Filed pursuant to
Rule 424(b) and (c)
with respect to
Reg. No. 33-59013
FIFTH PROSPECTUS SUPPLEMENT
dated August 15, 1996 to
PROSPECTUS dated October 11, 1995
of WALTER INDUSTRIES, INC.
Relating to 31,911,136
Shares of Common Stock
WALTER INDUSTRIES, INC.
1500 North Dale Mabry Highway
Tampa, Florida 33607
PROXY STATEMENT
_______________
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Walter Industries, Inc. (the "Company") of proxies for
the Annual Meeting of Stockholders of the Company to be held on September 17,
1996 at 10:00 a.m., local time, at the Tampa Convention Center, Ball Room Level,
Meeting Room 11-12, 333 S. Franklin Street, Tampa, Florida 33602, and at any
adjournments thereof (the "Annual Meeting").
THE PROXY
In addition to soliciting stockholders by mail, the Company will request
banks, brokerage houses and other custodians, nominees and fiduciaries to
forward solicitation materials to the beneficial owners of the stock held of
record by such persons and the Company will reimburse them for their reasonable
out-of-pocket expenses incurred in doing so. The Company may use the services
of its officers, directors and other employees of the Company to solicit
proxies, personally, by telephone or by facsimile transmission. The cost of
soliciting proxies will be borne by the Company.
The date of this Proxy Statement is August 15, 1996, the date on which this
Proxy Statement and enclosed proxy were first mailed to stockholders.
The close of business on July 26, 1996 has been fixed by the Board of
Directors as the record date (the "Record Date") for determination of
stockholders entitled to notice of and to vote at the Annual Meeting. On the
Record Date there were outstanding and entitled to vote 54,868,335 shares of
common stock, par value $.01 per share, of the Company (the "Common Stock").
Each stockholder is entitled to one vote for each share of stock held1.
Presence in person or by proxy of a majority of the shares of Common Stock
outstanding and entitled to vote on the Record Date is
- --------------------
1 The Stockholder's Agreement dated as of March 17, 1995 between the Company
and The Celotex Corporation ("Celotex"), solely in its capacity as the Celotex
Settlement Fund Recipient, under and as defined in the Second Amended and
Restated Veil Piercing Settlement Agreement dated as of November 22, 1994 (the
"Veil Piercing Settlement Agreement"), provides that Celotex will vote the
shares of Common Stock held by said fund for and/or against each matter in
proportion to the votes cast by the other holders of Common Stock who voted.
The Company will advise Celotex of the proportion of such votes and Celotex
shall have no responsibility for the determination thereof. Celotex shall be
present in person or by proxy at all meetings of holders of Common Stock
so that all shares of Common Stock beneficially owned by said fund may be
counted for the purpose of determining the presence of a quorum at such
meetings. See "Security Ownership of Management and Principal Stockholders -
Ownership of Principal Stockholders" herein for information concerning said
fund's beneficial ownership of Common Stock.
1
required for a quorum. An affirmative vote of a majority of the shares of
Common Stock present in person or by proxy and entitled to vote at the Annual
Meeting is required for approval of the proposal set forth herein. Broker non-
votes and abstentions will be counted as present for purpose of determining a
quorum but are not counted as votes cast on any matter to which they relate.
If the enclosed proxy is properly signed and returned and not revoked, the
shares represented thereby will be voted at the Annual Meeting. If the
stockholder specifies in the proxy how the shares are to be voted, they will be
voted accordingly. If the stockholder does not specify how the shares are to be
voted, they will be voted FOR the ratification of the appointment of Price
Waterhouse LLP as independent certified public accountants for the Company for
the fiscal year ending May 31, 1997.
A stockholder giving a proxy has the power to revoke it at any time prior
to its exercise by giving written notice revoking it or by a later proxy, in
either case delivered by mail to the Secretary of the Company. Attendance at
the Annual Meeting will not automatically revoke a proxy, but a stockholder in
attendance may request a ballot and vote in person, thereby revoking a prior
granted proxy.
The Annual Report of the Company for the year ended May 31, 1996,
containing audited financial statements for such year, is enclosed with this
Proxy Statement.
IN ORDER THAT YOUR SHARES OF COMMON STOCK MAY BE REPRESENTED AT THIS
MEETING, IN CASE YOU ARE NOT PERSONALLY PRESENT, YOU ARE REQUESTED TO PLEASE
SIGN, DATE AND MAIL THE PROXY PROMPTLY.
2
CORPORATE GOVERNANCE
General Information
The Amended Joint Plan of Reorganization Dated as of December 9, 1994, as
modified on March 1, 1995, of the Company and its subsidiaries (the "Plan of
Reorganization") and the Restated Certificate of Incorporation of the Company
(the "Charter") provide that, upon emerging from Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code") on March 17, 1995 (the "Effective
Date"), the Board of the Company shall consist of nine members until March 17,
1998, the third anniversary of the Effective Date (the "Initial Three Year
Term"), of which: (i) three directors initially were James W. Walter, G.
Robert Durham and Kenneth J. Matlock, their successors to be selected by the
remaining directors from the senior officers of the Company (William H. Weldon
and Kenneth E. Hyatt are now serving as successors to G. Robert Durham and
Kenneth J. Matlock, respectively); (ii) two directors (currently Michael T.
Tokarz and Perry Golkin) are to be designated by Kohlberg Kravis Roberts & Co.
("KKR"), an affiliate of certain principal stockholders of the Company; (iii)
two directors (currently, Howard L. Clark, Jr. and Eliot M. Fried) are to be
designated by Lehman Brothers Inc. ("Lehman"), whose affiliate Lehman Brothers
Holdings, Inc. ("Lehman Holdings") is another principal stockholder of the
Company; and (iv) two directors (currently James B. Farley and James L. Johnson)
are to be Independent Directors (as defined in the following paragraph).
Independent Directors are defined as persons who (i) are not (a) officers,
affiliates, employees, Interested Stockholders, consultants or partners of any
Significant Stockholder or any affiliate of any Significant Stockholder or of
any entity that was dependent upon any Significant Stockholder or any affiliate
of any Significant Stockholder for more than 5% of its revenues or earnings in
its most recent fiscal year, (b) officers, employees, consultants or partners of
the Company or any of its affiliates, or officers, employees, Interested
Stockholders, consultants or partners of any entity that was dependent upon the
Company or any of its affiliates for more than 5% of its revenues or earnings in
its most recent fiscal year or (c) any relative or spouse of any of the
foregoing persons or a relative of a spouse of any of the foregoing persons and
(ii) are selected by management of the Company from a list of qualified
candidates provided by an independent search firm selected by management and
Lehman. For these purposes "Interested Stockholder" means, with respect to any
person, any other person that together with its affiliates and associates
"beneficially owns" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended) (the "Exchange Act") 5% or more of the equity securities of
such person, and "Significant Stockholder" means an Interested Stockholder of
the Company.
