Walter to trim up to 375 jobs

The decision comes as the Tampa company formalizes its restructuring and reports a loss.

By KRIS HUNDLEY

© St. Petersburg Times, published August 3, 2000

TAMPA -- About six weeks ago, the executive charged with cutting $25-million in costs at struggling Walter Industries Inc. said layoffs would not be "a creative way to address the problem."

On Wednesday, the Tampa company said forget being creative: 5 percent of the work force, or as many as 375 jobs, will be eliminated.

James E. Lillie, the vice president who dismissed the idea of layoffs in June, said he expects most of the cutbacks to be in Walter's field offices as the company, which does everything from build homes to make water pipes, centralizes financial and legal services. He said there should be little if any effect on the 360 of Walter's 7,500 employees based in Tampa.

Walter's decision to get tough came as it reported a whopping $130.3-million net loss in its fourth quarter ended May 31, or $2.76 per share, as it takes major restructuring charges. That compares with earnings of $17.8-million, or 35 cents a share, in the same period of 1999.

Among the one-time charges were a $167-million write-down on Walter's coal-mining operation, which it has been unable to sell. Write-offs for obsolescent inventory, property, plants and equipment totaled $19-million. Severance for ousted executives, including former chief executive Ken Hyatt, who was shown the door in March, was $5-million.

Since Hyatt's departure, Walter has been run by Robert G. Burton, a turnaround expert handpicked by the company's largest shareholder, New York investment firm Kohlberg Kravis Roberts & Co. Burton made his name at World Color, the second-largest commercial printer in North America when he ran it.

In his nine years at World Color, Burton consistently delivered record financial results, and the stock increased in value by 100 percent in three years after it went public in 1996. World Color merged with a competitor in November.

Burton has brought on a slate of new vice presidents at Walter, including Lillie, and made clear his determination to succeed with the company, which has nearly $2-billion in revenues but has been a disappointment to investors after repeatedly missing earnings estimates.

"KKR has a reputation for expecting results, and I have always been comfortable with that," Burton said in late April.

On Wednesday, the company said it was restructuring into four segments:homebuilding and finance, industrial products, energy services, and natural resources. Walter said it was trying to drive down administrative costs by centralizing services and streamlining its supply chain.

For the fourth quarter, Walter's revenues were $509.8-million, up 4 percent compared with $489.6-million a year ago. Income before the restructuring charge was $8.6-million, or 18 cents per diluted share, exceeding analysts' estimate of 17 cents per share.

Strongest revenues in the most recent quarter came from Walter's industrial products division, up 12 percent. Its energy services group had a sales increase of 9 percent, while homebuilding and natural resources revenues were down 3 percent and 22 percent,respectively.

Walter Industries' stock, which has been as low as $7.25 in the past year, closed Wednesday at $11.38, up 25 cents. The company's financial report, which included year-end results, was released after the market's close. For the fiscal year, Walter's revenues were $1.91-billion, essentially the same as a year ago. Net loss was $104.7-million, or $2.15 per share, compared with earnings of $35.6-million, or 69 cents a share, a year ago.

- Information from Times files was used in this report.

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