SOURCE: Walter Energy

Walter Energy

February 14, 2011 18:59 ET

Walter Energy Announces Fourth Quarter and Full-Year 2010 Results

Company Reports Earnings From Continuing Operations of $1.75 per Diluted Share for Fourth Quarter and $7.25 per Diluted Share for Full Year 2010

$1.6 Billion in Full-Year 2010 Revenues on Record Coking Coal Sales of 7.2 Million Tons

Fourth Quarter EBITDA Triples to $171.5 Million; Full-Year EBITDA Climbs to Nearly $700 Million

Acquisition of Western Coal Corp. Progressing; Closing Anticipated on April 1, 2011

TAMPA, FL--(Marketwire - February 14, 2011) - Walter Energy (NYSE: WLT), a leading U.S. producer and exporter of premium hard coking coal for the global steel industry, today announced earnings from continuing operations of $1.75 per diluted share and EBITDA of $171.5 million for the quarter ended Dec. 31, 2010, compared to earnings from continuing operations of $0.62 per diluted share and EBITDA of $55.6 million in the fourth quarter 2009.

The Company also reported full-year 2010 earnings from continuing operations of $7.25 per diluted share and EBITDA of $692.8 million compared to full year 2009 earnings of $2.64 per diluted share and EBITDA of $275.1 million.

"We generated strong fourth quarter earnings on higher coking coal sales volumes and prices," said Walter Energy Interim Chief Executive Officer Joe Leonard. "For the full year, earnings increased by almost 175 percent over 2009, reflecting strong pricing and production growth from our organic growth initiatives. Globally, events continue to limit availability of premium coking coals and we see supply-demand imbalance continuing in our favor as global steel production improves on its record 2010 output."

"Strategically, we continue to make excellent progress on our transformative acquisition of Western Coal, which, when completed, will make Walter Energy the leading, publicly traded 'pure play' coking coal producer in the world. In addition, the combination increases the size, scale and diversity of our operations, significantly enhancing the Company's financial profile and geographic reach, particularly into Asia. We also recently completed the acquisition of a river terminal facility at the Port of Mobile to ensure unconstrained shipping capacity for our long-term coking coal production plans from our mines in Alabama, to maintain low mine-to-vessel costs and to make us less reliant on third parties," he said.

Full-Year 2010 Financial Results

For the full year 2010, revenues were $1.6 billion, a $621 million increase compared to 2009's full-year results. EBITDA also increased to $692.8 million, a $417.7 million improvement versus the prior year. The improvement was largely due to record revenues and operating income at the underground mining segment of $1.3 billion and $580.7 million, respectively, on significant year-over-year coking coal pricing and volume increases.

Fourth Quarter 2010 Financial Results

Revenues for the fourth quarter 2010 totaled $400.8 million compared to $236.3 million in the prior-year period. Operating income totaled $144.7 million for the quarter, compared to $36.9 million in the prior-year period. Revenue and operating income improvements were primarily due to higher coking coal pricing and volumes in the Company's underground mining operations.

Fourth quarter 2010 operating income includes $5.9 million in costs associated with Walter Energy's impending acquisition of Western Coal and $2.3 million in costs at Walter Coke related to long-term environmental monitoring. These charges negatively impacted earnings for the quarter by approximately $0.10 per diluted share.

Underground Mining

The underground mining segment reported revenues of $350.9 million in the fourth quarter 2010, compared to $179.7 million in the prior-year period. Operating income was $144.6 million, more than triple the segment's operating income in the same period last year. Revenues and operating income were higher primarily due to significantly higher average coking coal contract pricing along with higher sales volumes versus the prior-year period. The effect of these favorable items was partially offset by higher royalty and freight costs.

Coking coal sales totaled 1.7 million tons in the fourth quarter, up 25.1 percent compared to the prior-year period, at an average selling price of $196.47 per short ton FOB Port, a 55.3 percent increase over average selling prices of $126.48 per ton in the same period last year.

