SOURCE: Walter Energy

Walter Energy

February 03, 2010 17:45 ET

Walter Energy Announces Fourth Quarter and Full-Year 2009 Earnings

Company Reports Fourth Quarter 2009 Earnings From Continuing Operations of $0.62 per Diluted Share; Full-Year Earnings From Continuing Operations of $2.64 per Diluted Share

Record Sales Volumes Expected in 2010 on Incremental Longwall Tons and Strong Demand for Premium Hard Coking Coal

Company Settles Remaining 2008-2009 Carryover Tons; Expects to Deliver Approximately 1.3 Million Short Tons by April 2011 at Prices in Excess of $315 per Metric Ton FOB Port

TAMPA, FL--(Marketwire - February 3, 2010) - Walter Energy (NYSE: WLT), a leading U.S. producer and exporter of premium hard coking coal for the global steel industry, today reported income from continuing operations of $33.3 million, or $0.62 per diluted share, for the quarter ended Dec. 31, 2009, compared to $97.0 million, or $1.77 per diluted share in the fourth quarter 2008.

"Our premium hard coking coal business demonstrated its resilience last year, as we produced and sold more of our Blue Creek coal in 2009 than in 2008, despite historic lows in global steel capacity utilization," said Walter Energy Chief Executive Officer Victor P. Patrick. "As we look to 2010, we see significant upside potential as we expect to increase sales to record levels and to achieve record average realized pricing."

Fourth Quarter 2009 Financial Results

Net sales and revenues for the fourth quarter 2009 totaled $236.3 million compared to $365.5 million in the prior-year period. Operating income totaled $36.9 million for the quarter, down $91.1 million versus the prior-year period. Revenues were impacted by lower coking coal and metallurgical coke pricing and sales volumes. Lower coking coal pricing contributed to 43 percent of the decrease in revenues, while lower coking coal volumes caused 44 percent of the decrease. In addition, approximately 61 percent of the decline in operating income resulted from lower coking coal pricing, with the remainder primarily due to a decrease in coking coal volumes.

Fourth quarter 2009 results from continuing operations include pre-tax charges of $4.5 million associated with the closure of Walter Coke's fiber plant, completing the last transaction in the disposition of the Company's non-energy businesses. Results for the quarter also included favorable tax benefits of $9.7 million related to non-taxable Medicare Part D subsidies and the favorable effect of a state tax rate change. Results in 2008 included a pre-tax credit of $26.9 million for a black lung excise tax refund claim and a pre-tax charge of $32.4 million related to impairment of Taft Coal Sales & Associates' mineral interests.

Full-Year 2009 Financial Results

For the full year 2009, net sales and revenues were $966.8 million, a decrease of $182.9 million versus the prior year. Approximately 52 percent of the decrease is attributed to lower metallurgical coke pricing and volumes, while the remainder is primarily due to lower coking coal pricing and lower volumes. The variance in coking coal sales volumes was due to lower sales of purchased coal.

Total year operating income was $202.2 million, down $139.0 million versus the prior year, primarily due to lower coking coal, metallurgical coke and natural gas pricing and lower metallurgical coke volumes, with lower pricing of these products making up 55 percent of the decrease in operating income.

Underground Mining

Coking coal sales volumes were 1.4 million tons in the fourth quarter at an average selling price of $126.48 per short ton FOB Port, versus 1.7 million tons at an average price of $167.19 in the prior-year period. The lower sales volumes reflect the impact of approximately 200,000 tons of coal that shipped in early January 2010 due to transportation delays in December. Pricing in the fourth quarter 2009 includes the impact of 0.1 million tons at 2008-2009 carryover pricing of approximately $315 per metric ton, while the sales in the prior-year period included 0.5 million tons at that pricing level.

Total coking coal production in the quarter was 1.4 million tons, down 0.4 million tons versus the prior-year period. Coking coal production at Mine No. 4 totaled 0.6 million tons in the fourth quarter, down 0.1 million tons compared to the prior year primarily due to a longwall move in the current-year period. Mine No. 7 produced 0.7 million tons in the fourth quarter, 0.3 million tons less than the fourth quarter last year, which included the operation of two longwalls for the full period. The current-year period reflects the operation of two longwalls for two weeks, as the Mine No. 7 East Expansion longwall began in mid December.

Average mine production costs for the period were $67.44 per ton, or $15.16 higher than in the prior-year period. At No. 4, production costs were $61.35 per ton, an increase of $9.76 per ton over the prior year. Production costs at No. 7 were $72.36 per ton compared to $52.74 per ton in the prior-year period. Production costs at both mines were higher than in the prior-year period primarily as a result of reduced production volumes.

