Walter Energy 10-Q 6 Nov 09 2009 Q3 Quarterly report Financial data

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands	Sep. 30, 2009	Dec. 31, 2008
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	19,207	16,158
Long-term assets		18,396
Unclassified assets		1,837,744
Total assets of discontinued operations	19,207	1,872,298
Total assets	1,192,747	3,067,993
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	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	7,689	12,400
Unclassified liabilities		1,419,458
Total liabilities of discontinued operations	7,689	1,431,858
Total liabilities	927,147	2,437,724
Stockholders' equity:
Common stock, $0.01 par value per share: Authorized - 200,000,000 shares; Issued - 52,927,438 and 54,143,958 shares, respectively	529	541
Preferred stock, $0.01 par value per share: Authorized - 20,000,000 shares, issued - 0 shares	0	0
Capital in excess of par value	370,698	714,174
Retained earnings	26,979	50,990
Accumulated other comprehensive income (loss):
Pension and other postretirement benefit plans, net of tax	(132,541)	(137,364)
Unrealized gain (loss) on hedges, net of tax	(65)	1,928
Total stockholders' equity	265,600	630,269
Total liabilities and stockholders' equity	$1,192,747	$3,067,993

1_CONDENSED CONSOLIDATED BALANC

CONDENSED CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) (USD $)
	Sep. 30, 2009	Dec. 31, 2008
CONDENSED CONSOLIDATED BALANCE SHEETS
Common stock, par value per share (in dollars per share)	0.01	0.01
Common stock, shares authorized (in shares)	200,000,000	200,000,000
Common stock, shares issued (in shares)	52,927,438	54,143,958
Preferred stock, par value per share (in dollars per share)	0.01	0.01
Preferred stock, shares authorized (in shares)	20,000,000	20,000,000
Preferred stock, shares issued (in shares)	0	0

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Thousands, except Per Share data	3 Months Ended Sep. 30, 2009	3 Months Ended Sep. 30, 2008	9 Months Ended Sep. 30, 2009	9 Months Ended Sep. 30, 2008
Net sales and revenues:
Net sales	$276,331	$307,407	$721,502	$774,822
Miscellaneous income	1,974	1,400	9,060	9,325
Net sales and revenues	278,305	308,807	730,562	784,147
Costs and expenses:
Cost of sales (exclusive of depreciation)	190,678	164,801	436,487	462,612
Depreciation	18,214	13,525	54,216	37,833
Selling, general and administrative	19,238	14,036	51,091	49,693
Postretirement benefits	7,712	6,859	23,137	20,575
Amortization of intangibles	112	67	335	206
Costs and expenses	235,954	199,288	565,266	570,919
Operating income	42,351	109,519	165,296	213,228
Interest expense	(4,780)	(5,478)	(13,995)	(22,375)
Interest income	152	155	628	520
Income from continuing operations before income tax expense	37,723	104,196	151,929	191,373
Income tax expense	13,355	32,906	43,375	57,172
Income from continuing operations	24,368	71,290	108,554	134,201
Loss from discontinued operations	(560)	(16,290)	(572)	(27,926)
Net income	$23,808	$55,000	$107,982	$106,275
Basic income (loss) per share:
Income from continuing operations (in dollars per share)	0.46	1.28	2.05	2.5
Loss from discontinued operations (in dollars per share)	-0.01	-0.29	-0.01	-0.52
Net income (in dollars per share)	0.45	0.99	2.04	1.98
Diluted income (loss) per share:
Income from continuing operations (in dollars per share)	0.45	1.26	2.02	2.47
Loss from discontinued operations (in dollars per share)	-0.01	-0.29	-0.01	-0.52
Net income (in dollars per share)	0.44	0.97	2.01	1.95
Dividends declared per common share (in dollars per share)	0.1	0.1	0.3	0.2

