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 March 31, 2013
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                        to

Commission File Number 001-13711

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

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

(205) 745-2000
(Registrant's telephone number, including area code)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 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 the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

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). Yes o    No ý

        Number of shares of common stock outstanding as of April 30, 2013: 62,571,619

WALTER ENERGY, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS

		Page
Part I—Financial Information
Item 1.	Financial Statements
	Walter Energy, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited)		1
	Walter Energy, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited)		2
	Walter Energy, Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)		3
	Walter Energy, Inc. and Subsidiaries Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited)		4
	Walter Energy, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited)		5
	Walter Energy, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited)		6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		46
Item 4.	Controls and Procedures		46
Part II—Other Information
Item 1.	Legal Proceedings		48
Item 1A.	Risk Factors		49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		49
Item 4.	Mine Safety Disclosures		49
Item 6.	Exhibits		49
Signatures			51

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)

	March 31, 2013			December 31, 2012
ASSETS
Cash and cash equivalents	$	235,791		$	116,601
Receivables, net		315,296			256,967
Inventories		302,293			306,018
Deferred income taxes		55,629			58,526
Prepaid expenses		47,441			53,776
Other current assets		23,285			23,928
Total current assets		979,735			815,816
Mineral interests, net of accumulated depletion of $199.4 million and $179.6 million, respectively		2,927,591			2,965,557
Property, plant and equipment, net of accumulated depreciation of $845.2 million and $796.7 million, respectively		1,691,637			1,732,131
Deferred income taxes		185,387			160,422
Other long-term assets		99,092			94,494
	$	5,883,442		$	5,768,420
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	17,398		$	18,793
Accounts payable		133,040			114,913
Accrued expenses		192,913			184,875
Accumulated postretirement benefits obligation		29,637			29,200
Other current liabilities		207,328			206,473
Total current liabilities		580,316			554,254
Long-term debt		2,593,584			2,397,372
Deferred income taxes		883,659			921,687
Accumulated postretirement benefits obligation		636,129			633,264
Other long-term liabilities		244,084			251,272
Total liabilities		4,937,772			4,757,849
Commitments and contingencies (Note 8)
Stockholders' equity:
Common stock, $0.01 par value per share:
Authorized—200,000,000 shares,
Issued—62,563,004 and 62,521,300 shares, respectively		626			625
Capital in excess of par value		1,615,407			1,628,244
Accumulated deficit		(389,313	)		(347,448	)
Accumulated other comprehensive income (loss):
Pension and other postretirement benefit plans, net of tax		(261,383	)		(266,042	)
Foreign currency translation adjustment		(17,127	)		(1,502	)
Unrealized loss on hedges, net of tax		(3,481	)		(4,203	)
Unrealized investment gain, net of tax		941			897
Total stockholders' equity		945,670			1,010,571
	$	5,883,442		$	5,768,420

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

1

WALTER ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

	For the three months ended March 31,
	2013			2012
Revenues:
Sales	$	489,609		$	627,298
Miscellaneous income		1,734			4,265
		491,343			631,563
Costs and expenses:
Cost of sales (exclusive of depreciation and depletion)		420,934			431,534
Depreciation and depletion		81,190			66,493
Selling, general and administrative		30,674			36,247
Postretirement benefits		14,725			13,213
Restructuring charges		7,440			—
		554,963			547,487
Operating income (loss)		(63,620	)		84,076
Interest expense		(52,618	)		(28,067	)
Interest income		650			277
Other income (loss)		105			(6,993	)
Income (loss) before income tax expense		(115,483	)		49,293
Income tax expense (benefit)		(66,039	)		8,677
Net income (loss)	$	(49,444	)	$	40,616
Net income (loss) per share:
Basic	$	(0.79	)	$	0.65
Diluted	$	(0.79	)	$	0.65
Dividends per share	$	0.125		$	0.125

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

2

WALTER ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(IN THOUSANDS)

	For the three months ended March 31,
	2013			2012
Net income (loss)	$	(49,444	)	$	40,616
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, (net of tax expense: $2,882 and $2,422, respectively)		4,659			3,898
Change in unrealized gain (loss) on hedges, (net of tax expense (benefit): $343 and $(807), respectively)		722			(1,283	)
Change in foreign currency translation adjustment		(15,625	)		2,419
Change in unrealized gain (loss) on investments		44			(369	)
Total other comprehensive income (loss), net of tax		(10,200	)		4,665
Total comprehensive income (loss)	$	(59,644	)	$	45,281

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

3

WALTER ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2013 (UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

	Total			Common Stock		Capital in Excess of Par Value			Accumulated Deficit			Accumulated Other Comprehensive Loss
Balance at December 31, 2012	$	1,010,571		$	625	$	1,628,244		$	(347,448	)	$	(270,850	)
Net loss		(49,444	)							(49,444	)
Other comprehensive loss, net of tax		(10,200	)										(10,200	)
Stock issued upon the exercise of stock options		279			1		278
Dividends paid, $0.125 per share(1)		(7,816	)				(15,630	)		7,814
Stock based compensation		2,887					2,887
Excess tax deficit from stock-based compensation arrangements		(372	)				(372	)
Other		(235	)							(235	)
Balance at March 31, 2013	$	945,670		$	626	$	1,615,407		$	(389,313	)	$	(281,050	)

(1)

Current period amounts have been adjusted to correct the classification of the dividend declared in the fourth quarter of 2012. Refer to Note 1 "Basis of Presentation" for further discussion.

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

4

WALTER ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(IN THOUSANDS)

	For the three months ended March 31,
	2013			2012
OPERATING ACTIVITIES
Net income (loss)	$	(49,444	)	$	40,616
Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities:
Depreciation and depletion		81,190			66,493
Deferred income tax benefit		(61,941	)		(10,894	)
Amortization of debt issuance costs		9,982			3,644
Other		14,922			8,756
Decrease (increase) in current assets:
Receivables		(58,494	)		16,889
Inventories		5,428			(63,192	)
Prepaid expenses and other current assets		6,502			5,462
Increase (decrease) in current liabilities:
Accounts payable		22,534			37,604
Accrued expenses and other current liabilities		9,923			(34,524	)
Cash flows provided by (used in) operating activities		(19,398	)		70,854
INVESTING ACTIVITIES
Additions to property, plant and equipment		(34,027	)		(120,845	)
Proceeds from sales of investments		—			12,228
Other		1,021			(85	)
Cash flows used in investing activities		(33,006	)		(108,702	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		450,000			—
Borrowings under revolving credit agreement		320,778			135,294
Repayments on revolving credit agreement		(320,778	)		(70,156	)
Retirements of debt		(254,687	)		(9,177	)
Dividends paid		(7,816	)		(7,806	)
Debt issuance costs		(15,163	)		—
Other		(328	)		(624	)
Cash flows provided by financing activities		172,006			47,531
Effect of foreign exchange rates on cash		(412	)		87
Net increase in cash and cash equivalents	$	119,190		$	9,770
Cash and cash equivalents at beginning of period	$	116,601		$	128,430
Cash and cash equivalents at end of period	$	235,791		$	138,200

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

5

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 1—Basis of Presentation

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

        The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. These financial statements should be read in conjunction with the audited financial statements and related notes as of and for the year ended December 31, 2012 included in the Company's Annual Report filed on Form 10-K with the U.S. Securities and Exchange Commission. The balance sheet at December 31, 2012 has been derived from the audited consolidated financial statements for the year ended December 31, 2012 included in the Company's 2012 Annual Report on Form 10-K.

        During the first quarter of 2013, the Company determined that the cash dividend declared and paid in the fourth quarter of 2012 should have been reported as a reduction to the capital in excess of par value component of stockholders' equity rather than retained earnings as the Company was in an accumulated deficit position. The change of $7.8 million was included in the current period results by reclassifying the amount from accumulated deficit to capital in excess of par value. Management has determined that the effect of this classification change was immaterial to prior reporting periods affected. The change has no effect on total stockholders' equity.

        During the first quarter of 2013, the Company determined to classify certain indirect administrative costs as cost of sales as opposed to selling, general and administrative costs as these costs are supportive of operations. The Company has reported such costs in cost of sales beginning in the first quarter of 2013. If the current year classification of these costs had been retrospectively applied, selling, general and administrative expenses would have been $5.8 million less in the first quarter of 2012 and cost of sales would have increased by a similar amount. Prior period balances have not been restated as management has determined that the effect of this classification change was immaterial to prior reporting periods. The change in classification has no effect on net income.

Adoption of New Accounting Standards

        Comprehensive Income—Presentation.    On January 1, 2013, the Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2013-02 which requires disclosure of amounts reclassified out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under GAAP to be reclassified in its entirety to net income, either on the face of the Condensed Consolidated Statements of Operations or in the notes to the financial statements. For other amounts that are not required under GAAP to be reclassified in their entirety to net income in the same reporting period, cross references to other

6

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 1—Basis of Presentation (Continued)

disclosures required under GAAP that provide additional detail about the amounts must be provided. The Company has elected disclosure in the Notes to Condensed Consolidated Financial Statements as described in Note 10.

Note 2—Restructuring

        In response to the current depressed price environment for metallurgical coal, the Company decided in the first quarter of 2013 to curtail production at the Willow Creek mine in the Canadian and U.K. Operations segment. This curtailment will result in a workforce reduction of approximately 250 employees. The Company also plans to close the North River mine in 2013 approximately nine months earlier than the previously expected end of mine life of 2014.

        In connection with the curtailment of operations at the Willow Creek mine, the Company recognized a restructuring charge of approximately $7.4 million consisting of severance charges of approximately $4.4 million and contract termination costs of $3.0 million. The majority of the employee termination costs are expected to be paid during the second quarter of 2013. These charges are presented under restructuring charges in the Condensed Consolidated Statements of Operations.

Note 3—Inventories

        Inventories are summarized as follows (in thousands):

	March 31, 2013		December 31, 2012
Coal	$	217,557	$	228,910
Raw materials and supplies		84,736		77,108
Total inventories	$	302,293	$	306,018

Note 4—Income Taxes

        The Company estimates its annual effective tax rate based on projected financial income for the full year at the end of each interim reporting period unless projected financial income for the full year is close to break-even, in which case the annual effective tax rate could become volatile and could distort the income tax provision for an interim period. When this happens, the Company calculates the interim income tax provision using actual year-to-date financial results for certain jurisdictions. This method results in an income tax provision based solely on the year-to-date financial taxable income or loss for those jurisdictions. In both cases, 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.

        For the three months ended March 31, 2013, the Company determined the current period income tax benefit for the Alabama operations using the actual year-to-date financial results as compared to the estimated annual effective tax rate method utilized in 2012. The year-to-date tax benefit for the Canada, U.K. and West Virginia operations was determined using the estimated annual effective tax rate method.

7

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 4—Income Taxes (Continued)

        The Company recognized an income tax benefit of $66.0 million for the three months ended March 31, 2013, compared to an income tax provision of $8.7 million for the three months ended March 31, 2012 as the Company incurred a pretax operating loss for the three months ended March 31, 2013 compared to pretax operating income for the same period in 2012. The 2013 and 2012 tax rates reflect the benefit of our Canadian and U.K. operations which are taxed at statutory rates lower than the U.S. rate and the effects of tax losses in excess of losses related to foreign financing activities. The effective tax rates also reflect statutory depletion deductions in the Alabama mining operations.

Note 5—Debt

        Debt consisted of the following (in thousands):

	March 31, 2013			December 31, 2012			Weighted Average Stated Interest Rate At March 31, 2013	Final Maturity
2011 term loan A	$	656,566		$	756,974		4.80%	2016
2011 term loan B		978,178			1,127,770		5.75%	2018
Revolving credit facility		—			—		N/A	2016
9.875% senior notes ($500.0 million face value)		496,582			496,510		9.88%	2020
8.500% senior notes		450,000			—		8.50%	2021
Other(1)		29,656			34,911		Various	Various
Total debt		2,610,982			2,416,165
Less: current debt(1)		(17,398	)		(18,793	)
Total long-term debt	$	2,593,584		$	2,397,372

(1)

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

Credit Agreement Amendment

        On March 22, 2013, the Company entered into an amendment (the "Fourth Amendment") to the 2011 Credit Agreement dated as of April 1, 2011, as amended by the First Amendment to Credit Agreement, dated as of January 20, 2012, as further amended by the Second Amendment to Credit Agreement, dated as of August 16, 2012, and as further amended by the Third Amendment to Credit Agreement dated as of October 29, 2012, among the Company, the various lenders, Morgan Stanley Senior Funding, Inc. as administrative agent, and other agents named therein. The Fourth Amendment amended a financial covenant in the 2011 Credit Agreement to provide additional flexibility for the issuance of senior unsecured notes, subject to the lessor of 100% and $250.0 million, in each case, of the net proceeds of such notes issuance being used to repay term loans outstanding under the 2011 Credit Agreement. The Fourth Amendment also provided that, should a repricing event occur within six months of the effective date of the Fourth Amendment, the Company must pay a fee equal to 1.0% of the aggregate principal amount of, as applicable, (i) the portion of the Term Loan B balance prepaid in connection with such repricing event or (ii) the portion of the Term Loan B balance outstanding on such date that is subject to an effective pricing reduction pursuant to such repricing event.

8

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 5—Debt (Continued)

8.50% Senior Notes

        On March 27, 2013, the Company issued $450.0 million of 8.5% senior notes due April 15, 2021 (the "2021 Notes"). These Notes are unconditionally guaranteed, jointly and severally, on an unsecured basis, by each of our current and future wholly-owned U.S. domestic restricted subsidiaries. Interest on the 2021 Notes accrues at the rate of 8.5% per year and is payable semi-annually in arrears on April 15 and October 15, commencing on October 15, 2013. At any time prior to April 15, 2016, the Company may redeem up to 35% of the aggregate principal amount of the 2021 Notes at a redemption price of 108.5% of the principal amount, plus accrued and unpaid interest. The Company may redeem the 2021 Notes, in whole or in part, after April 15, 2016 and prior to April 15, 2017, at a redemption price equal to 100% of the aggregate principal amount of the 2021 Notes plus a "make-whole" premium and accrued and unpaid interest. The Company may redeem the 2021 Notes, in whole or in part at redemption prices equal to 104.25% for the twelve months commencing April 15, 2017, 102.125% for the twelve months commencing April 15, 2018 and 100% beginning on April 15, 2019, in each case plus accrued and unpaid interest.

        Upon the occurrence of a change of control repurchase event, unless the Company has exercised its right to redeem the 2021 Notes, the Company will be required to offer to repurchase each holder's 2021 Notes at a price equal to 101% of the aggregate principal amount, plus accrued and unpaid interest.

Note 6—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 March 31,						For the three months ended March 31,
	2013			2012			2013		2012
Components of net periodic benefit cost:
Service cost	$	1,766		$	1,498		$	2,486	$	2,018
Interest cost		3,070			3,129			7,198		7,253
Expected return on plan assets		(4,235	)		(4,031	)		—		—
Amortization of prior service cost		66			64			307		261
Amortization of net actuarial loss		2,434			2,313			4,734		3,681
Net periodic benefit cost	$	3,101		$	2,973		$	14,725	$	13,213

9

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 7—Net Income (Loss) Per Share

        A reconciliation of the basic and diluted net income (loss) per share computations for the three months ended March 31, 2013 and 2012 is as follows (in thousands, except per share data):

	For the three months ended March 31,
	2013						2012
	Basic			Diluted			Basic		Diluted
Numerator:
Net income (loss)	$	(49,444	)	$	(49,444	)	$	40,616	$	40,616
Denominator:
Average number of common shares outstanding		62,599			62,599			62,463		62,463
Effect of dilutive securities:
Stock awards and warrants(1)		—			—			—		276
		62,599			62,599			62,463		62,739
Net income (loss) per share	$	(0.79	)	$	(0.79	)	$	0.65	$	0.65

(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. In periods of net loss, the number of shares used to calculate diluted earnings per share is the same as basic earnings per share; therefore, the effect of dilutive securities is zero for such periods. The weighted average number of stock options outstanding for the three months ended March 31, 2013 and 2012 totaling 357,333 and 136,513, respectively, were excluded from the calculation above because their effect would have been anti-dilutive.

        The table below sets forth the share-based awards that have been exercised or released:

	For the three months ended March 31,
	2013		2012
Stock options		24,831		19,059
Restricted stock units		16,873		17,959
Total		41,704		37,018

10

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 8—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 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 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 2013. At the request of both parties, in January 2013 the Bankruptcy Court granted an additional extension of time until May 30, 2013 to submit the 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 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. As of March 31, 2013, a final resolution has not 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.

11

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

        In 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 the prior Proof of Claim and included a proposed adjustment to a worthless stock deduction reported in the Company's 2008 federal income tax return. In the third quarter of 2012, the Company received notification from the IRS that the audit of the 2006 through 2008 tax years had been reopened for further review. The IRS issued a revised IRS Appeals Transmittal Letter in April 2013 conceding the proposed adjustment to the worthless stock deduction. The Company has evaluated the remaining proposed adjustments submitted to IRS Appeals and believes the Company's 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 examination is ongoing, any resulting tax deficiency or overpayment cannot be estimated at this time. During 2013, 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 total uncertain income tax positions and net income.

        It is reasonably possible that the amount of unrecognized tax benefits will change in the next twelve months. The Company anticipates a final order will be issued by the Bankruptcy Court in 2013 settling the issues in the Proof of Claim. The final order by the Bankruptcy Court would permit a resolution of similar issues for the tax years currently in Appeals (2000-2005) and Exams (2006-2010). As of March 31, 2013, the Company had $38 million of accruals for unrecognized tax benefits on the matters subject to disposition. Due to the uncertainty related to the potential outcome of these matters, at this time the range of reasonably possible changes in unrecognized tax benefits in the next twelve months cannot be estimated.

        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. The Company believes that it has sufficient accruals to address any claims, including interest and penalties. Management does not believe that any potential difference between the final settlements and the amounts accrued will have a material effect on the Company's financial position, but such potential difference could be material to results of operations in a future reporting period.

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.

12

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

Walter Coke, Inc.

        Walter Coke entered into a decree order in 1989 ("the 1989 Order") 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. In 2004, the EPA re-directed Walter Coke's RFI efforts toward completion of the Environmental Indicator ("EI") determinations for the Current Human Exposures, which were approved and finalized for Walter Coke's Birmingham facility in 2005. In 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. The results of this sampling and testing were submitted to the EPA for review in 2009. In conjunction with the plan, Walter Coke agreed to remediate portions of 23 properties based on the 2009 sampling and that process was completed in 2012.

        In 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. Under CERCLA authority, EPA is proceeding directly with the offsite sampling work and deferring any further enforcement actions or decisions, including evaluating whether Walter Coke or any other company is in fact a PRP, to a subsequent time. In February 2013, the Agency for Toxic Substances and Disease Registry (ATSDR) released a draft report concerning past, present and future exposures to residential soils in North Birmingham and concluded that there is no public health hazard. In March 2013, EPA released the North Birmingham Air Toxics Risk Assessment showing the air quality to be acceptable.

        A RCRA Section 3008(h) Administrative Order on Consent ("the 2012 Order") with the effective date of September 24, 2012 was signed by Walter Coke and the EPA. The 2012 Order declared that all of the approved investigation tasks of the RFI Work Plans required by the 1989 Order had been completed by Walter Coke and that the 1989 Order was terminated and no longer in effect. The objectives of the 2012 Order are to perform Corrective Measure Studies, implement remedies if necessary, and implement and maintain institutional controls if required at the Walter Coke facility.

        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 March 31, 2013, 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. The amount of this accrual is not material to the Company's consolidated 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. Additionally, pending EPA's sampling activities in the neighborhoods and identification of PRP's, the Company at this time is unable to reasonably estimate the cost of offsite remediation activities that may 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

13

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

adverse effect on the Company's consolidated financial statements, but such cleanup costs could be material to results of operations in a future reporting period.

        In 2011, the Company and Walter Coke were named in a suit filed by Louise Moore (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 defendants and/or their predecessors. Subsequently, 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. Thereafter, Walter Coke filed a Motion to Dismiss the amended complaint. On September 28, 2012, the Court issued a memorandum opinion and order granting in part and denying in part the motion. In partially granting Walter Coke's motion, the Court held that the plaintiff's claim for injunctive relief was not valid and that class action-related claims must be dismissed (with leave to re-plead) due to an improperly defined class. In partially ruling for the plaintiff, the Court held that at the pleading stage the plaintiff's claims could not be dismissed on rule of repose grounds or due to insufficient pleading. The plaintiff filed an amended complaint on October 29, 2012. On November 19, 2012, Walter Coke filed an answer and motion for partial dismissal of plaintiff's second amended complaint. The Court held a hearing on Walter Coke's motion for partial dismissal of the second amended complaint on January 10, 2013 and a ruling is pending.

        The Company and Walter Coke believe that there is no merit to the claims alleged in this action and intend to vigorously defend this matter.

Jim Walter Resources

        In July, 2011, Jim Walter Resources, Inc. ("JWR") reported a slurry spill at its North River mine to the Alabama Department of Environmental Management ("ADEM") and the Alabama Surface Mining Commission ("ASMC"). As a result, a penalty of $145,200 was assessed and paid to ASMC in November, 2011. A penalty of $60,000 was assessed by ADEM in December 2011. JWR has expended approximately $5.0 million in remediation costs which is substantially complete. Walter Energy brought a related insurance claim that was resolved in March 2013.

Willow Creek

        On March 5, 2013, a complaint was received from British Columbia's Environmental Crown Counsel seeking a monetary penalty of $100,000 CAD for alleged violations of the Federal Fisheries Act associated with an April 2011 release of sediment and debris into Willow Creek from the forest service road leading to the Willow Creek mine. To date, we have incurred some costs in taking corrective actions in response to the 2011 release and are continuing to cooperate with regulatory authorities. We intend to negotiate with the authorities in pursuit of a mutually agreeable settlement.

14

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 8—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 U.K. Operations (collectively the "Individual Defendants"). The complaints were filed by Peter Rush and Michael Carney, purported shareholders of Walter Energy who each sought to represent a class of Walter Energy shareholders who purchased common stock between April 20, 2011 and September 21, 2011.

        These complaints alleged 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 alleged 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 claimed 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. On August 20, 2012, Lead Plaintiffs filed a consolidated amended class action complaint in this action. The consolidated amended complaint names as an additional defendant Joseph Leonard, a current director and former interim CEO of Walter, in addition to the previously named defendants. Defendants filed a Motion to Dismiss the amended complaint on October 4, 2012. On January 29, 2013, the court denied that motion without prejudice. Defendants answered the complaint on February 15, 2013 and on March 5, 2013. The parties are now in the process of discovery.

        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 named as defendants the Company's current Board of Directors, Keith Calder and Neil Winkelmann. The Company was named as a nominal defendant in each complaint. The three complaints alleged similar facts to those alleged in the Rush complaint. The complaints variously asserted 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 sought, 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 thereafter entered into a stipulation with the lead plaintiffs in the consolidated derivative suit, pursuant to which all proceedings in the derivative action were stayed pending the filing of the

15

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

consolidated amended complaint in the class action. On September 19, 2012, lead plaintiffs filed a consolidated shareholder derivative complaint. This action has been stayed pending the resolution of summary judgment motions in the putative securities class action. The derivative plaintiffs will have certain rights to participate in discovery taken in the federal securities 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.). On September 27, 2012 a second shareholder derivative lawsuit was filed in the same court (Sinerius v. Beatty, et al.) Both complaints name as defendants the Company's current Board of Directors and Keith Calder. The Company is named as a nominal defendant in each complaint. These complaints, like the state court derivative claims, allege similar facts to those alleged in the Rush complaint. The Makohin complaint asserts state law claims for breaches of fiduciary duties and unjust enrichment, while the Sinerius complaint asserts these same claims as well as claims for abuse of control and gross mismanagement. Both actions seek, among other things, recovery for the Company for damages that the Company suffered as a result of alleged wrongful conduct and restitution from defendants of all profits, benefits and other compensation that they wrongfully obtained. Like the state court derivative action, both of these cases have been stayed pending resolution of summary judgment motions in the putative securities class action. The federal derivative plaintiffs will also have certain rights to participate in discovery taken in the federal securities 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.

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 or results of operations.

Note 9—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

16

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 9—Derivative Financial Instruments (Continued)

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 30% 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 March 31, 2013.

17

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 9—Derivative Financial Instruments (Continued)

        The following table presents the fair values of the Company's derivative instruments as well as their classification within the Condensed Consolidated Balance Sheets (in thousands). See Note 11 for additional information related to the fair values of our derivative instruments.

