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 September 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 October 31, 2013: 62,576,333

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		40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		62
Item 4.	Controls and Procedures		62
Part II—Other Information
Item 1.	Legal Proceedings		63
Item 1A.	Risk Factors		63
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		63
Item 4.	Mine Safety Disclosures		63
Item 6.	Exhibits		64
Signatures			66

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)

	September 30, 2013			December 31, 2012
ASSETS
Cash and cash equivalents	$	293,134		$	116,601
Receivables, net		305,354			256,967
Inventories		320,681			306,018
Deferred income taxes		58,073			58,526
Prepaid expenses		47,097			53,776
Other current assets		20,778			23,928
Total current assets		1,045,117			815,816
Mineral interests, net of accumulated depletion of $232,065 and $179,595, respectively		2,917,902			2,965,557
Property, plant and equipment, net of accumulated depreciation of $925,650 and $796,683, respectively		1,628,441			1,732,131
Deferred income taxes		148,311			160,422
Other long-term assets		100,741			94,494
	$	5,840,512		$	5,768,420
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	12,179		$	18,793
Accounts payable		97,693			114,913
Accrued expenses		154,470			184,875
Accumulated postretirement benefits obligation		30,511			29,200
Other current liabilities		214,300			206,473
Total current liabilities		509,153			554,254
Long-term debt		2,770,381			2,397,372
Accumulated postretirement benefits obligation		641,337			633,264
Deferred income taxes		854,408			921,687
Other long-term liabilities		236,555			251,272
Total liabilities		5,011,834			4,757,849
Commitments and contingencies (Note 8)
Stockholders' equity:
Common stock, $0.01 par value per share:
Authorized—200,000,000 shares, Issued—62,576,365 and 62,521,300 shares, respectively		626			625
Capital in excess of par value		1,610,748			1,628,244
Accumulated deficit		(524,587	)		(347,448	)
Accumulated other comprehensive income (loss):
Pension and other postretirement benefit plans, net of tax		(252,066	)		(266,042	)
Foreign currency translation adjustment		(3,741	)		(1,502	)
Unrealized loss on hedges, net of tax		(2,302	)		(4,203	)
Unrealized investment gain, net of tax		—			897
Total stockholders' equity		828,678			1,010,571
	$	5,840,512		$	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 September 30,						For the nine months ended September 30,
	2013			2012			2013			2012
Revenues:
Sales	$	445,937		$	612,510		$	1,373,344		$	1,908,413
Miscellaneous income (loss)		9,859			(536	)		15,291			12,698
		455,796			611,974			1,388,635			1,921,111
Costs and expenses:
Cost of sales (exclusive of depreciation and depletion)		395,311			448,765			1,183,861			1,366,383
Depreciation and depletion		82,986			82,560			232,496			223,512
Selling, general and administrative		21,873			32,486			79,676			104,578
Postretirement benefits		14,707			13,213			44,157			39,639
Restructuring and asset impairment		—			1,106,715			1,699			1,106,715
		514,877			1,683,739			1,541,889			2,840,827
Operating loss		(59,081	)		(1,071,765	)		(153,254	)		(919,716	)
Interest expense		(63,544	)		(30,545	)		(169,291	)		(89,716	)
Interest income		15			113			809			731
Other income (loss), net		4,886			(943	)		4,277			(13,855	)
Loss from continuing operations before income tax benefit		(117,724	)		(1,103,140	)		(317,459	)		(1,022,556	)
Income tax benefit		(17,000	)		(41,184	)		(132,799	)		(27,972	)
Loss from continuing operations		(100,724	)		(1,061,956	)		(184,660	)		(994,584	)
Income from discontinued operations		—			—			—			5,180
Net loss	$	(100,724	)	$	(1,061,956	)	$	(184,660	)	$	(989,404	)
Basic income (loss) per share:
Loss from continuing operations	$	(1.61	)	$	(16.97	)	$	(2.95	)	$	(15.91	)
Income from discontinued operations		—			—			—			0.09
Net loss	$	(1.61	)	$	(16.97	)	$	(2.95	)	$	(15.82	)
Diluted income (loss) per share:
Loss from continuing operations	$	(1.61	)	$	(16.97	)	$	(2.95	)	$	(15.91	)
Income from discontinued operations		—			—			—			0.09
Net loss	$	(1.61	)	$	(16.97	)	$	(2.95	)	$	(15.82	)
Dividends per share	$	0.01		$	0.125		$	0.26		$	0.375

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 September 30,						For the nine months ended September 30,
	2013			2012			2013			2012
Net loss	$	(100,724	)	$	(1,061,956	)	$	(184,660	)	$	(989,404	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, (net of tax expense: $2,882 and $2,422 and $8,647 and $7,266 for the three and nine months ended September 30, 2013 and 2012, respectively)		4,659			3,898			13,976			11,693
Change in unrealized gain (loss) on hedges, (net of tax expense (benefit)): $409 and $(339) and $1,076 and $(2,381) for the three and nine months ended September 30, 2013 and 2012, respectively)		653			(545	)		1,901			(3,815	)
Change in foreign currency translation adjustment		14,847			3,132			(2,239	)		2,342
Change in unrealized gain (loss) on investments, net of tax		(940	)		1,135			(897	)		766
Total other comprehensive income, net of tax		19,219			7,620			12,741			10,986
Total comprehensive loss	$	(81,505	)	$	(1,054,336	)	$	(171,919	)	$	(978,418	)

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 NINE MONTHS ENDED SEPTEMBER 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		(184,660	)		—		—			(184,660	)		—
Other comprehensive income, net of tax		12,741			—		—			—			12,741
Stock issued upon the exercise of stock options		279			1		278			—			—
Dividends paid, $0.26 per share		(16,264	)		—		(24,078	)		7,814			—
Stock based compensation		7,022			—		7,022			—			—
Tax effect from stock-based compensation arrangements		(718	)		—		(718	)		—			—
Other		(293	)		—					(293	)		—
Balance at September 30, 2013	$	828,678		$	626	$	1,610,748		$	(524,587	)	$	(258,109	)

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 nine months ended September 30,
	2013			2012
OPERATING ACTIVITIES
Net loss	$	(184,660	)	$	(989,404	)
Less income from discontinued operations		—			(5,180	)
Loss from continuing operations		(184,660	)		(994,584	)
Adjustments to reconcile loss from continuing operations to net cash flows provided by (used in) operating activities:
Depreciation and depletion		232,496			223,512
Deferred income tax benefit		(68,426	)		(100,419	)
Impairment charges		—			1,106,715
Amortization of debt issuance costs		25,392			12,763
Other		(4,422	)		28,259
Decrease (increase) in current assets:
Receivables		(48,631	)		79,310
Inventories		(7,274	)		(113,601	)
Prepaid expenses and other current assets		4,801			(8,412	)
Increase (decrease) in current liabilities:
Accounts payable		(1,397	)		91,349
Accrued interest		30,676			(1,300	)
Accrued expenses and other current liabilities		(22,581	)		9,414
Cash flows provided by (used in) operating activities		(44,026	)		333,006
INVESTING ACTIVITIES
Additions to property, plant and equipment		(108,735	)		(331,340	)
Proceeds from sales of investments		1,559			12,382
Other		663			1,076
Cash flows used in investing activities		(106,513	)		(317,882	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		897,412			—
Borrowings under revolving credit agreement		646,320			272,926
Repayments on revolving credit agreement		(646,320	)		(125,396	)
Retirements of debt		(510,255	)		(128,450	)
Dividends paid		(16,264	)		(23,432	)
Net consideration paid upon exercise of warrants		—			(11,535	)
Debt issuance costs		(42,128	)		(6,376	)
Other		(732	)		178
Cash flows provided by (used in) financing activities		328,033			(22,085	)
Cash flows provided by (used in) continuing operations		177,494			(6,961	)
CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash flows provided by investing activities		—			9,500
Effect of foreign exchange rates on cash		(961	)		(1,047	)
Net increase in cash and cash equivalents		176,533			1,492
Cash and cash equivalents at beginning of period		116,601			128,430
Cash and cash equivalents at end of period	$	293,134		$	129,922

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

NINE MONTHS ENDED SEPTEMBER 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 nine months ended September 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 filed 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 as the change had no effect on total stockholders' equity.

        During the first quarter of 2013, the Company began to classify certain 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 nine months ended September 30, 2012 would have been $5.7 million and $19.1 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 second quarter of 2013. Prior period balances have not been restated as management has determined that the effect was not material to the current or prior reporting periods.

6

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 30, 2013 (Unaudited)

Note 2—Restructuring and Asset Impairment

        In response to the current depressed price environment for thermal coal and geological challenges 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 allows the closure of this mine in the fourth quarter of 2013. For the nine months ended September 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 the North River mine. The $17.0 million benefit 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 $10.7 million of costs related to the curtailment of the Willow Creek mine during the nine months ended September 30, 2013.

Note 3—Inventories

        Inventories are summarized as follows (in thousands):

	September 30, 2013		December 31, 2012
Coal	$	243,614	$	228,910
Raw materials and supplies		77,067		77,108
Total inventories	$	320,681	$	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 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 nine months ended September 30, 2013, the income tax benefit was determined based on the annual effective tax rate method. The Company recognized an income tax benefit of $132.8 million for the nine months ended September 30, 2013, compared to an income tax benefit of $28.0 million for the nine months ended September 30, 2012. The increase in the income tax benefit year-over-year was primarily attributable to an increase in pre-tax operating losses, excluding the 2012 non-deductible goodwill impairment charge, for the current period as compared to the prior year. The 2013 and 2012 income tax provisions reflect the benefits of the 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 nine months ended September 30, 2013 and 2012 also reflect statutory depletion deductions from the Alabama mining operations.

7

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 30, 2013 (Unaudited)

Note 4—Income Taxes (Continued)

        The current year provision for income taxes includes a benefit of $11.2 million attributable to foreign currency exchange rate fluctuations on foreign deferred tax liabilities. Additionally, the income tax provision for the three and nine months ended September 30, 2013 includes a non-cash deferred income tax charge of $13.7 million to reflect the revaluation of our Canadian and U.K. Operations deferred tax liabilities as the result of changes to the statutory corporate tax rates in each jurisdiction and a non-cash deferred income tax charge of $10.3 million related to foreign financing activities.

Note 5—Debt

        Debt consisted of the following (in thousands):

	September 30, 2013			December 31, 2012			Weighted Average Stated Interest Rate At September 30, 2013	Final Maturity
2011 term loan A ($406.6 million face value)	$	400,306		$	756,974		5.74%	2016
2011 term loan B ($978.2 million face value)		968,100			1,127,770		6.75%	2018
Revolving credit facility(1)		—			—		N/A	2016
9.875% senior notes ($500.0 million face value)		496,733			496,510		9.88%	2020
8.50% senior notes		450,000			—		8.50%	2021
9.50% senior secured notes ($450.0 million face value)		447,413			—		9.50%	2019
Other(2)		20,008			34,911		Various	Various
Total debt		2,782,560			2,416,165
Less: current debt(2)		(12,179	)		(18,793	)
Total long-term debt	$	2,770,381		$	2,397,372

(1)

As of September 30, 2013, the revolving credit facility interest rate was tied to LIBOR or CDOR, plus a credit spread ranging from 450 to 550 basis points and includes a commitment fee of 0.50% on the unused facility.

(2)

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

8

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 30, 2013 (Unaudited)

Note 5—Debt (Continued)

        The Company's minimum debt repayment schedule, excluding interest, as of September 30, 2013 is as follows (in thousands):

	Payments Due
	2013		2014		2015		2016		2017		Thereafter
2011 term loan A	$	—	$	—	$	305,941	$	100,625	$	—	$	—
2011 term loan B		—		—		—		—		—		978,178
9.875% senior notes		—		—		—		—		—		500,000
8.50% senior notes		—		—		—		—		—		450,000
9.50% senior secured notes		—		—		—		—		—		450,000
Other debt		4,899		10,090		4,929		90		—		—
	$	4,899	$	10,090	$	310,870	$	100,715	$	—	$	2,378,178

9.50% Senior Secured Notes due 2019

        On September 27, 2013, the Company issued $450.0 million aggregate principal amount of 9.50% senior secured notes due October 15, 2019 (the "2019 Notes"). The 2019 Notes are guaranteed, jointly and severally, by each of our current and future wholly-owned domestic restricted subsidiaries that from time to time guarantees any of our indebtedness or any indebtedness of any of our restricted subsidiaries. The 2019 Notes and related guarantees are secured on a first priority basis by substantially all of the property and assets of the Company and the guarantors. Interest on the 2019 Notes is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2014.

        The Company used $245.7 million of the proceeds from the 2019 Notes to extinguish $250.0 million of Term Loan A debt through a Dutch Auction process. The gain on partial extinguishment of Term Loan A debt of $4.3 million is included in other income (loss) in the Condensed Consolidated Statements of Operations. Additionally, the Company expensed $5.2 million of previously capitalized debt issuance costs as a result of the early extinguishment of the Term Loan A debt. The write-off of debt issuance costs is included in interest expense in the Condensed Consolidated Statements of Operations.

        The terms of the 2019 Notes provide that at any time prior to October 15, 2016, the Company may redeem up to 35% of the aggregate principal amount of the 2019 Notes with the net cash proceeds of certain equity offerings, at a redemption price of 109.5% of the aggregate principal amount. The Company may redeem the 2019 Notes, in whole or in part, prior to October 15, 2016, at a redemption price equal to 100% of the aggregate principal amount of the 2019 Notes plus a "make-whole" premium. The Company may redeem the 2019 Notes, in whole or in part at redemption prices equal to 107.125% for the twelve months commencing October 15, 2016, 102.375% for the twelve months commencing October 15, 2017 and 100% beginning on October 15, 2018. Upon the occurrence of a change of control, unless the Company has exercised its right to redeem the 2019 Notes, the Company will be required to offer to repurchase each holder's 2019 Notes at a price equal to 101% of the aggregate principal amount.

9

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 30, 2013 (Unaudited)

Note 5—Debt (Continued)

8.50% Senior Notes due 2021

        On March 27, 2013, the Company issued $450.0 million aggregate principal amount of 8.50% senior notes due April 15, 2021 (the "2021 Notes"). The 2021 Notes are unconditionally guaranteed, jointly and severally, on an unsecured basis, by each of our current and future wholly-owned domestic restricted subsidiaries that from time to time guarantees any of our indebtedness or any indebtedness of our restricted subsidiaries. Interest on the 2021 Notes is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on October 15, 2013.

        A portion of the proceeds from the 2021 Notes was used to repurchase $250.0 million of Term Loan A and B debt on a pro-rata basis. The Company expensed $6.0 million of previously capitalized debt issuance costs as a result of the early extinguishment of a portion of the Term Loan A and B debt. The write-off of debt issuance costs is included in interest expense in the Condensed Consolidated Statements of Operations.

        At any time prior to April 15, 2016, the Company may redeem up to 35% of the aggregate principal amount of the 2021 Notes with the net cash proceeds of certain equity offerings, at a redemption price of 108.50% of the aggregate principal amount. The Company may redeem the 2021 Notes, in whole or in part, 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. 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. 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.

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), 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 previous existing levels; (2) a less restrictive interest expense coverage ratio and suspension of compliance requirements until March 31, 2015; (3) a less restrictive senior secured leverage ratio and suspension of compliance requirements 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 to increase the 2014 capital spending limit up to $220.0 million; (6) additional flexibility for the Company to issue additional unsecured debt, subject to 100% of the net proceeds of any such incurrence of debt in excess of $250 million be used to repay term loans then outstanding under the Credit Agreement; and (7) a restriction on cash dividends allowed in any fiscal quarter when the secured leverage ratio exceeds 4.50:1.00.

10

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 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 September 30,						For the three months ended September 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			7,200		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			4,714		3,681
Net periodic benefit cost	$	3,101		$	2,973		$	14,707	$	13,213

	Pension Benefits						Other Postretirement Benefits
	For the nine months ended September 30,						For the nine months ended September 30,
	2013			2012			2013		2012
Components of net periodic benefit cost:
Service cost	$	5,298		$	4,494		$	7,458	$	6,054
Interest cost		9,210			9,387			21,596		21,759
Expected return on plan assets		(12,705	)		(12,093	)		—		—
Amortization of prior service cost		198			192			921		783
Amortization of net actuarial loss		7,302			6,939			14,182		11,043
Net periodic benefit cost	$	9,303		$	8,919		$	44,157	$	39,639

11

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 30, 2013 (Unaudited)

Note 7—Net Loss Per Share

        A reconciliation of the basic and diluted net loss per share computations for the three and nine months ended September 30, 2013 and 2012 is as follows (in thousands, except per share data):

	For the three months ended September 30,
	2013						2012
	Basic			Diluted			Basic			Diluted
Numerator:
Net loss	$	(100,724	)	$	(100,724	)	$	(1,061,956	)	$	(1,061,956	)
Denominator:
Average number of common shares outstanding		62,573			62,573			62,572			62,572
Effect of dilutive securities:
Stock awards(1)		—			—			—			—
		62,573			62,573			62,572			62,572
Net loss per share	$	(1.61	)	$	(1.61	)	$	(16.97	)	$	(16.97	)

	For the nine months ended September 30,
	2013						2012
	Basic			Diluted			Basic			Diluted
Numerator:
Loss from continuing operations	$	(184,660	)	$	(184,660	)	$	(994,584	)	$	(994,584	)
Income from discontinued operations	$	—		$	—		$	5,180		$	5,180
Denominator:
Average number of common shares outstanding		62,555			62,555			62,524			62,524
Effect of dilutive securities:
Stock awards(1)		—			—			—			—
		62,555			62,555			62,524			62,524
Loss from continuing operations	$	(2.95	)	$	(2.95	)	$	(15.91	)	$	(15.91	)
Income from discontinued operations		—			—			0.09			0.09
Net loss per share	$	(2.95	)	$	(2.95	)	$	(15.82	)	$	(15.82	)

(1)

Stock awards represent the weighted average number of shares of common stock issuable on the exercise of dilutive employee stock options and vesting of 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. 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 and non-vested shares outstanding for the three months ended September 30, 2013 and 2012 totaling 675,216 and 291,517, respectively, were excluded from the calculation above because their effect would have been anti-dilutive. Additionally, the weighted average number of stock options and non-vested shares outstanding for the nine months ended September 30, 2013 and 2012 totaling 525,402 and 224,240, respectively, were excluded from the calculation above because their effect would have been anti-dilutive.

12

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 30, 2013 (Unaudited)

Note 7—Net Loss Per Share (Continued)

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

	For the three months ended September 30,
	2013		2012
Stock options		—		1,500
Restricted stock units		4,558		3,470
Total		4,558		4,970

	For the nine months ended September 30,
	2013		2012
Stock options		24,831		20,759
Restricted stock units		30,234		32,085
Total		55,065		52,844

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

13

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 30, 2013 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

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 September 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 September 30, 2013, a final resolution has not been reached with the Appeals Division pertaining to the remaining disputed matters. The remaining disputed issues in this audit period are similar to the issues remaining in the Proof of Claim.

        The IRS is currently 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 September 30, 2013, the Company had $38 million of accruals for unrecognized tax benefits on the matters subject to

14

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 30, 2013 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

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, and 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 proceeded directly with the offsite sampling work and deferred any further enforcement actions or decisions. In March 2013, the EPA released the North Birmingham Air Toxics Risk Assessment showing the air quality around Company facilities to be acceptable. In August 2013, the Agency for Toxic Substances and Disease Registry (ATSDR) released a report concerning past, present and future exposures to residential soils in North Birmingham and concluded that there is no public health hazard. In September 2013, EPA sent an "Offer to Conduct Work" letter to Walter Coke and four other PRP's notifying them that EPA had completed sampling at 1,100 residential

15

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 30, 2013 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

properties and that 400 properties exceeded Regional Removal Management Levels (RML's) and offered the PRP's an opportunity to cleanup 50 Phase I properties. The Company is currently evaluating the letter.

        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 September 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. 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. On September 30, 2013, the Court issued a memorandum opinion and order denying the motion. On November 1, 2013 a joint motion to stay proceedings was filed with the Court. The Company believes that there is no merit to the claims alleged in this action and intends to vigorously defend this matter.

16

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 30, 2013 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

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. As of September 30, 2013, the Company has incurred some costs in taking corrective actions in response to the 2011 release and is continuing to cooperate with regulatory authorities. The Company intends 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

17

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 30, 2013 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

(Walters v. Scheller et al.). All three complaints named as defendants the Company's then 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 then 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.

18

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 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 effective portion 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. The ineffective portion of the change in the fair value of derivatives is recognized directly in earnings included in other income (loss) in the Condensed Consolidated Statements of Operations.

        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

19

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 30, 2013 (Unaudited)

Note 9—Derivative Financial Instruments (Continued)

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 through 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 September 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 the Company's derivative instruments.

	September 30, 2013		December 31, 2012
Asset derivatives designated as cash flow hedging instruments:
Interest rate cap(1)	$	2	$	12
Total asset derivatives	$	2	$	12
Liability derivatives designated as cash flow hedging instruments:
Interest rate swaps(2)	$	4,005	$	6,615
Total liability derivatives	$	4,005	$	6,615

(1)

$2 thousand and $8 thousand were included in other current assets within the Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012, respectively, while $4 thousand was included in other long-term assets as of December 31, 2012.

(2)

$4.0 million and $4.1 million were included within other current liabilities within the Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012, respectively, while $2.5 million was included within other long-term liabilities as of December 31, 2012.

20

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 30, 2013 (Unaudited)

Note 9—Derivative Financial Instruments (Continued)

        The following tables present the gains and losses from derivative instruments for the three and nine months ended September 30, 2013 and 2012 and their location within the condensed consolidated financial statements (in thousands).

	Gain (loss), net of tax, recognized in accumulated other comprehensive income (loss)						Gain, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings(1)(2)						Loss, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings (ineffective portion)(3)
	Three months ended September 30,						Three months ended September 30,						Three months ended September 30,
Derivatives designated as cash flow hedging instruments	2013			2012			2013			2012			2013		2012
Interest rate swaps	$	1,057		$	9		$	(636	)	$	(518	)	$	235	$	—
Interest rate cap		(3	)		(36	)		—			—			—		—
Total	$	1,054		$	(27	)	$	(636	)	$	(518	)	$	235	$	—

	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)						Loss, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings (ineffective portion)(3)
	Nine months ended September 30,						Nine months ended September 30,						Nine months ended September 30,
Derivatives designated as cash flow hedging instruments	2013			2012			2013			2012			2013		2012
Natural gas hedges	$	—		$	(5,798	)	$	—		$	3,279		$	—	$	—
Interest rate swaps		3,538			502			(1,866	)		(1,543	)		235		—
Interest rate cap		(6	)		(255	)		—			—			—		—
Total	$	3,532		$	(5,551	)	$	(1,866	)	$	1,736		$	235	$	—

(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.

(3)

The ineffective portion of the interest rate swap is recorded within other income (loss) in the Condensed Consolidated Statements of Operations.

21

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 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 nine months ended September 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		—			3,532			(2,239	)		(44	)		1,249
Amounts reclassified from accumulated other comprehensive income (loss)		13,976			(1,631	)		—	(1)		(853	)		11,492
Net current-period other comprehensive income (loss)		13,976			1,901			(2,239	)		(897	)		12,741
Ending balance as of September 30, 2013	$	(252,066	)	$	(2,302	)	$	(3,741	)	$	—		$	(258,109	)

⁽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.

22

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 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 nine months ended September 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	$	(3,018	)	Interest expense
Interest rate swaps (ineffective portion)		378		Other loss
		(2,640	)	Total before tax
		1,009		Income tax expense
	$	(1,631	)	Net of tax
Amortization of pension and postretirement benefit plans:
Prior service cost	$	1,119		(a)
Net actuarial loss		21,484		(a)
		22,603		Total before tax
		(8,627	)	Income tax benefit
	$	13,976		Net of tax
Gains and losses on available-for-sale securities	$	(1,382	)	Other income
		529		Income tax expense
	$	(853	)	Net of tax

(a)

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

Note 11—Fair Value of Financial Instruments

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

23

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 30, 2013 (Unaudited)

Note 11—Fair Value of Financial Instruments (Continued)

observable categorized as Level 1 and those that are the least observable categorized as Level 3. Hierarchy levels are defined as follows:

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

        The following table presents information about the Company's assets and liabilities that are measured at fair value on a recurring basis as of September 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.

	September 30, 2013
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	2	$	—	$	2
Liabilities:
Interest rate swaps	$	—	$	4,005	$	—	$	4,005

	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:

        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 was determined using quoted dealer prices for similar contracts in active over-the-counter markets.

24

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 30, 2013 (Unaudited)

Note 11—Fair Value of Financial Instruments (Continued)

        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 September 30, 2013 or December 31, 2012. The estimated fair value of the Company's debt is based on observable market data (Level 2). The carrying amounts and fair values of the Company's debt are presented below (in thousands):

	September 30, 2013				December 31, 2012
(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
2011 Term Loan A	$	400,306	$	395,386	$	756,974	$	758,867
2011 Term Loan B	$	968,100	$	941,497	$	1,127,770	$	1,135,293
9.875% Senior Notes	$	496,733	$	435,000	$	496,510	$	500,000
8.50% Senior Notes	$	450,000	$	373,500	$	—	$	—
9.50% Senior Secured Notes	$	447,413	$	465,188	$	—	$	—

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.

