<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
WALTER INDUSTRIES, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
September 11, 2000
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Walter Industries, Inc. (the "Company") to be held at 10:00 A.M. local time, on
Thursday, October 19, 2000, at the Hyatt Regency Westshore, 6200 Courtney
Campbell Causeway, Tampa, Florida, 33607.
As discussed in the accompanying Proxy Statement, stockholders will be asked
to consider and approve proposals to (1) elect nine directors to the Board of
Directors and (2) ratify the appointment of PricewaterhouseCoopers LLP as
independent certified public accountants for the Company for the fiscal year
ending May 31, 2001. In addition, one stockholder proposal will be acted on at
the Annual Meeting.
The Board of Directors urges you to sign, date and return your proxy in the
addressed envelope enclosed for your convenience so that as many shares as
possible may be represented at the Annual Meeting. The giving of the proxy will
not affect your right to attend the meeting or, if you choose to revoke the
proxy, your right to vote in person.
Sincerely,
/s/ Donald N. Boyce
Donald N. Boyce
Interim Chairman of the Board,
President and Chief Executive Officer
<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 19, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Walter
Industries, Inc. (the "Company"), a Delaware corporation, will be held on
Thursday, October 19, 2000 at 10:00 A.M., local time, at the Hyatt Regency
Westshore, 6200 Courtney Campbell Causeway, Tampa, Florida, 33607, for the
following purposes:
1. to elect nine members to the Board of Directors to serve for the ensuing
year;
2. to ratify the appointment of PricewaterhouseCoopers LLP as independent
certified public accountants for the Company for the fiscal year ending
May 31, 2001;
3. to vote upon one stockholder proposal which is described in the
accompanying proxy statement; and
4. to transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Only stockholders of record at the close of business on August 21, 2000 are
entitled to notice of and to vote at the Annual Meeting. The Annual Report of
the Company for the fiscal year ended May 31, 2000 is enclosed.
The mailing address of the principal executive offices of the Company is
Post Office Box 31601, Tampa, Florida 33631-3601.
Your attention is invited to the Proxy Statement on the following pages.
By Order of the Board of Directors
/s/ Edward A. Porter
EDWARD A. PORTER
Secretary
Tampa, Florida
September 11, 2000
<PAGE>
WALTER INDUSTRIES, INC.
1500 North Dale Mabry Highway
Tampa, Florida 33607
PROXY STATEMENT
------------------------
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Walter Industries, Inc. (the "Company") of proxies for the
Annual Meeting of Stockholders of the Company to be held on October 19, 2000 at
10:00 a.m., local time, at the Hyatt Regency Westshore, 6200 Courtney Campbell
Causeway, Tampa, Florida, 33607 and any adjournments thereof (the "Annual
Meeting") for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders.
THE PROXY
The cost of soliciting proxies will be borne by the Company. In addition to
soliciting stockholders by mail, the Company will request banks, brokerage
houses and other custodians, nominees and fiduciaries to forward solicitation
materials to the beneficial owners of the stock held of record by such persons
and the Company will reimburse them for their reasonable out-of-pocket expenses
incurred in doing so. The Company may use the services of its officers and other
employees of the Company who will receive no compensation for their services,
other than their regular compensation, to solicit proxies personally, by
telephone or by facsimile transmission.
This Proxy Statement and enclosed proxy is first being mailed to
stockholders on or about September 11, 2000.
The close of business on August 21, 2000 has been fixed by the Board of
Directors as the record date (the "Record Date") for determination of
stockholders entitled to notice of and to vote at the Annual Meeting. On the
Record Date there were issued and outstanding 46,338,892 shares of common stock,
par value $.01 per share, of the Company (the "Common Stock"). Each stockholder
is entitled to one vote for each share of stock held. The presence in person or
by proxy of a majority of the shares of Common Stock issued and outstanding on
the Record Date is required for a quorum. The affirmative vote of a majority of
the shares of Common Stock represented in person or by proxy at the Annual
Meeting is required to approve the proposal regarding the election of directors.
The affirmative vote of a majority of the shares of Common Stock represented in
person or by proxy at the Annual Meeting is required to approve the appointment
of PricewaterhouseCoopers LLP as independent certified public accountants for
the fiscal year ending May 31, 2001. The affirmative vote of a majority of the
shares of Common Stock represented in person or by proxy at the Annual Meeting
is required to approve the stockholder proposal regarding liquidation of the
Company.
If the enclosed proxy is properly signed and returned and not revoked, the
shares represented thereby will be voted at the Annual Meeting. If the
stockholder specifies in the proxy how the shares are to be voted, they will be
voted accordingly. If the stockholder does not specify in the proxy how the
shares are to be voted, the shares will be voted FOR the election of the
director nominees named in this Proxy Statement, FOR the ratification of the
appointment of PricewaterhouseCoopers LLP as independent certified public
accountants for the Company for the fiscal year ending May 31, 2001 and AGAINST
the stockholder proposal.
