Business News
Walter Industries, Inc. Announces Second Quarter 2008 Earnings of $0.94 Per Diluted Share
2008-07-28 15:56:00
Walter Industries, Inc. Announces Second Quarter 2008 Earnings of $0.94 Per Diluted Share
- Operating Income at Natural Resources and Sloss Up 214 Percent -
- Company Affirms 2008 Metallurgical Coal Production Outlook of 6.7 - 7.1
Million Tons and Projects Sales of 7.0 - 7.2 Million Tons -
- Separation of Financing and Homebuilding Businesses Remains on Track For
Year End -
TAMPA, Fla., July 28 /EMWNews/ -- Walter Industries, Inc.
(NYSE: WLT), a leading producer and exporter of U.S. metallurgical coal for
the global steel industry, today reported net income of $50.8 million, or
$0.94 per diluted share, for the quarter ended June 30, 2008 compared to
$18.1 million, or $0.34 per diluted share, in the second quarter 2007.
"Our overall financial performance in the quarter was outstanding,
particularly in our core Natural Resources and Sloss businesses, which
reported their best quarterly performance ever," said Walter Industries
Chairman Michael T. Tokarz. "These results have set the table for what we
expect to be the most profitable year in Walter Industries' history."
He added, "We continue to make meaningful advances in executing the
growth strategy of our core coal business and have also made significant
progress toward the planned separation of the Financing and Homebuilding
businesses."
Second Quarter 2008 Financial Results
Net sales and revenues for the second quarter 2008 totaled $370.0
million, up 24.8 percent from the prior-year period, driven by higher
metallurgical coal and coke pricing, as well as improved sales volumes of
both mined and purchased coal. These increases were partially offset by
declines in unit deliveries at Homebuilding.
Operating income from continuing operations for the second quarter 2008
totaled $82.3 million compared to $33.0 million in the second quarter 2007.
Operating income in the current period was higher primarily on strong
metallurgical coal and coke pricing, as well as increased sales volumes.
Second Quarter Results by Operating Group
Natural Resources & Sloss
The Natural Resources & Sloss group generated combined revenues of
$290.7 million in the second quarter, up 68.9 percent versus the prior-year
period. Results include a $16.50 per short ton increase in average
metallurgical coal selling prices on 1.7 million tons sold in the quarter,
which includes 0.2 million tons of purchased coal sales. Second quarter
2008 results also include increased metallurgical coke pricing at Sloss.
Natural Resources & Sloss reported combined operating income of $79.7
million in the second quarter compared to $25.3 million in the prior-year
period. Operating income in the current-year period reflects the pricing
and volume improvements at Jim Walter Resources and the increase in coke
prices at Sloss, partially offset by higher freight and royalty costs
associated with additional coal shipments and higher raw material coal
costs at Sloss.
"We generated strong production during the second quarter, resulting in
3.0 million tons of met coal production in the first half of 2008, which
was at the top end of our previously communicated expectations. Our first
half results, when combined with approximately 1.0 million tons of expected
incremental production from the Southwest 'A' panel, which will start up in
late August, keep our full-year expectation of 6.7 to 7.1 million tons of
metallurgical coal production squarely within reach," said Jim Walter
Resources CEO George R. Richmond. "In addition, we have completed all the
critical infrastructure associated with our 7 East expansion and are
developing its first longwall panel."
Jim Walter Resources
Mine No. 4 produced 0.8 million tons in the second quarter 2008
compared to 0.7 million tons in last year's second quarter. The increase
was primarily a result of improved longwall production during the quarter.
Mine No. 4's production cost per ton in the quarter was $46.77, or $2.15
per ton higher than in the prior-year period, primarily driven by increased
labor and material costs.
Mine No. 7 produced 0.6 million tons in the second quarter 2008,
approximately 0.1 million tons more than in the same period last year.
Production costs at Mine No. 7 were $70.64 per ton versus $71.23 per ton in
the prior-year period. The improvement in average coal production costs was
the result of the increase in production volume, which more than offset
increased spending for labor and materials at the mine. Production costs at
Mine No. 7 continue to reflect higher per-ton costs versus Mine No. 4 due
to the disproportionate mix of continuous miner tons versus longwall tons
associated with the development of the Southwest "A" panel and the East
expansion.
Sloss
Sloss Industries generated second quarter revenues of $53.3 million, up
60.8 percent versus the prior-year period, and operating income of $15.1
million, an increase of $12.1 million and more than five times the amount
earned in the prior-year period. Sloss' favorable results were driven by
record-high pricing for metallurgical coke, partially offset by higher raw
material coal costs and a $2.2 million charge related to the resolution of
legal matters.
