~~ Cost of product sold~~, as previously discussed~~.

Other

Operating loss increased during the ~~six~~nine months ended ~~June~~September 30, 2019 as compared to the same period in 2018. The increase was related to an increase in SG&A of $1316.21 million. SG&A increased $1513.18 million primarily due to higher legal and consulting costs related to our restructuring advisors prior to filing for Chapter 11 Bankruptcy protection. In addition, labor increased $4.4 million primarily due to higher stock based compensation. Finally, we recorded a $2.1 million impairment of long-lived assets to their fair value as determined under the income approach based primarily on cash flows from the Winning Bid in the Auction that took place on August 15, 2019 and August 16, 2019 and described further in Notes 61 and 246 of the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1. ~~This was partially offset by a decrease in SG&A costs such a travel, relocation, dues and donations.~~

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Other Income (Expense)

The following table presents Other income (expense) (in millions, except for percentages):

	Six Months Ended
	Nine Months Ended
	June 30,					Change
	September 30,					Change
	2019		2018			Amount		Percent
Other income (expense)	$	2714.86	$	(164.6	)	$	4419.42	~~267~~417.54

Other income increased $4419.42 million for the ~~six~~nine months ended ~~June~~September 30, 2019 as compared to the same period in 2018 primarily due to $3724.20 million in Reorganization items, net, which includes $53.5 million for the write-off of the deferred gain on the 2021 Notes, partially offset by $9.2 million for the write-off of debt issuance costs related to the Senior Notes and $719.12 million in professional fees. For further information see Note 7 of the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1. In addition, interest expense decreased by $713.03 million due to no longer accruing interest on the Senior Notes since filing for Chapter 11 Bankruptcy protection on May 10, 2019, as well as no longer amortizing the debt issuance costs related to the Senior Notes,. These decreases were partially offset by the 19.5 million gain recorded on the termination of our postretirement medical plan in the third quarter of 2018, and interest and fees of $12.39 million on the DIP Credit Agreement recorded in the current year.

Income Tax Provision

Our statutory income tax rate, including state income taxes for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018, was approximately 23%. Our effective tax rate for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018 was 0.0% and (01.82)%, respectively. The difference between our statutory income tax rate and our effective income tax rate for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018 is primarily the result of the impact of percentage depletion, income tax in the states in which we do business, and changes in our valuation allowance.

Liquidity and Capital Resources

	June 30,		December 31,
	September 30,		December 31,
	2019		2018
	(in millions)
Cash and cash equivalents	$	6484.48	$	91.2

Liquidity

Our liquidity outlook has continued to decline since the fourth quarter of 2018, which included the termination of our Amended Credit Agreement in November 2018. Severe weather and train unavailability further compounded operational issues in the first quarter of 2019, affecting production at all three of our mines. As a result of severe weather and flooding in the first quarter of 2019, the railroads serving the PRB were forced to reroute trains, and repair and rebuild significant portions of their infrastructure. The impacts of these conditions carried over into the second quarter of 2019 and were exacerbated by further flooding. Further, lower export prices, and lower demand overall, are expected to result in significantly lower levels of cash flow from operating activities in the future and have limited our ability to access capital markets. These factors raise substantial doubt about our ability to continue as going concern.

In addition to our cash and cash equivalents, our primary sources of liquidity are cash from our operations and any borrowing capacity under our A/R Securitization Program and DIP Credit Agreement. We had no availability for borrowing under the A/R Securitization Program as of ~~June~~September 30, 2019. Our availability under the DIP Credit Agreement was $1031.0 million as of ~~June~~September 30, 2019. Our total liquidity, which includes cash and cash equivalents and undrawn funding under the DIP Credit Agreement, was $70115.48 million as of June 30, 2019. We also have a capital leasing program, with a balance of $1.7 million as of June 30, 2019, for some of our capital equipment purchases subject to the conditions in the master lease agreement.September

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30, 2019. We also have a capital leasing program, with a balance of $1.3 million as of September 30, 2019, for some of our capital equipment purchases subject to the conditions in the master lease agreement.

Cash balances depend on a number of factors, such as the volume of coal sold by our Owned and Operated Mines segment; the price for which we sell our coal; the costs of mining, including labor, repairs and maintenance, fuel, and explosives; the amount of royalties, severance taxes, and other governmental levies that we pay; capital expenditures to acquire property, plant and equipment; the volume of deliveries coordinated by our Logistics and Related Activities segment to customer contracted destinations; the revenue we receive for our logistics services; demurrage and any take-or-pay charges; coal-fired electricity demand, regulatory changes and energy policies impacting our business; and other risks and uncertainties, including those discussed in Item 1A in our 2018 Form 10-K and in Item 1A of Part II of this report.

