Forward-Looking & Non-GAAP Statements

Transcription

1 November 2012

2 Forward-Looking & Non-GAAP Statements Statements in this presentation regarding Walter Energy, Inc.'s business, which are not historical facts, are "forward-looking statements" that involve risks and uncertainties and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of Forward-looking statements are based on information available to management at the time, and they involve judgments and estimates. Forwardlooking statements include expressions such as "believe," "anticipate," "expect," "estimate," "intend," "may," "plan," "predict," "will," and similar terms and expressions. These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to various risks, uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. The following factors are among those that may cause actual results to differ materially from our forward-looking statements: the market demand for coal, coke and natural gas as well as changes in pricing and costs; the availability of raw material, labor, equipment and transportation; changes in weather and geologic conditions; changes in extraction costs, pricing and assumptions and projections concerning reserves in our mining operations; changes in customer orders; pricing actions by our competitors, customers, suppliers and contractors; changes in governmental policies and laws, including with respect to safety enhancements and environmental initiatives; availability and costs of credit, surety bonds and letters of credit; and changes in general economic conditions. Forward-looking statements made by us in this presentation speak only as of the date on which the statements were made. See also the factors under the heading "Risk Factors" included in, and incorporated by reference into, the preliminary offering memorandum for a discussion of additional risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us or our anticipated results. We have no duty to, and do not intend to, update or revise the forward-looking statements in this presentation, except as may be required by law. In light of these risks and uncertainties, readers should keep in mind that any forward-looking statement made here may not occur. All data presented herein is as of the date of this writing unless otherwise noted. We use a number of different financial measures in assessing the overall performance of our business, including measures calculated in accordance with United States generally accepted accounting principles ( GAAP ) and non-gaap numbers. EBITDA is a financial measure that 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 entities. 2

3 Agenda I. Overview of the Company II. III. IV. Markets and Strategic Position Operating Initiatives Questions and Answers 3

4 Presenters Walter J. Scheller, III (CEO) Bill Harvey (CFO) Bill Harvey (CFO) Michael D. Griffin (Treasurer) Walter J. Scheller, III, was appointed Chief Executive Officer of Walter Energy in September 2011 after serving as President and Chief Operating Officer of the Company's primary subsidiary, Jim Walter Resources, beginning in June Prior to joining Jim Walter Resources, Mr. Scheller worked from June 2006 at Peabody Energy Corporation as Group Executive, Colorado Operations and before that, Senior Vice President, Strategic Operations. Prior to his career at Peabody, Mr. Scheller worked for CNX Gas Corporation as Vice President, Northern Appalachia Gas Operations as well as Consol Energy where he held a number of executive and operational roles, the last of which was Vice President, Operations. Mr. Scheller holds an MBA from University of Pittsburgh Joseph M. Katz Graduate School of Business, a Juris Doctor degree from Duquesne University and a bachelor's degree in mining engineering from West Virginia University. Bill Harvey was hired as Chief Financial Officer in July 2012 after serving as Senior Vice President and CFO of Resolute Forest Products Inc. and Bowater Inc. its predecessor company. At Resolute, Mr. Harvey had overall accountability for finance, accounting, treasury, SEC reporting, tax, risk management, business development, strategic planning, and investor Relations. He worked at Resolute for more than 20 years, excelling in an increasingly challenging environment Mr. Harvey holds an MBA from University of Toronto and a bachelor of science degree in mechanical engineering from Queen s University in Kingston, Ontario, Canada. Mr. Harvey is also a Chartered Financial Analyst. 4

5 Walter Energy: A One-of-a-Kind Mining Company Walter Energy is a leading, publicly traded pure-play metallurgical coal producer for the global steel industry with strategic access to high-growth steel markets in Asia, South America and Europe. The Company also produces thermal coal, anthracite, metallurgical coke and coal bed methane gas Diversified asset base with operations in the United States, Canada and United Kingdom employing 4,200 people world wide Commitment to safety and stewardship Highly qualified management team Emphasis on long-term value creation to grow in a financially prudent and sustainable manner #1 Pure-Play Metallurgical Coal Company Leading Profit Margins vs. Publicly Traded Competitors >32% 2012 Production Growth vs. 2011* 20+ MMTs by 2020 Long-Term Metallurgical Production Target * 2011 production excludes 1 MMTs of Q pre-acquisition met coal sales and production from Western Coal 5

6 Premium, Long-Life Assets in Secure Regions British Columbia, Canada Wolverine Mine Brule Mine Willow Creek Mine Wales, U.K. Aberpergwm Colliery Alabama, U.S. Corporate Headquarters Walter Coke Blue Creek Energy No. 1 Mine Blue Creek No. 7 Mine Blue Creek No. 4 Mine West Virginia, U.S. Maple Mine Gauley Eagle Mine Sycamore Mine 30+ year underground reserve life 6