Total coking coal production was 1.5 million tons in the quarter, almost 200,000 tons higher than in the fourth quarter 2009. The increase in production was generated from incremental tons from the Mine No. 7 East expansion and from improved recovery rates at the No. 4 Mine. Production costs for the quarter averaged $64.68 per ton, or $2.76 lower than in the prior-year period, primarily due to volume improvements at both mines, partially offset by higher labor and supply cost at Mine No. 7.

The natural gas business sold 3.4 billion cubic feet of gas at an average price of $4.06 per thousand cubic feet in the fourth quarter 2010 compared to 1.4 billion cubic feet at an average price of $4.09 per thousand cubic feet in the prior-year period. Increased production and sales for the quarter resulted from the Company's Walter Black Warrior Basin natural gas subsidiary acquired in May 2010.

Surface Mining

The surface mining segment reported revenues of $35.9 million for the fourth quarter 2010, compared to $26.0 million in the prior-year period on increased sales volumes and pricing. Although revenues increased 37.8 percent, operating income in the fourth quarter 2010 only increased 7.0 percent due to higher depreciation, diesel and blasting costs.

Coal sales from the surface mining segment were 348,000 tons during the fourth quarter, up 6.7 percent compared to the prior-year period primarily due to incremental sales volumes from the recently opened Reid School metallurgical coal mine. Production was 406,000 tons, up 35.3 percent compared to the fourth quarter last year primarily from additional tons produced at the Reid School Mine.

Walter Coke

Walter Coke reported revenues of $37.9 million in the fourth quarter 2010, compared to $37.4 million in the prior-year period. Walter Coke generated $5.4 million in operating income in the quarter, compared to a slight loss in the prior-year period. Operating income improvements were driven primarily by price increases and improved plant efficiencies, partially offset by higher coal raw material costs and a $2.3 million environmental charge. In addition, fourth quarter 2009 results included a $4.5 million charge related to the closure of Walter Coke's fiber plant.

The Company sold 87,000 tons of metallurgical coke in the fourth quarter 2010 at an average price of $381.96 per ton compared to 88,000 tons sold in the prior-year period at an average price of $312.11 per ton. Pricing increases were primarily attributable to improved demand in the domestic automotive and steel markets.

Corporate and Other

At Dec. 31, 2010, the Company had available liquidity of $533.5 million, including cash of $293.4 million and $240.1 million available under its credit facility.

Financial Summary & Business Outlook

Comparisons to the most recently provided business outlook are provided below, alongside Walter Energy's business outlook for the first quarter 2011:

  Underground Mining(1)             Q4-2010 E      Q4-2010 A      Q1-2011 E
    Coal Sales (short tons,
     in millions)                   1.7 - 2.0         1.7         1.6 - 1.8
    Average Operating Margin(2)
     Per Ton                        $84 - $87         $85         $83 - $87

  Surface Mining                    Q4-2010 E      Q4-2010 A      Q1-2011 E
    Coal Sales (short tons,
     in thousands)                  382 - 403         348         406 - 426
    Average Operating Margin(2)
     Per Ton                        $13 - $17         $18         $10 - $14

  Walter Coke                       Q4-2010 E     Q4-2010 A(3)    Q1-2011 E
    Coke Sales (tons, in thousands)  85 - 88           87          99 - 101
    Average Operating Margin(2)
     Per Ton                        $44 - $58         $63         $41 - $51

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

(1) Includes the coking coal operation at Jim Walter Resources; excludes
    the coal bed methane operations.
(2) Operating margin is defined as operating income (Earnings Before
    Interest & Taxes) from each business shown.
(3) Actual results include a $2.3 million charge related to long-term
    environmental monitoring.

In the fourth quarter 2010, coking coal sales volumes were at the low end of the previously issued expectations range due to a longer-than-expected longwall move in December and difficult mining conditions at both of our underground mines late in the quarter. These conditions continued into January and, along with the impact of planned first quarter 2011 longwall moves, the Company expects first quarter sales volumes to be in the range of 1.6 to 1.8 million tons.

Given the loss of production through mid-February 2011, the Company estimates that its full-year coking coal sales will be, at best, 8.5 million tons, with up to 500,000 tons of the total coming from purchased coal opportunities.

