WALTER ENERGY, INC. AND SUBSIDIARIES RESULTS BY OPERATING SEGMENT ($ in thousands) Unaudited For the three months For the years ended December 31, ended December 31, ------------------------ ------------------------ 2012 2011(1) 2012 2011(1) ----------- ----------- ----------- -----------REVENUES:U.S. Operations $ 325,837 $ 481,011 $ 1,728,363 $ 1,871,182Canadian and U.K. Operations 152,412 221,502 668,313 698,054Other 535 493 3,219 2,122 ----------- ----------- ----------- ----------- Revenues $ 478,784 $ 703,006 $ 2,399,895 $ 2,571,358 =========== =========== =========== ===========OPERATING INCOME (LOSS) BEFORE IMPAIRMENTS AND RESTRUCTURING CHARGES:U.S. Operations $ (3,302) $ 129,351 $ 302,977 $ 561,370Canadian and U.K. Operations (76,903) 16,335 (159,393) 86,538Other (2) (6,441) (14,512) (43,231) (74,477) ----------- ----------- ----------- ----------- Operating income (loss) before impairment and restructuring charges $ (86,646) $ 131,174 $ 100,353 $ 573,431 =========== =========== =========== ===========OPERATING INCOME (LOSS):U.S. Operations $ (3,302) $ 129,351 $ 188,696 $ 561,370Canadian and U.K. Operations (83,667) 16,335 (1,158,591) 86,538Other (2) (6,441) (14,512) (43,231) (74,477) ----------- ----------- ----------- ----------- Operating income (loss) $ (93,410) $ 131,174 $(1,013,126) $ 573,431 =========== =========== =========== ===========DEPRECIATION AND DEPLETION:U.S. Operations $ 42,505 $ 44,952 $ 173,140 $ 155,702Canadian and U.K. Operations 49,737 27,553 141,713 74,203Other 478 204 1,379 776 ----------- ----------- ----------- ----------- Depreciation and depletion $ 92,720 $ 72,709 $ 316,232 $ 230,681 =========== =========== =========== ===========CAPITAL EXPENDITURES:U.S. Operations $ 40,902 $ 23,453 $ 162,535 $ 149,996Canadian and U.K. Operations 18,807 97,639 224,583 264,476Other 463 97 4,394 94 ----------- ----------- ----------- ----------- Capital expenditures $ 60,172 $ 121,189 $ 391,512 $ 414,566 =========== =========== =========== ===========(1) Includes the results of Western Coal since the April 1, 2011 date of acquisition. Certain previously reported three months and year ended December 31, 2011 balances have been recast to reflect the effects of finalizing the allocation of the Western Coal purchase price during the 2012 first quarter.(2) Amounts for the year ended December 31, 2011 include $23.2 million of costs associated with the April 1, 2011 acquisition of Western Coal. WALTER ENERGY, INC. AND SUBSIDIAIRES SUPPLEMENTAL FNANCIAL DATA (Ton information in 000's metric tons and dollars in USD) Unaudited 3 Months Ended December 31, 2012 ------------------------------ Canadian and U.K. U.S. Operations Operations (4) Total ---------- ----------- -------Total Metallurgical Sales Metric Tons 1,506 1,040 2,546 Production Metric Tons 1,542 924 2,466 Average Net Selling Price $ 153.64 $ 141.07 $148.51 Average Cash Cost of Sales per Ton (2)(3) $ 118.05 $ 160.50 $135.39 Average Cash Cost of Production per Ton (2) $ 86.62 $ 107.84 $ 94.57 Low Vol Hard Coking Sales Metric Tons 828 4 832 Production Metric Tons 998 50 1,048 Average Net Selling Price $ 162.39 $ 210.40 $162.63 Average Cash Cost of Sales per Ton not (2)(3) $ 98.86 meaningful $111.30 Average Cash Cost of Production per Ton (2) $ 70.21 $ 146.93 $ 73.89 Mid Vol Hard Coking Sales Metric Tons 467 528 995 Production Metric Tons 358 398 756 Average Net Selling Price $ 143.43 $ 153.28 $148.65 Average Cash Cost of Sales per Ton (2)(3) $ 143.22 $ 120.10 $130.97 Average Cash Cost of Production per Ton (2) $ 122.47 $ 82.99 $101.70 High Vol Hard Coking Sales Metric Tons 211 - 211 Production Metric Tons 186 - 186 Average Net Selling Price $ 130.67 $ - $130.67 Average Cash Cost of Sales per Ton (2)(3) $ 139.10 $ - $139.10 Average Cash Cost of Production per Ton (2) $ 105.48 $ - $105.48 Low Vol PCI Sales Metric Tons - 508 508 Production Metric Tons - 476 476 Average Net Selling Price $ - $ 127.83 $127.83 Average Cash Cost of Sales per Ton (2)(3) $ - $ 181.38 $181.38 Average Cash Cost of Production per Ton (2) $ - $ 124.50 $124.50Thermal Sales Metric Tons 655 9 664 Production Metric Tons 552 7 559 Average Net Selling Price $ 64.33 $ 124.44 $ 65.14 Average