10-Q

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TABLE OF CONTENTS

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

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2014
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 o Accelerated filer ý Non-accelerated filer o
(Do not check if a
smaller reporting company) Smaller reporting company o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

        Number of shares of common stock outstanding as of July 31, 2014: 65,827,966

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

TABLE OF CONTENTS

		Page
Part I—Financial Information
Item 1.	Financial Statements
	Walter Energy, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited)		1
	Walter Energy, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited)		2
	Walter Energy, Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)		3
	Walter Energy, Inc. and Subsidiaries Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited)		4
	Walter Energy, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited)		5
	Walter Energy, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited)		6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		61
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		64
Item 4.	Mine Safety Disclosures		65
Item 6.	Exhibits		65
Signatures			67

PART I—FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

WALTER ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

	June 30, 2014			December 31, 2013
ASSETS
Cash and cash equivalents	$	293,472		$	260,818
Receivables, net		231,032			281,763
Inventories		274,482			312,647
Deferred income taxes		32,079			37,067
Prepaid expenses		45,361			39,022
Assets held for sale		24,150			—
Other current assets		12,504			18,031
Total current assets		913,080			949,348
Mineral interests, net		2,887,612			2,905,002
Property, plant and equipment, net		1,547,280			1,637,552
Other long-term assets		113,926			98,958
	$	5,461,898		$	5,590,860
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	15,353		$	9,210
Accounts payable		60,451			92,712
Accrued expenses		142,831			133,870
Accumulated other postretirement benefits obligation		30,887			30,036
Other current liabilities		225,713			214,073
Total current liabilities		475,235			479,901
Long-term debt		2,880,951			2,769,622
Accumulated other postretirement benefits obligation		574,856			570,712
Deferred income taxes		783,591			822,867
Other long-term liabilities		189,930			195,064
Total liabilities		4,904,563			4,838,166
Stockholders' equity:
Common stock, $0.01 par value per share:
Authorized—200,000,000 shares; issued—65,824,776 and 62,577,924 shares, respectively		658			626
Capital in excess of par value		1,639,310			1,613,256
Accumulated deficit		(942,499	)		(698,930	)
Accumulated other comprehensive loss		(140,134	)		(162,258	)
Total stockholders' equity		557,335			752,694
	$	5,461,898		$	5,590,860

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

1

WALTER ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

	For the three months ended June 30,						For the six months ended June 30,
	2014			2013			2014			2013
Revenues:
Sales	$	377,982		$	437,798		$	783,211		$	927,407
Miscellaneous income		369			3,698			9,025			5,432
		378,351			441,496			792,236			932,839
Costs and expenses:
Cost of sales (exclusive of depreciation and depletion)		343,761			367,616			693,636			788,550
Depreciation and depletion		69,816			68,320			146,240			149,510
Selling, general and administrative		19,002			27,129			39,781			57,803
Postretirement benefits		13,869			14,725			27,738			29,450
Restructuring and asset impairments		31,342			(5,741	)		31,342			1,699
		477,790			472,049			938,737			1,027,012
Operating loss		(99,439	)		(30,553	)		(146,501	)		(94,173	)
Interest expense, net		(73,402	)		(52,985	)		(138,834	)		(98,952	)
Gain (loss) on extinguishment of debt		11,397			—			(2,492	)		(6,001	)
Other income (loss), net		978			(714	)		(778	)		(609	)
Loss before income tax benefit		(160,466	)		(84,252	)		(288,605	)		(199,735	)
Income tax benefit		(9,075	)		(49,760	)		(45,036	)		(115,799	)
Net loss	$	(151,391	)	$	(34,492	)	$	(243,569	)	$	(83,936	)
Net loss per share:
Basic	$	(2.33	)	$	(0.55	)	$	(3.81	)	$	(1.34	)
Diluted	$	(2.33	)	$	(0.55	)	$	(3.81	)	$	(1.34	)
Dividends per share	$	0.01		$	0.125		$	0.02		$	0.25

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

2

WALTER ENERGY, INC. AND SUBSIDIARIES

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

(IN THOUSANDS)

	For the three months ended June 30,						For the six months ended June 30,
	2014			2013			2014			2013
Net loss	$	(151,391	)	$	(34,492	)	$	(243,569	)	$	(83,936	)
Other comprehensive income (loss):
Change in pension and postretirement benefit plans (net of tax: $2,154 and $4,322 and $2,883 and $5,765 for the three and six months ended June 30, 2014 and 2013, respectively)		3,498			4,658			7,017			9,317
Change in unrealized gain on hedges (net of tax: $1,034 for the six months ended June 30, 2014 and $324 and $667 for the three and six months ended June 30, 2013, respectively)		—			526			1,679			1,248
Change in foreign currency translation adjustment		11,264			(1,461	)		13,428			(17,086	)
Change in unrealized gain (loss) on investments, net of tax		—			(1	)		—			43
Total other comprehensive income (loss)		14,762			3,722			22,124			(6,478	)
Total comprehensive loss	$	(136,629	)	$	(30,770	)	$	(221,445	)	$	(90,414	)

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

3

WALTER ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2014 (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, 2013	$	752,694		$	626	$	1,613,256		$	(698,930	)	$	(162,258	)
Net loss		(243,569	)		—		—			(243,569	)		—
Other comprehensive income, net of tax		22,124			—		—			—			22,124
Dividends paid, $0.02 per share		(1,284	)		—		(1,284	)		—			—
Stock based compensation		4,865			—		4,865			—			—
Issuance of common stock in connection with the extinguishment of debt		22,696			32		22,664			—			—
Other		(191	)		—		(191	)		—			—
Balance at June 30, 2014	$	557,335		$	658	$	1,639,310		$	(942,499	)	$	(140,134	)

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

4

WALTER ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(IN THOUSANDS)

	For the six months ended June 30,
	2014			2013
OPERATING ACTIVITIES
Net loss	$	(243,569	)	$	(83,936	)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and depletion		146,240			149,510
Deferred income tax benefit		(41,257	)		(77,717	)
Amortization of debt issuance costs		8,356			8,014
Loss on extinguishment of debt		2,492			6,001
Other		39,183			8,402
Decrease (increase) in current assets:
Receivables		34,710			(2,302	)
Inventories		30,774			(24,281	)
Prepaid expenses and other current assets		(6,437	)		(8,826	)
Increase (decrease) in current liabilities:
Accounts payable		(32,227	)		24,483
Accrued interest		9,168			8,245
Accrued expenses and other current liabilities		13,559			(31,695	)
Cash flows used in operating activities		(39,008	)		(24,102	)
INVESTING ACTIVITIES
Additions to property, plant and equipment		(43,476	)		(80,251	)
Other		(350	)		964
Cash flows used in investing activities		(43,826	)		(79,287	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		553,000			450,000
Retirements of debt		(414,124	)		(259,200	)
Dividends paid		(1,284	)		(15,638	)
Debt issuance costs		(21,325	)		(15,080	)
Other		(191	)		(600	)
Cash flows provided by financing activities		116,076			159,482
Effect of foreign exchange rates on cash		(588	)		(1,816	)
Net increase in cash and cash equivalents		32,654			54,277
Cash and cash equivalents at beginning of period		260,818			116,601
Cash and cash equivalents at end of period	$	293,472		$	170,878

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

5

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2014 (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 of thermal coal and anthracite coal, as well as produces metallurgical coke and coal bed methane gas.

        The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. 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, 2013 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, 2013 has been derived from the audited consolidated financial statements for the year ended December 31, 2013 included in the Company's 2013 Annual Report filed on Form 10-K.

New Accounting Pronouncements

        In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08 improves the definition of discontinued operations by limiting the discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have or will have a major effect on an entity's operations and financial results, will require expanded disclosures for discontinued operations, and will require disclosure of the pre-tax profit or loss of an individually significant component of an entity that does not qualify for discontinued operations reporting. The amendments in ASU 2014-08 are effective prospectively for disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. Early adoption is permitted but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. The implementation of the amended guidance is not expected to have a material impact on the Company's financial condition, results of operations, and cash flows.

        In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). In summary, the core principle of Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: identify the contract(s) with a customer; identify the performance obligations in the contract; determine the transaction price; allocate the transaction price to the performance obligations in the contract; and recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 supersedes the revenue recognition

6

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 1—Basis of Presentation (Continued)

requirements in Accounting Standards Codification Topic No. 605, "Revenue Recognition," including most industry-specific guidance throughout the Industry Topics of the Accounting Standards Codification. ASU 2014-09 is effective for public entities within annual periods beginning after December 15, 2016, including interim periods within that reporting period, and early application is not permitted. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. The implementation of the amended guidance is not expected to have a material impact on the Company's financial condition, results of operations, and cash flows.

        In June 2014, the FASB issued ASU No. 2014-12, Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Accounting Standards Codification Topic No. 718, "Compensation—Stock Compensation" ("ASC 718"), as it relates to awards with performance conditions that affect vesting to account for such awards. The amendments in ASU 2014-12 are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in ASU 2014-12 either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The implementation of the amended guidance is not expected to have a material impact on the Company's financial condition, results of operations, and cash flows.

Revision for Gain (Loss) on Extinguishment of Debt

        During the quarter ended June 30, 2014, we have corrected our classification of accelerated amortization of debt issuance costs that we recognized upon the extinguishment or partial extinguishment of debt to present these amounts as a component of the gain (loss) recognized upon the extinguishment of debt as one line item in the accompanying Condensed Consolidated Statements of Operations in accordance with FASB Accounting Standards Codification ("ASC") Section 470-50. Components of the gain (loss) on the extinguishment of debt were previously recognized within interest expense in the accompanying Condensed Consolidated Statements of Operations. We have concluded that this revision is not material to our previously issued financial statements, as the net effect of these revisions did not impact our operating loss, net loss, stockholders' equity or cash flows. Previously reported interest expense has decreased by the same amount to correct the classification and we also

7

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 1—Basis of Presentation (Continued)

have elected to net interest income and interest expense. The following reflects the revisions for the relevant interim periods during 2014 and 2013:

	For the three months ended
	March 31
2014
Interest expense, prior to revision	$	79,396
Interest income		(75	)
Revision of loss on extinguishment of debt		(13,889	)
Interest expense, net, revised	$	65,432

	For the three months ended						For the six months ended
	March 31			June 30			June 30
2013
Interest expense, prior to revision	$	52,618		$	53,129		$	105,747
Interest income		(650	)		(144	)		(794	)
Revision of loss on extinguishment of debt		(6,001	)		—			(6,001	)
Interest expense, net, revised	$	45,967		$	52,985		$	98,952

        We intend to make conforming revisions to our annual consolidated financial statements for 2013 and 2012 when we file our Annual Report on Form 10-K for the year ending December 31, 2014. We have concluded that this revision is not material to our annual financial statements, as the net effect of these revisions did not impact our operating loss, net loss, stockholders' equity or cash flows. Previously reported interest expense has decreased by the same amount and we have netted interest income and interest expense. The following reflects the revisions that will be reported in our Form 10-K for the year ending December 31, 2014.

	2013			2012
Interest expense, prior to revision	$	233,854		$	139,356
Interest income		(1,103	)		(804	)
Revision of loss on extinguishment of debt		(11,168	)		(5,555	)
Interest expense, net, revised	$	221,583		$	132,997

Note 2—Restructuring and Asset Impairments

        In the second quarter of 2014, the Company idled the Canadian Operations, which included the Wolverine, Brule and Willow Creek mines in the Canadian and U.K. Operations segment. We placed the Wolverine mine on idle status in April and the Brazion operations (which includes the operations of Brule and Willow Creek) on idle status in June and recognized restructuring charges for this idling of approximately $7.1 million in the Canadian and U.K. Operations segment. The Company also

8

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 2—Restructuring and Asset Impairments (Continued)

recognized restructuring charges of approximately $0.7 million in the U.S. Operations segment and $0.5 million in the Other segment for the three and six months ended June 30, 2014. For the three and six months ended June 30, 2013, the Company recognized a gain of approximately $17.0 million due to the release of a below market contract liability that was obtained through the acquisition of North River which was partially offset by asset impairment charges of approximately $8.0 million, all related to the accelerated closure of the North River mine. The Company also incurred $3.3 million and $10.7 million of costs related to the curtailment of the Willow Creek mine for the three and six months ended June 30, 2013, respectively. All of these charges are presented as restructuring and asset impairments in the Condensed Consolidated Statements of Operations.

Assets Held for Sale

        On May 2, 2014, the Company reached an agreement in principle with the Alabama State Port Authority to sell both the Blue Creek Coal Terminal located in the Port of Mobile and an additional parcel of more than 60 acres of land (collectively "BCCT") for a total consideration of $25.0 million. Additionally, the parties have agreed in principle to amend and extend the existing coal handling agreement and make certain improvements to the coal handling facility at the port. As of June 30, 2014, the Company classified the BCCT as assets held for sale in current assets in the Condensed Consolidated Balance Sheets. The BCCT assets are part of the U.S. Operations segment. The Company anticipates the sale closing in the third quarter of 2014. The Company recognized an impairment charge of approximately $23.0 million as of June 30, 2014 to reduce the carrying value of these assets to their fair value less costs to sell. The carrying value of the BCCT assets as of December 31, 2013 was $47.5 million and was included in property, plant and equipment, net, within the Condensed Consolidated Balance Sheets. Fair value was determined based upon the anticipated sales price of the BCCT asset sale and is categorized as a Level 3 in the fair value hierarchy. This charge is included in restructuring and asset impairments in the Condensed Consolidated Statements of Operations.

Note 3—Inventories

        Inventories are summarized as follows (in thousands):

	June 30, 2014		December 31, 2013
Coal	$	211,874	$	238,820
Raw materials and supplies		62,608		73,827
Total inventories	$	274,482	$	312,647

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

9

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 4—Income Taxes (Continued)

both cases, the tax effect of unusual or infrequently occurring items, including effects of changes in tax laws or rates, are reported in the interim period in which they occur.

        For the six months ended June 30, 2014, the income tax benefit was determined based on the annual effective tax rate method. The Company recognized an income tax benefit of $45.0 million for the six months ended June 30, 2014 compared to an income tax benefit of $115.8 million for the six months ended June 30, 2013. The decrease in the income tax benefit year over year was primarily due to a full valuation allowance provided against the U.S. net deferred tax assets recorded for U.S. operating losses in the current period. During the second quarter of 2014, the Canada Revenue Agency ("CRA") concluded its income tax audit of the tax years ended December 31, 2011 and March 31, 2011. As a result of settling these audit years, the Company recorded a charge of $3.2 million in the current quarter to reflect the reduction of certain tax attributes, including net operating loss carryovers. The Company's effective tax rate for the six months ended June 30, 2014 and 2013 reflects 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 Company utilizes the asset and liability method of accounting for income taxes and records deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Based upon the Company's review of all positive and negative evidence, including its three year U.S. cumulative pre-tax book loss, it concluded that a full valuation allowance should continue to be recorded against its U.S net deferred tax assets at June 30, 2014. In the future, if the Company determines that it is more likely than not that it will realize its U.S. net deferred tax assets, it will reverse the applicable portion of the valuation allowance and recognize an income tax benefit in the period in which such determination is made.

10

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 5—Debt

        Debt consisted of the following (in thousands):

	June 30, 2014			December 31, 2013			Weighted Average Stated Interest Rate At June 30, 2014	Final Maturity
2011 term loan A	$	—		$	406,566		N/A	N/A
2011 term loan B(1)		978,178			978,178		7.25%	2018
Revolving credit facility(1)		—			—		N/A	2016/2017
9.875% senior notes(2)		465,000			500,000		9.875%	2020
8.50% senior notes		450,000			450,000		8.50%	2021
9.50% senior secured notes		450,000			450,000		9.50%	2019
9.50% add-on senior secured notes		200,000			—		9.50%	2019
11.0% / 12.0% senior secured PIK toggle notes		350,000			—		11.00%	2020
Other(3)		26,373			14,876		Various	Various
Debt discount, net		(23,247	)		(20,788	)	N/A	N/A
Total debt		2,896,304			2,778,832
Less: current debt(3)		(15,353	)		(9,210	)
Total long-term debt	$	2,880,951		$	2,769,622

(1)

As of June 30, 2014, the revolving credit facility and term loan B interest rates were tied to LIBOR or CDOR, plus a credit spread of 550 basis points for the revolver and 675 basis points with a minimum LIBOR floor of 100 basis points for the term loan B.

(2)

On April 23, 2014, the Company issued an aggregate of 3.15 million shares of its common stock in exchange for $35.0 million of its 9.875% Senior Notes due 2020. The Company recognized a net gain of $11.4 million in gain (loss) on extinguishment of debt in the Condensed Consolidated Statements of Operations in the current quarter.

(3)

Includes capital lease obligations and an equipment financing agreement.

        The Company's minimum debt repayment schedule, excluding interest, as of June 30, 2014 is as follows (in thousands):

	Payments Due
	2014		2015		2016		2017		2018		Thereafter
2011 term loan B	$	—	$	—	$	—	$	—	$	978,178	$	—
9.875% senior notes		—		—		—		—		—		465,000
8.50% senior notes		—		—		—		—		—		450,000
9.50% senior secured notes		—		—		—		—		—		450,000
9.50% add-on senior secured notes		—		—		—		—		—		200,000
11.0% / 12.0% senior secured PIK toggle notes		—		—		—		—		—		350,000
Other		7,836		12,775		5,762		—		—		—
	$	7,836	$	12,775	$	5,762	$	—	$	978,178	$	1,915,000

11

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 5—Debt (Continued)

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

Note 6—Pension and Other Postretirement Benefits

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

	Pension Benefits						Other Postretirement Benefits
	For the three months ended June 30,						For the three months ended June 30,
	2014			2013			2014		2013
Components of net periodic benefit cost:
Service cost	$	1,701		$	1,766		$	1,944	$	2,486
Interest cost		3,316			3,070			7,726		7,198
Expected return on plan assets		(4,553	)		(4,235	)		—		—
Amortization of prior service cost		61			66			307		307
Amortization of net actuarial loss		550			2,434			3,892		4,734
Settlement loss		843			—			—		—
Net periodic benefit cost	$	1,918		$	3,101		$	13,869	$	14,725

	Pension Benefits						Other Postretirement Benefits
	For the six months ended June 30,						For the six months ended June 30,
	2014			2013			2014		2013
Components of net periodic benefit cost:
Service cost	$	3,402		$	3,532		$	3,888	$	4,972
Interest cost		6,664			6,140			15,452		14,396
Expected return on plan assets		(9,106	)		(8,470	)		—		—
Amortization of prior service cost		122			132			614		614
Amortization of net actuarial loss		1,192			4,868			7,784		9,468
Settlement loss		1,627			—			—		—
Net periodic benefit cost	$	3,901		$	6,202		$	27,738	$	29,450

12

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 7—Net Loss Per Share

        A reconciliation of the basic and diluted net loss per share computations for the three and six months ended June 30, 2014 and 2013 is as follows (in thousands, except per share data):

	For the three months ended June 30,
	2014						2013
	Basic			Diluted			Basic			Diluted
Numerator:
Net loss	$	(151,391	)	$	(151,391	)	$	(34,492	)	$	(34,492	)
Denominator:
Average number of common shares outstanding(1)		65,024			65,024			62,632			62,632
Net loss per share	$	(2.33	)	$	(2.33	)	$	(0.55	)	$	(0.55	)

	For the six months ended June 30,
	2014						2013
	Basic			Diluted			Basic			Diluted
Numerator:
Net loss	$	(243,569	)	$	(243,569	)	$	(83,936	)	$	(83,936	)
Denominator:
Average number of common shares outstanding(1)		63,983			63,983			62,614			62,614
Net loss per share	$	(3.81	)	$	(3.81	)	$	(1.34	)	$	(1.34	)

(1)

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 restricted stock units outstanding for the three months ended June 30, 2014 and 2013 totaling 1,886 and 600, respectively, were excluded from the calculation above because their effect would have been anti-dilutive. Additionally, the weighted average number of stock options and restricted stock units outstanding for the six months ended June 30, 2014 and 2013 totaling 1,348 and 482, respectively, were excluded from the calculation above because their effect would have been anti-dilutive.

        The tables below sets forth stock options exercised and restricted stock units vested for the three and six months ended June 30, 2014 and 2013:

	For the three months ended June 30,				For the six months ended June 30,
	2014		2013		2014		2013
Stock options exercised		8,659		—		18,300		24,831
Restricted stock units vested		42,849		8,803		78,552		25,676
Total		51,508		8,803		96,852		50,507

13

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 8—Commitments and Contingencies

Income Tax Litigation

        On December 27, 1989, the Company and most of its U.S. subsidiaries each filed a voluntary petition for reorganization under Chapter 11 of Title 11 of the United States Bankruptcy 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, May 2013 and December 2013. At the request of the IRS, in December 2013 the Bankruptcy Court granted an additional extension of time to submit the final order.

        The amounts initially asserted by the Proof of Claim do not reflect the subsequent resolution of various issues through settlements or concessions by the parties. The Company believes that any financial exposure with respect to those issues that have not been resolved or settled in the Proof of Claim is limited to interest and possible penalties and the amount of tax assessed has been offset by tax reductions in future years. All of the issues in the Proof of Claim, which have not been settled or conceded, have been litigated before the Bankruptcy Court and are subject to appeal but only at the conclusion of the entire Adversary Proceeding.

        The IRS completed its audit of the Company's federal income tax returns for the years ended May 31, 2000 through December 31, 2005. The IRS issued 30-Day Letters to the Company in June 2010, proposing changes to tax for these tax years. The Company believes its tax filing positions have substantial merit and filed a formal protest with the IRS within the prescribed 30-day time limit for those issues which have not been previously settled or conceded. The IRS filed a rebuttal to the Company's formal protest and the case was assigned to the Appeals Division of the IRS. The Appeals Division convened a hearing on March 8, 2011 and heard arguments from both parties as to issues not settled or conceded for the 2000 through 2005 audit period. As of June 30, 2014, 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.

14

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

        In 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. Also in 2012, the Company received notification from the IRS that the audit of the 2006 through 2008 tax years had been reopened for further review. The IRS issued a revised IRS Appeals Transmittal Letter in April 2013 conceding the proposed adjustment to the worthless stock deduction. As of June 30, 2014, 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 conducting an audit of the Company's income tax returns filed for 2009 through 2012. Since the examination is ongoing, any resulting tax deficiency or overpayment cannot be estimated at this time. During 2014, 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 the 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 2014 settling the issues in the Proof of Claim. A final order by the Bankruptcy Court would permit a resolution of similar issues for the tax years currently in Appeals Division (2000-2008) and currently under IRS Exam (2009-2012). As of June 30, 2014, the Company had $35.0 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 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.

15

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

Walter Coke, Inc.

        Walter Coke entered into a decree order in 1989 (the "1989 Order") relative to a Resource Conservation Recovery Act ("RCRA") compliance program mandated by the Environmental Protection Agency ("EPA"). A RCRA Facility Investigation ("RFI") Work Plan was prepared which proposed investigative tasks to assess the presence of contamination at the Walter Coke facility. In 2004, the EPA re-directed Walter Coke's RFI efforts toward completion of the Environmental Indicator ("EI") determinations for the Current Human Exposures, which were approved and finalized for Walter Coke's Birmingham facility in 2005. In 2008, as a follow-up to the EI determination, the EPA requested that Walter Coke perform additional soil sampling and testing in the neighborhoods surrounding its facility. The results of this sampling and testing were submitted to the EPA for review in 2009. In conjunction with the plan, Walter Coke agreed to remediate portions of 23 properties based on the 2009 sampling and that process was completed in 2012.

        In 2011, the EPA notified Walter Coke in the form of a General Notice Letter that it proposed that the offsite remediation project be classified and managed as a Superfund site under Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), allowing other Potentially Responsible Parties (PRPs) 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, the EPA sent an "Offer to Conduct Work" letter to Walter Coke and four other PRPs notifying them that the EPA had completed sampling at 1,100 residential properties and that 400 properties exceeded Regional Removal Management Levels (RML's) and offered the PRPs an opportunity to cleanup 50 Phase I properties. The Company has notified the EPA that it has declined the Offer to Conduct Work.

        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 is no longer in effect. The objectives of the 2012 Order are to perform Corrective Measure Studies, implement remedies if necessary, and implement and maintain institutional controls if required at the Walter Coke facility.

        The Company has incurred costs to investigate the presence of contamination at the Walter Coke facility and to define remediation actions to address this environmental liability in accordance with the agreements reached with the EPA under the RFI and the residential soil sampling conducted by Walter Coke in the neighborhoods surrounding its facility. At June 30, 2014, the Company had 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. As of June 30, 2014, the amount of this accrual was 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

16

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

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 the proceeding was filed with the Court, which the Court granted on November 21, 2013. As a result of the Court's action, the case is currently stayed. The Company believes that there is no merit to the claims alleged in this action and intends to vigorously defend this matter.

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 seek to represent a class of Walter Energy shareholders who purchased common stock between April 20, 2011 and September 21, 2011.

        These complaints allege 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 allege 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 (the "1934 Act"), Rule 10b-5 promulgated thereunder, and Section 20(a) of the 1934 Act. On

17

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

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 Energy, 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. The parties are now in the process of discovery. Plaintiffs filed a motion for class certification on August 15, 2013. On March 18, 2014, the Court denied Plaintiffs' motion for class certification without prejudice to refiling and rebriefing and stayed this litigation pending a decision by the United States Supreme Court in Halliburton Co., et al. v. Erica P. John Fund, Inc. ("Halliburton II"). Following the U.S. Supreme Court's decision in Halliburton II on June 23, 2014, the parties have until August 22, 2014 to file a motion with the Court requesting the stay be lifted and also to submit a jointly proposed briefing schedule on a second motion for class certification, if such a motion is desired by Plaintiffs.

        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 allege similar claims to those alleged in the Rush complaint. The complaints variously assert 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 seek 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.

18

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 8—Commitments and Contingencies (Continued)

        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 and 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 in July 2014

19

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 9—Derivative Financial Instruments (Continued)

and is being accounted for as a cash flow hedge. Changes in the fair value of the effective portion of the hedge are reported in accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during the hedged transactions affect earnings. The Company recognized $1.1 million related to the effective portion of the hedge for the six months ended June 30, 2014 in interest expense, net in the Condensed Consolidated Statements of Operations. Upon the prepayment of term loan A in the first quarter of 2014, the interest rate swap became fully ineffective. The ineffective portion of the change in the fair value of the hedge is recognized directly in earnings. The Company recognized income of approximately $1.0 million and expense of $0.7 million for the three and six months ended June 30, 2014, respectively, related to the ineffective portion of the hedge in other income (loss) in the Condensed Consolidated Statements of Operations.

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 in July 2014 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.

        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.

	June 30, 2014		December 31, 2013
Asset derivatives designated as cash flow hedging instruments:
Interest rate cap(1)	$	—	$	1
Liability derivatives designated as cash flow hedging instruments:
Interest rate swaps(2)	$	1,019	$	3,080

(1)

$1 thousand was included in other current assets within the Condensed Consolidated Balance Sheets as of December 31, 2013.

(2)

$1.0 million and $3.1 million were included within other current liabilities within the Condensed Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013, respectively.

20

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 9—Derivative Financial Instruments (Continued)

        The following tables present the gains and losses from derivative instruments for the three and six months ended June 30, 2014 and 2013 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)
	Three months ended June 30,					Three months ended June 30,
Derivatives designated as cash flow hedging instruments	2014		2013			2014		2013
Interest rate swaps	$	—	$	1,142		$	—	$	(614	)
Interest rate cap		—		(2	)		—		—
Total	$	—	$	1,140		$	—	$	(614	)

	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)						Loss, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings (ineffective portion)(2)
	Six months ended June 30,					Six months ended June 30,						Six months ended June 30,
Derivatives designated as cash flow hedging instruments	2014		2013			2014			2013			2014		2013
Interest rate swaps	$	1,303	$	2,482		$	(677	)	$	(1,230	)	$	1,053	$	—
Interest rate cap		—		(4	)		—			—			—		—
Total	$	1,303	$	2,478		$	(677	)	$	(1,230	)	$	1,053	$	—

(1)

The effective portion of the interest rate swap amounts are reported within interest expense, net in the Condensed Consolidated Statements of Operations.

(2)

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

21

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 10—Accumulated Other Comprehensive Income (Loss)

        The following table presents the changes in accumulated other comprehensive income (loss) by component for the six months ended June 30, 2014, net of tax (in thousands).

	Pension and other postretirement plans			Unrealized gain/(loss) on hedges			Foreign currency translation adjustment			Total
Beginning balance as of December 31, 2013	$	(165,150	)	$	(1,679	)	$	4,571		$	(162,258	)
Other comprehensive income before reclassifications		—			1,303			13,428			14,731
Amounts reclassified from accumulated other comprehensive income (loss)		7,017			376			—(1	)		7,393
Net current-period other comprehensive income		7,017			1,679			13,428			22,124
Ending balance as of June 30, 2014	$	(158,133	)	$	—		$	17,999		$	(140,134	)

(1)

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

        The following table presents amounts reclassified out of each component of accumulated other comprehensive income (loss) for the six months ended June 30, 2014 (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 (effective portion)	$	(1,095	)	Interest expense, net
Interest rate swaps (ineffective portion)		1,701		Other loss
		606		Total before tax
		(230	)	Income tax benefit
	$	376		Net of tax
Amortization of pension and postretirement benefit plans:
Prior service cost	$	736		(a)
Net actuarial loss		8,976		(a)
Settlement loss		1,627		(a)
		11,339		Total before tax
		(4,322	)	Income tax benefit
	$	7,017		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.

22

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 11—Fair Value of Financial Instruments

        Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three level hierarchy has been established for valuing assets and liabilities based on how transparent (observable) the inputs are that are used to determine fair value, with the inputs considered most observable categorized as Level 1 and those that are the least observable categorized as Level 3. Hierarchy levels are defined as follows:

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

        The following table presents information about the Company's assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2014 and December 31, 2013 and indicates the fair value hierarchy of the valuation techniques utilized to determine such values. For some assets, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When this is the case, the asset is categorized based on the level of the most significant input to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment and considers factors specific to the assets being valued.

	June 30, 2014
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Liabilities:
Interest rate swaps	$	—	$	1,019	$	—	$	1,019

	December 31, 2013
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	1	$	—	$	1
Liabilities:
Interest rate swaps	$	—	$	3,080	$	—	$	3,080

        The Company uses quoted dealer prices for similar contracts in active over-the-counter markets for determining fair value of Level 2 financial assets and liabilities.

        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.

