Walter Industries, Inc. Announces First Quarter 2007 Results
- Earnings from Continuing Operations of $0.61 Per Diluted Share -
- Jim Walter Resources Produced 1.67 Million Tons of Metallurgical Coal -
- Substantial Portion of New Metallurgical Coal Contracts Settled at an Average of Approximately $101 Per Metric Ton -
TAMPA, Fla., May 2 /PRNewswire-FirstCall/ -- Walter Industries, Inc. (NYSE: WLT) today reported net income of $29.6 million, or $0.56 per diluted share for the first quarter ended March 31, 2007. Income from continuing operations for the first quarter, which excludes the discontinued operations of Crestline Homes, totaled $32.1 million, or $0.61 per diluted share, compared with income from continuing operations of $36.8 million, or $0.74 per diluted share in the first quarter last year.
"We are pleased with our first quarter 2007 results," said Walter Industries Chairman Michael T. Tokarz. "Coal production was very strong and metallurgical coal shipments improved sequentially and versus the prior-year period. In addition, our Financing business continued to perform extremely well by achieving low delinquency and foreclosure rates during the quarter."
The Company also announced that Jim Walter Resources has settled a substantial portion of its annual metallurgical coal contracts for the July 2007-to-June 2008 contract period. Based on the settlements to date, new contract pricing is expected to average approximately $101 per metric ton, FOB Port of Mobile.
"We have settled contracts with most of our major European and South American customers," said Jim Walter Resources Chief Executive Officer George R. Richmond. "Our realized prices and increases in committed tons from our customers in the coming year reinforce our well-established position that Blue Creek coal is one of the highest quality and most strategically located coking coals in the world."
First Quarter 2007 Financial Results
Net sales and revenues from continuing operations for the first quarter totaled $320.3 million, up from $313.1 million in the prior-year period, primarily stemming from higher unit selling prices at Homebuilding. In addition, average coal pricing was higher, as the prior year included lower-priced steam coal sales. These increases were partially offset by lower prepayment income at Financing and lower natural gas pricing.
Operating income from continuing operations for the first quarter totaled $61.1 million compared to $68.3 million in the first quarter 2006. Results in the current-year period primarily reflect higher expenses at Jim Walter Resources including freight, post-retirement healthcare costs and depreciation. In addition, the Company incurred $3.2 million of start-up expenses at Kodiak Mining. These unfavorable impacts were partially offset by increased profits generated from higher metallurgical coal sales volumes and strong coal production during the quarter.
Income from continuing operations for the first quarter totaled $32.1 million compared to $36.8 million in the first quarter 2006. Along with the previously noted revenue and operating income impacts, results for the current-year period also reflect a $5.1 million reduction in interest expense, primarily due to lower bank debt and the conversion of nearly all of the Company's convertible debt into equity in the fourth quarter 2006. Interest expense in the current-year period includes $2.0 million of ongoing non-cash interest on certain tax-related accruals and a $0.5 million non-cash write-off of unamortized debt expense due to the optional prepayment of bank term debt. In addition, income tax expense in the current-year period includes a $4.4 million write-off of certain deferred tax assets that are no longer considered realizable.
First Quarter Results by Operating Group
Natural Resources & Sloss
Natural Resources, which includes the operations of Jim Walter Resources and Kodiak Mining, reported revenues of $170.2 million in the first quarter, up slightly versus the same period last year. Prices for metallurgical coal were lower in the current quarter; however, average coal sales prices were higher due to the elimination of lower-priced steam coal sales from the prior-year period. Coal sales volumes declined slightly and natural gas prices were lower versus last year's first quarter, partially offsetting the higher average coal pricing.
Natural Resources reported operating income of $56.4 million in the first quarter, compared to $63.9 million in the prior-year period. Results in the current-year period include $2.3 million in increased freight costs, $2.1 million in higher post-retirement healthcare costs, $2.0 million in higher depreciation expense, as well as previously mentioned start-up expenses at Kodiak. In addition, Jim Walter Resources incurred $2.7 million of incremental expenses related to the new labor contract with the United Mine Workers of America (UMWA), which was more than offset by positive volume variances due to strong production performance at both Mine Nos. 4 and 7 in the current quarter. The unfavorable impacts were also partially offset by increased profits on higher metallurgical coal sales volumes.