25

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 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 September 30,						For the nine months ended September 30,
	2013			2012			2013			2012
Revenues:
U.S. Operations	$	337,269		$	483,615		$	997,503		$	1,402,526
Canadian and U.K. Operations		119,367			127,905			390,684			515,901
Other		(840	)		454			448			2,684
Total	$	455,796		$	611,974		$	1,388,635		$	1,921,111
Segment operating income (loss):
U.S. Operations	$	(8,008	)	$	(22,228	)	$	22,368		$	191,998
Canadian and U.K. Operations		(48,022	)		(1,036,690	)		(163,135	)		(1,074,924	)
Other		(3,051	)		(12,847	)		(12,487	)		(36,790	)
Total operating loss		(59,081	)		(1,071,765	)		(153,254	)		(919,716	)
Less interest expense, net		(63,529	)		(30,432	)		(168,482	)		(88,985	)
Other income (loss), net		4,886			(943	)		4,277			(13,855	)
Loss from continuing operations before income tax benefit		(117,724	)		(1,103,140	)		(317,459	)		(1,022,556	)
Income tax benefit		(17,000	)		(41,184	)		(132,799	)		(27,972	)
Loss from continuing operations	$	(100,724	)	$	(1,061,956	)	$	(184,660	)	$	(994,584	)
Impairment Charges:
U.S. Operations	$	—		$	114,281		$	—		$	114,281
Canadian and U.K. Operations		—			992,434			—			992,434
Other		—			—			—			—
Total	$	—		$	1,106,715		$	—		$	1,106,715
Depreciation and depletion:
U.S. Operations	$	53,060		$	44,789		$	131,722		$	130,635
Canadian and U.K. Operations		29,383			37,305			99,235			91,976
Other		543			466			1,539			901
Total	$	82,986		$	82,560		$	232,496		$	223,512
Capital expenditures:
U.S. Operations	$	24,741		$	41,670		$	90,945		$	121,633
Canadian and U.K. Operations		2,867			43,419			16,412			205,776
Other		876			195			1,378			3,931
Total	$	28,484		$	85,284		$	108,735		$	331,340

26

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 30, 2013 (Unaudited)

Note 12—Segment Information (Continued)

	September 30, 2013		December 31, 2012
Identifiable assets:
U.S. Operations	$	1,372,266	$	1,603,745
Canadian and U.K. Operations		3,722,676		3,728,817
Other		745,570		435,858
Total	$	5,840,512	$	5,768,420

Note 13—Supplemental Guarantor and Non-Guarantor Financial Information

        In accordance with the indentures governing the 9.875% senior notes due December 2020 and the 8.50% senior notes due April 2021 (collectively the "Senior Notes"), certain wholly-owned U.S. domestic restricted subsidiaries of the Company have fully and unconditionally guaranteed the Senior Notes on a joint and several basis. 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:

27

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 30, 2013 (Unaudited)

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

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

	Parent (Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
ASSETS
Cash and cash equivalents	$	261,733	$	—	$	31,401		$	—		$	293,134
Receivables, net		120,361		109,229		75,764			—			305,354
Intercompany receivables		—		216,751		57,438			(274,189	)		—
Intercompany loans receivable		55,583		1,096,126		—			(1,151,709	)		—
Inventories		—		164,493		156,188			—			320,681
Deferred income taxes		39,876		17,687		510			—			58,073
Prepaid expenses		2,931		39,792		4,374			—			47,097
Other current assets		17,867		631		2,280			—			20,778
Total current assets		498,351		1,644,709		327,955			(1,425,898	)		1,045,117
Mineral interests, net		—		7,687		2,910,215			—			2,917,902
Property, plant and equipment, net		6,753		759,471		862,217			—			1,628,441
Deferred income taxes		40,252		112,560		(4,501	)		—			148,311
Investment in subsidiaries		4,613,231		—		—			(4,613,231	)		—
Other long-term assets		74,318		10,331		16,092			—			100,741
	$	5,232,905	$	2,534,758	$	4,111,978		$	(6,039,129	)	$	5,840,512
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—	$	3,945	$	8,234		$	—		$	12,179
Accounts payable		3,446		72,706		21,541			—			97,693
Accrued expenses		53,472		44,752		56,246			—			154,470
Intercompany payables		274,189		—		—			(274,189	)		—
Intercompany loans payable		1,096,126		—		55,583			(1,151,709	)		—
Accumulated postretirement benefits obligation		161		30,350		—			—			30,511
Other current liabilities		168,993		23,202		22,105			—			214,300
Total current liabilities		1,596,387		174,955		163,709			(1,425,898	)		509,153
Long-term debt		2,762,553		—		7,828			—			2,770,381
Accumulated postretirement benefits obligation		400		640,937		—			—			641,337
Deferred income taxes		—		—		854,408			—			854,408
Other long-term liabilities		44,887		123,184		68,484			—			236,555
Total liabilities		4,404,227		939,076		1,094,429			(1,425,898	)		5,011,834
Stockholders' equity		828,678		1,595,682		3,017,549			(4,613,231	)		828,678
	$	5,232,905	$	2,534,758	$	4,111,978		$	(6,039,129	)	$	5,840,512

28

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 30, 2013 (Unaudited)

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

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS (Unaudited)
DECEMBER 31, 2012
(in thousands)

	Parent (Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
ASSETS
Cash and cash equivalents	$	83,833	$	61	$	32,707		$	—		$	116,601
Receivables, net		64,106		113,182		79,679			—			256,967
Intercompany receivables		721,293		—		—			(721,293	)		—
Intercompany loans receivable		118,079		1,074,879		—			(1,192,958	)		—
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		1,046,114		1,384,138		299,815			(1,914,251	)		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
	$	4,708,641	$	2,315,448	$	4,188,676		$	(5,444,345	)	$	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		—		567,360		153,933			(721,293	)		—
Intercompany loans payable		1,074,879		—		118,079			(1,192,958	)		—
Accumulated postretirement benefits obligation		131		29,069		—			—			29,200
Other current liabilities		157,044		24,389		25,040			—			206,473
Total current liabilities		1,264,379		792,429		411,697			(1,914,251	)		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		3,698,070		1,555,618		1,418,412			(1,914,251	)		4,757,849
Stockholders' equity		1,010,571		759,830		2,770,264			(3,530,094	)		1,010,571
	$	4,708,641	$	2,315,448	$	4,188,676		$	(5,444,345	)	$	5,768,420

29

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 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 SEPTEMBER 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	302,328	$	143,609		$	—		$	445,937
Miscellaneous income (loss)		(932	)		5,669		5,122			—			9,859
		(932	)		307,997		148,731			—			455,796
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			234,913		160,398			—			395,311
Depreciation and depletion		543			43,600		38,843			—			82,986
Selling, general and administrative		(3,730	)		13,854		11,749			—			21,873
Postretirement benefits		(54	)		14,761		—			—			14,707
Restructuring and asset impairment		—			—		—			—			—
		(3,241	)		307,128		210,990			—			514,877
Operating income (loss)		2,309			869		(62,259	)		—			(59,081	)
Interest expense		(72,054	)		—		(2,408	)		10,918			(63,544	)
Interest income		1,874			8,465		594			(10,918	)		15
Other loss		4,059			218		609			—			4,886
Income (loss) before income tax expense		(63,812	)		9,552		(63,464	)		—			(117,724	)
Income tax expense (benefit)		(715	)		1,368		(17,653	)		—			(17,000	)
		(63,097	)		8,184		(45,811	)		—			(100,724	)
Equity in earnings (losses) of subsidiaries		(37,627	)		—		—			37,627			—
Net income (loss)	$	(100,724	)	$	8,184	$	(45,811	)	$	37,627		$	(100,724	)

30

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 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 SEPTEMBER 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	441,518		$	170,992		$	—		$	612,510
Miscellaneous income (loss)		345			1,674			(2,555	)		—			(536	)
		345			443,192			168,437			—			611,974
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			283,138			165,627			—			448,765
Depreciation and depletion		466			35,576			46,518			—			82,560
Selling, general and administrative		6,026			17,885			8,575			—			32,486
Postretirement benefits		(112	)		13,325			—			—			13,213
Restructuring and asset impairment		—			—			1,106,715			—			1,106,715
		6,380			349,924			1,327,435			—			1,683,739
Operating income (loss)		(6,035	)		93,268			(1,158,998	)		—			(1,071,765	)
Interest expense		(35,618	)		(1,191	)		(2,484	)		8,748			(30,545	)
Interest income		1,124			6,699			1,038			(8,748	)		113
Other income (loss), net		3,019			—			(3,962	)		—			(943	)
Income (loss) before income tax expense		(37,510	)		98,776			(1,164,406	)		—			(1,103,140	)
Income tax benefit		(2,295	)		(1,632	)		(37,257	)		—			(41,184	)
		(35,215	)		100,408			(1,127,149	)		—			(1,061,956	)
Equity in earnings (losses) of subsidiaries		(1,026,741	)		—			—			1,026,741			—
Net income (loss)	$	(1,061,956	)	$	100,408		$	(1,127,149	)	$	1,026,741		$	(1,061,956	)

31

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 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)
NINE MONTHS ENDED SEPTEMBER 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	916,338		$	457,006		$	—		$	1,373,344
Miscellaneous income (loss)		(159	)		8,638			6,812			—			15,291
		(159	)		924,976			463,818			—			1,388,635
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			693,904			489,957			—			1,183,861
Depreciation and depletion		1,539			117,683			113,274			—			232,496
Selling, general and administrative		6,420			41,108			32,148			—			79,676
Postretirement benefits		(164	)		44,321			—			—			44,157
Restructuring and asset impairment		—			(8,947	)		10,646			—			1,699
		7,795			888,069			646,025			—			1,541,889
Operating income (loss)		(7,954	)		36,907			(182,207	)		—			(153,254	)
Interest expense		(190,227	)		—			(8,585	)		29,521			(169,291	)
Interest income		5,419			21,748			3,163			(29,521	)		809
Other income		4,059			218			—			—			4,277
Income (loss) before income tax expense		(188,703	)		58,873			(187,629	)		—			(317,459	)
Income tax expense (benefit)		(49,490	)		6,505			(89,814	)		—			(132,799	)
		(139,213	)		52,368			(97,815	)		—			(184,660	)
Equity in earnings (losses) of subsidiaries		(45,447	)		—			—			45,447			—
Net income (loss)	$	(184,660	)	$	52,368		$	(97,815	)	$	45,447		$	(184,660	)

32

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 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)
NINE MONTHS ENDED SEPTEMBER 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	1,290,567		$	617,846		$	—		$	1,908,413
Miscellaneous income (loss)		2,071			20,553			(9,926	)		—			12,698
		2,071			1,311,120			607,920			—			1,921,111
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			801,320			565,063			—			1,366,383
Depreciation and depletion		901			105,308			117,303			—			223,512
Selling, general and administrative		14,594			55,011			34,973			—			104,578
Postretirement benefits		(337	)		39,976			—			—			39,639
Restructuring and asset impairment		—			—			1,106,715			—			1,106,715
		15,158			1,001,615			1,824,054			—			2,840,827
Operating income (loss)		(13,087	)		309,505			(1,216,134	)		—			(919,716	)
Interest expense		(111,043	)		(1,731	)		(4,443	)		27,501			(89,716	)
Interest income		2,868			21,930			3,434			(27,501	)		731
Other income (loss), net		9,058			—			(22,913	)		—			(13,855	)
Income (loss) before income tax expense		(112,204	)		329,704			(1,240,056	)		—			(1,022,556	)
Income tax expense (benefit)		(25,860	)		63,849			(65,961	)		—			(27,972	)
Income (loss) from continuing operations		(86,344	)		265,855			(1,174,095	)		—			(994,584	)
Income from discontinued operations		—			—			5,180			—			5,180
Equity in earnings (losses) of subsidiaries		(903,060	)		—			—			903,060			—
Net income (loss)	$	(989,404	)	$	265,855		$	(1,168,915	)	$	903,060		$	(989,404	)

33

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 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 SEPTEMBER 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(100,724	)	$	8,184	$	(45,811	)	$	37,627		$	(100,724	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		4,659			13,338		—			(13,338	)		4,659
Change in unrealized gain on hedges, net of tax		653			12		—			(12	)		653
Change in foreign currency translation adjustment		14,847			—		14,847			(14,847	)		14,847
Change in unrealized loss on investments, net of tax		(940	)		—		(940	)		940			(940	)
Total other comprehensive income (loss), net of tax		19,219			13,350		13,907			(27,257	)		19,219
Total comprehensive income (loss)	$	(81,505	)	$	21,534	$	(31,904	)	$	10,370		$	(81,505	)

34

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 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 SEPTEMBER 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(1,061,956	)	$	100,408	$	(1,127,149	)	$	1,026,741		$	(1,061,956	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		3,898			—		—			—			3,898
Change in unrealized gain (loss) on hedges, net of tax		(545	)		23		—			(23	)		(545	)
Change in foreign currency translation adjustment		3,132			—		3,132			(3,132	)		3,132
Change in unrealized gain on investments, net of tax		1,135			—		1,135			(1,135	)		1,135
Total other comprehensive income (loss), net of tax		7,620			23		4,267			(4,290	)		7,620
Total comprehensive income (loss)	$	(1,054,336	)	$	100,431	$	(1,122,882	)	$	1,022,451		$	(1,054,336	)

35

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 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)
NINE MONTHS ENDED SEPTEMBER 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(184,660	)	$	52,368	$	(97,815	)	$	45,447		$	(184,660	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		13,976			13,338		—			(13,338	)		13,976
Change in unrealized gain on hedges, net of tax		1,901			49		—			(49	)		1,901
Change in foreign currency translation adjustment		(2,239	)		—		(2,239	)		2,239			(2,239	)
Change in unrealized gain on investments, net of tax		(897	)		—		(897	)		897			(897	)
Total other comprehensive income (loss), net of tax		12,741			13,387		(3,136	)		(10,251	)		12,741
Total comprehensive income (loss)	$	(171,919	)	$	65,755	$	(100,951	)	$	35,196		$	(171,919	)

36

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 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)
NINE MONTHS ENDED SEPTEMBER 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(989,404	)	$	265,855		$	(1,168,915	)	$	903,060		$	(989,404	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		11,693			(50,756	)		—			50,756			11,693
Change in unrealized gain (loss) on hedges, net of tax		(3,815	)		72			(2,519	)		2,447			(3,815	)
Change in foreign currency translation adjustment		2,342			—			2,342			(2,342	)		2,342
Change in unrealized loss on investments, net of tax		766			—			766			(766	)		766
Total other comprehensive income (loss), net of tax		10,986			(50,684	)		589			50,095			10,986
Total comprehensive income (loss)	$	(978,418	)	$	215,171		$	(1,168,326	)	$	953,155		$	(978,418	)

37

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 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)
NINE MONTHS ENDED SEPTEMBER 30, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(165,441	)	$	163,367		$	(41,952	)	$	—		$	(44,026	)
INVESTING ACTIVITIES
Additions to property, plant and equipment		(863	)		(84,623	)		(23,249	)		—			(108,735	)
Intercompany loans made		(33,100	)		—			—			33,100			—
Intercompany payments received		30,500			—			—			(30,500	)		—
Investments in subsidiaries		—			—			—			—			—
Proceeds from sales of investments		—			—			1,559			—			1,559
Other		—			—			663			—			663
Cash flows used in investing activities		(3,463	)		(84,623	)		(21,027	)		2,600			(106,513	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		897,412			—			—			—			897,412
Borrowings under revolving credit agreement		—			—			646,320			—			646,320
Repayments on revolving credit agreement		—			—			(646,320	)		—			(646,320	)
Retirements of debt		(496,062	)		(14,193	)		—			—			(510,255	)
Dividends paid		(16,264	)		—			—			—			(16,264	)
Debt issuance costs		(42,128	)		—			—			—			(42,128	)
Advances from (to) consolidated entities		4,729			(64,763	)		60,034			—			—
Intercompany borrowings		—			—			33,100			(33,100	)		—
Intercompany payments made		—			—			(30,500	)		30,500			—
Investment from Parent		—			—			—			—			—
Other		(883	)		151			—			—			(732	)
Cash flows provided by (used in) financing activities		346,804			(78,805	)		62,634			(2,600	)		328,033
Effect of foreign exchange rates on cash		—			—			(961	)		—			(961	)
Net increase (decrease) in cash and cash equivalents		177,900			(61	)		(1,306	)		—			176,533
Cash and cash equivalents at beginning of period		83,833			61			32,707			—			116,601
Cash and cash equivalents at end of period	$	261,733		$	—		$	31,401		$	—		$	293,134

38

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NINE MONTHS ENDED SEPTEMBER 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)
NINE MONTHS ENDED SEPTEMBER 30, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(141,991	)	$	360,669		$	114,328		$	—		$	333,006
INVESTING ACTIVITIES
Additions to property, plant and equipment		(4,127	)		(108,002	)		(219,211	)		—			(331,340	)
Proceeds from sales of investments		—			—			12,382			—			12,382
Intercompany Notes Issued		(58,102	)		—			—			58,102			—
Other		—			1,076			—			—			1,076
Cash flows used in investing activities		(62,229	)		(106,926	)		(206,829	)		58,102			(317,882	)
FINANCING ACTIVITIES
Borrowings under revolving credit agreement		—			—			272,926			—			272,926
Repayments on revolving credit agreement		—			—			(125,396	)		—			(125,396	)
Retirements of debt		(100,000	)		(6,056	)		(22,394	)		—			(128,450	)
Dividends paid		(23,432	)		—			—			—			(23,432	)
Net consideration paid upon exercise of warrants		(11,535	)		—			—			—			(11,535	)
Debt Issuance Costs		(6,376	)		—			—			—			(6,376	)
Advances from (to) consolidated entities		357,707			(257,147	)		(100,560	)		—			—
Intercompany borrowings		—			—			58,102			(58,102	)		—
Other		176			2			—			—			178
Cash flows provided by (used in) financing activities		216,540			(263,201	)		82,678			(58,102	)		(22,085	)
Cash flows provided by (used in) continuing operations		12,320			(9,458	)		(9,823	)		—			(6,961	)
CASH FLOWS FROM DISCONTINUED OPERATIONS		—			9,500			—			—			9,500
Effect of foreign exchange rates on cash		—			—			(1,047	)		—			(1,047	)
Net increase (decrease) in cash and cash equivalents		12,320			42			(10,870	)		—			1,492
Cash and cash equivalents at beginning of period		99,086			79			29,265			—			128,430
Cash and cash equivalents at end of period	$	111,406		$	121		$	18,395		$	—		$	129,922

39

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;

•

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

40

•

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.

        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.

41

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 in Canada and South Wales in 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). Although the Willow Creek mine is an active coal mine, we curtailed operations at this mine during the second quarter of 2013. The Willow Creek mine includes a processing plant and a load-out facility that serves our Brule mine and we are currently operating the active portions of the Willow Creek mine with Brule as a combined "Brazion Group". Our U.K. mining operation consists of an active underground 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 September 30, 2013 were 2.8 million metric tons and accounted for approximately 84% of our coal sales volume. Comparatively, sales of metallurgical coal were 2.6 million metric tons and accounted for approximately 74% of our coal sales volume for the three months ended September 30, 2012. The continued increase in metallurgical coal sales volume as a percentage of our total coal sales volume is consistent with our business strategy of increasing more profitable, high quality metallurgical coal production and sales.

        For the three months ended September 30, 2013, sales of thermal coal were 540 thousand metric tons and accounted for approximately 16% of our coal sales volume. Comparatively, sales of thermal coal were 937 thousand metric tons and accounted for approximately 26% of our coal sales volume for the three months ended September 30, 2012.

Industry Overview and Outlook

        The metallurgical coal market continues to be oversupplied primarily from mines in Australia. Australia continues to benefit from a weaker Australian dollar. Although the metallurgical coal market remains oversupplied, there are signs of improvement, as Europe and China's economic environments have all seemed to stabilize and improve over the past six months and supply rationalization has resulted in the closing of higher cost mines in the U.S. and abroad. As a result, the 2013 fourth quarter benchmark pricing has increased.

        The metallurgical coal market appears to have reached a floor in the third quarter of 2013 as the benchmark for high quality hard coking coal was approximately $145 per metric ton. During the third quarter, spot prices rebounded and surpassed the third quarter benchmark prices. This resulted in an improved benchmark price for the fourth quarter of $152 per metric ton for premium hard coking metallurgical coal and $120 per metric ton for low-volatile PCI coal. This represents an increase of $7 per metric ton for hard coking coal and $4 per metric ton for low-volatile PCI coal as compared with third quarter pricing.

        The current economic environment could indicate that the benchmark price of premium hard coking coal and low-volatile PCI coal will continue to improve as global demand continues to improve. China's demand for metallurgical coal has been strong and China is set to surpass Japan as the largest

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importer of hard coking coal. In Japan, the country has benefited from a weaker currency and economic growth that has increased steel production for automotive and construction products. In Korea, although steel production has decreased in 2013, demand for our low-vol PCI product remains strong. As previously mentioned, there are also positive signs in Europe as the World Steel Association projects growth in steel consumption next year of over 2%, reversing the decline of the past two years. According to the World Steel Association Short Range Outlook released in October 2013, steel demand in 2013 is now forecasted to grow 3.1%, led by forecasted growth of 6.0% in demand in China. Global crude steel production for the month of September 2013 increased 6.1% as compared with September 2012 due to an 11% increase in China and a 5.5% increase in Japan, partially offset by an 8.7% decrease in steel production in South Korea. Steel production for the nine months ended September 30, 2013 amounted to 1.2 billion tons or an increase of 2.7% compared with the prior year comparable period. The World Steel Association expects a continued recovery in global steel demand in 2014 with developed economies returning to positive growth, more than offsetting slower forecasted growth expected in China.

        We believe the improved benchmark price in the fourth quarter is sustainable and metallurgical coal prices should further improve in 2014 as long as there is continued strong demand in Asia and moderate improvements in other key markets. We also believe the long-term demand for metallurgical coal within all of our markets to be strong as industry projections indicate that global steelmaking will continue to require increasing amounts of high quality metallurgical coal. As such, we are focused on the long-term metallurgical coal market 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, we have the capability to increase our metallurgical coal production when the market rebounds to take advantage of potential opportunities in this highly volatile market.

        We expect our full year 2013 metallurgical coal production to be approximately 11.0 million metric tons. We also anticipate 2013 metallurgical coal sales to approximate production.

RESULTS OF OPERATIONS

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

	For the three months ended September 30, 2013
(in thousands)	U.S. Operations			Canadian and U.K. Operations			Other			Total
Sales	$	332,522		$	113,415		$	—		$	445,937
Miscellaneous income (loss)		4,747			5,952			(840	)		9,859
Revenues		337,269			119,367			(840	)		455,796
Cost of sales (exclusive of depreciation and depletion)		265,879			129,432			—			395,311
Depreciation and depletion		53,060			29,383			543			82,986
Selling, general and administrative		11,576			8,574			1,723			21,873
Postretirement benefits		14,762			—			(55	)		14,707
Restructuring and asset impairment		—			—			—			—
Operating loss	$	(8,008	)	$	(48,022	)	$	(3,051	)		(59,081	)
Interest expense, net											(63,529	)
Other income, net											4,886
Income tax benefit											17,000
Net loss										$	(100,724	)

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	For the three months ended September 30, 2012
(in thousands)	U.S. Operations			Canadian and U.K. Operations			Other			Total
Sales	$	485,720		$	126,790		$	—		$	612,510
Miscellaneous income (loss)		(2,105	)		1,115			454			(536	)
Revenues		483,615			127,905			454			611,974
Cost of sales (exclusive of depreciation and depletion)		320,716			128,049			—			448,765
Depreciation and depletion		44,789			37,305			466			82,560
Selling, general and administrative		12,732			6,807			12,947			32,486
Postretirement benefits		13,325			—			(112	)		13,213
Restructuring and asset impairment		114,281			992,434			—			1,106,715
Operating loss	$	(22,228	)	$	(1,036,690	)	$	(12,847	)		(1,071,765	)
Interest expense, net											(30,432	)
Other loss, net											(943	)
Income tax benefit											41,184
Net loss										$	(1,061,956	)

	Dollar variance for the three months ended September 30, 2013 versus 2012
(in thousands)	U.S. Operations			Canadian and U.K. Operations			Other			Total
Sales	$	(153,198	)	$	(13,375	)	$	—		$	(166,573	)
Miscellaneous income (loss)		6,852			4,837			(1,294	)		10,395
Revenues		(146,346	)		(8,538	)		(1,294	)		(156,178	)
Cost of sales (exclusive of depreciation and depletion)		(54,837	)		1,383			—			(53,454	)
Depreciation and depletion		8,271			(7,922	)		77			426
Selling, general and administrative		(1,156	)		1,767			(11,224	)		(10,613	)
Postretirement benefits		1,437			—			57			1,494
Restructuring charges		(114,281	)		(992,434	)		—			(1,106,715	)
Operating income (loss)	$	14,220		$	988,668		$	9,796			1,012,684
Interest expense, net											(33,097	)
Other income (loss), net											5,829
Income tax benefit											(24,184	)
Net loss										$	961,232

Summary of Third Quarter Consolidated Results of Operations

        Our net loss for the three months ended September 30, 2013 was $100.7 million, or $1.61 per diluted share, which compares to a loss of $1.1 billion, or $16.97 per diluted share for the three months ended September 30, 2012. The net loss was primarily due to a decrease compared to the prior quarter of approximately 31.1% in the average selling price of our metallurgical coal due to excess supply within the global market. The third quarter of 2012 net loss included a goodwill impairment charge of approximately $1.1 billion, primarily related to the effects of the weakened metallurgical coal market on future expected results and a pre-tax charge of $40.0 million associated with the abandonment of a natural gas exploration project. Earnings before interest expense, interest income, income taxes, depreciation, depletion and amortization ("EBITDA") for the third quarter of 2013 increased

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$1.0 billion as compared with the third quarter of 2012 primarily due to the 2012 impairment charge previously mentioned. A reconciliation of net loss to EBITDA is presented in the Liquidity and Capital Resources section below.

