EX-99.1 2 v073535_ex99-1.htm
 
Walter Industries, Inc. Announces First Quarter 2007 Results

- Earnings from Continuing Operations of $0.61 Per Diluted Share -

- Jim Walter Resources Produced 1.67 Million Tons of Metallurgical Coal -

- Substantial Portion of New Metallurgical Coal Contracts Settled at an Average of Approximately $101 Per Metric Ton -

TAMPA, Fla., May 2 /PRNewswire-FirstCall/ -- Walter Industries, Inc. (NYSE: WLT) today reported net income of $29.6 million, or $0.56 per diluted share for the first quarter ended March 31, 2007. Income from continuing operations for the first quarter, which excludes the discontinued operations of Crestline Homes, totaled $32.1 million, or $0.61 per diluted share, compared with income from continuing operations of $36.8 million, or $0.74 per diluted share in the first quarter last year.
"We are pleased with our first quarter 2007 results," said Walter Industries Chairman Michael T. Tokarz. "Coal production was very strong and metallurgical coal shipments improved sequentially and versus the prior-year period. In addition, our Financing business continued to perform extremely well by achieving low delinquency and foreclosure rates during the quarter."
The Company also announced that Jim Walter Resources has settled a substantial portion of its annual metallurgical coal contracts for the July 2007-to-June 2008 contract period. Based on the settlements to date, new contract pricing is expected to average approximately $101 per metric ton, FOB Port of Mobile.
"We have settled contracts with most of our major European and South American customers," said Jim Walter Resources Chief Executive Officer George R. Richmond. "Our realized prices and increases in committed tons from our customers in the coming year reinforce our well-established position that Blue Creek coal is one of the highest quality and most strategically located coking coals in the world."

First Quarter 2007 Financial Results
Net sales and revenues from continuing operations for the first quarter totaled $320.3 million, up from $313.1 million in the prior-year period, primarily stemming from higher unit selling prices at Homebuilding. In addition, average coal pricing was higher, as the prior year included lower-priced steam coal sales. These increases were partially offset by lower prepayment income at Financing and lower natural gas pricing.
Operating income from continuing operations for the first quarter totaled $61.1 million compared to $68.3 million in the first quarter 2006. Results in the current-year period primarily reflect higher expenses at Jim Walter Resources including freight, post-retirement healthcare costs and depreciation. In addition, the Company incurred $3.2 million of start-up expenses at Kodiak Mining. These unfavorable impacts were partially offset by increased profits generated from higher metallurgical coal sales volumes and strong coal production during the quarter.
Income from continuing operations for the first quarter totaled $32.1 million compared to $36.8 million in the first quarter 2006. Along with the previously noted revenue and operating income impacts, results for the current-year period also reflect a $5.1 million reduction in interest expense, primarily due to lower bank debt and the conversion of nearly all of the Company's convertible debt into equity in the fourth quarter 2006. Interest expense in the current-year period includes $2.0 million of ongoing non-cash interest on certain tax-related accruals and a $0.5 million non-cash write-off of unamortized debt expense due to the optional prepayment of bank term debt. In addition, income tax expense in the current-year period includes a $4.4 million write-off of certain deferred tax assets that are no longer considered realizable.

 
 
