Supplemental Guarantor and Non-Guarantor Financial Information

12 Months Ended

Dec. 31, 2013

Supplemental Guarantor and Non-Guarantor Financial Information

Supplemental Guarantor and Non-Guarantor Financial Information

NOTE 24—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 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
DECEMBER 31, 2013
(in thousands)

	Parent (Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Total Consolidated
ASSETS
Cash and cash equivalents	$	234,150	$	101	$	26,567	$	—		$	260,818
Receivables, net		113,936		90,460		77,367		—			281,763
Intercompany receivables		—		30,126		57,778		(87,904	)		—
Intercompany loans receivable		63,549		1,104,282		—		(1,167,831	)		—
Inventories		—		168,434		144,213		—			312,647
Deferred income taxes		23,957		12,154		956		—			37,067
Prepaid expenses		2,245		34,011		2,766		—			39,022
Other current assets		15,257		440		2,334		—			18,031
Total current assets		453,094		1,440,008		311,981		(1,255,735	)		949,348
Mineral interests, net		—		7,294		2,897,708		—			2,905,002
Property, plant and equipment, net		7,248		764,406		865,898		—			1,637,552
Deferred income taxes		3,049		4,458		—		(7,507	)		—
Investment in subsidiaries		4,409,683		86,357		—		(4,496,040	)		—
Other long-term assets		73,564		10,323		15,071		—			98,958
	$	4,946,638	$	2,312,846	$	4,090,658	$	(5,759,282	)	$	5,590,860
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—	$	1,313	$	7,897	$	—		$	9,210
Accounts payable		5,604		64,678		22,430		—			92,712
Accrued expenses		34,551		53,582		45,737		—			133,870
Intercompany payables		87,904		—		—		(87,904	)		—
Intercompany loans payable		1,104,282		—		63,549		(1,167,831	)		—
Accumulated other postretirement benefits obligation		94		29,942		—		—			30,036
Other current liabilities		164,364		27,062		22,647		—			214,073
Total current liabilities		1,396,799		176,577		162,260		(1,255,735	)		479,901
Long-term debt		2,763,957		—		5,665		—			2,769,622
Accumulated other postretirement benefits obligation		263		570,449		—		—			570,712
Deferred income taxes		—		—		830,374		(7,507	)		822,867
Other long-term liabilities		32,925		73,420		88,719		—			195,064
Total liabilities		4,193,944		820,446		1,087,018		(1,263,242	)		4,838,166
Stockholders' equity		752,694		1,492,400		3,003,640		(4,496,040	)		752,694
Total liabilities and stockholders' equity	$	4,946,638	$	2,312,846	$	4,090,658	$	(5,759,282	)	$	5,590,860

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS
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 other 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 other 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
Total liabilities and stockholders' equity	$	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
YEAR ENDED DECEMBER 31, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	1,231,883		$	604,460		$	—		$	1,836,343
Miscellaneous income		88			10,798			13,402			—			24,288
		88			1,242,681			617,862			—			1,860,631
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			911,023			647,282			—			1,558,305
Depreciation and depletion		2,150			149,096			160,268			—			311,514
Selling, general and administrative		4,393			50,073			45,528			—			99,994
Other postretirement benefits		(218	)		59,118			—			—			58,900
Restructuring and asset impairment		—			(7,763	)		10,646			—			2,883
		6,325			1,161,547			863,724			—			2,031,596
Operating income (loss)		(6,237	)		81,134			(245,862	)		—			(170,965	)
Interest expense		(269,586	)		—			(3,757	)		39,489			(233,854	)
Interest income		6,274			30,983			3,335			(39,489	)		1,103
Other income (loss)		3,993			—			(1,118	)		—			2,875
Income (loss) from continuing operations before income tax expense (benefit)		(265,556	)		112,117			(247,402	)		—			(400,841	)
Income tax expense (benefit)		(51,821	)		109,318			(99,335	)		—			(41,838	)
		(213,735	)		2,799			(148,067	)		—			(359,003	)
Equity in losses of subsidiaries		(145,268	)		—			—			145,268			—
Net income (loss)	$	(359,003	)	$	2,799		$	(148,067	)	$	145,268		$	(359,003	)