        Revenues for the three months ended September 30, 2013 were $455.8 million, representing a decrease of $156.2 million from $612.0 million for 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 $59.46 per metric ton, or approximately 31.1%, due to weaker worldwide sales prices for metallurgical coal. The decrease in average metallurgical coal selling price was partially offset by an increase of 201 thousand metric tons in metallurgical coal sales volume in the third quarter of 2013 as compared with the prior year comparable period.

        Cost of sales, exclusive of depreciation and depletion, for the three months ended September 30, 2013 decreased $53.5 million to $395.3 million as compared with $448.8 million in the third quarter of 2012 and was primarily the result of significant decreases in per metric ton cash cost of sales for our hard coking coal across all of our operations. The average cash cost of sales per metric ton of metallurgical coal sold decreased approximately 10.8% from $132.24 in the three months ended September 30, 2012 to $117.95 in the three months ended September 30, 2013. This was the result of a concerted effort throughout the year to lower costs across all operations and the substantial improvement reflects the results of our cost containment and restructuring initiatives.

        Selling, general and administrative expense for the three months ended September 30, 2013 decreased $10.6 million, or approximately 32.7% to $21.9 million, as compared with $32.5 million in the third quarter of 2012. The decrease was attributable to our cost containment initiatives as well as the reclassification of approximately $5.9 million of selling, general and administrative expenses to operations they support as discussed in Note 1 of the "Notes to Condensed Consolidated Financial Statements."

        Interest expense, net for the three months ended September 30, 2013 increased $33.1 million to $63.5 million, as compared with $30.4 million in the third quarter of 2012. The increase was driven by an increase in long-term debt of $492.2 million combined with an increase in interest rates on our 2011 Credit Agreement, higher interest rates on our outstanding notes, and additional interest expense related to the increase in our debt. The current quarter interest expense also includes accelerated amortization of $5.2 million related to the extinguishment of $250 million of Term Loan A debt upon the September 2013 issuance of the $450.0 million 9.50% senior secured notes.

        The $5.8 million increase in other income for the three months ended September 30, 2013 as compared with the same period in 2012 was primarily attributable to a gain of $4.3 million realized upon the extinguishment of $250.0 million of our Term Loan A debt through a Dutch auction. The $0.9 million other loss for the three months ended September 30, 2012 was primarily attributable to the sale and re-measurement to fair value of certain equity investments.

        We recognized an income tax benefit of $17.0 million for the three months ended September 30, 2013, compared with an income tax benefit of $41.2 million for the three months ended September 30, 2012 as the Company incurred pretax operating losses for both periods. The decrease in the Company's income tax benefit was primarily due to a non-cash deferred income tax charge of $13.7 million to reflect the revaluation of our Canadian and U.K. Operations deferred tax liabilities as the result of changes to the statutory corporate tax rates in each jurisdiction and a non-cash deferred income tax charge of $10.3 million related to foreign financing activities. 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 for the Alabama mining operations.

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

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Segment Analysis

U.S. Operations

        Hard coking coal sales totaled 2.0 million metric tons for the three months ended September 30, 2013, representing an increase of 3.9% compared with 1.9 million metric tons for the same period in 2012. Our hard coking coal production totaled 2.1 million metric tons in the third quarter of 2013, representing an increase of 20.2% from the same period in the prior year due to increased production from our Alabama underground mines. The average selling price of hard coking coal in the third quarter of 2013 was $132.46 per metric ton, representing a 32.6% decrease from the average selling price of $196.41 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 in the metallurgical coal market. Our average cash cost of sales per metric ton of hard coking coal sold during the third quarter of 2013 was $105.26, a decrease of $13.65 from the average cash cost of sales per ton sold during the third quarter of 2012 of $118.91.

        Thermal coal sales totaled approximately 540 thousand metric tons for the three months ended September 30, 2013, representing a decrease of approximately 41.7% compared with approximately 927 thousand metric tons sold during the same period in 2012, primarily due to a period of difficult mining conditions at our North River mine in Alabama and the idling of a West Virginia thermal coal surface mine in September 2012 due to lower demand and pricing. Our average selling price of thermal coal for the third quarter of 2013 was $65.04 per metric ton, remaining relatively consistent with our average selling price of $67.00 per metric ton for the same period in 2012. Thermal coal production totaled approximately 620 thousand metric tons in the third quarter of 2013, representing a decrease of approximately 23% compared with approximately 805 thousand metric tons produced during the same period in 2012. The average cash cost of sales per metric ton of thermal coal sold during the third quarter of 2013 was $53.44 per metric ton compared with $55.27 per metric ton for the same period in 2012. In response to the continued price deterioration in coal markets, in the second quarter of 2013 we renegotiated an unfavorably priced coal supply agreement to allow the accelerated closure of the North River mine, currently anticipated for the fourth quarter of 2013.

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

	Three months ended September 30,
	2013		2012(2)
Tons of hard coking coal sold(1) (in thousands)		1,953		1,880
Tons of hard coking coal produced (in thousands)		2,069		1,721
Average hard coking coal selling price(1) (per metric ton)	$	132.46	$	196.41
Average hard coking coal cash cost of sales(1) (per metric ton)	$	105.26	$	118.91
Average hard coking coal cash cost of production (per metric ton)	$	63.12	$	85.45
Tons of thermal coal sold (in thousands)		540		927
Tons of thermal coal produced (in thousands)		620		805
Average thermal coal selling price (per metric ton)	$	65.04	$	67.00
Average thermal coal cash cost of sales (per metric ton)	$	53.44	$	55.27
Average thermal coal cash cost of production (per metric ton)	$	34.77	$	57.21

(1)

Includes sales of both produced and purchased coal.

(2)

Prior period balances have not been restated to reflect the reclassification of selling, general and administrative expenses to costs of sales as discussed in Note 1 of the "Notes to Condensed Consolidated Financial Statements."

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        Our U.S. Operations segment reported revenues of $337.3 million for the three months ended September 30, 2013, representing a decrease of $146.3 million from the same period last year. The decrease in revenues during the third quarter of 2013 as compared with the third quarter of 2012 was primarily attributable to the decline in the average selling price of hard coking coal offset partially by an increase in hard coking coal sales volume.

        Cost of sales, exclusive of depreciation and depletion, of our U.S. Operations segment decreased $54.8 million to $265.9 million as compared with $320.7 million in the third quarter of 2012 primarily due to a $13.65 per metric ton decrease in the average cash cost of sales per ton of met coal sold partially offset by an increase in met coal tons sold of 73 thousand tons. The decrease was also due to a decrease of 387 thousand metric tons of thermal coal sales from the prior year comparable quarter combined with a slight decrease in the average cash cost of sales of thermal coal.

        Our U.S. Operations segment reported an operating loss of $8.0 million for the three months ended September 30, 2013, compared with an operating loss of $22.2 million in the same period in 2012. The decrease in operating loss was primarily due to a goodwill impairment charge of $74.3 million and an asset impairment charge for a capitalized shale natural gas exploratory project of $40.0 million recorded in 2012, partially offset by the effects of lower pricing for our metallurgical coal.

Canadian and U.K. Operations

        Metallurgical coal sales for the three months ended September 30, 2013 consisted of 346 thousand metric tons of hard coking coal at an average selling price of $143.94 per metric ton and 525 thousand metric tons of low-volatile PCI coal at an average selling price of $121.76 per metric ton. Metallurgical coal sales in the third quarter of 2012 consisted of 303 thousand metric tons of hard coking coal at an average selling price of $204.82 per metric ton and 440 thousand metric tons of low-volatile PCI coal at an average selling price of $160.37 per metric ton. The declines in the average selling price of hard coking coal and low-volatile PCI coal reflect the global oversupply of metallurgical coal. The average cash cost of sales per metric ton of hard coking coal sold during the third quarter of 2013 was $179.79, representing an increase of $38.06 from the average cash cost of sales per ton of hard coking coal sold during the third quarter of 2012 of $141.73. The increase was primarily due to the Wolverine mine transitioning to the next mining area in the mine plan which resulted in lower volume and higher costs on a per metric ton basis. Mining conditions are expected to improve at this site as the mine moves into a lower stripping ratio mining phase during the fourth quarter of 2013. The average cash cost of sales per metric ton of low-volatile PCI coal sold during the third quarter of 2013 was $124.45 representing a 31.9% decrease from the average cash cost of sales per ton of low-volatile PCI coal sold during the third quarter of 2012 of $182.76 which primarily reflects our cost improvement initiatives, including the conversion of the Brule mine from a contractor-operated to owner-operated mine in the fourth quarter of 2012.

        Our Canadian and U.K. Operations segment produced a total of 234 thousand metric tons of hard coking coal and 470 thousand metric tons of low-volatile PCI in the third quarter of 2013. During the third quarter of 2012, the segment produced 641 thousand metric tons of hard coking coal and 963 thousand metric tons of low-volatile PCI. The significant decrease in production was primarily due to the Wolverine mine transitioning to the next mining area in the plan mentioned previously and the planned reductions related to our Willow Creek mine. The Willow Creek mine produced approximately 90 thousand metric tons of low- volatile hard coking coal and 198 thousand tons of low-volatile PCI in the third quarter of 2012 with very little production in the current quarter as mining operations were curtailed in the second quarter of 2013.

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

	Three months ended September 30,
	2013		2012(1)
Tons of hard coking coal sold (in thousands)		346		303
Tons of hard coking coal produced (in thousands)		234		641
Average hard coking coal selling price (per metric ton)	$	143.94	$	204.82
Average hard coking coal cash cost of sales (per metric ton)	$	179.79	$	141.73
Average hard coking coal cash cost of production (per metric ton)	$	184.59	$	91.49
Tons of low-volatile PCI coal sold (in thousands)		525		440
Tons of low-volatile PCI coal produced (in thousands)		470		963
Average low-volatile PCI coal selling price (per metric ton)	$	121.76	$	160.37
Average low-volatile PCI cash cost of sales (per metric ton)	$	124.45	$	182.76
Average low-volatile PCI cash cost of production (per metric ton)	$	87.75	$	95.81

(1)

Prior period balances have not been restated to reflect the reclassification of selling, general and administrative expenses to costs of sales as discussed in Note 1 of the "Notes to Condensed Consolidated Financial Statements."

        Our Canadian and U.K. Operations segment reported revenues of $119.4 million for the third quarter of 2013, representing a decrease of $8.5 million from the same period last year. The decrease in revenues was attributable to a comparable decline of 29.7% and 24.1% in the average selling price of hard coking coal and low-volatile PCI coal, respectively. The declines were offset partially by a 43 thousand and 85 thousand metric ton increase in hard coking coal and low-volatile PCI coal sales volumes, respectively.

        Cost of sales, exclusive of depreciation and depletion, in our Canadian and U.K. Operations segment for the three months ended September 30, 2013 were relatively consistent as compared with the third quarter of 2012 as the increase in metallurgical coal tons sold of 128 thousand tons was offset by a $19.58 decrease in the average cash cost of sales per ton of metallurgical coal sold.

        Our Canadian and U.K. Operations segment reported an operating loss of $48.0 million in the three months ended September 30, 2013 as compared with an operating loss of $1.0 billion in the same period in 2012. The decrease in the operating loss was primarily due to the prior year period including a goodwill impairment charge of $992.4 million.

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Summary Operating Results for the
Nine months Ended September 30, 2013 and 2012

	For the nine months ended September 30, 2013
(in thousands)	U.S. Operations			Canadian and U.K. Operations			Other			Total
Sales	$	989,854		$	383,425		$	65		$	1,373,344
Miscellaneous income		7,649			7,259			383			15,291
Revenues		997,503			390,684			448			1,388,635
Cost of sales (exclusive of depreciation and depletion)		766,963			416,856			42			1,183,861
Depreciation and depletion		131,722			99,235			1,539			232,496
Selling, general and administrative		41,076			27,082			11,518			79,676
Postretirement benefits		44,321			—			(164	)		44,157
Restructuring and asset impairment		(8,947	)		10,646			—			1,699
Operating income (loss)	$	22,368		$	(163,135	)	$	(12,487	)		(153,254	)
Interest expense, net											(168,482	)
Other income, net											4,277
Income tax benefit											132,799
Loss from continuing operations										$	(184,660	)

	For the nine months ended September 30, 2012
(in thousands)	U.S. Operations		Canadian and U.K. Operations			Other			Total
Sales	$	1,388,773	$	519,335		$	305		$	1,908,413
Miscellaneous income (loss)		13,753		(3,434	)		2,379			12,698
Revenues		1,402,526		515,901			2,684			1,921,111
Cost of sales (exclusive of depreciation and depletion)		888,121		477,708			554			1,366,383
Depreciation and depletion		130,635		91,976			901			223,512
Selling, general and administrative		37,515		28,707			38,356			104,578
Postretirement benefits		39,976		0			(337	)		39,639
Restructuring and asset impairment		114,281		992,434			0			1,106,715
Operating income (loss)	$	191,998	$	(1,074,924	)	$	(36,790	)		(919,716	)
Interest expense, net										(88,985	)
Other loss, net										(13,855	)
Income tax benefit										27,972
Loss from continuing operations									$	(994,584	)

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	Dollar variance for the nine months ended September 30, 2013 versus 2012
(in thousands)	U.S. Operations			Canadian and U.K. Operations			Other			Total
Sales	$	(398,919	)	$	(135,910	)	$	(240	)	$	(535,069	)
Miscellaneous income (loss)		(6,104	)		10,693			(1,996	)		2,593
Revenues		(405,023	)		(125,217	)		(2,236	)		(532,476	)
Cost of sales (exclusive of depreciation and depletion)		(121,158	)		(60,852	)		(512	)		(182,522	)
Depreciation and depletion		1,087			7,259			638			8,984
Selling, general and administrative		3,561			(1,625	)		(26,838	)		(24,902	)
Postretirement benefits		4,345			—			173			4,518
Restructuring and asset impairment		(123,228	)		(981,788	)		—			(1,105,016	)
Operating income (loss)	$	(169,630	)	$	911,789		$	24,303		$	766,462
Interest expense, net											(79,497	)
Other income (loss), net											18,132
Income tax benefit											104,827
Loss from continuing operations										$	809,924

Summary of Year to Date Consolidated Results of Operations

        Our net loss for the nine months ended September 30, 2013 was $184.7 million, or $2.95 per diluted share, which compares to a loss from continuing operations of $994.6 million, or $15.91 per diluted share for the nine months ended September 30, 2012. EBITDA for the nine months ended September 30, 2013 increased $785.3 million as compared with the nine months ended September 30, 2012 primarily due to a goodwill impairment charge of approximately $1.1 billion related to the effects of the weakened metallurgical coal market on future expected results and a pre-tax charge of $40.0 million associated with the abandonment of a natural gas exploration project recorded in 2012. A reconciliation of net income loss to EBITDA is presented in the Liquidity and Capital Resources section below.

        Revenues for the nine months ended September 30, 2013 were $1.4 billion, representing a decrease of $532.5 million from $1.9 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 $55.60, or approximately 27.8% per. The decrease was due to the global oversupply of metallurgical coal.

        Cost of sales, exclusive of depreciation and depletion, for the nine months ended September 30, 2013 decreased $182.5 million to $1.2 billion as compared with the same period in 2012. The average cash cost of sales per ton for all our metallurgical coal decreased approximately 11.0% from $134.45 per metric ton in the nine months ended September 30, 2012 to $119.71 per metric ton in the nine months ended September 30, 2013, primarily due to a concerted effort throughout the year to lower costs across all operations. The substantial decrease reflects the results of our cost containment and restructuring initiatives.

        Selling, general and administrative expense for the nine months ended September 30, 2013 decreased $24.9 million or approximately 23.8% to $79.7 million, as compared with $104.6 million for the nine months ended September 30, 2012. The decrease was primarily due to our cost containment and restructuring initiatives. Additionally, the decrease was partially due to the reclassification of selling, general and administrative expenses to cost of sales of $17.4 million as discussed in Note 1 of the "Notes to Condensed Consolidated Financial Statements" mostly offset by a 2013 increase in proxy contest expenses of approximately $13.3 million.

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        Interest expense for the nine months ended September 30, 2013 increased $79.5 million to $168.5 million, as compared with $89.0 million in first nine months of 2012. The increase was primarily driven by an increase in long-term debt combined with an increase in interest rates on our 2011 Credit Agreement related to amendments and higher interest rates charged on our outstanding notes obtained in relation to the overall increase in debt. The current year interest expense also includes accelerated deferred financing cost amortization of $11.1 million related to the early extinguishment of debt as portions of the cash obtained through the debt offerings were paid against existing debt.

        The $18.1 million increase in other income for the nine months ended September 30, 2013 as compared with the same period in 2012 was primarily attributable to prior year losses recognized on the sale and measurement to fair value of certain equity investments combined with a current year gain of $4.3 million realized upon the extinguishment of $250.0 million of our Term Loan A debt through a Dutch auction.

        We recognized an income tax benefit of $132.8 million for the nine months ended September 30, 2013 compared with an income tax benefit of $28.0 million for the nine months ended September 30, 2012. The increase in the income tax benefit year-over-year was primarily attributable to an increase in pre-tax operating losses, excluding the 2012 non-deductible goodwill impairment charge, for the current period as compared with the prior year. The 2013 and 2012 income tax provisions 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 nine months ended September 30, 2013 and 2012 include the impact of statutory depletion deductions from the Alabama mining operations.

        The current year provision for income taxes includes a benefit of $11.2 million attributable to foreign currency exchange rate fluctuations on foreign deferred tax liabilities. Additionally, the income tax provision for the three and nine months ended September 30, 2013, included a non-cash deferred income tax charge of $13.7 million to reflect the revaluation of our Canadian and U.K. Operations deferred tax liabilities as the result of changes to the statutory corporate tax rates in each jurisdiction and a non-cash deferred income tax charge of $10.3 million related to foreign financing activities.

        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 5.3 million and 5.2 million metric tons for the nine months ended September 30, 2013 and 2012, respectively. Our hard coking coal production totaled 5.9 million metric tons in the nine months ended September 30, 2013, representing an increase of 8.6% 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 nine months ended September 30, 2013 was $147.09, representing a $55.85 per metric ton or a 27.5% decrease from the average selling price of $202.94 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 in the metallurgical coal market. The average cash cost of sales per metric ton of hard coking coal sold for the nine months ended September 30, 2013 was $105.44, representing a 6.2% decrease from the average cash cost of sales per ton sold in the prior year of $112.36 per metric ton.

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        Thermal coal sales totaled 1.3 million metric tons for the nine months ended September 30, 2013, representing a decrease of approximately 1.4 million metric tons or 52.4% compared with the 2.6 million metric tons sold during the same period in 2012. The decrease was primarily due to a period of 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 nine months ended September 30, 2013 was $65.53 per metric ton, representing a 4.6% decrease from the average selling price of $68.67 per metric ton for the same period in 2012. The average cash cost of sales per ton of thermal coal sold during the nine months ended 2013 was $74.64 per metric ton compared with $65.84 per metric ton 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, in the second quarter of 2013 we renegotiated an unfavorably priced coal supply agreement to allow the accelerated closure of the North River mine currently anticipated in the fourth quarter of 2013.

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

	Nine months ended September 30,
	2013		2012(2)
Tons of hard coking coal sold(1) (in thousands)		5,279		5,199
Tons of hard coking coal produced (in thousands)		5,877		5,414
Average hard coking coal selling price(1) (per metric ton)	$	147.09	$	202.94
Average hard coking coal cash cost of sales(1) (per metric ton)	$	105.44	$	112.36
Average hard coking coal cash cost of production (per metric ton)	$	69.35	$	76.65
Tons of thermal coal sold (in thousands)		1,228		2,580
Tons of thermal coal produced (in thousands)		1,461		2,529
Average thermal coal selling price (per metric ton)	$	65.53	$	68.67
Average thermal coal cash cost of sales (per metric ton)	$	74.64	$	65.84
Average thermal coal cash cost of production (per metric ton)	$	55.03	$	57.68

(1)

Includes sales of both produced and purchased coal.

(2)

Prior period balances have not been restated to reflect the reclassification of selling, general and administrative expenses to costs of sales as discussed in Note 1 of the "Notes to Condensed Consolidated Financial Statements."

        Our U.S. Operations segment reported revenues of $997.5 million for the nine months ended September 30, 2013, representing a decrease of $405.0 million from the same period last year. The decrease in revenues during the nine months ended September 30, 2013 as compared with the same period in 2012 was primarily attributable to a 27.5% 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 $121.1 million to $767.0 million for the nine months ended September 30, 2013 as compared with $888.1 million in the third 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 $22.4 million for the nine months ended September 30, 2013, compared with operating income of $192.0 million in the same period of 2012. Current year 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

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River mine in Alabama. The decrease in operating income was primarily due to an approximate 28.9% decrease in revenues as a result of lower global metallurgical coal pricing. The prior year period also included a goodwill impairment charge of $74.3 million and a pre-tax impairment charge for a capitalized shale natural gas exploratory project of $40.0 million.

Canadian and U.K. Operations

        Metallurgical coal sales for the nine months ended September 30, 2013 consisted of 1.4 million metric tons of hard coking coal at an average selling price of $147.92 per metric ton and 1.4 million metric tons of low-volatile PCI coal at an average selling price of $131.51 per metric ton. Metallurgical coal sales for the nine months ended September 30, 2012 consisted of 1.1 million metric tons of hard coking coal at an average selling price of $225.84 per metric ton and 1.5 million metric tons of low-volatile PCI coal at an average selling price of $170.88 per metric ton. The declines in the average selling price of hard coking coal and low-volatile PCI coal reflect the global oversupply of metallurgical coal. The average cash cost of sales per metric ton of hard coking coal sold during the nine months ended September 30, 2013 was $158.69 per metric ton, representing an increase of $15.00 per metric ton from the average cash cost of sales per ton of hard coking coal sold during the nine months ended September 30, 2012 of $143.69 per metric ton. The increase was primarily due to an increase in lower of cost or market charges recognized in the current year due primarily to the declines in sales prices combined with the Wolverine mine transitioning to the next mining area in the mine plan which resulted in lower volume and higher cost on a per metric ton. The average cash cost of sales per metric ton of low-volatile PCI coal sold during the nine months ended September 30, 2013 was $135.77 per metric ton representing a 33.4% decrease from the average cash cost of sales per ton of coal sold during the nine months ended September 30, 2012 of $203.99 per metric ton. This reduction reflects the impacts of the Company's cost containment and restructuring efforts including the conversion of the Brule mine from a contractor-operated to an owner-operated mine in the fourth quarter of 2012.

        Our Canadian and U.K. Operations segment produced a total of 1.2 million metric tons of hard coking coal and 1.4 million metric tons of low-volatile PCI in the nine months ended September 30, 2013. During the nine months ended September 30, 2012, the segment produced 1.5 million metric tons of hard coking coal and 2.3 million metric tons of low-volatile PCI. The Willow Creek mine produced approximately 142 thousand metric tons of low-volatile hard coking coal and 329 thousand tons of low-volatile PCI in the nine months ended September 30, 2013 as compared with 47 thousand metric tons of low-volatile hard coking coal and 373 thousand tons of low-volatile PCI in the nine months ended September 30, 2012.

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

	Nine months ended September 30,
	2013		2012(1)
Tons of hard coking coal sold (in thousands)		1,352		1,131
Tons of hard coking coal produced (in thousands)		1,181		1,516
Average hard coking coal selling price (per metric ton)	$	147.92	$	225.84
Average hard coking coal cash cost of sales (per metric ton)	$	158.69	$	143.69
Average hard coking coal cash cost of production (per metric ton)	$	129.56	$	102.25
Tons of low-volatile PCI coal sold (in thousands)		1,410		1,502
Tons of low-volatile PCI coal produced (in thousands)		1,421		2,270
Average low-volatile PCI coal selling price (per metric ton)	$	131.51	$	170.88
Average low-volatile PCI cash cost of sales (per metric ton)	$	135.77	$	203.99
Average low-volatile PCI cash cost of production (per metric ton)	$	93.90	$	138.76

(1)

Prior period balances have not been restated to reflect the reclassification of selling, general and administrative expenses to costs of sales as discussed in Note 1 of the "Notes to Condensed Consolidated Financial Statements."

