10-Q

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2012
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-13711

WALTER ENERGY, INC.
(Exact name of registrant as specified in its charter)

Incorporated in Delaware (State or other jurisdiction of incorporation or organization)	13-3429953 IRS Employer Identification No.
3000 Riverchase Galleria, Suite 1700 Birmingham, Alabama (Address of principal executive offices)	35244 (Zip Code)

(205) 745-2000
Telephone Number

        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, and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        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). Yes ý    No o

        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 definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

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

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. (Check one): Yes o No ý

        Number of shares of common stock outstanding as of July 31, 2012: 62,514,140

PART I—FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

WALTER ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

	June 30, 2012			Recast December 31, 2011(1)
ASSETS
Cash and cash equivalents	$	128,680		$	128,430
Receivables, net		194,217			313,343
Inventories		316,505			240,437
Deferred income taxes		56,645			61,079
Prepaid expenses		63,733			49,974
Other current assets		36,928			45,649
Total current assets		796,708			838,912
Mineral interests, net of accumulated depletion of $132.3 million and $84.2 million, respectively		3,010,448			3,056,258
Property, plant and equipment, net of accumulated depreciation of $687.1 million and $614.6 million, respectively		1,739,506			1,631,333
Deferred income taxes		106,848			109,300
Goodwill		1,066,754			1,066,754
Other long-term assets		134,891			153,951
	$	6,855,155		$	6,856,508
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	49,890		$	56,695
Accounts payable		155,524			112,661
Accrued expenses		233,749			229,067
Accumulated postretirement benefits obligation		28,181			27,247
Other current liabilities		45,885			63,757
Total current liabilities		513,229			489,427
Long-term debt		2,206,866			2,269,020
Deferred income taxes		1,007,065			1,029,336
Accumulated postretirement benefits obligation		556,758			550,671
Other long-term liabilities		370,908			381,537
Total liabilities		4,654,826			4,719,991
Commitments and contingencies (Note 10)
Stockholders' equity:
Common stock, $0.01 par value per share:
Authorized—200,000,000 shares,
Issued—62,511,717 and 62,444,905 shares, respectively		625			624
Capital in excess of par value		1,624,652			1,620,430
Retained earnings		801,162			744,939
Accumulated other comprehensive income (loss):
Pension and other postretirement benefit plans, net of tax		(217,746	)		(225,541	)
Foreign currency translation adjustment		(4,066	)		(3,276	)
Unrealized loss on hedges, net of tax		(4,057	)		(787	)
Unrealized investment gain (loss), net of tax		(241	)		128
Total stockholders' equity		2,200,329			2,136,517
	$	6,855,155		$	6,856,508

(1)

Certain previously reported December 31, 2011 balances have been recast to reflect the effects of finalizing the allocation of the Western Coal purchase price during the 2012 first quarter. See Note 2 for further information.

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

1

WALTER ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

	For the three months ended June 30,
	2012			Recast 2011(1)
Revenues:
Sales	$	668,605		$	764,587
Miscellaneous income		8,969			6,284
		677,574			770,871
Costs and expenses:
Cost of sales (exclusive of depreciation and depletion)		486,084			466,074
Depreciation and depletion		74,459			72,470
Selling, general and administrative		35,845			57,521
Postretirement benefits		13,213			10,343
		609,601			606,408
Operating income		67,973			164,463
Interest expense		(31,104	)		(32,047	)
Interest income		341			160
Other income (loss)		(5,919	)		24,503
Income from continuing operations before income tax expense		31,291			157,079
Income tax expense		4,535			42,626
Income from continuing operations		26,756			114,453
Income from discontinued operations		5,180			—
Net income	$	31,936		$	114,453
Basic income per share:
Income from continuing operations	$	0.43		$	1.84
Income from discontinued operations		0.08			—
Net income	$	0.51		$	1.84
Diluted income per share:
Income from continuing operations	$	0.43		$	1.83
Income from discontinued operations		0.08			—
Net income	$	0.51		$	1.83
Comprehensive income	$	30,637		$	101,722
Dividends per share	$	0.125		$	0.125

(1)

Certain previously reported three months ended June 30, 2011 balances have been recast to reflect the effects of finalizing the allocation of the Western Coal purchase price during the 2012 first quarter. See Note 2 for further information.

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

2

WALTER ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

	For the six months ended June 30,
	2012			Recast 2011(1)
Revenues:
Sales	$	1,295,903		$	1,171,162
Miscellaneous income		13,234			8,443
		1,309,137			1,179,605
Costs and expenses:
Cost of sales (exclusive of depreciation and depletion)		917,618			684,534
Depreciation and depletion		140,952			100,828
Selling, general and administrative		72,092			89,403
Postretirement benefits		26,426			20,610
		1,157,088			895,375
Operating income		152,049			284,230
Interest expense		(59,171	)		(35,603	)
Interest income		618			316
Other income (loss)		(12,912	)		24,503
Income from continuing operations before income tax expense		80,584			273,446
Income tax expense		13,212			77,180
Income from continuing operations		67,372			196,266
Income from discontinued operations		5,180			—
Net income	$	72,552		$	196,266
Basic income per share:
Income from continuing operations	$	1.08		$	3.36
Income from discontinued operations		0.08			—
Net income	$	1.16		$	3.36
Diluted income per share:
Income from continuing operations	$	1.08		$	3.34
Income from discontinued operations		0.08			—
Net income	$	1.16		$	3.34
Comprehensive income	$	75,918		$	196,192
Dividends per share	$	0.25		$	0.25

(1)

Certain previously reported six months ended June 30, 2011 balances have been recast to reflect the effects of finalizing the allocation of the Western Coal purchase price during the 2012 first quarter. See Note 2 for further information.

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

3

WALTER ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2012 (UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

	Total			Common Stock		Capital in Excess of Par Value		Retained Earnings			Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2011, recast	$	2,136,517		$	624	$	1,620,430	$	744,939		$	(229,476	)
Net income		72,552							72,552
Other comprehensive income, net of tax		3,366										3,366
Stock issued upon the exercise of stock options		122			1		121
Dividends paid, $0.25 per share		(15,618	)						(15,618	)
Stock based compensation		3,224					3,224
Excess tax benefits from stock-based compensation arrangements		877					877
Other		(711	)						(711	)
Balance at June 30, 2012	$	2,200,329		$	625	$	1,624,652	$	801,162		$	(226,110	)

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

4

WALTER ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(IN THOUSANDS)

	For the six months ended June 30,
	2012			Recast 2011(1)
OPERATING ACTIVITIES
Net income	$	72,552		$	196,266
Less income from discontinued operations		(5,180	)		—
Income from continuing operations		67,372			196,266
Adjustments to reconcile net income to net cash flows provided by (used in) operating activities:
Depreciation and depletion		140,952			100,828
Deferred income tax credit		(18,894	)		(11,121	)
Gain on investment in Western Coal Corp		—			(20,553	)
Other		18,360			10,247
Decrease (increase) in current assets, net of effect of business acquisitions:
Receivables		113,203			(41,571	)
Inventories		(66,213	)		38,076
Prepaid expenses and other current assets		(22,095	)		30
Increase (decrease) in current liabilities, net of effect of business acquisitions:
Accounts payable		81,684			(29,612	)
Accrued expenses and other current liabilities		(5,807	)		36,769
Cash flows provided by operating activities		308,562			279,359
INVESTING ACTIVITIES
Additions to property, plant and equipment		(246,056	)		(136,417	)
Acquisition of Western Coal Corp., net of cash acquired		—			(2,432,693	)
Proceeds from sales of investments		12,228			—
Other		582			5,286
Cash flows used in investing activities		(233,246	)		(2,563,824	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		—			2,350,000
Borrowings under revolving credit agreement		112,350			41,461
Repayments on revolving credit agreement		(63,341	)		(20,725	)
Retirements of debt		(118,003	)		(153,310	)
Dividends paid		(15,618	)		(14,434	)
Debt issuance costs		—			(80,027	)
Other		288			1,766
Cash flows provided by (used in) financing activities		(84,324	)		2,124,731
Cash flows used in continuing operations		(9,008	)		(159,734	)
CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash flows provided by investing activities		9,500			—
Effect of foreign exchange rates on cash		(242	)		—
Net increase (decrease) in cash and cash equivalents	$	250		$	(159,734	)
Cash and cash equivalents at beginning of period	$	128,430		$	293,410
Add: Cash and cash equivalents of discontinued operations at beginning of period		—			535
Net increase (decrease) in cash and cash equivalents		250			(159,734	)
Cash and cash equivalents at end of period	$	128,680		$	134,211

(1)

Certain previously reported six months ended June 30, 2011 balances have been recast to reflect the effects of finalizing the allocation of the Western Coal purchase price during the 2012 first quarter. See Note 2 for further information.

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

5

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 1—Basis of Presentation

        The accompanying unaudited condensed consolidated financial statements of Walter Energy, Inc. and its subsidiaries (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 to 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 and six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

        The balance sheet at December 31, 2011 has been derived from the audited consolidated financial statements at that date as recast to reflect the effects of finalizing the allocation of the Western Coal purchase price, but does not include all the notes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and related notes for the year ended December 31, 2011 included in the Company's Annual Report on Form 10-K. In addition, certain previously reported three and six months ended June 30, 2011 Condensed Consolidated Statements of Operations and Comprehensive Income balances and six months ended June 30, 2011 Condensed Consolidated Statement of Cash Flows balances have been recast to include the effects of finalizing the allocation of the Western Coal purchase price.

        As described in Note 2, on April 1, 2011 the Company completed the acquisition of all the outstanding common shares of Western Coal Corp. ("Western Coal"). The accompanying financial statements include the results of operations of Western Coal since April 1, 2011.

Note 2—Acquisition

        On November 18, 2010, the Company announced its intent to acquire all of the outstanding common shares of Western Coal. In connection with the acquisition the Company acquired high quality metallurgical coal mines in Northeast British Columbia (Canada), high quality metallurgical coal and compliant thermal coal mines located in West Virginia (United States), and a high quality anthracite coal mine located in South Wales (United Kingdom). The acquisition of Western Coal substantially increased the Company's reserves available for future production, the majority of which is high-quality metallurgical coal, and created a diverse geographical footprint with strategic access to high-growth steel-producing countries in both the Atlantic and Pacific basins.

        On November 17, 2010, the Company entered into a share purchase agreement with various funds advised by Audley Capital to purchase approximately 54.5 million common shares, or 19.8%, of the outstanding common shares of Western Coal for $11.50 Canadian dollars per share in two separate transactions. On December 2, 2010 the Company entered into an arrangement agreement with Western Coal to acquire all the remaining outstanding common shares of Western Coal for $11.50 Canadian dollars per share in cash or 0.114 of a Walter Energy share, or for a combination thereof at the holder's election, subject to proration.

        In January 2011, the Company completed the first transaction to acquire 25,274,745 common shares of Western Coal, or 9.15% of the outstanding shares, from funds advised by Audley Capital. The shares were purchased for $293.7 million in cash and had a fair value of $314.2 million on April 1,

6

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 2—Acquisition (Continued)

2011. The Company recognized a gain on April 1, 2011 of $20.5 million as a result of remeasuring to fair value the Western Coal shares acquired from Audley Capital which was included in other income in the Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2011. On April 1, 2011, the Company acquired the remaining outstanding common shares of Western Coal (including the second Audley Capital transaction) for a combination of $2.2 billion in cash and the issuance of 8,951,558 common shares of Walter Energy valued at $1.2 billion. The fair value of Walter Energy's common stock on April 1, 2011 was $136.75 per share based on the closing value on the New York Stock Exchange. The cash portion was funded with part of the proceeds from the new $2.725 billion credit facility discussed in Note 6. All of the outstanding options to purchase Western Coal common shares that were not exercised prior to the acquisition were exchanged for fully-vested and immediately exercisable options to purchase shares of Walter Energy common stock. The Company issued 193,498 stock options in exchange for the Western Coal stock options outstanding as of April 1, 2011. The stock options issued had a fair value of $15.5 million, which was estimated using the Black-Scholes option pricing model. The outstanding warrants of Western Coal were not directly affected by the acquisition. Instead, upon exercise each warrant entitled the holder to receive cash and shares of Walter Energy common stock that would have been issued if the warrants had been exercised immediately before closing the acquisition. As of June 30, 2012, no warrants of Western Coal were outstanding.

        The purchase consideration has been allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. Fair values were determined using the income, cost and market price valuation methods as deemed appropriate. During the 2012 first quarter, the Company completed the valuation of the assets and liabilities with the assistance of an independent third party and recorded refinement adjustments to the preliminary purchase price allocation. These refinements were primarily around the areas of acquired mineral interests including estimates for future costs, production volumes and timing which resulted in a $94.0 million increase in fair value allocated to mineral interests as compared to the December 31, 2011 preliminary fair value. This also resulted in a decrease in goodwill of $57.8 million and the deferred tax liability was increased by $25.5 million reflecting an increase in future depletion expense not deductible for tax. Retrospective application of the changes made to the allocation of the purchase consideration in the 2012 first quarter increased retained earnings, a component of stockholders' equity, as of December 31, 2011 and net income by $14.4 million for the year ended December 31, 2011. The increase to retained earnings resulting from the change in net income was primarily due to a decrease in mineral interests depletion related to

7

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 2—Acquisition (Continued)

2011. The following table summarizes the Company's recast and previously reported December 31, 2011 consolidated balance sheet amounts (in thousands):

	Recast December 31, 2011(1)		December 31, 2011(2)
ASSETS
Inventories	$	240,437	$	242,607
Other current assets	$	45,649	$	45,627
Mineral interests, net	$	3,056,258	$	2,946,113
Property, plant and equipment, net	$	1,631,333	$	1,637,182
Goodwill	$	1,066,754	$	1,124,597
LIABILITIES AND STOCKHOLDERS' EQUITY
Other current liabilities	$	63,757	$	59,827
Deferred income taxes	$	1,029,336	$	1,003,383
Retained earnings	$	744,939	$	730,517

(1)

As presented in the June 30, 2012 condensed consolidated financial statements herein.

(2)

As previously presented in the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

        Retrospective application of the changes made to the allocation of the purchase consideration in the 2012 first quarter increased net income by $7.1 million for the three and six months ended June 30, 2011. The increase to net income was primarily due to a decrease in mineral interests depletion during

8

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 2—Acquisition (Continued)

the period. The following table summarizes the changes to the Company's recast and previously reported June 30, 2011 Condensed Consolidated Statements of Operations amounts (in thousands):

	Recast June 30, 2011(1)		June 30, 2011(2)
For the three months ended:
Sales	$	764,587	$	766,716
Cost of sales (exclusive of depreciation and depletion)		466,074		462,061
Depreciation and depletion		72,470		89,426
Operating income		164,463		153,649
Income before income tax expense		157,079		146,265
Income tax expense		42,626		38,907
Net income	$	114,453	$	107,358
Net income per share:
Basic	$	1.84	$	1.72
Diluted	$	1.83	$	1.71
For the six months ended:
Sales	$	1,171,162	$	1,173,291
Cost of sales (exclusive of depreciation and depletion)		684,534		680,521
Depreciation and depletion		100,828		117,784
Operating income		284,230		273,416
Income before income tax expense		273,446		262,632
Income tax expense		77,180		73,461
Net income	$	196,266	$	189,171
Net income per share:
Basic	$	3.36	$	3.24
Diluted	$	3.34	$	3.22

(1)

As presented in the June 30, 2012 condensed financial statements herein.

(2)

As previously presented in the condensed consolidated financial statements in the Company's Form 10-Q for the three and six months ended June 30, 2011.

9

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 2—Acquisition (Continued)

        The following table summarizes the changes to the Company's recast and previously reported June 30, 2011 Condensed Consolidated Statement of Cash Flows amounts (in thousands):

	For the six months ended June 30,
	Recast 2011(1)			2011(2)
Net Income	$	196,266		$	189,171
Adjustments to reconcile net income to net cash flows provided by (used in) operating activities:
Depreciation and depletion	$	100,828		$	117,784
Deferred income tax credit	$	(11,121	)	$	(14,840	)
Other	$	10,247		$	27,521
Decrease in current assets, net of effect of business acquisitions:
Inventories	$	38,076		$	14,660

(1)

As presented in the June 30, 2012 condensed consolidated financial statements herein.

(2)

As previously presented in the condensed consolidated financial statements in the Company's Form 10-Q for the six months ended June 30, 2011.

        The following tables summarize the purchase consideration, the final purchase price allocation, the preliminary purchase price allocation reported in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 and the adjustments made in the three months ended March 31, 2012 (in thousands):

Purchase consideration:
Cash	$	2,173,080
Fair value of shares of common stock issued		1,224,126
Fair value of stock options issued and warrants		34,765
Fair value of consideration transferred		3,431,971
Fair value of equity interest in Western Coal held before the acquisition		314,231
Total consideration	$	3,746,202

10

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 2—Acquisition (Continued)

	Preliminary as of December 31, 2011		Adjustments			Final
Fair value of assets acquired and liabilities assumed:
Cash and cash equivalents	$	34,065	$	—		$	34,065
Receivables		163,668		—			163,668
Inventories		121,229		—			121,229
Other current assets		86,475		23			86,498
Mineral interests		2,992,000		94,000			3,086,000
Property, plant and equipment		560,894		(6,702	)		554,192
Goodwill		1,122,884		(57,844	)		1,065,040
Other long-term assets		54,150		—			54,150
Total assets		5,135,365		29,477			5,164,842
Accounts payable and accrued liabilities		184,983		—			184,983
Other current liabilities		82,175		3,930			86,105
Deferred tax liability		1,021,161		25,547			1,046,708
Other long-term liabilities		100,844		—			100,844
Total liabilities		1,389,163		29,477			1,418,640
Net assets acquired	$	3,746,202	$	—		$	3,746,202

        Goodwill is calculated as the excess of the purchase consideration transferred over the fair value of the identifiable assets acquired and liabilities assumed. The factors that contribute to the recognition of goodwill include Western Coal's (i) historical cash flows and income levels, (ii) reputation in its markets, (iii) strength of its personnel, (iv) efficiency of its operations, and (v) future cash flows and income growth projections. Goodwill has been assigned to the Canadian and U.K. Operations segment and the U.S. Operations segment in the amounts of $992.4 million and $72.6 million, respectively. None of the goodwill is expected to be tax deductible. The Company incurred acquisition costs related to the purchase of approximately $7.2 million and $17.1 million during the three and six months ended June 30, 2011, respectively. These costs were included in selling, general and administrative expenses in the Company's Condensed Consolidated Statement of Operations and Comprehensive Income.

        The unaudited supplemental pro forma information presented below includes the effects of the Western Coal acquisition as if it had been completed as of January 1, 2010 along with the effects of the recast adjustments described herein. The pro forma results include (i) the impact of certain estimated fair value adjustments, including additional estimated depreciation and depletion expense associated with the acquired mineral interests and property, plant and equipment and (ii) interest expense associated with debt used to fund the acquisition. Accordingly, the following unaudited pro forma financial information should not be considered indicative of either future results or results that might have occurred had the acquisition been consummated as of January 1, 2010 (in thousands):

	For the six months ended June 30, 2011
Revenues	$	1,403,813
Net income	$	253,926

11

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 3—Discontinued Operations

        In 2008, the Company announced the permanent closure of the underground coal mine operations of Kodiak Mining Company, LLC ("Kodiak") due to high operational costs, difficult operating conditions and a challenging pricing environment for Kodiak's products. During 2012, the Company divested the Kodiak assets and liabilities for cash proceeds of $9.5 million. The sale resulted in an after tax gain of $5.2 million that is presented as discontinued operations in the Company's Condensed Consolidated Statement of Operations and Comprehensive Income.

Note 4—Inventories

        Inventories are summarized as follows (in thousands):

	June 30, 2012		Recast December 31, 2011
Coal	$	235,602	$	180,537
Raw materials and supplies		80,903		59,900
Total inventories	$	316,505	$	240,437

Note 5—Income Taxes

        The Company estimates its annual effective tax rate at the end of each interim reporting period which is used to record the provision for income taxes in the interim financial statements. The tax effect of unusual or infrequently occurring items, including effects of changes in tax laws or rates, are reported in the interim period in which they occur. The Company's interim period's income tax expense is comprised of two key elements: 1) estimated tax expense applying our annual effective tax rate to our year to date earnings, and 2) the tax effect of unusual or infrequent items that occur in the period.

        The Company's income tax provision for continuing operations, excluding discrete items, for the six months ended June 30, 2012 was $12.2 million, or an effective rate of 15.2% of pre-tax income, compared to a tax provision for the six months ended June 30, 2011 of $77.2 million, or an effective rate of 28.2% of pre-tax income. The lower effective tax rate during the first six months of 2012 compared to the same period in 2011 is the result of a larger favorable impact of percentage depletion and the change in the geographical mix of income and losses as a result of the acquisition of Western Coal Corp. The provision for income taxes for the six months ended June 30, 2012 includes a charge for discrete items of $1.0 million due primarily to recording a valuation allowance on U.S. capital losses expected to expire before utilization.

        The Company has not provided U.S. income taxes and foreign withholding taxes on the undistributed earnings of foreign subsidiaries as of June 30, 2012 because it intends to indefinitely reinvest such earnings outside the U.S. If this intent changes, additional income tax expense would likely be recorded due to the differential in tax rates between the U.S. and the international jurisdictions. If foreign earnings were to be repatriated in the future, the related U.S. tax liability on such repatriation may be partially reduced by any foreign income taxes previously paid on these earnings. Determination of the amount of taxes that might be paid on these undistributed earnings if eventually remitted is not practicable.

12

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 6—Debt

        Debt consisted of the following (in thousands):

	June 30, 2012			December 31, 2011			Weighted Average Stated Interest Rate At June 30, 2012	Final Maturity
2011 term loan A	$	854,674		$	894,837		3.46%	2016
2011 term loan B		1,273,326			1,333,163		4.00%	2018
Revolving credit facility		59,009			10,000		4.22%	2016
Other(1)		69,747			87,715		Various	Various
Total debt		2,256,756			2,325,715
Less current debt		(49,890	)		(56,695	)
Total long-term debt	$	2,206,866		$	2,269,020

(1)

This balance includes capital lease obligations and an equipment financing agreement.

        2011 Credit Agreement    On April 1, 2011, the Company entered into a $2.725 billion credit agreement (the "2011 Credit Agreement") to partially fund the acquisition of Western Coal and to pay off all outstanding loans under the 2005 Credit Agreement. The 2011 Credit Agreement consists of (1) a $950.0 million principal amortizing term loan A facility maturing in April 2016, at which time the remaining outstanding principal is due, (2) a $1.4 billion principal amortizing term loan B facility maturing in April 2018, at which time the remaining outstanding principal is due and (3) a $375.0 million multi-currency revolving credit facility ("Revolver") maturing in April 2016, at which time any remaining balance is due. On June 28, 2012 we prepaid $100 million of the outstanding principal balances of the term loans. Due to the Company making prepayments on both the term loan A and term loan B facilities the remaining balance of the term loan B facility is due upon maturity. The Revolver provides for operational needs and letters of credit. The Company's obligations under the 2011 Credit Agreement are secured by substantially all of the Company's domestic and foreign real, personal and intellectual property. The 2011 Credit Agreement contains customary events of default and covenants, including among other things, covenants that restrict but do not prevent the ability of the Company and its subsidiaries to incur certain additional indebtedness, create or permit liens on assets, pay dividends and repurchase stock, engage in mergers or acquisitions and make investments and loans. The 2011 Credit Agreement also includes certain financial covenants that must be maintained.

        The Revolver, term loan A and term loan B interest rates are tied to LIBOR or the Canadian Dealer Offered Rate ("CDOR"), plus a credit spread ranging from 225 to 300 basis points for the Revolver and term loan A, and 275 to 300 basis points on the term loan B adjusted quarterly based on the Company's total leverage ratio as defined by the 2011 Credit Agreement. The term loan B has a minimum LIBOR floor of 1.0%. The Revolver loans can be denominated in either U.S. dollars or Canadian dollars at the Company's option. The commitment fee on the unused portion of the Revolver is 0.5% per year for all pricing levels. As of June 30, 2012, the Revolver had $59.0 million in

13

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 6—Debt (Continued)

borrowings, with $48.8 million outstanding stand-by letters of credit and $267.2 million of availability for future borrowings.

Note 7—Pension and Other Postretirement Benefits

        The components of net periodic benefit cost are as follows (in thousands):

	Pension Benefits						Other Postretirement Benefits
	For the three months ended June 30,						For the three months ended June 30,
	2012			2011			2012		2011
Components of net periodic benefit cost:
Service cost	$	1,498		$	1,291		$	2,018	$	1,253
Interest cost		3,129			3,144			7,253		6,278
Expected return on plan assets		(4,031	)		(3,929	)		—		—
Amortization of prior service cost (credit)		64			68			261		(240	)
Amortization of net actuarial loss		2,313			2,063			3,681		3,052
Net periodic benefit cost	$	2,973		$	2,637		$	13,213	$	10,343

	Pension Benefits						Other Postretirement Benefits
	For the six months ended June 30,						For the six months ended June 30,
	2012			2011			2012		2011
Components of net periodic benefit cost:
Service cost	$	2,996		$	2,582		$	4,036	$	2,506
Interest cost		6,258			6,288			14,506		12,480
Expected return on plan assets		(8,062	)		(7,858	)		—		—
Amortization of prior service cost (credit)		128			136			522		(480	)
Amortization of net actuarial loss		4,626			4,126			7,362		6,104
Settlement loss		—			1,716			—		—
Net periodic benefit cost	$	5,946		$	6,990		$	26,426	$	20,610

        The settlement loss shown above is related to the retirement of an executive of the Company and was included in selling, general and administrative expense in the Condensed Consolidated Statements of Operations and Comprehensive Income.