First quarter 2011 coking coal operating margins reflect an average selling price of $215 per metric ton FOB port ($195 per short ton FOB port), which includes a mix of carryover tons at $209 per metric ton as well as new contract tons for the quarter at or above the $225 per metric ton benchmark price. The average realized selling price will also be affected by lower priced purchased coal. First quarter 2011 coking coal production costs are expected to be in line with the fourth quarter 2010 results.

In the surface mining segment, although fourth quarter 2010 shipments were lower than expected due to lighter-than-expected customer demand, the segment expects to sell between 406,000 and 426,000 tons of metallurgical, steam and industrial coal in the first quarter 2011, with all expected steam and industrial sales volumes contractually priced. Operating income in the first quarter 2011 is expected to be negatively impacted by a shift in sales mix to lower-margin coal contracts, higher cost due to unfavorable mining ratios and higher fuel prices.

At Walter Coke, first quarter sales volumes are expected to be approximately 100,000 tons. Operating margins are expected to reflect higher metallurgical coke prices, offset by higher coal raw material costs.

Western Coal Acquisition Update

Walter Energy said it continues to make very good progress on its acquisition of Western Coal Corp. Western Coal issued its Circular to its shareholders on Feb. 4, 2011 and a vote of the Western Coal shareholders is scheduled for March 8, 2011. As announced on Jan. 20, 2011, the Company acquired a 9.15 percent stake in Western Coal from funds advised by Audley Capital for $293.7 million. The Company remains on track to close on the acquisition on April 1, 2011.

Conference Call Web Cast

Interim Chief Executive Officer Joe Leonard 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 Tuesday, Feb. 15, 2011, 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 $1.6 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 are based on information available to management at the time, and they involve judgments and estimates. There can be no assurance that the transaction with Western Coal will close. The transaction is subject to a number of closing conditions which may be outside of Walter Energy's control. Forward-looking statements include expressions such as "believe," "anticipate," "expect," "estimate," "intend," "may," "plan," "predict," "will," and similar terms and expressions. 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 differ 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 2009 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, readers should keep in mind that any forward-looking statement made in this press release may not occur. All data presented herein is as of Dec. 31, 2010 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,
                                                    ----------------------
                                                       2010        2009
                                                    ----------  ----------
Revenues:
  Sales                                             $  396,863  $  234,006
  Miscellaneous income                                   3,934       2,259
                                                    ----------  ----------
                                                       400,797     236,265
                                                    ----------  ----------

Costs and expenses:
  Cost of sales (exclusive of depreciation and
   depletion)                                          192,421     150,287
  Depreciation and depletion                            26,743      18,723
  Selling, general and administrative                   26,519      19,084
  Postretirement benefits                               10,379       7,696
  Restructuring and impairment charges (1)                   -       3,601
                                                    ----------  ----------
                                                       256,062     199,391
                                                    ----------  ----------

Operating income                                       144,735      36,874
  Interest expense                                      (4,130)     (4,980)
  Interest income                                          151         171
                                                    ----------  ----------
Income from continuing operations before income
 taxes                                                 140,756      32,065
Income tax expense (benefit) (2)                        47,108      (1,231)
                                                    ----------  ----------
Income from continuing operations                       93,648      33,296
Discontinued operations (3)                             (1,780)     (4,120)
                                                    ----------  ----------
Net income                                          $   91,868  $   29,176
                                                    ==========  ==========

Basic income per share:
Income from continuing operations                   $     1.77  $     0.63
Discontinued operations                                  (0.04)      (0.08)
                                                    ----------  ----------

Basic net income per share                          $     1.73  $     0.55
                                                    ==========  ==========

Weighted average number of shares outstanding       52,992,021  53,098,146
                                                    ==========  ==========

Diluted income per share:
Income from continuing operations                   $     1.75  $     0.62
Discontinued operations                                  (0.03)      (0.08)
                                                    ----------  ----------

Diluted net income per share                        $     1.72  $     0.54
                                                    ==========  ==========

Weighted average number of diluted shares
 outstanding                                        53,420,985  53,951,917
                                                    ==========  ==========


(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.

(2) 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 open the
    Company's administrative headquarters in 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 2010 primarily due to greater benefits from permanent
    percentage depletion deductions in 2009.

