Walter Industries Reports Fiscal 2001 First Quarter Earnings And New Strategic Direction-- EPS of $0.16 Before Restructuring Charge Exceeds Market Estimates -- -- 'Non-Strategic Assets' Targeted For Possible Divestiture --
PR NEWSWIRE - September 27, 2000 16:29
TAMPA, Fla., Sep 27, 2000 /PRNewswire via COMTEX/ -- Tampa-based Walter Industries, Inc. (NYSE: WLT) today reported results for its fiscal 2001 first quarter ended August 31, 2000. The company also issued an update on its ongoing efforts to reduce costs, improve profits and narrow its strategic focus.
FINANCIAL RESULTS Q1 2001 vs. Q1 2000
First quarter net income before a restructuring charge amounted to $7.4 million, or $0.16 per diluted share, exceeding analysts' expectations. After giving effect to the restructuring charge, net income was break-even for the quarter. The $7.4 million net of tax restructuring charge was principally the result of a reorganization of Applied Industrial Materials Corporation's (AIMCOR's) European operations and across-the-board staff reductions.
Net sales and revenues rose 12% during the current quarter to $513.8 million, compared with $459.8 million in the fiscal year 2000 first quarter. Segment operating income of $29.9 million before the restructuring charge reflected a $9.0 million decline principally driven by lower coal selling prices and a decrease in mortgage prepayments within the Homebuilding and Financing segment.
Earnings Before Interest, Taxes, Depreciation, Amortization and non-cash postretirement benefits (EBITDA) before the restructuring charge totaled $56.9 million versus $65.2 million in the prior year period. Goodwill amortization totaled $9.4 million in this year's first quarter versus $10.0 million last year. The company reported free cash flow (EBITDA less cash taxes, cash interest expense and capital expenditures) prior to the restructuring charge of $13.4 million for the current reporting period.
RESULTS FROM OPERATIONS
* Homebuilding and Financing -- First quarter sales and revenues declined $4.3 million as a result of lower mortgage prepayment revenue, partially offset by an increase in homebuilding revenue. Operating income decreased $2.9 million from the prior year period as a result of the decrease in prepayment income. The prepayment rate was 5.0% during the 2001 first quarter versus 7.6% a year ago. The homebuilding companies reported 1,126 home completions at an average selling price of $57,200 for the current quarter versus 1,169 units at an average price of $54,100 for the prior year quarter.
* Industrial Products -- The Industrial Products segment experienced strong sales growth of 12% for the current first quarter. First quarter revenues at U.S. Pipe increased 11% over the prior year, while JW Aluminum's revenue contribution rose by 18%. Segment operating income increased 6% compared with the prior year first quarter. Operating income at U.S. Pipe increased 15% in the current quarter while JW Aluminum's operating income was essentially flat due to increased energy and raw material costs. At Sloss Industries, first quarter 2001 revenues rose by 13%; however, production inefficiencies caused downward pressure on the bottom line.
* Energy Services -- AIMCOR experienced a 35% rise in first quarter revenues. Operating income before the current quarter restructuring charge improved by 54% year-over-year. During the quarter, AIMCOR recorded a $6.2 million pretax restructuring charge for the streamlining and consolidation of their European operations.
* Natural Resources -- The Natural Resources segment posted a $10.8 million decline in first quarter operating income versus the prior year on $8.4 million higher revenues. Despite improvements in productivity, the mining operations continued to be adversely affected by price declines in global coal markets. The Degas division revenues increased by nearly 85% over the prior year period, reflecting substantial increases in methane gas prices.
MANAGEMENT & COST REDUCTION INITIATIVES
The cost-reduction initiatives announced earlier this year are expected to eliminate an annualized $25 million from the company's overall cost structure by the end of the current fiscal year. A previously announced 5% company-wide staff reduction has already been achieved.
Costs are being reduced through consolidation of vendors, purchasing services, logistics, travel, energy, communications and employee benefits, each of which were previously handled on a decentralized basis. Management has also implemented new financial reporting standards emphasizing prompt and disciplined review of company-wide revenues, costs, profits and assets employed.