	March 31, 2013		December 31, 2012
Asset derivatives designated as cash flow hedging instruments:
Interest rate cap(1)	$	9	$	12
Total asset derivatives	$	9	$	12
Liability derivatives designated as cash flow hedging instruments:
Interest rate swaps(2)	$	5,546	$	6,615
Total liability derivatives	$	5,546	$	6,615

(1)

$7 thousand and $8 thousand is included in other current assets and $2 thousand and $4 thousand is included in other long-term assets within the Condensed Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012, respectively.

(2)

$4.1 million and $4.1 million is included within other current liabilities and $1.4 million and $2.5 million is included within other long-term liabilities in the Condensed Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012, respectively.

        The following tables presents the gains and losses from derivative instruments for the three months ended March 31, 2013 and 2012 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)
	Three months ended March 31,						Three months ended March 31,
Derivatives designated as cash flow hedging instruments	2013			2012			2013			2012
Natural gas hedges	$	—		$	(2,132	)	$	—		$	1,442
Interest rate swaps		1,340			103			(616	)		(565	)
Interest rate cap		(2	)		(131	)		—			—
Total	$	1,338		$	(2,160	)	$	(616	)	$	877

(1)

Natural gas hedge amounts are recorded within miscellaneous income in the Condensed Consolidated Statements of Operations.

(2)

Interest rate swap amounts are recorded within interest expense in the Condensed Consolidated Statements of Operations.

18

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 10—Accumulated Other Comprehensive Income (Loss)

        The following table presents the changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2013, net of tax (in thousands).

	Pension and other post-retirement plans			Unrealized gain/(loss) on hedges			Foreign currency translation adjustment			Unrealized gain/(loss) on investments			Total
Beginning balance as of December 31, 2012	$	(266,042	)	$	(4,203	)	$	(1,502	)	$	897		$	(270,850	)
Other comprehensive income (loss) before reclassifications		—			1,338			(15,625	)		48			(14,239	)
Amounts reclassified from accumulated other comprehensive income (loss)		4,659			(616	)		—	(1)		(4	)		4,039
Net current-period other comprehensive income (loss)		4,659			722			(15,625	)		44			(10,200	)
Total	$	(261,383	)	$	(3,481	)	$	(17,127	)	$	941		$	(281,050	)

(1)

Foreign currency translation adjustments are reclassified from accumulated other comprehensive income (loss) upon sale or substantially complete liquidation of an investment in a foreign entity.

19

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 10—Accumulated Other Comprehensive Income (Loss) (Continued)

        The following table presents amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three months ended March 31, 2013 (in thousands).

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Condensed Consolidated Statements of Operations
Gains and losses on cash flow hedges
Interest rate swaps	$	(997	)	Interest expense
		(997	)	Income (loss) before income tax expense
		381		Income tax benefit
	$	(616	)	Net income (loss)
Amortization of pension and postretirement benefit plans
Prior service cost	$	373		(a)
Net actuarial loss		7,168		(a)
		7,541		Income (loss) before income tax expense
		(2,882	)	Income tax (expense)
	$	4,659		Net income (loss)
Gains and losses on available-for-sale securities	$	(4	)	Other income (loss)
		(4	)	Income (loss) before income tax expense
		—		Income tax (expense)
	$	(4	)	Net income (loss)
Total reclassifications for the period	$	4,039		Net income (loss)

(a)

Amortization of pension benefit items is included in cost of sales (exclusive of depreciation and depletion) and selling, general and administrative expense while amortization of postretirement benefit items is included in postretirement benefits within the Condensed Consolidated Statements of Operations.

Note 11—Fair Value of Financial Instruments

        Fair value is defined as the price that would be received from the sale of 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

20

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 11—Fair Value of Financial Instruments (Continued)

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 March 31, 2013 and December 31, 2012 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.

	March 31, 2013
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	9	$	—	$	9
Liabilities:
Interest rate swaps	$	—	$	5,546	$	—	$	5,546

	December 31, 2012
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	12	$	—	$	12
Liabilities:
Interest rate swaps	$	—	$	6,615	$	—	$	6,615

        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 months ended March 31, 2013, a gain of $109 thousand was recorded related to trading securities held at the reporting date. Realized losses of $4 thousand on the sale of available-for-sale securities were recorded in other income (loss) during the three months ended March 31, 2013 and were determined using the specific identification method.

21

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 11—Fair Value of Financial Instruments (Continued)

        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.

        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 $656.6 million and $978.2 million, respectively, at March 31, 2013 and $757.0 million and $1.128 billion, respectively, at December 31, 2012 was carried at cost. There were no borrowings outstanding under the Revolver at March 31, 2013 and December 31, 2012. Debt associated with the Company's 2020 Notes in the amount of $496.6 million and $496.5 million at March 31, 2013 and December 31, 2012, respectively, and the 2021 Notes in the amount of $450.0 million at March 31, 2013 was carried at cost. The estimated fair value of the Company's term loan A, term loan B, 2020 Notes and 2021 Notes was $657.0 million, $983.3 million, $543.1 million and $461.2 million at March 31, 2013, respectively, based on similar transactions and yields in an active market for similarly rated debt (Level 2).

Note 12—Segment Information

        The Company's reportable segments are strategic business units arranged geographically which have separate management teams. 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 Other segment primarily includes corporate expenses.

        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 filed with the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 2012. The Company evaluates performance primarily based on operating income of the respective business segments.

22

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 12—Segment Information (Continued)

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

	For the three months ended March 31,
	2013			2012
Revenues:
U.S. Operations	$	339,225		$	452,150
Canadian and U.K. Operations		151,444			178,351
Other		674			1,062
Total Revenues	$	491,343		$	631,563
Segment operating income (loss):
U.S. Operations	$	(6,957	)	$	106,981
Canadian and U.K. Operations		(48,766	)		(13,555	)
Other		(7,897	)		(9,350	)
Total operating income (loss)		(63,620	)		84,076
Less interest expense, net		(51,968	)		(27,790	)
Other income (loss)		105			(6,993	)
Income (loss) before income tax expense		(115,483	)		49,293
Income tax expense (benefit)		(66,039	)		8,677
Net income (loss)	$	(49,444	)	$	40,616
Depreciation and depletion:
U.S. Operations	$	47,473		$	42,142
Canadian and U.K. Operations		33,232			24,136
Other		485			215
Total	$	81,190		$	66,493
Capital expenditures:
U.S. Operations	$	27,401		$	36,112
Canadian and U.K. Operations		6,314			84,180
Other		312			553
Total	$	34,027		$	120,845

	March 31, 2013		December 31, 2012
Identifiable assets:
U.S. Operations	$	1,438,289	$	1,603,745
Canadian and U.K. Operations		3,918,439		3,728,817
Other		526,714		435,858
Total	$	5,883,442	$	5,768,420

23

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 13—Supplemental Guarantor and Non-Guarantor Financial Information

        On November 21, 2012, the Company completed a private placement of $500.0 million in aggregate principal amount of 9.875% senior notes due December 15, 2020 ("2020 Notes") and on March 27, 2013, the Company completed a private placement of $450.0 million in aggregate principal amount of 8.5% senior notes due April 15, 2021 ("2021 Notes"). The 2020 Notes and 2021 Notes are unconditionally guaranteed, jointly and severally, on an unsecured basis, by each of the Company's current and future wholly-owned U.S. domestic restricted subsidiaries. In connection with the private placements, the guarantors entered into registration rights agreements with the initial purchasers in which the Company agreed, among other things, to file a registration statement covering an offer to exchange the 2020 Notes and 2021 Notes for a new issue of exchange notes registered under the Securities Act of 1933 with substantially identical terms. The Company intends to file a registration statement on Form S-4 with the Securities and Exchange Commission for each of the senior notes and is providing the information below to provide supplemental guarantor financial information pursuant to Rule 3-10(f) of Regulation S-X. The following tables present unaudited condensed consolidating

24

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 13—Supplemental Guarantor and Non-Guarantor Financial Information (Continued)

financial information for (i) the Company, (ii) the issuer of the senior notes, (iii) the guarantors under the senior notes, and (iv) the entities which are not guarantors of the senior notes:

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)

MARCH 31, 2013

(in thousands)

	Parent (Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
ASSETS
Cash and cash equivalents	$	200,185	$	158	$	35,448		$	—		$	235,791
Receivables, net		79,729		122,336		113,231			—			315,296
Intercompany receivables		—		538,342		75,419			(613,761	)		—
Intercompany notes receivable		143,263		—		—			(143,263	)		—
Inventories		—		118,744		183,549			—			302,293
Deferred income taxes		36,717		17,687		1,225			—			55,629
Prepaid expenses		1,374		40,861		5,206			—			47,441
Other current assets		18,146		1,128		4,011			—			23,285
Total current assets		479,414		839,256		418,089			(757,024	)		979,735
Mineral interests, net		—		17,015		2,910,576			—			2,927,591
Property, plant and equipment, net		8,276		779,101		904,260			—			1,691,637
Deferred income taxes		78,056		112,560		(5,229	)		—			185,387
Investment in subsidiaries		3,815,313		—		—			(3,815,313	)		—
Other long-term assets		76,091		9,674		13,327			—			99,092
	$	4,457,150	$	1,757,606	$	4,241,023		$	(4,572,337	)	$	5,883,442
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—	$	9,277	$	8,121		$	—		$	17,398
Accounts payable		11,588		80,694		40,758			—			133,040
Accrued expenses		100,956		87,102		4,855			—			192,913
Intercompany payables		613,761		—		—			(613,761	)		—
Intercompany notes payable		—		—		143,263			(143,263	)		—
Accumulated postretirement benefits obligation		131		29,506		—			—			29,637
Other current liabilities		157,201		23,619		26,508			—			207,328
Total current liabilities		883,637		230,198		223,505			(757,024	)		580,316
Long-term debt		2,581,327		115		12,142			—			2,593,584
Deferred income taxes		—		—		883,659			—			883,659
Accumulated postretirement benefits obligation		435		635,694		—			—			636,129
Other long-term liabilities		46,081		128,839		69,164			—			244,084
Total liabilities		3,511,480		994,846		1,188,470			(757,024	)		4,937,772
Stockholders' equity		945,670		762,760		3,052,553			(3,815,313	)		945,670
Total liabilities and stockholders' equity	$	4,457,150	$	1,757,606	$	4,241,023		$	(4,572,337	)	$	5,883,442

25

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 13—Supplemental Guarantor and Non-Guarantor Financial Information (Continued)

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS (Unaudited)

DECEMBER 31, 2012

(in thousands)

	Parent (Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
ASSETS
Cash and cash equivalents	$	83,833	$	61	$	32,707		$	—		$	116,601
Receivables, net		64,106		113,182		79,679			—			256,967
Intercompany receivables		153,933		507,519		—			(661,452	)		—
Intercompany notes receivable		118,079		—		—			(118,079	)		—
Inventories		—		131,893		174,125			—			306,018
Deferred income taxes		39,375		17,687		1,464			—			58,526
Prepaid expenses		1,869		45,327		6,580			—			53,776
Other current assets		17,559		1,109		5,260			—			23,928
Total current assets		478,754		816,778		299,815			(779,531	)		815,816
Mineral interests, net		—		18,475		2,947,082			—			2,965,557
Property, plant and equipment, net		8,448		790,900		932,783			—			1,732,131
Deferred income taxes		52,363		112,560		(4,501	)		—			160,422
Goodwill		—		—		—			—			—
Investment in subsidiaries		3,530,094		—		—			(3,530,094	)		—
Other long-term assets		71,622		9,375		13,497			—			94,494
	$	4,141,281	$	1,748,088	$	4,188,676		$	(4,309,625	)	$	5,768,420
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—	$	10,196	$	8,597		$	—		$	18,793
Accounts payable		5,128		78,260		31,525			—			114,913
Accrued expenses		27,197		83,155		74,523			—			184,875
Intercompany payables		507,519		—		153,933			(661,452	)		—
Intercompany notes payable		—		—		118,079			(118,079	)		—
Accumulated postretirement benefits obligation		131		29,069		—			—			29,200
Other current liabilities		157,044		24,389		25,040			—			206,473
Total current liabilities		697,019		225,069		411,697			(779,531	)		554,254
Long-term debt		2,381,255		1,784		14,333			—			2,397,372
Deferred income taxes		—		—		921,687			—			921,687
Accumulated postretirement benefits obligation		452		632,812		—			—			633,264
Other long-term liabilities		51,984		128,593		70,695			—			251,272
Total liabilities		3,130,710		988,258		1,418,412			(779,531	)		4,757,849
Stockholders' equity		1,010,571		759,830		2,770,264			(3,530,094	)		1,010,571
Total liabilities and stockholders' equity	$	4,141,281	$	1,748,088	$	4,188,676		$	(4,309,625	)	$	5,768,420

26

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 13—Supplemental Guarantor and Non-Guarantor Financial Information (Continued)

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2013

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Total Consolidated
Revenues:
Sales	$	—		$	314,812		$	174,797		$	—	$	489,609
Miscellaneous income (loss)		553			2,190			(1,009	)		—		1,734
		553			317,002			173,788			—		491,343
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			247,677			173,257			—		420,934
Depreciation and depletion		485			40,410			40,295			—		81,190
Selling, general and administrative		13,567			6,943			10,164			—		30,674
Postretirement benefits		(55	)		14,780			—			—		14,725
Restructuring charges		—			116			7,324			—		7,440
		13,997			309,926			231,040			—		554,963
Operating income (loss)		(13,444	)		7,076			(57,252	)		—		(63,620	)
Interest expense		(50,156	)		590			(3,052	)		—		(52,618	)
Interest income		15			—			635			—		650
Other income		—			—			105			—		105
Loss before income tax expense		(63,585	)		7,666			(59,564	)		—		(115,483	)
Income tax benefit		(26,667	)		(3,396	)		(35,976	)		—		(66,039	)
		(36,918	)		11,062			(23,588	)		—		(49,444	)
Equity in losses of subsidiaries		(12,526	)		—			—			12,526		—
Net income (loss)	$	(49,444	)	$	11,062		$	(23,588	)	$	12,526	$	(49,444	)

27

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 13—Supplemental Guarantor and Non-Guarantor Financial Information (Continued)

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2012

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	413,654		$	213,644		$	—		$	627,298
Miscellaneous income (loss)		675			4,071			(481	)		—			4,265
		675			417,725			213,163			—			631,563
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			246,205			185,329			—			431,534
Depreciation and depletion		215			34,367			31,911			—			66,493
Selling, general and administrative		10,729			12,148			13,370			—			36,247
Postretirement benefits		(112	)		13,325			—			—			13,213
		10,832			306,045			230,610			—			547,487
Operating income (loss)		(10,157	)		111,680			(17,447	)		—			84,076
Interest expense		(27,224	)		(286	)		(557	)		—			(28,067	)
Interest income		47			—			230			—			277
Other income (loss)		3,019			—			(10,012	)		—			(6,993	)
Income (loss) before income tax expense		(34,315	)		111,394			(27,786	)		—			49,293
Income tax expense (benefit)		(9,982	)		32,261			(13,602	)		—			8,677
		(24,333	)		79,133			(14,184	)		—			40,616
Equity in earnings of subsidiaries		64,949			—			—			(64,949	)		—
Net income (loss)	$	40,616		$	79,133		$	(14,184	)	$	(64,949	)	$	40,616

28

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 13—Supplemental Guarantor and Non-Guarantor Financial Information (Continued)

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2013

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(49,444	)	$	11,062	$	(23,588	)	$	12,526		$	(49,444	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		4,659			—		—			—			4,659
Change in unrealized gain on hedges, net of tax		722			21		—			(21	)		722
Change in foreign currency translation adjustment		(15,625	)		—		(15,625	)		15,625			(15,625	)
Change in unrealized gain on investments		44			—		44			(44	)		44
Total other comprehensive income (loss), net of tax		(10,200	)		21		(15,581	)		15,560			(10,200	)
Total comprehensive income (loss)	$	(59,644	)	$	11,083	$	(39,169	)	$	28,086		$	(59,644	)

29

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 13—Supplemental Guarantor and Non-Guarantor Financial Information (Continued)

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2012

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	40,616		$	79,133		$	(14,184	)	$	(64,949	)	$	40,616
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		3,898			(50,756	)		—			50,756			3,898
Change in unrealized gain (loss) on hedges, net of tax		(1,283	)		20			(690	)		670			(1,283	)
Change in foreign currency translation adjustment		2,419			—			2,419			(2,419	)		2,419
Change in unrealized gain on investments		(369	)		—			(369	)		369			(369	)
Total other comprehensive income (loss), net of tax		4,665			(50,736	)		1,360			49,376			4,665
Total comprehensive income (loss)	$	45,281		$	28,397		$	(12,824	)	$	(15,573	)	$	45,281

30

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 13—Supplemental Guarantor and Non-Guarantor Financial Information (Continued)

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2013

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(28,029	)	$	65,848		$	(57,217	)	$	—		$	(19,398	)
INVESTING ACTIVITIES
Additions to property, plant and equipment		(314	)		(24,545	)		(9,168	)		—			(34,027	)
Intercompany notes issued		(45,591	)		—			—			45,591			—
Intercompany notes proceeds		22,000			—			—			(22,000	)		—
Investments in subsidiaries		(50,103	)		—			—			50,103			—
Other		—			—			1,021			—			1,021
Cash flows used in investing activities		(74,008	)		(24,545	)		(8,147	)		73,694			(33,006	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		450,000			—			—			—			450,000
Borrowings under revolving credit agreement		—			—			320,778			—			320,778
Repayments on revolving credit agreement		—			—			(320,778	)		—			(320,778	)
Retirements of debt		(250,000	)		(2,588	)		(2,099	)		—			(254,687	)
Dividends paid		(7,816	)		—			—			—			(7,816	)
Excess tax deficit from stock-based compensation arrangements		(195	)		(177	)		—			—			(372	)
Proceeds from stock options exercised		279			—			—			—			279
Debt issuance costs		(15,163	)		—			—			—			(15,163	)
Advances from (to) consolidated entities		41,521			(38,443	)		(3,078	)		—			—
Intercompany notes borrowings		—			—			45,591			(45,591	)		—
Intercompany notes payments		—			—			(22,000	)		22,000			—
Investment from Parent		—			—			50,103			(50,103	)		—
Other		(237	)		2			—			—			(235	)
Cash flows provided by (used in) financing activities		218,389			(41,206	)		68,517			(73,694	)		172,006
Effect of foreign exchange rates on cash		—			—			(412	)		—			(412	)
Net increase in cash and cash equivalents	$	116,352		$	97		$	2,741		$	—		$	119,190
Cash and cash equivalents at beginning of period		83,833			61			32,707			—			116,601
Cash and cash equivalents at end of period	$	200,185		$	158		$	35,448		$	—		$	235,791

31

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

THREE MONTHS ENDED MARCH 31, 2013 (Unaudited)

Note 13—Supplemental Guarantor and Non-Guarantor Financial Information (Continued)

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2012

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(57,822	)	$	145,851		$	(17,175	)	$	—		$	70,854
INVESTING ACTIVITIES
Additions to property, plant and equipment		(630	)		(31,461	)		(88,754	)		—			(120,845	)
Proceeds from sales of investments		—			—			12,228			—			12,228
Intercompany notes issued		(11,101	)		—			—			11,101			—
Other		—			(85	)		—			—			(85	)
Cash flows used in investing activities		(11,731	)		(31,546	)		(76,526	)		11,101			(108,702	)
FINANCING ACTIVITIES
Borrowings under revolving credit agreement		—			—			135,294			—			135,294
Repayments on revolving credit agreement		—			—			(70,156	)		—			(70,156	)
Retirements of debt		—			(1,983	)		(7,194	)		—			(9,177	)
Dividends paid		(7,806	)		—			—			—			(7,806	)
Excess tax benefits from stock-based compensation arrangements		783			—			—			—			783
Proceeds from stock options exercised		120			—			—			—			120
Advances from (to) consolidated entities		104,534			(112,293	)		7,759			—			—
Intercompany notes borrowings		—			—			11,101			(11,101	)		—
Other		(647	)		1			(881	)		—			(1,527	)
Cash flows provided by (used in) financing activities		96,984			(114,275	)		75,923			(11,101	)		47,531
Effect of foreign exchange rates on cash		—			—			87			—			87
Net increase (decrease) in cash and cash equivalents	$	27,431		$	30		$	(17,691	)	$	—		$	9,770
Cash and cash equivalents at beginning of period		99,086			79			29,265			—			128,430
Cash and cash equivalents at end of period	$	126,517		$	109		$	11,574		$	—		$	138,200

32

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2012.

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, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), 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:

•

unfavorable economic, financial and business conditions;

•

global economic crisis;

•

market conditions beyond our control;

•

prolonged decline in the price of coal;

•

decline in global coal or steel demand;

•

prolonged or dramatic shortages or difficulties in coal production;

•

our customers' refusal to honor or renew contracts;

•

our ability to collect payments from our customers;

•

weather patterns and conditions affecting production;

•

geological, equipment and other operational risks associated with mining;

•

availability of adequate skilled employees and other labor relations matters;

•

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

•

availability of licenses, permits, and other authorizations may be subject to challenges;

•

concentration of our mineral operations in a limited number of areas subjects us to risk;

•

a significant reduction of, or loss of purchases by our largest customer;

•

unavailability of cost-effective transportation for our coal;

•

availability, performance and costs of railroad, barge, truck and other transportation;

•

disruptions or delays at the port facilities used by the Company;

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•

risks associated with our reclamation and mine closure obligations; including failure to obtain or renew surety bonds;

•

inaccuracies in our estimates of coal reserves;

•

estimates concerning economically recoverable coal reserves;

•

significant cost increases and delays in the delivery of raw materials, mining equipment and purchased components;

•

failure to meet project development and expansion targets;

•

risks associated with operating in foreign jurisdictions;

•

significant increase in competitive pressures and foreign currency fluctuations;

•

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

•

greater than anticipated costs incurred for compliance with environmental liabilities or limitations on our ability to produce or sell coal;

•

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

•

risks related to our indebtedness and our ability to generate cash for our financial obligations;

•

inability to access needed capital;

•

events beyond our control may result in an event of default under one or more of our debt instruments;

•

costs related to our post-retirement benefit obligations and workers' compensation obligations;

•

downgrade in our credit rating;

•

adverse rulings in current or future litigation;

•

our ability to attract and retain key personnel;

•

our ability to identify suitable acquisition candidates to promote growth;

•

our ability to successfully integrate acquisitions;

•

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 Part I, Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2012 and as updated by any subsequent Form 10-Qs or other documents that are on file with the Securities and Exchange Commission.

        When considering forward-looking statements made by us in this Quarterly Report on Form 10-Q ("Form 10-Q"), or elsewhere, such statements speak only as of the date on which we make them. New risks and uncertainties arise 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 Form 10-Q after the date of this Form 10-Q, except as may be required by law. In light of these risks and uncertainties, keep in mind that any forward-looking statement made in this Form 10-Q or elsewhere might not occur.

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Overview

        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 the United Kingdom. We also extract, process, market and/or possess mineral reserves of thermal coal and anthracite coal, as well as produce metallurgical coke and coal bed methane gas.

        We currently operate 11 active coal mines, a coke plant and a coal bed methane extraction operation located throughout Alabama, West Virginia, Northeast British Columbia and the U.K. We operate our business through two principal business segments: U.S. Operations and Canadian and U.K. Operations. The U.S. Operations segment includes hard coking coal and thermal coal mines in both Alabama and West Virginia, a coke plant in Alabama, and coal bed methane extraction operations located in Alabama. The Canadian mining operations currently operate three surface metallurgical coal mines in Northeast British Columbia's coalfields (the Wolverine Mine, the Brule Mine, and the Willow Creek Mine). Our U.K. mining operation consists of an idled underground and an idled surface mine located in South Wales. The underground mine produced anthracite coal, which can be sold as a low-volatile PCI coal and the surface mine operations produced thermal coal.

        Sales of metallurgical coal for the three months ended March 31, 2013 were 2.8 million metric tons and accounted for approximately 88% of our coal sales volume. Comparatively, for the three months ended March 31, 2012, sales of metallurgical coal were 2.4 million metric tons and accounted for approximately 75% of our coal sales volume. The increase in metallurgical coal sales volume as a percentage of our total coal sales volume in comparison to the prior year comparable quarter is consistent with our business strategy of increasing profitable, high quality metallurgical coal production and sales volume, as metallurgical coal generally sells for prices significantly higher than those for thermal coal.

        For the three months ended March 31, 2013, sales of thermal coal were 387 thousand metric tons and accounted for approximately 12% of our coal sales volume. Comparatively, for the three months ended March 31, 2012, sales of thermal coal were 807 thousand metric tons and accounted for approximately 25% of our coal sales volume.