(3) Discontinued operations includes the results of our closed Homebuilding
    and Kodiak operations for both periods.




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

                                                     For the three months
                                                            ended
                                                         December 31,
                                                    ----------------------
                                                       2010        2009
                                                    ----------  ----------
REVENUES:
Underground Mining                                  $  350,948  $  179,655
Surface Mining                                          35,862      26,029
Walter Coke                                             37,923      37,369
Other                                                      846         430
Consolidating eliminations of intersegment activity    (24,782)     (7,218)
                                                    ----------  ----------
                                                    $  400,797  $  236,265
                                                    ==========  ==========

OPERATING INCOME (LOSS):
Underground Mining                                  $  144,608  $   41,579
Surface Mining                                           6,861       6,415
Walter Coke (1)                                          5,445         (43)
Other (2)                                              (12,697)    (10,869)
Consolidating eliminations of intersegment activity        518        (208)
                                                    ----------  ----------
  Operating income                                  $  144,735  $   36,874
                                                    ==========  ==========


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

(2) Results for 2010 include $5.9 million in costs associated with the
    pending acquisition.




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


                                                     For the year ended
                                                        December 31,
                                                  ------------------------
                                                      2010         2009
                                                  -----------  -----------
Revenues:
  Sales                                           $ 1,570,845  $   955,508
  Miscellaneous income                                 16,885       11,319
                                                  -----------  -----------
                                                    1,587,730      966,827
                                                  -----------  -----------

Costs and expenses:
  Cost of sales (exclusive of depreciation and
   depletion)                                         766,516      586,774
  Depreciation and depletion                           98,702       72,939
  Selling, general and administrative                  86,972       70,510
  Postretirement benefits                              41,478       30,833
  Restructuring and impairment charges (1)                  -        3,601
                                                  -----------  -----------
                                                      993,668      764,657
                                                  -----------  -----------

Operating income                                      594,062      202,170
  Interest expense                                    (17,250)     (18,975)
  Interest income                                         784          799
                                                  -----------  -----------
Income from continuing operations before income
 taxes                                                577,596      183,994
Income tax expense                                    188,171       42,144
                                                  -----------  -----------
Income from continuing operations                     389,425      141,850
Discontinued operations (2)                            (3,628)      (4,692)
                                                  -----------  -----------
Net income                                        $   385,797  $   137,158
                                                  ===========  ===========

Basic income per share:
Income from continuing operations                 $      7.32  $      2.67
Discontinued operations                                 (0.07)       (0.09)
                                                  -----------  -----------

Basic net income per share                        $      7.25  $      2.58
                                                  ===========  ===========

Weighted average number of shares outstanding      53,178,901   53,075,622
                                                  ===========  ===========

Diluted income per share:
Income from continuing operations                 $      7.25  $      2.64
Discontinued operations                                 (0.07)       (0.09)
                                                  -----------  -----------

Diluted net income per share                      $      7.18  $      2.55
                                                  ===========  ===========

Weighted average number of diluted shares
 outstanding                                       53,700,181   53,819,396
                                                  ===========  ===========


(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.

(2) Discontinued operations includes the results of our closed Homebuilding
    and Kodiak operations for both periods, while 2009 also includes the
    results of our Financing segment, which was spun off in April 2009.




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

                                                     For the year ended
                                                        December 31,
                                                  ------------------------
                                                      2010         2009
                                                  -----------  -----------
REVENUES:
Underground Mining                                $ 1,349,748  $   787,325
Surface Mining                                        133,734       99,556
Walter Coke                                           181,979      101,233
Other                                                   2,996        2,469
Consolidating eliminations of intersegment
 activity                                             (80,727)     (23,756)
                                                  -----------  -----------
                                                  $ 1,587,730  $   966,827
                                                  ===========  ===========

OPERATING INCOME (LOSS):
Underground Mining                                $   580,650  $   208,189
Surface Mining                                         24,170       24,045
Walter Coke (1)                                        32,471       (1,338)
Other (2)                                             (40,380)     (29,086)
Consolidating eliminations of intersegment
 activity                                              (2,849)         360
                                                  -----------  -----------
  Operating income                                $   594,062  $   202,170
                                                  ===========  ===========


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

(2) Results for 2010 include $9.5 million of costs associated with
    completed and pending acquisitions.