Jim Walter Resources sold 1.5 million tons of metallurgical coal during the first quarter at an average price of $100.34 per short ton FOB port, compared to 1.2 million tons of metallurgical coal at an average price of $112.70 per ton during the same period last year. During the current quarter, average realized sales prices were negatively impacted by approximately $2.3 million, or $1.50 per short ton, of increased demurrage charges primarily resulting from delays caused by dredging activity at the Port of Mobile late in the quarter.
The natural gas operation sold 1.9 billion cubic feet of gas at an average price of $7.92 per thousand cubic feet in the first quarter 2007. Natural gas volumes were up slightly on strong production from Mine Nos. 4 and 7, offsetting the reduction of gas production from Mine No. 5. Natural gas prices realized in the current-year period include the benefit of hedging approximately 33 percent of production at an average price of $10.28 per thousand cubic feet, compared with approximately 76 percent of production hedged in the prior-year period at an average of $9.29. Realized market prices in the current-year period averaged $6.71 per thousand cubic feet versus $8.82 in the prior-year period.
Jim Walter Resources produced 1.7 million tons of coal at Mine Nos. 4 and 7 in the quarter, up 0.5 million tons sequentially and up 0.1 million tons versus the first quarter 2006 on a comparable mine basis. Production in the prior-year period included 0.3 million tons from Mine No. 5, which ceased operations in December 2006 as planned. Average coal production costs at Mine Nos. 4 and 7 of $39.82 per ton rose $5.21 per ton versus the prior-year period, primarily as a result of higher labor costs. Increased labor costs were driven by the impacts of the new UMWA contract and the increased personnel required to develop Mine No. 7's 'Southwest A' panel. Higher labor costs were partially offset by the elimination of Mine No. 5's higher-cost operation and volume improvements at Mine Nos. 4 and 7.
Sloss Industries generated first quarter revenues of $32.8 million, down $0.5 million from the prior-year period, and operating income of $1.3 million, down $0.9 million from the prior-year period. Sloss' results for the quarter reflect slightly higher coke volumes which were more than offset by lower pricing as well as higher selling, general and administrative costs.
Financing & Homebuilding
The Financing and Homebuilding group reported combined revenues of $115.9 million for the first quarter 2007, compared to $111.3 million in the prior-year period. The $4.6 million increase was primarily due to higher average on-your-lot selling prices at Homebuilding, partially offset by lower prepayment income at Financing.
Combined operating income was $7.9 million for the quarter, compared to operating income of $8.1 million in last year's first quarter. Operating income for the quarter reflects a $1.1 million reduction in prepayment income, $1.3 million in higher stock option expenses and a $0.6 million increase in provision for losses on instalment notes. Approximately $0.5 million of the increase in provision for losses is the result of portfolio growth. These unfavorable impacts were partially offset by improved gross margins at Homebuilding.
Financing continued its strong financial performance in the first quarter as delinquencies on the mortgage portfolio were 3.4 percent at March 31, 2007, an improvement of 100 basis points from Dec. 31, 2006 and 30 basis points compared to March 31, 2006. In addition, foreclosures declined 18 percent and "Real Estate Owned" inventory was 11 percent lower on a quarter-over-quarter basis.
At Homebuilding, on-your-lot completions totaled 634 units in the first quarter, down 3 percent versus the same period last year. Average on-your-lot net selling prices increased 16.3 percent over the prior-year period to $98,000. For the current period, new sales orders, net of cancellations, were 656, up 26.2 percent compared to the first quarter last year.
"Our delinquency rates are at historical low levels, despite troubles elsewhere in the subprime lending industry, primarily as a result of our consistent underwriting and strong mortgage servicing platform," said Financing and Homebuilding Chief Executive Officer Mark J. O'Brien. "We continue to make progress at Homebuilding, which generated a 330 basis-point improvement in gross margins and a more than 26 percent increase in net new sales orders."
