10-Q

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

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 July 31, 2013: 62,576,200

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	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	58
Part II—Other Information
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 4.	Mine Safety Disclosures	60
Item 6.	Exhibits	60
Signatures		61

PART I—FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

WALTER ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

	June 30, 2013			December 31, 2012
ASSETS
Cash and cash equivalents	$	170,878		$	116,601
Receivables, net		254,256			256,967
Inventories		339,584			306,018
Deferred income taxes		55,318			58,526
Prepaid expenses		60,151			53,776
Other current assets		23,754			23,928
Total current assets		903,941			815,816
Mineral interests, net of accumulated depletion of $218.8 million and $179.6 million, respectively		2,914,825			2,965,557
Property, plant and equipment, net of accumulated depreciation of $890.2 million and $796.7 million, respectively		1,657,123			1,732,131
Deferred income taxes		161,215			160,422
Other long-term assets		94,752			94,494
	$	5,731,856		$	5,768,420
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	14,919		$	18,793
Accounts payable		123,540			114,913
Accrued expenses		135,772			184,875
Accumulated postretirement benefits obligation		30,074			29,200
Other current liabilities		202,300			206,473
Total current liabilities		506,605			554,254
Long-term debt		2,591,181			2,397,372
Accumulated postretirement benefits obligation		638,713			633,264
Deferred income taxes		848,748			921,687
Other long-term liabilities		237,320			251,272
Total liabilities		4,822,567			4,757,849
Commitments and contingencies (Note 8)
Stockholders' equity:
Common stock, $0.01 par value per share:
Authorized—200,000,000 shares,
Issued—62,571,807 and 62,521,300 shares, respectively		626			625
Capital in excess of par value		1,609,854			1,628,244
Accumulated deficit		(423,863	)		(347,448	)
Accumulated other comprehensive income (loss):
Pension and other postretirement benefit plans, net of tax		(256,725	)		(266,042	)
Foreign currency translation adjustment		(18,588	)		(1,502	)
Unrealized loss on hedges, net of tax		(2,955	)		(4,203	)
Unrealized investment gain, net of tax		940			897
Total stockholders' equity		909,289			1,010,571
	$	5,731,856		$	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 June 30,						For the six months ended June 30,
	2013			2012			2013			2012
Revenues:
Sales	$	437,798		$	668,605		$	927,407		$	1,295,903
Miscellaneous income		3,698			8,969			5,432			13,234
		441,496			677,574			932,839			1,309,137
Costs and expenses:
Cost of sales (exclusive of depreciation and depletion)		367,616			486,084			788,550			917,618
Depreciation and depletion		68,320			74,459			149,510			140,952
Selling, general and administrative		27,129			35,845			57,803			72,092
Postretirement benefits		14,725			13,213			29,450			26,426
Restructuring and asset impairment		(5,741	)		—			1,699			—
		472,049			609,601			1,027,012			1,157,088
Operating income (loss)		(30,553	)		67,973			(94,173	)		152,049
Interest expense		(53,129	)		(31,104	)		(105,747	)		(59,171	)
Interest income		144			341			794			618
Other loss, net		(714	)		(5,919	)		(609	)		(12,912	)
Income (loss) from continuing operations before income tax expense (benefit)		(84,252	)		31,291			(199,735	)		80,584
Income tax expense (benefit)		(49,760	)		4,535			(115,799	)		13,212
Income (loss) from continuing operations		(34,492	)		26,756			(83,936	)		67,372
Income from discontinued operations		—			5,180			—			5,180
Net income (loss)	$	(34,492	)	$	31,936		$	(83,936	)	$	72,552
Basic income (loss) per share:
Income (loss) from continuing operations	$	(0.55	)	$	0.43		$	(1.34	)	$	1.08
Income from discontinued operations		—			0.08			—			0.08
Net income (loss)	$	(0.55	)	$	0.51		$	(1.34	)	$	1.16
Diluted income (loss) per share:
Income (loss) from continuing operations	$	(0.55	)	$	0.43		$	(1.34	)	$	1.08
Income from discontinued operations		—			0.08			—			0.08
Net income (loss)	$	(0.55	)	$	0.51		$	(1.34	)	$	1.16
Dividends per share	$	0.125		$	0.125		$	0.25		$	0.25

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 June 30,						For the six months ended June 30,
	2013			2012			2013			2012
Net income (loss)	$	(34,492	)	$	31,936		$	(83,936	)	$	72,552
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, (net of tax expense: $2,883 and $5,765, and $2,422 and $4,844, for the three and six months ended June 30, 2013 and 2012, respectively)		4,658			3,897			9,317			7,795
Change in unrealized gain (loss) on hedges, (net of tax expense (benefit): $324 and $667, and $(1,235) and $(2,042), for the three and six months ended June 30, 2013 and 2012, respectively)		526			(1,987	)		1,248			(3,270	)
Change in foreign currency translation adjustment		(1,461	)		(3,209	)		(17,086	)		(790	)
Change in unrealized gain (loss) on investments, net of tax		(1	)		—			43			(369	)
Total other comprehensive income (loss), net of tax		3,722			(1,299	)		(6,478	)		3,366
Total comprehensive income (loss)	$	(30,770	)	$	30,637		$	(90,414	)	$	75,918

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 SIX MONTHS ENDED JUNE 30, 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		(83,936	)		—		—			(83,936	)		—
Other comprehensive loss, net of tax		(6,478	)		—		—			—			(6,478	)
Stock issued upon the exercise of stock options		279			1		278			—			—
Dividends paid, $0.25 per share		(15,638	)		—		(23,452	)		7,814			—
Stock based compensation		5,370			—		5,370			—			—
Tax effect from stock-based compensation arrangements		(586	)		—		(586	)		—			—
Other		(293	)		—		—			(293	)		—
Balance at June 30, 2013	$	909,289		$	626	$	1,609,854		$	(423,863	)	$	(277,328	)

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 six months ended June 30,
	2013			2012
OPERATING ACTIVITIES
Net income (loss)	$	(83,936	)	$	72,552
Less income from discontinued operations		—			(5,180	)
Income (loss) from continuing operations		(83,936	)		67,372
Adjustments to reconcile income (loss) from continuing operations to net cash flows provided by (used in) operating activities:
Depreciation and depletion		149,510			140,952
Deferred income tax benefit		(77,717	)		(18,894	)
Amortization of debt issuance costs		14,015			9,033
Other		8,402			9,327
Decrease (increase) in current assets:
Receivables		(2,302	)		113,203
Inventories		(24,281	)		(66,213	)
Prepaid expenses and other current assets		(8,826	)		(22,095	)
Increase (decrease) in current liabilities:
Accounts payable		24,483			81,684
Accrued expenses and other current liabilities		(23,450	)		(5,807	)
Cash flows provided by (used in) operating activities		(24,102	)		308,562
INVESTING ACTIVITIES
Additions to property, plant and equipment		(80,251	)		(246,056	)
Proceeds from sales of investments		202			12,228
Other		762			582
Cash flows used in investing activities		(79,287	)		(233,246	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		450,000			—
Borrowings under revolving credit agreement		529,382			112,350
Repayments on revolving credit agreement		(529,382	)		(63,341	)
Retirements of debt		(259,200	)		(118,003	)
Dividends paid		(15,638	)		(15,618	)
Debt issuance costs		(15,080	)		—
Other		(600	)		288
Cash flows provided by (used in) financing activities		159,482			(84,324	)
Cash flows provided by (used in) continuing operations		56,093			(9,008	)
CASH FLOWS FROM DISCONTINUED OPERATIONS		—			9,500
Effect of foreign exchange rates on cash		(1,816	)		(242	)
Net increase in cash and cash equivalents	$	54,277		$	250
Cash and cash equivalents at beginning of period		116,601			128,430
Cash and cash equivalents at end of period	$	170,878		$	128,680

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

SIX MONTHS ENDED JUNE 30, 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 with mineral reserves 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 and six months ended June 30, 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 first quarter of 2013 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 had no effect on total stockholders' equity.

        During the first quarter of 2013, the Company began to classify certain indirect administrative costs as cost of sales as opposed to selling, general and administrative costs as it determined that these costs are directly supportive of operations. If this classification of these costs had been retrospectively applied, selling, general and administrative expenses for the three and six months ended June 30, 2012 would have been $4.3 million and $10.0 million, respectively, less and cost of sales would have been increased by similar amounts. 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.

        During the second quarter of 2013, the Company identified an immaterial cumulative error related to the mineral interest value of Western Coal Corp. The related correction resulted in an $8.4 million dollar reduction to depreciation and depletion expense in the current period. Prior period balances have not been restated as management has determined that the effect was not material to the current or prior reporting periods.

Note 2—Restructuring and Asset Impairment

        In response to the current depressed price environment for thermal coal and geological issues within the Company's North River mine, the Company announced plans to close the mine in 2013

6

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

Note 2—Restructuring and Asset Impairment (Continued)

approximately nine months earlier than the previously expected end of mine life of 2014. In connection with the accelerated closure, the Company renegotiated an unfavorably priced coal sales contract in the second quarter of 2013 to reduce the total tons committed for sale from this mine. The renegotiation will allow a closure of this mine in the latter half of 2013. For the three and six months ended June 30, 2013 the Company recognized a gain of approximately $17.0 million due to the release of the related below market contract liability that was obtained through the acquisition of North River. The benefit of $17.0 million was partially offset by asset impairment charges of approximately $8.0 million, all related to the accelerated closure of the North River Mine. The Company also incurred $3.3 million and $10.7 million of costs related to the curtailment of the Willow Creek mine for the three and six months ended June 30, 2013, respectively.

Note 3—Inventories

        Inventories are summarized as follows (in thousands):

	June 30, 2013		December 31, 2012
Coal	$	258,181	$	228,910
Raw materials and supplies		81,403		77,108
Total inventories	$	339,584	$	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 six months ended June 30, 2013, the income tax benefit was determined based on the annual effective tax rate method. The Company recognized an income tax benefit of $115.8 million for the six months ended June 30, 2013, compared to an income tax provision of $13.2 million for the six months ended June 30, 2012 as the Company incurred a pretax operating loss for the six months ended June 30, 2013 compared to pretax operating income for the same period in 2012. The 2013 and 2012 tax rates reflect the benefits of our Canadian and U.K. Operations which are taxed at statutory rates lower than the U.S. rate and the effects of additional tax losses related to foreign financing activities. The income tax provisions for the six months ended June 30, 2013 and 2012 also reflect a statutory depletion deduction from the Alabama mining operations. The current year provision for income taxes also includes a benefit of $13.7 million attributable to year-to-date foreign currency exchange rate fluctuations on foreign deferred tax liabilities.

7

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

Note 5—Debt

        Debt consisted of the following (in thousands):

	June 30, 2013			December 31, 2012			Weighted Average Stated Interest Rate At June 30, 2013			Final Maturity
2011 term loan A	$	656,566		$	756,974			4.78	%		2016
2011 term loan B		978,178			1,127,770			5.75	%		2018
Revolving credit facility		—			—			N/A			2016
9.875% senior notes(1)		496,656			496,510			9.88	%		2020
8.50% senior notes		450,000			—			8.50	%		2021
Other(2)		24,700			34,911			Various			Various
Total debt		2,606,100			2,416,165
Less: current debt(2)		(14,919	)		(18,793	)
Total long-term debt	$	2,591,181		$	2,397,372

(1)

The 9.875% senior notes ($500.0 million face value) were issued at a discount at an initial price of 99.302%.

(2)

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

8.50% Senior Notes

        In March 2013, the Company issued $450.0 million aggregate principal amount of 8.50% 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, exclusive of the West Virginia entities as they are owned by our U.K. Operations. Interest on the 2021 Notes 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 108.50% of the principal amount. 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 "make-whole" premium relates to the discount granted when the Company issued the bonds. 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, 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.

        See Note 14 regarding subsequent events related to long-term debt.

8

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

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 June 30,						For the three months ended June 30,
	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

	Pension Benefits						Other Postretirement Benefits
	For the six months ended June 30,						For the six months ended June 30,
	2013			2012			2013		2012
Components of net periodic benefit cost:
Service cost	$	3,532		$	2,996		$	4,972	$	4,036
Interest cost		6,140			6,258			14,396		14,506
Expected return on plan assets		(8,470	)		(8,062	)		—		—
Amortization of prior service cost		132			128			614		522
Amortization of net actuarial loss		4,868			4,626			9,468		7,362
Net periodic benefit cost	$	6,202		$	5,946		$	29,450	$	26,426

9

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 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 and six months ended June 30, 2013 and 2012 is as follows (in thousands, except per share data):

	For the three months ended June 30,
	2013						2012
	Basic			Diluted			Basic		Diluted
Numerator:
Income (loss) from continuing operations	$	(34,492	)	$	(34,492	)	$	26,756	$	26,756
Income from discontinued operations		—			—		$	5,180	$	5,180
Denominator:
Average number of common shares outstanding		62,632			62,632			62,537		62,537
Effect of dilutive securities:
Stock awards and warrants(1)		—			—			—		243
		62,632			62,632			62,537		62,780
Income (loss) from continuing operations	$	(0.55	)	$	(0.55	)	$	0.43	$	0.43
Income from discontinued operations		—			—			0.08		0.08
Net income (loss) per share	$	(0.55	)	$	(0.55	)	$	0.51	$	0.51

	For the six months ended June 30,
	2013						2012
	Basic			Diluted			Basic		Diluted
Numerator:
Income (loss) from continuing operations	$	(83,936	)	$	(83,936	)	$	67,372	$	67,372
Income from discontinued operations		—			—		$	5,180	$	5,180
Denominator:
Average number of common shares outstanding		62,614			62,614			62,503		62,503
Effect of dilutive securities:
Stock awards and warrants(1)		—			—			—		256
		62,614			62,614			62,503		62,759
Income (loss) from continuing operations	$	(1.34	)	$	(1.34	)	$	1.08	$	1.08
Income from discontinued operations		—			—			0.08		0.08
Net income (loss) per share	$	(1.34	)	$	(1.34	)	$	1.16	$	1.16

(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

10

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

Note 7—Net Income (Loss) Per Share (Continued)

securities is zero for such periods. The weighted average number of stock options outstanding for the three months ended June 30, 2013 and 2012 totaling 599,630 and 234,323, respectively, were excluded from the calculation above because their effect would have been anti-dilutive. Additionally, the weighted average number of stock options outstanding for the six months ended June 30, 2013 and 2012 totaling 481,635 and 205,378, respectively, were excluded from the calculation above because their effect would have been anti-dilutive.


The tables below set forth stock options exercised and restricted stock units vested for the three and six months ended June 30, 2013 and 2012:

	For the three months ended June 30,
	2013		2012
Stock options		—		—
Restricted stock units		8,803		10,856
Total		8,803		10,856

	For the six months ended June 30,
	2013		2012
Stock options		24,831		19,059
Restricted stock units		25,676		28,815
Total		50,507		47,874

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

11

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

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, January 2013, and May 2013. At the request of the Internal Revenue Service, in May 2013 the Bankruptcy Court granted an additional extension of time until November 14, 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 June 30, 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 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. As of June 30, 2013, a final resolution has not been reached with the Appeals Division pertaining to the remaining disputed matters. The disputed issues in this audit period are similar to the issues remaining in the Proof of Claim.

        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.

12

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

        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 (2000-2008). As of June 30, 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, any possible changes in unrecognized tax benefits cannot be reasonably estimated.

        The Company believes that all of its current and prior tax filing positions have substantial merit and intends to vigorously defend 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, provincial 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, the 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

13

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

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, the EPA released the North Birmingham Air Toxics Risk Assessment showing the air quality around Company facilities 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 June 30, 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 the 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 the Company's 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

14

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

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.

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.

15

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

        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.

16

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

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 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

17

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

Note 9—Derivative Financial Instruments (Continued)

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 June 30, 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.

	June 30, 2013		December 31, 2012
Asset derivatives designated as cash flow hedging instruments:
Interest rate cap(1)	$	6	$	12
Total asset derivatives	$	6	$	12
Liability derivatives designated as cash flow hedging instruments:
Interest rate swaps(2)	$	4,693	$	6,615
Total liability derivatives	$	4,693	$	6,615

(1)

$5 thousand and $8 thousand are included in other current assets and $1 thousand and $4 thousand are included in other long-term assets within the Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012, respectively.

(2)

$4.3 million and $4.1 million are included within other current liabilities and $0.4 million and $2.5 million are included within other long-term liabilities in the Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012, respectively.

        The following tables present the gains and losses from derivative instruments for the three and six months ended June 30, 2013 and 2012 and their location within the condensed consolidated financial

18

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

Note 9—Derivative Financial Instruments (Continued)

statements (in thousands). The Company utilizes only cash flow hedges that are considered highly effective.

	Gain (loss), net of tax, recognized in accumulated other comprehensive income (loss)						Gain (loss), net of tax, reclassified from accumulated other comprehensive income (loss) to earnings(1)(2)
	Three months ended June 30,						Three months ended June 30,
Derivatives designated as cash flow hedging instruments	2013			2012			2013			2012
Natural gas hedges	$	—		$	(3,666	)	$	—		$	1,837
Interest rate swaps		1,142			390			(614	)		(460	)
Interest rate cap		(2	)		(88	)		—			—
Total	$	1,140		$	(3,364	)	$	(614	)	$	1,377

	Gain (loss), net of tax, recognized in accumulated other comprehensive income (loss)						Gain (loss), net of tax, reclassified from accumulated other comprehensive income (loss) to earnings(1)(2)
	Six months ended June 30,						Six months ended June 30,
Derivatives designated as cash flow hedging instruments	2013			2012			2013			2012
Natural gas hedges	$	—		$	(5,798	)	$	—		$	3,279
Interest rate swaps		2,482			493			(1,230	)		(1,025	)
Interest rate cap		(4	)		(219	)		—			—
Total	$	2,478		$	(5,524	)	$	(1,230	)	$	2,254

(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.

19

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 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 and six months ended June 30, 2013, net of tax (in thousands).

	Pension and other postretirement plans			Unrealized gain/(loss) on hedges			Foreign currency translation adjustment			Unrealized gain 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		—			2,478			(17,086	)		39		(14,569	)
Amounts reclassified from accumulated other comprehensive income (loss)		9,317			(1,230	)		—	(1)		4		8,091
Net current-period other comprehensive income (loss)		9,317			1,248			(17,086	)		43		(6,478	)
Ending balance as of June 30, 2013	$	(256,725	)	$	(2,955	)	$	(18,588	)	$	940	$	(277,328	)

(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.

20

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 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 six months ended June 30, 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	$	(1,991	)	Interest expense
		(1,991	)	Income (loss) from continuing
				operations before income tax
				expense (benefit)
		(761	)	Income tax expense (benefit)
	$	(1,230	)	Net income (loss)
Amortization of pension and postretirement benefit plans:
Prior service cost	$	746		(a)
Net actuarial loss		14,336		(a)
		15,082		Income (loss) from continuing
				operations before income tax
				expense (benefit)
		5,765		Income tax expense (benefit)
	$	9,317		Net income (loss)
Gains and losses on available-for-sale securities	$	4		Other income (loss)
		4		Income (loss) from continuing
				operations before income tax
				expense (benefit)
		—		Income tax expense (benefit)
	$	4		Net income (loss)
Total reclassifications for the period	$	8,091		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

21

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

Note 11—Fair Value of Financial Instruments (Continued)

three level hierarchy has been established for valuing assets and liabilities based on how transparent (observable) the inputs are that are used to determine fair value, with the inputs considered most observable categorized as Level 1 and those that are the least observable categorized as Level 3. Hierarchy levels are defined as follows:

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

        The following table presents information about the Company's assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2013 and December 31, 2012 and indicates the fair value hierarchy of the valuation techniques utilized to determine such values. For some assets, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When this is the case, the asset is categorized based on the level of the most significant input to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment and considers factors specific to the assets being valued.

	June 30, 2013
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	6	$	—	$	6
Liabilities:
Interest rate swaps	$	—	$	4,693	$	—	$	4,693

	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 and six months ended June 30, 2013, a loss of $277 thousand and $168 thousand, respectively, was recorded related to trading securities held at the reporting date. Realized gains of $9 thousand and $5 thousand on the sale of available-for-sale

22

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

Note 11—Fair Value of Financial Instruments (Continued)

securities were recorded in other loss during the three and six months ended June 30, 2013, respectively, 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—All of the Company's outstanding debt is carried at cost. There were no borrowings outstanding under the Revolver at June 30, 2013 or December 31, 2012. The estimated fair value of the Company's debt is based on similar transactions and yields in an active market for similarly rated debt (Level 2). The carrying amounts and fair values of the Company's debt are presented below (in thousands):

	June 30, 2013				December 31, 2012
(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
2011 Term Loan A	$	656,566	$	636,869	$	756,974	$	758,867
2011 Term Loan B	$	978,178	$	948,833	$	1,127,770	$	1,135,293
9.875% Senior Notes	$	496,656	$	433,125	$	496,510	$	500,000
8.50% Senior Notes	$	450,000	$	358,875	$	—	$	—

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, processing and exporting metallurgical coal for the steel industry. The Other segment primarily includes unallocated 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.