2_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (USD $)
In Thousands	Common Stock	Capital in Excess of Par Value	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Total
Balance at Dec. 31, 2008	$541	$714,174	$50,990	($135,436)	$630,269
Comprehensive income:
Net income			107,982		107,982
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans				5,981	5,981
Change in unrealized gain (loss) on hedges				(1,465)	(1,465)
Comprehensive income					112,498
Purchases of stock under stock repurchase program	(13)	(27,950)			(27,963)
Stock dividend for spin-off of Financing		(321,301)	(116,106)	(1,686)	(439,093)
Dividends paid, $0.30 per share			(15,887)		(15,887)
Stock-based compensation		5,565			5,565
Other	1	210			211
Balance at Sep. 30, 2009	$529	$370,698	$26,979	($132,606)	$265,600

3_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (PARENTHETICAL) (USD $)
	1/1/2009 - 9/30/2009
Increase (Decrease) in Stockholders' Equity
Dividends paid (in dollars per share)	0.3
Increase (Decrease) in Stockholders' Equity
Dividends paid (in dollars per share)	0.3

4_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands	3 Months Ended Sep. 30, 2009	3 Months Ended Sep. 30, 2008	9 Months Ended Sep. 30, 2009	9 Months Ended Sep. 30, 2008
OPERATING ACTIVITIES
Net income	$23,808	$55,000	$107,982	$106,275
Loss from discontinued operations	560	16,290	572	27,926
Income from continuing operations	24,368	71,290	108,554	134,201
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation	18,214	13,525	54,216	37,833
Other			21,077	6,188
Decrease (increase) in current assets:
Receivables			18,126	(71,658)
Inventories			(30,213)	(23,645)
Other current assets			11,267	7,049
Increase (decrease) in current liabilities:
Accounts payable			(12,126)	11,780
Accrued expenses and other current liabilities			(6,131)	35,168
Cash flows provided by (used in) operating activities			164,770	136,916
INVESTING ACTIVITIES
Additions to property, plant and equipment			(67,312)	(83,768)
Acquisition of Taft Coal Sales & Associates, Inc.				(17,871)
Other			3,667	(364)
Cash flows provided by (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 (used in) operating activities			24,133	22,190
Cash flows provided by (used in) investing activities			25,732	29,116
Cash flows provided by (used in) financing activities			(41,385)	(306,559)
Cash flows provided by (used in) discontinued operations			8,480	(255,253)
Net increase (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 period			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	1,269	1,644
Cash and cash equivalents at end of period	87,815	29,547	87,815	29,547
Non-cash transactions:
Financing of one-year property insurance policy			8,515	9,291
Dividend to spin off Financing			437,407
Acquisition of property, plant and equipment under capital lease and other obligations				$22,587

Basis of Presentation

Basis of Presentation
	9 Months Ended Sep. 30, 2009 USD / shares
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation	Note1Basis of Presentation On April23, 2009, Walter Industries,Inc. changed its name to Walter Energy,Inc. ("Walter"). Walter, together with its consolidated subsidiaries ("the Company"), is a leading U.S. producer and exporter of premium hard coking coal for the global steel industry (Underground Mining), operates surface mines for the steam coal and industrial coal markets (Surface Mining) and produces metallurgical coke (Walter Coke). In December 2008, the Company announced the closure of its Homebuilding segment and on April17, 2009, the Company spun off its Financing segment. As a result of the closure and spin-off, amounts previously reported in those segments are presented as discontinued operations for all periods presented. See Note2. These actions have completed the transformation of Walter Industries,Inc. from a diversified corporation to a pure play natural resources and energy company, now renamed Walter Energy,Inc. Prior to the first quarter of 2009, the Company's underground and surface coal mining operations were reported together as the Natural Resources segment. Beginning with the first quarter of 2009, the Company revised its reportable segments to separate the Natural Resources segment into Underground Mining and Surface Mining. Underground Mining includes the Company's underground hard coking coal operations from the No.4 and No.7 mines and its natural gas operations. Surface Mining includes the Company's surface coal mining operations for Tuscaloosa Resources,Inc. ("TRI") and Taft Coal Sales Associates,Inc. ("Taft") as well as Walter Minerals,Inc. (formerly known as United Land Corporation) results. In addition, during the second quarter of 2009 the Company changed the name of its metallurgical coke manufacturer from Sloss Industries Corporation to Walter Coke,Inc. See Note9 for segment information. Historically, the Company has prepared its balance sheet on an unclassified basis because the operating cycle of Financing exceeded one year. As a result of the spin-off of this business, the assets and liabilities for continuing operations are now presented on a classified basis for all periods presented to reflect the Company's current operating cycle. The assets and liabilities of discontinued operations attributable to Kodiak and Homebuilding have also been restated to reflect their one-year operating cycle. The assets and liabilities of discontinued operations attributable to Financing continue to be presented on an unclassified basis. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form10-Q and Article10 of RegulationS-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended Septem

