Form 10-Q CLOUD PEAK ENERGY INC. For: Sep 30

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October 28, 2015 6:05 AM EDT

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Table of Contents

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 September 30, 2015

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.)

505 S. Gillette Ave., Gillette, Wyoming		82716
(Address of principal executive offices)		(Zip Code)

(307) 687-6000

(Registrant’s telephone number, including area code)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x	Accelerated filer o

Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

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, 61,171,814 shares outstanding as of October 22, 2015.

Table of Contents

CLOUD PEAK ENERGY INC.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
		Page
Item 1	Financial Statements –
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2015 and 2014	1
	Unaudited Condensed Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014	2
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014	3
	Notes to Unaudited Condensed Consolidated Financial Statements	4
	Cautionary Notice Regarding Forward-Looking Statements	37

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3	Quantitative and Qualitative Disclosures About Market Risk	62
Item 4	Controls and Procedures	63

PART II — OTHER INFORMATION
Item 1	Legal Proceedings	64
Item 1A	Risk Factors	64
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	65
Item 3	Defaults Upon Senior Securities	65
Item 4	Mine Safety Disclosures	65
Item 5	Other Information	65
Item 6	Exhibits	65

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.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS AND COMPREHENSIVE INCOME

(in thousands, except per share data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Revenue	$	301,673		$	342,337		$	863,374		$	982,253
Costs and expenses
Cost of product sold (exclusive of depreciation, depletion, amortization, and accretion, shown separately)	248,500			288,345			735,258			830,405
Depreciation and depletion	7,896			25,815			51,742			81,944
Amortization of port access contract rights	928			—			2,783			—
Accretion	3,070			3,848			9,960			12,066
Derivative financial instruments	10,235			(515		)	17,781			(16,052		)
Selling, general and administrative expenses	12,940			12,163			36,701			37,086
Goodwill impairment	—			—			33,355			—
Other operating costs	646			1,099			1,163			1,671
Total costs and expenses	284,215			330,755			888,743			947,120
Gain on sale of Decker Mine interest	—			(74,262		)	—			(74,262		)
Operating income (loss)	17,458			85,844			(25,369		)	109,395
Other income (expense)
Interest income	37			37			137			222
Interest expense	(10,985		)	(12,701		)	(36,274		)	(64,508		)
Tax agreement benefit	—			58,595			—			58,595
Other, net	253			(31		)	158			(262		)
Total other income (expense)	(10,695		)	45,900			(35,979		)	(5,953		)
Income (loss) before income tax provision and earnings from unconsolidated affiliates	6,763			131,744			(61,348		)	103,442
Income tax benefit (expense)	2,205			(40,688		)	12,350			(30,709		)
Income (loss) from unconsolidated affiliates, net of tax	(95		)	13			294			562
Net income (loss)	8,873			91,069			(48,704		)	73,295
Other comprehensive income (loss)
Postretirement medical plan amortization of prior service costs	313			247			939			741
Write-off of prior service costs related to Decker Mine pension	—			3,183			—			3,183
Income tax on postretirement medical plan	(116		)	(1,235		)	(347		)	(1,413		)
Other comprehensive income (loss)	197			2,195			592			2,511
Total comprehensive income (loss)	$	9,070		$	93,264		$	(48,112	)	$	75,806
Income (loss) per common share:
Basic	$	0.15		$	1.50		$	(0.80	)	$	1.21
Diluted	$	0.14		$	1.49		$	(0.80	)	$	1.20
Weighted-average shares outstanding - basic	61,074			60,850			61,013			60,803
Weighted-average shares outstanding - diluted	61,351			61,133			61,013			61,197

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

CLOUD PEAK ENERGY INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	September 30,			December 31,
	2015			2014
ASSETS
Current assets
Cash and cash equivalents	$	123,519		$	168,745
Accounts receivable	62,029			86,838
Due from related parties	4,152			227
Inventories, net	75,503			79,802
Deferred income taxes	21,670			21,670
Derivative financial instruments	7,258			17,111
Prepaid taxes	9,388			3
Other assets	16,668			9,837
Total current assets	320,187			384,233

Noncurrent assets
Property, plant and equipment, net	1,514,762			1,589,138
Port access contract rights, net	50,997			53,780
Goodwill	2,280			35,634
Deferred income taxes	65,918			56,468
Other assets	44,540			31,900
Total assets	$	1,998,684		$	2,151,153

LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	54,189		$	52,035
Royalties and production taxes	126,139			126,212
Accrued expenses	45,989			52,213
Current portion of federal coal lease obligations	—			63,970
Other liabilities	1,803			1,632
Total current liabilities	228,120			296,062

Noncurrent liabilities
Senior notes	490,792			489,715
Asset retirement obligations, net of current portion	167,790			216,241
Accumulated postretirement medical benefit obligation, net of current portion	55,401			50,276
Other liabilities	12,370			11,025
Total liabilities	954,473			1,063,319
Commitments and Contingencies (Note 13)

Equity
Common stock ($0.01 par value; 200,000 shares authorized; 61,647 and 61,454 shares issued and 61,172 and 61,022 outstanding at September 30, 2015 and December 31, 2014, respectively)	612			610
Treasury stock, at cost (475 shares and 432 shares at September 30, 2015 and December 31, 2014, respectively)	(6,493		)	(6,243		)
Additional paid-in capital	572,758			568,022
Retained earnings	488,041			536,744
Accumulated other comprehensive income (loss)	(10,707		)	(11,299		)
Total equity	1,044,211			1,087,834
Total liabilities and equity	$	1,998,684		$	2,151,153

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CLOUD PEAK ENERGY INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine Months Ended
	September 30,
	2015			2014
Cash flows from operating activities
Net income (loss)	$	(48,704	)	$	73,295
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and depletion	51,742			81,944
Amortization of port access contract rights	2,783			—
Accretion	9,960			12,066
Goodwill impairment	33,355			—
Loss (income) from unconsolidated affiliates, net of tax	(294		)	(562		)
Distributions of income from unconsolidated affiliates	—			1,250
Deferred income taxes	(10,115		)	30,715
Gain on sale of Decker Mine interest	—			(74,262		)
Tax agreement benefit	—			(58,595		)
Equity-based compensation expense	4,819			5,819
Derivative mark-to-market (gains) losses	17,781			(16,052		)
Cash received (paid) on derivative financial instrument settlements	(1,618		)	16,905
Premium payments on derivative financial instruments	(5,813		)	—
Non-cash interest expense related to early retirement of debt and refinancings	—			7,338
Net periodic postretirement benefit costs	6,072			5,247
Other	1,953			4,021
Changes in operating assets and liabilities:
Accounts receivable	25,614			(6,459		)
Inventories, net	4,300			(3,927		)
Due to or from related parties	(3,925		)	137
Other assets	(10,875		)	4,173
Accounts payable and accrued expenses	(14,191		)	4,850
Tax agreement liability	—			(45,000		)
Asset retirement obligations	(780		)	(788		)
Net cash provided by (used in) operating activities	62,064			42,115

Investing activities
Purchases of property, plant and equipment	(28,125		)	(14,680		)
Cash paid for capitalized interest	(404		)	(4,066		)
Investments in marketable securities	—			(8,159		)
Maturity and redemption of investments	—			88,845
Investment in port access contract rights	—			(37,100		)
Investment in development projects	(1,526		)	(3,522		)
Investment in unconsolidated affiliates	(5,383		)	—
Payment of restricted cash	(6,500		)	—
Other	185			(1,830		)
Net cash provided by (used in) investing activities	(41,753		)	19,488

Financing activities
Principal payments on federal coal leases	(63,970		)	(58,958		)
Issuance of senior notes	—			200,000
Repayment of senior notes	—			(300,000		)
Payment of deferred financing costs	(342		)	(14,683		)
Other	(1,225		)	(305		)
Net cash provided by (used in) financing activities	(65,537		)	(173,946		)

Net increase (decrease) in cash and cash equivalents	(45,226		)	(112,343		)
Cash and cash equivalents at beginning of period	168,745			231,633
Cash and cash equivalents at end of period	$	123,519		$	119,290

Supplemental cash flow disclosures:
Interest paid	$	32,827		$	37,017
Income taxes paid (refunded)	$	10,123		$	(5,798	)
Supplemental non-cash investing and financing activities:
Capital expenditures included in accounts payable	$	6,401		$	1,816
Assets acquired under capital leases	$	—		$	1,209
Port access contract rights acquired in sale of Decker Mine interest	$	—		$	5,000

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

We are one of the largest producers of coal in the United States of America (“U.S.”) and the Powder River Basin (“PRB”), based on our 2014 coal sales. 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 operate three 100% owned 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. We do not produce any metallurgical coal. Thermal coal is primarily consumed by electric utilities and industrial consumers as fuel for electricity generation and steam output. In 2014, the coal we produced generated approximately 4% of the electricity produced in the U.S.

On August 24, 2015, we entered into a surface rights agreement that provides us access to significant additional coal contained within a federal coal lease controlled by the Cordero Rojo Mine. The agreement involved a land exchange and production payments from any future sales of the underlying coal, including certain recoupable advance production payments.

We also have two development projects, the Youngs Creek project and the Crow project. The Youngs Creek project is a permitted but undeveloped surface mine project in the Northern PRB region located 13 miles north of Sheridan, Wyoming, contiguous with the Wyoming-Montana state line. The Youngs Creek project is approximately seven miles south of our Spring Creek Mine and seven miles from the mainline railroad. We have not been able to classify the Youngs Creek project mineral rights as proven and probable reserves as they remain subject to further exploration and evaluation based on market conditions. We also have an option to lease agreement and a corresponding exploration agreement with the Crow Tribe of Indians (the “Crow project”). The Crow project is located on the Crow Indian Reservation in southeast Montana and is near the Youngs Creek project. We are in the process of evaluating development options for the Youngs Creek project and the Crow project and believe that their proximity to the Spring Creek Mine represents an opportunity to optimize our mine developments 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.

We continue to manage our sales of PRB coal and delivery services business to Asian export customers. In 2014, our logistics business was the largest U.S. exporter of thermal coal into South Korea. Exports through the Westshore Terminals Limited Partnership port (“Westshore”) are currently forecast to be approximately 4.0 million tons for 2015. We are contracted to ship approximately 4.3 million tons at Westshore for 2015. This reflects our previously announced reduction of export shipments by approximately 1.9 million tons as compared to the originally contracted amount. This reduction is part of our ongoing efforts to address the impact of low seaborne thermal coal prices for international coal sales and to mitigate our associated losses and take-or-pay exposure in our logistics business. In addition, we are currently in discussions with our rail and port partners and expect to reduce our contracted export volumes in 2016 and beyond if weak pricing for seaborne thermal coal persists.

In addition to our committed capacity at Westshore, we hold option contracts to potentially increase our future export capacity through proposed Pacific Northwest export terminals. We have a throughput option agreement with SSA Marine, which provides us with an option for up to 17.6 million tons of capacity per year through the planned dry bulk cargo Gateway Pacific Terminal (“GPT”) at Cherry Point in Washington State.

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

expenses through 2019. Thereafter, the owners will share any permitting expenses in excess of $30 million in proportion with their ownership interests. As of September 30, 2015, we have paid $5.4 million toward permitting expenses as a partner in GPT. We have the right to exit the partnership, at our discretion at any time during the permitting phase, with no further obligation.

We also have a throughput option for up to 7.7 million tons per year at the proposed Millennium Bulk Terminals coal export facility in Washington State. Our options in each of these proposed terminals are exercisable following the successful completion of the ongoing permit process, each of which is currently in the environmental impact statement phase. The timing and outcome of these permit processes, and therefore the construction of the terminals, are uncertain.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. (“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 note disclosures that are normally included in annual financial statements prepared in conformity with U.S. GAAP. The year-end condensed consolidated balance sheet data was derived from audited consolidated financial statements, but does not include all footnote disclosures required to be included in annual financial statements by U.S. GAAP. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of December 31, 2014 and 2013, and for each of the three years ended December 31, 2014, included in our Annual Report on Form 10-K for the year ended December 31, 2014 (“2014 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 to present fairly our financial position as of September 30, 2015, and the results of our operations, comprehensive income for the three and nine months ended September 30, 2015 and 2014, and cash flows for the nine months ended September 30, 2015 and 2014, in conformity with U.S. GAAP. Our results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for future quarters or for the year ended December 31, 2015.

The preparation of our 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 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 and goodwill 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.

Certain amounts in prior years have been reclassified to conform to the 2015 presentation and were not material to the financial statements. 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 Financial Accounting Standards Board (“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”). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to be material to our consolidated financial statements upon adoption.

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), as amended, requiring entities to provide greater insight into both revenue that has been recognized and revenue that is expected to be recognized in the future from existing contracts. The new guidance is effective for interim and annual periods beginning after December 15, 2017, although entities may adopt one year earlier if they choose. We are considering the impact the adoption of ASU 2014-09 may have on our results of operations, financial condition, and cash flows.

In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis (“ASU 2015-02”), requiring entities to reevaluate whether they should consolidate certain legal entities. The new guidance is effective for interim and annual periods beginning after December 15, 2015. We do not expect any impact from the adoption of this standard on our results of operations, financial condition, or cash flows at this time.

On April 7, 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability. The new guidance is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. We elected to early adopt ASU 2015-03 during the three months ended September 30, 2015 and have applied the new guidance to the debt issuance costs related to our senior notes. The adoption of this guidance constitutes a change in accounting principle, and requires retrospective application. As a result of implementing this guidance, our noncurrent Other assets and Senior notes liability were reduced by $7.9 million and $8.8 million as of September 30, 2015 and December 31, 2014, respectively. See Note 8 for a discussion related to our senior notes. Approximately $9.0 million of debt issuance costs related to the Credit Agreement and A/R Securitization Program were not subject to ASU 2015-03 and remain in noncurrent Other assets. See Note 11.

3. Goodwill

The carrying amounts of our mineral properties, equipment, goodwill and port access contract rights are sensitive to declines in domestic and international coal prices. These assets are at risk of impairment if future prices continue to decline. The cash flow models that we use to assess impairment includes numerous assumptions such as our current estimates of forecast coal production, market outlook on forward commodity prices, operating and development costs, and discount rates. A decrease in forward prices alone could result in an impairment of our long-lived assets. In addition, the denial of regulatory approval could also result in an impairment of certain of these assets.

Goodwill, which represents the excess of the amount paid over the fair value of net assets acquired in a business combination, relates to the mines included in our Owned and Operated Mines segment. Each mine represents a reporting unit for purposes of our goodwill assessment. We assess the goodwill in each reporting unit for impairment annually during the fourth quarter, or more frequently if events or changes in circumstances indicate that the goodwill might be impaired.

We assess each reporting unit’s goodwill for impairment by comparing the carrying amount of each reporting unit to its fair value. We determine the fair value of each reporting unit utilizing estimated future discounted cash flows based on estimates of proven and probable reserves, coal prices, and operating and equipment costs, consistent with assumptions that we believe marketplace participants would use in their estimates of fair value. If the carrying amount of a reporting unit exceeds its fair value, we allocate the fair value to the reporting unit’s assets and liabilities in a manner similar to a purchase business combination, to determine the implied fair value of the reporting unit’s goodwill. If the implied fair value of goodwill is less than the related carrying amount, we record an impairment charge to reduce the carrying amount to its implied fair value.

We generally do not view short-term declines in thermal coal prices as an indicator of impairment; however, we do view a sustained trend of adverse coal market pricing or unfavorable changes thereto as a potential indicator of impairment. Due to the weak domestic coal market outlook, especially as it relates to 8400 Btu coal, coupled with our recent decision to reduce annual production at the Cordero Rojo Mine to 24 million tons, we determined that there was a potential indication of impairment of the Cordero Rojo Mine’s goodwill and performed an interim goodwill impairment assessment during the second quarter of 2015. Based on the results of that assessment, we determined that the carrying amount of the Cordero Rojo Mine exceeded its estimated fair value and that the implied fair value of the related goodwill, which related to an acquisition completed in 1997, was $0 requiring a $33.4 million impairment charge which is reflected in the nine months ended

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015. The remaining $2.3 million balance in goodwill relates to our other mines in the Owned and Operated Mines segment.

4. Sale of Decker Mine Interest

On September 12, 2014, we completed the sale of our 50% non-operating interest in the Decker Mine to an affiliate of Ambre Energy North America, Inc. (“Ambre Energy”), now known as Lighthouse Resources Inc. Under the terms of the agreement, Ambre Energy acquired our 50% interest in the Decker Mine and related assets and assumed all reclamation and other liabilities, giving Ambre Energy 100% ownership of the Decker Mine. As a result of this agreement, we recognized a gain on sale of the Decker Mine interest of $74.3 million during the three and nine months ended September 30, 2014. We reported the results of our 50% interest in the Decker Mine in our Corporate and Other segment. Results of operations for the Decker Mine included in the unaudited condensed consolidated statements of operations and comprehensive income consists of the following (in thousands):

	Three Months Ended			Nine Months Ended
Decker Mine	September 30, 2014			September 30, 2014
Revenues	$	6,095		$	15,653
Costs and expenses	5,774			19,475
Operating income (loss)	321			(3,823		)
Other income (expense)	(13		)	(41		)
Income (loss) before income tax provision	$	309		$	(3,863	)

5. Inventories

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

	September 30,			December 31,
	2015			2014
Materials and supplies	$	74,050		$	77,736
Less: Obsolescence allowance	(1,050		)	(1,102		)
Material and supplies, net	73,000			76,634
Coal inventory	2,503			3,168
Inventories, net	$	75,503		$	79,802

6. 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. These include 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

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 September 30, 2015 or December 31, 2014.

The tables below set forth, by level, our financial assets and liabilities that are recorded at fair value in the accompanying condensed consolidated balance sheets (in thousands):

	Fair Value at September 30, 2015
Description	Level 1		Level 2		Total
Assets
Money market funds (1)	$	81,822	$	—	$	81,822
Derivative financial instruments	$	—	$	7,258	$	7,258
Liabilities
Derivative financial instruments	$	—	$	4,106	$	4,106

	Fair Value at December 31, 2014
Description	Level 1		Level 2		Total
Assets
Money market funds (1)	$	98,789	$	—	$	98,789
Derivative financial instruments	$	—	$	17,111	$	17,111
Liabilities
Derivative financial instruments	$	—	$	3,608	$	3,608

(1) Included in Cash and cash equivalents in the condensed consolidated balance sheets along with $41.7 million and $70.0 million of demand deposits at September 30, 2015 and December 31, 2014, respectively.

We did not have any transfers between levels during the nine months ended September 30, 2015. Our policy is to value all transfers between levels using the beginning of period valuation.

7. Derivative Financial Instruments

Coal Contracts

We use derivative financial instruments to help manage our exposure to market changes in coal prices. To manage our exposure in the international markets, we have international coal forward contracts and put options linked to forward Newcastle coal prices. We use domestic coal futures contracts referenced to the 8800 Btu coal price sold from the PRB, as quoted on the Chicago Mercantile Exchange (“CME”), to help manage our exposure to market changes in domestic coal prices.

Under the international coal forward contracts, if the monthly average index price is lower than the contract price, we receive the difference, and if the monthly average index price is higher than the contract price, we pay the difference. Under the international put options, if the monthly average index price is lower than the option price, we receive the difference, and if the monthly average index price is higher than the option price, we do not receive or pay anything.

Under the domestic coal futures contracts, if the monthly average index price is higher than the contract price, we receive the difference, and if the monthly average index price is lower than the contract price, we pay the difference.

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Amounts due to us or to the CME as a result of changes in the market price of our open domestic coal futures contracts and to fulfill margin requirements are received or paid through our brokerage bank on a daily basis; therefore, there is no asset or liability on the condensed consolidated balance sheets.

At September 30, 2015, we held positions that are expected to settle in the following years (in thousands, except per ton amounts):

	2015		2016		Total
International Coal Forward Contracts
Notional amount (tons)	172		132		304
Net asset position	$	4,117	$	7,032	$	11,149
Weighted-average per ton	$	99.53	$	100.13	$	99.90

International Coal Put Options
Notional amount (tons)	—		2,480		2,480
Net asset position	$	—	$	4,783	$	4,783
Weighted-average per ton	$	—	$	44.75	$	44.75

Domestic Coal Futures Contracts
Notional amount (tons)	360		120		480
Weighted-average per ton	$	13.10	$	14.70	$	13.50

WTI Derivatives

We use derivative financial instruments, such as collars and swaps, 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 does not directly offset market changes to our diesel costs.

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.

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 use swap agreements to help fix a portion of our diesel costs for 2015 and 2016.

During the nine months ended September 30, 2015, we settled a portion of our 2015 call options by either closing out those positions or entering into offsetting call option positions. We also entered into new 2015 swap positions. In addition, we entered into new collar arrangements and swap positions for 2016. At September 30, 2015, we held the following WTI derivative financial instruments:

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	Floor			Ceiling			Swaps
Settlement Period	Notional Amount	Weighted- Average per Barrel		Notional Amount	Weighted- Average per Barrel		Notional Amount	Weighted- Average per Barrel
	(barrels in thousands)			(barrels in thousands)			(barrels in thousands)
2015 swap positions (1)	—	$	—	—	$	—	173	$	53.20
2016 collar positions (2)	342	$	53.94	342	$	72.88	—	$	—
2016 swap positions (2)	—	$	—	—	$	—	342	$	63.39
Total	342	$	53.94	342	$	72.88	515	$	59.96

(1) Represents 100% of expected diesel consumption for the fourth quarter of 2015.

(2) Represents 50% of expected diesel consumption for 2016.

U.S. On-Highway Diesel Derivatives

A portion of our rail transportation cost for coal shipments to Westshore, the rail fuel surcharge, is priced using the Department of Energy’s U.S. On-Highway Diesel Fuel Prices (“U.S. On-Highway Diesel”). During the nine months ended September 30, 2015, we entered into new swap positions indexed to the U.S. On-Highway Diesel prices to help fix a portion of the rail fuel surcharge for 2015 and 2016. 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.

At September 30, 2015, we held the following U.S. On-Highway Diesel derivative financial instruments:

	Swaps
Settlement Period	Notional Amount	Weighted- Average per Gallon
	(gallons in thousands)
2015 swap positions	2,650	$	3.10
2016 swap positions	6,400	$	3.18
Total	9,050	$	3.16

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Offsetting and Balance Sheet Presentation

	September 30, 2015
	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
International coal forward contracts	$	11,149	$	—		$	—		$	—	$	11,149		$	—
International coal put options	4,783		—			—			—		4,783			—
WTI derivative financial instruments	—		(8,351		)	(4,246		)	4,246		(4,246		)	(4,106		)
U.S. On-Highway Diesel derivative financial instruments	—		(4,429		)	(4,429		)	4,429		(4,429		)	—
Total	$	15,932	$	(12,780	)	$	(8,675	)	$	8,675	$	7,258		$	(4,106	)

	December 31, 2014
	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
International coal forward contracts	$	20,861	$	(129	)	$	(129	)	$	129	$	20,732		$	—
WTI derivative financial instruments	—		(7,228		)	(3,620		)	3,620		(3,620		)	(3,608		)
Total	$	20,861	$	(7,357	)	$	(3,749	)	$	3,749	$	17,111		$	(3,608	)

Net amounts of derivative assets are included in Derivative financial instruments and net amounts of derivative liabilities are included in Accrued expenses in the condensed consolidated balance sheets. There were no cash collateral requirements at September 30, 2015 or December 31, 2014.

Derivative Gains and Losses

Derivative mark-to-market (gains) and losses recognized in the condensed consolidated statement of operations and comprehensive income were as follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
International coal forward contracts	$	(1,153	)	$	(3,989	)	$	(5,999	)	$	(18,071	)
International coal put options	(4,039		)	—			5,155			—
Domestic coal futures contracts	(564		)	2,946			4,095			1,958
WTI derivative financial instruments	11,500			526			8,875			60
U.S. On-Highway Diesel derivative financial instruments	4,491			—			5,656			—
Net derivative financial instruments loss (gain)	$	10,235		$	(515	)	$	17,781		$	(16,052	)

See Note 6 for a discussion related to the fair value of derivative financial instruments.

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8. Senior Notes

Senior notes consisted of the following (in thousands):

	September 30, 2015						December 31, 2014
	Principal		Carrying Value		Fair Value (1)		Principal		Carrying Value		Fair Value (1)
8.50% senior notes due 2019, net of unamortized discount and debt issuance costs	$	300,000	$	294,970	$	197,250	$	300,000	$	294,259	$	315,000

6.375% senior notes due 2024, net of unamortized debt issuance costs	200,000		195,822		112,000		200,000		195,457		189,500
Total senior notes	$	500,000	$	490,792	$	309,250	$	500,000	$	489,715	$	504,500

(1) The fair value of the senior notes was based on observable market inputs, which are considered Level 2 in the fair value hierarchy.

Debt issuance costs of approximately $12 million were incurred in connection with the issuance of the 2019 Notes and 2024 Notes. These costs were deferred and are being amortized to interest expense over the respective terms of the senior notes using the effective interest method. During the three months ended September 30, 2015, we implemented ASU 2015-03, which requires that debt issuance costs be presented in the balance sheet as a direct deduction from the associated debt liability. Historically, the unamortized debt issuance costs related to the senior notes were included in noncurrent Other assets.

Unamortized debt issuance costs included in senior notes in the accompanying condensed consolidated balance sheets were as follows (in thousands):

	September 30,		December 31,
	2015		2014
Unamortized debt issuance costs	$	7,876	$	8,765

9. Federal Coal Lease Obligations

As of September 30, 2015, we have no further committed lease by application (“LBA”) payments. Federal coal lease obligations consisted of the following (in thousands):

	September 30,		December 31,
	2015		2014
Federal coal lease obligations, current	$	—	$	63,970

Our federal coal lease obligations, as reflected in the condensed consolidated balance sheets, consisted of obligations payable to the Bureau of Land Management of the U.S. Department of the Interior (the “BLM”) discounted at an imputed interest rate. Imputed interest was included in Accrued expenses.

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10. Asset Retirement Obligations

Changes in the carrying amount of our asset retirement obligations were as follows (in thousands):

	2015			2014
Balance at January 1,	$	217,312		$	247,329
Reduction in asset retirement obligation attributable to sale of Decker Mine interest	—			(72,175		)
Accretion expense	9,960			12,066
Revisions to estimated future reclamation cash flows	(57,631		)	(9,852		)
Payments	(780		)	(788		)
Balance at September 30,	168,861			176,580
Less: current portion	(1,071		)	(1,118		)
Asset retirement obligation, net of current portion	$	167,790		$	175,462

Revisions to estimated future reclamation cash flows reflect our regular updates to our estimated costs of closure activities throughout the lives of the respective mines and reflect changes in estimates of closure volumes, disturbed acreages, the timing of the reclamation activities, and third-party unit costs as of September 30, 2015 and 2014. The land acquired during the three months ended September 30, 2015 near our Cordero Rojo Mine has been included in the revisions to estimated future reclamation cash flows as the mine life for Cordero Rojo Mine is now expected to be approximately four years longer. Also included were modifications to the Cordero Rojo Mine reclamation plan that resulted in significantly less soil movement to achieve the required post mining topography. Both of these factors have combined to reduce the discounted value of our future liability by $35.2 million. Reductions to asset retirement obligations resulting from such revisions generally result in a corresponding reduction to the related asset retirement cost in Property, plant and equipment, net. However, these factors caused a decrease to the asset retirement obligation that exceeded the carrying amount of the related asset retirement cost of $18.4 million. The resulting non-cash credit reduced Depreciation and depletion expense on the condensed consolidated statements of operations by $16.8 million for the three and nine months ended September 30, 2015.

