SOURCE: Walter Energy

Walter Energy

October 20, 2009 16:30 ET

Walter Energy Announces Third Quarter 2009 Earnings From Continuing Operations of $0.45 per Diluted Share on Record Coking Coal Sales Volumes

Third Quarter Coking Coal Sales of 1.9 Million Tons up 35.2 Percent Versus Prior Year; Year-to-Date Sales Volumes Ahead of Same Period Last Year

Company Resumes Delivery on Carryover Coal Contracts at $315 per Ton

Company Expects Premium Hard Coking Coal Production and Sales of Approximately 8 Million Tons in 2010 and Up to 9.5 Million Tons in 2012

TAMPA, FL--(Marketwire - October 20, 2009) - 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 $24.4 million, or $0.45 per diluted share, for the quarter ended Sept. 30, 2009, compared to $71.3 million, or $1.26 per diluted share in the third quarter 2008. Results are up significantly versus second quarter 2009, when income from continuing operations was $11.3 million.

"Our third quarter performance illustrates the strong demand for our high quality coking coal," said Company Chief Executive Officer Victor P. Patrick. "We continue to see improving market conditions for our product and we are on track to achieve sales of approximately 3.5 million tons in the second half. This performance supports our plan to produce and sell approximately 8 million tons in 2010, with the startup of the Mine No. 7 East longwall in early January 2010."

Third Quarter 2009 Financial & Operating Results from Continuing Operations

Net sales and revenues for the third quarter 2009 totaled $278.3 million, compared to $308.8 million in the prior-year period. Operating income totaled $42.4 million for the quarter, down $67.2 million versus the prior-year period. Both revenues and operating income were lower, driven by significantly lower coke sales as well as lower realized prices for coking coal compared to the previous year's all-time highs.

Net sales and revenues and operating income were up $109.2 million and $20.9 million, respectively, versus the second quarter 2009. The sequential improvements were driven by strong customer demand resulting in 0.8 million tons of additional coking coal sales in the current period, facilitated by improvements in loading rates at the Port of Mobile. In addition, volumes included approximately 79,000 tons of carryover tonnage from the prior contract year priced in excess of $315 per metric ton.

Underground Mining

Coking coal sales volumes were 1.9 million tons in the third quarter, a record for quarterly sales volumes, at an average selling price of $121.66 per short ton FOB Port, versus 1.4 million tons at an average price of $161.92 in the prior-year period. On a year-to-date basis, coking coal sales volumes totaled 4.7 million tons, up slightly versus the first nine months of 2008, despite declines in global steel production.

Total coking coal production in the quarter was 1.5 million tons versus 1.2 million tons in the prior-year period. Coking coal production at Mine No. 4 totaled 0.7 million tons in the third quarter, slightly lower than in the prior year. Mine No. 7 produced 0.8 million tons in the third quarter, 0.3 million tons more than in the third quarter last year. This is the result of improved longwall performance at the No. 7 Mine in the current-year period, as well as lower volumes in the prior-year period due to a longwall move at that mine.

Average mine production costs for the period were $60.60 per ton. At No. 4, production costs were $58.27 per ton, an increase of $7.41 per ton over the prior year, as a result of lower volumes, along with higher labor and depreciation costs. Production costs at No. 7 were $62.48 per ton compared to $94.82 per ton in the prior-year period, a result of the increase in production volume, partially offset by higher labor and depreciation costs.

The natural gas business sold 1.5 billion cubic feet of gas, slightly less than in the prior year, at an average price of $3.29 per thousand cubic feet in the third quarter 2009 compared to an average price of $8.69 per thousand cubic feet in the prior-year period.

Surface Mining

The surface mining segment reported net sales and revenues of $25.2 million in the third quarter 2009, compared to $18.9 million in the prior-year period, driven primarily by a 28.8 percent increase in average selling prices for steam and industrial coal in the current period. Sales volumes were also higher in the current period primarily resulting from the acquisition of Taft Coal Sales & Associates, Inc. ("Taft") in September 2008. Operating income in the third quarter 2009 was $6.8 million, compared to $1.7 million in the third quarter 2008, primarily driven by the higher average contract prices for steam and industrial coal and higher sales volumes.

