cleaning the decks
SOURCE: Walter Industries, Inc.
Walter Industries Reports Fiscal 2000 Fourth Quarter and Full Year Results
TAMPA, Fla., Aug. 2 /PRNewswire/ -- Tampa-based Walter Industries, Inc. (NYSE: WLT - news) today reported results for its fiscal fourth quarter and full year ended May 31, 2000.
Fourth quarter earnings per diluted share (EPS) were $0.18 before certain restructuring, impairment and other charges. These earnings exceed analysts' expectations of $0.17 per diluted share. Full year earnings per diluted share were $0.63 before restructuring, impairment and other charges. Full year results were in line with analysts' expectations.
In addition to reporting results, the company, under the leadership of its new management team, announced several initiatives directed at improving shareholder value. The company unveiled initiatives designed to eliminate at least $25 million in costs from its businesses during the next 12 months. Among the initiatives is the restructuring of its businesses into four distinct operating segments. This move will create cost synergies, improve communications and increase operational efficiencies. The four segments are:
1. Homebuilding and Financing
2. Industrial Products
3. Energy Services
4. Natural Resources
To further leverage the company's size and to enhance operational efficiencies, eliminate duplicative administrative services and drive down General and Administrative costs, the company is planning to centralize functions to develop a ``shared services'' approach to managing its business. This process also includes reviewing various functions with the goal of outsourcing back office activities to ``best practice'' providers.
Other cost-saving activities will include, but are not limited to, investment in information technology, a 5% headcount reduction, and the establishment of a synergy development team focused on leveraging the purchasing power of the company and streamlining the company's supply chain.
As a result of these initiatives and the diligence performed by the new management team, the company has recorded various restructuring, impairment and other charges totaling approximately $139 million after tax during the fourth quarter of fiscal 2000.
These charges include:
$167 million related to SFAS 121: ``Impairment of Long-Lived Assets'' at JW Resources, the company's mining operation.
$10 million related to company-wide inventory obsolescence.
$5 million related to severance costs for the former CEO and other senior managers.
$9 million of additional charges related to the write-off of property, plant and equipment and other miscellaneous write-offs.
($52) million, which represents the tax effect of the above referenced items.
Of the total charge, 97.5% was non-cash.
Robert B. Lewis, Executive Vice President and Chief Financial Officer, stated:
``We have worked diligently during our brief tenure to address significant issues impacting Walter Industries' performance. Our management team believes that the charge, coupled with aggressive cost savings activity and targeted operational efficiency improvements, has strategically positioned us for ongoing growth in our core operations. These changes as well as the accounting charge are the first step in addressing non-growth assets of the company.
We are continuing the diligence review that began in May and are making significant progress on many levels. We have brought several talented people into the organization and are leveraging other key company resources directed toward delivering meaningful results for our customers and investors. In this light, we are focused on analyzing all of our operations with the goal of eliminating under-performing assets and reducing the overall cost structure. While a decision has yet to be made, we anticipate further organizational changes and the announcement of additional restructuring charges during fiscal 2001.``
FINANCIAL RESULTS Q4 2000 vs. Q4 1999
Net sales and revenues rose 4% to $509.8 million for the current quarter compared with $489.6 million in the 1999 fourth quarter. The company posted segment operating income before restructuring, impairment and other charges of $44.9 million compared with $51.6 million in the 1999 period. Earnings Before Interest, Taxes, Depreciation, Amortization and non-cash postretirement benefits (EBITDA) before restructuring, impairment and other charges totaled $54.4 million versus $72.0 million in the prior year period. Net income before restructuring, impairment and other charges amounted to $8.6 million, or $0.18 per diluted share in the current fourth quarter, exceeding the consensus analyst estimate of $0.17 per diluted share. Goodwill amortization totaled $9.1 million in this year's fourth quarter. The company reported free cash flow (EBITDA less cash taxes, cash interest expense and capital expenditures) prior to restructuring, impairment and other charges of $17.3 million for the current reporting period.
FINANCIAL RESULTS FULL YEAR 2000 vs. FULL YEAR 1999
For the full year ended May 31, 2000, net sales and revenues were $1.91 billion, essentially flat with the same period in 1999. Segment operating income before restructuring, impairment and other charges totaled $144.5 million compared with $141.5 last year. EBITDA before restructuring, impairment and other charges amounted to $233 million versus $260 million in the 1999 period. Excluding the restructuring, impairment and other charges, net income amounted to $30.8 million, or $0.63 per diluted share in the current year compared with net income of $48.5 million, or $0.94 per diluted share in the prior year period. Goodwill amortization totaled $37.7 million. The company generated free cash flow prior to restructuring, impairment and other charges of $94.2 million for full year 2000.
RESULTS FROM OPERATIONS
Homebuilding and Financing -- Fourth quarter sales and revenue fell $4.4 million versus the same quarter 1999 as a result of lower prepayment revenue, offset by an increase in homebuilding revenue. Operating income decreased $7.0 million for the fourth quarter as a result of the decrease in the mortgage prepayment income. The prepayment rate continues to run at approximately 6.0% versus 8.4% a year ago. The homebuilding companies reported 1,108 home completions at an average selling price of $57,600 for the current quarter versus 1,151 units at an average price of $53,200 for the prior year quarter.
Industrial Products -- Comprised of the operations of U.S. Pipe and Foundry Company, Sloss Industries, JW Aluminum Company and Southern Precision Corporation, the Industrial Products segment generated strong sales growth of over 10% for fourth quarter 2000. The segment saw especially strong revenue contributions from U.S. Pipe and JW Aluminum.
Fourth quarter revenues at U.S. Pipe increased $10.0 million, or 8% versus the prior year, while JW Aluminum contributed $13.4 million of additional revenue versus the prior year quarter, growing over 24%. Absent restructuring, impairment and other charges, principally associated with inventory obsolescence and related equipment write-downs, U.S. Pipe and JW Aluminum grew operating income 30% and 34% respectively.
Energy Services -- Applied Industrial Materials Corporation (AIMCOR), generated additional fourth quarter revenues of $8.0 million versus the same period in 1999. Operating income deteriorated $6.7 million versus the prior year fourth quarter, primarily due to increases in the allowance for doubtful accounts and a soft global petcoke market.
Natural Resources -- The Natural Resources segment posted a $4.2 million decline in fourth quarter operating income before impairment charges on a $13.2 million revenue shortfall. While the company continues to reduce its cost per ton, the current market for coal continues to decline. As a result of this anticipated future financial performance, the company has recorded a fourth quarter charge of $167 million to write-down the assets of the mining division. The Resources group has long-term contract obligations through June 2001. The Degas division revenues grew 36% year-over-year for the fourth quarter as the natural gas market continued to be very strong. |