Other
Results in the "Other" segment, comprised of the Company's corporate expenses and land subsidiaries, improved by approximately $0.8 million in the first quarter, driven by lower salaries expense and professional fees, partially offset by higher stock option expenses.
Conference Call Web cast
Members of the Company's leadership team will discuss Walter Industries' first quarter 2007 results, its business drivers for the balance of 2007 and other general business matters during a conference call and live Web cast to be held on Thursday, May 3, 2007, at 10 a.m. Eastern Daylight Time. To listen to the event live or in archive, visit the Company Web site at www.walterind.com.
About Walter Industries
Walter Industries, Inc., based in Tampa, Fla., is a leading producer and exporter of metallurgical coal for the global steel industry and also produces steam coal, coal bed methane gas, furnace and foundry coke and other related products. The Company also operates a mortgage financing and affordable homebuilding business. The Company has annual revenues of approximately $1.3 billion and employs approximately 2,800 people. For more information about Walter Industries, please visit the Company Web site at www.walterind.com.
Safe Harbor Statement
Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks include, among others, changes in customers' demand for the Company's products, changes in raw material, labor, equipment and transportation costs and availability, geologic and weather conditions, changes in extraction costs and pricing in the Company's mining operations, changes in customer orders, pricing actions by the Company's competitors, changes in law, potential changes in the mortgage-backed capital markets, and general changes in economic conditions. Those risks also include the timing of and ability to execute any strategic actions that may be pursued. Risks associated with forward-looking statements are more fully described in the Company's filings with the Securities and Exchange Commission. The Company assumes no duty to update its forward-looking statements as of any future date.
| WALTER INDUSTRIES, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF OPERATIONS |
| ($ in Thousands) |
| Unaudited |
| | | For the three months | |
| | | ended March 31, | |
| | | 2007 | | 2006 | |
| Net sales and revenues: | | | | | |
| Net sales | | $ | 259,387 | | $ | 254,474 | |
| Interest income on instalment notes | | | 49,565 | | | 50,530 | |
| Miscellaneous | | | 11,342 | | | 8,070 | |
| | | | 320,294 | | | 313,074 | |
| Costs and expenses: | | | | | | | |
| Cost of sales (exclusive of depreciation) | | | 171,640 | | | 163,792 | |
| Depreciation | | | 10,630 | | | 8,434 | |
Selling, general and administrative | | | 37,451 | | | 35,174 | |
| Provision for losses on instalment notes | | | 2,897 | | | 2,305 | |
| Postretirement benefits | | | 6,332 | | | 4,407 | |
| Interest expense - mortgage- | | | | | | | |
| backed/asset-backed notes | | | 29,771 | | | 29,976 | |
| Interest expense - corporate debt | | | 7,347 | | | 12,469 | |
| Amortization of intangibles | | | 478 | | | 697 | |
| | | | 266,546 | | | 257,254 | |
| Income from continuing operations | | | | | | | |
| before income tax expense | | | 53,748 | | | 55,820 | |
| Income tax expense (1) | | | 21,613 | | | 19,070 | |
| Income from continuing operations | | | 32,135 | | | 36,750 | |
