Note 13—Supplemental Guarantor and Non-Guarantor Financial Information

On November 21, 2012, the Company completed a private placement of $500.0 million in aggregate principal amount of 9.875% senior notes due December 15, 2020 ("2020 Notes") and on March 27, 2013, the Company completed a private placement of $450.0 million in aggregate principal amount of 8.5% senior notes due April 15, 2021 ("2021 Notes"). The 2020 Notes and 2021 Notes are unconditionally guaranteed, jointly and severally, on an unsecured basis, by each of the Company's current and future wholly-owned U.S. domestic restricted subsidiaries. In connection with the private placements, the guarantors entered into registration rights agreements with the initial purchasers in which the Company agreed, among other things, to file a registration statement covering an offer to exchange the 2020 Notes and 2021 Notes for a new issue of exchange notes registered under the Securities Act of 1933 with substantially identical terms. The Company intends to file a registration statement on Form S-4 with the Securities and Exchange Commission for each of the senior notes and is providing the information below to provide supplemental guarantor financial information pursuant to Rule 3-10(f) of Regulation S-X. The following tables present unaudited condensed consolidating financial information for (i) the Company, (ii) the issuer of the senior notes, (iii) the guarantors under the senior notes, and (iv) the entities which are not guarantors of the senior notes:

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)

MARCH 31, 2013

(in thousands)

	Parent (Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated

ASSETS
Cash and cash equivalents	$	200,185	$	158	$	35,448		$	—		$	235,791
Receivables, net		79,729		122,336		113,231			—			315,296
Intercompany receivables		—		538,342		75,419			(613,761	)		—
Intercompany notes receivable		143,263		—		—			(143,263	)		—
Inventories		—		118,744		183,549			—			302,293
Deferred income taxes		36,717		17,687		1,225			—			55,629
Prepaid expenses		1,374		40,861		5,206			—			47,441
Other current assets		18,146		1,128		4,011			—			23,285

Total current assets		479,414		839,256		418,089			(757,024	)		979,735
Mineral interests, net		—		17,015		2,910,576			—			2,927,591
Property, plant and equipment, net		8,276		779,101		904,260			—			1,691,637
Deferred income taxes		78,056		112,560		(5,229	)		—			185,387
Investment in subsidiaries		3,815,313		—		—			(3,815,313	)		—
Other long-term assets		76,091		9,674		13,327			—			99,092

	$	4,457,150	$	1,757,606	$	4,241,023		$	(4,572,337	)	$	5,883,442

LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—	$	9,277	$	8,121		$	—		$	17,398
Accounts payable		11,588		80,694		40,758			—			133,040
Accrued expenses		100,956		87,102		4,855			—			192,913
Intercompany payables		613,761		—		—			(613,761	)		—
Intercompany notes payable		—		—		143,263			(143,263	)		—
Accumulated postretirement benefits obligation		131		29,506		—			—			29,637
Other current liabilities		157,201		23,619		26,508			—			207,328

Total current liabilities		883,637		230,198		223,505			(757,024	)		580,316
Long-term debt		2,581,327		115		12,142			—			2,593,584
Deferred income taxes		—		—		883,659			—			883,659
Accumulated postretirement benefits obligation		435		635,694		—			—			636,129
Other long-term liabilities		46,081		128,839		69,164			—			244,084

Total liabilities		3,511,480		994,846		1,188,470			(757,024	)		4,937,772
Stockholders' equity		945,670		762,760		3,052,553			(3,815,313	)		945,670

Total liabilities and stockholders' equity	$	4,457,150	$	1,757,606	$	4,241,023		$	(4,572,337	)	$	5,883,442

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS (Unaudited)

DECEMBER 31, 2012

(in thousands)

	Parent (Issuer)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated

ASSETS
Cash and cash equivalents	$	83,833	$	61	$	32,707		$	—		$	116,601
Receivables, net		64,106		113,182		79,679			—			256,967
Intercompany receivables		153,933		507,519		—			(661,452	)		—
Intercompany notes receivable		118,079		—		—			(118,079	)		—
Inventories		—		131,893		174,125			—			306,018
Deferred income taxes		39,375		17,687		1,464			—			58,526
Prepaid expenses		1,869		45,327		6,580			—			53,776
Other current assets		17,559		1,109		5,260			—			23,928

Total current assets		478,754		816,778		299,815			(779,531	)		815,816
Mineral interests, net		—		18,475		2,947,082			—			2,965,557
Property, plant and equipment, net		8,448		790,900		932,783			—			1,732,131
Deferred income taxes		52,363		112,560		(4,501	)		—			160,422
Goodwill		—		—		—			—			—
Investment in subsidiaries		3,530,094		—		—			(3,530,094	)		—
Other long-term assets		71,622		9,375		13,497			—			94,494