11. Other Obligations

Capital Equipment Lease Obligations

From time to time, we enter into capital leases on equipment under various lease schedules, which are subject to a master lease agreement, and are pre-payable at our option. Interest on the leases is based on the one-month London Interbank Offered Rate (“LIBOR”) plus 1.95% for a current rate of 2.16% as of September 30, 2015. The gross value of property, plant and equipment under capital leases was $11.4 million as of September 30, 2015 and related primarily to mining equipment. The accumulated depreciation for these items was $2.8 million as of September 30, 2015, and changes have been included in Depreciation and depletion in the condensed consolidated statements of operations. Due to the variable nature of the imputed interest, fair value is equal to carrying value.

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Future payments on capital equipment lease obligations are as follows (in thousands):

Year Ended December 31,
2015	$	449
2016	1,777
2017	1,741
2018	1,706
2019	1,670
Thereafter	879
Total	8,223
Less: interest	411
Total principal payments	7,812
Less: current portion	1,632
Capital equipment lease obligations, net of current portion	$	6,179

Accounts Receivable Securitization

On February 11, 2013, we executed an Accounts Receivable Securitization Facility (“A/R Securitization Program”) with a committed capacity of up to $75.0 million, which was due to expire on February 11, 2015. On January 23, 2015, we entered into an agreement extending the term of the A/R Securitization Program to January 23, 2018. All other terms of the program have remained substantially the same. Certain of our subsidiaries are parties to the A/R Securitization Program. In January 2013, we formed Cloud Peak Energy Receivables LLC (the “SPE”), a special purpose, bankruptcy-remote 100% owned subsidiary, to purchase, subject to certain exclusions, in a true sale, trade receivables generated by certain of our subsidiaries without recourse (other than customary indemnification obligations for breaches of specific representations and warranties) and then transfer undivided interests in up to $75.0 million of those accounts receivable to a financial institution for cash borrowings for our ultimate benefit. The total borrowings are limited by eligible accounts receivable, as defined under the terms of the A/R Securitization Program. As of September 30, 2015, the A/R Securitization Program would have allowed for $45.2 million of borrowing capacity. There were no borrowings outstanding from the A/R Securitization Program as of September 30, 2015. The SPE is consolidated into our financial statements.

Credit Facility

On February 21, 2014, Cloud Peak Energy Resources LLC entered into a five-year Credit Agreement with PNC Bank, National Association, as administrative agent, and a syndicate of lenders, which was amended on September 5, 2014 (as amended, the “Credit Agreement”). The Credit Agreement provides us with a senior secured revolving credit facility with a capacity of up to $500 million that can be used to borrow funds or issue letters of credit. The borrowing capacity under the Credit Agreement is reduced by the amount of letters of credit issued, which may be up to $250 million. Subject to the satisfaction of certain conditions, we may elect to increase the size of the revolving credit facility and/or request the addition of one or more new tranches of term loans in an amount up to the greater of (i) $200 million or (ii) our EBITDA (which is defined in the Credit Agreement) for the preceding four fiscal quarters. The Credit Agreement provides for the designation of a foreign restricted subsidiary as a borrower, subject to certain conditions and approvals.

The financial covenants under the Credit Agreement require us to maintain (a) a ratio of EBITDA (as defined in the Credit Agreement) for the preceding four fiscal quarters to consolidated net cash interest expense equal to or greater than 1.50 to 1 and (b) a ratio of secured funded debt less unrestricted cash and marketable securities (net secured debt) to EBITDA for the preceding four fiscal quarters equal to or less than 4.00 to 1. The credit facility and capital leases are considered secured funded debt under the covenant calculations whereas federal coal lease obligations, accounts receivable securitizations, and senior notes are not considered secured funded debt. The Credit Agreement also contains other non-financial covenants, including covenants related to our ability to incur additional debt or take other corporate actions. The Credit Agreement also contains customary events of default with customary grace periods and thresholds. Our ability to

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access the available funds under the credit facility may be prohibited in the event that we do not comply with the covenant requirements or if we default on our obligations under the Credit Agreement. If our trailing twelve month EBITDA were to continue to decline and we were unable to negotiate an amendment with the bank group, our actual borrowing capacity under the Credit Agreement may be reduced or eliminated entirely depending on the extent of the decline in trailing twelve month EBITDA.

Loans under the Credit Agreement bear interest at LIBOR plus an applicable margin of 2.00% to 2.75%, depending on our net total leverage to EBITDA ratio. We pay the lenders a commitment fee between 0.375% and 0.50% per year, depending on our net total leverage to EBITDA ratio, on the unused amount of the credit facility. Letters of credit issued under the credit facility, unless drawn upon, will incur a per annum fee from the date at which they are issued between 2.00% and 2.75% depending on our net total leverage to EBITDA ratio. Letters of credit that are drawn upon are converted to loans. In addition, in connection with the issuance of a letter of credit, we are required to pay the issuing bank a fronting fee of 0.125% per annum.

As of September 30, 2015, no borrowings or letters of credit were outstanding under the credit facility, and we were in compliance with the covenants contained in the Credit Agreement. Our aggregate borrowing capacity under the Credit Agreement and the A/R Securitization Program was approximately $545.2 million as of September 30, 2015.

Other

Other long-term obligations include liabilities incurred in connection with the August 24, 2015 acquisition of land. We had the following purchase obligations with parties other than the BLM (in thousands):

	September 30,			December 31,
	2015			2014
Purchase obligations, total	$	2,527		$	—
Interest rate	12		%	—

The fair value of other long-term obligations approximated its carrying amount at September 30, 2015.

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12. Interest Expense

Interest expense consisted of the following (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Senior notes	$	9,563		$	9,563		$	28,688		$	31,140
Credit facility unutilized fee	643			614			2,027			1,836
Federal coal lease obligations imputed interest	35			1,478			2,883			6,702
Amortization of deferred financing costs and original issue discount	1,040			1,021			3,133			3,185
Other	44			64			137			209
Subtotal	11,325			12,740			36,868			43,072

Premium on early retirement of debt	—			—			—			13,837
Write-off of deferred financing costs and original issue discount	—			—			—			7,338
Other	—			—			—			364
Total cost of early retirement of debt and refinancings	—			—			—			21,538
Total interest expense	11,325			12,740			36,868			64,610
Less interest capitalized	(340		)	(39		)	(594		)	(102		)
Net interest expense	$	10,985		$	12,701		$	36,274		$	64,508

13. Commitments and Contingencies

Commitments

Purchase Commitments

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

	September 30,		December 31,
	2015		2014
Capital Commitments
Equipment	$	10,007	$	11,751
Land	$	23,678	$	24,663

Supplies and Services
Coal purchase commitments	$	1,458	$	2,592
Port throughput agreement (1)	$	553,970	$	604,750
Rail transportation agreements (2)	$	82,713	$	86,780
Materials and supplies	$	—	$	12,185

(1) Represents undiscounted take-or-pay commitments through the remaining term of the agreement if we do not ship any export tons.

(2) Represents undiscounted take-or-pay commitments through the remaining term of the agreements if we do not transport any export tons by rail or fulfill any of our other rail commitments.

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Contingencies

Litigation

WildEarth Guardians’ and Northern Plains Resource Council’s Regulatory Challenge to OSM’s Approval Process for Mine Plans

Background—On February 27, 2013, WildEarth Guardians (“WildEarth”) filed a complaint in the United States District Court for the District of Colorado (“Colorado District Court”) challenging the federal Office of Surface Mining’s (“OSM”) approvals of mine plans for seven different coal mines located in four different states. The challenged approvals included two that were issued to subsidiaries of Cloud Peak Energy: one for the Cordero Rojo Mine in Wyoming and one for the Spring Creek Mine in Montana.

On February 7, 2014, the Colorado District Court severed the claims in WildEarth’s complaint and transferred all the claims pertaining to non-Colorado mines to the federal district courts for the states in which the mines were located. Pursuant to this order, the challenge to Cordero Rojo’s mine plan approval (along with challenges to two other OSM approvals) was transferred to the United States District Court in Wyoming (“Wyoming District Court”) and the challenge to Spring Creek’s mine plan approval was transferred to the United States District Court for the District of Montana (“Montana District Court”). On February 14, 2014, WildEarth voluntarily dismissed the case pending in the Wyoming District Court, thereby concluding its challenge to OSM’s approval of the Cordero Rojo mine plan. WildEarth has continued to pursue its challenges to mine plan approvals pending in district courts in Colorado, New Mexico, and Montana.

On March 14, 2014, WildEarth amended its complaint in the Montana District Court to reflect the transfer order from the Colorado District Court. WildEarth has asked the Montana District Court to vacate OSM’s 2012 approval of the Spring Creek mine plan and enjoin mining operations at the Spring Creek Mine until OSM undertakes additional environmental analysis and related public process requested by WildEarth.

On August 14, 2014, Northern Plains Resource Council and the Western Organization of Resource Councils (collectively “Northern Plains”) filed a complaint in the Montana District Court challenging the same OSM approval of Spring Creek’s mine plan. Northern Plains, like WildEarth, requested that the Montana District Court vacate OSM’s 2012 approval of the Spring Creek mine plan and enjoin mining operations at the Spring Creek Mine until OSM undertakes the additional analysis requested by Northern Plains.

Intervention by Cloud Peak Energy and Others—By orders dated May 30, 2014, May 9, 2014, and April 28, 2014, the Montana District Court granted intervention to the State of Montana, the National Mining Association, and Spring Creek Coal LLC, a 100% owned subsidiary of Cloud Peak Energy, respectively. Each of these parties intervened on the side of OSM.

Current Schedule— On October 28, 2014, the Montana District Court consolidated the WildEarth and Northern Plains cases and set a briefing schedule for resolution of all of WildEarth’s and Northern Plains’ claims through motions for summary judgment. Plaintiffs filed their opening briefs on December 8, 2014, and under a revised schedule, briefing by all parties was completed on May 7, 2015. The Montana District Court held an oral argument on July 31, 2015 before a Magistrate Judge in Billings, Montana. At the conclusion of the oral argument, the Magistrate Judge ordered the parties to negotiate and attempt to resolve this dispute by agreement of the parties. In October 2015, the parties jointly submitted a status report to the Court stating they were unable to reach a settlement. On October 23, 2015, the Magistrate Judge issued her findings and recommendations to the District Court Judge. In this order, the Magistrate found that OSM had failed to follow the procedural requirements of the National Environmental Policy Act by failing to provide notice to the public when the agency had completed its environmental analysis and by failing to explain how OSM concluded that its approval of the 2012 mining plan would have no significant environmental impacts. Based on these findings, the Magistrate further recommended that OSM be directed to prepare a supplemental environmental analysis within 180 days from the date the District Court issues a final judgment. Under the Magistrate’s recommendation, mining at the Spring Creek mine would proceed unabated during the time OSM is undertaking its supplemental environmental analysis. The mining plan for the Spring Creek Mine would not be vacated unless OSM failed to complete its supplemental analysis within 180 days. The parties have until November 6, 2015 to file objections to the Magistrate’s findings and recommendations. Those parties which support the Magistrate’s order have until November 20, 2015 to file their responses to these objections. The District Court judge has complete discretion to adopt, reject, or modify the Magistrate’s findings and recommendations before entering a final judgment on the parties’ pending cross-motions for summary judgment. We continue to believe WildEarth’s challenge and the related Northern Plains’ challenge against OSM are without merit. Nevertheless, the plaintiffs seek in their underlying complaints to vacate existing, required regulatory approvals and to enjoin mining operations at Spring Creek Mine. If the District Judge were to grant the Plaintiffs’ requested relief or enter an order which goes beyond even the Magistrate’s proposed remedy, the impact of any such court order 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 required reductions or modifications to our mining activities.

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

Background—On September 5, 2014, WildEarth filed an appeal with the Interior Board of Land Appeals (“IBLA”) challenging the BLM August 15, 2014 decision to approve Antelope Coal LLC’s proposed modification of Antelope Coal’s West Antelope II South (“WAII South”) lease. Antelope Coal is a 100% owned subsidiary of Cloud Peak Energy. On September 12, 2014, Powder River Basin Resource Council and Sierra Club (collectively “PRBRC”) filed an appeal with the IBLA challenging this same BLM decision. The BLM’s decision that is the subject of both appeals approves the proposed amendment of WAII South lease. If the lease modification is entered into, it would add approximately 15.8 million tons of coal underlying nearly 857 surface acres. WildEarth and PRBRC have asked the IBLA to vacate the proposed WAII South lease modification and direct the BLM to prepare additional environmental analysis on the impacts of the lease modification.

Intervention by Cloud Peak Energy and State of Wyoming—On September 24, 2014 and October 6, 2014, Antelope Coal and the State of Wyoming, respectively, moved to intervene in the WildEarth and PRBRC appeals as respondents to defend the BLM’s lease modification decision. The IBLA granted these intervention motions.

Current Schedule. WildEarth filed its Statement of Reasons (opening brief) on October 6, 2014, and PRBRC filed its Statement of Reasons on October 10, 2014. The BLM filed its Answer (opposition brief) on January 12, 2015 and moved for the two appeals to be consolidated. Antelope Coal and State of Wyoming filed their respective Answers on January 20, 2015. Briefing has been completed in both appeals. The parties are awaiting a decision from the IBLA. We believe the WildEarth and PRBRC appeals challenging the BLM’s West Antelope II South lease modification decision are without merit. Nevertheless, if the plaintiff’s claims are successful, the timing and ability of Cloud Peak Energy to lease and mine the coal underlying the applicable surface acres would be materially adversely impacted.

WildEarth Guardians’ 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 OSM’s 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 LLC, a subsidiary of Cloud Peak Energy, for the Antelope Mine in Wyoming. The plaintiff seeks to vacate existing, required regulatory approvals and to enjoin mining operations at Antelope Mine.

Current Schedule—The OSM’s answer to WildEarth’s complaint is currently due November 27, 2015. We believe WildEarth’s challenge is without merit. Nevertheless, if the plaintiff’s claims 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.

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 LBAs, lease by modifications, 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 Cloud Peak Energy’s 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.

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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.

Several non-income based production tax audits related to federal and state royalties and severance taxes, including periods back to 2005, 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 nine months ended September 30, 2015 and 2014, there was no 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. The credit risk is controlled through credit approvals and monitoring procedures.

Guarantees and Off-Balance Sheet Risk

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. Prior to 2014, the method we used to meet these reclamation obligations and to secure coal lease obligations was to provide a third-party surety bond, typically through an insurance company, or provide a letter of credit, typically through a bank. In 2014, we were granted approval from the state of Wyoming to self-bond $200 million of our reclamation obligations within the state, subject to annual renewal requirements. We received approval to continue self-bonding on April 14, 2015. Specific bond and/or letter of credit amounts may change over time, depending on the activity at the respective site and any specific requirements by federal or state laws. As of September 30, 2015, we were self-bonded for $200 million and had $441.2 million of surety bonds outstanding to secure certain of our obligations to reclaim lands used for mining, secure coal lease obligations, and for other operating requirements.

14. Postretirement Medical Plan

We maintain an unfunded postretirement medical plan to provide certain postretirement medical benefits to eligible employees. Net periodic postretirement benefit costs included the following components (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Service cost	$	1,229	$	1,038	$	3,687	$	3,113
Interest cost	482		464		1,446		1,393
Amortization of prior service cost	313		247		939		741
Net periodic benefit cost	$	2,024	$	1,749	$	6,072	$	5,247

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

15. Income Taxes

Our Income (loss) before income tax provision and earnings from unconsolidated affiliates is earned solely in the U.S. The following table summarizes income taxes (dollars in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Income tax benefit (expense)	$	2,205		$	(40,688	)	$	12,350		$	(30,709	)
Effective tax rate	(32.6		)%	30.9		%	20.1		%	29.7		%

Our statutory income tax rate, including state income taxes, is 37%. The difference between the statutory income tax rate and our effective tax rate for the three and nine months ended September 30, 2015 is due primarily to the impact of the lower equity-based compensation tax deduction for shares that vested during the period, the impact of the goodwill impairment, which is not deductible for tax purposes, and permanent differences between book and tax treatments.

16. Accumulated Other Comprehensive Income (Loss)

The changes in Accumulated other comprehensive income (loss) (“AOCI”) by component, net of tax are as follows (in thousands):

	Nine Months Ended September 30,
	2015			2014
	Post- retirement Medical Plan			Post- retirement Medical Plan			Decker Defined Benefit Pension			Total
Beginning balance, January 1	$	(11,299	)	$	(8,242	)	$	(2,038	)	$	(10,279	)
Other comprehensive income (loss) before reclassifications	—			—			—			—
Amounts reclassified from accumulated other comprehensive income (loss)	591			474			2,038			2,511
Net current period other comprehensive income (loss)	591			474			2,038			2,511
Ending balance, September 30	$	(10,707	)	$	(7,768	)	$	—		$	(7,768	)

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Postretirement Medical Plan (1)
Amortization of prior service costs included in Cost of product sold (2)	$	264		$	209		$	792		$	626
Amortization of prior service costs included in Selling, general and administrative expenses (2)	49			38			147			115
Write-off of Decker Mine pension prior service costs included in gain on sale of Decker Mine interest	—			3,183			—			3,183
Total before tax	313			3,430			939			3,924
Tax benefit	(116		)	(1,235		)	(347		)	(1,413		)
Amounts reclassified from AOCI	$	197		$	2,195		$	592		$	2,511

(1) See Note 14 for the components of our net periodic postretirement benefit costs.

(2) Presented on the condensed consolidated statements of operations and comprehensive income.

17. Earnings (Loss) per Share

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

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015			2014
Numerator for calculation of diluted earnings (loss) per share:
Net income (loss)	$	8,873	$	91,069	$	(48,704	)	$	73,295
Denominator for basic income (loss) per share – weighted-average shares outstanding	61,074		60,850		61,013			60,803
Dilutive effect of stock equivalents	277		283		—			394
Denominator for diluted earnings (loss) per share	61,351		61,133		61,013			61,197
Diluted earnings (loss) per share	$	0.14	$	1.49	$	(0.80	)	$	1.20

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		Nine Months Ended
	September 30,		September 30,
	2015	2014	2015	2014
Anti-dilutive stock equivalents	2,165	1,036	2,071	888

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

18. Segment Information

We have reportable segments of Owned and Operated Mines, Logistics and Related Activities, and Corporate and Other.

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, although a portion is 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 our 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. 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 our international coal forward contracts, international coal put options, and U.S. On-Highway Diesel derivative financial instruments are reported within this segment. Port access contract rights and related amortization are also included in this segment.

Our Corporate and Other segment includes results relating to broker activity, our previous share of the Decker Mine operations (which was sold in September 2014), and unallocated corporate costs and assets. All corporate costs, except Board of Directors related expenses, are allocated to the segments based upon their relative percentage of certain financial metrics.

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

Our chief operating decision maker uses Adjusted EBITDA as the primary measure of segment reporting performance. EBITDA represents income (loss) from continuing operations, or net income (loss), as applicable, 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. For the periods presented herein, the specifically identified items are: (1) adjustments to exclude the updates to the tax agreement liability, including tax impacts of the IPO and Secondary Offering and the termination of the Tax Receivable Agreement in August 2014, (2) adjustments for derivative financial instruments, excluding fair value mark-to-market gains or losses and including cash amounts received or paid, (3) adjustments to exclude non-cash goodwill impairment charges, and (4) adjustments to exclude the gain from the sale of our 50% non-operating interest in the Decker Mine in September 2014. Our calculation of Adjusted EBITDA does not include premiums paid for derivative financial instruments; either at contract inception, as these payments pertain to future settlement periods, or in the period of contract settlement, as the payment occurred in a preceding period.

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Revenue

The following table presents revenue (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Owned and Operated Mines	$	265,657		$	285,983		$	733,735		$	827,680
Logistics and Related Activities	44,772			65,640			162,802			178,836
Corporate and Other	2,176			7,789			8,626			20,429
Eliminations of intersegment sales	(10,931		)	(17,075		)	(41,789		)	(44,692		)
Consolidated revenue	$	301,673		$	342,337		$	863,374		$	982,253

The following table presents revenue from external customers by geographic region (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
United States	$	265,531	$	284,843	$	726,340	$	819,562
South Korea	29,252		48,945		114,734		127,370
Other	6,890		8,549		22,300		35,321
Total revenue from external customers	$	301,673	$	342,337	$	863,374	$	982,253

We attribute revenue to individual countries based on the location of the physical delivery of the coal. All of our revenue for the nine months ended September 30, 2015 and 2014 originated in the U.S.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Adjusted EBITDA

The following table reconciles segment Adjusted EBITDA to net income (loss) (in thousands):

	Three Months Ended September 30,
	2015						2014
Adjusted EBITDA
Owned and Operated Mines				$	57,795					$	43,589
Logistics and Related Activities				(19,050		)				1,394
Corporate and Other				512						1,040
Subtotal reportable segments				39,257						46,023
Eliminations				(237		)				(304		)
Interest expense, net				(10,947		)				(12,664		)
Depreciation and depletion				(7,896		)				(25,815		)
Amortization				(928		)				—
Accretion				(3,070		)				(3,848		)
Income tax benefit (expense)				2,205						(40,688		)
Tax agreement benefit (1)				—						58,595
Derivative financial instruments:
Exclusion of fair value mark-to-market gains (losses) (2)	$	(10,235	)				$	515
Inclusion of cash amounts paid (received) (3)(4)	724						(5,007		)
Total derivative financial instruments				(9,511		)				(4,492		)
Goodwill impairment				—						—
Gain on sale of Decker Mine interest				—						74,262
Net income (loss)				$	8,873					$	91,069

(1) Changes to related deferred taxes are included in income tax benefit (expense).

(2) Fair value mark-to-market (gains) losses reflected on the statement of operations.

(3) Cash gains and losses reflected within operating cash flows.

(4) Excludes $991 of premiums paid in prior periods for contracts settled during the three months ended September 30, 2015.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	Nine Months Ended September 30,
	2015						2014
Adjusted EBITDA
Owned and Operated Mines				$	119,221					$	126,741
Logistics and Related Activities				(33,780		)				4,465
Corporate and Other				4,994						593
Subtotal reportable segments				90,435						131,799
Eliminations				(1,349		)				(1,503		)
Interest expense, net				(36,137		)				(64,286		)
Depreciation and depletion				(51,742		)				(81,944		)
Amortization				(2,783		)				—
Accretion				(9,960		)				(12,066		)
Income tax benefit (expense)				12,350						(30,709		)
Tax agreement benefit (1)				—						58,595
Derivative financial instruments:
Exclusion of fair value mark-to-market gains (losses) (2)	$	(17,781	)				$	16,052
Inclusion of cash amounts paid (received) (3)(4)(5)	1,618						(16,905		)
Total derivative financial instruments				(16,164		)				(852		)
Goodwill impairment				(33,355		)				—
Gain on sale of Decker Mine interest				—						74,262

Net income (loss)				$	(48,704	)				$	73,295

(1) Changes to related deferred taxes are included in income tax benefit (expense).

(2) Fair value mark-to-market (gains) losses reflected on the statement of operations.

(3) Cash gains and losses reflected within operating cash flows.

(4) Excludes $3,967 of premiums paid in prior periods for contracts settled during the nine months ended September 30, 2015.

(5) Excludes $5,813 of premiums paid in at contract inception during the nine months ended September 30, 2015.

Total Assets

The following table presents total assets (in thousands):

	September 30,			December 31,
	2015			2014
Owned and Operated Mines	$	1,594,188		$	1,704,267
Logistics and Related Activities	86,356			92,347
Corporate and Other	318,297			354,846
Eliminations	(157		)	(307		)
Consolidated assets	$	1,998,684		$	2,151,153

As of September 30, 2015 and December 31, 2014, all of our long-lived assets were located in the U.S.

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Capital Expenditures

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

	Nine Months Ended
	September 30,
	2015		2014
Owned and Operated Mines	$	32,640	$	17,534
Logistics and Related Activities	—		37,100
Corporate and Other	3,198		3,692
Consolidated	$	35,838	$	58,326

19. 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. 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. In May 2011, the stockholders approved increasing the pool of shares of our common stock authorized for issuance in connection with equity-based awards under the LTIP from 3.4 million shares to 5.5 million shares. As of September 30, 2015, approximately 1.8 million shares were available for grant, depending on the actual performance and vesting of then-outstanding awards.

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 for any other reason 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.

Restricted Stock and Restricted Stock Units

We granted restricted stock and restricted stock units under the LTIP to eligible employees, and we granted restricted stock units to our non-employee directors. 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.

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

			Weighted- Average Grant-Date
	Number		Fair Value
			(per share)
Non-vested shares at January 1, 2015	407		$	18.14
Granted	487		$	7.83
Forfeited	(43	)	$	15.33
Vested	(109	)	$	17.01
Non-vested shares at September 30, 2015	742		$	11.71

As of September 30, 2015, unrecognized compensation cost related to restricted stock awards was $4.0 million, which will be recognized over a weighted-average period of 2.0 years prior to vesting.

Performance-Based Share Units

Performance-based share units granted represent the number of shares of common stock to be awarded based on the achievement of targeted performance levels related to pre-established total stockholder return goals over a three-year period and may range from 0% to 200% of the targeted amount. The grant date fair value of the awards is based upon a Monte Carlo simulation and is amortized over the performance period.

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

			Weighted- Average Grant-Date
	Number		Fair Value
			(per share)
Non-vested units at January 1, 2015	497		$	21.84
Granted	601		$	9.66
Forfeited	(88	)	$	18.79
Vested	(97	)	$	17.61
Non-vested units at September 30, 2015	913		$	14.57

The assumptions used to estimate the fair value of the performance-based share units granted on March 2, 2015 are as follows:

Risk-free interest rate	1.0		%
Expected volatility	37.7		%
Term	2.8 years
Fair value (per share)	$	9.66

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

20. Supplemental Guarantor/Non-Guarantor Financial Information

In accordance with the indentures governing the senior notes, 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 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 permitted by the applicable indenture,

· a disposition of the majority of the capital stock of a Guarantor Subsidiary to a third person otherwise permitted by 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; or

· the release, other than the discharge through payment by the Guarantor Subsidiary, of all other guarantees by such Restricted Subsidiary of Debt (as defined in the applicable indenture) of either issuer of the senior notes or (in the case of the indenture for the $200 million senior notes due March 15, 2024) the debt of another Guarantor Subsidiary under the Credit Agreement.