The natural gas business sold 1.4 billion cubic feet of gas at an average price of $4.09 per thousand cubic feet in the fourth quarter 2009 compared to 1.8 billion cubic feet an average price of $7.92 per thousand cubic feet in the prior-year period.

Surface Mining

The surface mining segment reported net sales and revenues of $26.0 million in the fourth quarter 2009, compared to $24.1 million in the prior-year period, primarily resulting from higher contract prices. Operating income in the fourth quarter 2009 was $6.4 million, compared to operating income of $3.4 million in the fourth quarter 2008, excluding the impairment charge at Taft.

Steam and industrial coal sales were 326,000 tons during the fourth quarter compared to sales of 362,000 tons in the prior-year period. Production totaled 300,000 tons in the fourth quarter versus prior-year production of 348,000 tons, reflecting lower demand in the 2009 period.

Walter Coke

Walter Coke generated net sales and revenues of $37.4 million in the fourth quarter 2009, compared to $48.4 million in the prior-year period. Excluding the charge associated with the closure of Walter Coke's fiber plant, the business generated $4.4 million in operating income in the fourth quarter 2009 versus $12.2 million in the prior year. Lower revenue and operating income compared to the prior-year period were driven by reduced volume and pricing on lower domestic steel demand.

Fourth quarter 2009 metallurgical coke sales were 88,317 tons at an average price of $312.11 per ton. In the prior year, Walter Coke sold 97,927 tons at $391.28 per ton.

Corporate and Other

At Dec. 31, 2009, the Company had available liquidity of $401.6 million, including cash of $165.3 million and $236.3 million available under its credit facility. Total net debt outstanding at Dec. 31, 2009 was $11.2 million compared to $95.0 million at Sept. 30, 2009.

Capital expenditures were $29.0 million in the fourth quarter, totaling $96.3 million for the year.

Business Outlook

Walter Energy's business outlook includes the following:

Coking Coal Sales(1)                        Q4-2009 A         Q1-2010 E
                                        ----------------- -----------------
  Tons Sold (short tons, in millions)          1.4           1.7 - 1.9
  Average Operating Margin(2) Per Ton       $ 30.50         $ 32 - $ 40
                                        ----------------- -----------------

Steam & Industrial Coal Sales               Q4-2009 A         Q1-2010 E
                                        ----------------- -----------------
  Tons Sold (short tons)                     326,000      315,000 - 350,000
  Average Operating Margin(2) Per Ton       $ 18.59          $ 15 - $ 20
                                        ----------------- -----------------


Coke Sales                                  Q4-2009 A         Q1-2010 E
                                        ----------------- -----------------
  Tons Sold                                  88,317       125,000 - 135,000
  Average Operating Margin(2) Per Ton(3)    $ 50.08          $ 44 - $ 49
                                        ----------------- -----------------

Quarter-to-quarter variability in timing, availability and pricing of
shipments may result in significant shifts in income between
quarters.

(1) Includes the underground mining operation at Jim Walter Resources;
    excludes the coal bed methane operation
(2) Operating margin is defined as operating income (Earnings Before
    Interest & Taxes) from each business shown
(3) Fourth quarter 2009 operating margin excludes a $4.5 million pre-tax
    charge related to the closure of Walter Coke's Fiber Division.

The Company recently concluded settlement of its remaining 2008-2009 carryover tons and expects to deliver 1.1 million short tons in 2010 and 0.2 million short tons in the first quarter of 2011.

Coking coal sales committed and priced for 2010 are projected as follows:

Coking Coal Sales Committed and                Q1    Q2       Q3      Q4
Priced (short tons in millions)             2010 E  2010 E  2010 E  2010 E
                                            ------- ------- ------- -------
2008-2009 Carryover Tons                      0.2     0.3     0.4     0.2
2009-2010 Contract Tons                     1.5-1.7 0.5-0.7    -       -
                                            ------- ------- ------- -------

Total coking coal sales are expected to total approximately 8.0 million tons in 2010. Pricing on all 2008-2009 carryover tons is at original contract of approximately $315 per metric ton FOB Port (approximately $286 per short ton FOB Port). Pricing on the 2009-2010 benchmark tons is at approximately $129 per metric ton FOB Port (approximately $117 per short ton FOB Port). The remainder of coking coal sales volume for 2010 is unpriced. Given the current market environment, the Company expects to achieve record average realized pricing for the year.

