Note 13—Supplemental Guarantor and Non-Guarantor Financial Information

In accordance with the indentures governing the 9.875% senior notes due December 2020 and the 8.50% senior notes due April 2021 (collectively the "Senior Notes"), certain wholly-owned U.S. domestic restricted subsidiaries of the Company have fully and unconditionally guaranteed the Senior Notes on a joint and several basis. The following tables present unaudited condensed consolidating financial information for (i) the Company, (ii) the issuer of the senior notes, (iii) the 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)
SEPTEMBER 30, 2013
(in thousands)

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

ASSETS
Cash and cash equivalents	$	261,733	$	—	$	31,401		$	—		$	293,134
Receivables, net		120,361		109,229		75,764			—			305,354
Intercompany receivables		—		216,751		57,438			(274,189	)		—
Intercompany loans receivable		55,583		1,096,126		—			(1,151,709	)		—
Inventories		—		164,493		156,188			—			320,681
Deferred income taxes		39,876		17,687		510			—			58,073
Prepaid expenses		2,931		39,792		4,374			—			47,097
Other current assets		17,867		631		2,280			—			20,778

Total current assets		498,351		1,644,709		327,955			(1,425,898	)		1,045,117
Mineral interests, net		—		7,687		2,910,215			—			2,917,902
Property, plant and equipment, net		6,753		759,471		862,217			—			1,628,441
Deferred income taxes		40,252		112,560		(4,501	)		—			148,311
Investment in subsidiaries		4,613,231		—		—			(4,613,231	)		—
Other long-term assets		74,318		10,331		16,092			—			100,741

	$	5,232,905	$	2,534,758	$	4,111,978		$	(6,039,129	)	$	5,840,512

LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt	$	—	$	3,945	$	8,234		$	—		$	12,179
Accounts payable		3,446		72,706		21,541			—			97,693
Accrued expenses		53,472		44,752		56,246			—			154,470
Intercompany payables		274,189		—		—			(274,189	)		—
Intercompany loans payable		1,096,126		—		55,583			(1,151,709	)		—
Accumulated postretirement benefits obligation		161		30,350		—			—			30,511
Other current liabilities		168,993		23,202		22,105			—			214,300

Total current liabilities		1,596,387		174,955		163,709			(1,425,898	)		509,153
Long-term debt		2,762,553		—		7,828			—			2,770,381
Accumulated postretirement benefits obligation		400		640,937		—			—			641,337
Deferred income taxes		—		—		854,408			—			854,408
Other long-term liabilities		44,887		123,184		68,484			—			236,555

Total liabilities		4,404,227		939,076		1,094,429			(1,425,898	)		5,011,834
Stockholders' equity		828,678		1,595,682		3,017,549			(4,613,231	)		828,678

	$	5,232,905	$	2,534,758	$	4,111,978		$	(6,039,129	)	$	5,840,512

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		721,293		—		—			(721,293	)		—
Intercompany loans receivable		118,079		1,074,879		—			(1,192,958	)		—
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		1,046,114		1,384,138		299,815			(1,914,251	)		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
Investment in subsidiaries		3,530,094		—		—			(3,530,094	)		—
Other long-term assets		71,622		9,375		13,497			—			94,494

	$	4,708,641	$	2,315,448	$	4,188,676		$	(5,444,345	)	$	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		—		567,360		153,933			(721,293	)		—
Intercompany loans payable		1,074,879		—		118,079			(1,192,958	)		—
Accumulated postretirement benefits obligation		131		29,069		—			—			29,200
Other current liabilities		157,044		24,389		25,040			—			206,473

Total current liabilities		1,264,379		792,429		411,697			(1,914,251	)		554,254
Long-term debt		2,381,255		1,784		14,333			—			2,397,372
Accumulated postretirement benefits obligation		452		632,812		—			—			633,264
Deferred income taxes		—		—		921,687			—			921,687
Other long-term liabilities		51,984		128,593		70,695			—			251,272

Total liabilities		3,698,070		1,555,618		1,418,412			(1,914,251	)		4,757,849
Stockholders' equity		1,010,571		759,830		2,770,264			(3,530,094	)		1,010,571

