EX-99.1
2
wi4984ex991.txt
EXHIBIT 99.1

                                                                    Exhibit 99.1

      WALTER INDUSTRIES ANNOUNCES FOURTH QUARTER AND FULL-YEAR 2005 RESULTS

- As Expected, Goodwill Impairment and Acquisition-Related Charges
Resulted in

a Fourth Quarter Loss of $1.88 per Share and Full-Year Earnings of $0.18
per

                                 Diluted Share -

             - Company Increases Integration Synergy Benefits Range
           to $40.0 to $50.0 Million in its Water Products Business -

- Company Restates Prior Period Sales and Cost of Sales for Freight and

Handling Costs; No Impact on Operating Income, Net Income or EPS -

TAMPA, Fla., Feb. 28 /PRNewswire-FirstCall/ -- Walter Industries, Inc. (NYSE:
WLT) today reported a fourth quarter loss of $73.4 million, or $1.88 per share,
and full-year 2005 net income of $7.0 million, or $0.18 per diluted share. The
loss of $1.88 per share for the quarter was within the previously communicated
expectation range of a $1.80 to $1.90 loss per share. Full-year earnings of
$0.18 per diluted share were also within the previously communicated range of
$0.15 to $0.25 per diluted share.

The Company recorded an operating loss for the fourth quarter of $40.8 million,
compared with operating income in the same period in 2004 of $29.2 million.
Excluding certain pre-tax charges of $167.5 million (see attached supplemental
data), non-GAAP operating income for the fourth quarter of 2005 totaled $126.7
million. In this press release, the term "non-GAAP" refers to an adjustment to
GAAP measures based on the applicable portion of the $167.5 million of pre-tax
charges. Results for the current quarter reflect significant income improvements
at Natural Resources and U.S. Pipe, primarily due to strong year-over-year
pricing in both segments. Current quarter results also include non-GAAP
operating income from Mueller and Anvil of $52.7 million, which excludes
acquisition-related charges of $64.3 million.

The Company also announced that it increased the expected operating income
synergies from integrating Mueller and U.S. Pipe from a previous range of $25.0
million to $35.0 million to a new range of $40.0 million to $50.0 million. The
revised synergy benefits, which are expected to be realized on a run-rate basis
over the next two years, were increased due to better than expected cost savings
from the shutdown of U.S. Pipe's Chattanooga facility combined with Mueller and
Anvil plant consolidation and rationalization activities.

"We are very pleased with Mueller's operating results, which were driven by
strong volumes and improved valve and hydrant margins," said Walter Industries
Chairman and CEO Gregory E. Hyland. "The integration of Mueller and U.S. Pipe
has also progressed extremely well and we have determined that the original
synergy benefits forecast should be increased substantially."

Hyland added, "2005 was a landscape-changing year for Walter Industries as we
aggressively pursued our transformation and value creation strategy, and also
generated significant revenue and earnings momentum from our Natural Resources
and Water Products businesses. Our value creation strategy continues in 2006 as
we move forward with the IPO and eventual spin-off of our Water Products
business, as well as the evaluation of strategic alternatives for our remaining
businesses."



Results for the quarter on a non-GAAP basis were $1.48 per diluted share, which
compares to the previously expected range of $1.45 to $1.55 per diluted share.
Full-year 2005 earnings on a non-GAAP basis were $3.18 per diluted share,
compared with the previously communicated range of $3.10 to $3.20 per diluted
share.

Fourth Quarter 2005 Financial Results

Net sales and revenues for the fourth quarter totaled $801.2 million, up from
$391.0 million in 2004. Excluding Mueller and Anvil revenues of $309.3 million,
fourth quarter revenues improved 25.8% on a year-over-year basis, primarily
driven by higher metallurgical coal pricing and increases in ductile iron pipe
pricing and shipments.

On a non-GAAP basis, operating income was $126.7 million, or $97.5 million
higher than the prior-year period. The improvement in operating income was
primarily due to the first-time inclusion of Mueller and Anvil results in the
Company's fourth quarter, increased pricing for metallurgical coal and improved
operating margins at U.S. Pipe. These favorable impacts were partially offset by
charges related to the temporary idling of Mine No. 5 and Mine No. 7, which
increased average production costs at Natural Resources.

Full-Year 2005 Financial Results

Net sales and revenues for 2005 totaled $2.1 billion, including fourth quarter
revenue from the Mueller and Anvil segments of $309.3 million. Excluding Mueller
and Anvil, revenue grew by $195.5 million, or 12.6%, principally due to an
increase in metallurgical coal and ductile iron pipe prices.