23

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

Note 12—Segment Information (Continued)

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

	For the three months ended June 30,						For the six months ended June 30,
	2013			2012			2013			2012
Revenues:
U.S. Operations	$	321,009		$	466,761		$	660,234		$	918,911
Canadian and U.K. Operations		119,873			209,645			271,317			387,996
Other		614			1,168			1,288			2,230
Total Revenues	$	441,496		$	677,574		$	932,839		$	1,309,137
Segment operating income (loss):
U.S. Operations	$	37,333		$	107,245		$	30,376		$	214,226
Canadian and U.K. Operations		(66,347	)		(24,679	)		(115,113	)		(38,234	)
Other		(1,539	)		(14,593	)		(9,436	)		(23,943	)
Total operating income (loss)		(30,553	)		67,973			(94,173	)		152,049
Less interest expense, net		(52,985	)		(30,763	)		(104,953	)		(58,553	)
Other loss, net		(714	)		(5,919	)		(609	)		(12,912	)
Income (loss) from continuing operations before income tax expense (benefit)		(84,252	)		31,291			(199,735	)		80,584
Income tax expense (benefit)		(49,760	)		4,535			(115,799	)		13,212
Income (loss) from continuing operations	$	(34,492	)	$	26,756		$	(83,936	)	$	67,372
Depreciation and depletion:
U.S. Operations	$	31,189		$	43,704		$	78,662		$	85,846
Canadian and U.K. Operations		36,620			30,535			69,852			54,671
Other		511			220			996			435
Total	$	68,320		$	74,459		$	149,510		$	140,952
Capital expenditures:
U.S. Operations	$	38,803		$	43,851		$	66,204		$	79,963
Canadian and U.K. Operations		7,231			78,177			13,545			162,357
Other		190			3,183			502			3,736
Total	$	46,224		$	125,211		$	80,251		$	246,056

24

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

Note 12—Segment Information (Continued)

	June 30, 2013		December 31, 2012
Identifiable assets:
U.S. Operations	$	1,199,787	$	1,603,745
Canadian and U.K. Operations		3,800,009		3,728,817
Other		732,060		435,858
Total	$	5,731,856	$	5,768,420

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 8.50% 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, exclusive of the West Virginia entities as they are owned by our U.K. Operations. 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:

25

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

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

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)
JUNE 30, 2013
(in thousands)

	Parent (Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
ASSETS
Cash and cash equivalents	$	136,634	$	—	$	34,244		$	—		$	170,878
Receivables, net		96,820		91,498		65,938			—			254,256
Intercompany receivables		—		1,319,675		68,772			(1,388,447	)		—
Intercompany loans receivable		152,755		—		—			(152,755	)		—
Inventories		—		159,887		179,697			—			339,584
Deferred income taxes		39,656		14,914		748			—			55,318
Prepaid expenses		23,635		29,891		6,625			—			60,151
Other current assets		19,406		694		3,654			—			23,754
Total current assets		468,906		1,616,559		359,678			(1,541,202	)		903,941
Mineral interests, net		—		9,621		2,905,204			—			2,914,825
Property, plant and equipment, net		7,910		772,302		876,911			—			1,657,123
Deferred income taxes		53,157		112,560		(4,502	)		—			161,215
Investment in subsidiaries		4,537,487		—		—			(4,537,487	)		—
Other long-term assets		72,142		10,892		11,718			—			94,752
	$	5,139,602	$	2,521,934	$	4,149,009		$	(6,078,689	)	$	5,731,856
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—	$	6,734	$	8,185		$	—		$	14,919
Accounts payable		26,164		72,887		24,489			—			123,540
Accrued expenses		31,526		64,509		39,737			—			135,772
Intercompany payables		1,388,447		—		—			(1,388,447	)		—
Intercompany loans payable		—		—		152,755			(152,755	)		—
Accumulated postretirement benefits obligation		131		29,943		—			—			30,074
Other current liabilities		159,413		23,516		19,371			—			202,300
Total current liabilities		1,605,681		197,589		244,537			(1,541,202	)		506,605
Long-term debt		2,581,402		345		9,434			—			2,591,181
Accumulated postretirement benefits obligation		344		637,800		569			—			638,713
Deferred income taxes		—		—		848,748			—			848,748
Other long-term liabilities		42,886		125,843		68,591			—			237,320
Total liabilities		4,230,313		961,577		1,171,879			(1,541,202	)		4,822,567
Stockholders' equity		909,289		1,560,357		2,977,130			(4,537,487	)		909,289
	$	5,139,602	$	2,521,934	$	4,149,009		$	(6,078,689	)	$	5,731,856

26

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 loans 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
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 loans 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
Accumulated postretirement benefits obligation		452		632,812		—			—			633,264
Deferred income taxes		—		—		921,687			—			921,687
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
	$	4,141,281	$	1,748,088	$	4,188,676		$	(4,309,625	)	$	5,768,420

27

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 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 JUNE 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	299,198		$	138,600		$	—		$	437,798
Miscellaneous income		220			779			2,699			—			3,698
		220			299,977			141,299			—			441,496
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			211,314			156,302			—			367,616
Depreciation and depletion		511			33,673			34,136			—			68,320
Selling, general and administrative		11,684			7,144			8,301			—			27,129
Postretirement benefits		(55	)		14,780			—			—			14,725
Restructuring and asset impairment		—			(9,063	)		3,322			—			(5,741	)
		12,140			257,848			202,061			—			472,049
Operating income (loss)		(11,920	)		42,129			(60,762	)		—			(30,553	)
Interest expense		(49,414	)		(590	)		(3,125	)		—			(53,129	)
Interest income		28			116			—			—			144
Other loss		—			—			(714	)		—			(714	)
Income (loss) before income tax expense		(61,306	)		41,655			(64,601	)		—			(84,252	)
Income tax expense (benefit)		(22,108	)		8,533			(36,185	)		—			(49,760	)
		(39,198	)		33,122			(28,416	)		—			(34,492	)
Equity in earnings of subsidiaries		4,706			—			—			(4,706	)		—
Net income (loss)	$	(34,492	)	$	33,122		$	(28,416	)	$	(4,706	)	$	(34,492	)

28

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 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 JUNE 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	435,395		$	233,210		$	—		$	668,605
Miscellaneous income (loss)		1,051			14,808			(6,890	)		—			8,969
		1,051			450,203			226,320			—			677,574
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			271,977			214,107			—			486,084
Depreciation and depletion		2,235			34,296			37,928			—			74,459
Selling, general and administrative		12,941			10,818			12,086			—			35,845
Postretirement benefits		(113	)		13,326			—			—			13,213
		15,063			330,417			264,121			—			609,601
Operating income (loss)		(14,012	)		119,786			(37,801	)		—			67,973
Interest expense		(29,448	)		(254	)		(1,402	)		—			(31,104	)
Interest income		61			2			278			—			341
Other income (expense)		3,020			—			(8,939	)		—			(5,919	)
Income (loss) from continuing operations before income tax expense (benefit)		(40,379	)		119,534			(47,864	)		—			31,291
Income tax expense (benefit)		(13,583	)		33,220			(15,102	)		—			4,535
Income (loss) from continuing operations		(26,796	)		86,314			(32,762	)		—			26,756
Income from discontinued operations		—			—			5,180			—			5,180
Equity in earnings of subsidiaries		58,732			—			—			(58,732	)		—
Net income (loss)	$	31,936		$	86,314		$	(27,582	)	$	(58,732	)	$	31,936

29

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

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

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Total Consolidated
Revenues:
Sales	$	—		$	614,010		$	313,397		$	—	$	927,407
Miscellaneous income		773			2,969			1,690			—		5,432
		773			616,979			315,087			—		932,839
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			458,991			329,559			—		788,550
Depreciation and depletion		996			74,083			74,431			—		149,510
Selling, general and administrative		25,251			14,087			18,465			—		57,803
Postretirement benefits		(110	)		29,560			—			—		29,450
Restructuring and asset impairment		—			(8,947	)		10,646			—		1,699
		26,137			567,774			433,101			—		1,027,012
Operating income (loss)		(25,364	)		49,205			(118,014	)		—		(94,173	)
Interest expense		(99,570	)		—			(6,177	)		—		(105,747	)
Interest income		43			116			635			—		794
Other loss		—			—			(609	)		—		(609	)
Income (loss) before income tax expense		(124,891	)		49,321			(124,165	)		—		(199,735	)
Income tax expense (benefit)		(48,775	)		5,137			(72,161	)		—		(115,799	)
		(76,116	)		44,184			(52,004	)		—		(83,936	)
Equity in losses of subsidiaries		(7,820	)		—			—			7,820		—
Net income (loss)	$	(83,936	)	$	44,184		$	(52,004	)	$	7,820	$	(83,936	)

30

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

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

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	849,049		$	446,854		$	—		$	1,295,903
Miscellaneous income (loss)		1,726			18,879			(7,371	)		—			13,234
		1,726			867,928			439,483			—			1,309,137
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			518,182			399,436			—			917,618
Depreciation and depletion		3,933			68,122			68,897			—			140,952
Selling, general and administrative		22,187			23,507			26,398			—			72,092
Postretirement benefits		(225	)		26,651			—			—			26,426
		25,895			636,462			494,731			—			1,157,088
Operating income (loss)		(24,169	)		231,466			(55,248	)		—			152,049
Interest expense		(56,672	)		(540	)		(1,959	)		—			(59,171	)
Interest income		108			2			508			—			618
Other income (loss)		6,039			—			(18,951	)		—			(12,912	)
Income (loss) before income tax expense		(74,694	)		230,928			(75,650	)		—			80,584
Income tax expense (benefit)		(23,565	)		65,481			(28,704	)		—			13,212
Income (loss) from continuing operations		(51,129	)		165,447			(46,946	)		—			67,372
Income from discontinued operations		—			—			5,180			—			5,180
Equity in earnings of subsidiaries		123,681			—			—			(123,681	)		—
Net income (loss)	$	72,552		$	165,447		$	(41,766	)	$	(123,681	)	$	72,552

31

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 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 JUNE 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(34,492	)	$	33,122	$	(28,416	)	$	(4,706	)	$	(34,492	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		4,658			—		—			—			4,658
Change in unrealized gain on hedges, net of tax		526			16		—			(16	)		526
Change in foreign currency translation adjustment		(1,461	)		—		(1,461	)		1,461			(1,461	)
Change in unrealized loss on investments, net of tax		(1	)		—		(1	)		1			(1	)
Total other comprehensive income (loss), net of tax		3,722			16		(1,462	)		1,446			3,722
Total comprehensive income (loss)	$	(30,770	)	$	33,138	$	(29,878	)	$	(3,260	)	$	(30,770	)

32

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 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 JUNE 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	31,936		$	86,314	$	(27,582	)	$	(58,732	)	$	31,936
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		3,897			—		—			—			3,897
Change in unrealized gain (loss) on hedges, net of tax		(1,987	)		29		(1,829	)		1,800			(1,987	)
Change in foreign currency translation adjustment		(3,209	)		—		(3,209	)		3,209			(3,209	)
Total other comprehensive income (loss), net of tax		(1,299	)		29		(5,038	)		5,009			(1,299	)
Total comprehensive income (loss)	$	30,637		$	86,343	$	(32,620	)	$	(53,723	)	$	30,637

33

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 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)
SIX MONTHS ENDED JUNE 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(83,936	)	$	44,184	$	(52,004	)	$	7,820		$	(83,936	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		9,317			—		—			—			9,317
Change in unrealized gain on hedges, net of tax		1,248			37		—			(37	)		1,248
Change in foreign currency translation adjustment		(17,086	)		—		(17,086	)		17,086			(17,086	)
Change in unrealized gain on investments, net of tax		43			—		43			(43	)		43
Total other comprehensive income (loss), net of tax		(6,478	)		37		(17,043	)		17,006			(6,478	)
Total comprehensive income (loss)	$	(90,414	)	$	44,221	$	(69,047	)	$	24,826		$	(90,414	)

34

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 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)
SIX MONTHS ENDED JUNE 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	72,552		$	165,447		$	(41,766	)	$	(123,681	)	$	72,552
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		7,795			(50,756	)		—			50,756			7,795
Change in unrealized gain (loss) on hedges, net of tax		(3,270	)		49			(2,519	)		2,470			(3,270	)
Change in foreign currency translation adjustment		(790	)		—			(790	)		790			(790	)
Change in unrealized loss on investments, net of tax		(369	)		—			(369	)		369			(369	)
Total other comprehensive income (loss), net of tax		3,366			(50,707	)		(3,678	)		54,385			3,366
Total comprehensive income (loss)	$	75,918		$	114,740		$	(45,444	)	$	(69,296	)	$	75,918

35

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 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)
SIX MONTHS ENDED JUNE 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(130,045	)	$	112,000		$	(6,057	)	$	—		$	(24,102	)
INVESTING ACTIVITIES
Additions to property, plant and equipment		(459	)		(58,130	)		(21,662	)		—			(80,251	)
Intercompany loans made		(54,736	)		—			—			54,736			—
Intercompany payments received		23,500			—			—			(23,500	)		—
Investments in subsidiaries		(50,103	)		—			—			50,103			—
Proceeds from sales of investments		—			—			202			—			202
Other		—			—			762			—			762
Cash flows used in investing activities		(81,798	)		(58,130	)		(20,698	)		81,339			(79,287	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		450,000			—			—			—			450,000
Borrowings under revolving credit agreement		—			—			529,382			—			529,382
Repayments on revolving credit agreement		—			—			(529,382	)		—			(529,382	)
Retirements of debt		(250,000	)		(4,903	)		(4,297	)		—			(259,200	)
Dividends paid		(15,638	)		—			—			—			(15,638	)
Excess tax deficit from stock-based compensation arrangements		(586	)		—			—			—			(586	)
Proceeds from stock options exercised		279			—			—			—			279
Debt issuance costs		(15,080	)		—			—			—			(15,080	)
Advances from (to) consolidated entities		95,962			(49,028	)		(46,934	)		—			—
Intercompany borrowings		—			—			54,736			(54,736	)		—
Intercompany payments made		—			—			(23,500	)		23,500			—
Investment from Parent		—			—			50,103			(50,103	)		—
Other		(293	)		—			—			—			(293	)
Cash flows provided by (used in) financing activities		264,644			(53,931	)		30,108			(81,339	)		159,482
Effect of foreign exchange rates on cash		—			—			(1,816	)		—			(1,816	)
Net increase (decrease) in cash and cash equivalents	$	52,801		$	(61	)	$	1,537		$	—		$	54,277
Cash and cash equivalents at beginning of period		83,833			61			32,707			—			116,601
Cash and cash equivalents at end of period	$	136,634		$	—		$	34,244		$	—		$	170,878

36

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 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)
SIX MONTHS ENDED JUNE 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(92,589	)	$	334,473		$	66,678		$	—		$	308,562
INVESTING ACTIVITIES
Additions to property, plant and equipment		(3,785	)		(70,234	)		(172,037	)		—			(246,056	)
Proceeds from sales of investments		—			—			12,228			—			12,228
Intercompany loans made		(27,694	)		—			—			27,694			—
Other		—			512			70			—			582
Cash flows used in investing activities		(31,479	)		(69,722	)		(159,739	)		27,694			(233,246	)
FINANCING ACTIVITIES
Borrowings under revolving credit agreement		—			—			112,350			—			112,350
Repayments on revolving credit agreement		—			—			(63,341	)		—			(63,341	)
Retirements of debt		(100,000	)		(4,025	)		(13,978	)		—			(118,003	)
Dividends paid		(15,618	)		—			—			—			(15,618	)
Excess tax benefits from stock-based compensation arrangements		877			—			—			—			877
Proceeds from stock options exercised		122			—			—			—			122
Advances from (to) consolidated entities		241,244			(176,220	)		(65,024	)		—			—
Intercompany borrowings		—			—			27,694			(27,694	)		—
Other		(711	)		—			—						(711	)
Cash flows provided by (used in) financing activities		125,914			(180,245	)		(2,299	)		(27,694	)		(84,324	)
Cash flows provided by (used in) continuing operations		1,846			84,506			(95,360	)		—			(9,008	)
CASH FLOWS FROM DISCONTINUED OPERATIONS		—			9,500			—			—			9,500
Effect of foreign exchange rates on cash		—			—			(242	)		—			(242	)
Net increase (decrease) in cash and cash equivalents	$	1,846		$	94,006		$	(95,602	)	$	—		$	250
Cash and cash equivalents at beginning of period		99,086			79			29,265			—			128,430
Cash and cash equivalents at end of period	$	100,932		$	94,085		$	(66,337	)	$	—		$	128,680

37

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2013 (Unaudited)

Note 14—Subsequent Events

Credit Agreement Amendment

        On July 23, 2013, the Company entered into an amendment (the "Fifth 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, the Second Amendment to Credit Agreement, dated as of August 16, 2012, the Third Amendment to Credit Agreement dated as of October 29, 2012, and as further amended by the Fourth Amendment to Credit Agreement, dated as of March 22, 2013, among the Company, the various lenders, Morgan Stanley Senior Funding, Inc. as administrative agent, and other agents named therein. The Fifth Amendment provides for, among other things:

•

increased interest margins of 1.00% from their existing levels;

•

less restrictive interest expense coverage ratio and suspension of compliance until March 31, 2015;

•

less restrictive senior secured leverage ratio and suspension of compliance until June 30, 2014;

•

an additional minimum liquidity covenant of $225.0 million that applies at the end of each fiscal quarter through June 30, 2014 and at any time thereafter when the senior secured leverage ratio is greater than 5.50:1.00;

•

an additional capital expenditures covenant limiting capital expenditures to $175.0 million in 2013 and $200.0 million in 2014 with a potential that up to $20.0 million in unused 2013 capital spending may be carried forward and utilized in the succeeding fiscal year increasing the 2014 capital spending limit up to $220.0 million;

•

modifies the requirement that 100% of the net cash proceeds from the incurrence or issuance of unsecured indebtedness shall be applied as a mandatory repayment to exclude the mandatory repayment requirement for the first $250.0 million of such indebtedness; and

•

a restriction on cash dividends allowed in any fiscal quarter when the secured leverage ratio exceeds 4.50:1.00.

Quarterly Dividend

        In connection with the Fifth Amendment and in light of current market conditions, on July 23, 2013 the Company announced that its Board of Directors determined to reduce its regular quarterly dividend to $0.01 per share from the most recent quarterly dividend of $0.125 per share.

38

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 filed 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;

39

•

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

•

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 filed 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.

40

        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.

Overview

        Walter Energy, Inc. ("Walter") is a leading producer and exporter of metallurgical coal for the global steel industry from underground and surface mines with mineral reserves located in the United States, 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 within 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 metallurgical coal surface mines in Northeast British Columbia (the Wolverine Mine, the Brule Mine, and the Willow Creek Mine). Although the Willow Creek mine is an active coal mine, we have curtailed operations at this mine during the current quarter. Our U.K. mining operation consists of an active underground and a curtailed surface mine located in South Wales. The active underground mine produces anthracite coal, which can be sold as a low-volatile PCI coal and the curtailed surface mine operations produced thermal coal.

        Sales of metallurgical coal for the three months ended June 30, 2013 were 2.4 million metric tons and accounted for approximately 89% of our coal sales volume. Comparatively, for the three months ended June 30, 2012, sales of metallurgical coal were 2.8 million metric tons and accounted for approximately 76% 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 June 30, 2013, sales of thermal coal were 317 thousand metric tons and accounted for approximately 11% of our coal sales volume. Comparatively, for the three months ended June 30, 2012, sales of thermal coal were 891 thousand metric tons and accounted for approximately 24% of our coal sales volume.

Industry Overview and Outlook

        The metallurgical coal market continues to be adversely impacted by a combination of slowing Chinese economic growth, the weak economic environment in Europe and excess Australian supply into the markets, all of which continue to result in an oversupply of metallurgical coal. The oversupply of metallurgical coal continues to put pressure on the selling price. The benchmark for high quality metallurgical coal in the first quarter of 2013 was approximately $165 per metric ton and in the second quarter of 2013 benchmark price of hard coking coal was approximately $172 per metric ton. During the second quarter of 2013, the metallurgical coal market weakened as the gradual erosion of spot prices in the first quarter of 2013 and in the month of April accelerated into a significant decline

41

during May and June. This resulted in a third quarter benchmark price of $145 per metric ton for premium hard coking metallurgical coal or a $27 per metric ton decrease from the benchmark in the second quarter of 2013.

        The metallurgical coal benchmark price of $145 per metric ton in the third quarter reflects the increase in production by Australian and other producers as they increased output. The Australian producers are also benefiting from a weaker Australian Dollar in the foreign currency exchange market.

        We believe the third quarter benchmark price of $145 per metric ton will continue to result in industry-wide idling or curtailment of mines that are either high cost or have lower quality products that are further discounted from the benchmark as many of these mines are expected to be operating at negative margins. While the short-term outlook for global metallurgical coal pricing remains depressed, 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 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.

        We expect 2013 metallurgical coal production to be approximately 11.0 million metric tons. We also anticipate 2013 metallurgical coal sales to be in line with production.

42

RESULTS OF OPERATIONS

Summary Operating Results for the
Three Months Ended June 30, 2013 and 2012

	For the three months ended June 30, 2013
(in thousands)	U.S. Operations			Canadian and U.K. Operations			Other			Total
Sales	$	320,591		$	117,207		$	—		$	437,798
Miscellaneous income		418			2,666			614			3,698
Revenues		321,009			119,873			614			441,496
Cost of sales (exclusive of depreciation and depletion)		231,536			136,053			27			367,616
Depreciation and depletion		31,189			36,620			511			68,320
Selling, general and administrative		15,235			10,225			1,669			27,129
Postretirement benefits		14,779			—			(54	)		14,725
Restructuring and asset impairment		(9,063	)		3,322			—			(5,741	)
Operating income (loss)	$	37,333		$	(66,347	)	$	(1,539	)	$	(30,553	)
Interest expense, net											(52,985	)
Other loss, net											(714	)
Income tax benefit											49,760
Loss from continuing operations										$	(34,492	)

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

43

	Dollar variance for the three months ended June 30, 2013 versus 2012
(in thousands)	U.S. Operations			Canadian and U.K. Operations			Other			Total
Sales	$	(136,344	)	$	(94,508	)	$	45		$	(230,807	)
Miscellaneous income (loss)		(9,408	)		4,736			(599	)		(5,271	)
Revenues		(145,752	)		(89,772	)		(554	)		(236,078	)
Cost of sales (exclusive of depreciation and depletion)		(59,294	)		(59,202	)		28			(118,468	)
Depreciation and depletion		(12,515	)		6,085			291			(6,139	)
Selling, general and administrative		3,579			1,691			(13,986	)		(8,716	)
Postretirement benefits		1,453			—			59			1,512
Restructuring charges		(9,063	)		3,322			—			(5,741	)
Operating income (loss)	$	(69,912	)	$	(41,668	)	$	13,054		$	(98,526	)
Interest expense, net											(22,222	)
Other income (loss)											5,205
Income tax benefit (expense)											54,295
Income (loss) from continuing operations										$	(61,248	)

Summary of Second Quarter Consolidated Results of Operations

        Our net loss for the three months ended June 30, 2013 was $34.5 million, or $0.55 per diluted share, which compares to income from continuing operations of $26.8 million, or $0.43 per diluted share for the three months ended June 30, 2012. The net loss was primarily due to a decrease of approximately 22.2% in the average selling price of our metallurgical coal as a result of excess supply within the global metallurgical coal market. Earnings before interest expense, interest income, income taxes, depreciation, depletion and amortization ("EBITDA") for the second quarter of 2013 decreased $107.7 million as compared to the second quarter of 2012 primarily due to a decrease in revenues as a result of lower metallurgical coal prices. A reconciliation of net income (loss) to EBITDA is presented in the Liquidity and Capital Resources section below.

