FOR IMMEDIATE RELEASE | Investor Contact: Mark H. Tubb |
| November 1, 2007 | Vice President - Investor Relations |
| | 813.871.4027 |
| | mtubb@walterind.com |
| | Media Contact: Michael A. Monahan |
| | Director - Corporate Communications |
| | 813.871.4132 |
| | mmonahan@walterind.com |
WALTER INDUSTRIES, INC. ANNOUNCES THIRD QUARTER 2007 RESULTS
- Company Reports Earnings of $0.46 Per Diluted Share -
- Natural Resources Production Improves; Acquisition of Tuscaloosa Resources, Inc. Completed -
- Homebuilding Achieves Near Break-Even Results on Margin Improvements -
- Financial Services Group Renews $200.0 Million Mortgage Warehouse Facility -
(TAMPA, Fla.) - Walter Industries, Inc. (NYSE: WLT) today reported net income of $24.4 million, or $0.46 per diluted share for the third quarter ended Sept. 30, 2007. For the same period last year, the Company reported income from continuing operations of $43.5 million, or $0.85 per diluted share.
“Walter Industries delivered solid operating results in the third quarter as Natural Resources improved coal production over both the prior-year period and the second quarter 2007. Additionally, we closed on our acquisition of Tuscaloosa Resources, expanding our mining footprint in Southern Appalachia,” said Walter Industries Chairman Michael T. Tokarz. “Our expansion activity at Mine No. 7 is progressing well, and given the strength and positive outlook for the global metallurgical coal industry, our planned increase in metallurgical coal production will be coming online at an opportune time.”
Consolidated revenues for the third quarter declined versus the prior-year period, reflecting lower metallurgical coal sales prices and fewer unit completions at Homebuilding, partially offset by higher Homebuilding selling prices. Income from continuing operations for the third quarter declined versus last year’s third quarter due to the unfavorable impact from lower revenues, plus higher depreciation expense, increases in postretirement benefits expense and a higher effective tax rate, partially offset by lower selling, general and administrative expenses, as well as interest expense on bank debt.
Third Quarter Results by Operating Group
Natural Resources & Sloss
The Natural Resources & Sloss group generated combined revenues of $196.5 million in the third quarter, down $22.3 million versus the same period last year, but up $25.9 million from the second quarter 2007. The decline in revenues from the year-ago period was the result of a 15.4 percent reduction in metallurgical coal prices along with lower natural gas volumes and pricing. The 15.2 percent increase in revenues versus the second quarter 2007 was primarily due to $25.4 million in increased coal volume and a $1.3 million decrease in demurrage charges, partially offset by lower selling prices.
4211 W. Boy Scout Blvd. | Tampa, Florida 33607 | Tel: 813.871.4811 | Web site: www.walterind.com
Natural Resources & Sloss reported combined operating income of $32.4 million in the third quarter, compared to $56.9 million in the prior-year period. Operating income in the current-year period reflects $27.1 million of reduced metallurgical coal and natural gas pricing as well as $2.0 million of increased losses at Kodiak, partially offset by lower production costs at Jim Walter Resources.
“We were pleased with our operating performance during the third quarter, particularly at Jim Walter Resources and Sloss,” said George R. Richmond, Chief Executive Officer of Jim Walter Resources. “At Jim Walter Resources, we mined through the area at Mine No. 7 where we experienced difficulties in the second quarter, and moved the longwall to the next panel in September, as expected. In addition, Mine No. 4 delivered very strong production volumes that significantly reduced cost per ton.”
Richmond added, “The underlying fundamentals for the metallurgical coal market are the strongest we have seen for some time. Constraints on new capacity, as well as those on existing infrastructure in some parts of the world, continue to limit global supply. Additionally, demand for metallurgical coal and coke from our strategic markets continues to be very strong. We expect the confluence of these supply and demand indicators to drive prices higher.”
Jim Walter Resources
Jim Walter Resources sold 1.6 million tons of metallurgical coal during the third quarter, comparable with the prior-year period and up 0.3 million tons versus this year’s second quarter. Metallurgical coal sales prices (in short tons, FOB port) averaged $89.22 in the third quarter compared to $105.48 during the same period last year and $94.29 in this year’s second quarter. As expected, average realized prices declined, primarily due to lower contract pricing.
Mine No. 4 produced 0.8 million tons in the current-year period compared to 0.4 million tons in last year’s third quarter, when production was hampered by roof control problems, and 0.7 million tons in this year’s second quarter. Mine No. 4’s cost per ton was $34.91, reflecting a $30.35 improvement over the prior-year period, primarily driven by the return of production volumes to historic averages, partially offset by higher labor costs associated with the UMWA contract effective at the beginning of 2007.
Mine No. 7 produced 0.5 million tons in the third quarter 2007 versus 0.6 million tons in the same period last year and 0.5 million in this year’s second quarter. Third quarter production costs at Mine No. 7 were $68.51 per ton versus $44.17 per ton in the prior-year period. The cost per ton increase reflects lower volumes, as well as higher-cost continuous miner development work associated with the Southwest “A” panel and increased UMWA contract labor costs. Since the longwall move in September, the mine has produced at significantly higher advance rates and production volumes.