Note 8—Comprehensive Income

        Comprehensive income is comprised of net income, changes in pension and other postretirement benefit plans, unrealized gains or losses on investments, gains or losses from the effect of cash flow hedges and foreign currency translation adjustments. Foreign currency translation adjustments are not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries. The

14

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 8—Comprehensive Income (Continued)

differences between net income and comprehensive income for the three and six months ended June 30, 2012 and 2011 were as follows (in thousands):

	For the three months ended June 30,
	2012			Recast 2011
Net income	$	31,936		$	114,453
Change in pension and other postretirement benefit plans, net of deferred taxes of $2.4 and $1.8 million, respectively		3,897			3,085
Change in foreign currency translation adjustment		(3,209	)		(1,101	)
Change in unrealized loss on hedges, net of deferred taxes of $1.2 million and $0.4 million, respectively		(1,987	)		(595	)
Change in unrealized loss on investments, net of deferred taxes of $7.3 million		—			(14,120	)
Comprehensive income	$	30,637		$	101,722

	For the six months ended June 30,
	2012			Recast 2011
Net income	$	72,552		$	196,266
Change in pension and other postretirement benefit plans, net of deferred taxes of $4.8 and $3.7 million, respectively		7,795			6,234
Change in foreign currency translation adjustment		(790	)		(1,101	)
Change in unrealized loss on hedges, net of deferred taxes of $2.0 million and $0.4 million, respectively		(3,270	)		(713	)
Change in unrealized loss on investments, net of deferred taxes of $0.0 million and $1.7 million, respectively		(369	)		(4,494	)
Comprehensive income	$	75,918		$	196,192

15

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 9—Net Income Per Share

        A reconciliation of the basic and diluted net income per share computations for the three and six months ended June 30, 2012 and 2011 is as follows (in thousands, except per share data):

	For the three months ended June 30,
	2012				Recast 2011
	Basic		Diluted		Basic		Diluted
Numerator:
Income from continuing operations	$	26,756	$	26,756	$	114,453	$	114,453
Income from discontinued operations	$	5,180	$	5,180		—		—
Denominator:
Average number of common shares outstanding		62,537		62,537		62,313		62,313
Effect of dilutive securities:
Stock awards and warrants(1)		—		243		—		393
		62,537		62,780		62,313		62,706
Income from continuing operations	$	0.43	$	0.43	$	1.84	$	1.83
Income from discontinued operations		0.08		0.08		—		—
Net income per share	$	0.51	$	0.51	$	1.84	$	1.83

	For the six months ended June 30,
	2012				Recast 2011
	Basic		Diluted		Basic		Diluted
Numerator:
Income from continuing operations	$	67,372	$	67,372	$	196,266	$	196,266
Income from discontinued operations	$	5,180	$	5,180		—		—
Denominator:
Average number of common shares outstanding		62,503		62,503		58,390		58,390
Effect of dilutive securities:
Stock awards and warrants(1)		—		256		—		370
		62,503		62,759		58,390		58,760
Income from continuing operations	$	1.08	$	1.08	$	3.36	$	3.34
Income from discontinued operations		0.08		0.08		—		—
Net income per share	$	1.16	$	1.16	$	3.36	$	3.34

(1)

Stock awards represent the weighted average number of shares of common stock issuable on the exercise of dilutive employee stock options and restricted stock units, less the number of shares of common stock which could have been purchased with the proceeds from the exercise of such stock awards. These purchases were assumed to have been made at the average market price of the common stock for the period. The weighted average number of stock options outstanding for the

16

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 9—Net Income Per Share (Continued)

three months ended June 30, 2012 and 2011 totaling 234,323 and 50,814, respectively, were excluded from the calculation above because their effect would have been anti-dilutive. Additionally, the weighted average number of stock options outstanding for the six months ended June 30, 2012 and 2011 totaling 205,378 and 29,038, respectively, were excluded from the calculation above because their effect would have been anti-dilutive. Outstanding warrants entitle the holder to receive cash and shares of common stock upon exercise. All of the Company's outstanding stock warrants were exercised or expired during the second quarter of 2012.

Note 10—Commitments and Contingencies

Income Tax Litigation

        On December 27, 1989, the Company and most of its U.S. subsidiaries each filed a voluntary petition for reorganization under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Proceedings") in the United States Bankruptcy Court for the Middle District of Florida, Tampa Division (the "Bankruptcy Court"). The Company emerged from bankruptcy on March 17, 1995 (the "Effective Date") pursuant to the Amended Joint Plan of Reorganization dated as of December 9, 1994, as modified on March 1, 1995 (as so modified the "Consensual Plan"). Despite the confirmation and effectiveness of the Consensual Plan, the Bankruptcy Court continues to have jurisdiction over, among other things, the resolution of disputed prepetition claims against the Company and other matters that may arise in connection with or related to the Consensual Plan, including claims related to federal income taxes.

        In connection with the U.S. Bankruptcy Proceedings, the Internal Revenue Service ("IRS") filed a proof of claim in the Bankruptcy Court (the "Proof of Claim") for a substantial amount of taxes, interest and penalties with respect to fiscal years ended August 31, 1983 through May 31, 1994. The Company filed an adversary proceeding in the Bankruptcy Court disputing the Proof of Claim (the "Adversary Proceeding") and the various issues have been litigated in the Bankruptcy Court. An opinion was issued by the Bankruptcy Court in June 2010 as to the remaining disputed issues. The Bankruptcy Court instructed both parties to submit a proposed final order addressing all issues that have been litigated for the tax years 1983 through 1995 in the Adversary Proceeding by late August 2010. At the request of both parties, the Bankruptcy Court granted an extension of time of 90 days from the initial submission date to submit the proposed final order. Additional extensions of time to submit the proposed final order were granted in November 2010, February 2011, May 2011, September 2011 and January 2012. At the request of both parties, in May 2012 the Bankruptcy Court granted an additional extension of time until January 8, 2013 to submit the proposed final order.

        The amounts initially asserted by the Proof of Claim do not reflect the subsequent resolution of various issues through settlements or concessions by the parties. The Company believes that any financial exposure with respect to those issues that have not been resolved or settled in the Proof of Claim is limited to interest and possible penalties and the amount of tax assessed has been offset by tax reductions in future years. All of the issues in the Proof of Claim, which have not been settled or conceded, have been litigated before the Bankruptcy Court and are subject to appeal but only at the conclusion of the entire Adversary Proceeding.

17

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 10—Commitments and Contingencies (Continued)

        The Company believes that those portions of the Proof of Claim, which remain in dispute or are subject to appeal, substantially overstate the amount of taxes allegedly owed. However, because of the complexity of the issues presented and the uncertainties associated with litigation, the Company is unable to predict the ultimate outcome of the Adversary Proceeding.

        The IRS completed its audit of the Company's federal income tax returns for the years ended May 31, 2000 through December 31, 2005. The IRS issued 30-Day Letters to the Company in June 2010, proposing changes to tax for these tax years. The Company believes its tax filing positions have substantial merit and filed a formal protest with the IRS within the prescribed 30-day time limit for those issues which have not been previously settled or conceded. The IRS filed a rebuttal to the Company's formal protest and the case was assigned to the Appeals Division of the IRS. The Appeals Division convened a hearing on March 8, 2011 and heard arguments from both parties as to issues not settled or conceded for the 2000 through 2005 audit period. At this time, no final resolution has been reached with the Appeals Division pertaining to these matters. The disputed issues in this audit period are similar to the issues remaining in the Proof of Claim and consequently, should the IRS prevail on its positions, the Company believes its financial exposure is limited to interest and possible penalties.

        During the second quarter of 2012, the IRS completed its audit of the Company's federal income tax returns for the years 2006 through 2008 and has proposed adjustments to tax for these periods. The IRS issued a 30-Day Letter with proposed adjustments and the Company responded to the IRS within the prescribed 30-day time limit. The proposed adjustments are similar to issues in a prior Proof of Claim and include a proposed adjustment to a worthless stock deduction reported in the Company's 2008 federal income tax return. In 2008, the Company recorded a benefit attributable to the worthless stock deduction of $167.0 million as a result of the deemed liquidation of its homebuilding business on December 31, 2008. The Company has evaluated all of the proposed adjustments, including the proposed adjustment related to the worthless stock deduction, and believes the tax filing positions have substantial merit.

        The IRS is conducting an audit of the Company's income tax returns filed for 2009 and 2010. Since the IRS examination is ongoing, any resulting tax deficiency or overpayment cannot be estimated at this time. During 2012, the statute of limitations for assessing additional income tax deficiencies will expire for certain tax years in several state tax jurisdictions. The expiration of the statute of limitations for these years is expected to have an immaterial impact on the total uncertain income tax positions and net income.

        The Company believes that all of its current and prior tax filing positions have substantial merit and intends to defend vigorously any tax claims asserted. While results cannot be predicted with certainty, the Company believes that it has sufficient accruals to address any claims and that the final outcomes of such claims will not have a material adverse effect on the Company's consolidated financial statements.

Environmental Matters

        The Company is subject to a wide variety of laws and regulations concerning the protection of the environment, both with respect to the construction and operation of its plants, mines and other

18

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 10—Commitments and Contingencies (Continued)

facilities and with respect to remediating environmental conditions that may exist at its own and other properties.

        The Company believes that it is in substantial compliance with federal, state and local environmental laws and regulations. The Company accrues for environmental expenses resulting from existing conditions that relate to past operations when the costs are probable and can be reasonably estimated.

Walter Coke, Inc.

        Walter Coke entered into a decree order in 1989 relative to a Resource Conservation Recovery Act ("RCRA") compliance program mandated by the Environmental Protection Agency ("EPA"). A RCRA Facility Investigation ("RFI") Work Plan was prepared which proposed investigative tasks to assess the presence of contamination at the Walter Coke facility. A work plan was approved in 1994 and the Phase I investigations were conducted and completed between 1995 and 1999. Phase II investigations for the Chemical Plant/Coke Plant and Biological Treatment Facility and Sewers/Land Disposal Areas at the Walter Coke facility were performed in 2000 and 2001 and are complete. At the end of 2004, the EPA re-directed Walter Coke's RFI efforts toward completion of the Environmental Indicator ("EI") determinations for the Current Human Exposures. This EI effort was completed to assist the EPA in meeting goals set by the Government Performance Results Act ("GPRA") for RCRA by 2005. Walter Coke implemented the approved EI sampling plan in April 2005. The EPA approved and finalized the EI determinations for Walter Coke's Birmingham facility in September 2005. In an effort to refocus the RFI, the EPA approved technical comments on the Phase II RFI report and the report submitted as part of the EI effort. A Phase III work plan was submitted to the EPA during the first quarter of 2007. The EPA commented on the Phase III plan and Walter Coke responded. Subsequently, a meeting was held with the EPA during the third quarter of 2007 with the objective of finalization of the Phase III plan. Phase III sampling reports were submitted in March 2009 and June 2009. Beyond the scope of the Phase III activity performed in 2007 through 2009, additional requests by EPA expanded the scope of the project which required additional sampling and testing. In January 2008, as a follow-up to the EI determination, the EPA requested that Walter Coke perform additional soil sampling and testing in the neighborhoods surrounding its facility. Subsequent to EPA's initial request and presentation of a residential sampling plan to EPA by Walter Coke, the plan was finalized and community involvement initiated, with sampling and testing commencing in July 2009. The results of this sampling and testing were submitted to the EPA for review in December 2009. In conjunction with the plan, Walter Coke agreed to remediate portions of 23 properties based on the 2009 sampling and that process was started in July 2011. As of June 30, 2012, Walter Coke had completed soil removal action at portions of 16 residential properties for which access agreements were obtained. In December 2011, the EPA notified Walter Coke in the form of a General Notice Letter that it proposed that the offsite remediation project be classified and managed as a Superfund site under CERCLA, allowing other Potentially Responsible Parties (PRP's) to potentially be held responsible.

        The Company has incurred costs to investigate the presence of contamination at the Walter Coke facility and to define remediation actions to address this environmental liability in accordance with the agreements reached with the EPA under the RFI and the residential soil sampling conducted by Walter Coke in the neighborhoods surrounding its facility. At June 30, 2012, the Company has an amount

19

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 10—Commitments and Contingencies (Continued)

accrued that is probable and can be reasonably estimated for the costs to be incurred to identify and define remediation actions, as well as to perform certain remedial tasks which can be quantified, in accordance with the agreements reached and proposals that continue to be coordinated with the EPA to date. The amount of this accrual is not material to the financial statements. While it is probable that the Company will incur additional future costs to remediate environmental liabilities at the Walter Coke facility, the amount of such additional costs cannot be reasonably estimated at this time. Because the RCRA and CERCLA compliance programs are in the study phase with negotiation of final orders ongoing, until these processes are complete, the Company is unable to fully estimate the cost of remediation activities that will be required. Although no assurances can be given that the Company will not be required in the future to make material expenditures relating to the Walter Coke site or other sites, management does not believe at this time that the cleanup costs, if any, associated with these sites will have a material adverse effect on the financial condition of the Company, but such cleanup costs could be material to results of operations in a future reporting period.

        The Company and Walter Coke were named in a suit filed by Louise Moore on April 26, 2011 (Louise Moore v. Walter Energy, Inc. and Walter Coke, Inc., Case No. 2:11-CV-01391) in the federal District Court for the Northern District of Alabama. This is a putative civil class action alleging state law tort claims arising from the alleged presence on properties of substances, including arsenic, BaP, and other hazardous substances, allegedly as a result of current and/or historic operations in the area conducted by the companies and/or their predecessors. This action is still in the early stages of litigation. On June 6, 2011, the plaintiff filed an amended complaint eliminating Walter Energy as a defendant and amending the claims alleged against Walter Coke to relate to Walter Coke's alleged conduct for the period commencing after March 2, 1995. Based on initial evaluation, management believes that both procedural and substantive defenses are available to the Company and Walter Coke intends to vigorously defend this matter. No specific dollar value has been claimed in the suit's demand for monetary damages. On June 20, 2011, Walter Coke filed a Motion to Dismiss which was heard on October 28, 2011. As of the date of filing this quarterly report on Form 10-Q, a ruling has not been received.

Maple Coal Company

        Maple Coal Company ("Maple") was the subject of a compliance order issued against its water discharge permit in April 2007 by the West Virginia Department of Environmental Protection ("WVDEP"). This order provided that Maple would have until April 5, 2010 to comply with certain water quality-based effluent limitations for selenium concentrations in discharges from its mining operations.

        Maple sought a permit modification to extend the selenium compliance date beyond April 5, 2010. That permit modification application was denied by the WVDEP. Maple appealed that denial to the West Virginia Environmental Quality Board ("EQB"), which issued a stay of those limits, to be effective until it had issued a ruling. The Kanawha County (West Virginia) Circuit Court also issued stay orders, preventing the selenium effluent limits in Maple's National Pollutant Discharge Elimination System ("NPDES") permit from taking effect until the exhaustion of all appeals from the WVDEP denial and the conclusion of the WVDEP's civil enforcement action.

20

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 10—Commitments and Contingencies (Continued)

        The EQB ruled against Maple's appeal. Maple has filed an appeal of these rulings (consolidated into one case) with the Fayette County (West Virginia) Circuit Court. In connection with this administrative appeal, Maple has also obtained a stay order from the Fayette County Circuit Court, suspending the effective date of the selenium limits in its NPDES permit pending the outcome of that appeal. The parties to that appeal agreed to defer briefing, pending negotiation of a comprehensive settlement of all such issues (discussed below) and the Court entered an order suspending the briefing schedule.

        In a related action, in June 2010 the WVDEP instituted a civil enforcement action against Maple seeking to enforce effluent limits for non-selenium parameters found in the Maple permit, asserting violations of various in-stream water quality standards, and alleging a violation of the April 5, 2007 selenium compliance order. Maple has entered into a comprehensive consent decree with the WVDEP with civil penalties of $229,350, resolving that case and the EQB case mentioned above.

        In a second related action, in January 2011 three environmental interest groups filed a Clean Water Act citizen's suit against Maple, seeking more than $14 million in civil penalties for selenium violations since April 2010 and injunctive relief in the form of mandatory treatment plant installations. The plaintiffs filed a motion for partial summary judgment on jurisdiction and liability, and Maple filed a cross-motion for summary judgment. On September 2, 2011, the Court issued a memorandum opinion and order (the "Sept. 2 Order") granting, in part, and denying, in part, both motions. In partially granting Maple's motion, the Court held that the plaintiffs' members had not shown a sufficient connection to establish standing to bring a claim as to discharges from one of the outlets under the Maple NPDES Permit at issue. The Court upheld jurisdiction over claims based on discharges from one of the outlets, and found that the plaintiffs were entitled to summary judgment on liability as to past and continuing selenium discharges from that outlet. The plaintiffs filed a motion to amend judgment, asking the Court to reverse its Sept. 2 Order as to their dismissed claims, that was denied by Order dated October 24, 2011. Maple, in turn, filed a motion seeking the right to file an interlocutory appeal of that part of the Court's Sept. 2 Order that denied its motion to dismiss based on the WVDEP's diligent enforcement against Maple, which the Court denied by order dated December 19, 2011. On June 26, 2012, the Court entered a Consent Decree between the parties to this federal action ("Federal Consent Decree"), resolving all claims asserted against Maple. The Federal Consent Decree requires the payment of approximately $103,000 in attorney's fees and expenses and that Maple complete additional documentation as part of its implementation of the WVDEP Consent Decree.

        In addition, these same plaintiffs in the federal lawsuit described immediately above served a second "Notice of Intent to Sue" under the Clean Water Act on September 23, 2011, alleging that Maple is liable for having caused selenium water quality standard violations authorized under a different NPDES permit. Maple responded to that notice on October 31, 2011, and provisions that address the violations alleged in this second notice were included as a part of the WVDEP Consent Decree. Although the plaintiffs did not amend their earlier suit addressing those threatened claims, they were effectively resolved by the Federal Consent Decree.

21

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 10—Commitments and Contingencies (Continued)

Securities Class Actions and Shareholder Derivative Actions

        On January 26, 2012 and March 15, 2012, putative class actions were filed against Walter Energy, Inc. and some of its current and former senior executive officers in the U.S. District Court for the Northern District of Alabama (Rush v. Walter Energy, Inc., et al.). The three executive officers named in the complaints are: Keith Calder, Walter's former CEO; Walter Scheller, the Company's current CEO and a director; and Neil Winkelmann, former President of Walter's Canadian and European Operations (collectively the "Individual Defendants"). The complaints were filed by Peter Rush and Michael Carney, purported shareholders of Walter Energy who each seek to represent a class of Walter Energy shareholders who purchased common stock between April 20, 2011 and September 21, 2011.

        These complaints allege that Walter Energy and the Individual Defendants made false and misleading statements regarding the Company's operations outlook for the second quarter of 2011. The complaints further allege that the Company and the Individual Defendants knew that these statements were misleading and failed to disclose material facts that were necessary in order to make the statements not misleading. Plaintiffs claim violations of Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5 promulgated thereunder, and Section 20(a) of the 1934 Act. On May 30, 2012, the two actions were consolidated into In re Walter Energy, Inc. Securities Litigation. The court also appointed the Government of Bermuda Contributory and Public Service Superannuation Pension Plans as well as the Stephen C. Beaulieu Revocable Trust to be lead plaintiffs and approved lead plaintiffs' selection of Robbins Geller Rudman & Dowd LLP and Kessler Topaz Meltzer & Check, LLP as lead plaintiffs' counsel for the consolidated action. A consolidated amended complaint has not yet been filed. Walter Energy and the other named defendants believe that there is no merit to the claims alleged and intend to vigorously defend these actions.

        On February 7, 2012, a shareholder derivative lawsuit was filed in the 10th Judicial Circuit of Alabama (Israni v. Clark et al.). On February 10, 2012, a second shareholder derivative suit was filed in the same court (Himmel v. Scheller et al.), and on February 16, 2012 a third derivative suit was filed (Walters v. Scheller et al.). All three complaints name as defendants the Company's current Board of Directors, Keith Calder and Neil Winkelmann. The Company is named as a nominal defendant in each complaint. The three complaints allege similar facts to those alleged in the Rush complaint. The complaints variously assert state law claims for breaches of fiduciary duties for alleged failures to maintain internal controls and to properly manage the Company, unjust enrichment, waste of corporate assets, gross mismanagement and abuse of control. The three derivative actions seek, among other things, recovery for the Company for damages that the Company suffered as a result of alleged wrongful conduct. On April 11, 2012, the Court consolidated these shareholder derivative suits. Walter Energy has entered into a stipulation with the lead plaintiffs in the consolidated derivative suit, pursuant to which, all proceedings in the derivative action are stayed pending the resolution of Walter Energy's anticipated motion to dismiss in the putative securities class action.

        On March 1, 2012, a shareholder derivative lawsuit was filed in the U.S. District Court for the Northern District of Alabama (Makohin v. Clark, et al.). This complaint names as defendants the Company's current Board of Directors and Keith Calder. The Company is named as a nominal defendant. This complaint, like the state court derivative claims, alleges similar facts to those alleged in the Rush complaint. The Makohin complaint asserts state law claims for breaches of fiduciary duties

22

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 10—Commitments and Contingencies (Continued)

and unjust enrichment. The derivative action seeks, among other things, recovery for the Company for damages that the Company suffered as a result of alleged wrongful conduct. This plaintiff has also agreed to temporarily stay the action pending resolution of Walter Energy's anticipated Motion to Dismiss in the putative securities class action.

        Walter Energy and the other named defendants believe that there is no merit to the claims alleged in these shareholder derivative lawsuits and intend to vigorously defend these actions.

        In November 2009, Western Coal was named as a defendant in a statement of claim issued by a plaintiff who seeks leave of the Ontario Courts to proceed with a securities class action. This claim also named Western Coal's former President and director, John Hogg, and two of its non-executive directors, John Brodie and Robert Chase, as defendants.

        The plaintiff subsequently delivered an amended claim that added new allegations that seeks to have the amended claim certified as a class action separately from the proposed securities class action allegations. The new allegations focused on certain transactions the plaintiff claims were oppressive and unfair to the interests of shareholders. The amended claim included additional defendants of Western Coal's former Chairman, John Byrne, its remaining non-executive directors John Conlon and Charles Pitcher, Audley European Opportunities Master Fund Limited, Audley Capital Management Limited, and Audley Advisors LLP.

        The proposed securities claims allege that those persons who acquired or disposed of Western Coal shares between November 14, 2007 and December 10, 2007 should be entitled to recover $200 million for general damages and $20 million in punitive damages. The plaintiff alleges that Western Coal's consolidated financial statements for the second quarter of fiscal 2008 and the accompanying news release issued on November 14, 2007 misrepresented Western Coal's financial condition and that Western Coal failed to make full, plain and true disclosure of all material facts and changes.

        The plaintiff's oppression claims are advanced in respect of security holders in the period between April 26, 2007 and July 13, 2009. The claims are that the defendants caused Western Coal to enter into transactions that had a dilutive effect on the interests of shareholders. The damages associated with these alleged dilutive effects have not been developed or quantified.

        The plaintiff's motions to proceed with securities claims and also to certify the securities and oppression claims as class actions were argued in June. The court has reserved decision, and it is not known when the decision will be rendered.

        Western Coal and the other named defendants will continue to vigorously defend the allegations. They maintain that there is no merit to the claims and that the damages are without foundation and excessive.

Miscellaneous Litigation

        The Company and its subsidiaries are parties to a number of other lawsuits arising in the ordinary course of their businesses. The Company records costs relating to these matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of these matters on the Company's future results of operations cannot be predicted with certainty as any such effect depends on future results of operations and the amount and timing of the resolution of such matters. While the

23

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 10—Commitments and Contingencies (Continued)

results of litigation cannot be predicted with certainty, the Company believes that the final outcome of such other litigation will not have a material adverse effect on the Company's consolidated financial statements.

Commitments and Contingencies—Other

        In the opinion of management, accruals associated with contingencies incurred in the normal course of business are sufficient. Resolution of existing known contingencies is not expected to significantly affect the Company's financial position and results of operations.

Note 11—Derivative Financial Instruments

Interest Rate Swaps

        On June 27, 2011, the Company entered into an interest rate swap agreement with a notional value of $450.0 million. The objective of the swap is to protect against the variability in expected future cash flows attributable to changes in the benchmark interest rate related to interest payments required under the 2011 Credit Agreement. The interest rate on the debt is subject to change due to fluctuations in the benchmark interest rate of 3-month LIBOR. The structure of the hedge is a three year amortizing interest rate swap based on a 1.17% fixed rate with quarterly fixed rate and floating rate payment dates beginning on July 18, 2011. The hedge will be settled upon maturity and is being accounted for as a cash flow hedge. Changes in the fair value of the hedge that take place through the date of maturity are reported in accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings.

        On December 30, 2008, the Company entered into an interest rate hedge agreement with a notional value of $31.5 million. The objective of the hedge is to protect against the variability in expected future cash flows attributable to changes in the benchmark interest rate related to 62 of the 64 monthly interest payments required under an equipment financing arrangement for a new longwall shield system entered into on October 21, 2008. The interest rate on the debt is subject to change due to fluctuations in the benchmark interest rate of 1-month LIBOR. The structure of the hedge is a 62 month amortizing interest rate swap based on a 1.84% fixed rate with monthly fixed rate and floating rate payment dates beginning on February 1, 2009. The hedge will be settled upon maturity and is being accounted for as a cash flow hedge. Changes in the fair value of the hedge that take place through the date of maturity are reported in accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings.

Interest Rate Cap

        On June 27, 2011, the Company entered into an interest rate cap agreement related to interest payments required under the 2011 Credit Agreement with a notional value of $255.0 million. The objective of the cap is to protect against the variability in expected future cash flows attributable to changes in the benchmark interest rate above 2.00%. The interest rate on the debt is subject to change due to fluctuations in the benchmark interest rate of 3-month LIBOR. The structure of the hedge is a three year amortizing interest rate cap based on a strike price of 2.00% with quarterly fixed rate and

24

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 11—Derivative Financial Instruments (Continued)

floating rate payment dates beginning on July 7, 2011. The hedge will be settled upon maturity and is being accounted for as a cash flow hedge. Changes in the fair value of the hedge that take place through the date of maturity are reported in accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings.

Natural Gas Hedge

        Revenues derived from the sale of natural gas are subject to volatility based on changes in market prices. In order to reduce the risk associated with natural gas price volatility, on June 7, 2011 the Company entered into a one year swap contract to hedge 4.2 million MMBTUs of natural gas sales beginning in July 2011 and ending June 2012, at a price of $5.00 per MMBTU. The swap agreement hedged approximately 35% of anticipated natural gas sales from July 2011 until June 2012. The hedge was settled upon maturity and was accounted for as a cash flow hedge. The Company did not have any commodity hedges outstanding at June 30, 2012.

        The following table presents the fair values of the Company's derivative instruments as well as the classification on the Condensed Consolidated Balance Sheets (in thousands). See Note 12 for additional information related to the fair values of our derivative instruments.

	June 30, 2012		December 31, 2011
Asset derivatives designated as cash flow hedging instruments:
Natural gas hedge(1)	$	—	$	4,050
Interest rate cap(2)		81		432
Total asset derivatives	$	81	$	4,482
Liability derivatives designated as cash flow hedging instruments:
Interest rate swaps(3)	$	6,594	$	5,683

(1)

Included in other current assets at December 31, 2011.

(2)

$39,000 and $143,000 is included in other current assets and $42,000 and $289,000 is included in other long-term assets in the Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011, respectively.

(3)

$3.1 million and $1.8 million is included in other current liabilities and $3.5 million and $3.9 million is included in other long-term liabilities in the Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011, respectively.

25

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 11—Derivative Financial Instruments (Continued)

        The following tables present the gains and losses from derivative instruments for the three and six months ended June 30, 2012 and 2011 and their location within the condensed consolidated financial statements (in thousands). The Company utilizes only cash flow hedges that are considered highly effective.

	Gain (loss) recognized in accumulated other comprehensive income, net of tax						Gain (loss) reclassified from accumulated other comprehensive income to earnings, net of tax(1)(2)						Ineffective portion of Gain (loss) recognized in earnings
	Three months ended June 30,						Three months ended June 30,						Three months ended June 30,
Derivatives designated as cash flow hedging instruments	2012			2011			2012			2011			2012		2011
Natural gas hedges	$	(3,666	)	$	948		$	1,837		$	—		$	—	$	—
Interest rate swaps		390			(155	)		(460	)		(48	)		—		—
Interest rate cap		(88	)		(1,340	)		—			—			—		—
Total	$	(3,364	)	$	(547	)	$	1,377		$	(48	)	$	—	$	—

	Gain (loss) recognized in accumulated other comprehensive income, net of tax						Gain (loss) reclassified from accumulated other comprehensive income to earnings, net of tax(1)(2)						Ineffective portion of Gain (loss) recognized in earnings
	Six months ended June 30,						Six months ended June 30,						Six months ended June 30,
Derivatives designated as cash flow hedging instruments	2012			2011			2012			2011			2012		2011
Natural gas hedges	$	(5,798	)	$	781		$	3,279		$	—		$	—	$	—
Interest rate swaps		493			(60	)		(1,025	)		(94	)		—		—
Interest rate cap		(219	)		(1,340	)		—			—			—		—
Total	$	(5,524	)	$	(619	)	$	2,254		$	(94	)	$	—	$	—

(1)

Natural gas hedge amounts recorded in miscellaneous income in the Condensed Consolidated Statements of Operations and Comprehensive Income.