Steam and industrial coal sales were 302,000 tons during the third quarter compared to sales of 283,000 tons in the prior-year period. Production totaled 359,000 tons in the third quarter versus prior-year production of 268,000 tons, primarily from the inclusion of a full quarter of Taft's production in the current period compared to only one month in the prior year.

Walter Coke

Walter Coke generated net sales and revenues of $23.3 million in the third quarter 2009, compared to $53.7 million in the prior-year period. Walter Coke returned to near break-even in the third quarter 2009 on strengthening demand for metallurgical coke.

Third quarter 2009 metallurgical coke sales were 38,478 tons at an average price of $361.95 per ton. In the prior year, Walter Coke sold 101,077 tons at $397.20 per ton. Declines in revenue and operating income in the current period reflect lower shipments resulting from lower domestic steel capacity utilization versus the prior year.

Corporate and Other

Interest expense totaled $4.8 million in the quarter, down $0.7 million versus the prior-year period. Interest expense in the quarter was lower due to the Company's repayment of its revolving credit facility balance earlier this year and lower interest rates on outstanding debt.

At Sept. 30, 2009, the Company had available liquidity of $322.9 million, including cash of $87.8 million and $235.1 million available under its credit facility. Total net debt outstanding at Sept. 30, 2009 was $95.0 million compared to $147.2 million at June 30, 2009.

Business Outlook

Walter Energy's business outlook for the remainder of 2009 includes the following:

Coking Coal Sales(1)                     Q3-2009 A       Q4-2009 E
-------------------                      ---------       ---------
Tons Sold (short tons, in millions)      1.9             1.6 - 1.7
Average Operating Margin(2) Per Ton      $23.91          $27 - $33

Steam & Industrial Coal Sales(3)         Q3-2009 A       Q4-2009 E
-------------------------------          ---------       ---------
Tons Sold (short tons)                   302,000         300,000 - 330,000
Average Operating Margin(2) Per Ton      $17.38          $12 - $17

Coke Sales                               Q3-2009 A       Q4-2009 E
----------                               ---------       ---------
Tons Sold                                38,478          78,000 - 86,000
Average Operating Margin (Loss)(2)
 Per Ton                                 $(5.71)         $19 - $24

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) Includes the surface mining operations; excludes income from
    royalties and miscellaneous land sales reported in the surface mining
    segment

The Company expects to ship 126,000 tons of hard coking coal at 2008-2009 carryover pricing of approximately $315 per metric ton in the fourth quarter 2009.

Coking coal production is expected to be between 1.4 and 1.5 million tons in the fourth quarter, with production costs expected to average between $65 and $70 per ton.

"We expect continued improvement in market conditions for the remainder of 2009," said Patrick. "Moving into 2010, we are seeing increasing demand for premium mid- and low-vol coals from our key product destinations, as well as Asia, with port constraints in Australia continuing to make high-quality coking coals a scarce resource."

The Company recently finalized its long-range mining plan and expects to produce approximately 8.0 million tons of premium hard coking coal in 2010, highlighted by incremental production from the Company's Mine No. 7 East expansion. The Company added that it expects to increase coking coal production capacity to between 8.5 and 9.0 million tons in 2011 and between 9.0 and 9.5 million tons in 2012.

Walter Coke is expecting improved sales and a return to profitability in the fourth quarter 2009, driven primarily by increased orders from the domestic steel industry.

Capital expenditures were $14.9 million in the third quarter, totaling $67.3 million for the year. The Company expects full-year capital expenditures of approximately $85 million.

Conference Call Web cast

Chief Executive Officer Victor P. Patrick and members of the Company's leadership team will discuss Walter Energy's third quarter results, its outlook and other general business matters during a conference call and live Web cast to be held on Wednesday, Oct. 21, 2009, at 10 a.m. Eastern Daylight 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 $1.2 billion and employs approximately 2,150 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. Forward-looking statements, including expressions such as "believe," "anticipate," "expect," "estimate," "intend," "may," "will," and similar expressions involve known and unknown risks, uncertainties, and other factors that may cause Walter Energy's actual results in future periods to differ materially from the expectations expressed or implied by such forward-looking statements. These factors include, among others, the following: the market demand for the Company's products 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 Walter Energy's mining operations; changes in customer orders; pricing actions by the Company's competitors, customers, suppliers and contractors; changes in governmental policies and laws; and changes in general economic conditions. Forward-looking statements made by Walter Energy in this release, or elsewhere, speak only as of the date on which the statements were made. Any forward-looking statements should be considered in context with the various disclosures made by Walter Energy, including the Risk Factors described in the Company's 2008 Annual Report on Form 10-K and Walter Energy's other filings with the Securities and Exchange Commission. Walter Energy has no obligation to update its forward-looking statements as of any future date.