Capital expenditures are necessary to keep our equipment fleets updated to maintain our mining productivity and competitive position and to add new equipment as necessary. Capital expenditures for the ~~six~~nine months ended ~~June~~September 30, 2019 and 2018 were $13.3 million and $47.82 million, respectively.

The elimination of the Alternative Minimum Tax (“AMT”) and the ability to offset our regular tax liability or claim refunds for taxable years 2018 through 2021 for our AMT credits carried forward from prior periods, was a material impact of the Tax Cuts and Jobs Act legislation enacted in December 2017. In May 2019, we received $15.8 million in AMT credit refunds. We currently anticipate receipt of an additional approximately $15.8 million in AMT credit refunds over the next three years with approximately half of this value realized in 2020.

Subject to certain exceptions under the Bankruptcy Code, the filing of the Bankruptcy Petitions automatically enjoined, or stayed, the continuation of most judicial or administrative proceedings or other actions against the Debtors or their property to recover, collect or secure a claim arising prior to the filing of the Bankruptcy Petitions. Thus, for example, most creditor actions to obtain possession of property from the Debtors, or to create, perfect or enforce any lien against the Debtors’ property, or to collect on monies owed or otherwise exercise rights or remedies with respect to a pre-petition claim are enjoined unless the Bankruptcy Court lifts the automatic stay.

Although we have lowered our capital budget and reduced the scale of our operations significantly, our business remains capital intensive. In addition to the cash requirements necessary to fund ongoing operations, we have incurred, and expect to continue to incur, significant professional fees and other costs in connection with our Chapter 11 proceedings. As of ~~September~~October 611, 2019, our total available liquidity was $~~116~~129.74 million, which includes cash on hand from operations and borrowings made in June and August 2019 under our DIP Credit Agreement. We expect to continue using additional cash that will further reduce this liquidity. However, we believe we have sufficient liquidity, including cash on hand and funds generated from ongoing operations, to fund anticipated cash requirements through the Chapter 11 proceedings for minimum operating and working capital purposes and excluding principal and interest payments on our outstanding debt. As such, we expect to pay vendor and royalty obligations on a go-forward basis according to the terms of our current contracts and consistent with applicable court orders, if any, approving such payments. There are no assurances that our current liquidity is sufficient to allow us to satisfy our obligations related to the Chapter 11 Cases, or to pursue confirmation of a Chapter 11 plan of reorganization or plan of liquidation. We can provide no assurance that we will be able to secure additional interim financing or exit financing sufficient to meet our liquidity needs or, if sufficient funds are available, offered to us on acceptable terms.

Our ability to maintain adequate liquidity through the sale process depends on our ability to successfully consummate a sale in Chapter 11, successful operation of our business, and appropriate management of operating expenses and capital spending. Our anticipated liquidity needs are highly sensitive to changes in each of these and other factors. If we are unable to meet our liquidity needs, we may have to take other actions to seek additional financing to the extent available or we could be forced to consider other alternatives to maximize potential recovery for the creditors, including possible liquidation under Chapter 7 of the Bankruptcy Code.

The filing of the Bankruptcy Petitions constituted an event of default that accelerated our obligations, all as further described in Note 1, “Organization and Business”, of the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1. Pursuant to the Bankruptcy Code, the filing of the Bankruptcy Petitions automatically stayed most actions against the Debtors, including most actions to collect indebtedness incurred prior to the Petition Date or to exercise control over the Debtors’ property. Accordingly, although the filing of the Bankruptcy Petitions triggered defaults under the Debt Instruments, creditors are stayed from taking action as a result of

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stayed most actions against the Debtors, including most actions to collect indebtedness incurred prior to the Petition Date or to exercise control over the Debtors’ property. Accordingly, although the filing of the Bankruptcy Petitions triggered defaults under the Debt Instruments, creditors are stayed from taking action as a result of these defaults. Additionally, under Section 502(b)(2) of the Bankruptcy Code, the Company is no longer required to pay interest on its senior notes accruing on or after the Petition Date. However, the Debtors will be required to pay interest on amounts borrowed under the DIP Credit Agreement.

Sale and Plan Support Agreement

Prior to filing the Bankruptcy Petitions, on May 6, 2019, the Company and the Filing Subsidiaries entered into the Support Agreement with holders of approximately 62% in principal amount of the 2021 Notes and holders of more than 50% in principal amount of the 2024 Notes. The Support Agreement provides that the holders of Notes party thereto will, among other things, support a marketing and sale process to be conducted by the Company in Chapter 11 and vote in favor of an orderly plan of liquidation that complies with certain provisions of the Support Agreement.