	$	4,708,641	$	2,315,448	$	4,188,676		$	(5,444,345	)	$	5,768,420

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

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

Revenues:
Sales	$	—		$	302,328	$	143,609		$	—		$	445,937
Miscellaneous income (loss)		(932	)		5,669		5,122			—			9,859

		(932	)		307,997		148,731			—			455,796

Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			234,913		160,398			—			395,311
Depreciation and depletion		543			43,600		38,843			—			82,986
Selling, general and administrative		(3,730	)		13,854		11,749			—			21,873
Postretirement benefits		(54	)		14,761		—			—			14,707
Restructuring and asset impairment		—			—		—			—			—

		(3,241	)		307,128		210,990			—			514,877

Operating income (loss)		2,309			869		(62,259	)		—			(59,081	)
Interest expense		(72,054	)		—		(2,408	)		10,918			(63,544	)
Interest income		1,874			8,465		594			(10,918	)		15
Other loss		4,059			218		609			—			4,886

Income (loss) before income tax expense		(63,812	)		9,552		(63,464	)		—			(117,724	)
Income tax expense (benefit)		(715	)		1,368		(17,653	)		—			(17,000	)

		(63,097	)		8,184		45,811			—			(100,724	)
Equity in earnings (losses) of subsidiaries		(37,627	)		—		—			37,627			—

Net income (loss)	$	(100,724	)	$	8,184	$	45,811		$	37,627		$	(100,724	)

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 2012
(in thousands)

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

Revenues:
Sales	$	—		$	441,518		$	170,992		$	—		$	612,510
Miscellaneous income (loss)		345			1,674			(2,555	)		—			(536	)

		345			443,192			168,437			—			611,974

Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			283,138			165,627			—			448,765
Depreciation and depletion		466			35,576			46,518			—			82,560
Selling, general and administrative		6,026			17,885			8,575			—			32,486
Postretirement benefits		(112	)		13,325			—			—			13,213
Restructuring and asset impairment		—			—			1,106,715			—			1,106,715

		6,380			349,924			1,327,435			—			1,683,739

Operating income (loss)		(6,035	)		93,268			(1,158,998	)		—			(1,071,765	)
Interest expense		(35,618	)		(1,191	)		(2,484	)		8,748			(30,545	)
Interest income		1,124			6,699			1,038			(8,748	)		113
Other income (loss), net		3,019			—			(3,962	)		—			(943	)

Income (loss) before income tax expense		(37,510	)		98,776			(1,164,406	)		—			(1,103,140	)
Income tax benefit		(2,295	)		(1,632	)		(37,257	)		—			(41,184	)

		(35,215	)		100,408			(1,127,149	)		—			(1,061,956	)
Equity in earnings (losses) of subsidiaries		(1,026,741	)		—			—			1,026,741			—

Net income (loss)	$	(1,061,956	)	$	100,408		$	(1,127,149	)	$	1,026,741		$	(1,061,956	)

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

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

Revenues:
Sales	$	—		$	916,338		$	457,006		$	—		$	1,373,344
Miscellaneous income (loss)		(159	)		8,638			6,812			—			15,291

		(159	)		924,976			463,818			—			1,388,635

Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			693,904			489,957			—			1,183,861
Depreciation and depletion		1,539			117,683			113,274			—			232,496
Selling, general and administrative		6,420			41,108			32,148			—			79,676
Postretirement benefits		(164	)		44,321			—			—			44,157
Restructuring and asset impairment		—			(8,947	)		10,646			—			1,699

		7,795			888,069			646,025			—			1,541,889

Operating income (loss)		(7,954	)		36,907			(182,207	)		—			(153,254	)
Interest expense		(190,227	)		—			(8,585	)		29,521			(169,291	)
Interest income		5,419			21,748			3,163			(29,521	)		809
Other income		4,059			218			—			—			4,277

Income (loss) before income tax expense		(188,703	)		58,873			(187,629	)		—			(317,459	)
Income tax expense (benefit)		(49,490	)		6,505			(89,814	)		—			(132,799	)

		(139,213	)		52,368			(97,815	)		—			(184,660	)
Equity in earnings (losses) of subsidiaries		(45,447	)		—			—			45,447			—

Net income (loss)	$	(184,660	)	$	52,368		$	(97,815	)	$	45,447		$	(184,660	)

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2012
(in thousands)