Discontinued Operations

Discontinued Operations
	9 Months Ended Sep. 30, 2009 USD / shares
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Discontinued Operations	Note2Discontinued Operations Spin-off of FinancingOn April17, 2009, the Company completed the spin-off of its Financing business and the merger of that business with Hanover Capital Mortgage Holdings,Inc. to create Walter Investment Management Corp. ("Walter Investment"), which operates as a publicly traded real estate investment trust. The spin-off was intended to be tax-free to the Company and to the shareholders of the Company for U.S. income tax purposes. The subsidiaries and assets that Walter Investment owned at the time of the spin-off included all assets of Financing except for those associated with the workers' compensation program and various other run-off insurance programs within Cardem InsuranceCo.,Ltd. As a result of the distribution, the Company no longer has any ownership interest in Walter Investment. The Company and Walter Investment have entered into several agreements to facilitate the spin-off. These include the following: (1)A Transition Services Agreement to provide certain services to each other, including tax, accounting, human resources and communication. The Company and Walter Investment will provide certain services to each party for a limited duration, in all cases not expected to exceed 24months, with the precise term of each service set forth in the Transition Services Agreement; (2)A Tax Separation Agreement that sets forth the rights and obligations of the Company and Walter Investment with respect to taxes and other liabilities that could be imposed if Walter Investment is required to pay an additional dividend in order to maintain its REIT status for U.S. federal income tax purposes. If that need arises, the Company will be required to reimburse Walter Investment for a portion of such additional dividend; (3)A Joint Litigation Agreement that allocates responsibilities for pending and future litigation and claims, allocates insurance coverages and third-party indemnification rights, where appropriate, and provides that each party should cooperate with each other regarding such litigation claims and rights on a going forward basis, and; (4)A Trademark Licensing Agreement whereby the Company granted Walter Investment a paid-up, perpetual, non-exclusive, non-transferable (except to affiliates) license to use certain variations and/or acronyms of the "Walter", "Best Insurors" and "Mid-State" names in connection with mortgage finance, lending, insurance and reinsurance services, and financial services related thereto, in the United States. In order to facilitate the successful spin-off of Financing, the Company entered into a Support Letter of Credit Agreement (the "L/C Agreement") and a revolving credit facility agreement with Walter Investment and certain of its subsidiaries on April20, 2009. The L/C Agreement provides Walter Investments' financial lending institutions with a stand-by letter of credit totaling $15.7million. This stand-by letter of credit was issued under the Company's 2005 Walter Credit Agreement and enabled Walter Investment to obtain third-party financing under a revolving credit agreement. The maximum amount of future payments that the Company could be required to make under the

Inventories

Inventories
	9 Months Ended Sep. 30, 2009 USD / shares
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Inventories	Note3Inventories Inventories are summarized as follows (in thousands): September30, 2009 December31, 2008 Finished goods $ 78,337 $ 45,642 Raw materials and supplies 26,943 29,530 Total inventories $ 105,280 $ 75,172