- WLT -

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


                                                    For the three months
                                                     ended September 30,
                                                  -----------  -----------
                                                      2009         2008
                                                  -----------  -----------
Net sales and revenues:
  Net sales                                       $   276,331  $   307,407
  Miscellaneous income                                  1,974        1,400
                                                  -----------  -----------
                                                      278,305      308,807
                                                  -----------  -----------

Costs and expenses:
  Cost of sales (exclusive of depreciation)           190,678      164,801
  Depreciation                                         18,214       13,525
  Selling, general and administrative                  19,238       14,036
  Postretirement benefits                               7,712        6,859
  Amortization of intangibles                             112           67
                                                  -----------  -----------
                                                      235,954      199,288
                                                  -----------  -----------

Operating income                                       42,351      109,519
  Interest expense                                    (4,780)      (5,478)
  Interest income                                        152          155
                                                  -----------  -----------
Income from continuing operations before income
 taxes                                                 37,723      104,196
Income tax expense                                     13,355       32,906
                                                  -----------  -----------
Income from continuing operations                      24,368       71,290
Discontinued operations (1)                              (560)     (16,290)
                                                  -----------  -----------
Net income                                        $    23,808  $    55,000
                                                  ===========  ===========

Basic income per share:
Income from continuing operations                 $      0.46  $      1.28
Discontinued operations                                 (0.01)       (0.29)
                                                  -----------  -----------

Basic net income per share                        $      0.45  $      0.99
                                                  ===========  ===========

Weighted average number of shares outstanding      52,903,686   55,685,967
                                                  ===========  ===========

Diluted income per share:
Income from continuing operations                 $      0.45  $      1.26
Discontinued operations                                 (0.01)       (0.29)
                                                  -----------  -----------

Diluted net income per share                      $      0.44  $      0.97
                                                  ===========  ===========

Weighted average number of diluted shares
 outstanding                                       53,761,367   56,449,918
                                                  ===========  ===========

(1) 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.


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


                                                    For the three months
                                                    ended September 30,
                                                  ------------------------
                                                      2009         2008
                                                  -----------  -----------

NET SALES AND REVENUES:
Underground Mining (1)                            $   233,060  $   251,373
Surface Mining (1)                                     25,229       18,908
Walter Coke                                            23,307       53,738
Other                                                     910        1,910
Consolidating eliminations of intersegment
 activity                                              (4,201)     (17,123)
                                                  -----------  -----------
                                                  $   278,305  $   308,806
                                                  ===========  ===========

OPERATING INCOME (LOSS):
Underground Mining (1)                            $    44,120  $    96,319
Surface Mining (1)                                      6,777        1,670
Walter Coke                                              (223)      14,638
Other                                                  (8,403)      (3,082)
Consolidating eliminations of intersegment
 activity                                                  80          (26)
                                                  -----------  -----------
  Operating income                                $    42,351  $   109,519
                                                  ===========  ===========

(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, which is 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.



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


                                                    For the nine months
                                                     ended September 30,
                                                  -----------  -----------
                                                      2009         2008
                                                  -----------  -----------
Net sales and revenues:
  Net sales                                       $   721,502  $   774,822
  Miscellaneous income                                  9,060        9,325
                                                  -----------  -----------
                                                      730,562      784,147
                                                  -----------  -----------

Costs and expenses:
  Cost of sales (exclusive of depreciation)           436,487      462,612
  Depreciation                                         54,216       37,833
  Selling, general and administrative                  51,091       49,693
  Postretirement benefits                              23,137       20,575
  Amortization of intangibles                             335          206
                                                  -----------  -----------
                                                      565,266      570,919
                                                  -----------  -----------