Industry Overview and Outlook

        During 2012, the metallurgical coal market was adversely impacted by a combination of slowing Chinese demand growth, the weak economic environment in Europe and the recovery of Australian supply, all of which resulted in an oversupply of metallurgical coal. This oversupply of metallurgical coal put pressure on the selling price of metallurgical coal reducing the price to levels not experienced in several years. According to the World Steel Association Short Range Outlook for 2013 and 2014, steel use during 2012 increased at the slowest rate since 2009 when demand declined by 6.5%. In the early part of 2013, the key risks to the global economy surrounding the Eurozone crisis and the U.S. fiscal cliff issue have stabilized and a recovery in global steel demand is expected by the second half of 2013, led by emerging economies. However, a recent downward trend in short-term growth expectations for China's economy has added a level of uncertainty to the second half of 2013 pricing expectations. In 2014, the World Steel Association expects a further pickup in global steel demand with the developed economies increasingly contributing to the growth.

        During the first quarter of 2013 supply-demand imbalance resulted in a benchmark for high quality metallurgical coal of $165. Although the benchmark for high quality coals decreased in the first quarter of 2013, our average realized metallurgical coal sales prices improved compared to the fourth quarter of 2012 due to higher sales volume of our premium low-volatile hard coking coal as a percentage of total metallurgical coal sales.

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        We have seen evidence of stronger demand and improved pricing for the second quarter of 2013, as the second quarter benchmark price of hard coking coal is approximately $172 per metric ton and $141 per metric ton for low-volatile PCI. Although we anticipate a slight improvement in average realized metallurgical coal prices the second quarter of 2013, the latest estimates of China's economic short-term growth combined with ample supply to the market has driven the spot market prices down causing the third quarter of 2013 pricing to be less certain and the recovery in the global economy and metallurgical coal markets continues to be volatile and remain uncertain. Although the remainder of 2013 remains uncertain, according to the World Steel Association Short Range Outlook for 2013 and 2014, global steel use is expected to increase by 2.9% in 2013 and by 3.2% in 2014.

        Our management strives to aggressively control costs and improve operating performance. During the three months ended March 31, 2013, we announced the planned curtailment of production at our Willow Creek mine in the Canadian and U.K. Operations segment. The Company also plans to close the operations at the North River mine in the U.S. Operations segment approximately nine months earlier than the previously expected end of mine life of 2014. The Willow Creek surface mine reserves primarily consist of metallurgical coal comprised of an estimated one-third hard coking coal and two-thirds low-volatile PCI. The North River mine reserves primarily consist of thermal coal. Due to the Willow Creek mine curtailment, for the three months ended March 31, 2013, we recognized severance charges of $4.4 million and contract termination costs of $3.0 million. In addition to the curtailment of these operations, in the previous twelve months the Company idled the development spending at the Aberpergwm mine in South Wales, idled the Gauley Eagle surface mine in West Virginia and curtailed production at its Maple underground mine in West Virginia. The curtailment and in some cases the idling of these higher-cost and lower-quality coal production mines allows us to focus on our higher margin and higher-quality coal mine operations. We believe these actions position us well as we look ahead to the remainder of 2013. We will continue to evaluate market conditions and will make further adjustments if market conditions warrant.

        Despite the short-term challenges, we believe the long-term demand for metallurgical coal within all of our geographic markets is anticipated to be strong 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, we are focused on the long-term metallurgical coal market as we anticipate strong long-term demand for the high-quality metallurgical coals we produce. Although we have responded to the short-term deterioration in market conditions by curtailing and in some cases idling higher-cost and lower-quality coal production mines, when the market rebounds from its current weakness, we have the capability to increase our metallurgical coal production to take advantage of such potential opportunities in this highly volatile market.

        Even though we have taken steps to curtail and in some cases idle lower margin mines, we expect 2013 metallurgical coal production to be approximately 11.0 million tons as we expect to operate our higher margin hard coking coal mines at capacity.

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RESULTS OF OPERATIONS

Summary Operating Results for the
Three Months Ended March 31, 2013 and 2012

	For the three months ended March 31, 2013
(in thousands)	U.S. Operations			Canadian and U.K. Operations			Other			Total
Sales	$	336,741		$	152,803		$	65		$	489,609
Miscellaneous income (loss)		2,484			(1,359	)		609			1,734
Revenues		339,225			151,444			674			491,343
Cost of sales (exclusive of depreciation and depletion)		269,548			151,371			15			420,934
Depreciation and depletion		47,473			33,232			485			81,190
Selling, general and administrative		14,265			8,283			8,126			30,674
Postretirement benefits		14,780			—			(55	)		14,725
Restructuring charges		116			7,324			—			7,440
Operating loss	$	(6,957	)	$	(48,766	)	$	(7,897	)		(63,620	)
Interest expense, net											(51,968	)
Other income											105
Income tax benefit											66,039
Net loss										$	(49,444	)

	For the three months ended March 31, 2012
(in thousands)	U.S. Operations		Canadian and U.K. Operations			Other			Total
Sales	$	446,118	$	180,830		$	350		$	627,298
Miscellaneous income (loss)		6,032		(2,479	)		712			4,265
Revenues		452,150		178,351			1,062			631,563
Cost of sales (exclusive of depreciation and depletion)		276,575		154,404			555			431,534
Depreciation and depletion		42,142		24,136			215			66,493
Selling, general and administrative		13,127		13,366			9,754			36,247
Postretirement benefits		13,325		—			(112	)		13,213
Operating income (loss)	$	106,981	$	(13,555	)	$	(9,350	)		84,076
Interest expense, net										(27,790	)
Other loss										(6,993	)
Income tax expense										(8,677	)
Net income									$	40,616

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	Dollar variance for the three months ended March 31, 2013 versus 2012
(in thousands)	U.S. Operations			Canadian and U.K. Operations			Other			Total
Sales	$	(109,377	)	$	(28,027	)	$	(285	)	$	(137,689	)
Miscellaneous income (loss)		(3,548	)		1,120			(103	)		(2,531	)
Revenues		(112,925	)		(26,907	)		(388	)		(140,220	)
Cost of sales (exclusive of depreciation and depletion)		(7,027	)		(3,033	)		(540	)		(10,600	)
Depreciation and depletion		5,331			9,096			270			14,697
Selling, general and administrative		1,138			(5,083	)		(1,628	)		(5,573	)
Postretirement benefits		1,455			—			57			1,512
Restructuring charges		116			7,324			—			7,440
Operating income (loss)	$	(113,938	)	$	(35,211	)	$	1,453			(147,696	)
Interest expense, net											(24,178	)
Other income (loss)											7,098
Income tax benefit (expense)											74,716
Net income (loss)										$	(90,060	)

Summary of First Quarter Consolidated Results of Operations

        Our net loss for the three months ended March 31, 2013 was $49.4 million, or $0.79 per diluted share, which compares to net income of $40.6 million, or $0.65 per diluted share for the three months ended March 31, 2012. The net loss is primarily due to a decrease of approximately 30% in the average selling price of metallurgical coal as a result of lower global metallurgical coal prices. Earnings before interest expense, interest income, income taxes, depreciation, depletion and amortization ("EBITDA") for the first quarter of 2013 decreased $125.9 million as compared to the first quarter of 2012 primarily due to the decrease in revenues as a result of lower pricing. A reconciliation of net income (loss) to EBITDA is presented in the Liquidity and Capital Resources section below.

        Revenues for the three months ended March 31, 2013 were $491.3 million, representing a decrease of $140.2 million from $631.6 million in the same period in 2012. The decrease in revenues was primarily due to a decrease in the average selling price of metallurgical coal of $65.81, or approximately 30%, per ton due to weaker worldwide demand for metallurgical coal. The significant decrease in the average selling price was partially offset by an increase in metallurgical coal sales volumes of approximately 410,000 tons, for a 17% increase year over year.

        Cost of sales, exclusive of depreciation and depletion, decreased $10.6 million to $420.9 million as compared to the first quarter of 2012 and was primarily the result of a significant improvement in per ton cost of sales for low-volatile PCI partially offset by an increase in sales volumes of metallurgical coal. The average cash cost of sales per ton of low-volatile PCI sold decreased approximately 40% from $207.70 in the first quarter of 2012 to $123.64 in the first quarter of 2013 primarily due to a concentrated effort throughout 2012 and the first quarter of 2013 to lower costs in our Canadian and U.K. Operations segment. The substantial improvement in low-volatile PCI costs reflects the results of our cost containment and restructuring initiatives.

        Selling, general and administrative expense decreased $5.5 million or approximately 15% to $30.7 million, as compared to $36.2 million in the first quarter of 2012, primarily due to the reclassification of selling, general and administrative expenses as discussed in Note 1 of the "Notes to Condensed Consolidated Financial Statements" in this Form 10-Q combined with the results of our cost containment initiatives offset partially by proxy contest expenses.

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        The $0.1 million other income for the three months ended March 31, 2013 and $7.0 million other loss for the three months ended March 31, 2012 was primarily attributable to gains and losses on the sale and re-measurement to fair value of equity investments.

        We recognized an income tax benefit of $66.0 million for the three months ended March 31, 2013, compared to an income tax provision of $8.7 million for the three months ended March 31, 2012. For the three months ended March 31, 2013, we determined the current year income tax benefit for the Alabama operations using the actual year-to-date financial results as compared to the estimated annual effective tax rate method utilized in 2012. The current quarter income tax benefit for the Canada, U.K. and West Virginia operations is based upon an estimated annual effective tax rate method. The 2013 and 2012 effective tax rates also reflect the benefit of our Canadian and U.K. operations which are taxed at statutory rates lower than the U.S. rate, and the effects of tax losses in excess of losses related to foreign financing activities. The effective tax rates also reflect statutory depletion deductions in the Alabama mining operations.

        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 1.7 million metric tons for the three months ended March 31, 2013, representing an increase of 11.1% compared to 1.5 million metric tons during the same period in 2012 due to continued demand for our high quality low and mid-volatility hard coking coal produced at the No. 4 and No. 7 mines. Our hard coking coal production totaled 1.7 million metric tons in the first quarter of 2013, a decrease of 11.7% from the same period in the prior year primarily as a result of lower production at the Alabama underground operations due to the operation of three longwall panels in our Alabama operations in the current quarter as opposed to the operation of four longwall panels during the three months ended March 31, 2012 and due to two longwall panel moves in the current quarter. The average selling price of hard coking coal in the first quarter of 2013 was $157.28 per metric ton, representing a 29.0% decrease from the average selling price of $221.22 per metric ton for the same period in 2012. The decrease in the average selling price of hard coking coal reflects the current depressed market conditions in the metallurgical coal market. The average cash cost of sales per ton of hard coking coal sold during the first quarter of 2013 was $109.76, a slight decrease from the average cash cost of sales per ton of hard coking coal sold during the first quarter of 2012 of $110.33.

        Thermal coal sales and production totaled approximately 400 thousand metric tons for the three months ended March 31, 2013, a decrease of approximately 50.0% compared to approximately 800 thousand metric tons during the same period in 2012 primarily due to difficult mining conditions at the North River mine in Alabama and the idling of a thermal coal surface mine in the second quarter of 2012 due to lower demand and pricing. The average selling price of thermal coal for the first quarter of 2013 was $64.23 per metric ton, down 9.9% from the average selling price of $71.27 per metric ton for the same period in 2012, which was primarily attributable to the continued softening of demand for thermal coal. The average cash cost of sales per ton of thermal coal sold during the first quarter of 2013 was $90.34 compared to $78.87 for the same period in 2012 as a result of difficult mining conditions at our North River mine. In response to the continued deterioration in coal markets, we continue to take steps to reduce operations at lower margin mines and we plan to close our North River thermal coal mine in 2013 approximately nine months earlier than the previously expected end of mine life of 2014.

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

	Three months ended March 31,
	2013		2012
Tons of hard coking coal sold(1) (in thousands)		1,706		1,535
Tons of hard coking coal produced (in thousands)		1,738		1,969
Average hard coking coal selling price(1) (per metric ton)	$	157.28	$	221.22
Average hard coking coal cash cost of sales(1) (per metric ton)	$	109.76	$	110.33
Average hard coking coal cash cost of production (per metric ton)	$	78.11	$	71.68
Tons of thermal coal sold (in thousands)		383		782
Tons of thermal coal produced (in thousands)		434		816
Average thermal coal selling price (per metric ton)	$	64.23	$	71.27
Average thermal coal cash cost of sales (per metric ton)	$	90.34	$	78.87
Average thermal coal cash cost of production (per metric ton)	$	76.16	$	60.74

(1)

Includes sales of both produced and purchased coal.

        Our U.S. Operations segment reported revenues of $339.2 million for the three months ended March 31, 2013, representing a decrease of $112.9 million from the same period last year. The decrease in revenues during the first quarter of 2013 as compared to the first quarter of 2012 was primarily attributable to the decline in the average selling price of both hard coking and thermal coal, partially offset by higher hard coking coal sales volumes at the Alabama underground operations.

        Cost of sales, exclusive of depreciation and depletion, of our U.S. Operations segment decreased $7.0 million to $269.5 million as compared to the first quarter of 2012 despite an 11.1% increase in metallurgical coal sales volume. The decrease in cost of sales was primarily attributable to our cost containment efforts.

        Our U.S. Operations segment reported an operating loss of $7.0 million for the three months ended March 31, 2013, compared to operating income of $107.0 million in the same period in 2012. The decrease in operating income was primarily due to an approximately 25.0% decrease in revenues as a result of lower global metallurgical and thermal coal pricing.

Canadian and U.K. Operations

        Metallurgical coal sales for the three months ended March 31, 2013 totaled 652 thousand metric tons of hard coking coal at an average selling price of $147.00 per metric ton and 419 thousand metric tons of low-volatile PCI coal at an average selling price of $139.23 per metric ton. Metallurgical coal sales in the first quarter of 2012 totaled 322 thousand metric tons of hard coking coal at an average selling price of $250.00 per metric ton and 510 thousand metric tons of low-volatile PCI coal at an average selling price of $187.97. The declines in the average selling price of hard coking coal and low-volatile PCI coal reflect the weakened worldwide demand for metallurgical coal. The average cash cost of sales per ton of hard coking coal sold during the first quarter of 2013 was $142.13, representing a decrease of $2.96 per ton from the average cash cost of sales per ton of hard coking coal sold during the first quarter of 2012 of $145.09. The average cash cost of sales per ton of low-volatile PCI coal sold during the first quarter of 2013 was $123.64, representing a 40.5% decrease from the average cash cost of sales per ton of low-volatile PCI coal sold during the first quarter of 2012 of $207.70 as we converted from a contractor-operated to owner-operated mine. These reductions in cash cost of sales reflect the concentrated efforts throughout 2012 and 2013 to reduce costs in our Canadian and U.K. Operations.

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        Our Canadian and U.K. Operations segment produced a total of 532 thousand metric tons of hard coking coal and 487 thousand metric tons of low-volatile PCI in the first quarter of 2013. During the first quarter of 2012, the segment produced 414 thousand metric tons of hard coking coal and 611 thousand metric tons of low-volatile PCI. The increase in hard coking coal production reflects significant improvements in productivity at the Wolverine mine and the addition of hard coking coal production at the Willow Creek mine. During the first quarter of 2012 the Willow Creek mine primarily produced low-volatile PCI coal. The Willow Creek mine produced approximately 99 thousand metric tons of low-volatile hard coking coal and 155 thousand tons of low-volatile PCI in the first quarter of 2013. In connection with our focus to aggressively control cost and improve operating performance, we announced in March 2013 plans to significantly curtail production at the Willow Creek mine beginning in April 2013 until market pricing conditions improve. The 124 thousand metric tons or 20.4% decrease in low-volatile PCI production is primarily due to our actions initiated in the fourth quarter of 2012 to temporarily reduce production at the Brule mine in an effort to reduce inventory levels.

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

	Three months ended March 31,
	2013		2012
Tons of hard coking coal sold (in thousands)		652		322
Tons of hard coking coal produced (in thousands)		532		414	(1)
Average hard coking coal selling price (per metric ton)	$	147.00	$	250.00
Average hard coking coal cash cost of sales (per metric ton)	$	142.13	$	145.09
Average hard coking coal cash cost of production (per metric ton)	$	110.22	$	108.75	(1)
Tons of low-volatile PCI coal sold (in thousands)		419		510
Tons of low-volatile PCI coal produced (in thousands)		487		611	(1)
Average low-volatile PCI coal selling price (per metric ton)	$	139.23	$	187.97
Average low-volatile PCI cash cost of sales (per metric ton)	$	123.64	$	207.70
Average low-volatile PCI cash cost of production (per metric ton)	$	109.08	$	135.31	(1)

(1)

During the third quarter of 2012, we realigned certain metrics around tons included in production in our Canadian and U.K. Operations segment to conform with how we account for production in the U.S. Operations segment. Historically, the Canadian and U.K. Operations segment did not record tons as produced until they were deemed finished goods. We revised this methodology to include all tons mined, no matter if in process or finished, as produced based on a clean coal tonnage equivalent. Our Form 8-K filed on November 5, 2012, includes a reconciliation of production statistics previously presented as compared with the realigned methodology from the Western Coal acquisition date of April 1, 2011 through June 30, 2012.

        Our Canadian and U.K. Operations segment reported revenues of $151.4 million for the first quarter of 2013, a decrease of $26.9 million from the same period last year. The decrease in revenues during the first quarter of 2013 as compared to the first quarter of 2012 was attributable to a decline of 41.2% and 25.9% in the average selling price of hard coking coal and low-volatile PCI coal, respectively.

        Cost of sales, exclusive of depreciation and depletion, in our Canadian and U.K. Operations segment for the three months ended March 31, 2013 decreased $3.0 million to $151.4 million as compared to the 2012 first quarter. The decrease in cost of sales was primarily attributable to a significant improvement in cost of sales for low-volatile PCI which reflects the cost savings from

41

converting our Brule mine from contractor-operated to owner-operated and the results of cost containment initiatives.

        Our Canadian and U.K. Operations segment reported an operating loss of $48.8 million for the three months ended March 31, 2013 as compared to an operating loss of $13.6 million for the same period in 2012. The operating loss for the quarter was primarily due to lower average selling prices for hard coking and low-volatile PCI coal as a result of lower global metallurgical coal pricing.

FINANCIAL CONDITION

        Cash and cash equivalents increased by $119.2 million at March 31, 2013 compared to December 31, 2012 primarily due to cash flows provided by financing activities of $172.0 million due to the successful issuance of the 2021 Senior Notes offset by cash flows used in investing activities of $33.0 million and cash flows used in operating activities of $19.4 million.

        Net receivables were $315.3 million at March 31, 2013, representing an increase of $58.3 million from December 31, 2012 primarily due to the timing of metallurgical coal sales during March 2013 as compared to December 2012 combined with an increase in the average selling price of metallurgical coal during the first quarter of 2013 as compared to the fourth quarter of 2012.

        Net property, plant and equipment decreased by $40.5 million at March 31, 2013 as compared to December 31, 2012 primarily due to depreciation expense, partially offset by capital expenditures of $34.0 million.

LIQUIDITY AND CAPITAL RESOURCES

Overview

        Our principal sources of short-term funding are our existing cash balances, operating cash flows and borrowings under our revolving credit facility. Our principal sources of long-term funding are our bank term loans entered into on April 1, 2011 and our senior notes issued in 2012 and 2013, as discussed below. Our available liquidity as of March 31, 2013 was $560 million, consisting of cash and cash equivalents of $236 million and $324 million available under the Company's $375 million revolving credit facility, net of outstanding letters of credit of $51 million. In recent quarters, we have entered into the financing transactions and amendments discussed below which have increased our interest expense. These transactions were completed to enhance liquidity and extend our debt maturities.

2021 Senior Notes

        On March 27, 2013, the Company issued $450.0 million of 8.5% senior notes due April 15, 2021 (the "2021 Notes"). These Notes are unconditionally guaranteed, jointly and severally, on an unsecured basis, by each of our current and future wholly-owned U.S. domestic restricted subsidiaries. Interest on the 2021 Notes accrues at the rate of 8.5% per year and is payable semi-annually in arrears on April 15 and October 15, commencing on October 15, 2013. At any time prior to April 15, 2016, the Company may redeem up to 35% of the aggregate principal amount of the 2021 Notes at a redemption price of 108.5% of the principal amount, plus accrued and unpaid interest. The Company may redeem the 2021 Notes, in whole or in part, after April 15, 2016 and prior to April 15, 2017, at a redemption price equal to 100% of the aggregate principal amount of the 2021 Notes plus a "make-whole" premium and accrued and unpaid interest. The Company may redeem the 2021 Notes, in whole or in part at redemption prices equal to 104.25% for the twelve months commencing April 15, 2017, 102.125% for the twelve months commencing April 15, 2018 and 100% beginning on April 15, 2019, in each case plus accrued and unpaid interest.

        Upon the occurrence of a change of control repurchase event with respect to the 2021 Notes, unless the Company has exercised its right to redeem the 2021 Notes, the Company will be required to

42

offer to repurchase each holder's 2021 Notes at a price equal to 101% of the aggregate principal amount, plus accrued and unpaid interest, if any, to the date of purchase.

2020 Senior Notes

        On November 21, 2012, we issued $500.0 million of 9.875% senior notes due December 15, 2020 (the "2020 Notes") at an initial price of 99.302% of their face amount. The 2020 Notes are unconditionally guaranteed, jointly and severally, on an unsecured basis, by each of our current and future wholly-owned U.S. domestic restricted subsidiaries. Interest on the 2020 Notes accrues at the rate of 9.875% per year and is payable semi-annually in arrears on June 15 and December 15, beginning on June 15, 2013. We may redeem the 2020 Notes, in whole or in part, at any time prior to December 15, 2016, at a price equal to 100.000% of the aggregate principal amount of the 2020 Notes plus a "make-whole" premium, plus accrued and unpaid interest. We may redeem the 2020 Notes, in whole or in part, at any time during the twelve months commencing December 15, 2016, at 104.938% of the aggregate principal amount of the 2020 Notes, at any time during the twelve months commencing December 15, 2017, at 102.469% of the aggregate principal amount of the 2020 Notes, and at any time after December 15, 2018, at 100.000% of the aggregate principal amount of the 2020 Notes, in each case plus accrued and unpaid interest.

        As market conditions warrant, we may from time to time repurchase our debt securities in privately negotiated transactions, in open market purchases, by tender offer or otherwise.

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, engage in mergers or acquisitions, and make investments and loans. The 2011 Credit Agreement also includes certain financial covenants that must be maintained.

Credit Agreement Amendment

        On March 22, 2013, the Company entered into an amendment (the "Fourth Amendment") to the 2011 Credit Agreement dated as of April 1, 2011, as amended by the First Amendment to Credit Agreement, dated as of January 20, 2012, as further amended by the Second Amendment to Credit Agreement, dated as of August 16, 2012, and as further amended by the Third Amendment to Credit Agreement dated as of October 29, 2012 among the Company, the various lenders, Morgan Stanley Senior Funding, Inc. as administrative agent, and other agents named therein. The Fourth Amendment amended a financial covenant in the 2011 Credit Agreement to provide additional flexibility for the issuance of senior unsecured notes, subject to the lessor of 100% and $250.0 million, in each case, of the net proceeds of such notes issuance being used to repay term loans outstanding under the 2011 Credit Agreement. The Fourth Amendment also provided that, should a repricing event occur within six months of the effective date of the Fourth Amendment, the Company must pay a fee equal to 1.0% of the aggregate principal amount of, as applicable, (i) the portion of the Term Loan B balance prepaid

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in connection with such repricing event or (ii) the portion of the Term Loan B balance outstanding on such date that is subject to an effective pricing reduction pursuant to such repricing event. All other terms of the 2011 Credit Agreement, including the aggregate principal amount that may be borrowed thereunder, remained substantially unchanged.

        The Revolver, term loan A and term loan B interest rates are tied to LIBOR or CDOR, plus a credit spread ranging from 350 to 450 basis points for the Revolver and term loan A and 475 basis points on the term loan B, adjusted quarterly based on the Company's total leverage ratio as defined by the amended 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.

        Borrowings at March 31, 2013 under the amended 2011 Credit Agreement consisted of a term loan A balance of $656.6 million with a weighted average interest rate of 4.80%, a term loan B balance of $978.2 million with a weighted average interest rate of 5.75% and no borrowings under the Revolver, with $50.8 million in outstanding stand-by letters of credit and $324.2 million of availability for future borrowings. On March 27, 2013, the Company prepaid $250 million of the outstanding principal balances of the term loans using a portion of the net proceeds from issuance of $450.0 million 2021 Notes. As a result of these prepayments, the remaining balance of the term loan B facility is due upon maturity.