Sloss sold approximately 106,000 tons of metallurgical coke at an
average price of $397.50 per ton compared to approximately 103,000 tons at
$225.91 in the prior-year period. The pricing improvement of 76.0 percent
stems from higher contract pricing and spot sales at prices in excess of
$500 per short ton FOB plant.
Natural Gas
The natural gas business sold 1.6 billion cubic feet of gas at an
average price of $8.99 per thousand cubic feet in the second quarter 2008
compared to sales of 1.8 billion cubic feet at an average price of $7.96
per thousand cubic feet in the prior-year period.
Financing & Homebuilding
The Financing & Homebuilding group reported second quarter revenues of
$90.9 million, compared to $123.2 million in the prior-year period.
Revenues were lower primarily as a result of fewer unit completions and a
$4.2 million increase in the discount on instalment notes originated in the
quarter. Operating income for the group was $11.1 million, compared to
$12.6 million in the second quarter last year, also primarily due to fewer
unit completions and the discount adjustment mentioned above, partially
offset by lower selling, general and administrative expenses at
Homebuilding resulting from the restructuring actions taken in February.
At Financing, operating income for the second quarter was $14.3
million, an increase of 9.9 percent compared to the same period last year,
primarily on lower interest expense as a result of paying down debt,
partially offset by lower income from prepayments. Delinquencies on the
mortgage portfolio were 4.1 percent at June 30, 2008, compared to 3.8
percent at June 30, 2007.
"Our Financing business remains a strong, stable generator of income
and cash flows, despite continued and unprecedented disruption in the
residential mortgage market. Low delinquencies, strong recovery rates and,
in particular, an effective, high-touch servicing platform with focused
loss-mitigation strategies, have generated strong results," said JWH
Holding Company Chairman and CEO Mark J. O'Brien. "Strategically, the
recent refinancing of our warehouse facilities and the restructuring of
Homebuilding in February better position us to separate these businesses
from Walter Industries by year end."
Corporate and Other
In June, Walter Industries completed an offering of 3.2 million shares
of its common stock, from which the Company received approximately $280.4
million of net proceeds. The Company used these proceeds to repay a portion
of the term loan and revolving credit facility borrowings under the
Company's Amended 2005 Credit Agreement. In the second quarter 2008,
interest expense included $3.1 million in accelerated amortization of
deferred financing fees associated with this debt repayment.
Income tax expense in the quarter included a $3.7 million credit
resulting from the resolution of certain Federal tax matters.
Business Outlook
The Company affirms its previously communicated expectations for its
key business drivers, and updates its sales volumes and operating margin
per ton expectations as follows:
Metallurgical Coal Sales
Outlook Q1A Q2A Q3E Q4E
Tons Sold (short tons,
in millions) 1.5 1.7 1.7 - 1.8 2.1 - 2.2
Average Operating
Margin Per Ton $8 $33 $75 - $81 $95 - $100
Coke Sales Outlook Q1A Q2A Q3E Q4E
Tons Sold 104,024 106,431 100,000 - 106,000 106,000 - 112,000
Average Operating
Margin Per Ton $182 $162 $140 - $165 $140 - $165
Quarter-to-quarter variability in timing, availability and pricing of
shipments may result in significant shifts in income between quarters.
Changes in metallurgical coal sales volumes between the third and
fourth quarter reflect a change in the anticipated timing of shipments for
approximately 100,000 tons versus prior expectations. The average
metallurgical coal operating margin per ton is expected to improve by
approximately $5 per ton in the fourth quarter compared to previously
communicated expectations, driven largely by higher metallurgical coal
sales prices.
The coke sales outlook for the second half of the year also reflects a
shift in tons between the third and fourth quarter as coke oven repairs in
the third quarter will reduce tonnage volumes slightly that will be made up
in the fourth quarter. The operating margin per ton ranges are consistent
with prior expectations and reflect favorable spot sales prices, offset by
higher coal input costs.