        Our Canadian and U.K. Operations segment reported revenues of $390.7 million for the nine months ended September 30, 2013, representing a decrease of $125.2 million from the same period in 2012. The decrease in revenues during the nine months ended September 30, 2013 as compared with the nine months ended September 30, 2012 was attributable to a decline of 34.5% and 23.0% 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 nine months ended September 30, 2013 decreased $60.9 million to $416.9 million as compared with the same period in 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 due to our cost containment and restructuring efforts, inclusive of converting our Brule mine from contractor-operated to owner-operated.

        Our Canadian and U.K. Operations segment reported an operating loss of $163.1 million for the nine months ended September 30, 2013 as compared to an operating loss of $1.1 billion for the same period in 2012. The decrease in the operating loss was primarily due to the prior year period including a goodwill impairment charge of $992.4 million.

FINANCIAL CONDITION

        Cash and cash equivalents increased by $176.5 million at September 30, 2013 compared with December 31, 2012, primarily due to net cash flows provided by financing activities of $328.0 million through the issuance of the 2021 Senior Notes in March 2013 and the 2019 Senior Secured Notes in September 2013. Cash flows provided by financing activities were partially offset by cash flows used in investing activities of $106.5 million, primarily from capital expenditures, and cash flows used in operating activities of $44.0 million.

        Net property, plant and equipment decreased by $103.7 million at September 30, 2013 as compared with December 31, 2012 primarily due to depreciation and depletion expense, partially offset by capital expenditures of $108.7 million.

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LIQUIDITY AND CAPITAL RESOURCES

Overview

        Our principal sources of short-term funding are our existing cash balances, any 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 September 30, 2013 was $614.0 million, consisting of cash and cash equivalents of $293.1 million and $320.9 million available under the Company's $375 million revolving credit facility, net of outstanding letters of credit of $54.1 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 September 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 450 to 550 basis points for the Revolver and term loan A debt and 575 basis points on the term loan B debt, adjusted quarterly based on the Company's total leverage ratio as defined by the amended 2011 Credit Agreement. The term loan B has a minimum LIBOR floor of 1.0%. The Revolver loans can be denominated in either U.S. dollars or Canadian dollars at our option. The commitment fee on the unused portion of the Revolver is 0.5% per year for all pricing levels.

        Borrowings at September 30, 2013 under the amended 2011 Credit Agreement consisted of a term loan A debt balance of $400.3 million with a weighted average interest rate of 5.74%, a term loan B debt balance of $968.1 million with a weighted average interest rate of 6.75% and no borrowings under the Revolver, with $54.1 million in outstanding stand-by letters of credit and $320.9 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 $225.0 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.

9.50% Senior Secured Notes due 2019

        On September 27, 2013, the Company issued $450.0 million aggregate principal amount of 9.50% senior secured notes due October 15, 2019 (the "2019 Notes"). The 2019 Notes are guaranteed, jointly and severally, by each of our current and future wholly-owned domestic restricted subsidiaries that from time to time guarantees any of our indebtedness or any indebtedness of any of our restricted subsidiaries. The 2019 Notes and related guarantees are secured on a first priority basis by substantially all of the property and assets of the Company and the guarantors. Interest on the 2019 Notes is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2014.

        The Company used $245.7 million of the proceeds from the 2019 Notes to extinguish $250.0 million of Term Loan A debt through a Dutch Auction process. The gain of $4.3 million on partial extinguishment of Term Loan A debt is included in other income (loss) in the Condensed Consolidated Statements of Operations. Additionally, the Company expensed $5.2 million of previously capitalized debt issuance costs as a result of the early extinguishment of the Term Loan A debt. The write-off of debt issuance costs is included in interest expense in the Condensed Consolidated Statements of Operations.

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        The terms of the 2019 Notes provide that at any time prior to October 15, 2016, the Company may redeem up to 35% of the aggregate principal amount of the 2019 Notes with the net cash proceeds of certain equity offerings, at a redemption price of 109.5% of the aggregate principal amount. The Company may redeem the 2019 Notes, in whole or in part, prior to October 15, 2016, at a redemption price equal to 100% of the aggregate principal amount of the 2019 Notes plus a "make-whole" premium. The Company may redeem the 2019 Notes, in whole or in part at redemption prices equal to 107.125% for the twelve months commencing October 15, 2016, 102.375% for the twelve months commencing October 15, 2017 and 100% beginning on October 15, 2018. Upon the occurrence of a change of control, unless the Company has exercised its right to redeem the 2019 Notes, the Company will be required to offer to repurchase each holder's 2019 Notes at a price equal to 101% of the aggregate principal amount.

8.50% Senior Notes due 2021

        On March 27, 2013, the Company issued $450.0 million aggregate principal amount of 8.50% senior notes due April 15, 2021 (the "2021 Notes"). The 2021 Notes are unconditionally guaranteed, jointly and severally, on an unsecured basis, by each of our current and future wholly-owned domestic restricted subsidiaries that from time to time guarantees any of our indebtedness or ay indebtedness of our restricted subsidiaries. Interest on the 2021 Notes is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on October 15, 2013.

        A portion of the proceeds from the 2021 Notes was used to repurchase $250.0 million of Term Loan A and B debt on a pro-rata basis. The Company expensed $6.0 million of previously capitalized debt issuance costs as a result of the early extinguishment of a portion of the Term Loan A and B debt. The write-off of debt issuance costs is included in interest expense in the Condensed Consolidated Statements of Operations.

        At any time prior to April 15, 2016, the Company may redeem up to 35% of the aggregate principal amount of the 2021 Notes with the net cash proceeds of certain equity offerings, at a redemption price of 108.50% of the aggregate principal amount. The Company may redeem the 2021 Notes, in whole or in part, 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. 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. 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.

9.875% Senior Notes due 2020

        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 domestic restricted subsidiaries that from time to time guarantees any of our indebtedness or any indebtedness of our 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. 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. 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

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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. 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 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.

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), 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 previous existing levels; (2) a less restrictive interest expense coverage ratio and suspension of compliance requirements until March 31, 2015; (3) a less restrictive senior secured leverage ratio and suspension of compliance requirements 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 to increase the 2014 capital spending limit up to $220.0 million; (6) additional flexibility for the Company to issue additional unsecured debt, subject to 100% of the net proceeds of any such incurrence of debt in excess of $250 million be used to repay term loans then outstanding under the Credit Agreement; 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 to the 2011 Credit Agreement 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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Statements of Cash Flows

        Cash balances were $293.1 million and $116.6 million at September 30, 2013 and December 31, 2012, respectively. The increase in cash during the nine months ended September 30, 2013 of $176.5 million primarily resulted from net cash provided by financing activities of $328.0 million. This was partially offset by cash used in operating activities of $44.0 million and cash used in investing activities of $106.5 million, which included capital expenditures of $108.7 million.

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

	Nine months ended September 30,
	2013			2012
Cash flows provided by (used in) operating activities	$	(44,026	)	$	333,006
Cash flows used in investing activities		(106,513	)		(317,882	)
Cash flows provided by (used in) financing activities		328,033			(22,085	)
Cash flows provided by discontinued operations		—			9,500
Effect of foreign exchange rates on cash		(961	)		(1,047	)
Net increase in cash and cash equivalents	$	176,533		$	1,492

        The decrease of $377.0 million in cash provided by operating activities was primarily attributable to a $296.8 million decrease in net loss from continuing operations as compared with the same period in 2012, excluding the impact of the impairment charges of $1.1 billion, resulting from the decline in the average selling price of metallurgical coal.

        The decrease in cash flows used in investing activities of $211.4 million was primarily attributable to a $222.6 million decrease in capital expenditures.

        The increase in cash flows provided by financing activities of $350.1 million was primarily attributable to $897.4 million of proceeds from the issuance of the 2021 Notes and the 2019 Notes partially offset by an increase in the retirement of existing debt of $381.8 million, a reduction in net borrowings under the revolving credit agreement of $147.5 million and an increase in debt issuance costs incurred $35.8 million.

Capital Expenditures

        Capital expenditures totaled $28.5 million and $108.7 million during the three and nine months ended September 30, 2013 compared with $85.3 million and $331.3 million during the three and nine months ended September 30, 2012, respectively. We currently expect 2013 capital expenditures to total approximately $150.0 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 charges (benefits), asset impairment, proxy contest expenses and other miscellaneous items, gain on early extinguishment of debt, and loss on ineffective portion of derivative instruments. Consolidated EBTIDA as defined under the amended 2011 Credit Agreement is EBITDA further adjusted to exclude certain non-cash items, non-recurring items, and other adjustments permitted in calculating covenant compliance under the Credit Agreement. Certain items that may adjust Consolidated EBITDA in the compliance calculation are: (a) gains and losses on non-ordinary course asset sales,

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disposals or abandonments; (b) non-cash impairment charges; (c) gains and losses from equity method investments; (d) any long-term incentive plan accruals or any non-cash compensation expense recorded from grants of stock appreciation or similar rights, stock options or other rights to officers, directors and employees; (e) restructuring charges; (f) actuarial gains related to pension and other post-employment benefits; (g) gains and losses associated with the change in fair value of derivative instruments; (h) currency translation gains and losses related to currency remeasurements; (i) after-tax gains or losses from discontinued operations; (j) franchise taxes; and (k) other non-cash expenses that do not represent an accrual or reserve for future cash expense.

        EBITDA from continuing operations, EBITDA, Adjusted EBITDA, and Consolidated 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, Adjusted EBITDA, and Consolidated EBITDA are useful measures as some investors and analysts use EBITDA from continuing operations, EBITDA, Adjusted EBITDA, and Consolidated 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, Adjusted EBITDA, and Consolidated EBITDA present a useful measure of our ability to incur and service debt based on ongoing operations. EBITDA from continuing operations, EBITDA, Adjusted EBITDA, and Consolidated EBITDA may not be comparable to similarly titled measures used by other entities.

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        Reconciliation of loss from continuing operations to EBITDA from continuing operations, EBITDA, Adjusted EBITDA, and Consolidated EBITDA (in thousands):

	For the three months ended September 30,						For the nine months ended September 30,
	2013			2012			2013			2012
Loss from continuing operations	$	(100,724	)	$	(1,061,956	)	$	(184,660	)	$	(994,584	)
Interest expense		63,544			30,545			169,291			89,716
Interest income		(15	)		(113	)		(809	)		(731	)
Income tax expense (benefit)		(17,000	)		(41,184	)		(132,799	)		(27,972	)
Depreciation and depletion expense		82,986			82,560			232,496			223,512
Earnings from continuing operations before interest, income taxes, and depreciation and depletion (EBITDA from continuing operations)		28,791			(990,148	)		83,519			(710,059	)
Pretax income from discontinued operations		—			—			—			8,282
Earnings before interest, income taxes, and depreciation and depletion (EBITDA)		28,791			(990,148	)		83,519			(701,777	)
Restructuring and asset impairment		—			1,106,715			1,699			1,106,715
Gain on extinguishment of debt		(4,293	)		—			(4,293	)		—
Other items, including proxy contest expenses		(3,415	)		—			8,852			—
Loss on ineffective portion of derivative instruments		235			—			235			—
Adjusted EBITDA		21,318			116,567			90,012			404,938
Non-cash charges(1)		12,743			5,612			29,955			14,854
Other adjustments(1)		(4,460	)		(8,684	)		10,995			(6,608	)
Consolidated EBITDA(1)	$	29,601		$	113,495		$	130,962		$	413,184

(1)

Calculated in accordance with the amended 2011 Credit Agreement.

Analysis of Material Covenants

        We believe we were in compliance with all covenants under the amended 2011 Credit Agreement and the indentures governing our notes as of September 30, 2013. A breach of the covenants in the amended 2011 Credit Agreement or the indentures governing our notes; including the financial covenants under the amended 2011 Credit Agreement that measure ratios based on Consolidated EBITDA, as defined under the 2011 Credit Agreement, minimum liquidity covenants, limits to capital spending, or other restricted cash outflows; could result in a default under the amended 2011 Credit Agreement or the indentures governing our notes and the respective lenders and note holders could elect to declare all amounts borrowed due and payable upon such default. Any acceleration under either the amended 2011 Credit Agreement or one of the indentures governing our notes would also result in a default under the other indentures governing our notes. Additionally, under the amended 2011 Credit Agreement and the indentures governing our notes, our ability to engage in activities such as incurring additional indebtedness and paying dividends is also tied to ratios based on Consolidated EBITDA.

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        Actual covenant levels and required levels set forth in our amended 2011 Credit Agreement are:

	Actual Covenant Levels for the Period Ended September 30, 2013		Required Covenant Levels
Minimum Liquidity Requirement(1)	$	614.0	$	225.0 million
Capital Expenditures Covenant(2)	$	108.7	$	175.0 million
Minimum Consolidated EBITDA Interest Coverage Ratio		N/A		N/A	(3)
Maximum total senior secured debt less unrestricted cash to Consolidated EBITDA Ratio		N/A		N/A	(4)

(1)

The Fifth Amendment to the 2011 Credit Agreement contains a 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.

(2)

The Fifth Amendment to the 2011 Credit Agreement contains a capital expenditure 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.

(3)

The Fifth Amendment to the 2011 Credit Agreement suspended the interest coverage ratio covenant until March 31, 2015. The required minimum interest coverage ratio covenant shall be the following for each period of four consecutive fiscal quarters then ending: March 31, 2015—1.25x; June 30, 2015—1.5x; September 30, 2015—2.0x; December 31, 2015—2.0x; and March 31, 2016 and each fiscal quarter ending thereafter—2.5x.

(4)

The Fifth Amendment to the 2011 Credit Agreement suspended the senior secured leverage ratio covenant until June 30, 2014. The required maximum senior secured leverage ratio covenant shall be the following for each period of four consecutive fiscal quarters then ending: June 30, 2014—8.0x; September 30, 2014—7.5x; December 31, 2014—6.5x; March 31, 2015—5.5x; June 30, 2015—5.0x; September 30, 2015—4.5x; December 31, 2015 and each fiscal quarter ending thereafter—3.75x.

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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 September 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 450 to 550 basis points for the revolver and term loan A and 575 basis points on the term loan B adjusted quarterly based on our total leverage ratio as defined by the 2011 Credit Agreement. As of September 30, 2013, our borrowings due under the 2011 Credit Agreement totaled $1.4 billion. As of September 30, 2013 a 100 basis point increase in interest rates would increase our quarterly interest expense by approximately $929 thousand while a 100 basis point decrease in interest rates would decrease our quarterly interest expense by approximately $57 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 September 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 September 30, 2013 that would materially affect, or is reasonably likely to materially affect, our internal control over financial reporting.

62

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. 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 September 30, 2013:

Period	Total Number of Shares Purchased(1)		Average Price Paid per Share
July 1, 2013 - July 31, 2013		—	$	—
August 1, 2013 - August 31, 2013		70	$	10.44
September 1, 2013 - September 30, 2013		—	$	—
		70

(1)

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

Item 4.    Mine Safety Disclosures

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

63

Item 6.    Exhibits

Exhibit Number
	4.1		Indenture, dated as of September 27, 2013, by and among Walter Energy, Inc., the subsidiary guarantors named therein and Union Bank, N.A., as trustee and collateral agent (Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-K (File No. 001-13711) filed on September 30, 2013)
	4.2		Form of 9.500% senior secured note due 2019 (Incorporated by reference to Exhibit 4.2 of the Registrant's Current Report on Form 8-K (File No. 001-13711) filed on September 30, 2013)
	10.1		First-Lien Notes Collateral Agreement, dated as of September 27, 2013, among Walter Energy, Inc., certain subsidiaries of Walter Energy, Inc. and Union Bank, N.A., as collateral agent (Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K (File No. 001-13711) filed on September 30, 2013)
	10.2		First-Lien Intercreditor Agreement, dated as of September 27, 2013, among Walter Energy, Inc., the other grantors party thereto, Morgan Stanley Senior Funding, Inc., as Credit Agreement Collateral Agent and Authorized Representative for the Credit Agreement Secured Parties, Union Bank, N.A., as Initial Additional Collateral Agent and Initial Additional Authorized Representative for the Initial Additional First-Lien Secured Parties, and each additional Collateral Agent and Authorized Representative from time to time party thereto (Incorporated by reference to Exhibit 10.2 of the Registrant's Current Report on Form 8-K (File No. 001-13711) filed on September 30, 2013)
	10.3		Grant of Security Interests in United States Trademarks, dated September 27, 2013 (Incorporated by reference to Exhibit 10.3 of the Registrant's Current Report on Form 8-K (File No. 001-13711) filed on September 30, 2013)
	10.4		Fifth Amendment to Credit Agreement, dated as of July 23, 2013, by and among Walter Energy, Inc., certain subsidiaries of Walter Energy, Inc., the lenders party thereto and Morgan Stanley Senior Funding,  Inc., as Administrative Agent (Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K (File No. 001-13711) filed on July 23, 2013)
	31.1	*	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002—Chief Executive Officer
	31.2	*	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002—Chief Financial Officer
	32.1	*	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350—Chief Executive Officer
	32.2	*	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350—Chief Financial Officer
	95	*	Mine Safety Disclosures Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 299.104)

64

Exhibit Number
	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 September 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.

65

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: November 6, 2013

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

Date: November 6, 2013

66

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: November 6, 2013

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

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EXHIBIT 31.1

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

EX-31.2

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EXHIBIT 31.2

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

I, William G. Harvey, certify that:

1.

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

2.

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

3.

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

4.

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

(a)

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

(b)

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

(c)

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

(d)

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

5.

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

(a)

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

(b)

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

Date: November 6, 2013

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

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EXHIBIT 31.2

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

EX-32.1

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EXHIBIT 32.1

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

        In connection with the accompanying Quarterly Report of Walter Energy, Inc. (the "Company") on Form 10-Q for the quarterly period ended September 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: November 6, 2013

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

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EXHIBIT 32.1

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

EX-32.2

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EXHIBIT 32.2

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

        In connection with the accompanying Quarterly Report of Walter Energy, Inc. (the "Company") on Form 10-Q for the quarterly period ended September 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: November 6, 2013

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

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EXHIBIT 32.2

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

EX-95

Exhibit 95

Item 5. Other Information

Mine Safety and Health Administration Safety Data

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

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

During the quarter ended September 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 September 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 September 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	76	1	5	—	—	170.4	—
JWR No. 3	—	—	—	—	—	—	—
JWR No. 7	33	—	—	—	—	95.4	—
JWR Central Supply	—	—	—	—	—	0.1	—
JWR Central Shop	—	—	—	—	—	—	—
JWR North River	24	—	2	—	—	51.5	—
Taft Reid School	—	—	—	—	—	—	—
Taft Choctaw	—	—	—	—	—	—	—
TRI East Brookwood	—	—	—	—	—	—	—
TRI Highway 59	—	—	—	—	—	—	—
TRI Swann’s Crossing	—	—	—	—	—	0.4	—
Atlantic Leaseco King Coal 1 Mine	—	—	—	—	—	—	—
Atlantic Leaseco King Coal 1 Prep Plant	—	1	—	—	—	—	—
Atlantic Leaseco Black Pearl	—	—	—	—	—	—	—
Atlantic Leaseco Cowen Loadout	—	—	—	—	—	—	—
Atlantic Leaseco Crooked Run	—	—	—	—	—	—	—
Maple Coal Maple Eagle No. 1	7	—	—	—	—	96.6	—

Maple Coal Maple Prep Plant	1	—	—	—	—	0.2	—
Maple Coal Huffman Sycamore SM	1	—	—	—	—	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 September 30, 2013	Initiated During Q3 2013	Resolved During Q3 2013
JWR No. 3
29 CFR Part 2700, Subpart C	1	—	—
JWR No. 4
29 CFR Part 2700, Subpart B	8	—	1
29 CFR Part 2700, Subpart C	27	5	15
JWR No. 5
29 CFR Part 2700, Subpart C	—	—	1
JWR No. 7
29 CFR Part 2700, Subpart B	8	—	3
29 CFR Part 2700, Subpart C	17	3	4
29 CFR Part 2700, Subpart E	1	—	1
29 CFR Part 2700, Subpart H	3	—	—
JWR North River
29 CFR Part 2700, Subpart B	—	—	—
29 CFR Part 2700, Subpart C	4	3	1
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	14	1	—
Maple Coal Maple Eagle No. 1
29 CFR Part 2700, Subpart B	9	—	—
29 CFR Part 2700, Subpart C	11	3	1
Maple Coal Maple Prep Plant
29 CFR Part 2700, Subpart C	1	1	—
Maple Coal Huffman Sycamore SM
29 CFR Part 2700, Subpart C	—	—	—

(1)Effective January 27, 2011, SEC adopted amendments to its rules to implement Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “final rule”).  The final rule modified previous reporting requirements and requires that the total number of legal actions pending before the Federal Mine Safety and Health Review Commission (FMSHRC) as of the last day of the time period covered by the report be categorized according to type of proceeding, in accordance with the categories established in the Procedural Rules of FMSHRC.  SEC rules require that six different categories of pending legal actions be disclosed.  Categories for which there is no pending litigation for the respective mine are not listed in the table.  The types of proceedings are listed as follows:

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

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

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

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

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

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

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Commitments and Contingencies

9 Months Ended

Sep. 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 September 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 September 30, 2013, a final resolution has not been reached with the Appeals Division pertaining to the remaining disputed matters. The remaining disputed issues in this audit period are similar to the issues remaining in the Proof of Claim.

        The IRS is currently 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 September 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, and 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 proceeded directly with the offsite sampling work and deferred any further enforcement actions or decisions. In March 2013, the EPA released the North Birmingham Air Toxics Risk Assessment showing the air quality around Company facilities to be acceptable. In August 2013, the Agency for Toxic Substances and Disease Registry (ATSDR) released a report concerning past, present and future exposures to residential soils in North Birmingham and concluded that there is no public health hazard. In September 2013, EPA sent an "Offer to Conduct Work" letter to Walter Coke and four other PRP's notifying them that EPA had completed sampling at 1,100 residential properties and that 400 properties exceeded Regional Removal Management Levels (RML's) and offered the PRP's an opportunity to cleanup 50 Phase I properties. The Company is currently evaluating the letter.

        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 September 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. 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. On September 30, 2013, the Court issued a memorandum opinion and order denying the motion. On November 1, 2013 a joint motion to stay proceedings was filed with the Court. The Company believes that there is no merit to the claims alleged in this action and intends 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. As of September 30, 2013, the Company has incurred some costs in taking corrective actions in response to the 2011 release and is continuing to cooperate with regulatory authorities. The Company intends 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 then 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 then current Board of Directors and Keith Calder. The Company is named as a nominal defendant in each complaint. These complaints, like the state court derivative claims, allege similar facts to those alleged in the Rush complaint. The Makohin complaint asserts state law claims for breaches of fiduciary duties and unjust enrichment, while the Sinerius complaint asserts these same claims as well as claims for abuse of control and gross mismanagement. Both actions seek, among other things, recovery for the Company for damages that the Company suffered as a result of alleged wrongful conduct and restitution from defendants of all profits, benefits and other compensation that they wrongfully obtained. Like the state court derivative action, both of these cases have been stayed pending resolution of summary judgment motions in the putative securities class action. The federal derivative plaintiffs will also have certain rights to participate in discovery taken in the federal securities action.

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

Miscellaneous Litigation

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

Commitments and Contingencies—Other

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

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Revenues:
Sales	$ 445,937	$ 612,510	$ 1,373,344	$ 1,908,413
Miscellaneous income (loss)	9,859	(536)	15,291	12,698
Total revenues	455,796	611,974	1,388,635	1,921,111
Costs and expenses:
Cost of sales (exclusive of depreciation and depletion)	395,311	448,765	1,183,861	1,366,383
Depreciation and depletion	82,986	82,560	232,496	223,512
Selling, general and administrative	21,873	32,486	79,676	104,578
Postretirement benefits	14,707	13,213	44,157	39,639
Restructuring and asset impairment		1,106,715	1,699	1,106,715
Total costs and expenses	514,877	1,683,739	1,541,889	2,840,827
Operating loss	(59,081)	(1,071,765)	(153,254)	(919,716)
Interest expense	(63,544)	(30,545)	(169,291)	(89,716)
Interest income	15	113	809	731
Other income (loss), net	4,886	(943)	4,277	(13,855)
Loss from continuing operations before income tax benefit	(117,724)	(1,103,140)	(317,459)	(1,022,556)
Income tax benefit	(17,000)	(41,184)	(132,799)	(27,972)
Loss from continuing operations	(100,724)	(1,061,956)	(184,660)	(994,584)
Income from discontinued operations				5,180
Net loss	$ (100,724)	$ (1,061,956)	$ (184,660)	$ (989,404)
Basic income (loss) per share:
Loss from continuing operations (in dollars per share)	$ (1.61)	$ (16.97)	$ (2.95)	$ (15.91)
Income from discontinued operations (in dollars per share)				$ 0.09
Net loss per share (in dollars per share)	$ (1.61)	$ (16.97)	$ (2.95)	$ (15.82)
Diluted income (loss) per share:
Loss from continuing operations (in dollars per share)	$ (1.61)	$ (16.97)	$ (2.95)	$ (15.91)
Income from discontinued operations (in dollars per share)				$ 0.09
Net loss per share (in dollars per share)	$ (1.61)	$ (16.97)	$ (2.95)	$ (15.82)
Dividends per share (in dollars per share)	$ 0.01	$ 0.125	$ 0.26	$ 0.375

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Basis of Presentation

9 Months Ended

Sep. 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 nine months ended September 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 filed 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 as the change had no effect on total stockholders' equity.