Based on year-to-date results, the Company has tightened its estimated full year coal production range at Jim Walter Resources to 5.9 to 6.0 million tons.
Tuscaloosa Resources, Inc.
The Company completed the acquisition of Tuscaloosa Resources, Inc. on Aug. 31, 2007 and the acquired operation has performed as expected. For the month of September, TRI produced 63,000 tons and sold 67,000 tons of steam coal.
Kodiak Mining
Kodiak incurred operating losses totaling $4.9 million during the third quarter versus a $2.9 million loss from last year’s third quarter. Production volumes in the quarter were low due to thin seam conditions, poor operating performance and the impact of excessive downtime from 16 idle mine days. The idle mine days primarily related to repositioning activities associated with recent mine plan modifications designed to better assess the long-term performance prospects of the mine.
WALTER INDUSTRIES ANNOUNCES THIRD QUARTER 2007 RESULTS - Page 2 - 11/1/07
“While Kodiak’s operating losses narrowed versus the second quarter, we continue to be disappointed with the unit’s overall performance,” Richmond said. “The majority of our focus at Kodiak this quarter was on repositioning the mine and moving equipment to another area where we will get a better view of the future outlook for this venture.”
Natural Gas
The natural gas operation sold 1.8 billion cubic feet of gas at an average price of $7.59 per thousand cubic feet in the third quarter 2007 versus sales of 2.0 billion cubic feet at an average price of $8.49 per thousand cubic feet in the prior-year period. The decline in natural gas volumes reflects the loss of gas production from the now-closed Mine No. 5, as well as lower volumes from Mine No. 7.
Sloss
Sloss Industries generated third quarter revenues of $34.5 million, flat with the prior-year period, and operating income of $3.2 million, up $2.0 million from the prior-year period. Operating income improvements primarily reflect increased spot sales at higher pricing for furnace coke, indicative of current favorable market conditions. Additionally, improved plant performance and lower administrative expenses contributed to the increase in operating income.
Financing & Homebuilding
The Financing & Homebuilding group reported combined revenues of $112.2 million for the third quarter, down 2.8 percent versus the prior-year period. The decrease was primarily the result of lower unit deliveries at Homebuilding and lower prepayment income at Financing, partially offset by higher selling prices at Homebuilding and increased Financing interest income.
Combined operating income for Financing & Homebuilding was down $0.6 million for the quarter versus last year’s third quarter, primarily driven by reduced prepayment income and a higher provision for losses at Financing, partially offset by margin improvements at Homebuilding. Financing added $1.0 million to its loss provision due to expected weakness in the purchased Adjustable Rate Mortgage (ARM) portfolio, which was approximately $53.0 million at Sept. 30, 2007, or less than three percent of the total portfolio. Results in the prior-year period also included operating income of $1.1 million at Financing resulting from better than expected claims experience in the insurance business.
Delinquencies on the mortgage portfolio were 4.9 percent at Sept. 30, 2007, compared to 4.2 percent at Sept. 30, 2006 and 3.8 percent at June 30, 2007. The increase in delinquencies versus the prior-year period was primarily due to weakness in the ARM portion of the Company’s portfolio. Performance by Financing’s mortgage servicing organization helped reduce delinquency levels at Oct. 31, 2007 to approximately 4.3 percent.
Average unit net selling prices at Homebuilding were $98,327 in the quarter, an increase of $6,740 per home versus the prior-year period. Unit completions were 585 in the third quarter, down 11.6 percent versus the same period last year, reflecting lower sales orders in prior periods. Gross margins improved by 530 basis points in the third quarter versus the same period last year and 190 basis points compared to this year’s second quarter, primarily on higher selling prices and lower materials costs. For the current quarter, new sales orders, net of cancellations, totaled 440 units, down 16.0 percent compared to the third quarter last year, primarily reflecting unfavorable market conditions facing the entire homebuilding industry.
“We remain confident in the prospects for our Financing and Homebuilding business, despite continued deterioration in the broader markets,” said Financing & Homebuilding Chief Executive Officer Mark J. O’Brien. “Although home sales and backlog levels are lower than we would like, improved pricing and cost controls have significantly lowered our break-even point. Also, our mortgage servicing organization continues to drive solid portfolio performance.”
WALTER INDUSTRIES ANNOUNCES THIRD QUARTER 2007 RESULTS - Page 3 - 11/1/07
The Company also announced that its Financing business renewed its $200.0 million Trust XIV Variable Funding Loan Agreement through Oct. 23, 2008 on substantially similar terms. Combined with the renewal of its $150.0 million warehouse facility in July, the Company has ample liquidity to continue funding mortgage accounts originated by the Financing and Homebuilding businesses.
Other
Operating income in the “Other” segment, comprised of the Company’s corporate expenses and land subsidiaries, improved by approximately $2.1 million in the third quarter, driven by increased land sales and lower corporate selling, general and administrative expenses.
Walter Industries also announced that it spent $5.2 million during the quarter to repurchase approximately 219,000 shares.
Conference Call Webcast
Members of the Company's leadership team will discuss Walter Industries’ third quarter 2007 results, its business drivers for the remainder of 2007 and other general business matters during a conference call and live Web cast to be held on Friday, Nov. 2, 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 $1.3 billion and employs approximately 2,800 people. For more information about Walter Industries, please visit the Company Web site at www.walterind.com.