Subsequently, on May 9, 2019, the Company and the Filing Subsidiaries entered into the Amended and Restated Support Agreement with holders of approximately 62% in principal amount of the 2021 Notes and holders of more than 50% in principal amount of the 2024 Notes.

The Amended and Restated Support Agreement provides, among other things, that:

· the Noteholders party thereto will support the sale and marketing process the Debtors will conduct during their Chapter 11 Cases;

· the Noteholders will vote in favor of an orderly plan of liquidation that complies with certain provisions of the Amended and Restated Support Agreement;

· the holders of 2021 Notes will consent to priming liens and the use of cash collateral in connection with the DIP Credit Agreement;

· certain of the Noteholders have provided the DIP Credit Agreement;

· the Noteholders consent to receiving distributions of any sale proceeds after the payment of certain administrative and priority claims;

· the Company and the subsidiary guarantors under the indenture governing the 2024 Notes reaffirm the guarantees under the 2024 Notes.

The Support Agreement Amendment also provides consent by the parties thereto of certain uses of cash on hand by the Company and certain of its subsidiaries prior to any sale, including to pay “Critical Vendor Payments” (as defined in the Support Agreement Amendment), certain administrative expense and priority claims, expenses arising under certain executory contracts and unexpired leases in connection with a sale, certain professional fees and expenses relating to key employee incentive and retention plans.

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~~The~~Payments” ~~Support Agreement Amendment also provides that the Plan shall include an agreement to share certain proceeds between the holders of Contingent Roll-Up Loans~~ (as defined in the ~~DIP~~Support ~~Credit~~ Agreement) ~~and holders of 2021 Notes~~Amendment), oncertain ~~the~~administrative ~~one~~expense ~~hand,~~ and ~~holders~~priority ~~of unsecured~~ claims, onexpenses ~~the~~arising ~~other~~under ~~(the~~certain ~~“Unsecured~~executory ~~Creditor~~contracts ~~Sharing Agreement”). The Unsecured Creditor Sharing Agreement provides that, upon recovery by the holders of 2021 Notes~~ and ~~Contingent~~unexpired ~~Roll-Up~~leases ~~Loans~~in ofconnection atwith ~~least~~a ~~50% of their total claims~~sale, ~~excess amounts up to 75% of such total claims will be distributed 90% to holders of such claims~~ and ~~10%~~certain toprofessional ~~holders~~fees ~~of unsecured claims. Distributions in excess of 75% of the total claims of the holders of 2021 Notes~~ and ~~Contingent~~expenses ~~Roll-Up~~relating ~~Loans will be paid 80%~~ to ~~holders~~key ofemployee ~~such~~incentive ~~claims~~ and ~~20%~~retention ~~to holders of unsecured claims~~plans. As a result of the satisfaction of the Specified Tax Condition (as defined in the DIP Credit Agreement) prior to the date of the Second Borrowing (as defined in the DIP Credit Agreement), no Contingent Roll-Up Loans were issued pursuant to the DIP Credit Agreement.

The Support Agreement Amendment also provides that the Plan shall include an agreement to share certain proceeds between the holders of Contingent Roll-Up Loans (as defined in the DIP Credit Agreement) and holders of 2021 Notes, on the one hand, and holders of unsecured claims, on the other (the “Unsecured Creditor Sharing Agreement”). The Unsecured Creditor Sharing Agreement provides that, upon recovery by the holders of 2021 Notes and Contingent Roll-Up Loans of at least 50% of their total claims, excess amounts up to 75% of such total claims will be distributed 90% to holders of such claims and 10% to holders of unsecured claims. Distributions in excess of 75% of the total claims of the holders of 2021 Notes and Contingent Roll-Up Loans will be paid 80% to holders of such claims and 20% to holders of unsecured claims. Following the Auction and entry of the Sale Order approving the NTEC sale, the Official Unsecured Creditors’ Committee agreed to a compromise and settlement, as set forth in the Plan as filed on October 4, 2019, under which holders of Allowed General Unsecured Claims (as defined in the Plan) will be entitled to share pro rata in the “General Unsecured Claims Cash Distribution Amount” (as defined in the Plan), which is an amount of $1.25 million, in full and final satisfaction of such claims. As a result of the satisfaction of the Specified Tax Condition (as defined in the DIP Credit Agreement) prior to the date of the Second Borrowing (as defined in the DIP Credit Agreement), no Contingent Roll-Up Loans were issued pursuant to the DIP Credit Agreement.