| Discontinued operations (2) | | | (2,510 | ) | | (1,451 | ) |
| Net income | | $ | 29,625 | | $ | 35,299 | |
| | | | | | | | |
| Basic income per share: | | | | | | | |
| Income from continuing operations | | $ | 0.62 | | $ | 0.90 | |
| Discontinued operations | | | (0.05 | ) | | (0.04 | ) |
| | | | | | | | |
| Net income | | $ | 0.57 | | $ | 0.86 | |
| | | | | | | | |
| Weighted average number of shares outstanding | | | 52,012,638 | | | 40,881,505 | |
| Diluted income per share: | | | | | | | |
| Income from continuing operations | | $ | 0.61 | | $ | 0.74 | |
| Discontinued operations | | | (0.05 | ) | | (0.03 | ) |
| | | | | | | | |
| Net income | | $ | 0.56 | | $ | 0.71 | |
| | | | | | | | |
| | | | | | | | |
| Weighted average number of diluted | | | | | | | |
| shares outstanding | | | 52,512,615 | | | 50,980,570 | |
| (1) | Income tax expense for the three months ended March 31, 2007 includes a $4.4 million write-off of certain deferred tax assets no longer considered realizable. |
| (2) | In the first quarter of 2007, the Company decided to exit the modular home manufacturing business. As a result, the operating results of Crestline Homes have been classified as discontinued operations for the three months ended March 31, 2007 and 2006. The three months ended March 31, 2006 also includes the results of Mueller Water Products, which was spun-off to shareholders in December 2006. |
| WALTER INDUSTRIES, INC. AND SUBSIDIARIES |
| RESULTS BY OPERATING SEGMENT |
| ($ in Thousands) |
| Unaudited |
| | | For the three months | |
| | | ended March 31, | |
| | | 2007 | | 2006 | |
| NET SALES AND REVENUES: | | | | | |
| Natural Resources | | $ | 170,175 | | $ | 169,098 | |
| Sloss | | | 32,801 | | | 33,285 | |
| Natural Resources and Sloss | | | 202,976 | | | 202,383 | |
| Financing | | | 53,747 | | | 56,019 | |
| Homebuilding (1) | | | 62,133 | | | 55,288 | |
| Financing and Homebuilding Group | | | 115,880 | | | 111,307 | |
| Other | | | 3,518 | | | 3,163 | |
| Consolidating Eliminations | | | (2,080 | ) | | (3,779 | ) |
| | | $ | 320,294 | | $ | 313,074 | |
| OPERATING INCOME (LOSS) FROM | | | | | | | |
| CONTINUING OPERATIONS: | | | | | | | |
| Natural Resources | | $ | 56,441 | | $ | 63,925 | |
| Sloss | | | 1,306 | | | 2,182 | |
| Natural Resources and Sloss | | | 57,747 | | | 66,107 | |
| Financing | | | 10,571 | | | 12,992 | |
| Homebuilding (1) | | | (2,678 | ) | | (4,851 | ) |
| Financing and Homebuilding Group | | | 7,893 | | | 8,141 | |
| Other | | | (4,545 | ) | | (5,314 | ) |
| Consolidating Eliminations | | | - | | | (645 | ) |
| Operating income from continuing | | | | | | | |
| operations | | | 61,095 | | | 68,289 | |
| Corporate debt interest expense | | | (7,347 | ) | | (12,469 | ) |
| Income from continuing operations | | | | | | | |
| before income tax expense | | $ | 53,748 | | $ | 55,820 | |
| (1) | Excludes Crestline Homes, which is classified as discontinued operations, pending the sale of this business. |
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Unaudited
| | | For the three months ended March 31, |
| | | 2007 | | 2006 | |
| Operating Data: | | | | | |
| Jim Walter Resources | | | | | |
| Tons sold by type (in thousands): | | | | | |
| Metallurgical coal, contracts | | | 1,426 | | | 1,245 | |
| Purchased metallurgical coal | | | 96 | | | - | |
| Steam coal | | | - | | | 298 | |
| | | | 1,522 | | | 1,543 | |