Safe Harbor Statement
Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks include, among others, changes in customers' demand for the Company's products, changes in raw material, labor, equipment and transportation costs and availability, geologic and weather conditions, changes in extraction costs and pricing in the Company's mining operations, changes in customer orders, pricing actions by the Company's competitors, changes in law, changes in the mortgage-backed capital markets, and changes in economic conditions. Those risks also include the timing of and ability to execute any strategic actions that may be pursued. Risks associated with forward-looking statements are more fully described in the Company's filings with the Securities and Exchange Commission. The Company assumes no duty to update its forward-looking statements as of any future date.
- WLT -
WALTER INDUSTRIES ANNOUNCES THIRD QUARTER 2007 RESULTS - Page 4 - 11/1/07
| WALTER INDUSTRIES, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF OPERATIONS |
| ($ in Thousands) |
| Unaudited |
| | | For the three months | |
| | ended September 30, | |
| | 2007 | | 2006 | |
| Net sales and revenues: | | | | | |
Net sales | | $ | 249,163 | | $ | 273,467 | |
Interest income on instalment notes | | | 49,712 | | | 49,434 | |
Miscellaneous | | | 13,331 | | | 10,384 | |
| | | | 312,206 | | | 333,285 | |
| Costs and expenses: | | | | | | | |
Cost of sales (exclusive of depreciation) | | | 184,535 | | | 186,710 | |
Depreciation | | | 12,089 | | | 9,963 | |
Selling, general and administrative | | | 34,088 | | | 36,343 | |
Provision for losses on instalment notes | | | 3,366 | | | 1,946 | |
Postretirement benefits | | | 6,863 | | | 4,406 | |
Interest expense - mortgage-backed/asset-backed notes | | | 29,996 | | | 29,465 | |
Interest expense - other debt | | | 7,358 | | | 9,966 | |
Amortization of intangibles | | | 455 | | | 560 | |
| | | | 278,750 | | | 279,359 | |
| Income from continuing operations before income tax | | | | | | | |
expense and minority interest | | | 33,456 | | | 53,926 | |
| Income tax expense (2) | | | 9,093 | | | 10,478 | |
| Income from continuing operations before minority interest | | | 24,363 | | | 43,448 | |
| Minority interest in net loss of affiliate | | | - | | | 59 | |
| Income from continuing operations | | | 24,363 | | | 43,507 | |
| Discontinued operations (1) | | | - | | | 19,738 | |
| Net income | | $ | 24,363 | | $ | 63,245 | |
| | | | | | | | |
| Basic income per share: | | | | | | | |
| Income from continuing operations | | $ | 0.47 | | $ | 1.00 | |
| Discontinued operations | | | - | | | 0.45 | |
| | | | | | | | |
| Net income | | $ | 0.47 | | $ | 1.45 | |
| | | | | | | | |
| Weighted average number of shares outstanding | | | 52,035,228 | | | 43,634,042 | |
| | | | | | | | |
| Diluted income per share: | | | | | | | |
| Income from continuing operations | | $ | 0.46 | | $ | 0.85 | |
| Discontinued operations | | | - | | | 0.38 | |
| | | | | | | | |
| Net income | | $ | 0.46 | | $ | 1.23 | |
| | | | | | | | |
| Weighted average number of diluted shares outstanding | | | 52,521,787 | | | 52,176,845 | |
| (1) | The Company sold its modular home manufacturing business, which operated as Crestline Homes, Inc., in May 2007. As a result, operating results of this business for the three months ended September 30, 2006 have been classified as discontinued operations. Discontinued operations for the three months ended September 30, 2006 also include the results of Mueller Water Products, Inc., which was spun off to shareholders in December 2006. |
| (2) | Income tax expense for the three months ended September 30, 2006 includes favorable adjustments resulting from effective tax rate revisions and additional benefits from percentage depletion deductions. |
WALTER INDUSTRIES ANNOUNCES THIRD QUARTER 2007 RESULTS - Page 5 - 11/1/07
| WALTER INDUSTRIES, INC. AND SUBSIDIARIES |
| RESULTS BY OPERATING SEGMENT |
| ($ in Thousands) |
| Unaudited |
| | | For the three months | |
| | ended September 30, | |
| | 2007 | | 2006 | |
| NET SALES AND REVENUES: | | | | | |
| Natural Resources | | $ | 162,064 | | $ | 184,392 | |
| Sloss | | | 34,471 | | | 34,414 | |