A stockholder giving a proxy has the power to revoke it at any time prior to
its exercise by giving written notice revoking it or by giving a later proxy, in
either case delivered by mail to the Secretary of the Company. Attendance at the
Annual Meeting will not automatically revoke a proxy, but a stockholder in
attendance may request a ballot and vote in person, thereby revoking a prior
granted proxy.
The Stockholders' Agreement dated as of March 17, 1995 between the Company
and The Celotex Corporation ("Celotex"), solely in its capacity as the Celotex
Settlement Fund Recipient (the "Stockholders Agreement"), under and as defined
in the Second Amended and Restated Veil Piercing Settlement
<PAGE>
Agreement dated as of November 22, 1994 (the "Veil Piercing Settlement
Agreement"), provides that Celotex or its successor will vote the shares of
Common Stock held by said fund for and/or against each matter in proportion to
the votes cast by the other holders of Common Stock who voted. The Common Stock
held by the Celotex Settlement Fund Recipient was transferred to the Asbestos
Settlement Trust (the "Celotex Trust") on May 30, 1997, and the rights and
obligations of Celotex under the Stockholders' Agreement were subsequently
assumed by the Celotex Trust. The Company will advise the Celotex Trust of the
proportion of such votes and the Celotex Trust shall have no responsibility for
the determination thereof. The Celotex Trust is obligated to be present in
person or by proxy at all meetings of holders of Common Stock so that all shares
of Common Stock owned by the Celotex Trust may be counted for the purpose of
determining the presence of a quorum at such meetings. See "Security Ownership
of Management and Principal Stockholders--Ownership of Principal Stockholders"
herein for information concerning the Celotex Trust's ownership of Common Stock.
The Annual Report of the Company for the year ended May 31, 2000, which
includes the audited financial statements for such year, is enclosed with this
Proxy Statement.
IN ORDER THAT YOUR SHARES OF COMMON STOCK MAY BE REPRESENTED AT THIS MEETING
IN CASE YOU ARE NOT PERSONALLY PRESENT, YOU ARE REQUESTED TO PLEASE SIGN, DATE
AND MAIL THE PROXY PROMPTLY.
2
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
A board of nine (9) directors is to be elected at the Annual Meeting. The
nine (9) nominees for election as directors are named below, all of whom are
presently directors of the Company. In the event that any such nominee is unable
or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for any nominee who is designated by the present Board of
Directors to fill the vacancy. The Company is not aware of any nominee who will
be unable or will decline to serve as a director. The term of office for each
person elected as a director will continue until the next Annual Meeting of
Stockholders or until his successor has been elected and qualified. Management
believes these nominees include seasoned business executives with experience in
business restructuring and focusing, which will benefit the Company.
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
SERVED AS DIRECTOR
NAME AGE OF THE COMPANY FROM
---- -------- -------------------
<S> <C> <C>
Robert F. Amter............................................. 61 2000
Donald N. Boyce............................................. 62 1998
Howard L. Clark, Jr......................................... 56 1987
Perry Golkin................................................ 46 1987
James L. Johnson............................................ 73 1995
Scott C. Nuttall............................................ 27 2000
Wayne W. Robinson........................................... 40 2000
Neil A. Springer............................................ 62 2000
Michael T. Tokarz........................................... 50 1987
</TABLE>
ROBERT F. AMTER was appointed to the Board of Directors on August 3, 2000.
Mr. Amter has been Chief Executive Officer of Amter & Associates since 1991.
DONALD N. BOYCE has been a director of the Company since August 18, 1998 and
was appointed Interim Chairman of the Board, President and Chief Executive
Officer on August 3, 2000. Mr. Boyce was Chairman of the Board of IDEX
Corporation from April 1, 1999 until March 31, 2000 and was Chief Executive
Officer of IDEX Corporation from January 1988 until March 31, 1999. Mr. Boyce
also is a director of United Dominion Industries, Ltd.
HOWARD L. CLARK, JR. has been Vice Chairman of Lehman Brothers Inc., an
investment-banking firm, since February 1993; prior thereto Mr. Clark served as
Chairman and Chief Executive Officer of Shearson Lehman Brothers Inc. Prior
thereto Mr. Clark was an Executive Vice President and Chief Financial Officer of
American Express Company, a financial services firm. Mr. Clark also is a
director of Lehman Brothers Inc., Maytag Corporation and White Mountains
Insurance Group, Ltd.
PERRY GOLKIN has been a member of the limited liability company which serves
as the general partner of Kohlberg Kravis Roberts & Co. L.P. since
January 1996. Mr. Golkin was a general partner of Kohlberg Kravis Roberts & Co.