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

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Operations and Comprehensive Income

(in thousands)

	Three Months Ended September 30, 2015
	Parent Guarantor (CPE Inc.)			Issuing Company (CPE Resources)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	1,327		$	—		$	301,673		$	—		$	(1,327	)	301,673
Costs and expenses
Cost of product sold (exclusive of depreciation, depletion, amortization, and accretion, shown separately)	—			(1		)	248,500			—			—			248,500
Depreciation and depletion	—			530			7,366			—			—			7,896
Amortization of port access contract rights	—			—			928			—			—			928
Accretion	—			—			3,070			—			—			3,070
Derivative financial instruments	—			—			10,235			—			—			10,235
Selling, general and administrative expenses	1,878			247			12,142			—			(1,327		)	12,940
Other operating costs	—			—			646			—			—			646
Total costs and expenses	1,878			776			282,887			—			(1,327		)	284,215
Operating income (loss)	(551		)	(776		)	18,786			—			—			17,458
Other income (expense)
Interest income	—			37			—			—			—			37
Interest expense	—			(10,785		)	(113		)	(87		)	—			(10,985		)
Other, net	—			(41		)	252			41			—			253
Total other income (expense)	—			(10,789		)	139			(46		)	—			(10,695		)
Income (loss) before income tax provision and earnings from unconsolidated affiliates	(551		)	(11,565		)	18,925			(46		)	—			6,763
Income tax benefit (expense)	111			3,578			(1,495		)	11			—			2,205
Income (loss) from unconsolidated affiliates, net of tax	—			8			(103		)	—			—			(95		)
Income (loss) from consolidated affiliates, net of tax	9,313			17,292			(35		)	—			(26,570		)	—
Net income (loss)	8,873			9,313			17,292			(35		)	(26,570		)	8,873
Other comprehensive income (loss)
Postretirement medical plan amortization of prior service cost	313			313			313			—			(626		)	313
Income tax on postretirement medical plan	(116		)	(116		)	(116		)	—			232			(116		)
Other comprehensive income (loss)	197			197			197			—			(394		)	197
Total comprehensive income (loss)	$	9,070		$	9,510		$	17,489		$	(35	)	$	(26,964	)	$	9,070

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Operations and Comprehensive Income

(in thousands)

	Three Months Ended September 30, 2014
	Parent Guarantor (CPE Inc.)			Issuing Company (CPE Resources)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	2,256		$	—		$	336,242		$	6,095		$	(2,256	)	342,337
Costs and expenses
Cost of product sold (exclusive of depreciation, depletion, amortization, and accretion, shown separately)	—			12			282,402			5,932			—			288,345
Depreciation and depletion	—			765			25,979			(929		)	—			25,815
Accretion	—			—			3,077			771			—			3,848
Derivative financial instruments	—			—			(515		)	—			—			(515		)
Selling, general and administrative expenses	2,257			189			11,973			—			(2,256		)	12,163
Other operating costs	—			—			1,099			—			—			1,099
Total costs and expenses	2,257			966			324,015			5,774			(2,256		)	330,755
Gain on sale of Decker Mine interest	—			—			(74,262		)	—			—			(74,262		)
Operating income (loss)	(1		)	(966		)	86,489			321			—			85,844
Other income (expense)
Interest income	—			37			—			—			—			37
Interest expense	—			(11,000		)	(1,602		)	(99		)	—			(12,701		)
Tax agreement benefit	58,595			—			—			—			—			58,595
Other, net	—			(84		)	(30		)	84			—			(31		)
Total other income (expense)	58,595			(11,047		)	(1,632		)	(15		)	—			45,900
Income (loss) before income tax provision and earnings from unconsolidated affiliates	58,594			(12,013		)	84,857			306			—			131,744
Income tax benefit (expense)	(21,522		)	12,084			(31,499		)	249			—			(40,688		)
Income (loss) from unconsolidated affiliates, net of tax	—			7			6			—			—			13
Income (loss) from consolidated affiliates, net of tax	53,997			53,919			555			—			(108,471		)	—
Net income (loss)	91,069			53,997			53,919			555			(108,471		)	91,069
Other comprehensive income (loss)
Postretirement medical plan amortization of prior service cost	247			247			247			—			(494		)	247
Write-off of prior service costs of prior service cost related to Decker Mine pension	3,183			3,183			3,183			3,183			(9,549		)	3,183
Income tax on postretirement medical plan	(1,235		)	(1,235		)	(1,235		)	(1,146		)	3,616			(1,235		)
Other comprehensive income (loss)	2,195			2,195			2,195			2,037			(6,427		)	2,195
Total comprehensive income (loss)	$	93,264		$	56,192		$	56,114		$	2,592		$	(114,898	)	$	93,264

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Operations and Comprehensive Income

(in thousands)

	Nine Months Ended September 30, 2015
	Parent Guarantor (CPE Inc.)			Issuing Company (CPE Resources)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	5,602		$	—		$	863,374		$	—		$	(5,602	)	863,374
Costs and expenses
Cost of product sold (exclusive of depreciation, depletion, amortization and accretion, shown separately)	—			17			735,242			—			—			735,258
Depreciation and depletion	—			1,822			49,920			—			—			51,742
Amortization of port access contract rights	—			—			2,783			—			—			2,783
Accretion	—			—			9,960			—			—			9,960
Derivative financial instruments	—			—			17,781			—			—			17,781
Selling, general and administrative expenses	6,162			702			35,438			—			(5,602		)	36,701
Goodwill impairment	—			—			33,355			—			—			33,355
Other operating costs	—			—			1,163			—			—			1,163
Total costs and expenses	6,162			2,541			885,642			—			(5,602		)	888,743
Operating income (loss)	(560		)	(2,541		)	(22,268		)	—			—			(25,369		)
Other income (expense)
Interest income	—			137			—			—			—			137
Interest expense	—			(32,855		)	(3,162		)	(258		)	—			(36,274		)
Other, net	—			(172		)	159			172			—			158
Total other income (expense)	—			(32,890		)	(3,003		)	(86		)	—			(35,979		)
Income (loss) before income tax provision and earnings from unconsolidated affiliates	(560		)	(35,431		)	(25,271		)	(86		)	—			(61,348		)
Income tax benefit (expense)	112			7,133			5,088			17			—			12,350
Income (loss) from unconsolidated affiliates, net of tax	—			7			287			—			—			294
Income (loss) from consolidated affiliates, net of tax	(48,256		)	(19,965		)	(69		)	—			68,290			—
Net income (loss)	(48,704		)	(48,256		)	(19,965		)	(69		)	68,290			(48,704		)
Other comprehensive income (loss)
Postretirement medical plan amortization of prior service cost	939			939			939			—			(1,878		)	939
Income tax on postretirement medical plan	(347		)	(347		)	(347		)	—			694			(347		)
Other comprehensive income (loss)	592			592			592			—			(1,184		)	592
Total comprehensive income (loss)	$	(48,112	)	$	(47,664	)	$	(19,373	)	$	(69	)	$	67,106		$	(48,112	)

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Operations and Comprehensive Income

(in thousands)

	Nine Months Ended September 30, 2014
	Parent Guarantor (CPE Inc.)			Issuing Company (CPE Resources)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenue	$	6,131		$	—		$	966,601		$	15,653		$	(6,132	)	982,253
Costs and expenses
Cost of product sold (exclusive of depreciation, depletion, amortization and accretion, shown separately)	—			209			812,355			17,841			—			830,405
Depreciation and depletion	—			2,300			80,812			(1,168		)	—			81,944
Accretion	—			—			9,263			2,803			—			12,066
Derivative financial instruments	—			—			(16,052		)	—			—			(16,052		)
Selling, general and administrative expenses	6,132			548			36,537			—			(6,131		)	37,086
Other operating costs	—			46			1,627			—			—			1,671
Total costs and expenses	6,132			3,103			924,542			19,475			(6,131		)	947,120
Gain on sale of Decker Mine interest	—			—			(74,262		)	—			—			(74,262		)
Operating income (loss)	(1		)	(3,103		)	116,321			(3,823		)	(1		)	109,395
Other income (expense)
Interest income	—			222			—			—			—			222
Interest expense	—			(57,053		)	(7,156		)	(299		)	—			(64,508		)
Tax agreement benefit	58,595			—			—			—			—			58,595
Other, net	—			(865		)	315			289			—			(262		)
Total other income (expense)	58,595			(57,696		)	(6,841		)	(10		)	—			(5,953		)
Income (loss) before income tax provision and earnings from unconsolidated affiliates	58,594			(60,799		)	109,480			(3,833		)	(1		)	103,442
Income tax benefit (expense)	(21,522		)	24,866			(35,585		)	1,531			—			(30,709		)
Income (loss) from unconsolidated affiliates, net of tax	—			(8		)	571			—			—			562
Income (loss) from consolidated affiliates, net of tax	36,223			72,164			(2,302		)	—			(106,085		)	—
Net income (loss)	73,295			36,223			72,164			(2,302		)	(106,086		)	73,295
Other comprehensive income (loss)
Postretirement medical plan amortization of prior service cost	741			741			741			—			(1,482		)	741
Write-off of prior service costs of prior service cost related to Decker Mine pension	3,183			3,183			3,183			3,183			(9,549		)	3,183
Income tax on postretirement medical plan	(1,413		)	(1,413		)	(1,413		)	(1,146		)	3,972			(1,413		)
Other comprehensive income (loss)	2,511			2,511			2,511			2,037			(7,059		)	2,511
Total comprehensive income (loss)	$	75,806		$	38,734		$	74,675		$	(265	)	$	(113,145	)	$	75,806

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Balance Sheet

(in thousands)

	September 30, 2015
	Parent Guarantor (CPE Inc.)		Issuing Company (CPE Resources)		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	—	$	121,055	$	2,465	$	—	$	—		$	123,519
Accounts receivable	1		—		705		61,323		—			62,029
Due from related parties	—		—		578,641		—		(574,490		)	4,152
Inventories, net	—		7,184		68,319		—		—			75,503
Deferred income taxes	—		—		21,715		—		(45		)	21,670
Derivative financial instruments	—		—		7,258		—		—			7,258
Prepaid taxes	9,388		—		—		—		—			9,388
Other assets	577		—		16,091		—		—			16,668
Total current assets	9,966		128,239		695,194		61,323		(574,535		)	320,187
Noncurrent assets
Property, plant and equipment, net	—		5,280		1,509,482		—		—			1,514,762
Port access contract rights, net	—		—		50,997		—		—			50,997
Goodwill	—		—		2,280		—		—			2,280
Deferred income taxes	—		48,348		26,193		14		(8,637		)	65,918
Other assets	1,060,437		1,890,055		41,015		—		(2,946,967		)	44,540
Total assets	$	1,070,403	$	2,071,922	$	2,325,161	$	61,337	$	(3,530,139	)	$	1,998,684

LIABILITIES AND MEMBER’S EQUITY
Current liabilities
Accounts payable	$	212	$	8,309	$	45,653	$	16	$	—		$	54,189
Royalties and production taxes	—		—		126,139		—		—			126,139
Accrued expenses	1,859		8,500		35,630		—		—			45,989
Due to related parties	15,484		503,887		—		55,118		(574,490		)	—
Other liabilities	—		45		1,803		—		(45		)	1,803
Total current liabilities	17,555		520,741		209,225		55,134		(574,535		)	228,120
Noncurrent liabilities
Senior notes	—		490,792		—		—		—			490,792
Asset retirement obligations, net of current portion	—		—		167,790		—		—			167,790
Deferred income taxes	8,637		—		—		—		(8,637		)	—
Accumulated postretirement medical benefit obligation, net of current portion	—		—		55,401		—		—			55,401
Other liabilities	—		—		12,370		—		—			12,370
Total liabilities	26,192		1,011,533		444,786		55,134		(583,172		)	954,473
Commitments and Contingencies (Note 13)
Total equity	1,044,211		1,060,389		1,880,375		6,203		(2,946,967		)	1,044,211
Total liabilities and equity	$	1,070,403	$	2,071,922	$	2,325,161	$	61,337	$	(3,530,139	)	$	1,998,684

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Balance Sheet

(in thousands)

	December 31, 2014
	Parent Guarantor (CPE Inc.)		Issuing Company (CPE Resources)		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	—	$	167,532	$	1,213	$	—	$	—		$	168,745
Accounts receivable	—		—		14,161		72,676		—			86,838
Due from related parties	—		—		601,540		—		(601,313		)	227
Inventories, net	—		6,700		73,103		—		—			79,802
Deferred income taxes	—		—		21,716		—		(46		)	21,670
Derivative financial instruments	—		—		17,111		—		—			17,111
Prepaid taxes	3		—		—		—		—			3
Other assets	289		6		9,541		—		—			9,837
Total current assets	292		174,238		738,385		72,676		(601,359		)	384,233
Noncurrent assets
Property, plant and equipment, net	—		6,167		1,582,971		—		—			1,589,138
Port access contract rights, net	—		—		53,780		—		—			53,780
Goodwill	—		—		35,634		—		—			35,634
Deferred income taxes	—		33,926		22,542		—		—			56,468
Other assets	1,108,101		1,910,699		26,543		—		(3,013,443		)	31,900
Total assets	$	1,108,393	$	2,125,031	$	2,459,855	$	72,676	$	(3,614,802	)	$	2,151,153

LIABILITIES AND MEMBER’S EQUITY
Current liabilities
Accounts payable	$	—	$	1,287	$	50,679	$	68	$	—		$	52,035
Royalties and production taxes	—		—		126,212		—		—			126,212
Accrued expenses	6,194		5,318		40,701		—		—			52,213
Due to related parties	14,365		520,611		—		66,337		(601,313		)	—
Current portion of federal coal lease obligations	—		—		63,970		—		—			63,970
Other liabilities	—		46		1,632		—		(46		)	1,632
Total current liabilities	20,559		527,262		283,194		66,405		(601,359		)	296,062
Noncurrent liabilities
Senior notes	—		489,715		—		—		—			489,715
Asset retirement obligations, net of current portion	—		—		216,241		—		—			216,241
Accumulated postretirement medical benefit obligation, net of current portion	—		—		50,276		—		—			50,276
Other liabilities	—		—		11,025		—		—			11,025
Total liabilities	20,559		1,016,978		560,736		66,405		(601,359		)	1,063,319
Commitments and Contingencies (Note 13)
Total equity	1,087,834		1,108,053		1,899,119		6,271		(3,013,443		)	1,087,834
Total liabilities and equity	$	1,108,393	$	2,125,031	$	2,459,855	$	72,676	$	(3,614,802	)	$	2,151,153

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Cash Flows

(in thousands)

	Nine Months Ended September 30, 2015
	Parent Guarantor (CPE Inc.)		Issuing Company (CPE Resources)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries		Eliminations		Consolidated
Net cash provided by (used in) operating activities	$	—	$	(43,653	)	$	105,717		$	—	$	—	$	62,064

Investing activities
Purchases of property, plant and equipment	—		(2,827		)	(25,298		)	—		—		(28,125		)
Cash paid for capitalized interest	—		—			(404		)	—		—		(404		)
Investment in development projects	—		—			(1,526		)	—		—		(1,526		)
Investment in unconsolidated affiliates	—		—			(5,383		)	—		—		(5,383		)
Payment of restricted cash	—		—			(6,500		)	—		—		(6,500		)
Other	—		5			180			—		—		185
Net cash provided by (used in) investing activities	—		(2,822		)	(38,931		)	—		—		(41,753		)

Financing activities
Principal payments of federal coal leases	—		—			(63,970		)	—		—		(63,970		)
Payment of deferred financing costs	—		(2		)	(339		)	—		—		(342		)
Other	—		—			(1,225		)	—		—		(1,225		)
Net cash provided by (used in) financing activities	—		(2		)	(65,534		)	—		—		(65,537		)

Net increase (decrease) in cash and cash equivalents	—		(46,477		)	1,252			—		—		(45,226		)
Cash and cash equivalents at beginning of period	—		167,532			1,213			—		—		168,745
Cash and cash equivalents at the end of period	$	—	$	121,055		$	2,465		$	—	$	—	$	123,519

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CLOUD PEAK ENERGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Cash Flows

(in thousands)

	Nine Months Ended September 30, 2014
	Parent Guarantor (CPE Inc.)			Issuing Company (CPE Resources)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(891	)	$	(71,744	)	$	119,157		$	(4,408	)	$	—		$	42,115

Investing activities
Purchases of property, plant and equipment	—			(3,012		)	(11,667		)	—			—			(14,680		)
Cash paid for capitalized interest	—			—			(4,066		)	—			—			(4,066		)
Investments in marketable securities	—			(8,159		)	—			—			—			(8,159		)
Maturity and redemption of investments	—			88,845			—			—			—			88,845
Investment in port access contract rights	—			—			(37,100		)	—			—			(37,100		)
Investment in development projects	—			—			(3,522		)	—			—			(3,522		)
Contributions made to subsidiary	—			—			(1,750		)	—			1,750			—
Distribution received from subsidiary	—			—			1,486			—			(1,486		)	—
Other	—			—			(1,830		)	—			—			(1,830		)
Net cash provided by (used in) investing activities	—			77,674			(58,449		)	—			264			19,488

Financing activities
Principal payments of federal coal leases	—			—			(58,958		)	—			—			(58,958		)
Issuance of senior notes	—			200,000			—			—			—			200,000
Repayment of senior notes	—			(300,000		)	—			—			—			(300,000		)
Payment of deferred financing costs	—			(14,683		)	—			—			—			(14,683		)
Contributions received from parent	—			—			—			1,750			(1,750		)	—
Distributions made to parent	—			—			—			(1,486		)	1,486			—
Other	891			—			(1,196		)	—			—			(305		)
Net cash provided by (used in) financing activities	891			(114,683		)	(60,154		)	264			(264		)	(173,946		)

Net increase (decrease) in cash and cash equivalents	—			(108,753		)	554			(4,144		)	—			(112,343		)
Cash and cash equivalents at beginning of period	—			226,993			496			4,144			—			231,633
Cash and cash equivalents at the end of period	$	—		$	118,240		$	1,050		$	—		$	—		$	119,290

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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 any future acquisitions. The factors listed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014 (our “2014 Form 10-K”) and Item 1A of Part II of this report, as well as any other 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:

· the timing and extent of any recovery for depressed coal industry conditions, domestically and internationally, and the impact of ongoing depressed industry conditions on our financial performance and liquidity;

· 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 increased short-term and spot purchases of coal;

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

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

· coal-fired power plant capacity and utilization, including the impact of climate change or other environmental regulations, energy policies, political pressures, NGO activities, 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 Powder River Basin (“PRB”);

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

· the impact of well-funded, anti-coal initiatives by environmental activist groups and others;

· market demand for domestic and foreign coal, electricity and steel;

· our ability to offset declining U.S. demand for coal and achieve growth in our business through our logistics revenue and export sales;

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

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

· domestic and international economic conditions;

· timing of reductions or increases in customer coal inventories;

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· weather conditions or weather-related damage that impacts demand for coal, our mining operations, our customers, or transportation infrastructure;

· risks inherent to surface coal mining;

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

· our ability to produce coal at existing and planned volumes and to effectively manage the costs of our operations;

· the impact of 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, including risks associated with acquisitions;

· the impact of current and future environmental, health, safety and other laws, regulations, treaties or governmental policies, or changes in interpretations thereof, and third-party regulatory challenges, including those affecting our coal mining operations or our customers’ coal usage, carbon and other gaseous emissions or ash handling, or the logistics, transportation, or terminal industries, as well as related costs and liabilities;

· the impact of required regulatory processes and approvals to lease and obtain 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;

· 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;

· our ability to obtain required surety bonds and provide any associated collateral on commercially reasonable terms and our ability to continue to self-bond;

· disruptions in delivery or increases in pricing from third-party vendors of raw materials and other 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 our credit agreement and financial institutions with whom we maintain accounts or enter hedging arrangements;

· the results of our hedging strategies for commodities, including our current hedging programs for domestic and international coal sales and diesel fuel costs;

· the terms and restrictions of our indebtedness;

· liquidity constraints, including those 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, or the increasing credit pressures on our industry due to depressed conditions;

· volatility and recent decline in the price of our common stock, including the impact of any delisting of our stock from the New York Stock Exchange (“NYSE”) if we fail to meet the minimum average closing price listing standard;

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

· other factors, including those discussed in Item 1A of our 2014 Form 10-K and 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 Annual Report on Form 10-K for the year ended December 31, 2014 (“2014 Form 10-K”) and in Item 1A of Part II of this report. Please see “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 Item 1 of this report and our other SEC filings, including our audited consolidated financial statements in Item 8 of our 2014 Form 10-K.

Overview

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discussions with our rail and port partners and expect to reduce our contracted export volumes in 2016 and beyond if weak pricing for seaborne thermal coal persists.

On August 13, 2015, we announced that we and the Crow Tribe are joining SSA Marine as 49% partners in GPT. Under the new ownership structure, SSA Marine remains the majority owner, retaining 51% of the equity. The Crow Tribe has an option to secure up to 5%, with a corresponding reduction in our ownership. For the 49% ownership interest, we paid $2 million upon signing and will pay all future permitting expenses up to $30 million, which we anticipate will cover such expenses through 2019. Thereafter, the owners will share any permitting expenses in excess of $30 million in proportion with their ownership interests. As of September 30, 2015, we have paid $5.4 million toward permitting expenses as a partner in GPT. We have the right to exit the partnership, at our discretion at any time during the permitting phase, with no further obligation.

Segment Information

We have reportable segments of Owned and Operated Mines, Logistics and Related Activities, and Corporate and Other.

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; although a portion is 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 our domestic coal futures contracts and West Texas Intermediate (“WTI”) derivative financial instruments are reported within this segment.

Our Corporate and Other segment includes results relating to broker activity, our previous share of the Decker Mine operations (which was sold in September 2014) and unallocated corporate costs and assets. All corporate costs, except Board of Directors related expenses, are allocated to the segments based upon their relative percentage of certain financial metrics.

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

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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;

· 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;

· 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; and

· the results of our derivative financial instruments.

The 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, environmental and legal challenges, political and regulatory factors, energy policies, international and domestic economic conditions, and other factors discussed in this Item 2 and in our 2014 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 enter into multi-year contracts with our customers which helps mitigate the risks associated with any short-term imbalance in supply and demand. We typically seek to enter each year with expected production effectively fully sold. This strategy helps us run our mines at predictable production rates, which improves control of operating costs.

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 use derivative financial instruments to help manage our exposure to diesel fuel prices.

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 and available port capacity.

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 rental, 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 obligations for our rail and port committed capacities. We are also incurring costs to investigate and pursue development of additional port opportunities.

We entered into coal forward, put options, and futures contracts that are scheduled to settle at various dates through 2016 to hedge a portion of our export and domestic coal sales prices. We have also entered into WTI derivative financial instruments to hedge our diesel fuel costs and U.S. On-Highway Diesel derivatives to hedge a portion of our rail fuel surcharge related to coal shipped to Westshore.

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Current Considerations

Owned and Operated Mines Segment

Shipments for the quarter improved significantly and are expected to continue this trend for the remainder of the year. Our mines continue to be well positioned with the equipment, manpower, and inventory to meet anticipated 2015 demand.

Increasing natural gas production and mixed regional and seasonal summer weather have continued downward pressure on natural gas prices and led to an increase in coal and natural gas inventories. Low oil and natural gas prices have led to a significant slowdown in drilling in many U.S. oil and natural gas fields. However, due to a large inventory of drilled wells and increased productivity, natural gas production continues to increase, keeping natural gas prices depressed, which in turn puts pressure on coal prices.

In the near term, weather-related demand and natural gas prices are the largest factors impacting coal demand. At the same time, the ongoing regulatory burden on coal-fired electricity generation and the subsidies for renewable energy continue to decrease overall coal demand and are likely to lead to increased electricity prices for consumers. Currently, U.S thermal coal demand for the nine months ended September 30, 2015 from electric generators is estimated to be down 67 million tons from 654 million tons compared to the same period in 2014. Shipments from the PRB are down only six million tons from 313 million tons over the same period, which demonstrates the PRB’s competitiveness even in this challenging market environment.

Logistics and Related Activities Segment

The international thermal coal market is very weak due to significantly reduced Chinese coal imports throughout 2015 and a strong U.S. dollar, which have depressed prices significantly even as demand from other Asian countries continues to grow.

Chinese thermal coal imports this year are expected to be down over 60 million tonnes from 2014. This is the main driver for current weak international prices. It remains unclear whether near term Chinese thermal import demand will stabilize at current levels.

While the strong U.S. dollar has improved the economics for coal producers in Australia and Indonesia, we do not believe new production capacity will be built at current price levels. Given the large number of Asian plants currently being built to take imported coal and the growth in Indian imports, we still believe current oversupply will be overcome by growing demand over time. We continue to see interest in demand for PRB coal and our logistics services from our Asian customers and continue to have successful test burns in our target markets.

Asset Impairments

The carrying value of our long-lived assets, including goodwill, port access contract rights, and mineral reserves is sensitive to declines in domestic and international coal prices. These assets are at risk of impairment if future prices continue to decline. The cash flow model that we use to assess impairment includes numerous assumptions, such as our current estimates of forecast coal production, market outlook on forward commodity prices, operating and development costs, and discount rates. A decrease in forward prices alone could result in an impairment of our long-lived assets. In addition, the denial of regulatory approval could also result in an impairment of certain of these assets. Due to the weak market outlook for 8400 Btu coal, we recorded a non-cash impairment charge of $33.4 million related to goodwill at our 8400 Btu Cordero Rojo Mine during the nine months ended September 30, 2015. This represents a full write down of the Cordero Rojo Mine’s goodwill, which was originally recorded in 1997.

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

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continue to have, a significant adverse effect on our production costs and our competitive position relative to certain other fuel 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 2014 Form 10-K.

In August 2015, the EPA issued its final Clean Power Plan (“CPP”) rules that establish carbon pollution standards for power plants, called CO2 emission performance rates. The EPA expects each state to develop implementation plans for power plants in its state to meet the individual state targets established in the CPP. The EPA has given states the option to develop compliance plans for annual rate-based reductions (pounds per megawatt hour) or mass-based tonnage limits for CO2. The state plans are due in September 2016, subject to potential extensions of up to two years for final plan submission. The compliance period begins in 2022, and emission reductions will be phased in up to 2030. The EPA also proposed a federal compliance plan to implement the CPP in the event that an approvable state plan is not submitted to the EPA. We expect that judicial challenges will be filed, which may result in a stay of the implementation of the rules. If the rules were implemented in their current form, the market for coal will likely be decreased, potentially significantly. While we believe that we are similarly situated with other producers of coal relative to the expected impacts of the final rules, we are continuing to evaluate the rules and are not in a position to make any meaningful determination about the extent of the impacts to our operations.

In June 2015, the United States Supreme Court decided Michigan v. the EPA, which held that the EPA should have considered the compliance costs associated with its Mercury and Air Toxics Standards (“MATS”) in deciding to regulate power plants under Section 112(n)(1) of the Clean Air Act. The Court did not vacate the MATS rule, and it remains to be seen what action the D.C. Circuit Court of Appeals will take on remand to conform its prior judgment to the Court’s opinion. If the rule is vacated, it is unclear how and when the EPA might reevaluate its decision to regulate emissions of mercury and other toxic pollutants from power plants in light of the Supreme Court’s instruction to consider the compliance costs of any such program pursuant to Section 112(n)(1); the EPA may re-propose the MATS rule or otherwise pursue regulation of emissions of mercury and other toxic pollutants from power plants in the future. The MATS rule was expected to result in the retirement of certain older coal plants. It remains to be seen whether any such plants may reevaluate their decision to retire following the Supreme Court’s decision, or whether plants that have already installed certain controls to comply with MATS will continue to operate them at all times.

In May 2015, the EPA released a final rule that sets forth changes to its definition of “waters of the United States” under the Clean Water Act (“CWA”). In August 2015, a federal district judge in North Dakota enjoined implementation of the rule in 13 states, including Montana and Wyoming, where our mines are located. Federal district judges in West Virginia and Georgia have denied similar motions for injunctions for lack of subject matter jurisdiction, while district judges in several other jurisdictions have stayed their cases until the Judicial Panel on Multidistrict Litigation rules on whether to consolidate all of the district court cases in a single court. In October 2015, the Judicial Panel on Multidistrict Litigation declined to consolidate the various district court cases in a single court. In addition, in October 2015 the Sixth Circuit issued a nationwide stay of the rule until it determines whether it has jurisdiction over the petitions for review brought in the federal appellate courts. It remains to be seen how the various proceedings in more than a dozen federal district courts and possibly in the Sixth Circuit will affect the substance of the final rule and its implementation in Montana and Wyoming. Any expansion to CWA jurisdiction could impose additional permitting obligations on our operations, which may adversely impact our coal production or results of operations.