23

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 11—Fair Value of Financial Instruments (Continued)

        Debt—All of the Company's outstanding debt is carried at cost. There were no borrowings outstanding under the Revolver at June 30, 2014 or December 31, 2013. 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 long-term debt (excluding capital obligations, equipment financing agreements and a discount on the Revolver of $7,437 as of June 30, 2014) are presented below (in thousands):

	June 30, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
2011 term loan A(1)	$	—	$	—	$	401,052	$	403,517
2011 term loan B(2)	$	964,684	$	912,152	$	968,581	$	959,838
9.875% senior notes(3)	$	462,200	$	287,138	$	496,831	$	431,250
8.50% senior notes	$	450,000	$	255,375	$	450,000	$	374,625
9.50% senior secured notes(4)	$	447,656	$	455,625	$	447,492	$	474,750
9.50% add-on senior secured notes(5)	$	202,828	$	202,500	$	—	$	—
11.0%/12.0% senior secured PIK toggle notes	$	350,000	$	288,750	$	—	$	—

(1)

Net of debt discount of $5,514 as of December 31, 2013.

(2)

Net of debt discount of $13,494 and $9,597 as of June 30, 2014 and December 31, 2013, respectively.

(3)

Net of debt discount of $2,800 and $3,169 as of June 30, 2014 and December 31, 2013, respectively.

(4)

Net of debt discount of $2,344 and $2,508 as of June 30, 2014 and December 31, 2013, respectively.

(5)

Includes a premium of $2,828 as of June 30, 2014.

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, 2013. The Company evaluates performance primarily based on operating income of the respective business segments.

24

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 12—Segment Information (Continued)

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

	For the three months ended June 30,						For the six months ended June 30,
	2014			2013			2014			2013
Revenues:
U.S. Operations	$	298,685		$	321,009		$	629,349		$	660,234
Canadian and U.K. Operations		79,044			119,873			160,621			271,317
Other		622			614			2,266			1,288
Total revenues	$	378,351		$	441,496		$	792,236		$	932,839
Segment operating income (loss):
U.S. Operations	$	(30,409	)	$	37,333		$	(24,539	)	$	30,376
Canadian and U.K. Operations		(66,426	)		(66,347	)		(119,044	)		(115,113	)
Other		(2,604	)		(1,539	)		(2,918	)		(9,436	)
Total operating loss		(99,439	)		(30,553	)		(146,501	)		(94,173	)
Less interest expense, net		(73,402	)		(52,985	)		(138,834	)		(98,952	)
Gain (loss) on extinguishment of debt		11,397			—			(2,492	)		(6,001	)
Other income (loss)		978			(714	)		(778	)		(609	)
Loss before income tax benefit		(160,466	)		(84,252	)		(288,605	)		(199,735	)
Income tax benefit		(9,075	)		(49,760	)		(45,036	)		(115,799	)
Net loss	$	(151,391	)	$	(34,492	)	$	(243,569	)	$	(83,936	)
Depreciation and depletion:
U.S. Operations	$	37,694		$	31,189		$	76,760		$	78,662
Canadian and U.K. Operations		31,509			36,620			68,219			69,852
Other		613			511			1,261			996
Total	$	69,816		$	68,320		$	146,240		$	149,510
Capital expenditures:
U.S. Operations	$	29,490		$	38,803		$	39,741		$	66,204
Canadian and U.K. Operations		1,435			7,231			2,044			13,545
Other		270			190			1,691			502
Total	$	31,195		$	46,224		$	43,476		$	80,251

	June 30, 2014		December 31, 2013
Segment assets:
U.S. Operations	$	1,230,287	$	1,265,255
Canadian and U.K. Operations		3,667,691		3,687,925
Other		563,920		637,680
Total	$	5,461,898	$	5,590,860

25

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

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"), as of June 30, 2014 certain 100% 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 subsidiaries which are guarantors under the senior notes, and (iv) the subsidiaries which are not guarantors of the senior notes:

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)
JUNE 30, 2014
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Total Consolidated
ASSETS
Cash and cash equivalents	$	255,620		$	27	$	37,825	$	—		$	293,472
Receivables, net		102,008			103,686		25,338		—			231,032
Intercompany receivables		—			179,412		60,357		(239,769	)		—
Intercompany loans receivable		—			—		352		(352	)		—
Inventories		—			130,447		144,035		—			274,482
Deferred income taxes		26,390			4,733		956		—			32,079
Prepaid expenses		1,457			38,683		5,221		—			45,361
Assets held for sale		—			24,150		—		—			24,150
Other current assets		9,666			478		2,360		—			12,504
Total current assets		395,141			481,616		276,444		(240,121	)		913,080
Mineral interests, net		—			6,897		2,880,715		—			2,887,612
Property, plant and equipment, net		7,680			712,731		826,869		—			1,547,280
Deferred income taxes		3,046			7,990		—		(11,036	)		—
Investment in subsidiaries		3,435,398			81,384		—		(3,516,782	)		—
Other long-term assets		85,925			18,718		9,283		—			113,926
	$	3,927,190		$	1,309,336	$	3,993,311	$	(3,767,939	)	$	5,461,898
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—		$	7,461	$	7,892	$	—		$	15,353
Accounts payable		6,968			42,342		11,141		—			60,451
Accrued expenses		45,962			60,237		36,632		—			142,831
Intercompany payables		239,769			—		—		(239,769	)		—
Intercompany loans payable		352			—		—		(352	)		—
Accumulated other postretirement benefits obligation		945			29,942		—		—			30,887
Other current liabilities		179,634			21,313		24,766		—			225,713
Total current liabilities		473,630			161,295		80,431		(240,121	)		475,235
Long-term debt		2,869,931			9,355		1,665		—			2,880,951
Accumulated other postretirement benefits obligation		(497	)		575,353		—		—			574,856
Deferred income taxes		—			—		794,627		(11,036	)		783,591
Other long-term liabilities		26,791			81,079		82,060		—			189,930
Total liabilities		3,369,855			827,082		958,783		(251,157	)		4,904,563
Stockholders' equity		557,335			482,254		3,034,528		(3,516,782	)		557,335
Total liabilities and stockholders' equity	$	3,927,190		$	1,309,336	$	3,993,311	$	(3,767,939	)	$	5,461,898

26

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

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

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS (Unaudited)
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

27

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

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

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, 2014
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Total Consolidated
Revenues:
Sales	$	—		$	277,856		$	100,126		$	—	$	377,982
Miscellaneous income (loss)		324			1,822			(1,777	)		—		369
		324			279,678			98,349			—		378,351
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			226,588			117,173			—		343,761
Depreciation and depletion		613			31,840			37,363			—		69,816
Selling, general and administrative		1,961			10,935			6,106			—		19,002
Postretirement benefits		(44	)		13,913			—			—		13,869
Restructuring and asset impairments		514			23,686			7,142			—		31,342
		3,044			306,962			167,784			—		477,790
Operating loss		(2,720	)		(27,284	)		(69,435	)		—		(99,439	)
Interest expense, net		(72,338	)		(292	)		(772	)		—		(73,402	)
Gain on extinguishment of debt		11,397			—			—			—		11,397
Other income (loss)		981			—			(3	)		—		978
Loss before income tax expense (benefit)		(62,680	)		(27,576	)		(70,210	)		—		(160,466	)
Income tax expense (benefit)		16,128			(7,753	)		(17,450	)		—		(9,075	)
Equity in net losses of subsidiaries		(72,583	)		—			—			72,583		—
Net loss	$	(151,391	)	$	(19,823	)	$	(52,760	)	$	72,583	$	(151,391	)

28

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

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

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	299,198		$	138,600		$	—		$	437,798
Miscellaneous income		220			779			2,699			—			3,698
		220			299,977			141,299			—			441,496
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			211,314			156,302			—			367,616
Depreciation and depletion		511			33,673			34,136			—			68,320
Selling, general and administrative		3,939			13,921			9,269			—			27,129
Postretirement benefits		(55	)		14,780			—			—			14,725
Restructuring and asset impairments		—			(9,063	)		3,322			—			(5,741	)
		4,395			264,625			203,029			—			472,049
Operating income (loss)		(4,175	)		35,352			(61,730	)		—			(30,553	)
Interest income (expense), net		(57,131	)		6,303			(2,157	)		—			(52,985	)
Other loss		—			—			(714	)		—			(714	)
Income (loss) before income tax expense (benefit)		(61,306	)		41,655			(64,601	)		—			(84,252	)
Income tax expense (benefit)		(22,108	)		8,533			(36,185	)		—			(49,760	)
Equity in earnings of subsidiaries		4,706			—			—			(4,706	)		—
Net income (loss)	$	(34,492	)	$	33,122		$	(28,416	)	$	(4,706	)	$	(34,492	)

29

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

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

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2014
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Total Consolidated
Revenues:
Sales	$	—		$	583,898		$	199,313		$	—	$	783,211
Miscellaneous income		979			3,694			4,352			—		9,025
		979			587,592			203,665			—		792,236
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			461,954			231,682			—		693,636
Depreciation and depletion		1,261			67,048			77,931			—		146,240
Selling, general and administrative		3,114			23,871			12,796			—		39,781
Postretirement benefits		(88	)		27,826			—			—		27,738
Restructuring and asset impairments		514			23,686			7,142			—		31,342
		4,801			604,385			329,551			—		938,737
Operating loss		(3,822	)		(16,793	)		(125,886	)		—		(146,501	)
Interest income (expense), net		(144,742	)		6,962			(1,054	)		—		(138,834	)
Loss on extinguishment of debt		(2,492	)		—			—			—		(2,492	)
Other loss		(719	)					(59	)		—		(778	)
Loss before income tax benefit		(151,775	)		(9,831	)		(126,999	)		—		(288,605	)
Income tax benefit		(2,433	)		(4,359	)		(38,244	)		—		(45,036	)
Equity in net losses of subsidiaries		(94,227	)		—			—			94,227		—
Net loss	$	(243,569	)	$	(5,472	)	$	(88,755	)	$	94,227	$	(243,569	)

30

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

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

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Total Consolidated
Revenues:
Sales	$	—		$	614,010		$	313,397		$	—	$	927,407
Miscellaneous income		773			2,969			1,690			—		5,432
		773			616,979			315,087			—		932,839
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			458,991			329,559			—		788,550
Depreciation and depletion		996			74,083			74,431			—		149,510
Selling, general and administrative		10,150			27,254			20,399			—		57,803
Postretirement benefits		(110	)		29,560			—			—		29,450
Restructuring and asset impairments		—			(8,947	)		10,646			—		1,699
		11,036			580,941			435,035			—		1,027,012
Operating income (loss)		(10,263	)		36,038			(119,948	)		—		(94,173	)
Interest income (expense), net		(108,627	)		13,283			(3,608	)		—		(98,952	)
Loss on extinguishment of debt		(6,001	)		—			—			—		(6,001	)
Other loss		—			—			(609	)		—		(609	)
Income (loss) before income tax expense (benefit)		(124,891	)		49,321			(124,165	)		—		(199,735	)
Income tax expense (benefit)		(48,775	)		5,137			(72,161	)		—		(115,799	)
Equity in net losses of subsidiaries		(7,820	)		—			—			7,820		—
Net income (loss)	$	(83,936	)	$	44,184		$	(52,004	)	$	7,820	$	(83,936	)

31

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

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

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE
INCOME (LOSS) (UNAUDITED)
THREE MONTHS ENDED JUNE 30, 2014
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net loss	$	(151,391	)	$	(19,823	)	$	(52,760	)	$	72,583		$	(151,391	)
Other comprehensive income (loss):
Change in pension and postretirement benefit plans, net of tax		3,498			3,187			—			(3,187	)		3,498
Change in foreign currency translation adjustment		11,264			—			11,264			(11,264	)		11,264
Total other comprehensive income		14,762			3,187			11,264			(14,451	)		14,762
Total comprehensive loss	$	(136,629	)	$	(16,636	)	$	(41,496	)	$	58,132		$	(136,629	)

32

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

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

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

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

33

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

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

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE
INCOME (LOSS) (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2014
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net loss	$	(243,569	)	$	(5,472	)	$	(88,755	)	$	94,227		$	(243,569	)
Other comprehensive income (loss):
Change in pension and postretirement benefit plans, net of tax		7,017			6,991			—			(6,991	)		7,017
Change in unrealized gain on hedges, net of tax		1,679			3			—			(3	)		1,679
Change in foreign currency translation adjustment		13,428			—			13,428			(13,428	)		13,428
Total other comprehensive income		22,124			6,994			13,428			(20,422	)		22,124
Total comprehensive income (loss)	$	(221,445	)	$	1,522		$	(75,327	)	$	73,805		$	(221,445	)

34

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

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

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

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

35

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

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

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2014
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(112,535	)	$	95,649		$	(22,122	)	$	—		$	(39,008	)
INVESTING ACTIVITIES
Additions to property, plant and equipment		(1,691	)		(37,428	)		(4,357	)		—			(43,476	)
Intercompany loans made		(3,700	)		—			—			3,700			—
Intercompany loans received		1,828			—			—			(1,828	)		—
Other		—			—			(350	)		—			(350	)
Cash flows used in investing activities		(3,563	)		(37,428	)		(4,707	)		1,872			(43,826	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		553,000			—			—			—			553,000
Retirements of debt		(406,566	)		(3,590	)		(3,968	)		—			(414,124	)
Dividends paid		(1,284	)		—			—			—			(1,284	)
Debt issuance costs		(21,325	)		—			—			—			(21,325	)
Advances from (to) consolidated entities		13,934			(54,705	)		40,771			—			—
Intercompany borrowings		—			—			3,700			(3,700	)		—
Intercompany payments made		—			—			(1,828	)		1,828			—
Other		(191	)		—			—			—			(191	)
Cash flows provided by (used in) financing activities		137,568			(58,295	)		38,675			(1,872	)		116,076
Effect of foreign exchange rates on cash		—			—			(588	)		—			(588	)
Net increase (decrease) in cash and cash equivalents		21,470			(74	)		11,258			—			32,654
Cash and cash equivalents at beginning of period		234,150			101			26,567			—			260,818
Cash and cash equivalents at end of period	$	255,620		$	27		$	37,825		$	—		$	293,472

36

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

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

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(130,045	)	$	112,000		$	(6,057	)	$	—		$	(24,102	)
INVESTING ACTIVITIES
Additions to property, plant and equipment		(459	)		(58,130	)		(21,662	)		—			(80,251	)
Intercompany notes issued		(54,736	)		—			—			54,736			—
Intercompany notes proceeds		23,500			—			—			(23,500	)		—
Investments in subsidiaries		(50,103	)		—			—			50,103			—
Other		—			—			964			—			964
Cash flows used in investing activities		(81,798	)		(58,130	)		(20,698	)		81,339			(79,287	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		450,000			—			—			—			450,000
Retirements of debt		(250,000	)		(4,903	)		(4,297	)		—			(259,200	)
Dividends paid		(15,638	)		—			—			—			(15,638	)
Debt issuance costs		(15,080	)		—			—			—			(15,080	)
Advances from (to) consolidated entities		95,962			(49,028	)		(46,934	)		—			—
Intercompany notes borrowings		—			—			54,736			(54,736	)		—
Intercompany notes payments		—			—			(23,500	)		23,500			—
Investment from Parent		—			—			50,103			(50,103	)		—
Other		(600	)		—			—			—			(600	)
Cash flows provided by (used in) financing activities		264,644			(53,931	)		30,108			(81,339	)		159,482
Effect of foreign exchange rates on cash		—			—			(1,816	)		—			(1,816	)
Net increase (decrease) in cash and cash equivalents		52,801			(61	)		1,537			—			54,277
Cash and cash equivalents at beginning of period		83,833			61			32,707			—			116,601
Cash and cash equivalents at end of period	$	136,634		$	—		$	34,244		$	—		$	170,878

Note 14—Subsequent Events

Credit Agreement Amendments

        On July 7, 2014, the Company entered into an amendment (the "Seventh Amendment") to the 2011 Credit Agreement dated as of April 1, 2011 (as amended, the "Credit Agreement"), which, among other things, modified the financial maintenance ratio to be unlimited for the quarter ended June 30, 2014 so long as the Company issued at least $275.0 million of additional first lien notes within seven days (or such longer period during the fiscal quarter ending September 30, 2014 as may be determined by the administrative agent of the Credit Agreement) of the effective date of the Seventh Amendment.

37

WALTER ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIX MONTHS ENDED JUNE 30, 2014 (Unaudited)

Note 14—Subsequent Events (Continued)

On July 14, 2014, concurrently with the closing of the issuance of $320.0 million aggregate principal amount of 9.50% Senior Secured Notes (the "New First Lien Notes"), the financial maintenance ratio for the second quarter of 2014 became unlimited.

        On July 8, 2014, the Company entered into an amendment (the "Eighth Amendment") to the Credit Agreement, which, among other things, provided the Company with an additional tranche of revolving loan commitments (the "New Revolving Credit Facility Tranche") in the amount of $61.2 million, thereby increasing the total available commitments under the revolving credit facility in the Credit Agreement to $375.0 million. The New Revolving Credit Facility Tranche would have matured in 2017. Effectiveness of the Eighth Amendment was conditioned upon the Company pricing a bond offering in an aggregate principal amount of no less than $275.0 million and certain other conditions, including making arrangements so that, immediately after giving effect to the funding of any loans under the New Revolving Credit Facility Tranche, proceeds of such bond issuance are applied to repay certain revolving loans and permanently terminate certain revolving commitments (including the New Revolving Credit Facility Tranche), required under the Credit Agreement. The Eighth Amendment also reduced the amount available under the 2016 revolver from $69.0 million to $16.9 million and reduced the amount available under the 2017 revolver from $244.8 million to $60.0 million for total availability of $76.9 million. On July 14, 2014, concurrently with the closing of the issuance of the New First Lien Notes, the Eighth Amendment became effective and the New Revolving Credit Facility Tranche was terminated.

New First Lien Notes

        On July 14, 2014, the Company issued the New First Lien Notes. The New First Lien Notes are an addition to the $450.0 million aggregate principal amount of the Company's 9.50% Senior Secured Notes due 2019 that were issued on September 27, 2013 and the $200.0 million aggregate principal amount of 9.50% Senior Secured Notes due 2019 (the "9.50% Add-On Senior Secured Notes") that were issued on March 27, 2014 (collectively, the "First Lien Notes"). The First Lien Notes will mature on October 15, 2019, and interest is payable on April 15 and October 15 of each year. The next interest payment date for the First Lien Notes is October 15, 2014.

        The First Lien Notes are unconditionally guaranteed, jointly and severally, by the Guarantors. The First Lien Notes and the guarantees are secured on a first priority basis, equally and ratably with the Company's Credit Agreement and any future pari passu secured obligations (subject to permitted liens) on substantially all of the Company's and the Guarantor's property and assets, which also secure the Company's 11.0%/12.0% Senior Secured PIK Toggle Notes due 2020 (the "Second Lien Notes") on a second priority basis.

        At any time prior to October 15, 2016, the Company may redeem up to 35% of the aggregate principal amount of the First Lien Notes with the net cash proceeds from certain equity offerings, at a redemption price of 109.50% of the aggregate principal amount. The Company may redeem the First Lien 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 First Lien Notes plus a "make-whole" premium. The Company may redeem the First Lien Notes, in whole or in part at redemption prices equal to 107.125% for the year commencing October 15, 2016, 102.375% for the year 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 First Lien Notes, the Company will be required to offer to repurchase each holder's First Lien Notes at a price equal to 101% of the aggregate principal amount.

38

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

        The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this Quarterly Report and our Annual Report filed on Form 10-K for the fiscal year ended December 31, 2013.

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;

•

A substantial or extended decline in pricing, demand, and other factors beyond our control;

•

Failure of our customers to honor or renew contracts;

•

Our ability to collect payments from our customers;

•

Inherent difficulties and challenges in coal mining that are beyond our control;

•

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

•

Concentration of our mining operations in a limited number of areas;

•

A significant reduction of or loss of purchases by our largest customers;

•

Unavailability or uneconomical transportation for our coal;

•

Significant competition and foreign currency fluctuation;

•

Significant cost increases and fluctuations, and delay in the delivery of raw materials, mining equipment and purchased components;

•

Work stoppages, labor shortages and other labor relations matters within our operations and those of our suppliers and customers;

•

Our ability to hire and retain a skilled labor force;

•

Our obligations surrounding reclamation and mine closure;

•

Inaccuracies in our estimates of coal reserves;

•

Our ability to develop or acquire coal reserves in an economically feasible manner;

39

•

Challenges to our licenses, permits and other authorizations;

•

Failure to meet project development and expansion targets;

•

Challenges associated with operating in foreign jurisdictions;

•

Challenges associated with environmental, health and safety laws and regulations;

•

Regulatory requirements associated with federal, state and provincial regulatory agencies, authority to order temporary or permanent closure of our mines;

•

Increased focus by regulatory authorities on the effects of surface coal mining on the environment;

•

Climate change concerns;

•

Our operations' impact on the environment;

•

Our indebtedness;

•

Our ability to generate cash for our financial obligations, to refinance our indebtedness or to obtain additional financing;

•

Our ability to incur additional indebtedness;

•

Restrictions in our existing and future debt agreements;

•

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

•

Downgrades in our credit ratings;

•

Failure to obtain or renew surety bonds on acceptable terms could affect our ability to secure reclamation and coal lease obligations;

•

Costs associated with our pension and benefits, including post-retirement benefits;

•

Costs associated with our workers' compensation and certain medical and disability benefits;

•

Adverse rulings in current or future litigation;

•

Our ability to attract and retain key personnel;

•

Our ability to identify or integrate suitable acquisition candidates to promote growth;

•

Volatility in the price of our common stock;

•

Our ability to pay regular dividends to stockholders;

•

Our exposure to indemnification obligations;

•

Potential terrorist attacks and threats and escalation of military activity in response to such attacks;

•

Potential cyber-attacks or other security breaches; 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, 2013 and as updated by any subsequent Form 10-Qs, including this Form 10-Q, or other documents that we 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

40

how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this Form 10-Q after the date of this Form 10-Q, except as may be required by law. In light of these risks and uncertainties, keep in mind that any forward-looking statement made in this Form 10-Q or elsewhere might not occur.

Overview

        We are 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 five active coal mines, a coke plant and a coal bed methane extraction operation located in Alabama and West Virginia. We have curtailed and idled mines in Northeast British Columbia in Canada and South Wales in the U.K. We operate our business through the U.S. Operations and Canadian and U.K. Operations principal business segments. The U.S. Operations segment includes the operations of our underground mines, surface mines, coke plant and natural gas operations located in Alabama and our underground and surface mining operations located in West Virginia.

        The Canadian and U.K. Operations segment includes surface mines in Northeast British Columbia (Canada) and an underground development mine in South Wales (U.K.). The Canadian mining operations consist of three metallurgical coal surface mines in Northeast British Columbia (the Wolverine mine, the Brule mine, and the Willow Creek mine). The Willow Creek mine operations were curtailed during the first half of 2013, the Wolverine mine was idled in April 2014 and the Brazion operations (which include the Company's Brule and Willow Creek mines) were idled in June 2014. The Company will continue to operate the preparation plant at the Willow Creek mine to complete processing of coal inventory that has already been mined. Our U.K. mining operation consists of an underground development mine located in South Wales that produces anthracite coal, which can be sold as low-volatile PCI coal.

        Sales of metallurgical coal for the three months ended June 30, 2014 were 2.7 million metric tons and accounted for approximately 92% of our coal sales volume. Comparatively, for the three months ended June 30, 2013, sales of metallurgical coal were 2.4 million metric tons and accounted for approximately 89% of our coal sales volume.

        Sales of thermal coal for the three months ended June 30, 2014 were 222 thousand metric tons and accounted for approximately 8% of our coal sales volume. Comparatively, for the three months ended June 30, 2013, sales of thermal coal were 317 thousand metric tons and accounted for approximately 11% of our coal sales volume.

Industry Overview and Outlook

        The global metallurgical coal market remains challenged due to issues of overcapacity in the global steel and metallurgical coal mining industries. The metallurgical coal benchmark for the third quarter of 2014 settled at approximately $120 per metric ton which is consistent with the second quarter of 2014 benchmark and represents a $25 per metric ton decrease from the negotiated third quarter 2013 benchmark price.

        Although the current metallurgical coal market remains weak, there are some positive signs in the market. According to the World Steel Association, world crude steel production in the six months ended June 30, 2014 increased 2.5% compared to the same period in the prior year. In Europe, for the six months ended June 30, 2014 steel production grew by approximately 4% as compared to the prior year. Germany's steel production increased approximately 4% due to the strong automotive market and

41

the U.K. increased more than 7%. China's crude steel production for the six months ended June 30, 2014 increased approximately 3% over the prior year. Elsewhere in Asia, South Korea's steel production increased approximately 9% due to the start of a third blast furnace by Hyundai Steel and steel production in Japan and India increased approximately 1%. On the global metallurgical coal production side, there have been global production cuts of approximately 22 million tons announced in 2014, the majority of which have been in the U.S. and Canada. Although there still remains an excess of metallurgical coal in the market, we believe these signs reflect positive trends in both supply and demand that are encouraging. Global metallurgical coal demand is projected to continue to grow modestly with an expected increase in global steel production. Global steel production grew by 3.6% in 2013 and is expected to grow an additional 3.1% in 2014 and 3.3% in 2015 driven largely by the Chinese market, which accounts for 45-50% of global steel production. Steel consumption in the Europe Union is also expected to grow 3.1% in 2014 according to the World Steel Association, following a decline in 2013 and 2012. At current prices, we believe a significant portion of global metallurgical coal production is uneconomic and, if the current prices were to continue, additional idling would be expected.

        We 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. We remain committed to aggressively controlling costs and improving operating performance. 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, which include our Canadian operations, 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.

        In conjunction with the announcement of our idling of the remaining Canadian operations, we have revised our full year 2014 target metallurgical coal production to be between 9.0 and 10.0 million metric tons and full year 2014 metallurgical coal sales volumes are estimated to total between 9.5 and 10.5 million metric tons, a reduction from the previous sales volume outlook of 10.5 to 11.5 million metric tons, primarily due to the Company's principal coal transportation provider at the Brule mine within the Canada and U.K. Operations segment ceasing operations in June 2014.

42

RESULTS OF OPERATIONS

Summary Operating Results for the
Three Months Ended June 30, 2014 and 2013

	For the three months ended June 30, 2014
(in thousands)	U.S. Operations			Canadian and U.K. Operations			Other			Total
Sales	$	297,077		$	80,845		$	60		$	377,982
Miscellaneous income (loss)		1,608			(1,801	)		562			369
Revenues		298,685			79,044			622			378,351
Cost of sales (exclusive of depreciation and depletion)		242,198			101,542			21			343,761
Depreciation and depletion		37,694			31,509			613			69,816
Selling, general and administrative		11,566			5,314			2,122			19,002
Postretirement benefits		13,913			—			(44	)		13,869
Restructuring and asset impairments		23,723			7,105			514			31,342
Operating loss	$	(30,409	)	$	(66,426	)	$	(2,604	)		(99,439	)
Interest expense, net											(73,402	)
Gain on extinguishment of debt											11,397
Other income, net											978
Income tax benefit											9,075
Net loss										$	(151,391	)

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

43

	Dollar variance for the three months ended June 30, 2014 versus 2013
(in thousands)	U.S. Operations			Canadian and U.K. Operations			Other			Total
Sales	$	(23,514	)	$	(36,362	)	$	60		$	(59,816	)
Miscellaneous income (loss)		1,190			(4,467	)		(52	)		(3,329	)
Revenues		(22,324	)		(40,829	)		8			(63,145	)
Cost of sales (exclusive of depreciation and depletion)		10,662			(34,511	)		(6	)		(23,855	)
Depreciation and depletion		6,505			(5,111	)		102			1,496
Selling, general and administrative		(3,669	)		(4,911	)		453			(8,127	)
Postretirement benefits		(866	)		—			10			(856	)
Restructuring and asset impairments		32,786			3,783			514			37,083
Operating income (loss)	$	(67,742	)	$	(79	)	$	(1,065	)		(68,886	)
Interest expense, net											(20,417	)
Gain on extinguishment of debt											11,397
Other income, net											1,692
Income tax benefit											(40,685	)
Net loss										$	(116,899	)

Summary of Second Quarter Consolidated Results of Operations

        Our net loss for the three months ended June 30, 2014 was $151.4 million, or $2.33 per diluted share, which compares to a net loss of $34.5 million, or $0.55 per diluted share, for the three months ended June 30, 2013. The net loss was primarily due to a decrease of $36.20, or 24.1%, in the average selling price of our metallurgical coal due to excess supply within the global market. Earnings before interest, income taxes, depreciation, depletion and amortization ("EBITDA") for the second quarter of 2014 decreased $54.3 million as compared with the second quarter of 2013 due to a decrease in gross profit as a result of a decrease in the average net selling price of coal, an increase in restructuring and asset impairment charges as a result of idling the Canadian operations and an impairment charge due to reducing the Blue Creek Coal Terminal assets held for sale to their fair value less costs to sell. These items were partially offset by a decrease in selling, general and administrative expenses. A reconciliation of net loss to EBITDA is presented in the following Liquidity and Capital Resources section.

        The $63.1 million decrease in revenues for the three months ended June 30, 2014 as compared with the second quarter of 2013 was primarily due to a $98.1 million decrease in revenues as a result of a $36.20, or 24.1%, decrease in the average selling price per metric ton of our metallurgical coal resulting from lower worldwide sales prices for metallurgical coal and a net $4.1 million decrease in revenue due to a decrease in thermal coal sales volume offset partially by an increase in thermal coal prices. These decreases in revenues were offset partially by an increase in revenue of $40.6 million due to increased metallurgical coal sales volume.

        The $23.9 million decrease in cost of sales, exclusive of depreciation and depletion, for the three months ended June 30, 2014 as compared with the second quarter of 2013 was primarily the result of significant decreases in per metric ton cash cost of sales for our metallurgical coal within all of our operations due to the Company's improvement in cost performance. Cost of sales decreased approximately $60.6 million due to a decrease in the average cash cost of sales per metric ton of metallurgical coal sold of approximately 18.3%, decreased approximately $10.5 million due to a decrease in thermal coal sales volume and average cash cost of sales and decreased $7.1 million due to a decrease in cost of sales within our metallurgical coke and coal bed methane gas operations. This

44

decrease was offset by an increase in cost of sales of $33.1 million due to a 270 thousand metric ton, or 11.1%, increase in metallurgical tons sold and an increase of $10.9 million in cost of sales related to the idling of the Canadian operations, of which $6.4 million relates to transportation take or pay charges and $4.5 million relates to idle mine costs.