Debt

Debt
	9 Months Ended Sep. 30, 2009 USD / shares
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Debt	Note4Debt Total debt consisted of the following (in thousands): September30, 2009 December31, 2008 Debt: 2005 Walter term loan $ 137,857 $ 138,934 2005 Walter revolving credit facility 40,000 Other 44,978 46,451 Total debt 182,835 225,385 Less: current debt (17,566 ) (13,480 ) Long-term debt $ 165,269 $ 211,905 2005 Walter Credit Agreement, as Amended On September3, 2009 the Company amended the 2005 Walter Credit Agreement ("Credit Agreement") to extend the maturity date for the Company's Revolving Credit Facility ("Revolver") from October4, 2010 to July2, 2012 and amend the size of the Revolver to $300.0million that, subject to certain conditions, can be increased to $425.0million. Prior to the amendment, the Revolver was scheduled to be reduced from $350.0million to $300.0million at September30, 2009 and to $250.0million at December31, 2009. The amendment also increases the interest rate on the Revolver by 100 basis points. The commitment fee on the unused portion of the revolving facility was set at 0.5% per year for all pricing levels compared to a range of 0.4% to 0.5% per year prior to the change. In addition, certain financial covenants in the Credit Agreement were eliminated. The amendment did not affect the term loan portion of the Credit Agreement. As of September30, 2009, borrowings under the Credit Agreement consisted of a term loan balance of $137.9million with a weighted average interest rate of 2.50%. The Credit Agreement is a secured obligation of the Company and substantially all of its wholly owned domestic subsidiaries. The term loan requires quarterly principal payments of $0.4million through October3, 2012 at which time the remaining outstanding principal is due. The Revolver and the term loan currently bear interest at LIBOR plus 300 and 225 basis points, respectively. As of September30, 2009, the Company had $64.9million in outstanding stand-by letters of credit, of which $15.7million relates to the support letter of credit discussed in Note2, $0 borrowings, and $235.1million of availability for future borrowings under the Revolver. Other Debt In 2008, the Company entered into a financing arrangement and a capital lease arrangement to procure mining equipment. At September30, 2009, $28.0million was outstanding at an interest rate of 4.00% related to the equipment financing and $8.1million was outstanding at an implicit rate of 9.78% related to the capital lease. In June 2009, the Company entered into a $12.7million arrangement to finance the premium payments of its property insurance. The debt obligation is being repaid in nine monthly installments of $1.4million that began in July 2009 and has an interest rate of 3.90%. As of September30, 2009, $8.5million was outstanding. In addition, as of September30, 2009, $0.3million of other debt was outstanding.

Pension and Other Postretiremen

Pension and Other Postretirement Benefits
	9 Months Ended Sep. 30, 2009 USD / shares
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Pension and Other Postretirement Benefits	Note5Pension and Other Postretirement Benefits The components of net periodic benefit cost are as follows (in thousands): Pension Benefits Other Benefits For the three months ended September30, For the three months ended September30, 2009 2008 2009 2008 Components of net periodic benefit cost: Service cost $ 1,039 $ 1,002 $ 763 $ 748 Interest cost 3,115 3,003 5,216 5,351 Expected return on plan assets (2,826 ) (3,632 ) Amortization of prior service cost (credit) 76 76 (487 ) (540 ) Amortization of net actuarial loss 2,341 615 2,220 1,300 Net periodic benefit cost $ 3,745 $ 1,064 $ 7,712 $ 6,859 Pension Benefits Other Benefits For the nine months ended September30, For the nine months ended September30, 2009 2008 2009 2008 Components of net periodic benefit cost: Service cost $ 3,117 $ 3,006 $ 2,287 $ 2,244 Interest cost 9,345 9,009 17,482 16,051 Expected return on plan assets (8,478 ) (10,896 ) Amortization of prior service cost (credit) 228 228 (1,462 ) (1,620 ) Amortization of net actuarial loss 7,017 1,845 4,830 3,900 Net periodic benefit cost $ 11,229 $ 3,192 $ 23,137 $ 20,575