Debtor-in-Possession Financing

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the DIP Credit Agreement. New Money Loans will be made available in two or three draws, each subject to the satisfaction of certain conditions under the Credit Agreement, including compliance with a Borrowing Base (as defined in the DIP Credit Agreement). The first borrowing, which is capped at $10 million, will be funded within three business days of the date on which the Interim DIP Order is entered. The second borrowing will be funded within ten business days of the date the Final DIP Order is entered. The third borrowing (if any), must occur within 30 days of the date the Final DIP Order is entered or any remaining unused commitments will expire.

Each Lender who is a party to the DIP Credit Agreement and a holder of the 2021 Notes issued by Cloud Peak Energy Resources, LLC and Cloud Peak Energy Finance Corp. will, subject to entry of and the terms of the Final DIP Order, roll-up an amount of the indebtedness they hold under the 2021 Notes equal to 80% of the New Money Loans provided by such Lender into loans incurred under the DIP Credit Agreement (all such loans, the “Roll-Up Loans”). The proceeds of such Roll-Up Loans will be used to refinance and discharge such indebtedness under the 2021 Notes or as otherwise set forth in the DIP Credit Agreement.

New Money Loans bear interest at a rate equal to, at our option, (a) the alternate base rate (subject to a 2% floor) plus 8% per annum or (b) the adjusted LIBOR rate (subject to a 1% floor) plus 9% annum. Roll-Up Loans will bear interest at the adjusted LIBOR rate (subject to a 1% floor) plus 9% per annum. The Debtors will pay certain other agreed fees to the Lenders and the agents under the DIP Credit Agreement. Fees and interest are paid-in-kind and added to the principal amount of loans outstanding under the DIP Credit Agreement.

On June 12, 2019, the Company launched a tender offer providing eligible holders of 2021 Notes the opportunity to participate as a lender under the DIP Credit Agreement on a pro rata basis up to such holder’s percentage ownership of the outstanding 2021 Notes, and to exchange, or “roll-up” a principal amount of their 2021 Notes equal to 80% of their $35 million commitments as a lender under the DIP Credit Agreement for an equal amount of Roll-Up Loans under the DIP Credit Agreement. The transactions contemplated by the tender offer closed on August 1, 2019. The Non-Backstop Lenders subscribed for the assignment from the Backstop Lenders of approximately $3.8 million of New Money Loans, and the Non-Backstop Lenders and Backstop Lenders exchanged a total of $28 million of their 2021 Notes for Roll-Up Loans.

On June 25, 2019, the DIP Credit Agreement was further amended to, among other things, provide that upon entry of the Final DIP Order, the DIP Credit Agreement will be amended to accommodate and provided for the borrowing and roll-up mechanics described in the tender offer documentation.

On July 16, 2019, the Debtors entered into the DIP Limited Waiver. The DIP Limited Waiver, among other things, waived the events of default arising under the DIP Credit Agreement as a result of the non-commencement of an auction for substantially all assets of the Debtors and the non-occurrence of a sale order under Section 363 of Title 11 of the U.S. Code by the Bankruptcy Court by the respective milestone dates set forth in the DIP Credit Agreement and amends the milestones for these and other events in the auction process.

On July 18, 2019, the Bankruptcy Court entered a Final Order (I) Authorizing the Debtors to (A) Obtain Postpetition Financing Secured by Senior Priming Liens and (B) Use Cash Collateral, (II) Granting Liens and Providing Superpriority Administrative Expense Status, (III) Granting Adequate Protection, (IV) Modifying the Automatic Stay and (V) Granting Related Relief [Docket No. 407] pursuant to the Final DIP Order, approved the DIP Credit Agreement, as amended.

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On September 13, 2019, the DIP Credit Agreement was further amended to, among other things, (i) extend the milestone dates set forth in the DIP Credit Agreement by which a sale order under Section 363 of the Bankruptcy Code by the Bankruptcy Court must be entered and (ii) waive the event of default ~~arising,~~that ~~and~~had ~~which~~occurred ~~continues~~and ~~arising,~~was continuing under the DIP Credit Agreement as a result of non-compliance with the Approved Budget (as defined in the DIP Credit Agreement) due to an Unpermitted Variance (as defined in the DIP Credit Agreement) with respect to receipts for the week ending on September 6, 2019.

81On September 20, 2019 and September 27, 2019, the DIP Credit Agreement was further amended to, among other things, extend the milestone dates by which a sale order under Section 363 of the Bankruptcy Code by the Bankruptcy Court must be entered.