        Consolidated gross margin percentage, calculated as consolidated revenues less consolidated cost of coal sales, exclusive of depreciation and depletion, divided by consolidated revenues, was 9.1% for the three months ended June 30, 2014 compared with 16.7% in the prior year period. Consolidated gross margin percentage for our U.S. Operations and Canadian and U.K. Operations was 18.9% and (28.5)%, respectively, for the three months ended June 30, 2014 compared with 27.9% and (13.5)%, respectively, in the prior year period.

        The decrease in margins within our U.S. Operations and Canadian and U.K. Operations primarily reflects the deterioration in metallurgical coal market conditions. As a result, we have curtailed, and in some cases idled, higher-cost and lower-quality coal mines. We will continue to monitor margins within all of our operations and will continue to idle operations that are not economic under current conditions.

        The $8.1 million, or 30.0%, decrease in selling, general and administrative expense for the three months ended June 30, 2014 as compared with the second quarter of 2013 was primarily attributable to our cost containment initiatives that we began in 2013 and a reduction in professional fees as the prior year included professional fees associated with the proxy challenge.

        The operating results for the three months ended June 30, 2014 include restructuring and asset impairment charges of $31.3 million, which are comprised of an asset impairment charge of $23.0 million to reduce the carrying value of the Blue Creek Coal Terminal assets held for sale to their fair value less costs to sell and restructuring charges of $8.3 million primarily incurred in connection with the idling of the Canadian operations. The results for the three months ended June 30, 2013 include a restructuring and asset impairment benefit of $5.7 million, which includes a gain of $17.0 million due to the release of a below market contract liability that was acquired through the acquisition of North River offset by $8.0 million of expense related to the accelerated closure of the North River mine in the U.S. Operations segment and $3.3 million of expense related to the curtailment of the Willow Creek mine in the Canada and U.K. Operations segment.

        The $20.4 million increase in interest expense, net for the three months ended June 30, 2014 as compared with the second quarter of 2013 was primarily due to an increase in long-term debt combined with an increase in the effective interest rates on outstanding debt obligations due to the amendments to the 2011 Credit Agreement and the issuance of senior notes.

        The $11.4 million net gain on extinguishment of debt for the three months ended June 30, 2014 was recognized upon the extinguishment of $35.0 million of 9.875% Senior Notes in exchange for shares of common stock.

        The effective tax rate for the three months ended June 30, 2014 was 5.7% compared with 59.1% for the same period in the prior year. The difference between the rates was primarily due to a full valuation allowance provided against the U.S. net deferred tax assets recorded for U.S. operating losses in the current period. The effective tax rates for both periods also reflects the benefits of the losses 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 current and prior year period results also include the impact of factors discussed in the following segment analysis.

45

Segment Analysis

U.S. Operations

        Hard coking coal sales totaled 2.0 million metric tons for the three months ended June 30, 2014, representing an increase of 420 thousand metric tons, or 25.9%, compared with 1.6 million metric tons for the same period in 2013. Our hard coking coal production totaled 1.9 million metric tons in the second quarter of 2014, which is relatively consistent with the 2.1 million metric tons produced in the second quarter of 2013. The average selling price of hard coking coal in the second quarter of 2014 was $113.64 per metric ton, representing a 26.2% decrease from the average selling price of $153.99 per metric ton for the same period in 2013. The decrease in the average selling price of hard coking coal continues to reflect the pricing pressure experienced in the metallurgical coal market due to oversupply. Our average cash cost of sales per metric ton of hard coking coal sold during the second quarter of 2014 was $90.83, representing a decrease of $10.29, or 10.2%, from the $101.12 average cash cost of sales per ton sold during the second quarter of 2013.

        Thermal coal sales totaled 196 thousand metric tons for the three months ended June 30, 2014, representing a decrease of 109 thousand metric tons, or 35.7%, compared with 305 thousand metric tons sold during the same period in 2013. Our average selling price of thermal coal for the three months ended June 30, 2014 was $75.03 per metric ton, representing an increase of 10.3%, compared to $68.03 per metric ton for the same period in 2013. Thermal coal production totaled 140 thousand metric tons for the three months ended June 30, 2014, representing a decrease of 65.6%, compared with 407 thousand metric tons produced during the same period in 2013. This was primarily due to the closure of the Alabama North River mine in the fourth quarter of 2013. The average cash cost of sales per metric ton of thermal coal sold for the three months ended June 30, 2014 was $89.20 per metric ton compared with $92.48 per metric ton for the same period in 2013.

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

	Three months ended June 30,
	2014		2013
Tons of hard coking coal sold(1) (in thousands)		2,041		1,621
Tons of hard coking coal produced (in thousands)		1,924		2,070
Average hard coking coal selling price(1) (per metric ton)	$	113.64	$	153.99
Average hard coking coal cash cost of sales(1) (per metric ton)	$	90.83	$	101.12
Average hard coking coal cash cost of production (per metric ton)	$	70.34	$	68.22
Tons of thermal coal sold (in thousands)		196		305
Tons of thermal coal produced (in thousands)		140		407
Average thermal coal selling price (per metric ton)	$	75.03	$	68.03
Average thermal coal cash cost of sales (per metric ton)	$	89.20	$	92.48
Average thermal coal cash cost of production (per metric ton)	$	55.40	$	63.34

(1)

Includes sales of both produced and purchased coal.

        The $22.3 million decrease in our U.S. Operations segment reported revenues for the three months ended June 30, 2014 compared to the same period in the prior year was primarily attributable to a $82.4 million decrease due to a $40.35, or 26.2%, decrease in the average selling price of hard coking coal and a decrease of $6.0 million primarily due to a decrease in thermal coal sales. These decreases in revenue were offset partially by an increase in revenue of $64.7 million due to a 420 thousand or 25.9% increase in hard coking coal sales volume and an increase in revenue of $1.4 million within our metallurgical coke and gas operations.

46

        The $10.7 million increase in cost of sales, exclusive of depreciation and depletion, as compared with the second quarter of 2013 is primarily due to an increase of $42.5 million due to a 420 thousand, or 25.9%, increase in hard coking coal sales offset partially by a decrease in cost of sales of $31.5 million due to a $10.29 per metric ton, or 10.2%, decrease in the average cash cost of sales per ton of hard coking coal sold, a 109 thousand, or 35.7%, decrease in thermal coal sales, and a $3.28 decrease in average thermal coal cash cost of sales. The decrease in per metric ton cash cost of sales was primarily due to increased volume and cost reduction driven by continued improvements in our cost performance within the operations. The decrease in thermal coal sales volume is due to the closure of the Alabama North River mine in the fourth quarter of 2013.

        Consolidated metallurgical coal margin per ton, calculated as average consolidated metallurgical coal selling price per ton less average consolidated cost of metallurgical coal sales per ton, was $22.81 and $52.87, respectively, for the three months ended June 30, 2014 and 2013. While margins within our U.S. Operations have decreased in the short-term, we believe global metallurgical coal demand will continue to grow modestly with global steel production in the long-term. At current prices, we believe a significant portion of global metallurgical coal production is uneconomic and, if the current prices were to continue, additional idling would be expected. We will continue to monitor the margins within our U.S. Operations and will idle operations that are not economic under current market conditions.

        The current quarter includes restructuring and asset impairment charges of $23.7 million which is comprised of an asset impairment charge of $23.0 million to reduce the carrying value of the Blue Creek Coal Terminal assets held for sale to their fair value less costs to sell and restructuring charges of $0.7 million. The restructuring and asset impairment benefit of $9.1 million in the prior year comparable quarter is attributable to a gain recognized due to the release of a below market contract liability that was obtained through the acquisition of North River offset by impairment charges related to the accelerated closure of the North River mine.

        Our U.S. Operations segment reported an operating loss of $30.4 million for the three months ended June 30, 2014, compared to operating income of $37.3 million in the same period in 2013. The decrease in operating income was primarily due to an increase in restructuring and asset impairment charges of $32.8 million combined with a decrease in revenues due to the decline in the average selling price of hard coking coal.

Canadian and U.K. Operations

        Metallurgical coal sales for the three months ended June 30, 2014 consisted of 315 thousand metric tons of hard coking coal at an average selling price of $123.35 per metric ton and 354 thousand metric tons of low-volatile PCI coal at an average selling price of $109.37 per metric ton. Metallurgical coal sales in the second quarter of 2013 consisted of 354 thousand metric tons of hard coking coal at an average selling price of $153.51 per metric ton and 465 thousand metric tons of low-volatile PCI coal at an average selling price of $135.55 per metric ton. 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 second quarter of 2014 was $128.18, representing a $40.55, or 24.0%, decrease from the average cash cost of sales per ton of hard coking coal sold during the second quarter of 2013 of $168.73. The average cash cost of sales per metric ton of low-volatile PCI coal sold during the second quarter of 2014 was $124.76 representing a $34.72, or 21.8%, decrease from the average cash cost of sales per ton of low-volatile PCI coal sold during the second quarter of 2013 of $159.48. The decreases in average cash cost of sales per ton were primarily driven by continued improvement in our company-wide cost performance.

        Our Canadian and U.K. Operations segment produced a total of 73 thousand metric tons of hard coking coal and 446 thousand metric tons of low-volatile PCI coal in the second quarter of 2014. During the second quarter of 2013, the segment produced 414 thousand metric tons of hard coking

47

coal and 465 thousand metric tons of low-volatile PCI coal. The decrease in hard coking coal production was primarily due to the idling of the Wolverine mine in April 2014.

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

	Three months ended June 30,
	2014		2013
Tons of metallurgical coal sold (in thousands)		669		819
Tons of metallurgical coal produced (in thousands)		519		879
Average metallurgical coal selling price (per metric ton)	$	115.96	$	143.31
Average metallurgical cash cost of sales (per metric ton)	$	126.78	$	163.43
Average metallurgical coal cash cost of production (per metric ton)	$	82.71	$	102.62
Tons of hard coking coal sold (in thousands)		315		354
Tons of hard coking coal produced (in thousands)		73		414
Average hard coking coal selling price (per metric ton)	$	123.35	$	153.51
Average hard coking coal cash cost of sales (per metric ton)	$	128.18	$	168.73
Average hard coking coal cash cost of production (per metric ton)	$	133.69	$	123.24
Tons of low-volatile PCI coal sold (in thousands)		354		465
Tons of low-volatile PCI coal produced (in thousands)		446		465
Average low-volatile PCI coal selling price (per metric ton)	$	109.37	$	135.55
Average low-volatile PCI coal cash cost of sales (per metric ton)	$	124.76	$	159.48
Average low-volatile PCI coal cash cost of production (per metric ton)	$	73.31	$	84.24

        The $40.8 million decrease in segment reported revenues for the second quarter of 2014 compared to the same period in the prior year was attributable to a decrease in revenue of $21.5 million due to a decrease of 150 thousand, or 18.3%, in hard coking and low-volatile PCI tons sold combined with a decrease in revenue of $18.3 million due to a decrease of 19.6% and 19.3% in the average selling price of hard coking coal and low-volatile PCI coal, respectively.

        The $34.5 million decrease in cost of sales, exclusive of depreciation and depletion, in the segment for the three months ended June 30, 2014 compared to the same period in 2013 was primarily due to a decrease in cost of sales of $49.0 million as a result of a decrease in metallurgical tons sold combined with a decrease in the average cash cost of sales per ton of metallurgical tons sold. The decrease is offset partially by an $10.9 million increase in cost of sales due to the idling of the Canadian operations, of which $6.4 million relates to transportation take or pay charges related to port shortfall commitments and $4.5 million relates to idle mine costs. The shortfall is the proportionate share of the total estimated shortfall penalty for the year allocated to the tons shipped in the current quarter.

        Consolidated metallurgical coal margin per ton, calculated as average consolidated metallurgical coal selling price per ton less average consolidated cost of metallurgical coal sales per ton, was $(10.82) and $(20.12), respectively, for the three months ended June 30, 2014 and 2013. Our margins within our Canadian and U.K. Operations in the short-term remain under pressure. As a result, we have responded to the short-term deterioration in market conditions by idling the Canadian operations. We believe the long-term demand for metallurgical and low-volatile PCI coal within our Canadian and U.K. Operations to be strong as industry projections indicate that global steel making will continue to require increasing amounts of high quality metallurgical coal.

        The current year includes restructuring and asset impairment charges of $7.1 million incurred in connection with the idling of the Canadian operations in the current quarter. The restructuring and

48

asset impairment charge of $3.3 million in the prior year is attributable to charges incurred in connection with the curtailment of operations at our Willow Creek mine.

        Our Canadian and U.K. Operations segment reported an operating loss of $66.4 million for the three months ended June 30, 2014, which is consistent with an operating loss of $66.3 million in the prior period.

Summary Operating Results for the
Six Months Ended June 30, 2014 and 2013

	For the six months ended June 30, 2014
(in thousands)	U.S. Operations			Canadian and U.K. Operations			Other			Total
Sales	$	626,868		$	156,283		$	60		$	783,211
Miscellaneous income		2,481			4,338			2,206			9,025
Revenues		629,349			160,621			2,266			792,236
Cost of sales (exclusive of depreciation and depletion)		500,255			193,349			32			693,636
Depreciation and depletion		76,760			68,219			1,261			146,240
Selling, general and administrative		25,324			10,992			3,465			39,781
Postretirement benefits		27,826			—			(88	)		27,738
Restructuring and asset impairments		23,723			7,105			514			31,342
Operating loss	$	(24,539	)	$	(119,044	)	$	(2,918	)		(146,501	)
Interest expense, net											(138,834	)
Loss on extinguishment of debt											(2,492	)
Other loss, net											(778	)
Income tax benefit											45,036
Net loss										$	(243,569	)

	For the six months ended June 30, 2013
(in thousands)	U.S. Operations			Canadian and U.K. Operations			Other			Total
Sales	$	657,332		$	270,010		$	65		$	927,407
Miscellaneous income		2,902			1,307			1,223			5,432
Revenues		660,234			271,317			1,288			932,839
Cost of sales (exclusive of depreciation and depletion)		501,084			287,424			42			788,550
Depreciation and depletion		78,662			69,852			996			149,510
Selling, general and administrative		29,500			18,508			9,795			57,803
Postretirement benefits		29,559			—			(109	)		29,450
Restructuring and asset impairments		(8,947	)		10,646			—			1,699
Operating income (loss)	$	30,376		$	(115,113	)	$	(9,436	)		(94,173	)
Interest expense, net											(98,952	)
Loss on extinguishment of debt											(6,001	)
Other loss, net											(609	)
Income tax benefit											115,799
Net loss										$	(83,936	)

49

	Dollar variance for the six months ended June 30, 2014 versus 2013
(in thousands)	U.S. Operations			Canadian and U.K. Operations			Other			Total
Sales	$	(30,464	)	$	(113,727	)	$	(5	)	$	(144,196	)
Miscellaneous income (loss)		(421	)		3,031			983			3,593
Revenues		(30,885	)		(110,696	)		978			(140,603	)
Cost of sales (exclusive of depreciation and depletion)		(829	)		(94,075	)		(10	)		(94,914	)
Depreciation and depletion		(1,902	)		(1,633	)		265			(3,270	)
Selling, general and administrative		(4,176	)		(7,516	)		(6,330	)		(18,022	)
Postretirement benefits		(1,733	)		—			21			(1,712	)
Restructuring and asset impairments		32,670			(3,541	)		514			29,643
Operating income (loss)	$	(54,915	)	$	(3,931	)	$	6,518			(52,328	)
Interest expense, net											(39,882	)
Gain on extinguishment of debt											3,509
Other loss, net											(169	)
Income tax benefit											(70,763	)
Net loss										$	(159,633	)

Summary of Year to Date Consolidated Results of Operations

        Our net loss for the six months ended June 30, 2014 was $243.6 million, or $3.81 per diluted share, which compares to a loss of $83.9 million, or $1.34 per diluted share, for the six months ended June 30, 2013. The net loss was primarily due to a decrease of $31.08, or 20.5%, in the average selling price of our metallurgical coal due to excess supply within the global market. Earnings before interest, income taxes, depreciation, depletion and amortization ("EBITDA") for the six months ended June 30, 2014 decreased $52.3 million as compared to the six months ended June 30, 2013, primarily due to a decrease in gross profit combined with an increase in restructuring and asset impairment charges, offset by a decrease in selling, general and administrative costs. A reconciliation of net loss to EBITDA is presented in the following Liquidity and Capital Resources section.

        The $140.6 million decrease in revenues for the six months ended June 30, 2014 as compared with the six months ended June 30, 2013 was primarily due to a $165.4 million reduction to revenue due to a $31.08 per metric ton, or 20.5%, decrease in the average selling price of our metallurgical coal combined with a net $6.7 million decrease in thermal coal sales due primarily to a 138 thousand per metric ton decrease in sales volume, offset partially by an increase in revenue of $15.7 million due to increased metallurgical coal sales volume of 103 thousand metric tons and a $15.8 million increase in revenue within our metallurgical coke and coal bed methane gas operations.

        The $94.9 million decrease in cost of sales, exclusive of depreciation and depletion, for the six months ended June 30, 2014 as compared with the same period in 2013 was primarily the result of a decrease of $90.2 million due to a decrease in metallurgical coal average cash cost of sales, as average cash cost of sales per metric ton of metallurgical coal sold decreased approximately 14.0% from $120.67 in the six months ended June 30, 2013 to $103.72 in the six months ended June 30, 2014, and a decrease of $23.9 million due to a decrease in thermal coal sales volume and decrease in average cash cost of sales. These decreases in cost of sales were offset by a $12.3 million increase in cost of sales due to a 103 thousand metric ton increase in metallurgical coal sales combined with a $10.9 million increase in cost of sales related to the idling of the Canadian operations, of which $6.4 million relates to transportation take or pay charges and $4.5 million relates to idle mine costs.

50

        Consolidated gross margin percentage, calculated as consolidated revenues less consolidated cost of coal sales, exclusive of depreciation and depletion, divided by consolidated revenues, was 12.4% for the six months ended June 30, 2014 compared with 15.5% in the prior year period. Consolidated gross margin percentage for our U.S. Operations and Canadian and U.K. Operations was 20.5% and (20.4)%, respectively, for the six months ended June 30, 2014 compared with 24.1% and (5.9)% in the prior year period.

        The decrease in margins within our U.S. Operations and Canadian and U.K. Operations primarily reflects the short-term deterioration in metallurgical coal market conditions. As a result, we have curtailed, and in some cases idled, higher-cost and lower-quality mines. We will continue to monitor margins within all of our operations and will continue to idle operations that are not economic under current conditions.

        The $18.0 million, or 31.2%, decrease in selling, general and administrative expense for the six months ended June 30, 2014 as compared with the same period of 2013 was primarily attributable to a reduction in proxy challenge cost combined with our cost containment initiatives that we began in 2013.

        The operating results for the six months ended June 30, 2014 include restructuring and asset impairment charges of $31.3 million, which are comprised of an asset impairment charge of $23.0 million to reduce the carrying value of the Blue Creek Coal Terminal assets held for sale to their fair value less costs to sell and restructuring charges of $8.3 million primarily incurred in connection with the idling of the Canadian operations. The results for the six months ended June 30, 2013 include restructuring and asset impairment charges of $1.7 million, which includes asset impairment charges of $8.0 million related to the accelerated closure of the North River mine and $10.7 million of cost related to the curtailment of the Willow Creek mine offset by a gain of $17.0 million due to the release of a below market contract liability that was acquired through the acquisition of North River.

        The $39.9 million increase in interest expense, net for the six months ended June 30, 2014 as compared with the six months ended June 30, 2013 was primarily due to an increase in long-term debt combined with an increase in the effective interest rates on outstanding debt obligations due to the amendments to the 2011 Credit Agreement and the issuance of senior notes.

        The $2.5 million loss on the extinguishment of debt for the six months ended June 30, 2014 includes $13.9 million of accelerated amortization of capitalized debt discount and issuance cost associated with the refinancing of term loan A debt in the first quarter of 2014 and a net gain of $11.4 million recognized upon the extinguishment of $35.0 million of 9.875% Senior Notes due 2020 in exchange for shares of common stock in the second quarter of 2014. The prior year comparable period includes accelerated amortization of $6.0 million associated with the prepayment of term loan A debt.

        The effective tax rate for the six months ended June 30, 2014 was 15.6% compared with 58.0% for the same period in the prior year. The difference between the rates resulted in a $70.8 million decrease in the income tax benefit for the six months ended June 30, 2014 and was primarily due to a full valuation allowance provided against the U.S. net deferred tax assets recorded for U.S. operating losses in the current period. The effective tax rates for both periods also reflects the benefits of the losses 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 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 4.1 million metric tons for the six months ended June 30, 2014, representing an increase of 727 thousand metric tons, or 21.9%, compared with 3.3 million metric tons for the same period in 2013. Our hard coking coal production totaled 4.0 million metric tons in the six months ended June 30, 2014, representing an increase of 4.8% compared to 3.8 million during the same period in the prior year due to increased production from our Alabama underground mines. The average selling price of hard coking coal for the six months ended June 30, 2014 was $120.46 per metric ton, representing a 22.6% decrease from the average selling price of $155.68 per metric ton for the same period in 2013. The decrease in the average selling price of hard coking coal continues to reflect the pricing pressure experienced in the metallurgical coal market due to oversupply. Our average cash cost of sales per metric ton of hard coking coal sold during the six months ended June 30, 2014 was $93.16, representing a decrease of $12.39, or 11.7%, from the $105.55 average cash cost of sales per ton sold during the same period in the prior year.

        Thermal coal sales totaled 524 thousand metric tons for the six months ended June 30, 2014, representing a decrease of approximately 164 thousand metric tons, or 23.8%, compared with 688 thousand metric tons sold during the same period in 2013. Our average selling price of thermal coal for the six months ended June 30, 2014 was $66.97 per metric ton, approximating the $65.91 per metric ton for the same period in 2013. Thermal coal production totaled 295 thousand metric tons for the six months ended June 30, 2014, representing a decrease of approximately 65% compared with 842 thousand metric tons produced during the same period in 2013. This was primarily due to the closure of the Alabama North River mine in the fourth quarter of 2013. The average cash cost of sales per metric ton of thermal coal sold for the six months ended June 30, 2014 was $70.39 per metric ton compared with $91.29 per metric ton for the same period in 2013.

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

	Six months ended June 30,
	2014		2013
Tons of hard coking coal sold(1) (in thousands)		4,053		3,326
Tons of hard coking coal produced (in thousands)		3,990		3,808
Average hard coking coal selling price(1) (per metric ton)	$	120.46	$	155.68
Average hard coking coal cash cost of sales(1) (per metric ton)	$	93.16	$	105.55
Average hard coking coal cash cost of production (per metric ton)	$	66.05	$	72.73
Tons of thermal coal sold (in thousands)		524		688
Tons of thermal coal produced (in thousands)		295		842
Average thermal coal selling price (per metric ton)	$	66.97	$	65.91
Average thermal coal cash cost of sales (per metric ton)	$	70.39	$	91.29
Average thermal coal cash cost of production (per metric ton)	$	55.85	$	69.96

(1)

Includes sales of both produced and purchased coal.

        The $30.9 million decrease in our U.S. Operations segment reported revenues for the six months ended June 30, 2014 compared to the same period in the prior year was primarily attributable to a decrease in revenue of $142.8 million as a result of a $35.22 decline in the average selling price of hard coking coal offset partially by an increase in revenue of $113.3 million due to increased sales volume of hard coking coal.

        The $829 thousand decrease in cost of sales, exclusive of depreciation and depletion, as compared to the six months ended June 30, 2013 is primarily due to a decrease of $76.2 million in the average

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cash cost of sales per ton of hard coking coal and thermal coal sales combined with a decrease in thermal coal sales volume. This decrease is offset by an increase in cost of sales of $76.8 million due to an increase in hard coking coal tons sold. The decrease in per metric ton cash cost of sales was primarily due to increased volume and cost reduction initiatives within the operations. The decrease in metric tons sold and the average cash cost of sales per ton of thermal coal was primarily due to the closure of the Alabama North River mine in the fourth quarter of 2013 and improved mining conditions immediately prior to the mine closure.

        Consolidated metallurgical coal margin per ton, calculated as average consolidated metallurgical coal selling price per ton less average consolidated cost of metallurgical coal sales per ton, was $27.30 and $50.13, respectively, for the six months ended June 30, 2014 and 2013. While margins within our U.S. Operations have decreased in the short-term, we believe global metallurgical coal demand will continue to grow modestly with global steel production in the long-term. At current prices, we believe a significant portion of global metallurgical coal production is uneconomic and, if the current prices were to continue, additional idling would be expected. We will continue to monitor the margins within our U.S. Operations and will idle operations that are not economic under current market conditions.

        The current year period includes restructuring and asset impairment charges of $23.7 million, which is comprised of an asset impairment charge of $23.0 million to reduce the carrying value of the Blue Creek Coal Terminal assets held for sale to their fair value less costs to sell and restructuring charges of $0.7 million. The restructuring and asset impairment benefit of $8.9 million in the prior year is attributable to a gain of approximately $17.0 million due to the release of a below market contract liability that was obtained through the acquisition of North River offset by impairment charges of approximately $8.0 million related to the accelerated closure of the North River mine.

        Our U.S. Operations segment reported an operating loss of $24.5 million for the six months ended June 30, 2014, compared to operating income of $30.4 million in the same period in 2013. The decrease in operating income was primarily due to an increase of $32.7 million in restructuring and asset impairment charges combined with a decrease in revenue due to a decline in the selling prices of our coal.

Canadian and U.K. Operations

        Metallurgical coal sales for the six months ended June 30, 2014 consisted of 593 thousand metric tons of hard coking coal at an average selling price of $126.89 per metric ton and 674 thousand metric tons of low-volatile PCI coal at an average selling price of $113.12 per metric ton. Metallurgical coal sales for the six months ended June 30, 2013 consisted of 1.0 million metric tons of hard coking coal at an average selling price of $149.29 per metric ton and 884 thousand metric tons of low-volatile PCI coal at an average selling price of $137.29 per metric ton. 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 six months ended June 30, 2014 was $138.44, representing a decrease of $13.01 from the average cash cost of sales per ton of hard coking coal sold for the six months ended June 30, 2013 of $151.45. The average cash cost of sales per metric ton of low-volatile PCI coal sold during the six months ended June 30, 2014 was $135.47, representing a 4.9% decrease from the average cash cost of sales per metric ton of low-volatile PCI coal sold in the six months ended June 30, 2013 of $142.49. The decreases in average cash cost of sales per ton primarily reflect the company-wide improvement in cost performance.

        Our Canadian and U.K. Operations segment produced a total of 563 thousand metric tons of hard coking coal and 1.0 million metric tons of low-volatile PCI coal in the six months ended June 30, 2014. During the same period in 2013, the segment produced 946 thousand metric tons of hard coking coal and 951 thousand metric tons of low-volatile PCI coal. The decrease in hard coking coal production is

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primarily due to the idling of the Wolverine mine in April 2014 and the curtailment of production at the Willow Creek mine in the first half of 2013.

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

	Six months ended June 30,
	2014		2013
Tons of metallurgical coal sold (in thousands)		1,267		1,891
Tons of metallurgical coal produced (in thousands)		1,578		1,898
Average metallurgical coal selling price (per metric ton)	$	119.57	$	143.68
Average metallurgical coal cash cost of sales (per metric ton)	$	137.49	$	147.26
Average metallurgical coal cash cost of production (per metric ton)	$	82.07	$	106.41
Tons of hard coking coal sold (in thousands)		593		1,007
Tons of hard coking coal produced (in thousands)		563		946
Average hard coking coal selling price (per metric ton)	$	126.89	$	149.29
Average hard coking coal cash cost of sales (per metric ton)	$	138.44	$	151.45
Average hard coking coal cash cost of production (per metric ton)	$	92.08	$	115.92
Tons of low-volatile PCI coal sold (in thousands)		674		884
Tons of low-volatile PCI coal produced (in thousands)		1,015		951
Average low-volatile PCI coal selling price (per metric ton)	$	113.12	$	137.29
Average low-volatile PCI coal cash cost of sales (per metric ton)	$	135.47	$	142.49
Average low-volatile PCI coal cash cost of production (per metric ton)	$	76.03	$	96.94

        The $110.7 million decrease in segment reported revenues for the six months ended June 30, 2014 compared to the same period in the prior year was attributable to a decrease in revenues of $90.6 million due to a decrease of 414 thousand and 210 thousand tons sold of hard coking and low-volatile PCI coal, respectively, with the remainder of the decrease due to a 15.0% and 17.6% decrease in the average selling price of hard coking coal and low-volatile PCI coal, respectively.

        The $94.1 million decrease in cost of sales, exclusive of depreciation and depletion, for the six months ended June 30, 2014 compared to the same period in 2013 was primarily due to a decrease of $92.5 million due to a decrease in hard coking and low-volatile PCI coal tons sold, combined with a decrease of approximately $12.5 million due to a decrease in the average cash cost of sales per ton of hard coking coal and low-volatile PCI sold as a result of continued improvement in cost performance. These decreases to cost of sales were offset by a $10.9 million increase in cost of sales due to the idling of the Canadian operations, of which $6.4 million relates to transportation take or pay charges related to port shortfall commitments and $4.5 million relates to idle mine costs. The shortfall is the proportionate share of the total estimated shortfall penalty for the year allocated to the tons shipped in the six months ended June 30, 2014.

        Consolidated metallurgical coal margin per ton, calculated as average consolidated metallurgical coal selling price per ton less average consolidated cost of metallurgical coal sales per ton, was $(17.92) and $(3.58), respectively, for the six months ended June 30, 2014 and 2013. Our margins within our Canadian and U.K. Operations remain under pressure. As a result, we have responded to the deterioration in market conditions by idling the Canadian operations. We believe the long-term demand for metallurgical and low-volatile PCI coal within our Canadian and U.K. Operations to be strong as industry projections indicate that global steel making will continue to require increasing amounts of high quality metallurgical coal.

        The current year period includes restructuring and asset impairment charges of $7.1 million incurred in connection with the idling of the Canadian operations in the current quarter. The restructuring and asset impairment charge of $10.6 million in the prior year is attributable to charges incurred in connection with the curtailment of operations at our Willow Creek mine.

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        Our Canadian and U.K. Operations segment reported an operating loss of $119.0 million for the six months ended June 30, 2014 as compared to an operating loss of $115.1 million in the prior year period. The increase in the operating loss is due to a decrease in hard coking and low-volatile PCI coal sold combined with a decrease in the average selling prices as a result of excess supply within the global metallurgical coal market offset partially by reduced average cash cost per ton driven by continued improvement in cost performance.