Coking coal production is expected to total 1.7 to 1.8 million tons in the first quarter, with production costs expected to average between $55 and $60 per ton.

Walter Coke should return to full capacity by the end of the first quarter and expects full-year 2010 sales to total 380,000 - 400,000 tons. In addition, returning to full production should improve cost leverage after the first quarter.

Walter Minerals expects to produce and sell 1.3 - 1.4 million tons of steam and industrial coal in 2010, with all expected sales volumes priced. Overall results for 2010 are expected to remain consistent with the results in 2009.

The Company expects 2010 full-year capital expenditures of approximately $110 million, including maintenance capital of approximately $80 million.

Conference Call Web cast

Chief Executive Officer Victor P. Patrick, President and Chief Operating Officer George R. Richmond and members of the Company's leadership team will discuss Walter Energy's fourth quarter results, its outlook and other general business matters during a conference call and live Web cast to be held on Thursday, Feb. 4, 2010, at 10 a.m. Eastern Standard Time. To listen to the event live or in archive, visit the Company Web site at www.walterenergy.com.

About Walter Energy

Walter Energy is a leading U.S. producer and exporter of premium hard coking coal for the global steel industry and also produces steam coal and industrial coal, metallurgical coke and coal bed methane gas. The Company has revenues of approximately $1.0 billion and employs approximately 2,100 people. For more information about Walter Energy, please visit the Company Web site at www.walterenergy.com.

Safe Harbor Statement

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and may involve a number of risks and uncertainties. Forward-looking statements, including expressions such as "believe," "anticipate," "expect," "estimate," "intend," "may," "plan," "predict," "will," and similar terms and expressions 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 various risks, 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. The following factors are among those that may cause actual results to materially from our forward-looking statements: the market demand for coal, coke and natural gas as well as changes in pricing and costs; the availability of raw material, labor, equipment and transportation; changes in weather and geologic conditions; changes in extraction costs, pricing and assumptions and projections concerning reserves in our mining operations; changes in customer orders; pricing actions by our competitors, customers, suppliers and contractors; changes in governmental policies and laws, including with respect to safety enhancements and environmental initiatives; availability and costs of credit, surety bonds and letters of credit; and changes in general economic conditions. Forward-looking statements made by us in this release, or elsewhere, speak only as of the date on which the statements were made. See also the "Risk Factors" in our 2008 Annual Report on Form 10-K and subsequent filings with the SEC which are currently available on our website at www.walterenergy.com. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us or our anticipated results. We have no duty to, and do not intend to, update or revise the forward-looking statements in this release, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that any forward-looking statement made in this press release might not occur. All data presented herein is as of December 31, 2009 unless otherwise noted.

                   WALTER ENERGY, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS
           ($ in thousands, except per share and share amounts)
                                Unaudited

                                                     For the three months
                                                      ended December 31,
                                                    ----------------------
                                                       2009        2008
                                                    ----------  ----------
Net sales and revenues:
  Net sales                                         $  234,006  $  360,923
  Miscellaneous income                                   2,259       4,613
                                                    ----------  ----------
                                                       236,265     365,536
                                                    ----------  ----------

Costs and expenses:
  Cost of sales (exclusive of depreciation)            150,287     165,712
  Depreciation                                          18,723      18,709
  Selling, general and administrative                   18,972      13,702
  Postretirement benefits                                7,696       6,982
  Amortization of intangibles                              112          67
  Restructuring and impairment charges (1)               3,601      32,386
                                                    ----------  ----------
                                                       199,391     237,558
                                                    ----------  ----------

Operating income                                        36,874     127,978
  Interest expense                                      (4,980)     (3,851)
  Interest income (2)                                      171      17,288
                                                    ----------  ----------
Income from continuing operations before income
 taxes                                                  32,065     141,415
Income tax expense (benefit) (3)                        (1,231)     44,424
                                                    ----------  ----------
Income from continuing operations                       33,296      96,991
Discontinued operations (4), (5)                        (4,120)    143,314
                                                    ----------  ----------
Net income                                          $   29,176  $  240,305
                                                    ==========  ==========

Basic income per share:
Income from continuing operations                   $     0.63  $     1.78
Discontinued operations                                  (0.08)       2.63
                                                    ----------  ----------

Basic net income per share                          $     0.55  $     4.41
                                                    ==========  ==========

Weighted average number of shares outstanding       53,098,146  54,534,083
                                                    ==========  ==========

Diluted income per share:
Income from continuing operations                   $     0.62  $     1.77
Discontinued operations                                  (0.08)       2.60
                                                    ----------  ----------

Diluted net income per share                        $     0.54  $     4.37
                                                    ==========  ==========

Weighted average number of diluted shares
 outstanding                                        53,951,917  54,944,493
                                                    ==========  ==========



(1) The Company recorded a $3.6 million restructuring and impairment charge
in the fourth quarter 2009 related to the closure of Walter Coke's fiber
plant.  In addition, inventory write-downs of $0.9 million are included in
cost of sales related to this closure, for total closure costs recognized
of $4.5 million. During the fourth quarter 2008, the Company recorded a
$32.4 million impairment charge related to mineral interests at Taft Coal
Sales & Associates.