L.P. from January 1995 to January 1996. Prior to 1995 Mr. Golkin was an
executive of Kohlberg Kravis Roberts & Co. L.P. Mr. Golkin also is a director of
PRIMEDIA Inc. Mr. Golkin was a director of the Company from 1987 to March 2,
1995. On November 14, 1995, he was re-elected a director of the Company.
JAMES L. JOHNSON has been Chairman Emeritus of GTE Corporation since 1992.
From April 1988 to May 1992 he was Chairman and Chief Executive Officer of GTE.
Mr. Johnson also is a director of
3
<PAGE>
CellStar Corporation, The FINOVA Group Inc., Harte-Hanks Communications Inc.,
MONY Group and Valero Energy Corp.
SCOTT C. NUTTALL was appointed to the Board of Directors on August 3, 2000.
Mr. Nuttall has been an associate of Kohlberg Kravis Roberts & Co. since 1996.
From 1995 to 1996, Mr. Nuttall was an executive with the Blackstone Group.
Mr. Nuttall also is a director of Kinder Care Learning Centers.
WAYNE W. ROBINSON was appointed to the Board of Directors on August 3, 2000.
Mr. Robinson has been the Chairman and Chief Executive Officer of United
Fixtures Company since 1998. From 1996-1998 Mr. Robinson served as President and
Chief Executive Officer of Allied Foods, Inc., and from 1994 to 1996
Mr. Robinson was the General Manager-Manufacturing of GE Power Delivery for the
General Electric Company.
NEIL A. SPRINGER is managing director of Springer & Associates LLC which was
established in 1994. Mr. Springer also is a director of IDEX Corporation and US
Freightways.
MICHAEL T. TOKARZ has been a member of the limited liability company which
serves as the general partner of Kohlberg Kravis Roberts & Co. L.P. since
January 1996. Mr. Tokarz was a general partner of Kohlberg Kravis Roberts & Co.
L.P. from January 1993 to January 1996. Prior to 1993 Mr. Tokarz was an
executive of Kohlberg Kravis Roberts & Co. L.P. Mr. Tokarz also is a director of
Evenflo Company, Inc., IDEX Corporation, KSL Recreation Corporation,
PRIMEDIA Inc. and Spalding Holdings Corporation.
In order to be elected, a nominee must receive the vote of a majority of the
shares of Common Stock represented in person or by proxy at the Annual Meeting.
Abstentions from voting, as well as broker non-votes, will be considered as
votes cast against and therefore will have the same effect as a vote against the
election of directors. Unless otherwise instructed, the proxy holders will vote
proxies held by them FOR the election of the nominees listed above.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES
SET FORTH ABOVE.
PROPOSAL TWO
TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING
MAY 31, 2001
The Board has appointed PricewaterhouseCoopers LLP as independent certified
public accountants for the fiscal year ending May 31, 2001. A representative of
PricewaterhouseCoopers LLP will be present at the Annual Meeting. He will have
the opportunity to make a statement if he desires to do so and will be available
to respond to appropriate questions. PricewaterhouseCoopers LLP has served as
independent certified public accountants for the Company since its formation in
1987.
The appointment of PricewaterhouseCoopers LLP as independent certified
public accountants for the fiscal year ending May 31, 2001 will be ratified if
approved by the affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy at the Annual Meeting under Delaware law.
Abstentions from voting, as well as broker non-votes, will be considered as
votes cast against the proposal and, therefore, will have the same effect as a
vote against the appointment of PricewaterhouseCoopers LLP as independent
certified public accountants. Unless otherwise instructed, the proxy holders
will vote proxies held by them FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as independent certified public accountants for the
fiscal year ending May 31, 2001.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS FOR THE COMPANY FOR THE FISCAL YEAR ENDING MAY 31, 2001.
4
<PAGE>
CORPORATE GOVERNANCE
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended May 31, 2000, there were seven (7) meetings of
the Board, three (3) meetings of the Audit Committee and five (5) meetings of
the Compensation Committee. The Nominating Committee did not meet.
All of the incumbent directors attended at least 75% of the combined number
of Board meetings and meetings of Committees of which they were members that
were held during the fiscal year ended May 31, 2000. Messrs. Amter, Nuttall,
Robinson and Springer were appointed to the Board on August 3, 2000.
The Audit Committee adopted a written charter on May 26, 2000 in compliance
with the rules of the New York Stock Exchange. The charter provides that the
Audit Committee shall assist the Board of Directors in fulfilling its
responsibility to the Company's stockholders relating to the Company's financial
reporting process and systems of internal control. The Audit Committee is also
responsible for determining whether the Company's financial systems and
reporting practices are in accordance with applicable requirements. The Audit
Committee has the authority to institute special investigations and to retain
special counsel or experts as it deems appropriate. The present members of the
Committee are Howard L. Clark, Jr., Chairman, James L. Johnson and Neil A.