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

Revenues:
Sales	$	—		$	1,290,567		$	617,846		$	—		$	1,908,413
Miscellaneous income (loss)		2,071			20,553			(9,926	)		—			12,698

		2,071			1,311,120			607,920			—			1,921,111

Cost and expenses:
Cost of sales (exclusive of depreciation and depletion)		—			801,320			565,063			—			1,366,383
Depreciation and depletion		901			105,308			117,303			—			223,512
Selling, general and administrative		14,594			55,011			34,973			—			104,578
Postretirement benefits		(337	)		39,976			—			—			39,639
Restructuring and asset impairment		—			—			1,106,715			—			1,106,715

		15,158			1,001,615			1,824,054			—			2,840,827

Operating income (loss)		(13,087	)		309,505			(1,216,134	)		—			(919,716	)
Interest expense		(111,043	)		(1,731	)		(4,443	)		27,501			(89,716	)
Interest income		2,868			21,930			3,434			(27,501	)		731
Other income (loss), net		9,058			—			(22,913	)		—			(13,855	)

Income (loss) before income tax expense		(112,204	)		329,704			(1,240,056	)		—			(1,022,556	)
Income tax expense (benefit)		(25,860	)		63,849			(65,961	)		—			(27,972	)

Income (loss) from continuing operations		(86,344	)		265,855			(1,174,095	)		—			(994,584	)
Income from discontinued operations		—			—			5,180			—			5,180
Equity in earnings (losses) of subsidiaries		(903,060	)		—			—			903,060			—

Net income (loss)	$	(989,404	)	$	265,855		$	(1,168,915	)	$	903,060		$	(989,404	)

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

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

Net income (loss)	$	(100,724	)	$	8,184	$	(45,811	)	$	37,627		$	(100,724	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		4,659			13,338		—			(13,338	)		4,659
Change in unrealized gain on hedges, net of tax		653			12		—			(12	)		653
Change in foreign currency translation adjustment		14,847			—		14,847			(14,847	)		14,847
Change in unrealized loss on investments, net of tax		(940	)		—		(940	)		940			(940	)

Total other comprehensive income (loss), net of tax		19,219			13,350		13,907			(27,257	)		19,219

Total comprehensive income (loss)	$	(81,505	)	$	21,534	$	(31,904	)	$	10,370		$	(81,505	)

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE
INCOME (LOSS) (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 2012
(in thousands)

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

Net income (loss)	$	(1,061,956	)	$	100,408	$	(1,127,149	)	$	1,026,741		$	(1,061,956	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		3,898			—		—			—			3,898
Change in unrealized gain (loss) on hedges, net of tax		(545	)		23		—			(23	)		(545	)
Change in foreign currency translation adjustment		3,132			—		3,132			(3,132	)		3,132
Change in unrealized gain on investments, net of tax		1,135			—		1,135			(1,135	)		1,135

Total other comprehensive income (loss), net of tax		7,620			23		4,267			(4,290	)		7,620

Total comprehensive income (loss)	$	(1,054,336	)	$	100,431	$	(1,122,882	)	$	1,022,451		$	(1,054,336	)

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

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

Net income (loss)	$	(184,660	)	$	47,594	$	(98,407	)	$	50,813		$	(184,660	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		13,976			13,338		—			(13,338	)		13,976
Change in unrealized gain on hedges, net of tax		1,901			49		—			(49	)		1,901
Change in foreign currency translation adjustment		(2,239	)		—		(2,239	)		2,239			(2,239	)
Change in unrealized gain on investments, net of tax		(897	)		—		(897	)		897			(897	)

Total other comprehensive income (loss), net of tax		12,741			13,387		(3,136	)		(10,251	)		12,741

Total comprehensive income (loss)	$	(171,919	)	$	60,981	$	(101,543	)	$	40,562		$	(171,919	)

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE
INCOME (LOSS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2012
(in thousands)

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

Net income (loss)	$	(989,404	)	$	265,855		$	(1,168,915	)	$	903,060		$	(989,404	)
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans, net of tax		11,693			(50,756	)		—			50,756			11,693
Change in unrealized gain (loss) on hedges, net of tax		(3,815	)		72			(2,519	)		2,447			(3,815	)
Change in foreign currency translation adjustment		2,342			—			2,342			(2,342	)		2,342
Change in unrealized loss on investments, net of tax		766			—			766			(766	)		766

