Walter Industries Reports Second Quarter EPS of $0.54, Exceeding Previously Announced Guidance of $0.45 to $0.50
--Earnings Per Share Rises 17% Over Prior Year's Comparable Results-- --Company Discloses Impact of Adopting FAS 142--
--Company Increases Full-Year EPS Guidance for 2002--
TAMPA, Fla., July 23 /PRNewswire-FirstCall/ -- Walter Industries, Inc. (NYSE: WLT - News) today reported earnings of $0.54 per diluted share for the second quarter ended June 30, 2002. These results exceeded the prior year's comparable quarter by 17%, after adjusting last year's results for the impact of new goodwill accounting standards. The results also exceeded the Company's previously announced earnings guidance of $0.45 to $0.50 per share.
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Improved earnings followed strong performances by the Homebuilding and Natural Resources segments and substantial profit and performance improvements at the Company's JW Aluminum and Sloss Industries subsidiaries. Ongoing cost reductions and productivity improvements throughout the Company, as well as lower interest expense, also contributed to stronger-than-expected results. These improvements more than offset weaker performance at U.S. Pipe and AIMCOR attributable to reduced demand and pricing for their products in today's difficult economic environment.
"We were able to exceed our second-quarter financial targets, even though adverse market conditions are affecting certain of our businesses, by continuing to focus on reducing costs and improving productivity and cash flow," said Chairman and Chief Executive Officer Don DeFosset. "We have maintained our margins despite a difficult economic environment, and that has given us the confidence to raise our earnings forecast for the year to $1.62- $1.72 per share."
Second Quarter 2002 Financial Results
Net income was $24.2 million, or $0.54 per diluted share, during the second quarter ended June 30, 2002. Net income in the comparable period of last year of $14.3 million, or $0.32 per diluted share, included approximately $6.3 million, or $0.14 per share, of after-tax goodwill amortization which is no longer being expensed under FAS 142. On a comparable basis, this quarter's earnings were up 17%, or $0.08 per share, versus $0.46 per share for the second quarter of 2001.
Results for the second quarter reflect increased revenues in the Homebuilding segment and higher coal prices and productivity gains in the Natural Resources segment. In addition, higher volumes, cost reductions and productivity enhancements improved operating income at JW Aluminum and Sloss. The Company's results also reflect reduced corporate overhead expenses and lower interest expense from reduced borrowings and declining interest rates. These improvements were partially offset by reduced operating income at U.S. Pipe and AIMCOR.
Net sales and revenues for the quarter were $501.4 million, down 3% from the year earlier period. This decrease in revenues primarily reflects declines in sales at U.S. Pipe and AIMCOR, partially offset by volume increases at Jim Walter Homes, JW Aluminum and Sloss.
Earnings before senior debt interest, taxes, depreciation, amortization and non-cash post-retirement health benefits (EBITDA) totaled $60.9 million during the second quarter, compared with $62.9 million in the comparable prior period.
Results By Operating Segment (Pro Forma Excluding FAS 142 Impact)
The Homebuilding segment reported quarterly revenues of $67.5 million, up $8.6 million or 15% over the preceding year. Operating income increased to $4.0 million from $3.5 million in the year-ago period, due principally to increases in the number of home completions. Home completions increased by 8% from 998 units in the prior year's quarter to 1,081 units in the current quarter. Average net selling price rose to $62,300 in the second quarter of 2002, compared to $58,400 for the same period last year, primarily due to the Company selling larger homes and more amenities.
The Financing segment reported quarterly revenues of $58.9 million, compared to $60.6 million in the same period last year. Operating income decreased by $0.8 million to $13.6 million in the second quarter, compared to $14.4 million in the year-ago period, principally due to lower portfolio yields and slower prepayment speeds of 6.4% in the second quarter, compared to 6.7% in the prior-year period. Portfolio performance remained solid during the quarter, with delinquencies (the percentage of amounts outstanding over 30 days past due) improving to 6.8% at June 30, 2002 from 7.1% a year earlier.
The Company's Industrial Products segment posted $192.4 million in revenues during the current period, compared to $198.7 million in the year earlier period. Lower revenues for the segment reflect the impact of the economic slowdown on demand and pricing for the Company's pipe products in 2002, as compared to last year's second quarter, which was one of the strongest in U.S. Pipe's history. U.S. Pipe's shipments and prices were each down approximately 5% compared to the prior year. Partially offsetting this negative impact on the segment's sales were shipments of aluminum products, which were up by 24% from the prior year. Even though demand for higher- margin fin stock products remains low, JW Aluminum has successfully pursued new markets for its products. Operating income for the segment declined $6.8 million from the second quarter of last year to $16.2 million, reflecting lower volume and pricing in pipe products. U.S. Pipe has been taking aggressive actions to counter these trends, reducing its workforce by 274 people, or 12%, during the second quarter of 2002.
Operating income for the Carbon and Metals segment was $3.6 million in the second quarter of 2002, versus $9.0 million in the year-earlier quarter, as both supply and demand for petcoke decreased due to ongoing economic weakness affecting AIMCOR's markets. Operating income was also impacted by declining petcoke margins resulting from increased costs related to supplier contracts.
The Natural Resources segment continues to report significant improvements, with $10.4 million in operating income for the quarter, up 266% over the prior-year period. Increases in coal selling prices and productivity gains accounted for the dramatic improvement in profitability, while Mine No. 5 returned to full operation after repairs were completed in June following last September's accident. The mining operation sold 1.6 million tons of coal at an average price of $36.27 per ton in this year's second quarter, compared to 1.8 million tons at $28.73 per ton in the comparable prior period. Production costs declined 9.2% from a year ago, showing the continued impact of lean manufacturing and Six Sigma initiatives. The natural gas operation sold 2.4 billion cubic feet of gas at an average price of $3.11 per million cubic feet in the current quarter, as compared to 2.5 billion cubic feet at $4.84 per million cubic feet in the year-earlier quarter.
Impact of FAS 142
Effective January 1, 2002, the Company adopted FAS 142, and therefore, goodwill is no longer being amortized. As required under the transition provisions of FAS 142, goodwill must be tested for possible impairment as of the beginning of the fiscal year in which FAS 142 is initially applied. During the second quarter, the Company completed this analysis and determined that a significant portion of the goodwill associated with the 1997 acquisition of AIMCOR was impaired. As required by FAS 142, first quarter results for 2002 have been revised to include a non-cash, after-tax transition charge of $125.9 million, or $2.81 per diluted share, reflected as a cumulative effect of a change in accounting principle. This transition charge does not impact the Company's liquidity or the financial covenants in its loan agreements.
Outlook
Based on first-half results, current forecasts and anticipated market conditions, Walter Industries expects to generate 2002 third-quarter earnings in the range of $0.45 to $0.50 per share. The Company also raised its full year earnings expectations to $1.62 to $1.72 per share (excluding the FAS 142 charge).
Conference Call Webcast
Walter Industries Chairman and CEO Don DeFosset and members of the Company's leadership team will discuss quarterly results on a conference call and live Webcast to be held on Wednesday, July 24, 2002, at 9:00 a.m. EDT. To listen to the event live or in archive, visit the Company Web site at www.walterind.com. |