                   WALTER ENERGY, INC. AND SUBSIDIARIES
        RECONCILIATION OF EBITDA TO AMOUNTS REPORTED UNDER US GAAP
                             ($ in thousands)
                                Unaudited

                                For the three months      For the year
                                        ended                ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------
Net income                      $  91,868  $  29,176  $ 385,797  $ 137,158
   Add loss from discontinued
    operations                      1,780      4,120      3,628      4,692
   Add (less) income tax
    expense (benefit)              47,108     (1,231)   188,171     42,144
   Add interest expense             4,130      4,980     17,250     18,975
   Less interest income              (151)      (171)      (784)      (799)
   Add depreciation and
    depletion expense              26,743     18,723     98,702     72,939
Earnings from continuing
 operations before interest,
 income taxes, and depreciation ---------  ---------  ---------  ---------
 and depletion (EBITDA) (1)     $ 171,478  $  55,597  $ 692,764  $ 275,109
                                =========  =========  =========  =========

(1) EBITDA represents earnings from continuing operations before interest
    expense, interest income, income taxes, and depreciation and depletion
    expense. EBITDA is a financial measure which is not calculated in
    conformity with U.S. Generally Accepted Accounting Principles (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 EBITDA is a useful measure as some investors and
    analysts use EBITDA to compare us against other companies and to help
    analyze our ability to satisfy principal and interest obligations and
    capital expenditure needs. EBITDA may not be comparable to similarly
    titled measures used by other entities.




                   WALTER ENERGY, INC. AND SUBSIDIARIES
                         SUPPLEMENTAL INFORMATION
                                Unaudited

                                              For the          For the
                                        three months ended   year ended
                                           December 31,      December 31,
                                        ----------------- -----------------
                                          2010     2009     2010     2009
                                        -------- -------- -------- --------
Operating Data:
 Underground Mining
  Tons sold by type (in thousands):
   Metallurgical coal, contracts           1,589    1,369    6,833    5,986
   Purchased coal                            124        -      331       98
                                        -------- -------- -------- --------
                                           1,713    1,369    7,164    6,084
                                        ======== ======== ======== ========

  Average selling price per short ton   $ 196.47 $ 126.48 $ 180.80 $ 124.64

  Tons sold by mine (in thousands):
   Mine No. 4                                673      680    2,788    2,789
   Mine No. 7                                916      689    4,045    3,197
                                        -------- -------- -------- --------
          Total                            1,589    1,369    6,833    5,986
                                        ======== ======== ======== ========

  Coal cost of sales (exclusive of
   depreciation):
   Mine No. 4 per ton                   $  76.93 $  75.42 $  77.86 $  71.31
   Mine No. 7 per ton                   $  91.74 $  77.99 $  80.35 $  72.36
      Weighted average cost of sales
       per ton                          $  85.47 $  76.71 $  79.33 $  71.87
   Purchased coal costs (in thousands)  $ 13,526 $     23 $ 33,916 $  4,071
   Other costs (in thousands) (1)       $  8,619 $    802 $ 16,226 $ 12,142

  Tons of coal produced (in thousands):
   Mine No. 4                                689      605    2,798    2,719
   Mine No. 7                                855      749    3,870    3,366
                                        -------- -------- -------- --------
          Total                            1,544    1,354    6,668    6,085
                                        ======== ======== ======== ========

  Coal production costs per ton: (2)
   Mine No. 4                           $  55.35 $  61.35 $  57.79 $  56.77
   Mine No. 7                           $  72.19 $  72.36 $  62.08 $  64.64
      Weighted average production costs
       per ton                          $  64.68 $  67.44 $  60.28 $  61.12

  Natural gas sales, in mmcf (in
   thousands)                              3,405    1,352   10,615    6,132
  Natural gas average sale price per
   mcf                                  $   4.06 $   4.09 $   4.52 $   4.27
  Natural gas cost of sales per mcf     $   2.56 $   2.87 $   2.50 $   2.61