Operating income for the full year totaled $83.7 million, compared with $75.8
million in 2004. Non-GAAP operating income was $251.2 million, an improvement of
$175.4 million versus 2004. The year-over-year improvement reflects the addition
of $52.7 million in non-GAAP operating income contributed by Mueller and Anvil,
plus a dramatic increase in profitability at Jim Walter Resources and
significant income growth at U.S. Pipe. These stronger operating results were
partially offset by higher material and production costs at Natural Resources
and U.S. Pipe, and $6.6 million of incremental hurricane-related charges at
Financing.

Fourth Quarter Results by Operating Segment

Natural Resources

The Natural Resources segment reported fourth quarter revenue of $170.3 million,
up 49.3% versus the year-ago period, primarily due to higher metallurgical coal
selling prices and higher natural gas prices, partially offset by lower steam
coal shipments and lower natural gas volumes in the current-year period.
Operating income for the quarter was $51.7 million, which exceeded the
prior-year period by 53.8%. The income improvement versus the prior-year period
was primarily driven by increased metallurgical coal pricing, partially offset
by $3.0 million of idle mine costs at Mine No. 5 and $2.7 million of expenses
related to adverse geologic conditions in Mine No. 7, both of which were
resolved in the fourth quarter.



Jim Walter Resources sold 1.49 million tons of coal at an average price of
$99.18 per ton in the fourth quarter, compared to 1.61 million tons at an
average price of $62.10 in the prior-year period. The natural gas operation sold
1.70 billion cubic feet of gas in the fourth quarter at an average price of
$10.54 per thousand cubic feet, compared to sales of 1.93 billion feet at an
average price of $6.61 per thousand cubic feet in the prior-year quarter.

Mueller and Anvil

Walter Industries acquired Mueller and Anvil on Oct. 3, 2005 and, therefore,
this will be the first time they have been included in the Company's segment and
consolidated results. However, in an effort to enhance comparability and
evaluate calendar fourth quarter period-to-period performance, variance
explanations refer to a pro forma calendar fourth quarter prior-year period,
even though pro forma data is not included in the actual reported segment or
consolidated results.

Revenue for the Mueller and Anvil segments totaled $309.3 million for the
quarter, up from the prior-year period total of $256.1 million, primarily due to
higher valve and hydrant volumes and higher selling prices of Mueller's
butterfly valves, hydrants and brass products. Anvil also generated higher
volumes of iron fittings. Non-GAAP operating income for both segments, excluding
the effects of acquisition-related adjustments, was $52.7 million compared to
operating income in the prior-year period of $32.2 million.

Including acquisition-related impacts, Mueller and Anvil reported an operating
loss of $11.6 million in the current period fourth quarter. Operating results
for the period included expected purchase accounting-related inventory step-up
costs of $58.4 million and incremental ongoing intangible amortization expenses
of $5.9 million.

Industrial Products (U.S. Pipe)

U.S. Pipe reported fourth quarter revenue of $172.0 million, up $30.8 million
versus the prior-year period as the Company generated improvements in both
pricing and volume. U.S. Pipe sold 155,804 tons of ductile iron pipe during the
quarter, up 10.3% versus the prior-year period.

U.S. Pipe reported a loss in the fourth quarter 2005 of $25.6 million, compared
to a loss in the prior year's fourth quarter of $0.5 million. The fourth quarter
2005 loss included $40.0 million in charges related to the announced closure of
U.S. Pipe's Chattanooga valves, hydrants and fittings facility. Excluding these
charges, U.S. Pipe's operating income was $14.4 million, an improvement of $14.9
million versus the prior-year as stronger margins more than offset higher
natural gas costs.

Financing

Financing segment revenue for the fourth quarter was $54.8 million, down $4.9
million from the prior-year period, primarily due to a decline in the instalment
note portfolio balance as a result of fewer note originations from the
Homebuilding segment.

Fourth quarter operating income was $16.7 million, up $0.9 million over the
prior-year period, driven by lower interest expense, a lower provision for
losses and better workers compensation experience, partially offset by lower
interest income. At Dec. 31, 2005, delinquencies (the percentage of amounts
outstanding more than 30 days past due) were 5.2%, versus 4.9% at Dec. 31, 2004
due primarily to customer payment disruptions caused by the 2005 hurricanes.



Homebuilding

At Homebuilding, fourth quarter revenue was $65.0 million, up $11.1 million
versus the year-ago period, driven primarily by an increase of 48 on-your-lot
unit completions over the prior-year's fourth quarter. Homebuilding completed
641 on-your-lot homes during the fourth quarter at an average selling price of
$80,300 versus 593 homes at an average selling price of $74,600 for the same
period last year. Including Crestline Homes, the Company's modular home
business, total unit deliveries for the quarter were 865, compared with 727
homes in the prior-year period.