Springer.
The Compensation Committee is responsible for reviewing and approving
officer and executive salaries of the Company and its subsidiaries in amounts
over $150,000 annually and for reviewing and recommending for approval by the
Board executive and key employee compensation plans, including incentive
compensation, stock incentives and other benefits. The Committee consists of
directors who are not and never have been employees of the Company. The present
members of the Committee are James L. Johnson, Chairman, Howard L. Clark, Jr.,
and Perry Golkin.
The Nominating Committee is responsible for establishing the criteria for
and the qualifications of persons suitable for nomination as directors and
reporting its recommendations to the Board. The Nominating Committee will
consider candidates for nominees for election as directors of the Company
submitted by stockholders. Any stockholder who wishes to have the Committee
consider a candidate is required to give written notice of the stockholder's
intention to make such a nomination. Notices of nomination for the fiscal year
ending May 31, 2001 must be received by the Company's Secretary at the address
on the first page of this Proxy Statement no earlier than July 1, 2001 and no
later than July 21, 2001. The notice of nomination is required to contain
certain information about both the nominee and the stockholder making the
nomination, as set forth in the Company's by-laws. A proposed nomination which
does not comply with the above requirements will not be considered. The present
members of the Committee are Perry Golkin, Chairman, James L. Johnson, and
Michael T. Tokarz.
DIRECTORS' COMPENSATION
No directors' fees are paid to directors who are full-time employees of the
Company or any of its subsidiaries. For the fiscal year ended May 31, 2000
non-employee directors of the Company were paid retainer fees of $25,000 per
year. Committee Chairmen received an additional retainer fee of $5,000 per year.
Each non-employee director also received a fee of $1,500 for each Board or
Committee meeting attended and was reimbursed for travel and lodging expenses.
On April 11, 1995, the Board approved and adopted the Walter
Industries, Inc. Directors' Deferred Fee Plan under which non-employee directors
may elect to defer all or a portion of their director's fees. The deferred fees,
at each electing director's option, are credited to either an income account or
a stock equivalent account or divided between the two accounts. If a director
elects the income account, the director's fees otherwise payable are credited as
a dollar amount to the director's income account on the date such fees would
otherwise have been paid. If a director elects the stock equivalent account,
director's fees otherwise payable are converted to stock equivalent shares equal
in number to the maximum number
5
<PAGE>
of shares of Common Stock, or fraction thereof (to the nearest one hundredth
( 1/100) of one share), which could be purchased with the dollar amount of such
fees at the closing market price of the Common Stock on the date such fees would
otherwise have been paid, or if that date is not a trading date, on the next
trading date. The income account is credited quarterly with interest at the
prime rate, and the stock equivalent account is credited with stock equivalent
shares equal in number to the maximum number of shares of Common Stock, or
fraction thereof (to the nearest one hundredth ( 1/100) of one share), which
could have been purchased with the cash dividend, if any, which would have been
payable had the participant been the actual owner of the number of shares of
Common Stock credited to his account immediately prior to such dividend.
Payments under the Deferred Fee Plan begin upon the later of the termination of
the director's services as a director or date of retirement from the director's
principal occupation or employment in such number of annual installments as
shall be determined by the Company. Payments from the income account are made in
cash, and payments from the stock equivalent account are made in cash at the
Common Stock's then current market value, or, at the Company's option, in shares
of Common Stock. As of August 21, 2000, none of the incumbent directors had
elected to participate in the Directors' Deferred Fee Plan.
CERTAIN RELATIONSHIPS AND CERTAIN RELATED TRANSACTIONS
In May 2000, Lehman Brothers Inc. acted as an underwriter in connection with
the public issuance by Mid-State Trust VIII, an affiliate of the Company, of
$386,500,000 of Mid-State Trust VIII asset-backed notes, for which Lehman
Brothers Inc. received underwriting commissions and fees of $390,000.
In connection with the resignation of Kenneth E. Hyatt as Chairman, Chief
Executive Officer and President of the Company effective March 23, 2000,
Mr. Hyatt entered into a Retirement and Consulting Agreement with the Company
which included the following provisions: a severance payment to him of
$3.9 million in April 2000; the right to exercise all outstanding options
(whether or not yet exercisable); deferred compensation of $100,000 for each of
the three years following his resignation in lieu of the contributions that the
Company would have made on his behalf to the Company's Profit Sharing and
Supplemental Profit Sharing Plans had he not resigned from the Company; and
office space and secretarial support until he commences other employment. The
Agreement also provides that for a period of three years from his resignation,
Mr. Hyatt will be paid an annual consulting fee of $100,000 and will render to
the Company such services of an advisory or consulting nature as the Company may
reasonably require. The Agreement also contains a covenant prohibiting, during
the term of the Agreement and for a period of one year after its termination,
Mr. Hyatt's engagement in a business in competition with the Company or its
subsidiaries.