Conference Call Webcast
Members of the Company's leadership team will discuss Walter
Industries' second quarter 2008 results, its outlook for the remainder of
the year and other general business matters during a conference call and
live Web cast to be held on Tuesday, July 29, 2008, at 10 a.m. Eastern
Daylight Time. To listen to the event live or in archive, visit the Company
Web site at http://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 $1.2 billion and employs approximately 2,500 people. For more
information about Walter Industries, please visit the Company Web site at
http://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, including expressions such as "believe,"
"anticipate," "expect," "estimate," "intend," "may," "will," and similar
expressions involve known and unknown risks, uncertainties, and other
factors that may cause the Company's actual results in future periods to
differ materially from the expectations expressed or implied by such
forward-looking statements. These factors include, among others, the
following: the market demand for the Company's products as well as changes
in costs and the availability of raw material, labor, equipment and
transportation; changes in weather and geologic conditions; changes in
extraction costs, pricing and our assumptions and projections concerning
our reserves in the Company's mining operations; changes in customer
orders; pricing actions by the Company's competitors, customers, suppliers
and contractors; changes in governmental policies and laws; changes in the
mortgage-backed capital markets; changes in general economic conditions;
and the successful implementation and anticipated timing of any strategic
actions and objectives that may be pursued, including our announced
separation of the Financing and Homebuilding business from the Company.
Forward-looking statements made by the Company in this release, or
elsewhere, speak only as of the date on which the statements were made. Any
forward-looking statements should be considered in context with the various
disclosures made by us about our businesses, including the Risk Factors
described in our 2007 Annual Report on Form 10-K and our other filings with
the Securities and Exchange Commission. The Company disclaims any duty to
update its forward-looking statements as of any future date.
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in Thousands)
Unaudited
For the three months
ended June 30,
2008 2007
Net sales and revenues:
Net sales $315,686 $239,146
Interest income on instalment notes 48,022 50,662
Miscellaneous 6,328 6,716
370,036 296,524
Costs and expenses:
Cost of sales (exclusive of
depreciation) 200,893 174,457
Depreciation 13,633 11,591
Selling, general and administrative 37,400 38,125
Provision for losses on instalment notes 3,002 2,493
Postretirement benefits 6,596 6,687
Interest expense - mortgage-
backed/asset-backed notes 25,846 29,745
Interest expense - other debt 11,184 7,218
Amortization of intangibles 340 442
298,894 270,758
Income from continuing operations
before income tax expense 71,142 25,766
Income tax expense (1) 20,366 7,996
Income from continuing operations 50,776 17,770
Discontinued operations (2) - 281
Net income $50,776 $18,051
Basic income per share:
Income from continuing operations $0.96 $0.34
Discontinued operations - $0.01
Net income $0.96 $0.35
Weighted average number of shares
outstanding 52,982,775 52,081,436
Diluted income per share:
Income from continuing operations $0.94 $0.33
Discontinued operations - $0.01
Net income $0.94 $0.34
Weighted average number of diluted
shares outstanding 53,771,216 52,574,803
(1) Income tax expense for the quarter ended June 30, 2008 includes a
$3.7 million credit resulting from the resolution of certain Federal tax
matters associated with an ongoing IRS audit.
(2) The Company sold its modular home manufacturing business, which
operated as Crestline Homes, Inc., in May 2007. Operating results of this
business for the quarter ended June 30, 2007 have been classified as
discontinued operations.
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
RESULTS BY OPERATING SEGMENT
($ in Thousands)
Unaudited
For the three months
ended June 30,
2008 2007
NET SALES AND REVENUES:
Natural Resources (1) $237,428 $139,019
Sloss 53,265 33,122
Natural Resources and Sloss 290,693 172,141
Financing 51,722 55,046
Homebuilding 39,227 68,175
Financing and Homebuilding Group 90,949 123,221
Other (1) 706 3,268
Consolidating Eliminations (12,312) (2,106)
$370,036 $296,524
OPERATING INCOME (LOSS) FROM
CONTINUING OPERATIONS:
Natural Resources (1) $64,573 $22,399
Sloss 15,091 2,948
Natural Resources and Sloss 79,664 25,347
Financing 14,334 13,045
Homebuilding (3,243) (467)
Financing and Homebuilding Group 11,091 12,578
Other (1) (8,184) (4,941)
Consolidating Eliminations (245) -
Operating income from
continuing operations 82,326 32,984
Other debt interest expense (11,184) (7,218)
Income from continuing operations
before income tax expense $71,142 $25,766
(1) Results for 2007 have been revised to reflect the reclassification of
United Land (the parent company of Kodiak and TRI) from "Other" to Natural
Resources.