| Natural Resources and Sloss | | | 196,535 | | | 218,806 | |
| | | | | | | | |
| Financing | | | 54,104 | | | 54,587 | |
| Homebuilding (1) | | | 58,060 | | | 60,854 | |
| Financing and Homebuilding Group | | | 112,164 | | | 115,441 | |
| | | | | | | | |
| Other | | | 4,689 | | | 4,203 | |
| Consolidating Eliminations | | | (1,182 | ) | | (5,165 | ) |
| | | $ | 312,206 | | $ | 333,285 | |
| OPERATING INCOME (LOSS) FROM CONTINUING | | | | | | | |
| OPERATIONS: | | | | | | | |
| Natural Resources | | $ | 29,124 | | $ | 55,641 | |
| Sloss | | | 3,231 | | | 1,271 | |
| Natural Resources and Sloss | | | 32,355 | | | 56,912 | |
| | | | | | | | |
| Financing | | | 11,247 | | | 14,226 | |
| Homebuilding (1) | | | (82 | ) | | (2,467 | ) |
| Financing and Homebuilding Group | | | 11,165 | | | 11,759 | |
| | | | | | | | |
| Other | | | (2,706 | ) | | (4,779 | ) |
| Consolidating Eliminations | | | - | | | - | |
| Operating income from continuing | | | | | | | |
| operations | | | 40,814 | | | 63,892 | |
| Other debt interest expense | | | (7,358 | ) | | (9,966 | ) |
| Income from continuing operations before | | | | | | | |
| income tax expense and minority interest | | $ | 33,456 | | $ | 53,926 | |
| (1) | Excludes Crestline Homes, Inc., which was sold in May 2007. |
WALTER INDUSTRIES ANNOUNCES THIRD QUARTER 2007 RESULTS - Page 6 - 11/1/07
| WALTER INDUSTRIES, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF OPERATIONS |
| ($ in Thousands) |
| Unaudited |
| | | For the nine months | |
| | ended September 30, | |
| | 2007 | | 2006 | |
| Net sales and revenues: | | | | | |
Net sales | | $ | 747,696 | | $ | 786,295 | |
Interest income on instalment notes | | | 149,939 | | | 150,901 | |
Miscellaneous | | | 31,389 | | | 28,153 | |
| | | | 929,024 | | | 965,349 | |
| Cost and expenses: | | | | | | | |
Cost of sales (exclusive of depreciation) | | | 530,632 | | | 517,815 | |
Depreciation | | | 34,310 | | | 27,811 | |
Selling, general and administrative | | | 109,664 | | | 108,347 | |
Provision for losses on instalment notes | | | 8,756 | | | 6,761 | |
Postretirement benefits | | | 19,882 | | | 13,220 | |
Interest expense - mortgage-backed/asset-backed notes | | | 89,512 | | | 88,399 | |
Interest expense - other debt | | | 21,923 | | | 31,355 | |
Amortization of intangibles | | | 1,375 | | | 1,899 | |
| | | | 816,054 | | | 795,607 | |
| Income from continuing operations before income tax | | | | | | | |
expense and minority interest | | | 112,970 | | | 169,742 | |
| Income tax expense | | | 38,702 | | | 46,286 | |
| Income from continuing operations before minority interest | | | 74,268 | | | 123,456 | |
| Minority interest in net loss of affiliate | | | - | | | 1,000 | |
| Income from continuing operations | | | 74,268 | | | 124,456 | |
| Discontinued operations (1) | | | (2,229 | ) | | 38,049 | |
| Net income | | $ | 72,039 | | $ | 162,505 | |
| | | | | | | | |
| Basic income (loss) per share: | | | | | | | |
| Income from continuing operations | | $ | 1.42 | | $ | 2.93 | |
| Discontinued operations | | | (0.04 | ) | $ | 0.89 | |
| | | | | | | | |
| Net income | | $ | 1.38 | | $ | 3.82 | |
| | | | | | | | |
| Weighted average number of shares outstanding | | | 52,035,491 | | | 42,511,178 | |
| | | | | | | | |
| Diluted income (loss) per share: | | | | | | | |
| Income from continuing operations | | $ | 1.41 | | $ | 2.46 | |
| Discontinued operations | | | (0.04 | ) | | 0.74 | |
| | | | | | | | |
| Net income | | $ | 1.37 | | $ | 3.20 | |
| | | | | | | | |
| Weighted average number of diluted shares outstanding | | | 52,517,297 | | | 51,601,866 | |
| (1) | The Company sold its modular home manufacturing business, which operated as Crestline Homes, Inc., in May 2007. As a result, operating results of this business for the nine months ended September 30, 2007 and 2006 have been classified as discontinued operations. Discontinued operations for the nine months ended September 30, 2006 also include the results of Mueller Water Products, Inc., which was spun off to shareholders in December 2006. |
WALTER INDUSTRIES ANNOUNCES THIRD QUARTER 2007 RESULTS - Page 7 - 11/1/07
| WALTER INDUSTRIES, INC. AND SUBSIDIARIES |
| RESULTS BY OPERATING SEGMENT |