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	1,592,680		$	789,080		$	—		$	2,381,760
Miscellaneous income (loss)		2,233			20,518			(4,616	)		—			18,135
		2,233			1,613,198			784,464			—			2,399,895
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			1,039,547			757,444			—			1,796,991
Depreciation and depletion		1,379			141,463			173,390			—			316,232
Selling, general and administrative		11,716			71,208			50,543			—			133,467
Other postretirement benefits		(449	)		53,301			—			—			52,852
Restructuring and asset impairment		—			—			49,070			—			49,070
Goodwill impairment		—			1,713			1,062,696			—			1,064,409
		12,646			1,307,232			2,093,143			—			3,413,021
Operating income (loss)		(10,413	)		305,966			(1,308,679	)		—			(1,013,126	)
Interest expense		(162,938	)		(1,826	)		(12,731	)		38,139			(139,356	)
Interest income		5,895			28,617			4,431			(38,139	)		804
Other income		—			—			(13,081	)		—			(13,081	)
Income (loss) from continuing operations before income tax expense (benefit)		(167,456	)		332,757			(1,330,060	)		—			(1,164,759	)
Income tax expense (benefit)		(68,615	)		85,935			(116,524	)		—			(99,204	)
Income (loss) from continuing operations		(98,841	)		246,822			(1,213,536	)		—			(1,065,555	)
Income from discontinued operations		—			5,180			—			—			5,180
Equity in losses of subsidiaries		(961,534	)		—			—			961,534			—
Net income (loss)	$	(1,060,375	)	$	252,002		$	(1,213,536	)	$	961,534		$	(1,060,375	)

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2011
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	1,694,235		$	868,090		$	—		$	2,562,325
Miscellaneous income (loss)		21,486			8,973			(21,426	)		—			9,033
		21,486			1,703,208			846,664			—			2,571,358
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			927,465			633,647			—			1,561,112
Depreciation and depletion		776			120,086			109,819			—			230,681
Selling, general and administrative		39,165			79,564			47,020			—			165,749
Other postretirement benefits		(1,360	)		41,745			—			—			40,385
		38,581			1,168,860			790,486			—			1,997,927
Operating income (loss)		(17,095	)		534,348			56,178			—			573,431
Interest expense		(131,545	)		(1,629	)		(4,917	)		41,271			(96,820	)
Interest income		1,251			36,554			4,072			(41,271	)		606
Other income		—			—			17,606			—			17,606
Income (loss) from continuing operations before income tax expense (benefit)		(147,389	)		569,273			72,939			—			494,823
Income tax expense (benefit)		(71,566	)		199,886			2,905			—			131,225
Income (loss) from continuing operations		(75,823	)		369,387			70,034			—			363,598
Equity in earnings (losses) of subsidiaries		439,421			—			—			(439,421	)		—
Net income	$	363,598		$	369,387		$	70,034		$	(439,421	)	$	363,598

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING
STATEMENTS OF COMPREHENSIVE INCOME

YEAR ENDED DECEMBER 31, 2013

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(359,003	)	$	2,799	$	(148,067	)	$	145,268		$	(359,003	)
Other comprehensive income (loss), net of tax:
Change in pension and other postretirement benefit plans, net of tax		100,892			91,501		—			(91,501	)		100,892
Change in unrealized loss on hedges, net of tax		2,524			58		—			(58	)		2,524
Change in foreign currency translation adjustment		6,073			—		6,073			(6,073	)		6,073
Change in unrealized gain on investments		(897	)		—		(897	)		897			(897	)
Total other comprehensive income (loss), net of tax		108,592			91,559		5,176			(96,735	)		108,592
Total comprehensive income (loss)	$	(250,411	)	$	94,358	$	(142,891	)	$	48,533		$	(250,411	)

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING
STATEMENTS OF COMPREHENSIVE INCOME