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in Thousands)
Unaudited
For the six months ended
June 30,
2008 2007
Net sales and revenues:
Net sales $558,686 $498,533
Interest income on instalment notes 96,732 100,227
Miscellaneous 10,308 18,058
665,726 616,818
Cost and expenses:
Cost of sales (exclusive of depreciation) 374,929 346,097
Depreciation 27,600 22,221
Selling, general and administrative 75,270 75,576
Provision for losses on instalment notes 7,327 5,390
Postretirement benefits 13,188 13,019
Interest expense - mortgage-
backed/asset-backed notes 54,154 59,516
Interest rate hedge ineffectiveness (1) 16,981 -
Interest expense - other debt 16,899 14,565
Amortization of intangibles 705 920
Restructuring and impairment charges (2) 6,770 -
593,823 537,304
Income from continuing operations before
income tax expense and minority interest 71,903 79,514
Income tax expense (3) 20,628 29,609
Income from continuing operations 51,275 49,905
Discontinued operations (4) - (2,229)
Net income $51,275 $47,676
Basic income (loss) per share:
Income from continuing operations $0.98 $0.96
Discontinued operations - (0.04)
Net income $0.98 $0.92
Weighted average number of shares
outstanding 52,581,857 52,046,083
Diluted income (loss) per share:
Income from continuing operations $0.96 $0.95
Discontinued operations - (0.04)
Net income $0.96 $0.91
Weighted average number of diluted
shares outstanding 53,332,579 52,525,490
(1) During the quarter ended March 31, 2008, the Company recognized a
loss of $17.0 million for the ineffectiveness of interest rate hedges held
by Financing that were intended to hedge an April 2008 securitization of
instalment notes receivable. Unfavorable market conditions precluded an
April 2008 securitization and management could not predict when such a
securitization might occur.
(2) Homebuilding recorded restructuring charges totaling $6.8 million
during the quarter ended March 31, 2008 related to the closure of 36 sales
offices.
(3) Income tax expense for the six months ended June 30, 2008 includes
a $3.7 million credit resulting from the resolution of certain Federal tax
matters associated with an ongoing IRS audit. Income tax expense for the
six months ended June 30 , 2007 included a $4.4 million write-off of
certain deferred tax assets no longer considered realizable.
(4) The Company sold its modular home manufacturing business, which
operated as Crestline Homes, Inc., in May 2007. Operating results of this
business for the six months ended June 30, 2007 have been classified as
discontinued operations.
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
RESULTS BY OPERATING SEGMENT
($ in Thousands)
Unaudited
For the six months ended
June 30,
2008 2007
NET SALES AND REVENUES:
Natural Resources (1) $390,459 $310,465
Sloss 104,136 65,923
Natural Resources and Sloss 494,595 376,388
Financing 103,826 108,793
Homebuilding 79,299 130,308
Financing and Homebuilding Group 183,125 239,101
Other (1) 1,124 4,538
Consolidating Eliminations (13,118) (3,209)
$665,726 $616,818
OPERATING INCOME (LOSS) FROM
CONTINUING OPERATIONS:
Natural Resources (1) $82,383 $79,940
Sloss 33,791 4,254
Natural Resources and Sloss 116,174 84,194
Financing (2) 7,622 23,616
Homebuilding (3) (17,970) (3,145)
Financing and Homebuilding Group (10,348) 20,471
Other (1) (16,380) (10,586)
Consolidating Eliminations (644) -
Operating income from continuing
operations 88,802 94,079
Other debt interest and debt
conversion expense (16,899) (14,565)
Income from continuing operations before
income tax expense and minority interest $71,903 $79,514
(1) Results for 2007 have been revised to reflect the reclassification
of United Land (the parent company of Kodiak and TRI) from "Other" to
Natural Resources.
(2) Includes a loss of $17.0 million for the ineffectiveness of
interest rate hedges that were intended to hedge an April 2008
securitization of instalment notes receivable.
(3) Homebuilding recorded restructuring charges totaling $6.8 million
during the quarter ended March 31, 2008 related to the closure of 36 sales
offices.