| Average sale price per short ton: | | | | | | | |
| Metallurgical coal, contracts | | $ | 100.34 | | $ | 112.70 | |
| Steam coal | | $ | - | | $ | 35.38 | |
| Total | | $ | 100.34 | | $ | 97.78 | |
| Tons sold by mine (in thousands): | | | | | | | |
| Mine No.4 | | | 630 | | | 856 | |
| Mine No.7 | | | 782 | | | 516 | |
| Subtotal | | | 1,412 | | | 1,372 | |
| Mine No.5(1) | | | 14 | | | 171 | |
| Total | | | 1,426 | | | 1,543 | |
| Coal cost of sales (exclusive of depreciation): | | | | | | | |
| Mine No.4 per ton | | $ | 48.89 | | $ | 48.48 | |
| Mine No.7 per ton | | $ | 53.29 | | $ | 49.89 | |
Mines No. 4 and No. 7 per ton average | | $ | 51.33 | | $ | 49.01 | |
| Mine No.5 per ton (1) | | $ | 57.98 | | $ | 83.31 | |
| Total average | | $ | 51.39 | | $ | 52.80 | |
| Idle mine costs ($ in thousands) (2) | | $ | - | | $ | 200 | |
| Other costs ($ in thousands) (3) (4) | | $ | 12,777 | | $ | 2,647 | |
| Tons of coal produced (in thousands) | | | | | | | |
| Mine No.4 | | | 789 | | | 770 | |
| Mine No.7 | | | 883 | | | 779 | |
| Subtotal | | | 1,672 | | | 1,549 | |
| Mine No.5 | | | - | | | 266 | |
| Total | | | 1,672 | | | 1,815 | |
| Coal production costs per ton: (5) | | | | | | | |
| Mine No.4 | | $ | 37.32 | | $ | 34.43 | |
| Mine No.7 | | $ | 42.05 | | $ | 34.79 | |
| Mines No. 4 and No. 7 average | | $ | 39.82 | | $ | 34.61 | |
| Mine No.5 | | $ | - | | $ | 61.53 | |
| Total average | | $ | 39.82 | | $ | 38.56 | |
| Natural gas sales, in mmcf (in thousands) | | | 1,863 | | | 1,831 | |
| Natural gas average sale price per mmcf | | $ | 7.92 | | $ | 9.29 | |
| Natural gas cost of sales per mmcf | | $ | 2.76 | | $ | 3.24 | |
| (1) | Mine No. 5 ceased production in December 2006 as planned. Sales and cost amounts in 2007 resulted from the sale of residual inventory on hand at December 31, 2006. |
| (2) | Idle mine costs are charged to period expense when incurred. |
| (3) | Consists of charges (credits) not directly allocable to a specific mine and cost related to purchased coal. |
| (4) | The three months ended March 31, 2007 includes $8.2 million of purchased coal. |
| (5) | Coal production costs per ton are a component of inventoriable costs, including depreciation. Other costs of sales not included in coal production costs per ton include Company-paid outbound freight, postretirement benefits, asset retirement obligation expenses, royalties and Black Lung excise taxes. |
| WALTER INDUSTRIES, INC. AND SUBSIDIARIES |
| SUPPLEMENTAL INFORMATION |
| Unaudited |
| | | For the three months | |
| | | ended March 31, | |
| | | 2007 | | 2006 | |
| Operating Data (continued): | | | | | |
| Sloss Industries | | | | | |
| Furnace and foundry coke tons sold | | | 108,955 | | | 101,010 | |
| Furnace and foundry coke average sale | | | | | | | |
| price per ton | | $ | 216.55 | | $ | 222.71 | |
| Fiber tons sold | | | 25,152 | | | 24,976 | |
| Fiber price per ton | | $ | 266.79 | | $ | 261.44 | |
| Financing | | | | | | | |
| Delinquencies, as of period end | | | 3.4 | % | | 3.7 | % |
| Prepayment speeds | | | 8.1 | % | | 9.1 | % |
| Homebuilding (excluding Crestline) | | | | | | | |
| New sales contracts | | | 740 | | | 648 | |
| Cancellations | | | 84 | | | 128 | |
| Unit completions | | | 634 | | | 654 | |
| Average sale price | | $ | 98,000 | | $ | 84,300 | |
| Ending backlog of homes | | | 1,535 | | | 1,916 | |
| Depreciation ($ in thousands): | | | | | | | |