(2) Interest income in 2008 includes $17.1 million of interest on a Black
Lung Excise Tax refund claim.   Total amount of the claim recorded in 2008
was $26.9 million.  Of this amount, $23.2 million was received in 2009.

(3) In the fourth quarter 2009, the Company recognized two large, unusual
tax benefits resulting in a net tax benefit on pre-tax income.  The tax
benefits included (1) a permanent tax benefit of $5.9 million for
non-taxable OPEB Medicare Part D subsidies and (2) a $3.8 million net tax
benefit on certain deferred tax assets relating to a change in the
effective state tax rate resulting from the decision to move the Company's
headquarters to Birmingham, AL.  Excluding these items, the Company's
fourth quarter 2009 effective tax rate was 26.5%.  This rate is lower than
the effective tax rate in the fourth quarter 2008 primarily due to greater
benefits from permanent percentage depletion deductions in 2009.

(4) Discontinued operations includes the results of Financing, Homebuilding
and Kodiak Mining, Co. ("Kodiak"), for all periods presented.  On April 17,
2009, Financing was spun off to shareholders and merged with Hanover
Capital Mortgage Holdings, Inc., creating Walter Investment Management
Corporation, a publicly traded real estate investment trust.  The Company
announced the closure of its Homebuilding business in January 2009 and
continues to liquidate the remaining assets.  The Company's Kodiak mining
operations were closed in December 2008.

(5)Discontinued operations for 2008 includes a tax benefit of $167.0
million resulting from the deemed liquidation, for tax purposes, of the
Homebuilding group.




                   WALTER ENERGY, INC. AND SUBSIDIARIES
                       RESULTS BY OPERATING SEGMENT
                             ($ in thousands)
                                Unaudited

                                                      For the three months
                                                       ended December 31,
                                                      --------------------
                                                        2009       2008
                                                      ---------  ---------

  NET SALES AND REVENUES:
  Underground Mining (1)                              $ 179,655  $ 302,625
  Surface Mining (1)                                     26,029     24,108
  Walter Coke                                            37,369     48,356
  Other                                                     430        673
  Consolidating eliminations of intersegment activity    (7,218)   (10,226)
                                                      ---------  ---------
                                                      $ 236,265  $ 365,536
                                                      =========  =========

  OPERATING INCOME (LOSS):
  Underground Mining (1)                              $  41,579  $ 148,706
  Surface Mining (1) (2)                                  6,415    (29,049)
  Walter Coke (3)                                           (43)    12,243
  Other (4)                                             (10,869)    (3,301)
  Consolidating eliminations of intersegment activity      (208)      (621)
                                                      ---------  ---------
   Operating income                                   $  36,874  $ 127,978
                                                      =========  =========

(1) The previous year's presentation has been revised to reflect a change
in reportable segments from Natural Resources to Underground Mining and
Surface Mining and to exclude Kodiak, Financing and Homebuilding which
are reported as discontinued operations. Underground Mining includes
the Company's deep underground metallurgical coal operations from the
No. 4 and No. 7 mines, and its natural gas operations.  Surface Mining
includes the operations of Tuscaloosa Resources, Inc., Taft Coal Sales
& Associates and Walter Minerals.

(2) The Company recorded a $32.4 million impairment charge related to
mineral interests at Taft Coal Sales & Associates during the 2008
fourth quarter.

(3) The Company recorded a $4.5 million charge in the 2009 fourth quarter
related to the closure of Walter Coke's fiber plant.

(4) The increase in the Operating Loss - Other in the fourth quarter 2009
as compared to the prior year period is primarily due to costs related
to the decision to relocate the Company's headquarters to Birmingham,
AL, as well as increased benefits costs, including pension and other
retirement benefits.