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Unaudited
For the three months For the six months
ended June 30, ended June 30,
2008 2007 2008 2007
Operating Data:
Jim Walter Resources
Tons sold by type (in thousands):
Metallurgical coal, contracts 1,535 1,301 3,012 2,727
Purchased metallurgical coal 212 - 229 96
1,747 1,301 3,241 2,823
Average sale price per short ton:
Metallurgical coal, contracts $110.79 $94.29 $98.61 $97.55
Coal cost of sales (exclusive of
depreciation):
Mine No. 4 per ton $60.23 $51.40 $56.39 $50.18
Mine No. 7 per ton $78.36 $73.71 $77.30 $62.60
Mines No. 4 and No. 7 per
ton average $66.61 $62.24 $64.48 $56.65
Mine No. 5 per ton (1) $- $- $- $57.98
Total average $66.61 $62.24 $64.48 $56.65
Other costs (in thousands)(2) $16,086 $2,776 $19,380 $15,553
Tons of coal produced
(in thousands)
Mine No. 4 773 665 1,742 1,454
Mine No. 7 622 521 1,260 1,404
Total 1,395 1,186 3,002 2,858
Coal production costs per ton: (3)
Mine No. 4 $46.77 $44.62 $40.79 $40.66
Mine No. 7 $70.64 $71.23 $68.98 $52.89
Total average $57.41 $56.31 $52.62 $46.67
Natural gas sales, in mmcf
(in thousands) 1,612 1,752 3,177 3,615
Natural gas average sale price
per mmcf $8.99 $7.96 $8.48 $7.94
Natural gas cost of sales
per mmcf $3.99 $3.27 $3.47 $3.01
Tuscaloosa Resources, Inc. (4)
Tons sold (in thousands) 224 - 423 -
Tons of coal produced
(in thousands) 221 - 433 -
Kodiak
Tons sold (in thousands) 40 - 83 15
Tons of coal produced
(in thousands) 25 20 45 46
(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) Consists of charges (credits) not directly allocable to a specific
mine as well as cost of purchased coal.
(3) 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.
(4) Tuscaloosa Resources, Inc. was acquired on August 31, 2007.
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Unaudited
For the three months For the six months
ended June 30, ended June 30,
2008 2007 2008 2007
Operating Data (continued):
Sloss Industries
Furnace and foundry coke
tons sold 106,431 102,780 210,454 211,736
Furnace and foundry coke
average sale price per ton $397.50 $225.91 $393.05 $221.09
Financing
Delinquencies, as of period end 4.1% 3.8% 4.1% 3.8%
Prepayment speeds 6.0% 8.7% 5.7% 8.4%
Number of repossessions 255 301 580 589
Repossession rate, annualized 2.6% 3.0% 3.0% 2.9%
Recovery rate on repossessions 89.9% 87.4% 86.3% 85.9%
Homebuilding (excluding Crestline)
New sales contracts 287 688 737 1,422
Cancellations 154 109 252 193
Unit completions 421 687 863 1,315
Average contractual
sales price $106,500 $105,500 $106,400 $104,900
Average revenue per
home sold (1) $90,200 $98,900 $90,333 $98,500
Ending backlog of homes 707 1,426 707 1,426
Depreciation ($ in thousands):
Natural Resources $11,528 $8,776 $22,903 $16,656
Sloss 979 943 1,985 1,859
Financing 123 273 258 554
Homebuilding 775 1,272 1,994 2,506
Other 228 327 460 646
$13,633 $11,591 $27,600 $22,221
Capital expenditures
($ in thousands):
Natural Resources $32,240 $33,786 $53,548 $55,864
Sloss 2,017 1,003 3,592 3,123
Financing 122 29 164 60
Homebuilding 223 610 652 1,856
Other 7 1 113 53
$34,609 $35,429 $58,069 $60,956
(1) Includes the effect of the discount required to sell instalment
notes receivable to Financing at the estimated market value.