Cash Cost of Sales per Ton (2)(3) $ 55.83 $ 70.31 $ 56.03 Average Cash Cost of Production per Ton (2) $ 64.99 $ - $ 64.17 3 Months Ended December 31, 2011 (1) ----------------------------- Canadian and U.K. U.S. Operations Operations (4) Total ---------- ---------- -------Total Metallurgical Sales Metric Tons 1,390 1,011 2,401 Production Metric Tons 1,449 878 2,327 Average Net Selling Price $ 242.61 $ 241.70 $242.23 Average Cash Cost of Sales per Ton (2)(3) $ 118.88 $ 167.62 $139.41 Average Cash Cost of Production per Ton (2) $ 81.77 $ 180.21 $118.91 Low Vol Hard Coking Sales Metric Tons 775 - 775 Production Metric Tons 838 1 839 Average Net Selling Price $ 265.19 $ - $265.19 Average Cash Cost of Sales per Ton (2)(3) $ 121.79 $ - $121.79 Average Cash Cost of Production per Ton (2) $ 77.72 $ 182.78 $ 77.77 Mid Vol Hard Coking Sales Metric Tons 317 488 805 Production Metric Tons 385 389 774 Average Net Selling Price $ 277.88 $ 273.21 $275.05 Average Cash Cost of Sales per Ton (2)(3) $ 127.14 $ 169.94 $153.08 Average Cash Cost of Production per Ton (2) $ 74.87 $ 150.29 $112.76 High Vol Hard Coking Sales Metric Tons 298 - 298 Production Metric Tons 225 - 225 Average Net Selling Price $ 149.42 $ - $149.42 Average Cash Cost of Sales per Ton (2)(3) $ 127.22 $ - $127.22 Average Cash Cost of Production per Ton (2) $ 108.69 $ - $108.69 Low Vol PCI Sales Metric Tons - 523 523 Production Metric Tons - 489 489 Average Net Selling Price $ - $ 212.29 $212.29 Average Cash Cost of Sales per Ton (2)(3) $ - $ 165.44 $165.44 Average Cash Cost of Production per Ton (2) $ - $ 204.03 $204.03Thermal Sales Metric Tons 1,036 32 1,068 Production Metric Tons 965 28 993 Average Net Selling Price $ 60.74 $ 106.94 $ 62.13 Average Cash Cost of Sales per Ton (2)(3) $ 66.92 $ 149.08 $ 69.40 Average Cash Cost of Production per Ton (2) $ 55.43 $ - $ 53.84 3 Months Ended September 30, 2012 ----------------------------- Canadian and U.K. U.S. Operations Operations (4) Total ---------- ---------- -------Total Metallurgical Sales Metric Tons 1,880 743 2,623 Production Metric Tons 1,721 1,604 3,325 Average Net Selling Price $ 196.41 $ 178.49 $191.34 Average Cash Cost of Sales per Ton (2)(3) $ 118.91 $ 165.98 $132.24 Average Cash Cost of Production per Ton (2) $ 85.45 $ 94.08 $ 89.61 Low Vol Hard Coking Sales Metric Tons 939 47 986 Production Metric Tons 1,015 90 1,105 Average Net Selling Price $ 213.80 $ 243.30 $215.14 Average Cash Cost of Sales per Ton (2)(3) $ 101.84 $ 329.41 $112.18 Average Cash Cost of Production per Ton (2) $ 68.56 $ 170.50 $ 76.86 Mid Vol Hard Coking Sales Metric Tons 678 256 934 Production Metric Tons 473 551 1,024 Average Net Selling Price $ 191.99 $ 197.79 $193.58 Average Cash Cost of Sales per Ton (2)(3) $ 135.74 $ 107.27 $127.94 Average Cash Cost of Production per Ton (2) $ 113.60 $ 78.59 $ 94.74 High Vol Hard Coking Sales Metric Tons 263 - 263 Production Metric Tons 233 - 233 Average Net Selling Price $ 138.28 $ - $138.28 Average Cash Cost of Sales per Ton (2)(3) $ 135.02 $ - $135.02 Average Cash Cost of Production per Ton (2) $ 101.93 $ - $101.93 Low Vol PCI Sales Metric Tons - 440 440 Production Metric Tons - 963 963 Average Net Selling Price $ - $ 160.37 $160.37 Average Cash Cost of Sales per Ton (2)(3) $ - $ 182.76 $182.76 Average Cash Cost of Production per Ton (2) $ - $ 95.81 $ 95.81Thermal Sales Metric Tons 927 10 937 Production Metric Tons 805 9 814 Average Net Selling Price $ 67.00 $ 117.55 $ 67.51 Average Cash Cost of Sales per Ton (2)(3) $ 55.27 $ 131.48 $ 56.05 Average Cash Cost of Production per Ton (2) $ 57.21 $ - $ 56.60(1) Certain previously reported three months ended December 31, 2011statistical information have been recast to reflect the effects offinalizing the allocation of the Western Coal purchase price during the 2012first quarter.