 
First Quarter Results by Operating Group
 
Natural Resources & Sloss
Natural Resources, which includes the operations of Jim Walter Resources and Kodiak Mining, reported revenues of $170.2 million in the first quarter, up slightly versus the same period last year. Prices for metallurgical coal were lower in the current quarter; however, average coal sales prices were higher due to the elimination of lower-priced steam coal sales from the prior-year period. Coal sales volumes declined slightly and natural gas prices were lower versus last year's first quarter, partially offsetting the higher average coal pricing.
Natural Resources reported operating income of $56.4 million in the first quarter, compared to $63.9 million in the prior-year period. Results in the current-year period include $2.3 million in increased freight costs, $2.1 million in higher post-retirement healthcare costs, $2.0 million in higher depreciation expense, as well as previously mentioned start-up expenses at Kodiak. In addition, Jim Walter Resources incurred $2.7 million of incremental expenses related to the new labor contract with the United Mine Workers of America (UMWA), which was more than offset by positive volume variances due to strong production performance at both Mine Nos. 4 and 7 in the current quarter. The unfavorable impacts were also partially offset by increased profits on higher metallurgical coal sales volumes.
Jim Walter Resources sold 1.5 million tons of metallurgical coal during the first quarter at an average price of $100.34 per short ton FOB port, compared to 1.2 million tons of metallurgical coal at an average price of $112.70 per ton during the same period last year. During the current quarter, average realized sales prices were negatively impacted by approximately $2.3 million, or $1.50 per short ton, of increased demurrage charges primarily resulting from delays caused by dredging activity at the Port of Mobile late in the quarter.
The natural gas operation sold 1.9 billion cubic feet of gas at an average price of $7.92 per thousand cubic feet in the first quarter 2007. Natural gas volumes were up slightly on strong production from Mine Nos. 4 and 7, offsetting the reduction of gas production from Mine No. 5. Natural gas prices realized in the current-year period include the benefit of hedging approximately 33 percent of production at an average price of $10.28 per thousand cubic feet, compared with approximately 76 percent of production hedged in the prior-year period at an average of $9.29. Realized market prices in the current-year period averaged $6.71 per thousand cubic feet versus $8.82 in the prior-year period.
Jim Walter Resources produced 1.7 million tons of coal at Mine Nos. 4 and 7 in the quarter, up 0.5 million tons sequentially and up 0.1 million tons versus the first quarter 2006 on a comparable mine basis. Production in the prior-year period included 0.3 million tons from Mine No. 5, which ceased operations in December 2006 as planned. Average coal production costs at Mine Nos. 4 and 7 of $39.82 per ton rose $5.21 per ton versus the prior-year period, primarily as a result of higher labor costs. Increased labor costs were driven by the impacts of the new UMWA contract and the increased personnel required to develop Mine No. 7's 'Southwest A' panel. Higher labor costs were partially offset by the elimination of Mine No. 5's higher-cost operation and volume improvements at Mine Nos. 4 and 7.
Sloss Industries generated first quarter revenues of $32.8 million, down $0.5 million from the prior-year period, and operating income of $1.3 million, down $0.9 million from the prior-year period. Sloss' results for the quarter reflect slightly higher coke volumes which were more than offset by lower pricing as well as higher selling, general and administrative costs.

 
 
 
Financing & Homebuilding
The Financing and Homebuilding group reported combined revenues of $115.9 million for the first quarter 2007, compared to $111.3 million in the prior-year period. The $4.6 million increase was primarily due to higher average on-your-lot selling prices at Homebuilding, partially offset by lower prepayment income at Financing.
Combined operating income was $7.9 million for the quarter, compared to operating income of $8.1 million in last year's first quarter. Operating income for the quarter reflects a $1.1 million reduction in prepayment income, $1.3 million in higher stock option expenses and a $0.6 million increase in provision for losses on instalment notes. Approximately $0.5 million of the increase in provision for losses is the result of portfolio growth. These unfavorable impacts were partially offset by improved gross margins at Homebuilding.
Financing continued its strong financial performance in the first quarter as delinquencies on the mortgage portfolio were 3.4 percent at March 31, 2007, an improvement of 100 basis points from Dec. 31, 2006 and 30 basis points compared to March 31, 2006. In addition, foreclosures declined 18 percent and "Real Estate Owned" inventory was 11 percent lower on a quarter-over-quarter basis.
At Homebuilding, on-your-lot completions totaled 634 units in the first quarter, down 3 percent versus the same period last year. Average on-your-lot net selling prices increased 16.3 percent over the prior-year period to $98,000. For the current period, new sales orders, net of cancellations, were 656, up 26.2 percent compared to the first quarter last year.
"Our delinquency rates are at historical low levels, despite troubles elsewhere in the subprime lending industry, primarily as a result of our consistent underwriting and strong mortgage servicing platform," said Financing and Homebuilding Chief Executive Officer Mark J. O'Brien. "We continue to make progress at Homebuilding, which generated a 330 basis-point improvement in gross margins and a more than 26 percent increase in net new sales orders."

