Walter Industries Reports First Quarter EPS of $0.13, Well Ahead of Estimates
--First Quarter EPS Exceeds Prior Year Period By 30%-- --Company Raises EPS Expectations for Full Year to $0.80 - $0.90--
TAMPA, Fla., April 24 /PRNewswire Interactive News Release/ -- Walter Industries, Inc. (NYSE: WLT - news) today reported earnings of $0.13 per share for the quarter ended March 31, 2001. These results exceeded the prior year's first quarter by 30% and the Company's previously announced projection for the quarter of $0.07 to $0.10 per share. Improved results were due to strong performances by the United States Pipe and Foundry Company, Inc. and Jim Walter Resources, Inc. subsidiaries. Results for the quarter ended March 31, 2001 are the first to be reported in accordance with the Company's change to a December 31 fiscal year-end.
``We continue to make great progress in delivering meaningful improvement in operating results and, at the same time, advancing the implementation of strategic initiatives aimed at unlocking shareholder value,'' said President and Chief Executive Officer Don DeFosset. ``While the current economic climate presents challenges to a number of our operating subsidiaries, we are taking necessary action to meet these challenges and to take advantage of opportunities we have in this environment.''
First Quarter 2001 Financial Results
Net income was $5.8 million, or $0.13 per basic and diluted share, during the quarter ended March 31, 2001. This compares with net income in the comparable period of last year of $4.8 million, or $0.10 per basic and diluted share, before a non-recurring credit of $2.4 million. These results principally reflect improved operating income at U.S. Pipe and Jim Walter Resources, reduced corporate expenses, a lower income tax rate and reduced shares outstanding as a result of share buybacks. Reduced mortgage prepayments and the impact of the current U.S. economic slowdown resulted in lower operating income at several of the Company's other subsidiaries, partially offsetting the positive results at U.S. Pipe and Jim Walter Resources.
Net sales and revenues were essentially flat for the quarter at $463.5 million. Revenue growth within the Industrial Products and Natural Resources segments was offset by a decline in unit sales of homes and time charge income. Also, volumes for the Energy Services segment declined due to delayed timing of petroleum coke shipments.
Earnings before senior debt interest, taxes, depreciation, amortization and non-cash OPEB (EBITDA) totaled $52.3 million during the first quarter, compared with $53.7 million in the comparable prior period before the non- recurring credit.
Results By Operating Segment
The Homebuilding and Financing segment reported quarterly revenues of $112.7 million compared with $122.2 million in the year-ago period. Operating income decreased $2.3 million, to $10.1 million, due principally to a $2.2 million decline in time charge income associated with lower prepayments. Prepayment speeds were 4.7% in the first quarter, compared to 5.3% in the prior-year period. Improved operating margins on homebuilding, attributable to lower materials costs and other expense reductions, were offset by lower revenues from fewer unit completions in the current quarter. Jim Walter Homes and its affiliated homebuilding operations completed 924 homes during the current quarter at an average net selling price of $58,500, compared with 1,065 homes at a $57,700 average price for the same period last year.
The Company's Industrial Products segment posted $197.7 million in revenues during the current period, compared to $196.5 million in the year earlier period. Operating income for the segment declined $3.4 million from the first quarter of last year to $14.8 million. Operating income at U.S. Pipe improved 16% during the current quarter on 14% higher revenues, reflecting strong demand for its ductile iron pipe products and continuing productivity improvements. However, this was more than offset by other decreases in operating income, primarily at Sloss Industries Corporation. Recent weakness in the domestic steel industry, caused by competition from foreign suppliers and a slowing economy, has significantly impacted sales at Sloss. Sloss' revenues decreased $6.7 million and operating income declined $3.8 million from last year, principally due to reduced sales of furnace coke. JW Aluminum also experienced lower shipments during the current quarter, principally due to weather-related delays in seasonal demand for its fin stock products used in air conditioning applications, and energy costs that were $1.1 million higher than last year's first quarter.
