Exhibit 99.1

FOR IMMEDIATE RELEASE	Investors Contact: Mark H. Tubb,
July 29, 2008	Vice President - Investor Relations
	813-871-4027
	mtubb@walterind.com
	Media Contact: Michael A. Monahan
	Director - Corporate Communications
	813-871-4132
	mmonahan@walterind.com

WALTER INDUSTRIES, INC. ANNOUNCES SECOND QUARTER 2008 EARNINGS

OF $0.94 PER DILUTED SHARE

[ PR Newswire  ·  2008-07-28 ]

- Operating Income at Natural Resources and Sloss Up 214 Percent -

- Company Affirms 2008 Metallurgical Coal Production Outlook of 6.7 - 7.1 Million Tons

and Projects Sales of 7.0 - 7.2 Million Tons -

- Separation of Financing and Homebuilding Businesses Remains on Track For Year End -

TAMPA, Fla., July 28 /PRNewswire-FirstCall/ -- Walter Industries, Inc. (NYSE: WLT), a leading producer and exporter of U.S. metallurgical coal for the global steel industry, today reported net income of $50.8 million, or $0.94 per diluted share, for the quarter ended June 30, 2008 compared to $18.1 million, or $0.34 per diluted share, in the second quarter 2007.

"Our overall financial performance in the quarter was outstanding, particularly in our core Natural Resources and Sloss businesses, which reported their best quarterly performance ever," said Walter Industries Chairman Michael T. Tokarz. "These results have set the table for what we expect to be the most profitable year in Walter Industries' history."

He added, "We continue to make meaningful advances in executing the growth strategy of our core coal business and have also made significant progress toward the planned separation of the Financing and Homebuilding businesses."

Second Quarter 2008 Financial Results

Net sales and revenues for the second quarter 2008 totaled $370.0 million, up 24.8 percent from the prior-year period, driven by higher metallurgical coal and coke pricing, as well as improved sales volumes of both mined and purchased coal. These increases were partially offset by declines in unit deliveries at Homebuilding.

Operating income from continuing operations for the second quarter 2008 totaled $82.3 million compared to $33.0 million in the second quarter 2007. Operating income in the current period was higher primarily on strong metallurgical coal and coke pricing, as well as increased sales volumes.

Second Quarter Results by Operating Group

Natural Resources & Sloss

The Natural Resources & Sloss group generated combined revenues of $290.7 million in the second quarter, up 68.9 percent versus the prior-year period. Results include a $16.50 per short ton increase in average metallurgical coal selling prices on 1.7 million tons sold in the quarter, which includes 0.2 million tons of purchased coal sales. Second quarter 2008 results also include increased metallurgical coke pricing at Sloss.

Natural Resources & Sloss reported combined operating income of $79.7 million in the second quarter compared to $25.3 million in the prior-year period. Operating income in the current-year period reflects the pricing and volume improvements at Jim Walter Resources and the increase in coke prices at Sloss, partially offset by higher freight and royalty costs associated with additional coal shipments and higher raw material coal costs at Sloss.

"We generated strong production during the second quarter, resulting in 3.0 million tons of met coal production in the first half of 2008, which was at the top end of our previously communicated expectations. Our first half results, when combined with approximately 1.0 million tons of expected incremental production from the Southwest 'A' panel, which will start up in late August, keep our full-year expectation of 6.7 to 7.1 million tons of metallurgical coal production squarely within reach," said Jim Walter Resources CEO George R. Richmond. "In addition, we have completed all the critical infrastructure associated with our 7 East expansion and are developing its first longwall panel."

Jim Walter Resources

Mine No. 4 produced 0.8 million tons in the second quarter 2008 compared to 0.7 million tons in last year's second quarter. The increase was primarily a result of improved longwall production during the quarter. Mine No. 4's production cost per ton in the quarter was $46.77, or $2.15 per ton higher than in the prior-year period, primarily driven by increased labor and material costs.