Upon his appointment as Chairman of the Board, Chief Executive Officer and
President of the Company on April 24, 2000, Robert G. Burton purchased from the
Company 242,425 shares of Common Stock at an aggregate purchase price of
$2,000,006. Mr. Burton resigned on August 2, 2000. In connection with his
resignation, Mr. Burton entered into a Separation Agreement with the Company
pursuant to which: the Company purchased 242,425 shares of Common Stock owned by
Mr. Burton at an aggregate price of $2,000,006; Mr. Burton received a lump sum
payout of $2,353,222 in cash; and Mr. Burton forfeited options to acquire
1,000,000 shares of Common Stock previously granted to him.
In connection with the resignation of Richard E. Almy, Executive Vice
President and Chief Operating Officer, on June 21, 2000, the Company entered
into a Separation Agreement with Mr. Almy which includes the following
provisions: a payment of $230,000, representing a bonus payment for the fiscal
year ended May 31, 2000 under the Company's Annual Incentive Plan for Key
Employees; payments of $230,000 in August 2001 and August 2002; salary
continuation of $400,000 per year for two years; executive outplacement services
for up to 12 months; and a payment of $60,000 in lieu of any contributions the
Company would have made on his behalf to the Company's Profit Sharing and
Supplemental Profit Sharing Plans had he not resigned from the Company.
6
<PAGE>
In connection with the resignation of Arthur W. Huge, Executive Vice
President and Chief Financial Officer, on May 8, 2000, the Company entered into
a Separation Agreement with Mr. Huge which includes the following provisions: a
payment of $325,004 on May 18, 2000, representing a guaranteed bonus of $150,000
and a payment of $175,004 for the value of certain stock grants forfeited upon
his resignation; salary continuation of $400,000 per year for two years;
executive outplacement services in the amount of $2,500; a payment of $148,500
representing payment in full of the Company's obligation for the purchase of an
annuity as provided in Mr. Huge's employment agreement; and a payment of $60,000
in lieu of any contributions the Company would have made on his behalf to the
Company's Profit Sharing and Supplemental Profit Sharing Plans had he not
resigned from the Company.
The Company entered into a consulting agreement with the Company's former
Chairman Emeritus, James W. Walter, effective upon his retirement on October 6,
1995. In October 1999 the agreement expired and the agreement was extended for
an additional period of one year. Mr. Walter died on January 6, 2000 and prior
to his death was paid $87,000 in consulting fees during the fiscal year ended
May 31, 2000.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation paid to
or accrued by the Company for the account of (i) each of the individuals who
served as the Chief Executive Officers of the Company during the fiscal year
ended May 31, 2000, (ii) each of the next four most highly compensated
individuals who were serving as executive officers of the Company as of May 31,
2000 and (iii) one additional individual for whom disclosure would have been
provided pursuant to clause (ii) above but for the fact that such individual was
not serving as an executive officer of the Company as of May 31, 2000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
YEAR ANNUAL COMPENSATION SECURITIES
ENDED ------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION MAY 31 SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION($)(1)
--------------------------- -------- ---------- --------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Robert G. Burton(2)................... 2000 93,750 0 1,000,000(3) 0
Former Chairman of the Board, Chief 1999 (2) (2) (2) (2)
Executive Officer and President 1998 (2) (2) (2) (2)
G. Robert Durham(2)................... 2000 0 0 40,000 0
Former Chairman of the Board, Chief 1999 (2) (2) (2) (2)
Executive Officer and President 1998 (2) (2) (2) (2)
Kenneth E. Hyatt(2)................... 2000 547,100 0 100,000 3,916,670(a)
Former Chairman of the Board, Chief 1999 615,000 600,000 100,000 105,771(b)
Executive Officer and President 1998 576,000 600,000 0 98,439(b)
Richard E. Almy(4).................... 2000 350,000 230,000 50,000(5) 0(b)
Former Executive Vice President 1999 300,000 230,000 50,000 50,556(b)
and Chief Operating Officer 1998 273,000 190,000 0 44,938(b)
Ralph E. Fifield(6)................... 2000 262,946 275,000 35,500 (c)
Executive Vice President of the 1999 239,493 240,000 50,000 15,676(c)
Company and President of United 1998 230,000 115,000 50,000 15,471(c)
States Pipe and Foundry Company,
Inc., a subsidiary of the Company
Peter Scott-Hansen(7)................. 2000 330,815 177,266 25,000(8) 14,600(d)
Former President of Applied 1999 306,200 110,766 10,000 14,600(d)
Industrial 1998 205,000 144,320 30,000 220,454(d)
Materials Corporation, a subsidiary
of the
Company
Arthur W. Huge(9)..................... 2000 404,889 200,000(10) 0 256,772(e)
Former Executive Vice President and 1999 (9) (9) (9) (9)
Chief Financial Officer 1998 (9) (9) (9) (9)
Robert W. Michael..................... 2000 212,500 250,000 30,000 (b)
Senior Vice President and 1999 204,212 170,000 30,000 35,189(b)
Group Executive; President of 1998 194,107 150,000 0 33,220(b)
Jim Walter Homes, Inc., a
subsidiary of the Company
</TABLE>
--------------------------
(1) This column consists of the following:
(a) A severance payment to Mr. Hyatt on April 4, 2000 of $3.9 million and
consulting fees of $16,670 pursuant to the Retirement and Consulting
Agreement described on page 6.