        Revenues for the three months ended June 30, 2013 were $441.5 million, representing a decrease of $236.1 million from $677.6 million in the same period in 2012. The decrease in revenues was primarily due to a decrease in the average selling price of our metallurgical coal of $42.91 per metric ton, or approximately 22.2%, per metric ton, due to weaker worldwide demand for metallurgical coal and a decrease in metallurgical coal sales volume of approximately 402,000 tons or 14.1%.

        Cost of sales, exclusive of depreciation and depletion, for the three months ended June 30, 2013 decreased $118.5 million to $367.6 million as compared to $486.1 million in the second quarter of 2012 and was primarily the result of a significant improvement in per ton cost of sales in hard coking coal across all of our operations combined with a decrease in coal sales volume. The average cash cost of sales per metric ton of total metallurgical coal decreased approximately 9.7% from $135.17 in the three months ended June 30, 2012 to $122.04 for the three months ended June 30, 2013 primarily due to a concerted effort throughout the year to lower costs across all operations. The substantial improvement continues to reflect the results of our cost containment and restructuring initiatives.

        Selling, general and administrative expense for the three months ended June 30, 2013 decreased $8.7 million or approximately 24.3% to $27.1 million, as compared to $35.8 million in the second quarter of 2012. The decrease was primarily due to our cost containment initiatives. Additionally, the reduction reflects the reclassification of selling, general and administrative expenses to the operations they support as discussed in Note 1 of the "Notes to Condensed Consolidated Financial Statements" in

44

this Form 10-Q combined with the results of our cost containment initiatives partially offset by approximately $8.1 million in proxy contest expenses.

        The $0.7 million other loss for the three months ended June 30, 2013 and $5.9 million other loss for the three months ended June 30, 2012 was primarily attributable to losses on the sale and re-measurement to fair value of equity investments.

        We recognized an income tax benefit of $49.8 million for the three months ended June 30, 2013, compared to an income tax provision of $4.5 million for the three months ended June 30, 2012 as the Company incurred a pretax operating loss for the three months ended June 30, 2013 compared to pretax operating income for the same period in 2012. 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 additional tax losses related to foreign financing activities. The effective tax rates also reflect statutory depletion deductions in the Alabama mining operations. On July 25, 2013, the provincial government of British Columbia increased the general corporate income tax rate to 11% from 10% effective April 1, 2013. The Company anticipates a one-time non-cash deferred income tax charge in the third quarter of 2013 of approximately $21.0 million as a result of the revaluation of its Canadian deferred tax liabilities.

        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 1.6 million metric tons for the three months ended June 30, 2013, representing a decrease of 9.1% compared to 1.8 million metric tons during the same period in 2012. Our hard coking coal production totaled 2.1 million metric tons in the second quarter of 2013, an increase of 20.0% from the same period in the prior year due to increased production at our Alabama underground mines. The average selling price of hard coking coal in the second quarter of 2013 was $153.99 per metric ton, representing a 20.7% decrease from the average selling price of $194.10 per metric ton for the same period in 2012. The decrease in the average selling price of hard coking coal continues to reflect the pricing pressure being experienced due to rising metallurgical coal inventories and soft steel demand. Our average cash cost of sales per metric ton of hard coking coal sold during the second quarter of 2013 was $101.12, a decrease of $6.07 from the average cash cost of sales per ton of hard coking coal sold during the second quarter of 2012 of $107.19.

        Thermal coal sales and production totaled approximately 305 thousand metric tons for the three months ended June 30, 2013, representing a decrease of approximately 65.0% compared to approximately 871 thousand metric tons produced during the same period in 2012 primarily due to difficult mining conditions at the North River mine in Alabama and the idling of a West Virginia thermal coal surface mine in June 2012 due to lower demand and pricing. Our average selling price of thermal coal for the second quarter of 2013 was $68.03 per metric ton, consistent with our average selling price of $68.11 per metric ton for the same period in 2012. The average cash cost of sales per metric ton of thermal coal sold during the second quarter of 2013 was $92.48 compared to $65.39 for the same period in 2012 due to difficult mining conditions at our North River mine. In response to the continued price deterioration in coal markets, we continue to take steps to reduce operations at lower margin mines and in the second quarter of 2013 we renegotiated an unfavorably priced coal supply agreement to allow the accelerated closure of the North River mine in the fourth quarter of 2013.

45

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

	Three months ended June 30,
	2013		2012
Tons of hard coking coal sold(1) (in thousands)		1,621		1,784
Tons of hard coking coal produced (in thousands)		2,070		1,724
Average hard coking coal selling price(1) (per metric ton)	$	153.99	$	194.10
Average hard coking coal cash cost of sales(1) (per metric ton)	$	101.12	$	107.19
Average hard coking coal cash cost of production (per metric ton)	$	68.22	$	73.55
Tons of thermal coal sold (in thousands)		305		871
Tons of thermal coal produced (in thousands)		407		908
Average thermal coal selling price (per metric ton)	$	68.03	$	68.11
Average thermal coal cash cost of sales (per metric ton)	$	92.48	$	65.39
Average thermal coal cash cost of production (per metric ton)	$	63.34	$	55.35

(1)

Includes sales of both produced and purchased coal.

        Our U.S. Operations segment reported revenues of $321.0 million for the three months ended June 30, 2013, representing a decrease of $145.8 million from the same period last year. The decrease in revenues during the second quarter of 2013 as compared to the second quarter of 2012 was primarily attributable to the decline in the average selling price of hard coking coal combined with a decrease in hard coking coal sales volumes from the Alabama underground operations.

        Cost of sales, exclusive of depreciation and depletion, of our U.S. Operations segment decreased $59.3 million to $231.5 million as compared to $290.8 million in the second quarter of 2012 primarily due to a 9.1% decrease in hard coking coal sales volumes to 1.6 million metric tons from 1.8 million metric tons and due to reduced unit costs resulting from our cost containment efforts.

        Our U.S. Operations segment reported operating income of $37.3 million for the three months ended June 30, 2013, compared to operating income of $107.2 million in the same period in 2012. Operating income for the U.S. Operations segment includes a net gain recognized of approximately $9.1 million due to the settlement of a negotiated contract partially offset by related asset impairment charges; all related to the contract renegotiation and accelerated closure of the North River mine in Alabama. The decrease in operating income was primarily due to an approximately 31.0% decrease in revenues as a result of lower global metallurgical coal pricing and sales volumes.

Canadian and U.K. Operations

        Metallurgical coal sales for the three months ended June 30, 2013 consisted of 354 thousand metric tons of hard coking coal at an average selling price of $153.51 per metric ton and 465 thousand metric tons of low-volatile PCI coal at an average selling price of $135.55 per metric ton. Metallurgical coal sales in the second quarter of 2012 consisted of 506 thousand metric tons of hard coking coal at an average selling price of $223.06 per metric ton and 552 thousand metric tons of low-volatile PCI coal at an average selling price of $163.51 per metric ton. 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 metric ton of hard coking coal sold during the second quarter of 2013 was $168.73, representing an increase of $24.75 from the average cash cost of sales per ton of hard coking coal sold during the second quarter of 2012 of $143.98. The increase was primarily due to higher mining ratios and a resulting increase in lower of cost or market charges recognized in the current quarter. The average cash cost of sales per metric ton of low-volatile PCI coal sold during the second quarter of 2013 was $159.48 representing a 26.7% decrease from the average cash cost of sales

46

per ton of low-volatile PCI coal sold during the second quarter of 2012 of $217.50 which primarily reflects the conversion of the Brule mine from a contractor-operated to owner-operated mine, other cost reduction initiatives and productivity improvements.

        Our Canadian and U.K. Operations segment produced a total of 414 thousand metric tons of hard coking coal and 465 thousand metric tons of low-volatile PCI in the second quarter of 2013. During the second quarter of 2012, the segment produced 536 thousand metric tons of hard coking coal and 440 thousand metric tons of low-volatile PCI. During the second quarter of 2012, the Willow Creek mine primarily produced low-volatile PCI coal. The Willow Creek mine produced approximately 3 thousand metric tons of low-volatile hard coking coal and 44 thousand tons of low-volatile PCI in the second quarter of 2013 as compared to 66 thousand metric tons of low-volatile hard coking coal and 154 thousand tons of low-volatile PCI in the second quarter of 2012. The Willow Creek mine was curtailed during the first quarter of 2013.

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

	Three months ended June 30,
	2013		2012
Tons of hard coking coal sold (in thousands)		354		506
Tons of hard coking coal produced (in thousands)(1)		414		536
Average hard coking coal selling price (per metric ton)	$	153.51	$	223.06
Average hard coking coal cash cost of sales (per metric ton)	$	168.73	$	143.98
Average hard coking coal cash cost of production (per metric ton)(1)	$	123.24	$	96.30
Tons of low-volatile PCI coal sold (in thousands)		465		552
Tons of low-volatile PCI coal produced (in thousands)(1)		465		440
Average low-volatile PCI coal selling price (per metric ton)	$	135.55	$	163.51
Average low-volatile PCI cash cost of sales (per metric ton)	$	159.48	$	217.50
Average low-volatile PCI cash cost of production (per metric ton)(1)	$	84.24	$	221.91

(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 $119.9 million for the second quarter of 2013, a decrease of $89.8 million from the same period last year. The decrease in revenues during the second quarter of 2013 as compared to the second quarter of 2012 was attributable to a decline of 31.2% and 17.1% in the average selling price of hard coking coal and low-volatile PCI coal, respectively, combined with a decrease of 152 thousand metric tons of hard coking coal and 87 thousand metric tons of low-volatile PCI coal sold, respectively.

        Cost of sales, exclusive of depreciation and depletion, in our Canadian and U.K. Operations segment for the three months ended June 30, 2013 decreased $59.2 million to $136.1 million as compared to the second quarter of 2012. The decrease in cost of sales was primarily attributable to lower sales volumes and a significant improvement in cost of sales for low-volatile PCI which reflects

47

the cost savings from 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 $66.3 million for the three months ended June 30, 2013 as compared to an operating loss of $24.7 million for the same period in 2012. Operating loss for the Canadian and U.K. Operations segment includes a restructuring charge of approximately $3.3 related to the curtailment of the Willow Creek mine. The increase in the operating loss was primarily due to lower average selling prices and sales volumes for hard coking and low-volatile PCI coal as a result of excess supply within the global metallurgical coal market.

Summary Operating Results for the
Six Months Ended June 30, 2013 and 2012

	For the six months ended June 30, 2013
(in thousands)	U.S. Operations			Canadian and U.K. Operations			Other			Total
Sales	$	657,332		$	270,010		$	65		$	927,407
Miscellaneous income		2,902			1,307			1,223			5,432
Revenues		660,234			271,317			1,288			932,839
Cost of sales (exclusive of depreciation and depletion)		501,084			287,424			42			788,550
Depreciation and depletion		78,662			69,852			996			149,510
Selling, general and administrative		29,500			18,508			9,795			57,803
Postretirement benefits		29,559			—			(109	)		29,450
Restructuring and asset impairment		(8,947	)		10,646			—			1,699
Operating income (loss)	$	30,376		$	(115,113	)	$	(9,436	)	$	(94,173	)
Interest expense, net											(104,953	)
Other loss, net											(609	)
Income tax benefit											115,799
Loss from continuing operations										$	(83,936	)

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

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	Dollar variance for the six months ended June 30, 2013 versus 2012
(in thousands)	U.S. Operations			Canadian and U.K. Operations			Other			Total
Sales	$	(245,721	)	$	(122,535	)	$	(240	)	$	(368,496	)
Miscellaneous income (loss)		(12,956	)		5,856			(702	)		(7,802	)
Revenues		(258,677	)		(116,679	)		(942	)		(376,298	)
Cost of sales (exclusive of depreciation and depletion)		(66,321	)		(62,235	)		(512	)		(129,068	)
Depreciation and depletion		(7,184	)		15,181			561			8,558
Selling, general and administrative		4,717			(3,392	)		(15,614	)		(14,289	)
Postretirement benefits		2,908			0			116			3,024
Restructuring and asset impairment		(8,947	)		10,646			0			1,699
Operating income (loss)		(183,850	)		(76,879	)		14,507			(246,222	)
Interest expense, net											(46,400	)
Other income (loss), net											12,303
Income tax benefit (expense)											129,011
Income (loss) from continuing operations										$	(151,308	)

Summary of Year to Date Consolidated Results of Operations

        Our net loss for the six months ended June 30, 2013 was $83.9 million, or $1.34 per diluted share, which compares to income from continuing operations of $67.4 million, or $1.08 per diluted share for the six months ended June 30, 2012. Earnings before interest expense, interest income, income taxes, depreciation, depletion and amortization ("EBITDA") for the six months ended June 30, 2013 decreased $233.6 million as compared to the six months ended June 30, 2012 primarily due to the decrease in revenues as a result of lower global metallurgical coal pricing. A reconciliation of net income (loss) to EBITDA is presented in the Liquidity and Capital Resources section below.

        Revenues for the six months ended June 30, 2013 were $932.8 million, representing a decrease of $376.3 million from $1.3 billion 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 $53.18, or approximately 26.0% per ton due to weaker worldwide demand for metallurgical coal.

        Cost of sales, exclusive of depreciation and depletion, for the six months ended June 30, 2013 decreased $129.1 million to $788.6 million as compared to the same period in 2012. The average cash cost of sales per ton of total metallurgical coal decreased approximately 11.0% from $135.57 per metric ton in the six months ended June 30, 2012 to $120.67 per metric ton for the six months ended June 30, 2013, primarily due to a concerted effort throughout the year to lower costs across all operations. The substantial improvement continues to reflect the results of our cost containment and restructuring initiatives.

        Selling, general and administrative expense for the six months ended June 30, 2013 decreased $14.3 million or approximately 19.8% to $57.8 million, as compared to $72.1 million for the six months ended June 30, 2012. The decrease was 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 partially offset by approximately $13.3 million in proxy contest expenses.

        The $0.6 million other loss for the six months ended June 30, 2013 and $12.9 million other loss for the six months ended June 30, 2012 was primarily attributable to losses on the sale and re-measurement to fair value of equity investments.

49

        We recognized an income tax benefit of $115.8 million for the six months ended June 30, 2013, compared to an income tax provision of $13.2 million for the six months ended June 30, 2012 as the Company incurred a pretax operating loss for the six months ended June 30, 2013 compared to pretax operating income for the same period in 2012. 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 additional tax losses related to foreign financing activities. The effective tax rates also reflect statutory depletion deductions in the Alabama mining operations. On July 25, 2013, the provincial government of British Columbia increased the general corporate income tax rate to 11% from 10% effective April 1, 2013. The Company anticipates a one-time non-cash deferred income tax charge in the third quarter of 2013 of approximately $21.0 million as a result of the revaluation of its Canadian deferred tax liabilities.

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

Segment Analysis

U.S. Operations

        Hard coking coal sales totaled 3.3 million metric tons for the six months ended June 30, 2013 and 2012, respectively. Our hard coking coal production totaled 3.8 million metric tons in the six months ended June 30, 2013, an increase of 3.1% from the same period in the prior year due to increased production at our Alabama underground mines. The average selling price per metric ton of hard coking coal for the six months ended June 30, 2013 was $155.68, representing a $50.96 or a 24.7% decrease from the average selling price of $206.64 for the same period in 2012. The decrease in the average selling price of hard coking coal continues to reflect the pricing pressure being experienced due to an oversupply of metallurgical coal and soft steel demand. The average cash cost of sales per metric ton of hard coking coal sold for the six months ended June 30, 2013 was $105.55, a slight decrease from the average cash cost of sales per ton of hard coking coal in the prior year of $108.64.

        Thermal coal sales totaled 688 thousand metric tons for the six months ended June 30, 2013, representing a decrease of approximately 965 thousand metric tons or 58.4% compared to approximately 1.7 million 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 West Virginia thermal coal surface mine in June 2012 due to lower demand and pricing. The average selling price per metric ton of thermal coal for the six months ended June 30, 2013 was $65.91, representing a 5.3% decrease from the average selling price of $69.60 for the same period in 2012. The average cash cost of sales per ton of thermal coal sold during the six months ended 2013 was $91.29 compared to $71.76 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 in the second quarter of 2013 we renegotiated an unfavorably priced coal supply agreement to allow the accelerated closure of the North River mine in the fourth quarter of 2013.

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

	Six months ended June 30,
	2013		2012
Tons of hard coking coal sold(1) (in thousands)		3,326		3,319
Tons of hard coking coal produced (in thousands)		3,808		3,693
Average hard coking coal selling price(1) (per metric ton)	$	155.68	$	206.64
Average hard coking coal cash cost of sales(1) (per metric ton)	$	105.55	$	108.64
Average hard coking coal cash cost of production (per metric ton)	$	72.73	$	72.55
Tons of thermal coal sold (in thousands)		688		1,653
Tons of thermal coal produced (in thousands)		842		1,725
Average thermal coal selling price (per metric ton)	$	65.91	$	69.60
Average thermal coal cash cost of sales (per metric ton)	$	91.29	$	71.76
Average thermal coal cash cost of production (per metric ton)	$	69.96	$	57.90

(1)

Includes sales of both produced and purchased coal.

        Our U.S. Operations segment reported revenues of $660.2 million for the six months ended June 30, 2013, representing a decrease of $258.7 million from the same period last year. The decrease in revenues during the six months ended June 30, 2013 as compared to the same period in 2012 was primarily attributable to the decline in the average selling price of hard coking coal.

        Cost of sales, exclusive of depreciation and depletion, of our U.S. Operations segment decreased $66.3 million to $501.1 million for the six months ended June 30, 2013 as compared to $567.4 million in the second quarter of 2012 primarily due to lower thermal coal sales volume combined with our cost containment and restructuring efforts.

        Our U.S. Operations segment reported operating income of $30.4 million for the six months ended June 30, 2013, compared to operating income of $214.2 million in the same period in 2012. Operating income for the U.S. Operations segment included a net gain recognized of approximately $9.1 million due to the settlement of a negotiated contract partially offset by related asset impairment charges; all related to the contract renegotiation and accelerated closure of the North River mine in Alabama. The decrease in operating income was primarily due to an approximately 28.2% decrease in revenues as a result of lower global metallurgical coal pricing.

Canadian and U.K. Operations

        Metallurgical coal sales for the six months ended June 30, 2013 consisted of 1.0 million metric tons of hard coking coal at an average selling price of $149.29 per metric ton and 884 thousand metric tons of low-volatile PCI coal at an average selling price of $137.29 per metric ton. Metallurgical coal sales for the six months ended June 30, 2012 consisted 828 thousand metric tons of hard coking coal at an average selling price of $233.53 per metric ton and 1.1 million metric tons of low-volatile PCI coal at an average selling price of $175.23 per metric ton. 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 metric ton of hard coking coal sold during the six months ended June 30, 2013 was $151.45, representing an increase of $7.04 from the average cash cost of sales per ton of hard coking coal sold during the six months ended June 30, 2012 of $144.41. The increase was primarily due to an increase in lower of cost or market charges recognized in the current year. The average cash cost of sales per metric ton of low-volatile PCI coal sold during the six months ended June 30, 2013 was $142.49 representing a 33% decrease from the average cash cost of sales per ton of

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coal sold during the six months ended June 30, 2012 of $212.79. This reduction reflects the conversion of the Brule mine from a contractor-operated to an owner-operated mine.

        Our Canadian and U.K. Operations segment produced a total of 946 thousand metric tons of hard coking coal and 951 thousand metric tons of low-volatile PCI in the six months ended June 30, 2013. During the six months ended June 30, 2012, the segment produced 950 thousand metric tons of hard coking coal and 1,051 thousand metric tons of low-volatile PCI. The Willow Creek mine produced approximately 102 thousand metric tons of low-volatile hard coking coal and 198 thousand tons of low-volatile PCI in the six months ended June 30, 2013 as compared to 75 thousand metric tons of low-volatile hard coking coal and 270 thousand tons of low-volatile PCI in the six months ended June 30, 2012.

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

	Six months ended June 30,
	2013		2012
Tons of hard coking coal sold (in thousands)		1,007		828
Tons of hard coking coal produced (in thousands)(1)		946		950
Average hard coking coal selling price (per metric ton)	$	149.29	$	233.53
Average hard coking coal cash cost of sales (per metric ton)	$	151.45	$	144.41
Average hard coking coal cash cost of production (per metric ton)(1)	$	115.92	$	101.77
Tons of low-volatile PCI coal sold (in thousands)		884		1,062
Tons of low-volatile PCI coal produced (in thousands)(1)		951		1,051
Average low-volatile PCI coal selling price (per metric ton)	$	137.29	$	175.23
Average low-volatile PCI cash cost of sales (per metric ton)	$	142.49	$	212.79
Average low-volatile PCI cash cost of production (per metric ton)(1)	$	96.94	$	171.57

(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 $271.3 million for the six months ended June 30, 2013, representing a decrease of $116.7 million from the same period in 2012. The decrease in revenues during the six months ended June 30, 2013 as compared to the six months ended June 30, 2012 was attributable to a decline of 36.1% and 21.6% 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 six months ended June 30, 2013 decreased $62.2 million to $287.4 million as compared to the second quarter of 2012. The decrease in cost of sales was primarily attributable to a significant improvement in cost of sales for low-volatile PCI which reflects improved operating performance by our Brule mine and the cost savings from converting our Brule mine from contractor-operated to owner-operated.

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        Our Canadian and U.K. Operations segment reported an operating loss of $115.1 million for the six months ended June 30, 2013 as compared to an operating loss of $38.2 million for the same period in 2012. The increase in the operating loss was primarily due to lower average selling prices for hard coking and low-volatile PCI coal as a result of excess supply within the global metallurgical coal market.

FINANCIAL CONDITION

        Cash and cash equivalents increased by $54.3 million at June 30, 2013 compared to December 31, 2012 primarily due to net cash flows provided by financing activities of $159.5 million due to the issuance of the 2021 Senior Notes in March 2013. Cash flows provided by financing activities is partially offset by cash flows used in investing activities of $79.3 million primarily due to capital expenditures and cash flows used in operating activities of $24.1 million.