Other
Results in the "Other" segment, comprised of the Company's corporate expenses and land subsidiaries, improved by approximately $0.8 million in the first quarter, driven by lower salaries expense and professional fees, partially offset by higher stock option expenses.

Conference Call Web cast
Members of the Company's leadership team will discuss Walter Industries' first quarter 2007 results, its business drivers for the balance of 2007 and other general business matters during a conference call and live Web cast to be held on Thursday, May 3, 2007, at 10 a.m. Eastern Daylight Time. To listen to the event live or in archive, visit the Company Web site at www.walterind.com.

About Walter Industries
Walter Industries, Inc., based in Tampa, Fla., is a leading producer and exporter of metallurgical coal for the global steel industry and also produces steam coal, coal bed methane gas, furnace and foundry coke and other related products. The Company also operates a mortgage financing and affordable homebuilding business. The Company has annual revenues of approximately $1.3 billion and employs approximately 2,800 people. For more information about Walter Industries, please visit the Company Web site at www.walterind.com.

Safe Harbor Statement
Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks include, among others, changes in customers' demand for the Company's products, changes in raw material, labor, equipment and transportation costs and availability, geologic and weather conditions, changes in extraction costs and pricing in the Company's mining operations, changes in customer orders, pricing actions by the Company's competitors, changes in law, potential changes in the mortgage-backed capital markets, and general changes in economic conditions. Those risks also include the timing of and ability to execute any strategic actions that may be pursued. Risks associated with forward-looking statements are more fully described in the Company's filings with the Securities and Exchange Commission. The Company assumes no duty to update its forward-looking statements as of any future date.

 
 
 
 WALTER INDUSTRIES, INC. AND SUBSIDIARIES  
 CONSOLIDATED STATEMENTS OF OPERATIONS  
 ($ in Thousands)  
Unaudited  
   
For the three months
  
   
ended March 31,
  
   
2007
  
 2006
  
Net sales and revenues:
           
Net sales
  
$
259,387
  
$
254,474
  
Interest income on instalment notes
    
49,565
    
50,530
  
Miscellaneous
    
11,342
    
8,070
  
     
320,294
    
313,074
  
Costs and expenses:
              
Cost of sales (exclusive of depreciation)
    
171,640
    
163,792
  
Depreciation
    
10,630
    
8,434
  
Selling, general and administrative
    
37,451
    
35,174
  
Provision for losses on instalment notes
    
2,897
    
2,305
  
Postretirement benefits
    
6,332
    
4,407
  
Interest expense - mortgage-
              
 backed/asset-backed notes
    
29,771
    
29,976
  
Interest expense - corporate debt
    
7,347
    
12,469
  
Amortization of intangibles
    
478
    
697
  
     
266,546
    
257,254
  
Income from continuing operations
              
 before income tax expense
    
53,748
    
55,820
  
Income tax expense (1)
    
21,613
    
19,070
  
Income from continuing operations
    
32,135
    
36,750
  
Discontinued operations (2)
    
(2,510
)
  
(1,451
)
Net income
  
$
29,625
  
$
35,299
  
               
Basic income per share:
              
Income from continuing operations
  
$
0.62
  
$
0.90
  
Discontinued operations
    
(0.05
)
  
(0.04
)
               
Net income
  
$
0.57
  
$
0.86
  
               
Weighted average number of shares outstanding
    
52,012,638
    
40,881,505
  
Diluted income per share:
              
Income from continuing operations
  
$
0.61
  
$
0.74
  
Discontinued operations
    
(0.05
)
  
(0.03
)
               
Net income
  
$
0.56
  
$
0.71
  
               
               
Weighted average number of diluted
              
 shares outstanding
    
52,512,615
    
50,980,570
  

(1)  
Income tax expense for the three months ended March 31, 2007 includes a $4.4 million write-off of certain deferred tax assets no longer considered realizable.
 