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in Thousands)
Unaudited
June 30, December 31,
2008 2007
ASSETS
Cash and cash equivalents $17,653 $30,614
Short-term investments, restricted 61,822 75,851
Instalment notes receivable, net of
allowance of $13,946 and $13,992,
respectively 1,821,745 1,837,059
Receivables, net 148,475 81,698
Inventories 119,937 101,676
Prepaid expenses 42,720 38,340
Property, plant and equipment, net 460,984 435,035
Other assets 153,566 156,113
Goodwill 10,895 10,895
$2,837,797 $2,767,281
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable $81,113 $72,072
Accrued expenses 82,618 83,072
Accrued interest on debt 12,503 13,940
Debt:
Mortgage-backed/asset-backed notes 1,437,387 1,706,218
Other debt 206,852 225,860
Accumulated postretirement
benefits obligation 342,769 335,034
Other liabilities 223,361 216,372
Total liabilities 2,386,603 2,652,568
Stockholders' equity 451,194 114,713
$2,837,797 $2,767,281
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2008
($ in Thousands)
Unaudited
Capital in
Common Excess of Comprehensive
Total Stock Par Value Income
Balance at
December 31, 2007 $114,713 $520 $497,032
Comprehensive income:
Net income 51,275 $51,275
Other comprehensive income (loss),
net of tax:
Change in pension and
postretirement benefit plans 1,273 1,273
Net unrealized loss on hedges (4,311) (4,311)
Comprehensive income $48,237
Effects of changing the pension
plan measurement date pursuant
to FASB 158:
Service cost, interest cost,
and expected return on plan
assets for October 1 -
December 31, 2007, net of
taxes (4,603)
Amortization of actuarial gain
and prior service cost for
October 1 - December 31, 2007,
net of taxes 670
Purchases of stock under stock
repurchase program (363) (363)
Proceeds from public stock
offering (1) 280,432 32 280,400
Stock issued upon the exercise
of stock options 7,544 4 7,540
Stock issued upon conversion of
convertible notes 785 1 784
Tax benefit from the exercise of
stock options 6,322 6,322
Dividends paid, $0.10 per share (5,225) (5,225)
Stock-based compensation 4,084 4,084
Other (1,402) (1,402)
Balance at June 30, 2008 $451,194 $557 $789,172
Accumulated
Other
Accumulated Comprehensive
Deficit Income (Loss)
Balance at December 31, 2007 $(290,986) $(91,853)
Comprehensive income:
Net income 51,275
Other comprehensive income (loss),
net of tax:
Change in pension and postretirement
benefit plans 1,273
Net unrealized loss on hedges (4,311)
Comprehensive income
Effects of changing the pension plan
measurement date pursuant to FASB 158:
Service cost, interest cost, and
expected return on plan assets for
October 1 - December 31, 2007, net of
taxes (4,603)
Amortization of actuarial gain and
prior service cost for October 1 -
December 31, 2007, net of taxes 670
Purchases of stock under stock repurchase
program
Proceeds from public stock offering (1)
Stock issued upon the exercise of stock
options
Stock issued upon conversion of
convertible notes
Tax benefit from the exercise of stock
options
Dividends paid, $0.10 per share
Stock-based compensation
Other
Balance at June 30, 2008 $(244,314) $(94,221)
(1) In June, the Company completed an offering of 3.2 million shares of
its common stock at $90.75 per share and received $280.4 million in
proceeds net of underwriting discounts and offering expenses.
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in Thousands)
Unaudited
For the six months ended June 30,
2008 2007
OPERATING ACTIVITIES
Net income $51,275 $47,676
Loss from discontinued operations - 2,229
Income from continuing operations 51,275 49,905
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Provision for losses on instalment
notes receivable 7,327 5,390
Depreciation 27,600 22,221
Other 15,353 4,802
Decrease (increase) in assets:
Receivables (51,054) 8,874
Inventories (18,261) (5,175)
Prepaid expenses 5,352 (639)
Instalment notes receivable, net (41) (41,099)
Increase (decrease) in liabilities:
Accounts payable 10,473 (2,888)
Accrued expenses (2,568) (23,852)
Accrued interest (1,437) (2,198)
Cash flows provided by operating
activities 44,019 15,341
INVESTING ACTIVITIES
Purchases of loans - (34,988)
Principal payments received on
purchased loans 8,028 20,908
Decrease in short-term investments,
restricted 14,029 6,525
Additions to property, plant and
equipment (58,069) (60,956)
Other 1,400 2,613
Cash flows used in investing
activities (34,612) (65,898)
FINANCING ACTIVITIES
Issuances of mortgage-backed/asset-
backed notes 25,000 113,350
Payments of mortgage-backed/asset-
backed notes (293,864) (118,598)
Proceeds from issuances of other debt 280,000 -
Retirements of other debt (315,669) (29,071)
Proceeds from stock offering 280,432 -
Other 1,733 (3,633)
Cash flows used in financing
activities (22,368) (37,952)
Cash flows used in continuing
operations $(12,961) $(88,509)
CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash flows used in operating
activities $- $630
Cash flows used in investing
activities - -
Cash flows provided by financing
activities - -
Cash flows used in discontinued
operations $- $630
Net decrease in cash and cash
equivalents $(12,961) $(87,879)
Cash and cash equivalents at
beginning of period $30,614 $127,369
Add: Cash and cash equivalents of
discontinued operations at beginning
of period - 1
Net decrease in cash and cash
equivalents (12,961) (87,879)
Cash and cash equivalents at
end of period $17,653 $39,491
SUPPLEMENTAL DISCLOSURES
Financing Activities
Non-cash transaction:
One-year property insurance policy
financing agreement $17,355 $12,516
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