        Net property, plant and equipment decreased by $75.0 million at June 30, 2013 as compared to December 31, 2012 primarily due to depreciation and depletion expense, partially offset by capital expenditures of $80.3 million.

LIQUIDITY AND CAPITAL RESOURCES

Overview

        Our principal sources of short-term funding are our existing cash balances, operating cash flows and the unused portion of 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 June 30, 2013 was $487.5 million, consisting of cash and cash equivalents of $170.9 million and $316.6 million available under the Company's $375 million revolving credit facility, net of outstanding letters of credit of $58.4 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, secure covenant relief and extend our debt maturities.

        As of June 30, 2013, the Revolver, term loan A and term loan B interest rates were 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. The interest margins under the Credit Agreement were increased by 1.00% from their existing levels as defined in the Fifth Amendment to the 2011 Credit Agreement beginning on July 23, 2013.

        Borrowings at June 30, 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 4.78%, 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 $58.4 million in outstanding stand-by letters of credit and $316.6 million of availability for future borrowings.

        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, to make all required interest and principal payments on indebtedness for the foreseeable future and to meet the minimum liquidity covenant of $255.0 million as required by the Fifth Amendment to the 2011 Credit Agreement. 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.

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        While we believe we have sufficient liquidity to meet substantially all of our operating needs, we remain focused on increasing our financial flexibility. We are exploring potential asset sales and joint ventures and are targeting proceeds of approximately $250.0 million to be achieved over the next nine months.

2021 Senior Notes

        In March 27, 2013, the Company issued $450.0 million aggregate principal amount of 8.50% 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, exclusive of the West Virginia entities as they are owned by our U.K. Operations. Interest on the 2021 Notes 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 108.50% of the principal amount. 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 "make-whole" premium relates to the discount granted when the Company issued the bonds. 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, 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.

2020 Senior Notes

        On November 21, 2012, we issued $500.0 million aggregate principal amount 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. At any time prior to December 15, 2015, the Company may redeem up to 35% of the aggregate principal amount of the 2020 Notes at a redemption price of 109.875% of the principal amount, plus accrued and unpaid interest. 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.

        Upon the occurrence of a change of control with respect to the 2020 Notes, unless the Company has exercised its right to redeem the 2020 Notes, the Company will be required to offer to repurchase each holder's 2020 Notes at a price equal to 101% of the aggregate principal amount, plus accrued and unpaid interest, if any, to the date of purchase.

        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.

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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 July 23, 2013, the Company entered into an amendment (the "Fifth 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, the Second Amendment to Credit Agreement, dated as of August 16, 2012, the Third Amendment to Credit Agreement dated as of October 29, 2012, and as further amended by the Fourth Amendment to Credit Agreement, dated as of March 22, 2013, among the Company, the various lenders, Morgan Stanley Senior Funding, Inc. as administrative agent, and other agents named therein. The Fifth Amendment provides for, among other things (1) increased interest margins of 1.00% from their existing levels; (2) less restrictive interest expense coverage ratio and suspension of compliance until March 31, 2015; (3) less restrictive senior secured leverage ratio and suspension of compliance until June 30, 2014; (4) an additional minimum liquidity covenant of $225.0 million that applies at the end of each fiscal quarter through June 30, 2014 and at any time thereafter when the senior secured leverage ratio is greater than 5.50:1.00; (5) an additional capital expenditures covenant limiting capital expenditures to $175.0 million in 2013 and $200.0 million in 2014 with a potential that up to $20.0 million in unused 2013 capital spending may be carried forward and utilized in the succeeding fiscal year increasing the 2014 capital spending limit up to $220.0 million; (6) modifies the requirement that 100% of the net cash proceeds from the incurrence or issuance of unsecured indebtedness shall be applied as a mandatory repayment to exclude the mandatory repayment requirement for the first $250.0 million of such indebtedness; and (7) a restriction on cash dividends allowed in any fiscal quarter when the secured leverage ratio exceeds 4.50:1.00.

Quarterly Dividend

        In connection with the Fifth Amendment and in light of current market conditions, on July 23, 2013 the Company announced that its Board of Directors determined to reduce its regular quarterly dividend to $0.01 per share from the most recent quarterly dividend of $0.125 per share.

Statements of Cash Flows

        Cash balances were $170.9 million and $116.6 million at June 30, 2013 and December 31, 2012, respectively. The increase in cash during the six months ended June 30, 2013 of $54.3 million primarily resulted from net cash provided by financing activities of $159.5 million. This was partially offset by cash used in operating activities of $24.1 million and cash used in investing activities of $79.3 million, which included capital expenditures of $80.3 million.

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

	Six months ended June 30,
	2013			2012
Cash flows provided by (used in) operating activities	$	(24,102	)	$	308,562
Cash flows used in investing activities		(79,287	)		(233,246	)
Cash flows provided by (used in) financing activities		159,482			(84,324	)
Cash flows provided by discontinued operations		—			9,500
Effect of foreign exchange rates on cash		(1,816	)		(242	)
Net increase in cash and cash equivalents	$	54,277		$	250

        The decrease of $332.7 million in cash provided by operating activities was primarily attributable to a $151.3 million decrease in net income as compared to the same period in 2012, resulting from the decline in the average selling price and volume of metallurgical coal.

        The decrease in cash flows used in investing activities of $154.0 million was primarily attributable to a $165.8 million decrease in capital expenditures.

        The increase in cash flows provided by financing activities of $243.8 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 $141.2 million, a reduction in net borrowing under the revolving credit agreement of $49.0 million and debt issuance costs of $15.1 million.

Capital Expenditures

        Capital expenditures totaled $46.2 and $80.3 million during the three and six months ended June 30, 2013 compared to $125.2 and $246.1 million during the three and six months ended June 30, 2012, respectively. We currently expect 2013 capital expenditures to total approximately $150.0 million, a reduction of $20.0 million from our earlier estimate of $170.0 million.

EBITDA

        EBITDA from continuing operations is defined as earnings from continuing operations before interest expense, interest income, income taxes, and depreciation and depletion expense. 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 and asset impairment, proxy contest expenses and other miscellaneous items. EBITDA from continuing operations, 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 from continuing operations, EBITDA and adjusted EBITDA are useful measures as some investors and analysts use EBITDA from continuing operations, 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 EBITDA from continuing operations, EBITDA and adjusted EBITDA present a useful measure of our ability to incur and service debt based on ongoing operations. EBITDA from continuing 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 from continuing operations, EBITDA and Adjusted EBITDA (in thousands):

	For the three months ended June 30,						For the six months ended June 30,
	2013			2012			2013			2012
Income (loss) from continuing operations	$	(34,492	)	$	26,756		$	(83,936	)	$	67,372
Interest expense		53,129			31,104			105,747			59,171
Interest income		(144	)		(341	)		(794	)		(618	)
Income tax expense (benefit)		(49,760	)		4,535			(115,799	)		13,212
Depreciation and depletion expense		68,320			74,459			149,510			140,952
Earnings from continuing operations before interest, income taxes, and depreciation and depletion (EBITDA from continuing operations)		37,053			136,513			54,728			280,089
Pretax income from discontinued operations		—			8,282			—			8,282
Earnings before interest, income taxes, and depreciation and depletion (EBITDA)		37,053			144,795			54,728			288,371
Restructuring and asset impairment		(5,741	)		—			1,699			—
Proxy contest expenses and other		5,429			—			12,267			—
Adjusted EBITDA	$	36,741		$	144,795		$	68,694		$	288,371

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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 June 30, 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 June 30, 2013, our borrowings due under the 2011 Credit Agreement totaled $1.6 billion. As of June 30, 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 $141 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 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 June 30, 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 June 30, 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.

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 filed 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 June 30, 2013:

Period	Total Number of Shares Purchased(1)		Average Price Paid per Share
April 1, 2013 - April 30, 2013		2,120	$	20.45
May 1, 2013 - May 31, 2013		—		—
June 1, 2013 - June 30, 2013		—		—
		2,120

(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.

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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
	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 June 30, 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: August 7, 2013

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

Date: August 7, 2013

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EX-31.1

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EXHIBIT 31.1

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

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

1.

I have reviewed this quarterly report on Form 10-Q of Walter Energy, Inc.;

2.

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

3.

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

4.

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

(a)

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

(b)

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

(c)

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

(d)

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

5.

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

(a)

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

(b)

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

Date: August 7, 2013

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

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EXHIBIT 31.1

EX-31.2

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EXHIBIT 31.2

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

I, William G. Harvey, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Walter Energy, Inc.;

2.

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

3.

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

4.

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

(a)

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

(b)

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

(c)

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

(d)

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

5.

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

(a)

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

(b)

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

Date: August 7, 2013

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

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EXHIBIT 31.2

EX-32.1

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EXHIBIT 32.1

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

        In connection with the accompanying Quarterly Report of Walter Energy, Inc. (the "Company") on Form 10-Q for the quarterly period ended June 30, 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: August 7, 2013

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

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EXHIBIT 32.1

EX-32.2

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EXHIBIT 32.2

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

        In connection with the accompanying Quarterly Report of Walter Energy, Inc. (the "Company") on Form 10-Q for the quarterly period ended June 30, 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: August 7, 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

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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 June 30, 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 June 30, 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 June 30, 2013.

Mining Complex(1)(3)	Section 104 S&S Citations		Section 104(b) Orders		Section 104(d) Citations and Orders		Section 110(b)(2) Violations		Section 107(a) Orders		Proposed MSHA Assessments(2) ($ in thousands)		Fatalities
JWR No. 4		36		—		5		—		—		220		—
JWR No. 5		—		—		—		—		—		—		—
JWR No. 3		—		—		—		—		—		—		—
JWR No. 7		25		—		2		—		—		206.5		—
JWR Central Supply		—		—		—		—		—		—		—
JWR Central Shop		—		—		—		—		—		—		—
JWR North River		16		—		—		—		—		17.8		—
Taft Reid School		1		—		—		—		—		—		—
Taft Choctaw		1		—		—		—		—		—		—
TRI East Brookwood		—		—		—		—		—		—		—
TRI Highway 59		—		—		—		—		—		—		—
TRI Swann's Crossing		1		—		—		—		—		—		—
Atlantic Leaseco King Coal 1 Mine		—		—		—		—		—		—		—
Atlantic Leaseco King Coal 1 Prep Plant		—		—		—		—		—		—		—
Atlantic Leaseco Black Pearl		—		—		—		—		—		—		—
Atlantic Leaseco Cowen Loadout		—		—		—		—		—		—		—

Mining Complex(1)(3)	Section 104 S&S Citations		Section 104(b) Orders		Section 104(d) Citations and Orders		Section 110(b)(2) Violations		Section 107(a) Orders		Proposed MSHA Assessments(2) ($ in thousands)		Fatalities
Atlantic Leaseco Crooked Run		—		—		—		—		—		—		—
Maple Coal Maple Eagle No. 1		13		—		3		—		—		39.3		—
Maple Coal Maple Prep Plant		1		—		—		—		—		0.6		—
Maple Coal Huffman Sycamore SM		—		—		—		—		—		0.1		—

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)

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

•

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

•

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

•

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

•

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

•

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

Mining Complex Legal Actions(1)	Pending as of June 30, 2013		Initiated During Q2 2013		Resolved During Q2 2013
JWR No. 3
29 CFR Part 2700, Subpart C		1		—		—
JWR No. 4
29 CFR Part 2700, Subpart B		9		—		—
29 CFR Part 2700, Subpart C		37		3		—
JWR No. 5
29 CFR Part 2700, Subpart C		1		—		—
JWR No. 7
29 CFR Part 2700, Subpart B		11		—		—
29 CFR Part 2700, Subpart C		18		4		7
29 CFR Part 2700, Subpart H		3		—		—
JWR North River
29 CFR Part 2700, Subpart B		—		—		—
29 CFR Part 2700, Subpart C		2		2		4

Mining Complex Legal Actions(1)	Pending as of June 30, 2013		Initiated During Q2 2013		Resolved During Q2 2013
Taft Reid School
29 CFR Part 2700, Subpart C		1		—		—
TRI East Brookwood
29 CFR Part 2700, Subpart C		—		—		—
TRI Swann's Crossing
29 CFR Part 2700, Subpart C		4		—		—
Atlantic Leaseco King Coal 1 Mine Prep Plant
29 CFR Part 2700, Subpart C		1		1		—
Atlantic Leaseco Black Pearl
29 CFR Part 2700, Subpart C		13		—		—
Maple Coal Maple Eagle No. 1
29 CFR Part 2700, Subpart B		9		—		—
29 CFR Part 2700, Subpart C		9		2		—
Maple Coal Maple Prep Plant
29 CFR Part 2700, Subpart C		—		—		—
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.

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Exhibit 95
Item 5. Other Information

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Commitments and Contingencies

6 Months Ended

Jun. 30, 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, January 2013, and May 2013. At the request of the Internal Revenue Service, in May 2013 the Bankruptcy Court granted an additional extension of time until November 14, 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 June 30, 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 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. As of June 30, 2013, a final resolution has not been reached with the Appeals Division pertaining to the remaining disputed matters. The disputed issues in this audit period are similar to the issues remaining in the Proof of Claim.

        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 (2000-2008). As of June 30, 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, any possible changes in unrecognized tax benefits cannot be reasonably estimated.

        The Company believes that all of its current and prior tax filing positions have substantial merit and intends to vigorously defend 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, provincial 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, the 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, the EPA released the North Birmingham Air Toxics Risk Assessment showing the air quality around Company facilities 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 June 30, 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 the 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 the Company's 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.

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.

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Supplemental Guarantor and Non-Guarantor Financial Information (Details 5) (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Supplemental guarantor and non-guarantor financial information
Cash flows provided by (used in) operating activities	$ (24,102,000)	$ 308,562,000
INVESTING ACTIVITIES
Additions to property, plant and equipment	(80,251,000)	(246,056,000)
Proceeds from sales of investments	202,000	12,228,000
Other	762,000	582,000
Cash flows used in investing activities	(79,287,000)	(233,246,000)
FINANCING ACTIVITIES
Proceeds from issuance of debt	450,000,000
Borrowings under revolving credit agreement	529,382,000	112,350,000
Repayments on revolving credit agreement	(529,382,000)	(63,341,000)
Retirements of debt	(259,200,000)	(118,003,000)
Dividends paid	(15,638,000)	(15,618,000)
Excess tax benefits deficit from stock-based compensation arrangements	(586,000)	877,000
Proceeds from stock options exercised	279,000	122,000
Debt issuance costs	(15,080,000)
Other	(293,000)	(711,000)
Cash flows provided by (used in) financing activities	159,482,000	(84,324,000)
Cash flows provided by (used in) continuing operations	56,093,000	(9,008,000)
CASH FLOWS FROM DISCONTINUED OPERATIONS		9,500,000
Effect of foreign exchange rates on cash	(1,816,000)	(242,000)
Net increase (decrease) in cash and cash equivalents	54,277,000	250,000
Cash and cash equivalents at beginning of period	116,601,000	128,430,000
Cash and cash equivalents at end of period	170,878,000	128,680,000
Parent (Issuer)
Supplemental guarantor and non-guarantor financial information
Cash flows provided by (used in) operating activities	(130,045,000)	(92,589,000)
INVESTING ACTIVITIES
Additions to property, plant and equipment	(459,000)	(3,785,000)
Intercompany loans made	(54,736,000)	(27,694,000)
Intercompany payments received	23,500,000
Investments in subsidiaries	(50,103,000)
Cash flows used in investing activities	(81,798,000)	(31,479,000)
FINANCING ACTIVITIES
Proceeds from issuance of debt	450,000,000
Retirements of debt	(250,000,000)	(100,000,000)
Dividends paid	(15,638,000)	(15,618,000)
Excess tax benefits deficit from stock-based compensation arrangements	(586,000)	877,000
Proceeds from stock options exercised	279,000	122,000
Debt issuance costs	(15,080,000)
Advances from (to) consolidated entities	95,962,000	241,244,000
Other	(293,000)	(711,000)
Cash flows provided by (used in) financing activities	264,644,000	125,914,000
Cash flows provided by (used in) continuing operations		1,846,000
Net increase (decrease) in cash and cash equivalents	52,801,000	1,846,000
Cash and cash equivalents at beginning of period	83,833,000	99,086,000
Cash and cash equivalents at end of period	136,634,000	160,932,000
Guarantor Subsidiaries
Supplemental guarantor and non-guarantor financial information
Cash flows provided by (used in) operating activities	112,000,000	334,473,000
INVESTING ACTIVITIES
Additions to property, plant and equipment	(58,130,000)	(70,234,000)
Other		512,000
Cash flows used in investing activities	(58,130,000)	(69,722,000)
FINANCING ACTIVITIES
Retirements of debt	(4,903,000)	(4,025,000)
Advances from (to) consolidated entities	(49,028,000)	(176,220,000)
Cash flows provided by (used in) financing activities	(53,931,000)	(180,245,000)
Cash flows provided by (used in) continuing operations		84,506,000
CASH FLOWS FROM DISCONTINUED OPERATIONS		9,500,000
Net increase (decrease) in cash and cash equivalents	(61,000)	94,006,000
Cash and cash equivalents at beginning of period	61,000	79,000
Cash and cash equivalents at end of period		94,085,000
Non-Guarantor Subsidiaries
Supplemental guarantor and non-guarantor financial information
Cash flows provided by (used in) operating activities	(6,057,000)	66,678,000
INVESTING ACTIVITIES
Additions to property, plant and equipment	(21,662,000)	(172,037,000)
Proceeds from sales of investments	202,000	12,228,000
Other	762,000	70,000
Cash flows used in investing activities	(20,698,000)	(159,739,000)
FINANCING ACTIVITIES
Borrowings under revolving credit agreement	529,382,000	112,350,000
Repayments on revolving credit agreement	(529,382,000)	(63,341,000)
Retirements of debt	(4,297,000)	(13,978,000)
Advances from (to) consolidated entities	(46,934,000)	(65,024,000)
Intercompany borrowings	54,736,000	27,694,000
Intercompany payments made	(23,500,000)
Investment from Parent	50,103,000
Cash flows provided by (used in) financing activities	30,108,000	(2,299,000)
Cash flows provided by (used in) continuing operations		(95,360,000)
Effect of foreign exchange rates on cash	(1,816,000)	(242,000)
Net increase (decrease) in cash and cash equivalents	1,537,000	(95,602,000)
Cash and cash equivalents at beginning of period	32,707,000	29,265,000
Cash and cash equivalents at end of period	34,244,000	(66,337,000)
Eliminations
INVESTING ACTIVITIES
Intercompany loans made	54,736,000	27,694,000
Intercompany payments received	(23,500,000)
Investments in subsidiaries	50,103,000
Cash flows used in investing activities	81,339,000	27,694,000
FINANCING ACTIVITIES
Intercompany borrowings	(54,736,000)	(27,694,000)
Intercompany payments made	23,500,000
Investment from Parent	(50,103,000)
Cash flows provided by (used in) financing activities	$ (81,339,000)	$ (27,694,000)

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Revenues:
Sales	$ 437,798	$ 668,605	$ 927,407	$ 1,295,903
Miscellaneous income	3,698	8,969	5,432	13,234
Total revenues	441,496	677,574	932,839	1,309,137
Costs and expenses:
Cost of sales (exclusive of depreciation and depletion)	367,616	486,084	788,550	917,618
Depreciation and depletion	68,320	74,459	149,510	140,952
Selling, general and administrative	27,129	35,845	57,803	72,092
Postretirement benefits	14,725	13,213	29,450	26,426
Restructuring and asset impairment	(5,741)		1,699
Total costs and expenses	472,049	609,601	1,027,012	1,157,088
Operating income (loss)	(30,553)	67,973	(94,173)	152,049
Interest expense	(53,129)	(31,104)	(105,747)	(59,171)
Interest income	144	341	794	618
Other loss, net	(714)	(5,919)	(609)	(12,912)
Income (loss) from continuing operations before income tax expense (benefit)	(84,252)	31,291	(199,735)	80,584
Income tax expense (benefit)	(49,760)	4,535	(115,799)	13,212
Income (loss) from continuing operations	(34,492)	26,756	(83,936)	67,372
Income from discontinued operations		5,180		5,180
Net income (loss)	$ (34,492)	$ 31,936	$ (83,936)	$ 72,552
Basic income (loss) per share:
Income (loss) from continuing operations (in dollars per share)	$ (0.55)	$ 0.43	$ (1.34)	$ 1.08
Income from discontinued operations (in dollars per share)		$ 0.08		$ 0.08
Net income (loss) (in dollars per share)	$ (0.55)	$ 0.51	$ (1.34)	$ 1.16
Diluted income (loss) per share:
Income (loss) from continuing operations (in dollars per share)	$ (0.55)	$ 0.43	$ (1.34)	$ 1.08
Income from discontinued operations (in dollars per share)		$ 0.08		$ 0.08
Net income (loss) (in dollars per share)	$ (0.55)	$ 0.51	$ (1.34)	$ 1.16
Dividends per share (in dollars per share)	$ 0.125	$ 0.125	$ 0.25	$ 0.25

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Basis of Presentation

6 Months Ended

Jun. 30, 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 with mineral reserves 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 and six months ended June 30, 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 first quarter of 2013 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 had no effect on total stockholders' equity.

        During the first quarter of 2013, the Company began to classify certain indirect administrative costs as cost of sales as opposed to selling, general and administrative costs as it determined that these costs are directly supportive of operations. If this classification of these costs had been retrospectively applied, selling, general and administrative expenses for the three and six months ended June 30, 2012 would have been $4.3 million and $10.0 million, respectively, less and cost of sales would have been increased by similar amounts. 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.

        During the second quarter of 2013, the Company identified an immaterial cumulative error related to the mineral interest value of Western Coal Corp. The related correction resulted in an $8.4 million dollar reduction to depreciation and depletion expense in the current period. Prior period balances have not been restated as management has determined that the effect was not material to the current or prior reporting periods.

