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| Walter Energy, Inc. and Subsidiaries Reconciliation of Non-GAAP Financial Measures (Unaudited) Note: EBITDA from continuing operations is defined as earnings excluding discontinued 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 from continuing operations is a useful measure as some investors and analysts use EBITDA from continuing operations to compare us against other companies and to help analyze our ability to satisfy principal and interest obligations and capital expenditure needs. EBITDA from continuing operations may not be comparable to similarly titled measures used by other companies. EBITDA is defined as net income (loss) before interest expense, interest income, income taxes, and depreciation and depletion expense. EBITDA is a financial measure which is not calculated in conformity with 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. Adjusted EBITDA is defined as EBITDA further adjusted to exclude net restructuring charges, asset impairments, loss on investment, other items including proxy contest expenses and foreign currency adjustments and gain on early extinguishment of debt. Adjusted EBITDA is not a measure of financial performance in accordance with GAAP, and we believe items excluded from Adjusted EBITDA are significant to a reader 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 GAAP. 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. Adjusted net income (loss) is defined as net loss excluding income from discontinued operations, net restructuring charges, asset impairments, loss on investment, other items including proxy contest expenses and foreign currency adjustments, gain on early extinguishment of debt, and discrete income tax charges from valuation allowance adjustments, net of tax. Adjusted net income (loss) is not a measure of financial performance in accordance with GAAP, and we believe items excluded from Adjusted net income (loss) are significant to a reader 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. 24 Reconciliation of EBITDA from Continuing Operations, EBITDA and Adjusted EBITDA to Amounts Reported Under U.S. GAAP: For the Three Months Ended March 31, For the Years Ended December 31, ($ in Thousands) 2014 2013 2013 2012 Loss from continuing operations (92,178) (49,444) (359,003) (1,065,555) Interest expense 79,396 52,618 233,854 139,356 Interest income (75) (650) (1,103) (804) Income tax benefit (35,961) (66,039) (41,838) (99,204) Depreciation and depletion expense 76,424 81,190 311,514 316,232 Earnings from continuing operations before interest, income taxes, and depreciation and depletion (EBITDA from continuing operations) (1) 27,606 17,675 143,424 (709,975) Pretax income from discontinued operations - - - 8,282 Earnings before interest, income taxes, and depreciation and depletion (EBITDA) (2) 27,606 17,675 143,424 (701,693) Restructuring and asset impairment - 7,440 2,883 1,113,479 Loss on investment - - 1,336 - Other items, including proxy contest expenses and foreign currency adjustments (3,076) 6,838 5,866 - Gain on early extinguishment of debt - - (4,293) - Loss on interest rate swap hedge ineffectiveness 1,701 - - - Adjusted EBITDA (3) 26,231 31,953 149,216 411,786 Reconciliation of Adjusted Net Income (Loss) to Amounts Reported Under U.S. GAAP: Net loss (92,178) (49,444) (359,003) (1,060,375) Income from discontinued operations, net of tax - - - (5,180) Restructuring and asset impairment, net of tax - 4,851 2,063 1,096,277 Loss on investment, net of tax - - 827 - Other items, including proxy contest expenses and foreign currency adjustments, net of tax (1,999) 4,449 3,369 - Gain on early extinguishment of debt, net of tax - - (2,657) - Discrete tax charge from valuation allowance adjustment - - 144,619 19,189 Adjusted net income (loss) (4) (94,177) (40,144) (210,782) 49,911 Weighted average number of diluted shares outstanding 62,601,240 62,598,990 62,563,870 62,536,239 Adjusted diluted income (loss) per share: (1.50) (0.64) (3.37) 0.80 |