                   WALTER ENERGY, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS
           ($ in thousands, except per share and share amounts)
                                Unaudited

                                                     For the year ended
                                                        December 31,
                                                  ------------------------
                                                      2009         2008
                                                  -----------  -----------
Net sales and revenues:
  Net sales                                       $   955,508  $ 1,135,745
  Miscellaneous income                                 11,319       13,939
                                                  -----------  -----------
                                                      966,827    1,149,684
                                                  -----------  -----------

Costs and expenses:
  Cost of sales (exclusive of depreciation)           586,774      628,325
  Depreciation                                         72,939       56,542
  Selling, general and administrative                  70,063       63,394
  Postretirement benefits                              30,833       27,557
  Amortization of intangibles                             447          273
  Restructuring and impairment charges (1)              3,601       32,386
                                                  -----------  -----------
                                                      764,657      808,477
                                                  -----------  -----------

Operating income                                      202,170      341,207
  Interest expense                                    (18,975)     (26,226)
  Interest income                                         799       17,808
                                                  -----------  -----------
Income from continuing operations before income
 taxes                                                183,994      332,789
Income tax expense (2)                                 42,144      101,597
                                                  -----------  -----------
Income from continuing operations                     141,850      231,192
Discontinued operations (3), (4)                       (4,692)     115,388
                                                  -----------  -----------
Net income                                        $   137,158  $   346,580
                                                  ===========  ===========

Basic income (loss) per share:
Income from continuing operations                 $      2.67  $      4.30
Discontinued operations                                 (0.09)        2.14
                                                  -----------  -----------

Basic net income per share                        $      2.58  $      6.44
                                                  ===========  ===========

Weighted average number of shares outstanding      53,075,622   53,791,058
                                                  ===========  ===========

Diluted income (loss) per share:
Income from continuing operations                 $      2.64  $      4.24
Discontinued operations                                 (0.09)        2.11
                                                  -----------  -----------

Diluted net income per share                      $      2.55  $      6.35
                                                  ===========  ===========

Weighted average number of diluted shares
 outstanding                                       53,819,396   54,584,672
                                                  ===========  ===========


(1) The Company recorded a $3.6 million restructuring and impairment charge
in the fourth quarter 2009 related to the closure of Walter Coke's
fiber plant.  In addition, inventory write-downs of $0.9 million are
included in cost of sales related to this closure, for total closure
costs recognized of $4.5 million. During the fourth quarter 2008, the
Company recorded a $32.4 million impairment charge related to mineral
interests at Taft Coal Sales & Associates.

(2) The effective tax rate for 2009 is significantly lower than the
effective tax rate in 2008 primarily due to an increase in benefits
from percentage depletion deductions, an increase in non-taxable OPEB
Medicare Part D subsidies earned, and an increase to certain deferred
tax assets relating to a change in the effective state tax rate
resulting from the decision to move the Company's headquarters to
Birmingham, AL.

(3) Discontinued operations includes the results of Financing,
Homebuilding and Kodiak Mining, Co. ("Kodiak"), for all periods
presented.  On April 17, 2009, Financing was spun off to shareholders
and merged with Hanover Capital Mortgage Holdings, Inc., creating
Walter Investment Management Corporation, a publicly traded real estate
investment trust.  The Company announced the closure of its
Homebuilding business in January 2009 and continues to liquidate the
remaining assets.  The Company's Kodiak mining operations were closed
in December 2008.

(4) Discontinued operations for 2008 includes a tax benefit of $167.0
million resulting from the deemed liquidation, for tax purposes, of
the Homebuilding group.




                   WALTER ENERGY, INC. AND SUBSIDIARIES
                       RESULTS BY OPERATING SEGMENT
                             ($ in thousands)
                                Unaudited

                                                        For the year
                                                     ended December 31,
                                                  ------------------------
                                                      2009         2008
                                                  -----------  -----------

NET SALES AND REVENUES:
Underground Mining (1)                            $   787,325  $   911,067
Surface Mining (1)                                     99,556       72,711
Walter Coke                                           101,233      206,230
Other                                                   2,469        3,424
Consolidating eliminations of intersegment
 activity                                             (23,756)     (43,748)
                                                  -----------  -----------
                                                  $   966,827  $ 1,149,684
                                                  ===========  ===========

OPERATING INCOME (LOSS):
Underground Mining (1)                            $   208,189  $   328,071
Surface Mining (1) (2)                                 24,045      (23,397)
Walter Coke (3)                                        (1,338)      60,672
Other                                                 (29,086)     (22,825)
Consolidating eliminations of intersegment
 activity                                                 360       (1,314)
                                                  -----------  -----------
  Operating income                                $   202,170  $   341,207
                                                  ===========  ===========

(1) The previous year's presentation has been revised to reflect a change
in reportable segments from Natural Resources to Underground Mining and
Surface Mining and to exclude Kodiak, Financing and Homebuilding which are
reported as discontinued operations. Underground Mining includes the
Company's deep underground metallurgical coal operations from the No. 4 and
No. 7 mines, and its natural gas operations.  Surface Mining includes the
operations of Tuscaloosa Resources, Inc., Taft Coal Sales & Associates and
Walter Minerals.