Mine No. 7 produced 0.6 million tons in the second quarter 2008, approximately 0.1 million tons more than in the same period last year. Production costs at Mine No. 7 were $70.64 per ton versus $71.23 per ton in the prior-year period. The improvement in average coal production costs was the result of the increase in production volume, which more than offset increased spending for labor and materials at the mine. Production costs at Mine No. 7 continue to reflect higher per-ton costs versus Mine No. 4 due to the disproportionate mix of continuous miner tons versus longwall tons associated with the development of the Southwest "A" panel and the East expansion.

Sloss

Sloss Industries generated second quarter revenues of $53.3 million, up 60.8 percent versus the prior-year period, and operating income of $15.1 million, an increase of $12.1 million and more than five times the amount earned in the prior-year period. Sloss' favorable results were driven by record-high pricing for metallurgical coke, partially offset by higher raw material coal costs and a $2.2 million charge related to the resolution of legal matters.

Sloss sold approximately 106,000 tons of metallurgical coke at an average price of $397.50 per ton compared to approximately 103,000 tons at $225.91 in the prior-year period. The pricing improvement of 76.0 percent stems from higher contract pricing and spot sales at prices in excess of $500 per short ton FOB plant.

Natural Gas

The natural gas business sold 1.6 billion cubic feet of gas at an average price of $8.99 per thousand cubic feet in the second quarter 2008 compared to sales of 1.8 billion cubic feet at an average price of $7.96 per thousand cubic feet in the prior-year period.

WALTER INDUSTRIES, INC. ANNOUNCES SECOND QUARTER 2008 EARNINGS

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Financing & Homebuilding

The Financing & Homebuilding group reported second quarter revenues of $90.9 million, compared to $123.2 million in the prior-year period. Revenues were lower primarily as a result of fewer unit completions and a $4.2 million increase in the discount on instalment notes originated in the quarter. Operating income for the group was $11.1 million, compared to $12.6 million in the second quarter last year, also primarily due to fewer unit completions and the discount adjustment mentioned above, partially offset by lower selling, general and administrative expenses at Homebuilding resulting from the restructuring actions taken in February.

At Financing, operating income for the second quarter was $14.3 million, an increase of 9.9 percent compared to the same period last year, primarily on lower interest expense as a result of paying down debt, partially offset by lower income from prepayments. Delinquencies on the mortgage portfolio were 4.1 percent at June 30, 2008, compared to 3.8 percent at June 30, 2007.

"Our Financing business remains a strong, stable generator of income and cash flows, despite continued and unprecedented disruption in the residential mortgage market. Low delinquencies, strong recovery rates and, in particular, an effective, high-touch servicing platform with focused loss-mitigation strategies, have generated strong results," said JWH Holding Company Chairman and CEO Mark J. O'Brien. "Strategically, the recent refinancing of our warehouse facilities and the restructuring of Homebuilding in February better position us to separate these businesses from Walter Industries by year end."

Corporate and Other

In June, Walter Industries completed an offering of 3.2 million shares of its common stock, from which the Company received approximately $280.4 million of net proceeds. The Company used these proceeds to repay a portion of the term loan and revolving credit facility borrowings under the Company's Amended 2005 Credit Agreement. In the second quarter 2008, interest expense included $3.1 million in accelerated amortization of deferred financing fees associated with this debt repayment.

Income tax expense in the quarter included a $3.7 million credit resulting from the resolution of certain Federal tax matters.

Business Outlook

The Company affirms its previously communicated expectations for its key business drivers, and updates its sales volumes and operating margin per ton expectations as follows:

Metallurgical Coal Sales Outlook	Q1A		Q2A		Q3E		Q4E
Tons Sold (short tons, in millions)		1.5		1.7		1.7 - 1.8		2.1 - 2.2
Average Operating Margin Per Ton	$	8	$	33	$	75 - $81	$	95 - $100

Coke Sales Outlook	Q1A		Q2A		Q3E		Q4E
Tons Sold		104,024		106,431		100,000 - 106,000		106,000 - 112,000
Average Operating Margin Per Ton	$	182	$	162	$	140 - $165	$	140 - $165

Quarter-to-quarter variability in timing, availability and pricing of shipments may result in significant shifts in income between quarters.