FINANCIAL CONDITION

        Cash and cash equivalents increased by $32.7 million at June 30, 2014 compared with December 31, 2013, primarily due to net cash flows provided by financing activities of $116.1 million as a result of the issuance in the first quarter of 2014 of $200.0 million in principal amount of 9.50% Add-on Senior Secured Notes due 2019 and $350.0 million in principal amount of 11.0%/12.0% Senior Secured Second Lien PIK Toggle Notes due 2020. The majority of the proceeds received from the issuance of these notes was used to prepay the remaining $406.6 million of term loan A and debt issuance costs of $21.3 million. Cash flows provided by financing activities were partially offset by cash flows used in investing activities of $43.8 million, primarily for capital expenditures, and cash flows used in operating activities of $39.0 million.

        Net receivables were $231.0 million at June 30, 2014, representing a decrease of $50.7 million from December 31, 2013 primarily due to a decrease in revenues as a result of a decline in metallurgical coal prices and the timing of metallurgical coal sales during June 2014 as compared with December 2013.

        Net property, plant and equipment decreased by $90.3 million at June 30, 2014 as compared with December 31, 2013 primarily due to an increase in accumulated depreciation of $115.4 million and the reclassification of Blue Creek Coal Terminal assets of $47.2 million to assets held for sale, offset partially by accrual based capital expenditures of $62.7 million and the impact of foreign currency exchange of $4.2 million.

LIQUIDITY AND CAPITAL RESOURCES

Overview

        Our principal sources of short-term funding are our existing cash balances, operating cash flows and the unused portion of our revolving credit facility. Our principal sources of long-term funding are our term loan B entered into on April 1, 2011 and the proceeds received from our senior notes issued in 2012, 2013 and 2014, as discussed below. Our available liquidity as of June 30, 2014 was $563.9 million, consisting of cash and cash equivalents of $293.5 million and $270.4 million available under the Company's $313.8 million revolving credit facility, net of outstanding letters of credit of $43.4 million. In recent quarters, we have entered into the financing transactions and amendments discussed below which have enhanced liquidity, secured covenant relief and extended our debt maturities.

        As of June 30, 2014, the Revolver and term loan B interest rates were tied to LIBOR or CDOR, plus a credit spread ranging from 550 basis points for the Revolver and 625 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 2016 Revolver is 0.50% and on the 2017 Revolver is 0.625%. As of June 30, 2014, there were no borrowings outstanding under the Revolver, with $61.0 million available under the Company's $69.0 million 2016 Revolver, net of outstanding letters of credit of $8.0 million, and $209.4 million available under the Company's $244.8 million 2017 Revolver, net of outstanding letters of credit of $35.4 million, for a total availability of $270.4 million. All borrowings under the Revolver must be made pro-rata between the 2016 Revolver and 2017 Revolver through the maturity of the 2016 Revolver.

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        Borrowings at June 30, 2014 under the amended 2011 Credit Agreement consisted of a term loan B debt balance of $978.2 million with a weighted average interest rate of 7.25% and no borrowings under the Revolver, with $43.4 million in outstanding stand-by letters of credit.

        Based on current forecasts and anticipated market conditions, we believe that funding provided by operating cash flows and available sources of liquidity are sufficient to meet substantially all of our operating needs, to make planned capital expenditures, and all required interest and principal payments on indebtedness for the foreseeable future. Our operating cash flows and liquidity, however, are significantly influenced by numerous factors including prices of coal, coal production levels, mining conditions, costs of raw materials, interest rates and the general economy.

Credit Agreement Amendments

        On March 18, 2014, the Company entered into an amendment (the "Sixth Amendment") to the 2011 Credit Agreement (as amended, the "Credit Agreement") which, among other things, (i) permits the Company to repay the term loan A under its Credit Agreement without making a pro-rata repayment to the term loan B, (ii) extends the maturity of 81.6% of its revolving commitments (the "2017 Revolver") to October 2017, with such extending lenders having their revolving commitments reduced by 20%, (iii) provides for amendments to certain incurrence covenants to provide additional flexibility, (iv) eliminates the liquidity and fixed charge coverage maintenance covenants, (v) modifies the secured leverage ratio covenant, including to make it apply only to the commitments of the extending revolving lenders and (vi) provides for a 0.50% increase in the interest rate payable on the term loan B under the Credit Agreement. The Sixth Amendment also suspended the senior secured leverage ratio covenant until the aggregate amount outstanding under the Revolver exceeds 30%, or $94.1 million, of the total revolving commitment of $313.8 million, and became effective upon consummation of the offerings of the Add-on 2019 Notes (as defined below) and the Second Lien Notes (as defined below), the repayment in full of the term loan A and other customary conditions.

        On July 7, 2014, the Company entered into an amendment (the "Seventh Amendment") to the 2011 Credit Agreement dated as of April 1, 2011 (as amended, the "Credit Agreement"), which, among other things, modified the financial maintenance ratio to be unlimited for the quarter ended June 30, 2014 so long as the Company issued at least $275.0 million of additional first lien notes within seven days (or such longer period during the fiscal quarter ending September 30, 2014 as may be determined by the administrative agent of the Credit Agreement) of the effective date of the Seventh Amendment. On July 14, 2014, concurrently with the closing of the issuance of $320.0 million aggregate principal amount of 9.50% Senior Secured Notes (the "New First Lien Notes"), the financial maintenance ratio for the second quarter of 2014 became unlimited.

        On July 8, 2014, the Company entered into an amendment (the "Eighth Amendment") to the Credit Agreement, which, among other things, provided the Company with an additional tranche of revolving loan commitments (the "New Revolving Credit Facility Tranche") in the amount of $61.2 million, thereby increasing the total available commitments under the revolving credit facility in the Credit Agreement to $375.0 million. The New Revolving Credit Facility Tranche would have matured in 2017. Effectiveness of the Eighth Amendment was conditioned upon the Company pricing a bond offering in an aggregate principal amount of no less than $275.0 million and certain other conditions, including making arrangements so that, immediately after giving effect to the funding of any loans under the New Revolving Credit Facility Tranche, proceeds of such bond issuance are applied to repay certain revolving loans and permanently terminate certain revolving commitments (including the New Revolving Credit Facility Tranche), required under the Credit Agreement. The Eighth Amendment also reduced the amount available under the 2016 revolver from $69.0 million to $16.9 million and reduced the amount available under the 2017 revolver from $244.8 million to $60.0 million for total availability of $76.9 million. On July 14, 2014, concurrently with the closing of the issuance of the New

56

First Lien Notes, the Eighth Amendment became effective and the New Revolving Credit Facility Tranche was terminated.

9.50% Add-on Senior Secured Notes due 2019

        On March 27, 2014, the Company issued $200.0 million aggregate principal amount of 9.50% Senior Secured Notes due October 15, 2019 (the "Add-on 2019 Notes"). These notes are an addition to the $450.0 million aggregate principal amount of the Company's 9.50% Senior Secured Notes due 2019 (collectively the "First Lien Notes") which were issued on September 27, 2013 for a total principal amount of $650.0 million. The Add-on 2019 Notes are unconditionally guaranteed, jointly and severally, by each of our current and future 100% owned domestic restricted subsidiaries that from time to time guarantee any of our indebtedness or any indebtedness of any of our restricted subsidiaries. The Add-on 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 Add-on 2019 Notes is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2014.

11.0%/12.0% Senior Secured Second Lien PIK Toggle Notes due 2020

        On March 27, 2014, the Company also issued $350.0 million aggregate principal amount of 11.0%/12.0% Senior Secured Second Lien Payment-in-Kind ("PIK") Toggle Notes due April 1, 2020 (the "Second Lien Notes"). These notes are unconditionally guaranteed, jointly and severally, by each of our current and future 100% owned domestic restricted subsidiaries that from time to time guarantee any of our indebtedness or any indebtedness of any of our restricted subsidiaries. The Second Lien Notes and the guarantees are secured on a second priority basis, equally and ratably with all future second lien obligations, on substantially all of the Company's and the guarantors property and assets, which also secure the Company's 2011 Credit Agreement and First Lien Notes on a first priority basis. Interest on these notes is payable on April 1 and October 1 of each year, commencing on October 1, 2014.

        The Company may elect to pay interest on the Second Lien Notes (1) entirely in cash, at a rate of 11.0% per annum, or (2) with a combination of (i) 50% cash and 50% by increasing the principal amount of the outstanding Second Lien Notes or issuing additional Second Lien Notes ("PIK Interest") or (ii) 75% cash and 25% PIK Interest. Interest on PIK Interest accrues on the Second Lien Notes at a rate equal of 12.0% per annum. The Company will pay the first and last interest payments entirely in cash.

        At any time prior to April 1, 2017, the Company may redeem up to 35% of the aggregate principal amount of the Second Lien Notes with the net cash proceeds of certain equity offerings, at a redemption price of 111.0% of the aggregate principal amount. The Company may redeem the Second Lien Notes, in whole or in part, prior to April 1, 2017 at a redemption price equal to 100% of the aggregate principal amount of the Second Lien Notes plus a "make-whole" premium of 1.625% and accrued and unpaid interest. The Company may redeem the Second Lien Notes, in whole or in part at redemption prices equal to 105.5% for the year commencing April 1, 2017, 102.75% for the year commencing April 1, 2018 and 100% beginning on April 1, 2019. Upon the occurrence of a change of control, unless the Company has exercised its right to redeem the Second Lien Notes, the Company will be required to offer to repurchase each holder's Second Lien Notes at a price equal to 101% of the aggregate principal amount.

Use of Proceeds from Notes Offerings

        The Company utilized the net proceeds of the Add-on 2019 Notes and Second Lien Notes to repay in full its term loan A debt, increase its liquidity and pay related fees and expenses. As the term loan A

57

debt was extinguished, the unamortized debt issuance costs of $6.7 million and the unamortized debt discount of $7.2 million were expensed and are included in gain (loss) on extinguishment of debt in the Condensed Consolidated Statements of Operations.

New First Lien Notes

        On July 14, 2014, the Company issued the New First Lien Notes. The New First Lien Notes are an addition to the $450.0 million aggregate principal amount of the Company's 9.50% Senior Secured Notes due 2019 that were issued on September 27, 2013 and the $200.0 million aggregate principal amount of 9.50% Senior Secured Notes due 2019 (the "9.50% Add-On Senior Secured Notes") that were issued on March 27, 2014 (collectively, the "First Lien Notes"). The First Lien Notes will mature on October 15, 2019, and interest is payable on April 15 and October 15 of each year. The next interest payment date for the First Lien Notes is October 15, 2014.

        The First Lien Notes are unconditionally guaranteed, jointly and severally, by the Guarantors. The First Lien Notes and the guarantees are secured on a first priority basis, equally and ratably with the Company's Credit Agreement and any future pari passu secured obligations (subject to permitted liens) on substantially all of the Company's and the Guarantor's property and assets, which also secure the Company's 11.0%/12.0% Senior Secured PIK Toggle Notes due 2020 (the "Second Lien Notes") on a second priority basis.

        At any time prior to October 15, 2016, the Company may redeem up to 35% of the aggregate principal amount of the First Lien Notes with the net cash proceeds from certain equity offerings, at a redemption price of 109.50% of the aggregate principal amount. The Company may redeem the First Lien 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 First Lien Notes plus a "make-whole" premium. The Company may redeem the First Lien Notes, in whole or in part at redemption prices equal to 107.125% for the year commencing October 15, 2016, 102.375% for the year 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 First Lien Notes, the Company will be required to offer to repurchase each holder's First Lien Notes at a price equal to 101% of the aggregate principal amount.

        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.

Statements of Cash Flows

        Cash balances were $293.5 million and $260.8 million at June 30, 2014 and December 31, 2013, respectively. The increase in cash during the six months ended June 30, 2014 of $32.7 million primarily resulted from net cash provided by financing activities of $116.1 million due to the issuance of senior notes in the first quarter of 2014. This was partially offset by cash used in investing activities of $43.8 million, which included cash capital expenditures of $43.5 million, and cash used in operating activities of $39.0 million. The following table sets forth, for the periods indicated, selected consolidated cash flow information (in thousands):

	Six months ended June 30,
	2014			2013
Cash flows used in operating activities	$	(39,008	)	$	(24,102	)
Cash flows used in investing activities		(43,826	)		(79,287	)
Cash flows provided by financing activities		116,076			159,482
Effect of foreign exchange rates on cash		(588	)		(1,816	)
Net increase in cash and cash equivalents	$	32,654		$	54,277

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        The increase of $14.9 million in cash used in operating activities was primarily attributable to an increase in cash used in operations of $98.8 million, resulting primarily from the decline in the average selling price of metallurgical coal, partially offset by an increase in cash flows provided by working capital of $83.9 million.

        The decrease in cash flows used in investing activities of $35.5 million was primarily attributable to a $36.8 million decrease in capital expenditures.

        The decrease in cash flows provided by financing activities of $43.4 million was primarily attributable to an increase in retirement of debt of $154.9 million partially offset by an increase in proceeds from the issuance of debt of $103.0 million and a decrease in dividends paid of $14.4 million.

EBITDA

        EBITDA is defined as earnings before interest, income taxes, and depreciation and depletion expense. Adjusted EBITDA is defined as EBITDA further adjusted to exclude restructuring and asset impairment charges, gain (loss) on interest rate swap hedge ineffectiveness, gain (loss) on extinguishment of debt, Canada transportation take or pay charges and other items including proxy contest expenses and foreign currency adjustments. Consolidated EBITDA 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, 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, 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, Adjusted EBITDA, and Consolidated EBITDA are useful measures as some investors and analysts use 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, Adjusted EBITDA, and Consolidated EBITDA present a useful measure of our ability to incur and service debt based on ongoing 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 net loss to EBITDA, Adjusted EBITDA, and Consolidated EBITDA (in thousands):

	For the three months ended June 30,						For the six months ended June 30,
	2014			2013			2014			2013
Net loss	$	(151,391	)	$	(34,492	)	$	(243,569	)	$	(83,936	)
Interest expense, net		73,402			52,985			138,834			98,952
Income tax benefit		(9,075	)		(49,760	)		(45,036	)		(115,799	)
Depreciation and depletion expense		69,816			68,320			146,240			149,510
Earnings before interest, income taxes, and depreciation and depletion (EBITDA)		(17,248	)		37,053			(3,531	)		48,727
Restructuring and asset impairments		31,342			(5,741	)		31,342			1,699
Gain (loss) on extinguishment of debt		(11,397	)		—			2,492			6,001
Canada transportation take or pay charges		6,394			—			6,394			—
Other items, including proxy contest expenses and foreign currency adjustments		3,480			5,429			404			12,267
(Gain) loss on interest rate swap hedge ineffectiveness		(978	)		—			723			—
Adjusted EBITDA		11,593			36,741			37,824			68,694
Non-cash charges(1)		8,861			11,632			18,940			17,212
Other adjustments(1)		(1,987	)		4,729			1,418			15,455
Consolidated EBITDA(1)	$	18,467		$	53,102		$	58,182		$	101,361

(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 June 30, 2014. A breach of the covenants in the amended 2011 Credit Agreement or the indentures governing our notes; including the applicable financial covenants under the amended 2011 Credit Agreement that measure ratios based on Consolidated EBITDA, as defined under the 2011 Credit Agreement, 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 levels and specified covenant levels set forth in our amended 2011 Credit Agreement for the six months ended June 30, 2014 were:

	Actual Levels		Covenant Levels
Capital Expenditures Covenant(1)	$	62.4 million	$	220.0 million
Maximum total senior secured debt less unrestricted cash to Consolidated EBITDA Ratio		N/A		N/A	(2)

(1)

The Sixth Amendment to the 2011 Credit Agreement contains a capital expenditure covenant limiting capital expenditures to $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. As 2013 capital expenditures were $136.7 million compared to the 2013 covenant limit of $175.0 million, the 2014 covenant limit is now $220.0 million. The Company expects 2014 capital expenditures to be approximately $120.0 million.

(2)

The Sixth Amendment to the 2011 Credit Agreement suspended the senior secured leverage ratio covenant until the aggregate amount outstanding under the Revolver excluding outstanding letters of credit exceeds 30%, or $94.1 million, of the total revolving commitment of $313.8 million. On July 14, 2014, the Seventh Amendment to the 2011 Credit Agreement suspended the senior secured leverage ratio covenant for the quarter ended June 30, 2014 and the Eighth Amendment to the 2011 Credit Agreement reduced the total revolving commitment from $313.8 million to $76.9 million. The senior secured leverage ratio covenant remains suspended until the aggregate amount outstanding under the Revolver excluding letters of credit exceeds 30%, or $23.1 million, of the total revolving commitment of $76.9 million. The required maximum senior secured leverage ratio covenant shall be the following for each period of four consecutive fiscal quarters then ending: 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.

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.

Interest Rate Risk

        We have exposure to changes in interest rates under the 2011 Credit Agreement through our term loan B and Revolver loans. As of June 30, 2014, the interest rates for the term loan B and revolver loans were tied to LIBOR or the Canadian Dealer Offered Rate ("CDOR"), plus a credit spread of 550 basis points for the revolver and 625 basis points on the term loan B adjusted quarterly based on our total leverage ratio as defined by the 2011 Credit Agreement. As of June 30, 2014, our borrowings due under the 2011 Credit Agreement totaled $978.2 million. As of June 30, 2014, a 100 basis point increase in interest rates would increase our quarterly interest expense by approximately $2.9 million, while a 100 basis point decrease in interest rates would have no impact on our quarterly interest expense due to a minimum LIBOR floor of 1.0%.

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Commodity Risks

        We are exposed to commodity price risk on sales of natural gas. Our natural gas business sold 12.1 billion cubic feet of gas during the year ended December 31, 2013. We occasionally utilize derivative commodity instruments to manage the exposure to changing natural gas price. Such derivative instruments are structured as cash flow hedges and not for trading. These swap contracts effectively convert a portion of forecasted sales at floating-rate natural gas prices to a fixed-rate basis. No derivative instruments were entered into during the second quarter of 2014 and as of June 30, 2014, none were outstanding.

Foreign Currency Risks

        We are exposed to the effects of changes in exchange rates primarily from the Canadian dollar and the British pound in regions for which we operate but also have competitive exposure in other regions where our competitors maintain operations, such as Australia. We historically have not entered into any foreign exchange contracts to mitigate this type of risk.

ITEM 4.    CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

        We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of June 30, 2014 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.

Changes in Internal Control Over Financial Reporting

        There has been no change in our internal control over financial reporting as such term is defined in Rule 13a-15(f) of the Exchange Act, during the three months ended June 30, 2014 that would materially affect, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.    Legal Proceedings

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

        We and our subsidiaries are parties to a number of other lawsuits arising in the ordinary course of our businesses. 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, 2013, 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, and except to supplement and update the risk factor set forth below, 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, 2013. The risks described in this Quarterly Report on Form 10-Q and 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.

Our ability to generate the significant amount of cash needed to service our debt and financial obligations, to refinance all or a portion of our indebtedness or obtain additional financing depends on many factors beyond our control.

        Our ability to make payments on and to refinance our indebtedness depends on our ability to generate cash in the future. We are subject to general economic, climatic, industry, financial, competitive, legislative, regulatory and other factors that are beyond our control. In particular, economic conditions have caused the price of coal to fall and our revenue to decline and in the future could cause the price of coal to remain at current levels or fall, which may have an adverse effect on our operations, liquidity, ability to remain in compliance with our covenants in our Credit Agreement, and our ability to service our indebtedness. As a result, we may need to refinance all or a portion of our indebtedness on or before maturity. Our ability to refinance our debt or obtain additional financing will depend on, among other things:

•

our financial condition at the time;

•

restrictions in the agreements governing our indebtedness; and

•

other factors, including conditions in the financial and capital markets or coal industry.

        If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or

63

restructure or refinance our indebtedness. We may not be able to affect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The Credit Agreement and the indentures governing the Notes restrict our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise capital from debt or equity financings to repay other indebtedness when it becomes due. Additionally, we may not be able to consummate such dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations when due.

        In addition, we conduct a substantial portion of our operations through our subsidiaries. Accordingly, repayment of our indebtedness is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us by dividend, debt repayment or otherwise. Unless they are guarantors of the Notes or other indebtedness, our subsidiaries do not have any obligation to pay amounts due to our indebtedness or to make funds available for that purpose. Our subsidiaries may not be able to or be permitted to make distributions to enable us to make payments in respect to our indebtedness. Each subsidiary is a distinct legal entity and under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. While the Credit Agreement and the indentures governing the Notes limit the ability of our subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to us, these limitations are subject to qualifications and exceptions. In the event that we do not receive distributions from our subsidiaries we may be unable to make required principal and interest payments on our indebtedness.

        We may not be able to refinance any of our indebtedness on commercially reasonable terms or at all. If our operations do not generate sufficient cash flows, and additional borrowings or refinancing are not available to us, we may not have sufficient cash to enable us to meet all of our obligations.

        If we cannot make scheduled payments on our debt or are not in compliance with our covenants and are not able to amend those covenants, we will be in default and holders of the Notes could declare all outstanding principal and interest to be due and payable, the lenders under the Credit Agreement could terminate their commitments to loan money, the lenders could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation. If we are not able to generate sufficient cash flow from operations, we may need to seek an amendment to our Credit Agreement to prevent us from potentially being in breach of our covenants.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

Purchase of Equity Securities by Us and Affiliated Purchasers

        The following table provides a summary of all repurchases by Walter Energy of its common stock during the three-month period ended June 30, 2014:

Period	Total Number of Shares Purchased(1)		Average Price Paid per Share
April 1, 2014 - April 30, 2014		16,474	$	7.65
May 1, 2014 - May 31, 2014		—	$	—
June 1, 2014 - June 30, 2014		—	$	—
		16,474

(1)

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

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Item 4.    Mine Safety Disclosures

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

Item 6.    Exhibits

Exhibit Number
	3.1		Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K (File No. 001-13711), filed on April 28, 2009)
	3.2		Amended and Restated By-Laws (Incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K (File No. 001-13711), filed on February 23, 2012)
	4.1		Indenture, dated as of September 27, 2013, by and among Walter Energy, Inc., the subsidiary guarantors named therein and Wilmington Trust, National Association (as successor to Union Bank, N.A.), as trustee and collateral agent (Incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K (File No. 001-13711) filed on September 30, 2013)
	4.1.1		Form of 9.500% Senior Secured Note due 2019 (Incorporated by reference to Exhibit 4.2 of the Company'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, by and among Walter Energy, Inc., certain subsidiaries of Walter Energy, Inc. and Wilmington Trust, National Association (as successor to Union Bank, N.A.), as collateral agent (Incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K (File No. 001-13711) filed on September 30, 2013)
	10.2		Seventh Amendment, dated as of July 7, 2014, to Credit Agreement, 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 11, 2014)
	10.3		Eighth Amendment, dated as of July 8, 2014, to Credit Agreement, 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 11, 2014)
	10.4	†	Walter Energy, Inc. 2014 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K (File No. 001-13711), filed on April 28, 2014)
	10.5	*†	Form of Restricted Stock Unit Agreement under 2014 Long-Term Incentive Plan (50% vesting on second and third anniversaries of grant date)
	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

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Exhibit Number
	32.1	*	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350—Chief Executive Officer
	32.2	*	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350—Chief Financial Officer
	95	*	Mine Safety Disclosures Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 299.104)
	101	*	XBRL (Extensible Business Reporting Language)—The following materials from Walter Energy, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014, 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.

†

Denotes management contract or compensatory plan or arrangement.

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SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

WALTER ENERGY, INC.

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

Date: August 6, 2014

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

Date: August 6, 2014

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EX-10.5

Exhibit 10.5

WALTER ENERGY, INC.

2014 LONG-TERM INCENTIVE PLAN

RESTRICTED STOCK UNIT AGREEMENT

(50% vesting on 2nd and 3rd anniversaries of Date of Grant)

THIS AGREEMENT (the “Agreement”), is made effective as of                          (the “Date of Grant”), between Walter Energy, Inc., a Delaware corporation, or any successor thereto (the “Company”) and                            (the “Participant”).

R E C I T A L S:

WHEREAS, the Company has adopted the Plan (as defined below), the terms of which are incorporated herein by reference and made a part of this Agreement; and

WHEREAS, the Committee (as defined below) has determined that it would be in the best interests of the Company and its stockholders to grant the Restricted Stock Units (as defined in the Plan) provided for herein to the Participant pursuant to the Plan and the terms set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

1.Definitions.  Whenever the following terms are used in this Agreement, they shall have the meanings set forth below.  Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan.

(a)Cash Value: The term “Cash Value” shall have the meaning set forth in Section 4 of this Agreement.

(b)CIC Per Share Price: The term “CIC Per Share Price” shall mean the price per Share paid for one Share in the Change in Control transaction (with the value of any security that is paid as consideration in the Change in Control determined by the Committee as of the date of such Change in Control).

(c)DD Termination Fraction: The term “DD Termination Fraction” shall mean (x) for any applicable Termination occurring prior to the First Vesting Date, a fraction the numerator of which equals the number of days that have elapsed from the Date of Grant through the Termination Date, and the denominator of which equals 1095; and (y) for any applicable Termination occurring after the First Vesting Date but prior to the Second Vesting Date, a fraction the numerator of which equals the number of days that have elapsed from the First Vesting Date through the Termination Date, and the denominator of which equals 365.

(d)Employment: The term “Employment” shall mean the Participant’s employment as an employee of the Company or any of its Affiliates or Subsidiaries.

(e)First Vesting Date: The term “First Vesting Date” shall have the meaning set forth in Section 3 of this Agreement.

(f)Immediate Family Members: The term “Immediate Family Members” shall have the meaning set forth in Section 10(b) of this Agreement.

(g)Plan: The term “Plan” shall mean the Walter Energy, Inc. 2014 Long-Term Incentive Plan, as amended from time to time.

(h)Protected Information.  The term “Protected Information” shall mean trade secrets, confidential and proprietary business information of the Company and its Subsidiaries, and any other information of the Company and its Subsidiaries, including, but not limited to, customer lists (including potential customers), sources of supply, processes, plans, materials, pricing information, internal memoranda, marketing plans, internal policies, and products and services which may be developed from time to time by the Company and its Subsidiaries and their respective agents or employees, including the Participant; provided, however, that information that is in the public domain (other than as a result of a breach of this Agreement), approved for release by the Company or a Subsidiary or lawfully obtained from third parties who are not bound by a confidentiality agreement with the Company or such Subsidiary, is not Protected Information.

(i)Second Vesting Date: The term “Second Vesting Date” shall have the meaning set forth in Section 3 of this Agreement.

(j)Share: The term “Share” shall mean a share of Common Stock, subject to adjustment as set forth in the Plan.

(k)RSUs: The term “RSUs” shall have the meaning set forth in Section 2 of this Agreement.

(l)Termination Date: The term “Termination Date” shall mean the date upon which the Participant incurs a Termination for any reason.

(m)WC Termination Fraction: The term “WC Termination Fraction” shall mean a fraction determined as follows, based on the applicable Termination Date:

Termination Date	WC Termination Fraction
Prior to first anniversary of the Date of Grant	¼
On or after first anniversary of the Date of Grant but prior to the First Vesting Date	½
On or after First Vesting Date but prior to the Second Vesting Date	1

2.Grant of Restricted Stock Units.  Subject to the terms and conditions of the Plan and the additional terms and conditions set forth in this Agreement, the Company hereby grants to the Participant the number of Restricted Stock Units set forth on the signature page attached hereto (the “RSUs”) (with each RSU representing an unfunded, unsecured right to receive

2

one Share subject to Section 4 hereof), subject to adjustment as set forth in the Plan; provided, however, that such grant shall be forfeited in the event the Participant does not execute this Agreement within the time period specified by the Company.  The RSUs shall vest and settle in accordance with Sections 3, 5 and 6 hereof, subject to Section 4 hereof.

3.Vesting.  Provided that the Participant has not undergone a Termination prior to the applicable vesting date, fifty percent (50%) of the RSUs shall vest on the second anniversary of the Date of Grant (such date, the “First Vesting Date”) and the remaining fifty percent (50%) of the RSUs shall vest on the third anniversary of the Date of Grant (such date, the “Second Vesting Date”); provided, that if the RSUs are not evenly devisable by two, then no fractional units shall vest and the installments shall be as equal as possible with the smaller installment vesting first.

4.Change in Control.  Upon any Change in Control that occurs prior to the Participant’s Termination, from and after any such Change in Control, each RSU shall instead represent an unfunded, unsecured right to receive a cash payment equal to the CIC Per Share Price (the “Cash Value”), payable in accordance with Section 6 hereof.

5.Termination of Employment.

(a)General.  If the Participant incurs a Termination for any reason, including, without limitation, retirement, except as set forth in Section 5(b) and (c) below, (x) the RSUs shall, to the extent not then vested or previously forfeited, immediately be forfeited without any further action by the Company or the Participant, and without any payment of consideration therefor and (y) any and all rights the Participant has to receive the Cash Value shall cease as of the Termination Date.

(b)Death or Disability.  If the Participant incurs a Termination due to death or Disability, a number of RSUs shall vest, as of such Termination Date, equal to the number of unvested RSUs as of such Termination Date multiplied by the applicable DD Termination Fraction.

(c)Termination without Cause.  If the Participant incurs a Termination by the Company or any of its Subsidiaries without Cause (other than due to death or Disability), a number of RSUs shall vest, as of such Termination Date, equal to the number of unvested RSUs as of such Termination Date multiplied by the applicable WC Termination Fraction.

6.Settlement of RSUs.

(a)RSUs that have vested on or prior to the First Vesting Date shall be settled by the Company on or as soon as practicable (and in no event more than thirty (30) days) following the First Vesting Date by delivery to the Participant of one Share for each vested RSU or, if such settlement occurs following a Change in Control, by payment to the Participant of the Cash Value of such RSU.

(b)RSUs that have vested following the First Vesting Date shall be settled by the Company on or as soon as practicable (and in no event more than thirty (30) days) following the Second Vesting Date by delivery to the Participant of one Share for each vested RSU or, if such

3

settlement occurs following a Change in Control, by payment to the Participant of the Cash Value of such RSU.

(c)Following delivery of Shares, or payment of the Cash Value, as applicable, in settlement of an RSU, the Participant shall have no further rights with respect to such RSU.

7.Restrictive Covenants.

