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.