If, at any time during the Initial Three Year Term, Lehman and its
affiliates fail to have beneficial ownership of 8% or more of the
outstanding Common Stock (without giving effect to shares of Common Stock held
in escrow pursuant to the Plan of Reorganization -- see Footnote (3) to
"Security Ownership of Management and Principal Stockholders - Ownership of
Principal Stockholders" herein) (the "Outstanding Common Stock") and KKR and its
affiliates have, at such time, beneficial ownership of 8% or more of the
3
Outstanding Common Stock, then KKR shall have the right to compel one director
selected by Lehman (from among those designated by Lehman) to resign as a
director and to appoint a successor. If, at any time during the Initial Three
Year Term, KKR and its affiliates fail to have beneficial ownership of 8% or
more of the Outstanding Common Stock and Lehman and its affiliates have, at such
time, beneficial ownership of 8% or more of the Outstanding Common Stock, then
Lehman shall have the right to compel one director selected by KKR (from among
those designated by KKR) to resign as a director and to appoint a successor.
If, at any time during the Initial Three Year Term, either Lehman and its
affiliates or KKR and its affiliates fail to have beneficial ownership of 5% or
more of the Outstanding Common Stock, then the directors appointed by Lehman or
by KKR, respectively, shall resign and the remaining directors of the Company
shall appoint their successor(s) for the remainder of the Initial Three Year
Term; provided, however, that KKR shall be entitled to designate one director
during the Initial Three Year Term if, and so long as, the number of shares of
Common Stock beneficially owned by KKR and its affiliates, together with shares
of Common Stock held in escrow pursuant to the Plan of Reorganization that would
be distributed to KKR or its affiliates upon release from escrow, shall together
equal 5% or more of the then outstanding Common Stock of the Company, including,
for purposes of this calculation only, any shares held in escrow pursuant to the
Plan of Reorganization.
After the Initial Three Year Term, the Charter currently provides that all
the directors of the Company shall be elected by the stockholders of the Company
annually for a term of one year each.
4
Directors
Set forth below is a list (as of July 1, 1996) showing the names, ages and
business background of all directors of the Company, and, where applicable, the
executive office or offices held by each director with the Company.
Name Age Position
James W. Walter 73 Chairman Emeritus
Kenneth E. Hyatt 55 Chairman, Chief Executive Officer and President
William H. Weldon 64 Director, Executive Vice President and Chief
Financial Officer (1)
Howard L. Clark, Jr. 52 Director
James B. Farley 65 Director
Eliot M. Fried 63 Director
James L. Johnson 69 Director
Perry Golkin 42 Director
Michael T. Tokarz 46 Director
_______________________
(1) Mr. Weldon has announced his intention to retire on September 30, 1996.
Under the Plan of Reorganization and Charter, the director who replaces him
will be selected by the remaining directors from the senior officers of the
Company.
5
JAMES W. WALTER has been a director of the Company since 1988, serving as
Chairman until October 6, 1995 and Chairman Emeritus thereafter. Mr. Walter
founded Walter Construction Co., a predecessor of Jim Walter Corporation, in
1948 and Jim Walter Corporation in 1955. He was President and Chief Executive
Officer of Jim Walter Corporation from 1955 to 1963, Chairman and Chief
Executive Officer from 1963 to 1983 and Chairman until 1988. He is a director
of Anchor Glass Container Corporation and Contel Cellular, Inc.
HOWARD L. CLARK, JR. has been the Vice Chairman of Lehman, an investment-banking
firm, since February 1993; prior thereto he served as Chairman and Chief
Executive Officer of Shearson Lehman Brothers, Inc. Prior thereto he was an
Executive Vice President and the Chief Financial Officer of American Express
Company, a financial services firm. He also is a director of Lehman, Plasti-
Line, Inc., The Maytag Corporation and Fund American Enterprises Holdings,
Inc. Mr. Clark has been a director of the Company since March 17, 1995.
JAMES B. FARLEY is the retired Chairman of the Board, and a current Trustee, of
Mutual of New York, a life insurance company. He served as Chairman and Chief
Executive Officer of Mutual of New York from 1989 to 1994. He also is a director
of Ashland Oil, Inc. and Harrah's Entertainment Company. Mr. Farley has been a
director of the Company since March 17, 1995.
ELIOT M. FRIED has been a Managing Director of Lehman or Shearson Lehman
Brothers, Inc. since 1991 and is Co-chairman of Lehman's Firm Wide Investment
Committee. He served as a Senior Vice President of a predecessor firm of Lehman
from 1982 to 1991. He also is a director of Bridgeport Machines, Inc., Energy
Ventures, Inc., Sun Distributors L.P. and Vernitron Corporation. Mr. Fried has
been a director of the Company since March 17, 1995.
JAMES L. JOHNSON is Chairman Emeritus of GTE Corporation, a telephone company
and cellular service provider. From April 1988 to May 1992 he was Chairman and
Chief Executive Officer of GTE. He also is a director of Contel Cellular, Inc.,
CellStar Corporation, The FINOVA Group Inc., Harte-Hanks Communications Inc. and
Valero Energy Corp. and a Trustee of Mutual of New York. Mr. Johnson has been a
director of the Company since March 17, 1995.
MICHAEL T. TOKARZ is a member of KKR & Co L.L.C. which is the general
partner of KKR. He is also a general partner of KKR Associates L.P. Prior
to 1993 he was an executive of KKR. He also is a director of Safeway, Inc.,
K-III Communications Corporation, Flagstar Companies, Inc., Flagstar
Corporation, Neway Anchorlok International, Inc., KSL Recreation Corporation,
IDEX Corporation and United Fixtures Company. Mr. Tokarz has been a director
of the Company since 1987.