(2)

Interest rate swap amounts recorded in interest expense in the Condensed Consolidated Statements of Operations and Comprehensive Income.

26

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 12—Fair Value of Financial Instruments

        Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three level hierarchy has been established for valuing assets and liabilities based on how transparent (observable) the inputs are that are used to determine fair value, with the inputs considered most observable categorized as Level 1 and those that are the least observable categorized as Level 3. Hierarchy levels are defined as follows:

Level 1:	Quoted prices in active markets for identical assets and liabilities;
Level 2:	Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and
Level 3:	Unobservable inputs that are supported by little or no market data which require the reporting entity to develop its own assumptions.

        The following table presents information about the Company's assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2012 and December 31, 2011 and indicate the fair value hierarchy of the valuation techniques utilized to determine such values. For some assets, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When this is the case, the asset is categorized based on the level of the most significant input to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment and considers factors specific to the assets being valued.

	June 30, 2012
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	81	$	—	$	81
Total assets	$	—	$	81	$	—	$	81
Liabilities:
Interest rate swaps	$	—	$	6,594	$	—	$	6,594

	December 31, 2011
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Equity securities, trading	$	12,369	$	—	$	—	$	12,369
Equity securities, available-for-sale		12,099		—		—		12,099
Interest rate cap		—		432		—		432
Natural gas hedge		—		4,050		—		4,050
Total assets	$	24,468	$	4,482	$	—	$	28,950
Liabilities:
Interest rate swaps	$	—	$	5,683	$	—	$	5,683

27

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 12—Fair Value of Financial Instruments (Continued)

        Below is a summary of the Company's valuation techniques for Level 1 and Level 2 financial assets and liabilities:

        Equity securities—Changes in the fair value of trading securities are recorded in other income (loss) and determined using observable market prices. For the three and six months ended June 30, 2012 a loss of $5.9 million and $12.4 million, respectively was recorded related to trading securities held at the reporting date. Realized losses of $452,000 on the sale of available-for-sale securities were recorded in other income (loss) during the six months ended June 30, 2012 and determined using the specific identification method.

        Interest rate cap—The fair value of the interest rate cap was determined using quoted dealer prices for similar contracts in active over-the-counter markets.

        Natural gas hedge—The fair value of the natural gas hedge was determined using quoted dealer prices for similar contracts in active over-the-counter markets.

        Interest rate swaps—The fair value of interest rate swaps were determined using quoted dealer prices for similar contracts in active over-the-counter markets.

        The following methods and assumptions were used to estimate the fair value for which the fair value option was not elected:

        Cash and cash equivalents, receivables and accounts payable—The carrying amounts reported in the balance sheet approximate fair value.

        Debt—Debt associated with the Company's 2011 term loan A and term loan B in the amount of $854.7 million and $1.273 billion, respectively, at June 30, 2012 and $894.8 million and $1.333 billion, respectively, at December 31, 2011 is carried at cost. Debt associated with the Company's revolving credit facility in the amount of $59.0 million at June 30, 2012 and $10.0 million at December 31, 2011 is carried at cost. The estimated fair value of the Company's term loan A, term loan B and Revolver was $842.7 million, $1.246 billion and $58.0 million at June 30, 2012, respectively, and $880.6 million, $1.319 billion and $9.7 million at December 31, 2011, respectively, based on similar transactions and yields in an active market for similarly rated debt (Level 2).

Note 13—Segment Information

        The Company's reportable segments are strategic business units arranged geographically which have separate management teams. The business units have been aggregated into three reportable segments following the April 1, 2011 Western Coal acquisition described in Note 2. These reportable segments are U.S. Operations, Canadian and U.K. Operations, and Other. Both the U.S. Operations and Canadian and U.K. Operations reportable segments primary business is that of mining and exporting metallurgical coal for the steel industry. The U.S. Operations segment includes Walter Energy's historical operating segments of Underground Mining, Surface Mining and Walter Coke as well as the results of the West Virginia mining operations acquired through the acquisition of Western Coal. The Canadian and U.K. Operations segment includes the results of the mining operations located in Northeast British Columbia (Canada) and South Wales (United Kingdom). The Other segment primarily includes corporate activities and expenditures.

28

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 13—Segment Information (Continued)

        The accounting policies of the segments are the same as those described in Note 2 of the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011. The Company evaluates performance primarily based on operating income of the respective business segments.

        Summarized financial information of the Company's reportable segments is shown in the following table (in thousands):

	For the three months ended June 30,
	2012			Recast 2011
Revenues:
U.S. Operations	$	466,761		$	511,080
Canadian and U.K. Operations		209,645			259,218
Other		1,168			573
Total Revenues	$	677,574		$	770,871
Segment operating income (loss):
U.S. Operations	$	107,245		$	173,133
Canadian and U.K. Operations		(24,679	)		18,800
Other		(14,593	)		(27,470	)
Total operating income		67,973			164,463
Less interest expense, net		(30,763	)		(31,887	)
Other income (loss)		(5,919	)		24,503
Income from continuing operations before income tax expense		31,291			157,079
Income tax expense		4,535			42,626
Income from continuing operations	$	26,756		$	114,453
Depreciation and depletion:
U.S. Operations	$	43,704		$	39,035
Canadian and U.K. Operations		30,535			33,243
Other		220			192
Total	$	74,459		$	72,470
Capital Expenditures:
U.S. Operations	$	43,851		$	40,972
Canadian and U.K. Operations		78,177			51,411
Other		3,183			(259	)
Total	$	125,211		$	92,124

29

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 13—Segment Information (Continued)

	For the six months ended June 30,
	2012			Recast 2011
Revenues:
U.S. Operations	$	918,911		$	919,016
Canadian and U.K. Operations		387,996			259,218
Other		2,230			1,371
Total Revenues	$	1,309,137		$	1,179,605
Segment operating income (loss):
U.S. Operations	$	214,226		$	312,106
Canadian and U.K. Operations		(38,234	)		18,800
Other		(23,943	)		(46,676	)
Total operating income		152,049			284,230
Less interest expense, net		(58,553	)		(35,287	)
Other income (loss)		(12,912	)		24,503
Income from continuing operations before income tax expense		80,584			273,446
Income tax expense		13,212			77,180
Income from continuing operations	$	67,372		$	196,266
Depreciation and depletion:
U.S. Operations	$	85,846		$	67,204
Canadian and U.K. Operations		54,671			33,243
Other		435			381
Total	$	140,952		$	100,828
Capital Expenditures:
U.S. Operations	$	79,963		$	85,108
Canadian and U.K. Operations		162,357			51,411
Other		3,736			(102	)
Total	$	246,056		$	136,417

	June 30, 2012		Recast December 31, 2011
Identifiable Assets:
U.S. Operations	$	1,039,630	$	1,118,451
Canadian and U.K. Operations		5,150,719		5,021,521
Other		664,806		716,536
Total	$	6,855,155	$	6,856,508

30

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

Note 14—New Accounting Pronouncements

        In September 2011, the Financial Accounting Standards Board ("FASB") issued an accounting standard update intended to simplify how entities test for goodwill impairment by adding a qualitative review step to assess whether the required quantitative impairment analysis is necessary. The accounting standard permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is concluded that this is not the case, it is not necessary to perform the two-step impairment test described in Accounting Standards Codification Topic 350, Intangibles-Goodwill and Other. The accounting standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The guidance is only intended to simplify goodwill impairment testing and will not have an impact on the Company's results of operations or financial condition.

        In June 2011, the FASB issued an accounting standard update that requires companies to present the components of net income and other comprehensive income either in a single continuous statement or as two separate but consecutive statements. The accounting standard update eliminates the option to present components of other comprehensive income solely as part of the statement of changes in stockholders' equity. The guidance became effective for interim and annual periods beginning after December 15, 2011, with the exception of disclosing reclassification of items from other comprehensive income to net income, which is effective for interim and annual periods beginning after December 15, 2012. The accounting standard update does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The Company has reflected the new presentation for interim periods in its condensed consolidated financial statements.

31

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS, FINANCIAL CONDITION AND LIQUIDITY AND CAPITAL RESOURCES

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

        This report includes statements of our expectations, intentions, plans and beliefs that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are intended to come within the safe harbor protection provided by those sections. These statements, which involve risks and uncertainties, relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable and may also relate to our future prospects, developments and business strategies. We have used the words "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "should" and similar terms and phrases, including references to assumptions, in this report to identify forward-looking statements. These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to:

•

Deteriorating conditions in the financial markets;

•

Global economic crisis;

•

Market conditions beyond our control;

•

Prolonged decline in the price of coal;

•

Decline in global steel demand;

•

Our customer's refusal to honor or renew contracts;

•

Title defects preventing us from (or resulting in additional costs for) mining our mineral interests;

•

Concentration of our coal and gas producing mineral interests in limited number of areas subjects us to risk;

•

Weather patterns and conditions affecting production;

•

Geological, equipment and operational risks associated with mining;

•

Unavailability of cost-effective transportation for our coal;

•

Significant increase in competitive pressures;

•

Significant cost increases and delays in the delivery of purchased components;

•

Availability of adequate skilled employees and other labor relations matters;

•

Greater than anticipated costs incurred for compliance with environmental liabilities;

•

Our ability to attract and retain key personnel;

•

Future regulations that increase our costs or limit our ability to produce coal;

•

New laws and regulations to reduce greenhouse gas emissions that impact the demand for our coal reserves;

•

Adverse rulings in current or future litigation;

•

Inability to access needed capital;

32

•

Downgrade in our credit rating;

•

Our ability to identify suitable acquisition candidates to promote growth;

•

Our ability to successfully integrate acquisitions, including the acquisition of Western Coal Corp.;

•

Volatility in the price of our common stock;

•

Our ability to pay regular dividends to stockholders;

•

Our exposure to indemnification obligations; and

•

Other factors, including the other factors discussed in Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2011 and as updated by any subsequent Form 10-Qs or other documents that are on file with the Securities and Exchange Commission.

        You should keep in mind that any forward-looking statement made by us in this Quarterly Report on Form 10-Q or elsewhere speaks only as of the date on which we make it. New risks and uncertainties come up from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this Quarterly Report on Form 10-Q after the date of this Quarterly Report on Form 10-Q, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that any forward-looking statement made in this Quarterly Report on Form 10-Q or elsewhere might not occur.

ORGANIZATION

        Walter Energy, Inc. ("Walter") is a leading producer and exporter of metallurgical coal for the global steel industry from underground and surface mines located in the United States, Canada and United Kingdom. Walter also produces thermal coal, anthracite coal, metallurgical coke and coal bed methane gas.

        This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto of Walter and its subsidiaries, particularly Note 13 of "Notes to Condensed Consolidated Financial Statements," which provides our revenues and operating income by reportable segment.

        As fully discussed in Note 2 to the "Notes to Condensed Consolidated Financial Statements," on April 1, 2011 we completed the acquisition of Western Coal Corp. ("Western Coal"). The accompanying summary operating results include the results of operations of Western Coal since April 1, 2011.

        Certain previously reported December 31, 2011 Condensed Consolidated Balance Sheet balances, three and six months ended June 30, 2011 Condensed Consolidated Statements of Operations and Comprehensive Income balances and six months ended June 30, 2011 Condensed Consolidated Statements of Cash Flows balances have been recast to include the effects of finalizing the allocation of the Western Coal purchase price. See Note 2 to the "Notes to Condensed Consolidated Financial Statements" for further information.

OUTLOOK AND STRATEGIC INITIATIVES

Industry Overview

        The long-term demand for metallurgical coal within all of our geographic markets is anticipated to be strong over the long term as industry projections indicate that global steelmaking will continue to require increasing amounts of high quality metallurgical coal, which is a limited commodity. As such,

33

we are focused on the long-term metallurgical coal market and anticipate continued strong long-term demand for the high-quality metallurgical coals we produce.

        The macro global economic uncertainty has negatively impacted the outlook for global steel production including potentially lower growth estimates for China. Even in the current uncertain global environment, our low-volatile metallurgical coals continue to be in high demand and command prices at or near the benchmarks. Our mid-volatile metallurgical coals typically command a slight discount to the low-volatile metallurgical coal benchmark and currently there is price pressure for a slightly greater discount for mid-volatile metallurgical coals due partially to the recent influx of high-volatile coal into the market. In the present market, the lower the quality of coal the wider the discount to the benchmark price.

Acquisition of Western Coal

        On April 1, 2011 we completed the acquisition of Western Coal for a total purchase price of approximately $3.7 billion. In connection with the acquisition we acquired high quality metallurgical coal mines in Northeast British Columbia (Canada), high quality metallurgical coal and compliant thermal coal mines located in West Virginia (United States), and a high quality anthracite coal mine in South Wales (United Kingdom). The acquisition of Western Coal transformed the Company into the leading, publicly traded 'pure-play' metallurgical coal producer in the world with strategic access to high-growth steel-producing countries in Asia, South America and Europe. We have significant reserves available for future production, the majority of which is high demand metallurgical coal, with a diverse geographical footprint.

2012 Business Outlook

        We currently expect 2012 metallurgical coal production to be within the range of 11.5 million and 13.0 million metric tons of which an estimated approximately 75% will be hard coking coal and the remainder will be low-volatile pulverized coal injection ("PCI") coal.

RESULTS OF OPERATIONS

Summary Operating Results for the
Three Months Ended June 30, 2012 and 2011

	For the three months ended June 30, 2012
(in thousands)	U.S. Operations		Canadian and U.K. Operations			Other			Total
Sales	$	456,935	$	211,715		$	(45	)	$	668,605
Miscellaneous income (loss)		9,826		(2,070	)		1,213			8,969
Revenues		466,761		209,645			1,168			677,574
Cost of sales (exclusive of depreciation and depletion)		290,830		195,255			(1	)		486,084
Depreciation and depletion		43,704		30,535			220			74,459
Selling, general and administrative		11,656		8,534			15,655			35,845
Postretirement benefits		13,326		—			(113	)		13,213
Operating income (loss)	$	107,245	$	(24,679	)	$	(14,593	)		67,973
Interest expense, net										(30,763	)
Other loss										(5,919	)
Income tax expense										(4,535	)
Income from continuing operations									$	26,756

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	For the three months ended June 30, 2011 Recast
(in thousands)	U.S. Operations		Canadian and U.K. Operations		Other			Total
Sales	$	508,875	$	255,442	$	270		$	764,587
Miscellaneous income		2,205		3,776		303			6,284
Revenues		511,080		259,218		573			770,871
Cost of sales (exclusive of depreciation and depletion)		274,333		190,906		835			466,074
Depreciation and depletion		39,035		33,243		192			72,470
Selling, general and administrative		13,896		16,269		27,356			57,521
Postretirement benefits		10,683		—		(340	)		10,343
Operating income (loss)	$	173,133	$	18,800	$	(27,470	)		164,463
Interest expense, net									(31,887	)
Other income									24,503
Income tax expense									(42,626	)
Income from continuing operations								$	114,453

	Dollar variance for the three months ended June 30, 2012 versus 2011
(in thousands)	U.S. Operations			Canadian and U.K. Operations			Other			Total
Sales	$	(51,940	)	$	(43,727	)	$	(315	)	$	(95,982	)
Miscellaneous income (loss)		7,621			(5,846	)		910			2,685
Revenues		(44,319	)		(49,573	)		595			(93,297	)
Cost of sales (exclusive of depreciation and depletion)		16,497			4,349			(836	)		20,010
Depreciation and depletion		4,669			(2,708	)		28			1,989
Selling, general and administrative		(2,240	)		(7,735	)		(11,701	)		(21,676	)
Postretirement benefits		2,643			—			227			2,870
Operating income (loss)	$	(65,888	)	$	(43,479	)	$	12,877			(96,490	)
Interest expense, net											1,124
Other loss											(30,422	)
Income tax expense											38,091
Income from continuing operations										$	(87,697	)

Summary of Second Quarter Consolidated Results of Continuing Operations

        Our income from continuing operations for the three months ended June 30, 2012 was $26.8 million, or $0.43 per diluted share, which compares to $114.5 million, or $1.83 per diluted share, for the three months ended June 30, 2011. EBITDA from continuing operations for the second quarter of 2012 was $136.5 million compared to $261.4 million in the second quarter of 2011. The decreases in income, diluted earnings per share and EBITDA from continuing operations are primarily due to lower metallurgical coal pricing and the operational factors described below. A reconciliation of net income to EBITDA is presented in Liquidity and Capital Resources section below.

        Revenues for the three months ended June 30, 2012 were $677.6 million, a decrease of $93.3 million from $770.9 million in the same period in 2011. The decrease in revenues was primarily due to a decrease in metallurgical coal pricing reflecting world market trends and lower sales volumes and pricing of thermal coal, partially offset by higher hard coking coal sales volume.

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        Cost of sales, exclusive of depreciation and depletion, increased $20.0 million to $486.1 million as compared to the second quarter of 2011 and is primarily the result of increased hard coking coal sales volumes.

        Selling, general and administrative expense decreased $21.7 million to $35.8 million, as compared to $57.5 in the second quarter of 2011, primarily attributable to non-recurring professional, legal, and severance expenses incurred with the acquisition of Western Coal as well as lower employee expenses in Canada.

        The $5.9 million other loss for the three months ended June 30, 2012 is attributable to losses on remeasurement to fair value of equity investments. Other income of $24.5 million for the three months ended June 30, 2011 is primarily attributable to a gain of $20.5 million recognized on April 1, 2011 as a result of remeasuring to fair value the Western Coal shares acquired from Audley Capital in January 2011.

        The effective tax rates for the three months ended June 30, 2012 and 2011 were 14.5% and 27.1%, respectively. Our effective tax rate declined as compared to 2011 primarily due to a larger favorable impact of percentage depletion and the change in the geographical mix of foreign income and losses.

        The current and prior year period results also include the impact of factors discussed in the following segment analysis.

Segment Analysis

U.S. Operations

        Hard coking coal sales totaled 1.8 million metric tons in the second quarter of 2012 as compared to 1.5 million metric tons in the second quarter of 2011 reflecting an increase in production. The average selling price of hard coking coal in the second quarter of 2012 was $194.10 per metric ton, an 18.8% decrease from the average selling price of $239.02 per metric ton for the same period in 2011. The decrease in the average selling price of hard coking coal reflects world market trends and is attributable to pricing pressure being experienced due to rising coal inventories and softening demand. The continued softness in the world steel market and potential lower growth estimates overseas lend uncertainty to the fourth quarter for 2012 pricing. However, preliminary settlements in the third quarter of 2012 have slightly improved as compared to the second quarter. Our hard coking coal production totaled 1.7 million metric tons in the second quarter of 2012, an increase of 4.6% from the same period in the prior year as a result of higher production at the Alabama underground operations resulting from improved mining conditions. Production at our Alabama underground operations was higher despite Mine No. 4 experiencing an extended long wall move for the majority of the 2012 second quarter.

        Thermal coal sales totaled 871,000 metric tons in the second quarter of 2012 compared to 1.0 million metric tons during the same period in 2011. The average selling price of thermal coal in the second quarter of 2012 was $68.11 per metric ton, down 7.7% from the average selling price of $73.80 per metric ton for the same period in 2011. The decrease in thermal coal sales volumes and prices during the 2012 second quarter as compared to the same period last year was attributable to continued softening in demand for thermal coal mitigated by the fact that the majority of our thermal coal is under long term price and volume contracts. Our second quarter 2012 average pricing of thermal coal reflects the full quarter impact of lower prices for additional tons sold by the North River mine acquired in May 2011. Thermal coal production totaled 908,000 metric tons in the second quarter of 2012, as compared to 881,000 metric tons during the same period in 2011. The increase in production was primarily due to the additional tons produced at the North River mining operations partially offset by lower production at our West Virginia operations as we idled a thermal coal surface mine at that operation due to the softening demand and prices.

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        Statistics for U.S. Operations are presented in the following table:

	Three months ended June 30,
	2012		2011
Tons of hard coking coal sold(1) (in thousands)		1,784		1,546
Tons of hard coking coal produced (in thousands)		1,724		1,648
Average hard coking coal selling price(1) (per metric ton)	$	194.10	$	239.02
Tons of thermal coal sold (in thousands)		871		1,014
Tons of thermal coal produced (in thousands)		908		881
Average thermal coal selling price (per metric ton)	$	68.11	$	73.80

(1)

Includes sales of both produced and purchased coal.

        Our U.S. Operations segment reported revenues of $466.8 million in the second quarter of 2012, a decrease of $44.3 million from the same period last year. The decrease in revenues during the second quarter of 2012 as compared to the 2011 second quarter was primarily attributable to the decline in the average selling price of hard coking coal and lower thermal coal sales volumes, partially offset by higher hard coking coal sales volumes.

        Cost of sales, exclusive of depreciation and depletion, in our U.S. Operations segment increased $16.5 million to $290.8 million as compared to the 2011 second quarter. The increase in cost of sales was primarily attributable to the increase in hard coking coal sales volumes and additional costs incurred due to an extended longwall move at our Alabama Mine No. 4, partially offset by lower cost of sales at our West Virginia operations due to idling a thermal coal surface mine.

        U.S. Operations reported operating income of $107.2 million in the second quarter of 2012, compared to $173.1 million in the same period in 2011. The $65.9 million decrease in operating income was primarily due to the decrease in revenue due to the decrease in average selling prices.

Canadian and U.K. Operations

        Metallurgical coal sales in the second quarter of 2012 totaled 506,000 metric tons of hard coking coal at an average selling price of $223.06 per metric ton and 552,000 metric tons of low-volatile PCI coal at an average selling price of $163.51 per metric ton. Metallurgical coal sales in the second quarter of 2011 totaled 476,000 metric tons of hard coking coal at an average selling price of $250.92 per metric ton and 645,000 metric tons of low-volatile PCI coal at an average selling price of $206.48. The decline in the average selling price of hard coking coal and low-volatile PCI coal reflect world market trends and the softening of demand in the world steel market. The softness in the world steel market and potentially lower global economic growth estimates create uncertainty for fourth quarter of 2012 metallurgical coal pricing; however, preliminary settlements in the third quarter of 2012 have shown slight improvement as compared to the second quarter.

        The Canadian and U.K. Operations segment produced a total of 466,000 metric tons of hard coking coal and 720,000 metric tons of low-volatile PCI in the second quarter of 2012. During the second quarter of 2011 the Canadian and U.K. Operations segments produced 347,000 metric tons of hard coking coal and 495,000 metric tons of low-volatile PCI. Both hard coking coal and low-volatile PCI coal production in the second quarter of 2011 had been adversely impacted by challenging weather conditions, permit delays at the Willow Creek mine and higher waste removal. Prior to the second quarter of 2012 the Willow Creek mine primarily produced low-volatile PCI coal. During the second quarter of 2012, Willow Creek started mining hard coking coal, and as of June 30, 2012 we had inventory of approximately 65,000 tons. Over its life the mine is projected to produce almost half its remaining production in premium low-volatile hard coking coal, which we believe is similar in quality to

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Mine No. 7 in Alabama. At our Brule mine, mining of raw coal was significantly lower in the second quarter of 2012 as compared to the second quarter of 2011 due to much higher mining waste removal.

        Statistics for Canadian and U.K. Operations are presented in the following table:

	Three months ended June 30,
	2012		2011
Tons of hard coking coal sold (in thousands)		506		476
Tons of hard coking coal produced (in thousands)		466		347
Average hard coking coal selling price (per metric ton)	$	223.06	$	250.92
Tons of low-volatile PCI coal sold (in thousands)		552		645
Tons of low-volatile PCI coal produced (in thousands)		720		495
Average low-volatile PCI coal selling price (per metric ton)	$	163.51	$	206.48
Tons of thermal coal sold (in thousands)		20		27
Tons of thermal coal produced (in thousands)		17		33
Average thermal coal selling price (per metric ton)	$	126.61	$	117.45

        Our Canadian and U.K. Operations segment reported revenues of $209.6 million in the second quarter of 2012, a decrease of $49.6 million from the same period last year. The decrease in revenues during the second quarter of 2012 as compared to the 2011 second quarter was attributable to a decline in the average selling price of hard coking coal and low-volatile PCI coal and lower low-volatile PCI coal sales volumes, partially offset by higher hard coking coal sales volumes.

        Cost of sales, exclusive of depreciation and depletion, in our Canadian and U.K. Operations segment increased $4.3 million to $195.3 million as compared to the 2011 second quarter. The increase in cost of sales was primarily attributable to costs associated with higher waste removal at the Brule mine. The Brule mine is currently operated by an outside contractor and we have accelerated our plans to move to an owner-operated rather than contractor-operated mine to improve productivity.

        Our Canadian and U.K. Operations segment reported an operating loss of $24.7 million in the second quarter of 2012 as compared to operating income of $18.8 million in the same period in 2011. The operating loss for the quarter was primarily due to lower average selling prices for hard coking coal and low-volatile PCI coal, combined with the increase in cost of sales, partially offset by lower selling, general and administrative costs. Our Canadian mines are implementing expansion plans and initiatives designed to improve long-term production, optimize equipment usage and decrease costs.

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Summary Operating Results for the
Six Months Ended June 30, 2012 and 2011

	For the six months ended June 30, 2012
(in thousands)	U.S. Operations		Canadian and U.K. Operations			Other			Total
Sales	$	903,053	$	392,545		$	305		$	1,295,903
Miscellaneous income (loss)		15,858		(4,549	)		1,925			13,234
Revenues		918,911		387,996			2,230			1,309,137
Cost of sales (exclusive of depreciation and depletion)		567,405		349,659			554			917,618
Depreciation and depletion		85,846		54,671			435			140,952
Selling, general and administrative		24,783		21,900			25,409			72,092
Postretirement benefits		26,651		—			(225	)		26,426
Operating income (loss)	$	214,226	$	(38,234	)	$	(23,943	)		152,049
Interest expense, net										(58,553	)
Other loss										(12,912	)
Income tax expense										(13,212	)
Income from continuing operations									$	67,372

	For the six months ended June 30, 2011 Recast
(in thousands)	U.S. Operations		Canadian and U.K. Operations		Other			Total
Sales	$	915,104	$	255,442	$	616		$	1,171,162
Miscellaneous income		3,912		3,776		755			8,443
Revenues		919,016		259,218		1,371			1,179,605
Cost of sales (exclusive of depreciation and depletion)		492,480		190,906		1,148			684,534
Depreciation and depletion		67,204		33,243		381			100,828
Selling, general and administrative		25,936		16,269		47,198			89,403
Postretirement benefits		21,290		—		(680	)		20,610
Operating income (loss)	$	312,106	$	18,800	$	(46,676	)		284,230
Interest expense, net									(35,287	)
Other income									24,503
Income tax expense									(77,180	)
Income from continuing operations								$	196,266

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	Dollar variance for the six months ended June 30, 2012 versus 2011
(in thousands)	U.S. Operations			Canadian and U.K. Operations			Other			Total
Sales	$	(12,051	)	$	137,103		$	(311	)	$	124,741
Miscellaneous income (loss)		11,946			(8,325	)		1,170			4,791
Revenues		(105	)		128,778			859			129,532
Cost of sales (exclusive of depreciation and depletion)		74,925			158,753			(594	)		233,084
Depreciation and depletion		18,642			21,428			54			40,124
Selling, general and administrative		(1,153	)		5,631			(21,789	)		(17,311	)
Postretirement benefits		5,361			—			455			5,816
Operating income (loss)	$	(97,880	)	$	(57,034	)	$	22,733			(132,181	)
Interest expense, net											(23,266	)
Other loss											(37,415	)
Income tax expense											63,968
Income from continuing operations										$	(128,894	)

Summary of Year to Date Consolidated Results of Continuing Operations

        Our income from continuing operations for the six months ended June 30, 2012 was $67.4 million, or $1.08 per diluted share, which compares to $196.3 million, or $3.34 per diluted share for the six months ended June 30, 2011. EBITDA from continuing operations for the six months ended June 30, 2012 was $280.1 million compared to $409.6 million for the same period in 2011. The decrease in income from continuing operations, diluted earnings per share and EBITDA are primarily due to lower metallurgical coal pricing and the operational factors described below. In addition, net income from continuing operations and diluted earnings per share for the six months ended June 30, 2012 as compared to the same period in 2011 included additional interest expense of $23.3 million and an other loss of $12.9 million versus other income of $24.5 million. A reconciliation of net income to EBITDA is presented in Liquidity and Capital Resources below.

