Walter Industries Reports Strong Third Quarter Earnings Comparisons From Continuing Operations
EPS From Continuing Operations Reaches $0.14 Versus $0.03 in Prior Year
Charge For Discontinued Operations Taken Against Net Income, As Expected
TAMPA, Fla., March 22 /PRNewswire/ -- Walter Industries, Inc. (NYSE: WLT - news) today reported results for its fiscal third quarter and nine months ended February 28, 1999. (NOTE: Walter Industries' income statements have been restated to reflect operating results of a subsidiary, Jim Walter Resources, Inc., as a discontinued operation. On March 1, 1999, the Company announced its intent to pursue strategic alternatives for the disposition of Jim Walter Resources).
Third Quarter Results
Income from continuing operations (which excludes Jim Walter Resources) and corresponding earnings per share for the third quarter were more than four times greater than in the same prior year period. Income amounted to $6.9 million compared with $1.5 million in the prior year third quarter. Basic and diluted earnings per share were $0.14 compared with $0.03 in the prior year quarter. The number of shares used to calculate earnings were approximately 3.1 million shares lower for the current quarter as a result of the Company's ongoing share repurchase program.
''As expected, results from continuing operations demonstrated the significant earnings contributions of our four core business lines: homebuilding and financing, pipe manufacturing, specialty industrial products and energy services,'' said Kenneth E. Hyatt, Walter Industries' Chairman and Chief Executive Officer. ''Unfortunately, their very positive contributions in recent quarters have been overshadowed by the challenges of our coal mining operations. As previously announced, we have now taken definitive steps toward the disposition of this non-core business and toward a heightened focus on core operations which offer greater potential for sustainable earnings growth.''
Net sales and revenues from continuing operations totaled $352.6 million compared with $377.0 million in the prior year third quarter.
Operating income from continuing operations rose 13% to $40.0 million compared with $35.4 million a year earlier. Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) totaled $57.6 million versus $52.5 million in the year ago period, a 10% increase.
After incurring an operating loss from the discontinued Jim Walter Resources operations, including a non-recurring charge associated with the shutdown of one of the company's four coal mines, partially offset by a gain from a reduction in post-retirement benefit liabilities (see attached financial tables for detail), Walter Industries reported a consolidated net loss of $10.9 million, or $0.21 per share for the quarter, compared with net income of $7.7 million, or $0.14 per share in the prior year period.
Hyatt noted that the current quarter results were net of $10.2 million, or $0.19 per share of goodwill amortization (net of income tax benefit) which is deducted from both operating and net income. The bulk of this goodwill is a carryover from the Company's 1987 leveraged buyout. Goodwill in last year's third quarter totaled $10.5 million, or $0.18 per share.
Underscoring management's confidence in Walter Industries' future earnings potential, Hyatt said that the Company repurchased approximately 318,000 shares of its common stock during the current third quarter, as well as an additional 221,000 shares since the close of the quarter, bringing to 3,194,200 the total number of shares repurchased under a stock buyback program authorized by the Company's Board of Directors last July. Combined with 1,387,092 shares purchased in a privately negotiated transaction in June 1997, the Company has now repurchased a total of 4,581,292 shares, representing an investment of more than $67 million.
Nine Month Results
Income from continuing operations for the nine months ended February 28 rose 124% to $30.9 million from $13.8 million a year ago. Earnings per share from continuing operations were $0.59 versus $0.25 per diluted share last year, a 136% increase.
Nine month sales and revenues from continuing operations were 14% higher at $1.19 billion compared with $1.04 billion in the prior year. Operating income rose 35% to $136.1 million compared with $100.9 million last year. EBITDA amounted to $194.7 million versus $153.8 million, a 27% increase.
After absorbing the loss from the discontinued operation in the third quarter, and including a previously reported gain in the fiscal second quarter from the sale of the Company's JW Window Components subsidiary, nine month net income was $17.8 million, or $0.34 per share compared with $31.8 million, or $0.58 per diluted share in the prior year nine months.
Cash flows from continuing operations, less amounts used in investing activities (and excluding acquisitions and divestitures), amounted to $237.0 million in the current nine months compared with $78.6 million a year ago. The current nine month amount includes the release, in the fiscal first quarter, of $121.6 million of funds previously held by Mid-State Trust II. These funds were used to pay down indebtedness of Mid-State Trust IV.
Capital expenditures for continuing operations amounted to $39.3 million for the current nine months versus $36.7 million in the prior year period.
Third Quarter Results by Operating Segment
Operating income was sharply higher based on the following segment results:
* Homebuilding and Financing operating income was 10% higher on the strength of increased mortgage portfolio income, an increase in home completions and 7% higher average home selling prices. Revenues rose 2%. Jim Walter Homes and its affiliated homebuilding operations reported 864 unit completions for the quarter at an average net selling price of $52,800 versus 856 homes at an average price of $49,500 in the comparable period last year. As an indication of future homebuilding activity, Jim Walter Homes ended the quarter with 2,401 orders in backlog compared with 1,894 homes a year earlier, a 27% increase.
* Water Transmission Products generated a $9.5 million improvement in operating income, from a $2.9 million loss in the prior year third quarter to a $6.6 million contribution in the current year. This strong performance largely resulted from the success of ongoing margin improvement programs underway at the Company's U.S. Pipe and Foundry subsidiary, as well as from higher selling prices, lower raw material costs and increased demand for its ductile iron pressure pipe used in the nation's water transmission systems. Sales and revenues were 4% higher for the quarter.
* The Industrial Products Group generated 14% higher operating income on the strength of higher shipments and margin improvement at JW Aluminum Company, the largest of the segment's four operating subsidiaries. Revenues were 4% lower; however, prior year revenues included $7 million from JW Window Components, a former subsidiary that was sold in November 1998.
* Energy Services, comprised of the operations of Applied Industrial Materials Corporation (AIMCOR), reported operating earnings of $3.0 million in the wake of extreme volatility in its global energy and steel markets. Unfavorable sales and earnings comparisons with the prior year third quarter were attributable to two principal factors: a steep -- and short-lived -- decline in U.S. and European steel production which affected pricing and demand for AIMCOR's petroleum coke and specialty metal products during the quarter; and a temporary slowdown in petroleum coke shipments and higher bulk handling costs at the company's Texas Gulf Coast terminals and services operations, which were damaged last fall by severe weather conditions. Given the present recovery in its served steel markets and improvements to its terminal operations following last fall's adverse weather, AIMCOR is now benefiting from more normalized conditions, similar to those experienced in the fiscal second quarter, and appears on pace to generate materially higher income for the current fiscal fourth quarter. |