~~Table~~The Debtors borrowed $10 million and $25 million under the DIP Credit Agreement on May 16, 2019 and August 1, 2019, respectively. The Debtors have drawn $4 million, leaving $31 million in escrow as of ~~Contents~~October 11, 2019. In addition, on August 1, 2019, $28 million in principal amount of the 2021 Notes was exchanged and rolled-up to the DIP Credit Agreement. The Debtors have $66.1 million outstanding under the DIP Credit Agreement as of October 11, 2019, including interest, fees and Roll-Up Loans.

The Debtors borrowed $10 million and $25 million under the DIP Credit Agreement on May 16, 2019 and August 1, 2019, respectively. The Debtors have drawn $4 million, leaving $31 million in escrow as of September 6, 2019. In addition, on August 1, 2019, $28 million in principal amount of the 2021 Notes was exchanged and rolled-up to the DIP Credit Agreement. The Debtors have $65.4 million outstanding under the DIP Credit Agreement as of September 6, 2019, including interest, fees and Roll-Up Loans.

Amendment to A/R Securitization Program

CPE Resources is party to the A/R Securitization Program with PNC Bank, National Association, as administrator. Effective May 10, 2019, we entered into the Receivables Purchase Agreement Amendment that modified the Receivables Purchase Agreement such that the Chapter 11 Cases would not result in an automatic termination of the A/R Securitization Program and resulting acceleration of the obligations thereunder. On May 15, 2019, we entered into a Second Amended and Restated Receivables Purchase Agreement (the “Receivables Purchase Agreement Amendment”), by and among Cloud Peak Energy Receivables LLC (“CPE Receivables”), CPE Resources, the various Conduit Purchasers and Related Committed Purchasers (collectively, the “Purchasers”), LC Participants and Purchaser Agents from time to time party thereto, PNC Bank, National Association, as Administrator (the “Administrator”), and PNC Capital Markets LLC, as Structuring Agent. Prior to entering into the Receivables Purchase Agreement Amendment, it was approved by the Bankruptcy Court on May 14, 2019.

Under the terms of the A/R Securitization Program, eligible trade receivables consist of certain trade receivables from certain of the Company’s operating subsidiaries. The amount available with respect to the receivables sold into the A/R Securitization Program is subject to customary limits and reserves, including reserves based on customer concentration and prior past due balances. Of the eligible pool of receivables sold to CPE Receivables, undivided interests in only a portion of the pool are sold to the Purchasers under the facility, subject to a $35~~,000,000~~ million purchase limit, which was reduced from $70~~,000,000~~ million under the A/R Securitization Program prior to the Receivables Purchase Agreement Amendment. Although the Purchasers in the program bear the risk of non-payment of purchased receivables, CPE Resources has agreed to indemnify the Purchasers, Purchaser Agents, Administrator and other secured parties with respect to various matters, including any defaults by CPE Resources or its operating subsidiaries under the documents relating to the A/R Securitization Program, and may be required to repurchase receivables which do not comply with the requirements of the program. CPE Resources services the receivables sold into the A/R Securitization Program.

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commercial paper to fund its purchases of receivables, is a rate equivalent to the weighted average cost incurred in connection with the issuance of such commercial paper. If the commercial paper rate is not applicable, the alternate rate will apply. The alternate rate is equal to 2.00% plus (i) one month LIBOR (subject to a 0% floor) or, (ii) if LIBOR is unavailable, the daily average base rate which is defined as the higher of either the prime rate or the federal funds rate plus 50 basis points. CPE Receivables will pay fees to the Administrator and Purchaser, including paying (i) the Administrator a structuring fee, (ii) each of the Purchasers facility fees and program fees and (iii) letter of credit fees to each letter of credit participants.

Overview of Cash Transactions

We started 2019 with cash, cash equivalents, and restricted cash of $92.1 million and concluded the ~~six~~nine months ended ~~June~~September 30, 2019 with $88143.56 million. The primary reason for this decrease was cash used in operating activities of $1318.97 million. This was partially offset by the DIP financing of $1035 million and from proceeds from the sale of assets of $3.2 million. The following table represents cash flows (in millions, except percentages).

	Nine Months Ended
	September 30,				Change
	2019		2018		Amount			Percent
Beginning balance - cash, cash equivalents, and restricted cash	$	92.1	$	108.7	$	(16.6	)	(15.3	)
Net cash provided by (used in) operating activities	18.7		24.1		(5.4		)	(22.4	)
Net cash provided by (used in) investing activities

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