(2) Average Cash Cost of Sales per Ton is based on reported Cost of Salesand includes items such as freight, royalties, manpower, fuel and othersimilar production and sales cost items but excludes depreciation, depletionand post retirement benefits. Average Cash Cost of Production per Ton isbased on period costs of mining and includes items such as manpower, fueland other similar production items but excludes depreciation, depletion andpost retirement benefits. Average Cash Cost per Ton are non-GAAP financialmeasures which are not calculated in conformity with U.S. Generally AcceptedAccounting Principles (GAAP) and should be considered supplemental to, andnot as a substitute or superior to financial measures calculated inconformity with GAAP. We believe Average Cash Cost per Ton are usefulmeasures of performance and we believe it aids some investors and analystsin comparing us against other companies to help analyze our current andfuture potential performance. Average Cash Costof Sales per Ton may not becomparable to similarly titled measures used by other companies.(3) Reconciliation of Cash Costs of Sales per Ton to Cost of Sales asdisclosed (in thousands USD): Quarter Ended Quarter Ended December 31, Quarter Ended December 31, 2011 Actual, Sept. 30, 2012 Actual Recast (1) 2012 Actual ------------- ------------- -------------Cash Costs of Sales as calculated from above (sales tons times average cash cost per ton) $ 381,907 $ 408,843 $ 399,382 Cash Costs of other products 48,701 47,045 49,383 ------------- ------------- ------------- Total Cost of Sales $ 430,608 $ 455,888 $ 448,765 ============= ============= =============(4) During the third quarter of 2012, in our Canadian and U.K. operations certain metrics around tons included in production were realigned to align with how we account for production in the U.S. operations. Historically, the Canadian and U.K. operations were not recording tons produced until they were deemed finished goods. We revised this methodology to include all tons mined, no matter if in process or finished, as produced based on a clean coal tonnage equivalent. Our Form 8-K filed on November 5, 2012, includes a reconciliation of production statistics previously presented as compared with the realigned methodology from the Western Coal acquisition date of April 1, 2011 through June 30, 2012. WALTER ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ($ in thousands) Unaudited December 31, December 31, 2012 2011(1) ------------- -------------ASSETSCash and cash equivalents $ 116,601 $ 128,430Receivables, net 256,967 313,343Inventories 306,018 240,437Deferred income taxes 58,526 61,079Prepaid expenses 53,776 49,974Other current assets 23,928 45,649 ------------- ------------- Total current assets 815,816 838,912Mineral interests, net 2,965,557 3,056,258Property, plant and equipment, net 1,732,131 1,631,333Deferred income taxes 160,422 109,300Goodwill - 1,066,754Other long-term assets 94,494 153,951 ------------- -------------TOTAL ASSETS $ 5,768,420 $ 6,856,508 ============= =============LIABILITIES AND STOCKHOLDERS' EQUITYCurrent debt $ 18,793 $ 56,695Accounts payable 114,913 112,661Accrued expenses 184,875 229,067Accumulated postretirement benefits obligation 29,200 27,247Other current liabilities 206,473 63,757 ------------- ------------- Total current liabilities 554,254 489,427Long-term debt 2,397,372 2,269,020Deferred income taxes 921,687 1,029,336Accumulated postretirement benefits obligation 633,264 550,671Other long-term liabilities 251,272 381,537 ------------- -------------TOTAL LIABILITIES 4,757,849 4,719,991STOCKHOLDERS' EQUITY (1) 1,010,571 2,136,517 ------------- -------------TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,768,420 $ 6,856,508 ============= =============(1) The December 31, 2011 balance sheet has been recast to reflect the effects of finalizing the allocation of the Western Coal purchase price during the 2012 first quarter. Retained earnings, a component of stockholders' equity, was increased by $14.4 million, primarily due to a decrease in mineral interests depletion net of income tax expense applicable to 2011. WALTER ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2012 ($ in thousands, except per share amounts) Unaudited Retained Accumulated Capital in Earnings Other Common Excess of (Accumulated Comprehensive Total Stock Par Value Deficit)(1) Income (Loss) ----------- ------ ---------- ------------ -------------Balance at December 31, 2011, recast (1) $ 2,136,517 $ 624 $1,620,430 $ 744,939 $ (229,476)Net loss (1,060,375) (1,060,375)Other