| ($ in Thousands) |
| Unaudited |
| | | For the nine months | |
| | | ended September 30, | |
| | | 2007 | | 2006 | |
| NET SALES AND REVENUES: | | | | | |
| Natural Resources | | $ | 469,729 | | $ | 526,584 | |
| Sloss | | | 100,394 | | | 102,611 | |
| Natural Resources and Sloss | | | 570,123 | | | 629,195 | |
| | | | | | | | |
| Financing | | | 162,897 | | | 166,425 | |
| Homebuilding (1) | | | 188,368 | | | 171,067 | |
| Financing and Homebuilding Group | | | 351,265 | | | 337,492 | |
| | | | | | | | |
| Other | | | 13,172 | | | 10,223 | |
| Consolidating Eliminations | | | (5,536 | ) | | (11,561 | ) |
| | | $ | 929,024 | | $ | 965,349 | |
| OPERATING INCOME (LOSS) FROM CONTINUING | | | | | | | |
| OPERATIONS: | | | | | | | |
| Natural Resources | | $ | 107,329 | | $ | 182,670 | |
| Sloss | | | 7,485 | | | 5,530 | |
| Natural Resources and Sloss | | | 114,814 | | | 188,200 | |
| | | | | | | | |
| Financing | | | 34,863 | | | 40,576 | |
| Homebuilding (1) | | | (3,227 | ) | | (11,712 | ) |
| Financing and Homebuilding Group | | | 31,636 | | | 28,864 | |
| | | | | | | | |
| Other | | | (11,557 | ) | | (15,322 | ) |
| Consolidating Eliminations | | | - | | | (645 | ) |
| Operating income from continuing | | | | | | | |
| operations | | | 134,893 | | | 201,097 | |
| Other debt interest expense | | | (21,923 | ) | | (31,355 | ) |
| Income from continuing operations before | | | | | | | |
| income tax expense and minority interest | | $ | 112,970 | | $ | 169,742 | |
| (1) | Excludes Crestline Homes, Inc., which was sold in May 2007. |
WALTER INDUSTRIES ANNOUNCES THIRD QUARTER 2007 RESULTS - Page 8 - 11/1/07
| WALTER INDUSTRIES, INC. AND SUBSIDIARIES |
| SUPPLEMENTAL INFORMATION |
| Unaudited |
| | | For the three months | | For the nine months | |
| | | ended September 30, | | ended September 30, | |
| | | 2007 | | 2006 | | 2007 | | 2006 | |
| Operating Data: | | | | | | | | | |
Jim Walter Resources | | | | | | | | | |
Tons sold by type (in thousands): | | | | | | | | | |
Metallurgical coal, contracts | | | 1,570 | | | 1,511 | | | 4,297 | | | 4,165 | |
Purchased metallurgical coal | | | - | | | 56 | | | 96 | | | 56 | |
Steam coal | | | - | | | - | | | - | | | 300 | |
| | | | 1,570 | | | 1,567 | | | 4,393 | | | 4,521 | |
Average sale price per short ton: | | | | | | | | | | | | | |
Metallurgical coal, contracts | | $ | 89.22 | | $ | 105.48 | | $ | 94.57 | | $ | 108.96 | |
Steam coal | | $ | - | | $ | - | | $ | - | | $ | 35.02 | |
Total average | | $ | 89.22 | | $ | 105.48 | | $ | 94.57 | | $ | 104.05 | |
| | | | | | | | | | | | | | |
Tons sold by mine (in thousands): | | | | | | | | | | | | | |
Mine No. 4 | | | 1,108 | | | 423 | | | 2,407 | | | 1,862 | |
Mine No. 7 | | | 462 | | | 806 | | | 1,876 | | | 1,974 | |
Subtotal | | | 1,570 | | | 1,229 | | | 4,283 | | | 3,836 | |
Mine No. 5 (1) | | | - | | | 282 | | | 14 | | | 629 | |
Total | | | 1,570 | | | 1,511 | | | 4,297 | | | 4,465 | |
| | | | | | | | | | | | | | |
Coal cost of sales (exclusive of depreciation): | | | | | | | | | | | | | |
Mine No. 4 per ton | | $ | 54.42 | | $ | 78.01 | | $ | 52.13 | | $ | 59.80 | |
Mine No. 7 per ton | | $ | 78.01 | | $ | 57.20 | | $ | 66.26 | | $ | 53.50 | |
| Mines No. 4 and No. 7 per ton average | | $ | 61.36 | | $ | 64.36 | | $ | 58.32 | | $ | 56.56 | |
Mine No. 5 per ton (1) | | $ | - | | $ | 63.76 | | $ | 57.98 | | $ | 71.28 | |
Total average | | $ | 61.36 | | $ | 64.25 | | $ | 58.32 | | $ | 58.63 | |
Idle mine costs (in thousands) (2) | | $ | - | | $ | 200 | | $ | 263 | | $ | 582 | |
Purchased coal costs (in thousands) | | $ | - | | $ | 6,502 | | $ | 8,192 | | $ | 6,502 | |
Other costs (in thousands) (3) | | $ | 2,708 | | $ | 2,355 | | $ | 10,070 | | $ | 7,848 | |
| | | | | | | | | | | | | | |
Tons of coal produced (in thousands) | | | | | | | | | | | | | |
Mine No. 4 | | | 823 | | | 385 | | | 2,277 | | | 1,538 | |
Mine No. 7 | | | 468 | | | 567 | | | 1,871 | | | 1,981 | |
Subtotal | | | 1,291 | | | 952 | | | 4,148 | | | 3,519 | |
Mine No. 5 | | | - | | | 216 | | | - | | | 654 | |
Total | | | 1,291 | | | 1,168 | | | 4,148 | | | 4,173 | |
| | | | | | | | | | | | | | |
Coal production costs per ton: (4) | | | | | | | | | | | | | |