Operating income of the Energy Services segment, comprised of the operations of AIMCOR, was $5.2 million in the first quarter of 2001 on revenues of $85.6 million. Lower revenues and operating income versus the prior year reflect lower margins per ton and first quarter delays of petroleum coke shipments that are now expected in the second quarter of this year. Reduced margins were primarily due to higher priced contracts being replaced at lower margins in the current period. The metals additive business is also down due to the current distressed situation of the domestic steel industry. AIMCOR has been successful recently in winning new contracts for in-refinery servicing at three major U.S. refineries. AIMCOR also secured the rights to market 1.3 million tons of petroleum coke from a major U.S. refiner beginning in 2002.
The Natural Resources segment, comprised of the coal mining and methane gas operations of Jim Walter Resources, Inc., reported a significant improvement in results for the quarter with $0.6 million in operating income, compared to an $8.3 million operating loss in the prior year period. This improvement was principally driven by significant increases in natural gas prices that were 175% higher than in the year-earlier quarter. The methane gas operation sold 2.3 billion cubic feet of gas at an average price of $6.84 per million cubic foot in the current quarter, as compared to 2.4 billion cubic feet at $2.49 per million cubic foot in the year-earlier quarter. As a result of first quarter sales and hedging transactions, the methane gas operation has already locked in over 50% of its estimated 2001 production at selling prices 60% greater than 2000 prices. Jim Walter Resources' mining operations also continue to show significant improvement as average production costs have declined 5% from a year ago. As announced earlier this month, Jim Walter Resources has negotiated price increases of up to 35% over last year's business during the current contract renewal period, which occurs between March and June of each year. These new contracts are expected to come online between May and July of 2001.
Operational Excellence Activities
The Company remains on track with its previously announced cost reduction and productivity enhancement efforts. Forty-five employees, designated as ``black belt'' and ``green belt'' candidates, have completed an intensive training program in Six Sigma and Lean Manufacturing methodologies and are currently working on cost reduction and quality improvement projects in both manufacturing and transactional areas of the Company. These employees have identified and are working on projects that will enable the Company to achieve its goal of 5% annual productivity improvement. These ongoing efforts reinforce a company-wide culture of continuous improvement.
``The Company continues to make progress in other operational initiatives. We are aggressively implementing action plans to take advantage of the Natural Resources segment's recent strong recovery in coal and gas prices, as well as to offset the economy's impact on furnace coke volumes at our Sloss subsidiary. For example, the carbon-related businesses are exploring a number of previously untapped marketing and administrative synergies and were recently successful in identifying additional export sales opportunities for Sloss' furnace coke. This partially mitigates the reduced domestic demand for this product,'' said DeFosset.
Divestiture Update
The Company is currently negotiating with interested parties for a potential sale of its JW Aluminum Company subsidiary. As previously announced, the Company believes that should an acceptable offer be received, a transaction could be finalized during the first half of 2001.
Share Repurchases
The Company repurchased approximately 526,900 shares of its common stock during the quarter ended March 31, 2001. As recently announced, the Walter Industries Board of Directors increased the amount available under its buyback program to $25 million, of which $22.7 remains available to repurchase shares.
Outlook
Based on results for the first quarter, current forecasts and anticipated market conditions, Walter Industries expects to generate 2001 second quarter earnings in the range of $0.23 to $0.26 per share. The Company has also raised its full-year earnings per share expectations to $0.80 to $0.90. These projections do not factor in the potential impact of divestitures or a change in goodwill accounting.
Stockholders Meeting
The Annual Meeting of Stockholders for 2001 will be held April 26, 2001, at 10:00 a.m. at the Marriott Tampa Waterside in Tampa, Florida.
Conference Call Webcast
Walter Industries President and CEO Don DeFosset and members of the Company's leadership team will discuss quarterly results and other general business matters on a conference call and live Webcast to be held on Wednesday, April 25, 2001, at 9:00 a.m. EDT. To listen to the event live or in archive, visit the Company Web site at www.walterind.com. |