Surface Mining
  Tons sold (in thousands)                   348      326    1,477    1,234
  Tons of coal produced (in thousands)       406      300    1,511    1,328
  Average selling price per short ton   $  96.78 $  77.47 $  85.64 $  76.20
  Coal production costs per ton         $  59.77 $  69.29 $  65.65 $  62.20


(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            For the
                                    three months ended      year ended
                                        December 31,        December 31,
                                    ------------------- -------------------
                                      2010      2009      2010      2009
                                    --------- --------- --------- ---------
Operating Data (continued):

  Walter Coke:
    Metallurgical coke tons sold (in
     thousands)                            87        88       434       200
    Metallurgical coke average sales
     price per ton                  $  381.96 $  312.11 $  372.76 $  328.85

  Depreciation and depletion ($ in
   thousands):
    Underground Mining              $  21,749 $  15,633 $  81,563 $  59,393
    Surface Mining                      3,760     1,880    12,515     8,574
    Walter Coke                         1,038     1,148     4,092     4,566
    Other                                 196        62       532       406
                                    --------- --------- --------- ---------
                                    $  26,743 $  18,723 $  98,702 $  72,939
                                    ========= ========= ========= =========

  Capital expenditures ($ in
   thousands):
    Underground Mining              $  65,936 $  23,778 $ 130,582 $  74,625
    Surface Mining                      5,629     3,490    14,320    16,210
    Walter Coke                         4,726     1,475     7,397     4,837
    Other                                 955       243     5,177       626
                                    --------- --------- --------- ---------
                                    $  77,246 $  28,986 $ 157,476 $  96,298
                                    ========= ========= ========= =========





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

                                                            As of
                                                    -----------------------
                                                     December    December
                                                        31,         31,
                                                       2010        2009
                                                    ----------- -----------
ASSETS
Cash and cash equivalents                           $   293,410 $   165,279
Receivables, net                                        143,238      70,500
Inventories                                              97,631      99,278
Deferred income taxes                                    62,371     110,576
Prepaid expenses                                         28,179      22,702
Other current assets                                      4,798       4,363
Current assets of discontinued operations (1)             5,912      15,197
                                                    ----------- -----------
   Total current assets                                 635,539     487,895
Property, plant and equipment, net                      790,001     522,931
Deferred income taxes                                   149,520     178,338
Other long-term assets                                   82,705      70,192
                                                    ----------- -----------
TOTAL ASSETS                                        $ 1,657,765 $ 1,259,356
                                                    =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable                                    $    70,692 $    44,211
Accrued expenses                                         52,399      39,034
Current debt                                             13,903      13,351
Accumulated postretirement benefits obligation           24,753      23,563
Other current liabilities                                24,362      18,513
Current liabilities of discontinued operations (1)        7,738       7,310
                                                    ----------- -----------
   Total current liabilities                            193,847     145,982
Long-term debt                                          154,570     163,147
Accumulated postretirement benefits obligation          451,348     429,096
Other long-term liabilities                             262,934     261,736
                                                    ----------- -----------
TOTAL LIABILITIES                                     1,062,699     999,961
STOCKHOLDERS' EQUITY                                    595,066     259,395
                                                    ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY          $ 1,657,765 $ 1,259,356
                                                    =========== ===========

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




                   WALTER ENERGY, INC. AND SUBSIDIARIES
        CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                         AND COMPREHENSIVE INCOME
              FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2010
                             ($ in thousands)
                                Unaudited

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

Balance at
 December
 31, 2009  $259,395  $ 533  $374,522                $ 50,852  $   (166,512)
Comprehensive
 income:
Net income  385,797                   $     385,797  385,797
Other
 comprehensive
 income, net
 of tax:
  Change in
   pension and
   post-
   retirement
   benefit
   plans     (5,280)                         (5,280)                (5,280)
  Change in
   unrealized
   gain on
   hedges      (596)                           (596)                  (596)
                                      -------------
Comprehensive
 income                               $     379,921
                                      =============