	$	4,141,281	$	1,748,088	$	4,188,676		$	(4,309,625	)	$	5,768,420

LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—	$	10,196	$	8,597		$	—		$	18,793
Accounts payable		5,128		78,260		31,525			—			114,913
Accrued expenses		27,197		83,155		74,523			—			184,875
Intercompany payables		507,519		—		153,933			(661,452	)		—
Intercompany notes payable		—		—		118,079			(118,079	)		—
Accumulated postretirement benefits obligation		131		29,069		—			—			29,200
Other current liabilities		157,044		24,389		25,040			—			206,473

Total current liabilities		697,019		225,069		411,697			(779,531	)		554,254
Long-term debt		2,381,255		1,784		14,333			—			2,397,372
Deferred income taxes		—		—		921,687			—			921,687
Accumulated postretirement benefits obligation		452		632,812		—			—			633,264
Other long-term liabilities		51,984		128,593		70,695			—			251,272

Total liabilities		3,130,710		988,258		1,418,412			(779,531	)		4,757,849
Stockholders' equity		1,010,571		759,830		2,770,264			(3,530,094	)		1,010,571

Total liabilities and stockholders' equity	$	4,141,281	$	1,748,088	$	4,188,676		$	(4,309,625	)	$	5,768,420

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2013

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Total Consolidated

Revenues:
Sales	$	—		$	314,812		$	174,797		$	—	$	489,609
Miscellaneous income (loss)		553			2,190			(1,009	)		—		1,734

		553			317,002			173,788			—		491,343

Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			247,677			173,257			—		420,934
Depreciation and depletion		485			40,410			40,295			—		81,190
Selling, general and administrative		13,567			6,943			10,164			—		30,674
Postretirement benefits		(55	)		14,780			—			—		14,725
Restructuring charges		—			116			7,324			—		7,440

		13,997			309,926			231,040			—		554,963

Operating income (loss)		(13,444	)		7,076			(57,252	)		—		(63,620	)
Interest expense		(50,156	)		590			(3,052	)		—		(52,618	)
Interest income		15			—			635			—		650
Other income		—			—			105			—		105

Loss before income tax expense		(63,585	)		7,666			(59,564	)		—		(115,483	)
Income tax benefit		(26,667	)		(3,396	)		(35,976	)		—		(66,039	)

		(36,918	)		11,062			(23,588	)		—		(49,444	)
Equity in losses of subsidiaries		(12,526	)		—			—			12,526		—

Net income (loss)	$	(49,444	)	$	11,062		$	(23,588	)	$	12,526	$	(49,444	)

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2012

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated

Revenues:
Sales	$	—		$	413,654		$	213,644		$	—		$	627,298
Miscellaneous income (loss)		675			4,071			(481	)		—			4,265

		675			417,725			213,163			—			631,563

Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			246,205			185,329			—			431,534
Depreciation and depletion		215			34,367			31,911			—			66,493
Selling, general and administrative		10,729			12,148			13,370			—			36,247
Postretirement benefits		(112	)		13,325			—			—			13,213

		10,832			306,045			230,610			—			547,487

Operating income (loss)		(10,157	)		111,680			(17,447	)		—			84,076
Interest expense		(27,224	)		(286	)		(557	)		—			(28,067	)
Interest income		47			—			230			—			277
Other income (loss)		3,019			—			(10,012	)		—			(6,993	)

Income (loss) before income tax expense		(34,315	)		111,394			(27,786	)		—			49,293
Income tax expense (benefit)		(9,982	)		32,261			(13,602	)		—			8,677

		(24,333	)		79,133			(14,184	)		—			40,616
Equity in earnings of subsidiaries		64,949			—			—			(64,949	)		—

Net income (loss)	$	40,616		$	79,133		$	(14,184	)	$	(64,949	)	$	40,616

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2013

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Total Consolidated

Net income (loss)	$	(49,444	)	$	11,062	$	(23,588	)	$	12,526		$	(49,444	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		4,659			—		—			—			4,659
Change in unrealized gain on hedges, net of tax		722			21		—			(21	)		722
Change in foreign currency translation adjustment		(15,625	)		—		(15,625	)		15,625			(15,625	)
Change in unrealized gain on investments		44			—		44			(44	)		44

Total other comprehensive income (loss), net of tax		(10,200	)		21		(15,581	)		15,560			(10,200	)

Total comprehensive income (loss)	$	(59,644	)	$	11,083	$	(39,169	)	$	28,086		$	(59,644	)