        We were in compliance with all covenants under our Credit Agreement and the indenture governing our notes as of March 31, 2013. If operating results fall materially or other adverse factors occur, they could result in our being unable to comply with covenants in our Credit Agreement. A breach of covenants in the Credit Agreement, including the covenants that stipulate ratios based on Adjusted EBITDA as specifically defined under the Credit Agreement, could result in a default under the Credit Agreement and the lenders thereunder could elect to declare all amounts borrowed due and payable. Any acceleration under the Credit Agreement could result in a default under the indenture governing our notes.

        Based on current forecasts and anticipated market conditions, we believe that funding provided by operating cash flows and available sources of liquidity are sufficient to meet substantially all of our operating needs, to make planned capital expenditures and to make all required interest and principal payments on indebtedness for the foreseeable future. However, our operating cash flows and liquidity are significantly influenced by numerous factors including prices of coal, coal production levels, costs of raw materials, interest rates and the general economy. Although we have observed recent improvement in the market for our products, renewed deterioration of economic conditions or deteriorating mining conditions could adversely impact our operating cash flows.

Statements of Cash Flows

        Cash balances were $235.8 million and $116.6 million at March 31, 2013 and December 31, 2012, respectively. The increase in cash during the three months ended March 31, 2013 of $119.2 million primarily resulted from cash provided by financing activities of $172.0 million offset by cash used in operating activities of $19.4 million and cash used in investing activities of $33.0 million, which included capital expenditures of $34.0 million.

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

	Three months ended March 31,
	2013			2012
Cash flows provided by (used in) operating activities	$	(19,398	)	$	70,854
Cash flows used in investing activities		(33,006	)		(108,702	)
Cash flows provided by financing activities		172,006			47,531
Effect of foreign exchange rates on cash		(412	)		87
Net increase in cash and cash equivalents	$	119,190		$	9,770

        The decrease of $90.3 million in net cash provided by operating activities is primarily attributable to a $90.1 million decrease in net income as compared to the same period in 2012, resulting from the decline in the average selling price of metallurgical coal.

        The decrease in cash flows used in investing activities of $75.7 million was primarily attributable to an $86.8 million decrease in capital expenditures.

        The increase in cash flows provided by financing activities of $124.5 million was primarily attributable to $450.0 million of proceeds from the issuance of the 2021 Notes partially offset by retirements of existing debt of $245.5 million, a reduction in net borrowings under the revolving credit agreement of $65.1 million and debt issuance costs of $15.2 million.

Capital Expenditures

        Capital expenditures totaled $34.0 million during the three months ended March 31, 2013 compared to $120.8 million during the three months ended March 31, 2012. We currently expect 2013 capital expenditures to total approximately $170 million.

EBITDA

        EBITDA is defined as earnings before interest expense, interest income, income taxes, and depreciation and depletion expense. Adjusted EBITDA is defined as EBITDA further adjusted to exclude restructuring charges, proxy contest expenses and other miscellaneous items. EBITDA and adjusted EBITDA are financial measures which are 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 these non-GAAP measures provide additional insights into the performance of the Company, and they reflect how management analyzes Company performance and compares that performance against other companies. In addition, we believe that EBITDA and adjusted EBITDA are a useful measure as some investors and analysts use EBITDA and adjusted EBITDA to compare us against other companies and to help analyze our ability to satisfy principal and interest obligations and capital expenditure needs. We believe that adjusted EBITDA presents a useful measure of our ability to incur and service debt based on ongoing operations. EBITDA and adjusted EBITDA may not be comparable to similarly titled measures used by other entities.

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        Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA (in thousands):

	For the three months ended March 31,
	2013			2012
Net income (loss)	$	(49,444	)	$	40,616
Add: Interest expense		52,618			28,067
Less: Interest income		(650	)		(277	)
Add: Income tax expense (benefit)		(66,039	)		8,677
Add: Depreciation and depletion expense		81,190			66,493
Earnings before interest, income taxes, and depreciation and depletion (EBITDA)	$	17,675		$	143,576
Add: Restructuring charges		7,440			—
Add: Proxy contest expenses and other		6,838			—
Adjusted EBITDA	$	31,953		$	143,576

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. Our primary market risk exposures relate to interest rate risk, commodity price 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. As of March 31, 2013, the interest rates for the term loan A, term loan B and revolver loans are tied to LIBOR or CDOR, plus a credit spread ranging from 350 to 450 basis points for the revolver and term loan A and 475 basis points on the term loan B adjusted quarterly based on our total leverage ratio as defined by the 2011 Credit Agreement. As of March 31, 2013, our borrowings due under the 2011 Credit Agreement totaled $1.6 billion. As of March 31, 2013 a 100 basis point increase in interest rates would increase our quarterly interest expense by approximately $1.2 million while a 100 basis point decrease in interest rates would decrease our quarterly interest expense by approximately $147 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 our exposure to rising interest rates and the risk that changing interest rates could have on our operations, we entered into an interest rate swap agreement and an interest rate cap agreement during June 2011. 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

        We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding

46

required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of March 31, 2013 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. There has been no change in our internal control over financial reporting as such term is defined in Rule 13a-15(f) of the Exchange Act, during the three months ended March 31, 2013 that would materially affect, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.    Legal Proceedings

        See Note 8 of the "Notes to Condensed Consolidated Financial Statements" in this Form 10-Q for a description of current legal proceedings, which is incorporated by reference in this Part II, Item 1.

        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.

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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. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Industry Overview and Outlook," which could materially affect our business, financial condition or future results. Other than as described in this report, there have been no material changes to the risk factors disclosed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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 three-month period ended March 31, 2013:

Period	Total Number of Shares Purchased(1)		Average Price Paid per Share
January 1, 2013 - January 31, 2013		—		—
February 1, 2013 - February 28, 2013		5,839	$	35.55
March 1, 2013 - March 31, 2013		1,099	$	30.59
		6,938

(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
	4.1	Indenture, dated as of March 27, 2013, by and among Walter Energy, Inc., the subsidiary guarantors named therein and Union Bank, N.A., as trustee (Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-K (File No. 011-13711), filed on March 27, 2013).
	4.2	Form of 8.500% senior note due 2021(included in Exhibit 4.1) (Incorporated by reference to Exhibit 4.2 of the Registrant's Current Report on Form 8-K (File No. 011-13711), filed on March 27, 2013).

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Exhibit Number
	10.1	†	Form of Restricted Stock Unit Award Agreement—Performance Vesting Award—2 Year Performance Period (Incorporated by reference to Exhibit 10.11.9 of the Registrant's Annual Report on Form 10-K (File No. 011-13711) for the year ended December 31, 2012).
	10.2	†	Form of Restricted Stock Unit Award Agreement—Performance Vesting Award—3 Year Performance Period (Incorporated by reference to Exhibit 10.11.10 of the Registrant's Annual Report on Form 10-K (File No. 011-13711) for the year ended December 31, 2012).
	10.3	†	Form of Restricted Stock Unit Award Agreement (for executives executing agreements after February 18, 2013) (Incorporated by reference to Exhibit 10.11.11 of the Registrant's Annual Report on Form 10-K (File No. 011-13711) for the year ended December 31, 2012).
	10.4	†	Form of Non-Qualified Stock Option Agreement (for executives executing agreements after February 18, 2013) (Incorporated by reference to Exhibit 10.11.12 of the Registrant's Annual Report on Form 10-K (File No. 011-13711) for the year ended December 31, 2012).
	10.5	*†	2013 Executive Incentive Plan.
	10.6		Fourth Amendment to Credit Agreement, dated as of March 21, 2013, by and among Walter Energy, Inc., certain subsidiaries of Walter Energy, Inc., the lenders party thereto and Morgan Stanley Senior Funding,  Inc., as Administrative Agent (Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K (File No. 011-13711), filed on March 22, 2013).
	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. Section 1350—Chief Executive Officer
	32.2	*	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 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 quarterly period ended March 31, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income (iv) the Condensed Consolidated Statement of Changes in Stockholders' Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements.

*

Filed herewith.

†

Denote management contracts or compensatory plans or arrangements.

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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: May 8, 2013

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

Date: May 8, 2013

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EX-10.5

Exhibit 10.5

FINAL

WALTER ENERGY

2013 EXECUTIVE PERFORMANCE PROGRAM

UNDER THE EXECUTIVE INCENTIVE PLAN

I.The Program

The Walter Energy, Inc. 2013 Executive Performance Program, as it may be amended from time to time (the “Program”), under the Walter Energy, Inc. Executive Incentive Plan, as it may be amended from time to time (the “Plan”), is intended to stimulate and reinforce executive actions that support and assure the attainment of key corporate objectives.  The Program facilitates these objectives by providing key employees the opportunity to earn additional cash compensation if the Company and its Subsidiaries attain their financial and operating objectives during the 2013 Plan Year and the Participant (as defined below) attains required individual performance levels.  The terms and provisions of the Plan are hereby incorporated herein by reference.  In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.  All capitalized terms used but not defined herein shall have the meaning ascribed to such term in the Plan.

II.Definitions

1.Base Salary means a Participant’s aggregate annual base salary (exclusive of  any special stipends, interim payments, commissions, overrides, and any incentive and other cash and non-cash payments) earned in respect of the 2013 Plan Year.

2.Committee means the Compensation and Human Resources Committee of the Board, as it is constituted from time to time.

3.Consolidated EBITDA means total earnings before interest expense, interest income, income taxes, depreciation, depletion and amortization for Walter Energy Inc.

4.Employee means an Employee of an Operating Unit.

5.Incentive Fund means the fund created in accordance with Section VII of the Program.

6.Operating Unit means a wholly owned subsidiary of the Company that has been declared by the Committee to be eligible to participate in the Plan and the Program.

7.Participant means an Employee who has been selected to participate in the Program in accordance with and subject to the terms and conditions set forth herein.

8.Peer Group means a group of companies that are selected by the Committee for comparison purposes based on set of criteria (e.g., being a direct competitor; the same or

1

similar industry; same or similar size or annual revenues to one or more Subsidiaries or the Company).

9.Performance Goal means the performance goals for the 2013 Plan Year, as more fully described in Section V, and the measures that are designated for all Participants or individual Participants so that, if each is attained at 100%, the Participant could receive the Target Incentive Opportunity for such Participant.

10.Target Incentive Opportunity means additional cash compensation, expressed as a percentage of Base Salary, which may be recommended as an incentive award if all targets are attained at 100%.  The actual amount of the award payable hereunder could increase or decrease as more fully described in Section VIII, subject to the terms of the Plan and the Program.

III.Administration

1.The Program shall be administered by the Committee.

2.The Committee shall have sole and complete authority to make awards under the Program from funds authorized by the Committee in accordance with the terms of the Plan and the Program and to adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the Program, as it shall deem advisable from time to time and to interpret the terms and provisions of the Program.

A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by a majority of the Committee without a meeting, shall be the acts of the Committee.

3.Nothing in the Plan, the Program or any of the related documents and no representations by the Company, shall be construed as creating a contract, oral or written, that guarantees employment of an individual for any period of time, nor is there created any entitlement to receive an incentive payment except as determined by the Committee.  The decisions and determinations of the Committee shall be final, conclusive and binding on all Participants.

IV.Eligible Participants

1.The following Employees of the Company and its Subsidiaries are eligible to participate in the Program: Employees who hold positions that are equal to or greater than salary grade 9, or the equivalent, under the Company’s job evaluation program.

2.Participants in the Program may not take part in any other cash incentive or production bonus plan that is sponsored by the Company or any of its Subsidiaries.

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3.Participation in the Company’s Employee Stock Purchase Plan is required of all eligible Participants in the Plan and Program to receive an incentive award.

V.Performance Goals

1.Financial Performance Goals — 60% of a Participant’s incentive opportunity.

From time to time in its discretion with respect to a Plan Year, the Committee will establish one or more financial performance goals based on the annual business plan, improvement over the former year, a Peer Group comparison, or such other criteria as it may determine in its discretion.  The financial performance goals may include one or more measures, such as: earnings before taxes (EBT); net income (NI); earnings per share (EPS); operating income (OI); return on net assets (RONA), earnings before interest, taxes, depreciation and amortization (EBITDA); earnings before interest and taxes (EBIT); and/or pricing, production volume, production capacity, cost per ton, etc. that reflect the combined results of one or more of the Company’s Subsidiaries.  If the Committee designates more than one target, it shall assign relative weights to each target so that the sum of all weighting factors is to equal 1.0.

For the 2013 Plan Year, as more fully described in the 2013 Performance Metrics and Design Parameters attached hereto (the “Parameters”), the Committee has designated Consolidated EBITDA, production tons and cost per ton as the financial performance goals, with each such goal representing 20% of the weighting for all Participants.

The Committee will have the sole power and authority to review and adjust the financial performance goals during the 2013 Plan Year due to unanticipated events, including, but not limited to, windfall gains, disposal of significant assets, catastrophes and other nonrecurring events.

2.Safety Performance Goal — 20% of a Participant’s incentive opportunity.

As soon as practicable at or near the beginning of the 2013 Plan Year, the Committee will establish one or more safety performance goals for each Operating Unit based on each Operating Unit’s safety performance record.  Safety performance goals may include, but are not limited to, lost time accident (LTA) rate, incident rate and citations issued. If there is more than one goal, relative weights will be assigned to each goal so that the sum of all weighting factors is equal to 1.0.  The safety performance goals applicable for the 2013 Plan Year are more fully described in the Parameters.

3.Individual Goals — 20% of a Participant’s incentive opportunity.

As soon as practicable at or near the beginning of the 2013 Plan Year, one or more individual goals will be established for each Participant by the Participant’s manager in

3

consultation with the Participant.  If there is more than one goal, the manager will assign relative weights to each goal so that the sum of all weighting factors is equal to 1.0.  The goals will be reviewed and approved by the next level of executive management, and communicated directly to the Participant.

Individual Goals will focus on key actions and accomplishments by the Participant that support the Company’s strategic objectives.  The goals, in order to be effective, must be specific and measurable, to the greatest extent possible.  Examples of individual goals will relate to operation excellence, growth of the Company and employee development.

A Participant’s manager shall have the authority, with the written approval of the next level of executive management, to review and adjust the individual goals during the 2013 Plan Year because of unanticipated events, including, but not limited to, windfall gains,  disposal of significant assets, catastrophes and other nonrecurring events.

VI.Target Incentive Opportunity

1.Each Participant in the Program will have a Target Incentive Opportunity, as determined by the Committee or in accordance with the Company’s compensation policies, as of the beginning of the 2013 Plan Year.

2.A Target Incentive Opportunity represents the amount of additional cash compensation that will be recommended for payment if all of the financial, safety and individual performance targets are attained at 100%, subject to the other terms and conditions contained herein and in the Parameters.

3.Actual payments to a Participant may be increased or decreased from the Participant’s Target Incentive Opportunity depending on actual performance compared to performance goals and final determination by the Committee, but in no event will a Participant’s Target Incentive Opportunity exceed the maximum award permitted under the Plan.  Subject to the terms of the Plan, the maximum award under the Program will be a percentage of Base Salary as determined by Company compensation policies.

VII.Incentive Fund

At the beginning of each Plan Year, subject to the terms of the Plan, the Company will establish an Incentive Fund derived from the aggregate of the Base Salaries of the Participants times their Target Incentive Opportunity.  During the course of the Plan Year, the Company may adjust the size of the Incentive Fund to reflect projected year-end performance, Participant changes and resulting year-end incentive payments; provided, however, that in no event may the Incentive Fund exceed the Award Pool.

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VIII.Incentive Awards

1.A Participant’s incentive award under the Program will be calculated by the sum of the following components:

Part A- Financial performance to financial performance goals

Part B- Safety performance to safety performance goals

Part C- Individual performance to individual goals

2.Minimum Individual Performance Required

Notwithstanding anything herein to the contrary, a Participant who has an overall unsatisfactory performance rating under the Company’s performance appraisal program is not eligible for an incentive payment hereunder unless and until such Participant’s performance improves to meet acceptable standards.  A Participant who is not rated due to being new in the position is eligible for an incentive payment as long as the Participant is progressing satisfactorily towards expected standards and is meeting the other requirements of the Plan and Program.

3.Incentive awards hereunder may not be paid until the completion of the Company’s audited financial statements corresponding to the 2013 Plan Year and the approval of the Company’s Audit Committee has been received.

4.The calculated awards will be recommended for payment to the Committee.  The Committee may use discretion to increase or decrease the size of the award; provided that no award may exceed the maximum award as provided in the Plan; and provided further, that the aggregate total of all awards granted in a Plan Year may not exceed the Award Pool.

IX.Timing and Method of Payment

1.Awards hereunder, if any, will be paid in cash, less required withholdings, within 75 days following the end of the 2013 Plan Year.

2.Pro rata payments:

a.A Participant must be an Employee at the time the bonus is paid in order to receive an incentive payment under the Program.  A Participant whose employment terminates for any reason before the end of the 2013 Plan Year will not be eligible for an incentive award for such Plan Year unless the termination was the result of death, Disability (as defined under the Company’s disability plan(s)) or Retirement (as defined below) under a Company sponsored retirement plan, in which case, a payment based on the portion of the 2013 Plan Year worked

5

applied to target (or less than target if actual performance is below target in any area)  may be recommended  to the Committee, provided the Participant worked at least three months during the 2013 Plan Year.  “Retirement” is defined as the termination of the Participant’s employment by the Participant either (a) on or after the date on which the Participant attains the age of 60, or, (b) on a date on which the sum of the Participant’s age and completed years of employment with the Company and its Subsidiaries is at least eighty (80).

b.Participants who are hired following the commencement of the 2013 Plan Year, or are transferred or promoted into an incentive eligible position may be recommended for a payment hereunder, based on their Target Incentive Opportunity and their time in the eligible position, as long as they have worked in that position at least three months during the 2013 Plan Year.

c.Participants who are promoted or transferred from one incentive position to another incentive position will receive a payment hereunder based on their Target Incentive Opportunity, the period of time they were in each position and their Base Salary. Any such payment from Part A- Financial performance and Part B- Safety will be measured and apportioned at the end of the 2013 Plan Year.  Individual Goals must be set and measured for the period in each position.

3.Notwithstanding anything herein to the contrary, a Participant who is eligible for a payment under the Program following termination of employment and under the terms of an employment, severance, or change in control agreement will be paid at a time and frequency specified in such employment, severance, or change in control agreement.  If the Participant is a “Specified Employee” as defined under Section 409A of the Code, the payment shall be deferred until the first business day after the date that is six (6) months after the termination date in order to comply with the Code, to the extent applicable.

4.Clawbacks:  If any of the Company’s financial statements are required to be restated due to errors, omissions, fraud, or misconduct, the Committee may, in its sole discretion but acting in good faith, direct that the Company recover all or a portion of any incentive award hereunder or any past or future compensation from any Participant with respect to any fiscal year of the Company for which the financial results are negatively affected by such restatement.  For purposes of this paragraph, errors, omissions, fraud, or misconduct may include and is not limited to circumstances where the Company has been required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement, as enforced by the United States Securities and Exchange Commission, and the Committee has determined in its sole discretion that a Participant had knowledge of the material noncompliance or the circumstances that gave rise to such noncompliance and failed to take reasonable steps to bring it to the attention of the appropriate individuals within the Company, or the Participant personally and knowingly engaged in practices which materially contributed to the circumstances that enabled a material noncompliance to occur.

6

X.Effective Date and Duration

1.The Program shall be effective as of January 1, 2013.

2.The Committee may discontinue the Program, in whole or in part, at any time, or may, from time to time, amend the Program in any respect that the Committee may deem to be advisable.

7

2013 Performance Metrics and Design Parameters

Mechanics

1.Each Participant will have a Target Incentive Opportunity expressed as a percentage of Base Salary.

2.The Program will use a “balanced scorecard” of goals including financial, safety and individual goals.

3.All Participants will have a shared corporate financial goal — Consolidated EBITDA.  In order for any payment to be made under the Program, a threshold Consolidated EBITDA target must be met.

4.Each goal will have an assigned weight, with all weights adding to 100%.

5.Each goal will have assigned minimum, target and maximum performance levels, established to ensure both the appropriate degree of stretch and probability of achievement.

6.Award payouts will range from 50% of the Target Incentive Opportunity for minimum performance, to 100% of the Target Incentive Opportunity for performance at target, to 200% of the Target Incentive Opportunity for maximum performance.

7.Performance against each goal will be assessed, weighted and added together to determine the award for each Participant at year-end.

Performance Metrics

1.Financial (60% Weighting)

a.Consolidated EBITDA: 20% weighting for all Participants.

b.Production Tons: 20% weighting for all Participants.

i.Corporate officers and staff: Metric will be the sum of all business units.

ii.Business Unit executives and staff: Metric will be the sum of mines in the business unit.

iii.Mine managers and staff: Metric will be mine specific.

c.Cash cost per Ton: 20% weighting for all Participants.

i.Corporate officers and staff: Metric will be a weighted based on operating income of all business units.

ii.Business Unit executives and staff: Metric will be a weighted based on operating income of mines in the business unit.

iii.Mine managers and staff: Metric will be mine specific.

2.Safety (20% Weighting)

a.Based on reportable incident rates for all Participants.

8

i.Corporate officers and staff: Metric will be a weighted based on operating income of all business units.

ii.Business Unit executives and staff: Metric will be a weighted based on operating income of mines in the business unit.

iii.Mine managers and staff: Metric will be mine specific.

b.In the event of a fatality, all Participants will automatically lose one-fourth of the safety component incentive opportunity, and the business unit in which the fatality occurred will lose all of the safety component incentive opportunity.

3.Individual Goals (20% Weighting)

a.All Participants will have documented individual goals, developed in conjunction with their manager.

b.Goals must be specific, measureable and tied directly to furthering the Company’s overall business objectives.

Final Awards

After initial awards are determined through application of the goal weights and performance against targets, the Committee will have discretion to adjust the initial awards to take into account relevant factors that affected performance during the year, i.e. key external factors, performance versus peers, etc.

Awards will be paid annually in cash, less required withholdings, within 75 days of the close of the 2013 Plan Year.

9

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: May 8, 2013

/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: May 8, 2013

/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 March 31, 2013 (the "Report"), I, Walter J. Scheller, III, Chief 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: May 8, 2013

/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 March 31, 2013 (the "Report"), I, William G. Harvey, Chief 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) 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: May 8, 2013

/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

Exhibit 95

Item 5. Other Information

Mine Safety and Health Administration Safety Data

The Company is committed to the safety of its employees and to 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 factors 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 March 31, 2013 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) of the Mine Act 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 March 31, 2013.  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 March 31, 2013.

Mining Complex(1) (4)	Section 104S&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 (3)
JWR No. 4	45	—	4	—	—	97.1	—
JWR No. 5	—	—	—	—	—	—	—
JWR No. 3	—	—	—	—	—	—	—
JWR No. 7	57	—	2	—	—	108.5	—
JWR Central Supply	—	—	—	—	—	—	—
JWR Central Shop	—	—	—	—	—	—	—
JWR North River	9	—	—	—	—	216.7	—
Taft Reid School	1	—	—	—	—	—	—
Taft Choctaw	1	—	—	—	—	—	—
TRI East Brookwood	—	—	—	—	—	—	—
TRI Highway 59	—	—	—	—	—	—	—
TRI Swann’s Crossing	—	—	—	—	—	—	—
Atlantic Leaseco King Coal 1 Mine	—	—	—	—	—	—	—
Atlantic Leaseco King Coal 1 Prep Plant	—	—	—	—	—	1.5	—
Atlantic Leaseco Black Pearl	—	—	—	—	—	—	—
Atlantic Leaseco Cowen Loadout	—	—	—	—	—	—	—
Atlantic Leaseco Crooked Run	—	—	—	—	—	—	—
Maple Coal Maple Eagle No. 1	7	—	—	—	—	6.2	—
Maple Coal Maple Prep Plant	1	—	—	—	—	—	—
Maple Coal Huffman Sycamore SM	—	—	—	—	—	—	—

(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, 2012.  Idle facilities are not included in the table above unless they received a citation, order or assessment by MSHA during the current annual 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)On December 5, 2011, an underground miner at Maple Eagle No. 1 Mine suffered an apparent heart attack while at work.  The miner was taken to a local hospital where he died a few days later.  MSHA has established policies and procedures for determining whether a fatality is unrelated to mining activity, such as homicides, suicides, and deaths by natural causes (commonly referred to as “non-chargeable” to the mining industry.)  The SEC’s final rules implementing Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act specify that disclosure is required of all fatalities, unless the fatality is determined to be “non-chargeable.” SEC rules specify that until MSHA’s fatality review committee has formally declared a fatality to be “non-chargeable,” it must be disclosed, and Walter Energy disclosed the fatality in its 2011 10-K..  MSHA regulations require mine operators to report to MSHA all fatalities that occur at a mine.  MSHA initiated a Non-Chargeable Accident Investigation into the fatality and forwarded its report to the fatality review committee.  On January 9, 2013, the Fatality Review Committee issued its decision on chargeability.  Based on their findings and the results of MSHA’s investigation, the Committee members concluded that the miner died from natural causes and that his death should not be charged to the mining industry.  As a result, it was not subject to the disclosure requirements of the SEC’s final rules implementing Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

(4)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 March 31, 2013	Initiated During Q1 2013	Resolved During Q1 2013
JWR No. 3
29 CFR Part 2700, Subpart C	1	—	—
JWR No. 4
29 CFR Part 2700, Subpart B	9	2	1
29 CFR Part 2700, Subpart C	34	3	4
JWR No. 5
29 CFR Part 2700, Subpart C	1	—	—
JWR No. 7
29 CFR Part 2700, Subpart B	11	2	—
29 CFR Part 2700, Subpart C	18	3	7
29 CFR Part 2700, Subpart H	3	—	—
JWR North River
29 CFR Part 2700, Subpart B	—	—	—
29 CFR Part 2700, Subpart C	2	1	4
Taft Reid School
29 CFR Part 2700, Subpart C	1	—	—
TRI East Brookwood
29 CFR Part 2700, Subpart C	—	—	1
TRI Swann’s Crossing
29 CFR Part 2700, Subpart C	4	—	—
Atlantic Leaseco King Coal 1 Mine
29 CFR Part 2700, Subpart C	—	—	—
Atlantic Leaseco Black Pearl
29 CFR Part 2700, Subpart C	13	—	—
Maple Coal Maple Eagle No. 1
29 CFR Part 2700, Subpart B	9	—	6
29 CFR Part 2700, Subpart C	7	2	15
Maple Coal Maple Prep Plant
29 CFR Part 2700, Subpart C	—	—	1
Maple Coal Huffman Sycamore SM
29 CFR Part 2700, Subpart C	—	—	—

(1)Effective January 27, 2011, 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 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.