STRATEGIC DIRECTION
The company has engaged in a series of studies to determine its optimal future operating profile. With these studies underway, a number of inquiries have been received regarding the potential sale of various portions of the company's business, including JW Aluminum Company. Based in Mt. Holly, South Carolina, JW Aluminum is a profitable, growing niche business. However, it has no relationship to any of the company's other businesses and does not lend itself to the synergistic profile envisioned for the future. As a result, a decision has been made to respond to potential JW Aluminum suitors. The company is also considering the divestiture of certain other operating subsidiaries, but is not prepared to provide further specifics at this time. It is possible that a divestiture of JW Aluminum could be concluded early in the 2001 calendar year. The decision to consider offers for JW Aluminum Company is indicative of the company's desire to narrow its focus, shifting away from the excessively diverse portfolio of businesses that it has historically operated.
The company also continues to explore ways to exit its Jim Walter Resources coal mining and degasification business. While the operation is currently reporting an operating loss, it has made significant progress in the areas of productivity and cost reduction in recent months and, at current market prices, is expected to generate modestly positive cash flow for Walter Industries this fiscal year. The company believes that an orderly exit from this business will be achieved at an appropriate future date that is in the best interest of shareholders.
Donald N. Boyce, Interim Chairman, President and Chief Executive Officer, said, "Walter Industries is a company with a great deal of untapped potential, as evidenced by our positive first quarter operating results. The company has remained excessively diverse, however, with many smaller, unrelated businesses clouding our core competencies. 'Cost creep,' lack of adequate marketing, manufacturing and buying leverage, and inability to achieve needed synergies have been the inevitable outcomes.
"A strengthened Board of Directors and management team, combined with a cadre of capable 'Walter-experienced' executives, is intently addressing this situation, making remarkable progress in reducing costs, improving financial discipline, upgrading systems, resolving outstanding administrative issues and defining a sound strategy for the business as a whole. Focusing on a limited number of platform businesses will lead to a de-leveraging of Walter Industries' balance sheet which, in turn, will allow the company to build on a more narrowly defined business model that can achieve synergies and thus create considerable shareholder value. It is expected that the company's future profile will have been determined by the end of the current calendar year, if not sooner.
"With the support of employees company-wide, we have not lost traction in recent months despite changes at the CEO level," Mr. Boyce added. "We anticipate hiring a capable permanent Chief Executive in the near future who will step in to execute a plan that is well-developed and underway. We expect to generate dramatic and positive change in the coming months."
Walter Industries Reports Fiscal 2001 First Quarter Earnings And New Strategic Direction-- EPS of $0.16 Before Restructuring Charge Exceeds Market Estimates -- -- 'Non-Strategic Assets' Targeted For Possible Divestiture --
PR NEWSWIRE - September 27, 2000 16:29
TAMPA, Fla., Sep 27, 2000 /PRNewswire via COMTEX/ -- Tampa-based Walter Industries, Inc. (NYSE: WLT) today reported results for its fiscal 2001 first quarter ended August 31, 2000. The company also issued an update on its ongoing efforts to reduce costs, improve profits and narrow its strategic focus.
FINANCIAL RESULTS Q1 2001 vs. Q1 2000
First quarter net income before a restructuring charge amounted to $7.4 million, or $0.16 per diluted share, exceeding analysts' expectations. After giving effect to the restructuring charge, net income was break-even for the quarter. The $7.4 million net of tax restructuring charge was principally the result of a reorganization of Applied Industrial Materials Corporation's (AIMCOR's) European operations and across-the-board staff reductions.
Net sales and revenues rose 12% during the current quarter to $513.8 million, compared with $459.8 million in the fiscal year 2000 first quarter. Segment operating income of $29.9 million before the restructuring charge reflected a $9.0 million decline principally driven by lower coal selling prices and a decrease in mortgage prepayments within the Homebuilding and Financing segment.
Earnings Before Interest, Taxes, Depreciation, Amortization and non-cash postretirement benefits (EBITDA) before the restructuring charge totaled $56.9 million versus $65.2 million in the prior year period. Goodwill amortization totaled $9.4 million in this year's first quarter versus $10.0 million last year. The company reported free cash flow (EBITDA less cash taxes, cash interest expense and capital expenditures) prior to the restructuring charge of $13.4 million for the current reporting period.
RESULTS FROM OPERATIONS
* Homebuilding and Financing -- First quarter sales and revenues declined $4.3 million as a result of lower mortgage prepayment revenue, partially offset by an increase in homebuilding revenue. Operating income decreased $2.9 million from the prior year period as a result of the decrease in prepayment income. The prepayment rate was 5.0% during the 2001 first quarter versus 7.6% a year ago. The homebuilding companies reported 1,126 home completions at an average selling price of $57,200 for the current quarter versus 1,169 units at an average price of $54,100 for the prior year quarter.