        Revenues for the six months ended June 30, 2012 were $1.3 billion, an increase of $129.5 million from $1.2 billion for the same period in 2011. The increase in revenues was primarily due to six months of revenue from the Canadian and U.K. Operations segment and the West Virginia mining operations within our U.S. Operations segment as a result of the April 1, 2011 Western Coal acquisition compared to three months in the prior year comparable period. Increased revenues were also due to the acquisition of the North River thermal coal mine in Alabama on May 6, 2011. These acquired operations contributed revenues of $497.6 million and $328.0 million during the six months ended June 30, 2012 and 2011, respectively. Excluding the impact of acquisitions, the decrease in revenues is primarily due to a decrease in metallurgical coal pricing partially offset by higher coal sales volumes.

        Cost of sales, exclusive of depreciation and depletion, for the six months ended June 30, 2012 increased $233.1 million to $917.6 million as compared to the same period in 2011. The increase in cost of sales is primarily due to the impact of a full six months of cost of sales from the addition of the Canadian and U.K. Operations segment and the West Virginia mining operations within our U.S. Operations segment compared to three months in the prior year comparable period. Increased cost of sales were also due to the acquisition of the North River mine. Cost of sales from these acquired operations was $446.9 million and $249.8 million during the six months ended June 30, 2012 and 2011, respectively. Excluding the impact of the acquisitions, the increase in cost of sales was primarily due to increased sales volumes and an increase in production costs incurred at the Canadian operation's Brule mine due to higher waste removal.

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        Depreciation and depletion expense for the six months ended June 30, 2012 was $141.0 million, an increase of $40.1 million compared to the same period in 2011. The increase is primarily attributable to the inclusion of six months for the Canadian and U.K. Operations segment and the West Virginia mining operations within our U.S. Operations segment as compared to three months in the prior year comparable period. The increase is also due to a full six months of the North River mining operation in the U.S. Operations segment compared to two months in the prior year comparable period. Depreciation and depletion expense from these acquired operations was $77.1 million and $42.2 million during the six months ended June 30, 2012 and 2011, respectively.

        Selling, general and administrative expense decreased $17.3 million for the six months ended June 30, 2012 as compared to the same period in 2011 despite a full six months of expenses at our Canadian and U.K. Operations segment and West Virginia operations as compared to three months in the prior year period, primarily attributable to a decrease of $18.9 million in costs associated with the acquisition of Western Coal.

        Interest expense, net of interest income for the six months ended June 30, 2012 was $58.6 million, an increase of $23.3 million compared to the same period in 2011. The increase reflects six months of interest on borrowings with an initial balance of $2.35 billion on April 1, 2011 under the 2011 Credit Agreement. The Company had borrowings of only approximately $161.3 million during the first three months in the prior year comparable period.

        The $12.9 million other loss for the six months ended June 30, 2012 is primarily attributable to losses on the sale and remeasurement to fair value of equity investments. Other income of $24.5 million for the six months ended June 30, 2011 is primarily attributable to a gain of $20.5 million recognized on April 1, 2011 as a result of remeasuring to fair value the Western Coal shares acquired from Audley Capital in January 2011.

        The effective tax rates for the six months ended June 30, 2012 and 2011 were 16.4% and 28.2%, respectively. Our effective tax rate for 2012 is lower than the 2011 tax rate, primarily due to a larger favorable impact of percentage depletion and the change in the geographical mix of foreign income and losses.

        The current and prior year period results also include the impact of factors discussed in the following segment analysis.

Segment Analysis

U.S. Operations

        Hard coking coal sales totaled 3.3 million metric tons during the six months ended June 30, 2012 as compared to 3.0 million metric tons during the same period in 2011. The average selling price of hard coking coal during the six months ended June 30, 2012 was $206.64 per metric ton, an 8.9% decrease as compared to the average selling price of $226.74 per metric ton for the same period in 2011. The decrease in the average selling price of hard coking coal reflects world market trends and is attributable to pricing pressure being experienced due to rising coal inventories and softening demand. Continued softness in the world steel market and potential lower economic growth estimates overseas creates uncertainty in fourth quarter of 2012 pricing; however, preliminary settlements in the third quarter of 2012 have shown a slight improvement as compared to the second quarter. Our hard coking coal production totaled 3.7 million metric tons during the six months ended June 30, 2012, an increase of 17.3% from the same period in the prior year primarily as a result of higher production at the Alabama underground operations during the first quarter due to improved mining conditions and the operation of a third longwall at Mine No. 7 that replaced the existing second longwall which was decommissioned in late April 2012. Production at our Alabama underground operations was higher despite Mine No. 4 experiencing an extended long wall move for the majority of the 2012 second quarter.

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        Thermal coal sales totaled 1.7 million metric tons for the six months ended June 30, 2012 compared to 1.3 million metric tons during the same period in 2011. The increase in thermal coal sales was attributable to six months results of our West Virginia and North River mining operations which were both acquired during the second quarter of 2011 and contributed three months and two months, respectively, to the prior year comparable period. The average selling price of thermal coal during the first six months of 2012 was $69.60 per metric ton, down 11.0% from the average selling price of $78.20 per metric ton for the same period in 2011. Lower average pricing of thermal coal reflects six months impact of lower prices for tons sold by the North River mine acquired in May 2011 and continued softening demand. Thermal coal production totaled 1.7 million metric tons during the first six months of 2012, as compared to 1.2 million metric tons during the same period in 2011. The increase in production was attributable to six months results of our West Virginia and North River mining operations as compared to just three months and two months, respectively, in the prior year comparable period.

        Statistics for U.S. Operations are presented in the following table:

	Six months ended June 30,
	2012		2011
Tons of hard coking coal sold(1) (in thousands)		3,319		3,033
Tons of hard coking coal produced (in thousands)		3,693		3,149
Average hard coking coal selling price(1) (per metric ton)	$	206.64	$	226.74
Tons of thermal coal sold (in thousands)		1,653		1,335
Tons of thermal coal produced (in thousands)		1,725		1,150
Average thermal coal selling price (per metric ton)	$	69.60	$	78.20

(2)

Includes sales of both produced and purchased coal.

        Our U.S. Operations segment reported revenues of $918.9 million for the six months ended June 30, 2012, which is consistent with revenues reported in the six months ended June 30, 2011 of $919.0 million. Revenues for the six months ended June 30, 2012 includes a full six months of revenue contributed by the West Virginia operations acquired with Western Coal and the North River operations acquired in May 2011. Revenues from these acquired operations were $109.6 million and $68.8 million during the six months ended June 30, 2012 and 2011, respectively. Excluding the impact of the acquisitions, the decrease in revenues is primarily attributable to a decline in the average selling price of hard coking coal from $226.74 to $206.64 reflecting world market trends.

        Cost of sales, exclusive of depreciation and depletion, increased $74.9 million to $567.4 million during the six months ended June 30, 2012 as compared to the same period in 2011. The increase in cost of sales was primarily attributable to an increase in both hard coking coal and thermal coal sales volumes and six months of cost from West Virginia and North River as compared to three months and two months in the prior year comparable period, respectively. Cost of sales from these acquired operations were $97.3 million and $58.9 million during the six months ended June 30, 2012 and 2011, respectively.

        U.S. Operations reported operating income of $214.2 million for the six months ended June 30, 2012, compared to $312.1 million in the same period in 2011. The $97.9 million decrease in operating income was primarily due to lower hard coking coal and thermal coal selling prices.

Canadian and U.K. Operations

        The Canadian and U.K. Operations segment was acquired during the second quarter of 2011 as part of the Western Coal acquisition and therefore there are no comparable six-month results from the prior year and we have limited our historic comparison to the first quarter of 2012. Metallurgical coal

42

sales in the second quarter of 2012 from the Canadian and U.K. Operations segment totaled 506,000 metric tons of hard coking coal at an average selling price of $223.06 per metric ton and 552,000 metric tons of low-volatile PCI coal at an average selling price of $163.51 per metric ton. Metallurgical coal sales in the first quarter of 2012 totaled 322,000 metric tons of hard coking coal at an average selling price of $250.02 per metric ton and 510,000 metric tons of low-volatile PCI coal at an average selling price of $187.91 per metric ton. During the first quarter of 2012 hard coking coal sales volumes were adversely impacted by shipload scheduling and customer preference deferring sales of hard coking coal into the second quarter. The decline in the average selling price of hard coking coal and low-volatile PCI coal reflected world market trends.

        The Canadian and U.K. Operations segment produced a total of 466,000 metric tons of hard coking coal and 720,000 metric tons of low-volatile PCI in the second quarter of 2012. During the first quarter of 2012 the Canadian and U.K. Operations segments produced 408,000 metric tons of hard coking coal and 586,000 metric tons of low-volatile PCI. At the Willow Creek mine in Canada production was limited in the first quarter of 2012 and costs were impacted by the scheduled wash plant outage that was necessary to upgrade its ability to process hard coking coal. This outage resulted in minimal production during January and February of 2012 with the majority of the operating costs directly impacting cost of sales as opposed to being absorbed into inventory which resulted in approximately $20 million of additional expense incurred during the first quarter. The upgrade was successfully completed and during the quarter we saw improving trends on a month to month basis. We also moved the Willow Creek mine from a contractor-operated mine to an owner-operated mine and while we were successful in retaining approximately 90% of the workforce, we did incur some duplicate costs, primarily during the 2012 first quarter. Prior to the second quarter of 2012, the Willow Creek mine primarily produced low-volatile PCI coal; however, the mine is projected to produce half its remaining production in premium low-volatile hard coking coal. During the second quarter of 2012, Willow Creek started mining hard coking coal, and as of June 30, 2012 we had inventory of approximately 65,000 metric tons. This premium low-volatile hard coking coal is expected to be similar in quality to Mine No. 7 in Alabama. We have accelerated our plans to transition the Brule mine from a contractor-operated mine to an owner-operated mine to improve productivity.

        Statistics for Canadian and U.K. Operations are presented in the following table:

	Six months ended June 30,
	2012		2011
Tons of hard coking coal sold (in thousands)		828		476
Tons of hard coking coal produced (in thousands)		875		347
Average hard coking coal selling price (per metric ton)	$	233.53	$	250.92
Tons of low-volatile PCI coal sold (in thousands)		1,062		645
Tons of low-volatile PCI coal produced (in thousands)		1,306		495
Average low-volatile PCI coal selling price (per metric ton)	$	175.23	$	206.48
Tons of thermal coal sold (in thousands)		44		27
Tons of thermal coal produced (in thousands)		47		33
Average thermal coal selling price (per metric ton)	$	123.48	$	117.45

        Our Canadian and U.K. Operations segment reported revenues of $388.0 million and an operating loss of $38.2 million during the six months ended June 30, 2012. The operating loss in the Canadian and U.K. Operations segment for the six months was primarily due to low production and high operating costs mentioned above at the Willow Creek mine in Canada related to the wash plant outage and the transition to an owner-operated mine. We also experienced additional costs at the Brule mine in Canada due to higher waste removal during the second quarter as well as lower average selling prices for low-volatile PCI coal, reflecting world market trends. Our Canadian mines are implementing

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expansion plans and initiatives designed to improve long-term production, optimize equipment usage and decrease costs.

FINANCIAL CONDITION

        Net receivables were $194.2 million at June 30, 2012, a decrease of $119.1 million from December 31, 2011 primarily attributable to the timing of collections and a decline in average coal selling prices.

        Inventories increased by $76.1 million at June 30, 2012 as compared to December 31, 2011 primarily due to increased hard coking coal production which exceeded sales volumes during the first six months of 2012.

        Net property, plant and equipment increased by $108.2 million at June 30, 2012 as compared to December 31, 2011, primarily due to capital expenditures of $246.1 million, partially offset by depreciation expense.

LIQUIDITY AND CAPITAL RESOURCES

Overview

        Our principal sources of short-term liquidity are our existing cash balances, operating cash flows and borrowings under our revolving credit facility. Our principal source of long-term liquidity is our credit agreement as discussed below.

        Based on current forecasts and anticipated market conditions, we believe that funds provided by operating cash flows and available sources of liquidity will be sufficient to meet our operating needs, to make planned capital expenditures and to make all required interest and principal payments on indebtedness for the next twelve to eighteen months. Our operating cash flows and liquidity are significantly influenced by numerous factors including prices of coal, coal production, costs of raw materials, interest rates and the general economy. Deterioration of economic conditions or deteriorating mining conditions could adversely affect our operating cash flows. Additionally, although financial market conditions have improved there remains volatility and uncertainty, limited availability of credit, potential counterparty defaults, sovereign credit concerns and commercial and investment bank stress. While we have no indication that the uncertainty in the financial markets would impact our current credit facility or current credit providers, the possibility does exist.

2011 Credit Agreement

        On April 1, 2011, we entered into a $2.725 billion credit agreement (the "2011 Credit Agreement") to partially fund the acquisition of Western Coal and to pay off all outstanding loans under the 2005 Credit Agreement. The 2011 Credit Agreement consists of (1) a $950.0 million principal amortizing term loan A facility maturing in April 2016, at which time the remaining outstanding principal is due, (2) a $1.4 billion principal amortizing term loan B facility maturing in April 2018, at which time the remaining outstanding principal is due and (3) a $375.0 million multi-currency revolving credit facility ("Revolver") maturing in April 2016, at which time any remaining balance is due. The Revolver provides for operational needs and letters of credit. Our obligations under the 2011 Credit Agreement are secured by our domestic and foreign real, personal and intellectual property. The 2011 Credit Agreement contains customary events of default and covenants, including among other things, covenants that do not prevent but restrict us and our subsidiaries' ability to incur certain additional indebtedness, create or permit liens on assets, pay dividends and repurchase stock, and engage in mergers or acquisitions, make investments and loans. The 2011 Credit Agreement also includes certain financial covenants that must be maintained.

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        The Revolver, term loan A and term loan B interest rates are tied to LIBOR or CDOR, plus a credit spread ranging from 225 to 300 basis points for the Revolver and term loan A, and 275 to 300 basis points on the term loan B, adjusted quarterly based on our total leverage ratio as defined by the 2011 Credit Agreement. The term loan B has a minimum LIBOR floor of 1.0%. The Revolver loans can be denominated in either U.S. dollars or Canadian dollars at our option. The commitment fee on the unused portion of the Revolver is 0.5% per year for all pricing levels.

        As of June 30, 2012, borrowings under the 2011 Credit Agreement consisted of a term loan A balance of $854.7 million with a weighted average interest rate of 3.46%, a term loan B balance of $1.273 billion with a weighted average interest rate of 4.00% and, under the Revolver, $59.0 million in borrowings with $48.8 million in outstanding stand-by letters of credit and $267.2 million of availability for future borrowings. On June 28, 2012 we prepaid $100 million of the outstanding principal balances of the term loans; however, borrowings from our revolver increased by approximately $49.0 million during the second quarter.

Statements of Cash Flows

        Cash balances were $128.7 million and $128.4 million at June 30, 2012 and December 31, 2011, respectively. The increase in cash during the six months ended June 30, 2012 of $0.3 million primarily resulted from cash provided by operating activities of $308.6 million offset by retirements of debt of $69.0 million and capital expenditures of $246.1 million.

        The following table sets forth, for the periods indicated, selected consolidated cash flow information (in thousands):

	Six months ended June 30,
	2012			2011
Cash flows provided by operating activities	$	308,562		$	279,359
Cash flows used in investing activities		(233,246	)		(2,563,824	)
Cash flows provided by (used in) financing activities		(84,324	)		2,124,731
Cash flows provided by discontinued operations		9,500			—
Effect of foreign exchange rates on cash		(242	)		—
Net increase (decrease) in cash and cash equivalents	$	250		$	(159,734	)

        Net cash provided by operating activities of continuing operations was $308.6 million for the six months ended June 30, 2012 as compared to $279.4 million for the same period in 2011, an increase of $29.2 million. The increase is primarily attributable to an increase of $154.8 million from accounts receivable, an increase of $111.3 million from accounts payable, and a $61.0 million increase for non-cash items such as depreciation and depletion. These increases were partially offset by a decrease in income from continuing operations of $128.9 million, a decrease from inventory of $104.3 million and a decrease from accrued expenses and other current liabilities of $42.6 million.

        Cash flows used in investing activities for the six months ended June 30, 2012 were $233.2 million as compared to $2.6 billion for the same period in 2011. The decrease in cash flows used in investing activities of $2.3 billion was primarily attributable to $2.4 billion of cash used in the acquisition of Western Coal during the second quarter of 2011, partially offset by an increase in capital expenditures of $109.6 million.

        Cash flows used in financing activities for the six months ended June 30, 2012 were $84.3 million as compared to cash flows provided by financing activities of $2.1 billion for the same period in 2011. The decrease in cash flows provided by financing activities of $2.2 billion was primarily attributable to $2.4 billion of borrowings under the 2011 Credit Agreement to fund a portion of the Western Coal acquisition.

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Capital Expenditures

        Capital expenditures totaled $246.1 million during the six months ended June 30, 2012. We have re-evaluted our capital projects and currently expect 2012 capital expenditures to total approximately $400 million, reflecting selected reductions of various growth projects including those at our U.K. and West Virginia operations.

EBITDA

        EBITDA is defined as earnings from continuing operations before interest, income taxes, depreciation, depletion and amortization expense. EBITDA is a financial measure which is not calculated in conformity with GAAP and should be considered supplemental to, and not as a substitute or superior to financial measures calculated in conformity with GAAP. We believe that EBITDA is a useful measure as some investors and analysts use EBITDA to compare us against other companies and to help analyze our ability to satisfy principal and interest obligations and capital expenditure needs. EBITDA may not be comparable to similarly titled measures used by other entities.

        Reconciliation of Net Income to EBITDA (in thousands):

	For the three months ended June 30,						For the six months ended June 30,
	2012			2011			2012			2011
Income from continuing operations	$	26,756		$	114,453		$	67,372		$	196,266
Add: Interest expense		31,104			32,047			59,171			35,603
Less: Interest income		(341	)		(160	)		(618	)		(316	)
Add: Income tax expense		4,535			42,626			13,212			77,180
Add: Depreciation and depletion expense		74,459			72,470			140,952			100,828
Earnings from continuing operations before interest, income taxes, and depreciation and depletion (EBITDA)	$	136,513		$	261,436		$	280,089		$	409,561

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        We are exposed to certain market risks inherent in our operations. These risks generally arise from transactions entered into in the normal course of business. The primary market risk exposures relate to commodity price risk, interest rate risk and foreign currency risks. We do not enter into derivatives or other financial instruments for trading or speculative purposes.

        We have exposure to changes in interest rates under the 2011 Credit Agreement through our term loan A, term loan B and Revolver loans. The interest rates for the term loan A, term loan B and revolver loans are tied to LIBOR or the Canadian Dealer Offered Rate ("CDOR"), plus a credit spread ranging from 225 to 300 basis points for the revolver and term loan A and 275 to 300 basis points on the term loan B adjusted quarterly based on our total leverage ratio as defined by the 2011 Credit Agreement. As of June 30, 2012, our borrowings due under the 2011 Credit Agreement totaled $2.187 billion. As of June 30, 2012 a 100 basis point increase in interest rates would increase our quarterly interest expense by approximately $2.5 million while a 100 basis point decrease in interest rates would decrease our quarterly interest expense by approximately $614 thousand due to the LIBOR floor.

        Our objective in managing exposure to interest rate changes is to protect against the variability in expected future cash flows attributable to changes in the benchmark interest rate related to interest payments required under the 2011 Credit Agreement. To achieve this objective, we manage a portion of our interest rate exposure through the use of interest rate swaps and an interest rate cap. To reduce

46

our exposure to rising interest rates and the risk that changing interest rates could have on our operations, during June 2011 we entered into an interest rate swap agreement and an interest rate cap agreement. The interest rate swap agreement has a notional value of $450.0 million and is based on a 1.17% fixed rate. The interest rate cap agreement has a notional value of $255.0 million and has a strike price of 2.00%.

ITEM 4.    CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

        An evaluation was performed under the supervision and with the participation of our management (including our principal executive officer and principal financial officer) of the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 as amended ("Exchange Act"), as of the end of the period covered by this quarterly report on Form 10-Q. Based on that evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures were effective as of June 30, 2012 to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures. During the quarter, the Company has transitioned much of the accounting activities for the Canadian operations to the U.S. and migrated from one enterprise resource planning system to another. Management took additional steps during the quarter to help provide assurance that these activities did not weaken overall controls in these areas. Other than changes related to our Canadian operations, there has been no change in our internal control over financial reporting during the three months ended June 30, 2012 that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1.    Legal Proceedings

        See Note 10 of the "Notes to Condensed Consolidated Financial Statements" in this Form 10-Q for a description of current legal proceedings.

        We and our subsidiaries are parties to a number of other lawsuits arising in the ordinary course of our businesses. Most of these cases are in a preliminary stage and we are unable to predict a range of possible loss, if any. We record costs relating to these matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of these matters on our future results of operations cannot be predicted with certainty as any such effect depends on future results of operations and the amount and timing of the resolution of such matters. While the results of litigation cannot be predicted with certainty, we believe that the final outcome of such litigation will not have a material adverse effect on our consolidated financial statements.

Item 1A.    Risk Factors

        Our business, financial condition, operating results and cash flows can be impacted by a number of factors, any one of which could cause actual results to vary materially from recent results or from anticipated future results. For a discussion of our risk factors, please refer to Part 1, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2011.

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

Purchase of Equity Securities by Us and Affiliated Purchasers

        The following table provides a summary of all repurchases by Walter Energy of its common stock during the six-month period ended June 30, 2012:

Period	Total Number of Shares Purchased(1)		Average Price Paid per Share
January 1, 2012 - January 31, 2012		—		—
February 1, 2012 - February 29, 2012		7,846	$	66.35
March 1, 2012 - March 31, 2012		1,292	$	63.38
April 1, 2012 - April 30, 2012		186	$	72.89
May 1, 2012 - May 31, 2012		—		—
June 1, 2012 - June 30, 2012		—		—
		9,324

(1)

These shares were acquired to satisfy certain employees' tax withholding obligations associated with the lapse of restrictions on certain stock awards granted under the 2002 Long-Term Incentive Award Plan. Upon acquisition, these shares were retired.

Item 4.    Mine Safety Disclosures

        The information concerning mine safety violations and other regulatory matters is filed as Exhibit 95 to this quarterly report on Form 10-Q pursuant to the requirements of Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104).

Item 6.    Exhibits

Exhibit Number
	10.1	Letter Agreement between Walter Energy, Inc. and William G. Harvey, dated May 29, 2012 (Incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on June 1, 2012)
	31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002—Chief Executive Officer
	31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002—Chief Financial Officer
	32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Session 1350—Chief Executive Officer
	32.2	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Session 1350—Chief Financial Officer
	95	Mine Safety Disclosures Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 299.104)
	101	XBRL (Extensible Business Reporting Language)—The following materials from Walter Energy, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations and Comprehensive Income, (iii) the Condensed Consolidated Statement of Changes in Stockholders' Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements.

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SIGNATURES

        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.

WALTER ENERGY, INC.

/s/ WALTER J. SCHELLER, III
Chief Executive Officer (Principal Executive Officer)

Date: August 8, 2012

/s/ WILLIAM G. HARVEY
Chief Financial Officer (Principal Financial Officer)

Date: August 8, 2012

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ITEM 1. FINANCIAL STATEMENTS

WALTER ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
WALTER ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
WALTER ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
WALTER ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2012 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
WALTER ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
WALTER ENERGY, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 2012 (Unaudited)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS, FINANCIAL CONDITION AND LIQUIDITY AND CAPITAL RESOURCES

Summary Operating Results for the Three Months Ended June 30, 2012 and 2011
Summary Operating Results for the Six Months Ended June 30, 2012 and 2011

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4. CONTROLS AND PROCEDURES
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 4. Mine Safety Disclosures
Item 6. Exhibits

SIGNATURES

EX-31.1

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EXHIBIT 31.1

Walter Energy, Inc.
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
CERTIFICATION OF PERIODIC REPORT

I, Walter J. Scheller, III, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Walter 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.

Date: August 8, 2012

/s/ WALTER J. SCHELLER, III
Chief Executive Officer
(Principal Executive Officer)

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EXHIBIT 31.1

Walter Energy, Inc. Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 CERTIFICATION OF PERIODIC REPORT

EX-31.2

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EXHIBIT 31.2

Walter Energy, Inc.
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
CERTIFICATION OF PERIODIC REPORT

I, William G. Harvey, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Walter 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.

Date: August 8, 2012

/s/ WILLIAM G. HARVEY
Chief Financial Officer
(Principal Financial Officer)

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EXHIBIT 31.2

Walter Energy, Inc. Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 CERTIFICATION OF PERIODIC REPORT

EX-32.1

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EXHIBIT 32.1

Walter Energy, Inc.
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
18 U.S.C. Section 1350

        In connection with the accompanying Quarterly Report of Walter Energy, Inc. (the "Company") on Form 10-Q for the quarterly period ended June 30, 2012 (the "Report"), I, Walter J. Scheller, III, Chief Executive Officer, Director and Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

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

Date: August 8, 2012

/s/ WALTER J. SCHELLER, III
Chief Executive Officer
(Principal Executive Officer)

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EXHIBIT 32.1

Walter Energy, Inc. Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 18 U.S.C. Section 1350

EX-32.2

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EXHIBIT 32.2

Walter Energy, Inc.
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
18 U.S.C. Section 1350

        In connection with the accompanying Quarterly Report of Walter Energy, Inc. (the "Company") on Form 10-Q for the quarterly period ended June 30, 2012 (the "Report"), I, William G. Harvey, Chief Financial Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) of 15(d) of the Securities Exchange Act of 1934; and



(2)

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

Date: August 8, 2012

/s/ WILLIAM G. HARVEY
Chief Financial Officer
(Principal Financial Officer)

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EXHIBIT 32.2

Walter Energy, Inc. Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 18 U.S.C. Section 1350

EX-95

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Exhibit 95

Mine Safety and Health Administration Safety Data

        The Company is committed to the safety of its employees and in achieving a goal of providing a workplace that is incident free. In achieving this goal the company has in place health and safety programs that include regulatory-based training, accident prevention, workplace inspection, emergency preparedness response, accident investigations and program auditing. These programs are designed to comply with regulatory mining-related coking coal safety and environmental standards. Additionally, the programs provide a basis for promoting a best in industry safety practice.