XML

Commitments and Contingencies (Details)	1 Months Ended	6 Months Ended		3 Months Ended	0 Months Ended	1 Months Ended		3 Months Ended	1 Months Ended		3 Months Ended
	Jun. 30, 2010	Jun. 30, 2012	Mar. 31, 2013 USD ($)	Mar. 31, 2013 Environmental Matters Walter Coke, Inc. item	Mar. 05, 2013 Environmental Matters Jim Walter Resources, Inc CAD	Dec. 31, 2011 Environmental Matters Jim Walter Resources, Inc USD ($)	Nov. 30, 2011 Environmental Matters Jim Walter Resources, Inc USD ($)	Mar. 31, 2013 Environmental Matters Jim Walter Resources, Inc USD ($)	May 30, 2012 Securities Class Actions and Shareholder Derivative Actions item	Jan. 31, 2012 Securities Class Actions and Shareholder Derivative Actions item	Mar. 31, 2013 Securities Class Actions and Shareholder Derivative Actions item
Commitments and contingencies
Extension period to submit proposed final order	90 days
Comment letter period	30 days	30 days
Accruals for unrecognized tax benefits related to disposition			$ 38,000,000
Number of properties that the entity has agreed to remediate				23
Litigation settlement fine							145,200
Penalty sought					100,000	60,000
Remediation cost incurred								$ 5,000,000
Number of executive directors as defendants										3
Number of actions									2
Number of complaints											3

XML

Supplemental Guarantor and Non-Guarantor Financial Information (Details) (USD $) In Millions, unless otherwise specified	0 Months Ended		0 Months Ended
	Nov. 21, 2012 2020 Notes	Mar. 31, 2013 2020 Notes	Mar. 27, 2013 2021 Notes	Mar. 31, 2013 2021 Notes
Debt instrument
Amount borrowed	$ 500.0		$ 450.0
Interest rate (as a percent)	9.875%	9.875%	8.50%	8.50%

XML

Fair Value of Financial Instruments (Details 2) (USD $) In Millions, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Carrying amount, cost | 2011 term loan A
Debt
Debt	$ 656.6	$ 757.0
Carrying amount, cost | 2011 term loan B
Debt
Debt	978.2	1,128.0
Carrying amount, cost | 2020 Notes
Debt
Debt	496.6	496.5
Carrying amount, cost | Revolving Credit Facility
Debt
Debt	0	0
Carrying amount, cost | 2021 Notes
Debt
Debt	450.0
Fair value | 2011 term loan A
Debt
Debt	657.0
Fair value | 2011 term loan B
Debt
Debt	983.3
Fair value | 2020 Notes
Debt
Debt	543.1
Fair value | 2021 Notes
Debt
Debt	$ 461.2

XML

Restructuring (Details) (Willow Creek mine in the Canadian and U.K. operations, USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2013
Restructuring
Restructuring charges	$ 7.4
Employee severance
Restructuring
Number of employees terminated	250
Restructuring charges	4.3
Contract termination
Restructuring
Restructuring charges	$ 3.0

XML

Pension and Other Postretirement Benefits (Tables)

3 Months Ended

Mar. 31, 2013

Pension and Other Postretirement Benefits

Components of net periodic benefit costs

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

	Pension Benefits						Other Postretirement Benefits
	For the three months ended March 31,						For the three months ended March 31,
	2013			2012			2013		2012
Components of net periodic benefit cost:
Service cost	$	1,766		$	1,498		$	2,486	$	2,018
Interest cost		3,070			3,129			7,198		7,253
Expected return on plan assets		(4,235	)		(4,031	)		—		—
Amortization of prior service cost		66			64			307		261
Amortization of net actuarial loss		2,434			2,313			4,734		3,681
Net periodic benefit cost	$	3,101		$	2,973		$	14,725	$	13,213

XML

Supplemental Guarantor and Non-Guarantor Financial Information (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Revenues:
Sales	$ 489,609	$ 627,298
Miscellaneous income (loss)	1,734	4,265
Total revenues	491,343	631,563
Costs and expenses:
Cost of sales (exclusive of depreciation and depletion)	420,934	431,534
Depreciation and depletion	81,190	66,493
Selling, general and administrative	30,674	36,247
Postretirement benefits	14,725	13,213
Restructuring charges	7,440
Total costs and expenses	554,963	547,487
Operating income (loss)	(63,620)	84,076
Interest expense	(52,618)	(28,067)
Interest income	650	277
Other income (loss)	105	(6,993)
Income (loss) before income tax expense	(115,483)	49,293
Income tax expense (benefit)	(66,039)	8,677
Income (loss)	(49,444)	40,616
Net income (loss)	(49,444)	40,616
Parent (Issuer)
Revenues:
Miscellaneous income (loss)	553	675
Total revenues	553	675
Costs and expenses:
Depreciation and depletion	485	215
Selling, general and administrative	13,567	10,729
Postretirement benefits	(55)	(112)
Total costs and expenses	13,997	10,832
Operating income (loss)	(13,444)	(10,157)
Interest expense	(50,156)	(27,224)
Interest income	15	47
Other income (loss)		3,019
Income (loss) before income tax expense	(63,585)	(34,315)
Income tax expense (benefit)	(26,667)	(9,982)
Income (loss)	(36,918)	(24,333)
Equity in earnings (losses) of subsidiaries	(12,526)	64,949
Net income (loss)	(49,444)	40,616
Guarantor Subsidiaries
Revenues:
Sales	314,812	413,654
Miscellaneous income (loss)	2,190	4,071
Total revenues	317,002	417,725
Costs and expenses:
Cost of sales (exclusive of depreciation and depletion)	247,677	246,205
Depreciation and depletion	40,410	34,367
Selling, general and administrative	6,943	12,148
Postretirement benefits	14,780	13,325
Restructuring charges	116
Total costs and expenses	309,926	306,045
Operating income (loss)	7,076	111,680
Interest expense	(590)	(286)
Income (loss) before income tax expense	7,666	111,394
Income tax expense (benefit)	(3,396)	32,261
Income (loss)	11,062	79,133
Net income (loss)	11,062	79,133
Non-Guarantor Subsidiaries
Revenues:
Sales	174,797	213,644
Miscellaneous income (loss)	(1,009)	(481)
Total revenues	173,788	213,163
Costs and expenses:
Cost of sales (exclusive of depreciation and depletion)	173,257	185,329
Depreciation and depletion	40,295	31,911
Selling, general and administrative	10,164	13,370
Restructuring charges	7,324
Total costs and expenses	231,040	230,610
Operating income (loss)	(57,252)	(17,447)
Interest expense	(3,052)	(557)
Interest income	635	230
Other income (loss)	105	(10,012)
Income (loss) before income tax expense	(59,564)	(27,786)
Income tax expense (benefit)	(35,976)	(13,602)
Income (loss)	(23,588)	(14,184)
Net income (loss)	(23,588)	(14,184)
Eliminations
Costs and expenses:
Equity in earnings (losses) of subsidiaries	12,526	(64,949)
Net income (loss)	$ 12,526	$ (64,949)

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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
	Mar. 31, 2013	Mar. 31, 2012
Derivatives designated as cash flow hedging instruments
Gain (loss) recognized in accumulated other comprehensive income, net of tax	$ 1,338	$ (2,160)
Gain (loss) reclassified from accumulated other comprehensive income (loss) to earnings	(616)	877
Natural gas hedges
Derivatives designated as cash flow hedging instruments
Gain (loss) recognized in accumulated other comprehensive income, net of tax		(2,132)
Gain (loss) reclassified from accumulated other comprehensive income (loss) to earnings		1,442
Interest rate swaps
Derivatives designated as cash flow hedging instruments
Gain (loss) recognized in accumulated other comprehensive income, net of tax	1,340	103
Gain (loss) reclassified from accumulated other comprehensive income (loss) to earnings	(616)	(565)
Interest rate cap
Derivatives designated as cash flow hedging instruments
Gain (loss) recognized in accumulated other comprehensive income, net of tax	$ (2)	$ (131)

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Pension and Other Postretirement Benefits (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Pension Benefits
Components of net periodic benefit cost:
Service cost	$ 1,766	$ 1,498
Interest cost	3,070	3,129
Expected return on plan assets	(4,235)	(4,031)
Amortization of prior service cost	66	64
Amortization of net actuarial loss	2,434	2,313
Net periodic benefit cost	3,101	2,973
Other Postretirement Benefits
Components of net periodic benefit cost:
Service cost	2,486	2,018
Interest cost	7,198	7,253
Amortization of prior service cost	307	261
Amortization of net actuarial loss	4,734	3,681
Net periodic benefit cost	$ 14,725	$ 13,213

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Supplemental Guarantor and Non-Guarantor Financial Information (Details 5) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Supplemental guarantor and non-guarantor financial information
Cash flows provided by (used in) operating activities	$ (19,398)	$ 70,854
INVESTING ACTIVITIES
Additions to property, plant and equipment	(34,027)	(120,845)
Proceeds from sales of investments		12,228
Other	1,021	(85)
Cash flows used in investing activities	(33,006)	(108,702)
FINANCING ACTIVITIES
Proceeds from issuance of debt	450,000
Borrowings under revolving credit agreement	320,778	135,294
Repayments on revolving credit agreement	(320,778)	(70,156)
Retirements of debt	(254,687)	(9,177)
Dividends paid	(7,816)	(7,806)
Excess tax benefits deficit from stock-based compensation arrangements	(372)	783
Proceeds from stock options exercised	279	120
Debt issuance costs	(15,163)
Other	(235)	(1,527)
Cash flows provided by financing activities	172,006	47,531
Net increase in cash and cash equivalents	119,190	9,770
Effect of foreign exchange rates on cash	(412)	87
Net increase (decrease) in cash and cash equivalents	119,190	9,770
Cash and cash equivalents at beginning of period	116,601	128,430
Cash and cash equivalents at end of period	235,791	138,200
Parent (Issuer)
Supplemental guarantor and non-guarantor financial information
Cash flows provided by (used in) operating activities	(28,029)	(57,822)
INVESTING ACTIVITIES
Additions to property, plant and equipment	(314)	(630)
Intercompany notes issued	(45,591)	(11,101)
Intercompany notes proceeds	22,000
Investments in subsidiaries	(50,103)
Cash flows used in investing activities	(74,008)	(11,731)
FINANCING ACTIVITIES
Proceeds from issuance of debt	450,000
Retirements of debt	(250,000)
Dividends paid	(7,816)	(7,806)
Excess tax benefits deficit from stock-based compensation arrangements	(195)	783
Proceeds from stock options exercised	279	120
Debt issuance costs	15,163
Advances from (to) consolidated entities	41,521	104,534
Other	(237)	(647)
Cash flows provided by financing activities	218,389	96,984
Net increase (decrease) in cash and cash equivalents	116,352	27,431
Cash and cash equivalents at beginning of period	83,833	99,086
Cash and cash equivalents at end of period	200,185	126,517
Guarantor Subsidiaries
Supplemental guarantor and non-guarantor financial information
Cash flows provided by (used in) operating activities	65,848	145,851
INVESTING ACTIVITIES
Additions to property, plant and equipment	(24,545)	(31,461)
Other		(85)
Cash flows used in investing activities	(24,545)	(31,546)
FINANCING ACTIVITIES
Retirements of debt	(2,588)	(1,983)
Excess tax benefits deficit from stock-based compensation arrangements	(177)
Advances from (to) consolidated entities	(38,443)	(112,293)
Other	2	1
Cash flows provided by financing activities	(41,206)	(114,275)
Net increase (decrease) in cash and cash equivalents	97	30
Cash and cash equivalents at beginning of period	61	79
Cash and cash equivalents at end of period	158	109
Non-Guarantor Subsidiaries
Supplemental guarantor and non-guarantor financial information
Cash flows provided by (used in) operating activities	(57,217)	(17,175)
INVESTING ACTIVITIES
Additions to property, plant and equipment	9,168	(88,754)
Proceeds from sales of investments		12,228
Other	1,021
Cash flows used in investing activities	(8,147)	(76,526)
FINANCING ACTIVITIES
Borrowings under revolving credit agreement	320,778	135,294
Repayments on revolving credit agreement	(320,778)	(70,156)
Retirements of debt	(2,099)	(7,194)
Advances from (to) consolidated entities	(3,078)	7,759
Intercompany notes borrowings	45,591	11,101
Intercompany notes payments	(22,000)
Investment from Parent	(50,103)
Other		(881)
Cash flows provided by financing activities	68,517	75,923
Effect of foreign exchange rates on cash	(412)	87
Net increase (decrease) in cash and cash equivalents	2,741	(17,691)
Cash and cash equivalents at beginning of period	32,707	29,265
Cash and cash equivalents at end of period	35,448	11,574
Eliminations
INVESTING ACTIVITIES
Intercompany notes issued	45,591	11,101
Intercompany notes proceeds	(22,000)
Investments in subsidiaries	50,103
Cash flows used in investing activities	73,694	11,101
FINANCING ACTIVITIES
Intercompany notes borrowings	(45,591)	(11,101)
Intercompany notes payments	22,000
Investment from Parent	(50,103)
Cash flows provided by financing activities	$ (73,694)	$ (11,101)

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Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Revenues:
Total Revenues	$ 491,343	$ 631,563
Segment operating income (loss):
Total operating income (loss)	(63,620)	84,076
Less interest expense, net	(51,968)	(27,790)
Other income (loss)	105	(6,993)
Income (loss) before income tax expense	(115,483)	49,293
Income tax expense (benefit)	(66,039)	8,677
Net income (loss)	(49,444)	40,616
Depreciation and depletion:
Total depreciation and depletion	81,190	66,493
Capital expenditures:
Total capital expenditures	34,027	120,845
Identifiable assets by segment:
Total identifiable assets	5,883,442		5,768,420
U.S. Operations
Revenues:
Total Revenues	339,225	452,150
Segment operating income (loss):
Total operating income (loss)	(6,957)	106,981
Depreciation and depletion:
Total depreciation and depletion	47,473	42,142
Capital expenditures:
Total capital expenditures	27,401	36,112
Identifiable assets by segment:
Total identifiable assets	1,438,289		1,603,745
Canadian and U.K. operations
Revenues:
Total Revenues	151,444	178,351
Segment operating income (loss):
Total operating income (loss)	(48,766)	(13,555)
Depreciation and depletion:
Total depreciation and depletion	33,232	24,136
Capital expenditures:
Total capital expenditures	6,314	84,180
Identifiable assets by segment:
Total identifiable assets	3,918,439		3,728,817
Other
Revenues:
Total Revenues	674	1,062
Segment operating income (loss):
Total operating income (loss)	(7,897)	(9,350)
Depreciation and depletion:
Total depreciation and depletion	485	215
Capital expenditures:
Total capital expenditures	312	553
Identifiable assets by segment:
Total identifiable assets	$ 526,714		$ 435,858

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
OPERATING ACTIVITIES
Net income (loss)	$ (49,444)	$ 40,616
Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities:
Depreciation and depletion	81,190	66,493
Deferred income tax benefit	(61,941)	(10,894)
Amortization of debt issuance costs	9,982	3,644
Other	14,922	8,756
Decrease (increase) in current assets:
Receivables	(58,494)	16,889
Inventories	5,428	(63,192)
Prepaid expenses and other current assets	6,502	5,462
Increase (decrease) in current liabilities:
Accounts payable	22,534	37,604
Accrued expenses and other current liabilities	9,923	(34,524)
Cash flows provided by (used in) operating activities	(19,398)	70,854
INVESTING ACTIVITIES
Additions to property, plant and equipment	(34,027)	(120,845)
Proceeds from sales of investments		12,228
Other	1,021	(85)
Cash flows used in investing activities	(33,006)	(108,702)
FINANCING ACTIVITIES
Proceeds from issuance of debt	450,000
Borrowings under revolving credit agreement	320,778	135,294
Repayments on revolving credit agreement	(320,778)	(70,156)
Retirements of debt	(254,687)	(9,177)
Dividends paid	(7,816)	(7,806)
Debt issuance costs	(15,163)
Other	(328)	(624)
Cash flows provided by financing activities	172,006	47,531
Effect of foreign exchange rates on cash	(412)	87
Net increase in cash and cash equivalents	119,190	9,770
Cash and cash equivalents at beginning of period	116,601	128,430
Cash and cash equivalents at end of period	$ 235,791	$ 138,200

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Accumulated Other Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Changes in accumulated other comprehensive income (loss) by component
Balance at the beginning of the period	$ (270,850)
Other comprehensive income (loss) before reclassifications	(14,239)
Amounts reclassified from accumulated other comprehensive income (loss)	4,039
Net current-period other comprehensive income (loss)	(10,200)
Total other comprehensive income (loss), net of tax	(10,200)	4,665
Balance at the end of the period	(281,050)
Pension and other post-retirement plans
Changes in accumulated other comprehensive income (loss) by component
Balance at the beginning of the period	(266,042)
Amounts reclassified from accumulated other comprehensive income (loss)	4,659
Net current-period other comprehensive income (loss)	4,659
Total other comprehensive income (loss), net of tax	4,659
Balance at the end of the period	(261,383)
Unrealized gain/(loss) on hedges
Changes in accumulated other comprehensive income (loss) by component
Balance at the beginning of the period	(4,203)
Other comprehensive income (loss) before reclassifications	1,338
Amounts reclassified from accumulated other comprehensive income (loss)	(616)
Net current-period other comprehensive income (loss)	722
Total other comprehensive income (loss), net of tax	722
Balance at the end of the period	(3,481)
Foreign currency translation adjustment
Changes in accumulated other comprehensive income (loss) by component
Balance at the beginning of the period	(1,502)
Other comprehensive income (loss) before reclassifications	(15,625)
Net current-period other comprehensive income (loss)	(15,625)
Total other comprehensive income (loss), net of tax	(15,625)
Balance at the end of the period	(17,127)
Unrealized gain/(loss) on investments
Changes in accumulated other comprehensive income (loss) by component
Balance at the beginning of the period	897
Other comprehensive income (loss) before reclassifications	48
Amounts reclassified from accumulated other comprehensive income (loss)	(4)
Net current-period other comprehensive income (loss)	44
Total other comprehensive income (loss), net of tax	44
Balance at the end of the period	$ 941

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Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2013

Fair Value of Financial Instruments

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

	March 31, 2013
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	9	$	—	$	9
Liabilities:
Interest rate swaps	$	—	$	5,546	$	—	$	5,546

	December 31, 2012
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	12	$	—	$	12
Liabilities:
Interest rate swaps	$	—	$	6,615	$	—	$	6,615

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Accumulated Other Comprehensive Income (Loss) (Tables)

3 Months Ended

Mar. 31, 2013

Accumulated Other Comprehensive Income (Loss)

Schedule of changes in accumulated other comprehensive income (loss) by component

The following table presents the changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2013, net of tax (in thousands).

	Pension and other post-retirement plans			Unrealized gain/(loss) on hedges			Foreign currency translation adjustment			Unrealized gain/(loss) on investments			Total
Beginning balance as of December 31, 2012	$	(266,042	)	$	(4,203	)	$	(1,502	)	$	897		$	(270,850	)
Other comprehensive income (loss) before reclassifications		—			1,338			(15,625	)		48			(14,239	)
Amounts reclassified from accumulated other comprehensive income (loss)		4,659			(616	)		—	(1)		(4	)		4,039
Net current-period other comprehensive income (loss)		4,659			722			(15,625	)		44			(10,200	)
Total	$	(261,383	)	$	(3,481	)	$	(17,127	)	$	941		$	(281,050	)

(1)

Foreign currency translation adjustments are reclassified from accumulated other comprehensive income (loss) upon sale or substantially complete liquidation of an investment in a foreign entity.

Schedule of amounts reclassified out of each component of accumulated other comprehensive income (loss)

The following table presents amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three months ended March 31, 2013 (in thousands).

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Condensed Consolidated Statements of Operations
Gains and losses on cash flow hedges
Interest rate swaps	$	(997	)	Interest expense
		(997	)	Income (loss) before income tax expense
		381		Income tax benefit
	$	(616	)	Net income (loss)
Amortization of pension and postretirement benefit plans
Prior service cost	$	373		(a)
Net actuarial loss		7,168		(a)
		7,541		Income (loss) before income tax expense
		(2,882	)	Income tax (expense)
	$	4,659		Net income (loss)
Gains and losses on available-for-sale securities	$	(4	)	Other income (loss)
		(4	)	Income (loss) before income tax expense
		—		Income tax (expense)
	$	(4	)	Net income (loss)
Total reclassifications for the period	$	4,039		Net income (loss)

(a)

Amortization of pension benefit items is included in cost of sales (exclusive of depreciation and depletion) and selling, general and administrative expense while amortization of postretirement benefit items is included in postretirement benefits within the Condensed Consolidated Statements of Operations.