6
KENNETH E. HYATT has been Chairman of the Board and Chief Executive Officer of
the Company since June 1, 1996 and has been President of the Company since
September 1, 1995. Between September 1, 1995 and June 1, 1996, he also served
as Chief Operating Officer of the Company. He was elected a director on
September 12, 1995. Mr. Hyatt served as President and Chief Executive Officer
and a director of Celotex from 1990 until shortly prior to his election,
effective September 1, 1995, as President and Chief Operating Officer of the
Company. Mr. Hyatt held various management and executive positions with various
subsidiaries of Jim Walter Corporation from 1966 until 1984, at which time he
was named Vice President and Group Executive of Jim Walter Corporation. In 1986
he was elected Executive Vice President and Chief Operating Officer of Jim
Walter Corporation. Following Jim Walter Corporation's leveraged buyout in 1988
by KKR, Mr. Hyatt joined with an investor group in the acquisition of Celotex
and certain related entities. In October 1990 Celotex and one of its
subsidiaries filed voluntary petitions for reorganization under Chapter 11 of
the Bankruptcy Code in the Bankruptcy Court for the Middle District of Florida,
Tampa Division, as a result of massive litigation involving asbestos-related
liabilities. The Celotex Settlement Fund Recipient is a principal stockholder
of the Company. See "Security Ownership of Management and Principal
Stockholders - Ownership of Principal Stockholders" herein.
PERRY GOLKIN is a member of KKR & Co. L.L.C. which is the general partner
of KKR. He is also a general partner of KKR Associates, L.P. Prior to 1995
he was an executive of KKR. He is also a director of K-III Communications
Corporation and American Re Corporation. Mr. Golkin was a director of the
Company from 1987 to March 2, 1995. He was elected to the Board on
November 14, 1995.
WILLIAM H. WELDON was elected a director of the Company on June 1, 1996. Since
December 1, 1995 he has been Executive Vice President and Chief Financial
Officer of the Company. Mr. Weldon had been Senior Vice President-Finance and
Chief Accounting Officer of the Company since November 1991. He previously
served as Vice President, Controller and Chief Accounting Officer of the Company
since 1988.
Except during the Initial Three Year Term as described in "Corporate
Governance - General Information" above, directors of the Company are elected by
the stockholders of the Company. Each director holds office until his successor
is elected and qualified. The Company is not aware of any family relationships
among any of the foregoing directors.
7
Committees of the Board of Directors
There are five standing committees of the Board: the Audit Committee, the
Compensation Committee, the Finance Committee, the Nominating Committee and the
Environmental, Health and Safety Committee. There is one special committee, the
Tax Oversight Committee. The Board may, from time to time, establish certain
other committees to facilitate the management of the Company.
The Audit Committee is responsible for meeting with representatives of the
Company's independent certified public accountants and financial management to
review accounting, internal control, auditing and financial reporting matters,
and is also responsible, among other things, for maintaining liaison with and
exercising such supervision of the actions of said public accountants in
whatever manner and to whatever extent shall be deemed, at its discretion,
necessary, proper and in the best interest of the Company and its stockholders.
The Audit Committee consists of directors who are not and never have been
employees of the Company. The members of the Committee are Eliot M. Fried,
Chairman, Perry Golkin, James L. Johnson and James B. Farley.
The Compensation Committee is responsible for reviewing and approving
officer and executive salaries of the Company and its subsidiaries in amounts
over $100,000 annually and for reviewing and recommending for approval by the
Board executive and key employee compensation plans, including incentive
compensation, stock incentives and other benefits, and consists of directors
who are not and never have been employees of the Company. The members of the
Committee are James L. Johnson, Chairman, Howard L. Clark, Jr., James B. Farley
and Michael T. Tokarz.
The Finance Committee is responsible for recommendations to the Board
concerning public and private financings, dividends, discretionary contributions
by the Company under the Company's and its subsidiaries' employee benefit plans
and other financial matters, approval of the designation of the investment fund
managers for the Company's and its subsidiaries' employee benefit plans, and
approval of investment of the Company's funds by establishment of policies for
investment of funds by the Company's officers. The members of the Committee are
James B. Farley, Chairman, Michael T. Tokarz, Howard L. Clark, Jr., and James W.
Walter.
The Environmental, Health and Safety Committee is responsible for receiving
environmental, health and safety reports from the Company's and its
subsidiaries' environmental counsel and engineers and health and safety
personnel; examining and reporting upon the Company's and its subsidiaries'
compliance with environmental, reclamation, health and safety requirements and
the policies pertaining thereto and reporting the same to the Board; approving
the proposed scope of internal and independent environmental and health and
safety audits; and periodically evaluating and recommending to the Board changes
in the Company's and its subsidiaries' environmental, health and safety
policies. The members of the Committee are Michael T. Tokarz, Chairman, James
B. Farley, Eliot M. Fried and James L. Johnson.
8
The Nominating Committee is responsible for establishing the criteria for
and the qualifications of persons suitable for nomination as directors,
including nominees recommended by stockholders, and reporting its
recommendations to the Board. During the Initial Three Year Term, selection of
directors is subject to restrictions discussed in "Corporate Governance -
General Information" above. The members of the Committee are Howard L. Clark,
Jr., Chairman, Perry Golkin, James L. Johnson and James W. Walter.
The Tax Oversight Committee is a special purpose temporary committee and is
responsible for (i) approving all settlements and agreements by the Company or
any of its subsidiaries regarding all claims of the Internal Revenue Service
that are entitled to priority under the Bankruptcy Code, and (ii) determining
final resolution of certain contingencies regarding Federal income tax claims,
both as more fully described in the Plan of Reorganization. The members of the
Tax Oversight Committee shall consist at all times of two Independent Directors
and a director (or other person) designated by Lehman. The members of the
Committee are Howard L. Clark, Jr., Chairman, James B. Farley and James L.
Johnson.
Pursuant to the Charter and By-laws, at all times during the Initial Three
Year Term, each committee of the Board (other than the Tax Oversight Committee,
which shall be constituted as described above) shall include such number of
directors (but in any event at least one director) designated by each of KKR and
Lehman so that each of KKR and Lehman has representation on each such committee
proportionate to the representation it has on the Board. The Charter provides
that the foregoing provision of the By-laws and certain other provisions of the
By-laws cannot be amended by the Board during the Initial Three Year Term unless
67% of the whole Board votes in favor of the amendment. Thereafter, the
affirmative vote of a majority of directors will be required to amend those
provisions.
Board and Committee Meetings
For the fiscal year ended May 31, 1996, there have been seven meetings of
the Board, two meetings of the Audit Committee, three meetings of the
Compensation Committee, two meetings of the Finance Committee, one meeting of
the Environmental, Health and Safety Committee, no meetings of the Nominating
Committee and one meeting of the Tax Oversight Committee.
All of the directors attended at least 75% of the combined number of Board
meetings and meetings of Committees of which they were members that were held
during the fiscal year ended May 31, 1996.
9
Directors' Compensation
No directors' fees are paid to directors who are full-time employees of the
Company or any of its subsidiaries. Non-employee directors of the Company
(Messrs. Clark, Farley, Fried, Johnson, Walter (since the date of his retirement
as an employee of the Company) Golkin and Tokarz) are paid retainer fees of
$25,000 per year. Committee Chairmen receive an additional retainer fee of
$5,000 per year. Each non-employee director also receives a fee of $1,500 for
each Board or Committee meeting attended and is reimbursed for travel and
lodging expenses.