        The operation of our mines is subject to regulation by the Mine Safety and Health Administration ("MSHA") under the Federal Mine Safety and Health Act of 1977 ("the Mine Act"). MSHA inspects our mines on a continual basis and issues various citations and orders when it believes a violation has occurred under the Mine Act. As required by Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, each operator of a coal or other mine is required to include certain mine safety results in its periodic reports filed with the Securities and Exchange Commission. Within this disclosure, we present information regarding certain mining safety and health citations which MSHA has issued with respect to our mining operations. In evaluating this information, consideration should be given to facts such as: (i) the number of citations and orders will vary depending on the size of the coal mine, (ii) the number of citations issued will vary from inspector to inspector and mine to mine, and (iii) citations and orders can be contested and appealed, and in that process, are sometimes dismissed and remaining citations are often reduced in severity and amount.

        During the quarter ended June 30, 2012 none of the Company's mining complexes received written notice from MSHA of (i) a 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 coal or other mine health or safety hazards under section 104(e) or (ii) the potential to have such a pattern.

        The table below presents the total number of specific citations and orders issued by MSHA to Walter Energy Inc. and its subsidiaries, together with the total dollar value of the proposed MSHA civil penalty assessments received during the quarter ended June 30, 2012. The second table presents legal actions pending before the Federal Mine Safety and Health Review Commission for each of our mining complexes that had pending legal actions during the quarter ended June 30, 2012.

Mining Complex(1)(3)	Section 104 S&S Citations		Section 104(b) Orders		Section 104(d) Citations and Orders		Section 110(b)(2) Violations		Section 107(a) Orders		Proposed MSHA Assessments(2) ($ in thousands)		Fatalities
JWR No. 4		57		—		3		—		—		222.3		—
JWR North River		19		—		—		—		—		49.5		—
JWR No. 7		31		—		—		—		—		121.8		—
Taft Reid School		1		—		—		—		—		0.5		—
Taft Choctaw		1		—		—		—		—		0.9		—
TRI Highway 59		—		—		—		—		—		140.0		—
TRI Swann's Crossing		—		—		—		—		—		8.4		—
Atlantic Leaseco Crooked Run		1		—		—		—		—		—		—
Atlantic Leaseco Black Pearl Underground Mine		—		—		—		—		—		0.1		—
Maple Coal Maple Eagle No. 1		9		—		—		—		—		365.6		—
Maple Coal Maple Prep Plant		—		—		—		—		—		1.0		—

1)

MSHA assigns an identification number to each coal mine and may or may not assign separate identification numbers to related facilities such as preparation plants. We are providing the information in the table by

mining complex rather than MSHA identification number because we believe that this presentation is more useful to investors. For descriptions of each of these mining operations, please refer to the descriptions under Item 1. Description of Business, in Part 1 of our Annual Report on Form-10K for the fiscal year ended December 31, 2011. Idle facilities are not included in the table above unless they received a citation, order or assessment by MSHA during the current quarterly reporting period or are subject to pending legal actions.

2)

Amounts listed under this heading include proposed assessments received from MSHA in the current annual reporting period for alleged violations, regardless of the issuance date of the related citation or order.

3)

The table includes references to specific sections of the Mine Act as follows:

•

Section 104(a) Citations include citations for health or safety standards that could significantly and substantially contribute to serious injury if left unabated.

•

Section 104(b) Orders represent failures to abate a citation under 104(a) within the period of time prescribed by MSHA and that the period of time prescribed for the abatement should not be further extended. This results in an order of immediate withdrawal from the area of the mine affected by the condition until MSHA determines that the violation has been abated.

•

Section 104(d) Citations and Orders are for unwarrantable failure to comply with mandatory health and safety standards where such violation is of such a nature as could significantly or substantially contribute to the cause and effect of a coal or other mine safety or health hazard.

•

Section 110(b)(2) Violations are for flagrant violations.

•

Section 107(a) Orders are for situations in which MSHA determined an imminent danger existed.

Mining Complex Legal Actions(1)	Pending as of June 30, 2012		Initiated During 2Q 2012		Resolved During 2Q 2012
JWR No. 3
29 CFR Part 2700, Subpart C		1		1		—
JWR No. 4
29 CFR Part 2700, Subpart B		7		—		—
29 CFR Part 2700, Subpart C		31		5		7
JWR No. 5
29 CFR Part 2700, Subpart C		1		—		—
JWR No. 7
29 CFR Part 2700, Subpart B		8		—		3
29 CFR Part 2700, Subpart C		33		7		18
29 CFR Part 2700, Subpart H		2		—		—
JWR North River
29 CFR Part 2700, Subpart B		8		—		—
29 CFR Part 2700, Subpart C		29		6		—
Taft Reid School
29 CFR Part 2700, Subpart C		1		—		—
TRI Swann's Crossing
29 CFR Part 2700, Subpart C		2		2		—
TRI East Brookwood
29 CFR Part 2700, Subpart C		1		—		—
Atlantic Leaseco Black Pearl
29 CFR Part 2700, Subpart C		13		—		3

2

Mining Complex Legal Actions(1)	Pending as of June 30, 2012		Initiated During 2Q 2012		Resolved During 2Q 2012
Maple Coal Maple Eagle No. 1
29 CFR Part 2700, Subpart B		23		—		—
29 CFR Part 2700, Subpart C		32		6		—
Maple Coal Maple Prep Plant
29 CFR Part 2700, Subpart C		1		—		—
Maple Coal Huffman Sycamore SM
29 CFR Part 2700, Subpart C		1		—		—

1)

Effective January 27, 2012, SEC adopted amendments to its rules to implement Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "final rule".) The final rule modified previous reporting requirements and requires that the total number of legal actions pending before the Federal Mine Safety and Health Review Commission (FMSHRC) as of the last day of the time period covered by the report be categorized according to type of proceeding, in accordance with the categories established in the Procedural Rules of FMSHRC. SEC rules require that six different categories of pending legal actions be disclosed. Categories for which there is no pending litigation for the respective mine are not listed in the table. The types of proceedings are listed as follows:

•

"29 CFR Part 2700, Subpart B" These legal actions include proceedings initiated under FMSHRC Procedural Rule 29 CFR Part 2700, Subpart B such as contests of citations and orders filed prior to receipt of a proposed penalty assessment from MSHA, contests related to orders for which penalties are not assessed (such as imminent danger orders under Section 107 of the Mine Act), and emergency response plan dispute proceedings.

•

"29 CFR Part 2700, Subpart C" These legal actions include proceedings initiated under FMSHRC Procedural Rule 29 CFR Part 2700, Subpart C and are contests of citations and orders after receipt of proposed penalties.

•

"29 CFR Part 2700, Subpart D" These legal actions include proceedings initiated under FMSHRC Procedural Rule 29 CFR Part 2700, Subpart D and are complaints for compensation, which are cases under section 111 of the Mine Act.

•

"29 CFR Part 2700, Subpart E" These legal actions include proceedings initiated under FMSHRC Procedural Rule 29 CFR Part 2700, Subpart E and are complaints of discharge, discrimination or interference and temporary reinstatement under section 105 of the Mine Act.

•

"29 CFR Part 2700, Subpart F" These legal actions include proceedings initiated under FMSHRC Procedural Rule 29 CFR Part 2700, Subpart F such as applications for temporary relief under section 105(b)(2) of the Mine Act from any modification or termination of any order issued thereunder, or from any order issued under section 104 of the Mine Act (other than citations issued under section 104(a) or (f) of the Mine Act).

•

"29 CFR Part 2700, Subpart H" These legal actions include proceedings initiated under under FMSHRC Procedural Rule 29 CFR Part 2700, Subpart H and are appeals of judges' decisions or orders to FMSHRC, including petitions for discretionary review and review by FMSHRC on its own motion.

3

QuickLinks

Exhibit 95

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Net Income Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Numerator:
Income from continuing operations (in dollars)	$ 26,756	$ 114,453	$ 67,372	$ 196,266
Income from discontinued operations	$ 5,180		$ 5,180
Denominator:
Average number of common shares outstanding (in shares)	62,537,000	62,313,000	62,503,000	58,390,000
Effect of dilutive securities:
Stock awards and warrants (in shares)	243,000	393,000	256,000	370,000
Weighted average shares, diluted (in shares)	62,780,000	62,706,000	62,759,000	58,760,000
Income from continuing operations, basic (in dollars per share)	$ 0.43	$ 1.84	$ 1.08	$ 3.36
Income from discontinued operations (in dollars per share)	$ 0.08		$ 0.08
Net income (in dollars per share)	$ 0.51	$ 1.84	$ 1.16	$ 3.36
Income from continuing operations, diluted (in dollars per share)	$ 0.43	$ 1.83	$ 1.08	$ 3.34
Income from discontinued operations (in dollars per share)	$ 0.08		$ 0.08
Net income (in dollars per share)	$ 0.51	$ 1.83	$ 1.16	$ 3.34
Anti-dilutive securities excluded from earnings per share calculation (in shares)	234,323	50,814	205,378	29,038

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Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012 item	Jun. 30, 2011	Dec. 31, 2011
Segment Information
Number of reportable segments			3
Revenues:
Total Revenues	$ 677,574	$ 770,871	$ 1,309,137	$ 1,179,605
Segment operating income (loss):
Total operating income	67,973	164,463	152,049	284,230
Less interest expense, net	(30,763)	(31,887)	(58,553)	(35,287)
Other income (loss)	(5,919)	24,503	(12,912)	24,503
Income from continuing operations before income tax expense	31,291	157,079	80,584	273,446
Income tax expense	4,535	42,626	13,212	77,180
Income from continuing operations	26,756	114,453	67,372	196,266
Depreciation and depletion:
Total depreciation and depletion	74,459	72,470	140,952	100,828
Capital Expenditures:
Total capital expenditures	125,211	92,124	246,056	136,417
Identifiable assets by segment:
Total identifiable assets	6,855,155		6,855,155		6,856,508
U.S. Operations
Revenues:
Total Revenues	466,761	511,080	918,911	919,016
Segment operating income (loss):
Total operating income	107,245	173,133	214,226	312,106
Depreciation and depletion:
Total depreciation and depletion	43,704	39,035	85,846	67,204
Capital Expenditures:
Total capital expenditures	43,851	40,972	79,963	85,108
Identifiable assets by segment:
Total identifiable assets	1,039,630		1,039,630		1,118,451
Canadian and U.K. operations
Revenues:
Total Revenues	209,645	259,218	387,996	259,218
Segment operating income (loss):
Total operating income	(24,679)	18,800	(38,234)	18,800
Depreciation and depletion:
Total depreciation and depletion	30,535	33,243	54,671	33,243
Capital Expenditures:
Total capital expenditures	78,177	51,411	162,357	51,411
Identifiable assets by segment:
Total identifiable assets	5,150,719		5,150,719		5,021,521
Other
Revenues:
Total Revenues	1,168	573	2,230	1,371
Segment operating income (loss):
Total operating income	(14,593)	(27,470)	(23,943)	(46,676)
Depreciation and depletion:
Total depreciation and depletion	220	192	435	381
Capital Expenditures:
Total capital expenditures	3,183	(259)	3,736	(102)
Identifiable assets by segment:
Total identifiable assets	$ 664,806		$ 664,806		$ 716,536

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Discontinued Operations (Details) (Kodiak, USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Kodiak
Discontinued operations
Cash proceeds received	$ 9.5
Gain from discontinued operations	$ 5.2

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Pension and Other Postretirement Benefits (Tables)

6 Months Ended

Jun. 30, 2012

Pension and Other Postretirement Benefits

Components of net periodic benefit cost

	Pension Benefits						Other Postretirement Benefits
	For the three months ended June 30,						For the three months ended June 30,
	2012			2011			2012		2011
Components of net periodic benefit cost:
Service cost	$	1,498		$	1,291		$	2,018	$	1,253
Interest cost		3,129			3,144			7,253		6,278
Expected return on plan assets		(4,031	)		(3,929	)		—		—
Amortization of prior service cost (credit)		64			68			261		(240	)
Amortization of net actuarial loss		2,313			2,063			3,681		3,052
Net periodic benefit cost	$	2,973		$	2,637		$	13,213	$	10,343

	Pension Benefits						Other Postretirement Benefits
	For the six months ended June 30,						For the six months ended June 30,
	2012			2011			2012		2011
Components of net periodic benefit cost:
Service cost	$	2,996		$	2,582		$	4,036	$	2,506
Interest cost		6,258			6,288			14,506		12,480
Expected return on plan assets		(8,062	)		(7,858	)		—		—
Amortization of prior service cost (credit)		128			136			522		(480	)
Amortization of net actuarial loss		4,626			4,126			7,362		6,104
Settlement loss		—			1,716			—		—
Net periodic benefit cost	$	5,946		$	6,990		$	26,426	$	20,610

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Derivative Financial Instruments (Details 2) (Designated as cash flow hedging instruments, USD $)	Jun. 30, 2012	Dec. 31, 2011
Entity's derivative instruments within the condensed consolidated balance sheets
Asset derivatives	$ 81,000	$ 4,482,000
Natural Gas Hedge
Entity's derivative instruments within the condensed consolidated balance sheets
Asset derivatives		4,050,000
Interest rate cap
Entity's derivative instruments within the condensed consolidated balance sheets
Asset derivatives	81,000	432,000
Interest rate cap | Other current assets
Entity's derivative instruments within the condensed consolidated balance sheets
Asset derivatives	39,000	143,000
Interest rate cap | Other long-term assets
Entity's derivative instruments within the condensed consolidated balance sheets
Asset derivatives	42,000	289,000
Interest rate swaps
Entity's derivative instruments within the condensed consolidated balance sheets
Liability derivatives	6,594,000	5,683,000
Interest rate swaps | Other current liabilities
Entity's derivative instruments within the condensed consolidated balance sheets
Liability derivatives	3,100,000	1,800,000
Interest rate swaps | Other long-term liabilities
Entity's derivative instruments within the condensed consolidated balance sheets
Liability derivatives	$ 3,500,000	$ 3,900,000

XML

Pension and Other Postretirement Benefits (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Pension Benefits
Components of net periodic benefit cost:
Service cost	$ 1,498	$ 1,291	$ 2,996	$ 2,582
Interest cost	3,129	3,144	6,258	6,288
Expected return on plan assets	(4,031)	(3,929)	(8,062)	(7,858)
Amortization of prior service cost (credit)	64	68	128	136
Amortization of net actuarial loss	2,313	2,063	4,626	4,126
Settlement loss				1,716
Net periodic benefit cost for continuing operations	2,973	2,637	5,946	6,990
Other Postretirement Benefits
Components of net periodic benefit cost:
Service cost	2,018	1,253	4,036	2,506
Interest cost	7,253	6,278	14,506	12,480
Amortization of prior service cost (credit)	261	(240)	522	(480)
Amortization of net actuarial loss	3,681	3,052	7,362	6,104
Net periodic benefit cost for continuing operations	$ 13,213	$ 10,343	$ 26,426	$ 20,610

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Acquisition

6 Months Ended

Jun. 30, 2012

Acquisition

Acquisition

Note 2—Acquisition

        On November 18, 2010, the Company announced its intent to acquire all of the outstanding common shares of Western Coal. In connection with the acquisition the Company acquired high quality metallurgical coal mines in Northeast British Columbia (Canada), high quality metallurgical coal and compliant thermal coal mines located in West Virginia (United States), and a high quality anthracite coal mine located in South Wales (United Kingdom). The acquisition of Western Coal substantially increased the Company's reserves available for future production, the majority of which is high-quality metallurgical coal, and created a diverse geographical footprint with strategic access to high-growth steel-producing countries in both the Atlantic and Pacific basins.

        On November 17, 2010, the Company entered into a share purchase agreement with various funds advised by Audley Capital to purchase approximately 54.5 million common shares, or 19.8%, of the outstanding common shares of Western Coal for $11.50 Canadian dollars per share in two separate transactions. On December 2, 2010 the Company entered into an arrangement agreement with Western Coal to acquire all the remaining outstanding common shares of Western Coal for $11.50 Canadian dollars per share in cash or 0.114 of a Walter Energy share, or for a combination thereof at the holder's election, subject to proration.

        In January 2011, the Company completed the first transaction to acquire 25,274,745 common shares of Western Coal, or 9.15% of the outstanding shares, from funds advised by Audley Capital. The shares were purchased for $293.7 million in cash and had a fair value of $314.2 million on April 1, 2011. The Company recognized a gain on April 1, 2011 of $20.5 million as a result of remeasuring to fair value the Western Coal shares acquired from Audley Capital which was included in other income in the Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2011. On April 1, 2011, the Company acquired the remaining outstanding common shares of Western Coal (including the second Audley Capital transaction) for a combination of $2.2 billion in cash and the issuance of 8,951,558 common shares of Walter Energy valued at $1.2 billion. The fair value of Walter Energy's common stock on April 1, 2011 was $136.75 per share based on the closing value on the New York Stock Exchange. The cash portion was funded with part of the proceeds from the new $2.725 billion credit facility discussed in Note 6. All of the outstanding options to purchase Western Coal common shares that were not exercised prior to the acquisition were exchanged for fully-vested and immediately exercisable options to purchase shares of Walter Energy common stock. The Company issued 193,498 stock options in exchange for the Western Coal stock options outstanding as of April 1, 2011. The stock options issued had a fair value of $15.5 million, which was estimated using the Black-Scholes option pricing model. The outstanding warrants of Western Coal were not directly affected by the acquisition. Instead, upon exercise each warrant entitled the holder to receive cash and shares of Walter Energy common stock that would have been issued if the warrants had been exercised immediately before closing the acquisition. As of June 30, 2012, no warrants of Western Coal were outstanding.

        The purchase consideration has been allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. Fair values were determined using the income, cost and market price valuation methods as deemed appropriate. During the 2012 first quarter, the Company completed the valuation of the assets and liabilities with the assistance of an independent third party and recorded refinement adjustments to the preliminary purchase price allocation. These refinements were primarily around the areas of acquired mineral interests including estimates for future costs, production volumes and timing which resulted in a $94.0 million increase in fair value allocated to mineral interests as compared to the December 31, 2011 preliminary fair value. This also resulted in a decrease in goodwill of $57.8 million and the deferred tax liability was increased by $25.5 million reflecting an increase in future depletion expense not deductible for tax. Retrospective application of the changes made to the allocation of the purchase consideration in the 2012 first quarter increased retained earnings, a component of stockholders' equity, as of December 31, 2011 and net income by $14.4 million for the year ended December 31, 2011. The increase to retained earnings resulting from the change in net income was primarily due to a decrease in mineral interests depletion related to 2011. The following table summarizes the Company's recast and previously reported December 31, 2011 consolidated balance sheet amounts (in thousands):

	Recast December 31, 2011(1)		December 31, 2011(2)
ASSETS
Inventories	$	240,437	$	242,607
Other current assets	$	45,649	$	45,627
Mineral interests, net	$	3,056,258	$	2,946,113
Property, plant and equipment, net	$	1,631,333	$	1,637,182
Goodwill	$	1,066,754	$	1,124,597
LIABILITIES AND STOCKHOLDERS' EQUITY
Other current liabilities	$	63,757	$	59,827
Deferred income taxes	$	1,029,336	$	1,003,383
Retained earnings	$	744,939	$	730,517

(1)

As presented in the June 30, 2012 condensed consolidated financial statements herein.

(2)

As previously presented in the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

        Retrospective application of the changes made to the allocation of the purchase consideration in the 2012 first quarter increased net income by $7.1 million for the three and six months ended June 30, 2011. The increase to net income was primarily due to a decrease in mineral interests depletion during the period. The following table summarizes the changes to the Company's recast and previously reported June 30, 2011 Condensed Consolidated Statements of Operations amounts (in thousands):

	Recast June 30, 2011(1)		June 30, 2011(2)
For the three months ended:
Sales	$	764,587	$	766,716
Cost of sales (exclusive of depreciation and depletion)		466,074		462,061
Depreciation and depletion		72,470		89,426
Operating income		164,463		153,649
Income before income tax expense		157,079		146,265
Income tax expense		42,626		38,907
Net income	$	114,453	$	107,358
Net income per share:
Basic	$	1.84	$	1.72
Diluted	$	1.83	$	1.71
For the six months ended:
Sales	$	1,171,162	$	1,173,291
Cost of sales (exclusive of depreciation and depletion)		684,534		680,521
Depreciation and depletion		100,828		117,784
Operating income		284,230		273,416
Income before income tax expense		273,446		262,632
Income tax expense		77,180		73,461
Net income	$	196,266	$	189,171
Net income per share:
Basic	$	3.36	$	3.24
Diluted	$	3.34	$	3.22

(1)

As presented in the June 30, 2012 condensed financial statements herein.

(2)

As previously presented in the condensed consolidated financial statements in the Company's Form 10-Q for the three and six months ended June 30, 2011.

        The following table summarizes the changes to the Company's recast and previously reported June 30, 2011 Condensed Consolidated Statement of Cash Flows amounts (in thousands):

	For the six months ended June 30,
	Recast 2011(1)			2011(2)
Net Income	$	196,266		$	189,171
Adjustments to reconcile net income to net cash flows provided by (used in) operating activities:
Depreciation and depletion	$	100,828		$	117,784
Deferred income tax credit	$	(11,121	)	$	(14,840	)
Other	$	10,247		$	27,521
Decrease in current assets, net of effect of business acquisitions:
Inventories	$	38,076		$	14,660

(1)

As presented in the June 30, 2012 condensed consolidated financial statements herein.

(2)

As previously presented in the condensed consolidated financial statements in the Company's Form 10-Q for the six months ended June 30, 2011.

        The following tables summarize the purchase consideration, the final purchase price allocation, the preliminary purchase price allocation reported in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 and the adjustments made in the three months ended March 31, 2012 (in thousands):

Purchase consideration:
Cash	$	2,173,080
Fair value of shares of common stock issued		1,224,126
Fair value of stock options issued and warrants		34,765
Fair value of consideration transferred		3,431,971
Fair value of equity interest in Western Coal held before the acquisition		314,231
Total consideration	$	3,746,202

	Preliminary as of December 31, 2011		Adjustments			Final
Fair value of assets acquired and liabilities assumed:
Cash and cash equivalents	$	34,065	$	—		$	34,065
Receivables		163,668		—			163,668
Inventories		121,229		—			121,229
Other current assets		86,475		23			86,498
Mineral interests		2,992,000		94,000			3,086,000
Property, plant and equipment		560,894		(6,702	)		554,192
Goodwill		1,122,884		(57,844	)		1,065,040
Other long-term assets		54,150		—			54,150
Total assets		5,135,365		29,477			5,164,842
Accounts payable and accrued liabilities		184,983		—			184,983
Other current liabilities		82,175		3,930			86,105
Deferred tax liability		1,021,161		25,547			1,046,708
Other long-term liabilities		100,844		—			100,844
Total liabilities		1,389,163		29,477			1,418,640
Net assets acquired	$	3,746,202	$	—		$	3,746,202

        Goodwill is calculated as the excess of the purchase consideration transferred over the fair value of the identifiable assets acquired and liabilities assumed. The factors that contribute to the recognition of goodwill include Western Coal's (i) historical cash flows and income levels, (ii) reputation in its markets, (iii) strength of its personnel, (iv) efficiency of its operations, and (v) future cash flows and income growth projections. Goodwill has been assigned to the Canadian and U.K. Operations segment and the U.S. Operations segment in the amounts of $992.4 million and $72.6 million, respectively. None of the goodwill is expected to be tax deductible. The Company incurred acquisition costs related to the purchase of approximately $7.2 million and $17.1 million during the three and six months ended June 30, 2011, respectively. These costs were included in selling, general and administrative expenses in the Company's Condensed Consolidated Statement of Operations and Comprehensive Income.

        The unaudited supplemental pro forma information presented below includes the effects of the Western Coal acquisition as if it had been completed as of January 1, 2010 along with the effects of the recast adjustments described herein. The pro forma results include (i) the impact of certain estimated fair value adjustments, including additional estimated depreciation and depletion expense associated with the acquired mineral interests and property, plant and equipment and (ii) interest expense associated with debt used to fund the acquisition. Accordingly, the following unaudited pro forma financial information should not be considered indicative of either future results or results that might have occurred had the acquisition been consummated as of January 1, 2010 (in thousands):

	For the six months ended June 30, 2011
Revenues	$	1,403,813
Net income	$	253,926

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Derivative Financial Instruments (Details 3) (Derivatives designated as cash flow hedging instruments, USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Derivatives designated as cash flow hedging instruments
Gain (loss) recognized in accumulated other comprehensive income, net of tax	$ (3,364)	$ (547)	$ (5,524)	$ (619)
Gain (loss) reclassified from accumulated other comprehensive income to earnings, net of tax	1,377	(48)	2,254	(94)
Natural gas hedges
Derivatives designated as cash flow hedging instruments
Gain (loss) recognized in accumulated other comprehensive income, net of tax	(3,666)	948	(5,798)	781
Gain (loss) reclassified from accumulated other comprehensive income to earnings, net of tax	1,837		3,279
Interest rate swaps
Derivatives designated as cash flow hedging instruments
Gain (loss) recognized in accumulated other comprehensive income, net of tax	390	(155)	493	(60)
Gain (loss) reclassified from accumulated other comprehensive income to earnings, net of tax	(460)	(48)	(1,025)	(94)
Interest rate cap
Derivatives designated as cash flow hedging instruments
Gain (loss) recognized in accumulated other comprehensive income, net of tax	$ (88)	$ (1,340)	$ (219)	$ (1,340)

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value of Financial Instruments

Schedule of assets and liabilities measured at fair value on a recurring basis

	June 30, 2012
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	81	$	—	$	81
Total assets	$	—	$	81	$	—	$	81
Liabilities:
Interest rate swaps	$	—	$	6,594	$	—	$	6,594

	December 31, 2011
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Equity securities, trading	$	12,369	$	—	$	—	$	12,369
Equity securities, available-for-sale		12,099		—		—		12,099
Interest rate cap		—		432		—		432
Natural gas hedge		—		4,050		—		4,050
Total assets	$	24,468	$	4,482	$	—	$	28,950
Liabilities:
Interest rate swaps	$	—	$	5,683	$	—	$	5,683

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Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2012

Derivative Financial Instruments

Schedule of fair values of derivative instruments

	June 30, 2012		December 31, 2011
Asset derivatives designated as cash flow hedging instruments:
Natural gas hedge(1)	$	—	$	4,050
Interest rate cap(2)		81		432
Total asset derivatives	$	81	$	4,482
Liability derivatives designated as cash flow hedging instruments:
Interest rate swaps(3)	$	6,594	$	5,683

(1)

Included in other current assets at December 31, 2011.

(2)

$39,000 and $143,000 is included in other current assets and $42,000 and $289,000 is included in other long-term assets in the Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011, respectively.

(3)

$3.1 million and $1.8 million is included in other current liabilities and $3.5 million and $3.9 million is included in other long-term liabilities in the Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011, respectively.

Schedule of gains and losses from derivative instruments

	Gain (loss) recognized in accumulated other comprehensive income, net of tax						Gain (loss) reclassified from accumulated other comprehensive income to earnings, net of tax(1)(2)						Ineffective portion of Gain (loss) recognized in earnings
	Three months ended June 30,						Three months ended June 30,						Three months ended June 30,
Derivatives designated as cash flow hedging instruments	2012			2011			2012			2011			2012		2011
Natural gas hedges	$	(3,666	)	$	948		$	1,837		$	—		$	—	$	—
Interest rate swaps		390			(155	)		(460	)		(48	)		—		—
Interest rate cap		(88	)		(1,340	)		—			—			—		—
Total	$	(3,364	)	$	(547	)	$	1,377		$	(48	)	$	—	$	—

	Gain (loss) recognized in accumulated other comprehensive income, net of tax						Gain (loss) reclassified from accumulated other comprehensive income to earnings, net of tax(1)(2)						Ineffective portion of Gain (loss) recognized in earnings
	Six months ended June 30,						Six months ended June 30,						Six months ended June 30,
Derivatives designated as cash flow hedging instruments	2012			2011			2012			2011			2012		2011
Natural gas hedges	$	(5,798	)	$	781		$	3,279		$	—		$	—	$	—
Interest rate swaps		493			(60	)		(1,025	)		(94	)		—		—
Interest rate cap		(219	)		(1,340	)		—			—			—		—
Total	$	(5,524	)	$	(619	)	$	2,254		$	(94	)	$	—	$	—

(1)

Natural gas hedge amounts recorded in miscellaneous income in the Condensed Consolidated Statements of Operations and Comprehensive Income.