(2)  
In the first quarter of 2007, the Company decided to exit the modular home manufacturing business. As a result, the operating results of Crestline Homes have been classified as discontinued operations for the three months ended March 31, 2007 and 2006. The three months ended March 31, 2006 also includes the results of Mueller Water Products, which was spun-off to shareholders in December 2006.
 
 
 
 
 WALTER INDUSTRIES, INC. AND SUBSIDIARIES  
 RESULTS BY OPERATING SEGMENT  
($ in Thousands)  
 Unaudited  
   
For the three months
  
   
ended March 31,
  
   
2007
  
 2006
  
NET SALES AND REVENUES:
           
Natural Resources
  
$
170,175
  
$
169,098
  
Sloss
    
32,801
    
33,285
  
 Natural Resources and Sloss
    
202,976
    
202,383
  
Financing
    
53,747
    
56,019
  
Homebuilding (1)
    
62,133
    
55,288
  
 Financing and Homebuilding Group
    
115,880
    
111,307
  
Other
    
3,518
    
3,163
  
Consolidating Eliminations
    
(2,080
)
  
(3,779
)
   
$
320,294
  
$
313,074
  
OPERATING INCOME (LOSS) FROM
              
 CONTINUING OPERATIONS:
              
Natural Resources
  
$
56,441
  
$
63,925
  
Sloss
    
1,306
    
2,182
  
 Natural Resources and Sloss
    
57,747
    
66,107
  
Financing
    
10,571
    
12,992
  
Homebuilding (1)
    
(2,678
)
  
(4,851
)
 Financing and Homebuilding Group
    
7,893
    
8,141
  
Other
    
(4,545
)
  
(5,314
)
Consolidating Eliminations
    
-
    
(645
)
Operating income from continuing
              
 operations
    
61,095
    
68,289
  
Corporate debt interest expense
    
(7,347
)
  
(12,469
)
Income from continuing operations
              
 before income tax expense
  
$
53,748
  
$
55,820
  
 
(1)  
Excludes Crestline Homes, which is classified as discontinued operations, pending the sale of this business.

 
 
 
 
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Unaudited
 
   
For the three months
ended March 31,
   
2007
 
2006
  
Operating Data:
          
Jim Walter Resources
         
Tons sold by type (in thousands):
          
 Metallurgical coal, contracts
    
1,426
    
1,245
  
 Purchased metallurgical coal
    
96
    
-
  
 Steam coal
    
-
    
298
  
     
1,522
    
1,543
  
Average sale price per short ton:
              
 Metallurgical coal, contracts
  
$
100.34
  
$
112.70
  
 Steam coal
  
$
-
  
$
35.38
  
Total
  
$
100.34
  
$
97.78
  
Tons sold by mine (in thousands):
              
 Mine No.4
    
630
    
856
  
 Mine No.7
    
782
    
516
  
Subtotal
    
1,412
    
1,372
  
 Mine No.5(1)
    
14
    
171
  
Total
    
1,426
    
1,543
  
Coal cost of sales (exclusive of depreciation):
              
 Mine No.4 per ton
  
$
48.89
  
$
48.48
  
 Mine No.7 per ton
  
$
53.29
  
$
49.89
  
Mines No. 4 and No. 7 per ton average
  
$
51.33
  
$
49.01
  
 Mine No.5 per ton (1)
  
$
57.98
  
$
83.31
  
Total average
  
$
51.39
  
$
52.80
  
 Idle mine costs ($ in thousands) (2)
  
$
-
  
$
200
  
 Other costs ($ in thousands) (3) (4)
  
$
12,777
  
$
2,647
  
Tons of coal produced (in thousands)
              
 Mine No.4
    
789
    
770
  
 Mine No.7
    
883
    
779
  
Subtotal
    
1,672
    
1,549
  
 Mine No.5
    
-
    
266
  
Total
    
1,672
    
1,815
  
Coal production costs per ton: (5)
              