Operating income                                      165,296      213,228
  Interest expense                                   (13,995)     (22,375)
  Interest income                                        628          520
                                                  -----------  -----------
Income from continuing operations before income
 taxes                                                151,929      191,373
Income tax expense                                     43,375       57,172
                                                  -----------  -----------
Income from continuing operations                     108,554      134,201
Discontinued operations (1)                              (572)     (27,926)
                                                  -----------  -----------
Net income                                        $   107,982  $   106,275
                                                  ===========  ===========

Basic income (loss) per share:
Income from continuing operations                 $      2.05  $      2.50
Discontinued operations                                 (0.01)       (0.52)
                                                  -----------  -----------

Basic net income per share                        $      2.04  $      1.98
                                                  ===========  ===========

Weighted average number of shares outstanding      53,051,794   53,613,732
                                                  ===========  ===========

Diluted income (loss) per share:
Income from continuing operations                 $      2.02  $      2.47
Discontinued operations                                 (0.01)       (0.52)
                                                  -----------  -----------

Diluted net income per share                      $      2.01  $      1.95
                                                  ===========  ===========

Weighted average number of diluted shares
 outstanding                                       53,695,337   54,363,127
                                                  ===========  ===========



(1) 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.


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


                                                    For the nine months
                                                    ended September 30,
                                                  ------------------------
                                                      2009         2008
                                                  -----------  -----------

NET SALES AND REVENUES:
Underground Mining (1)                            $   607,670  $   622,242
Surface Mining (1)                                     73,527       48,603
Walter Coke                                            63,864      157,874
Other                                                   2,039        2,751
Consolidating eliminations of intersegment
 activity                                             (16,538)     (47,323)
                                                  -----------  -----------
                                                  $   730,562  $   784,147
                                                  ===========  ===========

OPERATING INCOME (LOSS):
Underground Mining (1)                            $   166,610  $   179,364
Surface Mining (1)                                     17,630        5,652
Walter Coke                                            (1,295)      48,429
Other                                                 (18,217)     (19,523)
Consolidating eliminations of intersegment
 activity                                                 568         (694)
                                                  -----------  -----------
Operating income                                  $   165,296  $   213,228
                                                  ===========  ===========

(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, which is 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.



                   WALTER ENERGY, INC. AND SUBSIDIARIES
                         SUPPLEMENTAL INFORMATION
                                Unaudited


                                         For the three      For the nine
                                          months ended      months ended
                                          September 30,     September 30,
                                        ----------------- -----------------
                                          2009     2008     2009     2008
                                        -------- -------- -------- --------
Operating Data:
  Underground Mining
    Tons sold by type (in thousands):
      Metallurgical coal, contracts        1,868    1,250    4,618    4,261
      Purchased coal                           3      134       97      362
                                        -------- -------- -------- --------
                                           1,871    1,384    4,715    4,623
                                        ======== ======== ======== ========

    Average selling price per short ton $ 121.66 $ 161.92 $ 124.11 $ 117.55

    Tons sold by mine (in thousands):
      Mine No. 4                             748      740    2,109    2,585
      Mine No. 7                           1,120      510    2,509    1,676
                                        -------- -------- -------- --------
          Total                            1,868    1,250    4,618    4,261
                                        ======== ======== ======== ========

    Coal cost of sales (exclusive of
     depreciation):
      Mine No. 4 per ton                $  73.09 $  67.89 $  69.98 $  59.68
      Mine No. 7 per ton                $  85.95 $ 102.15 $  70.82 $  84.86
        Weighted average cost of sales
         per ton                        $  80.80 $  81.87 $  70.44 $  69.58
      Purchased coal costs (in
       thousands)                       $     92 $  8,071 $  4,048 $ 20,487
      Other costs (in thousands) (1)    $  4,983 $  3,172 $ 11,340 $ 10,136

    Tons of coal produced (in
     thousands):
      Mine No. 4                             687      731    2,113    2,473
      Mine No. 7                             849      513    2,617    1,773
                                        -------- -------- -------- --------
          Total                            1,536    1,244    4,730    4,246
                                        ======== ======== ======== ========

    Coal production costs per ton: (2)
      Mine No. 4                        $  58.27 $  50.86 $  55.45 $  43.77
      Mine No. 7                        $  62.48 $  94.82 $  62.43 $  76.45
        Weighted average production
         costs per ton                  $  60.60 $  68.99 $  59.31 $  57.42