(a)The Participant acknowledges and recognizes the highly competitive nature of the business of the Company and its Subsidiaries and accordingly agrees as follows:

(i)  Confidentiality. The Company has advised the Participant and the Participant acknowledges that it is the policy of the Company and its Subsidiaries to maintain as secret and confidential all Protected Information, and that Protected Information has been and will be developed at substantial cost and effort to the Company and its Subsidiaries. All Protected Information shall remain confidential permanently and the Participant shall not at any time, directly or indirectly, divulge, furnish, or make accessible to any Person (otherwise than as may be required in the regular course of the Participant’s Employment), nor use in any manner, either during the term of Employment or after termination, at any time, for any reason, any Protected Information, or cause any such information of the Company or any of its Subsidiaries to enter the public domain;

(ii)  Non-Solicitation.  During the term of Employment and for a period of twelve (12) months after the Participant’s Employment terminates for any reason, the Participant shall not (i) employ or retain or solicit for employment or arrange to have any other Person employ or retain or solicit for employment or otherwise participate in the employment or retention of any Person who is an employee of the Company or any of its Subsidiaries or (ii) call upon, solicit, write, direct, divert, influence or accept business (either direct or indirectly) with respect to any account or customer or prospective customer of the Company or any entity controlling, controlled by, under common control with or otherwise related to the Company or any of its affiliated entities; and

(iii)  Non-Disparagement.  At all times, the Participant agrees not to disparage the Company or any of its Subsidiaries or employees or otherwise make comments harmful to the Company’s reputation.

(b)Injunctive Relief.  The Participant acknowledges and agrees that a violation of any of the terms of this Agreement will cause the Company irreparable injury for which adequate remedy at law is not available.  Accordingly, it is agreed that the Company or any of its Subsidiaries shall be entitled to an injunction, restraining order or other equitable relief to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court of competent jurisdiction in the United States or any state thereof, in addition to any other remedy to which it may be entitled at law or equity.

(c)Blue Pencil.  The Participant and the Company agree that the covenants contained in this Agreement are reasonable covenants under the circumstances, and further agree

4

that if, in the opinion of any court of competent jurisdiction such covenants are not reasonable in any respect, such court shall have the right, power and authority to excise or modify such provision or provisions of these covenants as to the court shall appear not reasonable and to enforce the remainder of these covenants as so amended.

8.Rights as a Stockholder; Book Entry.  The Participant shall not have any rights of a common stockholder of the Company unless and until the Participant receives and becomes the record holder of the Shares pursuant to Section 6 above.  The Company shall recognize the Participant’s ownership of Shares through uncertificated book entry. Upon delivery to the Participant of the Shares pursuant to Section 6, the Participant’s name shall be registered and recorded in the stock transfer book and records maintained by the Company or a transfer or clearing agent designated by the Company.

9.No Right to Continued Employment.  Neither the Plan nor this Agreement nor the granting of the RSUs hereunder shall be construed as giving the Participant the right to be retained in the employ of, or in any consulting relationship to, the Company or any Affiliate.  Further, the Company or any Affiliate may at any time dismiss the Participant or discontinue any consulting relationship, free from any liability or any claim under the Plan or this Agreement, except as otherwise expressly provided herein.

10.Transferability.

(a)The RSUs may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant other than by will or by the laws or descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided, that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

(b)Notwithstanding the foregoing and subject to Section 14(b) of the Plan, the RSUs may be transferred to: (i) any person who is a “family member” of the Participant, as such term is used in the instructions to Form S-8 under the Securities Act or any successor form of registration statement promulgated by the Securities and Exchange Commission (collectively, the “Immediate Family Members”); (ii) a trust solely for the benefit of the Participant and his or her Immediate Family Members; (iii) a partnership or limited liability company whose only partners or stockholders are the Participant and his or her Immediate Family Members; or (iv) a beneficiary to whom donations are eligible to be treated as “charitable contributions” for federal income tax purposes; provided, that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of the Plan.

11.Withholding.

(a)The Participant shall be required to pay to the Company or any Affiliate, and the Company shall have the right and is hereby authorized to withhold, from any Shares, any Cash Value or from any compensation (including from payroll or any other amounts payable to the Participant) the amount (in cash, Shares, or other property) of any required withholding or other

5

taxes in respect of a Restricted Stock Unit award, and to take such other action as may be necessary in the opinion of the Committee or the Company to satisfy all obligations for the payment of such withholding and other taxes; provided, however, that no amounts shall be withheld in excess of the Company’s statutory minimum withholding liability.

(b)Without limiting the generality of the foregoing, to the extent permitted by the Committee, the Participant may, subject to applicable law, satisfy, in whole or in part, the foregoing withholding liability by delivery of Shares held by the Participant (which are fully vested and not subject to any pledge or other security interest) or by having the Company withhold from the number of Shares otherwise issuable to the Participant hereunder Shares with a Fair Market Value not in excess of the statutory minimum withholding liability.  The Participant agrees to make adequate provision for any sums required to satisfy all applicable federal, state, local and foreign tax withholding obligations of the Company which may arise in connection with this Restricted Stock Unit award.

12.Securities Laws.  With respect to any RSUs and the issuance of Shares pursuant to Section 6, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws, the Plan or with this Agreement.

13.Notices.  Any notice necessary under this Agreement shall be addressed to the Company in care of its General Counsel, addressed to the principal office of the Company and to the Participant at the address appearing in the personnel records of the Company for the Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other.  Any such notice shall be deemed effective upon receipt thereof by the addressee.

14.Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to conflicts of laws.

15.RSUs Subject to Plan.  The Participant acknowledges that the Participant has received and read a copy of the Plan.  The RSUs are subject to the terms and provisions of the Plan, as may be amended from time to time, and which are hereby incorporated by reference.  In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

16.Amendment. Subject to Section 13(b) of the Plan, the Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, this Agreement, prospectively or retroactively (including after the Participant’s Termination); provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of the Participant hereunder shall not to that extent be effective without the consent of the Participant.

17.Compliance with Section 409A.  This Agreement is intended to comply with Section 409A of the Code and will be interpreted accordingly.  References under this Agreement to the Participant’s termination of employment shall be deemed to refer to the date upon which the Participant has experienced a “separation from service” within the meaning of

6

Section 409A of the Code.  Notwithstanding anything herein to the contrary, (i) if at the time of the Participant’s termination of employment with the Company and its Affiliates the Participant is a “specified employee” as defined in Section 409A of the Code and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to the Participant) until the date that is six months following such termination of employment (or the earliest date as is permitted under Section 409A of the Code) and (ii) if any other payments of money or other benefits due to the Participant hereunder could cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, determined by the Board, that does not cause such an accelerated or additional tax.  The Company shall consult with the Participant in good faith regarding the implementation of the provisions of this Section 17; provided, that neither the Company nor any of its employees or representatives shall have any liability to the Participant with respect to thereto.

18.Entire Agreement.  This Agreement and the Plan constitute the entire understanding between the Participant and the Company regarding the RSUs and any Cash Value that may become payable.  This Agreement and the Plan supersede any prior agreements, commitments or negotiations concerning the RSUs.

19.Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

[The remainder of this page intentionally left blank.]

7

IN WITNESS WHEREOF, the parties have caused this Agreement to be effective as of the date set forth on the Company’s signature page.

		Participant
		Name:
Agreed and accepted:
		WALTER ENERGY, INC.
		By:
		Its:
	Restricted Stock Units:	[Number of RSUs]

[Signature Page – RSU Agreement ([Name of Participant])]

EX-31.1

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EXHIBIT 31.1

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

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

1.

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

2.

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

3.

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

4.

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

(a)

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

(b)

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

(c)

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

(d)

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

5.

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

(a)

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

(b)

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

Date: August 6, 2014

/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: August 6, 2014

/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 June 30, 2014 (the "Report"), I, Walter J. Scheller, III, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 6, 2014

/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 June 30, 2014 (the "Report"), I, William G. Harvey, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 6, 2014

/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 4. Mine Safety Disclosures

Mine Safety and Health Administration Safety Data

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

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

During the quarter ended June 30, 2014 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 first table below presents the total number of specific citations and orders issued by MSHA to Walter Energy, Inc. and its subsidiaries, together with the total dollar value of the proposed MSHA civil penalty assessments received, during the quarter ended June 30, 2014.  The second table presents legal actions pending before the Federal Mine Safety and Health Review Commission for each of our mining complexes as of June 30, 2014, together with the number of legal actions initiated and the number of legal actions resolved during the quarter ended June 30, 2014.

Mining Complex(1) (3)	Section 104S&S Citations	Section 104(b) Orders	Section 104(d) Citations and Orders	Section 110(b)(2) Violations	Section 107(a) Orders	Proposed MSHA Assessments(2)($ in thousands)	Fatalities
JWR No. 4	13	—	—	—	—	483.9	—
JWR No. 7	17	—	—	—	1	107.6	—
JWR Central Supply	—	—	—	—	—	—	—
JWR Central Shop	—	—	—	—	—	0.1	—
JWR North River	—	—	—	—	—	0.1	—
Taft Reid School	—	—	—	—	—	—	—
Taft Choctaw	—	—	—	—	—	0.1	—
TRI East Brookwood	—	—	—	—	—	—	—
TRI Highway 59	—	—	—	—	—	—	—
TRI Swann’s Crossing	—	—	—	—	—	—	—
Atlantic Leaseco King Coal 1 Mine	—	—	—	—	—	—	—
Atlantic Leaseco King Coal 1 Prep Plant	—	—	—	—	—	—	—
Atlantic Leaseco Black Pearl	—	—	—	—	—	—	—
Atlantic Leaseco Cowen Loadout	—	—	—	—	—	—	—
Atlantic Leaseco Crooked Run	—	—	—	—	—	—	—
Maple Coal Maple Eagle No. 1	19	—	1	—	—	335.7	—
Maple Coal Maple Prep Plant	—	—	—	—	—	—	—
Maple Coal Huffman Sycamore SM	—	—	—	—	—	0.8	—

(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 10-K for the fiscal year ended December 31, 2013.  Idle facilities are not included in the table above unless they received a citation, order or assessment by MSHA during the current quarterly reporting period or are subject to pending legal actions.

(2)Amounts listed under this heading include proposed assessments received from MSHA in the current quarterly 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 ofJune 30, 2014	Initiated During Q2 2014	Resolved During Q2 2014
JWR No. 3
29 CFR Part 2700, Subpart C	—	—	—
JWR No. 4
29 CFR Part 2700, Subpart B	9	—	—
29 CFR Part 2700, Subpart C	24	4	10
JWR No. 7
29 CFR Part 2700, Subpart B	8	—	—
29 CFR Part 2700, Subpart C	25	4	8
29 CFR Part 2700, Subpart E	1	—	1
29 CFR Part 2700, Subpart H	4	1	—
JWR North River
29 CFR Part 2700, Subpart B	—	—	—
29 CFR Part 2700, Subpart C	4	—	5
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	17	1	1
Maple Coal Maple Prep Plant
29 CFR Part 2700, Subpart C	1	—	—
Maple Coal Huffman Sycamore SM
29 CFR Part 2700, Subpart C	—	—	—

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

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

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

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

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

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

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

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Income Taxes (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Income Taxes
Income tax benefit	$ 9,075,000	$ 49,760,000	$ 45,036,000	$ 115,799,000
Period of cumulative pre-tax loss			3 years
Canada Revenue Agency
Income tax audit
Charge recorded as a result of settling audit	$ 3,200,000

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Supplemental Guarantor and Non-Guarantor Financial Information (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended		12 Months Ended
	Jun. 30, 2014	Mar. 31, 2014	Jun. 30, 2013	Mar. 31, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Dec. 31, 2012
Revenues:
Sales	$ 377,982		$ 437,798		$ 783,211	$ 927,407
Miscellaneous income (loss)	369		3,698		9,025	5,432
Total revenues	378,351		441,496		792,236	932,839
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)	343,761		367,616		693,636	788,550
Depreciation and depletion	69,816		68,320		146,240	149,510
Selling, general and administrative	19,002		27,129		39,781	57,803
Postretirement benefits	13,869		14,725		27,738	29,450
Restructuring and asset impairments	31,342		(5,741)		31,342	1,699
Total costs and expenses	477,790		472,049		938,737	1,027,012
Operating loss	(99,439)		(30,553)		(146,501)	(94,173)
Interest income (expense), net	(73,402)	(65,432)	(52,985)	(45,967)	(138,834)	(98,952)	(221,583)	(132,997)
Gain on extinguishment of debt	11,397				(2,492)	(6,001)
Other income (loss)	978		(714)		(778)	(609)
Loss before income tax benefit	(160,466)		(84,252)		(288,605)	(199,735)
Income tax expense (benefit)	(9,075)		(49,760)		(45,036)	(115,799)
Net loss	(151,391)		(34,492)		(243,569)	(83,936)
Reportable legal entities | Parent (Issuer)
Revenues:
Miscellaneous income (loss)	324		220		979	773
Total revenues	324		220		979	773
Cost and expenses:
Depreciation and depletion	613		511		1,261	996
Selling, general and administrative	1,961		3,939		3,114	10,150
Postretirement benefits	(44)		(55)		(88)	(110)
Restructuring and asset impairments	514				514
Total costs and expenses	3,044		4,395		4,801	11,036
Operating loss	(2,720)		(4,175)		(3,822)	(10,263)
Interest income (expense), net	(72,338)		(57,131)		(144,742)	(108,627)
Gain on extinguishment of debt	11,397				(2,492)	(6,001)
Other income (loss)	981				(719)
Loss before income tax benefit	(62,680)		(61,306)		(151,775)	(124,891)
Income tax expense (benefit)	16,128		(22,108)		(2,433)	(48,775)
Equity in net earnings (losses) of subsidiaries	(72,583)		4,706		(94,227)	(7,820)
Net loss	(151,391)		(34,492)		(243,569)	(83,936)
Reportable legal entities | Guarantor Subsidiaries
Revenues:
Sales	277,856		299,198		583,898	614,010
Miscellaneous income (loss)	1,822		779		3,694	2,969
Total revenues	279,678		299,977		587,592	616,979
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)	226,588		211,314		461,954	458,991
Depreciation and depletion	31,840		33,673		67,048	74,083
Selling, general and administrative	10,935		13,921		23,871	27,254
Postretirement benefits	13,913		14,780		27,826	29,560
Restructuring and asset impairments	23,686		(9,063)		23,686	(8,947)
Total costs and expenses	306,962		264,625		604,385	580,941
Operating loss	(27,284)		35,352		(16,793)	36,038
Interest income (expense), net	(292)		6,303		6,962	13,283
Loss before income tax benefit	(27,576)		41,655		(9,831)	49,321
Income tax expense (benefit)	(7,753)		8,533		(4,359)	5,137
Net loss	(19,823)		33,122		(5,472)	44,184
Reportable legal entities | Non-Guarantor Subsidiaries
Revenues:
Sales	100,126		138,600		199,313	313,397
Miscellaneous income (loss)	(1,777)		2,699		4,352	1,690
Total revenues	98,349		141,299		203,665	315,087
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)	117,173		156,302		231,682	329,559
Depreciation and depletion	37,363		34,136		77,931	74,431
Selling, general and administrative	6,106		9,269		12,796	20,399
Restructuring and asset impairments	7,142		3,322		7,142	10,646
Total costs and expenses	167,784		203,029		329,551	435,035
Operating loss	(69,435)		(61,730)		(125,886)	(119,948)
Interest income (expense), net	(772)		(2,157)		(1,054)	(3,608)
Other income (loss)	(3)		(714)		(59)	(609)
Loss before income tax benefit	(70,210)		(64,601)		(126,999)	(124,165)
Income tax expense (benefit)	(17,450)		(36,185)		(38,244)	(72,161)
Net loss	(52,760)		(28,416)		(88,755)	(52,004)
Eliminations
Cost and expenses:
Equity in net earnings (losses) of subsidiaries	72,583		(4,706)		94,227	7,820
Net loss	$ 72,583		$ (4,706)		$ 94,227	$ 7,820

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Accumulated Other Comprehensive Income (Loss) (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended		12 Months Ended
	Jun. 30, 2014	Mar. 31, 2014	Jun. 30, 2013	Mar. 31, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Dec. 31, 2012
Amounts reclassified out of each component of accumulated other comprehensive income (loss)
Interest expense, net	$ (73,402)	$ (65,432)	$ (52,985)	$ (45,967)	$ (138,834)	$ (98,952)	$ (221,583)	$ (132,997)
Other loss	(978)		714		778	609
Loss before income tax benefit	160,466		84,252		288,605	199,735
Income tax benefit	(9,075)		(49,760)		(45,036)	(115,799)
Net loss	151,391		34,492		243,569	83,936
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 before income tax benefit					606
Income tax benefit					(230)
Net loss					376
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, net					(1,095)
Other loss					1,701
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					736
Net actuarial loss					8,976
Settlement loss					1,627
Loss before income tax benefit					11,339
Income tax benefit					(4,322)
Net loss					$ 7,017

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Supplemental Guarantor and Non-Guarantor Financial Information (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Supplemental guarantor and non-guarantor financial information
Net income (loss)	$ (151,391)	$ (34,492)	$ (243,569)	$ (83,936)
Other comprehensive income (loss)
Change in pension and postretirement benefit plans, net of tax	3,498	4,658	7,017	9,317
Change in unrealized gain on hedges, net of tax		526	1,679	1,248
Change in foreign currency translation adjustment	11,264	(1,461)	13,428	(17,086)
Change in unrealized gain on investments		(1)		43
Total other comprehensive income (loss)	14,762	3,722	22,124	(6,478)
Total comprehensive loss	(136,629)	(30,770)	(221,445)	(90,414)
Reportable legal entities | Parent (Issuer)
Supplemental guarantor and non-guarantor financial information
Net income (loss)	(151,391)	(34,492)	(243,569)	(83,936)
Other comprehensive income (loss)
Change in pension and postretirement benefit plans, net of tax	3,498	4,658	7,017	9,317
Change in unrealized gain on hedges, net of tax		526	1,679	1,248
Change in foreign currency translation adjustment	11,264	(1,461)	13,428	(17,086)
Change in unrealized gain on investments		(1)		43
Total other comprehensive income (loss)	14,762	3,722	22,124	(6,478)
Total comprehensive loss	(136,629)	(30,770)	(221,445)	(90,414)
Reportable legal entities | Guarantor Subsidiaries
Supplemental guarantor and non-guarantor financial information
Net income (loss)	(19,823)	33,122	(5,472)	44,184
Other comprehensive income (loss)
Change in pension and postretirement benefit plans, net of tax	3,187		6,991
Change in unrealized gain on hedges, net of tax		16	3	37
Total other comprehensive income (loss)	3,187	16	6,994	37
Total comprehensive loss	(16,636)	33,138	1,522	44,221
Reportable legal entities | Non-Guarantor Subsidiaries
Supplemental guarantor and non-guarantor financial information
Net income (loss)	(52,760)	(28,416)	(88,755)	(52,004)
Other comprehensive income (loss)
Change in foreign currency translation adjustment	11,264	(1,461)	13,428	(17,086)
Change in unrealized gain on investments		(1)		43
Total other comprehensive income (loss)	11,264	(1,462)	13,428	(17,043)
Total comprehensive loss	(41,496)	(29,878)	(75,327)	(69,047)
Eliminations
Supplemental guarantor and non-guarantor financial information
Net income (loss)	72,583	(4,706)	94,227	7,820
Other comprehensive income (loss)
Change in pension and postretirement benefit plans, net of tax	(3,187)		(6,991)
Change in unrealized gain on hedges, net of tax		(16)	(3)	(37)
Change in foreign currency translation adjustment	(11,264)	1,461	(13,428)	17,086
Change in unrealized gain on investments		1		(43)
Total other comprehensive income (loss)	(14,451)	1,446	(20,422)	17,006
Total comprehensive loss	$ 58,132	$ (3,260)	$ 73,805	$ 24,826

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Derivative Financial Instruments (Details 3) (Derivatives designated as cash flow hedging instruments, USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Derivatives designated as cash flow hedging instruments
Gain (loss), net of tax recognized in accumulated other comprehensive income (loss)	$ 1,140	$ 1,303	$ 2,478
Gain, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings	(614)	(677)	(1,230)
Loss, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings (ineffective portion)		1,053
Interest rate swaps
Derivatives designated as cash flow hedging instruments
Gain (loss), net of tax recognized in accumulated other comprehensive income (loss)	1,142	1,303	2,482
Gain, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings	(614)	(677)	(1,230)
Loss, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings (ineffective portion)		1,053
Interest rate cap
Derivatives designated as cash flow hedging instruments
Gain (loss), net of tax recognized in accumulated other comprehensive income (loss)	$ (2)		$ (4)

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2014

Segment Information

Summarized financial information by reportable segment

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

	For the three months ended June 30,						For the six months ended June 30,
	2014			2013			2014			2013
Revenues:
U.S. Operations	$	298,685		$	321,009		$	629,349		$	660,234
Canadian and U.K. Operations		79,044			119,873			160,621			271,317
Other		622			614			2,266			1,288
Total revenues	$	378,351		$	441,496		$	792,236		$	932,839
Segment operating income (loss):
U.S. Operations	$	(30,409	)	$	37,333		$	(24,539	)	$	30,376
Canadian and U.K. Operations		(66,426	)		(66,347	)		(119,044	)		(115,113	)
Other		(2,604	)		(1,539	)		(2,918	)		(9,436	)
Total operating loss		(99,439	)		(30,553	)		(146,501	)		(94,173	)
Less interest expense, net		(73,402	)		(52,985	)		(138,834	)		(98,952	)
Gain (loss) on extinguishment of debt		11,397			—			(2,492	)		(6,001	)
Other income (loss)		978			(714	)		(778	)		(609	)
Loss before income tax benefit		(160,466	)		(84,252	)		(288,605	)		(199,735	)
Income tax benefit		(9,075	)		(49,760	)		(45,036	)		(115,799	)
Net loss	$	(151,391	)	$	(34,492	)	$	(243,569	)	$	(83,936	)
Depreciation and depletion:
U.S. Operations	$	37,694		$	31,189		$	76,760		$	78,662
Canadian and U.K. Operations		31,509			36,620			68,219			69,852
Other		613			511			1,261			996
Total	$	69,816		$	68,320		$	146,240		$	149,510
Capital expenditures:
U.S. Operations	$	29,490		$	38,803		$	39,741		$	66,204
Canadian and U.K. Operations		1,435			7,231			2,044			13,545
Other		270			190			1,691			502
Total	$	31,195		$	46,224		$	43,476		$	80,251

	June 30, 2014		December 31, 2013
Segment assets:
U.S. Operations	$	1,230,287	$	1,265,255
Canadian and U.K. Operations		3,667,691		3,687,925
Other		563,920		637,680
Total	$	5,461,898	$	5,590,860

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Subsequent Events (Details) (USD $) In Millions, unless otherwise specified										0 Months Ended			0 Months Ended
	Jun. 30, 2014 9.50% senior secured notes due 2019	Sep. 27, 2013 9.50% senior secured notes due 2019	Jun. 30, 2014 9.50% add-on senior secured notes due 2019	Mar. 27, 2014 9.50% add-on senior secured notes due 2019	Jun. 30, 2014 2016 Revolver	Jun. 30, 2014 2017 Revolver	Jun. 30, 2014 11.0% / 12.0% senior secured PIK toggle notes Minimum	Jun. 30, 2014 11.0% / 12.0% senior secured PIK toggle notes Maximum	Jul. 07, 2014 Subsequent Event Credit Agreement Minimum	Jul. 07, 2014 Subsequent Event Credit Agreement Maximum	Jul. 08, 2014 Subsequent Event Revolving Credit Facility	Jul. 08, 2014 Subsequent Event Revolving Credit Facility Minimum	Jul. 14, 2014 Subsequent Event First Lien Notes	Jul. 14, 2014 Subsequent Event First Lien Notes Prior to October 15, 2016	Jul. 14, 2014 Subsequent Event First Lien Notes Year commencing October 15, 2016	Jul. 14, 2014 Subsequent Event First Lien Notes Year commencing October 15, 2017	Jul. 14, 2014 Subsequent Event First Lien Notes Beginning on October 15, 2018	Jul. 14, 2014 Subsequent Event First Lien Notes Maximum Prior to October 15, 2016	Jul. 08, 2014 Subsequent Event 2016 and 2017 Revolver	Jul. 08, 2014 Subsequent Event 2016 Revolver	Jul. 08, 2014 Subsequent Event 2017 Revolver
Subsequent Event
Additional debt amount to be issued for financial ratios to be unlimited									$ 275.0
Term for issuance of additional debt										7 days
Amount of increase in borrowing capacity											61.2
Total available commitments											375.0
Aggregate principal amount of bond offering pricing for effectiveness of amendment												275.0
Maximum borrowing capacity					69.0	244.8													76.9	16.9	60.0
Aggregate principal amount		$ 450.0		$ 200.0									$ 320.0
Interest rate (as a percent)	9.50%	9.50%	9.50%	9.50%			11.00%	12.00%					9.50%
Aggregate principal amount that may be redeemed with net cash proceeds of certain equity offerings (as a percent)																		35.00%
Redemption price of debt instrument, with net cash proceeds from certain equity offerings (as a percent)														109.50%
Redemption price of debt instrument (as a percent)														100.00%	107.125%	102.375%	100.00%
Redemption price of debt instrument, upon occurrence of a change in control (as a percent)													101.00%

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Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2014

Basis of Presentation

Schedule of revision for loss on extinguishment of debt

	For the three months ended
	March 31
2014
Interest expense, prior to revision	$	79,396
Interest income		(75	)
Revision of loss on extinguishment of debt		(13,889	)
Interest expense, net, revised	$	65,432

	For the three months ended						For the six months ended
	March 31			June 30			June 30
2013
Interest expense, prior to revision	$	52,618		$	53,129		$	105,747
Interest income		(650	)		(144	)		(794	)
Revision of loss on extinguishment of debt		(6,001	)		—			(6,001	)
Interest expense, net, revised	$	45,967		$	52,985		$	98,952

        The following reflects the revisions that will be reported in our Form 10-K for the year ending December 31, 2014.

	2013			2012
Interest expense, prior to revision	$	233,854		$	139,356
Interest income		(1,103	)		(804	)
Revision of loss on extinguishment of debt		(11,168	)		(5,555	)
Interest expense, net, revised	$	221,583		$	132,997

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Fair Value of Financial Instruments (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Debt
Debt discount	$ 23,247	$ 20,788
Revolving Credit Facility
Debt
Debt discount	7,437
2011 term loan A
Debt
Debt discount		5,514
2011 term loan B
Debt
Debt discount	13,494	9,597
9.875% senior notes
Debt
Debt discount	2,800	3,169
9.50% senior secured notes
Debt
Debt discount	2,344	2,508
9.50% add-on senior secured notes
Debt
Debt premium	2,828
Carrying Amount | Revolving Credit Facility
Debt
Debt	0	0
Carrying Amount | 2011 term loan A
Debt
Debt		401,052
Carrying Amount | 2011 term loan B
Debt
Debt	964,684	968,581
Carrying Amount | 9.875% senior notes
Debt
Debt	462,200	496,831
Carrying Amount | 8.50% senior notes
Debt
Debt	450,000	450,000
Carrying Amount | 9.50% senior secured notes
Debt
Debt	447,656	447,492
Carrying Amount | 9.50% add-on senior secured notes
Debt
Debt	202,828
Carrying Amount | 11.0% / 12.0% senior secured PIK toggle notes
Debt
Debt	350,000
Fair Value | 2011 term loan A
Debt
Debt		403,517
Fair Value | 2011 term loan B
Debt
Debt	912,152	959,838
Fair Value | 9.875% senior notes
Debt
Debt	287,138	431,250
Fair Value | 8.50% senior notes
Debt
Debt	255,375	374,625
Fair Value | 9.50% senior secured notes
Debt
Debt	455,625	474,750
Fair Value | 9.50% add-on senior secured notes
Debt
Debt	202,500
Fair Value | 11.0% / 12.0% senior secured PIK toggle notes
Debt
Debt	$ 288,750

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Net Loss Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Numerator:
Net loss	$ (151,391)	$ (34,492)	$ (243,569)	$ (83,936)
Denominator:
Average number of common shares outstanding, Basic	65,024,000	62,632,000	63,983,000	62,614,000
Average number of common shares outstanding, diluted	65,024,000	62,632,000	63,983,000	62,614,000
Net loss per share (in dollars per share)	$ (2.33)	$ (0.55)	$ (3.81)	$ (1.34)
Net loss per share (in dollars per share)	$ (2.33)	$ (0.55)	$ (3.81)	$ (1.34)
Effect of dilutive securities (in shares)	0	0	0	0
Anti-dilutive securities excluded from earnings per share calculation	1,886	600	1,348	482
Share-based awards exercised or released
Stock options exercised	8,659		18,300	24,831
Restricted stock units vested	42,849	8,803	78,552	25,676
Total	51,508	8,803	96,852	50,507

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Restructuring and Asset Impairments (Details 2) (BCCT, USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	May 02, 2014 acre
BCCT
Asset impairments and restructuring
Area of minimum additional land sold		60
Total consideration		$ 25.0
Impairment charge recognized	23.0
Carrying value of assets		$ 47.5

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Supplemental Guarantor and Non-Guarantor Financial Information (Details)	6 Months Ended
	Jun. 30, 2014
Debt instrument
Percentage of ownership interest in subsidiaries	100.00%
2020 Notes
Debt instrument
Interest rate (as a percent)	9.875%
2021 Notes
Debt instrument
Interest rate (as a percent)	8.50%

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Accumulated Other Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Changes in accumulated other comprehensive income (loss) by component
Balance at the beginning of the period			$ (162,258)
Other comprehensive income before reclassifications			14,731
Amounts reclassified from accumulated other comprehensive income (loss)			7,393
Total other comprehensive income (loss)	14,762	3,722	22,124	(6,478)
Balance at the end of the period	(140,134)		(140,134)
Pension and other postretirement plans
Changes in accumulated other comprehensive income (loss) by component
Balance at the beginning of the period			(165,150)
Amounts reclassified from accumulated other comprehensive income (loss)			7,017
Total other comprehensive income (loss)			7,017
Balance at the end of the period	(158,133)		(158,133)
Unrealized gain/(loss) on hedges
Changes in accumulated other comprehensive income (loss) by component
Balance at the beginning of the period			(1,679)
Other comprehensive income before reclassifications			1,303
Amounts reclassified from accumulated other comprehensive income (loss)			376
Total other comprehensive income (loss)			1,679
Foreign currency translation adjustment
Changes in accumulated other comprehensive income (loss) by component
Balance at the beginning of the period			4,571
Other comprehensive income before reclassifications			13,428
Total other comprehensive income (loss)			13,428
Balance at the end of the period	$ 17,999		$ 17,999

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
OPERATING ACTIVITIES
Net loss	$ (243,569)	$ (83,936)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and depletion	146,240	149,510
Deferred income tax benefit	(41,257)	(77,717)
Amortization of debt issuance costs	8,356	8,014
Loss on extinguishment of debt	2,492	6,001
Other	39,183	8,402
Decrease (increase) in current assets:
Receivables	34,710	(2,302)
Inventories	30,774	(24,281)
Prepaid expenses and other current assets	(6,437)	(8,826)
Increase (decrease) in current liabilities:
Accounts payable	(32,227)	24,483
Accrued interest	9,168	8,245
Accrued expenses and other current liabilities	13,559	(31,695)
Cash flows used in operating activities	(39,008)	(24,102)
INVESTING ACTIVITIES
Additions to property, plant and equipment	(43,476)	(80,251)
Other	(350)	964
Cash flows used in investing activities	(43,826)	(79,287)
FINANCING ACTIVITIES
Proceeds from issuance of debt	553,000	450,000
Retirements of debt	(414,124)	(259,200)
Dividends paid	(1,284)	(15,638)
Debt issuance costs	(21,325)	(15,080)
Other	(191)	(600)
Cash flows provided by financing activities	116,076	159,482
Effect of foreign exchange rates on cash	(588)	(1,816)
Net increase in cash and cash equivalents	32,654	54,277
Cash and cash equivalents at beginning of period	260,818	116,601
Cash and cash equivalents at end of period	$ 293,472	$ 170,878

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Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified	1 Months Ended	12 Months Ended		6 Months Ended	9 Months Ended	0 Months Ended			6 Months Ended
	Jun. 30, 2010	Dec. 31, 2012	Jun. 30, 2014	Jun. 30, 2014 Environmental Matters Walter Coke, Inc. item	Sep. 30, 2013 Environmental Matters Walter Coke, Inc. item	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	Jun. 30, 2014 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			$ 35.0
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
Number of executive directors as defendants							3	3
Number of actions						2
Number of complaints									3

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Net Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2014

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 six months ended June 30, 2014 and 2013 is as follows (in thousands, except per share data):

	For the three months ended June 30,
	2014						2013
	Basic			Diluted			Basic			Diluted
Numerator:
Net loss	$	(151,391	)	$	(151,391	)	$	(34,492	)	$	(34,492	)
Denominator:
Average number of common shares outstanding(1)		65,024			65,024			62,632			62,632
Net loss per share	$	(2.33	)	$	(2.33	)	$	(0.55	)	$	(0.55	)

	For the six months ended June 30,
	2014						2013
	Basic			Diluted			Basic			Diluted
Numerator:
Net loss	$	(243,569	)	$	(243,569	)	$	(83,936	)	$	(83,936	)
Denominator:
Average number of common shares outstanding(1)		63,983			63,983			62,614			62,614
Net loss per share	$	(3.81	)	$	(3.81	)	$	(1.34	)	$	(1.34	)

(1)

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 restricted stock units outstanding for the three months ended June 30, 2014 and 2013 totaling 1,886 and 600, respectively, were excluded from the calculation above because their effect would have been anti-dilutive. Additionally, the weighted average number of stock options and restricted stock units outstanding for the six months ended June 30, 2014 and 2013 totaling 1,348 and 482, respectively, were excluded from the calculation above because their effect would have been anti-dilutive.