Purchases of
 stock under
 stock
 repurchase
 program    (65,438)    (9)  (65,429)
Stock issued
 upon the
 exercise
 of stock
 options     17,134      8    17,126
Dividends
 paid,
 $0.475 per
 share      (25,266)                                 (25,266)
Stock-based
 compensation 3,460      -     3,460
Excess tax
 benefit from
 stock-based
 compensation
 arrange-
 ments       28,875           28,875
Other        (3,015)    (1)   (3,014)
Balance at
 December 31,
 2010      $595,066  $ 531  $355,540                $411,383  $   (172,388)
           ========  =====  ========                ========  ============




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

                                                      For the year ended
                                                         December 31,
                                                    ----------------------
                                                       2010        2009
                                                    ----------  ----------
OPERATING ACTIVITIES
Net income                                          $  385,797  $  137,158
  Loss (income) from discontinued operations             3,628       4,692
                                                    ----------  ----------
  Income from continuing operations                    389,425     141,850

Adjustments to reconcile income from continuing
 operations to net cash flows provided by operating
 activities:
   Depreciation and depletion                           98,702      72,939
   Decrease in deferred income taxes                    83,174      29,038
   Non cash restructuring and impairment charges             -       3,601
   Tax benefit on the exercise of stock awards         (28,875)          -
   Other                                                17,408      18,337

   Decrease (increase) in assets, net of effect of
    business acquisition:
     Receivables                                       (65,935)     69,772
     Inventories                                         1,966     (25,076)
     Other current assets                               13,155      17,624
   Increase (decrease) in liabilities, net of effect
    of business acquisition:
     Accounts payable                                   23,717     (16,286)
     Accrued expenses and other current liabilities     41,413     (27,831)
       Cash flows provided by (used in) operating
                                                    ----------  ----------
        activities                                     574,150     283,968
                                                    ----------  ----------

INVESTING ACTIVITIES
 Additions to property, plant and equipment           (157,476)    (96,298)
 Acquisition (1)                                      (209,964)          -
 Other                                                  (3,414)      3,270
                                                    ----------  ----------
       Cash flows provided by (used in) investing
        activities                                    (370,854)    (93,028)
                                                    ----------  ----------

FINANCING ACTIVITIES
 Retirements of debt                                   (26,972)    (61,597)
 Dividends paid                                        (25,266)    (21,190)
 Cash spun off to Financing                                  -     (33,821)
 Purchases of stock under stock repurchase program     (65,438)    (34,254)
 Tax benefit on the exercise of stock awards            28,875           -
 Proceeds from stock options exercised                  17,134       9,888
 Other                                                  (3,015)     (6,169)
                                                    ----------  ----------
       Cash flows provided by (used in) financing
        activities                                     (74,682)   (147,143)
                                                    ----------  ----------
       Cash flows provided by (used in) continuing
        operations                                     128,614      43,797
                                                    ----------  ----------

CASH FLOWS FROM DISCONTINUED OPERATIONS
 Cash flows provided by (used in) operating
  activities                                            (6,268)     19,070
 Cash flows provided by (used in) investing
  activities                                             5,066      27,379
 Cash flows provided by (used in) financing
  activities                                                 -     (41,385)
                                                    ----------  ----------
       Cash flows provided by (used in)
        discontinued operations                         (1,202)      5,064
                                                    ----------  ----------

Net increase (decrease) in cash and cash
 equivalents                                        $  127,412  $   48,861
                                                    ==========  ==========

Cash and cash equivalents at beginning of period    $  165,279  $  116,074
Add: Cash and cash equivalents of discontinued
 operations at beginning of period                       1,254       1,598
Net increase (decrease) in cash and cash
 equivalents                                           127,412      48,861
Less: Cash and cash equivalents of discontinued
 operations at end of period                               535       1,254
                                                    ----------  ----------
Cash and cash equivalents at end of period          $  293,410  $  165,279
                                                    ==========  ==========

SUPPLEMENTAL DISCLOSURES

Non-cash transactions:
Financing of one-year property insurance policy     $   18,947  $   12,710
                                                    ==========  ==========
Dividend to spin off Financing                      $        -  $  437,407
                                                    ==========  ==========


(1) On May 28, 2010, the Company acquired HighMount Exploration &
    Production Alabama, LLC for a cash payment of $210.0 million. The fair
    value of the assets acquired and the liabilities assumed totaled $217.6
    and $7.6 million, respectively.