7 Long Track Record of Value Added Growth, Operational Excellence and Capital Discipline A History of Value-Added Growth Achieved Through Commitment to Safety, Operational Excellence and Capital Discipline Strong Track Record of Strategic Acquisitions and Successful Integrations Jim Walter starts homebuilding business in Tampa, FL Acquires U.S. Pipe & Foundry Company Walter Industries sells Jim Walter Corp. and other subsidiaries Establishes new mortgage lending operation Sells AIMCOR and JW Aluminum Financing segment launches program to buy seasoned loans that fit strict underwriting criteria Spins off Mueller Water Products, Inc. Acquires Tuscaloosa Resources Acquires Taft Coal Sales & Associates Acquires HighMount Exploration & Production LLC s Alabama Natural Gas Assets Company s stock listed on the NYSE Starts development of four underground coal mines on Blue Creek Seam JW Aluminum begins operations Taken private by group of investors led by KKR Buys AIMCOR, which markets and distributes petroleum coke Relisted on the NYSE Acquires Mueller Water Products, Inc. Closes Jim Walter Homes Spins off Walter investment Management Corp. Announces rebranding and name change to Walter Energy, Inc. Announces opening of Mine No. 7 East expansion Completes acquisition of Western Coal Completes transactions with Chevron Mining Walter J. Scheller, III, appointed CEO Committed to Strong Execution in 2012 In Progress Complete Increased production at Blue Creek No. 7 in Alabama Appointed seasoned executive management team Executing integration efforts One Company/One Team Signed collective labor agreement in Alabama (Jim Walter Resources) Signed collective labor agreement in Canada 7

8 Agenda I. Overview of the Company II. III. IV. Markets and Strategic Position Operating Initiatives Questions and Answers 8

9 Building on Key Strengths 1. Diversified customers and geography 2. Positioned in attractive, growing market 3. High-quality product, high-margin producer 4. Pure-play metallurgical coal company 9

10 STRENGTH #4: Highly Levered Towards Met Coal Uniquely Positioned: A Leading Metallurgical Coal Company High Walter Energy Margins Other Coal Producers Low Low Metallurgical Coal Focus High Little Exposure to More Challenged Thermal Coal Market 10

11 STRENGTH #3: QUALITY High Quality, Premium Coal High-Quality, Premium Products Characteristics of Premium Quality Met Coal Walter Energy Met Coal Blue Creek Low-vol HCC is One of the World s Best Plus Focus on Reducing Costs and Customer Loyalty = Premium Products Highest quality coal; premium pricing 75% HCC / 25% PCI + Focus on Reducing Costs 60% production from efficient longwall mining Large scale met coal surface mining Low transportation costs + Long-Term Customer Retention A Winning Combination Focus on excellent service to diversified and profitable customers 11

12 S T R E N G T H # 1 : D I V E R S I F I C A T I O N Diversified Sales and Geographic Mix Met Coal Sales by Region 2011* Met Coal Production by Region 2011 (Tonnes)* S. America N. America 4% 16% 48% Europe Canada 32% 32% 68% U.S. Asia * Excludes pre-acquisition sales and production at Western Coal 12

13 S T R E N G T H # 2 : G R O W I N G M A R K E T Positioned in a Growing Market Demand for Seaborne Metallurgical Coal (Million Metric Tons) ROW South America Europe/ME Other Asia China India Japan E 2012F 2015F New supply is constrained by rail and port capacity in emerging basins Note: Outlook based on WoodMackenzie & CRU 13

14 STRENGTH #2: GROWING MARKET International Demand A Long-Term Growth Driver RUSSIA EUROPE NORTH AMERICA 62 INDIA CHINA 36 NORTH ASIA SOUTH AMERICA 17 MOZAMBIQUE * AUSTRALIA Trade flow Export Import * (1) Demand: Wood Mackenzie (2) Supply: Estimates from Tex Report & China Steel Home (3) Australia below nominal capacity due to heavy seasonal rain in 2010/11 (4) All units in MM tonnes 14

15 Potential to Target 20+ MMTs of Met Coal Production (Million Metric Tons) Blue Creek Belcourt Saxon Aberpergwm 8.7 Willow Creek Significant Growth ability 15

16 Agenda I. Company Overview II. III. IV. Markets and Strategic Position Operating Initiatives Questions and Answers 16

17 Operating Strategy Restrict capital spending Prioritize Blue Creek project Reduce capital spending to $220 million in 2013 Reconfigure operations aggressively Cost reduction programs at all sites Curtail production at non-cash generating sites Manage inventory levels Current Initiatives Have achieved year-end 2012 cost-reduction targets at mines ahead of schedule (3Q) Additional Production Cost Reductions 17