Total other comprehensive income (loss), net of tax		10,986			(50,684	)		589			50,095			10,986

Total comprehensive income (loss)	$	(978,418	)	$	215,171		$	(1,168,326	)	$	953,155		$	(978,418	)

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

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

Cash flows provided by (used in) operating activities	$	(165,441	)	$	163,367		$	(41,952	)	$	—		$	(44,026	)

INVESTING ACTIVITIES
Additions to property, plant and equipment		(863	)		(84,623	)		(23,249	)		—			(108,735	)
Intercompany loans made		(33,100	)		—			—			33,100			—
Intercompany payments received		30,500			—			—			(30,500	)		—
Investments in subsidiaries		—			—			—			—			—
Proceeds from sales of investments		—			—			1,559			—			1,559
Other		—			—			663			—			663

Cash flows used in investing activities		(3,463	)		(84,623	)		(21,027	)		2,600			(106,513	)

FINANCING ACTIVITIES
Proceeds from issuance of debt		897,412			—			—			—			897,412
Borrowings under revolving credit agreement		—			—			646,320			—			646,320
Repayments on revolving credit agreement		—			—			(646,320	)		—			(646,320	)
Retirements of debt		(496,062	)		(14,193	)		—			—			(510,255	)
Dividends paid		(16,264	)		—			—			—			(16,264	)
Debt issuance costs		(42,128	)		—			—			—			(42,128	)
Advances from (to) consolidated entities		4,729			(64,763	)		60,034			—			—
Intercompany borrowings		—			—			33,100			(33,100	)		—
Intercompany payments made		—			—			(30,500	)		30,500			—
Investment from Parent		—			—			—			—			—
Other		(883	)		151			—			—			(732	)

Cash flows provided by (used in) financing activities		346,804			(78,805	)		62,634			(2,600	)		328,033

Effect of foreign exchange rates on cash		—			—			(961	)		—			(961	)

Net increase (decrease) in cash and cash equivalents		177,900			(61	)		(1,306	)		—			176,533
Cash and cash equivalents at beginning of period		83,833			61			32,707			—			116,601

Cash and cash equivalents at end of period	$	261,733		$	—		$	31,401		$	—		$	293,134

WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2012
(in thousands)

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

Cash flows provided by (used in) operating activities	$	(141,991	)	$	360,669		$	114,328		$	—		$	333,006

INVESTING ACTIVITIES
Additions to property, plant and equipment		(4,127	)		(108,002	)		(219,211	)		—			(331,340	)
Proceeds from sales of investments		—			—			12,382			—			12,382
Intercompany Notes Issued		(58,102	)		—			—			58,102			—
Other		—			1,076			—			—			1,076

Cash flows used in investing activities		(62,229	)		(106,926	)		(206,829	)		58,102			(317,882	)

FINANCING ACTIVITIES
Borrowings under revolving credit agreement		—			—			272,926			—			272,926
Repayments on revolving credit agreement		—			—			(125,396	)		—			(125,396	)
Retirements of debt		(100,000	)		(6,056	)		(22,394	)		—			(128,450	)
Dividends paid		(23,432	)		—			—			—			(23,432	)
Net consideration paid upon exercise of warrants		(11,535	)		—			—			—			(11,535	)
Debt Issuance Costs		(6,376	)		—			—			—			(6,376	)
Advances from (to) consolidated entities		357,707			(257,147	)		(100,560	)		—			—
Intercompany borrowings		—			—			58,102			(58,102	)		—
Other		176			2			—			—			178

Cash flows provided by (used in) financing activities		216,540			(263,201	)		82,678			(58,102	)		(22,085	)

Cash flows provided by (used in) continuing operations		12,320			(9,458	)		(9,823	)		—			(6,961	)

CASH FLOWS FROM DISCONTINUED OPERATIONS		—			9,500			—			—			9,500

Effect of foreign exchange rates on cash		—			—			(1,047	)		—			(1,047	)

Net increase (decrease) in cash and cash equivalents		12,320			42			(10,870	)		—			1,492
Cash and cash equivalents at beginning of period		99,086			79			29,265			—			128,430

Cash and cash equivalents at end of period	$	111,406		$	121		$	18,395		$	—		$	129,922