On April 11, 1995, the Board approved and adopted the Walter Industries,
Inc. Directors' Deferred Fee Plan under which non-employee directors may elect
to defer all or a portion of their director's fees. The deferred fees, at each
electing director's option, are credited to either an income account or a stock
equivalent account or divided between the two accounts. The income account is
credited quarterly with interest at the prime rate and the stock equivalent
account is credited with an amount equal to the number of equivalent shares of
Common Stock which could have been purchased with the cash dividend, if any,
which would have been payable had the participant been the actual owner of the
number of shares of Common Stock credited to his account. Payments begin, at
the participant's election, upon the later of the termination of his services as
a director or date of retirement from his principal occupation or employment in
such number of annual installments as shall be determined by the Company.
Payments from the income account are in cash and payments from the stock
equivalent account are in cash at the Common Stock's then current market value,
or, at the Company's option, in shares of Common Stock. Mr. Farley has elected
to have all of his director's fees credited to a stock equivalent account.
Mr. Walter, Chairman Emeritus, entered into a consulting agreement upon his
retirement from employment with the Company on October 6, 1995 (see "Certain
Relationships and Certain Related Transactions"). During the fiscal year ended
May 31, 1996, he received $87,580 pursuant to this agreement.
10
Certain Relationships and Certain Related Transactions
In July 1986, Waltsons, Inc., a family owned corporation in which James W.
Walter, Chairman Emeritus of the Board, has a twenty percent (20%) interest,
acquired a fifty percent (50%) interest in the operations of Booker & Company,
Inc. ("Booker"), a wholesale distributor of building supplies and materials
headquartered in Tampa, Florida. For over 30 years, Booker has been a supplier
of various building supplies and materials to Dixie Building Supplies, Inc., a
wholly owned subsidiary of the Company. During the fiscal year ended May 31,
1996, Booker's sales of building supplies and materials to such subsidiary
totaled $5,679,000. The Company believes that the terms of the transactions
between the Company and Booker are at least as favorable to the Company as those
that could be obtained from unaffiliated third parties.
The Company entered into a consulting agreement with Mr. Walter effective
upon his retirement on October 6, 1995. The term of the agreement is for a
period of three years, commencing October 6, 1995, during which time Mr. Walter
will render to the Company such services of an advisory or consulting nature as
the Company may reasonably require. Mr. Walter will be paid an annual
consulting fee of $150,000. The agreement also contains a restrictive covenant
prohibiting, during the term of the agreement and for a period of three years
after its termination, Mr. Walter's employment by any person, firm or
corporation which is engaged in a business in competition with the Company or
its subsidiaries, or his engaging in such business for his own account.
11
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following tables furnish information, as of August 5, 1996, as to: (i)
shares of Common Stock beneficially owned by each director and each executive
officer (including one retired executive officer) of the Company named in the
Summary Compensation Table herein; (ii) shares of Common Stock beneficially
owned by all current directors and executive officers of the Company as a group;
and (iii) shares of Common Stock known by the Company to be beneficially owned
by any person owning beneficially more than five percent (5%) of the outstanding
shares of Common Stock, together with such person's address. (Except as
indicated below, to the knowledge of the Company each person indicated in the
following tables has sole voting and investment power as to the shares shown.)
Ownership of Directors and Executive Officers
Number of Shares Percent of Common
Name of Beneficial Owner Beneficially Owned Stock Outstanding
- ------------------------ ------------------ -----------------
James W. Walter, 132,710 (1) (2) *
Chairman Emeritus and Director
Kenneth E. Hyatt, 73,280(1) (3) *
Chairman, Chief Executive Officer
and President
Howard L. Clark, Jr. (4) (4)
Director
James B. Farley 10,000 *
Director
Eliot M. Fried (4) (4)
Director
James L. Johnson 10,000 *
Director
Perry Golkin 14,268,589(5) 26.0(5)
Director
Michael T. Tokarz 14,268,589 (5) 26.0(5)
Director
G. Robert Durham 76,666 (6) *
(Director and Chief Executive
Officer-retired May 31, 1996)
William H. Weldon 31,950 (1) (7) *
Director, Executive Vice President
and Chief Financial Officer
William N. Temple, 20,140(1) (8) *
Senior Vice President and Group
Executive; President of United
States Pipe and Foundry Company, Inc.,
a subsidiary of the Company
12
William Carr 38,355(1)(9) *
President and Chief Operating Officer
of Jim Walter Resources, Inc., a
subsidiary of the Company
All current directors and 14,680,910(1)(10) 26.8(1)(11)
executive officers as a group
(19 individuals)
* Less than 1% of outstanding Common Stock
(1) Includes 6,234; 23,689; 2,493; 1,246; 4,363; and 3,601,378 shares of
Common Stock issued to an escrow account for the benefit of Messrs. Hyatt,
Walter, Weldon, Temple and Carr, and to all current directors and executive
officers as a group (including 3,553,380 shares for the benefit of the KKR
Investors), respectively, on September 13, 1995 pursuant to the Plan of
Reorganization. To the extent that certain contingencies regarding Federal
income tax claims of the Company are resolved satisfactorily, such escrowed
shares will be distributed to such persons under the Plan of
Reorganization. To the extent such matters are not settled satisfactorily,
the escrowed shares will be returned to the Company and canceled. Until
such matters are finally determined, such persons will have the power to
exercise voting rights with respect to such respective escrowed shares of
Common Stock. For so long as such persons have the power to exercise
voting rights with respect to all such escrowed shares, or if all such
escrowed shares were distributed to such persons, such persons will
beneficially own such 6,234; 23,689; 2,493; 1,246; 4,363; and 3,601,378
shares of Common Stock, respectively.
(2) Includes options to purchase 66,666 shares, which became exercisable as of
July 12, 1996.
(3) Includes options to purchase 50,000 shares which will become exercisable as
of September 1, 1996. Also includes 200 shares held by Mr. Hyatt's children
of which Mr. Hyatt disclaims beneficial ownership.
(4) Messrs. Clark and Fried are Vice Chairman and Managing Director,
respectively, of Lehman. See "Ownership of Principal Stockholders" below
for information concerning ownership of shares by Lehman's affiliate,
Lehman Holdings.