(b) The Company's contribution for the accounts of Messrs. Hyatt, Almy and
Michael in the Walter Industries, Inc. Profit Sharing Plan (the "Profit
Sharing Plan") and accruals for the related Supplemental Profit Sharing
Plan (the "Supplemental Profit Sharing Plan") which provides benefits
which would have been
8
<PAGE>
provided under the tax-qualified Profit Sharing Plan but for restrictions
on such benefits imposed by the Internal Revenue Code of 1986, as
amended. The Profit Sharing Plan and the Supplemental Profit Sharing Plan
amounts are for the plan years ended August 31, 1998 and August 31, 1999.
The amounts to be contributed to Mr. Michael's account for the plan year
ended August 31, 2000 are not currently available but are anticipated to
not be materially different from the amounts for the plan year ended
August 31, 1999. Due to their resignations prior to August 31, 2000
Messrs. Hyatt and Almy are not eligible for a contribution for the plan
year ended August 31, 2000.
(c) Accruals for the account of Mr. Fifield under the Company's Supplemental
Pension Plan which provides benefits which would have been provided under
a tax-qualified pension plan but for restrictions on such benefits
imposed by the Internal Revenue Code of 1986, as amended. The current
Supplemental Pension Plan year ends December 31, 2000; the amount to be
accrued for Mr. Fifield under the Supplemental Pension Plan for 2000 has
thus not been determined.
(d) The matching and discretionary contributions by Mr. Scott-Hansen's
employer, Applied Industrial Materials Corporation ("AIMCOR"), under its
401(k) Plan and, for the fiscal year ended May 31, 1998, a bonus of
$216,000 paid to Mr. Scott-Hansen upon the consummation of the sale of
AIMCOR to the Company in October 1997.
(e) A payment of $175,004 paid upon Mr. Huge's resignation on May 8, 2000
pursuant to his separation agreement with the Company, representing the
value of Mr. Huge's forfeited grants of stock, and a grant of $81,768 of
Common Stock received by Mr. Huge on January 20, 2000 pursuant to his
employment agreement, valued at $9.8125 per share, the closing market
price of the Common Stock on the date of receipt.
Except as noted above, the Company did not pay or provide other forms of
compensation (such as perquisites) to any of the named executive officers
in amounts having an aggregate value exceeding the lesser of $50,000 or
10% of the total annual salary and bonus reported for such officers.
(2) Mr. Hyatt resigned as Chairman, Chief Executive Officer and President on
March 23, 2000. Mr. Durham was elected Chairman, Chief Executive Officer and
President on April 3, 2000. Following Mr. Durham's resignation on April 24,
2000, Mr. Burton was elected Chairman, Chief Executive Officer and
President. Mr. Burton resigned on August 2, 2000.
(3) Mr. Burton forfeited his options upon his resignation on August 2, 2000.
(4) Mr. Almy resigned on June 21, 2000.
(5) Mr. Almy forfeited his options upon his resignation on June 21, 2000.
(6) Mr. Fifield became an Executive Vice President of the Company on June 22,
2000.
(7) Mr. Scott-Hansen retired on June 30, 2000.
(8) Mr. Scott-Hansen forfeited his options upon his retirement on June 30, 2000.
(9) Mr. Huge became an employee of the Company in June 1999 and resigned on
May 8, 2000.
(10) Mr. Huge received a sign-on bonus of $50,000 in June 1999 and a bonus of
$150,000 upon his resignation on May 8, 2000 pursuant to his employment
agreement with the Company.