(2) The Company recorded a $32.4 million impairment charge related to
mineral interests at Taft Coal Sales & Associates during the 2008 fourth
quarter.

(3) The Company recorded a $4.5 million charge in the 2009 fourth quarter
related to the closure of Walter Coke's fiber plant.




                   WALTER ENERGY, INC. AND SUBSIDIARIES
                         SUPPLEMENTAL INFORMATION
                                Unaudited


                                For the three months      For the year
                                 ended December 31,    ended December 31,
                                --------------------- ---------------------
                                  2009       2008       2009       2008
                                ---------- ---------- ---------- ----------
Operating Data:
  Underground Mining
   Tons sold by type (in
    thousands):
     Metallurgical coal,
      contracts                      1,369      1,583      5,986      5,844
     Purchased coal                      -        126         98        490
                                ---------- ---------- ---------- ----------
                                     1,369      1,709      6,084      6,334
                                ========== ========== ========== ==========

  Average selling price per
   short ton                    $   126.48 $   167.19 $   124.64 $   130.95

  Tons sold by mine (in
   thousands):
    Mine No. 4                         680        663      2,789      3,248
    Mine No. 7                         689        920      3,197      2,596
                                ---------- ---------- ---------- ----------
          Total                      1,369      1,583      5,986      5,844
                                ========== ========== ========== ==========

  Coal cost of sales (exclusive
   of depreciation):
    Mine No. 4 per ton          $    75.42 $    69.08 $    71.31 $    61.60
    Mine No. 7 per ton          $    77.99 $    65.00 $    72.36 $    77.82
      Weighted average cost of
       sales per ton            $    76.71 $    66.71 $    71.87 $    68.81
    Purchased coal costs (in
     thousands)                 $       23 $    7,740 $    4,071 $   28,150
    Other costs (in thousands)
     (1)                        $      802 $    5,971 $   12,142 $   16,650

  Tons of coal produced (in
   thousands):
    Mine No. 4                         605        715      2,719      3,188
    Mine No. 7                         749      1,079      3,366      2,852
                                ---------- ---------- ---------- ----------
       Total                         1,354      1,794      6,085      6,040
                                ========== ========== ========== ==========

  Coal production costs per
   ton: (2)
    Mine No. 4                  $    61.35 $    51.59 $    56.77 $    45.52
    Mine No. 7                  $    72.36 $    52.74 $    64.64 $    67.48
      Weighted average
       production costs per ton $    67.44 $    52.28 $    61.12 $    55.89

  Natural gas sales, in mmcf
   (in thousands)                    1,352      1,781      6,132      6,625
  Natural gas average sale
   price per mcf                $     4.09 $     7.92 $     4.27 $     8.39
  Natural gas cost of sales per
   mcf                          $     2.87 $     2.93 $     2.61 $     3.32

 Surface Mining
  Tons sold (in thousands)             326        362      1,234      1,069
  Tons of coal produced (in
   thousands)                          300        348      1,328      1,049
  Average selling price per
   short ton                    $    77.47 $    65.43 $    76.20 $    64.96
  Coal production costs per ton $    69.29 $    61.99 $    62.20 $    59.34


(1) Consists of charges (credits) not directly allocable to a specific
underground mine.

(2) Coal production costs per ton are a component of inventoriable costs,
including depreciation.  Other costs not included in coal production costs
per ton include Company-paid outbound freight, postretirement benefits,
asset retirement obligation expenses, royalties, and Black Lung excise
taxes.