Excluding the $63.2 million goodwill impairment charge, the operating loss at
Homebuilding was $7.7 million, or an improvement of $0.6 million, versus the
prior-year period. The fourth quarter loss reflects Homebuilding's efforts to
complete and deliver lower-margin units out of its backlog, and proactively
reduce the quantity of outstanding warranty-related claims. Overall, the
period-over-period improvement primarily reflects the higher on-your-lot
deliveries and price increases noted above.

Other

Sloss Industries generated revenue of $33.1 million, an increase of 34.1% over
the prior-year period. Sloss reported operating income of $4.2 million,
exceeding income in the prior-year period by $3.6 million. The revenue and
income increases were due to significantly higher furnace and foundry coke
pricing, partially offset by increases in metallurgical coal costs.

Parent company expenses in the fourth quarter were $4.7 million below the
prior-year period, reflecting lower medical and Sarbanes-Oxley compliance costs.
Interest expense increased by $39.8 million from the prior-year period,
primarily reflecting higher debt balances related to the Mueller acquisition.

Restatement of Prior-Period Sales and Costs of Sales for Freight and
Handling Costs

The Company announced that it will be restating its consolidated financial
statements to correct the classification of certain prior-period shipping and
handling costs in compliance with EITF 00-10: "Accounting for Shipping and
Handling Fees and Costs" for U.S. Pipe, Jim Walter Resources and Sloss.

The Company's long-standing method of accounting for the cost to deliver
products to the customer has been to include these costs as a deduction from net
sales and revenues. Such costs are now included in cost of sales.

In addition to consolidated net sales and revenues and cost of sales, this
change in classification affects reported net sales and revenues of our
Industrial Products, Natural Resources and Other segments. The overall impact is
to increase consolidated sales and cost of sales in equal amounts for the fourth
quarter and full year of 2004. More specifically, the restatement has no effect
on reported operating income, net income or EPS. In total, these costs were
$23.5 million in the fourth quarter of 2004 and $87.6 million for the full year
of 2004.



Conference Call Webcast

Walter Industries Chairman and CEO Greg Hyland 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 Wed., March 1, 2006,
at 9 a.m. Eastern Standard Time. To listen to the event live or in archive,
visit the Company Web site at http://www.walterind.com .

Walter Industries, Inc. is a diversified company with annual revenues of
approximately $3.0 billion. The Company is a leader in water
infrastructure, flow control and water transmission products, with
respected brand names such as Mueller, U.S. Pipe, James Jones, Henry
Pratt and Anvil. The Company is also a significant producer of
high-quality metallurgical coal and natural gas for worldwide markets
and is a leader in affordable homebuilding and financing. Based in
Tampa, Fla., the Company employs approximately 10,000 people. For more
information about Walter Industries, please visit the Company Web site
at http://www.walterind.com .

Non-GAAP Financial Measures

Within this announcement, the Company makes reference to certain non-GAAP
financial measures, which have directly comparable GAAP financial measures as
identified in this release. These non-GAAP measures are provided so that
investors have the same financial data that management uses with the belief that
it will assist the investment community in properly assessing the underlying
performance of the Company for the periods being reported. The reconciliation
between GAAP and non-GAAP performance measures is reported in the Supplemental
Information section of this earnings release and is presented in compliance with
the provisions of the rules under Regulation G and Item 2.02.

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, the
collection of approximately $14 million of receivables associated with a working
capital adjustment arising from the sale of a subsidiary in 2003, 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 on the
initial public offering and spin-off of the Company's Water Products business
and any other strategic action that may be pursued. Risks associated with
forward-looking statements are more fully described in the Company's and
Mueller'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
                            SUPPLEMENTAL INFORMATION
                            SEGMENT INCOME COMPARISON
                                    Unaudited

The purpose of this  schedule is to reconcile  the  Company's  GAAP and non-GAAP
operating income and earnings per share for the fourth quarters of 2005 and 2004
and for the full years  2005 and 2004,  as  referenced  in the  Company's  press
release dated February 28, 2006.