* Industrial Products -- The Industrial Products segment experienced strong sales growth of 12% for the current first quarter. First quarter revenues at U.S. Pipe increased 11% over the prior year, while JW Aluminum's revenue contribution rose by 18%. Segment operating income increased 6% compared with the prior year first quarter. Operating income at U.S. Pipe increased 15% in the current quarter while JW Aluminum's operating income was essentially flat due to increased energy and raw material costs. At Sloss Industries, first quarter 2001 revenues rose by 13%; however, production inefficiencies caused downward pressure on the bottom line.
* Energy Services -- AIMCOR experienced a 35% rise in first quarter revenues. Operating income before the current quarter restructuring charge improved by 54% year-over-year. During the quarter, AIMCOR recorded a $6.2 million pretax restructuring charge for the streamlining and consolidation of their European operations.
* Natural Resources -- The Natural Resources segment posted a $10.8 million decline in first quarter operating income versus the prior year on $8.4 million higher revenues. Despite improvements in productivity, the mining operations continued to be adversely affected by price declines in global coal markets. The Degas division revenues increased by nearly 85% over the prior year period, reflecting substantial increases in methane gas prices.
MANAGEMENT & COST REDUCTION INITIATIVES
The cost-reduction initiatives announced earlier this year are expected to eliminate an annualized $25 million from the company's overall cost structure by the end of the current fiscal year. A previously announced 5% company-wide staff reduction has already been achieved.
Costs are being reduced through consolidation of vendors, purchasing services, logistics, travel, energy, communications and employee benefits, each of which were previously handled on a decentralized basis. Management has also implemented new financial reporting standards emphasizing prompt and disciplined review of company-wide revenues, costs, profits and assets employed.
STRATEGIC DIRECTION
The company has engaged in a series of studies to determine its optimal future operating profile. With these studies underway, a number of inquiries have been received regarding the potential sale of various portions of the company's business, including JW Aluminum Company. Based in Mt. Holly, South Carolina, JW Aluminum is a profitable, growing niche business. However, it has no relationship to any of the company's other businesses and does not lend itself to the synergistic profile envisioned for the future. As a result, a decision has been made to respond to potential JW Aluminum suitors. The company is also considering the divestiture of certain other operating subsidiaries, but is not prepared to provide further specifics at this time. It is possible that a divestiture of JW Aluminum could be concluded early in the 2001 calendar year. The decision to consider offers for JW Aluminum Company is indicative of the company's desire to narrow its focus, shifting away from the excessively diverse portfolio of businesses that it has historically operated.
The company also continues to explore ways to exit its Jim Walter Resources coal mining and degasification business. While the operation is currently reporting an operating loss, it has made significant progress in the areas of productivity and cost reduction in recent months and, at current market prices, is expected to generate modestly positive cash flow for Walter Industries this fiscal year. The company believes that an orderly exit from this business will be achieved at an appropriate future date that is in the best interest of shareholders.
Donald N. Boyce, Interim Chairman, President and Chief Executive Officer, said, "Walter Industries is a company with a great deal of untapped potential, as evidenced by our positive first quarter operating results. The company has remained excessively diverse, however, with many smaller, unrelated businesses clouding our core competencies. 'Cost creep,' lack of adequate marketing, manufacturing and buying leverage, and inability to achieve needed synergies have been the inevitable outcomes.
"A strengthened Board of Directors and management team, combined with a cadre of capable 'Walter-experienced' executives, is intently addressing this situation, making remarkable progress in reducing costs, improving financial discipline, upgrading systems, resolving outstanding administrative issues and defining a sound strategy for the business as a whole. Focusing on a limited number of platform businesses will lead to a de-leveraging of Walter Industries' balance sheet which, in turn, will allow the company to build on a more narrowly defined business model that can achieve synergies and thus create considerable shareholder value. It is expected that the company's future profile will have been determined by the end of the current calendar year, if not sooner.
"With the support of employees company-wide, we have not lost traction in recent months despite changes at the CEO level," Mr. Boyce added. "We anticipate hiring a capable permanent Chief Executive in the near future who will step in to execute a plan that is well-developed and underway. We expect to generate dramatic and positive change in the coming months." |