Changes in metallurgical coal sales volumes between the third and fourth quarter reflect a change in the anticipated timing of shipments for approximately 100,000 tons versus prior expectations. The average metallurgical coal operating margin per ton is expected to improve by approximately $5 per ton in the fourth quarter compared to previously communicated expectations, driven largely by higher metallurgical coal sales prices.

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The coke sales outlook for the second half of the year also reflects a shift in tons between the third and fourth quarter as coke oven repairs in the third quarter will reduce tonnage volumes slightly that will be made up in the fourth quarter. The operating margin per ton ranges are consistent with prior expectations and reflect favorable spot sales prices, offset by higher coal input costs.

Conference Call Webcast

Members of the Company's leadership team will discuss Walter Industries' second quarter 2008 results, its outlook for the remainder of the year and other general business matters during a conference call and live Web cast to be held on Tuesday, July 29, 2008, 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 $1.2 billion and employs approximately 2,500 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, including expressions such as "believe," "anticipate," "expect," "estimate," "intend," "may," "will," and similar expressions involve known and unknown risks, uncertainties, and other factors that may cause the Company's actual results in future periods to differ materially from the expectations expressed or implied by such forward-looking statements. These factors include, among others, the following: the market demand for the Company's products as well as changes in costs and the availability of raw material, labor, equipment and transportation; changes in weather and geologic conditions; changes in extraction costs, pricing and our assumptions and projections concerning our reserves in the Company's mining operations; changes in customer orders; pricing actions by the Company's competitors, customers, suppliers and contractors; changes in governmental policies and laws; changes in the mortgage-backed capital markets; changes in general economic conditions; and the successful implementation and anticipated timing of any strategic actions and objectives that may be pursued, including our announced separation of the Financing and Homebuilding business from the Company. Forward-looking statements made by the Company in this release, or elsewhere, speak only as of the date on which the statements were made. Any forward-looking statements should be considered in context with the various disclosures made by us about our businesses, including the Risk Factors described in our 2007 Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission. The Company disclaims any duty to update its forward-looking statements as of any future date.

-WLT-

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WALTER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

($ in Thousands)

Unaudited

	For the three months
	ended June 30,
	2008		2007
Net sales and revenues:
Net sales	$	315,686	$	239,146
Interest income on instalment notes		48,022		50,662
Miscellaneous		6,328		6,716
		370,036		296,524
Costs and expenses:
Cost of sales (exclusive of depreciation)		200,893		174,457
Depreciation		13,633		11,591
Selling, general and administrative		37,400		38,125
Provision for losses on instalment notes		3,002		2,493
Postretirement benefits		6,596		6,687
Interest expense - mortgage- backed/asset-backed notes		25,846		29,745
Interest expense - other debt		11,184		7,218
Amortization of intangibles		340		442
		298,894		270,758
Income from continuing operations before income tax expense		71,142		25,766
Income tax expense (1)		20,366		7,996
Income from continuing operations		50,776		17,770
Discontinued operations (2)		-		281
Net income	$	50,776	$	18,051
Basic income per share:
Income from continuing operations	$	0.96	$	0.34
Discontinued operations		-	$	0.01
Net income	$	0.96	$	0.35
Weighted average number of shares outstanding		52,982,775		52,081,436
Diluted income per share:
Income from continuing operations	$	0.94	$	0.33
Discontinued operations		-	$	0.01
Net income	$	0.94	$	0.34
Weighted average number of diluted shares outstanding		53,771,216		52,574,803

(1) Income tax expense for the quarter ended June 30, 2008 includes a $3.7 million credit resulting from the resolution of certain Federal tax matters associated with an ongoing IRS audit.