Mueller Water Industrial $ in Millions Homebuilding Financing Products Products ---------------------------------------------- ------------ ------------ ------------ ------------ Q4 2005 GAAP Operating Income (Loss) (70.9) 16.7 (11.6) (25.6) Adjustments to GAAP Operating Income (Loss): Homebuilding Goodwill Impairment 63.2 Mueller Inventory Fair Value Adjustment Charged to Cost of Sales 58.4 Mueller Incremental Amortization of Definite-Lived Intangible Assets 5.9 U.S.Pipe Charges - Restructuring 24.1 U.S.Pipe Charges - Inventory Write- offs and Unabsorbed Overhead 15.9 Total Adjustments to GAAP Operating Income (Loss) 63.2 -- 64.3(1) 40.0 Q4 2005 Non-GAAP Operating Income (Loss) (7.7) 16.7 52.7 14.4 Q4 2004 GAAP Operating Income (Loss) (8.3) 15.8 -- (0.5) Q4 2005 Non-GAAP Variance to Q4 2004 GAAP 0.6 0.9 52.7 14.9
Total Operating Natural Income $ in Millions Resources Other Cons Elims (Loss) ---------------------------------------------- ------------ ------------ ------------ ------------ Q4 2005 GAAP Operating Income (Loss) 51.7 (0.3) (0.8) (40.8) Adjustments to GAAP Operating Income (Loss): Homebuilding Goodwill Impairment 63.2 Mueller Inventory Fair Value Adjustment Charged to Cost of Sales 58.4 Mueller Incremental Amortization of Definite-Lived Intangible Assets 5.9 U.S.Pipe Charges - Restructuring 24.1 U.S.Pipe Charges - Inventory Write- offs and Unabsorbed Overhead 15.9 Total Adjustments to GAAP Operating Income (Loss) -- -- -- 167.5 Q4 2005 Non-GAAP Operating Income (Loss) 51.7 (0.3) (0.8) 126.7 Q4 2004 GAAP Operating Income (Loss) 33.6 (10.7) (0.7) 29.2 Q4 2005 Non-GAAP Variance to Q4 2004 GAAP 18.1 10.4 (0.1) 97.5
Mueller Water Industrial Homebuilding Financing Products Products ------------ ------------ ------------ ------------ Full-Year 2005 GAAP Operating Income (Loss) (103.9) 46.0 (11.6) 2.1 Adjustments to GAAP Operating Income (Loss): Homebuilding Goodwill Impairment 63.2 Mueller Inventory Fair Value Adjustment Charged to Cost of Sales 58.4 Mueller Incremental Amortization of Definite-Lived Intangible Assets 5.9 U.S.Pipe Charges - Restructuring 24.1 U.S.Pipe Charges - Inventory Write- offs and Unabsorbed Overhead 15.9 Total Adjustments to GAAP Operating Income (Loss) 63.2 -- 64.3(1) 40.0 Full-Year 2005 Non-GAAP Operating Income (Loss) (40.7) 46.0 52.7 42.1 Full-Year 2004 GAAP Operating Income (Loss) (33.3) 54.8 -- 7.6 Full-Year 2005 Non-GAAP Variance to Full-Year 2004 GAAP (7.4) (8.8) 52.7 34.5
Total Natural Operating Resources Other Cons Elims Income ------------ ------------ ------------ ------------ Full-Year 2005 GAAP Operating Income (Loss) 164.1 (9.3) (3.7) 83.7 Adjustments to GAAP Operating Income (Loss): Homebuilding Goodwill Impairment 63.2 Mueller Inventory Fair Value Adjustment Charged to Cost of Sales 58.4 Mueller Incremental Amortization of Definite-Lived Intangible Assets 5.9 U.S.Pipe Charges - Restructuring 24.1 U.S.Pipe Charges - Inventory Write- offs and Unabsorbed Overhead 15.9 Total Adjustments to GAAP Operating Income (Loss) -- -- -- 167.5 Full-Year 2005 Non-GAAP Operating Income (Loss) 164.1 (9.3) (3.7) 251.2 Full-Year 2004 GAAP Operating Income (Loss) 69.7 (20.3) (2.7) 75.8 Full-Year 2005 Non-GAAP Variance to Full-Year 2004 GAAP 94.4 11.0 (1.0) 175.4
(1) Mueller acquisition-related charges total $66.8 million and include bridge loan fees of $2.5 million reflected in interest expense.
Reconciliation to Non-GAAP Net Income and EPS Q4 Total Year ---------------------------------------------- ------------ ------------ Non-GAAP Operating Income Per Above 126.7 251.2 Interest Expense on Non-GAAP Pre-tax Income (42.0) (53.4) Taxes (12.7) (44.8) Disc Ops (0.1) (0.7) Non-GAAP Net Income 71.9 152.3 Add Back Interest on Convertible Debt Notes 1.1 4.3 Non-GAAP Net Income Excluding Interest on Convertible Debt Notes 73.0 156.6 Non-GAAP EPS $ 1.48 $ 3.18 Shares outstanding (millions) 49.3 49.2 Assumes fully diluted shares for Non-GAAP calculation to account for convertible debt, per EITF 04-08.
WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS ($ in Thousands) Unaudited For the three months ended December 31, ---------------------------- As Restated 2005 2004 ------------ ------------ Net sales and revenues: Net sales $ 744,367 $ 332,847 Interest income on instalment notes 49,002 53,407 Miscellaneous 7,841 4,754 801,210 391,008 Cost and expenses: Cost of sales (exclusive of depreciation) 600,284 247,491 Depreciation 25,398 15,032 Selling, general and administrative 87,123 60,077 Provision for losses on instalment notes 2,514 4,105 Postretirement benefits 3,236 2,982 Interest expense - mortgage- backed/asset-backed notes 29,422 32,447 Interest expense - other debt 44,548 4,733 Amortization of intangibles 7,444 1,060 Credit for estimated hurricane insurance losses (1,600) (935) Impairment of goodwill 63,210 -- Restructuring and impairment charges (credits) 25,006 (457) 886,585 366,535 Income (loss) from continuing operations before income tax benefit (85,375) 24,473 Income tax benefit (1) 12,087 2,710 Income (loss) from continuing operations (73,288) 27,183 Discontinued operations, net of income taxes (2) (109) -- Net income (loss) $ (73,397) $ 27,183 Basic income (loss) per share: Income (loss) from continuing operations $ (1.88) $ 0.74 Discontinued operations -- -- Net income (loss) $ (1.88) $ 0.74 Weighted average number of shares outstanding 38,982,151 36,963,534 Diluted income (loss) per share: Income (loss) from continuing operations $ (1.88) $ 0.59 Discontinued operations -- -- Net income (loss) $ (1.88) $ 0.59 Weighted average number of dilutive securities (3) 38,982,151 48,066,504 (1) Results for the fourth quarter of 2004 include a net income tax benefit of approximately $9.7 million associated with favorable adjustments to income tax valuation allowances, primarily resulting from profitability improvements at Jim Walter Resources. (2) 2005 expenses resulted from the Company's sale of its AIMCOR subsidiary in December 2003. (3) Weighted average basic shares outstanding was used in the 2005 quarter period, as the use of fully diluted shares would have had an anti-dilutive effect. WALTER INDUSTRIES, INC. AND SUBSIDIARIES RESULTS BY OPERATING SEGMENT ($ in Thousands) Unaudited For the three months ended December 31, ---------------------------- As Restated 2005 2004 ------------ ------------ NET SALES AND REVENUES: Homebuilding $ 65,006 $ 53,923 Financing 54,836 59,737 Mueller (1) 176,747 -- Anvil (1) 132,581 -- Industrial Products 171,993 141,157 Natural Resources 170,253 114,062 Other 36,823 27,458 Consolidating Eliminations (7,029) (5,329) $ 801,210 $ 391,008 OPERATING INCOME (LOSS): Homebuilding $ (70,884) $ (8,276) Financing 16,696 15,773 Mueller (1) (7,460) -- Anvil (1) (4,183) -- Industrial Products (25,608) (528) Natural Resources 51,694 33,622 Other (257) (10,735) Consolidating Eliminations (825) (650) Operating income (loss) (40,827) 29,206 Other debt interest expense (44,548) (4,733) Income (loss) from continuing operations before income tax benefit $ (85,375) $ 24,473 (1) The results of Mueller and Anvil are included from the date of acquisition on October 3, 2005. WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS ($ in Thousands) Unaudited For the years ended December 31, ---------------------------- As Restated 2005 2004 ------------ ------------ Net sales and revenues: Net sales $ 1,823,654 $ 1,311,831 Interest income on instalment notes 206,582 220,041 Miscellaneous 23,904 17,407 2,054,140 1,549,279 Cost and expenses: Cost of sales (exclusive of depreciation) 1,415,778 1,048,404 Depreciation 68,461 60,220 Selling, general and administrative 232,036 207,451 Provision for losses on instalment notes 10,724 12,402 Postretirement benefits 12,948 8,140 Interest expense - mortgage- backed/asset-backed notes 122,005 127,273 Interest expense - other debt 55,852 18,687 Amortization of intangibles 10,267 4,976 Provision for estimated hurricane insurance losses 10,600 3,983 Impairment of goodwill 63,210 -- Restructuring and impairment charges 24,373 591 2,026,254 1,492,127 Income from continuing operations before income tax expense 27,886 57,152 Income tax expense (20,142) (7,235) Income from continuing operations 7,744 49,917 Discontinued operations, net