| Natural Resources | | $ | 7,800 | | $ | 5,845 | |
| Sloss | | | 916 | | | 940 | |
| Financing | | | 281 | | | 342 | |
| Homebuilding | | | 1,234 | | | 1,082 | |
| Other | | | 399 | | | 225 | |
| | | $ | 10,630 | | $ | 8,434 | |
| Capital expenditures ($ in thousands): | | | | | | | |
| Natural Resources | | $ | 21,897 | | $ | 24,148 | |
| Sloss | | | 2,120 | | | 2,034 | |
| Financing | | | 31 | | | 44 | |
| Homebuilding | | | 1,240 | | | 1,200 | |
| Other | | | 239 | | | 504 | |
| | | $ | 25,527 | | $ | 27,930 | |
| WALTER INDUSTRIES, INC. AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| ($ in Thousands) |
| Unaudited |
| | | March 31, | | December 31, | |
| | | 2007 | | 2006 | |
| ASSETS | | | | | |
| Cash and cash equivalents | | $ | 100,902 | | $ | 127,369 | |
| Short-term investments, restricted | | | 84,306 | | | 90,042 | |
| Instalment notes receivable, net of | | | | | | | |
| allowance of $12,640 and | | | | | | | |
| $13,011, respectively | | | 1,803,732 | | | 1,779,697 | |
| Receivables, net | | | 75,563 | | | 85,094 | |
| Inventories | | | 113,896 | | | 105,527 | |
| Prepaid expenses | | | 27,360 | | | 29,727 | |
| Property, plant and equipment, net | | | 324,908 | | | 310,163 | |
| Other long-term assets | | | 135,561 | | | 135,274 | |
| Goodwill | | | 10,895 | | | 10,895 | |
| Assets of discontinued operations | | | 10,977 | | | 10,327 | |
| | | $ | 2,688,100 | | $ | 2,684,115 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | |
| Accounts payable | | $ | 67,635 | | $ | 62,323 | |
| Accrued expenses | | | 70,857 | | | 94,930 | |
| Accrued interest on debt | | | 15,460 | | | 17,053 | |
| Debt: | | | | | | | |
| Mortgage-backed/asset-backed notes | | | 1,737,168 | | | 1,736,706 | |
| Corporate debt | | | 220,979 | | | 249,491 | |
| Accumulated postretirement benefits | | | | | | | |
| obligation | | | 331,172 | | | 330,241 | |
| Other long-term liabilities | | | 212,554 | | | 189,458 | |
| Liabilities of discontinued | | | | | | | |
| operations | | | 3,836 | | | 2,005 | |
| Total liabilities | | | 2,659,661 | | | 2,682,207 | |
| Stockholders' equity | | | 28,439 | | | 1,908 | |
| | | $ | 2,688,100 | | $ | 2,684,115 | |
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2007
($ in Thousands)
Unaudited
| | | | | | | Capital in | | | |
| | | | | Common | | Excess of | | Comprehensive | |
| | | Total | | Stock | | Par Value | | Income | |
| Balance at December 31, 2006 | | $ | 1,908 | | $ | 728 | | $ | 757,699 | | | | |
| Adjustment to initially apply FIN | | | | | | | | | | | | | |
| No. 48 (1) | | | (4,421 | ) | | | | | | | | | |
| Adjusted balance at January 1, 2007 | | $ | (2,513 | ) | $ | 728 | | $ | 757,699 | | | | |
| Comprehensive income: | | | | | | | | | | | | | |
| Net income | | | 29,625 | | | | | | | | $ | 29,625 | |
| Other comprehensive income (loss), | | | | | | | | | | | | | |
| net of tax: | | | | | | | | | | | | | |
| Amortization of prior service cost | | | | | | | | | | | | | |
| and actuarial loss on post- | | | | | | | | | | | | | |
| retirement benefits obligation | | | 2,025 | | | | | | | | | 2,025 | |
| Net unrealized loss on hedges | | | (2,304 | ) | | | | | | | | (2,304 | ) |
| Comprehensive income | | | | | | | | | | | $ | 29,346 | |
| Retirement of treasury stock | | | - | | | (208 | ) | | (259,901 | ) | | | |
| Stock issued upon the exercise of | | | | | | | | | | | | | |