comprehensive income, net of tax (41,374) (41,374)Stock issued upon the exercise of stock options 161 1 160Dividends paid, $0.50 per share (31,246) (31,246)Stock-based compensation 7,437 7,437Excess tax benefits from stock-based compensation arrangements 217 217Other (766) - - (766) ----------- ------ ---------- ------------ -------------Balance at December 31, 2012 $ 1,010,571 $ 625 $1,628,244 $ (347,448) $ (270,850) =========== ====== ========== ============ =============(1) Retained earnings as of December 31, 2011 has been recast to reflect the effects of finalizing the allocation of the Western Coal purchase price. The balance was increased by $14.4 million primarily due to a decrease in mineral interests depletion net of income tax expense applicable to 2011. WALTER ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($ in thousands) Unaudited For the years ended December 31, ------------------------ 2012 2011(1) ----------- -----------OPERATING ACTIVITIESNet income (loss) $(1,060,375) $ 363,598 Less income from discontinued operations (5,180) - ----------- ----------- Income (loss) from continuing operations (1,065,555) 363,598Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities: Depreciation and depletion 316,232 230,681 Deferred income tax provision (credit) (132,220) 66,803 Gain on investment in Western Coal Corp. - (20,553) Impairment charges 1,107,512 - Other (36,801) 30,989 Decrease (increase) in current assets, net of effect of business acquisitions: Receivables 44,378 (1,605) Inventories (62,630) (1,885) Prepaid expenses and other current assets 11,702 18,929 Increase in current liabilities, net of effect of business acquisitions: Accounts payable 34,594 13,676 Accrued expenses and other current liabilities 112,695 6,233 ----------- ----------- Cash flows provided by operating activities 329,907 706,866 ----------- -----------INVESTING ACTIVITIES Additions to property, plant and equipment (391,512) (436,705) Acquisition of Western Coal Corp., net of cash acquired - (2,432,693) Proceeds from sales of investments 13,239 27,325 Other 898 1,413 ----------- ----------- Cash flows used in investing activities (377,375) (2,840,660) ----------- -----------FINANCING ACTIVITIES Proceeds from issuance of debt 496,510 2,350,000 Borrowings under revolving credit agreement 510,650 71,259 Repayments on revolving credit agreement (519,453) (61,259) Retirements of debt (392,851) (290,630) Dividends paid (31,246) (30,042) Net consideration paid upon exercise of warrants (11,535) - Debt issuance costs (24,532) (80,027) Other (388) 12,646 ----------- ----------- Cash flows provided by financing activities 27,155 1,971,947 ----------- ----------- Cash flows used in continuing operations (20,313) (161,847) ----------- -----------CASH FLOWS FROM DISCONTINUED OPERATIONS Cash flows provided by investing activities 9,500 - ----------- -----------EFFECT OF FOREIGN EXCHANGE RATES ON CASH (1,016) (3,668) ----------- -----------Net increase (decrease) in cash and cash equivalents $ (11,829) $ (165,515) =========== ===========Cash and cash equivalents at beginning of period $ 128,430 $ 293,410Add: Cash and cash equivalents of discontinued operations at beginning of period - 535Net increase (decrease) in cash and cash equivalents (11,829) (165,515) ----------- -----------Cash and cash equivalents at end of period $ 116,601 $ 128,430 =========== ===========(1) Includes the results of Western Coal since the April 1, 2011 date of acquisition. Certain previously reported year ended December 31, 2011 balances have been recast to reflect the effects of finalizing the allocation of the Western Coal purchase price during the 2012 first quarter. WALTER ENERGY, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Unaudited RECONCILIATION OF EBITDA FROM CONTINUING OPERATIONS, EBITDA AND ADJUSTED EBITDA TO AMOUNTS REPORTED UNDER US GAAP: For the three months ended For the years ended December 31, December 31, ------------------------ ------------------------ ($ in thousands) 2012 2011(1) 2012 2011(1) ----------- ----------- ----------- -----------Income (loss) from continuing operations $ (70,971) $ 80,252 $(1,065,555) $ 363,598 Add: interest expense 49,640 33,575 139,356 96,820 Less: interest income (73) (250) (804) (606) Add: income tax expense (benefit) (71,232) 23,843 (99,204) 131,225 Add: depreciation and depletion expense 92,720 72,709 316,232 230,681 ----------- ----------- ----------- -----------Earnings from continuing operations before interest, income taxes, and depreciation and depletion (EBITDA from continuing operations) (2) 84 210,129 (709,975) 821,718Add: pretax income from discontinued operations - - 8,282 - ----------- ----------- ----------- -----------Earnings before interest, income taxes, and depreciation and depletion (EBITDA) (3) 84 210,129 (701,693) 821,718Add: goodwill impairment (2,345) - 1,064,409 -Add: asset impairment and restructuring charges 9,109 - 49,070 - ----------- ----------- ----------- -----------Adjusted EBITDA (4) $ 6,848 $ 210,129 $ 411,786 $ 821,718 =========== =========== =========== ===========RECONCILIATION OF ADJUSTED NET INCOME (LOSS) TO AMOUNTS REPORTED UNDER US GAAP: For the three months ended For the years ended December 31, December 31, ------------------------ ------------------------($ in thousands) 2012 2011(1) 2012 2011(1) ----------- ----------- ----------- -----------Net income (loss) $ (70,971) $ 80,252 $(1,060,375) $ 363,598Less: income from discontinued operations - - (5,180) -Add: asset impairment and restructuring charges, net of tax ($2.2 million and $17.2 million for three months and year ended December 31, 2012, respectively) 6,877 - 31,868 -Add: goodwill impairment (2,345) - 1,064,409 - ----------- ----------- ----------- -----------Adjusted net income (loss) (5) $ (66,439) $ 80,252 $ 30,722 $ 363,598 =========== =========== =========== ===========(1) Includes the results of Western Coal since the April 1, 2011 date of acquisition. Certain previously reported three months and year ended December 31, 2011 balances have been recast to reflect the effects of finalizing the allocation of the Western Coal purchase price during the 2012 first quarter.(2) EBITDA from continuing operations is defined as earnings from continuing operations before interest expense, interest income, income taxes, and depreciation and depletion expense. EBITDA from continuing operations 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 companies.(3) EBITDA is defined as earnings 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. 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 companies.(4) Adjusted EBITDA is defined as EBITDA further adjusted to exclude goodwill impairment and asset impairment and restructuring charges. Adjusted EBITDA is not a measure of financial performance in accordance with GAAP, and items excluded from Adjusted EBITDA are significant in understanding and assessing our financial condition. Therefore, Adjusted EBITDA should not be considered in isolation, nor as an alternative to net income, income from operations, cash flows from operations or as a measure of our profitability, liquidity or performance under generally accepted accounting principles. We believe that Adjusted EBITDA presents a useful measure of our ability to incur and service debt based on ongoing operations. Furthermore, analogous measures are used by industry analysts to evaluate our operating performance. Investors should be aware that our presentation of Adjusted EBITDA may not be comparable to similarly titled measures used by other companies.(5) Adjusted net income (loss) is defined as net income (loss) excluding income from discontinued operations, net of tax, goodwill impairment and asset impairment and restructuring charges, net of tax. Adjusted net income (loss) is not a measure of financial performance in accordance with generally accepted accounting principles, and items excluded from Adjusted net income (loss) are significant in understanding and assessing our results of operations. Therefore, Adjusted net income (loss) should not be considered in isolation, nor as an alternative to net income (loss) under generally accepted accounting principles.
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Contact:
Paul Blalock
Vice President, Investor Relations
205.745.2627
paul.blalock@walterenergy.com