(2) The Company sold its modular home manufacturing business, which operated as Crestline Homes, Inc., in May 2007. Operating results of this business for the quarter ended June 30, 2007 have been classified as discontinued operations.

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WALTER INDUSTRIES, INC. AND SUBSIDIARIES

RESULTS BY OPERATING SEGMENT

($ in Thousands)

Unaudited

	For the three months ended June 30,
	2008			2007
NET SALES AND REVENUES:
Natural Resources (1)	$	237,428		$	139,019
Sloss		53,265			33,122
Natural Resources and Sloss		290,693			172,141
Financing		51,722			55,046
Homebuilding		39,227			68,175
Financing and Homebuilding Group		90,949			123,221
Other (1)		706			3,268
Consolidating Eliminations		(12,312	)		(2,106	)
	$	370,036		$	296,524
OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS:
Natural Resources (1)	$	64,573		$	22,399
Sloss		15,091			2,948
Natural Resources and Sloss		79,664			25,347
Financing		14,334			13,045
Homebuilding		(3,243	)		(467	)
Financing and Homebuilding Group		11,091			12,578
Other (1)		(8,184	)		(4,941	)
Consolidating Eliminations		(245	)		-
Operating income from continuing operations		82,326			32,984
Other debt interest expense		(11,184	)		(7,218	)
Income from continuing operations before income tax expense	$	71,142		$	25,766

(1) Results for 2007 have been revised to reflect the reclassification of United Land (the parent company of Kodiak and TRI) from "Other" to Natural Resources.

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WALTER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

($ in Thousands)

Unaudited

	For the six months ended June 30,
	2008		2007
Net sales and revenues:
Net sales	$	558,686	$	498,533
Interest income on instalment notes		96,732		100,227
Miscellaneous		10,308		18,058
		665,726		616,818
Cost and expenses:
Cost of sales (exclusive of depreciation)		374,929		346,097
Depreciation		27,600		22,221
Selling, general and administrative		75,270		75,576
Provision for losses on instalment notes		7,327		5,390
Postretirement benefits		13,188		13,019
Interest expense - mortgage- backed/asset-backed notes		54,154		59,516
Interest rate hedge ineffectiveness (1)		16,981		-
Interest expense - other debt		16,899		14,565
Amortization of intangibles		705		920
Restructuring and impairment charges (2)		6,770		-
		593,823		537,304
Income from continuing operations before income tax expense and minority interest		71,903		79,514
Income tax expense (3)		20,628		29,609
Income from continuing operations		51,275		49,905
Discontinued operations (4)		-		(2,229	)
Net income	$	51,275	$	47,676
Basic income (loss) per share:
Income from continuing operations	$	0.98	$	0.96
Discontinued operations		-		(0.04	)
Net income	$	0.98	$	0.92
Weighted average number of shares outstanding		52,581,857		52,046,083
Diluted income (loss) per share:
Income from continuing operations	$	0.96	$	0.95
Discontinued operations		-		(0.04	)
Net income	$	0.96	$	0.91
Weighted average number of diluted shares outstanding		53,332,579		52,525,490

(1) During the quarter ended March 31, 2008, the Company recognized a loss of $17.0 million for the ineffectiveness of interest rate hedges held by Financing that were intended to hedge an April 2008 securitization of instalment notes receivable. Unfavorable market conditions precluded an April 2008 securitization and management could not predict when such a securitization might occur.

(2) Homebuilding recorded restructuring charges totaling $6.8 million during the quarter ended March 31, 2008 related to the closure of 36 sales offices.

(3) Income tax expense for the six months ended June 30, 2008 includes a $3.7 million credit resulting from the resolution of certain Federal tax matters associated with an ongoing IRS audit. Income tax expense for the six months ended June 30 , 2007 included a $4.4 million write-off of certain deferred tax assets no longer considered realizable.

(4) The Company sold its modular home manufacturing business, which operated as Crestline Homes, Inc., in May 2007. Operating results of this business for the six months ended June 30, 2007 have been classified as discontinued operations.