9
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE
% OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------------
NAME GRANTED(1) IN FISCAL 2000 ($/SH) DATE(2) 5%(3) 10%(3)
---- ----------- -------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Burton(4).......... 500,000 29.3 8.625 4/24/2010 $2,712,108 $6,873,014
Robert G. Burton(4).......... 500,000 29.3 10.375 4/24/2010 1,837,108 5,998,014
G. Robert Durham............. 40,000 2.3 7.8125 4/3/2010 196,530 498,045
Kenneth E. Hyatt............. 100,000 5.9 10.4375 12/2/2009 666,589 1,679,680
Richard E. Almy(4)........... 50,000 2.9 10.4375 12/2/2009 333,295 839,840
Ralph E. Fifield............. 35,500 2.1 10.4375 12/2/2009 236,639 596,286
Peter Scott-Hansen(4)........ 25,000 1.5 10.4375 12/2/2009 166,647 419,920
Arthur W. Huge(5)............ 0 0 0 -- 0 0
Robert W. Michael............ 30,000 1.8 10.4375 12/2/2009 199,977 503,904
</TABLE>
------------------------
(1) Mr. Durham's options became exercisable in full on April 24, 2000, the date
of grant. Mr. Hyatt's options became exercisable in full upon his
resignation on March 23, 2000. Mr. Michael's and Mr. Fifield's options will
become exercisable in three equal installments commencing on December 2,
2000, the first anniversary of the date of grant, and continuing on each of
the two subsequent anniversaries.
(2) The right to exercise all of the options expires no later than the tenth
anniversary of the date on which they were granted.
(3) The amounts of hypothetical potential appreciation shown in these columns
reflect required calculations at annual appreciation rates of 5% and 10% set
by the Securities and Exchange Commission and, therefore, are not intended
to represent either historical appreciation or anticipated future
appreciation in the price of Common Stock.
(4) Due to their resignations within one year of the grant of options listed in
this table, Messrs. Almy, Burton and Scott-Hansen forfeited such options
upon termination of their employment with the Company on June 21, 2000,
August 2, 2000, and June 30, 2000, respectively.
(5) Mr. Huge was granted options to purchase an aggregate of 100,000 shares
during the fiscal year, all of which were forfeited upon his resignation on
May 8, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END ($)(1)
NAME EXERCISE (#) REALIZED ($) (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
---- ------------ ------------ --------------------------- ---------------------------
<S> <C> <C> <C> <C>
Robert G. Burton(2).... 0 0 0/1,000,000 0/1,312,500
G. Robert Durham....... 0 0 140,000/0 120,000/0
Kenneth E. Hyatt....... 0 0 500,000/0 37,500/0
Richard E. Almy(2)..... 0 0 159,666/83,334 0/18,750
Ralph E. Fifield....... 0 0 50,000/85,500 0/13,312
Peter
Scott-Hansen(2)...... 0 0 3,333/61,667 0/9,375
Arthur W. Huge(2)...... 0 0 0/0 0/0
Robert W. Michael...... 0 0 110,000/50,000 0/11,250
</TABLE>
------------------------
(1) Represents the fair market value as of May 31, 2000 (at $10.8125 per share,
the closing stock price on such date) of the option shares less the exercise
price of the options.
(2) Due to their resignations prior to the first anniversary of the grant date
of options granted during the fiscal year ended May 31, 2000, Messrs. Almy,
Burton, Scott-Hansen and Huge forfeited 50,000, 1,000,000, 25,000 and
100,000 options, respectively.
10
<PAGE>
PROFIT SHARING PLANS
Under the Profit Sharing Plan and the Supplemental Profit Sharing Plan,
amounts contributed by the Company for the benefit of the participants become
payable upon termination of employment. In the case of the Supplemental Profit
Sharing Plan, accrued amounts are payable, at the discretion of the Company, in
either a lump sum or in sixty equal monthly installments. While the Profit
Sharing Plan provides retirement benefits for all salaried employees of the
Company and certain of its subsidiaries, the Company makes accruals for the
Supplemental Profit Sharing Plan only for such employees as to whom the full
contribution under the Profit Sharing Plan has been limited by the Internal
Revenue Code. Mr. Michael participates in the Profit Sharing Plan and the
Supplemental Profit Sharing Plan. Prior to their resignations, Messrs. Hyatt and
Almy participated in the Profit Sharing Plan and the Supplemental Profit Sharing
Plan. Prior to their resignations, neither Mr. Huge nor Mr. Burton had completed
one year of service with the Company and, thus, neither was eligible to
participate in either plan.