        During the first quarter of 2013, the Company began to classify certain 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 nine months ended September 30, 2012 would have been $5.7 million and $19.1 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 second quarter of 2013. 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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Debt (Tables)

9 Months Ended

Sep. 30, 2013

Debt

Schedule of debt instruments

Debt consisted of the following (in thousands):

	September 30, 2013			December 31, 2012			Weighted Average Stated Interest Rate At September 30, 2013	Final Maturity
2011 term loan A ($406.6 million face value)	$	400,306		$	756,974		5.74%	2016
2011 term loan B ($978.2 million face value)		968,100			1,127,770		6.75%	2018
Revolving credit facility(1)		—			—		N/A	2016
9.875% senior notes ($500.0 million face value)		496,733			496,510		9.88%	2020
8.50% senior notes		450,000			—		8.50%	2021
9.50% senior secured notes ($450.0 million face value)		447,413			—		9.50%	2019
Other(2)		20,008			34,911		Various	Various
Total debt		2,782,560			2,416,165
Less: current debt(2)		(12,179	)		(18,793	)
Total long-term debt	$	2,770,381		$	2,397,372

(1)

As of September 30, 2013, the revolving credit facility interest rate was tied to LIBOR or CDOR, plus a credit spread ranging from 450 to 550 basis points and includes a commitment fee of 0.50% on the unused facility.

(2)

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

Minimum debt repayment schedule, excluding interest

The Company's minimum debt repayment schedule, excluding interest, as of September 30, 2013 is as follows (in thousands):

	Payments Due
	2013		2014		2015		2016		2017		Thereafter
2011 term loan A	$	—	$	—	$	305,941	$	100,625	$	—	$	—
2011 term loan B		—		—		—		—		—		978,178
9.875% senior notes		—		—		—		—		—		500,000
8.50% senior notes		—		—		—		—		—		450,000
9.50% senior secured notes		—		—		—		—		—		450,000
Other debt		4,899		10,090		4,929		90		—		—
	$	4,899	$	10,090	$	310,870	$	100,715	$	—	$	2,378,178

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Derivative Financial Instruments

9 Months Ended

Sep. 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 effective portion 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. The ineffective portion of the change in the fair value of derivatives is recognized directly in earnings included in other income (loss) in the Condensed Consolidated Statements of Operations.

        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 through 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 September 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 the Company's derivative instruments.

	September 30, 2013		December 31, 2012
Asset derivatives designated as cash flow hedging instruments:
Interest rate cap(1)	$	2	$	12
Total asset derivatives	$	2	$	12
Liability derivatives designated as cash flow hedging instruments:
Interest rate swaps(2)	$	4,005	$	6,615
Total liability derivatives	$	4,005	$	6,615

(1)

$2 thousand and $8 thousand were included in other current assets within the Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012, respectively, while $4 thousand was included in other long-term assets as of December 31, 2012.

(2)

$4.0 million and $4.1 million were included within other current liabilities within the Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012, respectively, while $2.5 million was included within other long-term liabilities as of December 31, 2012.

        The following tables present the gains and losses from derivative instruments for the three and nine months ended September 30, 2013 and 2012 and their location within the condensed consolidated financial statements (in thousands).

	Gain (loss), net of tax, recognized in accumulated other comprehensive income (loss)						Gain, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings(1)(2)						Loss, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings (ineffective portion)(3)
	Three months ended September 30,						Three months ended September 30,						Three months ended September 30,
Derivatives designated as cash flow hedging instruments	2013			2012			2013			2012			2013		2012
Interest rate swaps	$	1,057		$	9		$	(636	)	$	(518	)	$	235	$	—
Interest rate cap		(3	)		(36	)		—			—			—		—
Total	$	1,054		$	(27	)	$	(636	)	$	(518	)	$	235	$	—

	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)						Loss, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings (ineffective portion)(3)
	Nine months ended September 30,						Nine months ended September 30,						Nine months ended September 30,
Derivatives designated as cash flow hedging instruments	2013			2012			2013			2012			2013		2012
Natural gas hedges	$	—		$	(5,798	)	$	—		$	3,279		$	—	$	—
Interest rate swaps		3,538			502			(1,866	)		(1,543	)		235		—
Interest rate cap		(6	)		(255	)		—			—			—		—
Total	$	3,532		$	(5,551	)	$	(1,866	)	$	1,736		$	235	$	—

(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.

(3)

The ineffective portion of the interest rate swap is recorded within other income (loss) in the Condensed Consolidated Statements of Operations.

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Supplemental Guarantor and Non-Guarantor Financial Information (Details)	Sep. 30, 2013	Mar. 31, 2013
2020 Notes
Debt instrument
Interest rate (as a percent)	9.875%
2021 Notes
Debt instrument
Interest rate (as a percent)	8.50%	8.50%
2019 Notes
Debt instrument
Interest rate (as a percent)	9.50%

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Net Loss Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Numerator:
Net loss	$ (100,724)	$ (1,061,956)	$ (184,660)	$ (994,584)
Income from discontinued operations				$ 5,180
Denominator:
Average number of common shares outstanding, Basic	62,573,000	62,572,000	62,555,000	62,524,000
Effect of dilutive securities:
Average number of common shares outstanding, diluted	62,573,000	62,572,000	62,555,000	62,524,000
Loss from continuing operations, basic (in dollars per share)	$ (1.61)	$ (16.97)	$ (2.95)	$ (15.91)
Income from discontinued operations, basic (in dollars per share)				$ 0.09
Net loss per share (in dollars per share)	$ (1.61)	$ (16.97)	$ (2.95)	$ (15.82)
Loss from continuing operations, diluted (in dollars per share)	$ (1.61)	$ (16.97)	$ (2.95)	$ (15.91)
Income from discontinued operations, diluted (in dollars per share)				$ 0.09
Net loss per share (in dollars per share)	$ (1.61)	$ (16.97)	$ (2.95)	$ (15.82)
Anti-dilutive securities excluded from earnings per share calculation	675,216	291,517	525,402	224,240
Share-based awards exercised or released
Stock options		1,500	24,831	20,759
Restricted stock units	4,558	3,470	30,234	32,085
Total	4,558	4,970	55,065	52,844

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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 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 the Company's derivative instruments.

	September 30, 2013		December 31, 2012
Asset derivatives designated as cash flow hedging instruments:
Interest rate cap(1)	$	2	$	12
Total asset derivatives	$	2	$	12
Liability derivatives designated as cash flow hedging instruments:
Interest rate swaps(2)	$	4,005	$	6,615
Total liability derivatives	$	4,005	$	6,615

(1)

$2 thousand and $8 thousand were included in other current assets within the Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012, respectively, while $4 thousand was included in other long-term assets as of December 31, 2012.

(2)

$4.0 million and $4.1 million were included within other current liabilities within the Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012, respectively, while $2.5 million was included within other long-term liabilities as of December 31, 2012.

Schedule of gains and losses from derivative instruments

The following tables present the gains and losses from derivative instruments for the three and nine months ended September 30, 2013 and 2012 and their location within the condensed consolidated financial statements (in thousands).

	Gain (loss), net of tax, recognized in accumulated other comprehensive income (loss)						Gain, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings(1)(2)						Loss, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings (ineffective portion)(3)
	Three months ended September 30,						Three months ended September 30,						Three months ended September 30,
Derivatives designated as cash flow hedging instruments	2013			2012			2013			2012			2013		2012
Interest rate swaps	$	1,057		$	9		$	(636	)	$	(518	)	$	235	$	—
Interest rate cap		(3	)		(36	)		—			—			—		—
Total	$	1,054		$	(27	)	$	(636	)	$	(518	)	$	235	$	—

	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)						Loss, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings (ineffective portion)(3)
	Nine months ended September 30,						Nine months ended September 30,						Nine months ended September 30,
Derivatives designated as cash flow hedging instruments	2013			2012			2013			2012			2013		2012
Natural gas hedges	$	—		$	(5,798	)	$	—		$	3,279		$	—	$	—
Interest rate swaps		3,538			502			(1,866	)		(1,543	)		235		—
Interest rate cap		(6	)		(255	)		—			—			—		—
Total	$	3,532		$	(5,551	)	$	(1,866	)	$	1,736		$	235	$	—

(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.

(3)

The ineffective portion of the interest rate swap is recorded within other income (loss) in the Condensed Consolidated Statements of Operations.

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Net Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2013

Net Loss Per Share

Reconciliation of the basic and diluted net loss per share computations

A reconciliation of the basic and diluted net loss per share computations for the three and nine months ended September 30, 2013 and 2012 is as follows (in thousands, except per share data):

	For the three months ended September 30,
	2013						2012
	Basic			Diluted			Basic			Diluted
Numerator:
Net loss	$	(100,724	)	$	(100,724	)	$	(1,061,956	)	$	(1,061,956	)
Denominator:
Average number of common shares outstanding		62,573			62,573			62,572			62,572
Effect of dilutive securities:
Stock awards(1)		—			—			—			—
		62,573			62,573			62,572			62,572
Net loss per share	$	(1.61	)	$	(1.61	)	$	(16.97	)	$	(16.97	)

	For the nine months ended September 30,
	2013						2012
	Basic			Diluted			Basic			Diluted
Numerator:
Loss from continuing operations	$	(184,660	)	$	(184,660	)	$	(994,584	)	$	(994,584	)
Income from discontinued operations	$	—		$	—		$	5,180		$	5,180
Denominator:
Average number of common shares outstanding		62,555			62,555			62,524			62,524
Effect of dilutive securities:
Stock awards(1)		—			—			—			—
		62,555			62,555			62,524			62,524
Loss from continuing operations	$	(2.95	)	$	(2.95	)	$	(15.91	)	$	(15.91	)
Income from discontinued operations		—			—			0.09			0.09
Net loss per share	$	(2.95	)	$	(2.95	)	$	(15.82	)	$	(15.82	)

(1)

Stock awards represent the weighted average number of shares of common stock issuable on the exercise of dilutive employee stock options and vesting of 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. 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 and non-vested shares outstanding for the three months ended September 30, 2013 and 2012 totaling 675,216 and 291,517, respectively, were excluded from the calculation above because their effect would have been anti-dilutive. Additionally, the weighted average number of stock options and non-vested shares outstanding for the nine months ended September 30, 2013 and 2012 totaling 525,402 and 224,240, 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 September 30,
	2013		2012
Stock options		—		1,500
Restricted stock units		4,558		3,470
Total		4,558		4,970

	For the nine months ended September 30,
	2013		2012
Stock options		24,831		20,759
Restricted stock units		30,234		32,085
Total		55,065		52,844

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Fair Value of Financial Instruments (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Carrying Amount | Revolving Credit Facility
Debt
Debt	$ 0	$ 0
Carrying Amount | 2011 Term Loan A
Debt
Debt	400,306	756,974
Carrying Amount | 2011 Term Loan B
Debt
Debt	968,100	1,127,770
Carrying Amount | 9.875% Senior Notes
Debt
Debt	496,733	496,510
Carrying Amount | 8.50% Senior Notes
Debt
Debt	450,000
Carrying Amount | 9.50% senior secured notes due 2019
Debt
Debt	447,413
Fair Value | 2011 Term Loan A
Debt
Debt	395,386	758,867
Fair Value | 2011 Term Loan B
Debt
Debt	941,497	1,135,293
Fair Value | 9.875% Senior Notes
Debt
Debt	435,000	500,000
Fair Value | 8.50% Senior Notes
Debt
Debt	373,500
Fair Value | 9.50% senior secured notes due 2019
Debt
Debt	$ 465,188

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Inventories
Coal	$ 243,614	$ 228,910
Raw materials and supplies	77,067	77,108
Total inventories	$ 320,681	$ 306,018

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Derivative Financial Instruments (Details) (USD $) In Millions, unless otherwise specified	0 Months Ended
	Jun. 27, 2011 Interest rate swap - June 2011	Dec. 30, 2008 Interest rate swap - December 2008	Jun. 27, 2011 Interest rate cap	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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Supplemental Guarantor and Non-Guarantor Financial Information (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Dec. 31, 2011
ASSETS
Cash and cash equivalents	$ 293,134	$ 116,601	$ 129,922	$ 128,430
Receivables, net	305,354	256,967
Inventories	320,681	306,018
Deferred income taxes	58,073	58,526
Prepaid expenses	47,097	53,776
Other current assets	20,778	23,928
Total current assets	1,045,117	815,816
Mineral interests, net	2,917,902	2,965,557
Property, plant and equipment, net	1,628,441	1,732,131
Deferred income taxes	148,311	160,422
Other long-term assets	100,741	94,494
Total assets	5,840,512	5,768,420
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	12,179	18,793
Accounts payable	97,693	114,913
Accrued expenses	154,470	184,875
Accumulated postretirement benefits obligation	30,511	29,200
Other current liabilities	214,300	206,473
Total current liabilities	509,153	554,254
Long-term debt	2,770,381	2,397,372
Accumulated postretirement benefits obligation	641,337	633,264
Deferred income taxes	854,408	921,687
Other long-term liabilities	236,555	251,272
Total liabilities	5,011,834	4,757,849
Total stockholders' equity	828,678	1,010,571
Total liabilities and stockholders' equity	5,840,512	5,768,420
Parent (Issuer)
ASSETS
Cash and cash equivalents	261,733	83,833	111,406	99,086
Receivables, net	120,361	64,106
Intercompany receivables		721,293
Intercompany loans receivable	55,583	118,079
Deferred income taxes	39,876	39,375
Prepaid expenses	2,931	1,869
Other current assets	17,867	17,559
Total current assets	498,351	1,046,114
Property, plant and equipment, net	6,753	8,448
Deferred income taxes	40,252	52,363
Investment in subsidiaries	4,613,231	3,530,094
Other long-term assets	74,318	71,622
Total assets	5,232,905	4,708,641
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	3,446	5,128
Accrued expenses	53,472	27,197
Intercompany payables	274,189
Intercompany loans payable	1,096,126	1,074,879
Accumulated postretirement benefits obligation	161	131
Other current liabilities	168,993	157,044
Total current liabilities	1,596,387	1,264,379
Long-term debt	2,762,553	2,381,255
Accumulated postretirement benefits obligation	400	452
Other long-term liabilities	44,887	51,984
Total liabilities	4,404,227	3,698,070
Total stockholders' equity	828,678	1,010,571
Total liabilities and stockholders' equity	5,232,905	4,708,641
Guarantor Subsidiaries
ASSETS
Cash and cash equivalents		61	121	79
Receivables, net	109,229	113,182
Intercompany receivables	216,751
Intercompany loans receivable	1,096,126	1,074,879
Inventories	164,493	131,893
Deferred income taxes	17,687	17,687
Prepaid expenses	39,792	45,327
Other current assets	631	1,109
Total current assets	1,644,709	1,384,138
Mineral interests, net	7,687	18,475
Property, plant and equipment, net	759,471	790,900
Deferred income taxes	112,560	112,560
Other long-term assets	10,331	9,375
Total assets	2,534,758	2,315,448
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	3,945	10,196
Accounts payable	72,706	78,260
Accrued expenses	44,752	83,155
Intercompany payables		567,360
Accumulated postretirement benefits obligation	30,350	29,069
Other current liabilities	23,202	24,389
Total current liabilities	174,955	792,429
Long-term debt		1,784
Accumulated postretirement benefits obligation	640,937	632,812
Other long-term liabilities	123,184	128,593
Total liabilities	939,076	1,555,618
Total stockholders' equity	1,595,682	759,830
Total liabilities and stockholders' equity	2,534,758	2,315,448
Non-Guarantor Subsidiaries
ASSETS
Cash and cash equivalents	31,401	32,707	18,395	29,265
Receivables, net	75,764	79,679
Intercompany receivables	57,438
Inventories	156,188	174,125
Deferred income taxes	510	1,464
Prepaid expenses	4,374	6,580
Other current assets	2,280	5,260
Total current assets	327,955	299,815
Mineral interests, net	2,910,215	2,947,082
Property, plant and equipment, net	862,217	932,783
Deferred income taxes	(4,501)	(4,501)
Other long-term assets	16,092	13,497
Total assets	4,111,978	4,188,676
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	8,234	8,597
Accounts payable	21,541	31,525
Accrued expenses	56,246	74,523
Intercompany payables		153,933
Intercompany loans payable	55,583	118,079
Other current liabilities	22,105	25,040
Total current liabilities	163,709	411,697
Long-term debt	7,828	14,333
Deferred income taxes	854,408	921,687
Other long-term liabilities	68,484	70,695
Total liabilities	1,094,429	1,418,412
Total stockholders' equity	3,017,549	2,770,264
Total liabilities and stockholders' equity	4,111,978	4,188,676
Eliminations
ASSETS
Intercompany receivables	(274,189)	(721,293)
Intercompany loans receivable	(1,151,709)	(1,192,958)
Total current assets	(1,425,898)	(1,914,251)
Investment in subsidiaries	(4,613,231)	(3,530,094)
Total assets	(6,039,129)	(5,444,345)
LIABILITIES AND STOCKHOLDERS' EQUITY
Intercompany payables	(274,189)	(721,293)
Intercompany loans payable	(1,151,709)	(1,192,958)
Total current liabilities	(1,425,898)	(1,914,251)
Total liabilities	(1,425,898)	(1,914,251)
Total stockholders' equity	(4,613,231)	(3,530,094)
Total liabilities and stockholders' equity	$ (6,039,129)	$ (5,444,345)

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Supplemental Guarantor and Non-Guarantor Financial Information (Tables)

9 Months Ended

Sep. 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)
SEPTEMBER 30, 2013
(in thousands)

	Parent (Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
ASSETS
Cash and cash equivalents	$	261,733	$	—	$	31,401		$	—		$	293,134
Receivables, net		120,361		109,229		75,764			—			305,354
Intercompany receivables		—		216,751		57,438			(274,189	)		—
Intercompany loans receivable		55,583		1,096,126		—			(1,151,709	)		—
Inventories		—		164,493		156,188			—			320,681
Deferred income taxes		39,876		17,687		510			—			58,073
Prepaid expenses		2,931		39,792		4,374			—			47,097
Other current assets		17,867		631		2,280			—			20,778
Total current assets		498,351		1,644,709		327,955			(1,425,898	)		1,045,117
Mineral interests, net		—		7,687		2,910,215			—			2,917,902
Property, plant and equipment, net		6,753		759,471		862,217			—			1,628,441
Deferred income taxes		40,252		112,560		(4,501	)		—			148,311
Investment in subsidiaries		4,613,231		—		—			(4,613,231	)		—
Other long-term assets		74,318		10,331		16,092			—			100,741
	$	5,232,905	$	2,534,758	$	4,111,978		$	(6,039,129	)	$	5,840,512
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—	$	3,945	$	8,234		$	—		$	12,179
Accounts payable		3,446		72,706		21,541			—			97,693
Accrued expenses		53,472		44,752		56,246			—			154,470
Intercompany payables		274,189		—		—			(274,189	)		—
Intercompany loans payable		1,096,126		—		55,583			(1,151,709	)		—
Accumulated postretirement benefits obligation		161		30,350		—			—			30,511
Other current liabilities		168,993		23,202		22,105			—			214,300
Total current liabilities		1,596,387		174,955		163,709			(1,425,898	)		509,153
Long-term debt		2,762,553		—		7,828			—			2,770,381
Accumulated postretirement benefits obligation		400		640,937		—			—			641,337
Deferred income taxes		—		—		854,408			—			854,408
Other long-term liabilities		44,887		123,184		68,484			—			236,555
Total liabilities		4,404,227		939,076		1,094,429			(1,425,898	)		5,011,834
Stockholders' equity		828,678		1,595,682		3,017,549			(4,613,231	)		828,678
	$	5,232,905	$	2,534,758	$	4,111,978		$	(6,039,129	)	$	5,840,512

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		721,293		—		—			(721,293	)		—
Intercompany loans receivable		118,079		1,074,879		—			(1,192,958	)		—
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		1,046,114		1,384,138		299,815			(1,914,251	)		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
	$	4,708,641	$	2,315,448	$	4,188,676		$	(5,444,345	)	$	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		—		567,360		153,933			(721,293	)		—
Intercompany loans payable		1,074,879		—		118,079			(1,192,958	)		—
Accumulated postretirement benefits obligation		131		29,069		—			—			29,200
Other current liabilities		157,044		24,389		25,040			—			206,473
Total current liabilities		1,264,379		792,429		411,697			(1,914,251	)		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		3,698,070		1,555,618		1,418,412			(1,914,251	)		4,757,849
Stockholders' equity		1,010,571		759,830		2,770,264			(3,530,094	)		1,010,571
	$	4,708,641	$	2,315,448	$	4,188,676		$	(5,444,345	)	$	5,768,420

Schedule of supplemental condensed consolidating statements of operations (Unaudited)

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

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	302,328	$	143,609		$	—		$	445,937
Miscellaneous income (loss)		(932	)		5,669		5,122			—			9,859
		(932	)		307,997		148,731			—			455,796
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			234,913		160,398			—			395,311
Depreciation and depletion		543			43,600		38,843			—			82,986
Selling, general and administrative		(3,730	)		13,854		11,749			—			21,873
Postretirement benefits		(54	)		14,761		—			—			14,707
Restructuring and asset impairment		—			—		—			—			—
		(3,241	)		307,128		210,990			—			514,877
Operating income (loss)		2,309			869		(62,259	)		—			(59,081	)
Interest expense		(72,054	)		—		(2,408	)		10,918			(63,544	)
Interest income		1,874			8,465		594			(10,918	)		15
Other loss		4,059			218		609			—			4,886
Income (loss) before income tax expense		(63,812	)		9,552		(63,464	)		—			(117,724	)
Income tax expense (benefit)		(715	)		1,368		(17,653	)		—			(17,000	)
		(63,097	)		8,184		45,811			—			(100,724	)
Equity in earnings (losses) of subsidiaries		(37,627	)		—		—			37,627			—
Net income (loss)	$	(100,724	)	$	8,184	$	45,811		$	37,627		$	(100,724	)

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	441,518		$	170,992		$	—		$	612,510
Miscellaneous income (loss)		345			1,674			(2,555	)		—			(536	)
		345			443,192			168,437			—			611,974
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			283,138			165,627			—			448,765
Depreciation and depletion		466			35,576			46,518			—			82,560
Selling, general and administrative		6,026			17,885			8,575			—			32,486
Postretirement benefits		(112	)		13,325			—			—			13,213
Restructuring and asset impairment		—			—			1,106,715			—			1,106,715
		6,380			349,924			1,327,435			—			1,683,739
Operating income (loss)		(6,035	)		93,268			(1,158,998	)		—			(1,071,765	)
Interest expense		(35,618	)		(1,191	)		(2,484	)		8,748			(30,545	)
Interest income		1,124			6,699			1,038			(8,748	)		113
Other income (loss), net		3,019			—			(3,962	)		—			(943	)
Income (loss) before income tax expense		(37,510	)		98,776			(1,164,406	)		—			(1,103,140	)
Income tax benefit		(2,295	)		(1,632	)		(37,257	)		—			(41,184	)
		(35,215	)		100,408			(1,127,149	)		—			(1,061,956	)
Equity in earnings (losses) of subsidiaries		(1,026,741	)		—			—			1,026,741			—
Net income (loss)	$	(1,061,956	)	$	100,408		$	(1,127,149	)	$	1,026,741		$	(1,061,956	)

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	916,338		$	457,006		$	—		$	1,373,344
Miscellaneous income (loss)		(159	)		8,638			6,812			—			15,291
		(159	)		924,976			463,818			—			1,388,635
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			693,904			489,957			—			1,183,861
Depreciation and depletion		1,539			117,683			113,274			—			232,496
Selling, general and administrative		6,420			41,108			32,148			—			79,676
Postretirement benefits		(164	)		44,321			—			—			44,157
Restructuring and asset impairment		—			(8,947	)		10,646			—			1,699
		7,795			888,069			646,025			—			1,541,889
Operating income (loss)		(7,954	)		36,907			(182,207	)		—			(153,254	)
Interest expense		(190,227	)		—			(8,585	)		29,521			(169,291	)
Interest income		5,419			21,748			3,163			(29,521	)		809
Other income		4,059			218			—			—			4,277
Income (loss) before income tax expense		(188,703	)		58,873			(187,629	)		—			(317,459	)
Income tax expense (benefit)		(49,490	)		6,505			(89,814	)		—			(132,799	)
		(139,213	)		52,368			(97,815	)		—			(184,660	)
Equity in earnings (losses) of subsidiaries		(45,447	)		—			—			45,447			—
Net income (loss)	$	(184,660	)	$	52,368		$	(97,815	)	$	45,447		$	(184,660	)