 Mine No.4
  
$
37.32
  
$
34.43
  
 Mine No.7
  
$
42.05
  
$
34.79
  
Mines No. 4 and No. 7 average
  
$
39.82
  
$
34.61
  
 Mine No.5
  
$
-
  
$
61.53
  
Total average
  
$
39.82
  
$
38.56
  
Natural gas sales, in mmcf (in thousands)
    
1,863
    
1,831
  
Natural gas average sale price per mmcf
  
$
7.92
  
$
9.29
  
Natural gas cost of sales per mmcf
  
$
2.76
  
$
3.24
  
 
(1)  
Mine No. 5 ceased production in December 2006 as planned. Sales and cost amounts in 2007 resulted from the sale of residual inventory on hand at December 31, 2006.
 
(2)  
Idle mine costs are charged to period expense when incurred.
 
(3)  
Consists of charges (credits) not directly allocable to a specific mine and cost related to purchased coal.
 
(4)  
The three months ended March 31, 2007 includes $8.2 million of purchased coal.
 
(5)  
Coal production costs per ton are a component of inventoriable costs, including depreciation. Other costs of sales not included in coal production costs per ton include Company-paid outbound freight, postretirement benefits, asset retirement obligation expenses, royalties and Black Lung excise taxes.
 
 
 
 
 
WALTER INDUSTRIES, INC. AND SUBSIDIARIES  
SUPPLEMENTAL INFORMATION  
 Unaudited  
   
 For the three months
  
   
ended March 31,
  
   
2007
  
 2006
  
Operating Data (continued):
           
Sloss Industries
           
 Furnace and foundry coke tons sold
    
108,955
    
101,010
  
 Furnace and foundry coke average sale
              
 price per ton
  
$
216.55
  
$
222.71
  
 Fiber tons sold
    
25,152
    
24,976
  
 Fiber price per ton
  
$
266.79
  
$
261.44
  
Financing
              
 Delinquencies, as of period end
    
3.4
%
  
3.7
%
 Prepayment speeds
    
8.1
%
  
9.1
%
Homebuilding (excluding Crestline)
              
 New sales contracts
    
740
    
648
  
 Cancellations
    
84
    
128
  
 Unit completions
    
634
    
654
  
 Average sale price
  
$
98,000
  
$
84,300
  
 Ending backlog of homes
    
1,535
    
1,916
  
Depreciation ($ in thousands):
              
 Natural Resources
  
$
7,800
  
$
5,845
  
 Sloss
    
916
    
940
  
 Financing
    
281
    
342
  
 Homebuilding
    
1,234
    
1,082
  
 Other
    
399
    
225
  
   
$
10,630
  
$
8,434
  
Capital expenditures ($ in thousands):
              
 Natural Resources
  
$
21,897
  
$
24,148
  
 Sloss
    
2,120
    
2,034
  
 Financing
    
31
    
44
  
 Homebuilding
    
1,240
    
1,200
  
 Other
    
239
    
504
  
   
$
25,527
  
$
27,930
  
 
 
 
 
 
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED BALANCE SHEETS
($ in Thousands)
 Unaudited
   
March 31,
  
December 31,
  
   
2007
  
2006
  
ASSETS
          
Cash and cash equivalents
  
$
100,902
  
$
127,369
  
Short-term investments, restricted
    
84,306
    
90,042
  
Instalment notes receivable, net of
              
allowance of $12,640 and
              
$13,011, respectively
    
1,803,732
    
1,779,697
  
Receivables, net
    
75,563
    
85,094
  
Inventories
    
113,896
    
105,527
  
Prepaid expenses
    
27,360
    
29,727
  
Property, plant and equipment, net
    
324,908
    
310,163
  
Other long-term assets
    
135,561
    
135,274
  
Goodwill
    
10,895
    
10,895
  
Assets of discontinued operations
    
10,977
    
10,327
  
   
$
2,688,100
  
$
2,684,115
  
LIABILITIES AND STOCKHOLDERS' EQUITY
              
Accounts payable
  
$
67,635
  
$
62,323
  
Accrued expenses
    
70,857
    
94,930
  
Accrued interest on debt
    
15,460
    
17,053
  
Debt:
              