YEAR ENDED DECEMBER 31, 2012

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income (loss)	$	(1,060,375	)	$	252,002		$	(1,213,536	)	$	961,534		$	(1,060,375	)
Other comprehensive income (loss), net of tax:
Change in pension and other postretirement benefit plans, net of tax		(40,501	)		(90,876	)		—			90,876			(40,501	)
Change in unrealized loss on hedges, net of tax		(3,416	)		95			(2,533	)		2,438			(3,416	)
Change in foreign currency translation adjustment		1,774			—			1,774			(1,774	)		1,774
Change in unrealized gain on investments		769			—			769			(769	)		769
Total other comprehensive income (loss), net of tax		(41,374	)		(90,781	)		10			90,771			(41,374	)
Total comprehensive income (loss)	$	(1,101,749	)	$	161,221		$	(1,213,526	)	$	1,052,305		$	(1,101,749	)

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING
STATEMENTS OF COMPREHENSIVE INCOME

YEAR ENDED DECEMBER 31, 2011

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Total Consolidated
Net income	$	363,598		$	369,387		$	70,034		$	(439,421	)	$	363,598
Other comprehensive income (loss), net of tax:
Change in pension and other postretirement benefit plans, net of tax		(53,224	)		(9,437	)		—			9,437			(53,224	)
Change in unrealized loss on hedges, net of tax		(716	)		85			2,309			(2,394	)		(716	)
Change in foreign currency translation adjustment		(3,276	)		—			(3,276	)		3,276			(3,276	)
Change in unrealized gain on investments		128			—			128			(128	)		128
Total other comprehensive loss, net of tax		(57,088	)		(9,352	)		(839	)		10,191			(57,088	)
Total comprehensive income	$	306,510		$	360,035		$	69,195		$	(429,230	)	$	306,510

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2013
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(204,982	)	$	236,491		$	(58,585	)	$	—		$	(27,076	)
INVESTING ACTIVITIES
Additions to property, plant and equipment		(2,294	)		(127,873	)		(23,729	)		—			(153,896	)
Proceeds from sales of investments		—			—			1,559			—			1,559
Intercompany loans made		(40,236	)		—			—			40,236			—
Intercompany payments received		30,500			—			—			(30,500	)		—
Other		—			—			1,824			—			1,824
Cash flows used in investing activities		(12,030	)		(127,873	)		(20,346	)		9,736			(150,513	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		897,412			—			—			—			897,412
Borrowings under revolving credit agreement		—			—			764,332			—			764,332
Repayments on revolving credit agreement		—			—			(764,332	)		—			(764,332	)
Retirements of debt		(496,062	)		(19,133	)		—			—			(515,195	)
Dividends paid		(16,889	)		—			—			—			(16,889	)
Tax effect from stock-based compensation arrangements		(717	)		—			—			—			(717	)
Proceeds from stock-options exercised		279			—			—			—			279
Debt issuance costs		(41,588	)		—			—			—			(41,588	)
Advances from (to) consolidated entities		25,072			(89,330	)		64,258			—			—
Intercompany borrowings		—			—			40,236			(40,236	)		—
Intercompany payments made		—			—			(30,500	)		30,500			—
Other		(178	)		(115	)		—			—			(293	)
Cash flows provided by (used in) financing activities		367,329			(108,578	)		73,994			(9,736	)		323,009
Effect of foreign exchange rates on cash		—			—			(1,203	)		—			(1,203	)
Net increase (decrease) in cash and cash equivalents	$	150,317		$	40		$	(6,140	)	$	—		$	144,217
Cash and cash equivalents at beginning of period		83,833			61			32,707			—			116,601
Cash and cash equivalents at end of period	$	234,150		$	101		$	26,567		$	—		$	260,818

