Walter Industries Reports Second Quarter EPS of $0.32, Exceeding Prior Year Period by 113%
-- Second Quarter EPS at High End of Recently Announced Guidance -- -- Company Raises EPS Expectations for Full Year to $0.90 - $1.00 --
TAMPA, Fla., July 25 /PRNewswire/ -- Walter Industries, Inc. (NYSE: WLT - news) today reported earnings of $0.32 per share for the quarter ended June 30, 2001. These results exceeded the prior year's comparable quarter by 113% and are at the high end of the Company's recently announced guidance for the quarter of $0.29 to $0.32 per share. Improved results were due to strong performances by the Homebuilding and Financing segment and the Company's Jim Walter Resources and U.S. Pipe subsidiaries, along with ongoing productivity improvements throughout the Company.
``We continue to show meaningful improvements across most of our businesses despite a challenging economic environment,'' said President and Chief Executive Officer Don DeFosset. ``At the same time, we are achieving significant progress in cutting costs and making our operations more efficient. Thus, we feel comfortable raising our EPS guidance for the full year.''
Second Quarter 2001 Financial Results
Net income was $14.7 million, or $0.32 per basic and diluted share, during the quarter ended June 30, 2001. This compares with net income in the comparable period of last year of $7.1 million, or $0.15 per basic and diluted share, before non-recurring restructuring, impairment and other charges of $138.9 million, net of taxes.
Margins increased at Jim Walter Homes, while increased sales and productivity gains resulted in improved income at U.S. Pipe for the quarter. Increased coal shipments and higher natural gas prices helped drive significant improvement in performance at Jim Walter Resources. The Company's results also reflect reduced corporate expenses, lower interest expense and reduced shares outstanding as a result of share buybacks.
Net sales and revenues were up 2% for the quarter at $516.5 million. This increase in revenues primarily reflected product shipments by the Company's AIMCOR subsidiary that were delayed from the first quarter to the second quarter. In addition, strong revenue growth at U.S. Pipe and Jim Walter Resources was partially offset by a decline in unit sales of homes, as well as lower shipments of specialty aluminum products and furnace coke.
Earnings before senior debt interest, taxes, depreciation, amortization and non-cash post-retirement health benefits (EBITDA) totaled $63.5 million during the second quarter, compared with $51.9 million (before the non- recurring charges) in the comparable prior period.
Proforma earnings per share, excluding all goodwill amortization, was $0.51 in the current quarter. Goodwill amortization of $9.3 million in the current quarter included $6.5 million, or $0.14 per share after taxes, that the company estimates would no longer be amortized under proposed changes in accounting standards for goodwill scheduled to be effective in 2002. The remainder of the goodwill amortization relates to certain installment notes receivable within the Company's Mid-State Homes mortgage portfolio, which will continue to be amortized under the new standards.
Results By Operating Segment
(Excluding Restructuring, Impairment and Other Charges/Credits)
The Homebuilding and Financing segment reported quarterly revenues of
$116.9 million compared with $119.6 million in the year ago period. Operating
income increased $4.9 million, to $15.1 million, due principally to improved
homebuilding margins and a $2.7 million increase in time charge income
associated with higher prepayments. Prepayment speed was 6.7% in the second
quarter, compared to 4.9% in the prior year period.
Lower homebuilding revenues were due to a decrease in unit completions in the current quarter. Jim Walter Homes and its affiliated homebuilding operations completed 998 homes during the current quarter at an average net selling price of $58,400, compared with 1,092 homes at a $57,500 average price for the same period last year. On a more comparable same-store-sales basis, units declined by 47, as 13 underperforming model home parks have been closed since last year. Significantly, homebuilding operating margins improved, due to productivity improvements and lower material costs.
The Company's Industrial Products segment posted $218.2 million in revenues during the current period, compared to $228.8 million in the year earlier period. Operating income for the segment declined $4.1 million from the second quarter of last year to $17.6 million. These results reflect decreased sales and operating income at Sloss Industries and JW Aluminum. Continued weakness in the domestic steel industry significantly impacted Sloss' revenues, which were down $7.7 million for the quarter, while operating income declined $4.5 million from the year-ago period. JW Aluminum revenues declined $14.1 million in the current quarter while operating income declined $3.1 million from the year earlier period, principally due to reduction in demand for its fin stock products used in air conditioners. However, the segment's performance was helped by strong results at U.S. Pipe, where operating income improved 28% during the current quarter on 10% higher revenues, reflecting strong demand for its ductile iron pipe products and continuing cost reductions and productivity improvements.
Operating income for the Energy Services segment, comprised of the operations of AIMCOR, was $9.7 million in the second quarter of 2001 on revenues of $112.5 million. Higher revenues and operating income versus the prior year reflect delays of petroleum coke shipments from the first quarter of 2001 into the second quarter. AIMCOR's results also reflect significant ongoing productivity improvements, along with cost reductions associated with last year's restructuring of its European operations. These improvements were offset by lower margins -- a number of higher-priced contracts were replaced by contracts with lower margins in the current period -- as well as weaker performance by its metals additive business. The metals additive business continues to be impacted by the distressed domestic steel industry.
The Natural Resources segment, comprised of the coal mining and natural gas operations of Jim Walter Resources, continues to report significant improvements, with $2.8 million in operating income for the quarter compared to a $6.7 million operating loss in the prior year period. Improved profitability in the mining operation was driven by increased shipments and higher coal prices, along with continued reduction of production costs.
The mining operation sold 1.8 million tons of coal at an average price of $28.73 per ton in this year's second quarter, as compared to 1.4 million tons at $27.82 per ton in the prior year's quarter. Production costs have declined 3.3% from a year ago. The improvement was also driven by significant increases in natural gas prices, which were 44% higher than in the year- earlier quarter. The natural gas operation sold 2.5 billion cubic feet of gas at an average price of $4.84 per million cubic foot in the current quarter, as compared to 2.5 billion cubic feet at $3.36 per million cubic foot in the year-earlier quarter.
The Natural Resources segment expects to benefit from significant increases in coal prices under contract in the second half of the year. Also, despite recent weakness in natural gas prices, the Company expects to continue to benefit from favorable hedges placed in January on approximately 50 percent of forecast production through December 2001.
Operational Excellence Activities
The Company continues to expand its Six Sigma initiative throughout the organization. Forty employees, designated as ``black belts'' and ``green belts,'' are implementing projects expected to generate approximately $14.5 million in annualized cost savings for the Company. Another group of 26 black and green belt candidates has started its training.
The savings identified from the Six Sigma program are in addition to the Company's previously announced $25 million cost reduction program. Six Sigma projects and other cost reduction initiatives are critical components of the Company's previously announced goal of 5% annual productivity improvement.
``We are cutting costs while embracing new ways of thinking. This will grow our business and drive productivity gains,'' DeFosset said. ``The Six Sigma program is helping us reinforce a company-wide commitment to continuous improvement. We are well on our way to establishing this as part of our new culture at Walter Industries.''
Share Repurchases
The Company repurchased approximately 727,200 shares of its common stock during the quarter ended June 30, 2001. Under the existing buyback authorization, $17.2 million remained available to repurchase shares as of June 30, 2001.
Outlook
Based on first-half results, current forecasts and anticipated market conditions, Walter Industries expects to generate 2001 third-quarter earnings in the range of $0.28 to $0.33 per share. The Company has also raised its full year earnings per share expectations to $0.90 to $1.00. |