of income taxes (1) (698) -- Net income $ 7,046 $ 49,917 Basic income per share: Income from continuing operations $ 0.20 $ 1.29 Discontinued operations (0.02) -- Net income $ 0.18 $ 1.29 Weighted average number of shares outstanding 38,484,675 38,581,893 Diluted income per share (2): Income from continuing operations $ 0.20 $ 1.14 Discontinued operations (0.02) -- Net income $ 0.18 $ 1.14 Weighted average number of dilutive securities (2) 39,403,873 46,254,746 (1) 2005 expenses resulted from the Company's sale of its AIMCOR subsidiary in December 2003. (2) The interest, net of tax, and shares issuable upon conversion related to the Company's $175 million contingent convertible senior subordinated notes were not included in the calculation of diluted income per share for 2005 as they would have an anti-dilutive effect. WALTER INDUSTRIES, INC. AND SUBSIDIARIES RESULTS BY OPERATING SEGMENT ($ in Thousands) Unaudited For the years ended December 31, ---------------------------- As Restated 2005 2004 ------------ ------------ NET SALES AND REVENUES: Homebuilding $ 226,796 $ 233,755 Financing 229,156 242,777 Mueller (1) 176,747 -- Anvil (1) 132,581 -- Industrial Products 628,922 587,755 Natural Resources 548,577 395,532 Other 141,389 112,016 Consolidating Eliminations (30,028) (22,556) $ 2,054,140 $ 1,549,279 OPERATING INCOME (LOSS): Homebuilding $ (103,881) $ (33,347) Financing 46,019 54,838 Mueller (1) (7,460) -- Anvil (1) (4,183) -- Industrial Products 2,079 7,609 Natural Resources 164,103 69,702 Other (9,275) (20,253) Consolidating Eliminations (3,664) (2,710) Operating income 83,738 75,839 Other debt interest expense (55,852) (18,687) Income from continuing operations before income tax expense $ 27,886 $ 57,152 (1) The results of Mueller and Anvil are included from the date of acquisition on October 3, 2005. WALTER INDUSTRIES, INC. AND SUBSIDIARIES SUPPLEMENTAL INFORMATION Unaudited
For the For the three three For the For the months months year year ended ended ended ended December 31, December 31, December 31, December 31, 2005 2004 2005 2004 ------------ ------------ ------------ ------------ Depreciation ($ in thousands): Homebuilding $ 1,321 $ 1,121 $ 4,966 $ 4,792 Financing 347 378 1,403 1,471 Mueller (1) 6,235 -- 6,235 -- Anvil (1) 4,574 -- 4,574 -- Industrial Products 6,276 6,514 25,677 26,672 Natural Resources 5,504 5,836 20,855 22,464 Other 1,141 1,183 4,751 4,821 $ 25,398 $ 15,032 $ 68,461 $ 60,220 Amortization of intangibles ($ in thousands): Financing $ 818 $ 1,060 $ 3,641 $ 4,976 Mueller (1) 5,902 -- 5,902 -- Anvil (1) 724 -- 724 -- $ 7,444 $ 1,060 $ 10,267 $ 4,976 Restructuring and impairment charges (credits) ($ in thousands): Homebuilding goodwill impairment $ 63,210 $ -- $ 63,210 $ -- U.S. Pipe Anniston plant shutdown costs -- -- -- 121 U.S. Pipe Chattanooga plant shutdown costs 24,138 -- 24,138 -- Mine No. 7 longwall shield impairment 853 -- 853 -- Mine No. 5 shutdown costs 15 (457) (618) 470 $ 88,216 $ (457) $ 87,583 $ 591 Operating Data: Homebuilding New sales contracts 807 1,057 4,042 4,123 Cancellations 274 154 843 931 Unit completions 865 727 3,022 3,251 Average sale price $ 75,000 $ 74,000 $ 74,700 $ 71,700 Ending homes backlog 2,178 2,001 2,178 2,001 Financing Delinquencies 5.2% 4.9% 5.2% 4.9% Prepayment speeds 10.5% 10.4% 10.7% 10.1% Industrial Products Ending pipe & fittings backlog, tons 88,959 100,388 88,959 100,388 Ending pipe & fittings backlog, dollars ($ in thousands) $ 78,795 $ 85,876 $ 78,795 $ 85,876 Sloss Industries Tons of foundry coke sold 24,325 36,698 121,353 144,941 Tons of furnace coke sold 82,358 62,510 277,184 273,728 Foundry coke average sale price per ton $ 276.68 $ 185.32 $ 269.27 $ 181.18 Furnace coke average sale price per ton $ 205.74 $ 140.34 $ 205.80 $ 141.86
(1) The results of Mueller and Anvil are included from the date of acquisition on October 3, 2005. WALTER INDUSTRIES, INC. AND SUBSIDIARIES SUPPLEMENTAL INFORMATION Unaudited