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Inventories (Tables)

6 Months Ended

Jun. 30, 2013

Inventories

Schedule of inventories

Inventories are summarized as follows (in thousands):

	June 30, 2013		December 31, 2012
Coal	$	258,181	$	228,910
Raw materials and supplies		81,403		77,108
Total inventories	$	339,584	$	306,018

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Derivative Financial Instruments

6 Months Ended

Jun. 30, 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 June 30, 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.

	June 30, 2013		December 31, 2012
Asset derivatives designated as cash flow hedging instruments:
Interest rate cap(1)	$	6	$	12
Total asset derivatives	$	6	$	12
Liability derivatives designated as cash flow hedging instruments:
Interest rate swaps(2)	$	4,693	$	6,615
Total liability derivatives	$	4,693	$	6,615

(1)

$5 thousand and $8 thousand are included in other current assets and $1 thousand and $4 thousand are included in other long-term assets within the Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012, respectively.

(2)

$4.3 million and $4.1 million are included within other current liabilities and $0.4 million and $2.5 million are included within other long-term liabilities in the Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012, respectively.

        The following tables present the gains and losses from derivative instruments for the three and six months ended June 30, 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), net of tax, recognized in accumulated other comprehensive income (loss)						Gain (loss), net of tax, reclassified from accumulated other comprehensive income (loss) to earnings(1)(2)
	Three months ended June 30,						Three months ended June 30,
Derivatives designated as cash flow hedging instruments	2013			2012			2013			2012
Natural gas hedges	$	—		$	(3,666	)	$	—		$	1,837
Interest rate swaps		1,142			390			(614	)		(460	)
Interest rate cap		(2	)		(88	)		—			—
Total	$	1,140		$	(3,364	)	$	(614	)	$	1,377

	Gain (loss), net of tax, recognized in accumulated other comprehensive income (loss)						Gain (loss), net of tax, reclassified from accumulated other comprehensive income (loss) to earnings(1)(2)
	Six months ended June 30,						Six months ended June 30,
Derivatives designated as cash flow hedging instruments	2013			2012			2013			2012
Natural gas hedges	$	—		$	(5,798	)	$	—		$	3,279
Interest rate swaps		2,482			493			(1,230	)		(1,025	)
Interest rate cap		(4	)		(219	)		—			—
Total	$	2,478		$	(5,524	)	$	(1,230	)	$	2,254

(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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Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Revenues:
Total Revenues	$ 441,496	$ 677,574	$ 932,839	$ 1,309,137
Segment operating income (loss):
Total operating income (loss)	(30,553)	67,973	(94,173)	152,049
Less interest expense, net	(52,985)	(30,763)	(104,953)	(58,553)
Other loss, net	(714)	(5,919)	(609)	(12,912)
Income (loss) from continuing operations before income tax expense (benefit)	(84,252)	31,291	(199,735)	80,584
Income tax expense (benefit)	(49,760)	4,535	(115,799)	13,212
Income (loss) from continuing operations	(34,492)	26,756	(83,936)	67,372
Depreciation and depletion:
Total depreciation and depletion	68,320	74,459	149,510	140,952
Capital expenditures:
Total capital expenditures	46,224	125,211	80,251	246,056
Identifiable assets by segment:
Total identifiable assets	5,731,856		5,731,856		5,768,420
U.S. Operations
Revenues:
Total Revenues	321,009	466,761	660,234	918,911
Segment operating income (loss):
Total operating income (loss)	37,333	107,245	30,376	214,226
Depreciation and depletion:
Total depreciation and depletion	31,189	43,704	78,662	85,846
Capital expenditures:
Total capital expenditures	38,803	43,851	66,204	79,963
Identifiable assets by segment:
Total identifiable assets	1,199,787		1,199,787		1,603,745
Canadian and U.K. operations
Revenues:
Total Revenues	119,873	209,645	271,317	387,996
Segment operating income (loss):
Total operating income (loss)	(66,347)	(24,679)	(115,113)	(38,234)
Depreciation and depletion:
Total depreciation and depletion	36,620	30,535	69,852	54,671
Capital expenditures:
Total capital expenditures	7,231	78,177	13,545	162,357
Identifiable assets by segment:
Total identifiable assets	3,800,009		3,800,009		3,728,817
Other
Revenues:
Total Revenues	614	1,168	1,288	2,230
Segment operating income (loss):
Total operating income (loss)	(1,539)	(14,593)	(9,436)	(23,943)
Depreciation and depletion:
Total depreciation and depletion	511	220	996	435
Capital expenditures:
Total capital expenditures	190	3,183	502	3,736
Identifiable assets by segment:
Total identifiable assets	$ 732,060		$ 732,060		$ 435,858

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Pension and Other Postretirement Benefits (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Pension Benefits
Components of net periodic benefit cost:
Service cost	$ 1,766	$ 1,498	$ 3,532	$ 2,996
Interest cost	3,070	3,129	6,140	6,258
Expected return on plan assets	(4,235)	(4,031)	(8,470)	(8,062)
Amortization of prior service cost	66	64	132	128
Amortization of net actuarial loss	2,434	2,313	4,868	4,626
Net periodic benefit cost	3,101	2,973	6,202	5,946
Other Postretirement Benefits
Components of net periodic benefit cost:
Service cost	2,486	2,018	4,972	4,036
Interest cost	7,198	7,253	14,396	14,506
Amortization of prior service cost	307	261	614	522
Amortization of net actuarial loss	4,734	3,681	9,468	7,362
Net periodic benefit cost	$ 14,725	$ 13,213	$ 29,450	$ 26,426

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Net Income (Loss) Per Share (Tables)

6 Months Ended

Jun. 30, 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 and six months ended June 30, 2013 and 2012 is as follows (in thousands, except per share data):

	For the three months ended June 30,
	2013						2012
	Basic			Diluted			Basic		Diluted
Numerator:
Income (loss) from continuing operations	$	(34,492	)	$	(34,492	)	$	26,756	$	26,756
Income from discontinued operations		—			—		$	5,180	$	5,180
Denominator:
Average number of common shares outstanding		62,632			62,632			62,537		62,537
Effect of dilutive securities:
Stock awards and warrants(1)		—			—			—		243
		62,632			62,632			62,537		62,780
Income (loss) from continuing operations	$	(0.55	)	$	(0.55	)	$	0.43	$	0.43
Income from discontinued operations		—			—			0.08		0.08
Net income (loss) per share	$	(0.55	)	$	(0.55	)	$	0.51	$	0.51

	For the six months ended June 30,
	2013						2012
	Basic			Diluted			Basic		Diluted
Numerator:
Income (loss) from continuing operations	$	(83,936	)	$	(83,936	)	$	67,372	$	67,372
Income from discontinued operations		—			—		$	5,180	$	5,180
Denominator:
Average number of common shares outstanding		62,614			62,614			62,503		62,503
Effect of dilutive securities:
Stock awards and warrants(1)		—			—			—		256
		62,614			62,614			62,503		62,759
Income (loss) from continuing operations	$	(1.34	)	$	(1.34	)	$	1.08	$	1.08
Income from discontinued operations		—			—			0.08		0.08
Net income (loss) per share	$	(1.34	)	$	(1.34	)	$	1.16	$	1.16

(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 June 30, 2013 and 2012 totaling 599,630 and 234,323, respectively, were excluded from the calculation above because their effect would have been anti-dilutive. Additionally, the weighted average number of stock options outstanding for the six months ended June 30, 2013 and 2012 totaling 481,635 and 205,378, respectively, were excluded from the calculation above because their effect would have been anti-dilutive.

Schedule of stock options exercised and restricted stock units vested

	For the three months ended June 30,
	2013		2012
Stock options		—		—
Restricted stock units		8,803		10,856
Total		8,803		10,856

	For the six months ended June 30,
	2013		2012
Stock options		24,831		19,059
Restricted stock units		25,676		28,815
Total		50,507		47,874

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Pension and Other Postretirement Benefits (Tables)

6 Months Ended

Jun. 30, 2013

Pension and Other Postretirement Benefits

Components of net periodic benefit cost

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

	Pension Benefits						Other Postretirement Benefits
	For the three months ended June 30,						For the three months ended June 30,
	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

	Pension Benefits						Other Postretirement Benefits
	For the six months ended June 30,						For the six months ended June 30,
	2013			2012			2013		2012
Components of net periodic benefit cost:
Service cost	$	3,532		$	2,996		$	4,972	$	4,036
Interest cost		6,140			6,258			14,396		14,506
Expected return on plan assets		(8,470	)		(8,062	)		—		—
Amortization of prior service cost		132			128			614		522
Amortization of net actuarial loss		4,868			4,626			9,468		7,362
Net periodic benefit cost	$	6,202		$	5,946		$	29,450	$	26,426

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Fair Value of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2013 Equity securities	Jun. 30, 2013 Equity securities	Jun. 30, 2013 Recurring Level 2 Interest rate cap	Dec. 31, 2012 Recurring Level 2 Interest rate cap	Jun. 30, 2013 Recurring Level 2 Interest rate swaps	Dec. 31, 2012 Recurring Level 2 Interest rate swaps	Jun. 30, 2013 Recurring Total Fair Value Interest rate cap	Dec. 31, 2012 Recurring Total Fair Value Interest rate cap	Jun. 30, 2013 Recurring Total Fair Value Interest rate swaps	Dec. 31, 2012 Recurring Total Fair Value Interest rate swaps
Fair value information
Derivative assets			$ 6	$ 12			$ 6	$ 12
Derivative liabilities					4,693	6,615			4,693	6,615
Recorded loss related to trading securities still held	277	168
Realized gains on sale of available-for-sale securities	$ 9	$ 5

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Restructuring and Asset Impairment (Details) (Closure, USD $) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2013
North River Mine
Asset impairment and restructuring
Gain on release of a below market contract liability	$ 17.0	$ 17.0
Asset impairment charges		8.0
Willow Creek Mine
Asset impairment and restructuring
Curtailment costs	$ 3.3	$ 10.7

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Commitments and Contingencies (Details)	1 Months Ended	6 Months Ended		6 Months Ended	0 Months Ended	1 Months Ended		6 Months Ended
	Jun. 30, 2010	Jun. 30, 2012	Jun. 30, 2013 USD ($)	Jun. 30, 2013 Environmental Matters Walter Coke, Inc. item	Mar. 05, 2013 Environmental Matters Jim Walter Resources, Inc CAD	May 30, 2012 Securities Class Actions and Shareholder Derivative Actions item	Jan. 31, 2012 Securities Class Actions and Shareholder Derivative Actions item	Jun. 30, 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
Penalty sought					100,000
Number of executive directors as defendants							3
Number of actions						2
Number of complaints								3

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Supplemental Guarantor and Non-Guarantor Financial Information (Details) (USD $) In Millions, unless otherwise specified	0 Months Ended		1 Months Ended
	Nov. 21, 2012 2020 Notes	Jun. 30, 2013 2020 Notes	Mar. 31, 2013 2021 Notes	Jun. 30, 2013 2021 Notes
Debt instrument
Amount borrowed	$ 500.0		$ 450.0
Interest rate (as a percent)	9.875%	9.875%	8.50%	8.50%

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2013

Segment Information

Summarized financial information by reportable segment

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

	For the three months ended June 30,						For the six months ended June 30,
	2013			2012			2013			2012
Revenues:
U.S. Operations	$	321,009		$	466,761		$	660,234		$	918,911
Canadian and U.K. Operations		119,873			209,645			271,317			387,996
Other		614			1,168			1,288			2,230
Total Revenues	$	441,496		$	677,574		$	932,839		$	1,309,137
Segment operating income (loss):
U.S. Operations	$	37,333		$	107,245		$	30,376		$	214,226
Canadian and U.K. Operations		(66,347	)		(24,679	)		(115,113	)		(38,234	)
Other		(1,539	)		(14,593	)		(9,436	)		(23,943	)
Total operating income (loss)		(30,553	)		67,973			(94,173	)		152,049
Less interest expense, net		(52,985	)		(30,763	)		(104,953	)		(58,553	)
Other loss, net		(714	)		(5,919	)		(609	)		(12,912	)
Income (loss) from continuing operations before income tax expense (benefit)		(84,252	)		31,291			(199,735	)		80,584
Income tax expense (benefit)		(49,760	)		4,535			(115,799	)		13,212
Income (loss) from continuing operations	$	(34,492	)	$	26,756		$	(83,936	)	$	67,372
Depreciation and depletion:
U.S. Operations	$	31,189		$	43,704		$	78,662		$	85,846
Canadian and U.K. Operations		36,620			30,535			69,852			54,671
Other		511			220			996			435
Total	$	68,320		$	74,459		$	149,510		$	140,952
Capital expenditures:
U.S. Operations	$	38,803		$	43,851		$	66,204		$	79,963
Canadian and U.K. Operations		7,231			78,177			13,545			162,357
Other		190			3,183			502			3,736
Total	$	46,224		$	125,211		$	80,251		$	246,056

	June 30, 2013		December 31, 2012
Identifiable assets:
U.S. Operations	$	1,199,787	$	1,603,745
Canadian and U.K. Operations		3,800,009		3,728,817
Other		732,060		435,858
Total	$	5,731,856	$	5,768,420

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Derivative Financial Instruments (Details 3) (Derivatives designated as cash flow hedging instruments, USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Derivatives designated as cash flow hedging instruments
Gain (loss), net of tax recognized in accumulated other comprehensive income (loss)	$ 1,140	$ (3,364)	$ 2,478	$ (5,524)
Gain (loss), net of tax reclassified from accumulated other comprehensive income(loss) to earnings	(614)	1,377	(1,230)	2,254
Natural gas hedges
Derivatives designated as cash flow hedging instruments
Gain (loss), net of tax recognized in accumulated other comprehensive income (loss)		(3,666)		(5,798)
Gain (loss), net of tax reclassified from accumulated other comprehensive income(loss) to earnings		1,837		3,279
Interest rate swaps
Derivatives designated as cash flow hedging instruments
Gain (loss), net of tax recognized in accumulated other comprehensive income (loss)	1,142	390	2,482	493
Gain (loss), net of tax reclassified from accumulated other comprehensive income(loss) to earnings	(614)	(460)	(1,230)	(1,025)
Interest rate cap
Derivatives designated as cash flow hedging instruments
Gain (loss), net of tax recognized in accumulated other comprehensive income (loss)	$ (2)	$ (88)	$ (4)	$ (219)

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Debt (Tables)

6 Months Ended

Jun. 30, 2013

Debt

Schedule of debt instruments

Debt consisted of the following (in thousands):

	June 30, 2013			December 31, 2012			Weighted Average Stated Interest Rate At June 30, 2013			Final Maturity
2011 term loan A	$	656,566		$	756,974			4.78	%		2016
2011 term loan B		978,178			1,127,770			5.75	%		2018
Revolving credit facility		—			—			N/A			2016
9.875% senior notes(1)		496,656			496,510			9.88	%		2020
8.50% senior notes		450,000			—			8.50	%		2021
Other(2)		24,700			34,911			Various			Various
Total debt		2,606,100			2,416,165
Less: current debt(2)		(14,919	)		(18,793	)
Total long-term debt	$	2,591,181		$	2,397,372

(1)

The 9.875% senior notes ($500.0 million face value) were issued at a discount at an initial price of 99.302%.

(2)

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

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Change in pension and postretirement benefit plans, tax expense	$ 2,883	$ 5,765	$ 2,422	$ 4,844
Change in unrealized gain (loss) on hedges, tax expense (benefit)	$ 324	$ 667	$ (1,235)	$ (2,042)

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) (USD $)	6 Months Ended
	Jun. 30, 2013
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Dividends paid (in dollars per share)	$ 0.25

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Restructuring and Asset Impairment

6 Months Ended

Jun. 30, 2013

Restructuring and Asset Impairment

Restructuring and Asset Impairment

Note 2—Restructuring and Asset Impairment

        In response to the current depressed price environment for thermal coal and geological issues within the Company's North River mine, the Company announced plans to close the mine in 2013 approximately nine months earlier than the previously expected end of mine life of 2014. In connection with the accelerated closure, the Company renegotiated an unfavorably priced coal sales contract in the second quarter of 2013 to reduce the total tons committed for sale from this mine. The renegotiation will allow a closure of this mine in the latter half of 2013. For the three and six months ended June 30, 2013 the Company recognized a gain of approximately $17.0 million due to the release of the related below market contract liability that was obtained through the acquisition of North River. The benefit of $17.0 million was partially offset by asset impairment charges of approximately $8.0 million, all related to the accelerated closure of the North River Mine. The Company also incurred $3.3 million and $10.7 million of costs related to the curtailment of the Willow Creek mine for the three and six months ended June 30, 2013, respectively.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
OPERATING ACTIVITIES
Net income (loss)	$ (83,936)	$ 72,552
Less income from discontinued operations		(5,180)
Income (loss) from continuing operations	(83,936)	67,372
Adjustments to reconcile income (loss) from continuing operations to net cash flows provided by (used in) operating activities:
Depreciation and depletion	149,510	140,952
Deferred income tax benefit	(77,717)	(18,894)
Amortization of debt issuance costs	14,015	9,033
Other	8,402	9,327
Decrease (increase) in current assets:
Receivables	(2,302)	113,203
Inventories	(24,281)	(66,213)
Prepaid expenses and other current assets	(8,826)	(22,095)
Increase (decrease) in current liabilities:
Accounts payable	24,483	81,684
Accrued expenses and other current liabilities	(23,450)	(5,807)
Cash flows provided by (used in) operating activities	(24,102)	308,562
INVESTING ACTIVITIES
Additions to property, plant and equipment	(80,251)	(246,056)
Proceeds from sales of investments	202	12,228
Other	762	582
Cash flows used in investing activities	(79,287)	(233,246)
FINANCING ACTIVITIES
Proceeds from issuance of debt	450,000
Borrowings under revolving credit agreement	529,382	112,350
Repayments on revolving credit agreement	(529,382)	(63,341)
Retirements of debt	(259,200)	(118,003)
Dividends paid	(15,638)	(15,618)
Debt issuance costs	(15,080)
Other	(600)	288
Cash flows provided by (used in) financing activities	159,482	(84,324)
Cash flows provided by (used in) continuing operations	56,093	(9,008)
CASH FLOWS FROM DISCONTINUED OPERATIONS		9,500
Effect of foreign exchange rates on cash	(1,816)	(242)
Net increase in cash and cash equivalents	54,277	250
Cash and cash equivalents at beginning of period	116,601	128,430
Cash and cash equivalents at end of period	$ 170,878	$ 128,680

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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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Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 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.

	June 30, 2013		December 31, 2012
Asset derivatives designated as cash flow hedging instruments:
Interest rate cap(1)	$	6	$	12
Total asset derivatives	$	6	$	12
Liability derivatives designated as cash flow hedging instruments:
Interest rate swaps(2)	$	4,693	$	6,615
Total liability derivatives	$	4,693	$	6,615

(1)

$5 thousand and $8 thousand are included in other current assets and $1 thousand and $4 thousand are included in other long-term assets within the Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012, respectively.

(2)

$4.3 million and $4.1 million are included within other current liabilities and $0.4 million and $2.5 million are included within other long-term liabilities in the Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012, respectively.

Schedule of gains and losses from derivative instruments

The following tables present the gains and losses from derivative instruments for the three and six months ended June 30, 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), net of tax, recognized in accumulated other comprehensive income (loss)						Gain (loss), net of tax, reclassified from accumulated other comprehensive income (loss) to earnings(1)(2)
	Three months ended June 30,						Three months ended June 30,
Derivatives designated as cash flow hedging instruments	2013			2012			2013			2012
Natural gas hedges	$	—		$	(3,666	)	$	—		$	1,837
Interest rate swaps		1,142			390			(614	)		(460	)
Interest rate cap		(2	)		(88	)		—			—
Total	$	1,140		$	(3,364	)	$	(614	)	$	1,377

	Gain (loss), net of tax, recognized in accumulated other comprehensive income (loss)						Gain (loss), net of tax, reclassified from accumulated other comprehensive income (loss) to earnings(1)(2)
	Six months ended June 30,						Six months ended June 30,
Derivatives designated as cash flow hedging instruments	2013			2012			2013			2012
Natural gas hedges	$	—		$	(5,798	)	$	—		$	3,279
Interest rate swaps		2,482			493			(1,230	)		(1,025	)
Interest rate cap		(4	)		(219	)		—			—
Total	$	2,478		$	(5,524	)	$	(1,230	)	$	2,254

(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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Supplemental Guarantor and Non-Guarantor Financial Information (Tables)

6 Months Ended

Jun. 30, 2013

Supplemental Guarantor and Non-Guarantor Financial Information

Schedule of supplemental condensed consolidating balance sheets (Unaudited)

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)
JUNE 30, 2013
(in thousands)

	Parent (Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
ASSETS
Cash and cash equivalents	$	136,634	$	—	$	34,244		$	—		$	170,878
Receivables, net		96,820		91,498		65,938			—			254,256
Intercompany receivables		—		1,319,675		68,772			(1,388,447	)		—
Intercompany loans receivable		152,755		—		—			(152,755	)		—
Inventories		—		159,887		179,697			—			339,584
Deferred income taxes		39,656		14,914		748			—			55,318
Prepaid expenses		23,635		29,891		6,625			—			60,151
Other current assets		19,406		694		3,654			—			23,754
Total current assets		468,906		1,616,559		359,678			(1,541,202	)		903,941
Mineral interests, net		—		9,621		2,905,204			—			2,914,825
Property, plant and equipment, net		7,910		772,302		876,911			—			1,657,123
Deferred income taxes		53,157		112,560		(4,502	)		—			161,215
Investment in subsidiaries		4,537,487		—		—			(4,537,487	)		—
Other long-term assets		72,142		10,892		11,718			—			94,752
	$	5,139,602	$	2,521,934	$	4,149,009		$	(6,078,689	)	$	5,731,856
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—	$	6,734	$	8,185		$	—		$	14,919
Accounts payable		26,164		72,887		24,489			—			123,540
Accrued expenses		31,526		64,509		39,737			—			135,772
Intercompany payables		1,388,447		—		—			(1,388,447	)		—
Intercompany loans payable		—		—		152,755			(152,755	)		—
Accumulated postretirement benefits obligation		131		29,943		—			—			30,074
Other current liabilities		159,413		23,516		19,371			—			202,300
Total current liabilities		1,605,681		197,589		244,537			(1,541,202	)		506,605
Long-term debt		2,581,402		345		9,434			—			2,591,181
Accumulated postretirement benefits obligation		344		637,800		569			—			638,713
Deferred income taxes		—		—		848,748			—			848,748
Other long-term liabilities		42,886		125,843		68,591			—			237,320
Total liabilities		4,230,313		961,577		1,171,879			(1,541,202	)		4,822,567
Stockholders' equity		909,289		1,560,357		2,977,130			(4,537,487	)		909,289
	$	5,139,602	$	2,521,934	$	4,149,009		$	(6,078,689	)	$	5,731,856