In May 2015, the Bureau of Land Management (“BLM”) and the U.S. Forest Service issued a series of final Environmental Impact Statements (“EISs”) for proposed land use plan amendments incorporating conservation measures for the greater sage-grouse in ten western states, including Wyoming. The BLM has stated that the EISs focus on conserving Priority Habitat areas that have been identified as having the highest value to maintaining the species and its habitat and contain land use measures designed to minimize or avoid habitat disturbance. The BLM has also stated that the plans honor all valid, existing rights, including those for oil and gas development, rights-of-way, locatable minerals, and other permitting projects. In September 2015, after evaluating the species’ population status and conservation efforts by the BLM and many others, the U.S. Fish and Wildlife Service determined that the greater sage-grouse does not require listing under the Endangered Species Act.

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On September 29, 2015, the Governor of Idaho and the Idaho legislature filed suit in Federal District Court in Washington, DC, seeking to challenge the actions of the Secretaries of the Interior and Agriculture and the United States Forest Service with respect to the land use plan amendments and other requirements to address the greater sage-grouse habitat. This lawsuit alleges the actions of these federal defendants in approving these measures violated several different statutes and that, collectively, these measures are worse than the consequences of a decision to list the greater sage-grouse as an endangered species. Were the court to grant the relief sought, including vacating and negating the conservation plan, that ruling would remove requirements that may impact our ability to conduct operations in areas that would otherwise be subject to the land use plan amendments and other requirements.

Federal and state laws require us to obtain surety bonds or post letters of credit to secure performance or payment of certain long-term obligations, such as mine closure or reclamation costs. We use self-bonding to secure performance of certain obligations in Wyoming. Self-bonding allows us to use the strength of our financials as security rather than obtaining a traditional surety bond. As of September 30, 2015, we have self-bonded $200 million in the State of Wyoming. The Land Quality Division of the Wyoming Department of Environmental Quality periodically re-evaluates the amount of the security required, our performance, and our eligibility for self-bonding. There can be no assurance that the Wyoming Department of Environmental Quality will continue to qualify us for self-bonding. To the extent we are unable to maintain our current level of self-bonding due to changes in legislation, regulations, or their interpretation by state agencies, or in our financial condition, we may be required to obtain surety bonds at commercial terms, which could cause our costs to increase and could have a material adverse effect on our liquidity and financial condition.

Adjusted EBITDA and Adjusted EPS

EBITDA, Adjusted EBITDA and Adjusted EPS are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles in the U.S. (“U.S. GAAP”). A quantitative reconciliation of Adjusted EBITDA to net income (loss) and Adjusted EPS to EPS (as defined below) is found in the tables below.

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. For the periods presented herein, the specifically identified items are: (1) adjustments to exclude the updates to the tax agreement liability, including tax impacts of the IPO and Secondary Offering and the termination of the Tax Receivable Agreement in August 2014, (2) adjustments for derivative financial instruments, excluding fair value mark-to-market gains or losses and including cash amounts received or paid, (3) adjustments to exclude non-cash goodwill impairment charges, and (4) adjustments to exclude the gain from the sale of our 50% non-operating interest in the Decker Mine in September 2014. We enter into certain derivative financial instruments such as put options that require the payment of premiums at contract inception. The reduction in the premium value over time is reflected in the mark-to-market gains or losses. Our calculation of Adjusted EBITDA does not include premiums paid for derivative financial instruments; either at contract inception, as these payments pertain to future settlement periods, or in the period of contract settlement, as the payment occurred in a preceding period.

Adjusted EPS represents diluted earnings (loss) per common share (“EPS”) adjusted to exclude (i) the estimated per share impact of the same specifically identified non-core items used to calculate Adjusted EBITDA as described above, and (ii) the cash and non-cash interest expense associated with the early retirement of debt and refinancing transactions. All items are adjusted at the statutory tax rate of approximately 37%.

Because not all companies use identical calculations, our presentations of Adjusted EBITDA and Adjusted EPS may not be comparable to other similarly titled measures of other companies. Moreover, our presentation of Adjusted EBITDA is different than EBITDA as defined in our debt financing agreements. We recognize that using Adjusted EBITDA and Adjusted EPS as performance measures has inherent limitations as compared to net income (loss), EPS, or other U.S. GAAP financial measures, as these non-GAAP measures exclude certain items, including items that are recurring in nature, which may be meaningful to investors. As a result of the exclusions, Adjusted EBITDA and Adjusted EPS should not be considered in isolation and do not purport to be alternatives to net income (loss), EPS, or other U.S. GAAP financial measures as a measure of our operating performance. See Part II—Item 6 “Selected Financial Data” of our 2014 Form 10-K for additional information regarding Adjusted EBITDA and Adjusted EPS and their limitations compared to U.S. GAAP financial measures.

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A quantitative reconciliation for each of the periods presented of net income (loss) to Adjusted EBITDA and EPS to Adjusted EPS is found within this Item 2.

Three Months Ended September 30, 2015 Compared to Three Months Ended September 30, 2014

Summary

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

	Three Months Ended
	September 30,				Change
	2015		2014		Amount			Percent
Total tons sold	20.8		22.0		(1.2		)	(5.5	)
Total revenue	$	301.7	$	342.3	$	(40.6	)	(11.9	)
Net income (loss)	$	8.9	$	91.1	$	(82.2	)	(90.2	)
Adjusted EBITDA (1)	$	39.0	$	45.7	$	(6.7	)	(14.7	)
Adjusted EPS (1)	$	0.24	$	0.04	$	0.20		500.0

(1) Non-GAAP measure; please see definition above and reconciliation below.

Adjusted EBITDA and Adjusted EPS

The following tables present a reconciliation of net income (loss) to Adjusted EBITDA, diluted earnings (loss) per common share to Adjusted EPS, and segment Adjusted EBITDA to net income (loss) (in millions, except per share amounts):

Adjusted EBITDA

	Three Months Ended
	September 30,
	2015						2014
Net income (loss)				$	8.9					$	91.1
Interest expense				11.0						12.7
Income tax (benefit) expense				(2.2		)				40.7
Depreciation and depletion				7.9						25.8
Amortization				0.9						—
EBITDA				26.4						170.2
Accretion				3.1						3.8
Tax agreement expense (benefit) (1)				—						(58.6		)
Derivative financial instruments:
Exclusion of fair value mark-to-market losses (gains)(2)	$	10.2					$	(0.5	)
Inclusion of cash amounts received (paid)(3)(4)	(0.7		)				5.0
Total derivative financial instruments				9.5						4.5
Gain on sale of Decker Mine interest				—						(74.3		)
Goodwill impairment				—						—
Adjusted EBITDA				$	39.0					$	45.7

(1) Changes to related deferred taxes are included in income tax expense (benefit).

(2) Derivative fair value mark-to-market (gains) losses reflected on the statement of operations.

(3) Cash amounts received and paid reflected within operating cash flows.

(4) Excludes $1.0 of premiums paid in prior periods for contracts settled during the three months ended September 30, 2015.

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Adjusted EBITDA by Segment

	Three Months Ended
	September 30,
	2015						2014
Owned and Operated Mines
Adjusted EBITDA				$	57.8					$	43.6
Depreciation and depletion				(7.4		)				(26.0		)
Accretion				(2.9		)				(2.9		)
Derivative financial instruments:
Exclusion of fair value mark-to-market gains (losses)	$	(10.9	)				$	(3.5	)
Inclusion of cash amounts (received) paid (1)	3.5						2.9
Total derivative financial instruments				(7.4		)				(0.6		)
Other				(0.3		)				0.1
Operating income (loss)				39.8						14.2

Logistics and Related Activities
Adjusted EBITDA				(19.0		)				1.4
Amortization				(0.9		)				—
Derivative financial instruments:
Exclusion of fair value mark-to-market gains (losses)	0.7						4.0
Inclusion of cash amounts (received) paid	(2.8		)				(8.0		)
Total derivative financial instruments				(2.1		)				(4.0		)
Operating income (loss)				(22.0		)				(2.6		)

Corporate and Other
Adjusted EBITDA				0.5						1.0
Depreciation and depletion				(0.5		)				0.2
Accretion				(0.1		)				(0.9		)
Gain on sale of Decker Mine interest				—						74.3
Other				—						(0.1		)
Operating income (loss)				(0.1		)				74.5

Eliminations
Adjusted EBITDA				(0.2		)				(0.3		)
Operating loss				(0.2		)				(0.3		)
Consolidated operating income (loss)				17.5						85.8
Interest expense				(11.0		)				(12.7		)
Tax agreement benefit				—						58.6
Other, net				0.3						—
Income tax (expense) benefit				2.2						(40.7		)
Income (loss) from unconsolidated affiliates, net of tax				(0.1		)				—
Net income (loss)				$	8.9					$	91.1

(1) Excludes $1.0 of premiums paid in prior periods for contracts settled during the three months ended September 30, 2015.

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Adjusted EPS

	Three Months Ended
	September 30,
	2015					2014
Diluted earnings (loss) per common share				$	0.14				$	1.49
Tax agreement benefit including tax impacts of IPO and Secondary Offering				—					(0.73		)
Derivative financial instruments:
Exclusion of fair value mark-to-market losses (gains)	$	0.11				$	(0.01	)
Inclusion of cash amounts received (paid) (1)	(0.01		)			0.05
Total derivative financial instruments				0.10					0.05
Refinancing transaction:
Exclusion of cash interest for early retirement of debt	—					—
Exclusion of non-cash interest for deferred finance fee write-off	—					—
Total refinancing transaction				—					—
Gain on sale of Decker Mine interest				—					(0.77		)
Goodwill impairment				—					—
Adjusted EPS				$	0.24				$	0.04
Weighted-average dilutive shares outstanding (in millions)				61.4					61.1

(1) Excludes per share impact of $0.01 for premiums paid in prior periods for contracts settled during the three months ended September 30, 2015.

Results of Operations

Revenue

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

	Three Months Ended September 30,						Change
	2015			2014			Amount			Percent
Owned and Operated Mines
Realized price per ton sold	$	12.62		$	13.12		$	(0.50	)	(3.8	)
Tons sold	20.8			21.5			(0.7		)	(3.3	)

Coal revenue	$	262.0		$	282.6		$	(20.6	)	(7.3	)
Other revenue	$	3.6		$	3.3		$	0.3		9.1
Logistics and Related Activities
Total tons delivered	1.4			1.6			(0.2		)	(12.5	)
Asian export tons	0.9			1.2			(0.3		)	(25.0	)

Revenue	$	44.8		$	65.6		$	(20.8	)	(31.7	)
Corporate and Other
Revenue	$	2.2		$	7.8		$	(5.6	)	(71.8	)
Eliminations of Intersegment Sales
Revenue	$	(10.9	)	$	(17.0	)	$	6.1		35.9
Total Consolidated
Revenue	$	301.7		$	342.3		$	(40.6	)	(11.9	)

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Owned and Operated Mines Segment

The following table shows volume and price related changes to coal revenue for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 (in millions):

Three months ended September 30, 2014	$	282.6
Changes associated with volumes	(10.1		)
Changes associated with prices	(10.5		)
Three months ended September 30, 2015	$	262.0

Revenue decreased for the three months ended September 30, 2015 compared to the same period in 2014 due to decreases in both tons shipped and realized price per ton sold. Volumes decreased as a result of the previously announced plan to reduce production at Cordero Rojo Mine. Prices for the three months ended September 30, 2015 were down compared to the same period in 2014 as the domestic coal market continues to be depressed.

Logistics and Related Activities Segment

Revenue decreased for the three months ended September 30, 2015 compared to the same period in 2014 due to continued weak international prices for seaborne coal. This was partially offset by an increase in the volume of domestic deliveries coordinated in the three months ended September 30, 2015 compared to the same period in 2014.

Our Asian delivered sales are priced broadly in line with a number of relevant international coal indices adjusted for energy content and other quality and delivery criteria. These indices include the Newcastle benchmark price. Based on the comparative quality and transport costs, our delivered sales are generally priced at approximately 60% to 75% of the forward Newcastle price.

Corporate and Other Segment

Revenue decreased for the three months ended September 30, 2015 compared to the same period in 2014 due to the sale of the Decker Mine in September 2014. The decrease was partially offset by an increase in broker revenue and a $1.0 million contract buyout during the three months ended September 30, 2015 compared to the same period in 2014.

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Cost of Product Sold

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

	Three Months Ended
	September 30,						Change
	2015			2014			Amount			Percent
Owned and Operated Mines
Average cost per ton sold	$	9.15		$	10.44		$	(1.29	)	(12.4	)

Cost of product sold (produced coal)	$	190.0		$	224.8		$	(34.8	)	(15.5	)
Other cost of product sold	3.2			3.0			0.2			6.7
Logistics and Related Activities
Cost of product sold	65.2			70.8			(5.6		)	(7.9	)
Corporate and Other
Cost of product sold	0.9			6.6			(5.7		)	(86.4	)
Eliminations of Intersegment Sales
Cost of product sold	(10.8		)	(16.9		)	6.1			36.1
Total Consolidated
Cost of product sold	$	248.5		$	288.3		$	(39.8	)	(13.8	)

Owned and Operated Mines Segment

Cost of product sold decreased primarily as a result of fewer tons of coal sold in the three months ended September 30, 2015 as compared to the same period in 2014, which resulted in lower direct operating costs. Additionally, we accrued $3 million in insurance deductible costs related to the flooding event at Cordero Rojo Mine in the three months ended September 30, 2014. The average cost per ton sold decreased primarily as a result of a decrease in our production taxes, diesel costs, and explosives costs in the three months ended September 30, 2015 as compared to the same period in 2014, partially offset by attributing costs to fewer tons sold.

Logistics and Related Activities Segment

Cost of product sold decreased in the three months ended September 30, 2015 as compared to the same period in 2014 due to a reduction in the volume of Asia tons delivered combined with a decrease in freight costs resulting from lower fuel surcharge costs. The decrease in volume resulted in lower terminal, demurrage and port handling costs in the three months ended September 30, 2015 as compared to the same period in 2014. These cost decreases were partially offset by expenses incurred related to reducing the contracted minimum throughput commitments at Westshore for 2015.

Corporate and Other Segment

Cost of product sold decreased in the three months ended September 30, 2015 compared to the same period in 2014 due to the sale of the Decker Mine in September 2014.

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Operating Income (Loss)

The following table presents operating income (loss) (in millions):

	Three Months Ended
	September 30,						Change
	2015			2014			Amount			Percent
Owned and Operated Mines
Operating income (loss)	$	39.8		$	14.2		$	25.6		180.3
Logistics and Related Activities
Operating income (loss)	(22.0		)	(2.6		)	(19.4		)	(746.2	)
Corporate and Other
Operating income (loss)	(0.1		)	74.5			(74.6		)	(100.1	)
Eliminations of Intersegment Sales
Operating income (loss)	(0.2		)	(0.3		)	0.1			33.3
Total Consolidated
Operating income (loss)	$	17.5		$	85.8		$	(68.3	)	(79.6	)

Owned and Operated Mines Segment

In addition to the revenue and cost of product sold factors previously discussed, operating income increased due to a decrease in depreciation of $16.8 million associated with the reduction in the asset retirement obligation (“ARO”) liability at Cordero Rojo Mine in the three months ended September 30, 2015. This was partially offset by mark-to-market losses of $10.9 million recognized on our WTI derivative financial instruments and our domestic coal futures contracts in the three months ended September 30, 2015 as compared to losses of $3.5 million for the same period in 2014.

Logistics and Related Activities Segment

In addition to the revenue and cost of product sold factors previously discussed, operating loss increased due to $4.5 million of mark-to-market losses recognized on the highway diesel derivatives during the three months ended September 30, 2015. These losses were partially offset by higher gains recognized on our international coal forward contracts and put options of $1.2 million in the three months ended September 30, 2015 as compared to the same period in 2014. Additionally, we recognized $0.9 million of amortization related to port access contract rights during the three months ended September 30, 2015 compared to none in the same period in 2014.

Corporate and Other Segment

Operating income for our Corporate and Other segment decreased primarily due to the revenue and cost of product sold factors previously discussed.

Other Income (Expense)

The following table presents other income (expense) (in millions):

	Three Months Ended
	September 30,					Change
	2015			2014		Amount			Percent
Other income (expense)	$	(10.7	)	$	45.9	$	(56.6	)	(123.3	)

Other income (expense) for the three months ended September 30, 2015 as compared to the same period in 2014 decreased primarily as a result of the adjustment to the tax agreement liability due to the acceleration and release agreement

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signed with Rio Tinto, which terminated the tax receivable agreement and resulted in a gain of $58.6 million in the three months ended September 30, 2014.

Income Tax Provision

The following table presents income tax provision (in millions):

	Three Months Ended
	September 30,						Change
	2015			2014			Amount			Percent
Income tax benefit (expense)	$	2.2		$	(40.7	)	$	42.9		105.4
Effective tax rate	(32.6		)%	30.9		%	(63.5		)	(205.5	)

Our statutory income tax rate, including state income taxes, is 37%. The difference between the statutory income tax rate and our effective tax rate for the three months ended September 30, 2015 is due primarily to permanent differences between book and tax treatments.

Nine Months Ended September 30, 2015 Compared to Nine Months Ended September 30, 2014

Summary

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

	Nine Months Ended
	September 30,						Change
	2015			2014			Amount			Percent
Total tons sold	56.6			63.7			(7.1		)	(11.1	)
Total revenue	$	863.4		$	982.3		$	(118.9	)	(12.1	)
Net income (loss)	$	(48.7	)	$	73.3		$	(122.0	)	(166.4	)
Adjusted EBITDA (1)	$	89.1		$	130.3		$	(41.2	)	(31.6	)
Adjusted EPS (1)	$	(0.08	)	$	(0.06	)	$	(0.02	)	(33.3	)

(1) Non-GAAP measure; please see definition in Adjusted EBITDA and Adjusted EPS section above and reconciliation below.

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Adjusted EBITDA and Adjusted EPS

The following tables present a reconciliation of net income to Adjusted EBITDA, diluted earnings per common share to Adjusted EPS, and segment Adjusted EBITDA to net income (in millions, except per share amounts):

Adjusted EBITDA

	Nine Months Ended
	September 30,
	2015						2014
Net income (loss)				$	(48.7	)				$	73.3
Interest income				(0.1		)				(0.2		)
Interest expense				36.3						64.5
Income tax (benefit) expense				(12.4		)				30.7
Depreciation and depletion				51.7						81.9
Amortization				2.8						—
EBITDA				29.6						250.2
Accretion				10.0						12.1
Tax agreement benefit(1)				—						(58.6		)
Derivative financial instruments:
Exclusion of fair value mark-to-market losses (gains)(2)	$	17.8					$	(16.1	)
Inclusion of cash amounts received (paid)(3)(4)(5)	(1.6		)				16.9
Total derivative financial instruments				16.2						0.8
Gain on sale of Decker Mine interest				—						(74.3		)
Goodwill impairment				33.4						—
Adjusted EBITDA				$	89.1					$	130.3

(1) Changes to related deferred taxes are included in income tax expense (benefit).

(2) Derivative fair value mark-to-market (gains) losses reflected on the statement of operations.

(3) Cash amounts received and paid reflected within operating cash flows.

(4) Excludes premiums of $4.0 paid in prior periods for contracts settled during the nine months ended September 30, 2015

(5) Excludes premiums of $5.8 paid at contract inception during the nine months ended September 30, 2015.

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Adjusted EBITDA by Segment

	Nine Months Ended
	September 30,
	2015						2014
Owned and Operated Mines
Adjusted EBITDA				$	119.2					$	126.7
Depreciation and depletion				(49.9		)				(80.8		)
Accretion				(9.5		)				(8.8		)
Derivative financial instruments:
Exclusion of fair value mark-to-market gains (losses)	$	(13.0	)				$	(2.0	)
Inclusion of cash amounts (received) paid (1)	11.8						2.0
Total derivative financial instruments				(1.2		)				—
Goodwill impairment				(33.4		)				—
Other				—						(0.3		)
Operating income (loss)				25.2						36.8

Logistics and Related Activities
Adjusted EBITDA				(33.8		)				4.5
Amortization				(2.8		)				—
Derivative financial instruments:
Exclusion of fair value mark-to-market gains (losses)	(4.8		)				18.1
Inclusion of cash amounts (received) paid (2)	(10.2		)				(18.9		)
Total derivative financial instruments				(15.0		)				(0.8		)
Other				0.1						—
Operating income (loss)				(51.5		)				3.7

Corporate and Other
Adjusted EBITDA				5.0						0.6
Depreciation and depletion				(1.8		)				(1.1		)
Accretion				(0.4		)				(3.3		)
Gain on sale of Decker mine interest				—						74.3
Other				(0.4		)				—
Operating income (loss)				2.4						70.5

Eliminations
Adjusted EBITDA				(1.3		)				(1.5		)
Operating loss				(1.3		)				(1.5		)
Consolidated operating income (loss)				(25.4		)				109.4
Interest income				0.1						0.2
Interest expense				(36.3		)				(64.5		)
Tax agreement benefit				—						58.6
Other, net				0.2						(0.3		)
Income tax (expense) benefit				12.4						(30.7		)
Income (loss) from unconsolidated affiliates, net of tax				0.3						0.6
Net income (loss)				$	(48.7	)				$	73.3

(1) Excludes premiums of $4.0 paid in prior periods for contracts settled during the nine months ended September 30, 2015.

(2) Excludes premiums of $5.8 paid at contract inception during the nine months ended September 30, 2015.

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Adjusted EPS

	Nine Months Ended
	September 30,
	2015						2014
Diluted earnings per common share				$	(0.80	)				$	1.20
Tax agreement benefit including tax impacts of IPO and Secondary Offering				—						(0.73		)
Derivative financial instruments:
Exclusion of fair value mark-to-market losses (gains)	$	0.18					$	(0.17	)
Inclusion of cash amounts received (paid) (1) (2)	(0.02		)				0.17
Total derivative financial instruments				0.17						0.01
Refinancing transaction:
Exclusion of cash interest for early retirement of debt	—						0.15
Exclusion of non-cash interest for deferred finance fee write-off	—						0.08
Total refinancing transaction				—						0.23
Gain on sale of Decker Mine Interest				—						(0.76		)
Goodwill impairment				0.55						—
Adjusted EPS				$	(0.08	)				$	(0.06	)
Weighted-average dilutive shares outstanding (in millions)				61.0						61.2

(1) Excludes per share impact of $0.04 for premiums paid in prior periods for contracts settled during the nine months ended September 30, 2015.

(2) Excludes per share impact of $0.06 for premiums paid at contract inception during the nine months ended September 30, 2015.

Results of Operations

Revenue

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

	Nine Months Ended
	September 30,						Change
	2015			2014			Amount			Percent
Owned and Operated Mines
Realized price per ton sold	$	12.81		$	13.07		$	(0.26	)	(2.0	)
Tons sold	56.4			62.6			(6.2		)	(9.9	)

Coal revenue	$	722.9		$	818.0		$	(95.1	)	(11.6	)
Other revenue	$	10.8		$	9.7		$	1.1		11.3
Logistics and Related Activities
Total tons delivered	4.5			4.0			0.5			12.5
Asian export tons	3.3			3.2			0.1			3.1

Revenue	$	162.8		$	178.8		$	(16.0	)	(8.9	)
Corporate and Other
Revenue	$	8.6		$	20.4		$	(11.8	)	(57.8	)
Eliminations of Intersegment Sales
Revenue	$	(41.7	)	$	(44.6	)	$	2.9		6.5
Total Consolidated
Revenue	$	863.4		$	982.3		$	(118.9	)	(12.1	)

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Owned and Operated Mines Segment

The following table shows volume and price related changes to coal revenue for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 (in millions):

Nine months ended September 30, 2014	$	818.0
Changes associated with volumes	(80.3		)
Changes associated with prices	(14.8		)
Nine months ended September 30, 2015	$	722.9

Volumes decreased for the nine months ended September 30, 2015 compared to the same period in 2014 as we continued to execute on our previously announced plan to reduce production at Cordero Rojo Mine. Additionally, prices for the nine months ended September 30, 2015 decreased compared to the same period in 2014 as the domestic coal market continues to be depressed.

Logistics and Related Activities Segment

The volume of Asian deliveries through the port increased in the nine months ended September 30, 2015 compared to the same period in 2014. In addition, domestic deliveries coordinated also increased in the same period. The increase in revenue from the higher volumes was offset by continued weak international prices for seaborne coal, resulting in a reduction in revenue for the nine months ended September 30, 2015 compared to the same period in 2014.

Corporate and Other Segment

Revenue decreased for the nine months ended September 30, 2015 compared to the same period in 2014 due to the sale of the Decker Mine in September 2014. The decreases were partially offset by an increase in broker revenue and $4.3 million of contract buyouts during the nine months ended September 30, 2015.

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Cost of Product Sold

The following table presents cost of product sold (in millions except per ton amounts):

	Nine Months Ended
	September 30,						Change
	2015			2014			Amount			Percent
Owned and Operated Mines
Average cost per ton sold	$	9.90		$	10.52		$	(0.62	)	(5.9	)

Cost of product sold (produced coal)	$	558.9		$	658.0		$	(99.1	)	(15.1	)
Other cost of product sold	9.1			8.0			1.1			13.8
Logistics and Related Activities
Cost of product sold	205.0			188.4			16.6			8.8
Corporate and Other
Cost of product sold	2.7			19.2			(16.5		)	(85.9	)
Eliminations of Intersegment Sales
Cost of product sold	(40.4		)	(43.2		)	2.8			6.5
Total Consolidated
Cost of product sold	$	735.3		$	830.4		$	(95.1	)	(11.5	)

Owned and Operated Mines Segment

Cost of product sold decreased primarily as a result of 6.2 million fewer tons of coal sold in the nine months ended September 30, 2015 as compared to the same period in 2014, which resulted in lower direct operating costs. We had a decrease of approximately $40 million in fuel costs resulting from a reduction in fuel prices combined with lower production compared to the same period in 2014. Our production costs also decreased compared to the prior year due to the previously announced planned reduction in production at Cordero Rojo Mine. Additionally, we accrued $3 million in insurance deductible costs related to the flooding event at Cordero Rojo Mine in the nine months ended September 30, 2014. The average cost per ton sold decreased as a result of the cost reductions discussed above, partially offset by attributing costs to fewer tons sold.

Logistics and Related Activities Segment

Cost of product sold increased in the nine months ended September 30, 2015 as compared to the same period in 2014 primarily due to expenses incurred related to reducing the contracted minimum throughput commitments at Westshore for 2015. Higher demurrage and port handling costs were also incurred in the nine months ended September 30, 2015 as compared to the same period in 2014. The cost increases were partially offset by decreased freight costs resulting from lower fuel surcharge.

Corporate and Other Segment

Cost of product sold decreased for the nine months ended September 30, 2015 as compared to the same period in 2014 due to the sale of Decker Mine in September 2014.