                   WALTER ENERGY, INC. AND SUBSIDIARIES
                         SUPPLEMENTAL INFORMATION
                                Unaudited


                                For the three months      For the year
                                 ended December 31,    ended December 31,
                                --------------------- ---------------------
                                  2009       2008       2009       2008
                                ---------- ---------- ---------- ----------
Operating Data (continued):

  Walter Coke:
    Metallurigical coke tons sold   88,317     97,927    200,241    409,457
    Metallurigical coke average
     sales price per ton        $   312.11 $   391.28 $   328.85 $   393.66

  Depreciation ($ in
   thousands):
    Underground Mining          $   15,633 $   12,931 $   59,393 $   43,149
    Surface Mining                   1,880      4,442      8,574      8,327
    Walter Coke                      1,148      1,119      4,566      4,152
    Other                               62        217        406        914
                                ---------- ---------- ---------- ----------
                                $   18,723 $   18,709 $   72,939 $   56,542
                                ========== ========== ========== ==========

   Capital expenditures ($ in
    thousands) (1):
      Underground Mining        $   23,778 $   27,684 $   74,625 $  125,789
      Surface Mining                 3,490      6,158     16,210      8,626
      Walter Coke                    1,475      1,333      4,837      6,904
      Other                            243         96        626        308
                                ---------- ---------- ---------- ----------
                                $   28,986 $   35,271 $   96,298 $  141,627
                                ========== ========== ========== ==========


 (1) Includes the acquisition of property, plant and equipment under
 capital lease and other obligations totaling $16.4 million and
 $41.7 million during the quarter and year ended December 31, 2008,
 respectively.




                   WALTER ENERGY, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                             ($ in thousands)
                                Unaudited


                                                            As of
                                                  -------------------------
                                                  December 31, December 31,
                                                      2009         2008
                                                  ------------ ------------
ASSETS
Current assets of continuing operations:
Cash and cash equivalents                         $    165,279 $    116,074
Receivables, net                                        70,500      140,423
Inventories                                             99,278       75,172
Deferred income taxes                                  110,576       84,669
Other current assets                                    27,065       26,119
                                                  ------------ ------------
    Total current assets                               472,698      442,457
Property, plant and equipment, net                     522,931      504,585
Deferred income taxes                                  178,338      179,402
Other long-term assets                                  70,192       69,251
                                                  ------------ ------------
    Total assets of continuing operations            1,244,159    1,195,695
                                                  ------------ ------------

Assets of discontinued operations:
Current assets (1)                                      15,197       16,158
Long-term assets (1)                                         -       18,396
Unclassified assets (2)                                      -    1,837,744
                                                  ------------ ------------
    Total assets of discontinued operations             15,197    1,872,298
                                                  ------------ ------------
TOTAL ASSETS                                      $  1,259,356 $  3,067,993
                                                  ============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities of continuing operations
Accounts payable                                  $     44,211 $     60,497
Accrued expenses                                        39,034       57,230
Current debt                                            13,351       13,480
Accumulated postretirement benefits obligation          23,563       19,124
Other current liabilities                               18,513       20,801
                                                  ------------ ------------
    Total current liabilities of continuing
     operations                                        138,672      171,132
Long-term debt                                         163,147      211,905
Accumulated postretirement benefits obligation         429,096      349,184
Other long-term liabilities                            261,736      273,645
                                                  ------------ ------------
    Total liabilities of continuing operations         992,651    1,005,866
                                                  ------------ ------------

Liabilities of discontinued operations:
Current liabilities (1)                                  7,310       12,400
Unclassified liabilities (2)                                 -    1,419,458
                                                  ------------ ------------
    Total liabilities of discontinued operations         7,310    1,431,858
                                                  ------------ ------------
TOTAL LIABILITIES                                      999,961    2,437,724
                                                  ------------ ------------

STOCKHOLDERS' EQUITY                                   259,395      630,269
                                                  ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $  1,259,356 $  3,067,993
                                                  ============ ============

(1) Includes the remaining assets and liabilities of the Company's closed
businesses: Homebuilding and Kodiak.

(2) Represents the assets and liabilities of the Company's Financing
business, which was spun off to shareholders on April 17, 2009.




                   WALTER ENERGY, INC. AND SUBSIDIARIES
        CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                         AND COMPREHENSIVE INCOME
                   FOR THE YEAR ENDED DECEMBER 31, 2009
                             ($ in thousands)
                                Unaudited

                                                               Accumulated
                           Capital in                            Other
                    Common  Excess of Comprehensive  Retained Comprehensive
            Total    Stock  Par Value     Income     Earnings     Loss
           --------  -----  ---------  ------------  -------- ------------

Balance at
 December
 31, 2008  $630,269  $  541 $ 714,174                $ 50,990 $   (135,436)

Comprehen-
 sive
 income:
Net income  137,158                      $  137,158   137,158
Other
 comprehe-
 nsive
 income
 (loss), net
 net of
 tax:
  Change in
   pension
   and
   postret-
   irement
   benefit
   plans    (28,513)                        (28,513)               (28,513)
  Change in
   unrealized
   gain (loss)
   on hedges   (877)                           (877)                  (877)
                                         ----------
Comprehensive
 income                                  $  107,768
                                         ==========