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2012
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(373,256	)	$	734,325		$	(31,162	)	$	—		$	329,907
INVESTING ACTIVITIES
Additions to property, plant and equipment		(4,395	)		(143,206	)		(243,911	)		—			(391,512	)
Proceeds from sales of investments		—			—			13,239			—			13,239
Intercompany notes issued		(293,170	)		—			—			293,170			—
Intercompany notes proceeds		16,513			—			—			(16,513	)		—
Investments in equity affiliates		(238,083	)		—			—			238,083			—
Distributions from equity affiliates		271,847			—			—			(271,847	)		—
Other		—			855			43			—			898
Cash flows used in investing activities		(247,288	)		(142,351	)		(230,629	)		242,893			(377,375	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		496,510			—			—			—			496,510
Borrowings under revolving credit agreement		—			—			510,650			—			510,650
Repayments on revolving credit agreement		—			—			(519,453	)		—			(519,453	)
Retirements of debt		(343,255	)		(8,131	)		(41,465	)		—			(392,851	)
Dividends paid		(31,246	)		—			—			—			(31,246	)
Tax effect from stock-based compensation arrangements		217			—			—			—			217
Proceeds from stock-options exercised		161			—			—			—			161
Net consideration paid upon exercise of warrants		(11,535	)		—			—			—			(11,535	)
Debt issuance costs		(24,532	)		—			—			—			(24,532	)
Advances from (to) consolidated entities		519,737			(570,342	)		50,605			—			—
Intercompany borrowings		—			—			293,170			(293,170	)		—
Intercompany payments made		—			—			(16,513	)		16,513			—
Investment from Parent		—			238,083			—			(238,083	)		—
Intercompany dividends		—			(261,102	)		(10,745	)		271,847			—
Other		(766	)		—			—			—			(766	)
Cash flows provided by (used in) financing activities		605,291			(601,492	)		266,249			(242,893	)		27,155
Cash flows provided by (used in) continuing operations		(15,253	)		(9,518	)		4,458			—			(20,313	)
CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash flows provided by investing activities		—			9,500			—			—			9,500
Cash flows provided by discontinued operations		—			9,500			—			—			9,500
Effect of foreign exchange rates on cash		—			—			(1,016	)		—			(1,016	)
Net increase (decrease) in cash and cash equivalents	$	(15,253	)	$	(18	)	$	3,442		$	—		$	(11,829	)
Cash and cash equivalents at beginning of period		99,086			79			29,265			—			128,430
Cash and cash equivalents at end of period	$	83,833		$	61		$	32,707		$	—		$	116,601

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2011
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(569,306	)	$	1,047,651		$	228,521		$	—		$	706,866
INVESTING ACTIVITIES
Additions to property, plant and equipment		(93	)		(143,529	)		(293,083	)		—			(436,705	)
Acquisition of Western Coal Corp., net of cash acquired		(2,466,758	)		—			34,065			—			(2,432,693	)
Proceeds from sales of investments		—			—			27,325			—			27,325
Intercompany notes issued		(50,738	)		—			—			50,738			—
Distributions from equity investments		516,407			—			—			(516,407	)		—
Other		23			273			1,117			—			1,413
Cash flows used in investing activities		(2,001,159	)		(143,256	)		(230,576	)		(465,669	)		(2,840,660	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		2,350,000			—			—			—			2,350,000
Borrowings under revolving credit agreement		—			—			71,259			—			71,259
Repayments on revolving credit agreement		—			—			(61,259	)		—			(61,259	)
Retirements of debt		(258,062	)		(12,300	)		(20,268	)		—			(290,630	)
Dividends paid		(30,042	)		—			—			—			(30,042	)
Tax effect from stock-based compensation arrangements		8,929			—			—			—			8,929
Proceeds from stock options exercised		8,920			—			—			—			8,920
Debt issuance costs		(80,027	)		—			—			—			(80,027	)
Advances from (to) consolidated entities		380,623			(374,321	)		(6,302	)		—			—
Intercompany borrowings		—			—			50,738			(50,738	)		—
Intercompany dividends		—			(516,407	)		—			516,407			—
Other		(5,203	)		—			—			—			(5,203	)
Cash flows provided by (used in) financing activities		2,375,138			(903,028	)		34,168			465,669			1,971,947
Effect of foreign exchange rates on cash		—			—			(3,668	)		—			(3,668	)
Net increase (decrease) in cash and cash equivalents	$	(195,327	)	$	1,367		$	28,445		$	—		$	(165,515	)
Cash and cash equivalents at beginning of period		294,413			(1,823	)		820			—			293,410
Add: Cash and cash equivalents of discontinued operations at beginning of year		—			535			—			—			535
Cash and cash equivalents at end of period	$	99,086		$	79		$	29,265		$	—		$	128,430