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Operating Income (Loss)

The following table presents operating income (loss) (in millions):

	Nine Months Ended
	September 30,						Change
	2015			2014			Amount			Percent
Owned and Operated Mines
Operating income	$	25.2		$	36.8		$	(11.6	)	(31.5	)
Logistics and Related Activities
Operating income (loss)	(51.5		)	3.7			(55.2		)	(1,491.9	)
Corporate and Other
Operating income (loss)	2.4			70.5			(68.1		)	(96.6	)
Eliminations of Intersegment Sales
Operating loss	(1.3		)	(1.5		)	0.2			13.3
Total Consolidated
Operating income (loss)	$	(25.4	)	$	109.4		$	(134.8	)	(123.2	)

Owned and Operated Mines Segment

In addition to the revenue and cost of product sold factors previously discussed, the decrease in operating income was due to the goodwill impairment charge of $33.4 million recognized in the nine months ended September 30, 2015. Additionally, we recognized mark-to-market losses of $13.0 million on our domestic coal futures contracts and WTI derivative financial instruments in the nine months ended September 30, 2015 as compared to losses of $2.0 million in the same period in 2014. These were partially offset by a credit to depreciation of $16.8 million associated with a decrease in the ARO liability at the Cordero Rojo Mine and lower Depreciation and depletion in the nine months ended September 30, 2015 due to lower shipments as compared to the same period in 2014.

Logistics and Related Activities Segment

In addition to the revenue and cost of product sold factors previously discussed, operating loss increased due to fewer gains recognized on our international coal forward contracts and put options of $0.8 million in the nine months ended September 30, 2015 as compared to gains of $18.1 million in the same period in 2014. We also recognized $5.7 million of mark-to-market losses on our highway diesel derivatives in the nine months ended September 30, 2015 as compared to none in the same period in 2014. Additionally, we recognized $2.8 million of amortization related to port access contract rights during the nine months ended September 30, 2015 compared to none in the same period in 2014.

Corporate and Other Segment

Operating income for our Corporate and Other segment decreased primarily due to the gain recognized on the sale of the Decker Mine interest during the nine months ended September 30, 2014 and as a result of the revenue and cost of product sold factors previously discussed.

Other Income (Expense)

The following table presents other income (expense) (in millions):

	Nine Months Ended
	September 30,						Change
	2015			2014			Amount			Percent
Other income (expense)	$	(36.0	)	$	(6.0	)	$	(30.0	)	(500.0	)

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Other expense for the nine months ended September 30, 2015 as compared to the same period in 2014 increased primarily as a result of the adjustment to the tax agreement liability due to the acceleration and release agreement signed with Rio Tinto, which terminated the tax receivable agreement and resulted in a gain of $58.6 million in the nine months ended September 30, 2014. The gain was offset by $21.5 million in interest expense incurred in the nine months ended September 30, 2014 related to the early retirement of debt and refinancings completed during 2014. This was partially offset by a decrease of $6.7 million in interest expense during the nine months ended September 30, 2015 compared to the same period in 2014 due to lower interest rates on our senior notes and lower imputed interest on our federal coal lease obligations.

Income Tax Provision

The following table presents income tax provision (in millions):

	Nine Months Ended
	September 30,						Change
	2015			2014			Amount		Percent
Income tax benefit (expense)	$	12.4		$	(30.7	)	$	43.1	(140.4	)
Effective tax rate	20.1		%	(29.7		)%	49.8		(167.7	)

Our statutory income tax rate, including state income taxes, is 37%. The difference between the statutory income tax rate and our effective tax rate for the nine months ended September 30, 2015 is due primarily to the impact of the lower equity-based compensation tax deduction for shares that vested during the period and the impact of the goodwill impairment, which is not deductible for tax purposes, and permanent differences between book and tax treatments.

Liquidity and Capital Resources

	September 30,		December 31,
	2015		2014
	(in millions)
Cash and cash equivalents	$	123.5	$	168.7

In addition to our cash and cash equivalents, our primary sources of liquidity are cash from our operations and borrowing capacity under our Accounts Receivable Securitization Facility (“A/R Securitization Program”) and revolving credit facility.

Cash from operations depends 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; 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; the costs for logistics services and rail and port charges for coal sales made on a delivered basis, including demurrage and any take-or-pay charges; the results of our derivative financial instruments; coal-fired electricity demand, regulatory changes and energy policies impacting our business; and other risks and uncertainties, including those risk factors discussed in Item 1A in our 2014 Form 10-K and in Item 1A of Part II of this report. Ongoing depressed industry conditions and recent coal producer bankruptcy filings have resulted in increased credit pressures on the coal industry. Any credit demands by third parties or refusals by banks, surety bond providers, investors or others to extend, renew or refinance credit on commercially reasonable terms may adversely impact our business, financial condition, results of operations, cash flows and liquidity.

Certain of our subsidiaries are parties to the A/R Securitization Program. Cloud Peak Energy Receivables LLC (the “SPE”), a special purpose, bankruptcy-remote wholly-owned subsidiary purchases, subject to certain exclusions, in a true sale, trade receivables generated by certain of our subsidiaries without recourse (other than customary indemnification obligations for breaches of specific representations and warranties), and then transfers undivided interests in up to $75 million of those accounts receivable to a financial institution for cash borrowings for our ultimate benefit. The total borrowings are limited by eligible accounts receivable, as defined under the terms of the A/R Securitization Program. On

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January 23, 2015, we entered into an agreement extending the term of the A/R Securitization Program to January 23, 2018. All other terms of the program have remained substantially the same. At September 30, 2015, the A/R Securitization Program would have allowed for $45.2 million of borrowing capacity. There were no borrowings outstanding from the A/R Securitization Program at September 30, 2015.

Our ability to access the available funds under the credit facility may be prohibited in the event that we do not comply with the covenant requirements or if we default on our obligations under the Credit Agreement. If our trailing twelve month EBITDA were to continue to decline and we were unable to negotiate an amendment with the bank group, our actual borrowing capacity under the Credit Agreement may be reduced or eliminated entirely depending on the extent of the decline in trailing twelve month EBITDA. As of September 30, 2015, our trailing twelve month EBITDA, as defined within the financial covenants of the Credit Agreement, was $167.4 million, and we have full availability under our Credit Agreement. If the trailing twelve month EBITDA were to fall below $125 million in the future, our borrowing capacity would begin to be reduced pursuant to this covenant based on our net secured debt position at that time.

Loans under the Credit Agreement bear interest at the London Interbank Offered Rate (“LIBOR”) plus an applicable margin of 2.00% to 2.75%, depending on our net total leverage to EBITDA ratio. We pay the lenders a commitment fee between 0.375% and 0.50% per year, depending on our net total leverage to EBITDA ratio, on the unused amount of the credit facility. Letters of credit issued under the credit facility, unless drawn upon, will incur a per annum fee from the date at which they are issued between 2.00% and 2.75% depending on our net total leverage to EBITDA ratio. Letters of credit that are drawn upon are converted to loans. In addition, in connection with the issuance of a letter of credit, we are required to pay the issuing bank a fronting fee of 0.125% per annum.

As of September 30, 2015, no borrowings or letters of credit were outstanding under the credit facility and we were in compliance with the covenants contained in the Credit Agreement. Our aggregate borrowing capacity under the Credit Agreement and the A/R Securitization Program was approximately $545.2 million at September 30, 2015.

In addition, under our Credit Agreement, we have the ability to enter into leases up to $150 million for some of our capital equipment purchases. We currently have $7.8 million outstanding under a master lease agreement. For further details on the capital leasing program, see Note 11 to our notes to unaudited condensed consolidated financial statements in Item 1.

These programs provide flexibility and liquidity to our capital structure.

We refer to the $300 million senior notes due December 15, 2019 (the “2019 Notes”) and the $200 million senior notes due March 15, 2024 (the “2024 Notes”) collectively as the “senior notes.” The 2019 Notes and 2024 Notes bear interest at fixed annual rates of 8.50% and 6.375%, respectively. There are no mandatory redemption or sinking fund payments for the senior notes. Interest payments are due semi-annually on June 15 and December 15 for the 2019 Notes and semi-annually on March 15 and September 15 for the 2024 Notes.

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Our senior notes are jointly and severally guaranteed by Cloud Peak Energy Inc. and all of our existing and future restricted subsidiaries that guarantee our debt under our credit facility. Substantially all of our consolidated subsidiaries, excluding Cloud Peak Energy Receivables LLC, are considered to be restricted subsidiaries and guarantee the senior notes.

The indentures governing the senior notes, among other things, limit our ability and the ability of our restricted subsidiaries to incur additional indebtedness and issue preferred equity; pay dividends or distributions; repurchase equity or repay subordinated indebtedness; make investments or certain other restricted payments; create liens; sell assets; enter into agreements that restrict dividends, distributions, or other payments from restricted subsidiaries; enter into transactions with affiliates; and consolidate, merge, or transfer all or substantially all of their assets and the assets of their restricted subsidiaries on a combined basis.

Upon the occurrence of certain transactions constituting a “change in control” as defined in the indentures, holders of our notes could require us to repurchase all outstanding notes at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase.

During the nine months ended September 30, 2015, we made payments of $69.4 million on committed lease by applications (“LBA”), and we have no further scheduled LBA payments.

During the nine months ended September 30, 2015, we recorded $14.0 million in take-or-pay charges related to our volume shortfalls under the terms of our rail and port commitments. If we are unable to negotiate contract reductions with our partners and do not ship any tons of coal in the future due to weak seaborne coal pricing, we have commitments to these partners over the next nine years that total over $637 million which would be computed on a quarterly or annual basis in accordance with the service agreements. These commitments could have a material adverse impact on our financial performance and liquidity.

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. Cash payments for capital expenditures (excluding capitalized interest) for the nine months ended September 30, 2015 were $28.1 million. Our anticipated capital expenditures (excluding capitalized interest and federal lease payments) are expected to be between $40 million and $50 million in 2015. This range includes approximately $23 million for the relocation of a dragline from the Cordero Rojo Mine to the Antelope Mine.

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 consolidated balance sheet. As of September 30, 2015, we were self-bonded for $200 million and had $441.2 million of surety bonds outstanding to secure certain of our obligations to reclaim lands used for mining, secure coal lease obligations, and for other operating requirements. The terms and conditions with the issuers of the surety bonds allow for collateral calls to mitigate their exposure. The amount of collateral that could be required would be based on the underlying bonded assets and their risks, our credit profile, and overall market conditions. Should collateral for these obligations be called, this could utilize a significant portion or our existing liquidity. We currently have no collateral posted.

We believe our sources of liquidity will be sufficient to fund our primary ordinary course uses of cash for the next twelve months, which include our costs of coal production and logistics services, capital expenditures, and interest on our debt.

If we do not have sufficient resources from ongoing operations to satisfy our obligations or the timing of payments on our obligations does not coincide with cash inflows from operations, we may need to use our cash on hand or borrow under our line of credit. If the obligation is in excess of these amounts, we may need to seek additional borrowing sources or take other actions. Depending upon existing circumstances at the time, we may not be able to obtain additional funding on acceptable terms or at all. In addition, our existing debt instruments contain restrictive covenants, which may prohibit us from borrowing under our revolving credit facility or pursuing certain alternatives to obtain additional funding.

We regularly monitor the capital and bank credit markets for opportunities that we believe will improve our balance sheet, and may engage, from time to time, in financing or refinancing transactions as market conditions permit. Future activities may include, but are not limited to, public or private debt or equity offerings, the purchase of our outstanding debt for cash in open market purchases or privately negotiated refinancing, extension and exchange transactions or public or private exchange offers or tender offers. Any financing or refinancing transaction may occur on a stand-alone basis or in

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connection with, or immediately following, other transactions. Our ability to access the debt or equity capital markets on economic terms in the future will be affected by general economic conditions, the domestic and global financial markets, our operational and financial performance, the value and performance of our debt or equity securities, prevailing commodity prices and other macroeconomic factors outside of our control.

Overview of Cash Transactions

We started 2015 with $168.7 million of unrestricted cash and cash equivalents. After capital expenditures, LBA payments, and generating cash from our operating activities, we concluded the nine months ended September 30, 2015 with cash and cash equivalents of $123.5 million.

Cash Flows

	Nine Months Ended
	September 30,						Change
	2015			2014			Amount			Percent
				(dollars in millions)
Beginning balance - cash and cash equivalents	$	168.7		$	231.6
Net cash provided by (used in) operating activities	62.1			42.1			$	20.0		47.5
Net cash provided by (used in) investing activities	(41.8		)	19.5			$	(61.3	)	(314.4	)
Net cash provided by (used in) financing activities	(65.5		)	(173.9		)	$	108.4		62.3
Ending balance - cash and cash equivalents	$	123.5		$	119.3

Beginning balance - marketable securities	$	—		$	80.7		*
Ending balance - marketable securities	$	—		$	—		*

* Decrease in marketable securities discussed in investing activities below.

Net cash provided by operating activities increased for the nine months ended September 30, 2015 as compared to the same period in 2014 due to increases in working capital of $47.2 million driven primarily by a $45 million cash payment made to Rio Tinto in 2014 to terminate the Tax Receivable Agreement. This was partially offset by cash paid on settled derivative financial instruments and for premiums on derivative financial instruments of $7.4 million in the nine months ended September 30, 2015 compared to cash received of $16.9 million during the same period in 2014. Net income as adjusted for non-cash items decreased $2.9 million.

The increase in cash used in investing activities for the nine months ended September 30, 2015 as compared to the same period in 2014 was primarily related to the net redemption of investments in marketable securities of $80.7 million in 2014, a $6.5 million payment of restricted cash in 2015, which was used to fund an escrow account associated with our increased Westshore capacity, and $5.4 million in payments toward permitting expenses as a partner in GPT. This was partially offset by $37.1 million investment in port access contract rights in 2014. In addition, purchases of property, plant and equipment increased by $13.4 million in the nine months ended September 30, 2015 as compared to the same period in 2014, primarily as a result of relocating a dragline from our Cordero Rojo Mine to our Antelope Mine.

The decrease in cash used in financing activities for the nine months ended September 30, 2015 as compared to the same period in 2014 was primarily due to the net repayment and issuance of senior notes of $100 million and additional deferred financing costs of $13.8 million that occurred in 2014.

Climate Change Regulatory Environment

Enactment of currently proposed or future laws or regulations regarding emissions from the combustion of coal by the U.S. or some of its states or by other countries, or other actions to limit such emissions, like the creation of mandatory use requirements for renewable fuel sources, could result in electricity generators further switching from coal to other fuel sources. Public concern and the political environment may also continue to materially and adversely impact future coal demand and usage to generate electricity, regardless of applicable legal and regulatory requirements. Additionally, the creation and issuance of subsidies designed to encourage use of alternative energy sources could decrease the demand of coal

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as an energy source. The potential financial impact on us as a result of these factors will depend upon the degree to which electricity generators diminish their reliance on coal as a fuel source as a result thereof. That, in turn, will depend on a number of factors, including the appeal and design of the subsidies being offered, the specific requirements imposed by any such laws or regulations such as mandating use by utilities of renewable fuel sources, the time periods over which those laws or regulations would be phased in and the state of any commercial development and deployment of carbon capture and storage technologies. In view of the significant uncertainty surrounding each of these factors, it is not possible for us to reasonably predict the impact that any such laws or regulations may have on our results of operations, financial condition, or cash flows. See Item 1 “Business—Environmental and Other Regulatory Matters—Global Climate Change” and Item 1A “Risk Factors” of our 2014 Form 10-K for additional discussion regarding how climate change and other environmental regulatory matters may materially adversely impact our business.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts. These estimates and assumptions are based on information available as of the date of the financial statements. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end. The results of operations for the nine months ended September 30, 2015 are not necessarily indicative of results that can be expected for future quarters or the full year. Please refer to the section entitled “Critical Accounting Policies and Estimates” of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2014 Form 10-K for a discussion of our critical accounting policies and estimates.

Newly Adopted Accounting Standards and Recently Issued Accounting Pronouncements

See Note 2 to our notes to unaudited condensed consolidated financial statements in Item 1 for a discussion of newly adopted accounting standards and recently issued accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We define market risk as the risk of economic loss as a consequence of the adverse movement of market rates and prices or credit standings. We believe our principal market risks are commodity price risk, interest rate risk, and credit risk.

Commodity Price Risk

Historically, we have principally managed the commodity price risk for our coal contract portfolio through the use of long-term coal supply agreements of varying terms and durations. Market risk includes the potential for changes in the market value of our coal portfolio, which includes index sales, export pricing, and PRB derivative financial instruments. As of September 30, 2015, we had committed to sell approximately 79.4 million tons during 2015, of which 79.1 million tons are under fixed-price contracts. A $1 change to the average coal sales price per ton for these 0.3 million unpriced tons would result in an approximate $0.3 million change to the coal revenue. In addition, we entered into certain forward financial contracts linked to Newcastle coal prices to help manage our exposure to variability in future international coal prices. As of September 30, 2015, we held coal forward contracts for approximately 0.3 million tons which will settle in 2015 and 2016, of which 0.1 million tons have been fixed under offsetting contracts. A $1 change to the market index price per ton for these coal forward contracts would result in an approximate $0.2 million change to operating income (expense). As of September 30, 2015, we held international coal put options with an average strike price of $44.75 per ton for approximately 2.5 million tons which will settle in 2016. A $1 decrease per ton to the market index price below our strike price for these international coal put options would result in an approximate $2.5 million increase to operating income (expense). There would be no impact if the market index price rises above our strike price. As of September 30, 2015, we held domestic coal futures contracts for approximately 0.5 million tons, which will settle in 2015 and 2016. A $1 change to the market index price per ton for these futures contracts would result in an approximate $0.5 million change to operating income (expense).

We also face price risk involving other commodities used in our production process, primarily diesel fuel. Based on our projections of our usage of diesel fuel for the next 12 months, and assuming that the average cost of diesel fuel increases by 10%, we would incur additional fuel costs of approximately $6.3 million over the next 12 months. In addition, we use derivative financial instruments to manage certain exposures to diesel fuel prices. If WTI decreases by 10%, we would incur additional costs of $3.9 million. We also use U.S. On-Highway Diesel derivative financial instruments to manage our exposure to changes in the rail fuel surcharge related to a portion of our rail transportation cost for coal shipments to

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Westshore. If U.S. On-Highway Diesel price decreases by 10%, we would incur additional costs of $2.3 million. The terms of the program are disclosed in Note 7 to our notes to unaudited condensed consolidated financial statements in Item 1.

Interest Rate Risk

Our revolving credit facility and A/R Securitization Program are subject to an adjustable interest rate. See Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” We had no outstanding borrowings under our credit facility or A/R Securitization Program as of September 30, 2015. If we borrow funds under the revolving credit facility or A/R Securitization Program, we may be subject to increased sensitivity to interest rate movements.

The $7.8 million of borrowings under the capital leasing program are also subject to variable interest rates although any change to the rate would not have a significant impact on cash flow. Any future debt arrangements that we enter into may also have adjustable interest rates that may increase our sensitivity to interest rate movements.

Credit Risk

We are exposed to credit loss in the event of non-performance by our counterparties, which may include end-use customers, trading houses, brokers, and financial institutions that serve as counterparties to our derivative financial instruments and hold our investments. We attempt to manage this exposure by entering into agreements with counterparties that meet our credit standards and that are expected to fully satisfy their obligations under the contracts. These steps may not always be effective in addressing counterparty credit risk.

When appropriate (as determined by our credit management function), we have taken steps to reduce our credit exposure to customers that do not meet our credit standards or whose credit has deteriorated. These steps include obtaining letters of credit and requiring prepayments for shipments. See Item 1A “Risk Factors—Risks Related to Our Business and Industry—We are exposed to counterparty risk with our customers, trading partners, financial institutions, and other parties with whom we conduct business.” in our 2014 Form 10-K.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to senior management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2015, and has concluded that such disclosure controls and procedures are effective at the reasonable assurance level.

Internal Control over Financial Reporting

During the most recent fiscal quarter, there have been no changes to our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

See Note 13 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this report relating to certain legal proceedings, which information is incorporated by reference herein.

Item 1A. Risk Factors.

In addition to the other information set forth in this report, including the risk factors set forth below, you should carefully consider the additional risks and uncertainties described in Item 1A of our 2014 Form 10-K. The risks described herein and in our 2014 Form 10-K are not the only risks we may face. If any of those risk factors, as well as other risks and uncertainties that are not currently known to us or that we currently believe are not material, actually occur, our business, financial condition, results of operations, cash flows, and liquidity could be materially and adversely affected. In our judgment, other than as set forth below, there were no material changes in the risk factors as previously disclosed in Item 1A of our 2014 Form 10-K.

The closing market price of our common stock has recently declined significantly. If the average closing price of our common stock declines to less than $1.00 over 30 consecutive trading days, our common stock could be delisted from the NYSE or trading could be suspended.

Our common stock is currently listed on the NYSE. In order for our common stock to continue to be listed on the NYSE, we are required to comply with various listing standards, including the maintenance of a minimum average closing price of at least $1.00 per share during a consecutive 30 trading-day period. A renewed or continued decline in the closing price of our common stock on the NYSE could result in a breach of these requirements. Although we would have an opportunity to take action to cure such a breach, if we did not succeed, the NYSE could commence suspension or delisting procedures in respect of our common stock. The commencement of suspension or delisting procedures by an exchange remains, at all times, at the discretion of such exchange and would be publicly announced by the exchange. If a suspension or delisting were to occur, there would be significantly less liquidity in the suspended or delisted securities. In addition, our ability to raise additional necessary capital through equity or debt financing, and attract and retain personnel by means of equity compensation, would be greatly impaired. Furthermore, with respect to any suspended or delisted securities, we would expect decreases in institutional and other investor demand, analyst coverage, market making activity and information available concerning trading prices and volume, and fewer broker-dealers would be willing to execute trades with respect to such securities. A suspension or delisting would likely decrease the attractiveness of our common stock to investors and cause the trading volume of our common stock to decline, which could result in a further decline in the market price of our common stock.

As a result of ongoing depressed industry conditions and recent coal producer bankruptcy filings, the coal industry has experienced increasing credit pressures that could result in demands for credit support by third parties or decisions by banks, surety bond providers, investors or other companies to reduce or eliminate their exposure to the coal industry, including our company. These credit pressures could materially and adversely impact our liquidity and ability to meet our regulatory requirements.

Ongoing depressed industry conditions and recent coal producer bankruptcy filings have resulted in increased credit pressures on the coal industry. These credit pressures include, for example, (a) vendors, suppliers, customers and other commercial counterparties seeking prepayments, security deposits, letters of credit and other credit protections, and (b) banks, surety bond providers, investors and other companies reducing or eliminating their exposure to the coal industry. Although some of these credit pressures may be company-specific, many are directed to the coal industry in general due to the current overall negative investor sentiment toward the industry. Any credit demands by third parties or refusals by banks, surety bond providers, investors or others to extend, renew or refinance credit on commercially reasonable terms may adversely impact our business, financial condition, results of operations, cash flows and liquidity. In some cases, such as any collateral requirements imposed by surety bond providers to issue surety bonds that secure our future performance under

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various federal and state laws, our ability to meet regulatory requirements may also be adversely impacted if we are not able to satisfy cash or other collateral requirements.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this Form 10-Q.

Item 5. Other Information.

None.

Item 6. Exhibits.

See Exhibit Index at page 67 of this report.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CLOUD PEAK ENERGY INC.


	By:	/s/ HEATH A. HILL
Date: October 27, 2015		Heath A. Hill
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer and Duly Authorized Officer)

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EXHIBIT INDEX

The exhibits below are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K.

Exhibit Number		Description of Documents

3.1		Amended and Restated Certificate of Incorporation of Cloud Peak Energy Inc. effective as of November 25, 2009 (incorporated by reference to Exhibit 3.1 to Cloud Peak Energy Inc.’s Annual Report on Form 10-K filed on February 14, 2014 (File No. 001-34547))

3.2*		Amended and Restated Bylaws of Cloud Peak Energy Inc., effective October 20, 2015

4.1*		Sixth Supplemental Indenture, dated as of September 10, 2015, to the Indenture, dated as of November 25, 2009, among Cloud Peak Energy Resources LLC, Cloud Peak Energy Finance Corp., the guarantors party thereto, Wilmington Trust Company, as trustee, and Citibank N.A., as securities administrator

4.2*		Second Supplemental Indenture, dated as of September 1, 2015, to the Indenture, dated as of March 11, 2014, among Cloud Peak Energy Resources LLC, Cloud Peak Energy Finance Corp., the guarantors party thereto and Wells Fargo Bank, National Association, as trustee

10.1*		Third Amendment to the Cloud Peak Energy Resources LLC Non-Qualified Deferred Compensation Plan

12.1*		Computation of Ratio of Earnings to Fixed Charges

31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

95.1*		Mine Safety Disclosure

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Calculation Linkbase Document

101.LAB*		XBRL Taxonomy Label Linkbase Document

101.PRE*		XBRL Taxonomy Presentation Linkbase Document

101.DEF*		XBRL Taxonomy Definition Document

* Filed or furnished herewith, as applicable

Exhibit 3.2

AMENDED AND RESTATED BYLAWS

CLOUD PEAK ENERGY INC.

ARTICLE I

Offices

SECTION 1. Registered Office. The registered office of the Company in the State of Delaware shall be located at 2711 Centerville Road, Suite 400, Wilmington, County of New Castle, Delaware 19808. The name of the Company’s registered agent at such address shall be Corporation Service Company. The registered office and/or registered agent of the Company may be changed from time to time by action of the Board of Directors.

SECTION 2. Other Offices. The Company may have an office or offices other than said registered office at such place or places, either within or without the State of Delaware, as the Board of Directors shall from time to time determine or the business of the Company may require.

ARTICLE II

Meetings of Stockholders

SECTION 1. Place of Meetings. All meetings of the stockholders for the election of directors or for any other purpose shall be held at any such place, either within or without the State of Delaware, or by means of remote communications, as shall be designated from time to time by the Board of Directors and stated in the notice of meeting.

SECTION 2. Annual Meeting. An annual meeting of stockholders shall be held each year. The date, time and place, if any, or means of remote communications, if any, of such meeting shall be determined by the Board of Directors of the Company. At such annual meeting the stockholders shall elect, subject to Article II, Section 9(b) of these Bylaws, members of the Board of Directors to succeed those whose terms expire and transact such other business as may properly be brought before the meeting. The Board of Directors may postpone, reschedule, adjourn, recess or cancel any annual meeting of stockholders previously scheduled by the Board of Directors.

SECTION 3. Special Meetings. Special meetings of stockholders may be called for any purpose by the majority of the Board of Directors or its Chairperson and may be held at such time and place, if any, within or without the State of Delaware, or by means of remote communications, if any, as shall be stated in a notice of meeting. The Board of Directors may postpone, reschedule, adjourn, recess or cancel any special meeting of stockholders previously scheduled by the Board of Directors.

SECTION 4. Notice of Meetings. Except as otherwise provided herein or expressly required by statute, notice of each annual and special meeting of stockholders stating the date, place, if any, and hour of the meeting, means of remote communications, if any, by which

stockholders and proxyholders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at the meeting as of the record date for determining stockholders entitled to notice of the meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. If mailed, notice to stockholders shall be deemed given when deposited in the mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Company. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders may be given by electronic transmission in the manner provided in, and to the extent permitted by, Section 232 of the Delaware General Corporation Law the (the “DGCL”). When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, notice of the place, if any, date, and time of the adjourned meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting.

SECTION 5. List of Stockholders. The officer who has charge of the stock ledger of the Company shall prepare and make, at least ten (10) days before each meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order for each class of stock, showing the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten (10) days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Company. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. This list shall presumptively determine the identity of the stockholders entitled to examine such stock list and to vote at the meeting and the number of shares held by each of them.