    Natural gas sales, in mmcf (in
     thousands)                            1,507    1,667    4,780    4,844
    Natural gas average sale price per
     mcf                                $   3.29 $   8.69 $   4.32 $   8.55
    Natural gas cost of sales per mcf   $   2.41 $   3.46 $   2.54 $   3.47

    Surface Mining
     Tons sold (in thousands)                302      283      908      707
     Tons of coal produced (in
      thousands)                             359      268    1,027      696
     Average selling price per short
      ton                               $  78.90 $  61.24 $  74.23 $  60.88
     Coal production costs per ton      $  54.25 $  60.57 $  60.13 $  58.01


(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     For the nine
                                     months            months
                                ended September   ended September
                                      30,               30,
                                ----------------- -----------------
                                  2009     2008     2009     2008
                                -------- -------- -------- --------
Operating Data (continued):

  Walter Coke:
    Metallurigical coke tons
     sold                         38,478  101,077  111,925  311,531
    Metallurigical coke average
     sales price per ton        $ 361.95 $ 397.20 $ 342.07 $ 394.40

  Depreciation ($ in thousands):
    Underground Mining          $ 14,824 $ 10,463 $ 43,760 $ 30,218
    Surface Mining                 2,142    1,777    6,694    3,885
    Walter Coke                    1,140    1,048    3,418    3,033
    Other                            108      237      344      697
                                -------- -------- -------- --------
                                $ 18,214 $ 13,525 $ 54,216 $ 37,833
                                ======== ======== ======== ========

  Capital expenditures ($ in
   thousands)(1):
    Underground Mining          $ 13,350 $ 49,083 $ 50,847 $ 98,105
    Surface Mining                   912    1,196   12,720    2,468
    Walter Coke                      311    1,979    3,362    5,571
    Other                            376       99      383      212
                                -------- -------- -------- --------
                                $ 14,949 $ 52,357 $ 67,312 $106,356
                                ======== ======== ======== ========


(1) Includes the acquisition of property, plant and equipment under
capital lease and other obligations totaling $22.6 million during
the quarter ended September 30, 2008.




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


                                                            As of
                                                 -------------------------
                                                 September 30, December 31,
                                                     2009         2008
                                                 ------------ ------------
ASSETS
Current assets of continuing operations:
Cash and cash equivalents                        $     87,815 $    116,074
Receivables, net                                      122,716      140,423
Inventories                                           105,280       75,172
Deferred income taxes                                  57,326       84,669
Other current assets                                   30,575       26,119
                                                 ------------ ------------
  Total current assets                                403,712      442,457
Property, plant and equipment, net                    515,952      504,585
Deferred income taxes                                 184,387      179,402
Other long-term assets                                 69,489       69,251
                                                 ------------ ------------
  Total assets of continuing operations             1,173,540    1,195,695
                                                 ------------ ------------

Assets of discontinued operations:
Current assets (1)                                     19,207       16,158
Long-term assets (1)                                        -       18,396
Unclassified assets (2)                                     -    1,837,744
                                                 ------------ ------------
  Total assets of discontinued operations              19,207    1,872,298
                                                 ------------ ------------
TOTAL ASSETS                                     $  1,192,747 $  3,067,993
                                                 ============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities of continuing operations
Accounts payable                                 $     48,371 $     60,497
Accrued expenses                                       40,398       57,230
Current debt                                           17,566       13,480
Accumulated postretirement benefits obligation         19,124       19,124
Other current liabilities                              20,545       20,801
                                                 ------------ ------------
  Total current liabilities of continuing
   operations                                         146,004      171,132
Long-term debt                                        165,269      211,905
Accumulated postretirement benefits obligation        351,168      349,184
Other long-term liabilities                           257,017      273,645
                                                 ------------ ------------
  Total liabilities of continuing operations          919,458    1,005,866
                                                 ------------ ------------

Liabilities of discontinued operations:
Current liabilities (1)                                 7,689       12,400
Unclassified liabilities (2)                                -    1,419,458
                                                 ------------ ------------
  Total liabilities of discontinued operations          7,689    1,431,858
                                                 ------------ ------------
TOTAL LIABILITIES                                     927,147    2,437,724
                                                 ------------ ------------