Comprehensive Income

Comprehensive Income
	9 Months Ended Sep. 30, 2009 USD / shares
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Comprehensive Income	Note6Comprehensive Income Comprehensive income is comprised primarily of net income, gains or losses from the effect of cash flow hedges and changes in pension and postretirement benefits obligations. Comprehensive income for the three months ended September30, 2009 and 2008 was $26.0million and $66.3million, respectively. Comprehensive income for the nine months ended September30, 2009 and 2008 was $112.5million and $114.5million, respectively.

Shareholders' Equity

Shareholders' Equity
	9 Months Ended Sep. 30, 2009 USD / shares
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Stockholders' Equity	Note7Stockholders' Equity In 2008, the Board of Directors approved a $100.0million share repurchase program. Purchases are based on liquidity and market conditions. In the first quarter of 2009, 1,371,750 shares were repurchased for $28.0million. No repurchases were made in the second or third quarters of 2009 under this program. A total of 2,648,493 shares have been repurchased for $73.1million under this program. In addition, on April23, 2009, shareholders voted to grant the Company the authority to issue 20,000,000 shares of Preferred Stock, par value $.01 per share. The Board believes the ability to issue preferred stock is necessary in order to provide the Company with greater flexibility in structuring future capital raising transactions, acquisitions and/or joint ventures, including taking advantage of financing techniques that receive favorable treatment from credit rating agencies. No preferred shares have been issued.

Net Income Per Share

Net Income Per Share
	9 Months Ended Sep. 30, 2009 USD / shares
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Net Income Per Share	Note8Net Income Per Share A reconciliation of the basic and diluted net income per share computations for the three and nine months ended September30, 2009 and 2008 are as follows (in thousands, except per share data): For the three months ended September30, 2009 2008 Basic Diluted Basic Diluted Numerator: Income from continuing operations $ 24,368 $ 24,368 $ 71,290 $ 71,290 Loss from discontinued operations $ (560 ) $ (560 ) $ (16,290 ) $ (16,290 ) Denominator: Average number of common shares outstanding 52,903 52,903 55,686 55,686 Effect of dilutive securities: Stock options and restricted stock units ("units")(a) 858 764 52,903 53,761 55,686 56,450 Income from continuing operations $ 0.46 $ 0.45 $ 1.28 $ 1.26 Loss from discontinued operations (0.01 ) (0.01 ) (0.29 ) (0.29 ) Net income per share $ 0.45 $ 0.44 $ 0.99 $ 0.97 For the nine months ended September30, 2009 2008 Basic Diluted Basic Diluted Numerator: Income from continuing operations $ 108,554 $ 108,554 $ 134,201 $ 134,201 Loss from discontinued operations $ (572 ) $ (572 ) $ (27,926 ) $ (27,926 ) Denominator: Average number of common shares outstanding 53,052 53,052 53,614 53,614 Effect of dilutive securities: Stock options and restricted stock units ("units")(a) 643 749 53,052 53,695 53,614 54,363 Income from continuing operations $ 2.05 $ 2.02 $ 2.50 $ 2.47 Loss from discontinued operations (0.01 ) (0.01 ) (0.52 ) (0.52 ) Net income per share $ 2.04 $ 2.01 $ 1.98 $ 1.95 (a) Represents the weighted average number of shares of common stock issuable on the exercise of dilutive employee stock options and restricted stock units less the number of shares of common stock which could have been purchased with the proceeds from the exercise of such stock awards. These purchases were assumed to have been made at the average market price of the common stock for the period. Weighted average number of stock options and restricted stock units outstanding for the three months ended September30, 2009 and 2008 totaling 76,918 and 56,889, respectively, were excluded from the calculation above because their effect would have been anti-dilutive. Additionally, weighted average number of stock options and restricted stock units outstanding for the nine months ended September30, 2009 and 2008 totaling 127,841 and 24