(5) Messrs. Tokarz and Golkin are general partners of KKR Associates, L.P.,
which is the sole general partner of each of JWC Associates, L.P., JWC
Associates II, L.P. and KKR Partners II, L.P. (the "KKR Investors") and
Channel One Associates, L.P. ("Channel One"), and thus Messrs. Tokarz and
Golkin may be deemed to be beneficial owners of the shares owned by the KKR
Investors and Channel One (see "Ownership of Principal Stockholders"
below). Messrs. Tokarz and Golkin disclaim beneficial ownership of such
shares.
The number of shares of Common Stock includes 3,553,380 shares of Common
Stock issued to an escrow account on September 13, 1995 for the benefit of
the KKR Investors pursuant to the Plan of Reorganization. See Footnote (3)
under "Ownership of Principal Stockholders" below. For so long as the KKR
Investors have the power to exercise voting rights with respect to all such
escrowed shares, or if all such escrowed shares were distributed to the KKR
Investors, Messrs. Tokarz and Golkin may be deemed to be beneficial owners
of such 3,553,380 escrowed shares of Common Stock.
(6) Includes options to purchase 66,666 shares which became exercisable as of
July 12, 1996.
(7) Includes options to purchase 25,000 shares which became exercisable as of
July 12, 1996.
(8) Includes options to purchase 16,666 shares which became exercisable as of
July 12, 1996.
(9) Includes options to purchase 16,666 shares which became exercisable as of
July 12, 1996.
(10) Includes 14,268,589 shares of Common Stock beneficially owned by the KKR
Investors and Channel One, which may be deemed to be beneficially owned by
Messrs. Tokarz and Golkin. See Footnote (5) above. Does not include
shares of Common Stock owned by Lehman Holdings. See Footnote (4) above.
Each director and executive officer of the Company is required to report to
the Securities and Exchange Commission, by a specified date, his transactions
related to the Company's Common Stock. During the fiscal year ended May 31,
1996 Mr. William Carr, an executive officer, failed to timely report one
transaction involving a purchase of 3,200 shares of Common Stock, which failure
to report has since been corrected. To the Company's knowledge, all other
filing requirements were timely complied with.
13
Ownership of Principal Stockholders
Name and Complete Mailing Address Number of Shares Percent of Class
The Celotex Settlement Fund Recipient 10,941,326 (1) 19.9 (1)
1 Metro Center
4010 Boy Scout Boulevard
Tampa, Florida 33607
Lehman Brothers Holdings, Inc. 7,869,525 (2) 14.3 (4)
3 World Financial Center
New York, NY 10285
The KKR Investors (JWC 14,268,589 (3) 26.0
Associates, L.P., JWC Associates II, L.P.
and KKR Partners II, L.P.) and
Channel One Associates, L.P.
c/o Kohlberg Kravis Roberts & Co., L.P.
9 West 57th Street
New York, NY 10009
____________________
(1) Celotex, on behalf of the Celotex Settlement Fund Recipient, has agreed
with the Company and Lehman to vote and execute written consents with
respect to the shares of Common Stock held by it in proportion to the votes
cast or consents executed and delivered by all other holders of Common
Stock on each matter voted on by stockholders. Identical restrictions on
the voting of the Celotex Settlement Fund Recipient's Common Stock are
contained in the Charter and in the Plan of Reorganization.
(2) Lehman transferred the shares of Common Stock which it received pursuant to
the Plan of Reorganization to its affiliate, Lehman Holdings.
(3) The shares of Common Stock beneficially owned by the KKR Investors are as
follows: 9,610,144 shares are beneficially owned by JWC Associates, L.P.;
63,680 shares are beneficially owned by JWC Associates II, L.P.; and
232,965 shares are beneficially owned by KKR Partners II, L.P., including
3,446,979; 22,841; and 83,560 shares, respectively, issued to an escrow
account on September 13, 1995 pursuant to the Plan of Reorganization. To
the extent that certain contingencies regarding Federal income tax claims
of the Company are resolved satisfactorily, up to 3,553,380 of the escrowed
shares will be distributed to the KKR Investors under the Plan of
Reorganization. To the extent such matters are not settled satisfactorily,
the escrowed shares will be returned to the Company and canceled. Until
such matters are fully determined, the KKR Investors will have the power to
exercise voting rights with respect to such shares of Common Stock. For so
long as the KKR Investors have the power to exercise voting rights with
respect to all such escrowed shares, or if all such escrowed shares were
distributed to the KKR Investors, the KKR Investors will beneficially own
such 3,553,380 shares of Common Stock. The Company has been advised that
as of July 26, 1996 Channel One beneficially owned 4,361,800 shares.
KKR Associates, L.P. is the sole general partner of each of the KKR
Investors and Channel One. The general partners of KKR Associates, L.P.
are Henry R. Kravis, George R. Roberts, Robert I. MacDonnell, Michael W.
Michelson, Saul A. Fox, Paul E. Raether, Michael T. Tokarz, James H.
Greene, Jr., Perry Golkin, Scott M. Stuart, Clifton S. Robbins and Edward
A. Gilhuly.
(4) As a result of errors by the balloting agent in recording elections to
receive cash and Series B Senior Notes Due 2000 of the Company in lieu of a
portion of the Common Stock to be received under the Plan of Reorganization
by holders of subordinated debt of the Company outstanding prior to the
Effective Date of the Plan of Reorganization, the number of shares of
Common Stock to be received by Lehman and other holders of such
subordinated debt was determined from a ruling by the Bankruptcy Court as
to which elections were proper. Appeals have been filed to the Bankruptcy
Court's decision, which appeals, if successful, could cause additional
shares of Common Stock to be delivered to Lehman (in lieu of a portion of
the cash and Series B Senior Notes Due 2000 previously delivered to Lehman)
pursuant to the Plan of Reorganization. When such appeals have been
finally adjudicated, such number of shares will be finally determinable.