For the For the three three For the For the months months year year ended ended ended ended December 31, December 31, December 31, December 31, 2005 2004 2005 2004 ------------ ------------ ------------ ------------ Operating Data: Natural Resources Tons sold by type (in thousands): Metallurgical coal, contracts 1,218 835 4,356 4,028 Metallurgical coal, spot sales -- 339 144 720 Steam coal 273 440 1,404 1,766 1,491 1,614 5,904 6,514 Average sale price per ton: Metallurgical coal, contracts $ 113.59 $ 59.55 $ 96.56 $ 51.64 Metallurgical coal, spot sales $ -- $ 103.62 $ 113.08 $ 104.46 Steam coal $ 34.84 $ 34.96 $ 35.02 $ 35.10 Tons sold by mine (in thousands): Mine No. 4 754 748 2,961 2,895 Mine No. 7 578 522 2,139 2,267 Mine No. 5 159 344 804 1,352 1,491 1,614 5,904 6,514 Coal cost of sales: Mine No. 4 per ton $ 47.40 $ 33.91 $ 40.29 $ 36.44 Mine No. 7 per ton $ 73.20 $ 44.97 $ 56.08 $ 41.01 Mine No. 5 per ton $ 66.59 $ 41.60 $ 53.64 $ 41.15 Mine No. 5 idle costs (in thousands) (1) $ 3,031 $ -- $ 19,164 $ -- Mine No. 7 idle costs (in thousands) (1) $ 2,732 $ -- $ 2,732 $ -- Other costs (in thousands) (2) $ 4,590 $ (2,688) $ 8,581 $ 2,851 Tons of coal produced (in thousands) 1,092 1,816 5,726 6,876 Coal production costs per ton: (3) Mine No. 4 $ 36.07 $ 26.11 $ 30.42 $ 29.33 Mine No. 7 $ 93.42 $ 38.81 $ 37.46 $ 32.65 Mine No. 5 $ 56.07 $ 35.04 $ 52.35 $ 38.57 Total $ 51.38 $ 31.86 $ 35.49 $ 32.35 Natural gas sales, in mmcf (in thousands) 1,696 1,926 6,937 7,890 Natural gas average sale price per mmcf $ 10.54 $ 6.61 $ 7.95 $ 6.08 Natural gas cost of sales per mmcf $ 3.56 $ 2.34 $ 2.87 $ 2.26
(1) Idle costs are charged to period expense when incurred. (2) Consists of charges (credits) not directly allocable to a specific mine. (3) Coal production costs per ton are a component of inventoriable costs. Other inventoriable 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. WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ($ in Thousands) Unaudited December 31, December 31, 2005 2004 ------------ ------------ ASSETS Cash and cash equivalents $ 137,396 $ 46,924 Short-term investments, restricted 124,573 99,905 Instalment notes receivable, net of allowance of $12,489 and $11,200, respectively 1,693,922 1,717,205 Receivables, net 334,322 170,219 Income tax receivable 16,793 14,977 Inventories 551,293 233,547 Prepaid expenses 31,320 19,590 Property, plant and equipment, net 603,350 331,959 Investments 6,056 6,165 Deferred income taxes -- 47,943 Unamortized debt expense 75,062 36,726 Other long-term assets 73,247 46,340 Identifiable intangibles, net 858,122 12,470 Goodwill 867,556 132,516 $ 5,373,012 $ 2,916,486 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 161,215 $ 90,217 Accrued expenses 213,596 125,681 Deferred income taxes 215,874 -- Debt: Mortgage-backed/asset-backed notes 1,727,329 1,763,827 Senior bank debt 1,498,594 -- 10% Senior subordinated debt 333,162 -- 14 3/4% Senior discount notes 165,697 -- Convertible senior subordinated notes 175,000 175,000 Accrued interest 32,619 16,813 Accumulated postretirement benefits obligation 275,336 282,599 Other long-term liabilities 285,974 203,122 Total liabilities 5,084,396 2,657,259 Stockholders' equity 288,616 259,227 $ 5,373,012 $ 2,916,486 WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS FOR THE YEAR ENDED DECEMBER 31, 2005 ($ in Thousands) Unaudited
Accumulated Other Comprehensive Accumulated Comprehensive Total Loss Deficit Loss ------------ ------------- ------------ ------------- Balance at December 31, 2004 $ 259,227 $ (609,048) $ (51,109) Comprehensive loss: Net income 7,046 $ 7,046 7,046 Other comprehensive income (loss), net of tax: Increase in additional minimum pension liability (9,573) (9,573) (9,573) Cumulative foreign currency translation adjustment (113) (113) (113) Net unrealized loss on hedges (619) (619) (619) Comprehensive loss $ (3,259) Stock issued upon exercise of stock options 19,872 Tax benefit from the exercise of stock options 17,469 Dividends paid, $.16 per share (6,145) Stock-based compensation 1,452 Balance at December 31, 2005 $ 288,616 $ (602,002) $ (61,414)