Segment Information

Segment Information
	9 Months Ended Sep. 30, 2009 USD / shares
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Segment Information	Note9Segment Information Summarized financial information of the Company's reportable segments is shown in the following table (in thousands): For the three months ended September30, 2009 2008 Sales and revenues: Underground Mining $ 233,060 $ 251,373 Surface Mining 25,229 18,908 Walter Coke 23,307 53,738 Other 910 1,910 Consolidating eliminations of intersegment activity(a) (4,201 ) (17,122 ) Net sales and revenues $ 278,305 $ 308,807 Segment operating income (loss): Underground Mining $ 44,120 $ 96,319 Surface Mining 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 Less interest expense, net of interest income (4,628 ) (5,323 ) Income from continuing operations before income tax expense 37,723 104,196 Income tax expense 13,355 32,906 Income from continuing operations $ 24,368 $ 71,290 Depreciation: Underground Mining $ 14,824 $ 10,463 Surface Mining 2,142 1,777 Walter Coke 1,140 1,048 Other 108 237 Total $ 18,214 $ 13,525 (a) Included in consolidating eliminations are intersegment sales that consisted primarily of sales between Underground Mining and Walter Coke totaling $2.2million and $8.3million, between Surface Mining and Walter Coke totaling $1.5million and $0.8million, between Underground Mining and Other totaling $0.0 and $7.4million and between Underground Mining and Surface Mining totaling $0.5million and $0.6million for the three months ended September30, 2009 and 2008, respectively. For the nine months ended September30, 2009 2008 Sales and revenues: Underground Mining $ 607,670 $ 622,242 Surface Mining 73,527 48,603 Walter Coke 63,864 157,874 Other 2,039 2,751 Consolidating eliminations of intersegment activity(a) (16,538 ) (47,323 ) Net sales and revenues $ 730,562 $ 784,147 Segment operating income (loss): Underground Mining $ 166,610 $ 179,364 Surface Mining 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 Less interest expense, net of interest income (13,367 ) (21,855 ) Income from continuing operations before income tax expense 151,929 191,373 Income tax expense 43,375 57,172 Income from continuing operations $ 108,554

Commitments and Contingencies

Commitments and Contingencies
	9 Months Ended Sep. 30, 2009 USD / shares
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Commitments and Contingencies	Note10Commitments and Contingencies Income Tax Litigation The Internal Revenue Service ("IRS") has completed its audits of the Company's federal income tax returns for the years ended May31, 2000 through December31, 2005. The unresolved issues relate primarily to the Company's method of recognizing revenue on the sale of homes and related interest on the instalment notes receivable. The items at issue relate primarily to the timing of revenue recognition and consequently, should the IRS prevail on its positions, the Company's financial exposure is limited to interest and penalties. On December27, 1989, the Company and most of its subsidiaries each filed a voluntary petition for reorganization under Chapter11 of Title 11 of the United States Code (the "Bankruptcy Proceedings") in the United States Bankruptcy Court for the Middle District of Florida, Tampa Division (the "Bankruptcy Court"). The Company emerged from bankruptcy on March17, 1995 (the "Effective Date") pursuant to the Amended Joint Plan of Reorganization dated as of December9, 1994, as modified on March1, 1995 (as so modified the "Consensual Plan"). Despite the confirmation and effectiveness of the Consensual Plan, the Bankruptcy Court continues to have jurisdiction over, among other things, the resolution of disputed prepetition claims against the Company and other matters that may arise in connection with or related to the Consensual Plan, including claims related to Federal income taxes. A controversy exists with regard to Federal income taxes allegedly owed by the Company for fiscal years 1980 through 1994. In connection with the bankruptcy proceedings, the IRS filed a proof of claim in the Bankruptcy Court (the "Proof of Claim") for a substantial amount of taxes, interest and penalties with respect to fiscal years ended August31, 1980 and August31, 1983 through May31, 1994. The Company filed an adversary proceeding in the Bankruptcy Court disputing the Proof of Claim (the "Adversary Proceeding") and the various issues have been and are being litigated in the Bankruptcy Court. The amounts initially asserted by the Proof of Claim do not reflect the subsequent resolution of various issues through settlements or concessions by the parties. After adjustment for these items, the Company estimates that the amount of tax presently claimed by the IRS is approximately $34.0million for issues currently in dispute in the Adversary Proceeding. This amount is subject to interest and penalties. Of the $34.0million in claimed tax, $21.0million represents issues in which the IRS is not challenging the deductibility of the particular expense but only whether such expense is deductible in a particular year. Consequently, the Company believes that, should the IRS prevail on any such issues, the Company's financial exposure is limited to interest and possible penalties and the amount of tax claimed will be offset by deductions in other years. Substantially all of the issues in the Proof of Claim, which have not been settled or conceded, have been litigated before the Bankruptcy Court and are subject to appeal but only at the conclusion of the entire Adversary Proceeding. The C