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WALTER INDUSTRIES, INC. AND SUBSIDIARIES

RESULTS BY OPERATING SEGMENT

($ in Thousands)

Unaudited

	For the six months ended June 30,
	2008			2007
NET SALES AND REVENUES:
Natural Resources (1)	$	390,459		$	310,465
Sloss		104,136			65,923
Natural Resources and Sloss		494,595			376,388
Financing		103,826			108,793
Homebuilding		79,299			130,308
Financing and Homebuilding Group		183,125			239,101
Other (1)		1,124			4,538
Consolidating Eliminations		(13,118	)		(3,209	)
	$	665,726		$	616,818
OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS:
Natural Resources (1)	$	82,383		$	79,940
Sloss		33,791			4,254
Natural Resources and Sloss		116,174			84,194
Financing (2)		7,622			23,616
Homebuilding (3)		(17,970	)		(3,145	)
Financing and Homebuilding Group		(10,348	)		20,471
Other (1)		(16,380	)		(10,586	)
Consolidating Eliminations		(644	)		-
Operating income from continuing operations		88,802			94,079
Other debt interest and debt conversion expense		(16,899	)		(14,565	)
Income from continuing operations before income tax expense and minority interest	$	71,903		$	79,514

(1) Results for 2007 have been revised to reflect the reclassification of United Land (the parent company of Kodiak and TRI) from "Other" to Natural Resources.

(2) Includes a loss of $17.0 million for the ineffectiveness of interest rate hedges that were intended to hedge an April 2008 securitization of instalment notes receivable.

(3) Homebuilding recorded restructuring charges totaling $6.8 million during the quarter ended March 31, 2008 related to the closure of 36 sales offices.

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WALTER INDUSTRIES, INC. AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

Unaudited

	For the three months ended June 30,				For the six months ended June 30,
	2008		2007		2008		2007
Operating Data:
Jim Walter Resources
Tons sold by type (in thousands):
Metallurgical coal, contracts		1,535		1,301		3,012		2,727
Purchased metallurgical coal		212		-		229		96
		1,747		1,301		3,241		2,823
Average sale price per short ton:
Metallurgical coal, contracts	$	110.79	$	94.29	$	98.61	$	97.55
Coal cost of sales (exclusive of depreciation):
Mine No. 4 per ton	$	60.23	$	51.40	$	56.39	$	50.18
Mine No. 7 per ton	$	78.36	$	73.71	$	77.30	$	62.60
Mines No. 4 and No. 7 per ton average	$	66.61	$	62.24	$	64.48	$	56.65
Mine No. 5 per ton (1)	$	-	$	-	$	-	$	57.98
Total average	$	66.61	$	62.24	$	64.48	$	56.65
Other costs (in thousands)(2)	$	16,086	$	2,776	$	19,380	$	15,553
Tons of coal produced (in thousands)
Mine No. 4		773		665		1,742		1,454
Mine No. 7		622		521		1,260		1,404
Total		1,395		1,186		3,002		2,858
Coal production costs per ton: (3)
Mine No. 4	$	46.77	$	44.62	$	40.79	$	40.66
Mine No. 7	$	70.64	$	71.23	$	68.98	$	52.89
Total average	$	57.41	$	56.31	$	52.62	$	46.67
Natural gas sales, in mmcf (in thousands)		1,612		1,752		3,177		3,615
Natural gas average sale price per mmcf	$	8.99	$	7.96	$	8.48	$	7.94
Natural gas cost of sales per mmcf	$	3.99	$	3.27	$	3.47	$	3.01
Tuscaloosa Resources, Inc. (4)
Tons sold (in thousands)		224		-		423		-
Tons of coal produced (in thousands)		221		-		433		-
Kodiak
Tons sold (in thousands)		40		-		83		15
Tons of coal produced (in thousands)		25		20		45		46

(1) Mine No. 5 ceased production in December 2006 as planned. Sales and cost of sales amounts in 2007 resulted from the sale of residual inventory on hand at December 31, 2006.