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Accumulated Other Comprehensive Income (Loss) (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Amounts reclassified out of each component of accumulated other comprehensive income (loss)
Interest expense	$ (52,618)	$ (28,067)
Other income (loss)	105	(6,993)
Income (loss) before income tax expense	(115,483)	49,293
Income tax expense (benefit)	66,039	(8,677)
Net income (loss)	(49,444)	40,616
Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
Amounts reclassified out of each component of accumulated other comprehensive income (loss)
Net income (loss)	4,039
Gains and losses on cash flow hedges | Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
Amounts reclassified out of each component of accumulated other comprehensive income (loss)
Income (loss) before income tax expense	(997)
Income tax expense (benefit)	381
Net income (loss)	(616)
Gains and losses on cash flow hedges | Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | Interest rate swaps
Amounts reclassified out of each component of accumulated other comprehensive income (loss)
Interest expense	(997)
Amortization of pension and postretirement benefit plans | Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
Amounts reclassified out of each component of accumulated other comprehensive income (loss)
Prior service cost	373
Net actuarial loss	7,168
Income (loss) before income tax expense	7,541
Income tax expense (benefit)	(2,882)
Net income (loss)	4,659
Gains and losses on available-for-sale securities | Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
Amounts reclassified out of each component of accumulated other comprehensive income (loss)
Other income (loss)	(4)
Income (loss) before income tax expense	(4)
Net income (loss)	$ (4)

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2013

Segment Information

Summarized financial information by reportable segment

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

	For the three months ended March 31,
	2013			2012
Revenues:
U.S. Operations	$	339,225		$	452,150
Canadian and U.K. Operations		151,444			178,351
Other		674			1,062
Total Revenues	$	491,343		$	631,563
Segment operating income (loss):
U.S. Operations	$	(6,957	)	$	106,981
Canadian and U.K. Operations		(48,766	)		(13,555	)
Other		(7,897	)		(9,350	)
Total operating income (loss)		(63,620	)		84,076
Less interest expense, net		(51,968	)		(27,790	)
Other income (loss)		105			(6,993	)
Income (loss) before income tax expense		(115,483	)		49,293
Income tax expense (benefit)		(66,039	)		8,677
Net income (loss)	$	(49,444	)	$	40,616
Depreciation and depletion:
U.S. Operations	$	47,473		$	42,142
Canadian and U.K. Operations		33,232			24,136
Other		485			215
Total	$	81,190		$	66,493
Capital expenditures:
U.S. Operations	$	27,401		$	36,112
Canadian and U.K. Operations		6,314			84,180
Other		312			553
Total	$	34,027		$	120,845

	March 31, 2013		December 31, 2012
Identifiable assets:
U.S. Operations	$	1,438,289	$	1,603,745
Canadian and U.K. Operations		3,918,439		3,728,817
Other		526,714		435,858
Total	$	5,883,442	$	5,768,420

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Supplemental Guarantor and Non-Guarantor Financial Information (Tables)

3 Months Ended

Mar. 31, 2013

Supplemental Guarantor and Non-Guarantor Financial Information

Schedule of supplemental condensed consolidating balance sheets (Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)

MARCH 31, 2013

(in thousands)

	Parent (Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
ASSETS
Cash and cash equivalents	$	200,185	$	158	$	35,448		$	—		$	235,791
Receivables, net		79,729		122,336		113,231			—			315,296
Intercompany receivables		—		538,342		75,419			(613,761	)		—
Intercompany notes receivable		143,263		—		—			(143,263	)		—
Inventories		—		118,744		183,549			—			302,293
Deferred income taxes		36,717		17,687		1,225			—			55,629
Prepaid expenses		1,374		40,861		5,206			—			47,441
Other current assets		18,146		1,128		4,011			—			23,285
Total current assets		479,414		839,256		418,089			(757,024	)		979,735
Mineral interests, net		—		17,015		2,910,576			—			2,927,591
Property, plant and equipment, net		8,276		779,101		904,260			—			1,691,637
Deferred income taxes		78,056		112,560		(5,229	)		—			185,387
Investment in subsidiaries		3,815,313		—		—			(3,815,313	)		—
Other long-term assets		76,091		9,674		13,327			—			99,092
	$	4,457,150	$	1,757,606	$	4,241,023		$	(4,572,337	)	$	5,883,442
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—	$	9,277	$	8,121		$	—		$	17,398
Accounts payable		11,588		80,694		40,758			—			133,040
Accrued expenses		100,956		87,102		4,855			—			192,913
Intercompany payables		613,761		—		—			(613,761	)		—
Intercompany notes payable		—		—		143,263			(143,263	)		—
Accumulated postretirement benefits obligation		131		29,506		—			—			29,637
Other current liabilities		157,201		23,619		26,508			—			207,328
Total current liabilities		883,637		230,198		223,505			(757,024	)		580,316
Long-term debt		2,581,327		115		12,142			—			2,593,584
Deferred income taxes		—		—		883,659			—			883,659
Accumulated postretirement benefits obligation		435		635,694		—			—			636,129
Other long-term liabilities		46,081		128,839		69,164			—			244,084
Total liabilities		3,511,480		994,846		1,188,470			(757,024	)		4,937,772
Stockholders' equity		945,670		762,760		3,052,553			(3,815,313	)		945,670
Total liabilities and stockholders' equity	$	4,457,150	$	1,757,606	$	4,241,023		$	(4,572,337	)	$	5,883,442

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS (Unaudited)

DECEMBER 31, 2012

(in thousands)

	Parent (Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
ASSETS
Cash and cash equivalents	$	83,833	$	61	$	32,707		$	—		$	116,601
Receivables, net		64,106		113,182		79,679			—			256,967
Intercompany receivables		153,933		507,519		—			(661,452	)		—
Intercompany notes receivable		118,079		—		—			(118,079	)		—
Inventories		—		131,893		174,125			—			306,018
Deferred income taxes		39,375		17,687		1,464			—			58,526
Prepaid expenses		1,869		45,327		6,580			—			53,776
Other current assets		17,559		1,109		5,260			—			23,928
Total current assets		478,754		816,778		299,815			(779,531	)		815,816
Mineral interests, net		—		18,475		2,947,082			—			2,965,557
Property, plant and equipment, net		8,448		790,900		932,783			—			1,732,131
Deferred income taxes		52,363		112,560		(4,501	)		—			160,422
Goodwill		—		—		—			—			—
Investment in subsidiaries		3,530,094		—		—			(3,530,094	)		—
Other long-term assets		71,622		9,375		13,497			—			94,494
	$	4,141,281	$	1,748,088	$	4,188,676		$	(4,309,625	)	$	5,768,420
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—	$	10,196	$	8,597		$	—		$	18,793
Accounts payable		5,128		78,260		31,525			—			114,913
Accrued expenses		27,197		83,155		74,523			—			184,875
Intercompany payables		507,519		—		153,933			(661,452	)		—
Intercompany notes payable		—		—		118,079			(118,079	)		—
Accumulated postretirement benefits obligation		131		29,069		—			—			29,200
Other current liabilities		157,044		24,389		25,040			—			206,473
Total current liabilities		697,019		225,069		411,697			(779,531	)		554,254
Long-term debt		2,381,255		1,784		14,333			—			2,397,372
Deferred income taxes		—		—		921,687			—			921,687
Accumulated postretirement benefits obligation		452		632,812		—			—			633,264
Other long-term liabilities		51,984		128,593		70,695			—			251,272
Total liabilities		3,130,710		988,258		1,418,412			(779,531	)		4,757,849
Stockholders' equity		1,010,571		759,830		2,770,264			(3,530,094	)		1,010,571
Total liabilities and stockholders' equity	$	4,141,281	$	1,748,088	$	4,188,676		$	(4,309,625	)	$	5,768,420

Schedule of supplemental condensed consolidating statements of operations (Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2013

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Total Consolidated
Revenues:
Sales	$	—		$	314,812		$	174,797		$	—	$	489,609
Miscellaneous income (loss)		553			2,190			(1,009	)		—		1,734
		553			317,002			173,788			—		491,343
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			247,677			173,257			—		420,934
Depreciation and depletion		485			40,410			40,295			—		81,190
Selling, general and administrative		13,567			6,943			10,164			—		30,674
Postretirement benefits		(55	)		14,780			—			—		14,725
Restructuring charges		—			116			7,324			—		7,440
		13,997			309,926			231,040			—		554,963
Operating income (loss)		(13,444	)		7,076			(57,252	)		—		(63,620	)
Interest expense		(50,156	)		590			(3,052	)		—		(52,618	)
Interest income		15			—			635			—		650
Other income		—			—			105			—		105
Loss before income tax expense		(63,585	)		7,666			(59,564	)		—		(115,483	)
Income tax benefit		(26,667	)		(3,396	)		(35,976	)		—		(66,039	)
		(36,918	)		11,062			(23,588	)		—		(49,444	)
Equity in losses of subsidiaries		(12,526	)		—			—			12,526		—
Net income (loss)	$	(49,444	)	$	11,062		$	(23,588	)	$	12,526	$	(49,444	)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2012

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	413,654		$	213,644		$	—		$	627,298
Miscellaneous income (loss)		675			4,071			(481	)		—			4,265
		675			417,725			213,163			—			631,563
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			246,205			185,329			—			431,534
Depreciation and depletion		215			34,367			31,911			—			66,493
Selling, general and administrative		10,729			12,148			13,370			—			36,247
Postretirement benefits		(112	)		13,325			—			—			13,213
		10,832			306,045			230,610			—			547,487
Operating income (loss)		(10,157	)		111,680			(17,447	)		—			84,076
Interest expense		(27,224	)		(286	)		(557	)		—			(28,067	)
Interest income		47			—			230			—			277
Other income (loss)		3,019			—			(10,012	)		—			(6,993	)
Income (loss) before income tax expense		(34,315	)		111,394			(27,786	)		—			49,293
Income tax expense (benefit)		(9,982	)		32,261			(13,602	)		—			8,677
		(24,333	)		79,133			(14,184	)		—			40,616
Equity in earnings of subsidiaries		64,949			—			—			(64,949	)		—
Net income (loss)	$	40,616		$	79,133		$	(14,184	)	$	(64,949	)	$	40,616

Schedule of supplemental condensed consolidating statements of comprehensive income

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2013

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(49,444	)	$	11,062	$	(23,588	)	$	12,526		$	(49,444	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		4,659			—		—			—			4,659
Change in unrealized gain on hedges, net of tax		722			21		—			(21	)		722
Change in foreign currency translation adjustment		(15,625	)		—		(15,625	)		15,625			(15,625	)
Change in unrealized gain on investments		44			—		44			(44	)		44
Total other comprehensive income (loss), net of tax		(10,200	)		21		(15,581	)		15,560			(10,200	)
Total comprehensive income (loss)	$	(59,644	)	$	11,083	$	(39,169	)	$	28,086		$	(59,644	)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2012

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	40,616		$	79,133		$	(14,184	)	$	(64,949	)	$	40,616
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		3,898			(50,756	)		—			50,756			3,898
Change in unrealized gain (loss) on hedges, net of tax		(1,283	)		20			(690	)		670			(1,283	)
Change in foreign currency translation adjustment		2,419			—			2,419			(2,419	)		2,419
Change in unrealized gain on investments		(369	)		—			(369	)		369			(369	)
Total other comprehensive income (loss), net of tax		4,665			(50,736	)		1,360			49,376			4,665
Total comprehensive income (loss)	$	45,281		$	28,397		$	(12,824	)	$	(15,573	)	$	45,281

Schedule of supplemental condensed consolidating statement of cash flows (Unaudited)

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2013

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(28,029	)	$	65,848		$	(57,217	)	$	—		$	(19,398	)
INVESTING ACTIVITIES
Additions to property, plant and equipment		(314	)		(24,545	)		(9,168	)		—			(34,027	)
Intercompany notes issued		(45,591	)		—			—			45,591			—
Intercompany notes proceeds		22,000			—			—			(22,000	)		—
Investments in subsidiaries		(50,103	)		—			—			50,103			—
Other		—			—			1,021			—			1,021
Cash flows used in investing activities		(74,008	)		(24,545	)		(8,147	)		73,694			(33,006	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		450,000			—			—			—			450,000
Borrowings under revolving credit agreement		—			—			320,778			—			320,778
Repayments on revolving credit agreement		—			—			(320,778	)		—			(320,778	)
Retirements of debt		(250,000	)		(2,588	)		(2,099	)		—			(254,687	)
Dividends paid		(7,816	)		—			—			—			(7,816	)
Excess tax deficit from stock-based compensation arrangements		(195	)		(177	)		—			—			(372	)
Proceeds from stock options exercised		279			—			—			—			279
Debt issuance costs		(15,163	)		—			—			—			(15,163	)
Advances from (to) consolidated entities		41,521			(38,443	)		(3,078	)		—			—
Intercompany notes borrowings		—			—			45,591			(45,591	)		—
Intercompany notes payments		—			—			(22,000	)		22,000			—
Investment from Parent		—			—			50,103			(50,103	)		—
Other		(237	)		2			—			—			(235	)
Cash flows provided by (used in) financing activities		218,389			(41,206	)		68,517			(73,694	)		172,006
Effect of foreign exchange rates on cash		—			—			(412	)		—			(412	)
Net increase in cash and cash equivalents	$	116,352		$	97		$	2,741		$	—		$	119,190
Cash and cash equivalents at beginning of period		83,833			61			32,707			—			116,601
Cash and cash equivalents at end of period	$	200,185		$	158		$	35,448		$	—		$	235,791

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2012

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(57,822	)	$	145,851		$	(17,175	)	$	—		$	70,854
INVESTING ACTIVITIES
Additions to property, plant and equipment		(630	)		(31,461	)		(88,754	)		—			(120,845	)
Proceeds from sales of investments		—			—			12,228			—			12,228
Intercompany notes issued		(11,101	)		—			—			11,101			—
Other		—			(85	)		—			—			(85	)
Cash flows used in investing activities		(11,731	)		(31,546	)		(76,526	)		11,101			(108,702	)
FINANCING ACTIVITIES
Borrowings under revolving credit agreement		—			—			135,294			—			135,294
Repayments on revolving credit agreement		—			—			(70,156	)		—			(70,156	)
Retirements of debt		—			(1,983	)		(7,194	)		—			(9,177	)
Dividends paid		(7,806	)		—			—			—			(7,806	)
Excess tax benefits from stock-based compensation arrangements		783			—			—			—			783
Proceeds from stock options exercised		120			—			—			—			120
Advances from (to) consolidated entities		104,534			(112,293	)		7,759			—			—
Intercompany notes borrowings		—			—			11,101			(11,101	)		—
Other		(647	)		1			(881	)		—			(1,527	)
Cash flows provided by (used in) financing activities		96,984			(114,275	)		75,923			(11,101	)		47,531
Effect of foreign exchange rates on cash		—			—			87			—			87
Net increase (decrease) in cash and cash equivalents	$	27,431		$	30		$	(17,691	)	$	—		$	9,770
Cash and cash equivalents at beginning of period		99,086			79			29,265			—			128,430
Cash and cash equivalents at end of period	$	126,517		$	109		$	11,574		$	—		$	138,200

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) (USD $)	3 Months Ended
	Mar. 31, 2013
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Dividends paid (in dollars per share)	$ 0.125

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Basis of Presentation (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2013
Basis of Presentation
Amount of the prior year first quarter impact had reclassification been made from selling, general and administrative costs to cost of sales	$ 5.8

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Derivative Financial Instruments (Details) (USD $) In Millions, unless otherwise specified	0 Months Ended	1 Months Ended			0 Months Ended	1 Months Ended	0 Months Ended
	Jun. 27, 2011 Interest rate swap - June 2011	Jun. 30, 2011 Interest rate swap - June 2011	Dec. 31, 2008 Interest rate swap - December 2008	Dec. 30, 2008 Interest rate swap - December 2008	Jun. 27, 2011 Interest rate cap	Jun. 30, 2011 Interest rate cap	Jun. 27, 2011 Natural Gas Hedge	Jun. 07, 2011 Natural Gas Hedge 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	3 years				3 years		1 year
Fixed rate (as a percent)	1.17%			1.84%
Number of monthly interest payments, hedged			62 months
Number of monthly interest payments			64 months
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								30.00%

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
ASSETS
Cash and cash equivalents	$ 235,791	$ 116,601
Receivables, net	315,296	256,967
Inventories	302,293	306,018
Deferred income taxes	55,629	58,526
Prepaid expenses	47,441	53,776
Other current assets	23,285	23,928
Total current assets	979,735	815,816
Mineral interests, net of accumulated depletion of $199.4 million and $179.6 million, respectively	2,927,591	2,965,557
Property, plant and equipment, net of accumulated depreciation of $845.2 million and $796.7 million, respectively	1,691,637	1,732,131
Deferred income taxes	185,387	160,422
Other long-term assets	99,092	94,494
Total assets	5,883,442	5,768,420
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	17,398	18,793
Accounts payable	133,040	114,913
Accrued expenses	192,913	184,875
Accumulated postretirement benefits obligation	29,637	29,200
Other current liabilities	207,328	206,473
Total current liabilities	580,316	554,254
Long-term debt	2,593,584	2,397,372
Deferred income taxes	883,659	921,687
Accumulated postretirement benefits obligation	636,129	633,264
Other long-term liabilities	244,084	251,272
Total liabilities	4,937,772	4,757,849
Commitments and contingencies (Note 8)
Stockholders' equity:
Common stock, $0.01 par value per share: Authorized-200,000,000 shares, Issued-62,563,004 and 62,521,300 shares, respectively	626	625
Capital in excess of par value	1,615,407	1,628,244
Accumulated deficit	(389,313)	(347,448)
Accumulated other comprehensive income (loss):
Pension and other postretirement benefit plans, net of tax	(261,383)	(266,042)
Foreign currency translation adjustment	(17,127)	(1,502)
Unrealized loss on hedges, net of tax	(3,481)	(4,203)
Unrealized investment gain, net of tax	941	897
Total stockholders' equity	945,670	1,010,571
Total liabilities and stockholders' equity	$ 5,883,442	$ 5,768,420

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Fair Value of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013 Equity securities	Mar. 31, 2013 Recurring Level 2 Interest rate cap	Dec. 31, 2012 Recurring Level 2 Interest rate cap	Mar. 31, 2013 Recurring Level 2 Interest rate swaps	Dec. 31, 2012 Recurring Level 2 Interest rate swaps	Mar. 31, 2013 Recurring Total Fair Value Interest rate cap	Dec. 31, 2012 Recurring Total Fair Value Interest rate cap	Mar. 31, 2013 Recurring Total Fair Value Interest rate swaps	Dec. 31, 2012 Recurring Total Fair Value Interest rate swaps
Fair value information
Total assets		$ 9	$ 12			$ 9	$ 12
Derivative liabilities				5,546	6,615			5,546	6,615
Recorded gain related to trading securities still held	109
Realized losses on sale of available-for-sale securities	$ 4

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Change in pension and postretirement benefit plans, tax expense	$ 2,882	$ 2,422
Change in unrealized gain (loss) on hedges, tax expense (benefit)	$ 343	$ (807)

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013 item	Mar. 31, 2012
Income Taxes
Number of key elements of which income tax provision is comprised	2
Income tax provision (benefit)	$ (66,039)	$ 8,677

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Supplemental Guarantor and Non-Guarantor Financial Information

3 Months Ended

Mar. 31, 2013

Supplemental Guarantor and Non-Guarantor Financial Information

Supplemental Guarantor and Non-Guarantor Financial Information

Note 13—Supplemental Guarantor and Non-Guarantor Financial Information

        On November 21, 2012, the Company completed a private placement of $500.0 million in aggregate principal amount of 9.875% senior notes due December 15, 2020 ("2020 Notes") and on March 27, 2013, the Company completed a private placement of $450.0 million in aggregate principal amount of 8.5% senior notes due April 15, 2021 ("2021 Notes"). The 2020 Notes and 2021 Notes are unconditionally guaranteed, jointly and severally, on an unsecured basis, by each of the Company's current and future wholly-owned U.S. domestic restricted subsidiaries. In connection with the private placements, the guarantors entered into registration rights agreements with the initial purchasers in which the Company agreed, among other things, to file a registration statement covering an offer to exchange the 2020 Notes and 2021 Notes for a new issue of exchange notes registered under the Securities Act of 1933 with substantially identical terms. The Company intends to file a registration statement on Form S-4 with the Securities and Exchange Commission for each of the senior notes and is providing the information below to provide supplemental guarantor financial information pursuant to Rule 3-10(f) of Regulation S-X. The following tables present unaudited condensed consolidating financial information for (i) the Company, (ii) the issuer of the senior notes, (iii) the guarantors under the senior notes, and (iv) the entities which are not guarantors of the senior notes:

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)

MARCH 31, 2013

(in thousands)

	Parent (Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
ASSETS
Cash and cash equivalents	$	200,185	$	158	$	35,448		$	—		$	235,791
Receivables, net		79,729		122,336		113,231			—			315,296
Intercompany receivables		—		538,342		75,419			(613,761	)		—
Intercompany notes receivable		143,263		—		—			(143,263	)		—
Inventories		—		118,744		183,549			—			302,293
Deferred income taxes		36,717		17,687		1,225			—			55,629
Prepaid expenses		1,374		40,861		5,206			—			47,441
Other current assets		18,146		1,128		4,011			—			23,285
Total current assets		479,414		839,256		418,089			(757,024	)		979,735
Mineral interests, net		—		17,015		2,910,576			—			2,927,591
Property, plant and equipment, net		8,276		779,101		904,260			—			1,691,637
Deferred income taxes		78,056		112,560		(5,229	)		—			185,387
Investment in subsidiaries		3,815,313		—		—			(3,815,313	)		—
Other long-term assets		76,091		9,674		13,327			—			99,092
	$	4,457,150	$	1,757,606	$	4,241,023		$	(4,572,337	)	$	5,883,442
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—	$	9,277	$	8,121		$	—		$	17,398
Accounts payable		11,588		80,694		40,758			—			133,040
Accrued expenses		100,956		87,102		4,855			—			192,913
Intercompany payables		613,761		—		—			(613,761	)		—
Intercompany notes payable		—		—		143,263			(143,263	)		—
Accumulated postretirement benefits obligation		131		29,506		—			—			29,637
Other current liabilities		157,201		23,619		26,508			—			207,328
Total current liabilities		883,637		230,198		223,505			(757,024	)		580,316
Long-term debt		2,581,327		115		12,142			—			2,593,584
Deferred income taxes		—		—		883,659			—			883,659
Accumulated postretirement benefits obligation		435		635,694		—			—			636,129
Other long-term liabilities		46,081		128,839		69,164			—			244,084
Total liabilities		3,511,480		994,846		1,188,470			(757,024	)		4,937,772
Stockholders' equity		945,670		762,760		3,052,553			(3,815,313	)		945,670
Total liabilities and stockholders' equity	$	4,457,150	$	1,757,606	$	4,241,023		$	(4,572,337	)	$	5,883,442

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS (Unaudited)

DECEMBER 31, 2012

(in thousands)

	Parent (Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
ASSETS
Cash and cash equivalents	$	83,833	$	61	$	32,707		$	—		$	116,601
Receivables, net		64,106		113,182		79,679			—			256,967
Intercompany receivables		153,933		507,519		—			(661,452	)		—
Intercompany notes receivable		118,079		—		—			(118,079	)		—
Inventories		—		131,893		174,125			—			306,018
Deferred income taxes		39,375		17,687		1,464			—			58,526
Prepaid expenses		1,869		45,327		6,580			—			53,776
Other current assets		17,559		1,109		5,260			—			23,928
Total current assets		478,754		816,778		299,815			(779,531	)		815,816
Mineral interests, net		—		18,475		2,947,082			—			2,965,557
Property, plant and equipment, net		8,448		790,900		932,783			—			1,732,131
Deferred income taxes		52,363		112,560		(4,501	)		—			160,422
Goodwill		—		—		—			—			—
Investment in subsidiaries		3,530,094		—		—			(3,530,094	)		—
Other long-term assets		71,622		9,375		13,497			—			94,494
	$	4,141,281	$	1,748,088	$	4,188,676		$	(4,309,625	)	$	5,768,420
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—	$	10,196	$	8,597		$	—		$	18,793
Accounts payable		5,128		78,260		31,525			—			114,913
Accrued expenses		27,197		83,155		74,523			—			184,875
Intercompany payables		507,519		—		153,933			(661,452	)		—
Intercompany notes payable		—		—		118,079			(118,079	)		—
Accumulated postretirement benefits obligation		131		29,069		—			—			29,200
Other current liabilities		157,044		24,389		25,040			—			206,473
Total current liabilities		697,019		225,069		411,697			(779,531	)		554,254
Long-term debt		2,381,255		1,784		14,333			—			2,397,372
Deferred income taxes		—		—		921,687			—			921,687
Accumulated postretirement benefits obligation		452		632,812		—			—			633,264
Other long-term liabilities		51,984		128,593		70,695			—			251,272
Total liabilities		3,130,710		988,258		1,418,412			(779,531	)		4,757,849
Stockholders' equity		1,010,571		759,830		2,770,264			(3,530,094	)		1,010,571
Total liabilities and stockholders' equity	$	4,141,281	$	1,748,088	$	4,188,676		$	(4,309,625	)	$	5,768,420

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2013

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Total Consolidated
Revenues:
Sales	$	—		$	314,812		$	174,797		$	—	$	489,609
Miscellaneous income (loss)		553			2,190			(1,009	)		—		1,734
		553			317,002			173,788			—		491,343
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			247,677			173,257			—		420,934
Depreciation and depletion		485			40,410			40,295			—		81,190
Selling, general and administrative		13,567			6,943			10,164			—		30,674
Postretirement benefits		(55	)		14,780			—			—		14,725
Restructuring charges		—			116			7,324			—		7,440
		13,997			309,926			231,040			—		554,963
Operating income (loss)		(13,444	)		7,076			(57,252	)		—		(63,620	)
Interest expense		(50,156	)		590			(3,052	)		—		(52,618	)
Interest income		15			—			635			—		650
Other income		—			—			105			—		105
Loss before income tax expense		(63,585	)		7,666			(59,564	)		—		(115,483	)
Income tax benefit		(26,667	)		(3,396	)		(35,976	)		—		(66,039	)
		(36,918	)		11,062			(23,588	)		—		(49,444	)
Equity in losses of subsidiaries		(12,526	)		—			—			12,526		—
Net income (loss)	$	(49,444	)	$	11,062		$	(23,588	)	$	12,526	$	(49,444	)