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	1,290,567		$	617,846		$	—		$	1,908,413
Miscellaneous income (loss)		2,071			20,553			(9,926	)		—			12,698
		2,071			1,311,120			607,920			—			1,921,111
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			801,320			565,063			—			1,366,383
Depreciation and depletion		901			105,308			117,303			—			223,512
Selling, general and administrative		14,594			55,011			34,973			—			104,578
Postretirement benefits		(337	)		39,976			—			—			39,639
Restructuring and asset impairment		—			—			1,106,715			—			1,106,715
		15,158			1,001,615			1,824,054			—			2,840,827
Operating income (loss)		(13,087	)		309,505			(1,216,134	)		—			(919,716	)
Interest expense		(111,043	)		(1,731	)		(4,443	)		27,501			(89,716	)
Interest income		2,868			21,930			3,434			(27,501	)		731
Other income (loss), net		9,058			—			(22,913	)		—			(13,855	)
Income (loss) before income tax expense		(112,204	)		329,704			(1,240,056	)		—			(1,022,556	)
Income tax expense (benefit)		(25,860	)		63,849			(65,961	)		—			(27,972	)
Income (loss) from continuing operations		(86,344	)		265,855			(1,174,095	)		—			(994,584	)
Income from discontinued operations		—			—			5,180			—			5,180
Equity in earnings (losses) of subsidiaries		(903,060	)		—			—			903,060			—
Net income (loss)	$	(989,404	)	$	265,855		$	(1,168,915	)	$	903,060		$	(989,404	)

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

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

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(100,724	)	$	8,184	$	(45,811	)	$	37,627		$	(100,724	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		4,659			13,338		—			(13,338	)		4,659
Change in unrealized gain on hedges, net of tax		653			12		—			(12	)		653
Change in foreign currency translation adjustment		14,847			—		14,847			(14,847	)		14,847
Change in unrealized loss on investments, net of tax		(940	)		—		(940	)		940			(940	)
Total other comprehensive income (loss), net of tax		19,219			13,350		13,907			(27,257	)		19,219
Total comprehensive income (loss)	$	(81,505	)	$	21,534	$	(31,904	)	$	10,370		$	(81,505	)

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

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(1,061,956	)	$	100,408	$	(1,127,149	)	$	1,026,741		$	(1,061,956	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		3,898			—		—			—			3,898
Change in unrealized gain (loss) on hedges, net of tax		(545	)		23		—			(23	)		(545	)
Change in foreign currency translation adjustment		3,132			—		3,132			(3,132	)		3,132
Change in unrealized gain on investments, net of tax		1,135			—		1,135			(1,135	)		1,135
Total other comprehensive income (loss), net of tax		7,620			23		4,267			(4,290	)		7,620
Total comprehensive income (loss)	$	(1,054,336	)	$	100,431	$	(1,122,882	)	$	1,022,451		$	(1,054,336	)

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

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(184,660	)	$	52,368	$	(97,815	)	$	45,447		$	(184,660	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		13,976			13,338		—			(13,338	)		13,976
Change in unrealized gain on hedges, net of tax		1,901			49		—			(49	)		1,901
Change in foreign currency translation adjustment		(2,239	)		—		(2,239	)		2,239			(2,239	)
Change in unrealized gain on investments, net of tax		(897	)		—		(897	)		897			(897	)
Total other comprehensive income (loss), net of tax		12,741			13,387		(3,136	)		(10,251	)		12,741
Total comprehensive income (loss)	$	(171,919	)	$	65,755	$	(100,951	)	$	35,196		$	(171,919	)

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(989,404	)	$	265,855		$	(1,168,915	)	$	903,060		$	(989,404	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		11,693			(50,756	)		—			50,756			11,693
Change in unrealized gain (loss) on hedges, net of tax		(3,815	)		72			(2,519	)		2,447			(3,815	)
Change in foreign currency translation adjustment		2,342			—			2,342			(2,342	)		2,342
Change in unrealized loss on investments, net of tax		766			—			766			(766	)		766
Total other comprehensive income (loss), net of tax		10,986			(50,684	)		589			50,095			10,986
Total comprehensive income (loss)	$	(978,418	)	$	215,171		$	(1,168,326	)	$	953,155		$	(978,418	)

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

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(165,441	)	$	163,367		$	(41,952	)	$	—		$	(44,026	)
INVESTING ACTIVITIES
Additions to property, plant and equipment		(863	)		(84,623	)		(23,249	)		—			(108,735	)
Intercompany loans made		(33,100	)		—			—			33,100			—
Intercompany payments received		30,500			—			—			(30,500	)		—
Investments in subsidiaries		—			—			—			—			—
Proceeds from sales of investments		—			—			1,559			—			1,559
Other		—			—			663			—			663
Cash flows used in investing activities		(3,463	)		(84,623	)		(21,027	)		2,600			(106,513	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		897,412			—			—			—			897,412
Borrowings under revolving credit agreement		—			—			646,320			—			646,320
Repayments on revolving credit agreement		—			—			(646,320	)		—			(646,320	)
Retirements of debt		(496,062	)		(14,193	)		—			—			(510,255	)
Dividends paid		(16,264	)		—			—			—			(16,264	)
Debt issuance costs		(42,128	)		—			—			—			(42,128	)
Advances from (to) consolidated entities		4,729			(64,763	)		60,034			—			—
Intercompany borrowings		—			—			33,100			(33,100	)		—
Intercompany payments made		—			—			(30,500	)		30,500			—
Investment from Parent		—			—			—			—			—
Other		(883	)		151			—			—			(732	)
Cash flows provided by (used in) financing activities		346,804			(78,805	)		62,634			(2,600	)		328,033
Effect of foreign exchange rates on cash		—			—			(961	)		—			(961	)
Net increase (decrease) in cash and cash equivalents		177,900			(61	)		(1,306	)		—			176,533
Cash and cash equivalents at beginning of period		83,833			61			32,707			—			116,601
Cash and cash equivalents at end of period	$	261,733		$	—		$	31,401		$	—		$	293,134

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(141,991	)	$	360,669		$	114,328		$	—		$	333,006
INVESTING ACTIVITIES
Additions to property, plant and equipment		(4,127	)		(108,002	)		(219,211	)		—			(331,340	)
Proceeds from sales of investments		—			—			12,382			—			12,382
Intercompany Notes Issued		(58,102	)		—			—			58,102			—
Other		—			1,076			—			—			1,076
Cash flows used in investing activities		(62,229	)		(106,926	)		(206,829	)		58,102			(317,882	)
FINANCING ACTIVITIES
Borrowings under revolving credit agreement		—			—			272,926			—			272,926
Repayments on revolving credit agreement		—			—			(125,396	)		—			(125,396	)
Retirements of debt		(100,000	)		(6,056	)		(22,394	)		—			(128,450	)
Dividends paid		(23,432	)		—			—			—			(23,432	)
Net consideration paid upon exercise of warrants		(11,535	)		—			—			—			(11,535	)
Debt Issuance Costs		(6,376	)		—			—			—			(6,376	)
Advances from (to) consolidated entities		357,707			(257,147	)		(100,560	)		—			—
Intercompany borrowings		—			—			58,102			(58,102	)		—
Other		176			2			—			—			178
Cash flows provided by (used in) financing activities		216,540			(263,201	)		82,678			(58,102	)		(22,085	)
Cash flows provided by (used in) continuing operations		12,320			(9,458	)		(9,823	)		—			(6,961	)
CASH FLOWS FROM DISCONTINUED OPERATIONS		—			9,500			—			—			9,500
Effect of foreign exchange rates on cash		—			—			(1,047	)		—			(1,047	)
Net increase (decrease) in cash and cash equivalents		12,320			42			(10,870	)		—			1,492
Cash and cash equivalents at beginning of period		99,086			79			29,265			—			128,430
Cash and cash equivalents at end of period	$	111,406		$	121		$	18,395		$	—		$	129,922

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Accumulated Other Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 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			1,249
Amounts reclassified from accumulated other comprehensive income (loss)			11,492
Total other comprehensive income, net of tax	19,219	7,620	12,741	10,986
Balance at the end of the period	(258,109)		(258,109)
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)			13,976
Total other comprehensive income, net of tax			13,976
Balance at the end of the period	(252,066)		(252,066)
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			3,532
Amounts reclassified from accumulated other comprehensive income (loss)			(1,631)
Total other comprehensive income, net of tax			1,901
Balance at the end of the period	(2,302)		(2,302)
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			(2,239)
Total other comprehensive income, net of tax			(2,239)
Balance at the end of the period	(3,741)		(3,741)
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			(44)
Amounts reclassified from accumulated other comprehensive income (loss)			(853)
Total other comprehensive income, net of tax			$ (897)

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Pension and Other Postretirement Benefits (Tables)

9 Months Ended

Sep. 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 September 30,						For the three months ended September 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			7,200		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			4,714		3,681
Net periodic benefit cost	$	3,101		$	2,973		$	14,707	$	13,213

	Pension Benefits						Other Postretirement Benefits
	For the nine months ended September 30,						For the nine months ended September 30,
	2013			2012			2013		2012
Components of net periodic benefit cost:
Service cost	$	5,298		$	4,494		$	7,458	$	6,054
Interest cost		9,210			9,387			21,596		21,759
Expected return on plan assets		(12,705	)		(12,093	)		—		—
Amortization of prior service cost		198			192			921		783
Amortization of net actuarial loss		7,302			6,939			14,182		11,043
Net periodic benefit cost	$	9,303		$	8,919		$	44,157	$	39,639

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Change in pension and postretirement benefit plans, tax expense	$ 2,882	$ 2,422	$ 8,647	$ 7,266
Change in unrealized gain (loss) on hedges, tax expense (benefit)	$ 409	$ (339)	$ 1,076	$ (2,381)

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) (USD $)	9 Months Ended
	Sep. 30, 2013
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Dividends paid (in dollars per share)	$ 0.26

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Restructuring and Asset Impairment

9 Months Ended

Sep. 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 challenges 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 allows the closure of this mine in the fourth quarter of 2013. For the nine months ended September 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 the North River mine. The $17.0 million benefit 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 $10.7 million of costs related to the curtailment of the Willow Creek mine during the nine months ended September 30, 2013.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
OPERATING ACTIVITIES
Net loss	$ (184,660)	$ (989,404)
Less income from discontinued operations		(5,180)
Loss from continuing operations	(184,660)	(994,584)
Adjustments to reconcile loss from continuing operations to net cash flows provided by (used in) operating activities:
Depreciation and depletion	232,496	223,512
Deferred income tax benefit	(68,426)	(100,419)
Impairment charges		1,106,715
Amortization of debt issuance costs	25,392	12,763
Other	(4,422)	28,259
Decrease (increase) in current assets:
Receivables	(48,631)	79,310
Inventories	(7,274)	(113,601)
Prepaid expenses and other current assets	4,801	(8,412)
Increase (decrease) in current liabilities:
Accounts payable	(1,397)	91,349
Accrued interest	30,676	(1,300)
Accrued expenses and other current liabilities	(22,581)	9,414
Cash flows provided by (used in) operating activities	(44,026)	333,006
INVESTING ACTIVITIES
Additions to property, plant and equipment	(108,735)	(331,340)
Proceeds from sales of investments	1,559	12,382
Other	663	1,076
Cash flows used in investing activities	(106,513)	(317,882)
FINANCING ACTIVITIES
Proceeds from issuance of debt	897,412
Borrowings under revolving credit agreement	646,320	272,926
Repayments on revolving credit agreement	(646,320)	(125,396)
Retirements of debt	(510,255)	(128,450)
Dividends paid	(16,264)	(23,432)
Net consideration paid upon exercise of warrants		(11,535)
Debt issuance costs	(42,128)	(6,376)
Other	(732)	178
Cash flows provided by (used in) financing activities	328,033	(22,085)
Cash flows provided by (used in) continuing operations	177,494	(6,961)
CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash flows provided by investing activities		9,500
Effect of foreign exchange rates on cash	(961)	(1,047)
Net increase in cash and cash equivalents	176,533	1,492
Cash and cash equivalents at beginning of period	116,601	128,430
Cash and cash equivalents at end of period	$ 293,134	$ 129,922

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Derivative Financial Instruments (Details 2) (Designated as cash flow hedging instruments, USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Entity's derivative instruments within the condensed consolidated balance sheets
Asset derivatives	$ 2	$ 12
Liability derivatives	4,005	6,615
Interest rate cap
Entity's derivative instruments within the condensed consolidated balance sheets
Asset derivatives	2	12
Interest rate cap | Other current assets
Entity's derivative instruments within the condensed consolidated balance sheets
Asset derivatives	2	8
Interest rate cap | Other long-term assets
Entity's derivative instruments within the condensed consolidated balance sheets
Asset derivatives		4
Interest rate swaps
Entity's derivative instruments within the condensed consolidated balance sheets
Liability derivatives	4,005	6,615
Interest rate swaps | Other current liabilities
Entity's derivative instruments within the condensed consolidated balance sheets
Liability derivatives	4,000	4,100
Interest rate swaps | Other long-term liabilities
Entity's derivative instruments within the condensed consolidated balance sheets
Liability derivatives		$ 2,500

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Accumulated Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 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 nine months ended September 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		—			3,532			(2,239	)		(44	)		1,249
Amounts reclassified from accumulated other comprehensive income (loss)		13,976			(1,631	)		—(1	)		(853	)		11,492
Net current-period other comprehensive income (loss)		13,976			1,901			(2,239	)		(897	)		12,741
Ending balance as of September 30, 2013	$	(252,066	)	$	(2,302	)	$	(3,741	)	$	—		$	(258,109	)

(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 nine months ended September 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	$	(3,018	)	Interest expense
Interest rate swaps (ineffective portion)		378		Other loss
		(2,640	)	Total before tax
		1,009		Income tax expense
	$	(1,631	)	Net of tax
Amortization of pension and postretirement benefit plans:
Prior service cost	$	1,119		(a)
Net actuarial loss		21,484		(a)
		22,603		Total before tax
		(8,627	)	Income tax benefit
	$	13,976		Net of tax
Gains and losses on available-for-sale securities	$	(1,382	)	Other income
		529		Income tax expense
	$	(853	)	Net of tax

(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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Basis of Presentation (Details) (USD $)	3 Months Ended		9 Months Ended			3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Mar. 31, 2013	Jun. 30, 2013 Western Coal Corp Purchase price allocation adjustments
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		5,700,000		19,100,000
Business acquisition
Depreciation and depletion	$ (82,986,000)	$ (82,560,000)	$ (232,496,000)	$ (223,512,000)		$ 8,400,000

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Pension and Other Postretirement Benefits (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Pension Benefits
Components of net periodic benefit cost:
Service cost	$ 1,766	$ 1,498	$ 5,298	$ 4,494
Interest cost	3,070	3,129	9,210	9,387
Expected return on plan assets	(4,235)	(4,031)	(12,705)	(12,093)
Amortization of prior service cost	66	64	198	192
Amortization of net actuarial loss	2,434	2,313	7,302	6,939
Net periodic benefit cost	3,101	2,973	9,303	8,919
Other Postretirement Benefits
Components of net periodic benefit cost:
Service cost	2,486	2,018	7,458	6,054
Interest cost	7,200	7,253	21,596	21,759
Amortization of prior service cost	307	261	921	783
Amortization of net actuarial loss	4,714	3,681	14,182	11,043
Net periodic benefit cost	$ 14,707	$ 13,213	$ 44,157	$ 39,639

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Supplemental Guarantor and Non-Guarantor Financial Information (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Revenues:
Sales	$ 445,937	$ 612,510	$ 1,373,344	$ 1,908,413
Miscellaneous income (loss)	9,859	(536)	15,291	12,698
Total revenues	455,796	611,974	1,388,635	1,921,111
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)	395,311	448,765	1,183,861	1,366,383
Depreciation and depletion	82,986	82,560	232,496	223,512
Selling, general and administrative	21,873	32,486	79,676	104,578
Postretirement benefits	14,707	13,213	44,157	39,639
Restructuring and asset impairment		1,106,715	1,699	1,106,715
Total costs and expenses	514,877	1,683,739	1,541,889	2,840,827
Operating income (loss)	(59,081)	(1,071,765)	(153,254)	(919,716)
Interest expense	(63,544)	(30,545)	(169,291)	(89,716)
Interest income	15	113	809	731
Other income (loss), net	4,886	(943)	4,277	(13,855)
Loss from continuing operations before income tax benefit	(117,724)	(1,103,140)	(317,459)	(1,022,556)
Income tax benefit	(17,000)	(41,184)	(132,799)	(27,972)
Loss from continuing operations	(100,724)	(1,061,956)	(184,660)	(994,584)
Income from discontinued operations				5,180
Net loss	(100,724)	(1,061,956)	(184,660)	(989,404)
Parent (Issuer)
Revenues:
Miscellaneous income (loss)	(932)	345	(159)	2,071
Total revenues	(932)	345	(159)	2,071
Cost and expenses:
Depreciation and depletion	543	466	1,539	901
Selling, general and administrative	(3,730)	6,026	6,420	14,594
Postretirement benefits	(54)	(112)	(164)	(337)
Total costs and expenses	(3,241)	6,380	7,795	15,158
Operating income (loss)	2,309	(6,035)	(7,954)	(13,087)
Interest expense	(72,054)	(35,618)	(190,227)	(111,043)
Interest income	1,874	1,124	5,419	2,868
Other income (loss), net	4,059	3,019	4,059	9,058
Loss from continuing operations before income tax benefit	(63,812)	(37,510)	(188,703)	(112,204)
Income tax benefit	(715)	(2,295)	(49,490)	(25,860)
Loss from continuing operations	(63,097)	(35,215)	(139,213)	(86,344)
Equity in earnings (losses) of subsidiaries	(37,627)	(1,026,741)	(45,447)	(903,060)
Net loss	(100,724)	(1,061,956)	(184,660)	(989,404)
Guarantor Subsidiaries
Revenues:
Sales	302,328	441,518	916,338	1,290,567
Miscellaneous income (loss)	5,669	1,674	8,638	20,553
Total revenues	307,997	443,192	924,976	1,311,120
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)	234,913	283,138	693,904	801,320
Depreciation and depletion	43,600	35,576	117,683	105,308
Selling, general and administrative	13,854	17,885	41,108	55,011
Postretirement benefits	14,761	13,325	44,321	39,976
Restructuring and asset impairment			(8,947)
Total costs and expenses	307,128	349,924	888,069	1,001,615
Operating income (loss)	869	93,268	36,907	309,505
Interest expense		(1,191)		(1,731)
Interest income	8,465	6,699	21,748	21,930
Other income (loss), net	218		218
Loss from continuing operations before income tax benefit	9,552	98,776	58,873	329,704
Income tax benefit	1,368	(1,632)	6,505	63,849
Loss from continuing operations	8,184	100,408	52,368	265,855
Net loss	8,184	100,408	52,368	265,855
Non-Guarantor Subsidiaries
Revenues:
Sales	143,609	170,992	457,006	617,846
Miscellaneous income (loss)	5,122	(2,555)	6,812	(9,926)
Total revenues	148,731	168,437	463,818	607,920
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)	160,398	165,627	489,957	565,063
Depreciation and depletion	38,843	46,518	113,274	117,303
Selling, general and administrative	11,749	8,575	32,148	34,973
Restructuring and asset impairment		1,106,715	10,646	1,106,715
Total costs and expenses	210,990	1,327,435	646,025	1,824,054
Operating income (loss)	(62,259)	(1,158,998)	(182,207)	(1,216,134)
Interest expense	(2,408)	(2,484)	(8,585)	(4,443)
Interest income	594	1,038	3,163	3,434
Other income (loss), net	609	(3,962)		(22,913)
Loss from continuing operations before income tax benefit	(63,464)	(1,164,406)	(187,629)	(1,240,056)
Income tax benefit	(17,653)	(37,257)	(89,814)	(65,961)
Loss from continuing operations	(45,811)	(1,127,149)	(97,815)	(1,174,095)
Income from discontinued operations				5,180
Net loss	(45,811)	(1,127,149)	(97,815)	(1,168,915)
Eliminations
Cost and expenses:
Interest expense	10,918	8,748	29,521	27,501
Interest income	(10,918)	(8,748)	(29,521)	(27,501)
Equity in earnings (losses) of subsidiaries	37,627	1,026,741	45,447	903,060
Net loss	$ 37,627	$ 1,026,741	$ 45,447	$ 903,060

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Fair Value of Financial Instruments (Details) (Recurring, USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Level 2 | Interest rate cap
Fair value information
Derivative assets	$ 2	$ 12
Level 2 | Interest rate swaps
Fair value information
Derivative liabilities	4,005	6,615
Total Fair Value | Interest rate cap
Fair value information
Derivative assets	2	12
Total Fair Value | Interest rate swaps
Fair value information
Derivative liabilities	$ 4,005	$ 6,615

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
CONDENSED CONSOLIDATED BALANCE SHEETS
Mineral interests, accumulated depletion (in dollars)	$ 232,065	$ 179,595
Property, plant and equipment, accumulated depreciation (in dollars)	$ 925,650	$ 796,683
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	62,576,365	62,521,300

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Debt

9 Months Ended

Sep. 30, 2013

Debt

Debt

Note 5—Debt

        Debt consisted of the following (in thousands):

	September 30, 2013			December 31, 2012			Weighted Average Stated Interest Rate At September 30, 2013	Final Maturity
2011 term loan A ($406.6 million face value)	$	400,306		$	756,974		5.74%	2016
2011 term loan B ($978.2 million face value)		968,100			1,127,770		6.75%	2018
Revolving credit facility(1)		—			—		N/A	2016
9.875% senior notes ($500.0 million face value)		496,733			496,510		9.88%	2020
8.50% senior notes		450,000			—		8.50%	2021
9.50% senior secured notes ($450.0 million face value)		447,413			—		9.50%	2019
Other(2)		20,008			34,911		Various	Various
Total debt		2,782,560			2,416,165
Less: current debt(2)		(12,179	)		(18,793	)
Total long-term debt	$	2,770,381		$	2,397,372

(1)

As of September 30, 2013, the revolving credit facility interest rate was tied to LIBOR or CDOR, plus a credit spread ranging from 450 to 550 basis points and includes a commitment fee of 0.50% on the unused facility.

(2)

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

        The Company's minimum debt repayment schedule, excluding interest, as of September 30, 2013 is as follows (in thousands):

	Payments Due
	2013		2014		2015		2016		2017		Thereafter
2011 term loan A	$	—	$	—	$	305,941	$	100,625	$	—	$	—
2011 term loan B		—		—		—		—		—		978,178
9.875% senior notes		—		—		—		—		—		500,000
8.50% senior notes		—		—		—		—		—		450,000
9.50% senior secured notes		—		—		—		—		—		450,000
Other debt		4,899		10,090		4,929		90		—		—
	$	4,899	$	10,090	$	310,870	$	100,715	$	—	$	2,378,178

9.50% Senior Secured Notes due 2019

        On September 27, 2013, the Company issued $450.0 million aggregate principal amount of 9.50% senior secured notes due October 15, 2019 (the "2019 Notes"). The 2019 Notes are guaranteed, jointly and severally, by each of our current and future wholly-owned domestic restricted subsidiaries that from time to time guarantees any of our indebtedness or any indebtedness of any of our restricted subsidiaries. The 2019 Notes and related guarantees are secured on a first priority basis by substantially all of the property and assets of the Company and the guarantors. Interest on the 2019 Notes is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2014.

        The Company used $245.7 million of the proceeds from the 2019 Notes to extinguish $250.0 million of Term Loan A debt through a Dutch Auction process. The gain on partial extinguishment of Term Loan A debt of $4.3 million is included in other income (loss) in the Condensed Consolidated Statements of Operations. Additionally, the Company expensed $5.2 million of previously capitalized debt issuance costs as a result of the early extinguishment of the Term Loan A debt. The write-off of debt issuance costs is included in interest expense in the Condensed Consolidated Statements of Operations.

        The terms of the 2019 Notes provide that at any time prior to October 15, 2016, the Company may redeem up to 35% of the aggregate principal amount of the 2019 Notes with the net cash proceeds of certain equity offerings, at a redemption price of 109.5% of the aggregate principal amount. The Company may redeem the 2019 Notes, in whole or in part, prior to October 15, 2016, at a redemption price equal to 100% of the aggregate principal amount of the 2019 Notes plus a "make-whole" premium. The Company may redeem the 2019 Notes, in whole or in part at redemption prices equal to 107.125% for the twelve months commencing October 15, 2016, 102.375% for the twelve months commencing October 15, 2017 and 100% beginning on October 15, 2018. Upon the occurrence of a change of control, unless the Company has exercised its right to redeem the 2019 Notes, the Company will be required to offer to repurchase each holder's 2019 Notes at a price equal to 101% of the aggregate principal amount.

• 8.50% Senior Notes due 2021

        On March 27, 2013, the Company issued $450.0 million aggregate principal amount of 8.50% senior notes due April 15, 2021 (the "2021 Notes"). The 2021 Notes are unconditionally guaranteed, jointly and severally, on an unsecured basis, by each of our current and future wholly-owned domestic restricted subsidiaries that from time to time guarantees any of our indebtedness or any indebtedness of our restricted subsidiaries. Interest on the 2021 Notes is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on October 15, 2013.