| stock options | | | 219 | | | | | | 219 | | | | |
| Tax benefit on the exercise of stock | | | | | | | | | | | | | |
| options | | | 1,062 | | | | | | 1,062 | | | | |
| Dividends paid, $0.05 per share | | | (2,606 | ) | | | | | (2,606 | ) | | | |
| Stock-based compensation | | | 3,723 | | | | | | 3,723 | | | | |
| Other | | | (792 | ) | | | | | | | | | |
| Balance at March 31, 2007 | | $ | 28,439 | | $ | 520 | | $ | 500,196 | | | | |
| (1) | The Company adopted FIN No. 48, "Accounting for Uncertainty in Income Taxes," as required on January 1, 2007. Upon adoption, the Company recognized a $4.4 million increase to the beginning accumulated deficit to reflect a necessary increase to the accrual for uncertain tax positions. |
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2007
($ in Thousands)
Unaudited
| | | | | | | Accumulated | |
| | | | | | | Other | |
| | | | | | | Comprehensive | |
| | | Accumulated | | Treasury | | Income | |
| | | Deficit | | Stock | | (Loss) | |
| Balance at December 31, 2006 | | $ | (398,564 | ) | $ | (259,317 | ) | $ | (98,638 | ) |
| Adjustment to initially apply FIN | | | | | | | | | | |
| No. 48 (1) | | | (4,421 | ) | | | | | | |
| Adjusted balance at January 1, 2007 | | $ | (402,985 | ) | $ | (259,317 | ) | $ | (98,638 | ) |
| Comprehensive income: | | | | | | | | | | |
| Net income | | | 29,625 | | | | | | | |
| Other comprehensive income (loss), | | | | | | | | | | |
| net of tax: | | | | | | | | | | |
| Amortization of prior service cost | | | | | | | | | | |
| and actuarial loss on post- | | | | | | | | | | |
| retirement benefits obligation | | | | | | | | | 2,025 | |
| Net unrealized loss on hedges | | | | | | | | | (2,304 | ) |
| Comprehensive income | | | | | | | | | | |
| Retirement of treasury stock | | | | | | 260,109 | | | | |
| Stock issued upon the exercise of | | | | | | | | | | |
| stock options | | | | | | | | | | |
| Tax benefit on the exercise of stock | | | | | | | | | | |
| options | | | | | | | | | | |
| Dividends paid, $0.05 per share | | | | | | | | | | |
| Stock-based compensation | | | | | | | | | | |
| Other | | | | | | (792 | ) | | | |
| Balance at March 31, 2007 | | $ | (373,360 | ) | $ | - | | $ | (98,917 | ) |
| (1) | The Company adopted FIN No. 48, "Accounting for Uncertainty in Income Taxes," as required on January 1, 2007. Upon adoption, the Company recognized a $4.4 million increase to the beginning accumulated deficit to reflect a necessary increase to the accrual for uncertain tax positions. |
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
$ in Thousands
Unadited
| | | For the three months ended March 31, | |
| | | 2007 | | 2006 | |
| | | | | |
| Net income | | $ | 29,625 | | $ | 35,299 | |
| Loss from discontinued operations | | | 2,510 | | | 1,451 | |
| Income from continuing operations | | | 32,135 | | | 36,750 | |
| Adjustments to reconcile income from | | | | | | | |
| continuing operations to net cash | | | | | | | |
| provided by operations: | | | | | | | |
| Provision for losses on instalment | | | | | | | |
| notes receivable | | | 2,897 | | | 2,305 | |
| Depreciation | | | 10,630 | | | 8,434 | |
| Provision for deferred income taxes | | | 21,613 | | | 15,922 | |
| Other | | | 1,060 | | | 3,742 | |
| Decrease (increase) in assets: | | | | | | | |
| Receivables | | | 10,535 | | | (24,937 | ) |
| Inventories | | | (8,369 | ) | | (1,673 | ) |