SECTION 6. Quorum; Adjournments. The holders of a majority of the voting power of the issued and outstanding stock of the Company entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of stockholders, except as otherwise provided by express provision of law (including the rules and regulations of administrative agencies or a national securities exchange upon which the Company is listed), or by the Amended and Restated Certificate of Incorporation of the

Company, as amended from time to time (the “Certificate of Incorporation”). Where a separate vote by a class or classes or series or series is required, a majority of the voting power of the shares of such class or classes or series or series entitled to vote, present in person or represented by proxy shall constitute a quorum entitled to take action with respect to that vote on that matter. If, however, such quorum shall not be present or represented by proxy at any meeting of stockholders, the chairperson of the meeting or the stockholders entitled to vote, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented by proxy.

SECTION 7. Organization. At each meeting of stockholders, the Chairperson of the Board of Directors, if one shall have been elected, or, in his or her absence or if one shall not have been elected, such person as the Board of Directors may have designated or, in his or her absence, the Chief Executive Officer, or in his or her absence, such person as may be chosen by the affirmative vote of the holders of a majority of the voting power of the outstanding shares of capital stock entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chairperson of the meeting. The Secretary or, in his or her absence or inability to act, the person whom the chairperson of the meeting shall appoint secretary of the meeting shall act as secretary of the meeting and keep the minutes thereof.

SECTION 8. Order of Business. The order of business at all meetings of the stockholders shall be as determined by the chairperson of the meeting. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting by the chairperson of the meeting. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairperson of the meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairperson, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairperson of the meeting, may include, without limitation, the following:

(i) the establishment of an agenda or order of business for the meeting;

(ii) rules and procedures for maintaining order at the meeting and the safety of those present;

(iii) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the chairperson of the meeting shall determine;

(iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and

(v) limitations on the time allotted to questions or comments by participants.

The chairperson of the meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such chairperson should so determine, such chairperson shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board of Directors or the chairperson of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

SECTION 9. (a) Voting. Except as otherwise provided by the Certificate of Incorporation or the DGCL, each stockholder of the Company shall be entitled at each meeting of stockholders to one (1) vote for each share of capital stock of the Company standing in his or her name on the record of stockholders of the Company:

(i) on the date fixed pursuant to the provisions of Section 14 of Article II of these Bylaws, as amended from time to time (the “Bylaws”) as the record date for the determination of the stockholders who shall be entitled to notice of and to vote at such meeting; or

(ii) if no such record date shall have been so fixed, then at the close of business on the day next preceding the day on which notice thereof shall be given, or, if notice is waived, at the close of business on the date next preceding the day on which the meeting is held.

Each stockholder entitled to vote at any meeting of stockholders may authorize another person or persons to act for him, her, or it by a proxy which is in writing or transmitted as permitted by law, including, without limitation, electronically, via telegram, internet, interactive voice response system, or other means of reliable electronic transmission executed or authorized by such stockholder or his or her attorney-in-fact, but no proxy shall be voted after (3) three years from its date, unless the proxy provides for a longer period. Any such proxy shall be delivered to the secretary of the meeting at or prior to the time designated in the order of business for so delivering such proxies. Any proxy transmitted electronically shall set forth information from which it can be determined by the secretary of the meeting that such electronic transmission was authorized by the stockholder. When a quorum is present at any meeting, the affirmative vote of the holders of a majority of the voting power of the issued and outstanding stock of the Company present in person or represented by proxy and entitled to vote thereon shall decide any question brought before such meeting, unless the question is one upon which by express provision of law (including statute and rules and regulations of administrative agencies or a national securities exchange upon which the Company is listed) or of the Certificate of Incorporation or of these Bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question. Where a separate vote by a class or classes or series or series is required, the affirmative vote of the majority of shares of such class or classes or series or series present in person or represented by proxy at the meeting and entitled to vote thereon shall be the act of such class or classes or series or series, unless the question is one upon which by express provision of law (including statute and rules and regulations of administrative agencies or a national securities exchange upon which the Company is listed) or of the Certificate of Incorporation or of these Bylaws, a different vote is

required, in which case such express provision shall govern and control the decision of such question. Unless required by statute, or determined by the chairperson of the meeting to be advisable, the vote on any question need not be by ballot.

(b) A nominee for director shall be elected to the Board of Directors at a meeting at which a quorum is present if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election (with abstentions and broker non-votes not counted as votes cast either “for” or “against” that director’s election); provided, however, that directors shall be elected by a plurality of the votes cast at any meeting of stockholders at which a quorum is present for which (i) the Secretary of the Company receives a notice that a stockholder has nominated a person for election to the Board of Directors in compliance with the requirements set forth in Article II, Section 11 or Section 15 of the Bylaws and (ii) such nomination has not been withdrawn by such stockholder on or prior to the tenth day before the Company first mails its notice of meeting for such meeting to the stockholders. If directors are to be elected by a plurality of the votes cast, stockholders shall not be permitted to vote against a nominee.

SECTION 10. Inspectors. The Board of Directors may, and to the extent required by law, shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. The Board of Directors may designate one or more alternate inspectors to replace any inspector who fails to act. If any of the inspectors so appointed or any alternate shall fail to appear or act, the chairperson of the meeting shall, or if inspectors shall not have been appointed, the chairperson of the meeting may, appoint one or more inspectors. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his or her ability. The inspectors shall determine the number of shares of capital stock of the Company outstanding and the voting power of each, the number of shares represented at the meeting and the validity of proxies and ballots, determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors and certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. On request of the chairperson of the meeting, the inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as an inspector of an election of directors. Inspectors need not be stockholders.

SECTION 11. Advance Notice Provisions for Election of Directors. Only persons who are nominated in accordance with this Section 11 or Section 15 of Article II of these Bylaws shall be eligible for election as directors of the Company. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors as provided under Section 3 of this Article II:

(a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or

(b) by any stockholder of record of the Company (the “Record Stockholder”):

(i) who is a Record Stockholder on the date of the giving of the notice provided for in this Section 11 and on the record date for the determination of stockholders entitled to vote at such meeting,

(ii) who is entitled to vote at such meeting, and

(iii) who complies with the notice procedures set forth in this Section 11.

For the avoidance of doubt, clause (b) above and Section 15 of Article II of these Bylaws shall be the exclusive means for a stockholder to make nominations before an annual meeting and clause (b) above shall be the exclusive means for a stockholder to make nominations before a special meeting of stockholders.

In addition to any other applicable requirements, for a nomination to be made by a Record Stockholder:

(i) such Record Stockholder must have given timely notice thereof in proper written form to the Secretary of the Company

(ii) and the Record Stockholder and the beneficial owner, if any, on whose behalf any such nomination is made, must have acted in accordance with the representations set forth in the Nomination Solicitation Statement required by these Bylaws.

To be timely, a Record Stockholder’s notice to the Secretary must be received at the principal executive offices of the Company:

(a) in the case of an annual meeting, not earlier than the close of business one hundred twenty (120) days, nor later than the close of business ninety (90) days, prior to the date of the anniversary of the previous year’s annual meeting provided, however, that, subject to the last sentence of this paragraph, in the event the annual meeting is convened on a date more than thirty (30) days prior to or delayed by more than sixty (60) days after such anniversary date, notice by the Record Stockholder in order to be timely must be so received not earlier than the close of business one hundred twenty (120) days prior to such annual meeting nor later than close of business on the later of ninety (90) days prior to such annual meeting or the tenth (10th) day following the day on which public disclosure of the date of the annual meeting was first made by the Company and

(b) in the case of a special meeting of stockholders called for the purpose of electing directors, not earlier than the close of business one hundred twenty (120) days prior to such annual meeting nor later than the close of business on the later of ninety (90) days prior to such special meeting or the tenth (10th) day following the day on which public disclosure is first made by the Company of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. Notwithstanding anything in the preceding sentence to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public disclosure naming all of the nominees

for director or specifying the size of the increased Board of Directors made by the Company at least ten (10) days before the last day a Record Stockholder may deliver a notice of nomination in accordance with the preceding sentence, a Record Stockholder’s notice required by this Bylaw shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be received by the Secretary at the principal executive offices of the Company not later than the close of business on the tenth (10th) day following the day on which such public disclosure is first made by the Company.

In no event shall an adjournment or postponement of a meeting of stockholders commence a new time period (or extend any time period) for the giving of a Record Stockholder’s notice.

To be in proper written form, a Record Stockholder’s notice to the Secretary must set forth:

(a) as to each person whom the Record Stockholder proposes to nominate for election or reelection as a director:

(i) the name, age, business address and residence address of the person,

(ii) the principal occupation or employment of the person,

(iii) (A) the class or classes or series and number of shares of capital stock of the Company which are owned beneficially or of record by such person, (B) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Company or with a value derived in whole or in part from the value of any class or series of shares of the Company, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Company or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by each such person, and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Company, (C) any proxy, contract, arrangement, understanding, or relationship pursuant to which such person has a right to vote any shares of any security of the Company, (D) any short interest in any security of the Company held by each such person (for purposes of this Section, a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security), (E) any rights to dividends on the shares of the Company owned beneficially by such person that are separated

or separable from the underlying shares of the Company, (F) any proportionate interest in shares of the Company or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such person is a general partner or, directly or indirectly, beneficially owns an interest in a general partner and (G) any performance-related fees (other than an asset-based fee) that such person is entitled to based on any increase or decrease in the value of shares of the Company or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by members of such person’s immediate family sharing the same household (which information set forth in this paragraph shall be supplemented by such person, as the case may be, not later than ten (10) days after the record date for the meeting to disclose such ownership as of the record date),

(iv) such person’s written consent to be named in the proxy statement as a nominee and to serve as a director if elected,

(v) a statement whether such person, if elected, intends to tender, promptly following such person’s election or re-election, an irrevocable resignation effective upon such person’s failure to receive the required vote for re-election at the next meeting at which such person would face re-election and upon acceptance of such resignation by the Board of Directors in accordance with the Board of Directors’ policy and

(vi) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder (such act and the rules and regulations promulgated thereunder, the “Exchange Act”),

(b) as to the Record Stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made (each, a “party”):

(i) the name and record address of such Record Stockholder and the name and address of any other party, if any,

(ii) (A) the class or classes or series or series and number of shares of capital stock of the Company which are owned beneficially or of record by such party, (B) any Derivative Instrument directly or indirectly owned beneficially by each such party, and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Company, (C) any proxy, contract, arrangement, understanding, or

relationship pursuant to which either party has a right to vote any shares of any security of the Company, (D) any short interest in any security of the Company held by each such party (for purposes of this Section, a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security), (E) any rights to dividends on the shares of the Company owned beneficially by each such party that are separated or separable from the underlying shares of the Company, (F) any proportionate interest in shares of the Company or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which either party is a general partner or, directly or indirectly, beneficially owns an interest in a general partner and (G) any performance-related fees (other than an asset-based fee) that each such party is entitled to based on any increase or decrease in the value of shares of the Company or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by members of each such party’s immediate family sharing the same household (which information set forth in this paragraph shall be supplemented by such stockholder or such beneficial owner, as the case may be, not later than ten (10) days after the record date for the meeting to disclose such ownership as of the record date),

(iii) a description of all arrangements or understandings between any and each party and any and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such Record Stockholder,

(iv) a representation that such Record Stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice,

(v) any other information relating to such party that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act, and

(vi) a statement whether or not each such party will deliver a proxy statement and form of proxy to holders of at least the percentage of voting power of all of the shares of capital stock of the Company reasonably believed by the Record Stockholder or beneficial holder, as the case may be, to be sufficient to elect the nominee or nominees proposed to be nominated by the Record Stockholder or otherwise solicit proxies or votes from stockholders in support of

such nomination (such statement, a “Nomination Solicitation Statement”).

The Company may require any proposed nominee to furnish such other information as the Company may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Company.

No person shall be eligible for election as a director of the Company unless nominated in accordance with the procedures set forth in this Section 11 or Section 15 of Article II of these Bylaws. The chairperson of the meeting shall have the power and the duty to determine whether a nomination has been made in accordance with the procedures set forth in this Section 11 and, if the chairperson of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the chairperson shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 11, unless otherwise required by law, if the Record Stockholder (or a qualified representative of the Record Stockholder) does not appear at the annual or special meeting of stockholders of the Company to present the nomination, such nomination shall be disregarded, notwithstanding that proxies in respect of such nomination may have been received by the Company.

For purposes of this Section 11, Section 12 and Section 15 of Article II of these Bylaws, to be considered a qualified representative of the Record Stockholder, a person must be a duly authorized officer, manager or partner of such Record Stockholder or must be authorized by a writing executed by such Record Stockholder or an electronic transmission delivered by such Record Stockholder to act for such Record Stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.

For purposes of this Section 11 and Section 12 of these Bylaws, “public disclosure” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the Company with the Securities and Exchange Commission pursuant to Section 13, 14, or 15(d) of the Exchange Act.

In addition to the foregoing provisions of this Section 11, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to matters set forth in this Section 11.

SECTION 12. Advance Notice Provisions for Business to be Transacted at Annual Meeting. No business may be transacted at an annual meeting of stockholders, other than business that is:

(a) included in the Company’s proxy materials with respect to such meeting,

(b) properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or

(i) who is a Record Stockholder on the date of the giving of the notice provided for in this Section 12 and on the record date for the determination of stockholders entitled to vote at such annual meeting,

(ii) who is entitled to vote at such meeting, and

(iii) who complies with the notice procedures set forth in this Section 12.

For the avoidance of doubt, clause (c) shall be the exclusive means for a stockholder to propose business to be transacted (other than business included in the Company’s proxy materials pursuant to Rule 14a-8 under the Exchange Act) before an annual meeting of stockholders.

In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a Record Stockholder:

(i) such Record Stockholder must have given timely notice thereof in proper written form to the Secretary of the Company,

(ii) any such business must be a proper matter for stockholder action under Delaware law, and

(iii) the Record Stockholder and the beneficial owner, if any, on whose behalf any such proposal is made, must have acted in accordance with the representations set forth in the Business Solicitation Statement required by these Bylaws.

To be timely, a Record Stockholder’s notice to the Secretary must be received at the principal executive offices of the Company not earlier than the close of business one hundred twenty (120) days, nor later than the close of business ninety (90) days, prior to the date of the anniversary of the previous year’s annual meeting; provided, however, that, subject to the last sentence of this paragraph, in the event the annual meeting is convened on a date more than thirty (30) days prior to or delayed by more than sixty (60) days after such anniversary date, notice by the Record Stockholder in order to be timely must be so received not earlier than the close of business one hundred twenty (120) days prior to such annual meeting nor later than the later of the close of business ninety (90) days prior to such annual meeting or the tenth (10th) day following the day on which public disclosure of the date of the annual meeting was first made by the Company. In no event shall an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a Record Stockholder’s notice.

To be in proper written form, a Record Stockholder’s notice to the Secretary must set forth:

(a) as to each matter such Record Stockholder proposes to bring before the annual meeting:

(i) a brief description of the business desired to be brought before the annual meeting,

(ii) the reasons for conducting such business at the annual meeting, and

(iii) any material interest in such business of such Record Stockholder and the beneficial owner, if any, on whose behalf the proposal is made,

(b) as to the Record Stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made (each, a “party”):

(i) the name and record address of such stockholder,

(ii) (A) the class or classes or series and number of shares of capital stock of the Company which are owned beneficially or of record by such party, (B) any Derivative Instrument directly or indirectly owned beneficially by each such party, and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Company, (C) any proxy, contract, arrangement, understanding, or relationship pursuant to which either party has a right to vote any shares of any security of the Company, (D) any short interest in any security of the Company held by each such party (for purposes of this Section, a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security), (E) any rights to dividends on the shares of the Company owned beneficially by each such party that are separated or separable from the underlying shares of the Company, (F) any proportionate interest in shares of the Company or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which either party is a general partner or, directly or indirectly, beneficially owns an interest in a general partner and (G) any performance-related fees (other than an asset-based fee) that each such party is entitled to based on any increase or decrease in the value of shares of the Company or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by members of each such party’s immediate family sharing the same household (which information set forth in this paragraph shall be supplemented by such stockholder or such beneficial owner, as the case may be, not later than ten (10) days after the record date for the meeting to disclose such ownership as of the record date),

(iii) a description of all arrangements or understandings between any and each party and any other person or persons (including their names) in connection with the proposal of such business by such Record Stockholder,

(iv) a representation that such Record Stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting,

(v) any other information relating to such party that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the transaction of business pursuant to Section 14 of the Exchange Act, and

(vi) a statement whether or not each such party will deliver a proxy statement and form of proxy to holders of at least the percentage of voting power of all of the shares of capital stock of the Company required under applicable law to carry the proposal or otherwise solicit proxies or votes from stockholders in support of such proposal (such statement, a “Business Solicitation Statement”).

No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 12; provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 12 shall be deemed to preclude discussion by any stockholder of any such business. The chairperson of the meeting shall have the power and the duty to determine whether a proposal has been made in accordance with the procedures set forth in this Section 12 and, if the chairperson of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the chairperson shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. Notwithstanding the foregoing provisions of this Section 12, unless otherwise required by law, if the Record Stockholder (or a qualified representative of the Record Stockholder) does not appear at the annual or special meeting of stockholders of the Company to present the proposal, such proposal shall be disregarded, notwithstanding that proxies in respect of such proposal may have been received by the Company.

In addition to the foregoing provisions of this Section 12, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to matters set forth in this Section 12. Nothing in this Section 12 shall be deemed to affect any rights of stockholders to request inclusion of a proposal in the Company’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

SECTION 13. Action by Written Consent. Subject to the rights of the holders of any series of Preferred Stock, any action required or permitted to be taken by the stockholders of the

Company must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders.

SECTION 14. Fixing the Record Date. In order that the Company may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and for determining stockholders entitled to receive payment of any dividend or other distribution or allotment of rights or to exercise any rights of change, conversion or exchange of stock or for any other purpose, the record date shall be at the close of business on the day on which the Board of Directors adopts a resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

SECTION 15. Proxy Access.

(a) Whenever the Board of Directors solicits proxies with respect to the election of directors at an annual meeting of stockholders, subject to the provisions of this Section 15, the Company shall include in its proxy statement for such annual meeting, in addition to any persons nominated for election by the Board of Directors or any committee thereof, the name, together with the Required Information (defined below), of any person nominated for election (the “Stockholder Nominee”) to the Board of Directors by a stockholder or group of no more than 20 stockholders (counting as one stockholder for this purpose, any two or more funds under common management) that satisfy the requirements of this Section 15 (such stockholder or stockholder group, including each member thereof to the extent the context requires, the “Eligible Stockholder”), and who expressly elect at the time of providing the notice required by this Section 15 (the “Notice of Proxy Access Nomination”) to have its nominee included in the Company’s proxy materials pursuant to this Section 15. In the event that the Eligible Stockholder consists of a group of stockholders, any and all requirements and obligations for an individual Eligible Stockholder that are set forth in these Bylaws, including the Minimum Holding Period, shall apply to each member of such group; provided, however, that the Required Ownership Percentage shall apply to the ownership of the group in the aggregate. For purposes of this Section 15, the “Required Information” that the Company will include in its proxy statement is the information provided to the Secretary of the Company concerning the Stockholder Nominee and the Eligible Stockholder that is required to be disclosed in the Company’s proxy statement by the regulations promulgated under the Exchange Act, and if the Eligible Stockholder so elects, a written statement, not to exceed 500 words, in support of the Stockholder Nominee(s)’ candidacy (the “Statement”). Notwithstanding anything to the contrary contained in this Section 15, the Company may omit from its proxy materials any

information or Statement (or portion thereof) that it, in good faith, believes would violate any applicable law or regulation.

(b) To be timely, the Notice of Proxy Access Nomination must be delivered to, or mailed to and received by, the Secretary of the Company no earlier than one hundred fifty (150) days and no later than one hundred twenty (120) days before the anniversary of the date that the Company issued its proxy statement for the previous year’s annual meeting of stockholders.

(c) The maximum number of Stockholder Nominees nominated by all Eligible Stockholders that will be included in the Company’s proxy materials with respect to an annual meeting of stockholders shall not exceed the lesser of (i) 20% of the total number of directors in office (rounded to the nearest whole number, but not less than one) and (ii) the total number of directors to be elected at such meeting as of the last day on which a Notice of Proxy Access Nomination may be delivered pursuant to and in accordance with this Section 15 (the “Final Proxy Access Nomination Date”); provided, however, that the maximum number of Stockholder Nominees nominated by all Eligible Stockholders pursuant to this Section 15 shall be reduced by the number of director candidates for which the Company shall have received one or more valid notices that a stockholder (other than an Eligible Stockholder) intends to nominate director candidates at such applicable annual meeting of stockholders pursuant to Section 11 of these Bylaws. In the event that one or more vacancies for any reason occurs in the class of directors to be elected at such annual meeting after the Final Proxy Access Nomination Date but before the date of the annual meeting and the Board of Directors resolves to reduce the size of the Board of Directors in connection therewith, the maximum number of Stockholder Nominees included in the Company’s proxy materials shall be calculated based on the number of directors to be elected at such annual meeting as so reduced. Any individual nominated by an Eligible Stockholder for inclusion in the Company’s proxy materials pursuant to this Section 15 whom the Board of Directors decides to nominate as a nominee of the Board of Directors shall be counted as one of the Stockholder Nominees for purposes of determining when the maximum number of Stockholder Nominees provided for in this Section 15 has been reached. Any Eligible Stockholder submitting more than one Stockholder Nominee for inclusion in the Company’s proxy materials pursuant to this Section 15 shall rank such Stockholder Nominees based on the order that the Eligible Stockholder desires such Stockholder Nominees to be selected for inclusion in the Company’s proxy statement in the event that the total number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this Section 15 exceeds the maximum number of nominees provided for in this Section 15. In the event that the number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this Section 15 exceeds the maximum number of nominees provided for in this Section 15, the highest ranking Stockholder Nominee who meets the requirements of this Section 15 from each Eligible Stockholder will be selected for inclusion in the Company’s proxy materials until the maximum number is reached, going in order of the amount (largest to smallest) of shares of common stock of the Company each Eligible Stockholder disclosed as “owned” (as defined below in Section 15(d)) in its respective Notice of Proxy Access Nomination submitted to the Company. If the maximum number is not reached after the highest ranking Stockholder Nominee who meets the requirements of this Section 15 from each Eligible Stockholder has been selected, this process will continue as many times as necessary, following the same order each time, until the maximum number is reached. Notwithstanding anything to the contrary contained in this Section 15, if the Company receives notice pursuant to Section 11 of these Bylaws that a stockholder intends to nominate for election at such meeting a number of nominees greater than or equal to 50% or more of the total number of directors to be elected at such meeting, no Stockholder

Nominees will be included in the Company’s proxy materials with respect to such meeting pursuant to this Section 15.

(d) For purposes of this Section 15, an Eligible Stockholder shall be deemed to “own” only those outstanding shares of common stock of the Company as to which the stockholder possesses both:

(i) the full voting and investment rights pertaining to the shares; and

(ii) the full economic interest in (including the opportunity for profit from and full risk of loss on) such shares;

provided that the number of “owned” shares calculated in accordance with clauses (i) and (ii) shall not include any shares:

(x) sold by such stockholder or any of its affiliates in any transaction that has not been settled or closed;

(y) borrowed by such stockholder or any of its affiliates for any purposes or purchased by such stockholder or any of its affiliates pursuant to an agreement to resell; or

(z) subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such stockholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of outstanding common stock of the Company, in any such case which instrument or agreement has, or is intended to have, the purpose or effect of:

(1) reducing in any manner, to any extent or at any time in the future, such stockholder’s or its affiliates’ full right to vote or direct the voting of any such shares; and/or

(2) hedging, offsetting or altering to any degree any gain or loss realized or realizable from maintaining the full economic ownership of such shares by such stockholder or its affiliates.

A stockholder shall “own” shares held in the name of a nominee or other intermediary so long as the stockholder retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A stockholder’s ownership of shares shall be deemed to continue during any period in which the stockholder has (i) delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time by the stockholder or (ii) loaned such shares provided that the stockholder has the power to recall such loaned shares on three business days’ notice and has recalled such loaned shares as of the date of the Notice of Proxy Access Nomination and through the date of the annual meeting. The terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings. Whether outstanding shares of the common stock of the Company are “owned” for these purposes shall be determined by the Board of Directors or any committee thereof, in each case, in its sole discretion. For purposes of this Section 15, the term “affiliate” or “affiliates” shall have the meaning ascribed thereto under the General Rules and

Regulations under Exchange Act. An Eligible Stockholder shall include in its Notice of Proxy Access Nomination the number of shares it is deemed to own for purposes of this Section 15 and how such “owned” shares are held by such Eligible Stockholder, including, but not limited to, whether the Eligible Stockholder has loaned or delegated any voting power with respect to such shares.

(e) In order to make a nomination pursuant to this Section 15, an Eligible Stockholder must have owned (as defined above) the Required Ownership Percentage (as defined below) of the Company’s outstanding common stock (the “Required Shares”) continuously for the Minimum Holding Period (as defined below) as of both the date the Notice of Proxy Access Nomination is delivered to, or mailed to and received by, the Secretary of the Company in accordance with this Section 15 and the record date for determining the stockholders entitled to vote at the annual meeting and must continue to own the Required Shares through the meeting date. For purposes of this Section 15, the “Required Ownership Percentage” is 3% or more, and the “Minimum Holding Period” is 3 years. Within the time period specified in this Section 15 for delivering the Notice of Proxy Access Nomination, an Eligible Stockholder must provide the following information in writing to the Secretary of the Company:

(i) one or more written statements from the record holder of the shares (and from each intermediary through which the shares are or have been held during the Minimum Holding Period) verifying that, as of a date within seven calendar days prior to the date the Notice of Proxy Access Nomination is delivered to, or mailed to and received by, the Secretary of the Company, the Eligible Stockholder owns, and has owned continuously for the Minimum Holding Period, the Required Shares, and the Eligible Stockholder’s agreement to provide, within five (5) business days after the record date for the annual meeting, written statements from the record holder and intermediaries verifying the Eligible Stockholder’s continuous ownership of the Required Shares through the record date;

(ii) a copy of the Schedule 14N that has been filed with the SEC as required by Rule 14a-18 under the Exchange Act;

(iii) the information, representations and agreements that are the same as those that would be required to be set forth in a stockholder’s notice of nomination pursuant to Section 11 of these Bylaws;

(iv) the consent of each Stockholder Nominee to being named in the proxy statement as a nominee and to serving as a director if elected;

(v) a representation that the Eligible Stockholder:

(A) acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control at the Company, and does not presently have such intent,

(B) presently intends to maintain qualifying ownership of the Required Shares through the date of the annual meeting,

(C) has not engaged and will not engage in, and has not and will not be a “participant” in another person’s, “solicitation” within the meaning of Rule

14a-1(l) under the Exchange Act in support of the election of any individual as a director at the annual meeting other than its Stockholder Nominee(s) or a nominee of the Board of Directors,

(D) agrees to comply with all applicable laws and regulations applicable to the use, if any, of soliciting material, and

(E) will provide facts, statements and other information in all communications with the Company and its stockholders that are or will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;

(vi) an undertaking that the Eligible Stockholder agrees to:

(A) assume all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholder’s communications with the stockholders of the Company or out of the information that the Eligible Stockholder provides to the Company;

(B) indemnify and hold harmless the Company and each of its directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Company or any of its directors, officers or employees arising out of any nomination submitted by the Eligible Stockholder pursuant to this Section 15; and

(C) in the case of a nomination by a group of stockholders that together is an Eligible Stockholder, the designation by all group members of one group member that is authorized to act on behalf of all such members with respect to the nomination and matters related thereto, including withdrawal of the nomination.