        A portion of the proceeds from the 2021 Notes was used to repurchase $250.0 million of Term Loan A and B debt on a pro-rata basis. The Company expensed $6.0 million of previously capitalized debt issuance costs as a result of the early extinguishment of a portion of the Term Loan A and B debt. The write-off of debt issuance costs is included in interest expense in the Condensed Consolidated Statements of Operations.

        At any time prior to April 15, 2016, the Company may redeem up to 35% of the aggregate principal amount of the 2021 Notes with the net cash proceeds of certain equity offerings, at a redemption price of 108.50% of the aggregate principal amount. The Company may redeem the 2021 Notes, in whole or in part, 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. 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. 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.

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), 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 previous existing levels; (2) a less restrictive interest expense coverage ratio and suspension of compliance requirements until March 31, 2015; (3) a less restrictive senior secured leverage ratio and suspension of compliance requirements 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 to increase the 2014 capital spending limit up to $220.0 million; (6) additional flexibility for the Company to issue additional unsecured debt, subject to 100% of the net proceeds of any such incurrence of debt in excess of $250 million be used to repay term loans then outstanding under the Credit Agreement; and (7) a restriction on cash dividends allowed in any fiscal quarter when the secured leverage ratio exceeds 4.50:1.00.

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net loss	$ (100,724)	$ (1,061,956)	$ (184,660)	$ (989,404)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, (net of tax expense: $2,882 and $2,422 and $8,647 and $7,266 for the three and nine months ended September 30, 2013 and 2012, respectively)	4,659	3,898	13,976	11,693
Change in unrealized gain (loss) on hedges, (net of tax expense (benefit)): $409 and $(339) and $1,076 and $(2,381) for the three and nine months ended September 30, 2013 and 2012, respectively)	653	(545)	1,901	(3,815)
Change in foreign currency translation adjustment	14,847	3,132	(2,239)	2,342
Change in unrealized gain (loss) on investments, net of tax	(940)	1,135	(897)	766
Total other comprehensive income, net of tax	19,219	7,620	12,741	10,986
Total comprehensive loss	$ (81,505)	$ (1,054,336)	$ (171,919)	$ (978,418)

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
ASSETS
Cash and cash equivalents	$ 293,134	$ 116,601
Receivables, net	305,354	256,967
Inventories	320,681	306,018
Deferred income taxes	58,073	58,526
Prepaid expenses	47,097	53,776
Other current assets	20,778	23,928
Total current assets	1,045,117	815,816
Mineral interests, net of accumulated depletion of $232,065 and $179,595, respectively	2,917,902	2,965,557
Property, plant and equipment, net of accumulated depreciation of $925,650 and $796,683, respectively	1,628,441	1,732,131
Deferred income taxes	148,311	160,422
Other long-term assets	100,741	94,494
Total assets	5,840,512	5,768,420
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	12,179	18,793
Accounts payable	97,693	114,913
Accrued expenses	154,470	184,875
Accumulated postretirement benefits obligation	30,511	29,200
Other current liabilities	214,300	206,473
Total current liabilities	509,153	554,254
Long-term debt	2,770,381	2,397,372
Accumulated postretirement benefits obligation	641,337	633,264
Deferred income taxes	854,408	921,687
Other long-term liabilities	236,555	251,272
Total liabilities	5,011,834	4,757,849
Commitments and contingencies (Note 8)
Stockholders' equity:
Common stock, $0.01 par value per share: Authorized-200,000,000 shares, Issued-62,576,365 and 62,521,300 shares, respectively	626	625
Capital in excess of par value	1,610,748	1,628,244
Accumulated deficit	(524,587)	(347,448)
Accumulated other comprehensive income (loss):
Pension and other postretirement benefit plans, net of tax	(252,066)	(266,042)
Foreign currency translation adjustment	(3,741)	(1,502)
Unrealized loss on hedges, net of tax	(2,302)	(4,203)
Unrealized investment gain, net of tax		897
Total stockholders' equity	828,678	1,010,571
Total liabilities and stockholders' equity	$ 5,840,512	$ 5,768,420

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Supplemental Guarantor and Non-Guarantor Financial Information (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Supplemental guarantor and non-guarantor financial information
Net income (loss)	$ (100,724)	$ (1,061,956)	$ (184,660)	$ (989,404)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax	4,659	3,898	13,976	11,693
Change in unrealized gain (loss) on hedges, net of tax	653	(545)	1,901	(3,815)
Change in foreign currency translation adjustment	14,847	3,132	(2,239)	2,342
Change in unrealized gain (loss)on investments net of tax	(940)	1,135	(897)	766
Total other comprehensive income, net of tax	19,219	7,620	12,741	10,986
Total comprehensive loss	(81,505)	(1,054,336)	(171,919)	(978,418)
Parent (Issuer)
Supplemental guarantor and non-guarantor financial information
Net income (loss)	(100,724)	(1,061,956)	(184,660)	(989,404)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax	4,659	3,898	13,976	11,693
Change in unrealized gain (loss) on hedges, net of tax	653	(545)	1,901	(3,815)
Change in foreign currency translation adjustment	14,847	3,132	(2,239)	2,342
Change in unrealized gain (loss)on investments net of tax	(940)	1,135	(897)	766
Total other comprehensive income, net of tax	19,219	7,620	12,741	10,986
Total comprehensive loss	(81,505)	(1,054,336)	(171,919)	(978,418)
Guarantor Subsidiaries
Supplemental guarantor and non-guarantor financial information
Net income (loss)	8,184	100,408	52,368	265,855
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax	13,338		13,338	(50,756)
Change in unrealized gain (loss) on hedges, net of tax	12	23	49	72
Total other comprehensive income, net of tax	13,350	23	13,387	(50,684)
Total comprehensive loss	21,534	100,431	65,755	215,171
Non-Guarantor Subsidiaries
Supplemental guarantor and non-guarantor financial information
Net income (loss)	(45,811)	(1,127,149)	(97,815)	(1,168,915)
Other comprehensive income (loss), net of tax:
Change in unrealized gain (loss) on hedges, net of tax				(2,519)
Change in foreign currency translation adjustment	14,847	3,132	(2,239)	2,342
Change in unrealized gain (loss)on investments net of tax	(940)	1,135	(897)	766
Total other comprehensive income, net of tax	13,907	4,267	(3,136)	589
Total comprehensive loss	(31,904)	(1,122,882)	(100,951)	(1,168,326)
Eliminations
Supplemental guarantor and non-guarantor financial information
Net income (loss)	37,627	1,026,741	45,447	903,060
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax	(13,338)		(13,338)	50,756
Change in unrealized gain (loss) on hedges, net of tax	(12)	(23)	(49)	2,447
Change in foreign currency translation adjustment	(14,847)	(3,132)	2,239	(2,342)
Change in unrealized gain (loss)on investments net of tax	940	(1,135)	897	(766)
Total other comprehensive income, net of tax	(27,257)	(4,290)	(10,251)	50,095
Total comprehensive loss	$ 10,370	$ 1,022,451	$ 35,196	$ 953,155

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value of Financial Instruments

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

	September 30, 2013
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	2	$	—	$	2
Liabilities:
Interest rate swaps	$	—	$	4,005	$	—	$	4,005

	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):

	September 30, 2013				December 31, 2012
(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
2011 Term Loan A	$	400,306	$	395,386	$	756,974	$	758,867
2011 Term Loan B	$	968,100	$	941,497	$	1,127,770	$	1,135,293
9.875% Senior Notes	$	496,733	$	435,000	$	496,510	$	500,000
8.50% Senior Notes	$	450,000	$	373,500	$	—	$	—
9.50% Senior Secured Notes	$	447,413	$	465,188	$	—	$	—

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Inventories (Tables)

9 Months Ended

Sep. 30, 2013

Inventories

Schedule of inventories

Inventories are summarized as follows (in thousands):

	September 30, 2013		December 31, 2012
Coal	$	243,614	$	228,910
Raw materials and supplies		77,067		77,108
Total inventories	$	320,681	$	306,018

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Accumulated Other Comprehensive Income (Loss) (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Amounts reclassified out of each component of accumulated other comprehensive income (loss)
Interest expense	$ (63,544)	$ (30,545)	$ (169,291)	$ (89,716)
Other income (loss)	4,886	(943)	4,277	(13,855)
Loss from continuing operations before income tax benefit	(117,724)	(1,103,140)	(317,459)	(1,022,556)
Income tax expense (benefit)	17,000	41,184	132,799	27,972
Net loss	(100,724)	(1,061,956)	(184,660)	(989,404)
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)
Loss from continuing operations before income tax benefit			(2,640)
Income tax expense (benefit)			1,009
Net loss			(1,631)
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			(3,018)
Other income (loss)			378
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			1,119
Net actuarial loss			21,484
Loss from continuing operations before income tax benefit			22,603
Income tax expense (benefit)			(8,627)
Net loss			13,976
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)			(1,382)
Income tax expense (benefit)			529
Net loss			$ (853)

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Commitments and Contingencies (Details)	1 Months Ended	3 Months Ended		9 Months Ended	0 Months Ended				9 Months Ended
	Jun. 30, 2010	Jun. 30, 2012	Sep. 30, 2013 USD ($)	Sep. 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	Mar. 15, 2012 Securities Class Actions and Shareholder Derivative Actions item	Jan. 26, 2012 Securities Class Actions and Shareholder Derivative Actions item	Sep. 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
Number of other PRP's in which "Offer to Conduct Work" letter was sent to				4
Number of residential properties whose sampling has been completed by EPA				1,100
Number of properties exceeding Regional Removal Management Levels (RML's)				400
Number of Phase I properties offered to Potentially Responsible Parties PRP's for cleanup				50
Penalty sought					100,000
Number of executive directors as defendants							3	3
Number of actions						2
Number of complaints									3

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Income Taxes (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Income Taxes
Income tax benefit	$ 17,000,000	$ 41,184,000	$ 132,799,000	$ 27,972,000
Benefit attributable to foreign currency exchange rate fluctuations on foreign deferred tax liabilities			11,200,000
One-time non-cash deferred income tax charge reflecting the revaluation of Canadian and U.K. Operations deferred tax liabilities as a result of change in the statutory corporate tax rates	13,700,000		13,700,000
One-time non-cash deferred income tax charge related to intercompany lending between the Company's West Virginia and U.K. operations	$ 10,300,000		$ 10,300,000

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Debt (Details) (USD $)	9 Months Ended		0 Months Ended			0 Months Ended					1 Months Ended	9 Months Ended					0 Months Ended	1 Months Ended	9 Months Ended	1 Months Ended						0 Months Ended	9 Months Ended	0 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Jul. 23, 2013 2011 Credit Agreement	Jul. 23, 2013 2011 Credit Agreement Minimum	Jul. 23, 2013 2011 Credit Agreement Maximum	Sep. 27, 2013 2011 term loan A	Sep. 30, 2013 2011 term loan A	Dec. 31, 2012 2011 term loan A	Sep. 30, 2013 2011 term loan B	Dec. 31, 2012 2011 term loan B	Mar. 31, 2013 Term Loan A and Term Loan B	Sep. 30, 2013 Revolving Credit Facility	Sep. 30, 2013 Revolving Credit Facility Minimum	Sep. 30, 2013 Revolving Credit Facility Maximum	Sep. 30, 2013 9.875% senior notes	Dec. 31, 2012 9.875% senior notes	Mar. 27, 2013 8.50% senior notes	Mar. 31, 2013 8.50% senior notes	Sep. 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	Sep. 27, 2013 9.50% senior secured notes due 2019	Sep. 30, 2013 9.50% senior secured notes due 2019	Sep. 27, 2013 9.50% senior secured notes due 2019 Prior to October 15, 2015	Sep. 27, 2013 9.50% senior secured notes due 2019 Prior to October 15, 2016	Sep. 27, 2013 9.50% senior secured notes due 2019 During the twelve months commencing October 15, 2016	Sep. 27, 2013 9.50% senior secured notes due 2019 During the twelve months commencing October 15, 2017	Sep. 27, 2013 9.50% senior secured notes due 2019 Period commencing October15, 2018	Sep. 27, 2013 9.50% senior secured notes due 2019 Maximum Prior to October 15, 2015	Sep. 30, 2013 Other	Dec. 31, 2012 Other
Debt instrument
Total debt	$ 2,782,560,000	$ 2,416,165,000					$ 400,306,000	$ 756,974,000	$ 968,100,000	$ 1,127,770,000					$ 496,733,000	$ 496,510,000			$ 450,000,000								$ 447,413,000								$ 34,911,000
Less current debt	(12,179,000)	(18,793,000)
Total long term debt	2,770,381,000	2,397,372,000
Weighted average stated interest rate (as a percent)							5.74%		6.75%						9.88%				8.50%								9.50%
Interest rate (as a percent)															9.875%			8.50%	8.50%								9.50%
Aggregate principal amount							406,600,000		978,200,000						500,000,000											450,000,000
Debt agreements
Debt instrument, description of variable rate basis												LIBOR or CDOR
Basis spread on variable rate (as a percent)													4.50%	5.50%
Commitment fee on the unused portion (as a percent)												0.50%
Debt repayment schedule, excluding interest
2013	4,899,000																																	4,899,000
2014	10,090,000																																	10,090,000
2015	310,870,000						305,941,000																											4,929,000
2016	100,715,000						100,625,000																											90,000
Thereafter	2,378,178,000								978,178,000						500,000,000										450,000,000		450,000,000
Debt issued																		450,000,000								450,000,000
Proceeds from debt	897,412,000																									245,700,000
Extinguishment of debt						250,000,000					250,000,000
Capitalized debt issuance costs expensed						5,200,000											6,000,000
Gain on partial extinguishment of debt						4,300,000
Aggregate principal of debt redeemed (as a percent)																									35.00%								35.00%
Redemption price of debt instrument (as a percent)																			101.00%	108.50%	100.00%	104.25%	102.125%	100.00%			101.00%	109.50%	100.00%	107.125%	102.375%	100.00%
Increase in interest margin from existing levels (as a percent)			1.00%
Additional minimum liquidity covenant amount			225,000,000
Senior secured leverage ratio (as a percent)				5.50
Additional capital expenditures covenant amount in 2013			175,000,000
Additional capital expenditures covenant amount in 2014			200,000,000
Potential unused capital spending that may be carried forward					20,000,000
Increased capital expenditures covenant amount in 2014, if carryforward from prior year is utilized					220,000,000
Percentage of net proceeds of additional debt issuances in excess of specified amount that is required to be used for the repayment of term loans			100.00%
Amount of net proceeds from additional debt issuances, that if in excess of, is required to be used for the repayment of term loans			$ 250,000,000
Secured leverage ratio requirement for restriction on cash dividends allowed in any fiscal quarter			4.50

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Income Taxes

9 Months Ended

Sep. 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 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 nine months ended September 30, 2013, the income tax benefit was determined based on the annual effective tax rate method. The Company recognized an income tax benefit of $132.8 million for the nine months ended September 30, 2013, compared to an income tax benefit of $28.0 million for the nine months ended September 30, 2012. The increase in the income tax benefit year-over-year was primarily attributable to an increase in pre-tax operating losses, excluding the 2012 non-deductible goodwill impairment charge, for the current period as compared to the prior year. The 2013 and 2012 income tax provisions reflect the benefits of the 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 nine months ended September 30, 2013 and 2012 also reflect statutory depletion deductions from the Alabama mining operations.

        The current year provision for income taxes includes a benefit of $11.2 million attributable to foreign currency exchange rate fluctuations on foreign deferred tax liabilities. Additionally, the income tax provision for the three and nine months ended September 30, 2013 includes a non-cash deferred income tax charge of $13.7 million to reflect the revaluation of our Canadian and U.K. Operations deferred tax liabilities as the result of changes to the statutory corporate tax rates in each jurisdiction and a non-cash deferred income tax charge of $10.3 million related to foreign financing activities.

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Segment Information (Tables)

9 Months Ended

Sep. 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 September 30,						For the nine months ended September 30,
	2013			2012			2013			2012
Revenues:
U.S. Operations	$	337,269		$	483,615		$	997,503		$	1,402,526
Canadian and U.K. Operations		119,367			127,905			390,684			515,901
Other		(840	)		454			448			2,684
Total	$	455,796		$	611,974		$	1,388,635		$	1,921,111
Segment operating income (loss):
U.S. Operations	$	(8,008	)	$	(22,228	)	$	22,368		$	191,998
Canadian and U.K. Operations		(48,022	)		(1,036,690	)		(163,135	)		(1,074,924	)
Other		(3,051	)		(12,847	)		(12,487	)		(36,790	)
Total operating loss		(59,081	)		(1,071,765	)		(153,254	)		(919,716	)
Less interest expense, net		(63,529	)		(30,432	)		(168,482	)		(88,985	)
Other income (loss), net		4,886			(943	)		4,277			(13,855	)
Loss from continuing operations before income tax benefit		(117,724	)		(1,103,140	)		(317,459	)		(1,022,556	)
Income tax benefit		(17,000	)		(41,184	)		(132,799	)		(27,972	)
Loss from continuing operations	$	(100,724	)	$	(1,061,956	)	$	(184,660	)	$	(994,584	)
Impairment Charges:
U.S. Operations	$	—		$	114,281		$	—		$	114,281
Canadian and U.K. Operations		—			992,434			—			992,434
Other		—			—			—			—
Total	$	—		$	1,106,715		$	—		$	1,106,715
Depreciation and depletion:
U.S. Operations	$	53,060		$	44,789		$	131,722		$	130,635
Canadian and U.K. Operations		29,383			37,305			99,235			91,976
Other		543			466			1,539			901
Total	$	82,986		$	82,560		$	232,496		$	223,512
Capital expenditures:
U.S. Operations	$	24,741		$	41,670		$	90,945		$	121,633
Canadian and U.K. Operations		2,867			43,419			16,412			205,776
Other		876			195			1,378			3,931
Total	$	28,484		$	85,284		$	108,735		$	331,340

	September 30, 2013		December 31, 2012
Identifiable assets:
U.S. Operations	$	1,372,266	$	1,603,745
Canadian and U.K. Operations		3,722,676		3,728,817
Other		745,570		435,858
Total	$	5,840,512	$	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		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Derivatives designated as cash flow hedging instruments
Gain (loss), net of tax recognized in accumulated other comprehensive income (loss)	$ 1,054	$ (27)	$ 3,532	$ (5,551)
Gain, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings	(636)	(518)	(1,866)	1,736
Loss, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings (ineffective portion)	235		235
Natural gas hedges
Derivatives designated as cash flow hedging instruments
Gain (loss), net of tax recognized in accumulated other comprehensive income (loss)				(5,798)
Gain, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings				3,279
Interest rate swaps
Derivatives designated as cash flow hedging instruments
Gain (loss), net of tax recognized in accumulated other comprehensive income (loss)	1,057	9	3,538	502
Gain, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings	(636)	(518)	(1,866)	(1,543)
Loss, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings (ineffective portion)	235		235
Interest rate cap
Derivatives designated as cash flow hedging instruments
Gain (loss), net of tax recognized in accumulated other comprehensive income (loss)	$ (3)	$ (36)	$ (6)	$ (255)

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Net Loss Per Share

9 Months Ended

Sep. 30, 2013

Net Loss Per Share

Net Loss Per Share

Note 7—Net Loss Per Share

        A reconciliation of the basic and diluted net loss per share computations for the three and nine months ended September 30, 2013 and 2012 is as follows (in thousands, except per share data):

	For the three months ended September 30,
	2013						2012
	Basic			Diluted			Basic			Diluted
Numerator:
Net loss	$	(100,724	)	$	(100,724	)	$	(1,061,956	)	$	(1,061,956	)
Denominator:
Average number of common shares outstanding		62,573			62,573			62,572			62,572
Effect of dilutive securities:
Stock awards(1)		—			—			—			—
		62,573			62,573			62,572			62,572
Net loss per share	$	(1.61	)	$	(1.61	)	$	(16.97	)	$	(16.97	)

	For the nine months ended September 30,
	2013						2012
	Basic			Diluted			Basic			Diluted
Numerator:
Loss from continuing operations	$	(184,660	)	$	(184,660	)	$	(994,584	)	$	(994,584	)
Income from discontinued operations	$	—		$	—		$	5,180		$	5,180
Denominator:
Average number of common shares outstanding		62,555			62,555			62,524			62,524
Effect of dilutive securities:
Stock awards(1)		—			—			—			—
		62,555			62,555			62,524			62,524
Loss from continuing operations	$	(2.95	)	$	(2.95	)	$	(15.91	)	$	(15.91	)
Income from discontinued operations		—			—			0.09			0.09
Net loss per share	$	(2.95	)	$	(2.95	)	$	(15.82	)	$	(15.82	)

(1)

Stock awards represent the weighted average number of shares of common stock issuable on the exercise of dilutive employee stock options and vesting of 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. 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 and non-vested shares outstanding for the three months ended September 30, 2013 and 2012 totaling 675,216 and 291,517, respectively, were excluded from the calculation above because their effect would have been anti-dilutive. Additionally, the weighted average number of stock options and non-vested shares outstanding for the nine months ended September 30, 2013 and 2012 totaling 525,402 and 224,240, 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 nine months ended September 30, 2013 and 2012:

	For the three months ended September 30,
	2013		2012
Stock options		—		1,500
Restricted stock units		4,558		3,470
Total		4,558		4,970

	For the nine months ended September 30,
	2013		2012
Stock options		24,831		20,759
Restricted stock units		30,234		32,085
Total		55,065		52,844

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Inventories

9 Months Ended

Sep. 30, 2013

Inventories

Inventories

Note 3—Inventories

        Inventories are summarized as follows (in thousands):

	September 30, 2013		December 31, 2012
Coal	$	243,614	$	228,910
Raw materials and supplies		77,067		77,108
Total inventories	$	320,681	$	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	(184,660)			(184,660)
Other comprehensive income, net of tax	12,741				12,741
Stock issued upon the exercise of stock options	279	1	278
Dividends paid, $0.26 per share (in dollars per share)	(16,264)		(24,078)	7,814
Stock based compensation	7,022		7,022
Tax effect from stock-based compensation arrangements	(718)		(718)
Other	(293)			(293)
Balance at Sep. 30, 2013	$ 828,678	$ 626	$ 1,610,748	$ (524,587)	$ (258,109)

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Supplemental Guarantor and Non-Guarantor Financial Information (Details 5) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Supplemental guarantor and non-guarantor financial information
Cash flows provided by (used in) operating activities	$ (44,026)	$ 333,006
INVESTING ACTIVITIES
Additions to property, plant and equipment	(108,735)	(331,340)
Proceeds from sales of investments	1,559	12,382
Other	663	1,076
Cash flows used in investing activities	(106,513)	(317,882)
FINANCING ACTIVITIES
Proceeds from issuance of debt	897,412
Borrowings under revolving credit agreement	646,320	272,926
Repayments on revolving credit agreement	(646,320)	(125,396)
Retirements of debt	(510,255)	(128,450)
Dividends paid	(16,264)	(23,432)
Net consideration paid upon exercise of warrants		(11,535)
Debt issuance costs	(42,128)	(6,376)
Other	(732)	178
Cash flows provided by (used in) financing activities	328,033	(22,085)
Cash flows provided by (used in) continuing operations	177,494	(6,961)
CASH FLOWS FROM DISCONTINUED OPERATIONS		9,500
Effect of foreign exchange rates on cash	(961)	(1,047)
Net increase (decrease) in cash and cash equivalents	176,533	1,492
Cash and cash equivalents at beginning of period	116,601	128,430
Cash and cash equivalents at end of period	293,134	129,922
Parent (Issuer)
Supplemental guarantor and non-guarantor financial information
Cash flows provided by (used in) operating activities	(165,441)	(141,991)
INVESTING ACTIVITIES
Additions to property, plant and equipment	(863)	(4,127)
Intercompany loans made	(33,100)	(58,102)
Intercompany payments received	30,500
Cash flows used in investing activities	(3,463)	(62,229)
FINANCING ACTIVITIES
Proceeds from issuance of debt	897,412
Retirements of debt	(496,062)	(100,000)
Dividends paid	(16,264)	(23,432)
Net consideration paid upon exercise of warrants		(11,535)
Debt issuance costs	(42,128)	(6,376)
Advances from (to) consolidated entities	4,729	357,707
Other	(883)	176
Cash flows provided by (used in) financing activities	346,804	216,540
Cash flows provided by (used in) continuing operations		12,320
Net increase (decrease) in cash and cash equivalents	177,900	12,320
Cash and cash equivalents at beginning of period	83,833	99,086
Cash and cash equivalents at end of period	261,733	111,406
Guarantor Subsidiaries
Supplemental guarantor and non-guarantor financial information
Cash flows provided by (used in) operating activities	163,367	360,669
INVESTING ACTIVITIES
Additions to property, plant and equipment	(84,623)	(108,002)
Other		1,076
Cash flows used in investing activities	(84,623)	(106,926)
FINANCING ACTIVITIES
Retirements of debt	(14,193)	(6,056)
Advances from (to) consolidated entities	(64,763)	(257,147)
Other	151	2
Cash flows provided by (used in) financing activities	(78,805)	(263,201)
Cash flows provided by (used in) continuing operations		(9,458)
CASH FLOWS FROM DISCONTINUED OPERATIONS		9,500
Net increase (decrease) in cash and cash equivalents	(61)	42
Cash and cash equivalents at beginning of period	61	79
Cash and cash equivalents at end of period		121
Non-Guarantor Subsidiaries
Supplemental guarantor and non-guarantor financial information
Cash flows provided by (used in) operating activities	(41,952)	114,328
INVESTING ACTIVITIES
Additions to property, plant and equipment	(23,249)	(219,211)
Proceeds from sales of investments	1,559	12,382
Other	663
Cash flows used in investing activities	(21,027)	(206,829)
FINANCING ACTIVITIES
Borrowings under revolving credit agreement	646,320	272,926
Repayments on revolving credit agreement	(646,320)	(125,396)
Retirements of debt		(22,394)
Advances from (to) consolidated entities	60,034	(100,560)
Intercompany borrowings	33,100	58,102
Intercompany payments made	(30,500)
Cash flows provided by (used in) financing activities	62,634	82,678
Cash flows provided by (used in) continuing operations		(9,823)
Effect of foreign exchange rates on cash	(961)	(1,047)
Net increase (decrease) in cash and cash equivalents	(1,306)	(10,870)
Cash and cash equivalents at beginning of period	32,707	29,265
Cash and cash equivalents at end of period	31,401	18,395
Eliminations
INVESTING ACTIVITIES
Intercompany loans made	33,100	58,102
Intercompany payments received	(30,500)
Cash flows used in investing activities	2,600	58,102
FINANCING ACTIVITIES
Intercompany borrowings	(33,100)	(58,102)
Intercompany payments made	30,500
Cash flows provided by (used in) financing activities	$ (2,600)	$ (58,102)