Mine No. 4 | | $ | 34.91 | | $ | 65.26 | | $ | 38.58 | | $ | 47.35 | |
Mine No. 7 | | $ | 68.51 | | $ | 44.17 | | $ | 56.79 | | $ | 39.07 | |
| Mines No. 4 and No. 7 average | | $ | 47.09 | | $ | 52.70 | | $ | 46.79 | | $ | 42.69 | |
Mine No. 5 | | $ | - | | $ | 47.03 | | $ | - | | $ | 56.10 | |
Total average | | $ | 47.09 | | $ | 51.66 | | $ | 46.79 | | $ | 44.79 | |
| | | | | | | | | | | | | | |
Natural gas sales, in mmcf (in thousands) | | | 1,789 | | | 1,972 | | | 5,404 | | | 5,778 | |
Natural gas average sale price per mmcf | | $ | 7.59 | | $ | 8.49 | | $ | 7.82 | | $ | 8.74 | |
Natural gas cost of sales per mmcf | | $ | 2.41 | | $ | 2.45 | | $ | 2.81 | | $ | 2.74 | |
| | | | | | | | | | | | | | |
Kodiak | | | | | | | | | | | | | |
Tons sold (in thousands) | | | 30 | | | 1 | | | 39 | | | 4 | |
Tons of coal produced (in thousands) | | | 11 | | | 34 | | | 57 | | | 60 | |
| | | | | | | | | | | | | | |
Tuscaloosa Resources, Inc. (5) | | | | | | | | | | | | | |
Tons sold (in thousands) | | | 67 | | | - | | | 67 | | | - | |
Tons of coal produced (in thousands) | | | 63 | | | - | | | 63 | | | - | |
| (1) | Mine No. 5 ceased production in December 2006 as planned. Sales and cost of sales 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. |
| (4) | Coal production costs per ton are a component of inventoriable costs, including depreciation. Other costs 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. |
| (5) | Tuscaloosa Resources, Inc. was acquired on August 31, 2007. Quarter-to-date and year-to-date information represent tons sold and produced in September 2007. |
WALTER INDUSTRIES ANNOUNCES THIRD QUARTER 2007 RESULTS - Page 9 - 11/1/07
| WALTER INDUSTRIES, INC. AND SUBSIDIARIES |
| SUPPLEMENTAL INFORMATION |
| Unaudited |
| | | For the three months | | For the nine months | |
| | ended September 30, | | ended September 30, | |
| | 2007 | | 2006 | | 2007 | | 2006 | |
| Operating Data (continued): | | | | | | | | | |
Sloss Industries | | | | | | | | | |
Furnace and foundry coke tons sold | | | 110,109 | | | 100,624 | | | 321,844 | | | 305,763 | |
Furnace and foundry coke average sale price per ton | | $ | 224.41 | | $ | 222.61 | | $ | 222.23 | | $ | 222.24 | |
Fiber tons sold | | | 26,429 | | | 25,350 | | | 79,911 | | | 78,113 | |
Fiber price per ton | | $ | 271.94 | | $ | 265.52 | | $ | 268.01 | | $ | 263.92 | |
| | | | | | | | | | | | | | |
Financing | | | | | | | | | | | | | |
Delinquencies, as of period end | | | 4.9 | % | | 4.2 | % | | 4.9 | % | | 4.2 | % |
Prepayment speeds | | | 8.4 | % | | 10.6 | % | | 8.4 | % | | 10.0 | % |
Number of repossessions | | | 203 | | | 317 | | | 789 | | | 984 | |
Repossession rate, annualized | | | 2.2 | % | | 3.0 | % | | 2.6 | % | | 3.0 | % |
Recovery rate on repossessions | | | 84.3 | % | | 88.9 | % | | 85.6 | % | | 87.7 | % |
| | | | | | | | | | | | | | |
Homebuilding (excluding Crestline) | | | | | | | | | | | | | |
New sales contracts | | | 567 | | | 670 | | | 1,988 | | | 1,995 | |
Cancellations | | | 127 | | | 146 | | | 320 | | | 415 | |
Unit completions | | | 585 | | | 662 | | | 1,908 | | | 1,948 | |
Average sale price | | $ | 98,327 | | $ | 91,587 | | $ | 98,418 | | $ | 87,571 | |
Ending backlog of homes | | | 1,285 | | | 1,716 | | | 1,285 | | | 1,716 | |
| | | | | | | | | | | | | | |
Depreciation ($ in thousands): | | | | | | | | | | | | | |
Natural Resources | | $ | 9,087 | | $ | 7,004 | | $ | 25,583 | | $ | 19,549 | |
Sloss | | | 965 | | | 879 | | | 2,824 | | | 2,727 | |
Financing | | | 312 | | | 349 | | | 866 | | | 1,031 | |
Homebuilding | | | 1,290 | | | 1,127 | | | 3,796 | | | 3,307 | |
Other | | | 435 | | | 604 | | | 1,241 | | | 1,197 | |
| | | $ | 12,089 | | $ | 9,963 | | $ | 34,310 | | $ | 27,811 | |
Capital expenditures ($ in thousands): | | | | | | | | | | | | | |
Natural Resources | | $ | 47,417 | | $ | 19,704 | | $ | 103,013 | | $ | 64,623 | |
Sloss | | | 1,167 | | | 2,260 | | | 4,290 | | | 5,701 | |
Financing | | | 16 | | | 37 | | | 76 | | | 221 | |
Homebuilding | | | 789 | | | 1,073 | | | 2,639 | | | 3,498 | |
Other | | | - | | | 917 | | | 327 | | | 1,631 | |
| | | $ | 49,389 | | $ | 23,991 | | $ | 110,345 | | $ | 75,674 | |
WALTER INDUSTRIES ANNOUNCES THIRD QUARTER 2007 RESULTS - Page 10 - 11/1/07