Schedule of stock options exercised and restricted stock units vested

	For the three months ended June 30,				For the six months ended June 30,
	2014		2013		2014		2013
Stock options exercised		8,659		—		18,300		24,831
Restricted stock units vested		42,849		8,803		78,552		25,676
Total		51,508		8,803		96,852		50,507

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Pension and Other Postretirement Benefits (Tables)

6 Months Ended

Jun. 30, 2014

Pension and Other Postretirement Benefits

Components of net periodic benefit cost

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

	Pension Benefits						Other Postretirement Benefits
	For the three months ended June 30,						For the three months ended June 30,
	2014			2013			2014		2013
Components of net periodic benefit cost:
Service cost	$	1,701		$	1,766		$	1,944	$	2,486
Interest cost		3,316			3,070			7,726		7,198
Expected return on plan assets		(4,553	)		(4,235	)		—		—
Amortization of prior service cost		61			66			307		307
Amortization of net actuarial loss		550			2,434			3,892		4,734
Settlement loss		843			—			—		—
Net periodic benefit cost	$	1,918		$	3,101		$	13,869	$	14,725

	Pension Benefits						Other Postretirement Benefits
	For the six months ended June 30,						For the six months ended June 30,
	2014			2013			2014		2013
Components of net periodic benefit cost:
Service cost	$	3,402		$	3,532		$	3,888	$	4,972
Interest cost		6,664			6,140			15,452		14,396
Expected return on plan assets		(9,106	)		(8,470	)		—		—
Amortization of prior service cost		122			132			614		614
Amortization of net actuarial loss		1,192			4,868			7,784		9,468
Settlement loss		1,627			—			—		—
Net periodic benefit cost	$	3,901		$	6,202		$	27,738	$	29,450

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Supplemental Guarantor and Non-Guarantor Financial Information (Details 5) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Supplemental guarantor and non-guarantor financial information
Cash flows provided by (used in) operating activities	$ (39,008)	$ (24,102)
INVESTING ACTIVITIES
Additions to property, plant and equipment	(43,476)	(80,251)
Other	(350)	964
Cash flows used in investing activities	(43,826)	(79,287)
FINANCING ACTIVITIES
Proceeds from issuance of debt	553,000	450,000
Retirements of debt	(414,124)	(259,200)
Dividends paid	(1,284)	(15,638)
Debt issuance costs	(21,325)	(15,080)
Other	(191)	(600)
Cash flows provided by financing activities	116,076	159,482
Effect of foreign exchange rates on cash	(588)	(1,816)
Net increase in cash and cash equivalents	32,654	54,277
Cash and cash equivalents at beginning of period	260,818	116,601
Cash and cash equivalents at end of period	293,472	170,878
Reportable legal entities | Parent (Issuer)
Supplemental guarantor and non-guarantor financial information
Cash flows provided by (used in) operating activities	(112,535)	(130,045)
INVESTING ACTIVITIES
Additions to property, plant and equipment	(1,691)	(459)
Intercompany loans made	(3,700)	(54,736)
Intercompany loans received	1,828	23,500
Investments in subsidiaries		(50,103)
Cash flows used in investing activities	(3,563)	(81,798)
FINANCING ACTIVITIES
Proceeds from issuance of debt	553,000	450,000
Retirements of debt	(406,566)	(250,000)
Dividends paid	(1,284)	(15,638)
Debt issuance costs	(21,325)	(15,080)
Advances from (to) consolidated entities	13,934	95,962
Other	(191)	(600)
Cash flows provided by financing activities	137,568	264,644
Net increase in cash and cash equivalents	21,470	52,801
Cash and cash equivalents at beginning of period	234,150	83,833
Cash and cash equivalents at end of period	255,620	136,634
Reportable legal entities | Guarantor Subsidiaries
Supplemental guarantor and non-guarantor financial information
Cash flows provided by (used in) operating activities	95,649	112,000
INVESTING ACTIVITIES
Additions to property, plant and equipment	(37,428)	(58,130)
Cash flows used in investing activities	(37,428)	(58,130)
FINANCING ACTIVITIES
Retirements of debt	(3,590)	(4,903)
Advances from (to) consolidated entities	(54,705)	(49,028)
Cash flows provided by financing activities	(58,295)	(53,931)
Net increase in cash and cash equivalents	(74)	(61)
Cash and cash equivalents at beginning of period	101	61
Cash and cash equivalents at end of period	27
Reportable legal entities | Non-Guarantor Subsidiaries
Supplemental guarantor and non-guarantor financial information
Cash flows provided by (used in) operating activities	(22,122)	(6,057)
INVESTING ACTIVITIES
Additions to property, plant and equipment	(4,357)	(21,662)
Other	(350)	964
Cash flows used in investing activities	(4,707)	(20,698)
FINANCING ACTIVITIES
Retirements of debt	(3,968)	(4,297)
Advances from (to) consolidated entities	40,771	(46,934)
Intercompany borrowings	3,700	54,736
Intercompany payments made	(1,828)	(23,500)
Investment from Parent		50,103
Cash flows provided by financing activities	38,675	30,108
Effect of foreign exchange rates on cash	(588)	(1,816)
Net increase in cash and cash equivalents	11,258	1,537
Cash and cash equivalents at beginning of period	26,567	32,707
Cash and cash equivalents at end of period	37,825	34,244
Eliminations
INVESTING ACTIVITIES
Intercompany loans made	3,700	54,736
Intercompany loans received	(1,828)	(23,500)
Investments in subsidiaries		50,103
Cash flows used in investing activities	1,872	81,339
FINANCING ACTIVITIES
Intercompany borrowings	(3,700)	(54,736)
Intercompany payments made	1,828	23,500
Investment from Parent		(50,103)
Cash flows provided by financing activities	$ (1,872)	$ (81,339)

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Derivative Financial Instruments (Details) (Cash flow hedging, USD $) In Millions, unless otherwise specified	0 Months Ended	3 Months Ended	6 Months Ended
	Jun. 27, 2011	Jun. 30, 2014	Jun. 30, 2014
Interest rate swap - June 2011
Fair Value of Financial Instruments
Notional value	$ 450.0
Debt instrument, description of variable rate basis	3-month LIBOR
Agreement period	3 years
Fixed rate (as a percent)	1.17%
Amount recognized in interest expense, net effective portion			1.1
Amount recognized in other income (loss), ineffective portion		1.0	(0.7)
Interest rate cap
Fair Value of Financial Instruments
Notional value	$ 255.0
Debt instrument, description of variable rate basis	3-month LIBOR
Agreement period	3 years
Fixed rate (as a percent)	2.00%

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Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2014

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).

	June 30, 2014		December 31, 2013
Asset derivatives designated as cash flow hedging instruments:
Interest rate cap(1)	$	—	$	1
Liability derivatives designated as cash flow hedging instruments:
Interest rate swaps(2)	$	1,019	$	3,080

(1)

$1 thousand was included in other current assets within the Condensed Consolidated Balance Sheets as of December 31, 2013.

(2)

$1.0 million and $3.1 million were included within other current liabilities within the Condensed Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013, respectively.

Schedule of gains and losses from derivative instruments

 The following tables present the gains and losses from derivative instruments for the three and six months ended June 30, 2014 and 2013 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)
	Three months ended June 30,					Three months ended June 30,
Derivatives designated as cash flow hedging instruments	2014		2013			2014		2013
Interest rate swaps	$	—	$	1,142		$	—	$	(614	)
Interest rate cap		—		(2	)		—		—
Total	$	—	$	1,140		$	—	$	(614	)

	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)						Loss, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings (ineffective portion)(2)
	Six months ended June 30,					Six months ended June 30,						Six months ended June 30,
Derivatives designated as cash flow hedging instruments	2014		2013			2014			2013			2014		2013
Interest rate swaps	$	1,303	$	2,482		$	(677	)	$	(1,230	)	$	1,053	$	—
Interest rate cap		—		(4	)		—			—			—		—
Total	$	1,303	$	2,478		$	(677	)	$	(1,230	)	$	1,053	$	—

(1)

The effective portion of the interest rate swap amounts are reported within interest expense, net in the Condensed Consolidated Statements of Operations.

(2)

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

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Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2014

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 six months ended June 30, 2014, net of tax (in thousands).

	Pension and other postretirement plans			Unrealized gain/(loss) on hedges			Foreign currency translation adjustment			Total
Beginning balance as of December 31, 2013	$	(165,150	)	$	(1,679	)	$	4,571		$	(162,258	)
Other comprehensive income before reclassifications		—			1,303			13,428			14,731
Amounts reclassified from accumulated other comprehensive income (loss)		7,017			376			—(1	)		7,393
Net current-period other comprehensive income		7,017			1,679			13,428			22,124
Ending balance as of June 30, 2014	$	(158,133	)	$	—		$	17,999		$	(140,134	)

(1)

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

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

 The following table presents amounts reclassified out of each component of accumulated other comprehensive income (loss) for the six months ended June 30, 2014 (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 (effective portion)	$	(1,095	)	Interest expense, net
Interest rate swaps (ineffective portion)		1,701		Other loss
		606		Total before tax
		(230	)	Income tax benefit
	$	376		Net of tax
Amortization of pension and postretirement benefit plans:
Prior service cost	$	736		(a)
Net actuarial loss		8,976		(a)
Settlement loss		1,627		(a)
		11,339		Total before tax
		(4,322	)	Income tax benefit
	$	7,017		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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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) (USD $)	6 Months Ended
	Jun. 30, 2014
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Dividends paid (in dollars per share)	$ 0.02

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value of Financial Instruments

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

	June 30, 2014
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Liabilities:
Interest rate swaps	$	—	$	1,019	$	—	$	1,019

	December 31, 2013
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	1	$	—	$	1
Liabilities:
Interest rate swaps	$	—	$	3,080	$	—	$	3,080

Schedule of carrying amounts and fair values of long-term debt (excluding capital obligations and equipment financing agreement)

The carrying amounts and fair values of the Company's long-term debt (excluding capital obligations, equipment financing agreements and a discount on the Revolver of $7,437 as of June 30, 2014) are presented below (in thousands):

	June 30, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
2011 term loan A(1)	$	—	$	—	$	401,052	$	403,517
2011 term loan B(2)	$	964,684	$	912,152	$	968,581	$	959,838
9.875% senior notes(3)	$	462,200	$	287,138	$	496,831	$	431,250
8.50% senior notes	$	450,000	$	255,375	$	450,000	$	374,625
9.50% senior secured notes(4)	$	447,656	$	455,625	$	447,492	$	474,750
9.50% add-on senior secured notes(5)	$	202,828	$	202,500	$	—	$	—
11.0%/12.0% senior secured PIK toggle notes	$	350,000	$	288,750	$	—	$	—

(1)

Net of debt discount of $5,514 as of December 31, 2013.

(2)

Net of debt discount of $13,494 and $9,597 as of June 30, 2014 and December 31, 2013, respectively.

(3)

Net of debt discount of $2,800 and $3,169 as of June 30, 2014 and December 31, 2013, respectively.

(4)

Net of debt discount of $2,344 and $2,508 as of June 30, 2014 and December 31, 2013, respectively.

(5)

Includes a premium of $2,828 as of June 30, 2014.

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Debt (Details) (USD $) Share data in Millions, unless otherwise specified	0 Months Ended	3 Months Ended	6 Months Ended				6 Months Ended			6 Months Ended		0 Months Ended	3 Months Ended
	Apr. 23, 2014	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Dec. 31, 2013 2011 term loan A	Jun. 30, 2014 2011 term loan B	Dec. 31, 2013 2011 term loan B	Jun. 30, 2014 2011 term loan B Minimum	Jun. 30, 2014 Revolving Credit Facility	Jun. 30, 2014 Revolving credit facility and term loan B	Apr. 23, 2014 9.875% senior notes	Jun. 30, 2014 9.875% senior notes	Dec. 31, 2013 9.875% senior notes	Jun. 30, 2014 8.50% senior notes	Dec. 31, 2013 8.50% senior notes	Jun. 30, 2014 9.50% senior secured notes due 2019	Dec. 31, 2013 9.50% senior secured notes due 2019	Sep. 27, 2013 9.50% senior secured notes due 2019	Jun. 30, 2014 9.50% add-on senior secured notes due 2019	Mar. 27, 2014 9.50% add-on senior secured notes due 2019	Jun. 30, 2014 11.0% / 12.0% senior secured PIK toggle notes	Jun. 30, 2014 11.0% / 12.0% senior secured PIK toggle notes Minimum	Jun. 30, 2014 11.0% / 12.0% senior secured PIK toggle notes Maximum	Jun. 30, 2014 Other	Dec. 31, 2013 Other
Debt instrument
Debt discount, net		$ (23,247,000)	$ (23,247,000)		$ (20,788,000)	$ (5,514,000)	$ (13,494,000)	$ (9,597,000)		$ (7,437,000)			$ (2,800,000)	$ (3,169,000)			$ (2,344,000)	$ (2,508,000)
Total debt		2,896,304,000	2,896,304,000		2,778,832,000	406,566,000	978,178,000	978,178,000					465,000,000	500,000,000	450,000,000	450,000,000	450,000,000	450,000,000		200,000,000		350,000,000			26,373,000	14,876,000
Less current debt		(15,353,000)	(15,353,000)		(9,210,000)
Total long term debt		2,880,951,000	2,880,951,000		2,769,622,000
Weighted average stated interest rate (as a percent)							7.25%						9.875%		8.50%		9.50%			9.50%		11.00%
Interest rate (as a percent)													9.875%		8.50%		9.50%		9.50%	9.50%	9.50%		11.00%	12.00%
Debt agreements
Debt instrument, description of variable rate basis											LIBOR or CDOR
Basis spread on variable rate (as a percent)							6.75%			5.50%
Rate of LIBOR floor (as a percent)									1.00%
Common stock issued in exchange of debt instrument	3.15
Aggregate principal amount of debt exchanged												35,000,000
Gain (loss) on extinguishment of debt		11,397,000	(2,492,000)	(6,001,000)									11,400,000
Debt repayment schedule, excluding interest
2014		7,836,000	7,836,000																						7,836,000
2015		12,775,000	12,775,000																						12,775,000
2016		5,762,000	5,762,000																						5,762,000
2018		978,178,000	978,178,000				978,178,000
Thereafter		$ 1,915,000,000	$ 1,915,000,000										$ 465,000,000		$ 450,000,000		$ 450,000,000			$ 200,000,000		$ 350,000,000

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Supplemental Guarantor and Non-Guarantor Financial Information (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013	Dec. 31, 2012
ASSETS
Cash and cash equivalents	$ 293,472	$ 260,818	$ 170,878	$ 116,601
Receivables, net	231,032	281,763
Inventories	274,482	312,647
Deferred income taxes	32,079	37,067
Prepaid expenses	45,361	39,022
Assets held for sale	24,150
Other current assets	12,504	18,031
Total current assets	913,080	949,348
Mineral interests, net	2,887,612	2,905,002
Property, plant and equipment, net	1,547,280	1,637,552
Other long-term assets	113,926	98,958
Total assets	5,461,898	5,590,860
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	15,353	9,210
Accounts payable	60,451	92,712
Accrued expenses	142,831	133,870
Accumulated other postretirement benefits obligation	30,887	30,036
Other current liabilities	225,713	214,073
Total current liabilities	475,235	479,901
Long-term debt	2,880,951	2,769,622
Accumulated other postretirement benefits obligation	574,856	570,712
Deferred income taxes	783,591	822,867
Other long-term liabilities	189,930	195,064
Total liabilities	4,904,563	4,838,166
Total stockholders' equity	557,335	752,694
Total liabilities and stockholders' equity	5,461,898	5,590,860
Reportable legal entities | Parent (Issuer)
ASSETS
Cash and cash equivalents	255,620	234,150	136,634	83,833
Receivables, net	102,008	113,936
Intercompany loans receivable		63,549
Deferred income taxes	26,390	23,957
Prepaid expenses	1,457	2,245
Other current assets	9,666	15,257
Total current assets	395,141	453,094
Property, plant and equipment, net	7,680	7,248
Deferred income taxes	3,046	3,049
Investment in subsidiaries	3,435,398	4,409,683
Other long-term assets	85,925	73,564
Total assets	3,927,190	4,946,638
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	6,968	5,604
Accrued expenses	45,962	34,551
Intercompany payables	239,769	87,904
Intercompany loans payable	352	1,104,282
Accumulated other postretirement benefits obligation	945	94
Other current liabilities	179,634	164,364
Total current liabilities	473,630	1,396,799
Long-term debt	2,869,931	2,763,957
Accumulated other postretirement benefits obligation	(497)	263
Other long-term liabilities	26,791	32,925
Total liabilities	3,369,855	4,193,944
Total stockholders' equity	557,335	752,694
Total liabilities and stockholders' equity	3,927,190	4,946,638
Reportable legal entities | Guarantor Subsidiaries
ASSETS
Cash and cash equivalents	27	101		61
Receivables, net	103,686	90,460
Intercompany receivables	179,412	30,126
Intercompany loans receivable		1,104,282
Inventories	130,447	168,434
Deferred income taxes	4,733	12,154
Prepaid expenses	38,683	34,011
Assets held for sale	24,150
Other current assets	478	440
Total current assets	481,616	1,440,008
Mineral interests, net	6,897	7,294
Property, plant and equipment, net	712,731	764,406
Deferred income taxes	7,990	4,458
Investment in subsidiaries	81,384	86,357
Other long-term assets	18,718	10,323
Total assets	1,309,336	2,312,846
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	7,461	1,313
Accounts payable	42,342	64,678
Accrued expenses	60,237	53,582
Accumulated other postretirement benefits obligation	29,942	29,942
Other current liabilities	21,313	27,062
Total current liabilities	161,295	176,577
Long-term debt	9,355
Accumulated other postretirement benefits obligation	575,353	570,449
Other long-term liabilities	81,079	73,420
Total liabilities	827,082	820,446
Total stockholders' equity	482,254	1,492,400
Total liabilities and stockholders' equity	1,309,336	2,312,846
Reportable legal entities | Non-Guarantor Subsidiaries
ASSETS
Cash and cash equivalents	37,825	26,567	34,244	32,707
Receivables, net	25,338	77,367
Intercompany receivables	60,357	57,778
Intercompany loans receivable	352
Inventories	144,035	144,213
Deferred income taxes	956	956
Prepaid expenses	5,221	2,766
Other current assets	2,360	2,334
Total current assets	276,444	311,981
Mineral interests, net	2,880,715	2,897,708
Property, plant and equipment, net	826,869	865,898
Other long-term assets	9,283	15,071
Total assets	3,993,311	4,090,658
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	7,892	7,897
Accounts payable	11,141	22,430
Accrued expenses	36,632	45,737
Intercompany loans payable		63,549
Other current liabilities	24,766	22,647
Total current liabilities	80,431	162,260
Long-term debt	1,665	5,665
Deferred income taxes	794,627	830,374
Other long-term liabilities	82,060	88,719
Total liabilities	958,783	1,087,018
Total stockholders' equity	3,034,528	3,003,640
Total liabilities and stockholders' equity	3,993,311	4,090,658
Eliminations
ASSETS
Intercompany receivables	(239,769)	(87,904)
Intercompany loans receivable	(352)	(1,167,831)
Total current assets	(240,121)	(1,255,735)
Deferred income taxes	(11,036)	(7,507)
Investment in subsidiaries	(3,516,782)	(4,496,040)
Total assets	(3,767,939)	(5,759,282)
LIABILITIES AND STOCKHOLDERS' EQUITY
Intercompany payables	(239,769)	(87,904)
Intercompany loans payable	(352)	(1,167,831)
Total current liabilities	(240,121)	(1,255,735)
Deferred income taxes	(11,036)	(7,507)
Total liabilities	(251,157)	(1,263,242)
Total stockholders' equity	(3,516,782)	(4,496,040)
Total liabilities and stockholders' equity	$ (3,767,939)	$ (5,759,282)

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
ASSETS
Cash and cash equivalents	$ 293,472	$ 260,818
Receivables, net	231,032	281,763
Inventories	274,482	312,647
Deferred income taxes	32,079	37,067
Prepaid expenses	45,361	39,022
Assets held for sale	24,150
Other current assets	12,504	18,031
Total current assets	913,080	949,348
Mineral interests, net	2,887,612	2,905,002
Property, plant and equipment, net	1,547,280	1,637,552
Other long-term assets	113,926	98,958
Total assets	5,461,898	5,590,860
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	15,353	9,210
Accounts payable	60,451	92,712
Accrued expenses	142,831	133,870
Accumulated other postretirement benefits obligation	30,887	30,036
Other current liabilities	225,713	214,073
Total current liabilities	475,235	479,901
Long-term debt	2,880,951	2,769,622
Accumulated other postretirement benefits obligation	574,856	570,712
Deferred income taxes	783,591	822,867
Other long-term liabilities	189,930	195,064
Total liabilities	4,904,563	4,838,166
Stockholders' equity:
Common stock, $0.01 par value per share: Authorized-200,000,000 shares; issued-65,824,776 and 62,577,924 shares, respectively	658	626
Capital in excess of par value	1,639,310	1,613,256
Accumulated deficit	(942,499)	(698,930)
Accumulated other comprehensive loss	(140,134)	(162,258)
Total stockholders' equity	557,335	752,694
Total liabilities and stockholders' equity	$ 5,461,898	$ 5,590,860

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Derivative Financial Instruments (Details 2) (Designated as cash flow hedging instruments, USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Interest rate cap
Entity's derivative instruments within the consolidated balance sheets
Asset derivatives		$ 1
Interest rate cap | Other current assets
Entity's derivative instruments within the consolidated balance sheets
Asset derivatives		1
Interest rate swaps
Entity's derivative instruments within the consolidated balance sheets
Liability derivatives	1,019	3,080
Interest rate swaps | Other current liabilities
Entity's derivative instruments within the consolidated balance sheets
Liability derivatives	$ 1,000	$ 3,100

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Change in pension and postretirement benefit plans, tax	$ 2,154	$ 4,322	$ 2,883	$ 5,765
Change in unrealized gain on hedges, tax		$ 324	$ 1,034	$ 667

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Basis of Presentation (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended		12 Months Ended
	Jun. 30, 2014	Mar. 31, 2014	Jun. 30, 2013	Mar. 31, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Dec. 31, 2012
Revision of Loss on Extinguishment of Debt
Interest expense, net	$ 73,402	$ 65,432	$ 52,985	$ 45,967	$ 138,834	$ 98,952	$ 221,583	$ 132,997
Prior to revision
Revision of Loss on Extinguishment of Debt
Interest expense		79,396	53,129	52,618		105,747	233,854	139,356
Interest income		(75)	(144)	(650)		(794)	(1,103)	(804)
Revision | Incorrect classification of accelerated amortization of debt issuance cost
Revision of Loss on Extinguishment of Debt
Interest expense, net		$ (13,889)		$ (6,001)		$ (6,001)	$ (11,168)	$ (5,555)

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Supplemental Guarantor and Non-Guarantor Financial Information

6 Months Ended

Jun. 30, 2014

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"), as of June 30, 2014 certain 100% 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 subsidiaries which are guarantors under the senior notes, and (iv) the subsidiaries which are not guarantors of the senior notes:

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)
JUNE 30, 2014
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Total Consolidated
ASSETS
Cash and cash equivalents	$	255,620		$	27	$	37,825	$	—		$	293,472
Receivables, net		102,008			103,686		25,338		—			231,032
Intercompany receivables		—			179,412		60,357		(239,769	)		—
Intercompany loans receivable		—			—		352		(352	)		—
Inventories		—			130,447		144,035		—			274,482
Deferred income taxes		26,390			4,733		956		—			32,079
Prepaid expenses		1,457			38,683		5,221		—			45,361
Assets held for sale		—			24,150		—		—			24,150
Other current assets		9,666			478		2,360		—			12,504
Total current assets		395,141			481,616		276,444		(240,121	)		913,080
Mineral interests, net		—			6,897		2,880,715		—			2,887,612
Property, plant and equipment, net		7,680			712,731		826,869		—			1,547,280
Deferred income taxes		3,046			7,990		—		(11,036	)		—
Investment in subsidiaries		3,435,398			81,384		—		(3,516,782	)		—
Other long-term assets		85,925			18,718		9,283		—			113,926
	$	3,927,190		$	1,309,336	$	3,993,311	$	(3,767,939	)	$	5,461,898
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—		$	7,461	$	7,892	$	—		$	15,353
Accounts payable		6,968			42,342		11,141		—			60,451
Accrued expenses		45,962			60,237		36,632		—			142,831
Intercompany payables		239,769			—		—		(239,769	)		—
Intercompany loans payable		352			—		—		(352	)		—
Accumulated other postretirement benefits obligation		945			29,942		—		—			30,887
Other current liabilities		179,634			21,313		24,766		—			225,713
Total current liabilities		473,630			161,295		80,431		(240,121	)		475,235
Long-term debt		2,869,931			9,355		1,665		—			2,880,951
Accumulated other postretirement benefits obligation		(497	)		575,353		—		—			574,856
Deferred income taxes		—			—		794,627		(11,036	)		783,591
Other long-term liabilities		26,791			81,079		82,060		—			189,930
Total liabilities		3,369,855			827,082		958,783		(251,157	)		4,904,563
Stockholders' equity		557,335			482,254		3,034,528		(3,516,782	)		557,335
Total liabilities and stockholders' equity	$	3,927,190		$	1,309,336	$	3,993,311	$	(3,767,939	)	$	5,461,898

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS (Unaudited)
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 STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, 2014
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Total Consolidated
Revenues:
Sales	$	—		$	277,856		$	100,126		$	—	$	377,982
Miscellaneous income (loss)		324			1,822			(1,777	)		—		369
		324			279,678			98,349			—		378,351
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			226,588			117,173			—		343,761
Depreciation and depletion		613			31,840			37,363			—		69,816
Selling, general and administrative		1,961			10,935			6,106			—		19,002
Postretirement benefits		(44	)		13,913			—			—		13,869
Restructuring and asset impairments		514			23,686			7,142			—		31,342
		3,044			306,962			167,784			—		477,790
Operating loss		(2,720	)		(27,284	)		(69,435	)		—		(99,439	)
Interest expense, net		(72,338	)		(292	)		(772	)		—		(73,402	)
Gain on extinguishment of debt		11,397			—			—			—		11,397
Other income (loss)		981			—			(3	)		—		978
Loss before income tax expense (benefit)		(62,680	)		(27,576	)		(70,210	)		—		(160,466	)
Income tax expense (benefit)		16,128			(7,753	)		(17,450	)		—		(9,075	)
Equity in net losses of subsidiaries		(72,583	)		—			—			72,583		—
Net loss	$	(151,391	)	$	(19,823	)	$	(52,760	)	$	72,583	$	(151,391	)

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	299,198		$	138,600		$	—		$	437,798
Miscellaneous income		220			779			2,699			—			3,698
		220			299,977			141,299			—			441,496
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			211,314			156,302			—			367,616
Depreciation and depletion		511			33,673			34,136			—			68,320
Selling, general and administrative		3,939			13,921			9,269			—			27,129
Postretirement benefits		(55	)		14,780			—			—			14,725
Restructuring and asset impairments		—			(9,063	)		3,322			—			(5,741	)
		4,395			264,625			203,029			—			472,049
Operating income (loss)		(4,175	)		35,352			(61,730	)		—			(30,553	)
Interest income (expense), net		(57,131	)		6,303			(2,157	)		—			(52,985	)
Other loss		—			—			(714	)		—			(714	)
Income (loss) before income tax expense (benefit)		(61,306	)		41,655			(64,601	)		—			(84,252	)
Income tax expense (benefit)		(22,108	)		8,533			(36,185	)		—			(49,760	)
Equity in earnings of subsidiaries		4,706			—			—			(4,706	)		—
Net income (loss)	$	(34,492	)	$	33,122		$	(28,416	)	$	(4,706	)	$	(34,492	)