(2)

Interest rate swap amounts recorded in interest expense in the Condensed Consolidated Statements of Operations and Comprehensive Income.

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Fair Value of Financial Instruments (Details) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2012 Equity securities	Jun. 30, 2012 Equity securities	Dec. 31, 2011 Recurring Level 1	Dec. 31, 2011 Recurring Level 1 Equity securities	Jun. 30, 2012 Recurring Level 2	Dec. 31, 2011 Recurring Level 2	Jun. 30, 2012 Recurring Level 2 Interest rate cap	Dec. 31, 2011 Recurring Level 2 Interest rate cap	Dec. 31, 2011 Recurring Level 2 Natural Gas Hedge	Jun. 30, 2012 Recurring Level 2 Interest rate swaps	Dec. 31, 2011 Recurring Level 2 Interest rate swaps	Jun. 30, 2012 Recurring Total Fair Value	Dec. 31, 2011 Recurring Total Fair Value	Jun. 30, 2012 Recurring Total Fair Value Interest rate cap	Dec. 31, 2011 Recurring Total Fair Value Interest rate cap	Dec. 31, 2011 Recurring Total Fair Value Natural Gas Hedge	Jun. 30, 2012 Recurring Total Fair Value Interest rate swaps	Dec. 31, 2011 Recurring Total Fair Value Interest rate swaps	Dec. 31, 2011 Recurring Total Fair Value Equity securities
Fair value information
Trading securities				$ 12,369,000															$ 12,369,000
Available-for-sale securities				12,099,000															12,099,000
Total assets							81,000	432,000	4,050,000					81,000	432,000	4,050,000
Total assets			24,468,000		81,000	4,482,000						81,000	28,950,000
Derivative liabilities										6,594,000	5,683,000						6,594,000	5,683,000
Recorded loss related to trading securities still held	(5,900,000)	(12,400,000)
Realized losses on sale of available-for-sale securities		$ (452,000)

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2012

Segment Information

Summarized financial information by reportable segment

	For the three months ended June 30,
	2012			Recast 2011
Revenues:
U.S. Operations	$	466,761		$	511,080
Canadian and U.K. Operations		209,645			259,218
Other		1,168			573
Total Revenues	$	677,574		$	770,871
Segment operating income (loss):
U.S. Operations	$	107,245		$	173,133
Canadian and U.K. Operations		(24,679	)		18,800
Other		(14,593	)		(27,470	)
Total operating income		67,973			164,463
Less interest expense, net		(30,763	)		(31,887	)
Other income (loss)		(5,919	)		24,503
Income from continuing operations before income tax expense		31,291			157,079
Income tax expense		4,535			42,626
Income from continuing operations	$	26,756		$	114,453
Depreciation and depletion:
U.S. Operations	$	43,704		$	39,035
Canadian and U.K. Operations		30,535			33,243
Other		220			192
Total	$	74,459		$	72,470
Capital Expenditures:
U.S. Operations	$	43,851		$	40,972
Canadian and U.K. Operations		78,177			51,411
Other		3,183			(259	)
Total	$	125,211		$	92,124

	For the six months ended June 30,
	2012			Recast 2011
Revenues:
U.S. Operations	$	918,911		$	919,016
Canadian and U.K. Operations		387,996			259,218
Other		2,230			1,371
Total Revenues	$	1,309,137		$	1,179,605
Segment operating income (loss):
U.S. Operations	$	214,226		$	312,106
Canadian and U.K. Operations		(38,234	)		18,800
Other		(23,943	)		(46,676	)
Total operating income		152,049			284,230
Less interest expense, net		(58,553	)		(35,287	)
Other income (loss)		(12,912	)		24,503
Income from continuing operations before income tax expense		80,584			273,446
Income tax expense		13,212			77,180
Income from continuing operations	$	67,372		$	196,266
Depreciation and depletion:
U.S. Operations	$	85,846		$	67,204
Canadian and U.K. Operations		54,671			33,243
Other		435			381
Total	$	140,952		$	100,828
Capital Expenditures:
U.S. Operations	$	79,963		$	85,108
Canadian and U.K. Operations		162,357			51,411
Other		3,736			(102	)
Total	$	246,056		$	136,417

	June 30, 2012		Recast December 31, 2011
Identifiable Assets:
U.S. Operations	$	1,039,630	$	1,118,451
Canadian and U.K. Operations		5,150,719		5,021,521
Other		664,806		716,536
Total	$	6,855,155	$	6,856,508

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Acquisition (Details)	6 Months Ended			1 Months Ended					1 Months Ended					1 Months Ended
	Jun. 30, 2011 USD ($)	Apr. 02, 2011 USD ($)	Apr. 02, 2011 2011 Credit Agreement USD ($)	Dec. 31, 2010 Western Coal Corp	Nov. 30, 2010 Western Coal Corp item	Apr. 02, 2011 Western Coal Corp USD ($)	Dec. 02, 2010 Western Coal Corp CAD	Nov. 17, 2010 Western Coal Corp CAD	Apr. 30, 2011 Western Coal Corp Walter Energy stock options USD ($)	Apr. 30, 2011 Western Coal Corp First transaction USD ($)	Jan. 31, 2011 Western Coal Corp First transaction USD ($)	Apr. 02, 2011 Western Coal Corp First transaction USD ($)	Apr. 02, 2011 Western Coal Corp Second transaction and arrangement agreement USD ($)	Apr. 30, 2011 Western Coal Corp Second transaction and arrangement agreement Common stock of Walter Energy	Apr. 02, 2011 Western Coal Corp Second transaction and arrangement agreement Common stock of Walter Energy USD ($)
Acquisitions
Common shares to be purchased under share purchase agreement					54,500,000
Percentage of outstanding shares to be acquired under the share purchase agreement								19.80%
Acquisition price per share of common stock under the share purchase agreement (in Canadian dollars per share)								11.50
Number of separate transactions					2
Acquisition price per share of common stock under the share purchase agreement (in Canadian dollars per share)							11.50
Number of the entity's shares of common stock offered for exchange under the arrangement agreement				0.114
Common shares purchased under share purchase agreement											25,274,745
Percentage of outstanding shares acquired											9.15%
Cash paid for common shares purchased						$ 2,173,080,000					$ 293,700,000		$ 2,173,080,000
Fair value of shares acquired						314,231,000						314,200,000
Gain on remeasurement of previously held noncontrolling interest	20,553,000									20,500,000
Number of shares									193,498					8,951,558
Fair value									15,500,000						1,200,000,000
Fair value of common stock (in dollars per share)		$ 136.75
Walter Credit Agreement
Revolving credit facility, maximum borrowing capacity			$ 2,725,000,000

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Basis of Presentation

6 Months Ended

Jun. 30, 2012

Basis of Presentation

Basis of Presentation

Note 1—Basis of Presentation

        The accompanying unaudited condensed consolidated financial statements of Walter Energy, Inc. and its subsidiaries (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 to 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 and six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

        The balance sheet at December 31, 2011 has been derived from the audited consolidated financial statements at that date as recast to reflect the effects of finalizing the allocation of the Western Coal purchase price, but does not include all the notes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and related notes for the year ended December 31, 2011 included in the Company's Annual Report on Form 10-K. In addition, certain previously reported three and six months ended June 30, 2011 Condensed Consolidated Statements of Operations and Comprehensive Income balances and six months ended June 30, 2011 Condensed Consolidated Statement of Cash Flows balances have been recast to include the effects of finalizing the allocation of the Western Coal purchase price.

        As described in Note 2, on April 1, 2011 the Company completed the acquisition of all the outstanding common shares of Western Coal Corp. ("Western Coal"). The accompanying financial statements include the results of operations of Western Coal since April 1, 2011.

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Acquisitions (Details 2) (USD $)	3 Months Ended		6 Months Ended			3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended		3 Months Ended	6 Months Ended		3 Months Ended	6 Months Ended								3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Jun. 30, 2012 Canadian and U.K. operations	Jun. 30, 2011 Canadian and U.K. operations	Jun. 30, 2012 Canadian and U.K. operations	Jun. 30, 2011 Canadian and U.K. operations	Jun. 30, 2012 U.S. Operations	Jun. 30, 2011 U.S. Operations	Jun. 30, 2012 U.S. Operations	Jun. 30, 2011 U.S. Operations	Jun. 30, 2011 Previously reported/Preliminary	Jun. 30, 2011 Previously reported/Preliminary	Dec. 31, 2011 Previously reported/Preliminary	Jun. 30, 2011 Western Coal Corp	Jun. 30, 2011 Western Coal Corp	Mar. 31, 2012 Western Coal Corp	Apr. 02, 2011 Western Coal Corp	Apr. 02, 2011 Western Coal Corp Common stock of Walter Energy	Apr. 02, 2011 Western Coal Corp Stock options issued and warrants assumed	Jun. 30, 2012 Western Coal Corp Canadian and U.K. operations	Jun. 30, 2012 Western Coal Corp U.S. Operations	Dec. 31, 2011 Western Coal Corp Previously reported/Preliminary	Jun. 30, 2011 Western Coal Corp Adjustments Purchase price allocation adjustments	Jun. 30, 2011 Western Coal Corp Adjustments Purchase price allocation adjustments	Dec. 31, 2011 Western Coal Corp Adjustments Purchase price allocation adjustments	Jun. 30, 2012 Western Coal Corp Adjustments Purchase price allocation adjustments
Acquisitions
Net income	$ 31,936,000	$ 114,453,000	$ 72,552,000	$ 196,266,000										$ 107,358,000	$ 189,171,000											$ 7,100,000	$ 7,100,000	$ 14,400,000
ASSETS
Inventories	316,505,000		316,505,000		240,437,000											242,607,000
Other current assets	36,928,000		36,928,000		45,649,000											45,627,000
Mineral interests, net	3,010,448,000		3,010,448,000		3,056,258,000											2,946,113,000
Property, plant and equipment, net	1,739,506,000		1,739,506,000		1,631,333,000											1,637,182,000
Goodwill	1,066,754,000		1,066,754,000		1,066,754,000											1,124,597,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Other current liabilities	45,885,000		45,885,000		63,757,000											59,827,000
Deferred income taxes	1,007,065,000		1,007,065,000		1,029,336,000											1,003,383,000
Retained earnings	801,162,000		801,162,000		744,939,000											730,517,000
Company's recast and previously reported condensed consolidated statements of operations
Sales	668,605,000	764,587,000	1,295,903,000	1,171,162,000										766,716,000	1,173,291,000
Cost of sales (exclusive of depreciation and depletion)	486,084,000	466,074,000	917,618,000	684,534,000										462,061,000	680,521,000
Depreciation and depletion	74,459,000	72,470,000	140,952,000	100,828,000		30,535,000	33,243,000	54,671,000	33,243,000	43,704,000	39,035,000	85,846,000	67,204,000	89,426,000	117,784,000
Operating income	67,973,000	164,463,000	152,049,000	284,230,000		(24,679,000)	18,800,000	(38,234,000)	18,800,000	107,245,000	173,133,000	214,226,000	312,106,000	153,649,000	273,416,000
Income before income tax expense	31,291,000	157,079,000	80,584,000	273,446,000										146,265,000	262,632,000
Income tax expense	4,535,000	42,626,000	13,212,000	77,180,000										38,907,000	73,461,000
Net income	31,936,000	114,453,000	72,552,000	196,266,000										107,358,000	189,171,000											7,100,000	7,100,000	14,400,000
Net income per share:
Basic (in dollars per share)	$ 0.51	$ 1.84	$ 1.16	$ 3.36										$ 1.72	$ 3.24
Diluted (in dollars per share)	$ 0.51	$ 1.83	$ 1.16	$ 3.34										$ 1.71	$ 3.22
Company's recast and previously reported condensed consolidated statements of cash flows
Net income	31,936,000	114,453,000	72,552,000	196,266,000										107,358,000	189,171,000											7,100,000	7,100,000	14,400,000
Adjustments to reconcile net income to net cash flows provided by (used in) operating activities:
Depreciation and depletion	74,459,000	72,470,000	140,952,000	100,828,000		30,535,000	33,243,000	54,671,000	33,243,000	43,704,000	39,035,000	85,846,000	67,204,000	89,426,000	117,784,000
Deferred income tax credit			(18,894,000)	(11,121,000)											(14,840,000)
Other			18,360,000	10,247,000											27,521,000
Decrease in current assets, net of effect of business acquisitions:
Inventories			(66,213,000)	38,076,000											14,660,000
Purchase consideration:
Cash consideration																				2,173,080,000
Fair value of shares of common stock issued or stock options issued and warrants																					1,224,126,000	34,765,000
Fair value of consideration transferred																				3,431,971,000
Business Combination Step Acquisition Equity Interest in Acquiree Fair Value																				314,231,000
Total consideration																				3,746,202,000
Fair value of assets acquired and liabilities assumed
Cash and cash equivalents																			34,065,000						34,065,000
Receivables																			163,668,000						163,668,000
Inventories																			121,229,000						121,229,000
Other current assets																			86,498,000						86,475,000				23,000
Mineral interests																			3,086,000,000						2,992,000,000				94,000,000
Property, plant and equipment																			554,192,000						560,894,000				(6,702,000)
Goodwill																			1,065,040,000				992,400,000	72,600,000	1,122,884,000				(57,844,000)
Other long-term assets																			54,150,000						54,150,000
Total assets																			5,164,842,000						5,135,365,000				29,477,000
Accounts payable and accrued liabilities																			184,983,000						184,983,000
Other current liabilities																			86,105,000						82,175,000				3,930,000
Deferred tax liability																			1,046,708,000						1,021,161,000				25,547,000
Other long-term liabilities																			100,844,000						100,844,000
Total liabilities																			1,418,640,000						1,389,163,000				29,477,000
Net assets acquired																			3,746,202,000						3,746,202,000
Acquisition and integration related costs (included in Selling, general and administrative expenses at the end of the period)																	7,200,000	17,100,000
Supplemental Pro forma Combined Results
Revenue																		1,403,813,000
Net income																		$ 258,926,000

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Commitments and Contingencies (Details) (USD $)	1 Months Ended		12 Months Ended	6 Months Ended	1 Months Ended	6 Months Ended		1 Months Ended		6 Months Ended	1 Months Ended	6 Months Ended
	Jun. 30, 2012 D	Jun. 30, 2010 D	Dec. 31, 2008	Jun. 30, 2012 Environmental Matters Walter Coke, Inc. item	Jan. 31, 2011 Environmental Matters Maple Coal Company item	Jun. 30, 2012 Environmental Matters Maple Coal Company item	Jun. 30, 2012 Environmental Matters Maple Coal Company Minimum	May 31, 2012 Securities Class Actions and Shareholder Derivative Actions item	Jan. 31, 2012 Securities Class Actions and Shareholder Derivative Actions item	Jun. 30, 2012 Securities Class Actions and Shareholder Derivative Actions item	Nov. 30, 2009 Securities Class Actions and Shareholder Derivative Actions Western Coal Corp item	Jun. 30, 2012 Securities Class Actions and Shareholder Derivative Actions Western Coal Corp
Commitments and contingencies
Extension period to submit proposed final order (in days)		90
Comment letter period (in days)	30	30
Number of properties that the entity has agreed to remediate				23
Number of properties remediated				16
Number of outlets for which a sufficient connection not shown to establish standing to bring a claim as to discharges						1
Number of outlets for which jurisdiction over claims based on discharges was upheld						1
Penalty sought						$ 229,350	$ 14,000,000
Benefit of deemed liquidation of entity's homebuilding business			167,000,000
Attorny's fees and expenses						103,000
Number of actions								2
Number of executive directors as defendants									3
Number of environmental interest groups filing Clean Water Act citizen's suit					3
Number of complaints										3
Number of non-executive directors as defendants											2
General damages entitled to recover												200,000,000
Punitive damages entitled to recover												$ 20,000,000

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
ASSETS
Cash and cash equivalents	$ 128,680	$ 128,430
Receivables, net	194,217	313,343
Inventories	316,505	240,437
Deferred income taxes	56,645	61,079
Prepaid expenses	63,733	49,974
Other current assets	36,928	45,649
Total current assets	796,708	838,912
Mineral interests, net of accumulated depletion of $132.3 million and $84.2 million, respectively	3,010,448	3,056,258
Property, plant and equipment, net of accumulated depreciation of $687.1 million and $614.6 million, respectively	1,739,506	1,631,333
Deferred income taxes	106,848	109,300
Goodwill	1,066,754	1,066,754
Other long-term assets	134,891	153,951
Total assets	6,855,155	6,856,508
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	49,890	56,695
Accounts payable	155,524	112,661
Accrued expenses	233,749	229,067
Accumulated postretirement benefits obligation	28,181	27,247
Other current liabilities	45,885	63,757
Total current liabilities	513,229	489,427
Long-term debt	2,206,866	2,269,020
Deferred income taxes	1,007,065	1,029,336
Accumulated postretirement benefits obligation	556,758	550,671
Other long-term liabilities	370,908	381,537
Total liabilities	4,654,826	4,719,991
Commitments and contingencies (Note 10)
Stockholders' equity:
Common stock, $0.01 par value per share: Authorized-200,000,000 shares, Issued-62,511,717 and 62,444,905 shares, respectively	625	624
Capital in excess of par value	1,624,652	1,620,430
Retained earnings	801,162	744,939
Accumulated other comprehensive income (loss):
Pension and other postretirement benefit plans, net of tax	(217,746)	(225,541)
Foreign currency translation adjustment	(4,066)	(3,276)
Unrealized loss on hedges, net of tax	(4,057)	(787)
Unrealized investment gain (loss), net of tax	(241)	128
Total stockholders' equity	2,200,329	2,136,517
Total liabilities and stockholders' equity	$ 6,855,155	$ 6,856,508

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Fair Value of Financial Instruments (Details 2) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Carrying amount, cost | 2011 term loan A
Debt
Debt	$ 854.7	$ 894.8
Carrying amount, cost | 2011 term loan B
Debt
Debt	1,273.0	1,333.0
Carrying amount, cost | Revolving Credit Facility
Debt
Debt	59.0	10.0
Fair value | 2011 term loan A
Debt
Debt	842.7	880.6
Fair value | 2011 term loan B
Debt
Debt	1,246.0	1,319.0
Fair value | Revolving Credit Facility
Debt
Debt	$ 58.0	$ 9.7

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) (USD $)	6 Months Ended
	Jun. 30, 2012
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Dividends paid (in dollars per share)	$ 0.25

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Income Taxes (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012 item	Jun. 30, 2011
Income Taxes
Number of key elements of which income tax expense is comprised	2
Income tax provision for continuing operations	$ 12.2	$ 77.2
Estimated effective annual tax rate (as a percent)	15.20%	28.20%
Charge for discrete items	$ 1.0

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Acquisition (Tables)

6 Months Ended

Jun. 30, 2012

Acquisition

Summary of consolidated financial statements amounts as previously reported with preliminary purchase price allocation and as recast with refinements to purchase price allocation

The following table summarizes the Company's recast and previously reported December 31, 2011 consolidated balance sheet amounts (in thousands):

	Recast December 31, 2011(1)		December 31, 2011(2)
ASSETS
Inventories	$	240,437	$	242,607
Other current assets	$	45,649	$	45,627
Mineral interests, net	$	3,056,258	$	2,946,113
Property, plant and equipment, net	$	1,631,333	$	1,637,182
Goodwill	$	1,066,754	$	1,124,597
LIABILITIES AND STOCKHOLDERS' EQUITY
Other current liabilities	$	63,757	$	59,827
Deferred income taxes	$	1,029,336	$	1,003,383
Retained earnings	$	744,939	$	730,517

(1)

As presented in the June 30, 2012 condensed consolidated financial statements herein.

(2)

As previously presented in the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

        The following table summarizes the changes to the Company's recast and previously reported June 30, 2011 Condensed Consolidated Statements of Operations amounts (in thousands):

	Recast June 30, 2011(1)		June 30, 2011(2)
For the three months ended:
Sales	$	764,587	$	766,716
Cost of sales (exclusive of depreciation and depletion)		466,074		462,061
Depreciation and depletion		72,470		89,426
Operating income		164,463		153,649
Income before income tax expense		157,079		146,265
Income tax expense		42,626		38,907
Net income	$	114,453	$	107,358
Net income per share:
Basic	$	1.84	$	1.72
Diluted	$	1.83	$	1.71
For the six months ended:
Sales	$	1,171,162	$	1,173,291
Cost of sales (exclusive of depreciation and depletion)		684,534		680,521
Depreciation and depletion		100,828		117,784
Operating income		284,230		273,416
Income before income tax expense		273,446		262,632
Income tax expense		77,180		73,461
Net income	$	196,266	$	189,171
Net income per share:
Basic	$	3.36	$	3.24
Diluted	$	3.34	$	3.22

(1)

As presented in the June 30, 2012 condensed financial statements herein.

(2)

As previously presented in the condensed consolidated financial statements in the Company's Form 10-Q for the three and six months ended June 30, 2011.

        The following table summarizes the changes to the Company's recast and previously reported June 30, 2011 Condensed Consolidated Statement of Cash Flows amounts (in thousands):

	For the six months ended June 30,
	Recast 2011(1)			2011(2)
Net Income	$	196,266		$	189,171
Adjustments to reconcile net income to net cash flows provided by (used in) operating activities:
Depreciation and depletion	$	100,828		$	117,784
Deferred income tax credit	$	(11,121	)	$	(14,840	)
Other	$	10,247		$	27,521
Decrease in current assets, net of effect of business acquisitions:
Inventories	$	38,076		$	14,660

(1)

As presented in the June 30, 2012 condensed consolidated financial statements herein.

(2)

As previously presented in the condensed consolidated financial statements in the Company's Form 10-Q for the six months ended June 30, 2011.

Western Coal Corp

Acquisitions

Purchase consideration and fair value of assets acquired and liabilities assumed

Purchase consideration:
Cash	$	2,173,080
Fair value of shares of common stock issued		1,224,126
Fair value of stock options issued and warrants		34,765
Fair value of consideration transferred		3,431,971
Fair value of equity interest in Western Coal held before the acquisition		314,231
Total consideration	$	3,746,202

	Preliminary as of December 31, 2011		Adjustments			Final
Fair value of assets acquired and liabilities assumed:
Cash and cash equivalents	$	34,065	$	—		$	34,065
Receivables		163,668		—			163,668
Inventories		121,229		—			121,229
Other current assets		86,475		23			86,498
Mineral interests		2,992,000		94,000			3,086,000
Property, plant and equipment		560,894		(6,702	)		554,192
Goodwill		1,122,884		(57,844	)		1,065,040
Other long-term assets		54,150		—			54,150
Total assets		5,135,365		29,477			5,164,842
Accounts payable and accrued liabilities		184,983		—			184,983
Other current liabilities		82,175		3,930			86,105
Deferred tax liability		1,021,161		25,547			1,046,708
Other long-term liabilities		100,844		—			100,844
Total liabilities		1,389,163		29,477			1,418,640
Net assets acquired	$	3,746,202	$	—		$	3,746,202

Schedule of unaudited pro forma financial information

	For the six months ended June 30, 2011
Revenues	$	1,403,813
Net income	$	253,926

XML

Debt (Details) (USD $)			1 Months Ended		6 Months Ended					6 Months Ended					3 Months Ended	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2012 2011 Credit Agreement	Apr. 02, 2011 2011 Credit Agreement	Jun. 30, 2012 2011 term loan A	Dec. 31, 2011 2011 term loan A	Apr. 02, 2011 2011 term loan A	Jun. 30, 2012 2011 term loan A Minimum	Jun. 30, 2012 2011 term loan A Maximum	Jun. 30, 2012 2011 term loan B	Dec. 31, 2011 2011 term loan B	Apr. 02, 2011 2011 term loan B	Jun. 30, 2012 2011 term loan B Minimum	Jun. 30, 2012 2011 term loan B Maximum	Jun. 30, 2012 Revolving Credit Facility	Jun. 30, 2012 Revolving Credit Facility	Dec. 31, 2011 Revolving Credit Facility	Apr. 02, 2011 Revolving Credit Facility	Jun. 30, 2012 Revolving Credit Facility Minimum	Jun. 30, 2012 Revolving Credit Facility Maximum	Jun. 30, 2012 Other	Dec. 31, 2011 Other
Debt instrument
Total debt	$ 2,256,756,000	$ 2,325,715,000			$ 854,674,000	$ 894,837,000				$ 1,273,326,000	$ 1,333,163,000				$ 59,009,000	$ 59,009,000	$ 10,000,000				$ 69,747,000	$ 87,715,000
Less current debt	(49,890,000)	(56,695,000)
Total long term debt	2,206,866,000	2,269,020,000
Weighted average stated interest rate (as a percent)					3.46%					4.00%					4.22%	4.22%
Debt agreements
Principal amount of credit agreement							950,000,000					1,400,000,000
Revolving credit facility, maximum borrowing capacity				2,725,000,000														375,000,000
Payments of outstanding principal balances of the term loans			100,000,000
Debt instrument, description of variable rate basis					LIBOR or CDOR					LIBOR or CDOR					LIBOR or CDOR
Commitment fee on the unused portion (as a percent)																0.50%
Outstanding standby letters of credit															48,800,000	48,800,000
Availability for future borrowings under the Revolver															$ 267,200,000	$ 267,200,000
Rate of LIBOR floor (as a percent)													1.00%
Basis spread on variable rate (as a percent)								2.25%	3.00%				2.75%	3.00%					2.25%	3.00%

XML

Debt (Tables)

6 Months Ended

Jun. 30, 2012

Debt

Schedule of debt instruments

	June 30, 2012			December 31, 2011			Weighted Average Stated Interest Rate At June 30, 2012	Final Maturity
2011 term loan A	$	854,674		$	894,837		3.46%	2016
2011 term loan B		1,273,326			1,333,163		4.00%	2018
Revolving credit facility		59,009			10,000		4.22%	2016
Other(1)		69,747			87,715		Various	Various
Total debt		2,256,756			2,325,715
Less current debt		(49,890	)		(56,695	)
Total long-term debt	$	2,206,866		$	2,269,020

(1)

This balance includes capital lease obligations and an equipment financing agreement.