| WALTER INDUSTRIES, INC. AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| ($ in Thousands) |
| Unaudited |
| | | September 30, | | December 31, | | September 30, | |
| | | 2007 | | 2006 | | 2006 | |
| ASSETS | | | | | | | |
| Cash and cash equivalents | | $ | 23,159 | | $ | 127,369 | | $ | 69,252 | |
| Short-term investments, restricted | | | 86,607 | | | 90,042 | | | 86,296 | |
| Instalment notes receivable, net of allowance of $13,957, | | | | | | | | | | |
| $13,011 and $12,945, respectively | | | 1,834,816 | | | 1,779,697 | | | 1,765,794 | |
| Receivables, net | | | 97,350 | | | 85,094 | | | 110,693 | |
| Inventories | | | 90,763 | | | 105,527 | | | 97,877 | |
| Prepaid expenses | | | 46,933 | | | 29,727 | | | 42,532 | |
| Property, plant and equipment, net | | | 396,692 | | | 310,163 | | | 295,664 | |
| Other assets | | | 168,923 | | | 135,274 | | | 113,773 | |
| Goodwill | | | 10,895 | | | 10,895 | | | 10,895 | |
| Assets of discontinued operations | | | - | | | 10,327 | | | 2,993,056 | |
| | | $ | 2,756,138 | | $ | 2,684,115 | | $ | 5,585,832 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | | | |
| Accounts payable | | $ | 67,062 | | $ | 62,323 | | $ | 60,387 | |
| Accrued expenses | | | 76,331 | | | 94,930 | | | 91,153 | |
| Accrued interest on debt | | | 14,149 | | | 17,053 | | | 18,588 | |
| Debt: | | | | | | | | | | |
Mortgage-backed/asset-backed notes | | | 1,738,273 | | | 1,736,706 | | | 1,687,968 | |
Other debt | | | 229,708 | | | 249,491 | | | 422,736 | |
| Accumulated postretirement benefits obligation | | | 349,406 | | | 330,241 | | | 225,402 | |
| Other liabilities | | | 221,309 | | | 189,458 | | | 217,112 | |
| Liabilities of discontinued operations | | | - | | | 2,005 | | | 1,755,430 | |
| Total liabilities | | | 2,696,238 | | | 2,682,207 | | | 4,478,776 | |
| | | | | | | | | | | |
| Minority interest in discontinued operations | | | - | | | - | | | 304,733 | |
| | | | | | | | | | | |
| Stockholders' equity | | | 59,900 | | | 1,908 | | | 802,323 | |
| | | $ | 2,756,138 | | $ | 2,684,115 | | $ | 5,585,832 | |
WALTER INDUSTRIES ANNOUNCES THIRD QUARTER 2007 RESULTS - Page 11 - 11/1/07
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007
($ in Thousands)
| | | | Total | | | Stock | | | Capital in Excess of Par Value | | | Comprehensive Income | | | Accumulated Deficit | | | Treasury Stock | | | Income (Loss) | |
| Balance at December 31, 2006 | | $ | 1,908 | | $ | 728 | | $ | 757,699 | | | | | $ | (398,564 | ) | $ | (259,317 | ) | $ | (98,638 | ) |
| Adjustment to initially apply FIN No. 48 (1) | | | (4,421 | ) | | | | | | | | | | | (4,421 | ) | | | | | | |
| Adjusted balance at January 1, 2007 | | $ | (2,513 | ) | $ | 728 | | $ | 757,699 | | | | | $ | (402,985 | | | (259,317 | ) | $ | (98,638 | ) |
| Comprehensive income: | | | | | | | | | | | | | | | | | | | | | | |
| Net income | | | 72,039 | | | | | | | | $ | 72,039 | | | 72,039 | | | | | | | |
| Other comprehensive income (loss) , net of tax: | | | | | | | | | | | | | | | | | | | | | | |
Amortization of prior service cost and net actuarial loss | | | | | | | | | | | | | | | | | | | | | | |
on postretirement benefits obligation | | | 6,078 | | | | | | | | | 6,078 | | | | | | | | | 6,078 | |
Increase in accumulated postretirement benefit obligation for | | | | | | | | | | | | | | | | | | | | | | |
plan amendments after measurement date | | | (9,347 | ) | | | | | | | | (9,347 | ) | | | | | | | | (9,347 | ) |
Net unrealized loss on hedges | | | (4,122 | ) | | | | | | | | (4,122 | ) | | | | | | | | (4,122 | ) |
| Comprehensive income | | | | | | | | | | | $ | 64,648 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Retirement of treasury stock | | | - | | | (207 | ) | | (259,902 | ) | | | | | | | | 260,109 | | | | |
| Purchases of stock under stock repurchase program | | | (5,241 | ) | | (2 | ) | | (5,239 | ) | | | | | | | | | | | | |
| Stock issued upon the exercise of stock options | | | 725 | | | | | | 725 | | | | | | | | | | | | | |
| Tax benefit from the exercise of stock options | | | 1,380 | | | | | | 1,380 | | | | | | | | | | | | | |
| Dividends paid, $0.15 per share | | | (7,815 | ) | | | | | (7,815 | ) | | | | | | | | | | | | |