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2014
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Total Consolidated
Revenues:
Sales	$	—		$	583,898		$	199,313		$	—	$	783,211
Miscellaneous income		979			3,694			4,352			—		9,025
		979			587,592			203,665			—		792,236
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			461,954			231,682			—		693,636
Depreciation and depletion		1,261			67,048			77,931			—		146,240
Selling, general and administrative		3,114			23,871			12,796			—		39,781
Postretirement benefits		(88	)		27,826			—			—		27,738
Restructuring and asset impairments		514			23,686			7,142			—		31,342
		4,801			604,385			329,551			—		938,737
Operating loss		(3,822	)		(16,793	)		(125,886	)		—		(146,501	)
Interest income (expense), net		(144,742	)		6,962			(1,054	)		—		(138,834	)
Loss on extinguishment of debt		(2,492	)		—			—			—		(2,492	)
Other loss		(719	)					(59	)		—		(778	)
Loss before income tax benefit		(151,775	)		(9,831	)		(126,999	)		—		(288,605	)
Income tax benefit		(2,433	)		(4,359	)		(38,244	)		—		(45,036	)
Equity in net losses of subsidiaries		(94,227	)		—			—			94,227		—
Net loss	$	(243,569	)	$	(5,472	)	$	(88,755	)	$	94,227	$	(243,569	)

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Total Consolidated
Revenues:
Sales	$	—		$	614,010		$	313,397		$	—	$	927,407
Miscellaneous income		773			2,969			1,690			—		5,432
		773			616,979			315,087			—		932,839
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			458,991			329,559			—		788,550
Depreciation and depletion		996			74,083			74,431			—		149,510
Selling, general and administrative		10,150			27,254			20,399			—		57,803
Postretirement benefits		(110	)		29,560			—			—		29,450
Restructuring and asset impairments		—			(8,947	)		10,646			—		1,699
		11,036			580,941			435,035			—		1,027,012
Operating income (loss)		(10,263	)		36,038			(119,948	)		—		(94,173	)
Interest income (expense), net		(108,627	)		13,283			(3,608	)		—		(98,952	)
Loss on extinguishment of debt		(6,001	)		—			—			—		(6,001	)
Other loss		—			—			(609	)		—		(609	)
Income (loss) before income tax expense (benefit)		(124,891	)		49,321			(124,165	)		—		(199,735	)
Income tax expense (benefit)		(48,775	)		5,137			(72,161	)		—		(115,799	)
Equity in net losses of subsidiaries		(7,820	)		—			—			7,820		—
Net income (loss)	$	(83,936	)	$	44,184		$	(52,004	)	$	7,820	$	(83,936	)

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE
INCOME (LOSS) (UNAUDITED)
THREE MONTHS ENDED JUNE 30, 2014
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net loss	$	(151,391	)	$	(19,823	)	$	(52,760	)	$	72,583		$	(151,391	)
Other comprehensive income (loss):
Change in pension and postretirement benefit plans, net of tax		3,498			3,187			—			(3,187	)		3,498
Change in foreign currency translation adjustment		11,264			—			11,264			(11,264	)		11,264
Total other comprehensive income		14,762			3,187			11,264			(14,451	)		14,762
Total comprehensive loss	$	(136,629	)	$	(16,636	)	$	(41,496	)	$	58,132		$	(136,629	)

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

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

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE
INCOME (LOSS) (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2014
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net loss	$	(243,569	)	$	(5,472	)	$	(88,755	)	$	94,227		$	(243,569	)
Other comprehensive income (loss):
Change in pension and postretirement benefit plans, net of tax		7,017			6,991			—			(6,991	)		7,017
Change in unrealized gain on hedges, net of tax		1,679			3			—			(3	)		1,679
Change in foreign currency translation adjustment		13,428			—			13,428			(13,428	)		13,428
Total other comprehensive income		22,124			6,994			13,428			(20,422	)		22,124
Total comprehensive income (loss)	$	(221,445	)	$	1,522		$	(75,327	)	$	73,805		$	(221,445	)

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

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

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2014
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(112,535	)	$	95,649		$	(22,122	)	$	—		$	(39,008	)
INVESTING ACTIVITIES
Additions to property, plant and equipment		(1,691	)		(37,428	)		(4,357	)		—			(43,476	)
Intercompany loans made		(3,700	)		—			—			3,700			—
Intercompany loans received		1,828			—			—			(1,828	)		—
Other		—			—			(350	)		—			(350	)
Cash flows used in investing activities		(3,563	)		(37,428	)		(4,707	)		1,872			(43,826	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		553,000			—			—			—			553,000
Retirements of debt		(406,566	)		(3,590	)		(3,968	)		—			(414,124	)
Dividends paid		(1,284	)		—			—			—			(1,284	)
Debt issuance costs		(21,325	)		—			—			—			(21,325	)
Advances from (to) consolidated entities		13,934			(54,705	)		40,771			—			—
Intercompany borrowings		—			—			3,700			(3,700	)		—
Intercompany payments made		—			—			(1,828	)		1,828			—
Other		(191	)		—			—			—			(191	)
Cash flows provided by (used in) financing activities		137,568			(58,295	)		38,675			(1,872	)		116,076
Effect of foreign exchange rates on cash		—			—			(588	)		—			(588	)
Net increase (decrease) in cash and cash equivalents		21,470			(74	)		11,258			—			32,654
Cash and cash equivalents at beginning of period		234,150			101			26,567			—			260,818
Cash and cash equivalents at end of period	$	255,620		$	27		$	37,825		$	—		$	293,472

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(130,045	)	$	112,000		$	(6,057	)	$	—		$	(24,102	)
INVESTING ACTIVITIES
Additions to property, plant and equipment		(459	)		(58,130	)		(21,662	)		—			(80,251	)
Intercompany notes issued		(54,736	)		—			—			54,736			—
Intercompany notes proceeds		23,500			—			—			(23,500	)		—
Investments in subsidiaries		(50,103	)		—			—			50,103			—
Other		—			—			964			—			964
Cash flows used in investing activities		(81,798	)		(58,130	)		(20,698	)		81,339			(79,287	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		450,000			—			—			—			450,000
Retirements of debt		(250,000	)		(4,903	)		(4,297	)		—			(259,200	)
Dividends paid		(15,638	)		—			—			—			(15,638	)
Debt issuance costs		(15,080	)		—			—			—			(15,080	)
Advances from (to) consolidated entities		95,962			(49,028	)		(46,934	)		—			—
Intercompany notes borrowings		—			—			54,736			(54,736	)		—
Intercompany notes payments		—			—			(23,500	)		23,500			—
Investment from Parent		—			—			50,103			(50,103	)		—
Other		(600	)		—			—			—			(600	)
Cash flows provided by (used in) financing activities		264,644			(53,931	)		30,108			(81,339	)		159,482
Effect of foreign exchange rates on cash		—			—			(1,816	)		—			(1,816	)
Net increase (decrease) in cash and cash equivalents		52,801			(61	)		1,537			—			54,277
Cash and cash equivalents at beginning of period		83,833			61			32,707			—			116,601
Cash and cash equivalents at end of period	$	136,634		$	—		$	34,244		$	—		$	170,878

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Restructuring and Asset Impairments (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended	3 Months Ended	6 Months Ended	3 Months Ended		6 Months Ended	3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014 Wolverine, Brule and Willow Creek mines Other	Jun. 30, 2014 Wolverine, Brule and Willow Creek mines Other	Jun. 30, 2014 Wolverine, Brule and Willow Creek mines Canadian and U.K. Operations	Jun. 30, 2014 Wolverine, Brule and Willow Creek mines U.S. Operations	Jun. 30, 2014 Wolverine, Brule and Willow Creek mines U.S. Operations	Jun. 30, 2013 Willow Creek Mine	Jun. 30, 2013 Willow Creek Mine	Jun. 30, 2013 North River Mine Closure	Jun. 30, 2013 North River Mine Closure
Asset impairments and restructuring
Restructuring charges		$ 0.5	$ 0.5	$ 7.1	$ 0.7	$ 0.7	$ 3.3	$ 10.7
Gain on release of a below market contract liability									17.0	17.0
Asset impairment charges	$ 22.2								$ 8.0	$ 8.0

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2014

Basis of Presentation

New Accounting Pronouncements

New Accounting Pronouncements

        In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08 improves the definition of discontinued operations by limiting the discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have or will have a major effect on an entity's operations and financial results, will require expanded disclosures for discontinued operations, and will require disclosure of the pre-tax profit or loss of an individually significant component of an entity that does not qualify for discontinued operations reporting. The amendments in ASU 2014-08 are effective prospectively for disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. Early adoption is permitted but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. The implementation of the amended guidance is not expected to have a material impact on the Company's financial condition, results of operations, and cash flows.

        In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). In summary, the core principle of Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: identify the contract(s) with a customer; identify the performance obligations in the contract; determine the transaction price; allocate the transaction price to the performance obligations in the contract; and recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 supersedes the revenue recognition requirements in Accounting Standards Codification Topic No. 605, "Revenue Recognition," including most industry-specific guidance throughout the Industry Topics of the Accounting Standards Codification. ASU 2014-09 is effective for public entities within annual periods beginning after December 15, 2016, including interim periods within that reporting period, and early application is not permitted. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. The implementation of the amended guidance is not expected to have a material impact on the Company's financial condition, results of operations, and cash flows.

        In June 2014, the FASB issued ASU No. 2014-12, Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Accounting Standards Codification Topic No. 718, "Compensation—Stock Compensation" ("ASC 718"), as it relates to awards with performance conditions that affect vesting to account for such awards. The amendments in ASU 2014-12 are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in ASU 2014-12 either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The implementation of the amended guidance is not expected to have a material impact on the Company's financial condition, results of operations, and cash flows.

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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, 2013	$ 752,694	$ 626	$ 1,613,256	$ (698,930)	$ (162,258)
Increase (Decrease) in Stockholders' Equity
Net loss	(243,569)			(243,569)
Other comprehensive income, net of tax	22,124				22,124
Dividends paid, $0.02 per share	(1,284)		(1,284)
Stock based compensation	4,865		4,865
Issuance of common stock in connection with the extinguishment of debt	22,696	32	22,664
Other	(191)		(191)
Balance at Jun. 30, 2014	$ 557,335	$ 658	$ 1,639,310	$ (942,499)	$ (140,134)

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Jun. 30, 2014	Dec. 31, 2013
CONDENSED CONSOLIDATED BALANCE SHEETS
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	65,824,776	62,577,924

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

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 Bankruptcy 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, May 2013 and December 2013. At the request of the IRS, in December 2013 the Bankruptcy Court granted an additional extension of time to submit the final order.

        The amounts initially asserted by the Proof of Claim do not reflect the subsequent resolution of various issues through settlements or concessions by the parties. The Company believes that any financial exposure with respect to those issues that have not been resolved or settled in the Proof of Claim is limited to interest and possible penalties and the amount of tax assessed has been offset by tax reductions in future years. All of the issues in the Proof of Claim, which have not been settled or conceded, have been litigated before the Bankruptcy Court and are subject to appeal but only at the conclusion of the entire Adversary Proceeding.

        The IRS completed its audit of the Company's federal income tax returns for the years ended May 31, 2000 through December 31, 2005. The IRS issued 30-Day Letters to the Company in June 2010, proposing changes to tax for these tax years. The Company believes its tax filing positions have substantial merit and filed a formal protest with the IRS within the prescribed 30-day time limit for those issues which have not been previously settled or conceded. The IRS filed a rebuttal to the Company's formal protest and the case was assigned to the Appeals Division of the IRS. The Appeals Division convened a hearing on March 8, 2011 and heard arguments from both parties as to issues not settled or conceded for the 2000 through 2005 audit period. As of June 30, 2014, 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 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. Also in 2012, the Company received notification from the IRS that the audit of the 2006 through 2008 tax years had been reopened for further review. The IRS issued a revised IRS Appeals Transmittal Letter in April 2013 conceding the proposed adjustment to the worthless stock deduction. As of June 30, 2014, 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 conducting an audit of the Company's income tax returns filed for 2009 through 2012. Since the examination is ongoing, any resulting tax deficiency or overpayment cannot be estimated at this time. During 2014, 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 the 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 2014 settling the issues in the Proof of Claim. A final order by the Bankruptcy Court would permit a resolution of similar issues for the tax years currently in Appeals Division (2000-2008) and currently under IRS Exam (2009-2012). As of June 30, 2014, the Company had $35.0 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 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 Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), allowing other Potentially Responsible Parties (PRPs) 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, the EPA sent an "Offer to Conduct Work" letter to Walter Coke and four other PRPs notifying them that the EPA had completed sampling at 1,100 residential properties and that 400 properties exceeded Regional Removal Management Levels (RML's) and offered the PRPs an opportunity to cleanup 50 Phase I properties. The Company has notified the EPA that it has declined the Offer to Conduct Work.

        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 is no longer in effect. The objectives of the 2012 Order are to perform Corrective Measure Studies, implement remedies if necessary, and implement and maintain institutional controls if required at the Walter Coke facility.

        The Company has incurred costs to investigate the presence of contamination at the Walter Coke facility and to define remediation actions to address this environmental liability in accordance with the agreements reached with the EPA under the RFI and the residential soil sampling conducted by Walter Coke in the neighborhoods surrounding its facility. At June 30, 2014, the Company had 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. As of June 30, 2014, the amount of this accrual was 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 the proceeding was filed with the Court, which the Court granted on November 21, 2013. As a result of the Court's action, the case is currently stayed. The Company believes that there is no merit to the claims alleged in this action and intends to vigorously defend this matter.

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 seek to represent a class of Walter Energy shareholders who purchased common stock between April 20, 2011 and September 21, 2011.

        These complaints allege 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 allege 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 (the "1934 Act"), 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 Energy, 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. The parties are now in the process of discovery. Plaintiffs filed a motion for class certification on August 15, 2013. On March 18, 2014, the Court denied Plaintiffs' motion for class certification without prejudice to refiling and rebriefing and stayed this litigation pending a decision by the United States Supreme Court in Halliburton Co., et al. v. Erica P. John Fund, Inc. ("Halliburton II"). Following the U.S. Supreme Court's decision in Halliburton II on June 23, 2014, the parties have until August 22, 2014 to file a motion with the Court requesting the stay be lifted and also to submit a jointly proposed briefing schedule on a second motion for class certification, if such a motion is desired by Plaintiffs.

        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 allege similar claims to those alleged in the Rush complaint. The complaints variously assert 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 seek 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 and results of operations.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Jul. 31, 2014
Document and Entity Information
Entity Registrant Name	Walter Energy, Inc.
Entity Central Index Key	0000837173
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		65,827,966
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

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Derivative Financial Instruments

6 Months Ended

Jun. 30, 2014

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 in July 2014 and is being accounted for as a cash flow hedge. Changes in the fair value of the effective portion of the hedge are reported in accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during the hedged transactions affect earnings. The Company recognized $1.1 million related to the effective portion of the hedge for the six months ended June 30, 2014 in interest expense, net in the Condensed Consolidated Statements of Operations. Upon the prepayment of term loan A in the first quarter of 2014, the interest rate swap became fully ineffective. The ineffective portion of the change in the fair value of the hedge is recognized directly in earnings. The Company recognized income of approximately $1.0 million and expense of $0.7 million for the three and six months ended June 30, 2014, respectively, related to the ineffective portion of the hedge in other income (loss) in the Condensed Consolidated Statements of Operations.

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 in July 2014 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.

        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.

	June 30, 2014		December 31, 2013
Asset derivatives designated as cash flow hedging instruments:
Interest rate cap(1)	$	—	$	1
Liability derivatives designated as cash flow hedging instruments:
Interest rate swaps(2)	$	1,019	$	3,080

(1)

$1 thousand was included in other current assets within the Condensed Consolidated Balance Sheets as of December 31, 2013.

(2)

$1.0 million and $3.1 million were included within other current liabilities within the Condensed Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013, respectively.

        The following tables present the gains and losses from derivative instruments for the three and six months ended June 30, 2014 and 2013 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)
	Three months ended June 30,					Three months ended June 30,
Derivatives designated as cash flow hedging instruments	2014		2013			2014		2013
Interest rate swaps	$	—	$	1,142		$	—	$	(614	)
Interest rate cap		—		(2	)		—		—
Total	$	—	$	1,140		$	—	$	(614	)

	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)						Loss, net of tax, reclassified from accumulated other comprehensive income (loss) to earnings (ineffective portion)(2)
	Six months ended June 30,					Six months ended June 30,						Six months ended June 30,
Derivatives designated as cash flow hedging instruments	2014		2013			2014			2013			2014		2013
Interest rate swaps	$	1,303	$	2,482		$	(677	)	$	(1,230	)	$	1,053	$	—
Interest rate cap		—		(4	)		—			—			—		—
Total	$	1,303	$	2,478		$	(677	)	$	(1,230	)	$	1,053	$	—

(1)

The effective portion of the interest rate swap amounts are reported within interest expense, net in the Condensed Consolidated Statements of Operations.

(2)

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

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues:
Sales	$ 377,982	$ 437,798	$ 783,211	$ 927,407
Miscellaneous income	369	3,698	9,025	5,432
Total revenues	378,351	441,496	792,236	932,839
Costs and expenses:
Cost of sales (exclusive of depreciation and depletion)	343,761	367,616	693,636	788,550
Depreciation and depletion	69,816	68,320	146,240	149,510
Selling, general and administrative	19,002	27,129	39,781	57,803
Postretirement benefits	13,869	14,725	27,738	29,450
Restructuring and asset impairments	31,342	(5,741)	31,342	1,699
Total costs and expenses	477,790	472,049	938,737	1,027,012
Operating loss	(99,439)	(30,553)	(146,501)	(94,173)
Interest expense, net	(73,402)	(52,985)	(138,834)	(98,952)
Gain (loss) on extinguishment of debt	11,397		(2,492)	(6,001)
Other income (loss), net	978	(714)	(778)	(609)
Loss before income tax benefit	(160,466)	(84,252)	(288,605)	(199,735)
Income tax benefit	(9,075)	(49,760)	(45,036)	(115,799)
Net loss	$ (151,391)	$ (34,492)	$ (243,569)	$ (83,936)
Net loss per share:
Basic (in dollars per share)	$ (2.33)	$ (0.55)	$ (3.81)	$ (1.34)
Diluted (in dollars per share)	$ (2.33)	$ (0.55)	$ (3.81)	$ (1.34)
Dividends per share (in dollars per share)	$ 0.01	$ 0.125	$ 0.02	$ 0.25

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Inventories

6 Months Ended

Jun. 30, 2014

Inventories

Inventories

Note 3—Inventories

        Inventories are summarized as follows (in thousands):

	June 30, 2014		December 31, 2013
Coal	$	211,874	$	238,820
Raw materials and supplies		62,608		73,827
Total inventories	$	274,482	$	312,647

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Restructuring and Asset Impairments

6 Months Ended

Jun. 30, 2014

Restructuring and Asset Impairments

Restructuring and Asset Impairments

Note 2—Restructuring and Asset Impairments

        In the second quarter of 2014, the Company idled the Canadian Operations, which included the Wolverine, Brule and Willow Creek mines in the Canadian and U.K. Operations segment. We placed the Wolverine mine on idle status in April and the Brazion operations (which includes the operations of Brule and Willow Creek) on idle status in June and recognized restructuring charges for this idling of approximately $7.1 million in the Canadian and U.K. Operations segment. The Company also recognized restructuring charges of approximately $0.7 million in the U.S. Operations segment and $0.5 million in the Other segment for the three and six months ended June 30, 2014. For the three and six months ended June 30, 2013, the Company recognized a gain of approximately $17.0 million due to the release of a below market contract liability that was obtained through the acquisition of North River which was partially offset by asset impairment charges of approximately $8.0 million, all related to the accelerated closure of the North River mine. The Company also incurred $3.3 million and $10.7 million of costs related to the curtailment of the Willow Creek mine for the three and six months ended June 30, 2013, respectively. All of these charges are presented as restructuring and asset impairments in the Condensed Consolidated Statements of Operations.

Assets Held for Sale

        On May 2, 2014, the Company reached an agreement in principle with the Alabama State Port Authority to sell both the Blue Creek Coal Terminal located in the Port of Mobile and an additional parcel of more than 60 acres of land (collectively "BCCT") for a total consideration of $25.0 million. Additionally, the parties have agreed in principle to amend and extend the existing coal handling agreement and make certain improvements to the coal handling facility at the port. As of June 30, 2014, the Company classified the BCCT as assets held for sale in current assets in the Condensed Consolidated Balance Sheets. The BCCT assets are part of the U.S. Operations segment. The Company anticipates the sale closing in the third quarter of 2014. The Company recognized an impairment charge of approximately $23.0 million as of June 30, 2014 to reduce the carrying value of these assets to their fair value less costs to sell. The carrying value of the BCCT assets as of December 31, 2013 was $47.5 million and was included in property, plant and equipment, net, within the Condensed Consolidated Balance Sheets. Fair value was determined based upon the anticipated sales price of the BCCT asset sale and is categorized as a Level 3 in the fair value hierarchy. This charge is included in restructuring and asset impairments in the Condensed Consolidated Statements of Operations.

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Subsequent Events

6 Months Ended

Jun. 30, 2014

Subsequent Events

Subsequent Events

Note 14—Subsequent Events

Credit Agreement Amendments

        On July 7, 2014, the Company entered into an amendment (the "Seventh Amendment") to the 2011 Credit Agreement dated as of April 1, 2011 (as amended, the "Credit Agreement"), which, among other things, modified the financial maintenance ratio to be unlimited for the quarter ended June 30, 2014 so long as the Company issued at least $275.0 million of additional first lien notes within seven days (or such longer period during the fiscal quarter ending September 30, 2014 as may be determined by the administrative agent of the Credit Agreement) of the effective date of the Seventh Amendment. On July 14, 2014, concurrently with the closing of the issuance of $320.0 million aggregate principal amount of 9.50% Senior Secured Notes (the "New First Lien Notes"), the financial maintenance ratio for the second quarter of 2014 became unlimited.

        On July 8, 2014, the Company entered into an amendment (the "Eighth Amendment") to the Credit Agreement, which, among other things, provided the Company with an additional tranche of revolving loan commitments (the "New Revolving Credit Facility Tranche") in the amount of $61.2 million, thereby increasing the total available commitments under the revolving credit facility in the Credit Agreement to $375.0 million. The New Revolving Credit Facility Tranche would have matured in 2017. Effectiveness of the Eighth Amendment was conditioned upon the Company pricing a bond offering in an aggregate principal amount of no less than $275.0 million and certain other conditions, including making arrangements so that, immediately after giving effect to the funding of any loans under the New Revolving Credit Facility Tranche, proceeds of such bond issuance are applied to repay certain revolving loans and permanently terminate certain revolving commitments (including the New Revolving Credit Facility Tranche), required under the Credit Agreement. The Eighth Amendment also reduced the amount available under the 2016 revolver from $69.0 million to $16.9 million and reduced the amount available under the 2017 revolver from $244.8 million to $60.0 million for total availability of $76.9 million. On July 14, 2014, concurrently with the closing of the issuance of the New First Lien Notes, the Eighth Amendment became effective and the New Revolving Credit Facility Tranche was terminated.

New First Lien Notes

        On July 14, 2014, the Company issued the New First Lien Notes. The New First Lien Notes are an addition to the $450.0 million aggregate principal amount of the Company's 9.50% Senior Secured Notes due 2019 that were issued on September 27, 2013 and the $200.0 million aggregate principal amount of 9.50% Senior Secured Notes due 2019 (the "9.50% Add-On Senior Secured Notes") that were issued on March 27, 2014 (collectively, the "First Lien Notes"). The First Lien Notes will mature on October 15, 2019, and interest is payable on April 15 and October 15 of each year. The next interest payment date for the First Lien Notes is October 15, 2014.

        The First Lien Notes are unconditionally guaranteed, jointly and severally, by the Guarantors. The First Lien Notes and the guarantees are secured on a first priority basis, equally and ratably with the Company's Credit Agreement and any future pari passu secured obligations (subject to permitted liens) on substantially all of the Company's and the Guarantor's property and assets, which also secure the Company's 11.0%/12.0% Senior Secured PIK Toggle Notes due 2020 (the "Second Lien Notes") on a second priority basis.

        At any time prior to October 15, 2016, the Company may redeem up to 35% of the aggregate principal amount of the First Lien Notes with the net cash proceeds from certain equity offerings, at a redemption price of 109.50% of the aggregate principal amount. The Company may redeem the First Lien 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 First Lien Notes plus a "make-whole" premium. The Company may redeem the First Lien Notes, in whole or in part at redemption prices equal to 107.125% for the year commencing October 15, 2016, 102.375% for the year 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 First Lien Notes, the Company will be required to offer to repurchase each holder's First Lien Notes at a price equal to 101% of the aggregate principal amount.

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Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2014

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 six months ended June 30, 2014, net of tax (in thousands).

	Pension and other postretirement plans			Unrealized gain/(loss) on hedges			Foreign currency translation adjustment			Total
Beginning balance as of December 31, 2013	$	(165,150	)	$	(1,679	)	$	4,571		$	(162,258	)
Other comprehensive income before reclassifications		—			1,303			13,428			14,731
Amounts reclassified from accumulated other comprehensive income (loss)		7,017			376			—(1	)		7,393
Net current-period other comprehensive income		7,017			1,679			13,428			22,124
Ending balance as of June 30, 2014	$	(158,133	)	$	—		$	17,999		$	(140,134	)

(1)

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

        The following table presents amounts reclassified out of each component of accumulated other comprehensive income (loss) for the six months ended June 30, 2014 (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 (effective portion)	$	(1,095	)	Interest expense, net
Interest rate swaps (ineffective portion)		1,701		Other loss
		606		Total before tax
		(230	)	Income tax benefit
	$	376		Net of tax
Amortization of pension and postretirement benefit plans:
Prior service cost	$	736		(a)
Net actuarial loss		8,976		(a)
Settlement loss		1,627		(a)
		11,339		Total before tax
		(4,322	)	Income tax benefit
	$	7,017		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

6 Months Ended

Jun. 30, 2014

Pension and Other Postretirement Benefits

Pension and Other Postretirement Benefits

Note 6—Pension and Other Postretirement Benefits

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

	Pension Benefits						Other Postretirement Benefits
	For the three months ended June 30,						For the three months ended June 30,
	2014			2013			2014		2013
Components of net periodic benefit cost:
Service cost	$	1,701		$	1,766		$	1,944	$	2,486
Interest cost		3,316			3,070			7,726		7,198
Expected return on plan assets		(4,553	)		(4,235	)		—		—
Amortization of prior service cost		61			66			307		307
Amortization of net actuarial loss		550			2,434			3,892		4,734
Settlement loss		843			—			—		—
Net periodic benefit cost	$	1,918		$	3,101		$	13,869	$	14,725

	Pension Benefits						Other Postretirement Benefits
	For the six months ended June 30,						For the six months ended June 30,
	2014			2013			2014		2013
Components of net periodic benefit cost:
Service cost	$	3,402		$	3,532		$	3,888	$	4,972
Interest cost		6,664			6,140			15,452		14,396
Expected return on plan assets		(9,106	)		(8,470	)		—		—
Amortization of prior service cost		122			132			614		614
Amortization of net actuarial loss		1,192			4,868			7,784		9,468
Settlement loss		1,627			—			—		—
Net periodic benefit cost	$	3,901		$	6,202		$	27,738	$	29,450

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Income Taxes

6 Months Ended

Jun. 30, 2014

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 six months ended June 30, 2014, the income tax benefit was determined based on the annual effective tax rate method. The Company recognized an income tax benefit of $45.0 million for the six months ended June 30, 2014 compared to an income tax benefit of $115.8 million for the six months ended June 30, 2013. The decrease in the income tax benefit year over year was primarily due to a full valuation allowance provided against the U.S. net deferred tax assets recorded for U.S. operating losses in the current period. During the second quarter of 2014, the Canada Revenue Agency ("CRA") concluded its income tax audit of the tax years ended December 31, 2011 and March 31, 2011. As a result of settling these audit years, the Company recorded a charge of $3.2 million in the current quarter to reflect the reduction of certain tax attributes, including net operating loss carryovers. The Company's effective tax rate for the six months ended June 30, 2014 and 2013 reflects 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 Company utilizes the asset and liability method of accounting for income taxes and records deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Based upon the Company's review of all positive and negative evidence, including its three year U.S. cumulative pre-tax book loss, it concluded that a full valuation allowance should continue to be recorded against its U.S net deferred tax assets at June 30, 2014. In the future, if the Company determines that it is more likely than not that it will realize its U.S. net deferred tax assets, it will reverse the applicable portion of the valuation allowance and recognize an income tax benefit in the period in which such determination is made.

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Debt

6 Months Ended

Jun. 30, 2014

Debt

Debt

Note 5—Debt

        Debt consisted of the following (in thousands):

	June 30, 2014			December 31, 2013			Weighted Average Stated Interest Rate At June 30, 2014	Final Maturity
2011 term loan A	$	—		$	406,566		N/A	N/A
2011 term loan B(1)		978,178			978,178		7.25%	2018
Revolving credit facility(1)		—			—		N/A	2016/2017
9.875% senior notes(2)		465,000			500,000		9.875%	2020
8.50% senior notes		450,000			450,000		8.50%	2021
9.50% senior secured notes		450,000			450,000		9.50%	2019
9.50% add-on senior secured notes		200,000			—		9.50%	2019
11.0% / 12.0% senior secured PIK toggle notes		350,000			—		11.00%	2020
Other(3)		26,373			14,876		Various	Various
Debt discount, net		(23,247	)		(20,788	)	N/A	N/A
Total debt		2,896,304			2,778,832
Less: current debt(3)		(15,353	)		(9,210	)
Total long-term debt	$	2,880,951		$	2,769,622

(1)

As of June 30, 2014, the revolving credit facility and term loan B interest rates were tied to LIBOR or CDOR, plus a credit spread of 550 basis points for the revolver and 675 basis points with a minimum LIBOR floor of 100 basis points for the term loan B.

(2)

On April 23, 2014, the Company issued an aggregate of 3.15 million shares of its common stock in exchange for $35.0 million of its 9.875% Senior Notes due 2020. The Company recognized a net gain of $11.4 million in gain (loss) on extinguishment of debt in the Condensed Consolidated Statements of Operations in the current quarter.

(3)

Includes capital lease obligations and an equipment financing agreement.