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 loans 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
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 loans 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
Accumulated postretirement benefits obligation		452		632,812		—			—			633,264
Deferred income taxes		—		—		921,687			—			921,687
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
	$	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 JUNE 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	299,198		$	138,600		$	—		$	437,798
Miscellaneous income		220			779			2,699			—			3,698
		220			299,977			141,299			—			441,496
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			211,314			156,302			—			367,616
Depreciation and depletion		511			33,673			34,136			—			68,320
Selling, general and administrative		11,684			7,144			8,301			—			27,129
Postretirement benefits		(55	)		14,780			—			—			14,725
Restructuring and asset impairment		—			(9,063	)		3,322			—			(5,741	)
		12,140			257,848			202,061			—			472,049
Operating income (loss)		(11,920	)		42,129			(60,762	)		—			(30,553	)
Interest expense		(49,414	)		(590	)		(3,125	)		—			(53,129	)
Interest income		28			116			—			—			144
Other loss		—			—			(714	)		—			(714	)
Income (loss) before income tax expense		(61,306	)		41,655			(64,601	)		—			(84,252	)
Income tax expense (benefit)		(22,108	)		8,533			(36,185	)		—			(49,760	)
		(39,198	)		33,122			(28,416	)		—			(34,492	)
Equity in earnings of subsidiaries		4,706			—			—			(4,706	)		—
Net income (loss)	$	(34,492	)	$	33,122		$	(28,416	)	$	(4,706	)	$	(34,492	)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED JUNE 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	435,395		$	233,210		$	—		$	668,605
Miscellaneous income (loss)		1,051			14,808			(6,890	)		—			8,969
		1,051			450,203			226,320			—			677,574
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			271,977			214,107			—			486,084
Depreciation and depletion		2,235			34,296			37,928			—			74,459
Selling, general and administrative		12,941			10,818			12,086			—			35,845
Postretirement benefits		(113	)		13,326			—			—			13,213
		15,063			330,417			264,121			—			609,601
Operating income (loss)		(14,012	)		119,786			(37,801	)		—			67,973
Interest expense		(29,448	)		(254	)		(1,402	)		—			(31,104	)
Interest income		61			2			278			—			341
Other income (expense)		3,020			—			(8,939	)		—			(5,919	)
Income (loss) from continuing operations before income tax expense (benefit)		(40,379	)		119,534			(47,864	)		—			31,291
Income tax expense (benefit)		(13,583	)		33,220			(15,102	)		—			4,535
Income (loss) from continuing operations		(26,796	)		86,314			(32,762	)		—			26,756
Income from discontinued operations		—			—			5,180			—			5,180
Equity in earnings of subsidiaries		58,732			—			—			(58,732	)		—
Net income (loss)	$	31,936		$	86,314		$	(27,582	)	$	(58,732	)	$	31,936

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Total Consolidated
Revenues:
Sales	$	—		$	614,010		$	313,397		$	—	$	927,407
Miscellaneous income		773			2,969			1,690			—		5,432
		773			616,979			315,087			—		932,839
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			458,991			329,559			—		788,550
Depreciation and depletion		996			74,083			74,431			—		149,510
Selling, general and administrative		25,251			14,087			18,465			—		57,803
Postretirement benefits		(110	)		29,560			—			—		29,450
Restructuring and asset impairment		—			(8,947	)		10,646			—		1,699
		26,137			567,774			433,101			—		1,027,012
Operating income (loss)		(25,364	)		49,205			(118,014	)		—		(94,173	)
Interest expense		(99,570	)		—			(6,177	)		—		(105,747	)
Interest income		43			116			635			—		794
Other loss		—			—			(609	)		—		(609	)
Income (loss) before income tax expense		(124,891	)		49,321			(124,165	)		—		(199,735	)
Income tax expense (benefit)		(48,775	)		5,137			(72,161	)		—		(115,799	)
		(76,116	)		44,184			(52,004	)		—		(83,936	)
Equity in losses of subsidiaries		(7,820	)		—			—			7,820		—
Net income (loss)	$	(83,936	)	$	44,184		$	(52,004	)	$	7,820	$	(83,936	)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	849,049		$	446,854		$	—		$	1,295,903
Miscellaneous income (loss)		1,726			18,879			(7,371	)		—			13,234
		1,726			867,928			439,483			—			1,309,137
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			518,182			399,436			—			917,618
Depreciation and depletion		3,933			68,122			68,897			—			140,952
Selling, general and administrative		22,187			23,507			26,398			—			72,092
Postretirement benefits		(225	)		26,651			—			—			26,426
		25,895			636,462			494,731			—			1,157,088
Operating income (loss)		(24,169	)		231,466			(55,248	)		—			152,049
Interest expense		(56,672	)		(540	)		(1,959	)		—			(59,171	)
Interest income		108			2			508			—			618
Other income (loss)		6,039			—			(18,951	)		—			(12,912	)
Income (loss) before income tax expense		(74,694	)		230,928			(75,650	)		—			80,584
Income tax expense (benefit)		(23,565	)		65,481			(28,704	)		—			13,212
Income (loss) from continuing operations		(51,129	)		165,447			(46,946	)		—			67,372
Income from discontinued operations		—			—			5,180			—			5,180
Equity in earnings of subsidiaries		123,681			—			—			(123,681	)		—
Net income (loss)	$	72,552		$	165,447		$	(41,766	)	$	(123,681	)	$	72,552

Schedule of supplemental condensed consolidating statements of comprehensive income (loss) (Unaudited)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(34,492	)	$	33,122	$	(28,416	)	$	(4,706	)	$	(34,492	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		4,658			—		—			—			4,658
Change in unrealized gain on hedges, net of tax		526			16		—			(16	)		526
Change in foreign currency translation adjustment		(1,461	)		—		(1,461	)		1,461			(1,461	)
Change in unrealized loss on investments, net of tax		(1	)		—		(1	)		1			(1	)
Total other comprehensive income (loss), net of tax		3,722			16		(1,462	)		1,446			3,722
Total comprehensive income (loss)	$	(30,770	)	$	33,138	$	(29,878	)	$	(3,260	)	$	(30,770	)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	31,936		$	86,314	$	(27,582	)	$	(58,732	)	$	31,936
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		3,897			—		—			—			3,897
Change in unrealized gain (loss) on hedges, net of tax		(1,987	)		29		(1,829	)		1,800			(1,987	)
Change in foreign currency translation adjustment		(3,209	)		—		(3,209	)		3,209			(3,209	)
Total other comprehensive income (loss), net of tax		(1,299	)		29		(5,038	)		5,009			(1,299	)
Total comprehensive income (loss)	$	30,637		$	86,343	$	(32,620	)	$	(53,723	)	$	30,637

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(83,936	)	$	44,184	$	(52,004	)	$	7,820		$	(83,936	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		9,317			—		—			—			9,317
Change in unrealized gain on hedges, net of tax		1,248			37		—			(37	)		1,248
Change in foreign currency translation adjustment		(17,086	)		—		(17,086	)		17,086			(17,086	)
Change in unrealized gain on investments, net of tax		43			—		43			(43	)		43
Total other comprehensive income (loss), net of tax		(6,478	)		37		(17,043	)		17,006			(6,478	)
Total comprehensive income (loss)	$	(90,414	)	$	44,221	$	(69,047	)	$	24,826		$	(90,414	)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	72,552		$	165,447		$	(41,766	)	$	(123,681	)	$	72,552
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		7,795			(50,756	)		—			50,756			7,795
Change in unrealized gain (loss) on hedges, net of tax		(3,270	)		49			(2,519	)		2,470			(3,270	)
Change in foreign currency translation adjustment		(790	)		—			(790	)		790			(790	)
Change in unrealized loss on investments, net of tax		(369	)		—			(369	)		369			(369	)
Total other comprehensive income (loss), net of tax		3,366			(50,707	)		(3,678	)		54,385			3,366
Total comprehensive income (loss)	$	75,918		$	114,740		$	(45,444	)	$	(69,296	)	$	75,918

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

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(130,045	)	$	112,000		$	(6,057	)	$	—		$	(24,102	)
INVESTING ACTIVITIES
Additions to property, plant and equipment		(459	)		(58,130	)		(21,662	)		—			(80,251	)
Intercompany loans made		(54,736	)		—			—			54,736			—
Intercompany payments received		23,500			—			—			(23,500	)		—
Investments in subsidiaries		(50,103	)		—			—			50,103			—
Proceeds from sales of investments		—			—			202			—			202
Other		—			—			762			—			762
Cash flows used in investing activities		(81,798	)		(58,130	)		(20,698	)		81,339			(79,287	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		450,000			—			—			—			450,000
Borrowings under revolving credit agreement		—			—			529,382			—			529,382
Repayments on revolving credit agreement		—			—			(529,382	)		—			(529,382	)
Retirements of debt		(250,000	)		(4,903	)		(4,297	)		—			(259,200	)
Dividends paid		(15,638	)		—			—			—			(15,638	)
Excess tax deficit from stock-based compensation arrangements		(586	)		—			—			—			(586	)
Proceeds from stock options exercised		279			—			—			—			279
Debt issuance costs		(15,080	)		—			—			—			(15,080	)
Advances from (to) consolidated entities		95,962			(49,028	)		(46,934	)		—			—
Intercompany borrowings		—			—			54,736			(54,736	)		—
Intercompany payments made		—			—			(23,500	)		23,500			—
Investment from Parent		—			—			50,103			(50,103	)		—
Other		(293	)		—			—			—			(293	)
Cash flows provided by (used in) financing activities		264,644			(53,931	)		30,108			(81,339	)		159,482
Effect of foreign exchange rates on cash		—			—			(1,816	)		—			(1,816	)
Net increase (decrease) in cash and cash equivalents	$	52,801		$	(61	)	$	1,537		$	—		$	54,277
Cash and cash equivalents at beginning of period		83,833			61			32,707			—			116,601
Cash and cash equivalents at end of period	$	136,634		$	—		$	34,244		$	—		$	170,878

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(92,589	)	$	334,473		$	66,678		$	—		$	308,562
INVESTING ACTIVITIES
Additions to property, plant and equipment		(3,785	)		(70,234	)		(172,037	)		—			(246,056	)
Proceeds from sales of investments		—			—			12,228			—			12,228
Intercompany loans made		(27,694	)		—			—			27,694			—
Other		—			512			70			—			582
Cash flows used in investing activities		(31,479	)		(69,722	)		(159,739	)		27,694			(233,246	)
FINANCING ACTIVITIES
Borrowings under revolving credit agreement		—			—			112,350			—			112,350
Repayments on revolving credit agreement		—			—			(63,341	)		—			(63,341	)
Retirements of debt		(100,000	)		(4,025	)		(13,978	)		—			(118,003	)
Dividends paid		(15,618	)		—			—			—			(15,618	)
Excess tax benefits from stock-based compensation arrangements		877			—			—			—			877
Proceeds from stock options exercised		122			—			—			—			122
Advances from (to) consolidated entities		241,244			(176,220	)		(65,024	)		—			—
Intercompany borrowings		—			—			27,694			(27,694	)		—
Other		(711	)		—			—						(711	)
Cash flows provided by (used in) financing activities		125,914			(180,245	)		(2,299	)		(27,694	)		(84,324	)
Cash flows provided by (used in) continuing operations		1,846			84,506			(95,360	)		—			(9,008	)
CASH FLOWS FROM DISCONTINUED OPERATIONS		—			9,500			—			—			9,500
Effect of foreign exchange rates on cash		—			—			(242	)		—			(242	)
Net increase (decrease) in cash and cash equivalents	$	1,846		$	94,006		$	(95,602	)	$	—		$	250
Cash and cash equivalents at beginning of period		99,086			79			29,265			—			128,430
Cash and cash equivalents at end of period	$	100,932		$	94,085		$	(66,337	)	$	—		$	128,680

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Debt (Details) (USD $)							0 Months Ended	6 Months Ended		1 Months Ended	6 Months Ended	1 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2013 2011 term loan A	Dec. 31, 2012 2011 term loan A	Jun. 30, 2013 2011 term loan B	Dec. 31, 2012 2011 term loan B	Nov. 21, 2012 9.875% senior notes	Jun. 30, 2013 9.875% senior notes	Dec. 31, 2012 9.875% senior notes	Mar. 31, 2013 8.50% senior notes	Jun. 30, 2013 8.50% senior notes	Mar. 31, 2013 8.50% senior notes Prior to April 15, 2016	Mar. 31, 2013 8.50% senior notes Prior to April 15, 2017	Mar. 31, 2013 8.50% senior notes During the twelve months commencing April 15, 2017	Mar. 31, 2013 8.50% senior notes During the twelve months commencing April 15, 2018	Mar. 31, 2013 8.50% senior notes Period commencing April 15, 2019	Mar. 31, 2013 8.50% senior notes Maximum Prior to April 15, 2016	Jun. 30, 2013 Other	Dec. 31, 2012 Other
Debt instrument
Total debt	$ 2,606,100,000	$ 2,416,165,000	$ 656,566,000	$ 756,974,000	$ 978,178,000	$ 1,127,770,000		$ 496,656,000	$ 496,510,000		$ 450,000,000							$ 24,700,000	$ 34,911,000
Less current debt	(14,919,000)	(18,793,000)
Total long term debt	2,591,181,000	2,397,372,000
Weighted average stated interest rate (as a percent)			4.78%		5.75%			9.88%			8.50%
Debt agreements
Aggregate principal amount								500,000,000
Interest rate (as a percent)							9.875%	9.875%		8.50%	8.50%
Initial price of debt (as a percent)								99.302%
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%

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Supplemental Guarantor and Non-Guarantor Financial Information (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012	Dec. 31, 2011
ASSETS
Cash and cash equivalents	$ 170,878	$ 116,601	$ 128,680	$ 128,430
Receivables, net	254,256	256,967
Inventories	339,584	306,018
Deferred income taxes	55,318	58,526
Prepaid expenses	60,151	53,776
Other current assets	23,754	23,928
Total current assets	903,941	815,816
Mineral interests, net	2,914,825	2,965,557
Property, plant and equipment, net	1,657,123	1,732,131
Deferred income taxes	161,215	160,422
Other long-term assets	94,752	94,494
Total assets	5,731,856	5,768,420
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	14,919	18,793
Accounts payable	123,540	114,913
Accrued expenses	135,772	184,875
Accumulated postretirement benefits obligation	30,074	29,200
Other current liabilities	202,300	206,473
Total current liabilities	506,605	554,254
Long-term debt	2,591,181	2,397,372
Accumulated postretirement benefits obligation	638,713	633,264
Deferred income taxes	848,748	921,687
Other long-term liabilities	237,320	251,272
Total liabilities	4,822,567	4,757,849
Total stockholders' equity	909,289	1,010,571
Total liabilities and stockholders' equity	5,731,856	5,768,420
Parent (Issuer)
ASSETS
Cash and cash equivalents	136,634	83,833	160,932	99,086
Receivables, net	96,820	64,106
Intercompany receivables		153,933
Intercompany loans receivable	152,755	118,079
Deferred income taxes	39,656	39,375
Prepaid expenses	23,635	1,869
Other current assets	19,406	17,559
Total current assets	468,906	478,754
Property, plant and equipment, net	7,910	8,448
Deferred income taxes	53,157	52,363
Investment in subsidiaries	4,537,487	3,530,094
Other long-term assets	72,142	71,622
Total assets	5,139,602	4,141,281
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	26,164	5,128
Accrued expenses	31,526	27,197
Intercompany payables	1,388,447	507,519
Accumulated postretirement benefits obligation	131	131
Other current liabilities	159,413	157,044
Total current liabilities	1,605,681	697,019
Long-term debt	2,581,402	2,381,255
Accumulated postretirement benefits obligation	344	452
Other long-term liabilities	42,886	51,984
Total liabilities	4,230,313	3,130,710
Total stockholders' equity	909,289	1,010,571
Total liabilities and stockholders' equity	5,139,602	4,141,281
Guarantor Subsidiaries
ASSETS
Cash and cash equivalents		61	94,085	79
Receivables, net	91,498	113,182
Intercompany receivables	1,319,675	507,519
Inventories	159,887	131,893
Deferred income taxes	14,914	17,687
Prepaid expenses	29,891	45,327
Other current assets	694	1,109
Total current assets	1,616,559	816,778
Mineral interests, net	9,621	18,475
Property, plant and equipment, net	772,302	790,900
Deferred income taxes	112,560	112,560
Other long-term assets	10,892	9,375
Total assets	2,521,934	1,748,088
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	6,734	10,196
Accounts payable	72,887	78,260
Accrued expenses	64,509	83,155
Accumulated postretirement benefits obligation	29,943	29,069
Other current liabilities	23,516	24,389
Total current liabilities	197,589	225,069
Long-term debt	345	1,784
Accumulated postretirement benefits obligation	637,800	632,812
Other long-term liabilities	125,843	128,593
Total liabilities	961,577	988,258
Total stockholders' equity	1,560,357	759,830
Total liabilities and stockholders' equity	2,521,934	1,748,088
Non-Guarantor Subsidiaries
ASSETS
Cash and cash equivalents	34,244	32,707	(66,337)	29,265
Receivables, net	65,938	79,679
Intercompany receivables	68,772
Inventories	179,697	174,125
Deferred income taxes	748	1,464
Prepaid expenses	6,625	6,580
Other current assets	3,654	5,260
Total current assets	359,678	299,815
Mineral interests, net	2,905,204	2,947,082
Property, plant and equipment, net	876,911	932,783
Deferred income taxes	(4,502)	(4,501)
Other long-term assets	11,718	13,497
Total assets	4,149,009	4,188,676
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	8,185	8,597
Accounts payable	24,489	31,525
Accrued expenses	39,737	74,523
Intercompany payables		153,933
Intercompany loans payable	152,755	118,079
Other current liabilities	19,371	25,040
Total current liabilities	244,537	411,697
Long-term debt	9,434	14,333
Accumulated postretirement benefits obligation	569
Deferred income taxes	848,748	921,687
Other long-term liabilities	68,591	70,695
Total liabilities	1,171,879	1,418,412
Total stockholders' equity	2,977,130	2,770,264
Total liabilities and stockholders' equity	4,149,009	4,188,676
Eliminations
ASSETS
Intercompany receivables	(1,388,447)	(661,452)
Intercompany loans receivable	(152,755)	(118,079)
Total current assets	(1,541,202)	(779,531)
Investment in subsidiaries	(4,537,487)	(3,530,094)
Total assets	(6,078,689)	(4,309,625)
LIABILITIES AND STOCKHOLDERS' EQUITY
Intercompany payables	(1,388,447)	(661,452)
Intercompany loans payable	(152,755)	(118,079)
Total current liabilities	(1,541,202)	(779,531)
Total liabilities	(1,541,202)	(779,531)
Total stockholders' equity	(4,537,487)	(3,530,094)
Total liabilities and stockholders' equity	$ (6,078,689)	$ (4,309,625)

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Accumulated Other Comprehensive Income (Loss) (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Amounts reclassified out of each component of accumulated other comprehensive income (loss)
Interest expense	$ (53,129)	$ (31,104)	$ (105,747)	$ (59,171)
Other income (loss)	(714)	(5,919)	(609)	(12,912)
Income (loss) from continuing operations before income tax expense (benefit)	(84,252)	31,291	(199,735)	80,584
Income tax expense (benefit)	49,760	(4,535)	115,799	(13,212)
Net income (loss)	(34,492)	31,936	(83,936)	72,552
Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
Amounts reclassified out of each component of accumulated other comprehensive income (loss)
Net income (loss)			8,091
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) from continuing operations before income tax expense (benefit)			(1,991)
Income tax expense (benefit)			(761)
Net income (loss)			(1,230)
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			(1,991)
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			746
Net actuarial loss			14,336
Income (loss) from continuing operations before income tax expense (benefit)			15,082
Income tax expense (benefit)			5,765
Net income (loss)			9,317
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) from continuing operations before income tax expense (benefit)			4
Net income (loss)			$ 4

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
CONDENSED CONSOLIDATED BALANCE SHEETS
Mineral interests, accumulated depletion (in dollars)	$ 218.8	$ 179.6
Property, plant and equipment, accumulated depreciation (in dollars)	$ 890.2	$ 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	62,571,807	62,521,300

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Debt

6 Months Ended

Jun. 30, 2013

Debt

Debt

Note 5—Debt

        Debt consisted of the following (in thousands):

	June 30, 2013			December 31, 2012			Weighted Average Stated Interest Rate At June 30, 2013			Final Maturity
2011 term loan A	$	656,566		$	756,974			4.78	%		2016
2011 term loan B		978,178			1,127,770			5.75	%		2018
Revolving credit facility		—			—			N/A			2016
9.875% senior notes(1)		496,656			496,510			9.88	%		2020
8.50% senior notes		450,000			—			8.50	%		2021
Other(2)		24,700			34,911			Various			Various
Total debt		2,606,100			2,416,165
Less: current debt(2)		(14,919	)		(18,793	)
Total long-term debt	$	2,591,181		$	2,397,372

(1)

The 9.875% senior notes ($500.0 million face value) were issued at a discount at an initial price of 99.302%.

(2)

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

• 8.50% Senior Notes

        In March 2013, the Company issued $450.0 million aggregate principal amount of 8.50% 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, exclusive of the West Virginia entities as they are owned by our U.K. Operations. Interest on the 2021 Notes 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 108.50% of the principal amount. 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 "make-whole" premium relates to the discount granted when the Company issued the bonds. 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, 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.

        See Note 14 regarding subsequent events related to long-term debt.