(f) Within the time period specified in this Section 15 for delivering the Notice of Proxy Access Nomination, a Stockholder Nominee must deliver to the Secretary of the Company a written representation and agreement that such person:

(i) will act as a representative of all of the stockholders of the Company while serving as a director;

(ii) is not and will not become a party to any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such Stockholder Nominee, if elected as a director of the Company, will act or vote as a director on any issue or question to be decided by the Board of Directors or any committee thereof;

(iii) is not and will not become a party to any compensatory, payment or other financial agreement, arrangement or understanding with any person or entity other than the Company or a wholly owned subsidiary of the Company, and has not and will not receive any such compensation or other payment from any person or entity

other than the Company or a wholly owned subsidiary of the Company, in each case in connection with candidacy or service as a director of the Company (other than agreements providing for indemnification and/or reimbursement of out-of-pocket expenses in connection with candidacy or service as a director) unless the amount(s) of compensation, source(s) of compensation, payment criteria, form and timing of compensation, and all other material terms and conditions with respect to such compensatory, payment or other financial agreements, arrangements or understandings are accurately disclosed by such person to the Company’s stockholders in timely filed and distributed proxy solicitation disclosures in connection with the applicable stockholders meeting that includes a vote on the election of such Stockholder Nominee;

(iv) will comply with the Company’s Code of Conduct, Corporate Governance Guidelines, and other policies and procedures, including corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines, and any other policies and guidelines applicable to directors; and

(v) will provide facts, statements and other information in all communications with the Company and its stockholders that are or will be true and correct in all material respects (and shall not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading).

At the request of the Company, the Stockholder Nominee(s) must timely submit all completed and signed questionnaires required of directors and officers of the Company. The Company may request such additional information as necessary, in the sole discretion of the Board of Directors, to permit the Board of Directors to determine (A) if each Stockholder Nominee is independent under the listing standards of the principal U.S. exchange upon which the common stock of the Company is listed, any applicable rules of the SEC and any publicly disclosed standards used by the Board of Directors in determining and disclosing the independence of the Company’s directors and (B) compliance with the provisions of this Section 15.

(g) In the event that any information or communications provided by the Eligible Stockholder or the Stockholder Nominee to the Company or its stockholders ceases to be true and correct in all material respects or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, each Eligible Stockholder or Stockholder Nominee, as the case may be, shall promptly notify the Secretary of the Company in writing of any defect in such previously provided information and of the information that is required to correct any such defect.

(h) The Company shall not be required to include, pursuant to this Section 15, a Stockholder Nominee in its proxy materials for any meeting of stockholders:

(i) for which the Secretary of the Company receives a notice that a stockholder has nominated such Stockholder Nominee for election to the Board of Directors pursuant to the advance notice requirements for stockholder nominees for director set forth in Section 11 of these Bylaws;

(ii) if the Eligible Stockholder who has nominated such Stockholder Nominee has engaged in or is currently engaged in, or has been or is a “participant” in another person’s, “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the annual meeting other than its Stockholder Nominee(s) or a nominee of the Board of Directors;

(iii) if the Stockholder Nominee is or becomes a party to any compensatory, payment or other financial agreement, arrangement or understanding with any person or entity other than the Company or a wholly owned subsidiary of the Company, or has received any such compensation or other payment from any person or entity other than the Company or a wholly owned subsidiary of the Company, in each case in connection with candidacy or service as a director of the Company (other than agreements providing only for indemnification and/or reimbursement of out-of-pocket expenses in connection with candidacy or service as a director) unless the amount(s) of compensation, source(s) of compensation, payment criteria, form and timing of compensation, and all other material terms and conditions with respect to such compensatory, payment or other financial agreements, arrangements or understandings are accurately disclosed by such person to the Company’s stockholders in timely filed and distributed proxy solicitation disclosures in connection with the applicable stockholders meeting that includes a vote on the election of such Stockholder Nominee;

(iv) who is not independent under the listing standards of each principal U.S. exchange upon which the common stock of the Company is listed, any applicable rules of the SEC and any publicly disclosed standards used by the Board of Directors in determining and disclosing independence of the Company’s directors, in each case as determined by the Board of Directors in its sole discretion;

(v) whose election as a member of the Board of Directors would cause the Company to be in violation of these Bylaws, the Certificate of Incorporation, the rules and listing standards of the principal U.S. exchanges upon which the common stock of the Company is traded, or any applicable state or federal law, rule or regulation;

(vi) who is or has been, within the past three (3) years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914;

(vii) who is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted (including through a plea of nolo contendere) in such a criminal proceeding within the past ten (10) years;

(viii) who is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended;

(ix) if such Stockholder Nominee or the applicable Eligible Stockholder shall have provided information to the Company in respect to such nomination that was untrue in any material respect or omitted to state a material fact necessary in order to make the statement made, in light of the circumstances under which they were

made, not misleading, as determined by the Board of Directors or any committee thereof, in each case, in its sole discretion; or

(x) the Eligible Stockholder or applicable Stockholder Nominee fails to comply with its obligations pursuant to this Section 15.

(i) Notwithstanding anything to the contrary set forth herein, the Board of Directors or the chairperson of the meeting of stockholders shall declare a nomination by an Eligible Stockholder to be invalid, and such nomination shall be disregarded notwithstanding that proxies in respect of such vote may have been received by the Company, if:

(i) the Stockholder Nominee(s) and/or the applicable Eligible Stockholder shall have breached its or their obligations under this Section 15, as determined by the Board of Directors or the chairperson of the meeting of stockholders, in each case, in its or his sole discretion; or

(ii) the Eligible Stockholder (or a qualified representative thereof) does not appear at the meeting of stockholders to present any nomination pursuant to this Section 15.

(j) The Board of Directors shall have the exclusive power and authority to interpret the provisions of Sections 11, 12 and 15 of these Bylaws and make all determinations deemed necessary or advisable in connection with Sections 11, 12 and 15. All such actions, interpretations and determinations that are done or made by the Board of Directors shall be final, conclusive and binding on the Company, the stockholders and all other parties.

(k) No stockholder shall be permitted to join more than one group of stockholders to become an Eligible Stockholder for purposes of nominations pursuant to this Section 15 per each annual meeting of stockholders.

ARTICLE III

Board of Directors

SECTION 1. General Powers. The business and affairs of the Company shall be managed by or under the direction of the Board of Directors. The Board of Directors may exercise all such authority and powers of the Company and do all such lawful acts and things as are not by statute or the Certificate of Incorporation directed or required to be exercised or done by the stockholders.

SECTION 2. Number, Tenure, Election and Qualification. The number of directors shall be determined in the manner provided in the Certificate of Incorporation. The directors of the Company shall be divided as evenly as possible into three classes as provided in the Certificate of Incorporation. Except as otherwise provided in the Certificate of Incorporation, at each annual meeting of the stockholders of the Company, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the third succeeding annual meeting of the stockholders of the Company held after their election. No person shall qualify for service as a director of the Company if he or she is a party to any compensatory, payment or other financial agreement, arrangement or understanding with any

person or entity other than the Company or a wholly-owned subsidiary of the Company, or has received any such compensation or other payment from any person or entity other than the Company or a wholly-owned subsidiary of the Company, in each case in connection with candidacy or service as a director of the Company unless (a) the amount(s) of compensation, source(s) of compensation, payment criteria, form and timing of compensation, and all other material terms and conditions with respect to such compensatory, payment or other financial agreements, arrangements or understandings are accurately disclosed by such person to the Company’s stockholders in timely filed and distributed proxy solicitation disclosures in connection with the applicable stockholders meeting that includes a vote on the election of such person (“Third Party Compensation Disclosures”) and (b) such person assumes all liability from, and indemnifies the Company against, any legal or regulatory violation arising out of such person’s Third Party Compensation Disclosures; provided that agreements providing only for indemnification and/or reimbursement of out-of-pocket expenses in connection with candidacy or service as a director shall not be disqualifying under this Section 2 of Article III.

SECTION 3. Place of Meetings. Meetings of the Board of Directors shall be held at such place or places, within or without the State of Delaware, as the Board of Directors may from time to time determine or as shall be specified in the notice of any such meeting.

SECTION 4. Annual Meetings. The Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, as soon as practicable after each annual meeting of stockholders, and to the extent practicable, on the same day and at the same place where such annual meeting shall be held. In the event such annual meeting of the stockholders is not so held, the annual meeting of the Board of Directors may be held at such other time or place (within or without the State of Delaware) as shall be specified in a notice thereof given as hereinafter provided in Section 7 of this Article III.

SECTION 5. Regular Meetings. Regular meetings of the Board of Directors shall be held at such time and place as the Board of Directors may fix.

SECTION 6. Special Meetings. Special meetings of the Board of Directors may be held at any time or place whenever called by the Chairperson of the Board of Directors, if one shall have been elected, or by two or more directors of the Company or by the Chief Executive Officer.

SECTION 7. Notice of Meetings. Notice of regular meetings of the Board of Directors need not be given. Notice of each special meeting of the Board of Directors, and of each regular and annual meeting of the Board of Directors for which notice shall be required, shall be given by the Secretary as hereinafter provided in this Section 7, in which notice shall be stated the time and place of the meeting. Notice of any special meeting, and of any regular or annual meeting for which notice is required, shall be given to each director at least (a) twenty-four (24) hours before the meeting if by telephone or by being personally delivered or sent by telex, telecopy, electronic transmission or similar means or (b) five (5) days before the meeting if delivered by mail to the director’s residence or usual place of business. Such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage prepaid, or when transmitted if sent by telex, telecopy, electronic transmission or similar means. Except as otherwise required by these Bylaws, neither the business to be transacted at, nor the purpose of, any special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Any director may waive notice of any meeting by a writing signed by the

director entitled to the notice, or by electronic transmission by the director, and filed with the minutes or corporate records.

SECTION 8. Waiver of Notice and Presumption of Assent. Any member of the Board of Directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened.

SECTION 9. Quorum and Manner of Acting. A majority of the Whole Board shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, and, except as otherwise expressly required by statute or the Certificate of Incorporation or these Bylaws, the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. For purposes of these Bylaws, the term “Whole Board” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships. In the absence of a quorum at any meeting of the Board of Directors, a majority of the directors present thereat may adjourn such meeting to another time and place. Notice of the time and place of any such adjourned meeting shall be given to all of the directors unless such time and place were announced at the meeting at which the adjournment was taken, in which case such notice shall only be given to the directors who were not present thereat. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. The directors shall act only as a Board of Directors and, except to the extent designated as a committee of the Board of Directors pursuant to Section 13 of this Article III, the individual directors shall have no power as such.

SECTION 10. Organization. At each meeting of the Board of Directors, the Chairperson of the Board of Directors, if one shall have been elected, or, in the absence of the Chairperson of the Board of Directors or if one shall not have been elected, the Chief Executive Officer (or, in his or her absence, another director chosen by a majority of the directors present) shall act as chairperson of the meeting and preside thereat. The Secretary or, in his or her absence, any person appointed by the chairperson, shall act as secretary of the meeting and keep the minutes thereof.

SECTION 11. Resignations; Newly Created Directorships; Vacancies; and Removals. Any director of the Company may resign at any time by giving notice in writing or by electronic transmission of his or her resignation to the Company. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Newly created directorships resulting from any increase in the number of directors or any vacancies in the Board of Directors resulting from death, resignation, disqualification, removal or any other cause shall be filled as provided in the Certificate of Incorporation. Any director may be removed as provided in the Certificate of Incorporation.

SECTION 12. Compensation. The Board of Directors shall have authority to fix the compensation, including fees and reimbursement of expenses, of directors for services to the Company in any capacity.

SECTION 13. Committees. The Board of Directors may designate one or more committees, including an executive committee, each committee to consist of one or more of the directors of the Company. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Except to the extent restricted by statute or the Certificate of Incorporation, each such committee, to the extent provided in the resolution creating it, shall have and may exercise all the powers and authority of the Board of Directors (including, without limitation, the right to delegate authority to one or more subcommittees thereof) and may authorize the seal of the Company to be affixed to all papers which require it. Each such committee shall serve at the pleasure of the Board of Directors and have such name as may be determined from time to time by resolution adopted by the Board of Directors. Each committee shall keep regular minutes of its meetings.

SECTION 14. Committee Rules. Each committee of the Board of Directors may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the Board of Directors designating such committee. Unless otherwise provided in such a resolution, the presence of at least a majority of the members of the committee shall be necessary to constitute a quorum. In the event that a member and that member’s alternate, if alternates are designated by the Board of Directors as provided in Section 13 of this Article III, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member.

SECTION 15. Action by Consent. Notwithstanding any other provision contained herein, unless restricted by the Certificate of Incorporation, any action required or permitted to be taken by the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of the proceedings of the Board of Directors or such committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

SECTION 16. Telephonic and Other Meetings. Unless restricted by the Certificate of Incorporation, any one or more members of the Board of Directors or any committee thereof may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. Participation by such means shall constitute presence in person at a meeting.

ARTICLE IV

Officers

SECTION 1. Number and Qualifications. The officers of the Company shall be elected by the Board of Directors and shall include the Chief Executive Officer, the President, the Chief Financial Officer and the Secretary. The Company may also have, at the discretion of the Board of Directors, such other officers as are desired, including one or more Vice Presidents, Treasurer, one or more Assistant Treasurers, Controller, one or more Assistant Secretaries, and such other

officers as may be necessary or desirable for the business of the Company. In the event there are two or more Vice Presidents, then one or more may be designated as Executive Vice President, Senior Vice President, or other similar or dissimilar title. At the time of the election of officers, the directors may by resolution determine the order of their rank. Any number of offices may be held by the same person, and no officer need be a director. In its discretion, the Board of Directors may choose not to fill any office for any period as it may deem advisable, except that the offices of Chief Executive Officer, President and Secretary shall be filled as expeditiously as possible.

SECTION 2. Election and Term of Office. The officers of the Company shall be elected annually by the Board of Directors at its first meeting held after each annual meeting of stockholders or as soon thereafter as is convenient. Vacancies may be filled or new offices created and filled at any meeting of the Board of Directors. Each officer shall hold office until his or her successor shall have been duly elected and shall have qualified, or until his or her death, or until he shall have resigned or have been removed, as hereinafter provided in these Bylaws.

SECTION 3. Resignations. Any officer of the Company may resign at any time by giving written notice of his or her resignation to the Company. Any such resignation shall take effect at the time specified therein (or sooner if determined by the Board of Directors) or, if the time when it shall become effective shall not be specified therein, immediately upon receipt. Unless otherwise specified therein, the acceptance of any such resignation shall not be necessary to make it effective.

SECTION 4. Removal. Any officer of the Company may be removed, either with or without cause, at any time, by the Board of Directors at any meeting thereof.

SECTION 5. Vacancies. Any vacancy occurring in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term.

SECTION 6. Compensation. The compensation of the officers of the Company for their services as such officers shall be fixed from time to time by or in the manner provided by the Board of Directors. An officer of the Company shall not be prevented from receiving compensation by reason of the fact that he is also a director of the Company.

SECTION 7. Absence or Disability of Officers. In the case of the absence or disability of any officer of the Company and of any person hereby authorized to act in such officer’s place during such officer’s absence or disability, the Board of Directors may by resolution delegate the powers and duties of such officer to any other officer or to any director, or to any other person whom it may select.

ARTICLE V

Indemnification

SECTION 1. Nature of Indemnity. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved (including, without limitation, as a witness) in any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he is or

was a director or officer of the Company or, while a director or officer of the Company, is or was serving at the request of the Company as a director, officer, employee, agent or in a similar capacity of another corporation or of a partnership, limited liability company, joint venture, trust or other enterprise, including, without limitation, service with respect to an employee benefit plan (hereinafter, an “Indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity while so serving, shall be indemnified and held harmless by the Company to the full extent permitted by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment), or by other applicable law as then in effect, against all expense, liability and loss (including, without limitation, attorneys’ fees, costs and charges, judgments, fines, excise taxes or penalties under the Employee Retirement Income Security Act of 1974, as amended from time to time (“ERISA”), penalties and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by such Indemnitee in connection therewith; provided, however, that except as provided in Section 3 of this Article V with respect to proceedings to enforce rights to indemnification and advancement, the Company shall indemnify any such Indemnitee in connection with a proceeding (or part thereof) initiated by such Indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors.

SECTION 2. Advances for Expenses. Expenses (including, without limitation, attorneys’ fees, costs and charges) incurred by an Indemnitee in defending a proceeding shall be paid by the Company, to the fullest extent not prohibited by applicable law, in advance of the final disposition of such proceeding upon receipt of an undertaking by or on behalf an Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such Indemnitee is not entitled to be indemnified by the Company as authorized in this Article V; provided, however, that except as provided in Section 3 of this Article V with respect to proceedings to enforce rights to indemnification and advancement, the Company shall advance expenses of any such Indemnitee in connection with a proceeding (or part thereof) initiated by such Indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors. The Board of Directors may, upon approval of such Indemnitee, authorize the Company’s counsel to represent such person in any proceeding, whether or not the Company is a party to such proceeding.

SECTION 3. Procedure for Indemnification and Advancement. Any indemnification or advance of expenses (including, without limitation, attorney’s fees, costs and charges) under this Article V shall be made promptly, and in any event within 60 days, or, in the case of a claim for an advancement of expenses, within 20 days, upon the written request of an Indemnitee to the General Counsel of the Company (and, in the case of advance of expenses, receipt of a written undertaking by or on behalf of such Indemnitee to repay such amount if it shall ultimately be determined that such Indemnitee is not entitled to be indemnified therefor pursuant to the terms of this Article V). The right to indemnification or advances as granted by this Article V shall be enforceable by such Indemnitee in any court of competent jurisdiction, if the Company denies such request, in whole or in part, or if no disposition thereof is made within 60 days (or 20 days with respect to advancement of expenses). To the full extent permitted by law, such Indemnitee’s costs and expenses incurred in connection with successfully establishing his or her right to indemnification or advancement, in whole or in part, in any such action shall also be indemnified by the Company. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of expenses (including, without limitation, attorney’s

fees, costs and charges) under this Article V where the required undertaking, if any, has been received by the Company) that the claimant has not met the standard of conduct set forth in the DGCL, as the same exists or hereafter may be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment), but the burden of proving such defense shall be on the Company. Neither the failure of the Company (including its directors who are not parties to such action, a committee of such directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the DGCL, as the same exists or hereafter may be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment), nor the fact that there has been an actual determination by the Company (including its directors who are not parties to such action, a committee of such directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

SECTION 4. Other Rights; Continuation of Right to Indemnification. The rights to indemnification and advancement of expenses provided by this Article V shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding office or while employed by or acting as agent for the Company, and shall continue as to a person who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of such person. All rights to indemnification or advancement under this Article V shall be deemed to be a contract between the Company and each Indemnitee. Any repeal or modification of this Article V or any repeal or modification of relevant provisions of the DGCL or any other applicable laws shall not in any way diminish any rights to indemnification of such Indemnitee or the obligations of the Company arising hereunder with respect to any proceeding arising out of, or relating to, any actions, transactions or facts occurring prior to the final adoption of such repeal or modification.

SECTION 5. Insurance. The Company shall have power to purchase and maintain insurance on behalf of any person who is or was or has agreed to become a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, limited liability company, joint venture, trust or other enterprise (including, without limitation, with respect to an employee benefit plan), against any liability asserted against the person and incurred by the person or on the person’s behalf in any such capacity, or arising out of the person’s status as such, whether or not the Company would have the power to indemnify the person against such liability under the provisions of this Article V or the DGCL; provided, however, that such insurance is available on acceptable terms, which determination shall be made by a vote of a majority of the Board of Directors.

SECTION 6. Indemnification of Employees and Agents of the Company. The Company may, to the extent authorized from time to time by the Board of Directors, grant rights to

indemnification and to the advancement of expenses to any employee or agent of the Company to the full extent of the provisions of this Article V with respect to the indemnification and advancement of expenses of directors and officers of the Company.

SECTION 7. Savings Clause. If this Article V or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless provide indemnification and advancement to each Indemnitee entitled to such indemnification and advancement pursuant to paragraphs 1 and 2 of this Article V to the full extent permitted by any applicable portion of this Article V that shall not have been invalidated and to the full extent permitted by applicable law.

ARTICLE VI

Stock Certificates and Their Transfer

SECTION 1. Stock Certificates. The Board of Directors may issue stock certificates, or may provide by resolution or resolutions that some or all of any or all classes or series of stock of the Company shall be uncertificated shares of stock. Every holder of stock represented by a certificate shall be entitled to have a certificate signed by, or in the name of the Company by, the Chairperson of the Board of Directors or the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company, certifying the number of shares owned by him or her in the Company. A certificate representing shares issued by the Company shall, if the Company is authorized to issue more than one class or series of stock, set forth upon the face or back of the certificate, or shall state that the Company will furnish to any stockholder upon request and without charge, a full statement of the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. The Company shall furnish to any holder of uncertificated shares, upon request and without charge, a full statement of the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

SECTION 2. Facsimile Signatures. Any or all of the signatures on a certificate may be a facsimile, engraved or printed. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Company with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

SECTION 3. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Company alleged to have been lost, stolen, or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate or certificates, or his or her legal representative, to give the Company a bond in such sum as it may direct sufficient to indemnify it against any claim that may be made against the Company on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

SECTION 4. Transfers of Stock. Upon surrender to the Company or the transfer agent of the Company of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Company to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its records; provided, however, that the Company shall be entitled to recognize and enforce any lawful restriction on transfer. Whenever any transfer of stock shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of transfer if, when the certificates are presented to the Company for transfer, both the transferor and the transferee request the Company to do so.

SECTION 5. Transfer Agents and Registrars. The Board of Directors may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars.

SECTION 6. Regulations. The Board of Directors may make such additional rules and regulations, not inconsistent with these Bylaws, as it may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Company.

SECTION 7. Registered Stockholders. The Company shall be entitled to recognize the exclusive right of a person registered on its records as the owner of shares of stock to receive dividends and to vote as such owner and shall not be bound to recognize any equitable or other claim to or interest in such share or shares of stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.

ARTICLE VII

General Provisions

SECTION 1. Dividends. Subject to the provisions of statutes and the Certificate of Incorporation, dividends upon the shares of capital stock of the Company may be declared by the Board of Directors at any regular or special meeting out of funds legally available therefore. Dividends may be paid in cash, in property or in shares of stock of the Company, unless otherwise provided by statute or the Certificate of Incorporation.

SECTION 2. Reserves. Before payment of any dividend, there may be set aside out of any funds of the Company available for dividends such sum or sums as the Board of Directors may, from time to time, in its absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Company or for such other purpose as the Board of Directors may think conducive to the interests of the Company. The Board of Directors may modify or abolish any such reserves in the manner in which it was created.

SECTION 3. Seal. The seal of the Company shall be in such form as shall be approved by the Board of Directors, which form may be changed by resolution of the Board of Directors.

SECTION 4. Fiscal Year. The fiscal year of the Company shall end on December 31 of each fiscal year and may thereafter be changed by resolution of the Board of Directors.

SECTION 5. Checks, Notes, Drafts, Etc. All checks, notes, drafts or other orders for the payment of money of the Company shall be signed, endorsed or accepted in the name of the Company by such officer, officers, person or persons as from time to time may be designated by the Board of Directors or by an officer or officers authorized by the Board of Directors to make such designation.

SECTION 6. Execution of Contracts, Deeds, Etc. The Board of Directors may authorize any officer or officers, agent or agents, in the name and on behalf of the Company to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances.

SECTION 7. Voting of Stock in Other Corporations. Unless otherwise provided by resolution of the Board of Directors, the Chairperson of the Board of Directors or the Chief Executive Officer, from time to time, may (or may appoint one or more attorneys or agents to) cast the votes which the Company may be entitled to cast as a shareholder or otherwise in any other corporation, any of whose shares or securities may be held by the Company, at meetings of the holders of the shares or other securities of such other corporation. In the event one or more attorneys or agents are appointed, the Chairperson of the Board of Directors or the Chief Executive Officer may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent. The Chairperson of the Board of Directors, or the Chief Executive Officer may, or may instruct the attorneys or agents so appointed to, execute or cause to be executed in the name and on behalf of the Company and under its seal or otherwise, such written proxies, consents, waivers or other instruments as may be necessary or proper in the circumstances.

SECTION 8. Inspection of Books and Records. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the Company’s stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. In every instance where an attorney or other agent shall be the person who seeks the right of inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Company at its registered office in the State of Delaware or at its principal place of business. Beneficial owners of shares of Company stock held either in a voting trust or by a nominee on behalf of such person shall have such rights to inspect the books and records of the Company as are set forth in the DGCL.

SECTION 9. Inconsistent Provisions. In the event that any provision of these Bylaws is or becomes inconsistent with any provision of the Certificate of Incorporation, the DGCL or any other applicable law, the provision of these Bylaws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect.

SECTION 10. Waivers. A written waiver of any notice, signed by a stockholder or director, or waiver by electronic transmission by such person, whether given before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such person. Neither the business nor the purpose of any meeting need be

specified in such a waiver. Attendance at any meeting shall constitute waiver of notice except attendance for the sole purpose of objecting at the beginning of the meeting to the timeliness of notice.

SECTION 11. Forum Selection. Unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (1) any derivative action or proceeding brought on behalf of the Company, (2) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s stockholders, (3) any action arising pursuant to any provision of the DGCL, or (4) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Company shall be deemed to have notice of and consented to the provisions of this Section 11 of Article VII.

ARTICLE VIII

Amendments

These Bylaws may be amended or repealed or new Bylaws adopted only in accordance with Article V of the Certificate of Incorporation.

EXHIBIT 1

FORM OF RESIGNATION

[Date]

Attention: Chairperson of the Board of Directors

Dear :

In accordance with the policy of the Board of Directors of Cloud Peak Energy Inc. (the “Company”) regarding majority voting in director elections, I hereby tender my resignation as a director of the Board of Directors (the “Board”), provided that this resignation shall be effective upon, and only in the event that, (i) I fail to receive a sufficient number of votes for re-election at the next meeting of the stockholders of the Company at which my seat on the Board will be subject to election (the “Applicable Annual Meeting”) and (ii) the Board accepts this resignation following my failure to be re-elected at the Applicable Annual Meeting.

If I am re-elected at the Applicable Annual Meeting, this resignation will be deemed withdrawn upon my re-election. However, if I am not re-elected at the Applicable Annual Meeting, this resignation will remain in effect following such meeting but will be deemed withdrawn if and when the Board decides not to accept this resignation. This resignation may not be withdrawn by me at any time other than as set forth in this paragraph.

	Very truly yours,


	Director

EXHIBIT 2

MAJORITY VOTING POLICY

The Board of Directors has adopted the following policy:

In accordance with the Company’s Bylaws, if none of our stockholders provides the Company notice in compliance with the requirements for stockholder nominees for director set forth in Article II, Section 11 or Section 15 of the Bylaws, of an intention to nominate one or more candidates to compete with the Board’s nominees in a director election, or if our stockholders have withdrawn all such nominations by the tenth day before the Company mails its notice of meeting to our stockholders, a nominee must receive more votes cast for than against his or her election or re-election in order to be elected or re-elected to the Board. The Board expects a director to tender his or her resignation if he or she fails to receive the required number of votes for re-election. The Board shall nominate for election or re-election as director only a candidate who agrees to tender promptly following the annual meeting at which he or she is elected or re-elected as director, an irrevocable resignation that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which he or she faces re-election and (ii) Board acceptance of such resignation. In addition, the Board shall fill director vacancies and new directorships only with candidates who agree to tender, promptly following their appointment to the Board, the same form of resignation tendered by any other director in accordance with this Board policy.