18 Strong Focus on Reducing Costs Increase met production / Leverage infrastructure _ CANADA* 2.8 M Greater than 11.5 MMTs U.S. 6.0 M Reduce cost by solely utilizing Falling Creek Connector Road in British Columbia ($10+ MM annual savings) Mid-2013 move to longer panels at Jim Walter Resources No. 4 Mine Lower Costs Centralize supply chain Transition from contracted mines to owner operated Idle non-cash producing mines On track to deliver cost savings * 2011 production excludes 1 MMTs of Q pre-acquisition met coal sales and production from Western Coal 18

19 Significant Improvement in Production Cash Costs per Ton in Canada Wolverine Brule Willow Project (19%) (13%) January September (11%) January September January September Productivity enhancements significantly improving costs per ton at key mines in

20 Strong Track Record of Enhancing Business Profile Production (Tons in Millions) EBITDA* ($ in Millions) LTM Met Thermal 9/30 Capital Expenditures ($ in Millions) LTM 9/30 *Excludes goodwill and asset impairment charges Cash from Operations ($ in Millions) LTM 9/ LTM 9/30 20

21 Debt Maturity Profile Maturity Profile (As of 9/30/12) ($ in millions) Maturity Profile Pro Forma ($ in millions) 1,273 1, Term Loan Available Revolver Drawn Revolver Cash Recent Debt Offering 21

22 Financial Goals Reduce debt levels substantially Maintain adequate liquidity Retain flexibility in timing of capital spending 22

23 WLT: A Transformed Company 2009 LTM 9/30/12 Met Coal Production 5.5 MMTs 11.6 MMTs Revenue $967 M $2.6 B EBITDA* $275 M $615 M Underground Reserve Life 20 years 30 years *Excludes goodwill and asset impairment charges 23

24 In Summary Significant coal production focused on the premium grade (met) Merger integration almost complete Initial cost reduction targets have been met Revised operating strategy for cyclically low price environment Capital spending limited Curtail unprofitable production Aggressively lower costs further Reduce production to maximize cash flow 24

25 Agenda I. Company Overview II. III. IV. Markets and Operating Position Operating Initiatives Questions and Answers 25

26 -Appendix-

27 Reconciliation of Amounts Reported Under US GAAP to EBITDA and Adjusted EBITDA ($ in thousands) Years Ended December 31, Nine Months Ended September 30, Twelve Months Ended September 30, 2011* Income (Loss) from Continuing Operations $363,598 $389,425 $141,850 $(994,584) $283,346 $(914,332) Add: Interest Expense 96,820 17,250 18,975 89,716 63, ,291 Less: Interest Income (606) (784) (799) (731) (356) (981) Add: Income Tax Expense (Benefit) 131, ,171 42,144 (27,972) 107,382 (4,129) Add: Depreciation and Depletion Expense 230,681 98,702 72, , , ,221 Add: Pretax Income (Loss) from Discontinued Operations -- (5,856) (3,725) 8, ,282 Earnings before Interest, Income Taxes, and Depreciation and Depletion (EBITDA) $821,718 $686,908 $271,384 $(701,777) $611,589 $(491,648) Impairment Charges ,601 1,106, ,106,715 Adjusted EBITDA $821,718 $686,908 $274,985 $404,938 $611,589 $615,067 * Recast to reflect retrospective adjustments to provisional amounts recorded upon the acquisition of Western Coal corp. 27

28 Supply Side Actions Supply / Demand Being Balanced In 2012 producers have reduced met coal production by 20.0Mt (Decrease of 8% of Total Expected Production) 25 Number 1 2 Company Patriot Coal Alpha Natural Resources Date Jan-13 Feb-3 Met Reduction (Tonnes) MMT Cumulative Met Coal Reduction Alpha Natural Resources Feb Consol Energy Mar Walter Energy Mar BHP Apr Arch Coal May Suncoke Energy May Alpha Natural Resources May Alpha Natural Resources PBS Coals & RoxCOAL May-4 Jul Arch Coal Jul WV Mine Power Inc Aug Rio Tinto Aug Xinergy Aug Consol Sep BHP Sep Alpha Natural Resources Sep Total /13/12 2/3/12 2/24/12 3/9/12 3/26/12 4/11/12 5/1/12 5/1/12 5/1/12 5/3/12 5/4/12 7/20/12 7/27/12 8/2/12 8/16/12 8/20/12 9/4/12 9/4/12 9/4/12 9/10/12 9/18/12 * Outlook based on WoodMackenzie & CRU Global Met Coal Production Previously Forecasted to be 258Mt in 2012 * 28

29 -WLT-