14
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation paid to
or accrued for the account of (i) the Chief Executive Officer of the Company
and (ii) each of the next four most highly compensated executive officers of the
Company whose cash compensation exceeded $100,000 during the fiscal year ended
May 31, 1996, and (iii) one additional individual for whom disclosure would have
been provided pursuant to clause (ii) above but for the fact that such
individual was not serving as an executive officer of the Company at the end of
the last fiscal year.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
------------------------------ ----------------------
Year Securities
Name and Principal Position Ending Underlying All Other
May 31 Salary ($) Bonus ($)(1) Options (#)(2) Compensation($)(3)
____________________________ _____ _________ __________ ___________ ____________
G. Robert Durham 1996 531,648 450,000 200,000 *
Chairman of the Board 1995 466,764 1,225,000 0 67,598
and Chief Executive Officer 1994 460,214 400,000 0 69,275
(retired May 31, 1996)
Kenneth E. Hyatt (4) 1996 340,245 300,000 150,000 *
President and Chief 1995 (4) (4) (4) (4)
Operating Officer 1994 (4) (4) (4) (4)
William H. Weldon 1996 211,548 210,000 75,000 *
Executive Vice President and 1995 183,618 565,000 0 26,320
Chief Financial Officer 1994 173,688 160,000 0 25,798
William N. Temple 1996 213,854 106,000 50,000 *
Senior Vice President and 1995 205,202 287,000 0 128,596
Group Executive; President 1994 180,608 120,000 0 18,665
of United States Pipe and
Foundry Company, Inc., a
subsidiary of the Company
William Carr 1996 263,857 30,000 50,000 *
President and Chief 1995 247,077 215,000 0 56,491
Operating Officer 1994 236,164 25,000 0 0
of Jim Walter Resources,
Inc., a subsidiary of the
Company
James W. Walter 1996 158,677 250,000 200,000 *
Chairman (retired October 6, 1995 370,366 1,225,000 0 52,576
1995) 1994 369,603 400,000 0 53,880
* Not currently available. See footnote (3)
15
(1) For fiscal 1995, the amounts shown in this column include bonuses paid to
the named executive officers pursuant to the Plan of Reorganization in
addition to incentive bonus compensation. At the time of filing by the
Company and virtually all of its subsidiaries under Chapter 11 of the
Bankruptcy Code, accounting professionals for the official committees in
the Chapter 11 cases recommended that the Company adopt a retention bonus
arrangement, a common method of assuring retention of key personnel during
bankruptcy proceedings. The Company decided not to adopt such a retention
bonus plan, but determined instead to pay bonuses informally upon
completion of the reorganization to key personnel who continued their
employment with the Company and its subsidiaries during the pendency of the
Chapter 11 cases (which were initiated on December 27, 1989 and concluded
on March 17, 1995) despite the unavailability of long-term incentive
compensation plans and the limitations on salaries and incentive
compensation imposed by the Bankruptcy Court during such time. The
Company's proposal to make such informal payments was incorporated in the
Plan of Reorganization and approved by the Bankruptcy Court. Such bonuses
were paid upon the Effective Date of the Plan of Reorganization in the
amounts of $800,000; $800,000; $400,000; $175,000 and $175,000 to Messrs.
Durham, Walter, Weldon, Temple and Carr, respectively.
(2) Options were awarded pursuant to the 1995 Long-Term Incentive Stock Plan of
Walter Industries, Inc.
(3) The amounts shown in this column for fiscal 1994 and fiscal 1995 for
Messrs. Durham, Walter and Weldon represent the Company's contributions for
each of their accounts in the Walter Industries, Inc. Profit Sharing Plan
(the "Profit Sharing Plan") and accruals for the related Supplemental
Profit Sharing Plan (the "Supplemental Profit Sharing Plan") which provides
benefits which would have been provided under the tax-qualified Profit
Sharing Plan but for restrictions on such benefits imposed by the Internal
Revenue Code of 1986, as amended (the "IRC"). The Profit Sharing Plan and
the Supplemental Profit Sharing Plan amounts are for the plan years ended
August 31, 1994 and 1995. Amounts for the plan year ended August 31, 1996
are not currently available, but are anticipated not to be materially
different from amounts for the plan year ended August 31, 1995, except for
Mr. Walter who retired during the fiscal year ended May 31, 1996, whose
contribution under the Profit Sharing Plan is estimated to be $18,500 and
Mr. Hyatt whose contributions under the Profit Sharing Plan and
Supplemental Profit Sharing Plan are estimated to be $51,000.
The amounts shown in this column for fiscal 1994 and 1995 for Messrs. Carr
and Temple represent accruals for the Supplemental Pension Plan which
provides benefits which would have been provided under a tax-qualified
pension plan but for restrictions on such benefits imposed by the Internal
Revenue Code. Amounts for the 1996 plan year are not currently available
but are anticipated not to be materially different from the amounts for
fiscal 1995.
(4) Mr. Hyatt became an executive officer of the Company on September 1, 1995.
He has been Chairman of the Board and Chief Executive Officer of the
Company since June 1, 1996 and has been President since September 1, 1995.
Between September 1, 1995 and June 1, 1996, he also served as Chief
Operating Officer.
In its fiscal year ended May 31, 1996, the Company was not subject to
Section 162(m) of the IRC, which limits the deduction for compensation of
certain officers to one million dollars annually unless certain stated
performance goals are met.
16
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
- ---------------------------------------------------------------------------- ---------------------------
% of
Number of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees Price Expiration
Name Granted(#)(1) in Fiscal 1996 ($/Sh) Date(2) 5% ($) (3) 10% ($) (3)
__________________ _____________ ____________ _________ ___________ ____________ _____________
G. Robert Durham 200,000 13.3% $ 14.125 05/31/01 $ 780,495 $1,724,690
Kenneth E. Hyatt 150,000 10.0% 14.0625 09/01/05 1,162,958 2,412,258
William H. Weldon 75,000 5.0% 14.125 07/12/05 584,063 1,688,371
William N. Temple 50,000 3.3% 14.125 07/12/05 389,375 959,050
William Carr 50,000 3.3% 14.125 07/12/05 389,375 959,050
James W. Walter 200,000 13.3% 14.125 10/06/00 608,805 1,311,082
______________________________________________________________________________________________________________
(1) All options included in this table will become exercisable in three equal
installments commencing on the first anniversary of the date of grant and
continuing on each of the two anniversaries thereafter. The right to
exercise all of the options is contingent on the optionee's refraining
from conduct which the Compensation Committee determines is contrary to
the best interests of the Company (including but not limited to
competition with the Company) and, except in the case of Messrs. Walter,
Durham, and Weldon (see footnote (2) below), upon the optionee's remaining
in the employ of the Company or a subsidiary of the Company until the date
on which the installment becomes exercisable.
(2) The right to exercise all of the options expires on the tenth anniversary
of the date on which they were granted or, if earlier, three months after
termination of employment (one year in the event of death or disability).
However, in recognition of Messrs. Walter, Durham, and Weldon having
continued in the Company's employ until its emergence from Chapter 11 and
to reward them for their past, present and future services, exercisability
of their options will not be contingent upon continued employment by the
Company or a subsidiary (see footnote (1) above) and such options will
not expire as a result of termination of employment until five years after
such termination or, if later, one year after death. Since Messrs. Durham
and Walter retired on May 31, 1996 and October 6, 1995, respectively,
their options are scheduled to expire five years from their respective
dates of retirement.