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2012

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	413,654		$	213,644		$	—		$	627,298
Miscellaneous income (loss)		675			4,071			(481	)		—			4,265
		675			417,725			213,163			—			631,563
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			246,205			185,329			—			431,534
Depreciation and depletion		215			34,367			31,911			—			66,493
Selling, general and administrative		10,729			12,148			13,370			—			36,247
Postretirement benefits		(112	)		13,325			—			—			13,213
		10,832			306,045			230,610			—			547,487
Operating income (loss)		(10,157	)		111,680			(17,447	)		—			84,076
Interest expense		(27,224	)		(286	)		(557	)		—			(28,067	)
Interest income		47			—			230			—			277
Other income (loss)		3,019			—			(10,012	)		—			(6,993	)
Income (loss) before income tax expense		(34,315	)		111,394			(27,786	)		—			49,293
Income tax expense (benefit)		(9,982	)		32,261			(13,602	)		—			8,677
		(24,333	)		79,133			(14,184	)		—			40,616
Equity in earnings of subsidiaries		64,949			—			—			(64,949	)		—
Net income (loss)	$	40,616		$	79,133		$	(14,184	)	$	(64,949	)	$	40,616

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2013

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(49,444	)	$	11,062	$	(23,588	)	$	12,526		$	(49,444	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		4,659			—		—			—			4,659
Change in unrealized gain on hedges, net of tax		722			21		—			(21	)		722
Change in foreign currency translation adjustment		(15,625	)		—		(15,625	)		15,625			(15,625	)
Change in unrealized gain on investments		44			—		44			(44	)		44
Total other comprehensive income (loss), net of tax		(10,200	)		21		(15,581	)		15,560			(10,200	)
Total comprehensive income (loss)	$	(59,644	)	$	11,083	$	(39,169	)	$	28,086		$	(59,644	)

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2012

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	40,616		$	79,133		$	(14,184	)	$	(64,949	)	$	40,616
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		3,898			(50,756	)		—			50,756			3,898
Change in unrealized gain (loss) on hedges, net of tax		(1,283	)		20			(690	)		670			(1,283	)
Change in foreign currency translation adjustment		2,419			—			2,419			(2,419	)		2,419
Change in unrealized gain on investments		(369	)		—			(369	)		369			(369	)
Total other comprehensive income (loss), net of tax		4,665			(50,736	)		1,360			49,376			4,665
Total comprehensive income (loss)	$	45,281		$	28,397		$	(12,824	)	$	(15,573	)	$	45,281

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2013

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(28,029	)	$	65,848		$	(57,217	)	$	—		$	(19,398	)
INVESTING ACTIVITIES
Additions to property, plant and equipment		(314	)		(24,545	)		(9,168	)		—			(34,027	)
Intercompany notes issued		(45,591	)		—			—			45,591			—
Intercompany notes proceeds		22,000			—			—			(22,000	)		—
Investments in subsidiaries		(50,103	)		—			—			50,103			—
Other		—			—			1,021			—			1,021
Cash flows used in investing activities		(74,008	)		(24,545	)		(8,147	)		73,694			(33,006	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		450,000			—			—			—			450,000
Borrowings under revolving credit agreement		—			—			320,778			—			320,778
Repayments on revolving credit agreement		—			—			(320,778	)		—			(320,778	)
Retirements of debt		(250,000	)		(2,588	)		(2,099	)		—			(254,687	)
Dividends paid		(7,816	)		—			—			—			(7,816	)
Excess tax deficit from stock-based compensation arrangements		(195	)		(177	)		—			—			(372	)
Proceeds from stock options exercised		279			—			—			—			279
Debt issuance costs		(15,163	)		—			—			—			(15,163	)
Advances from (to) consolidated entities		41,521			(38,443	)		(3,078	)		—			—
Intercompany notes borrowings		—			—			45,591			(45,591	)		—
Intercompany notes payments		—			—			(22,000	)		22,000			—
Investment from Parent		—			—			50,103			(50,103	)		—
Other		(237	)		2			—			—			(235	)
Cash flows provided by (used in) financing activities		218,389			(41,206	)		68,517			(73,694	)		172,006
Effect of foreign exchange rates on cash		—			—			(412	)		—			(412	)
Net increase in cash and cash equivalents	$	116,352		$	97		$	2,741		$	—		$	119,190
Cash and cash equivalents at beginning of period		83,833			61			32,707			—			116,601
Cash and cash equivalents at end of period	$	200,185		$	158		$	35,448		$	—		$	235,791

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2012

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(57,822	)	$	145,851		$	(17,175	)	$	—		$	70,854
INVESTING ACTIVITIES
Additions to property, plant and equipment		(630	)		(31,461	)		(88,754	)		—			(120,845	)
Proceeds from sales of investments		—			—			12,228			—			12,228
Intercompany notes issued		(11,101	)		—			—			11,101			—
Other		—			(85	)		—			—			(85	)
Cash flows used in investing activities		(11,731	)		(31,546	)		(76,526	)		11,101			(108,702	)
FINANCING ACTIVITIES
Borrowings under revolving credit agreement		—			—			135,294			—			135,294
Repayments on revolving credit agreement		—			—			(70,156	)		—			(70,156	)
Retirements of debt		—			(1,983	)		(7,194	)		—			(9,177	)
Dividends paid		(7,806	)		—			—			—			(7,806	)
Excess tax benefits from stock-based compensation arrangements		783			—			—			—			783
Proceeds from stock options exercised		120			—			—			—			120
Advances from (to) consolidated entities		104,534			(112,293	)		7,759			—			—
Intercompany notes borrowings		—			—			11,101			(11,101	)		—
Other		(647	)		1			(881	)		—			(1,527	)
Cash flows provided by (used in) financing activities		96,984			(114,275	)		75,923			(11,101	)		47,531
Effect of foreign exchange rates on cash		—			—			87			—			87
Net increase (decrease) in cash and cash equivalents	$	27,431		$	30		$	(17,691	)	$	—		$	9,770
Cash and cash equivalents at beginning of period		99,086			79			29,265			—			128,430
Cash and cash equivalents at end of period	$	126,517		$	109		$	11,574		$	—		$	138,200

XML

Debt (Details) (USD $)			0 Months Ended						0 Months Ended				0 Months Ended	3 Months Ended	0 Months Ended
	Mar. 31, 2013	Dec. 31, 2012	Mar. 22, 2013 2011 Credit Agreement	Mar. 31, 2013 2011 term loan A	Dec. 31, 2012 2011 term loan A	Mar. 31, 2013 2011 term loan B	Mar. 22, 2013 2011 term loan B	Dec. 31, 2012 2011 term loan B	Mar. 22, 2013 2011 term loan B Maximum	Nov. 21, 2012 9.875% senior notes	Mar. 31, 2013 9.875% senior notes	Dec. 31, 2012 9.875% senior notes	Mar. 27, 2013 8.500% senior notes	Mar. 31, 2013 8.500% senior notes	Mar. 27, 2013 8.500% senior notes Prior to April 15, 2016	Mar. 27, 2013 8.500% senior notes Prior to April 15, 2017	Mar. 27, 2013 8.500% senior notes During the twelve months commencing April 15, 2017	Mar. 27, 2013 8.500% senior notes During the twelve months commencing April 15, 2018	Mar. 27, 2013 8.500% senior notes Period commencing April 15, 2019	Mar. 27, 2013 8.500% senior notes Maximum Prior to April 15, 2016	Mar. 31, 2013 Other	Dec. 31, 2012 Other
Debt instrument
Total debt	$ 2,610,982,000	$ 2,416,165,000		$ 656,566,000	$ 756,974,000	$ 978,178,000		$ 1,127,770,000			$ 496,582,000	$ 496,510,000		$ 450,000,000							$ 29,656,000	$ 34,911,000
Less current debt	(17,398,000)	(18,793,000)
Total long term debt	2,593,584,000	2,397,372,000
Weighted average stated interest rate (as a percent)				4.80%		5.75%					9.88%			8.50%
Debt agreements
Face amount											500,000,000
Interest rate (as a percent)										9.875%	9.875%		8.50%	8.50%
Percentage of proceeds from debt offering, if used to repay term loans would allow for additional flexibility to incur additional borrowings			100.00%
Increase in additional borrowings available, provided that specified percentage of the proceeds will be used to repay the term loans under the 2011 credit agreement			250,000,000
Repricing event, term									6 months
Fee to be paid should a repricing event occur (as a percent)							1.00%
Debt issued										$ 500,000,000			$ 450,000,000
Aggregate principal of debt redeemed (as a percent)																				35.00%
Redemption price of debt instrument (as a percent)														101.00%	108.50%	100.00%	104.25%	102.125%	100.00%

XML

Debt (Tables)

3 Months Ended

Mar. 31, 2013

Debt

Schedule of debt instruments

Debt consisted of the following (in thousands):

	March 31, 2013			December 31, 2012			Weighted Average Stated Interest Rate At March 31, 2013	Final Maturity
2011 term loan A	$	656,566		$	756,974		4.80%	2016
2011 term loan B		978,178			1,127,770		5.75%	2018
Revolving credit facility		—			—		N/A	2016
9.875% senior notes ($500.0 million face value)		496,582			496,510		9.88%	2020
8.500% senior notes		450,000			—		8.50%	2021
Other(1)		29,656			34,911		Various	Various
Total debt		2,610,982			2,416,165
Less: current debt(1)		(17,398	)		(18,793	)
Total long-term debt	$	2,593,584		$	2,397,372

(1)

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

XML

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (USD $) In Thousands, unless otherwise specified	Total	Common Stock	Capital in Excess of Par Value	Accumulated Deficit	Accumulated Other Comprehensive Loss
Balance at Dec. 31, 2012	$ 1,010,571	$ 625	$ 1,628,244	$ (347,448)	$ (270,850)
Increase (Decrease) in Stockholders' Equity
Net loss	(49,444)			(49,444)
Other comprehensive loss, net of tax	(10,200)				(10,200)
Stock issued upon the exercise of stock options	279	1	278
Dividends paid, $0.125 per share	(7,816)		(15,630)	7,814
Stock based compensation	2,887		2,887
Excess tax deficit from stock-based compensation arrangements	(372)		(372)
Other	(235)			(235)
Balance at Mar. 31, 2013	$ 945,670	$ 626	$ 1,615,407	$ (389,313)	$ (281,050)

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
CONDENSED CONSOLIDATED BALANCE SHEETS
Mineral interests, accumulated depletion (in dollars)	$ 199.4	$ 179.6
Property, plant and equipment, accumulated depreciation (in dollars)	$ 845.2	$ 796.7
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	62,563,004	62,521,300

XML

Commitments and Contingencies

3 Months Ended

Mar. 31, 2013

Commitments and Contingencies

Commitments and Contingencies

Note 8—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 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 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 2013. At the request of both parties, in January 2013 the Bankruptcy Court granted an additional extension of time until May 30, 2013 to submit the 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 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. As of March 31, 2013, a final resolution has not 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.

        In 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 the prior Proof of Claim and included a proposed adjustment to a worthless stock deduction reported in the Company's 2008 federal income tax return. In the third quarter of 2012, the Company received notification from the IRS that the audit of the 2006 through 2008 tax years had been reopened for further review. The IRS issued a revised IRS Appeals Transmittal Letter in April 2013 conceding the proposed adjustment to the worthless stock deduction. The Company has evaluated the remaining proposed adjustments submitted to IRS Appeals and believes the Company's 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 examination is ongoing, any resulting tax deficiency or overpayment cannot be estimated at this time. During 2013, 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 total uncertain income tax positions and net income.

        It is reasonably possible that the amount of unrecognized tax benefits will change in the next twelve months. The Company anticipates a final order will be issued by the Bankruptcy Court in 2013 settling the issues in the Proof of Claim. The final order by the Bankruptcy Court would permit a resolution of similar issues for the tax years currently in Appeals (2000-2005) and Exams (2006-2010). As of March 31, 2013, the Company had $38 million of accruals for unrecognized tax benefits on the matters subject to disposition. Due to the uncertainty related to the potential outcome of these matters, at this time the range of reasonably possible changes in unrecognized tax benefits in the next twelve months cannot be estimated.

        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. The Company believes that it has sufficient accruals to address any claims, including interest and penalties. Management does not believe that any potential difference between the final settlements and the amounts accrued will have a material effect on the Company's financial position, but such potential difference could be material to results of operations in a future reporting period.

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 ("the 1989 Order") 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. In 2004, the EPA re-directed Walter Coke's RFI efforts toward completion of the Environmental Indicator ("EI") determinations for the Current Human Exposures, which were approved and finalized for Walter Coke's Birmingham facility in 2005. In 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. The results of this sampling and testing were submitted to the EPA for review in 2009. In conjunction with the plan, Walter Coke agreed to remediate portions of 23 properties based on the 2009 sampling and that process was completed in 2012.

        In 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. Under CERCLA authority, EPA is proceeding directly with the offsite sampling work and deferring any further enforcement actions or decisions, including evaluating whether Walter Coke or any other company is in fact a PRP, to a subsequent time. In February 2013, the Agency for Toxic Substances and Disease Registry (ATSDR) released a draft report concerning past, present and future exposures to residential soils in North Birmingham and concluded that there is no public health hazard. In March 2013, EPA released the North Birmingham Air Toxics Risk Assessment showing the air quality to be acceptable.

        A RCRA Section 3008(h) Administrative Order on Consent ("the 2012 Order") with the effective date of September 24, 2012 was signed by Walter Coke and the EPA. The 2012 Order declared that all of the approved investigation tasks of the RFI Work Plans required by the 1989 Order had been completed by Walter Coke and that the 1989 Order was terminated and no longer in effect. The objectives of the 2012 Order are to perform Corrective Measure Studies, implement remedies if necessary, and implement and maintain institutional controls if required at the Walter Coke facility.

        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 March 31, 2013, 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. The amount of this accrual is not material to the Company's consolidated 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. Additionally, pending EPA's sampling activities in the neighborhoods and identification of PRP's, the Company at this time is unable to reasonably estimate the cost of offsite remediation activities that may 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 Company's consolidated financial statements, but such cleanup costs could be material to results of operations in a future reporting period.

        In 2011, the Company and Walter Coke were named in a suit filed by Louise Moore (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 defendants and/or their predecessors. Subsequently, 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. Thereafter, Walter Coke filed a Motion to Dismiss the amended complaint. On September 28, 2012, the Court issued a memorandum opinion and order granting in part and denying in part the motion. In partially granting Walter Coke's motion, the Court held that the plaintiff's claim for injunctive relief was not valid and that class action-related claims must be dismissed (with leave to re-plead) due to an improperly defined class. In partially ruling for the plaintiff, the Court held that at the pleading stage the plaintiff's claims could not be dismissed on rule of repose grounds or due to insufficient pleading. The plaintiff filed an amended complaint on October 29, 2012. On November 19, 2012, Walter Coke filed an answer and motion for partial dismissal of plaintiff's second amended complaint. The Court held a hearing on Walter Coke's motion for partial dismissal of the second amended complaint on January 10, 2013 and a ruling is pending.

        The Company and Walter Coke believe that there is no merit to the claims alleged in this action and intend to vigorously defend this matter.

Jim Walter Resources

        In July, 2011, Jim Walter Resources, Inc. ("JWR") reported a slurry spill at its North River mine to the Alabama Department of Environmental Management ("ADEM") and the Alabama Surface Mining Commission ("ASMC"). As a result, a penalty of $145,200 was assessed and paid to ASMC in November, 2011. A penalty of $60,000 was assessed by ADEM in December 2011. JWR has expended approximately $5.0 million in remediation costs which is substantially complete. Walter Energy brought a related insurance claim that was resolved in March 2013.

Willow Creek

        On March 5, 2013, a complaint was received from British Columbia's Environmental Crown Counsel seeking a monetary penalty of $100,000 CAD for alleged violations of the Federal Fisheries Act associated with an April 2011 release of sediment and debris into Willow Creek from the forest service road leading to the Willow Creek mine. To date, we have incurred some costs in taking corrective actions in response to the 2011 release and are continuing to cooperate with regulatory authorities. We intend to negotiate with the authorities in pursuit of a mutually agreeable settlement.

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 U.K. Operations (collectively the "Individual Defendants"). The complaints were filed by Peter Rush and Michael Carney, purported shareholders of Walter Energy who each sought to represent a class of Walter Energy shareholders who purchased common stock between April 20, 2011 and September 21, 2011.

        These complaints alleged 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 alleged 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 claimed 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. On August 20, 2012, Lead Plaintiffs filed a consolidated amended class action complaint in this action. The consolidated amended complaint names as an additional defendant Joseph Leonard, a current director and former interim CEO of Walter, in addition to the previously named defendants. Defendants filed a Motion to Dismiss the amended complaint on October 4, 2012. On January 29, 2013, the court denied that motion without prejudice. Defendants answered the complaint on February 15, 2013 and on March 5, 2013. The parties are now in the process of discovery.

        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 named as defendants the Company's current Board of Directors, Keith Calder and Neil Winkelmann. The Company was named as a nominal defendant in each complaint. The three complaints alleged similar facts to those alleged in the Rush complaint. The complaints variously asserted 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 sought, 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 thereafter entered into a stipulation with the lead plaintiffs in the consolidated derivative suit, pursuant to which all proceedings in the derivative action were stayed pending the filing of the consolidated amended complaint in the class action. On September 19, 2012, lead plaintiffs filed a consolidated shareholder derivative complaint. This action has been stayed pending the resolution of summary judgment motions in the putative securities class action. The derivative plaintiffs will have certain rights to participate in discovery taken in the federal securities 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.). On September 27, 2012 a second shareholder derivative lawsuit was filed in the same court (Sinerius v. Beatty, et al.) Both complaints name as defendants the Company's current Board of Directors and Keith Calder. The Company is named as a nominal defendant in each complaint. These complaints, like the state court derivative claims, allege similar facts to those alleged in the Rush complaint. The Makohin complaint asserts state law claims for breaches of fiduciary duties and unjust enrichment, while the Sinerius complaint asserts these same claims as well as claims for abuse of control and gross mismanagement. Both actions seek, among other things, recovery for the Company for damages that the Company suffered as a result of alleged wrongful conduct and restitution from defendants of all profits, benefits and other compensation that they wrongfully obtained. Like the state court derivative action, both of these cases have been stayed pending resolution of summary judgment motions in the putative securities class action. The federal derivative plaintiffs will also have certain rights to participate in discovery taken in the federal securities 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.

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 or results of operations.

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2013	Apr. 30, 2013
Document and Entity Information
Entity Registrant Name	Walter Energy, Inc.
Entity Central Index Key	0000837173
Document Type	10-Q
Document Period End Date	Mar. 31, 2013
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		62,571,619
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1

XML

Derivative Financial Instruments

3 Months Ended

Mar. 31, 2013

Derivative Financial Instruments

Derivative Financial Instruments

Note 9—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 30% 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 March 31, 2013.

        The following table presents the fair values of the Company's derivative instruments as well as their classification within the Condensed Consolidated Balance Sheets (in thousands). See Note 11 for additional information related to the fair values of our derivative instruments.

	March 31, 2013		December 31, 2012
Asset derivatives designated as cash flow hedging instruments:
Interest rate cap(1)	$	9	$	12
Total asset derivatives	$	9	$	12
Liability derivatives designated as cash flow hedging instruments:
Interest rate swaps(2)	$	5,546	$	6,615
Total liability derivatives	$	5,546	$	6,615

(1)

$7 thousand and $8 thousand is included in other current assets and $2 thousand and $4 thousand is included in other long-term assets within the Condensed Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012, respectively.

(2)

$4.1 million and $4.1 million is included within other current liabilities and $1.4 million and $2.5 million is included within other long-term liabilities in the Condensed Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012, respectively.

        The following tables presents the gains and losses from derivative instruments for the three months ended March 31, 2013 and 2012 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)
	Three months ended March 31,						Three months ended March 31,
Derivatives designated as cash flow hedging instruments	2013			2012			2013			2012
Natural gas hedges	$	—		$	(2,132	)	$	—		$	1,442
Interest rate swaps		1,340			103			(616	)		(565	)
Interest rate cap		(2	)		(131	)		—			—
Total	$	1,338		$	(2,160	)	$	(616	)	$	877

(1)

Natural gas hedge amounts are recorded within miscellaneous income in the Condensed Consolidated Statements of Operations.

(2)

Interest rate swap amounts are recorded within interest expense in the Condensed Consolidated Statements of Operations.

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Revenues:
Sales	$ 489,609	$ 627,298
Miscellaneous income	1,734	4,265
Total revenues	491,343	631,563
Costs and expenses:
Cost of sales (exclusive of depreciation and depletion)	420,934	431,534
Depreciation and depletion	81,190	66,493
Selling, general and administrative	30,674	36,247
Postretirement benefits	14,725	13,213
Restructuring charges	7,440
Total costs and expenses	554,963	547,487
Operating income (loss)	(63,620)	84,076
Interest expense	(52,618)	(28,067)
Interest income	650	277
Other income (loss)	105	(6,993)
Income (loss) before income tax expense	(115,483)	49,293
Income tax expense (benefit)	(66,039)	8,677
Net income (loss)	$ (49,444)	$ 40,616
Net income (loss) per share:
Basic (in dollars per share)	$ (0.79)	$ 0.65
Diluted (in dollars per share)	$ (0.79)	$ 0.65
Dividends per share (in dollars per share)	$ 0.125	$ 0.125

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Inventories

3 Months Ended

Mar. 31, 2013

Inventories

Inventories

Note 3—Inventories

        Inventories are summarized as follows (in thousands):

	March 31, 2013		December 31, 2012
Coal	$	217,557	$	228,910
Raw materials and supplies		84,736		77,108
Total inventories	$	302,293	$	306,018

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Restructuring

3 Months Ended

Mar. 31, 2013

Restructuring

Restructuring

Note 2—Restructuring

        In response to the current depressed price environment for metallurgical coal, the Company decided in the first quarter of 2013 to curtail production at the Willow Creek mine in the Canadian and U.K. Operations segment. This curtailment will result in a workforce reduction of approximately 250 employees. The Company also plans to close the North River mine in 2013 approximately nine months earlier than the previously expected end of mine life of 2014.

        In connection with the curtailment of operations at the Willow Creek mine, the Company recognized a restructuring charge of approximately $7.4 million consisting of severance charges of approximately $4.4 million and contract termination costs of $3.0 million. The majority of the employee termination costs are expected to be paid during the second quarter of 2013. These charges are presented under restructuring charges in the Condensed Consolidated Statements of Operations.

XML

Inventories (Tables)

3 Months Ended

Mar. 31, 2013

Inventories

Schedule of inventories

Inventories are summarized as follows (in thousands):

	March 31, 2013		December 31, 2012
Coal	$	217,557	$	228,910
Raw materials and supplies		84,736		77,108
Total inventories	$	302,293	$	306,018

XML

Accumulated Other Comprehensive Income (Loss)

3 Months Ended

Mar. 31, 2013

Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Income (Loss)

Note 10—Accumulated Other Comprehensive Income (Loss)

        The following table presents the changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2013, net of tax (in thousands).

	Pension and other post-retirement plans			Unrealized gain/(loss) on hedges			Foreign currency translation adjustment			Unrealized gain/(loss) on investments			Total
Beginning balance as of December 31, 2012	$	(266,042	)	$	(4,203	)	$	(1,502	)	$	897		$	(270,850	)
Other comprehensive income (loss) before reclassifications		—			1,338			(15,625	)		48			(14,239	)
Amounts reclassified from accumulated other comprehensive income (loss)		4,659			(616	)		—	(1)		(4	)		4,039
Net current-period other comprehensive income (loss)		4,659			722			(15,625	)		44			(10,200	)
Total	$	(261,383	)	$	(3,481	)	$	(17,127	)	$	941		$	(281,050	)

(1)

Foreign currency translation adjustments are reclassified from accumulated other comprehensive income (loss) upon sale or substantially complete liquidation of an investment in a foreign entity.

        The following table presents amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three months ended March 31, 2013 (in thousands).

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Condensed Consolidated Statements of Operations
Gains and losses on cash flow hedges
Interest rate swaps	$	(997	)	Interest expense
		(997	)	Income (loss) before income tax expense
		381		Income tax benefit
	$	(616	)	Net income (loss)
Amortization of pension and postretirement benefit plans
Prior service cost	$	373		(a)
Net actuarial loss		7,168		(a)
		7,541		Income (loss) before income tax expense
		(2,882	)	Income tax (expense)
	$	4,659		Net income (loss)
Gains and losses on available-for-sale securities	$	(4	)	Other income (loss)
		(4	)	Income (loss) before income tax expense
		—		Income tax (expense)
	$	(4	)	Net income (loss)
Total reclassifications for the period	$	4,039		Net income (loss)

(a)

Amortization of pension benefit items is included in cost of sales (exclusive of depreciation and depletion) and selling, general and administrative expense while amortization of postretirement benefit items is included in postretirement benefits within the Condensed Consolidated Statements of Operations.