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
OPERATING ACTIVITIES
Net income	$ 72,552	$ 196,266
Less income from discontinued operations	(5,180)
Income from continuing operations	67,372	196,266
Adjustments to reconcile net income to net cash flows provided by (used in) operating activities:
Depreciation and depletion	140,952	100,828
Deferred income tax credit	(18,894)	(11,121)
Gain on investment in Western Coal Corp		(20,553)
Other	18,360	10,247
Decrease (increase) in current assets, net of effect of business acquisitions:
Receivables	113,203	(41,571)
Inventories	(66,213)	38,076
Prepaid expenses and other current assets	(22,095)	30
Increase (decrease) in current liabilities, net of effect of business acquisitions:
Accounts payable	81,684	(29,612)
Accrued expenses and other current liabilities	(5,807)	36,769
Cash flows provided by operating activities	308,562	279,359
INVESTING ACTIVITIES
Additions to property, plant and equipment	(246,056)	(136,417)
Acquisition of Western Coal Corp., net of cash acquired		(2,432,693)
Proceeds from sales of investments	12,228
Other	582	5,286
Cash flows used in investing activities	(233,246)	(2,563,824)
FINANCING ACTIVITIES
Proceeds from issuance of debt		2,350,000
Borrowings under revolving credit agreement	112,350	41,461
Repayments on revolving credit agreement	(63,341)	(20,725)
Retirements of debt	(118,003)	(153,310)
Dividends paid	(15,618)	(14,434)
Debt issuance costs		(80,027)
Other	288	1,766
Cash flows provided by (used in) financing activities	(84,324)	2,124,731
Cash flows used in continuing operations	(9,008)	(159,734)
CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash flows provided by investing activities	9,500
Effect of foreign exchange rates on cash	(242)
Net increase (decrease) in cash and cash equivalents	250	(159,734)
Cash and cash equivalents at beginning of period	128,430	293,410
Add: Cash and cash equivalents of discontinued operations at beginning of period		535
Net increase (decrease) in cash and cash equivalents	250	(159,734)
Cash and cash equivalents at end of period	$ 128,680	$ 134,211

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
CONDENSED CONSOLIDATED BALANCE SHEETS
Mineral interests, accumulated depletion (in dollars)	$ 132.3	$ 84.2
Property, plant and equipment, accumulated depreciation (in dollars)	$ 687.1	$ 614.6
Common stock, par value per share (in dollars per share)	$ 0.01	$ 0.01
Common stock, Authorized shares	200,000,000	200,000,000
Common stock, Issued shares	62,511,717	62,444,905

XML

Commitments and Contingencies

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies

Commitments and Contingencies

Note 10—Commitments and Contingencies

Income Tax Litigation

        On December 27, 1989, the Company and most of its U.S. subsidiaries each filed a voluntary petition for reorganization under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Proceedings") in the United States Bankruptcy Court for the Middle District of Florida, Tampa Division (the "Bankruptcy Court"). The Company emerged from bankruptcy on March 17, 1995 (the "Effective Date") pursuant to the Amended Joint Plan of Reorganization dated as of December 9, 1994, as modified on March 1, 1995 (as so modified the "Consensual Plan"). Despite the confirmation and effectiveness of the Consensual Plan, the Bankruptcy Court continues to have jurisdiction over, among other things, the resolution of disputed prepetition claims against the Company and other matters that may arise in connection with or related to the Consensual Plan, including claims related to federal income taxes.

        In connection with the U.S. Bankruptcy Proceedings, the Internal Revenue Service ("IRS") filed a proof of claim in the Bankruptcy Court (the "Proof of Claim") for a substantial amount of taxes, interest and penalties with respect to fiscal years ended August 31, 1983 through May 31, 1994. The Company filed an adversary proceeding in the Bankruptcy Court disputing the Proof of Claim (the "Adversary Proceeding") and the various issues have been litigated in the Bankruptcy Court. An opinion was issued by the Bankruptcy Court in June 2010 as to the remaining disputed issues. The Bankruptcy Court instructed both parties to submit a proposed final order addressing all issues that have been litigated for the tax years 1983 through 1995 in the Adversary Proceeding by late August 2010. At the request of both parties, the Bankruptcy Court granted an extension of time of 90 days from the initial submission date to submit the proposed final order. Additional extensions of time to submit the proposed final order were granted in November 2010, February 2011, May 2011, September 2011 and January 2012. At the request of both parties, in May 2012 the Bankruptcy Court granted an additional extension of time until January 8, 2013 to submit the proposed final order.

        The amounts initially asserted by the Proof of Claim do not reflect the subsequent resolution of various issues through settlements or concessions by the parties. The Company believes that any financial exposure with respect to those issues that have not been resolved or settled in the Proof of Claim is limited to interest and possible penalties and the amount of tax assessed has been offset by tax reductions in future years. All of the issues in the Proof of Claim, which have not been settled or conceded, have been litigated before the Bankruptcy Court and are subject to appeal but only at the conclusion of the entire Adversary Proceeding.

        The Company believes that those portions of the Proof of Claim, which remain in dispute or are subject to appeal, substantially overstate the amount of taxes allegedly owed. However, because of the complexity of the issues presented and the uncertainties associated with litigation, the Company is unable to predict the ultimate outcome of the Adversary Proceeding.

        The IRS completed its audit of the Company's federal income tax returns for the years ended May 31, 2000 through December 31, 2005. The IRS issued 30-Day Letters to the Company in June 2010, proposing changes to tax for these tax years. The Company believes its tax filing positions have substantial merit and filed a formal protest with the IRS within the prescribed 30-day time limit for those issues which have not been previously settled or conceded. The IRS filed a rebuttal to the Company's formal protest and the case was assigned to the Appeals Division of the IRS. The Appeals Division convened a hearing on March 8, 2011 and heard arguments from both parties as to issues not settled or conceded for the 2000 through 2005 audit period. At this time, no final resolution has been reached with the Appeals Division pertaining to these matters. The disputed issues in this audit period are similar to the issues remaining in the Proof of Claim and consequently, should the IRS prevail on its positions, the Company believes its financial exposure is limited to interest and possible penalties.

        During the second quarter of 2012, the IRS completed its audit of the Company's federal income tax returns for the years 2006 through 2008 and has proposed adjustments to tax for these periods. The IRS issued a 30-Day Letter with proposed adjustments and the Company responded to the IRS within the prescribed 30-day time limit. The proposed adjustments are similar to issues in a prior Proof of Claim and include a proposed adjustment to a worthless stock deduction reported in the Company's 2008 federal income tax return. In 2008, the Company recorded a benefit attributable to the worthless stock deduction of $167.0 million as a result of the deemed liquidation of its homebuilding business on December 31, 2008. The Company has evaluated all of the proposed adjustments, including the proposed adjustment related to the worthless stock deduction, and believes the tax filing positions have substantial merit.

        The IRS is conducting an audit of the Company's income tax returns filed for 2009 and 2010. Since the IRS examination is ongoing, any resulting tax deficiency or overpayment cannot be estimated at this time. During 2012, the statute of limitations for assessing additional income tax deficiencies will expire for certain tax years in several state tax jurisdictions. The expiration of the statute of limitations for these years is expected to have an immaterial impact on the total uncertain income tax positions and net income.

        The Company believes that all of its current and prior tax filing positions have substantial merit and intends to defend vigorously any tax claims asserted. While results cannot be predicted with certainty, the Company believes that it has sufficient accruals to address any claims and that the final outcomes of such claims will not have a material adverse effect on the Company's consolidated financial statements.

Environmental Matters

        The Company is subject to a wide variety of laws and regulations concerning the protection of the environment, both with respect to the construction and operation of its plants, mines and other facilities and with respect to remediating environmental conditions that may exist at its own and other properties.

        The Company believes that it is in substantial compliance with federal, state and local environmental laws and regulations. The Company accrues for environmental expenses resulting from existing conditions that relate to past operations when the costs are probable and can be reasonably estimated.

Walter Coke, Inc.

        Walter Coke entered into a decree order in 1989 relative to a Resource Conservation Recovery Act ("RCRA") compliance program mandated by the Environmental Protection Agency ("EPA"). A RCRA Facility Investigation ("RFI") Work Plan was prepared which proposed investigative tasks to assess the presence of contamination at the Walter Coke facility. A work plan was approved in 1994 and the Phase I investigations were conducted and completed between 1995 and 1999. Phase II investigations for the Chemical Plant/Coke Plant and Biological Treatment Facility and Sewers/Land Disposal Areas at the Walter Coke facility were performed in 2000 and 2001 and are complete. At the end of 2004, the EPA re-directed Walter Coke's RFI efforts toward completion of the Environmental Indicator ("EI") determinations for the Current Human Exposures. This EI effort was completed to assist the EPA in meeting goals set by the Government Performance Results Act ("GPRA") for RCRA by 2005. Walter Coke implemented the approved EI sampling plan in April 2005. The EPA approved and finalized the EI determinations for Walter Coke's Birmingham facility in September 2005. In an effort to refocus the RFI, the EPA approved technical comments on the Phase II RFI report and the report submitted as part of the EI effort. A Phase III work plan was submitted to the EPA during the first quarter of 2007. The EPA commented on the Phase III plan and Walter Coke responded. Subsequently, a meeting was held with the EPA during the third quarter of 2007 with the objective of finalization of the Phase III plan. Phase III sampling reports were submitted in March 2009 and June 2009. Beyond the scope of the Phase III activity performed in 2007 through 2009, additional requests by EPA expanded the scope of the project which required additional sampling and testing. In January 2008, as a follow-up to the EI determination, the EPA requested that Walter Coke perform additional soil sampling and testing in the neighborhoods surrounding its facility. Subsequent to EPA's initial request and presentation of a residential sampling plan to EPA by Walter Coke, the plan was finalized and community involvement initiated, with sampling and testing commencing in July 2009. The results of this sampling and testing were submitted to the EPA for review in December 2009. In conjunction with the plan, Walter Coke agreed to remediate portions of 23 properties based on the 2009 sampling and that process was started in July 2011. As of June 30, 2012, Walter Coke had completed soil removal action at portions of 16 residential properties for which access agreements were obtained. In December 2011, the EPA notified Walter Coke in the form of a General Notice Letter that it proposed that the offsite remediation project be classified and managed as a Superfund site under CERCLA, allowing other Potentially Responsible Parties (PRP's) to potentially be held responsible.

        The Company has incurred costs to investigate the presence of contamination at the Walter Coke facility and to define remediation actions to address this environmental liability in accordance with the agreements reached with the EPA under the RFI and the residential soil sampling conducted by Walter Coke in the neighborhoods surrounding its facility. At June 30, 2012, the Company has an amount accrued that is probable and can be reasonably estimated for the costs to be incurred to identify and define remediation actions, as well as to perform certain remedial tasks which can be quantified, in accordance with the agreements reached and proposals that continue to be coordinated with the EPA to date. The amount of this accrual is not material to the financial statements. While it is probable that the Company will incur additional future costs to remediate environmental liabilities at the Walter Coke facility, the amount of such additional costs cannot be reasonably estimated at this time. Because the RCRA and CERCLA compliance programs are in the study phase with negotiation of final orders ongoing, until these processes are complete, the Company is unable to fully estimate the cost of remediation activities that will be required. Although no assurances can be given that the Company will not be required in the future to make material expenditures relating to the Walter Coke site or other sites, management does not believe at this time that the cleanup costs, if any, associated with these sites will have a material adverse effect on the financial condition of the Company, but such cleanup costs could be material to results of operations in a future reporting period.

        The Company and Walter Coke were named in a suit filed by Louise Moore on April 26, 2011 (Louise Moore v. Walter Energy, Inc. and Walter Coke, Inc., Case No. 2:11-CV-01391) in the federal District Court for the Northern District of Alabama. This is a putative civil class action alleging state law tort claims arising from the alleged presence on properties of substances, including arsenic, BaP, and other hazardous substances, allegedly as a result of current and/or historic operations in the area conducted by the companies and/or their predecessors. This action is still in the early stages of litigation. On June 6, 2011, the plaintiff filed an amended complaint eliminating Walter Energy as a defendant and amending the claims alleged against Walter Coke to relate to Walter Coke's alleged conduct for the period commencing after March 2, 1995. Based on initial evaluation, management believes that both procedural and substantive defenses are available to the Company and Walter Coke intends to vigorously defend this matter. No specific dollar value has been claimed in the suit's demand for monetary damages. On June 20, 2011, Walter Coke filed a Motion to Dismiss which was heard on October 28, 2011. As of the date of filing this quarterly report on Form 10-Q, a ruling has not been received.

Maple Coal Company

        Maple Coal Company ("Maple") was the subject of a compliance order issued against its water discharge permit in April 2007 by the West Virginia Department of Environmental Protection ("WVDEP"). This order provided that Maple would have until April 5, 2010 to comply with certain water quality-based effluent limitations for selenium concentrations in discharges from its mining operations.

        Maple sought a permit modification to extend the selenium compliance date beyond April 5, 2010. That permit modification application was denied by the WVDEP. Maple appealed that denial to the West Virginia Environmental Quality Board ("EQB"), which issued a stay of those limits, to be effective until it had issued a ruling. The Kanawha County (West Virginia) Circuit Court also issued stay orders, preventing the selenium effluent limits in Maple's National Pollutant Discharge Elimination System ("NPDES") permit from taking effect until the exhaustion of all appeals from the WVDEP denial and the conclusion of the WVDEP's civil enforcement action.

        The EQB ruled against Maple's appeal. Maple has filed an appeal of these rulings (consolidated into one case) with the Fayette County (West Virginia) Circuit Court. In connection with this administrative appeal, Maple has also obtained a stay order from the Fayette County Circuit Court, suspending the effective date of the selenium limits in its NPDES permit pending the outcome of that appeal. The parties to that appeal agreed to defer briefing, pending negotiation of a comprehensive settlement of all such issues (discussed below) and the Court entered an order suspending the briefing schedule.

        In a related action, in June 2010 the WVDEP instituted a civil enforcement action against Maple seeking to enforce effluent limits for non-selenium parameters found in the Maple permit, asserting violations of various in-stream water quality standards, and alleging a violation of the April 5, 2007 selenium compliance order. Maple has entered into a comprehensive consent decree with the WVDEP with civil penalties of $229,350, resolving that case and the EQB case mentioned above.

        In a second related action, in January 2011 three environmental interest groups filed a Clean Water Act citizen's suit against Maple, seeking more than $14 million in civil penalties for selenium violations since April 2010 and injunctive relief in the form of mandatory treatment plant installations. The plaintiffs filed a motion for partial summary judgment on jurisdiction and liability, and Maple filed a cross-motion for summary judgment. On September 2, 2011, the Court issued a memorandum opinion and order (the "Sept. 2 Order") granting, in part, and denying, in part, both motions. In partially granting Maple's motion, the Court held that the plaintiffs' members had not shown a sufficient connection to establish standing to bring a claim as to discharges from one of the outlets under the Maple NPDES Permit at issue. The Court upheld jurisdiction over claims based on discharges from one of the outlets, and found that the plaintiffs were entitled to summary judgment on liability as to past and continuing selenium discharges from that outlet. The plaintiffs filed a motion to amend judgment, asking the Court to reverse its Sept. 2 Order as to their dismissed claims, that was denied by Order dated October 24, 2011. Maple, in turn, filed a motion seeking the right to file an interlocutory appeal of that part of the Court's Sept. 2 Order that denied its motion to dismiss based on the WVDEP's diligent enforcement against Maple, which the Court denied by order dated December 19, 2011. On June 26, 2012, the Court entered a Consent Decree between the parties to this federal action ("Federal Consent Decree"), resolving all claims asserted against Maple. The Federal Consent Decree requires the payment of approximately $103,000 in attorney's fees and expenses and that Maple complete additional documentation as part of its implementation of the WVDEP Consent Decree.

        In addition, these same plaintiffs in the federal lawsuit described immediately above served a second "Notice of Intent to Sue" under the Clean Water Act on September 23, 2011, alleging that Maple is liable for having caused selenium water quality standard violations authorized under a different NPDES permit. Maple responded to that notice on October 31, 2011, and provisions that address the violations alleged in this second notice were included as a part of the WVDEP Consent Decree. Although the plaintiffs did not amend their earlier suit addressing those threatened claims, they were effectively resolved by the Federal Consent Decree.

Securities Class Actions and Shareholder Derivative Actions

        On January 26, 2012 and March 15, 2012, putative class actions were filed against Walter Energy, Inc. and some of its current and former senior executive officers in the U.S. District Court for the Northern District of Alabama (Rush v. Walter Energy, Inc., et al.). The three executive officers named in the complaints are: Keith Calder, Walter's former CEO; Walter Scheller, the Company's current CEO and a director; and Neil Winkelmann, former President of Walter's Canadian and European Operations (collectively the "Individual Defendants"). The complaints were filed by Peter Rush and Michael Carney, purported shareholders of Walter Energy who each seek to represent a class of Walter Energy shareholders who purchased common stock between April 20, 2011 and September 21, 2011.

        These complaints allege that Walter Energy and the Individual Defendants made false and misleading statements regarding the Company's operations outlook for the second quarter of 2011. The complaints further allege that the Company and the Individual Defendants knew that these statements were misleading and failed to disclose material facts that were necessary in order to make the statements not misleading. Plaintiffs claim violations of Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5 promulgated thereunder, and Section 20(a) of the 1934 Act. On May 30, 2012, the two actions were consolidated into In re Walter Energy, Inc. Securities Litigation. The court also appointed the Government of Bermuda Contributory and Public Service Superannuation Pension Plans as well as the Stephen C. Beaulieu Revocable Trust to be lead plaintiffs and approved lead plaintiffs' selection of Robbins Geller Rudman & Dowd LLP and Kessler Topaz Meltzer & Check, LLP as lead plaintiffs' counsel for the consolidated action. A consolidated amended complaint has not yet been filed. Walter Energy and the other named defendants believe that there is no merit to the claims alleged and intend to vigorously defend these actions.

        On February 7, 2012, a shareholder derivative lawsuit was filed in the 10th Judicial Circuit of Alabama (Israni v. Clark et al.). On February 10, 2012, a second shareholder derivative suit was filed in the same court (Himmel v. Scheller et al.), and on February 16, 2012 a third derivative suit was filed (Walters v. Scheller et al.). All three complaints name as defendants the Company's current Board of Directors, Keith Calder and Neil Winkelmann. The Company is named as a nominal defendant in each complaint. The three complaints allege similar facts to those alleged in the Rush complaint. The complaints variously assert state law claims for breaches of fiduciary duties for alleged failures to maintain internal controls and to properly manage the Company, unjust enrichment, waste of corporate assets, gross mismanagement and abuse of control. The three derivative actions seek, among other things, recovery for the Company for damages that the Company suffered as a result of alleged wrongful conduct. On April 11, 2012, the Court consolidated these shareholder derivative suits. Walter Energy has entered into a stipulation with the lead plaintiffs in the consolidated derivative suit, pursuant to which, all proceedings in the derivative action are stayed pending the resolution of Walter Energy's anticipated motion to dismiss in the putative securities class action.

        On March 1, 2012, a shareholder derivative lawsuit was filed in the U.S. District Court for the Northern District of Alabama (Makohin v. Clark, et al.). This complaint names as defendants the Company's current Board of Directors and Keith Calder. The Company is named as a nominal defendant. This complaint, like the state court derivative claims, alleges similar facts to those alleged in the Rush complaint. The Makohin complaint asserts state law claims for breaches of fiduciary duties and unjust enrichment. The derivative action seeks, among other things, recovery for the Company for damages that the Company suffered as a result of alleged wrongful conduct. This plaintiff has also agreed to temporarily stay the action pending resolution of Walter Energy's anticipated Motion to Dismiss in the putative securities class action.

        Walter Energy and the other named defendants believe that there is no merit to the claims alleged in these shareholder derivative lawsuits and intend to vigorously defend these actions.

        In November 2009, Western Coal was named as a defendant in a statement of claim issued by a plaintiff who seeks leave of the Ontario Courts to proceed with a securities class action. This claim also named Western Coal's former President and director, John Hogg, and two of its non-executive directors, John Brodie and Robert Chase, as defendants.

        The plaintiff subsequently delivered an amended claim that added new allegations that seeks to have the amended claim certified as a class action separately from the proposed securities class action allegations. The new allegations focused on certain transactions the plaintiff claims were oppressive and unfair to the interests of shareholders. The amended claim included additional defendants of Western Coal's former Chairman, John Byrne, its remaining non-executive directors John Conlon and Charles Pitcher, Audley European Opportunities Master Fund Limited, Audley Capital Management Limited, and Audley Advisors LLP.

        The proposed securities claims allege that those persons who acquired or disposed of Western Coal shares between November 14, 2007 and December 10, 2007 should be entitled to recover $200 million for general damages and $20 million in punitive damages. The plaintiff alleges that Western Coal's consolidated financial statements for the second quarter of fiscal 2008 and the accompanying news release issued on November 14, 2007 misrepresented Western Coal's financial condition and that Western Coal failed to make full, plain and true disclosure of all material facts and changes.

        The plaintiff's oppression claims are advanced in respect of security holders in the period between April 26, 2007 and July 13, 2009. The claims are that the defendants caused Western Coal to enter into transactions that had a dilutive effect on the interests of shareholders. The damages associated with these alleged dilutive effects have not been developed or quantified.

        The plaintiff's motions to proceed with securities claims and also to certify the securities and oppression claims as class actions were argued in June. The court has reserved decision, and it is not known when the decision will be rendered.

        Western Coal and the other named defendants will continue to vigorously defend the allegations. They maintain that there is no merit to the claims and that the damages are without foundation and excessive.

Miscellaneous Litigation

        The Company and its subsidiaries are parties to a number of other lawsuits arising in the ordinary course of their businesses. The Company records costs relating to these matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of these matters on the Company's future results of operations cannot be predicted with certainty as any such effect depends on future results of operations and the amount and timing of the resolution of such matters. While the results of litigation cannot be predicted with certainty, the Company believes that the final outcome of such other litigation will not have a material adverse effect on the Company's consolidated financial statements.

Commitments and Contingencies—Other

        In the opinion of management, accruals associated with contingencies incurred in the normal course of business are sufficient. Resolution of existing known contingencies is not expected to significantly affect the Company's financial position and results of operations.

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Jul. 31, 2012
Document and Entity Information
Entity Registrant Name	Walter Energy, Inc.
Entity Central Index Key	0000837173
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		62,514,140
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2

XML

Derivative Financial Instruments

6 Months Ended

Jun. 30, 2012

Derivative Financial Instruments

Derivative Financial Instruments

Note 11—Derivative Financial Instruments

Interest Rate Swaps

        On June 27, 2011, the Company entered into an interest rate swap agreement with a notional value of $450.0 million. The objective of the swap is to protect against the variability in expected future cash flows attributable to changes in the benchmark interest rate related to interest payments required under the 2011 Credit Agreement. The interest rate on the debt is subject to change due to fluctuations in the benchmark interest rate of 3-month LIBOR. The structure of the hedge is a three year amortizing interest rate swap based on a 1.17% fixed rate with quarterly fixed rate and floating rate payment dates beginning on July 18, 2011. The hedge will be settled upon maturity and is being accounted for as a cash flow hedge. Changes in the fair value of the hedge that take place through the date of maturity are reported in accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings.

        On December 30, 2008, the Company entered into an interest rate hedge agreement with a notional value of $31.5 million. The objective of the hedge is to protect against the variability in expected future cash flows attributable to changes in the benchmark interest rate related to 62 of the 64 monthly interest payments required under an equipment financing arrangement for a new longwall shield system entered into on October 21, 2008. The interest rate on the debt is subject to change due to fluctuations in the benchmark interest rate of 1-month LIBOR. The structure of the hedge is a 62 month amortizing interest rate swap based on a 1.84% fixed rate with monthly fixed rate and floating rate payment dates beginning on February 1, 2009. The hedge will be settled upon maturity and is being accounted for as a cash flow hedge. Changes in the fair value of the hedge that take place through the date of maturity are reported in accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings.

Interest Rate Cap

        On June 27, 2011, the Company entered into an interest rate cap agreement related to interest payments required under the 2011 Credit Agreement with a notional value of $255.0 million. The objective of the cap is to protect against the variability in expected future cash flows attributable to changes in the benchmark interest rate above 2.00%. The interest rate on the debt is subject to change due to fluctuations in the benchmark interest rate of 3-month LIBOR. The structure of the hedge is a three year amortizing interest rate cap based on a strike price of 2.00% with quarterly fixed rate and floating rate payment dates beginning on July 7, 2011. The hedge will be settled upon maturity and is being accounted for as a cash flow hedge. Changes in the fair value of the hedge that take place through the date of maturity are reported in accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings.

Natural Gas Hedge

        Revenues derived from the sale of natural gas are subject to volatility based on changes in market prices. In order to reduce the risk associated with natural gas price volatility, on June 7, 2011 the Company entered into a one year swap contract to hedge 4.2 million MMBTUs of natural gas sales beginning in July 2011 and ending June 2012, at a price of $5.00 per MMBTU. The swap agreement hedged approximately 35% of anticipated natural gas sales from July 2011 until June 2012. The hedge was settled upon maturity and was accounted for as a cash flow hedge. The Company did not have any commodity hedges outstanding at June 30, 2012.

        The following table presents the fair values of the Company's derivative instruments as well as the classification on the Condensed Consolidated Balance Sheets (in thousands). See Note 12 for additional information related to the fair values of our derivative instruments.

	June 30, 2012		December 31, 2011
Asset derivatives designated as cash flow hedging instruments:
Natural gas hedge(1)	$	—	$	4,050
Interest rate cap(2)		81		432
Total asset derivatives	$	81	$	4,482
Liability derivatives designated as cash flow hedging instruments:
Interest rate swaps(3)	$	6,594	$	5,683

(1)

Included in other current assets at December 31, 2011.

(2)

$39,000 and $143,000 is included in other current assets and $42,000 and $289,000 is included in other long-term assets in the Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011, respectively.

(3)

$3.1 million and $1.8 million is included in other current liabilities and $3.5 million and $3.9 million is included in other long-term liabilities in the Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011, respectively.

        The following tables present the gains and losses from derivative instruments for the three and six months ended June 30, 2012 and 2011 and their location within the condensed consolidated financial statements (in thousands). The Company utilizes only cash flow hedges that are considered highly effective.

	Gain (loss) recognized in accumulated other comprehensive income, net of tax						Gain (loss) reclassified from accumulated other comprehensive income to earnings, net of tax(1)(2)						Ineffective portion of Gain (loss) recognized in earnings
	Three months ended June 30,						Three months ended June 30,						Three months ended June 30,
Derivatives designated as cash flow hedging instruments	2012			2011			2012			2011			2012		2011
Natural gas hedges	$	(3,666	)	$	948		$	1,837		$	—		$	—	$	—
Interest rate swaps		390			(155	)		(460	)		(48	)		—		—
Interest rate cap		(88	)		(1,340	)		—			—			—		—
Total	$	(3,364	)	$	(547	)	$	1,377		$	(48	)	$	—	$	—

	Gain (loss) recognized in accumulated other comprehensive income, net of tax						Gain (loss) reclassified from accumulated other comprehensive income to earnings, net of tax(1)(2)						Ineffective portion of Gain (loss) recognized in earnings
	Six months ended June 30,						Six months ended June 30,						Six months ended June 30,
Derivatives designated as cash flow hedging instruments	2012			2011			2012			2011			2012		2011
Natural gas hedges	$	(5,798	)	$	781		$	3,279		$	—		$	—	$	—
Interest rate swaps		493			(60	)		(1,025	)		(94	)		—		—
Interest rate cap		(219	)		(1,340	)		—			—			—		—
Total	$	(5,524	)	$	(619	)	$	2,254		$	(94	)	$	—	$	—

(1)

Natural gas hedge amounts recorded in miscellaneous income in the Condensed Consolidated Statements of Operations and Comprehensive Income.