Fair Value of Financial Instrum

Fair Value of Financial Instruments
	9 Months Ended Sep. 30, 2009 USD / shares
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Fair Value of Financial Instruments	NOTE 11Fair Value of Financial Instruments The following methods and assumptions were used to estimate fair value for purposes of disclosure: Cash and cash equivalents, restricted short-term investments, receivables and accounts payableThe carrying amounts reported in the balance sheet approximate fair value. Debt The Company's term loan in the amount of $137.9million and $138.9million at September30, 2009 and December31, 2008, respectively, is carried at cost. The estimated fair value of the Company's term loan was $133.7million and $104.2million at September30, 2009 and December31, 2008, respectively, based on similar transactions and yields in an active market for similarly rated debt. The Company's revolving credit facility of $0 and $40.0million at September30, 2009 and December31, 2008, respectively, is carried at cost. The estimated fair value of the revolver debt at September30, 2009 and December31, 2008 was $0 and $28.4million, respectively, based on similar transactions and yields in an active market for similarly rated companies. The Company's equipment financing debt was $28.0million and $31.9million at September30, 2009 and December31, 2008, respectively and is carried at cost. The estimated fair value of this equipment financing debt as of September30, 2009 and December31, 2008 is $27.1million and $23.9million, respectively, based on comparable equipment financing transactions that similarly rated companies entered into at that date. The Company's short term borrowing to finance the premium payments on certain of its property insurance was $8.5million and $4.7million at September30, 2009 and December31, 2008, respectively, and is carried at cost. The carrying amounts reported on the balance sheet on this short term financing approximate fair value.

Subsequent Event

Subsequent Event
	9 Months Ended Sep. 30, 2009 USD / shares
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Subsequent Event	NOTE 12Subsequent Event On October20, 2009, the Company entered into a swap contract to hedge 1.5 bcf of natural gas, or approximately 24% of forecasted 2010 natural gas sales, at a price of $6.20 per thousand cubic feet. The objective of the hedge is to protect against the variability in expected future cash flows attributed to changes in natural gas prices. This contract is structured as a cash flow hedge that will convert a portion of forecasted sales at floating-rate natural gas prices to a fixed-rate basis and was not entered into for trading purposes. As such, changes in the fair value of the hedge will be recorded as a component of other comprehensive income and reclassified into earnings in the same periods during which the hedged transactions affect earnings.

DOCUMENT AND ENTITY INFORMATION

DOCUMENT AND ENTITY INFORMATION (USD $)
In Billions, except Share data	9 Months Ended Sep. 30, 2009	Oct. 30, 2009	Jun. 30, 2008
Document and Entity Information
Entity Registrant Name	Walter Energy, Inc.
Entity Central Index Key	0000837173
Document Type	10-Q
Document Period End Date	2009-09-30
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			6.1
Entity Common Stock, Shares Outstanding		52,990,073