(3) The amounts of hypothetical potential appreciation shown in these columns
reflect required calculations at annual appreciation rates of 5% and 10%
set by the Securities and Exchange Commission and, therefore, are not
intended to represent either historical appreciation or anticipated future
appreciation in the price of Common Stock.
17
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at Fiscal Year-End (#) Fiscal Year-End ($)
Shares
Acquired on
Name Exercise (#) Value Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- -----------------------------------------------------------------------------------------------------------------------
G. Robert Durham 0 0 0/200,000 0/0
Kenneth E. Hyatt 0 0 0/150,000 0/0
William H. Weldon 0 0 0/75,000 0/0
William N. Temple 0 0 0/50,000 0/0
William Carr 0 0 0/50,000 0/0
James W. Walter 0 0 0/200,000 0/0
_______________________________________________________________________________________________________________________
18
Annual Benefits Payable Under Pension Plans
The table below sets forth the aggregate estimated annual retirement
benefits payable under the Pension Plan for Salaried Employees of Subsidiaries,
Divisions and/or Affiliates of Walter Industries, Inc. (the "Pension Plan") and
under the Company's unfunded, non-qualified, Supplemental Pension Plan (the
"Supplemental Pension Plan" and together with the Pension Plan, the "Pension
Plans") for employees retiring at normal retirement age (65) on June 1, 1996 and
is based on social security covered compensation in effect on June 1, 1996:
Pension Plan Table
Years of Service
Remuneration 15 20 25 30 35
150,000 31,119 41,492 51,866 62,239 72,612
175,000 36,651 48,867 61,084 73,301 85,518
200,000 42,182 56,242 70,303 84,364 98,424
225,000 47,713 63,617 79,522 95,426 111,330
250,000 53,244 70,992 88,741 106,489 124,237
300,000 64,307 85,742 107,178 128,614 150,049
350,000 75,369 100,492 125,616 150,739 175,862
400,000 86,432 115,242 144,053 172,864 201,674
450,000 97,494 129,992 162,491 194,989 227,487
500,000 108,557 144,742 180,928 217,114 253,299
550,000 119,619 159,492 199,366 239,239 279,112
600,000 130,682 174,242 217,803 261,364 304,924
Benefit payments under the Pension Plans are based on final average annual
compensation (including overtime pay, incentive compensation and certain other
forms of compensation reportable as wages taxable for Federal income tax
purposes) for the five consecutive years within the final ten years of
employment prior to normal retirement age (65) which produce the highest
average. This is equivalent to the sum of the amounts included under the Salary
and Bonus column headings in the Summary Compensation Table above. Benefit
amounts are shown on a straight-line annuity basis, payable annually upon
retirement at age 65. No offsets are made for the value of any social security
benefits earned. The Company makes accruals for the Supplemental Pension Plan
only for such employees as to which the pension benefits under the Pension Plan
have been limited by the IRC. In the case of the Supplemental Pension Plan, the
applicable company may, in its sole discretion, elect to furnish any and all
benefits due by purchasing annuities, or by other means at its disposal,
including payment of the present value of such benefits.
Only employees of the Company's subsidiaries (except Jim Walter Homes, Inc.,
Mid-State Homes, Inc., Best Insurors, Inc., Best Insurors of Mississippi, Inc.,
Jim Walter Insurance Services, Inc., Dixie Building Supplies, Inc. and Coast to
Coast Advertising, Inc.) participate in the Pension Plans. Of the named
executive officers, only Messrs. Carr and Temple are participants in the Pension
Plans with twenty and ten years of credited service, respectively; Messrs.
Durham, Hyatt, Walter and Weldon are not participants in the Pension Plans.
19
Profit Sharing Plans
Under the Profit Sharing Plan and the Supplemental Profit Sharing Plan,
amounts contributed by the Company for the benefit of the participants become
payable upon termination of employment. In the case of the Supplemental Profit
Sharing Plan, accrued amounts are payable, at the discretion of the Company, in
either a lump sum or in sixty equal monthly installments. While the Profit
Sharing Plan provides retirement benefits for all salaried employees of the
Company and certain of its subsidiaries not covered by the Pension Plans, the
Company makes accruals for the Supplemental Profit Sharing Plan only for such
employees as to which the full contribution under the Profit Sharing Plan has
been limited by the IRC. For the Supplemental Profit Sharing Plan year ended
August 31, 1996, only three employees, Messrs. Durham, Hyatt and Weldon,
qualified for participation in the Supplemental Profit Sharing Plan. Amounts
for the plan year ended August 31, 1996 are not currently available. See
footnote (3) to the Summary Compensation Table herein.
Compensation Committee Interlocks or Insider Participation in Compensation
Decisions
During the fiscal year ended May 31, 1996, three employee directors James
W. Walter, (retired October 6, 1995), G. Robert Durham and Kenneth E. Hyatt,
participated in deliberations of the Company's Board concerning executive
compensation. However, no employee director voted on executive compensation
matters in which he was directly involved; instead he abstained on such
occasions.
Report of the Compensation Committee
The Compensation Committee of the Board of Directors (the "Committee"),
consisting entirely of non-employee directors, reviews and approves executive
compensation philosophy and policies, as well as the application of such
policies to the compensation of the Company's Chief Executive Officer and other
executive officers. The Committee is also responsible for the administration of
and awards under the 1995 Long-Term Incentive Stock Plan of Walter Industries,
Inc.
General Compensation Policy
- ---------------------------
The purpose of the Company's executive compensation program is to (i)
attract, motivate and retain qualified key executives who are responsible for
the success of the Company as a whole, (ii) provide incentives to management to
increase stockholder value, (iii) increase the overall performance of the
Company and (iv) increase the performance of individual executives.
During fiscal 1996, the Committee retained the services of an independent
outside compensation consultant in order to ensure that the Company's executive
compensation practices were consistent with competitive market practices and
aligned with stockholder interests. The Committee believes that such a review
was necessitated by the conclusion of the Company's Chapter 11 proceedings in
March 1995 and the Company becoming publicly owned.
The consultant reviewed the Company's executive compensation practices with
respect to base salaries, annual incentives and stock option grants, and has
advised the Committee with respect to each of these practices and the overall
compensation program. Based on this review, the Committee has confirmed that
the Company's current executive compensation policies and procedures for the
Company's executive officers are appropriate.