STOCKHOLDERS' EQUITY                                  265,600      630,269
                                                 ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $  1,192,747 $  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 NINE MONTHS ENDED SEPTEMBER 30, 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  107,982                    $    107,982   107,982
Other
 compre-
 hensive
 income
 (loss),
 net of
 tax:
  Change in
   pension
   and
   postre-
   tirement
   benefit
   plans      5,981                           5,981                  5,981
  Change in
  unrealized
  gain (loss)
  on hedges  (1,465)                         (1,465)                (1,465)
                                       ------------
Comprehensive
 income                                $    112,498
                                       ============

Purchases of
 stock under
 stock
 repurchase
 program    (27,963)   (13)   (27,950)
Stock
 dividend
 for spin-
 off of
 Financing (439,093)         (321,301)               (116,106)      (1,686)
Dividends
 paid,
 $0.30 per
 share      (15,887)                             -   (15,887)
Stock-based
 compensa-
 tion         5,565             5,565
Other           211      1        210
           --------  -----  ---------               --------  ------------
Balance at
 September
 30, 2009  $265,600  $ 529  $ 370,698               $ 26,979  $   (132,606)
           ========  =====  =========               ========  ============



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


                                                    For the nine months
                                                    ended September 30,
                                                  ------------------------
                                                      2009         2008
                                                  -----------  -----------

OPERATING ACTIVITIES
Net income                                        $   107,982  $   106,275
  Loss from discontinued operations                       572       27,926
                                                  -----------  -----------
  Income from continuing operations                   108,554      134,201

Adjustments to reconcile income from continuing
 operations to net cash flows provided by
 operating activities:
  Depreciation                                          54,216       37,833
  Other                                                 21,077        6,188

  Decrease (increase) in assets:
    Receivables                                        18,126      (71,658)
    Inventories                                       (30,213)     (23,645)
    Other current assets                               11,267        7,049
  Increase (decrease) in liabilities:
    Accounts payable                                  (12,126)      11,780
    Accrued expenses and other current
     liabilities                                       (6,131)      35,168
                                                  -----------  -----------
      Cash flows provided by operating activities     164,770      136,916
                                                  -----------  -----------

INVESTING ACTIVITIES
  Additions to property, plant and equipment          (67,312)     (83,768)
  Acquisition of Taft Coal Sales & Associates               -      (17,871)
  Other                                                 3,667         (364)
                                                  -----------  -----------
    Cash flows used in investing activities           (63,645)    (102,003)
                                                  -----------  -----------

FINANCING ACTIVITIES
  Proceeds from issuance of debt                            -      330,000
  Retirements of debt                                 (55,260)    (376,351)
  Proceeds from stock offering                              -      280,432
  Dividends paid                                      (15,887)     (10,799)
  Cash spun off to Financing                          (33,821)           -
  Purchases of stock under stock repurchase
   program                                            (27,963)     (14,461)
  Other                                                (5,262)      12,096
                                                  -----------  -----------
    Cash flows provided by (used in) financing
     activities                                      (138,193)     220,917
                                                  -----------  -----------
    Cash flows provided by (used in) continuing
     operations                                       (37,068)     255,830
                                                  -----------  -----------

CASH FLOWS FROM DISCONTINUED OPERATIONS
  Cash flows provided by operating activities          24,133       22,190
  Cash flows provided by investing activities          25,732       29,116
  Cash flows used in financing activities             (41,385)    (306,559)
                                                  -----------  -----------
    Cash flows provided by (used in) discontinued
     operations                                         8,480     (255,253)
                                                  -----------  -----------

Net decrease in cash and cash equivalents         $   (28,588) $       577
                                                  ===========  ===========

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                                          (28,588)         577
Less: Cash and cash equivalents of discontinued
 operations at end of period                            1,269        1,644
                                                  -----------  -----------
Cash and cash equivalents at end of period        $    87,815  $    29,547
                                                  ===========  ===========

SUPPLEMENTAL DISCLOSURES

Non-cash transations:
Financing of one-year property insurance policy   $     8,515  $     9,291
                                                  ===========  ===========
Dividend to spin off Financing                    $   437,407  $         -
                                                  ===========  ===========
Lease financing of equipment and other
 obligations                                      $         -  $    22,587
                                                  ===========  ===========