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2012

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated

Net income (loss)	$	40,616		$	79,133		$	(14,184	)	$	(64,949	)	$	40,616
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		3,898			(50,756	)		—			50,756			3,898
Change in unrealized gain (loss) on hedges, net of tax		(1,283	)		20			(690	)		670			(1,283	)
Change in foreign currency translation adjustment		2,419			—			2,419			(2,419	)		2,419
Change in unrealized gain on investments		(369	)		—			(369	)		369			(369	)

Total other comprehensive income (loss), net of tax		4,665			(50,736	)		1,360			49,376			4,665

Total comprehensive income (loss)	$	45,281		$	28,397		$	(12,824	)	$	(15,573	)	$	45,281

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2013

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated

Cash flows provided by (used in) operating activities	$	(28,029	)	$	65,848		$	(57,217	)	$	—		$	(19,398	)

INVESTING ACTIVITIES
Additions to property, plant and equipment		(314	)		(24,545	)		(9,168	)		—			(34,027	)
Intercompany notes issued		(45,591	)		—			—			45,591			—
Intercompany notes proceeds		22,000			—			—			(22,000	)		—
Investments in subsidiaries		(50,103	)		—			—			50,103			—
Other		—			—			1,021			—			1,021

Cash flows used in investing activities		(74,008	)		(24,545	)		(8,147	)		73,694			(33,006	)

FINANCING ACTIVITIES
Proceeds from issuance of debt		450,000			—			—			—			450,000
Borrowings under revolving credit agreement		—			—			320,778			—			320,778
Repayments on revolving credit agreement		—			—			(320,778	)		—			(320,778	)
Retirements of debt		(250,000	)		(2,588	)		(2,099	)		—			(254,687	)
Dividends paid		(7,816	)		—			—			—			(7,816	)
Excess tax deficit from stock-based compensation arrangements		(195	)		(177	)		—			—			(372	)
Proceeds from stock options exercised		279			—			—			—			279
Debt issuance costs		(15,163	)		—			—			—			(15,163	)
Advances from (to) consolidated entities		41,521			(38,443	)		(3,078	)		—			—
Intercompany notes borrowings		—			—			45,591			(45,591	)		—
Intercompany notes payments		—			—			(22,000	)		22,000			—
Investment from Parent		—			—			50,103			(50,103	)		—
Other		(237	)		2			—			—			(235	)

Cash flows provided by (used in) financing activities		218,389			(41,206	)		68,517			(73,694	)		172,006

Effect of foreign exchange rates on cash		—			—			(412	)		—			(412	)

Net increase in cash and cash equivalents	$	116,352		$	97		$	2,741		$	—		$	119,190
Cash and cash equivalents at beginning of period		83,833			61			32,707			—			116,601

Cash and cash equivalents at end of period	$	200,185		$	158		$	35,448		$	—		$	235,791

WALTER ENERGY, INC. AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2012

(in thousands)

	Parent (Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total Consolidated

Cash flows provided by (used in) operating activities	$	(57,822	)	$	145,851		$	(17,175	)	$	—		$	70,854

INVESTING ACTIVITIES
Additions to property, plant and equipment		(630	)		(31,461	)		(88,754	)		—			(120,845	)
Proceeds from sales of investments		—			—			12,228			—			12,228
Intercompany notes issued		(11,101	)		—			—			11,101			—
Other		—			(85	)		—			—			(85	)

Cash flows used in investing activities		(11,731	)		(31,546	)		(76,526	)		11,101			(108,702	)

FINANCING ACTIVITIES
Borrowings under revolving credit agreement		—			—			135,294			—			135,294
Repayments on revolving credit agreement		—			—			(70,156	)		—			(70,156	)
Retirements of debt		—			(1,983	)		(7,194	)		—			(9,177	)
Dividends paid		(7,806	)		—			—			—			(7,806	)
Excess tax benefits from stock-based compensation arrangements		783			—			—			—			783
Proceeds from stock options exercised		120			—			—			—			120
Advances from (to) consolidated entities		104,534			(112,293	)		7,759			—			—
Intercompany notes borrowings		—			—			11,101			(11,101	)		—
Other		(647	)		1			(881	)		—			(1,527	)

Cash flows provided by (used in) financing activities		96,984			(114,275	)		75,923			(11,101	)		47,531

Effect of foreign exchange rates on cash		—			—			87			—			87

Net increase (decrease) in cash and cash equivalents	$	27,431		$	30		$	(17,691	)	$	—		$	9,770
Cash and cash equivalents at beginning of period		99,086			79			29,265			—			128,430

Cash and cash equivalents at end of period	$	126,517		$	109		$	11,574		$	—		$	138,200