Mortgage-backed/asset-backed notes
    
1,737,168
    
1,736,706
  
Corporate debt
    
220,979
    
249,491
  
Accumulated postretirement benefits
              
obligation
    
331,172
    
330,241
  
Other long-term liabilities
    
212,554
    
189,458
  
Liabilities of discontinued
              
operations
    
3,836
    
2,005
  
Total liabilities
    
2,659,661
    
2,682,207
  
Stockholders' equity
    
28,439
    
1,908
  
   
$
2,688,100
  
$
2,684,115
  
 
 
 
 

WALTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2007
($ in Thousands)
Unaudited
            
 Capital in
  
 
  
       
 Common
  
 Excess of
  
 Comprehensive
  
   
Total
  
 Stock
  
 Par Value
  
 Income
  
Balance at December 31, 2006
  
$
1,908
  
$
728
  
$
757,699
        
Adjustment to initially apply FIN
                          
 No. 48 (1)
    
(4,421
)
                  
Adjusted balance at January 1, 2007
  
$
(2,513
)
$
728
  
$
757,699
        
Comprehensive income:
                          
Net income
    
29,625
              
$
29,625
  
Other comprehensive income (loss),
                          
 net of tax:
                          
Amortization of prior service cost
                          
 and actuarial loss on post-
                          
 retirement benefits obligation
    
2,025
                
2,025
  
 Net unrealized loss on hedges
    
(2,304
)
              
(2,304
)
Comprehensive income
                    
$
29,346
  
Retirement of treasury stock
    
-
    
(208
)
  
(259,901
)
      
Stock issued upon the exercise of
                          
 stock options
    
219
          
219
        
Tax benefit on the exercise of stock
                          
 options
    
1,062
          
1,062
        
Dividends paid, $0.05 per share
    
(2,606
)
        
(2,606
)
      
Stock-based compensation
    
3,723
          
3,723
        
Other
    
(792
)
                  
Balance at March 31, 2007
  
$
28,439
  
$
520
  
$
500,196
        
 
(1)  
The Company adopted FIN No. 48, "Accounting for Uncertainty in Income Taxes," as required on January 1, 2007. Upon adoption, the Company recognized a $4.4 million increase to the beginning accumulated deficit to reflect a necessary increase to the accrual for uncertain tax positions.
 
 
 
 
 
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2007
($ in Thousands)
Unaudited
            
 Accumulated
  
 
           
 Other
  
            
 Comprehensive
  
   
Accumulated
  
 Treasury
  
 Income
  
   
Deficit
  
 Stock
  
 (Loss)
  
Balance at December 31, 2006
  
$
(398,564
)
$
(259,317
)
$
(98,638
)
Adjustment to initially apply FIN
                    
 No. 48 (1)
    
(4,421
)
            
Adjusted balance at January 1, 2007
  
$
(402,985
)
$
(259,317
)
$
(98,638
)
Comprehensive income:
                    
Net income
    
29,625
              
Other comprehensive income (loss),
                    
 net of tax:
                    
Amortization of prior service cost
                    
 and actuarial loss on post-
                    
 retirement benefits obligation
                
2,025
  
Net unrealized loss on hedges
                
(2,304
)
Comprehensive income
                    
Retirement of treasury stock
          
260,109
        
Stock issued upon the exercise of
                    
 stock options
                    
Tax benefit on the exercise of stock
                    
 options
                    
Dividends paid, $0.05 per share
                    
Stock-based compensation
                    
Other
          
(792
)
      
Balance at March 31, 2007
  
$
(373,360
)
$
-
  
$
(98,917
)
 
(1)  
The Company adopted FIN No. 48, "Accounting for Uncertainty in Income Taxes," as required on January 1, 2007. Upon adoption, the Company recognized a $4.4 million increase to the beginning accumulated deficit to reflect a necessary increase to the accrual for uncertain tax positions.
 
