Business and Basis of Presentation

Walter Energy, Inc., together with its consolidated subsidiaries (the "Company"), is a leading producer and exporter of metallurgical coal for the global steel industry from underground and surface mines with mineral reserves located in the United States ("U.S."), Canada and the United Kingdom ("U.K."). The Company also extracts, processes, markets and/or possesses mineral reserves of thermal coal and anthracite coal, as well as produces metallurgical coke and coal bed methane gas.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. These financial statements should be read in conjunction with the audited financial statements and related notes as of and for the year ended December 31, 2014 included in the Company's Annual Report filed on Form 10-K with the U.S. Securities and Exchange Commission. The balance sheet at December 31, 2014 has been derived from the audited consolidated financial statements for the year ended December 31, 2014 included in the Company's Annual Report filed on Form 10-K.

In accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Section 470-50, during the second quarter of 2014, the Company corrected its classification of accelerated amortization of debt issuance costs that it recognized upon the extinguishment or partial extinguishment of debt to present these amounts as a component of the gain (loss) recognized upon the extinguishment of debt as one line item in the accompanying Condensed Consolidated Statements of Operations. Components of the gain (loss) on the extinguishment of debt were previously recognized within interest expense in the accompanying Condensed Consolidated Statements of Operations. We have concluded that this revision is not material to our previously issued financial statements, as the net effect of these revisions did not impact our operating loss, net loss, stockholders' equity or cash flows. Previously reported interest expense has been revised to correct the classification and interest income and interest expense have been netted in the current presentation. The following reflects the revisions for the three months ended March 31, 2014 (in thousands):



	For the three months ended
	March 31, 2014
Interest expense, prior to revision	$	(79,396	)
Interest income	75
Revision of loss on extinguishment of debt	13,889
Interest expense, net, revised	$	(65,432	)

Going Concern Matters

The accompanying unaudited Condensed Consolidated Financial Statements and related notes have been prepared assuming that the Company will continue as a going concern, although the events disclosed below raise substantial doubt about our ability to continue as a going concern. Accordingly, they do not include any adjustments related to the recoverability and classification of recorded assets or to the amounts and classification of liabilities or any other adjustments that would be required should we be unable to continue as a going concern.

Over the course of the last three years, our results of operations, including our operating revenues and operating cash flows, have been negatively impacted by weak coal market conditions, depressed metallurgical coal prices, reduced steel production and global steel demand. Our cash flows from operations were insufficient to fund our capital expenditure needs for 2014 and 2013 and we expect this trend to continue in 2015. If market conditions do not improve, we expect our liquidity to continue to be adversely affected. On April 15, 2015, the Company elected to exercise the 30-day grace period under the terms of the indentures governing its 9.50% Senior Secured Notes due 2019 and its 8.50% Senior Notes due 2021 to extend the timeline for making the cash interest payments due on April 15, 2015. The aggregate amount of the interest payments is approximately $62.4 million. During the 30-day grace period, the Company is working with its debt holders to establish a capital structure that will position the Company to weather a highly competitive and challenging market.

The election to exercise the 30-day grace period under the terms of the indentures governing its 9.50% Senior Secured Notes due 2019 and its 8.50% Senior Notes due 2021 constitutes a default; however, it does not constitute an Event of Default under the indentures governing our senior notes or the term loan credit facility. As a result of this default, certain restrictions have been placed on the Company, including but not limited to, its ability to incur additional indebtedness, draw on the revolver and issue additional letters of credit. The Company has 30 days to cure the default by making the required interest payments that were due on April 15, 2015. Alternatively, the Company may restructure the debt with its creditors. If the Company is unable to restructure the debt, the Company may consider filing voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code.

On May 15, 2015, if the interest payment default is not cured, the default would be considered an Event of Default and all outstanding notes will become due and payable immediately without further action or notice. An Event of Default would also trigger cross defaults in the Company's other debt obligations. If any other Event of Default occurs, the trustee or the holders of at least 25% in aggregate principal amount of the then outstanding notes may declare all the notes to be due and payable immediately. An Event of Default would have a material adverse effect on the Company's liquidity, financial condition and results of operations. As of March 31, 2015, the Company had approximately $3.1 billion in principal amount of term loans, senior notes, capital lease obligations and equipment financing obligations outstanding. Based on the facts and circumstances discussed above, all of this debt is classified as a current liability in the Condensed Consolidated Balance Sheet as of March 31, 2015.

New Accounting Pronouncements

In April 2015, the FASB issued Accounting Standards Update ("ASU") No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30). ASU 2015-03 simplifies the presentation of debt issuance costs by requiring debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying amount of the recognized debt liability. A reporting entity must apply the amended guidance on a retrospective basis. The amended guidance is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted. The Company has early adopted this standard for the Condensed Consolidated Financial Statements presented above and is in compliance. Previously reported other current assets, other long-term assets and long-term debt have been revised to reflect the retrospective application. The following reflects the revisions for the year ended December 31, 2014:



	December 31, 2014
Other current assets, prior to revision	$	19,542
Revision of debt issuance costs	(10,257		)
Other current assets, as revised	$	9,285

Other long-term assets, prior to revision	$	112,256
Revision of debt issuance costs	(44,508		)
Other long-term assets, as revised	$	67,748

Long-term debt, prior to revision	$	3,123,643
Revision of debt issuance costs	(54,765		)
Long-term debt, as revised	$	3,068,878