(2)

Interest rate swap amounts recorded in interest expense in the Condensed Consolidated Statements of Operations and Comprehensive Income.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Revenues:
Sales	$ 668,605	$ 764,587	$ 1,295,903	$ 1,171,162
Miscellaneous income	8,969	6,284	13,234	8,443
Total revenues	677,574	770,871	1,309,137	1,179,605
Costs and expenses:
Cost of sales (exclusive of depreciation and depletion)	486,084	466,074	917,618	684,534
Depreciation and depletion	74,459	72,470	140,952	100,828
Selling, general and administrative	35,845	57,521	72,092	89,403
Postretirement benefits	13,213	10,343	26,426	20,610
Total costs and expenses	609,601	606,408	1,157,088	895,375
Operating income	67,973	164,463	152,049	284,230
Interest expense	(31,104)	(32,047)	(59,171)	(35,603)
Interest income	341	160	618	316
Other income (loss)	(5,919)	24,503	(12,912)	24,503
Income from continuing operations before income tax expense	31,291	157,079	80,584	273,446
Income tax expense	4,535	42,626	13,212	77,180
Income from continuing operations	26,756	114,453	67,372	196,266
Income from discontinued operations	5,180		5,180
Net income	31,936	114,453	72,552	196,266
Basic income per share:
Income from continuing operations (in dollars per share)	$ 0.43	$ 1.84	$ 1.08	$ 3.36
Income from discontinued operations (in dollars per share)	$ 0.08		$ 0.08
Net income (in dollars per share)	$ 0.51	$ 1.84	$ 1.16	$ 3.36
Diluted income per share:
Income from continuing operations (in dollars per share)	$ 0.43	$ 1.83	$ 1.08	$ 3.34
Income from discontinued operations (in dollars per share)	$ 0.08		$ 0.08
Net income (in dollars per share)	$ 0.51	$ 1.83	$ 1.16	$ 3.34
Comprehensive income	$ 30,637	$ 101,722	$ 75,918	$ 196,192
Dividends per share (in dollars per share)	$ 0.125	$ 0.125	$ 0.25	$ 0.25

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Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes

Income Taxes

Note 5—Income Taxes

        The Company estimates its annual effective tax rate at the end of each interim reporting period which is used to record the provision for income taxes in the interim financial statements. The tax effect of unusual or infrequently occurring items, including effects of changes in tax laws or rates, are reported in the interim period in which they occur. The Company's interim period's income tax expense is comprised of two key elements: 1) estimated tax expense applying our annual effective tax rate to our year to date earnings, and 2) the tax effect of unusual or infrequent items that occur in the period.

        The Company's income tax provision for continuing operations, excluding discrete items, for the six months ended June 30, 2012 was $12.2 million, or an effective rate of 15.2% of pre-tax income, compared to a tax provision for the six months ended June 30, 2011 of $77.2 million, or an effective rate of 28.2% of pre-tax income. The lower effective tax rate during the first six months of 2012 compared to the same period in 2011 is the result of a larger favorable impact of percentage depletion and the change in the geographical mix of income and losses as a result of the acquisition of Western Coal Corp. The provision for income taxes for the six months ended June 30, 2012 includes a charge for discrete items of $1.0 million due primarily to recording a valuation allowance on U.S. capital losses expected to expire before utilization.

        The Company has not provided U.S. income taxes and foreign withholding taxes on the undistributed earnings of foreign subsidiaries as of June 30, 2012 because it intends to indefinitely reinvest such earnings outside the U.S. If this intent changes, additional income tax expense would likely be recorded due to the differential in tax rates between the U.S. and the international jurisdictions. If foreign earnings were to be repatriated in the future, the related U.S. tax liability on such repatriation may be partially reduced by any foreign income taxes previously paid on these earnings. Determination of the amount of taxes that might be paid on these undistributed earnings if eventually remitted is not practicable.

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Inventories

6 Months Ended

Jun. 30, 2012

Inventories

Inventories

Note 4—Inventories

        Inventories are summarized as follows (in thousands):

	June 30, 2012		Recast December 31, 2011
Coal	$	235,602	$	180,537
Raw materials and supplies		80,903		59,900
Total inventories	$	316,505	$	240,437

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Inventories (Tables)

6 Months Ended

Jun. 30, 2012

Inventories

Schedule of inventories

	June 30, 2012		Recast December 31, 2011
Coal	$	235,602	$	180,537
Raw materials and supplies		80,903		59,900
Total inventories	$	316,505	$	240,437

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2012

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Note 12—Fair Value of Financial Instruments

        Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three level hierarchy has been established for valuing assets and liabilities based on how transparent (observable) the inputs are that are used to determine fair value, with the inputs considered most observable categorized as Level 1 and those that are the least observable categorized as Level 3. Hierarchy levels are defined as follows:

Level 1:	Quoted prices in active markets for identical assets and liabilities;
Level 2:	Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and
Level 3:	Unobservable inputs that are supported by little or no market data which require the reporting entity to develop its own assumptions.

        The following table presents information about the Company's assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2012 and December 31, 2011 and indicate the fair value hierarchy of the valuation techniques utilized to determine such values. For some assets, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When this is the case, the asset is categorized based on the level of the most significant input to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment and considers factors specific to the assets being valued.

	June 30, 2012
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	81	$	—	$	81
Total assets	$	—	$	81	$	—	$	81
Liabilities:
Interest rate swaps	$	—	$	6,594	$	—	$	6,594

	December 31, 2011
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Equity securities, trading	$	12,369	$	—	$	—	$	12,369
Equity securities, available-for-sale		12,099		—		—		12,099
Interest rate cap		—		432		—		432
Natural gas hedge		—		4,050		—		4,050
Total assets	$	24,468	$	4,482	$	—	$	28,950
Liabilities:
Interest rate swaps	$	—	$	5,683	$	—	$	5,683

        Below is a summary of the Company's valuation techniques for Level 1 and Level 2 financial assets and liabilities:

        Equity securities—Changes in the fair value of trading securities are recorded in other income (loss) and determined using observable market prices. For the three and six months ended June 30, 2012 a loss of $5.9 million and $12.4 million, respectively was recorded related to trading securities held at the reporting date. Realized losses of $452,000 on the sale of available-for-sale securities were recorded in other income (loss) during the six months ended June 30, 2012 and determined using the specific identification method.

        Interest rate cap—The fair value of the interest rate cap was determined using quoted dealer prices for similar contracts in active over-the-counter markets.

        Natural gas hedge—The fair value of the natural gas hedge was determined using quoted dealer prices for similar contracts in active over-the-counter markets.

        Interest rate swaps—The fair value of interest rate swaps were determined using quoted dealer prices for similar contracts in active over-the-counter markets.

        The following methods and assumptions were used to estimate the fair value for which the fair value option was not elected:

        Cash and cash equivalents, receivables and accounts payable—The carrying amounts reported in the balance sheet approximate fair value.

        Debt—Debt associated with the Company's 2011 term loan A and term loan B in the amount of $854.7 million and $1.273 billion, respectively, at June 30, 2012 and $894.8 million and $1.333 billion, respectively, at December 31, 2011 is carried at cost. Debt associated with the Company's revolving credit facility in the amount of $59.0 million at June 30, 2012 and $10.0 million at December 31, 2011 is carried at cost. The estimated fair value of the Company's term loan A, term loan B and Revolver was $842.7 million, $1.246 billion and $58.0 million at June 30, 2012, respectively, and $880.6 million, $1.319 billion and $9.7 million at December 31, 2011, respectively, based on similar transactions and yields in an active market for similarly rated debt (Level 2).

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Comprehensive Income

6 Months Ended

Jun. 30, 2012

Comprehensive Income

Comprehensive Income

Note 8—Comprehensive Income

        Comprehensive income is comprised of net income, changes in pension and other postretirement benefit plans, unrealized gains or losses on investments, gains or losses from the effect of cash flow hedges and foreign currency translation adjustments. Foreign currency translation adjustments are not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries. The differences between net income and comprehensive income for the three and six months ended June 30, 2012 and 2011 were as follows (in thousands):

	For the three months ended June 30,
	2012			Recast 2011
Net income	$	31,936		$	114,453
Change in pension and other postretirement benefit plans, net of deferred taxes of $2.4 and $1.8 million, respectively		3,897			3,085
Change in foreign currency translation adjustment		(3,209	)		(1,101	)
Change in unrealized loss on hedges, net of deferred taxes of $1.2 million and $0.4 million, respectively		(1,987	)		(595	)
Change in unrealized loss on investments, net of deferred taxes of $7.3 million		—			(14,120	)
Comprehensive income	$	30,637		$	101,722

	For the six months ended June 30,
	2012			Recast 2011
Net income	$	72,552		$	196,266
Change in pension and other postretirement benefit plans, net of deferred taxes of $4.8 and $3.7 million, respectively		7,795			6,234
Change in foreign currency translation adjustment		(790	)		(1,101	)
Change in unrealized loss on hedges, net of deferred taxes of $2.0 million and $0.4 million, respectively		(3,270	)		(713	)
Change in unrealized loss on investments, net of deferred taxes of $0.0 million and $1.7 million, respectively		(369	)		(4,494	)
Comprehensive income	$	75,918		$	196,192

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Debt

6 Months Ended

Jun. 30, 2012

Debt

Debt

Note 6—Debt

        Debt consisted of the following (in thousands):

	June 30, 2012			December 31, 2011			Weighted Average Stated Interest Rate At June 30, 2012	Final Maturity
2011 term loan A	$	854,674		$	894,837		3.46%	2016
2011 term loan B		1,273,326			1,333,163		4.00%	2018
Revolving credit facility		59,009			10,000		4.22%	2016
Other(1)		69,747			87,715		Various	Various
Total debt		2,256,756			2,325,715
Less current debt		(49,890	)		(56,695	)
Total long-term debt	$	2,206,866		$	2,269,020

(1)

This balance includes capital lease obligations and an equipment financing agreement.

        2011 Credit Agreement    On April 1, 2011, the Company entered into a $2.725 billion credit agreement (the "2011 Credit Agreement") to partially fund the acquisition of Western Coal and to pay off all outstanding loans under the 2005 Credit Agreement. The 2011 Credit Agreement consists of (1) a $950.0 million principal amortizing term loan A facility maturing in April 2016, at which time the remaining outstanding principal is due, (2) a $1.4 billion principal amortizing term loan B facility maturing in April 2018, at which time the remaining outstanding principal is due and (3) a $375.0 million multi-currency revolving credit facility ("Revolver") maturing in April 2016, at which time any remaining balance is due. On June 28, 2012 we prepaid $100 million of the outstanding principal balances of the term loans. Due to the Company making prepayments on both the term loan A and term loan B facilities the remaining balance of the term loan B facility is due upon maturity. The Revolver provides for operational needs and letters of credit. The Company's obligations under the 2011 Credit Agreement are secured by substantially all of the Company's domestic and foreign real, personal and intellectual property. The 2011 Credit Agreement contains customary events of default and covenants, including among other things, covenants that restrict but do not prevent the ability of the Company and its subsidiaries to incur certain additional indebtedness, create or permit liens on assets, pay dividends and repurchase stock, engage in mergers or acquisitions and make investments and loans. The 2011 Credit Agreement also includes certain financial covenants that must be maintained.

        The Revolver, term loan A and term loan B interest rates are tied to LIBOR or the Canadian Dealer Offered Rate ("CDOR"), plus a credit spread ranging from 225 to 300 basis points for the Revolver and term loan A, and 275 to 300 basis points on the term loan B adjusted quarterly based on the Company's total leverage ratio as defined by the 2011 Credit Agreement. The term loan B has a minimum LIBOR floor of 1.0%. The Revolver loans can be denominated in either U.S. dollars or Canadian dollars at the Company's option. The commitment fee on the unused portion of the Revolver is 0.5% per year for all pricing levels. As of June 30, 2012, the Revolver had $59.0 million in borrowings, with $48.8 million outstanding stand-by letters of credit and $267.2 million of availability for future borrowings.

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Pension and Other Postretirement Benefits

6 Months Ended

Jun. 30, 2012

Pension and Other Postretirement Benefits

Pension and Other Postretirement Benefits

Note 7—Pension and Other Postretirement Benefits

        The components of net periodic benefit cost are as follows (in thousands):

	Pension Benefits						Other Postretirement Benefits
	For the three months ended June 30,						For the three months ended June 30,
	2012			2011			2012		2011
Components of net periodic benefit cost:
Service cost	$	1,498		$	1,291		$	2,018	$	1,253
Interest cost		3,129			3,144			7,253		6,278
Expected return on plan assets		(4,031	)		(3,929	)		—		—
Amortization of prior service cost (credit)		64			68			261		(240	)
Amortization of net actuarial loss		2,313			2,063			3,681		3,052
Net periodic benefit cost	$	2,973		$	2,637		$	13,213	$	10,343

	Pension Benefits						Other Postretirement Benefits
	For the six months ended June 30,						For the six months ended June 30,
	2012			2011			2012		2011
Components of net periodic benefit cost:
Service cost	$	2,996		$	2,582		$	4,036	$	2,506
Interest cost		6,258			6,288			14,506		12,480
Expected return on plan assets		(8,062	)		(7,858	)		—		—
Amortization of prior service cost (credit)		128			136			522		(480	)
Amortization of net actuarial loss		4,626			4,126			7,362		6,104
Settlement loss		—			1,716			—		—
Net periodic benefit cost	$	5,946		$	6,990		$	26,426	$	20,610

        The settlement loss shown above is related to the retirement of an executive of the Company and was included in selling, general and administrative expense in the Condensed Consolidated Statements of Operations and Comprehensive Income.

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Net Income Per Share

6 Months Ended

Jun. 30, 2012

Net Income Per Share

Net Income Per Share

Note 9—Net Income Per Share

        A reconciliation of the basic and diluted net income per share computations for the three and six months ended June 30, 2012 and 2011 is as follows (in thousands, except per share data):

	For the three months ended June 30,
	2012				Recast 2011
	Basic		Diluted		Basic		Diluted
Numerator:
Income from continuing operations	$	26,756	$	26,756	$	114,453	$	114,453
Income from discontinued operations	$	5,180	$	5,180		—		—
Denominator:
Average number of common shares outstanding		62,537		62,537		62,313		62,313
Effect of dilutive securities:
Stock awards and warrants(1)		—		243		—		393
		62,537		62,780		62,313		62,706
Income from continuing operations	$	0.43	$	0.43	$	1.84	$	1.83
Income from discontinued operations		0.08		0.08		—		—
Net income per share	$	0.51	$	0.51	$	1.84	$	1.83

	For the six months ended June 30,
	2012				Recast 2011
	Basic		Diluted		Basic		Diluted
Numerator:
Income from continuing operations	$	67,372	$	67,372	$	196,266	$	196,266
Income from discontinued operations	$	5,180	$	5,180		—		—
Denominator:
Average number of common shares outstanding		62,503		62,503		58,390		58,390
Effect of dilutive securities:
Stock awards and warrants(1)		—		256		—		370
		62,503		62,759		58,390		58,760
Income from continuing operations	$	1.08	$	1.08	$	3.36	$	3.34
Income from discontinued operations		0.08		0.08		—		—
Net income per share	$	1.16	$	1.16	$	3.36	$	3.34

(1)

Stock awards represent the weighted average number of shares of common stock issuable on the exercise of dilutive employee stock options and restricted stock units, less the number of shares of common stock which could have been purchased with the proceeds from the exercise of such stock awards. These purchases were assumed to have been made at the average market price of the common stock for the period. The weighted average number of stock options outstanding for the three months ended June 30, 2012 and 2011 totaling 234,323 and 50,814, respectively, were excluded from the calculation above because their effect would have been anti-dilutive. Additionally, the weighted average number of stock options outstanding for the six months ended June 30, 2012 and 2011 totaling 205,378 and 29,038, respectively, were excluded from the calculation above because their effect would have been anti-dilutive. Outstanding warrants entitle the holder to receive cash and shares of common stock upon exercise. All of the Company's outstanding stock warrants were exercised or expired during the second quarter of 2012.

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Inventories
Coal	$ 235,602	$ 180,537
Raw materials and supplies	80,903	59,900
Total inventories	$ 316,505	$ 240,437

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New Accounting Pronouncements

6 Months Ended

Jun. 30, 2012

New Accounting Pronouncements

New Accounting Pronouncements

Note 14—New Accounting Pronouncements

        In September 2011, the Financial Accounting Standards Board ("FASB") issued an accounting standard update intended to simplify how entities test for goodwill impairment by adding a qualitative review step to assess whether the required quantitative impairment analysis is necessary. The accounting standard permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is concluded that this is not the case, it is not necessary to perform the two-step impairment test described in Accounting Standards Codification Topic 350, Intangibles-Goodwill and Other. The accounting standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The guidance is only intended to simplify goodwill impairment testing and will not have an impact on the Company's results of operations or financial condition.

        In June 2011, the FASB issued an accounting standard update that requires companies to present the components of net income and other comprehensive income either in a single continuous statement or as two separate but consecutive statements. The accounting standard update eliminates the option to present components of other comprehensive income solely as part of the statement of changes in stockholders' equity. The guidance became effective for interim and annual periods beginning after December 15, 2011, with the exception of disclosing reclassification of items from other comprehensive income to net income, which is effective for interim and annual periods beginning after December 15, 2012. The accounting standard update does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The Company has reflected the new presentation for interim periods in its condensed consolidated financial statements.

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Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2012

Comprehensive Income

Schedule of differences between net income and comprehensive income

	For the three months ended June 30,
	2012			Recast 2011
Net income	$	31,936		$	114,453
Change in pension and other postretirement benefit plans, net of deferred taxes of $2.4 and $1.8 million, respectively		3,897			3,085
Change in foreign currency translation adjustment		(3,209	)		(1,101	)
Change in unrealized loss on hedges, net of deferred taxes of $1.2 million and $0.4 million, respectively		(1,987	)		(595	)
Change in unrealized loss on investments, net of deferred taxes of $7.3 million		—			(14,120	)
Comprehensive income	$	30,637		$	101,722

	For the six months ended June 30,
	2012			Recast 2011
Net income	$	72,552		$	196,266
Change in pension and other postretirement benefit plans, net of deferred taxes of $4.8 and $3.7 million, respectively		7,795			6,234
Change in foreign currency translation adjustment		(790	)		(1,101	)
Change in unrealized loss on hedges, net of deferred taxes of $2.0 million and $0.4 million, respectively		(3,270	)		(713	)
Change in unrealized loss on investments, net of deferred taxes of $0.0 million and $1.7 million, respectively		(369	)		(4,494	)
Comprehensive income	$	75,918		$	196,192

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Derivative Financial Instruments (Details) (USD $) In Millions, unless otherwise specified	1 Months Ended		1 Months Ended		1 Months Ended
	Jun. 30, 2011 Interest rate swap - June 2011	Jun. 27, 2011 Interest rate swap - June 2011	Dec. 31, 2008 Interest rate swap - December 2008 M	Dec. 30, 2008 Interest rate swap - December 2008	Jun. 30, 2011 Interest rate cap	Jun. 27, 2011 Interest rate cap	Jun. 07, 2011 Natural Gas Hedge DollarsPerMMBtu MMBTU
Fair Value of Financial Instruments
Notional value		$ 450.0		$ 31.5		$ 255.0
Debt instrument, description of variable rate basis	3-month LIBOR		1-month LIBOR		3-month LIBOR
Agreement period (in years)		3 years				3 years	1 year
Fixed rate (as a percent)		1.17%		1.84%
Number of monthly interest payments, hedged			62
Number of monthly interest payments			64
Fixed rate (as a percent)						2.00%
Amount hedged (in mmbtus)							4,200,000
Price per mmbtu of forecasted natural gas (in dollars per mmbtu)							5.00
Percentage of forecasted natural gas to be hedged							35.00%

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (USD $) In Thousands, unless otherwise specified	Total	Common Stock	Capital in Excess of Par Value	Retained Earnings	Accumulated Other Comprehensive Income (Loss)
Balance at Dec. 31, 2011	$ 2,136,517	$ 624	$ 1,620,430	$ 744,939	$ (229,476)
Increase (Decrease) in Stockholders' Equity
Net income	72,552			72,552
Other comprehensive income, net of tax	3,366				3,366
Stock issued upon the exercise of stock options	122	1	121
Dividends paid, $0.25 per share	(15,618)			(15,618)
Stock based compensation	3,224		3,224
Excess tax benefits from stock-based compensation arrangements	877		877
Other	(711)			(711)
Balance at Jun. 30, 2012	$ 2,200,329	$ 625	$ 1,624,652	$ 801,162	$ (226,110)

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Discontinued Operations

6 Months Ended

Jun. 30, 2012

Discontinued Operations

Discontinued Operations

Note 3—Discontinued Operations

        In 2008, the Company announced the permanent closure of the underground coal mine operations of Kodiak Mining Company, LLC ("Kodiak") due to high operational costs, difficult operating conditions and a challenging pricing environment for Kodiak's products. During 2012, the Company divested the Kodiak assets and liabilities for cash proceeds of $9.5 million. The sale resulted in an after tax gain of $5.2 million that is presented as discontinued operations in the Company's Condensed Consolidated Statement of Operations and Comprehensive Income.

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Net Income Per Share (Tables)

6 Months Ended

Jun. 30, 2012

Net Income Per Share

Reconciliation of the basic and diluted net income per share computations

	For the three months ended June 30,
	2012				Recast 2011
	Basic		Diluted		Basic		Diluted
Numerator:
Income from continuing operations	$	26,756	$	26,756	$	114,453	$	114,453
Income from discontinued operations	$	5,180	$	5,180		—		—
Denominator:
Average number of common shares outstanding		62,537		62,537		62,313		62,313
Effect of dilutive securities:
Stock awards and warrants(1)		—		243		—		393
		62,537		62,780		62,313		62,706
Income from continuing operations	$	0.43	$	0.43	$	1.84	$	1.83
Income from discontinued operations		0.08		0.08		—		—
Net income per share	$	0.51	$	0.51	$	1.84	$	1.83

	For the six months ended June 30,
	2012				Recast 2011
	Basic		Diluted		Basic		Diluted
Numerator:
Income from continuing operations	$	67,372	$	67,372	$	196,266	$	196,266
Income from discontinued operations	$	5,180	$	5,180		—		—
Denominator:
Average number of common shares outstanding		62,503		62,503		58,390		58,390
Effect of dilutive securities:
Stock awards and warrants(1)		—		256		—		370
		62,503		62,759		58,390		58,760
Income from continuing operations	$	1.08	$	1.08	$	3.36	$	3.34
Income from discontinued operations		0.08		0.08		—		—
Net income per share	$	1.16	$	1.16	$	3.36	$	3.34

(1)

Stock awards represent the weighted average number of shares of common stock issuable on the exercise of dilutive employee stock options and restricted stock units, less the number of shares of common stock which could have been purchased with the proceeds from the exercise of such stock awards. These purchases were assumed to have been made at the average market price of the common stock for the period. The weighted average number of stock options outstanding for the three months ended June 30, 2012 and 2011 totaling 234,323 and 50,814, respectively, were excluded from the calculation above because their effect would have been anti-dilutive. Additionally, the weighted average number of stock options outstanding for the six months ended June 30, 2012 and 2011 totaling 205,378 and 29,038, respectively, were excluded from the calculation above because their effect would have been anti-dilutive. Outstanding warrants entitle the holder to receive cash and shares of common stock upon exercise. All of the Company's outstanding stock warrants were exercised or expired during the second quarter of 2012.

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Comprehensive Income (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Comprehensive Income
Net income	$ 31,936,000	$ 114,453,000	$ 72,552,000	$ 196,266,000
Change in pension and other postretirement benefit plans, net of deferred taxes	3,897,000	3,085,000	7,795,000	6,234,000
Change in pension and other postretirement benefit plans, deferred taxes	2,400,000	1,800,000	4,800,000	3,700,000
Change in foreign currency translation adjustment	(3,209,000)	(1,101,000)	(790,000)	(1,101,000)
Change in unrealized loss on hedges, net of deferred taxes	(1,987,000)	(595,000)	(3,270,000)	(713,000)
Change in unrealized loss on hedges, deferred taxes	1,200,000	400,000	2,000,000	400,000
Change in unrealized loss on investments, net of deferred taxes		(14,120,000)	(369,000)	(4,494,000)
Change in unrealized loss on investments, deferred taxes		7,300,000	0.0	1,700,000
Comprehensive income	$ 30,637,000	$ 101,722,000	$ 75,918,000	$ 196,192,000

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Segment Information

6 Months Ended

Jun. 30, 2012

Segment Information

Segment Information

Note 13—Segment Information

        The Company's reportable segments are strategic business units arranged geographically which have separate management teams. The business units have been aggregated into three reportable segments following the April 1, 2011 Western Coal acquisition described in Note 2. These reportable segments are U.S. Operations, Canadian and U.K. Operations, and Other. Both the U.S. Operations and Canadian and U.K. Operations reportable segments primary business is that of mining and exporting metallurgical coal for the steel industry. The U.S. Operations segment includes Walter Energy's historical operating segments of Underground Mining, Surface Mining and Walter Coke as well as the results of the West Virginia mining operations acquired through the acquisition of Western Coal. The Canadian and U.K. Operations segment includes the results of the mining operations located in Northeast British Columbia (Canada) and South Wales (United Kingdom). The Other segment primarily includes corporate activities and expenditures.

        The accounting policies of the segments are the same as those described in Note 2 of the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011. The Company evaluates performance primarily based on operating income of the respective business segments.

        Summarized financial information of the Company's reportable segments is shown in the following table (in thousands):

	For the three months ended June 30,
	2012			Recast 2011
Revenues:
U.S. Operations	$	466,761		$	511,080
Canadian and U.K. Operations		209,645			259,218
Other		1,168			573
Total Revenues	$	677,574		$	770,871
Segment operating income (loss):
U.S. Operations	$	107,245		$	173,133
Canadian and U.K. Operations		(24,679	)		18,800
Other		(14,593	)		(27,470	)
Total operating income		67,973			164,463
Less interest expense, net		(30,763	)		(31,887	)
Other income (loss)		(5,919	)		24,503
Income from continuing operations before income tax expense		31,291			157,079
Income tax expense		4,535			42,626
Income from continuing operations	$	26,756		$	114,453
Depreciation and depletion:
U.S. Operations	$	43,704		$	39,035
Canadian and U.K. Operations		30,535			33,243
Other		220			192
Total	$	74,459		$	72,470
Capital Expenditures:
U.S. Operations	$	43,851		$	40,972
Canadian and U.K. Operations		78,177			51,411
Other		3,183			(259	)
Total	$	125,211		$	92,124

	For the six months ended June 30,
	2012			Recast 2011
Revenues:
U.S. Operations	$	918,911		$	919,016
Canadian and U.K. Operations		387,996			259,218
Other		2,230			1,371
Total Revenues	$	1,309,137		$	1,179,605
Segment operating income (loss):
U.S. Operations	$	214,226		$	312,106
Canadian and U.K. Operations		(38,234	)		18,800
Other		(23,943	)		(46,676	)
Total operating income		152,049			284,230
Less interest expense, net		(58,553	)		(35,287	)
Other income (loss)		(12,912	)		24,503
Income from continuing operations before income tax expense		80,584			273,446
Income tax expense		13,212			77,180
Income from continuing operations	$	67,372		$	196,266
Depreciation and depletion:
U.S. Operations	$	85,846		$	67,204
Canadian and U.K. Operations		54,671			33,243
Other		435			381
Total	$	140,952		$	100,828
Capital Expenditures:
U.S. Operations	$	79,963		$	85,108
Canadian and U.K. Operations		162,357			51,411
Other		3,736			(102	)
Total	$	246,056		$	136,417

	June 30, 2012		Recast December 31, 2011
Identifiable Assets:
U.S. Operations	$	1,039,630	$	1,118,451
Canadian and U.K. Operations		5,150,719		5,021,521
Other		664,806		716,536
Total	$	6,855,155	$	6,856,508