Purchases
 of stock
 under
 stock
 repurchase
 program    (34,254)    (14)  (34,240)
Stock
 issued
 upon the
 exercise
 of stock
 options      9,888       5     9,883
Stock
 dividend
 for
 spin-off
 of
 Financing (439,093)         (321,301)               (116,106)      (1,686)
Dividends
 paid,
 $0.40 per
 share      (21,190)               -                 (21,190)
Stock-based
 compensa-
 tion         6,703             6,703
Other          (696)             (696)
           --------  -----  ---------                -------- ------------
Balance at
 December
 31, 2009 $ 259,395  $ 532  $ 374,523                $ 50,852 $   (166,512)
           ========  =====  =========                ======== ============




                   WALTER ENERGY, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                             ($ in thousands)
                                Unaudited

                                            For the year ended
                                               December 31,
                                           ---------------------
                                             2009       2008
                                           ---------  ----------

OPERATING ACTIVITIES
Net income                                 $ 137,158  $  346,580
  Loss from discontinued operations            4,692    (115,388)
                                           ---------  ----------
  Income from continuing operations          141,850     231,192

Adjustments to reconcile income from
 continuing operations to net cash flows
 provided by operating activities:
   Depreciation                               72,939      56,542
   Non cash income tax provision              31,333      87,922
   Non cash restructuring and impairment
    charges                                    3,601      32,386
   Other                                      16,042      14,896

   Decrease (increase) in assets:
     Receivables                              69,772     (92,421)
     Inventories                             (25,076)    (32,005)
     Other current assets                     17,624      23,775
   Increase (decrease) in liabilities:
     Accounts payable                        (16,286)      4,768
     Accrued expenses and other current
      liabilities                            (27,831)      4,399
                                           ---------  ----------
        Cash flows provided by operating
         activities                          283,968     331,454
                                           ---------  ----------

INVESTING ACTIVITIES
  Additions to property, plant and
   equipment                                 (96,298)    (99,946)
  Acquisition of Taft Coal Sales &
   Associates                                      -     (17,088)
  Other                                        3,270      (1,727)
                                           ---------  ----------
    Cash flows used in investing activities  (93,028)   (118,761)
                                           ---------  ----------

FINANCING ACTIVITIES
  Proceeds from issuance of debt                   -     340,000
  Retirements of debt                        (61,597)   (398,709)
  Proceeds from stock offering                     -     280,464
  Dividends paid                             (21,190)    (16,233)
  Cash spun off to Financing                 (33,821)          -
  Purchases of stock under stock repurchase
   program                                   (34,254)    (64,644)
  Other                                        3,719       5,172
                                           ---------  ----------
    Cash flows provided by (used in)
     financing activities                   (147,143)    146,050
                                           ---------  ----------
    Cash flows provided by (used in)
     continuing operations                    43,797     358,743
                                           ---------  ----------

CASH FLOWS FROM DISCONTINUED OPERATIONS
  Cash flows provided by operating
   activities                                 19,070      25,563
  Cash flows provided by investing
   activities                                 27,379      36,210
  Cash flows used in financing activities    (41,385)   (333,458)
                                           ---------  ----------
    Cash flows provided by (used in)
     discontinued operations                   5,064    (271,685)
                                           ---------  ----------

Net decrease in cash and cash equivalents  $  48,861  $   87,058
                                           =========  ==========

Cash and cash equivalents at beginning of
 period                                    $ 116,074  $   27,459
Add: Cash and cash equivalents of
 discontinued operations at beginning of
 year                                          1,598       3,155
Net increase (decrease) in cash and cash
 equivalents                                  48,861      87,058
Less: Cash and cash equivalents of
 discontinued operations at end of period      1,254       1,598
                                           ---------  ----------
Cash and cash equivalents at end of period $ 165,279  $  116,074
                                           =========  ==========

SUPPLEMENTAL DISCLOSURES

Non-cash transations:
Financing of one-year property insurance
 policy                                    $  12,710  $   13,884
                                           =========  ==========
Dividend to spin off Financing             $ 437,407  $        -
                                           =========  ==========
Lease financing of equipment and other
 obligations                               $       -  $   41,681
                                           =========  ==========
Non-cash conversion of Senior Subordinated
 Convertible Notes into common stock       $       -  $      785
                                           =========  ==========