If an incumbent director fails to receive the required vote for re-election, the Board of Directors will act on an expedited basis to determine whether or not to accept the Director’s resignation. The Board expects that the director whose resignation is under consideration to abstain from participating in any decision regarding resignation. The Board of Directors may consider any factors it deems relevant in deciding whether or not to accept a director’s resignation.

Exhibit 4.1

Execution Version

CLOUD PEAK ENERGY RESOURCES LLC

and

CLOUD PEAK ENERGY FINANCE CORP., as Issuers,

CLOUD PEAK ENERGY INC.

and

CLOUD PEAK ENERGY LOGISTICS I LLC, as Guarantors,

WILMINGTON TRUST COMPANY, as Trustee,

and

CITIBANK, N.A., as Securities Administrator

SIXTH SUPPLEMENTAL INDENTURE

Dated as of September 10, 2015

Indenture

Dated as of November 25, 2009

8.500% Senior Notes due 2019

THIS SIXTH SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of September 10, 2015, is by and among Cloud Peak Energy Resources LLC, a Delaware limited liability company (the “Company”), Cloud Peak Energy Finance Corp., a Delaware corporation (the “Co-Issuer” and together with the Company, the “Issuers”), Cloud Peak Energy Inc., a Delaware corporation (the “Parent Guarantor”), Cloud Peak Energy Logistics I LLC, a Delaware limited liability company (the “New Guarantor”), Wilmington Trust Company, a Delaware trust company, as trustee (the “Trustee”), and Citibank, N.A., a national banking association, as securities administrator (the “Securities Administrator”).

WHEREAS, the Issuers, the Guarantors party thereto, the Trustee and the Securities Administrator have heretofore executed and delivered that certain Indenture, dated as of November 25, 2009 (as heretofore supplemented, the “Indenture”);

WHEREAS, Section 9.01 of the Indenture provides that, without notice to or the consent of any Noteholders, the Issuers, the Trustee and the Securities Administrator may enter into an indenture supplemental to the Indenture for the purpose of amending or supplementing the Indenture or the Notes in order to, among other things, provide for any Guarantee of the Notes;

WHEREAS, the New Guarantor wishes to Guarantee all of the outstanding Notes in accordance with the Indenture;

WHEREAS, the execution and delivery of this Supplemental Indenture have been authorized by each of the Issuers, the Parent Guarantor and the New Guarantor;

WHEREAS, the Company desires and has requested the Trustee and the Securities Administrator to join with the Issuers, the Parent Guarantor and the New Guarantor in entering into this Supplemental Indenture without the consent of the Noteholders for the purpose of supplementing the Indenture to add the New Guarantor as a Guarantor as permitted by Section 9.01(6) thereof; and

NOW, THEREFORE, in consideration of the above premises, each party hereby agrees, for the benefit of the others and for the equal and ratable benefit of the Noteholders, as follows:

ARTICLE I

ADDITION OF GUARANTOR

Section 1.1 Addition of Guarantor. The New Guarantor, by its execution of this Supplemental Indenture, agrees to be a Guarantor under the Indenture and to be bound by the terms of the Indenture applicable to Guarantors, including, but not limited to Article 10 thereof. The Note Guaranty of the New Guarantor may be released in accordance with the Indenture.

ARTICLE II

MISCELLANEOUS PROVISIONS

Section 2.1 Defined Terms. For all purposes of this Supplemental Indenture, except as otherwise defined or unless the context otherwise requires, terms used in capitalized form in this Supplemental Indenture and defined in the Indenture have the meanings specified in the Indenture.

Section 2.2 Indenture. Except as supplemented hereby, the Indenture and the Notes are in all respects ratified and confirmed and all the terms shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered under the Indenture shall be bound hereby and all terms and conditions of both shall be read together as though they constitute a single instrument, except that in the case of conflict the provisions of this Supplemental Indenture shall control.

Section 2.3 Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

Section 2.4 Successors. All agreements of the New Guarantor in this Supplemental Indenture shall bind its successors.

Section 2.5 Duplicate Originals. All parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together shall represent the same agreement. It is the express intent of the parties to be bound by the exchange of signatures on this Supplemental Indenture via telecopy or other form of electronic transmission.

Section 2.6 Severability. In case any one or more of the provisions in this Supplemental Indenture or in the Notes shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the fullest extent permitted by law.

Section 2.7 Disclaimer. The Trustee and the Securities Administrator accept the amendments of the Indenture effected by this Supplemental Indenture and agree to execute the trust created by the Indenture as hereby amended, but on the terms and conditions set forth in the Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee and the Securities Administrator, which terms and provisions shall in like manner define and limit their respective liabilities and responsibilities in the performance of the trust created by the Indenture as hereby amended, and without limiting the generality of the foregoing, neither the Trustee nor the Securities Administrator shall be responsible in any manner whatsoever for or with respect to any of the recitals or statements contained herein, all of which recitals or statements are made solely by the Issuers, the Parent Guarantor and the New Guarantor and neither the Trustee nor the Securities Administrator makes any representation with respect to any such matters. Additionally, neither the Trustee nor the Securities Administrator makes any representations as to the validity or sufficiency of this Supplemental Indenture.

Section 2.8 Effectiveness. The provisions of this Supplemental Indenture shall be effective upon execution and delivery of this instrument by the parties hereto.

Section 2.9 Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction thereof.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the day and year written above.

	COMPANY:

	CLOUD PEAK ENERGY RESOURCES LLC


	By:	/s/ Bryan Pechersky
		Bryan Pechersky
		Executive Vice President, General Counsel and
		Corporate Secretary


	CO-ISSUER:

	CLOUD PEAK ENERGY FINANCE CORP.


	By:	/s/ Bryan Pechersky
		Bryan Pechersky
		Executive Vice President, General Counsel and
		Corporate Secretary


	PARENT GUARANTOR:

	CLOUD PEAK ENERGY INC.


	By:	/s/ Bryan Pechersky
		Bryan Pechersky
		Executive Vice President, General Counsel and
		Corporate Secretary


	NEW GUARANTOR:

	CLOUD PEAK ENERGY LOGISTICS I LLC

	By:	/s/ Bryan Pechersky
		Bryan Pechersky
		Executive Vice President, General Counsel and
		Corporate Secretary

[Signature Page to Sixth Supplemental Indenture]

	TRUSTEE:

	WILMINGTON TRUST COMPANY, as Trustee


	By:	/s/ W. Thomas Morris, II
		W. Thomas Morris, II
		Vice President

[Signature Page to Sixth Supplemental Indenture]

	SECURITIES ADMINISTRATOR:

	CITIBANK, N. A., as Securities Administrator


	By:	/s/ Valerie Delgado
		Valerie Delgado
		Vice President

[Signature Page to Sixth Supplemental Indenture]

Exhibit 4.2

Execution Version

CLOUD PEAK ENERGY RESOURCES LLC

and

CLOUD PEAK ENERGY FINANCE CORP., as Issuers,

CLOUD PEAK ENERGY INC., as Parent Guarantor,

THE SUBSIDIARIES NAMED HEREIN, as Subsidiary Guarantors

and

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee

6.375% Senior Notes due 2024

SECOND SUPPLEMENTAL INDENTURE

Dated as of September 1, 2015

This SECOND SUPPLEMENTAL INDENTURE, (this “Supplemental Indenture”) dated as of September 1, 2015, is among Cloud Peak Energy Resources LLC, a Delaware limited liability company (the “Company”), Cloud Peak Energy Finance Corp., a Delaware corporation (the “Co-issuer” and, together with the Company, the “Issuers”), Cloud Peak Energy Inc., a Delaware corporation (the “Parent Guarantor”), each of the parties identified under the caption “Subsidiary Guarantors” on the signature page hereto (the “Subsidiary Guarantors”) and Wells Fargo Bank, National Association, a national banking association, as Trustee.

RECITALS

WHEREAS, the Issuers, the Parent Guarantor, the initial Subsidiary Guarantors and the Trustee entered into an Indenture, dated as of March 11, 2014 (as supplemented and amended by the First Supplemental Indenture dated as of March 11, 2014, the “Indenture”), pursuant to which the Issuers have issued $200,000,000 in principal amount of 6.375% Senior Notes due 2024 (the “Notes”);

WHEREAS, Section 10.01 of the Indenture provides that the Issuers and the Trustee may amend or supplement the Indenture in order to add one or more Subsidiary Guarantors pursuant to Section 5.13 thereof, without the consent of the Holders of the Notes; and

WHEREAS, all acts and things prescribed by the Indenture, by law and by the Certificate of Incorporation and the Bylaws (or comparable constituent documents) of the Issuers, of the Parent Guarantors and Subsidiary Guarantors and of the Trustee necessary to make this Supplemental Indenture a valid instrument legally binding on the Issuers, the Parent Guarantor and Subsidiary Guarantors and the Trustee, in accordance with its terms, have been duly done and performed;

WHEREAS, the Company desires and has requested the Trustee to join with the Issuers, the Parent Guarantor and the Subsidiary Guarantors in executing this Supplemental Indenture to add Cloud Peak Energy Logistics I LLC as a Subsidiary Guarantor as permitted by Section 5.13 of the Indenture;

NOW, THEREFORE, to comply with the provisions of the Indenture and in consideration of the above premises, the Issuers, the Parent Guarantors and Subsidiary Guarantors and the Trustee covenant and agree for the equal and proportionate benefit of the respective Holders of the Notes as follows:

ARTICLE 1

This Supplemental Indenture is supplemental to the Indenture and does and shall be deemed to form a part of, and shall be construed in connection with and as part of, the Indenture for any and all purposes.

This Supplemental Indenture shall become effective immediately upon its execution and delivery by each of the Issuers, the Subsidiary Guarantors and the Trustee.

ARTICLE II

From this date, in accordance with Section 5.13 and by executing this Supplemental Indenture, the Subsidiary Guarantors whose signatures appear below are subject to the provisions of the Indenture to the extent provided for in Article XI thereunder.

ARTICLE III

Except as specifically modified herein, the Indenture and the Notes are in all respects ratified and confirmed (mutatis mutandis) and shall remain in full force and effect in accordance with their terms with all capitalized terms used herein without definition having the same respective meanings ascribed to them as in the Indenture.

The Trustee accepts the amendments of the Indenture effected by this Supplemental Indenture and agrees to execute the trust created by the Indenture as hereby amended, but on the terms and conditions set forth in the Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee, which terms and provisions shall in like manner define and limit its liabilities and responsibilities in the performance of the trust created by the Indenture as hereby amended, and without limiting the generality of the foregoing, the Trustee shall not be responsible in any manner whatsoever for or with respect to any of the recitals or statements contained herein, all of which recitals or statements are made solely by the Issuers and the Subsidiary Guarantors, and the Trustee makes no representation with respect to any such matters. Additionally, the Trustee makes no representations as to the validity or sufficiency of this Supplemental Indenture

THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of such executed copies together shall represent the same agreement.

[NEXT PAGE IS SIGNATURE PAGE]

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first written above.

	COMPANY:

	CLOUD PEAK ENERGY RESOURCES LLC


	By:	/s/ Bryan Pechersky
		Bryan Pechersky
		Executive Vice President, General Counsel and Corporate Secretary


	CO-ISSUER:

	CLOUD PEAK ENERGY FINANCE CORP.


	By:	/s/ Bryan Pechersky
		Bryan Pechersky
		Executive Vice President, General Counsel and Corporate Secretary


	PARENT GUARANTOR:

	CLOUD PEAK ENERGY INC.


	By:	/s/ Bryan Pechersky
		Bryan Pechersky
		Executive Vice President, General Counsel and Corporate Secretary

Signature Page to Second Supplemental Indenture

	SUBSIDIARY GUARANTORS:

	ARROWHEAD I LLC
	ARROWHEAD II LLC
	ARROWHEAD III LLC
	YOUNGS CREEK HOLDINGS I LLC
	YOUNGS CREEK HOLDINGS II LLC
	YOUNGS CREEK MINING COMPANY, LLC
	BIG METAL COAL CO. LLC
	CORDERO MINING LLC
	CORDERO MINING HOLDINGS LLC
	CORDERO OIL AND GAS LLC
	CABALLO ROJO LLC
	CABALLO ROJO HOLDINGS LLC
	NERCO LLC
	NERCO COAL LLC
	ANTELOPE COAL LLC
	SPRING CREEK COAL LLC
	NERCO COAL SALES LLC
	PROSPECT LAND AND DEVELOPMENT LLC
	CLOUD PEAK ENERGY LOGISTICS LLC
	CLOUD PEAK ENERGY LOGISTICS I LLC
	KENNECOTT COAL SALES LLC
	RESOURCE DEVELOPMENT LLC
	WESTERN MINERALS LLC
	SEQUATCHIE VALLEY COAL CORPORATION
	CLOUD PEAK ENERGY SERVICES COMPANY,
	as Subsidiary Guarantors


	By:	/s/ Bryan Pechersky
		Bryan Pechersky
		Executive Vice President, General Counsel and Corporate Secretary

Signature Page to Second Supplemental Indenture

	WELLS FARGO BANK, NATIONAL ASSOCIATION, AS TRUSTEE


	By:	/s/ John C. Stohlmann
		John C. Stohlmann
		Vice President

Signature Page to Second Supplemental Indenture

Exhibit 10.1

THIRD AMENDMENT TO THE

CLOUD PEAK ENERGY RESOURCES LLC DEFERRED COMPENSATION PLAN

WHEREAS, Cloud Peak Energy Resources LLC (the “Company”), a Delaware limited liability company, adopted the Cloud Peak Energy Resources LLC Deferred Compensation Plan (the “Plan”), effective as of March 18, 2011, and subsequently amended the Plan with the First Amendment effective January 1, 2012 and the Second Amendment effective January 1, 2014; and

WHEREAS, the Company has the ability to amend the Plan pursuant to Section 8.1; and

WHEREAS, the Company desires to amend the Plan to clarify the availability of Scheduled Distributions under the Plan.

NOW, THEREFORE, the Company hereby amends the Plan in the following respects, effective as of the date adopted below:

1. Article V of the Plan is amended and restated as follow:

ARTICLE V
DISTRIBUTIONS

5.1 Distribution of Company Contributions Account. In the event of a Participant Termination of Service for any reason, the Distributable Amount credited to the Participant Company Contribution Account shall be paid in cash, an annuity contract or other property on the Payment Date following Termination of Service

5.2 Small Benefit Exception. If on commencement of benefits payable from an Account the Distributable Amount from such Account is less than or equal to the applicable dollar amount under Internal Revenue Code Section 402(g)(l )(B), the total Distributable Amount from such Account shall be paid in a lump sum in cash, an annuity contract or other property on the scheduled Payment Date.

5.3 Termination Distributions. Except as provided in Section 5.6, in the event of a Participant’s Termination of Service other than by reason of Retirement, death or Disability, the Distributable Amount credited to the Participant Deferral Accounts shall be paid in a lump sum in cash, an annuity or other property on the Payment Date following Termination of Service.

5.4 Retirement or Disability Distributions. Except as provided in Section 5.6, in the event of a Participant’s Retirement or Disability, the Distributable Amount credited to the Participant’s Deferral Accounts shall be paid to the Participant in cash, an annuity contract or other property on the Payment Date following the Participant’s Retirement or date of Disability unless the Participant has made an alternative benefit election on a timely basis pursuant to Section 3.4 to receive substantially equal annual installments over up to fifteen (15) years.

5.5 Death Benefits.

(a) Prior to Commencement of Benefits. In the event that the Participant dies prior to commencement of benefit payable from an Account, the Company shall pay to the Participant’s Beneficiary a death benefit equal to the Distributable Amount of such Account in a lump sum in cash or property other than an annuity contract on the Payment Date following the Participant’s death.

(b) After Commencement of Benefits. In the event that the Participant dies after commencement of benefits payable from an Account, benefits from such Account shall continue to be paid to the Participant’s Beneficiary at the same time and in the same form as they would have been paid to the Participant had the Participant not died.

5.6 Scheduled Distributions.

(a) Scheduled Distribution Election. Participants shall be entitled to elect to receive a Scheduled Distribution from the Deferral Account. However, a Scheduled Distribution may not be elected from a Fund Subaccount deemed to be invested in a Fund that includes an option for the Participant to elect to receive a distribution of an annuity contract. In the case of a Participant who has elected to receive a Scheduled Distribution, such Participant shall receive the Distributable Amount, with respect to the specified deferrals, including earnings thereon, which have been elected by the Participant to be subject to such Scheduled Distribution election in accordance with Section 3.4 of the Plan. A Participant’s Scheduled Distribution commencement date with respect to deferrals of Compensation for a given Plan Year shall be no earlier than two (2) years from the last day of the Plan Year in which the deferrals are credited to the Participant’s Account. The Participant may elect to receive the Scheduled Distribution in a single lump sum or substantially equal annual installments over a period of up to five (5) years. A Participant may delay and change the form of a Scheduled Distribution, provided such extension complies with the requirements of Section 3.4.

(b) Small Benefit Exception. If on commencement of benefits payable by reason of a Schedule Distribution the total balance of the Scheduled Distributions is less than or equal to the applicable dollar amount under Internal Revenue Code Section 402(g)(l)(B), the Scheduled Distribution shall be paid in the form of a single lump sum distribution on the scheduled commencement date.

(c) Termination of Service. In the event of a Participant’s Termination of Service prior to commencement of a Scheduled Distribution, the Participant’s Scheduled Distribution election shall be disregarded and the Participant’s Deferral Account will instead be paid in the form applicable to such Termination of Service under Section 5.2, 5.3 or 5.4 above (provided, however, that prior to January 1, 2014, a Participant’s Scheduled Distribution Election will be applied even in the event that the Participant has a Termination of Service prior to commencement of the Scheduled Distribution, but only if the Participant has five years of service or more as of the date of Termination of Service). In the event of a Participant’s Termination of Service for any reason after a Scheduled Distribution has commenced installment payments, such Scheduled Distribution benefits shall continue to be paid at the same time and in the same form as they would have been paid to the Participant had the Participant not terminated service.

5.7 Hardship Distribution. Upon a finding that the Participant (or, after the Participant’s death, a Beneficiary) has suffered a Financial Hardship, subject to compliance with Code Section 409A the Committee may, at the request of the Participant or Beneficiary, accelerate distribution of benefits or approve reduction or cessation of current deferrals under the Plan in the amount reasonably necessary to alleviate such Financial Hardship subject to the following conditions:

(a) The request to take a Hardship Distribution shall be made by filing a form provided by and filed with the Committee prior to the end of any calendar month.

(b) The amount distributed pursuant to this Section with respect to a Financial Hardship shall not exceed the amount necessary to satisfy such financial emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).

(c) The amount determined by the Committee as a Hardship Distribution shall be paid in a single cash lump sum as soon as practicable after the end of the calendar month in which the Hardship Distribution election is made and approved by the Committee.

(d) Upon a finding that the Participant (or, after the Participant’s death, a Beneficiary) has suffered a Financial Hardship, subject to Treasury Regulations promulgated under Code Section 409A the Committee may at the request of the Participant, accelerate distribution of benefits or approve reduction or cessation of current deferrals under the Plan in the amount reasonably necessary to alleviate such Financial Hardship. The amount distributed pursuant to this Section with respect to an emergency shall not exceed the amount necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).

5.8 Specified Employees. In the case of any Participant who is a specified employee within the meaning of Code Section 409A as of the date of a separation from service, payments due as of the Participant’s separation from service may not be made before the date that is six months after the date of separation from service (or, if earlier, the date of the Participant’s death).

2. In all other respects, the terms of this Plan are hereby ratified and confirmed.

IN WITNESS WHEREOF, the Company has caused this Third Amendment to be executed as of the date indicated below.

	CLOUD PEAK ENERGY RESOURCES LLC


	/s/ Cary W. Martin

	Cary W. Martin, SVP – Human Resources

	Date: October 20, 2015

Exhibit 12.1

COMPUTATION OF HISTORICAL RATIOS OF EARNINGS TO FIXED CHARGES (1)

(in thousands, except ratio data)

CLOUD PEAK ENERGY INC.

	September 30,			December 31,
	2015			2014			2013			2012			2011			2010
Earnings:
Income from continuing operations before income tax benefit (provision), earnings (loss) from unconsolidated affiliates and minority interest	$	(61,348	)	$	113,294		$	63,066		$	234,778		$	199,445		$	145,990
Amortization of capitalized interest	8,730			10,432			6,602			4,141			1,026			1,368
Distributions of income from equity investments	—			2,250			2,000			1,023			5,250			35
Capitalized interest	(594		)	(208		)	(29,378		)	(41,975		)	(44,883		)	(24,492		)
Fixed charges	37,441			78,143			71,682			79,448			79,205			71,816
Adjusted income from continuing operations before income tax provision	$	(15,771	)	$	203,910		$	113,972		$	277,415		$	240,043		$	194,717
Fixed charges:
Interest expense	$	36,274		$	77,160		$	41,665		$	36,327		$	33,866		$	46,938
Capitalized interest	594			208			29,378			41,975			44,883			24,492
Interest within rental expense	573			775			639			1,146			456			386
Total fixed charges	$	37,441		$	78,143		$	71,682		$	79,448		$	79,205		$	71,816
Ratio of earnings to fixed charges	(0.4)x			2.6x			1.6x			3.5x			3.0x			2.7x

(1) For purposes of calculating the ratio of earnings to fixed charges, earnings were calculated by adding (i) earnings from continuing operations, (ii) interest expense, net, including the portion of rents representative of an interest factor, (iii) amortization of debt issue costs and capitalized interest, (iv) distributions from equity investments and (v) capitalized interest. Fixed charges consist of interest expense, net, amortization of debt issue costs, and the portions of rents representative of an interest factor.

Exhibit 31.1

CERTIFICATION

I, Colin Marshall, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Cloud Peak Energy Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: October 27, 2015	/s/ COLIN MARSHALL
	Colin Marshall
	Chief Executive Officer

Exhibit 31.2

CERTIFICATION

I, Heath A. Hill, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Cloud Peak Energy Inc.;

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: October 27, 2015	/s/ HEATH A. HILL
	Heath A. Hill
	Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

I, Colin Marshall, the Chief Executive Officer of Cloud Peak Energy Inc. (the “Company”), certify, pursuant to 18 U.S.C., Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, that:

1. The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2015 (the “Periodic Report”) which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: October 27, 2015	/s/ COLIN MARSHALL
	Colin Marshall
	Chief Executive Officer

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

I, Heath A. Hill, the Chief Financial Officer of Cloud Peak Energy Inc. (the “Company”), certify, pursuant to 18 U.S.C., Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, that:

2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: October 27, 2015	/s/ HEATH A. HILL
	Heath A. Hill
	Chief Financial Officer

Exhibit 95.1

MINE SAFETY DISCLOSURE

Strong Safety Performance

One of our most important values is ensuring the safety of our employees and contractors by operating in a safe and responsible manner and protecting the environment in which we live and work. We have extensive safety systems that have been developed over many years. We continue to focus on developing these systems and the safety leadership skills of our frontline supervisors. We spend considerable time working in collaboration with our contractors to improve their safety performance while on our sites. We use external audits to maintain certifications of our Health, Safety and Environment Management System. A subset of this system is our certification under ISO-14001 and OHSAS-18001 programs, which cover Environment Management Systems and Occupational Health and Safety. Our mines are also regularly inspected by the Mine Safety and Health Administration (“MSHA”) and state mine inspectors as part of their normal programs.

For the quarter ended September 30, 2015, the all injury frequency rate (“AIFR”) for our three owned and operated mines was 1.11 (calculated internally based on MSHA methodology). The AIFR is the number of reportable injuries suffered by mine site employees per 200,000 hours worked.

Federal Mine Safety and Health Act Information

Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires issuers to include in periodic reports filed with the Securities and Exchange Commission (“SEC”) certain information relating to citations or orders for violations of standards under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). The following disclosures respond to that legislation and are presented in accordance with the SEC’s final rules promulgated under Section 1503 of the Dodd-Frank Act.

Whenever MSHA believes that a violation of the Mine Act, any health or safety standard, or any regulation has occurred, it may issue a citation which describes the alleged violation and fixes a time within which the operator must abate the alleged violation. In these situations, MSHA typically proposes a civil penalty, or fine, as a result of the alleged violation, that the operator is ordered to pay. In evaluating the below information regarding mine safety and health, investors should take into account factors such as: (a) the number of citations and orders will vary depending on the size of a coal mine, (b) the number of citations issued will vary from inspector to inspector and mine to mine, and (c) citations and orders can be contested and appealed, and during that process are often reduced in severity and amount, and are sometimes dismissed.

The following table sets out safety-related information required by the Dodd-Frank Act for our three operated mines for the quarter ended September 30, 2015 (amounts in whole dollars). The mine data retrieval system maintained by MSHA may show information that is different than what is provided herein. Any such differences may be attributed to the need to update that information on MSHA’s system and/or other factors.

Mine or Operating Name/MSHA Identification Number	Section 104 S&S Citations (#)(1)	Section 104(b) Orders (#)(2)	Section 104(d) Citations and Orders (#)(3)	Section 110(b)(2) Violations (#)(4)	Section 107(a) Orders (#)(5)	Total Dollar Value of MSHA Assessments Proposed ($)(6)		Total Number of Mining Related Fatalities (#)(7)	Received Notice of Pattern of Violations Under Section 104(e) (yes/no) (8)	Received Notice of Potential to Have Pattern Under Section 104(e) (yes/no) (8)	Legal Actions Pending as of Last Day of Period (#)(9)	Legal Actions Initiated During Period (#)(9)	Legal Actions Resolved During Period (#)(9)
Antelope Mine 48-01337	0	0	0	0	0	$	594	0	No	No	0	0	0
Cordero Rojo Mine 48-00992	3	0	0	0	0	$	*1780	0	No	No	0	0	0
Spring Creek Mine 24-01457	0	0	0	0	0	$	108	0	No	No	0	0	0

(1)	Mine Act Section 104(a) citations are for alleged violations of mandatory health or safety standards that could significantly and substantially contribute to the cause and effect of a coal mine safety or health hazard.

(2)	Mine Act Section 104(b) orders are for alleged failures to totally abate a citation within the period of time specified in the citation.

(3)	Mine Act Section 104(d) citations and orders are for an alleged unwarrantable failure to comply with mandatory health or safety standards.

(4)	Total number of flagrant violations issued under Section 110(b)(2) of the Mine Act.

(5)	Mine Act Section 107(a) orders are for alleged conditions or practices that could reasonably be expected to cause death or serious physical harm before such condition or practice can be abated and result in orders of immediate withdrawal from the area of the mine affected by the condition.

(6)	Total dollar value of MSHA assessments proposed during the quarter ended September 30, 2015.

* 2 S&S citations have not been assessed at the time of report filing

(7)	Total number of mining-related fatalities during the quarter ended September 30, 2015.

(8)	Mine Act Section 104(e) written notices are for an alleged pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of a coal mine health or safety hazard, or the potential to have such a pattern.

(9)	Any pending legal action before the Federal Mine Safety and Health Review Commission (the “Commission”) involving a coal mine owned and operated by us. The number of legal actions pending as of September 30, 2015 that fall into each of the following categories is as follows:

	(a) Contests of citations and orders: 0

	(b) Contests of proposed penalties: 0

	(c) Complaints for compensation under Section 111 of the Mine Act: 0

	(d) Complaints of discharge, discrimination or interference under Section 105 of the Mine Act: 0

	(e) Applications for temporary relief under Section 105(b)(2) of the Mine Act: 0

	(f) Appeals of judges’ decisions or orders to the Commission: 0

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Form 10-Q CLOUD PEAK ENERGY INC. For: Sep 30

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