 
 
 
WALTER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
$ in Thousands
Unadited

   
 For the three months ended March 31,  
  
   
2007
  
2006
  
OPERATING ACTIVITIES
      
Net income
  
$
29,625
  
$
35,299
  
Loss from discontinued operations
    
2,510
    
1,451
  
Income from continuing operations
    
32,135
    
36,750
  
Adjustments to reconcile income from
              
 continuing operations to net cash
              
 provided by operations:
              
 Provision for losses on instalment
              
 notes receivable
    
2,897
    
2,305
  
 Depreciation
    
10,630
    
8,434
  
 Provision for deferred income taxes
    
21,613
    
15,922
  
 Other
    
1,060
    
3,742
  
Decrease (increase) in assets:
              
 Receivables
    
10,535
    
(24,937
)
 Inventories
    
(8,369
)
  
(1,673
)
 Prepaid expenses
    
3,078
    
4,049
  
 Instalment notes receivable, net
    
(20,540
)
  
(4,112
)
Increase (decrease) in liabilities:
              
 Accounts payable
    
4,255
    
(560
)
 Accrued expenses
    
(24,195
)
  
(6,720
)
 Accrued interest
    
(1,593
)
  
(360
)
 Cash flows provided by operating
              
 activitiies
    
31,506
    
32,840
  
INVESTING ACTIVITIES
              
 Purchases of loans
    
(18,107
)
  
(39,120
)
 Principal payments received on
              
 purchased loans
    
11,715
    
7,970
  
 Decrease in short-term investments,
              
 restricted
    
5,736
    
40,131
  
 Additions to property, plant and
              
 equipment
    
(25,527
)
  
(27,930
)
 Other
    
26
    
288
  
 Acquisitions, net of cash acquired
    
-
    
10,500
  
 Cash flows used in investing
              
 activities
    
(26,157
)
  
(8,161
)
FINANCING ACTIVITIES
              
 Issuances of mortgage-backed/asset-
              
 backed notes
    
59,250
    
-
  
 Payments of mortgage-backed/asset-
              
 backed notes
    
(58,816
)
  
(66,781
)
 Retirements of corporate debt
    
(28,512
)
  
(103,781
)
 Dividends paid
    
(2,606
)
  
(1,568
)
 Tax benefit on the exercise of
              
 employee stock options
    
1,062
    
4,051
  
 Issuance of common stock
    
-
    
168,829
  
 Other
    
326
    
11,654
  
 Cash flows provided by (used in)
              
 financing activities
    
(29,296
)
  
12,404
  
 Cash flows provided by (used in)
              
 continuing operations
  
$
(23,947
)
$
37,083
  
CASH FLOWS FROM DISCONTINUED OPERATIONS
              
 Cash flows used in operating
              
 activities
  
$
(2,510
)
$
(6,306
)
 Cash flows used in investing
              
 activities
    
-
    
(28,536
)
 Cash flows provided by financing
              
 activities
    
-
    
6,579
  
 Cash flows used in discontinued
              
 operations
  
$
(2,510
)
$
(28,263
)
Net increase (decrease) in cash and
              
 cash equivalents
  
$
(26,457
)
$
8,820
  
Cash and cash equivalents at
              
 beginning of period
  
$
127,369
  
$
64,424
  
Add: Cash and cash equivalents of
              
 discontinued operations at beginning
              
 of period
    
1
    
72,972
  
Net increase (decrease) in cash and
              
 cash equivalents
    
(26,457
)
  
8,820
  
Less: Cash and cash equivalents of
              
 discontinued operations at end of
              
 period
    
11
    
50,885
  
Cash and cash equivalents at end of
              
 period
  
$
100,902
  
$
95,331
  
 
 
 
 
SOURCE Walter Industries, Inc.
-0- 05/02/2007
/CONTACT: Investor Contact, Mark H. Tubb, Vice President - Investor Relations, +1-813-871-4027, or mtubb@walterind.com; or Media Contact, Michael A. Monahan, Director - Corporate Communications, +1-813-871-4132, or mmonahan@walterind.com /
/First Call Analyst: /
/FCMN Contact: jadkins@walterind.com /
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