(2) Consists of charges (credits) not directly allocable to a specific mine as well as cost of purchased coal.

(3) Coal production costs per ton are a component of inventoriable costs, including depreciation. Other costs 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.

(4) Tuscaloosa Resources, Inc. was acquired on August 31, 2007.

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WALTER INDUSTRIES, INC. AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

Unaudited

	For the three months ended June 30,						For the six months ended June 30,
	2008			2007			2008			2007
Operating Data (continued):
Sloss Industries
Furnace and foundry coke tons sold		106,431			102,780			210,454			211,736
Furnace and foundry coke average sale price per ton	$	397.50		$	225.91		$	393.05		$	221.09
Financing
Delinquencies, as of period end		4.1	%		3.8	%		4.1	%		3.8	%
Prepayment speeds		6.0	%		8.7	%		5.7	%		8.4	%
Number of repossessions		255			301			580			589
Repossession rate, annualized		2.6	%		3.0	%		3.0	%		2.9	%
Recovery rate on repossessions		89.9	%		87.4	%		86.3	%		85.9	%
Homebuilding (excluding Crestline)
New sales contracts		287			688			737			1,422
Cancellations		154			109			252			193
Unit completions		421			687			863			1,315
Average contractual sales price	$	106,500		$	105,500		$	106,400		$	104,900
Average revenue per home sold (1)	$	90,200		$	98,900		$	90,333		$	98,500
Ending backlog of homes		707			1,426			707			1,426
Depreciation ($ in thousands):
Natural Resources	$	11,528		$	8,776		$	22,903		$	16,656
Sloss		979			943			1,985			1,859
Financing		123			273			258			554
Homebuilding		775			1,272			1,994			2,506
Other		228			327			460			646
	$	13,633		$	11,591		$	27,600		$	22,221
Capital expenditures ($ in thousands):
Natural Resources	$	32,240		$	33,786		$	53,548		$	55,864
Sloss		2,017			1,003			3,592			3,123
Financing		122			29			164			60
Homebuilding		223			610			652			1,856
Other		7			1			113			53
	$	34,609		$	35,429		$	58,069		$	60,956

(1) Includes the effect of the discount required to sell instalment notes receivable to Financing at the estimated market value.

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WALTER INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in Thousands)

Unaudited

	June 30, 2008		December 31, 2007
ASSETS
Cash and cash equivalents	$	17,653	$	30,614
Short-term investments, restricted		61,822		75,851
Instalment notes receivable, net of allowance of $13,946 and $13,992, respectively		1,821,745		1,837,059
Receivables, net		148,475		81,698
Inventories		119,937		101,676
Prepaid expenses		42,720		38,340
Property, plant and equipment, net		460,984		435,035
Other assets		153,566		156,113
Goodwill		10,895		10,895
	$	2,837,797	$	2,767,281
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	81,113	$	72,072
Accrued expenses		82,618		83,072
Accrued interest on debt		12,503		13,940
Debt:
Mortgage-backed/asset-backed notes		1,437,387		1,706,218
Other debt		206,852		225,860
Accumulated postretirement benefits obligation		342,769		335,034
Other liabilities		223,361		216,372
Total liabilities		2,386,603		2,652,568
Stockholders' equity		451,194		114,713
	$	2,837,797	$	2,767,281

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WALTER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

AND COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2008

($ in Thousands)