| Prepaid expenses | | | 3,078 | | | 4,049 | |
| Instalment notes receivable, net | | | (20,540 | ) | | (4,112 | ) |
| Increase (decrease) in liabilities: | | | | | | | |
| Accounts payable | | | 4,255 | | | (560 | ) |
| Accrued expenses | | | (24,195 | ) | | (6,720 | ) |
| Accrued interest | | | (1,593 | ) | | (360 | ) |
| Cash flows provided by operating | | | | | | | |
| activitiies | | | 31,506 | | | 32,840 | |
| INVESTING ACTIVITIES | | | | | | | |
| Purchases of loans | | | (18,107 | ) | | (39,120 | ) |
| Principal payments received on | | | | | | | |
| purchased loans | | | 11,715 | | | 7,970 | |
| Decrease in short-term investments, | | | | | | | |
| restricted | | | 5,736 | | | 40,131 | |
| Additions to property, plant and | | | | | | | |
| equipment | | | (25,527 | ) | | (27,930 | ) |
| Other | | | 26 | | | 288 | |
| Acquisitions, net of cash acquired | | | - | | | 10,500 | |
| Cash flows used in investing | | | | | | | |
| activities | | | (26,157 | ) | | (8,161 | ) |
| FINANCING ACTIVITIES | | | | | | | |
| Issuances of mortgage-backed/asset- | | | | | | | |
| backed notes | | | 59,250 | | | - | |
| Payments of mortgage-backed/asset- | | | | | | | |
| backed notes | | | (58,816 | ) | | (66,781 | ) |
| Retirements of corporate debt | | | (28,512 | ) | | (103,781 | ) |
| Dividends paid | | | (2,606 | ) | | (1,568 | ) |
| Tax benefit on the exercise of | | | | | | | |
| employee stock options | | | 1,062 | | | 4,051 | |
| Issuance of common stock | | | - | | | 168,829 | |
| Other | | | 326 | | | 11,654 | |
| Cash flows provided by (used in) | | | | | | | |
| financing activities | | | (29,296 | ) | | 12,404 | |
| Cash flows provided by (used in) | | | | | | | |
| continuing operations | | $ | (23,947 | ) | $ | 37,083 | |
| CASH FLOWS FROM DISCONTINUED OPERATIONS | | | | | | | |
| Cash flows used in operating | | | | | | | |
| activities | | $ | (2,510 | ) | $ | (6,306 | ) |
| Cash flows used in investing | | | | | | | |
| activities | | | - | | | (28,536 | ) |
| Cash flows provided by financing | | | | | | | |
| activities | | | - | | | 6,579 | |
| Cash flows used in discontinued | | | | | | | |
| operations | | $ | (2,510 | ) | $ | (28,263 | ) |
| Net increase (decrease) in cash and | | | | | | | |
| cash equivalents | | $ | (26,457 | ) | $ | 8,820 | |
| Cash and cash equivalents at | | | | | | | |
| beginning of period | | $ | 127,369 | | $ | 64,424 | |
| Add: Cash and cash equivalents of | | | | | | | |
| discontinued operations at beginning | | | | | | | |
| of period | | | 1 | | | 72,972 | |
| Net increase (decrease) in cash and | | | | | | | |
| cash equivalents | | | (26,457 | ) | | 8,820 | |
| Less: Cash and cash equivalents of | | | | | | | |
| discontinued operations at end of | | | | | | | |
| period | | | 11 | | | 50,885 | |
| Cash and cash equivalents at end of | | | | | | | |
| period | | $ | 100,902 | | $ | 95,331 | |
SOURCE Walter Industries, Inc.
-0- 05/02/2007
/CONTACT: Investor Contact, Mark H. Tubb, Vice President - Investor Relations, +1-813-871-4027, or mtubb@walterind.com; or Media Contact, Michael A. Monahan, Director - Corporate Communications, +1-813-871-4132, or mmonahan@walterind.com /
/First Call Analyst: /
/FCMN Contact: jadkins@walterind.com /
/Photo: http://www.newscom.com/cgi-bin/prnh/20020429/FLM010LOGO-c
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com/
/Web site: http://www.walterind.com/