Capital in Common Excess of Treasury Stock Par Value Stock ------------ ------------ ------------ Balance at December 31, 2004 $ 580 $ 1,178,121 $ (259,317) Comprehensive loss: Net income Other comprehensive income (loss), net of tax: Increase in additional minimum pension liability Cumulative foreign currency translation adjustment Net unrealized loss on hedges Comprehensive loss Stock issued upon exercise of stock options 18 19,854 Tax benefit from the exercise of stock options 17,469 Dividends paid, $.16 per share (6,145) Stock-based compensation 1,452 Balance at December 31, 2005 $ 598 $ 1,210,751 $ (259,317)
WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS ($ in Thousands) Unaudited
For the three months ended December 31, ---------------------------- $ 2004 2004 Change ------------ ------------ ------------ As Reported As Restated Net sales and revenues: Net sales $ 309,333 $ 332,847 $ 23,514 Interest income on instalment notes 53,407 53,407 0 Miscellaneous 4,754 4,754 0 367,494 391,008 23,514 Cost and expenses: Cost of sales (exclusive of depreciation) 223,977 247,491 23,514 Depreciation 15,032 15,032 -- Selling, general and administrative 60,077 60,077 -- Provision for losses on instalment notes 4,105 4,105 -- Postretirement benefits 2,982 2,982 -- Interest expense - mortgage- backed/asset-backed notes 32,447 32,447 -- Interest expense - other debt 4,733 4,733 -- Amortization of intangibles 1,060 1,060 -- Credit for estimated hurricane insurance losses (935) (935) -- Restructuring and impairment credits (457) (457) -- 343,021 366,535 23,514 Income from continuing operations before income tax benefit 24,473 24,473 -- Income tax benefit (1) 2,710 2,710 -- Net income $ 27,183 $ 27,183 $ -- Basic income per share: Net income $ 0.74 $ 0.74 Weighted average number of shares outstanding 36,963,534 36,963,534 Diluted income per share: Net income $ 0.59 $ 0.59 Weighted average number of dilutive securities 48,066,504 48,066,504
(1) Results for the fourth quarter of 2004 include a net income tax benefit of approximately $9.7 million associated with favorable adjustments to income tax valuation allowances, primarily resulting from profitability improvements at Jim Walter Resources. WALTER INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS ($ in Thousands) Unaudited
For the year ended December 31, ---------------------------- $ 2004 2004 Change ------------ ------------ ------------ As Reported As Restated Net sales and revenues: Net sales $ 1,224,274 $ 1,311,831 $ 87,557 Interest income on instalment notes 220,041 220,041 0 Miscellaneous 17,407 17,407 0 1,461,722 1,549,279 87,557 Cost and expenses: Cost of sales (exclusive of depreciation) 960,847 1,048,404 87,557 Depreciation 60,220 60,220 -- Selling, general and administrative 207,451 207,451 -- Provision for losses on instalment notes 12,402 12,402 -- Postretirement benefits 8,140 8,140 -- Interest expense - mortgage- backed/asset-backed notes 127,273 127,273 -- Interest expense - other debt 18,687 18,687 -- Amortization of intangibles 4,976 4,976 -- Provision for estimated hurricane insurance losses 3,983 3,983 -- Restructuring and impairment charges 591 591 -- 1,404,570 1,492,127 87,557 Income from continuing operations before income tax expense 57,152 57,152 -- Income tax expense (7,235) (7,235) -- Net income $ 49,917 $ 49,917 $ -- Basic income per share: Net income $ 1.29 $ 1.29 Weighted average number of shares outstanding 38,581,893 38,581,893 Diluted income per share: Net income $ 1.14 $ 1.14 Weighted average number of dilutive securities 46,254,746 46,254,746
SOURCE Walter Industries, Inc. -0- 02/28/2006 /CONTACT: Investor Contact, Joseph J. Troy, Sr. Vice President, +1-813-871-4404, or jtroy@walterind.com, or Media Contact, Michael A. Monahan, Director - Corporate Communications, +1-813-871-4132, or mmonahan@walterind.com, both of Walter Industries, Inc./ /Photo: http://www.newscom.com/cgi-bin/prnh/20020429/FLM010LOGO-c AP Archive: http://photoarchive.ap.org PRN Photo Desk, photodesk@prnewswire.com / /Web site: http://www.walterind.com /

The following information was filed by Walter Energy, Inc. (WLTGQ) on Wednesday, March 1, 2006 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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