Unaudited

	Total			Common Stock		Capital in Excess of Par Value			Comprehensive Income			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2007	$	114,713		$	520	$	497,032					$	(290,986	)	$	(91,853	)
Comprehensive income:
Net income		51,275							$	51,275			51,275
Other comprehensive income (loss), net of tax:
Change in pension and postretirement benefit plans		1,273								1,273						1,273
Net unrealized loss on hedges		(4,311	)							(4,311	)					(4,311	)
Comprehensive income									$	48,237
Effects of changing the pension plan measurement date pursuant to FASB 158:
Service cost, interest cost, and expected return on plan assets for October 1 - December 31, 2007, net of taxes		(4,603	)										(4,603	)
Amortization of actuarial gain and prior service cost for October 1 - December 31, 2007, net of taxes		670														670
Purchases of stock under stock repurchase program		(363	)				(363	)
Proceeds from public stock offering (1)		280,432			32		280,400
Stock issued upon the exercise of stock options		7,544			4		7,540
Stock issued upon conversion of convertible notes		785			1		784
Tax benefit from the exercise of stock options		6,322					6,322
Dividends paid, $0.10 per share		(5,225	)				(5,225	)
Stock-based compensation		4,084					4,084
Other		(1,402	)				(1,402	)
Balance at June 30, 2008	$	451,194		$	557	$	789,172					$	(244,314	)	$	(94,221	)

(1) In June, the Company completed an offering of 3.2 million shares of its common stock at $90.75 per share and received $280.4 million in proceeds net of underwriting discounts and offering expenses.

WALTER INDUSTRIES, INC. ANNOUNCES SECOND QUARTER 2008 EARNINGS

OF $0.94 PER DILUTED SHARE - Page 12 - 7/28/2008

WALTER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in Thousands)

Unaudited

	For the six months ended June 30,
	2008			2007
OPERATING ACTIVITIES
Net income	$	51,275		$	47,676
Loss from discontinued operations		-			2,229
Income from continuing operations		51,275			49,905
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Provision for losses on instalment notes receivable		7,327			5,390
Depreciation		27,600			22,221
Other		15,353			4,802
Decrease (increase) in assets:
Receivables		(51,054	)		8,874
Inventories		(18,261	)		(5,175	)
Prepaid expenses		5,352			(639	)
Instalment notes receivable, net		(41	)		(41,099	)
Increase (decrease) in liabilities:
Accounts payable		10,473			(2,888	)
Accrued expenses		(2,568	)		(23,852	)
Accrued interest		(1,437	)		(2,198	)
Cash flows provided by operating activities		44,019			15,341
INVESTING ACTIVITIES
Purchases of loans		-			(34,988	)
Principal payments received on purchased loans		8,028			20,908
Decrease in short-term investments, restricted		14,029			6,525
Additions to property, plant and equipment		(58,069	)		(60,956	)
Other		1,400			2,613
Cash flows used in investing activities		(34,612	)		(65,898	)
FINANCING ACTIVITIES
Issuances of mortgage-backed/asset-backed notes		25,000			113,350
Payments of mortgage-backed/asset-backed notes		(293,864	)		(118,598	)
Proceeds from issuances of other debt		280,000			-
Retirements of other debt		(315,669	)		(29,071	)
Proceeds from stock offering		280,432			-
Other		1,733			(3,633	)
Cash flows used in financing activities		(22,368	)		(37,952	)
Cash flows used in continuing operations	$	(12,961	)	$	(88,509	)
CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash flows used in operating activities	$	-		$	630
Cash flows used in investing activities		-			-
Cash flows provided by financing activities		-			-
Cash flows used in discontinued operations	$	-		$	630
Net decrease in cash and cash equivalents	$	(12,961	)	$	(87,879	)
Cash and cash equivalents at beginning of period	$	30,614		$	127,369
Add: Cash and cash equivalents of discontinued operations at beginning of period		-			1
Net decrease in cash and cash equivalents		(12,961	)		(87,879	)
Cash and cash equivalents at end of period	$	17,653		$	39,491
SUPPLEMENTAL DISCLOSURES
Financing Activities
Non-cash transaction:
One-year property insurance policy financing agreement	$	17,355		$	12,516

WALTER INDUSTRIES, INC. ANNOUNCES SECOND QUARTER 2008 EARNINGS

OF $0.94 PER DILUTED SHARE - Page 13 - 7/28/2008