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Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Revenues:
Total	$ 455,796	$ 611,974	$ 1,388,635	$ 1,921,111
Segment operating income (loss):
Total operating loss	(59,081)	(1,071,765)	(153,254)	(919,716)
Less interest expense, net	(63,529)	(30,432)	(168,482)	(88,985)
Other income (loss), net	4,886	(943)	4,277	(13,855)
Loss from continuing operations before income tax benefit	(117,724)	(1,103,140)	(317,459)	(1,022,556)
Income tax benefit	(17,000)	(41,184)	(132,799)	(27,972)
Loss from continuing operations	(100,724)	(1,061,956)	(184,660)	(994,584)
Impairment Charges:
Impairment charges		1,106,715		1,106,715
Depreciation and depletion:
Total depreciation and depletion	82,986	82,560	232,496	223,512
Capital expenditures:
Total capital expenditures	28,484	85,284	108,735	331,340
Identifiable assets by segment:
Total identifiable assets	5,840,512		5,840,512		5,768,420
U.S. Operations
Revenues:
Total	337,269	483,615	997,503	1,402,526
Segment operating income (loss):
Total operating loss	(8,008)	(22,228)	22,368	191,998
Impairment Charges:
Impairment charges		114,281		114,281
Depreciation and depletion:
Total depreciation and depletion	53,060	44,789	131,722	130,635
Capital expenditures:
Total capital expenditures	24,741	41,670	90,945	121,633
Identifiable assets by segment:
Total identifiable assets	1,372,266		1,372,266		1,603,745
Canadian and U.K. operations
Revenues:
Total	119,367	127,905	390,684	515,901
Segment operating income (loss):
Total operating loss	(48,022)	(1,036,690)	(163,135)	(1,074,924)
Impairment Charges:
Impairment charges		992,434		992,434
Depreciation and depletion:
Total depreciation and depletion	29,383	37,305	99,235	91,976
Capital expenditures:
Total capital expenditures	2,867	43,419	16,412	205,776
Identifiable assets by segment:
Total identifiable assets	3,722,676		3,722,676		3,728,817
Other
Revenues:
Total	(840)	454	448	2,684
Segment operating income (loss):
Total operating loss	(3,051)	(12,847)	(12,487)	(36,790)
Depreciation and depletion:
Total depreciation and depletion	543	466	1,539	901
Capital expenditures:
Total capital expenditures	876	195	1,378	3,931
Identifiable assets by segment:
Total identifiable assets	$ 745,570		$ 745,570		$ 435,858

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Restructuring and Asset Impairment (Details) (USD $)	3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Sep. 30, 2012 North River mine	Sep. 30, 2012 North River mine	Sep. 30, 2012 Willow Creek mine	Sep. 30, 2012 Willow Creek mine	Sep. 30, 2013 North River Mine Closure	Sep. 30, 2013 Willow Creek Mine Closure
Asset impairment and restructuring
Gain on release of a below market contract liability							$ 17,000,000
Asset impairment charges	1,106,715,000	1,106,715,000	114,281,000	114,281,000	992,434,000	992,434,000	8,000,000
Curtailment costs								$ 10,700,000

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Accumulated Other Comprehensive Income (Loss)

9 Months Ended

Sep. 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 nine months ended September 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		—			3,532			(2,239	)		(44	)		1,249
Amounts reclassified from accumulated other comprehensive income (loss)		13,976			(1,631	)		—(1	)		(853	)		11,492
Net current-period other comprehensive income (loss)		13,976			1,901			(2,239	)		(897	)		12,741
Ending balance as of September 30, 2013	$	(252,066	)	$	(2,302	)	$	(3,741	)	$	—		$	(258,109	)

(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 nine months ended September 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	$	(3,018	)	Interest expense
Interest rate swaps (ineffective portion)		378		Other loss
		(2,640	)	Total before tax
		1,009		Income tax expense
	$	(1,631	)	Net of tax
Amortization of pension and postretirement benefit plans:
Prior service cost	$	1,119		(a)
Net actuarial loss		21,484		(a)
		22,603		Total before tax
		(8,627	)	Income tax benefit
	$	13,976		Net of tax
Gains and losses on available-for-sale securities	$	(1,382	)	Other income
		529		Income tax expense
	$	(853	)	Net of tax

(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

9 Months Ended

Sep. 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 September 30,						For the three months ended September 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			7,200		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			4,714		3,681
Net periodic benefit cost	$	3,101		$	2,973		$	14,707	$	13,213

	Pension Benefits						Other Postretirement Benefits
	For the nine months ended September 30,						For the nine months ended September 30,
	2013			2012			2013		2012
Components of net periodic benefit cost:
Service cost	$	5,298		$	4,494		$	7,458	$	6,054
Interest cost		9,210			9,387			21,596		21,759
Expected return on plan assets		(12,705	)		(12,093	)		—		—
Amortization of prior service cost		198			192			921		783
Amortization of net actuarial loss		7,302			6,939			14,182		11,043
Net periodic benefit cost	$	9,303		$	8,919		$	44,157	$	39,639

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Supplemental Guarantor and Non-Guarantor Financial Information

9 Months Ended

Sep. 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

        In accordance with the indentures governing the 9.875% senior notes due December 2020 and the 8.50% senior notes due April 2021 (collectively the "Senior Notes"), certain wholly-owned U.S. domestic restricted subsidiaries of the Company have fully and unconditionally guaranteed the Senior Notes on a joint and several basis. 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)
SEPTEMBER 30, 2013
(in thousands)

	Parent (Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
ASSETS
Cash and cash equivalents	$	261,733	$	—	$	31,401		$	—		$	293,134
Receivables, net		120,361		109,229		75,764			—			305,354
Intercompany receivables		—		216,751		57,438			(274,189	)		—
Intercompany loans receivable		55,583		1,096,126		—			(1,151,709	)		—
Inventories		—		164,493		156,188			—			320,681
Deferred income taxes		39,876		17,687		510			—			58,073
Prepaid expenses		2,931		39,792		4,374			—			47,097
Other current assets		17,867		631		2,280			—			20,778
Total current assets		498,351		1,644,709		327,955			(1,425,898	)		1,045,117
Mineral interests, net		—		7,687		2,910,215			—			2,917,902
Property, plant and equipment, net		6,753		759,471		862,217			—			1,628,441
Deferred income taxes		40,252		112,560		(4,501	)		—			148,311
Investment in subsidiaries		4,613,231		—		—			(4,613,231	)		—
Other long-term assets		74,318		10,331		16,092			—			100,741
	$	5,232,905	$	2,534,758	$	4,111,978		$	(6,039,129	)	$	5,840,512
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—	$	3,945	$	8,234		$	—		$	12,179
Accounts payable		3,446		72,706		21,541			—			97,693
Accrued expenses		53,472		44,752		56,246			—			154,470
Intercompany payables		274,189		—		—			(274,189	)		—
Intercompany loans payable		1,096,126		—		55,583			(1,151,709	)		—
Accumulated postretirement benefits obligation		161		30,350		—			—			30,511
Other current liabilities		168,993		23,202		22,105			—			214,300
Total current liabilities		1,596,387		174,955		163,709			(1,425,898	)		509,153
Long-term debt		2,762,553		—		7,828			—			2,770,381
Accumulated postretirement benefits obligation		400		640,937		—			—			641,337
Deferred income taxes		—		—		854,408			—			854,408
Other long-term liabilities		44,887		123,184		68,484			—			236,555
Total liabilities		4,404,227		939,076		1,094,429			(1,425,898	)		5,011,834
Stockholders' equity		828,678		1,595,682		3,017,549			(4,613,231	)		828,678
	$	5,232,905	$	2,534,758	$	4,111,978		$	(6,039,129	)	$	5,840,512

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		721,293		—		—			(721,293	)		—
Intercompany loans receivable		118,079		1,074,879		—			(1,192,958	)		—
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		1,046,114		1,384,138		299,815			(1,914,251	)		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
	$	4,708,641	$	2,315,448	$	4,188,676		$	(5,444,345	)	$	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		—		567,360		153,933			(721,293	)		—
Intercompany loans payable		1,074,879		—		118,079			(1,192,958	)		—
Accumulated postretirement benefits obligation		131		29,069		—			—			29,200
Other current liabilities		157,044		24,389		25,040			—			206,473
Total current liabilities		1,264,379		792,429		411,697			(1,914,251	)		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		3,698,070		1,555,618		1,418,412			(1,914,251	)		4,757,849
Stockholders' equity		1,010,571		759,830		2,770,264			(3,530,094	)		1,010,571
	$	4,708,641	$	2,315,448	$	4,188,676		$	(5,444,345	)	$	5,768,420

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

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	302,328	$	143,609		$	—		$	445,937
Miscellaneous income (loss)		(932	)		5,669		5,122			—			9,859
		(932	)		307,997		148,731			—			455,796
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			234,913		160,398			—			395,311
Depreciation and depletion		543			43,600		38,843			—			82,986
Selling, general and administrative		(3,730	)		13,854		11,749			—			21,873
Postretirement benefits		(54	)		14,761		—			—			14,707
Restructuring and asset impairment		—			—		—			—			—
		(3,241	)		307,128		210,990			—			514,877
Operating income (loss)		2,309			869		(62,259	)		—			(59,081	)
Interest expense		(72,054	)		—		(2,408	)		10,918			(63,544	)
Interest income		1,874			8,465		594			(10,918	)		15
Other loss		4,059			218		609			—			4,886
Income (loss) before income tax expense		(63,812	)		9,552		(63,464	)		—			(117,724	)
Income tax expense (benefit)		(715	)		1,368		(17,653	)		—			(17,000	)
		(63,097	)		8,184		45,811			—			(100,724	)
Equity in earnings (losses) of subsidiaries		(37,627	)		—		—			37,627			—
Net income (loss)	$	(100,724	)	$	8,184	$	45,811		$	37,627		$	(100,724	)

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	441,518		$	170,992		$	—		$	612,510
Miscellaneous income (loss)		345			1,674			(2,555	)		—			(536	)
		345			443,192			168,437			—			611,974
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			283,138			165,627			—			448,765
Depreciation and depletion		466			35,576			46,518			—			82,560
Selling, general and administrative		6,026			17,885			8,575			—			32,486
Postretirement benefits		(112	)		13,325			—			—			13,213
Restructuring and asset impairment		—			—			1,106,715			—			1,106,715
		6,380			349,924			1,327,435			—			1,683,739
Operating income (loss)		(6,035	)		93,268			(1,158,998	)		—			(1,071,765	)
Interest expense		(35,618	)		(1,191	)		(2,484	)		8,748			(30,545	)
Interest income		1,124			6,699			1,038			(8,748	)		113
Other income (loss), net		3,019			—			(3,962	)		—			(943	)
Income (loss) before income tax expense		(37,510	)		98,776			(1,164,406	)		—			(1,103,140	)
Income tax benefit		(2,295	)		(1,632	)		(37,257	)		—			(41,184	)
		(35,215	)		100,408			(1,127,149	)		—			(1,061,956	)
Equity in earnings (losses) of subsidiaries		(1,026,741	)		—			—			1,026,741			—
Net income (loss)	$	(1,061,956	)	$	100,408		$	(1,127,149	)	$	1,026,741		$	(1,061,956	)

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	916,338		$	457,006		$	—		$	1,373,344
Miscellaneous income (loss)		(159	)		8,638			6,812			—			15,291
		(159	)		924,976			463,818			—			1,388,635
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			693,904			489,957			—			1,183,861
Depreciation and depletion		1,539			117,683			113,274			—			232,496
Selling, general and administrative		6,420			41,108			32,148			—			79,676
Postretirement benefits		(164	)		44,321			—			—			44,157
Restructuring and asset impairment		—			(8,947	)		10,646			—			1,699
		7,795			888,069			646,025			—			1,541,889
Operating income (loss)		(7,954	)		36,907			(182,207	)		—			(153,254	)
Interest expense		(190,227	)		—			(8,585	)		29,521			(169,291	)
Interest income		5,419			21,748			3,163			(29,521	)		809
Other income		4,059			218			—			—			4,277
Income (loss) before income tax expense		(188,703	)		58,873			(187,629	)		—			(317,459	)
Income tax expense (benefit)		(49,490	)		6,505			(89,814	)		—			(132,799	)
		(139,213	)		52,368			(97,815	)		—			(184,660	)
Equity in earnings (losses) of subsidiaries		(45,447	)		—			—			45,447			—
Net income (loss)	$	(184,660	)	$	52,368		$	(97,815	)	$	45,447		$	(184,660	)

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	1,290,567		$	617,846		$	—		$	1,908,413
Miscellaneous income (loss)		2,071			20,553			(9,926	)		—			12,698
		2,071			1,311,120			607,920			—			1,921,111
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			801,320			565,063			—			1,366,383
Depreciation and depletion		901			105,308			117,303			—			223,512
Selling, general and administrative		14,594			55,011			34,973			—			104,578
Postretirement benefits		(337	)		39,976			—			—			39,639
Restructuring and asset impairment		—			—			1,106,715			—			1,106,715
		15,158			1,001,615			1,824,054			—			2,840,827
Operating income (loss)		(13,087	)		309,505			(1,216,134	)		—			(919,716	)
Interest expense		(111,043	)		(1,731	)		(4,443	)		27,501			(89,716	)
Interest income		2,868			21,930			3,434			(27,501	)		731
Other income (loss), net		9,058			—			(22,913	)		—			(13,855	)
Income (loss) before income tax expense		(112,204	)		329,704			(1,240,056	)		—			(1,022,556	)
Income tax expense (benefit)		(25,860	)		63,849			(65,961	)		—			(27,972	)
Income (loss) from continuing operations		(86,344	)		265,855			(1,174,095	)		—			(994,584	)
Income from discontinued operations		—			—			5,180			—			5,180
Equity in earnings (losses) of subsidiaries		(903,060	)		—			—			903,060			—
Net income (loss)	$	(989,404	)	$	265,855		$	(1,168,915	)	$	903,060		$	(989,404	)

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

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(100,724	)	$	8,184	$	(45,811	)	$	37,627		$	(100,724	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		4,659			13,338		—			(13,338	)		4,659
Change in unrealized gain on hedges, net of tax		653			12		—			(12	)		653
Change in foreign currency translation adjustment		14,847			—		14,847			(14,847	)		14,847
Change in unrealized loss on investments, net of tax		(940	)		—		(940	)		940			(940	)
Total other comprehensive income (loss), net of tax		19,219			13,350		13,907			(27,257	)		19,219
Total comprehensive income (loss)	$	(81,505	)	$	21,534	$	(31,904	)	$	10,370		$	(81,505	)

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

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(1,061,956	)	$	100,408	$	(1,127,149	)	$	1,026,741		$	(1,061,956	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		3,898			—		—			—			3,898
Change in unrealized gain (loss) on hedges, net of tax		(545	)		23		—			(23	)		(545	)
Change in foreign currency translation adjustment		3,132			—		3,132			(3,132	)		3,132
Change in unrealized gain on investments, net of tax		1,135			—		1,135			(1,135	)		1,135
Total other comprehensive income (loss), net of tax		7,620			23		4,267			(4,290	)		7,620
Total comprehensive income (loss)	$	(1,054,336	)	$	100,431	$	(1,122,882	)	$	1,022,451		$	(1,054,336	)

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

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(184,660	)	$	47,594	$	(98,407	)	$	50,813		$	(184,660	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		13,976			13,338		—			(13,338	)		13,976
Change in unrealized gain on hedges, net of tax		1,901			49		—			(49	)		1,901
Change in foreign currency translation adjustment		(2,239	)		—		(2,239	)		2,239			(2,239	)
Change in unrealized gain on investments, net of tax		(897	)		—		(897	)		897			(897	)
Total other comprehensive income (loss), net of tax		12,741			13,387		(3,136	)		(10,251	)		12,741
Total comprehensive income (loss)	$	(171,919	)	$	60,981	$	(101,543	)	$	40,562		$	(171,919	)

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(989,404	)	$	265,855		$	(1,168,915	)	$	903,060		$	(989,404	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		11,693			(50,756	)		—			50,756			11,693
Change in unrealized gain (loss) on hedges, net of tax		(3,815	)		72			(2,519	)		2,447			(3,815	)
Change in foreign currency translation adjustment		2,342			—			2,342			(2,342	)		2,342
Change in unrealized loss on investments, net of tax		766			—			766			(766	)		766
Total other comprehensive income (loss), net of tax		10,986			(50,684	)		589			50,095			10,986
Total comprehensive income (loss)	$	(978,418	)	$	215,171		$	(1,168,326	)	$	953,155		$	(978,418	)

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(165,441	)	$	163,367		$	(41,952	)	$	—		$	(44,026	)
INVESTING ACTIVITIES
Additions to property, plant and equipment		(863	)		(84,623	)		(23,249	)		—			(108,735	)
Intercompany loans made		(33,100	)		—			—			33,100			—
Intercompany payments received		30,500			—			—			(30,500	)		—
Investments in subsidiaries		—			—			—			—			—
Proceeds from sales of investments		—			—			1,559			—			1,559
Other		—			—			663			—			663
Cash flows used in investing activities		(3,463	)		(84,623	)		(21,027	)		2,600			(106,513	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		897,412			—			—			—			897,412
Borrowings under revolving credit agreement		—			—			646,320			—			646,320
Repayments on revolving credit agreement		—			—			(646,320	)		—			(646,320	)
Retirements of debt		(496,062	)		(14,193	)		—			—			(510,255	)
Dividends paid		(16,264	)		—			—			—			(16,264	)
Debt issuance costs		(42,128	)		—			—			—			(42,128	)
Advances from (to) consolidated entities		4,729			(64,763	)		60,034			—			—
Intercompany borrowings		—			—			33,100			(33,100	)		—
Intercompany payments made		—			—			(30,500	)		30,500			—
Investment from Parent		—			—			—			—			—
Other		(883	)		151			—			—			(732	)
Cash flows provided by (used in) financing activities		346,804			(78,805	)		62,634			(2,600	)		328,033
Effect of foreign exchange rates on cash		—			—			(961	)		—			(961	)
Net increase (decrease) in cash and cash equivalents		177,900			(61	)		(1,306	)		—			176,533
Cash and cash equivalents at beginning of period		83,833			61			32,707			—			116,601
Cash and cash equivalents at end of period	$	261,733		$	—		$	31,401		$	—		$	293,134

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(141,991	)	$	360,669		$	114,328		$	—		$	333,006
INVESTING ACTIVITIES
Additions to property, plant and equipment		(4,127	)		(108,002	)		(219,211	)		—			(331,340	)
Proceeds from sales of investments		—			—			12,382			—			12,382
Intercompany Notes Issued		(58,102	)		—			—			58,102			—
Other		—			1,076			—			—			1,076
Cash flows used in investing activities		(62,229	)		(106,926	)		(206,829	)		58,102			(317,882	)
FINANCING ACTIVITIES
Borrowings under revolving credit agreement		—			—			272,926			—			272,926
Repayments on revolving credit agreement		—			—			(125,396	)		—			(125,396	)
Retirements of debt		(100,000	)		(6,056	)		(22,394	)		—			(128,450	)
Dividends paid		(23,432	)		—			—			—			(23,432	)
Net consideration paid upon exercise of warrants		(11,535	)		—			—			—			(11,535	)
Debt Issuance Costs		(6,376	)		—			—			—			(6,376	)
Advances from (to) consolidated entities		357,707			(257,147	)		(100,560	)		—			—
Intercompany borrowings		—			—			58,102			(58,102	)		—
Other		176			2			—			—			178
Cash flows provided by (used in) financing activities		216,540			(263,201	)		82,678			(58,102	)		(22,085	)
Cash flows provided by (used in) continuing operations		12,320			(9,458	)		(9,823	)		—			(6,961	)
CASH FLOWS FROM DISCONTINUED OPERATIONS		—			9,500			—			—			9,500
Effect of foreign exchange rates on cash		—			—			(1,047	)		—			(1,047	)
Net increase (decrease) in cash and cash equivalents		12,320			42			(10,870	)		—			1,492
Cash and cash equivalents at beginning of period		99,086			79			29,265			—			128,430
Cash and cash equivalents at end of period	$	111,406		$	121		$	18,395		$	—		$	129,922

XML

Fair Value of Financial Instruments

9 Months Ended

Sep. 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 September 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.

	September 30, 2013
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	2	$	—	$	2
Liabilities:
Interest rate swaps	$	—	$	4,005	$	—	$	4,005

	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:

        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 was 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 September 30, 2013 or December 31, 2012. The estimated fair value of the Company's debt is based on observable market data (Level 2). The carrying amounts and fair values of the Company's debt are presented below (in thousands):

	September 30, 2013				December 31, 2012
(in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
2011 Term Loan A	$	400,306	$	395,386	$	756,974	$	758,867
2011 Term Loan B	$	968,100	$	941,497	$	1,127,770	$	1,135,293
9.875% Senior Notes	$	496,733	$	435,000	$	496,510	$	500,000
8.50% Senior Notes	$	450,000	$	373,500	$	—	$	—
9.50% Senior Secured Notes	$	447,413	$	465,188	$	—	$	—

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Oct. 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	Sep. 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		62,576,333
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3

XML

Segment Information

9 Months Ended

Sep. 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 September 30,						For the nine months ended September 30,
	2013			2012			2013			2012
Revenues:
U.S. Operations	$	337,269		$	483,615		$	997,503		$	1,402,526
Canadian and U.K. Operations		119,367			127,905			390,684			515,901
Other		(840	)		454			448			2,684
Total	$	455,796		$	611,974		$	1,388,635		$	1,921,111
Segment operating income (loss):
U.S. Operations	$	(8,008	)	$	(22,228	)	$	22,368		$	191,998
Canadian and U.K. Operations		(48,022	)		(1,036,690	)		(163,135	)		(1,074,924	)
Other		(3,051	)		(12,847	)		(12,487	)		(36,790	)
Total operating loss		(59,081	)		(1,071,765	)		(153,254	)		(919,716	)
Less interest expense, net		(63,529	)		(30,432	)		(168,482	)		(88,985	)
Other income (loss), net		4,886			(943	)		4,277			(13,855	)
Loss from continuing operations before income tax benefit		(117,724	)		(1,103,140	)		(317,459	)		(1,022,556	)
Income tax benefit		(17,000	)		(41,184	)		(132,799	)		(27,972	)
Loss from continuing operations	$	(100,724	)	$	(1,061,956	)	$	(184,660	)	$	(994,584	)
Impairment Charges:
U.S. Operations	$	—		$	114,281		$	—		$	114,281
Canadian and U.K. Operations		—			992,434			—			992,434
Other		—			—			—			—
Total	$	—		$	1,106,715		$	—		$	1,106,715
Depreciation and depletion:
U.S. Operations	$	53,060		$	44,789		$	131,722		$	130,635
Canadian and U.K. Operations		29,383			37,305			99,235			91,976
Other		543			466			1,539			901
Total	$	82,986		$	82,560		$	232,496		$	223,512
Capital expenditures:
U.S. Operations	$	24,741		$	41,670		$	90,945		$	121,633
Canadian and U.K. Operations		2,867			43,419			16,412			205,776
Other		876			195			1,378			3,931
Total	$	28,484		$	85,284		$	108,735		$	331,340

	September 30, 2013		December 31, 2012
Identifiable assets:
U.S. Operations	$	1,372,266	$	1,603,745
Canadian and U.K. Operations		3,722,676		3,728,817
Other		745,570		435,858
Total	$	5,840,512	$	5,768,420