20
Principal Compensation Elements
- -------------------------------
The principal elements of the Company's executive compensation are base
pay, short-term cash incentive compensation and stock based incentives. To
determine guidelines for each of these elements of compensation, the Company
has, for many years, maintained specific salary grade levels and corresponding
pay ranges for every salaried position in the Company. Such salary ranges are
periodically benchmarked against external salary survey data, including
comparable compensation data for numerous diversified manufacturing and
residential construction companies. While none of the companies in these
surveys engage in precisely the same mix of businesses as the Company, the
Committee believes that such surveys provide a reliable standard for measuring
the Company's compensation practices. In addition, the analysis performed by
the compensation consultant confirmed the validity of the Company's executive
salary ranges and, in fact, recommended that ranges be raised in order to more
appropriately conform with competitive market levels for several key positions,
including the Chief Executive Officer.
Base Salary
The Committee annually reviews and approves the base salary of each
executive officer. In determining salary adjustments, the Committee considers
the responsibilities associated with the position, individual contribution and
performance and external surveys.
Base compensation for fiscal 1996 for Mr. Durham represents a continuation
of the salary level established with approval of the Bankruptcy Court and the
Company's creditors' committees during the course of the Company's Chapter 11
reorganization which were underway at the time Mr. Durham joined the Company as
Chief Executive Officer in June 1991.
Executive Incentive Compensation
For fiscal 1996, the Company maintained an incentive compensation plan (the
"Incentive Plan") substantially similar to the plan established with approval
of its creditors' committees during the Chapter 11 proceedings. Under the
Incentive Plan, the Company's plan participants (including Messrs. Durham,
Walter and Hyatt) were paid from a pool limited to 2 1/2% of consolidated
operating income of the Company and its subsidiaries, less interest associated
with the Company's mortgage portfolio. For fiscal 1996, 84% of the maximum
permitted amount was paid to eligible employees. Incentive compensation awards
paid to individual plan participants, other than Messrs. Walter, Durham and
Hyatt, were based on the recommendation of senior management of the Company to
the Committee and approved by the Board. The amount of incentive compensation
paid to Messrs. Durham, Walter and Hyatt for fiscal 1996 was recommended by the
Committee and approved by the Board.
Mr. Durham's incentive award for fiscal 1996 reflects his level of
responsibility within the Company and was determined by the Committee to be
consistent with amounts awarded in prior years, adjusted to reflect variations
in the Company's operating income performance.
Stock Based Compensation
The Committee believes that equity ownership by management is beneficial in
aligning the interests of management and the Company's stockholders for the
purpose of enhancing stockholder value. To this end in July 1995 the Company
adopted the 1995 Long-Term Incentive Stock Plan of Walter Industries, Inc. (the
"Stock Plan") which was ratified by the stockholders in October 1995.
The purpose of the Stock Plan is to utilize stock options, stock
appreciation rights and stock awards as components of executive compensation to
assure external competitiveness of total compensation, encourage equity
ownership by key executives, motivate executives to
21
improve long-term stock performance and align executives' interests with the
enhancement of stockholder value. Grants are made periodically by the
Committee, with the exception of grants to the Chief Executive Officer, based on
recommendations of the Chief Executive Officer, taking into consideration the
respective responsibilities of each position, and the strategic and operational
goals and performance of each participant. Awards to the Chief Executive
Officer are determined separately by the Committee and are based, among other
things, on the Committee's perception of expected future contributions to the
Company's long-term performance.
The exercise price for all options granted during fiscal 1996 were at the
then market value of the Common Stock. The exercise price of awards granted,
the life of such awards, vesting of awards and other terms and conditions
granted under the Stock Plan are determined by the Committee, in its discretion.
Options must expire not more than 10 years from their date of grant.
Mr. Durham's award under the Stock Plan during fiscal 1996 reflects his
level of responsibility within the Company taking into account relative amounts
of awards granted to other key executives as well as recognizing the absence of
similar long-term incentive programs during Mr. Durham's preceding four years of
service as Chief Executive Officer during the Company's Chapter 11 proceedings.
Compliance with Internal Revenue Code Section 162(m)
- ----------------------------------------------------
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the
tax deductibility by a company of compensation in excess of $1 million paid to
any of its five most highly compensated executive officers. However,
performance-based compensation that has been approved by stockholders is
excluded from the $1 million limit if, among other requirements, the
compensation is payable only upon attainment of pre-established, objective
performance goals and the board committee that establishes such goals consists
only of "outside directors" as defined for purposes of Section 162(m). All of
the members of the Committee qualify as "outside directors." The Committee
intends to maximize the extent of tax deductibility of executive compensation
under the provisions of Section 162(m) so long as doing so is compatible with
its determinations as to the most appropriate methods and approaches for the
design and delivery of compensation to the Company's executive officers.
Summary
- -------
The Committee believes that the mix of market-based salaries, significant
variable cash incentives for short-term performance and stock-based awards,
which provide the potential for equity ownership in the Company, represents a
balance that will enable the Company to attract and retain key executive talent
necessary for sustainable, long-term growth. The Committee further believes
that this program strikes an appropriate balance between the interests and needs
of the Company in operating its business .
COMPENSATION COMMITTEE
James L. Johnson, Chairman
Howard L. Clark, Jr.
James B. Farley
Michael T. Tokarz
22
PROPOSAL TO BE PRESENTED TO THE ANNUAL MEETING
1. TO RATIFY THE APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
Unless the stockholder shall direct otherwise, properly executed proxies
will be voted FOR the proposal to ratify the appointment of Price Waterhouse LLP
as independent certified public accountants for the fiscal year ending May 31,
1997. A representative of Price Waterhouse LLP will be present at the Annual
Meeting. He will have the opportunity to make a statement if he desires to
do so and will be available to respond to appropriate questions. Price
Waterhouse LLP has served as independent certified public accountants for the
Company since its formation in 1987.
The Board recommends voting FOR the ratification of the appointment of
Price Waterhouse LLP as independent certified public accountants for the Company
for the fiscal year ending May 31, 1997.
OTHER BUSINESS
The Board and management do not now intend to bring before the Annual Meeting
any matters other than those disclosed in the Notice of Annual Meeting of
stockholders, nor do they know of any business which other persons intend to
present at the Annual Meeting. Should any other matter or business requiring a
vote of stockholders arise, the persons named in the enclosed proxy intend to
exercise the authority conferred by the proxy and vote the shares represented
thereby in respect of any such other matter or business in accordance with their
best judgment in the interest of the Company.
DEADLINE FOR STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Under regulations issued by the Securities and Exchange Commission, all
stockholder proposals to be presented at the 1997 Annual Meeting must be
received at the principal office of the Company no later than the close of
business on April 17, 1997 to be considered for inclusion in the proxy statement
and form of proxy relating to that meeting.
By Order of the Board of Directors
/s/ Edward A. Porter
EDWARD A. PORTER
Secretary
Walter Industries, Inc.
Tampa, Florida
August 15, 1996
23