| Stock-based compensation | | | 9,508 | | | | | | 9,508 | | | | | | | | | | | | | |
| Other | | | (792 | ) | | | | | - | | | | | | | | | (792 | ) | | | |
| Balance at September 30, 2007 | | $ | 59,900 | | $ | 519 | | $ | 496,356 | | | | | $ | (330,946 | ) | $ | - | | $ | (106,029 | ) |
| (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 $4.4 million increase to the beginning accumulated deficit to reflect a necessary increase to the accrual for uncertain tax positions. |
WALTER INDUSTRIES ANNOUNCES THIRD QUARTER 2007 RESULTS - Page 12 - 11/1/07
| WALTER INDUSTRIES, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| ($ in Thousands) |
| Unadited |
| | | For the nine months ended September 30, | |
| | 2007 | | 2006 | |
OPERATING ACTIVITIES | | | | | |
| Net income | | $ | 72,039 | | $ | 162,505 | |
Loss (income) from discontinued operations | | | 2,229 | | | (38,049 | ) |
Income from continuing operations | | | 74,268 | | | 124,456 | |
| | | | | | | | |
| Adjustments to reconcile income from continuing operations to net cash provided by | | | | | | | |
continuing operations: | | | | | | | |
Provision for losses on instalment notes receivable | | | 8,756 | | | 6,761 | |
Depreciation | | | 34,310 | | | 27,811 | |
Provision for (benefit from) deferred income taxes | | | (2,579 | ) | | 28,114 | |
Other | | | 24,943 | | | 13,971 | |
| | | | | | | | |
Decrease (increase) in assets, net of effect of acquisition: | | | | | | | |
Receivables | | | (6,675 | ) | | (37,185 | ) |
Inventories | | | 15,107 | | | 18,872 | |
Prepaid expenses | | | (2,628 | ) | | (9,777 | ) |
Instalment notes receivable, net | | | (55,242 | ) | | (14,808 | ) |
Increase (decrease) in liabilities, net of effect of acquisition: | | | | | | | |
Accounts payable | | | 3,536 | | | 549 | |
Accrued expenses | | | (21,807 | ) | | (6,668 | ) |
Accrued interest | | | (2,904 | ) | | (1,809 | ) |
Cash flows provided by operating activities of continuing operations | | | 69,085 | | | 150,287 | |
| | | | | | | | |
INVESTING ACTIVITIES | | | | | | | |
Acquisition | | | (11,650 | ) | | - | |
Purchases of loans | | | (39,900 | ) | | (96,083 | ) |
Principal payments received on purchased loans | | | 31,267 | | | 32,257 | |
Decrease in short-term investments, restricted | | | 3,829 | | | 38,277 | |
Additions to property, plant and equipment | | | (110,345 | ) | | (75,674 | ) |
Escrow release from prior acquisition | | | - | | | 10,500 | |
Other | | | 5,388 | | | 3,872 | |
Cash flows used in investing activities of continuing operations | | | (121,411 | ) | | (86,851 | ) |
| | | | | | | | |
FINANCING ACTIVITIES | | | | | | | |
Issuances of mortgage-backed/asset-backed notes | | | 172,200 | | | 145,000 | |
Payments of mortgage-backed/asset-backed notes | | | (170,719 | ) | | (184,478 | ) |
Retirements of other debt (1) | | | (40,831 | ) | | (174,539 | ) |
Dividends paid | | | (7,815 | ) | | (5,053 | ) |
Tax benefit on the exercise of employee stock options | | | 1,380 | | | 7,150 | |
Issuance of common stock | | | - | | | 168,680 | |
Purchases of stock under stock repurchase program | | | (5,241 | ) | | - | |
Other | | | (1,489 | ) | | 11,579 | |
Cash flows used in financing activities of continuing operations | | | (52,515 | ) | | (31,661 | ) |
Cash flows provided by (used in) continuing operations | | $ | (104,841 | ) | $ | 31,775 | |
| | | | | | | | |
CASH FLOWS FROM DISCONTINUED OPERATIONS | | | | | | | |
Cash flows provided by operating activities | | $ | 630 | | $ | 36,851 | |
Cash flows used in investing activities | | | - | | | (64,969 | ) |
Cash flows provided by financing activities | | | - | | | 19,591 | |
Cash flows provided by (used in) discontinued operations | | $ | 630 | | $ | (8,527 | ) |
| | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | $ | (104,211 | ) | $ | 23,248 | |
| | | | | | | | |
| 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 | | | (104,211 | ) | | 23,248 | |
| Less: Cash and cash equivalents of discontinued operations at end of period | | | - | | | (91,392 | ) |
| Cash and cash equivalents at end of period | | $ | 23,159 | | $ | 69,252 | |
WALTER INDUSTRIES ANNOUNCES THIRD QUARTER 2007 RESULTS - Page 13 - 11/1/07