        The Company's minimum debt repayment schedule, excluding interest, as of June 30, 2014 is as follows (in thousands):

	Payments Due
	2014		2015		2016		2017		2018		Thereafter
2011 term loan B	$	—	$	—	$	—	$	—	$	978,178	$	—
9.875% senior notes		—		—		—		—		—		465,000
8.50% senior notes		—		—		—		—		—		450,000
9.50% senior secured notes		—		—		—		—		—		450,000
9.50% add-on senior secured notes		—		—		—		—		—		200,000
11.0% / 12.0% senior secured PIK toggle notes		—		—		—		—		—		350,000
Other		7,836		12,775		5,762		—		—		—
	$	7,836	$	12,775	$	5,762	$	—	$	978,178	$	1,915,000

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

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Net Loss Per Share

6 Months Ended

Jun. 30, 2014

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 six months ended June 30, 2014 and 2013 is as follows (in thousands, except per share data):

	For the three months ended June 30,
	2014						2013
	Basic			Diluted			Basic			Diluted
Numerator:
Net loss	$	(151,391	)	$	(151,391	)	$	(34,492	)	$	(34,492	)
Denominator:
Average number of common shares outstanding(1)		65,024			65,024			62,632			62,632
Net loss per share	$	(2.33	)	$	(2.33	)	$	(0.55	)	$	(0.55	)

	For the six months ended June 30,
	2014						2013
	Basic			Diluted			Basic			Diluted
Numerator:
Net loss	$	(243,569	)	$	(243,569	)	$	(83,936	)	$	(83,936	)
Denominator:
Average number of common shares outstanding(1)		63,983			63,983			62,614			62,614
Net loss per share	$	(3.81	)	$	(3.81	)	$	(1.34	)	$	(1.34	)

(1)

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 restricted stock units outstanding for the three months ended June 30, 2014 and 2013 totaling 1,886 and 600, respectively, were excluded from the calculation above because their effect would have been anti-dilutive. Additionally, the weighted average number of stock options and restricted stock units outstanding for the six months ended June 30, 2014 and 2013 totaling 1,348 and 482, respectively, were excluded from the calculation above because their effect would have been anti-dilutive.

        The tables below sets forth stock options exercised and restricted stock units vested for the three and six months ended June 30, 2014 and 2013:

	For the three months ended June 30,				For the six months ended June 30,
	2014		2013		2014		2013
Stock options exercised		8,659		—		18,300		24,831
Restricted stock units vested		42,849		8,803		78,552		25,676
Total		51,508		8,803		96,852		50,507

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Supplemental Guarantor and Non-Guarantor Financial Information (Tables)

6 Months Ended

Jun. 30, 2014

Supplemental Guarantor and Non-Guarantor Financial Information

Schedule of supplemental condensed consolidating balance sheets

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)
JUNE 30, 2014
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Total Consolidated
ASSETS
Cash and cash equivalents	$	255,620		$	27	$	37,825	$	—		$	293,472
Receivables, net		102,008			103,686		25,338		—			231,032
Intercompany receivables		—			179,412		60,357		(239,769	)		—
Intercompany loans receivable		—			—		352		(352	)		—
Inventories		—			130,447		144,035		—			274,482
Deferred income taxes		26,390			4,733		956		—			32,079
Prepaid expenses		1,457			38,683		5,221		—			45,361
Assets held for sale		—			24,150		—		—			24,150
Other current assets		9,666			478		2,360		—			12,504
Total current assets		395,141			481,616		276,444		(240,121	)		913,080
Mineral interests, net		—			6,897		2,880,715		—			2,887,612
Property, plant and equipment, net		7,680			712,731		826,869		—			1,547,280
Deferred income taxes		3,046			7,990		—		(11,036	)		—
Investment in subsidiaries		3,435,398			81,384		—		(3,516,782	)		—
Other long-term assets		85,925			18,718		9,283		—			113,926
	$	3,927,190		$	1,309,336	$	3,993,311	$	(3,767,939	)	$	5,461,898
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—		$	7,461	$	7,892	$	—		$	15,353
Accounts payable		6,968			42,342		11,141		—			60,451
Accrued expenses		45,962			60,237		36,632		—			142,831
Intercompany payables		239,769			—		—		(239,769	)		—
Intercompany loans payable		352			—		—		(352	)		—
Accumulated other postretirement benefits obligation		945			29,942		—		—			30,887
Other current liabilities		179,634			21,313		24,766		—			225,713
Total current liabilities		473,630			161,295		80,431		(240,121	)		475,235
Long-term debt		2,869,931			9,355		1,665		—			2,880,951
Accumulated other postretirement benefits obligation		(497	)		575,353		—		—			574,856
Deferred income taxes		—			—		794,627		(11,036	)		783,591
Other long-term liabilities		26,791			81,079		82,060		—			189,930
Total liabilities		3,369,855			827,082		958,783		(251,157	)		4,904,563
Stockholders' equity		557,335			482,254		3,034,528		(3,516,782	)		557,335
Total liabilities and stockholders' equity	$	3,927,190		$	1,309,336	$	3,993,311	$	(3,767,939	)	$	5,461,898

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS (Unaudited)
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

Schedule of supplemental condensed consolidating statements of operations

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, 2014
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Total Consolidated
Revenues:
Sales	$	—		$	277,856		$	100,126		$	—	$	377,982
Miscellaneous income (loss)		324			1,822			(1,777	)		—		369
		324			279,678			98,349			—		378,351
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			226,588			117,173			—		343,761
Depreciation and depletion		613			31,840			37,363			—		69,816
Selling, general and administrative		1,961			10,935			6,106			—		19,002
Postretirement benefits		(44	)		13,913			—			—		13,869
Restructuring and asset impairments		514			23,686			7,142			—		31,342
		3,044			306,962			167,784			—		477,790
Operating loss		(2,720	)		(27,284	)		(69,435	)		—		(99,439	)
Interest expense, net		(72,338	)		(292	)		(772	)		—		(73,402	)
Gain on extinguishment of debt		11,397			—			—			—		11,397
Other income (loss)		981			—			(3	)		—		978
Loss before income tax expense (benefit)		(62,680	)		(27,576	)		(70,210	)		—		(160,466	)
Income tax expense (benefit)		16,128			(7,753	)		(17,450	)		—		(9,075	)
Equity in net losses of subsidiaries		(72,583	)		—			—			72,583		—
Net loss	$	(151,391	)	$	(19,823	)	$	(52,760	)	$	72,583	$	(151,391	)

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Revenues:
Sales	$	—		$	299,198		$	138,600		$	—		$	437,798
Miscellaneous income		220			779			2,699			—			3,698
		220			299,977			141,299			—			441,496
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			211,314			156,302			—			367,616
Depreciation and depletion		511			33,673			34,136			—			68,320
Selling, general and administrative		3,939			13,921			9,269			—			27,129
Postretirement benefits		(55	)		14,780			—			—			14,725
Restructuring and asset impairments		—			(9,063	)		3,322			—			(5,741	)
		4,395			264,625			203,029			—			472,049
Operating income (loss)		(4,175	)		35,352			(61,730	)		—			(30,553	)
Interest income (expense), net		(57,131	)		6,303			(2,157	)		—			(52,985	)
Other loss		—			—			(714	)		—			(714	)
Income (loss) before income tax expense (benefit)		(61,306	)		41,655			(64,601	)		—			(84,252	)
Income tax expense (benefit)		(22,108	)		8,533			(36,185	)		—			(49,760	)
Equity in earnings of subsidiaries		4,706			—			—			(4,706	)		—
Net income (loss)	$	(34,492	)	$	33,122		$	(28,416	)	$	(4,706	)	$	(34,492	)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2014
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Total Consolidated
Revenues:
Sales	$	—		$	583,898		$	199,313		$	—	$	783,211
Miscellaneous income		979			3,694			4,352			—		9,025
		979			587,592			203,665			—		792,236
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			461,954			231,682			—		693,636
Depreciation and depletion		1,261			67,048			77,931			—		146,240
Selling, general and administrative		3,114			23,871			12,796			—		39,781
Postretirement benefits		(88	)		27,826			—			—		27,738
Restructuring and asset impairments		514			23,686			7,142			—		31,342
		4,801			604,385			329,551			—		938,737
Operating loss		(3,822	)		(16,793	)		(125,886	)		—		(146,501	)
Interest income (expense), net		(144,742	)		6,962			(1,054	)		—		(138,834	)
Loss on extinguishment of debt		(2,492	)		—			—			—		(2,492	)
Other loss		(719	)					(59	)		—		(778	)
Loss before income tax benefit		(151,775	)		(9,831	)		(126,999	)		—		(288,605	)
Income tax benefit		(2,433	)		(4,359	)		(38,244	)		—		(45,036	)
Equity in net losses of subsidiaries		(94,227	)		—			—			94,227		—
Net loss	$	(243,569	)	$	(5,472	)	$	(88,755	)	$	94,227	$	(243,569	)

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Total Consolidated
Revenues:
Sales	$	—		$	614,010		$	313,397		$	—	$	927,407
Miscellaneous income		773			2,969			1,690			—		5,432
		773			616,979			315,087			—		932,839
Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			458,991			329,559			—		788,550
Depreciation and depletion		996			74,083			74,431			—		149,510
Selling, general and administrative		10,150			27,254			20,399			—		57,803
Postretirement benefits		(110	)		29,560			—			—		29,450
Restructuring and asset impairments		—			(8,947	)		10,646			—		1,699
		11,036			580,941			435,035			—		1,027,012
Operating income (loss)		(10,263	)		36,038			(119,948	)		—		(94,173	)
Interest income (expense), net		(108,627	)		13,283			(3,608	)		—		(98,952	)
Loss on extinguishment of debt		(6,001	)		—			—			—		(6,001	)
Other loss		—			—			(609	)		—		(609	)
Income (loss) before income tax expense (benefit)		(124,891	)		49,321			(124,165	)		—		(199,735	)
Income tax expense (benefit)		(48,775	)		5,137			(72,161	)		—		(115,799	)
Equity in net losses of subsidiaries		(7,820	)		—			—			7,820		—
Net income (loss)	$	(83,936	)	$	44,184		$	(52,004	)	$	7,820	$	(83,936	)

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

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE
INCOME (LOSS) (UNAUDITED)
THREE MONTHS ENDED JUNE 30, 2014
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net loss	$	(151,391	)	$	(19,823	)	$	(52,760	)	$	72,583		$	(151,391	)
Other comprehensive income (loss):
Change in pension and postretirement benefit plans, net of tax		3,498			3,187			—			(3,187	)		3,498
Change in foreign currency translation adjustment		11,264			—			11,264			(11,264	)		11,264
Total other comprehensive income		14,762			3,187			11,264			(14,451	)		14,762
Total comprehensive loss	$	(136,629	)	$	(16,636	)	$	(41,496	)	$	58,132		$	(136,629	)

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

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

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE
INCOME (LOSS) (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2014
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Net loss	$	(243,569	)	$	(5,472	)	$	(88,755	)	$	94,227		$	(243,569	)
Other comprehensive income (loss):
Change in pension and postretirement benefit plans, net of tax		7,017			6,991			—			(6,991	)		7,017
Change in unrealized gain on hedges, net of tax		1,679			3			—			(3	)		1,679
Change in foreign currency translation adjustment		13,428			—			13,428			(13,428	)		13,428
Total other comprehensive income		22,124			6,994			13,428			(20,422	)		22,124
Total comprehensive income (loss)	$	(221,445	)	$	1,522		$	(75,327	)	$	73,805		$	(221,445	)

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

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

Schedule of supplemental condensed consolidating statement of cash flows

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2014
(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(112,535	)	$	95,649		$	(22,122	)	$	—		$	(39,008	)
INVESTING ACTIVITIES
Additions to property, plant and equipment		(1,691	)		(37,428	)		(4,357	)		—			(43,476	)
Intercompany loans made		(3,700	)		—			—			3,700			—
Intercompany loans received		1,828			—			—			(1,828	)		—
Other		—			—			(350	)		—			(350	)
Cash flows used in investing activities		(3,563	)		(37,428	)		(4,707	)		1,872			(43,826	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		553,000			—			—			—			553,000
Retirements of debt		(406,566	)		(3,590	)		(3,968	)		—			(414,124	)
Dividends paid		(1,284	)		—			—			—			(1,284	)
Debt issuance costs		(21,325	)		—			—			—			(21,325	)
Advances from (to) consolidated entities		13,934			(54,705	)		40,771			—			—
Intercompany borrowings		—			—			3,700			(3,700	)		—
Intercompany payments made		—			—			(1,828	)		1,828			—
Other		(191	)		—			—			—			(191	)
Cash flows provided by (used in) financing activities		137,568			(58,295	)		38,675			(1,872	)		116,076
Effect of foreign exchange rates on cash		—			—			(588	)		—			(588	)
Net increase (decrease) in cash and cash equivalents		21,470			(74	)		11,258			—			32,654
Cash and cash equivalents at beginning of period		234,150			101			26,567			—			260,818
Cash and cash equivalents at end of period	$	255,620		$	27		$	37,825		$	—		$	293,472

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

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated
Cash flows provided by (used in) operating activities	$	(130,045	)	$	112,000		$	(6,057	)	$	—		$	(24,102	)
INVESTING ACTIVITIES
Additions to property, plant and equipment		(459	)		(58,130	)		(21,662	)		—			(80,251	)
Intercompany notes issued		(54,736	)		—			—			54,736			—
Intercompany notes proceeds		23,500			—			—			(23,500	)		—
Investments in subsidiaries		(50,103	)		—			—			50,103			—
Other		—			—			964			—			964
Cash flows used in investing activities		(81,798	)		(58,130	)		(20,698	)		81,339			(79,287	)
FINANCING ACTIVITIES
Proceeds from issuance of debt		450,000			—			—			—			450,000
Retirements of debt		(250,000	)		(4,903	)		(4,297	)		—			(259,200	)
Dividends paid		(15,638	)		—			—			—			(15,638	)
Debt issuance costs		(15,080	)		—			—			—			(15,080	)
Advances from (to) consolidated entities		95,962			(49,028	)		(46,934	)		—			—
Intercompany notes borrowings		—			—			54,736			(54,736	)		—
Intercompany notes payments		—			—			(23,500	)		23,500			—
Investment from Parent		—			—			50,103			(50,103	)		—
Other		(600	)		—			—			—			(600	)
Cash flows provided by (used in) financing activities		264,644			(53,931	)		30,108			(81,339	)		159,482
Effect of foreign exchange rates on cash		—			—			(1,816	)		—			(1,816	)
Net increase (decrease) in cash and cash equivalents		52,801			(61	)		1,537			—			54,277
Cash and cash equivalents at beginning of period		83,833			61			32,707			—			116,601
Cash and cash equivalents at end of period	$	136,634		$	—		$	34,244		$	—		$	170,878

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Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Revenues:
Total Revenues	$ 378,351	$ 441,496	$ 792,236	$ 932,839
Segment operating income (loss):
Total operating loss	(99,439)	(30,553)	(146,501)	(94,173)
Less interest expense, net	(73,402)	(52,985)	(138,834)	(98,952)
Gain (loss) on extinguishment of debt	11,397		(2,492)	(6,001)
Other income (loss)	978	(714)	(778)	(609)
Loss before income tax benefit	(160,466)	(84,252)	(288,605)	(199,735)
Income tax benefit	(9,075)	(49,760)	(45,036)	(115,799)
Net loss	(151,391)	(34,492)	(243,569)	(83,936)
Depreciation and depletion:
Total depreciation and depletion	69,816	68,320	146,240	149,510
Capital expenditures:
Total capital expenditures	31,195	46,224	43,476	80,251
Segment assets:
Total Segment assets	5,461,898		5,461,898		5,590,860
Operating segment | U.S. Operations
Revenues:
Total Revenues	298,685	321,009	629,349	660,234
Segment operating income (loss):
Total operating loss	(30,409)	37,333	(24,539)	30,376
Depreciation and depletion:
Total depreciation and depletion	37,694	31,189	76,760	78,662
Capital expenditures:
Total capital expenditures	29,490	38,803	39,741	66,204
Segment assets:
Total Segment assets	1,230,287		1,230,287		1,265,255
Operating segment | Canadian and U.K. operations
Revenues:
Total Revenues	79,044	119,873	160,621	271,317
Segment operating income (loss):
Total operating loss	(66,426)	(66,347)	(119,044)	(115,113)
Depreciation and depletion:
Total depreciation and depletion	31,509	36,620	68,219	69,852
Capital expenditures:
Total capital expenditures	1,435	7,231	2,044	13,545
Segment assets:
Total Segment assets	3,667,691		3,667,691		3,687,925
Other
Revenues:
Total Revenues	622	614	2,266	1,288
Segment operating income (loss):
Total operating loss	(2,604)	(1,539)	(2,918)	(9,436)
Depreciation and depletion:
Total depreciation and depletion	613	511	1,261	996
Capital expenditures:
Total capital expenditures	270	190	1,691	502
Segment assets:
Total Segment assets	$ 563,920		$ 563,920		$ 637,680

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Segment Information

6 Months Ended

Jun. 30, 2014

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, 2013. The Company evaluates performance primarily based on operating income of the respective business segments.

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

	For the three months ended June 30,						For the six months ended June 30,
	2014			2013			2014			2013
Revenues:
U.S. Operations	$	298,685		$	321,009		$	629,349		$	660,234
Canadian and U.K. Operations		79,044			119,873			160,621			271,317
Other		622			614			2,266			1,288
Total revenues	$	378,351		$	441,496		$	792,236		$	932,839
Segment operating income (loss):
U.S. Operations	$	(30,409	)	$	37,333		$	(24,539	)	$	30,376
Canadian and U.K. Operations		(66,426	)		(66,347	)		(119,044	)		(115,113	)
Other		(2,604	)		(1,539	)		(2,918	)		(9,436	)
Total operating loss		(99,439	)		(30,553	)		(146,501	)		(94,173	)
Less interest expense, net		(73,402	)		(52,985	)		(138,834	)		(98,952	)
Gain (loss) on extinguishment of debt		11,397			—			(2,492	)		(6,001	)
Other income (loss)		978			(714	)		(778	)		(609	)
Loss before income tax benefit		(160,466	)		(84,252	)		(288,605	)		(199,735	)
Income tax benefit		(9,075	)		(49,760	)		(45,036	)		(115,799	)
Net loss	$	(151,391	)	$	(34,492	)	$	(243,569	)	$	(83,936	)
Depreciation and depletion:
U.S. Operations	$	37,694		$	31,189		$	76,760		$	78,662
Canadian and U.K. Operations		31,509			36,620			68,219			69,852
Other		613			511			1,261			996
Total	$	69,816		$	68,320		$	146,240		$	149,510
Capital expenditures:
U.S. Operations	$	29,490		$	38,803		$	39,741		$	66,204
Canadian and U.K. Operations		1,435			7,231			2,044			13,545
Other		270			190			1,691			502
Total	$	31,195		$	46,224		$	43,476		$	80,251

	June 30, 2014		December 31, 2013
Segment assets:
U.S. Operations	$	1,230,287	$	1,265,255
Canadian and U.K. Operations		3,667,691		3,687,925
Other		563,920		637,680
Total	$	5,461,898	$	5,590,860

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Inventories (Tables)

6 Months Ended

Jun. 30, 2014

Inventories

Schedule of inventories

  Inventories are summarized as follows (in thousands):

	June 30, 2014		December 31, 2013
Coal	$	211,874	$	238,820
Raw materials and supplies		62,608		73,827
Total inventories	$	274,482	$	312,647

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Fair Value of Financial Instruments (Details) (Recurring, USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Level 2 | Interest rate cap
Fair value information
Derivative assets		$ 1
Level 2 | Interest rate swaps
Fair value information
Derivative liabilities	1,019	3,080
Total Fair Value | Interest rate cap
Fair value information
Derivative assets		1
Total Fair Value | Interest rate swaps
Fair value information
Derivative liabilities	$ 1,019	$ 3,080

XML

Pension and Other Postretirement Benefits (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Pension Benefits
Components of net periodic benefit cost:
Service cost	$ 1,701	$ 1,766	$ 3,402	$ 3,532
Interest cost	3,316	3,070	6,664	6,140
Expected return on plan assets	(4,553)	(4,235)	(9,106)	(8,470)
Amortization of prior service cost	61	66	122	132
Amortization of net actuarial loss	550	2,434	1,192	4,868
Settlement loss	843		1,627
Net periodic benefit cost	1,918	3,101	3,901	6,202
Other Postretirement Benefits
Components of net periodic benefit cost:
Service cost	1,944	2,486	3,888	4,972
Interest cost	7,726	7,198	15,452	14,396
Amortization of prior service cost	307	307	614	614
Amortization of net actuarial loss	3,892	4,734	7,784	9,468
Net periodic benefit cost	$ 13,869	$ 14,725	$ 27,738	$ 29,450

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net loss	$ (151,391)	$ (34,492)	$ (243,569)	$ (83,936)
Other comprehensive income (loss):
Change in pension and postretirement benefit plans (net of tax: $2,154 and 4,322 and $2,883 and $5,765 for the three and six months ended June 30, 2014 and 2013, respectively)	3,498	4,658	7,017	9,317
Change in unrealized gain on hedges (net of tax: $1,034 for the six months ended June 30,2014 and $324 and $667 for the three and six months ended June 30, 2013, respectively)		526	1,679	1,248
Change in foreign currency translation adjustment	11,264	(1,461)	13,428	(17,086)
Change in unrealized gain (loss) on investments, net of tax		(1)		43
Total other comprehensive income (loss)	14,762	3,722	22,124	(6,478)
Total comprehensive loss	$ (136,629)	$ (30,770)	$ (221,445)	$ (90,414)

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Basis of Presentation

6 Months Ended

Jun. 30, 2014

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 of thermal coal and anthracite coal, as well as produces metallurgical coke and coal bed methane gas.

        The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. 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, 2013 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, 2013 has been derived from the audited consolidated financial statements for the year ended December 31, 2013 included in the Company's 2013 Annual Report filed on Form 10-K.

New Accounting Pronouncements

        In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08 improves the definition of discontinued operations by limiting the discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have or will have a major effect on an entity's operations and financial results, will require expanded disclosures for discontinued operations, and will require disclosure of the pre-tax profit or loss of an individually significant component of an entity that does not qualify for discontinued operations reporting. The amendments in ASU 2014-08 are effective prospectively for disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. Early adoption is permitted but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. The implementation of the amended guidance is not expected to have a material impact on the Company's financial condition, results of operations, and cash flows.

        In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). In summary, the core principle of Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: identify the contract(s) with a customer; identify the performance obligations in the contract; determine the transaction price; allocate the transaction price to the performance obligations in the contract; and recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 supersedes the revenue recognition requirements in Accounting Standards Codification Topic No. 605, "Revenue Recognition," including most industry-specific guidance throughout the Industry Topics of the Accounting Standards Codification. ASU 2014-09 is effective for public entities within annual periods beginning after December 15, 2016, including interim periods within that reporting period, and early application is not permitted. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. The implementation of the amended guidance is not expected to have a material impact on the Company's financial condition, results of operations, and cash flows.

        In June 2014, the FASB issued ASU No. 2014-12, Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Accounting Standards Codification Topic No. 718, "Compensation—Stock Compensation" ("ASC 718"), as it relates to awards with performance conditions that affect vesting to account for such awards. The amendments in ASU 2014-12 are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in ASU 2014-12 either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The implementation of the amended guidance is not expected to have a material impact on the Company's financial condition, results of operations, and cash flows.

Revision for Gain (Loss) on Extinguishment of Debt

        During the quarter ended June 30, 2014, we have corrected our classification of accelerated amortization of debt issuance costs that we recognized upon the extinguishment or partial extinguishment of debt to present these amounts as a component of the gain (loss) recognized upon the extinguishment of debt as one line item in the accompanying Condensed Consolidated Statements of Operations in accordance with FASB Accounting Standards Codification ("ASC") Section 470-50. Components of the gain (loss) on the extinguishment of debt were previously recognized within interest expense in the accompanying Condensed Consolidated Statements of Operations. We have concluded that this revision is not material to our previously issued financial statements, as the net effect of these revisions did not impact our operating loss, net loss, stockholders' equity or cash flows. Previously reported interest expense has decreased by the same amount to correct the classification and we also have elected to net interest income and interest expense. The following reflects the revisions for the relevant interim periods during 2014 and 2013:

	For the three months ended
	March 31
2014
Interest expense, prior to revision	$	79,396
Interest income		(75	)
Revision of loss on extinguishment of debt		(13,889	)
Interest expense, net, revised	$	65,432

	For the three months ended						For the six months ended
	March 31			June 30			June 30
2013
Interest expense, prior to revision	$	52,618		$	53,129		$	105,747
Interest income		(650	)		(144	)		(794	)
Revision of loss on extinguishment of debt		(6,001	)		—			(6,001	)
Interest expense, net, revised	$	45,967		$	52,985		$	98,952

        We intend to make conforming revisions to our annual consolidated financial statements for 2013 and 2012 when we file our Annual Report on Form 10-K for the year ending December 31, 2014. We have concluded that this revision is not material to our annual financial statements, as the net effect of these revisions did not impact our operating loss, net loss, stockholders' equity or cash flows. Previously reported interest expense has decreased by the same amount and we have netted interest income and interest expense. The following reflects the revisions that will be reported in our Form 10-K for the year ending December 31, 2014.

	2013			2012
Interest expense, prior to revision	$	233,854		$	139,356
Interest income		(1,103	)		(804	)
Revision of loss on extinguishment of debt		(11,168	)		(5,555	)
Interest expense, net, revised	$	221,583		$	132,997

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Debt (Tables)

6 Months Ended

Jun. 30, 2014

Debt

Schedule of debt instruments

  Debt consisted of the following (in thousands):

	June 30, 2014			December 31, 2013			Weighted Average Stated Interest Rate At June 30, 2014	Final Maturity
2011 term loan A	$	—		$	406,566		N/A	N/A
2011 term loan B(1)		978,178			978,178		7.25%	2018
Revolving credit facility(1)		—			—		N/A	2016/2017
9.875% senior notes(2)		465,000			500,000		9.875%	2020
8.50% senior notes		450,000			450,000		8.50%	2021
9.50% senior secured notes		450,000			450,000		9.50%	2019
9.50% add-on senior secured notes		200,000			—		9.50%	2019
11.0% / 12.0% senior secured PIK toggle notes		350,000			—		11.00%	2020
Other(3)		26,373			14,876		Various	Various
Debt discount, net		(23,247	)		(20,788	)	N/A	N/A
Total debt		2,896,304			2,778,832
Less: current debt(3)		(15,353	)		(9,210	)
Total long-term debt	$	2,880,951		$	2,769,622

(1)

As of June 30, 2014, the revolving credit facility and term loan B interest rates were tied to LIBOR or CDOR, plus a credit spread of 550 basis points for the revolver and 675 basis points with a minimum LIBOR floor of 100 basis points for the term loan B.

(2)

On April 23, 2014, the Company issued an aggregate of 3.15 million shares of its common stock in exchange for $35.0 million of its 9.875% Senior Notes due 2020. The Company recognized a net gain of $11.4 million in gain (loss) on extinguishment of debt in the Condensed Consolidated Statements of Operations in the current quarter.

(3)

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 June 30, 2014 is as follows (in thousands):

	Payments Due
	2014		2015		2016		2017		2018		Thereafter
2011 term loan B	$	—	$	—	$	—	$	—	$	978,178	$	—
9.875% senior notes		—		—		—		—		—		465,000
8.50% senior notes		—		—		—		—		—		450,000
9.50% senior secured notes		—		—		—		—		—		450,000
9.50% add-on senior secured notes		—		—		—		—		—		200,000
11.0% / 12.0% senior secured PIK toggle notes		—		—		—		—		—		350,000
Other		7,836		12,775		5,762		—		—		—
	$	7,836	$	12,775	$	5,762	$	—	$	978,178	$	1,915,000

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Inventories
Coal	$ 211,874	$ 238,820
Raw materials and supplies	62,608	73,827
Total inventories	$ 274,482	$ 312,647

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2014

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Note 11—Fair Value of Financial Instruments

        Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three level hierarchy has been established for valuing assets and liabilities based on how transparent (observable) the inputs are that are used to determine fair value, with the inputs considered most observable categorized as Level 1 and those that are the least observable categorized as Level 3. Hierarchy levels are defined as follows:

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

        The following table presents information about the Company's assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2014 and December 31, 2013 and indicates the fair value hierarchy of the valuation techniques utilized to determine such values. For some assets, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When this is the case, the asset is categorized based on the level of the most significant input to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment and considers factors specific to the assets being valued.

	June 30, 2014
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Liabilities:
Interest rate swaps	$	—	$	1,019	$	—	$	1,019

	December 31, 2013
	Fair Value Measurements Using
							Total Fair Value
(in thousands)	Level 1		Level 2		Level 3
Assets:
Interest rate cap	$	—	$	1	$	—	$	1
Liabilities:
Interest rate swaps	$	—	$	3,080	$	—	$	3,080

        The Company uses quoted dealer prices for similar contracts in active over-the-counter markets for determining fair value of Level 2 financial assets and liabilities.

        The following methods and assumptions were used to estimate the fair value for which the fair value option was not elected:

        Cash and cash equivalents, receivables and accounts payable—The carrying amounts reported in the balance sheet approximate fair value.

        Debt—All of the Company's outstanding debt is carried at cost. There were no borrowings outstanding under the Revolver at June 30, 2014 or December 31, 2013. 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 long-term debt (excluding capital obligations, equipment financing agreements and a discount on the Revolver of $7,437 as of June 30, 2014) are presented below (in thousands):

	June 30, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
2011 term loan A(1)	$	—	$	—	$	401,052	$	403,517
2011 term loan B(2)	$	964,684	$	912,152	$	968,581	$	959,838
9.875% senior notes(3)	$	462,200	$	287,138	$	496,831	$	431,250
8.50% senior notes	$	450,000	$	255,375	$	450,000	$	374,625
9.50% senior secured notes(4)	$	447,656	$	455,625	$	447,492	$	474,750
9.50% add-on senior secured notes(5)	$	202,828	$	202,500	$	—	$	—
11.0%/12.0% senior secured PIK toggle notes	$	350,000	$	288,750	$	—	$	—

(1)

Net of debt discount of $5,514 as of December 31, 2013.

(2)

Net of debt discount of $13,494 and $9,597 as of June 30, 2014 and December 31, 2013, respectively.

(3)

Net of debt discount of $2,800 and $3,169 as of June 30, 2014 and December 31, 2013, respectively.

(4)

Net of debt discount of $2,344 and $2,508 as of June 30, 2014 and December 31, 2013, respectively.

(5)

Includes a premium of $2,828 as of June 30, 2014.