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$ (34,492)	$ 31,936	$ (83,936)	$ 72,552
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, (net of tax expense: $2,883 and $5,765, and $2,422 and $4,844, for the three and six months ended June 30, 2013 and 2012, respectively)	4,658	3,897	9,317	7,795
Change in unrealized gain (loss) on hedges, (net of tax expense (benefit): $324 and $667, and $(1,235) and $(2,042), for the three and six months ended June 30, 2013 and 2012, respectively)	526	(1,987)	1,248	(3,270)
Change in foreign currency translation adjustment	(1,461)	(3,209)	(17,086)	(790)
Change in unrealized gain (loss) on investments, net of tax	(1)		43	(369)
Total other comprehensive income (loss), net of tax	3,722	(1,299)	(6,478)	3,366
Total comprehensive income (loss)	$ (30,770)	$ 30,637	$ (90,414)	$ 75,918

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
ASSETS
Cash and cash equivalents	$ 170,878	$ 116,601
Receivables, net	254,256	256,967
Inventories	339,584	306,018
Deferred income taxes	55,318	58,526
Prepaid expenses	60,151	53,776
Other current assets	23,754	23,928
Total current assets	903,941	815,816
Mineral interests, net of accumulated depletion of $218.8 million and $179.6 million, respectively	2,914,825	2,965,557
Property, plant and equipment, net of accumulated depreciation of $890.2 million and $796.7 million, respectively	1,657,123	1,732,131
Deferred income taxes	161,215	160,422
Other long-term assets	94,752	94,494
Total assets	5,731,856	5,768,420
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	14,919	18,793
Accounts payable	123,540	114,913
Accrued expenses	135,772	184,875
Accumulated postretirement benefits obligation	30,074	29,200
Other current liabilities	202,300	206,473
Total current liabilities	506,605	554,254
Long-term debt	2,591,181	2,397,372
Accumulated postretirement benefits obligation	638,713	633,264
Deferred income taxes	848,748	921,687
Other long-term liabilities	237,320	251,272
Total liabilities	4,822,567	4,757,849
Commitments and contingencies (Note 8)
Stockholders' equity:
Common stock, $0.01 par value per share: Authorized-200,000,000 shares, Issued-62,571,807 and 62,521,300 shares, respectively	626	625
Capital in excess of par value	1,609,854	1,628,244
Accumulated deficit	(423,863)	(347,448)
Accumulated other comprehensive income (loss):
Pension and other postretirement benefit plans, net of tax	(256,725)	(266,042)
Foreign currency translation adjustment	(18,588)	(1,502)
Unrealized loss on hedges, net of tax	(2,955)	(4,203)
Unrealized investment gain, net of tax	940	897
Total stockholders' equity	909,289	1,010,571
Total liabilities and stockholders' equity	$ 5,731,856	$ 5,768,420

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Supplemental Guarantor and Non-Guarantor Financial Information (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Revenues:
Sales	$ 437,798	$ 668,605	$ 927,407	$ 1,295,903
Miscellaneous income (loss)	3,698	8,969	5,432	13,234
Total revenues	441,496	677,574	932,839	1,309,137
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)	367,616	486,084	788,550	917,618
Depreciation and depletion	68,320	74,459	149,510	140,952
Selling, general and administrative	27,129	35,845	57,803	72,092
Postretirement benefits	14,725	13,213	29,450	26,426
Restructuring and asset impairment	(5,741)		1,699
Total costs and expenses	472,049	609,601	1,027,012	1,157,088
Operating income (loss)	(30,553)	67,973	(94,173)	152,049
Interest expense	(53,129)	(31,104)	(105,747)	(59,171)
Interest income	144	341	794	618
Other loss, net	(714)	(5,919)	(609)	(12,912)
Income (loss) from continuing operations before income tax expense (benefit)	(84,252)	31,291	(199,735)	80,584
Income tax expense (benefit)	(49,760)	4,535	(115,799)	13,212
Income (loss) from continuing operations	(34,492)	26,756	(83,936)	67,372
Income from discontinued operations		5,180		5,180
Net income (loss)	(34,492)	31,936	(83,936)	72,552
Parent (Issuer)
Revenues:
Miscellaneous income (loss)	220	1,051	773	1,726
Total revenues	220	1,051	773	1,726
Cost and expenses:
Depreciation and depletion	511	2,235	996	3,933
Selling, general and administrative	11,684	12,941	25,251	22,187
Postretirement benefits	(55)	(113)	(110)	(225)
Total costs and expenses	12,140	15,063	26,137	25,895
Operating income (loss)	(11,920)	(14,012)	(25,364)	(24,169)
Interest expense	(49,414)	(29,448)	(99,570)	(56,672)
Interest income	28	61	43	108
Other loss, net		3,020		6,039
Income (loss) from continuing operations before income tax expense (benefit)	(61,306)	(40,379)	(124,891)	(74,694)
Income tax expense (benefit)	(22,108)	(13,583)	(48,775)	(23,565)
Income (loss) from continuing operations	(39,198)	(26,796)	(76,116)	(51,129)
Equity in earnings (losses) of subsidiaries	4,706	58,732	(7,820)	123,681
Net income (loss)	(34,492)	31,936	(83,936)	72,552
Guarantor Subsidiaries
Revenues:
Sales	299,198	435,395	614,010	849,049
Miscellaneous income (loss)	779	14,808	2,969	18,879
Total revenues	299,977	450,203	616,979	867,928
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)	211,314	271,977	458,991	518,182
Depreciation and depletion	33,673	34,296	74,083	68,122
Selling, general and administrative	7,144	10,818	14,087	23,507
Postretirement benefits	14,780	13,326	29,560	26,651
Restructuring and asset impairment	(9,063)		(8,947)
Total costs and expenses	257,848	330,417	567,774	636,462
Operating income (loss)	42,129	119,786	49,205	231,466
Interest expense	(590)	(254)		(540)
Interest income	116	2	116	2
Income (loss) from continuing operations before income tax expense (benefit)	41,655	119,534	49,321	230,928
Income tax expense (benefit)	8,533	33,220	5,137	65,481
Income (loss) from continuing operations	33,122	86,314	44,184	165,447
Net income (loss)	33,122	86,314	44,184	165,447
Non-Guarantor Subsidiaries
Revenues:
Sales	138,600	233,210	313,397	446,854
Miscellaneous income (loss)	2,699	(6,890)	1,690	(7,371)
Total revenues	141,299	226,320	315,087	439,483
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)	156,302	214,107	329,559	399,436
Depreciation and depletion	34,136	37,928	74,431	68,897
Selling, general and administrative	8,301	12,086	18,465	26,398
Restructuring and asset impairment	3,322		10,646
Total costs and expenses	202,061	264,121	433,101	494,731
Operating income (loss)	(60,762)	(37,801)	(118,014)	(55,248)
Interest expense	(3,125)	(1,402)	(6,177)	(1,959)
Interest income		278	635	508
Other loss, net	(714)	(8,939)	(609)	(18,951)
Income (loss) from continuing operations before income tax expense (benefit)	(64,601)	(47,864)	(124,165)	(75,650)
Income tax expense (benefit)	(36,185)	(15,102)	(72,161)	(28,704)
Income (loss) from continuing operations	(28,416)	(32,762)	(52,004)	(46,946)
Income from discontinued operations		5,180		5,180
Net income (loss)	(28,416)	(27,582)	(52,004)	(41,766)
Eliminations
Cost and expenses:
Equity in earnings (losses) of subsidiaries	(4,706)	(58,732)	7,820	(123,681)
Net income (loss)	$ (4,706)	$ (58,732)	$ 7,820	$ (123,681)

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Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 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 and six months ended June 30, 2013, net of tax (in thousands).

	Pension and other postretirement plans			Unrealized gain/(loss) on hedges			Foreign currency translation adjustment			Unrealized gain 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		—			2,478			(17,086	)		39		(14,569	)
Amounts reclassified from accumulated other comprehensive income (loss)		9,317			(1,230	)		—	(1)		4		8,091
Net current-period other comprehensive income (loss)		9,317			1,248			(17,086	)		43		(6,478	)
Ending balance as of June 30, 2013	$	(256,725	)	$	(2,955	)	$	(18,588	)	$	940	$	(277,328	)

(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 six months ended June 30, 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	$	(1,991	)	Interest expense
		(1,991	)	Income (loss) from continuing
				operations before income tax
				expense (benefit)
		(761	)	Income tax expense (benefit)
	$	(1,230	)	Net income (loss)
Amortization of pension and postretirement benefit plans:
Prior service cost	$	746		(a)
Net actuarial loss		14,336		(a)
		15,082		Income (loss) from continuing
				operations before income tax
				expense (benefit)
		5,765		Income tax expense (benefit)
	$	9,317		Net income (loss)
Gains and losses on available-for-sale securities	$	4		Other income (loss)
		4		Income (loss) from continuing
				operations before income tax
				expense (benefit)
		—		Income tax expense (benefit)
	$	4		Net income (loss)
Total reclassifications for the period	$	8,091		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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Subsequent Events

6 Months Ended

Jun. 30, 2013

Subsequent Events

Subsequent Events

Note 14—Subsequent Events

Credit Agreement Amendment

        On July 23, 2013, the Company entered into an amendment (the "Fifth 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, the Second Amendment to Credit Agreement, dated as of August 16, 2012, the Third Amendment to Credit Agreement dated as of October 29, 2012, and as further amended by the Fourth Amendment to Credit Agreement, dated as of March 22, 2013, among the Company, the various lenders, Morgan Stanley Senior Funding, Inc. as administrative agent, and other agents named therein. The Fifth Amendment provides for, among other things:

• •

  increased interest margins of 1.00% from their existing levels;

  •

  less restrictive interest expense coverage ratio and suspension of compliance until March 31, 2015;

  •

  less restrictive senior secured leverage ratio and suspension of compliance until June 30, 2014;

  •

  an additional minimum liquidity covenant of $225.0 million that applies at the end of each fiscal quarter through June 30, 2014 and at any time thereafter when the senior secured leverage ratio is greater than 5.50:1.00;

  •

  an additional capital expenditures covenant limiting capital expenditures to $175.0 million in 2013 and $200.0 million in 2014 with a potential that up to $20.0 million in unused 2013 capital spending may be carried forward and utilized in the succeeding fiscal year increasing the 2014 capital spending limit up to $220.0 million;

  •

  modifies the requirement that 100% of the net cash proceeds from the incurrence or issuance of unsecured indebtedness shall be applied as a mandatory repayment to exclude the mandatory repayment requirement for the first $250.0 million of such indebtedness; and

  •

  a restriction on cash dividends allowed in any fiscal quarter when the secured leverage ratio exceeds 4.50:1.00.

Quarterly Dividend

        In connection with the Fifth Amendment and in light of current market conditions, on July 23, 2013 the Company announced that its Board of Directors determined to reduce its regular quarterly dividend to $0.01 per share from the most recent quarterly dividend of $0.125 per share.

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Accumulated Other Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 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			(14,569)
Amounts reclassified from accumulated other comprehensive income (loss)			8,091
Total other comprehensive income (loss), net of tax	3,722	(1,299)	(6,478)	3,366
Balance at the end of the period	(277,328)		(277,328)
Pension and other postretirement 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)			9,317
Total other comprehensive income (loss), net of tax			9,317
Balance at the end of the period	(256,725)		(256,725)
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			2,478
Amounts reclassified from accumulated other comprehensive income (loss)			(1,230)
Total other comprehensive income (loss), net of tax			1,248
Balance at the end of the period	(2,955)		(2,955)
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			(17,086)
Total other comprehensive income (loss), net of tax			(17,086)
Balance at the end of the period	(18,588)		(18,588)
Unrealized gain 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			39
Amounts reclassified from accumulated other comprehensive income (loss)			4
Total other comprehensive income (loss), net of tax			43
Balance at the end of the period	$ 940		$ 940

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Subsequent Events (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended		0 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jul. 23, 2013 Subsequent Event	Jul. 23, 2013 Subsequent Event 2011 Credit Agreement	Jul. 23, 2013 Subsequent Event 2011 Credit Agreement Greater than	Jul. 23, 2013 Subsequent Event 2011 Credit Agreement High end of range
Subsequent Event
Increase in interest margin from existing levels (as a percent)						1.00%
Additional minimum liquidity covenant amount						$ 225.0
Senior secured leverage ratio (as a percent)							5.50
Additional capital expenditures covenant amount in 2013						175.0
Additional capital expenditures covenant amount in 2014						200.0
Potential unused capital spending that may be carried forward								20.0
Increased capital expenditures covenant amount in 2014, if carryforward from prior year is utilized								220.0
Mandatory repayment percentage of net cash proceeds from incurrence and issuance of unsecured indebtedness						100.00%
First amount of indebtedness that is required to be mandatorily repaid for the incurrence or issuance of unsecured indebtedness						$ 250.0
Secured leverage ratio requirement for restriction on cash dividends allowed in any fiscal quarter						4.50
Quarterly dividend announced by Company due to current market conditions and fifth amendment to credit agreement					$ 0.01
Most recent quarterly dividend (in dollars per share)	$ 0.125	$ 0.125	$ 0.25	$ 0.25

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Net Income (Loss) Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Numerator:
Income (loss) from continuing operations	$ (34,492)	$ 26,756	$ (83,936)	$ 67,372
Income from discontinued operations		$ 5,180		$ 5,180
Denominator:
Average number of common shares outstanding, Basic	62,632,000	62,537,000	62,614,000	62,503,000
Effect of dilutive securities:
Stock awards and warrants (in shares)		243,000		256,000
Average number of common shares outstanding, diluted	62,632,000	62,780,000	62,614,000	62,759,000
Income (loss) from continuing operations (in dollars per share)	$ (0.55)	$ 0.43	$ (1.34)	$ 1.08
Income from discontinued operations, basic (in dollars per share)		$ 0.08		$ 0.08
Net income (loss) (in dollars per share)	$ (0.55)	$ 0.51	$ (1.34)	$ 1.16
Income from continuing operations, diluted (in dollars per share)	$ (0.55)	$ 0.43	$ (1.34)	$ 1.08
Income from discontinued operations, diluted (in dollars per share)		$ 0.08		$ 0.08
Net income (loss) (in dollars per share)	$ (0.55)	$ 0.51	$ (1.34)	$ 1.16
Anti-dilutive securities excluded from earnings per share calculation	599,630	234,323	481,635	205,378
Share-based awards exercised or released
Stock options			24,831	19,059
Restricted stock units	8,803	10,856	25,676	28,815
Total	8,803	10,856	50,507	47,874

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Inventories
Coal	$ 258,181	$ 228,910
Raw materials and supplies	81,403	77,108
Total inventories	$ 339,584	$ 306,018

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Income Taxes (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Income Taxes
Income tax provision (benefit)	$ (49,760,000)	$ 4,535,000	$ (115,799,000)	$ 13,212,000
Benefit attributable to year-to-date foreign currency exchange rate fluctuations on foreign deferred tax liabilities			$ 13,700,000

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Income Taxes

6 Months Ended

Jun. 30, 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 six months ended June 30, 2013, the income tax benefit was determined based on the annual effective tax rate method. The Company recognized an income tax benefit of $115.8 million for the six months ended June 30, 2013, compared to an income tax provision of $13.2 million for the six months ended June 30, 2012 as the Company incurred a pretax operating loss for the six months ended June 30, 2013 compared to pretax operating income for the same period in 2012. The 2013 and 2012 tax rates reflect the benefits of our Canadian and U.K. Operations which are taxed at statutory rates lower than the U.S. rate and the effects of additional tax losses related to foreign financing activities. The income tax provisions for the six months ended June 30, 2013 and 2012 also reflect a statutory depletion deduction from the Alabama mining operations. The current year provision for income taxes also includes a benefit of $13.7 million attributable to year-to-date foreign currency exchange rate fluctuations on foreign deferred tax liabilities.

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value of Financial Instruments

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

	June 30, 2013
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	6	$	—	$	6
Liabilities:
Interest rate swaps	$	—	$	4,693	$	—	$	4,693

	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

Schedule of carrying amounts and fair values of debt

The carrying amounts and fair values of the Company's debt are presented below (in thousands):

	June 30, 2013				December 31, 2012
(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
2011 Term Loan A	$	656,566	$	636,869	$	756,974	$	758,867
2011 Term Loan B	$	978,178	$	948,833	$	1,127,770	$	1,135,293
9.875% Senior Notes	$	496,656	$	433,125	$	496,510	$	500,000
8.50% Senior Notes	$	450,000	$	358,875	$	—	$	—

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Derivative Financial Instruments (Details 2) (Designated as cash flow hedging instruments, USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Entity's derivative instruments within the condensed consolidated balance sheets
Asset derivatives	$ 6	$ 12
Liability derivatives	4,693	6,615
Interest rate cap
Entity's derivative instruments within the condensed consolidated balance sheets
Asset derivatives	6	12
Interest rate cap | Other current assets
Entity's derivative instruments within the condensed consolidated balance sheets
Asset derivatives	5	8
Interest rate cap | Other long-term assets
Entity's derivative instruments within the condensed consolidated balance sheets
Asset derivatives	1	4
Interest rate swaps
Entity's derivative instruments within the condensed consolidated balance sheets
Liability derivatives	4,693	6,615
Interest rate swaps | Other current liabilities
Entity's derivative instruments within the condensed consolidated balance sheets
Liability derivatives	4,300	4,100
Interest rate swaps | Other long-term liabilities
Entity's derivative instruments within the condensed consolidated balance sheets
Liability derivatives	$ 400	$ 2,500

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Net Income (Loss) Per Share

6 Months Ended

Jun. 30, 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 and six months ended June 30, 2013 and 2012 is as follows (in thousands, except per share data):

	For the three months ended June 30,
	2013						2012
	Basic			Diluted			Basic		Diluted
Numerator:
Income (loss) from continuing operations	$	(34,492	)	$	(34,492	)	$	26,756	$	26,756
Income from discontinued operations		—			—		$	5,180	$	5,180
Denominator:
Average number of common shares outstanding		62,632			62,632			62,537		62,537
Effect of dilutive securities:
Stock awards and warrants(1)		—			—			—		243
		62,632			62,632			62,537		62,780
Income (loss) from continuing operations	$	(0.55	)	$	(0.55	)	$	0.43	$	0.43
Income from discontinued operations		—			—			0.08		0.08
Net income (loss) per share	$	(0.55	)	$	(0.55	)	$	0.51	$	0.51

	For the six months ended June 30,
	2013						2012
	Basic			Diluted			Basic		Diluted
Numerator:
Income (loss) from continuing operations	$	(83,936	)	$	(83,936	)	$	67,372	$	67,372
Income from discontinued operations		—			—		$	5,180	$	5,180
Denominator:
Average number of common shares outstanding		62,614			62,614			62,503		62,503
Effect of dilutive securities:
Stock awards and warrants(1)		—			—			—		256
		62,614			62,614			62,503		62,759
Income (loss) from continuing operations	$	(1.34	)	$	(1.34	)	$	1.08	$	1.08
Income from discontinued operations		—			—			0.08		0.08
Net income (loss) per share	$	(1.34	)	$	(1.34	)	$	1.16	$	1.16

(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 June 30, 2013 and 2012 totaling 599,630 and 234,323, respectively, were excluded from the calculation above because their effect would have been anti-dilutive. Additionally, the weighted average number of stock options outstanding for the six months ended June 30, 2013 and 2012 totaling 481,635 and 205,378, respectively, were excluded from the calculation above because their effect would have been anti-dilutive.

• The tables below set forth stock options exercised and restricted stock units vested for the three and six months ended June 30, 2013 and 2012:

	For the three months ended June 30,
	2013		2012
Stock options		—		—
Restricted stock units		8,803		10,856
Total		8,803		10,856

	For the six months ended June 30,
	2013		2012
Stock options		24,831		19,059
Restricted stock units		25,676		28,815
Total		50,507		47,874

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Inventories

6 Months Ended

Jun. 30, 2013

Inventories

Inventories

Note 3—Inventories

        Inventories are summarized as follows (in thousands):

	June 30, 2013		December 31, 2012
Coal	$	258,181	$	228,910
Raw materials and supplies		81,403		77,108
Total inventories	$	339,584	$	306,018

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (USD $) In Thousands, unless otherwise specified	Total	Common Stock	Capital in Excess of Par Value	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	(83,936)			(83,936)
Other comprehensive loss, net of tax	(6,478)				(6,478)
Stock issued upon the exercise of stock options	279	1	278
Dividends paid, $0.25 per share	(15,638)		(23,452)	7,814
Stock based compensation	5,370		5,370
Tax effect from stock-based compensation arrangements	(586)		(586)
Other	(293)			(293)
Balance at Jun. 30, 2013	$ 909,289	$ 626	$ 1,609,854	$ (423,863)	$ (277,328)

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Supplemental Guarantor and Non-Guarantor Financial Information (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Supplemental guarantor and non-guarantor financial information
Net income (loss)	$ (34,492)	$ 31,936	$ (83,936)	$ 72,552
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax	4,658	3,897	9,317	7,795
Change in unrealized gain (loss) on hedges, net of tax	526	(1,987)	1,248	(3,270)
Change in foreign currency translation adjustment	(1,461)	(3,209)	(17,086)	(790)
Change in unrealized gain (loss)on investments net of tax	(1)		43	(369)
Total other comprehensive income (loss), net of tax	3,722	(1,299)	(6,478)	3,366
Total comprehensive income (loss)	(30,770)	30,637	(90,414)	75,918
Parent (Issuer)
Supplemental guarantor and non-guarantor financial information
Net income (loss)	(34,492)	31,936	(83,936)	72,552
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax	4,658	3,897	9,317	7,795
Change in unrealized gain (loss) on hedges, net of tax	526	(1,987)	1,248	(3,270)
Change in foreign currency translation adjustment	(1,461)	(3,209)	(17,086)	(790)
Change in unrealized gain (loss)on investments net of tax	(1)		43	(369)
Total other comprehensive income (loss), net of tax	3,722	(1,299)	(6,478)	3,366
Total comprehensive income (loss)	(30,770)	30,637	(90,414)	75,918
Guarantor Subsidiaries
Supplemental guarantor and non-guarantor financial information
Net income (loss)	33,122	86,314	44,184	165,447
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax				(50,756)
Change in unrealized gain (loss) on hedges, net of tax	16	29	37	49
Total other comprehensive income (loss), net of tax	16	29	37	(50,707)
Total comprehensive income (loss)	33,138	86,343	44,221	114,740
Non-Guarantor Subsidiaries
Supplemental guarantor and non-guarantor financial information
Net income (loss)	(28,416)	(27,582)	(52,004)	(41,766)
Other comprehensive income (loss), net of tax:
Change in unrealized gain (loss) on hedges, net of tax		(1,829)		(2,519)
Change in foreign currency translation adjustment	(1,461)	(3,209)	(17,086)	(790)
Change in unrealized gain (loss)on investments net of tax	(1)		43	(369)
Total other comprehensive income (loss), net of tax	(1,462)	(5,038)	(17,043)	(3,678)
Total comprehensive income (loss)	(29,878)	(32,620)	(69,047)	(45,444)
Eliminations
Supplemental guarantor and non-guarantor financial information
Net income (loss)	(4,706)	(58,732)	7,820	(123,681)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax				50,756
Change in unrealized gain (loss) on hedges, net of tax	(16)	1,800	(37)	2,470
Change in foreign currency translation adjustment	1,461	3,209	17,086	790
Change in unrealized gain (loss)on investments net of tax	1		(43)	369
Total other comprehensive income (loss), net of tax	1,446	5,009	17,006	54,385
Total comprehensive income (loss)	$ (3,260)	$ (53,723)	$ 24,826	$ (69,296)

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Fair Value of Financial Instruments (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Carrying Amount | 2011 Term Loan A
Debt
Debt	$ 656,566	$ 756,974
Carrying Amount | 2011 Term Loan B
Debt
Debt	978,178	1,127,770
Carrying Amount | 9.875% Senior Notes
Debt
Debt	496,656	496,510
Carrying Amount | 8.50% Senior Notes
Debt
Debt	450,000
Fair Value | 2011 Term Loan A
Debt
Debt	636,869	758,867
Fair Value | 2011 Term Loan B
Debt
Debt	948,833	1,135,293
Fair Value | 9.875% Senior Notes
Debt
Debt	433,125	500,000
Fair Value | 8.50% Senior Notes
Debt
Debt	$ 358,875

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Basis of Presentation (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Mar. 31, 2013
Basis of Presentation
Amount of the prior year fourth quarter impact of cash dividend declared and paid had reclassification been made from accumulated deficit to capital in excess of par value					$ 7,800,000
Amount of the prior year first quarter impact had reclassification been made from selling, general and administrative costs to cost of sales		4,300,000		10,000,000
Business acquisition
Depreciation and depletion	(68,320,000)	(74,459,000)	(149,510,000)	(140,952,000)
Western Coal Corp | Purchase price allocation adjustments
Business acquisition
Depreciation and depletion	$ (8,400,000)

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Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 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 and six months ended June 30, 2013, net of tax (in thousands).