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Pension and Other Postretirement Benefits

3 Months Ended

Mar. 31, 2013

Pension and Other Postretirement Benefits

Pension and Other Postretirement Benefits

Note 6—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 March 31,						For the three months ended March 31,
	2013			2012			2013		2012
Components of net periodic benefit cost:
Service cost	$	1,766		$	1,498		$	2,486	$	2,018
Interest cost		3,070			3,129			7,198		7,253
Expected return on plan assets		(4,235	)		(4,031	)		—		—
Amortization of prior service cost		66			64			307		261
Amortization of net actuarial loss		2,434			2,313			4,734		3,681
Net periodic benefit cost	$	3,101		$	2,973		$	14,725	$	13,213

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Income Taxes

3 Months Ended

Mar. 31, 2013

Income Taxes

Income Taxes

Note 4—Income Taxes

        The Company estimates its annual effective tax rate based on projected financial income for the full year at the end of each interim reporting period unless projected financial income for the full year is close to break-even, in which case the annual effective tax rate could become volatile and could distort the income tax provision for an interim period. When this happens, the Company calculates the interim income tax provision using actual year-to-date financial results for certain jurisdictions. This method results in an income tax provision based solely on the year-to-date financial taxable income or loss for those jurisdictions. In both cases, 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.

        For the three months ended March 31, 2013, the Company determined the current period income tax benefit for the Alabama operations using the actual year-to-date financial results as compared to the estimated annual effective tax rate method utilized in 2012. The year-to-date tax benefit for the Canada, U.K. and West Virginia operations was determined using the estimated annual effective tax rate method.

        The Company recognized an income tax benefit of $66.0 million for the three months ended March 31, 2013, compared to an income tax provision of $8.7 million for the three months ended March 31, 2012 as the Company incurred a pretax operating loss for the three months ended March 31, 2013 compared to pretax operating income for the same period in 2012. The 2013 and 2012 tax rates reflect the benefit of our Canadian and U.K. operations which are taxed at statutory rates lower than the U.S. rate and the effects of tax losses in excess of losses related to foreign financing activities. The effective tax rates also reflect statutory depletion deductions in the Alabama mining operations.

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Debt

3 Months Ended

Mar. 31, 2013

Debt

Debt

Note 5—Debt

        Debt consisted of the following (in thousands):

	March 31, 2013			December 31, 2012			Weighted Average Stated Interest Rate At March 31, 2013	Final Maturity
2011 term loan A	$	656,566		$	756,974		4.80%	2016
2011 term loan B		978,178			1,127,770		5.75%	2018
Revolving credit facility		—			—		N/A	2016
9.875% senior notes ($500.0 million face value)		496,582			496,510		9.88%	2020
8.500% senior notes		450,000			—		8.50%	2021
Other(1)		29,656			34,911		Various	Various
Total debt		2,610,982			2,416,165
Less: current debt(1)		(17,398	)		(18,793	)
Total long-term debt	$	2,593,584		$	2,397,372

(1)

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

• Credit Agreement Amendment

        On March 22, 2013, the Company entered into an amendment (the "Fourth Amendment") to the 2011 Credit Agreement dated as of April 1, 2011, as amended by the First Amendment to Credit Agreement, dated as of January 20, 2012, as further amended by the Second Amendment to Credit Agreement, dated as of August 16, 2012, and as further amended by the Third Amendment to Credit Agreement dated as of October 29, 2012, among the Company, the various lenders, Morgan Stanley Senior Funding, Inc. as administrative agent, and other agents named therein. The Fourth Amendment amended a financial covenant in the 2011 Credit Agreement to provide additional flexibility for the issuance of senior unsecured notes, subject to the lessor of 100% and $250.0 million, in each case, of the net proceeds of such notes issuance being used to repay term loans outstanding under the 2011 Credit Agreement. The Fourth Amendment also provided that, should a repricing event occur within six months of the effective date of the Fourth Amendment, the Company must pay a fee equal to 1.0% of the aggregate principal amount of, as applicable, (i) the portion of the Term Loan B balance prepaid in connection with such repricing event or (ii) the portion of the Term Loan B balance outstanding on such date that is subject to an effective pricing reduction pursuant to such repricing event.

• 8.50% Senior Notes

        On March 27, 2013, the Company issued $450.0 million of 8.5% senior notes due April 15, 2021 (the "2021 Notes"). These Notes are unconditionally guaranteed, jointly and severally, on an unsecured basis, by each of our current and future wholly-owned U.S. domestic restricted subsidiaries. Interest on the 2021 Notes accrues at the rate of 8.5% per year and is payable semi-annually in arrears on April 15 and October 15, commencing on October 15, 2013. At any time prior to April 15, 2016, the Company may redeem up to 35% of the aggregate principal amount of the 2021 Notes at a redemption price of 108.5% of the principal amount, plus accrued and unpaid interest. The Company may redeem the 2021 Notes, in whole or in part, after April 15, 2016 and prior to April 15, 2017, at a redemption price equal to 100% of the aggregate principal amount of the 2021 Notes plus a "make-whole" premium and accrued and unpaid interest. The Company may redeem the 2021 Notes, in whole or in part at redemption prices equal to 104.25% for the twelve months commencing April 15, 2017, 102.125% for the twelve months commencing April 15, 2018 and 100% beginning on April 15, 2019, in each case plus accrued and unpaid interest.

        Upon the occurrence of a change of control repurchase event, unless the Company has exercised its right to redeem the 2021 Notes, the Company will be required to offer to repurchase each holder's 2021 Notes at a price equal to 101% of the aggregate principal amount, plus accrued and unpaid interest.

XML

Net Income (Loss) Per Share

3 Months Ended

Mar. 31, 2013

Net Income (Loss) Per Share

Net Income (Loss) Per Share

Note 7—Net Income (Loss) Per Share

        A reconciliation of the basic and diluted net income (loss) per share computations for the three months ended March 31, 2013 and 2012 is as follows (in thousands, except per share data):

	For the three months ended March 31,
	2013						2012
	Basic			Diluted			Basic		Diluted
Numerator:
Net income (loss)	$	(49,444	)	$	(49,444	)	$	40,616	$	40,616
Denominator:
Average number of common shares outstanding		62,599			62,599			62,463		62,463
Effect of dilutive securities:
Stock awards and warrants(1)		—			—			—		276
		62,599			62,599			62,463		62,739
Net income (loss) per share	$	(0.79	)	$	(0.79	)	$	0.65	$	0.65

(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. In periods of net loss, the number of shares used to calculate diluted earnings per share is the same as basic earnings per share; therefore, the effect of dilutive securities is zero for such periods. The weighted average number of stock options outstanding for the three months ended March 31, 2013 and 2012 totaling 357,333 and 136,513, respectively, were excluded from the calculation above because their effect would have been anti-dilutive.

        The table below sets forth the share-based awards that have been exercised or released:

	For the three months ended March 31,
	2013		2012
Stock options		24,831		19,059
Restricted stock units		16,873		17,959
Total		41,704		37,018

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Inventories
Coal	$ 217,557	$ 228,910
Raw materials and supplies	84,736	77,108
Total inventories	$ 302,293	$ 306,018

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Supplemental Guarantor and Non-Guarantor Financial Information (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Supplemental guarantor and non-guarantor financial information
Net income (loss)	$ (49,444)	$ 40,616
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax	4,659	3,898
Change in unrealized loss on hedges, net of tax	722	(1,283)
Change in foreign currency translation adjustment	(15,625)	2,419
Change in unrealized gain (loss) on investments	44	(369)
Total comprehensive income (loss)	(59,644)	45,281
Total other comprehensive income (loss), net of tax	(10,200)	4,665
Parent (Issuer)
Supplemental guarantor and non-guarantor financial information
Net income (loss)	(49,444)	40,616
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax	4,659	3,898
Change in unrealized loss on hedges, net of tax	722	(1,283)
Change in foreign currency translation adjustment	(15,625)	2,419
Change in unrealized gain (loss) on investments	44	(369)
Total comprehensive income (loss)	(59,644)	45,281
Total other comprehensive income (loss), net of tax	(10,200)	4,665
Guarantor Subsidiaries
Supplemental guarantor and non-guarantor financial information
Net income (loss)	11,062	79,133
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		(50,756)
Change in unrealized loss on hedges, net of tax	21	20
Total comprehensive income (loss)	11,083	28,397
Total other comprehensive income (loss), net of tax	21	(50,736)
Non-Guarantor Subsidiaries
Supplemental guarantor and non-guarantor financial information
Net income (loss)	(23,588)	(14,184)
Other comprehensive income (loss), net of tax:
Change in unrealized loss on hedges, net of tax		(690)
Change in foreign currency translation adjustment	(15,625)	2,419
Change in unrealized gain (loss) on investments	44	(369)
Total comprehensive income (loss)	(39,169)	(12,824)
Total other comprehensive income (loss), net of tax	(15,581)	1,360
Eliminations
Supplemental guarantor and non-guarantor financial information
Net income (loss)	12,526	(64,949)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		50,756
Change in unrealized loss on hedges, net of tax	21	670
Change in foreign currency translation adjustment	15,625	(2,419)
Change in unrealized gain (loss) on investments	(44)	369
Total comprehensive income (loss)	28,086	(15,573)
Total other comprehensive income (loss), net of tax	$ 15,560	$ 49,376

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Segment Information

3 Months Ended

Mar. 31, 2013

Segment Information

Segment Information

Note 12—Segment Information

        The Company's reportable segments are strategic business units arranged geographically which have separate management teams. 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 Other segment primarily includes corporate expenses.

        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 filed with the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 2012. 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 March 31,
	2013			2012
Revenues:
U.S. Operations	$	339,225		$	452,150
Canadian and U.K. Operations		151,444			178,351
Other		674			1,062
Total Revenues	$	491,343		$	631,563
Segment operating income (loss):
U.S. Operations	$	(6,957	)	$	106,981
Canadian and U.K. Operations		(48,766	)		(13,555	)
Other		(7,897	)		(9,350	)
Total operating income (loss)		(63,620	)		84,076
Less interest expense, net		(51,968	)		(27,790	)
Other income (loss)		105			(6,993	)
Income (loss) before income tax expense		(115,483	)		49,293
Income tax expense (benefit)		(66,039	)		8,677
Net income (loss)	$	(49,444	)	$	40,616
Depreciation and depletion:
U.S. Operations	$	47,473		$	42,142
Canadian and U.K. Operations		33,232			24,136
Other		485			215
Total	$	81,190		$	66,493
Capital expenditures:
U.S. Operations	$	27,401		$	36,112
Canadian and U.K. Operations		6,314			84,180
Other		312			553
Total	$	34,027		$	120,845

	March 31, 2013		December 31, 2012
Identifiable assets:
U.S. Operations	$	1,438,289	$	1,603,745
Canadian and U.K. Operations		3,918,439		3,728,817
Other		526,714		435,858
Total	$	5,883,442	$	5,768,420

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Net Income (Loss) Per Share (Tables)

3 Months Ended

Mar. 31, 2013

Net Income (Loss) Per Share

Reconciliation of the basic and diluted net income (loss) per share computations

A reconciliation of the basic and diluted net income (loss) per share computations for the three months ended March 31, 2013 and 2012 is as follows (in thousands, except per share data):

	For the three months ended March 31,
	2013						2012
	Basic			Diluted			Basic		Diluted
Numerator:
Net income (loss)	$	(49,444	)	$	(49,444	)	$	40,616	$	40,616
Denominator:
Average number of common shares outstanding		62,599			62,599			62,463		62,463
Effect of dilutive securities:
Stock awards and warrants(1)		—			—			—		276
		62,599			62,599			62,463		62,739
Net income (loss) per share	$	(0.79	)	$	(0.79	)	$	0.65	$	0.65

(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. In periods of net loss, the number of shares used to calculate diluted earnings per share is the same as basic earnings per share; therefore, the effect of dilutive securities is zero for such periods. The weighted average number of stock options outstanding for the three months ended March 31, 2013 and 2012 totaling 357,333 and 136,513, respectively, were excluded from the calculation above because their effect would have been anti-dilutive.

Schedule of share-based awards that have been exercised or released

	For the three months ended March 31,
	2013		2012
Stock options		24,831		19,059
Restricted stock units		16,873		17,959
Total		41,704		37,018

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Supplemental Guarantor and Non-Guarantor Financial Information (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012	Dec. 31, 2011
ASSETS
Cash and cash equivalents	$ 235,791	$ 116,601	$ 138,200	$ 128,430
Receivables, net	315,296	256,967
Inventories	302,293	306,018
Deferred income taxes	55,629	58,526
Prepaid expenses	47,441	53,776
Other current assets	23,285	23,928
Total current assets	979,735	815,816
Mineral interests, net	2,927,591	2,965,557
Property, plant and equipment, net	1,691,637	1,732,131
Deferred income taxes	185,387	160,422
Other long-term assets	99,092	94,494
Total assets	5,883,442	5,768,420
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	17,398	18,793
Accounts payable	133,040	114,913
Accrued expenses	192,913	184,875
Accumulated postretirement benefits obligation	29,637	29,200
Other current liabilities	207,328	206,473
Total current liabilities	580,316	554,254
Long-term debt	2,593,584	2,397,372
Deferred income taxes	883,659	921,687
Accumulated postretirement benefits obligation	636,129	633,264
Other long-term liabilities	244,084	251,272
Total liabilities	4,937,772	4,757,849
Total stockholders' equity	945,670	1,010,571
Total liabilities and stockholders' equity	5,883,442	5,768,420
Parent (Issuer)
ASSETS
Cash and cash equivalents	200,185	83,833	126,517	99,086
Receivables, net	79,729	64,106
Intercompany receivables		153,933
Intercompany notes receivable	143,263	118,079
Deferred income taxes	36,717	39,375
Prepaid expenses	1,374	1,869
Other current assets	18,146	17,559
Total current assets	479,414	478,754
Property, plant and equipment, net	8,276	8,448
Deferred income taxes	78,056	52,363
Investment in subsidiaries	3,815,313	3,530,094
Other long-term assets	76,091	71,622
Total assets	4,457,150	4,141,281
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	11,588	5,128
Accrued expenses	100,956	27,197
Intercompany payable	613,761	507,519
Accumulated postretirement benefits obligation	131	131
Other current liabilities	157,201	157,044
Total current liabilities	883,637	697,019
Long-term debt	2,581,327	2,381,255
Accumulated postretirement benefits obligation	435	452
Other long-term liabilities	46,081	51,984
Total liabilities	3,511,480	3,130,710
Total stockholders' equity	945,670	1,010,571
Total liabilities and stockholders' equity	4,457,150	4,141,281
Guarantor Subsidiaries
ASSETS
Cash and cash equivalents	158	61	109	79
Receivables, net	122,336	113,182
Intercompany receivables	538,342	507,519
Inventories	118,744	131,893
Deferred income taxes	17,687	17,687
Prepaid expenses	40,861	45,327
Other current assets	1,128	1,109
Total current assets	839,256	816,778
Mineral interests, net	17,015	18,475
Property, plant and equipment, net	779,101	790,900
Deferred income taxes	112,560	112,560
Other long-term assets	9,674	9,375
Total assets	1,757,606	1,748,088
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	9,277	10,196
Accounts payable	80,694	78,260
Accrued expenses	87,102	83,155
Accumulated postretirement benefits obligation	29,506	29,069
Other current liabilities	23,619	24,389
Total current liabilities	230,198	225,069
Long-term debt	115	1,784
Accumulated postretirement benefits obligation	635,694	632,812
Other long-term liabilities	128,839	128,593
Total liabilities	994,846	988,258
Total stockholders' equity	762,760	759,830
Total liabilities and stockholders' equity	1,757,606	1,748,088
Non-Guarantor Subsidiaries
ASSETS
Cash and cash equivalents	35,448	32,707	11,574	29,265
Receivables, net	113,231	79,679
Intercompany receivables	75,419
Inventories	183,549	174,125
Deferred income taxes	1,225	1,464
Prepaid expenses	5,206	6,580
Other current assets	4,011	5,260
Total current assets	418,089	299,815
Mineral interests, net	2,910,576	2,947,082
Property, plant and equipment, net	904,260	932,783
Deferred income taxes	(5,229)	(4,501)
Other long-term assets	13,327	13,497
Total assets	4,241,023	4,188,676
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	8,121	8,597
Accounts payable	40,758	31,525
Accrued expenses	4,855	74,523
Intercompany payable		153,933
Intercompany notes payable	143,263	118,079
Other current liabilities	26,508	25,040
Total current liabilities	223,505	411,697
Long-term debt	12,142	14,333
Deferred income taxes	883,659	921,687
Other long-term liabilities	69,164	70,695
Total liabilities	1,188,470	1,418,412
Total stockholders' equity	3,052,553	2,770,264
Total liabilities and stockholders' equity	4,241,023	4,188,676
Eliminations
ASSETS
Intercompany receivables	(613,761)	(661,452)
Intercompany notes receivable	(143,263)	(118,079)
Total current assets	(757,024)	(779,531)
Investment in subsidiaries	(3,815,313)	(3,530,094)
Total assets	(4,572,337)	(4,309,625)
LIABILITIES AND STOCKHOLDERS' EQUITY
Intercompany payable	(613,761)	(661,452)
Intercompany notes payable	(143,263)	(118,079)
Total current liabilities	(757,024)	(779,531)
Total liabilities	(757,024)	(779,531)
Total stockholders' equity	(3,815,313)	(3,530,094)
Total liabilities and stockholders' equity	$ (4,572,337)	$ (4,309,625)

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Derivative Financial Instruments (Details 2) (Designated as cash flow hedging instruments, USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Entity's derivative instruments within the condensed consolidated balance sheets
Asset derivatives	$ 9	$ 12
Liability derivatives	5,546	6,615
Interest rate cap
Entity's derivative instruments within the condensed consolidated balance sheets
Asset derivatives	9	12
Interest rate cap | Other current assets
Entity's derivative instruments within the condensed consolidated balance sheets
Asset derivatives	7	8
Interest rate cap | Other long-term assets
Entity's derivative instruments within the condensed consolidated balance sheets
Asset derivatives	2	4
Interest rate swaps
Entity's derivative instruments within the condensed consolidated balance sheets
Liability derivatives	5,546	6,615
Interest rate swaps | Other current liabilities
Entity's derivative instruments within the condensed consolidated balance sheets
Liability derivatives	4,100	4,100
Interest rate swaps | Other long-term liabilities
Entity's derivative instruments within the condensed consolidated balance sheets
Liability derivatives	$ 1,400	$ 2,500

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$ (49,444)	$ 40,616
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, (net of tax expense: $2,882 and $2,422, respectively)	4,659	3,898
Change in unrealized gain (loss) on hedges, (net of tax expense (benefit): $343 and $(807), respectively)	722	(1,283)
Change in foreign currency translation adjustment	(15,625)	2,419
Change in unrealized gain (loss) on investments	44	(369)
Total other comprehensive income (loss), net of tax	(10,200)	4,665
Total comprehensive income (loss)	$ (59,644)	$ 45,281

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Basis of Presentation

3 Months Ended

Mar. 31, 2013

Basis of Presentation

Basis of Presentation

Note 1—Basis of Presentation

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

        The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. These financial statements should be read in conjunction with the audited financial statements and related notes as of and for the year ended December 31, 2012 included in the Company's Annual Report filed on Form 10-K with the U.S. Securities and Exchange Commission. The balance sheet at December 31, 2012 has been derived from the audited consolidated financial statements for the year ended December 31, 2012 included in the Company's 2012 Annual Report on Form 10-K.

        During the first quarter of 2013, the Company determined that the cash dividend declared and paid in the fourth quarter of 2012 should have been reported as a reduction to the capital in excess of par value component of stockholders' equity rather than retained earnings as the Company was in an accumulated deficit position. The change of $7.8 million was included in the current period results by reclassifying the amount from accumulated deficit to capital in excess of par value. Management has determined that the effect of this classification change was immaterial to prior reporting periods affected. The change has no effect on total stockholders' equity.

        During the first quarter of 2013, the Company determined to classify certain indirect administrative costs as cost of sales as opposed to selling, general and administrative costs as these costs are supportive of operations. The Company has reported such costs in cost of sales beginning in the first quarter of 2013. If the current year classification of these costs had been retrospectively applied, selling, general and administrative expenses would have been $5.8 million less in the first quarter of 2012 and cost of sales would have increased by a similar amount. Prior period balances have not been restated as management has determined that the effect of this classification change was immaterial to prior reporting periods. The change in classification has no effect on net income.

Adoption of New Accounting Standards

        Comprehensive Income—Presentation.    On January 1, 2013, the Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2013-02 which requires disclosure of amounts reclassified out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under GAAP to be reclassified in its entirety to net income, either on the face of the Condensed Consolidated Statements of Operations or in the notes to the financial statements. For other amounts that are not required under GAAP to be reclassified in their entirety to net income in the same reporting period, cross references to other disclosures required under GAAP that provide additional detail about the amounts must be provided. The Company has elected disclosure in the Notes to Condensed Consolidated Financial Statements as described in Note 10.

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Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2013

Derivative Financial Instruments

Schedule of fair values of derivative instruments

The following table presents the fair values of the Company's derivative instruments as well as their classification within the Condensed Consolidated Balance Sheets (in thousands). See Note 11 for additional information related to the fair values of our derivative instruments.

	March 31, 2013		December 31, 2012
Asset derivatives designated as cash flow hedging instruments:
Interest rate cap(1)	$	9	$	12
Total asset derivatives	$	9	$	12
Liability derivatives designated as cash flow hedging instruments:
Interest rate swaps(2)	$	5,546	$	6,615
Total liability derivatives	$	5,546	$	6,615

(1)

$7 thousand and $8 thousand is included in other current assets and $2 thousand and $4 thousand is included in other long-term assets within the Condensed Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012, respectively.

(2)

$4.1 million and $4.1 million is included within other current liabilities and $1.4 million and $2.5 million is included within other long-term liabilities in the Condensed Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012, respectively.

Schedule of gains and losses from derivative instruments

The following tables presents the gains and losses from derivative instruments for the three months ended March 31, 2013 and 2012 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)
	Three months ended March 31,						Three months ended March 31,
Derivatives designated as cash flow hedging instruments	2013			2012			2013			2012
Natural gas hedges	$	—		$	(2,132	)	$	—		$	1,442
Interest rate swaps		1,340			103			(616	)		(565	)
Interest rate cap		(2	)		(131	)		—			—
Total	$	1,338		$	(2,160	)	$	(616	)	$	877

(1)

Natural gas hedge amounts are recorded within miscellaneous income in the Condensed Consolidated Statements of Operations.

(2)

Interest rate swap amounts are recorded within interest expense in the Condensed Consolidated Statements of Operations.

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Net Income (Loss) Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Numerator:
Net income (loss)	$ (49,444)	$ 40,616
Denominator:
Average number of common shares outstanding, Basic	62,599,000	62,463,000
Effect of dilutive securities:
Stock awards and warrants (in shares)		276,000
Average number of common shares outstanding, diluted	62,599,000	62,739,000
Net income (loss) per share, basic	$ (0.79)	$ 0.65
Net income (loss) per share, diluted	$ (0.79)	$ 0.65
Anti-dilutive securities excluded from earnings per share calculation	357,333	136,513
Share-based awards exercised or released
Stock options	24,831	19,059
Restricted stock units	16,873	17,959
Total	41,704	37,018

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2013

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Note 11—Fair Value of Financial Instruments

        Fair value is defined as the price that would be received from the sale of 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 March 31, 2013 and December 31, 2012 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.

	March 31, 2013
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	9	$	—	$	9
Liabilities:
Interest rate swaps	$	—	$	5,546	$	—	$	5,546

	December 31, 2012
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	12	$	—	$	12
Liabilities:
Interest rate swaps	$	—	$	6,615	$	—	$	6,615

        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 months ended March 31, 2013, a gain of $109 thousand was recorded related to trading securities held at the reporting date. Realized losses of $4 thousand on the sale of available-for-sale securities were recorded in other income (loss) during the three months ended March 31, 2013 and were 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.

        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 $656.6 million and $978.2 million, respectively, at March 31, 2013 and $757.0 million and $1.128 billion, respectively, at December 31, 2012 was carried at cost. There were no borrowings outstanding under the Revolver at March 31, 2013 and December 31, 2012. Debt associated with the Company's 2020 Notes in the amount of $496.6 million and $496.5 million at March 31, 2013 and December 31, 2012, respectively, and the 2021 Notes in the amount of $450.0 million at March 31, 2013 was carried at cost. The estimated fair value of the Company's term loan A, term loan B, 2020 Notes and 2021 Notes was $657.0 million, $983.3 million, $543.1 million and $461.2 million at March 31, 2013, respectively, based on similar transactions and yields in an active market for similarly rated debt (Level 2).