	Pension and other postretirement plans			Unrealized gain/(loss) on hedges			Foreign currency translation adjustment			Unrealized gain 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		—			2,478			(17,086	)		39		(14,569	)
Amounts reclassified from accumulated other comprehensive income (loss)		9,317			(1,230	)		—	(1)		4		8,091
Net current-period other comprehensive income (loss)		9,317			1,248			(17,086	)		43		(6,478	)
Ending balance as of June 30, 2013	$	(256,725	)	$	(2,955	)	$	(18,588	)	$	940	$	(277,328	)

(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 six months ended June 30, 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	$	(1,991	)	Interest expense
		(1,991	)	Income (loss) from continuing
				operations before income tax
				expense (benefit)
		(761	)	Income tax expense (benefit)
	$	(1,230	)	Net income (loss)
Amortization of pension and postretirement benefit plans:
Prior service cost	$	746		(a)
Net actuarial loss		14,336		(a)
		15,082		Income (loss) from continuing
				operations before income tax
				expense (benefit)
		5,765		Income tax expense (benefit)
	$	9,317		Net income (loss)
Gains and losses on available-for-sale securities	$	4		Other income (loss)
		4		Income (loss) from continuing
				operations before income tax
				expense (benefit)
		—		Income tax expense (benefit)
	$	4		Net income (loss)
Total reclassifications for the period	$	8,091		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

6 Months Ended

Jun. 30, 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 June 30,						For the three months ended June 30,
	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

	Pension Benefits						Other Postretirement Benefits
	For the six months ended June 30,						For the six months ended June 30,
	2013			2012			2013		2012
Components of net periodic benefit cost:
Service cost	$	3,532		$	2,996		$	4,972	$	4,036
Interest cost		6,140			6,258			14,396		14,506
Expected return on plan assets		(8,470	)		(8,062	)		—		—
Amortization of prior service cost		132			128			614		522
Amortization of net actuarial loss		4,868			4,626			9,468		7,362
Net periodic benefit cost	$	6,202		$	5,946		$	29,450	$	26,426

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Supplemental Guarantor and Non-Guarantor Financial Information

6 Months Ended

Jun. 30, 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 8.50% 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, exclusive of the West Virginia entities as they are owned by our U.K. Operations. 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)
JUNE 30, 2013
(in thousands)

	Parent (Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
ASSETS
Cash and cash equivalents	$	136,634	$	—	$	34,244		$	—		$	170,878
Receivables, net		96,820		91,498		65,938			—			254,256
Intercompany receivables		—		1,319,675		68,772			(1,388,447	)		—
Intercompany loans receivable		152,755		—		—			(152,755	)		—
Inventories		—		159,887		179,697			—			339,584
Deferred income taxes		39,656		14,914		748			—			55,318
Prepaid expenses		23,635		29,891		6,625			—			60,151
Other current assets		19,406		694		3,654			—			23,754
Total current assets		468,906		1,616,559		359,678			(1,541,202	)		903,941
Mineral interests, net		—		9,621		2,905,204			—			2,914,825
Property, plant and equipment, net		7,910		772,302		876,911			—			1,657,123
Deferred income taxes		53,157		112,560		(4,502	)		—			161,215
Investment in subsidiaries		4,537,487		—		—			(4,537,487	)		—
Other long-term assets		72,142		10,892		11,718			—			94,752
	$	5,139,602	$	2,521,934	$	4,149,009		$	(6,078,689	)	$	5,731,856
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—	$	6,734	$	8,185		$	—		$	14,919
Accounts payable		26,164		72,887		24,489			—			123,540
Accrued expenses		31,526		64,509		39,737			—			135,772
Intercompany payables		1,388,447		—		—			(1,388,447	)		—
Intercompany loans payable		—		—		152,755			(152,755	)		—
Accumulated postretirement benefits obligation		131		29,943		—			—			30,074
Other current liabilities		159,413		23,516		19,371			—			202,300
Total current liabilities		1,605,681		197,589		244,537			(1,541,202	)		506,605
Long-term debt		2,581,402		345		9,434			—			2,591,181
Accumulated postretirement benefits obligation		344		637,800		569			—			638,713
Deferred income taxes		—		—		848,748			—			848,748
Other long-term liabilities		42,886		125,843		68,591			—			237,320
Total liabilities		4,230,313		961,577		1,171,879			(1,541,202	)		4,822,567
Stockholders' equity		909,289		1,560,357		2,977,130			(4,537,487	)		909,289
	$	5,139,602	$	2,521,934	$	4,149,009		$	(6,078,689	)	$	5,731,856

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 loans 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
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 loans 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
Accumulated postretirement benefits obligation		452		632,812		—			—			633,264
Deferred income taxes		—		—		921,687			—			921,687
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
	$	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 JUNE 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	299,198		$	138,600		$	—		$	437,798
Miscellaneous income		220			779			2,699			—			3,698
		220			299,977			141,299			—			441,496
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			211,314			156,302			—			367,616
Depreciation and depletion		511			33,673			34,136			—			68,320
Selling, general and administrative		11,684			7,144			8,301			—			27,129
Postretirement benefits		(55	)		14,780			—			—			14,725
Restructuring and asset impairment		—			(9,063	)		3,322			—			(5,741	)
		12,140			257,848			202,061			—			472,049
Operating income (loss)		(11,920	)		42,129			(60,762	)		—			(30,553	)
Interest expense		(49,414	)		(590	)		(3,125	)		—			(53,129	)
Interest income		28			116			—			—			144
Other loss		—			—			(714	)		—			(714	)
Income (loss) before income tax expense		(61,306	)		41,655			(64,601	)		—			(84,252	)
Income tax expense (benefit)		(22,108	)		8,533			(36,185	)		—			(49,760	)
		(39,198	)		33,122			(28,416	)		—			(34,492	)
Equity in earnings of subsidiaries		4,706			—			—			(4,706	)		—
Net income (loss)	$	(34,492	)	$	33,122		$	(28,416	)	$	(4,706	)	$	(34,492	)

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED JUNE 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	435,395		$	233,210		$	—		$	668,605
Miscellaneous income (loss)		1,051			14,808			(6,890	)		—			8,969
		1,051			450,203			226,320			—			677,574
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			271,977			214,107			—			486,084
Depreciation and depletion		2,235			34,296			37,928			—			74,459
Selling, general and administrative		12,941			10,818			12,086			—			35,845
Postretirement benefits		(113	)		13,326			—			—			13,213
		15,063			330,417			264,121			—			609,601
Operating income (loss)		(14,012	)		119,786			(37,801	)		—			67,973
Interest expense		(29,448	)		(254	)		(1,402	)		—			(31,104	)
Interest income		61			2			278			—			341
Other income (expense)		3,020			—			(8,939	)		—			(5,919	)
Income (loss) from continuing operations before income tax expense (benefit)		(40,379	)		119,534			(47,864	)		—			31,291
Income tax expense (benefit)		(13,583	)		33,220			(15,102	)		—			4,535
Income (loss) from continuing operations		(26,796	)		86,314			(32,762	)		—			26,756
Income from discontinued operations		—			—			5,180			—			5,180
Equity in earnings of subsidiaries		58,732			—			—			(58,732	)		—
Net income (loss)	$	31,936		$	86,314		$	(27,582	)	$	(58,732	)	$	31,936

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Total Consolidated
Revenues:
Sales	$	—		$	614,010		$	313,397		$	—	$	927,407
Miscellaneous income		773			2,969			1,690			—		5,432
		773			616,979			315,087			—		932,839
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			458,991			329,559			—		788,550
Depreciation and depletion		996			74,083			74,431			—		149,510
Selling, general and administrative		25,251			14,087			18,465			—		57,803
Postretirement benefits		(110	)		29,560			—			—		29,450
Restructuring and asset impairment		—			(8,947	)		10,646			—		1,699
		26,137			567,774			433,101			—		1,027,012
Operating income (loss)		(25,364	)		49,205			(118,014	)		—		(94,173	)
Interest expense		(99,570	)		—			(6,177	)		—		(105,747	)
Interest income		43			116			635			—		794
Other loss		—			—			(609	)		—		(609	)
Income (loss) before income tax expense		(124,891	)		49,321			(124,165	)		—		(199,735	)
Income tax expense (benefit)		(48,775	)		5,137			(72,161	)		—		(115,799	)
		(76,116	)		44,184			(52,004	)		—		(83,936	)
Equity in losses of subsidiaries		(7,820	)		—			—			7,820		—
Net income (loss)	$	(83,936	)	$	44,184		$	(52,004	)	$	7,820	$	(83,936	)

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	849,049		$	446,854		$	—		$	1,295,903
Miscellaneous income (loss)		1,726			18,879			(7,371	)		—			13,234
		1,726			867,928			439,483			—			1,309,137
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			518,182			399,436			—			917,618
Depreciation and depletion		3,933			68,122			68,897			—			140,952
Selling, general and administrative		22,187			23,507			26,398			—			72,092
Postretirement benefits		(225	)		26,651			—			—			26,426
		25,895			636,462			494,731			—			1,157,088
Operating income (loss)		(24,169	)		231,466			(55,248	)		—			152,049
Interest expense		(56,672	)		(540	)		(1,959	)		—			(59,171	)
Interest income		108			2			508			—			618
Other income (loss)		6,039			—			(18,951	)		—			(12,912	)
Income (loss) before income tax expense		(74,694	)		230,928			(75,650	)		—			80,584
Income tax expense (benefit)		(23,565	)		65,481			(28,704	)		—			13,212
Income (loss) from continuing operations		(51,129	)		165,447			(46,946	)		—			67,372
Income from discontinued operations		—			—			5,180			—			5,180
Equity in earnings of subsidiaries		123,681			—			—			(123,681	)		—
Net income (loss)	$	72,552		$	165,447		$	(41,766	)	$	(123,681	)	$	72,552

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(34,492	)	$	33,122	$	(28,416	)	$	(4,706	)	$	(34,492	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		4,658			—		—			—			4,658
Change in unrealized gain on hedges, net of tax		526			16		—			(16	)		526
Change in foreign currency translation adjustment		(1,461	)		—		(1,461	)		1,461			(1,461	)
Change in unrealized loss on investments, net of tax		(1	)		—		(1	)		1			(1	)
Total other comprehensive income (loss), net of tax		3,722			16		(1,462	)		1,446			3,722
Total comprehensive income (loss)	$	(30,770	)	$	33,138	$	(29,878	)	$	(3,260	)	$	(30,770	)

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	31,936		$	86,314	$	(27,582	)	$	(58,732	)	$	31,936
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		3,897			—		—			—			3,897
Change in unrealized gain (loss) on hedges, net of tax		(1,987	)		29		(1,829	)		1,800			(1,987	)
Change in foreign currency translation adjustment		(3,209	)		—		(3,209	)		3,209			(3,209	)
Total other comprehensive income (loss), net of tax		(1,299	)		29		(5,038	)		5,009			(1,299	)
Total comprehensive income (loss)	$	30,637		$	86,343	$	(32,620	)	$	(53,723	)	$	30,637

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(83,936	)	$	44,184	$	(52,004	)	$	7,820		$	(83,936	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		9,317			—		—			—			9,317
Change in unrealized gain on hedges, net of tax		1,248			37		—			(37	)		1,248
Change in foreign currency translation adjustment		(17,086	)		—		(17,086	)		17,086			(17,086	)
Change in unrealized gain on investments, net of tax		43			—		43			(43	)		43
Total other comprehensive income (loss), net of tax		(6,478	)		37		(17,043	)		17,006			(6,478	)
Total comprehensive income (loss)	$	(90,414	)	$	44,221	$	(69,047	)	$	24,826		$	(90,414	)

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	72,552		$	165,447		$	(41,766	)	$	(123,681	)	$	72,552
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		7,795			(50,756	)		—			50,756			7,795
Change in unrealized gain (loss) on hedges, net of tax		(3,270	)		49			(2,519	)		2,470			(3,270	)
Change in foreign currency translation adjustment		(790	)		—			(790	)		790			(790	)
Change in unrealized loss on investments, net of tax		(369	)		—			(369	)		369			(369	)
Total other comprehensive income (loss), net of tax		3,366			(50,707	)		(3,678	)		54,385			3,366
Total comprehensive income (loss)	$	75,918		$	114,740		$	(45,444	)	$	(69,296	)	$	75,918

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(130,045	)	$	112,000		$	(6,057	)	$	—		$	(24,102	)
INVESTING ACTIVITIES
Additions to property, plant and equipment		(459	)		(58,130	)		(21,662	)		—			(80,251	)
Intercompany loans made		(54,736	)		—			—			54,736			—
Intercompany payments received		23,500			—			—			(23,500	)		—
Investments in subsidiaries		(50,103	)		—			—			50,103			—
Proceeds from sales of investments		—			—			202			—			202
Other		—			—			762			—			762
Cash flows used in investing activities		(81,798	)		(58,130	)		(20,698	)		81,339			(79,287	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		450,000			—			—			—			450,000
Borrowings under revolving credit agreement		—			—			529,382			—			529,382
Repayments on revolving credit agreement		—			—			(529,382	)		—			(529,382	)
Retirements of debt		(250,000	)		(4,903	)		(4,297	)		—			(259,200	)
Dividends paid		(15,638	)		—			—			—			(15,638	)
Excess tax deficit from stock-based compensation arrangements		(586	)		—			—			—			(586	)
Proceeds from stock options exercised		279			—			—			—			279
Debt issuance costs		(15,080	)		—			—			—			(15,080	)
Advances from (to) consolidated entities		95,962			(49,028	)		(46,934	)		—			—
Intercompany borrowings		—			—			54,736			(54,736	)		—
Intercompany payments made		—			—			(23,500	)		23,500			—
Investment from Parent		—			—			50,103			(50,103	)		—
Other		(293	)		—			—			—			(293	)
Cash flows provided by (used in) financing activities		264,644			(53,931	)		30,108			(81,339	)		159,482
Effect of foreign exchange rates on cash		—			—			(1,816	)		—			(1,816	)
Net increase (decrease) in cash and cash equivalents	$	52,801		$	(61	)	$	1,537		$	—		$	54,277
Cash and cash equivalents at beginning of period		83,833			61			32,707			—			116,601
Cash and cash equivalents at end of period	$	136,634		$	—		$	34,244		$	—		$	170,878

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(92,589	)	$	334,473		$	66,678		$	—		$	308,562
INVESTING ACTIVITIES
Additions to property, plant and equipment		(3,785	)		(70,234	)		(172,037	)		—			(246,056	)
Proceeds from sales of investments		—			—			12,228			—			12,228
Intercompany loans made		(27,694	)		—			—			27,694			—
Other		—			512			70			—			582
Cash flows used in investing activities		(31,479	)		(69,722	)		(159,739	)		27,694			(233,246	)
FINANCING ACTIVITIES
Borrowings under revolving credit agreement		—			—			112,350			—			112,350
Repayments on revolving credit agreement		—			—			(63,341	)		—			(63,341	)
Retirements of debt		(100,000	)		(4,025	)		(13,978	)		—			(118,003	)
Dividends paid		(15,618	)		—			—			—			(15,618	)
Excess tax benefits from stock-based compensation arrangements		877			—			—			—			877
Proceeds from stock options exercised		122			—			—			—			122
Advances from (to) consolidated entities		241,244			(176,220	)		(65,024	)		—			—
Intercompany borrowings		—			—			27,694			(27,694	)		—
Other		(711	)		—			—						(711	)
Cash flows provided by (used in) financing activities		125,914			(180,245	)		(2,299	)		(27,694	)		(84,324	)
Cash flows provided by (used in) continuing operations		1,846			84,506			(95,360	)		—			(9,008	)
CASH FLOWS FROM DISCONTINUED OPERATIONS		—			9,500			—			—			9,500
Effect of foreign exchange rates on cash		—			—			(242	)		—			(242	)
Net increase (decrease) in cash and cash equivalents	$	1,846		$	94,006		$	(95,602	)	$	—		$	250
Cash and cash equivalents at beginning of period		99,086			79			29,265			—			128,430
Cash and cash equivalents at end of period	$	100,932		$	94,085		$	(66,337	)	$	—		$	128,680

XML

Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 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 June 30, 2013 and December 31, 2012 and indicates the fair value hierarchy of the valuation techniques utilized to determine such values. For some assets, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When this is the case, the asset is categorized based on the level of the most significant input to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment and considers factors specific to the assets being valued.

	June 30, 2013
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	6	$	—	$	6
Liabilities:
Interest rate swaps	$	—	$	4,693	$	—	$	4,693

	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 and six months ended June 30, 2013, a loss of $277 thousand and $168 thousand, respectively, was recorded related to trading securities held at the reporting date. Realized gains of $9 thousand and $5 thousand on the sale of available-for-sale securities were recorded in other loss during the three and six months ended June 30, 2013, respectively, 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—All of the Company's outstanding debt is carried at cost. There were no borrowings outstanding under the Revolver at June 30, 2013 or December 31, 2012. The estimated fair value of the Company's debt is based on similar transactions and yields in an active market for similarly rated debt (Level 2). The carrying amounts and fair values of the Company's debt are presented below (in thousands):

	June 30, 2013				December 31, 2012
(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
2011 Term Loan A	$	656,566	$	636,869	$	756,974	$	758,867
2011 Term Loan B	$	978,178	$	948,833	$	1,127,770	$	1,135,293
9.875% Senior Notes	$	496,656	$	433,125	$	496,510	$	500,000
8.50% Senior Notes	$	450,000	$	358,875	$	—	$	—

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Jul. 31, 2013
Document and Entity Information
Entity Registrant Name	Walter Energy, Inc.
Entity Central Index Key	0000837173
Document Type	10-Q
Document Period End Date	Jun. 30, 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		62,576,200
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2

XML

Segment Information

6 Months Ended

Jun. 30, 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, processing and exporting metallurgical coal for the steel industry. The Other segment primarily includes unallocated 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 tables (in thousands):

	For the three months ended June 30,						For the six months ended June 30,
	2013			2012			2013			2012
Revenues:
U.S. Operations	$	321,009		$	466,761		$	660,234		$	918,911
Canadian and U.K. Operations		119,873			209,645			271,317			387,996
Other		614			1,168			1,288			2,230
Total Revenues	$	441,496		$	677,574		$	932,839		$	1,309,137
Segment operating income (loss):
U.S. Operations	$	37,333		$	107,245		$	30,376		$	214,226
Canadian and U.K. Operations		(66,347	)		(24,679	)		(115,113	)		(38,234	)
Other		(1,539	)		(14,593	)		(9,436	)		(23,943	)
Total operating income (loss)		(30,553	)		67,973			(94,173	)		152,049
Less interest expense, net		(52,985	)		(30,763	)		(104,953	)		(58,553	)
Other loss, net		(714	)		(5,919	)		(609	)		(12,912	)
Income (loss) from continuing operations before income tax expense (benefit)		(84,252	)		31,291			(199,735	)		80,584
Income tax expense (benefit)		(49,760	)		4,535			(115,799	)		13,212
Income (loss) from continuing operations	$	(34,492	)	$	26,756		$	(83,936	)	$	67,372
Depreciation and depletion:
U.S. Operations	$	31,189		$	43,704		$	78,662		$	85,846
Canadian and U.K. Operations		36,620			30,535			69,852			54,671
Other		511			220			996			435
Total	$	68,320		$	74,459		$	149,510		$	140,952
Capital expenditures:
U.S. Operations	$	38,803		$	43,851		$	66,204		$	79,963
Canadian and U.K. Operations		7,231			78,177			13,545			162,357
Other		190			3,183			502			3,736
Total	$	46,224		$	125,211		$	80,251		$	246,056

	June 30, 2013		December 31, 2012
Identifiable assets:
U.S. Operations	$	1,199,787	$	1,603,745
Canadian and U.K. Operations		3,800,009		3,728,817
Other		732,060		435,858
Total	$	5,731,856	$	5,768,420