ANNUAL BENEFITS PAYABLE UNDER PENSION PLANS
The table below sets forth the aggregate estimated annual retirement
benefits payable under the Pension Plan for Salaried Employees of Subsidiaries,
Divisions and/or Affiliates of Walter Industries, Inc. (the "Pension Plan") and
under the Company's unfunded, non-qualified Supplemental Pension Plan (the
"Supplemental Pension Plan" and, together with the Pension Plan, the "Pension
Plans") for employees of certain subsidiaries of the Company retiring at normal
retirement age (65) on June 1, 2000, and is based on social security covered
compensation in effect on June 1, 2000:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
150,000........................................ 30,555 40,740 50,925 61,110 71,295
175,000........................................ 36,086 48,115 60,144 72,173 84,201
200,000........................................ 41,618 55,490 69,363 83,235 97,108
225,000........................................ 47,149 62,865 78,581 94,298 110,014
250,000........................................ 52,680 70,240 87,800 105,360 122,920
300,000........................................ 63,743 84,990 106,238 127,485 148,733
350,000........................................ 74,805 99,740 124,675 149,610 174,545
400,000........................................ 85,868 114,490 143,113 171,735 200,358
450,000........................................ 96,930 129,240 161,550 193,680 226,170
500,000........................................ 107,993 143,990 179,988 215,985 251,983
550,000........................................ 119,055 158,740 198,425 238,110 277,795
600,000........................................ 130,118 173,490 216,863 260,235 303,608
650,000........................................ 141,180 188,240 235,300 282,360 329,420
700,000........................................ 152,243 202,990 253,738 304,485 355,233
750,000........................................ 163,305 217,740 272,175 326,610 381,045
800,000........................................ 174,368 232,490 290,613 348,735 406,858
</TABLE>
Benefit payments under the Pension Plans are based on final average annual
compensation (including overtime pay, incentive compensation and certain other
forms of compensation reportable as wages taxable for Federal income tax
purposes) for the five consecutive years within the final ten years of
employment prior to normal retirement age (65) which produce the highest
average. This is generally equivalent to the sum of the amounts included under
the Salary and Bonus column headings in the Summary Compensation Table above.
Benefit amounts are shown on a straight-line annuity basis, payable annually
upon retirement at age 65. No offsets are made for the value of any social
security benefits earned. The Company makes accruals for the Supplemental
Pension Plan only for such employees as to
11
<PAGE>
whom the pension benefits under the Pension Plan have been limited by the
Internal Revenue Code. In the case of the Supplemental Pension Plan, the
employer may, in its sole discretion, elect to furnish any and all benefits due
by purchasing annuities, or by other means at its disposal, including payment of
the present value of such benefits.
Of the named executive officers only Mr. Fifield is a participant in the
Pension Plans with 2.5 credited years of service. Prior to June 1, 1996,
Mr. Almy was employed by a subsidiary of the Company and participated in the
Pension Plans (4.5 credited years of service).
COMPENSATION COMMITTEE INTERLOCKS OR INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During the fiscal year ended May 31, 2000, two employee directors,
Messrs. Hyatt and Almy, participated in deliberations of the Company's Board
concerning executive compensation. However, neither Mr. Hyatt nor Mr. Almy voted
on executive compensation matters in which they were directly involved; instead
they abstained on such occasions.
12
<PAGE>
PERFORMANCE GRAPH
The following line graph compares the Company's cumulative stock market
performance with the Russell 2000 Stock Index ("Russell 2000") and the Dow Jones
Industrial-Diversified Index ("Dow Jones Industrial-Diversified").
Total return values were calculated based on cumulative total return
assuming (i) the investment of $100 in the Company's Common Stock, the Russell
2000 and the Dow Jones Industrial-Diversified on June 1, 1995 and
(ii) reinvestment of all dividends.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG WALTER INDUSTRIES, INC., RUSSELL 2000 AND DOW JONES INDUSTRIAL-DIVERSIFIED
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
JUN-95 MAY-96 MAY-97 MAY-98 MAY-99 MAY-00
<S> <C> <C> <C> <C> <C> <C>
WALTER INDUSTRIES INC. 100 96.26 106.54 142.99 98.13 81.57
RUSSELL 2000 INDEX 100 133.89 140.89 168.96 162.32 176.2
DOW JONES INDUSTRIAL-DIVERSIFIED 100 129.79 164.38 208.69 246.43 314.77
</TABLE>
<TABLE>
<CAPTION>
INDEXED RETURNS
YEARS ENDING
BASE PERIOD ------------------------------------------------------------------------
COMPANY/INDEX JUNE 1, 1995 MAY 31, 1996 MAY 31, 1997 MAY 31, 1998 MAY 31, 1999 MAY 31, 2000
------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
WALTER INDUSTRIES,
INC. ............... 100 96.26 106.54 142.99 98.13 81.57
DOW JONES INDUSTRIAL--
DIVERSIFIED......... 100 129.79 164.38 208.69 246.43 314.77
RUSSELL 2000.......... 100 133.89 140.89 168.96 162.32 176.20
</TABLE>
13
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"),
consists entirely of non-employee directors and is responsible for reviewing and
approving executive compensation philosophy and policies, as well as the
application of such policies to the compensation of the Company's Chief
Executive Officer and other executive officers. The Committee is also
responsible for the administration of and awards under the Amended 1995
Long-Term Incentive Stock Plan of Walter Industries, Inc. (the "1995 Stock
Plan").
GENERAL COMPENSATION POLICY
The purpose of the Company's executive compensation program is to
(i) attract, motivate and retain qualified key executives who are responsible
for the success of the Company as a whole, (ii) provide incentives to management
to increase stockholder value, (iii) increase the overall performance of the
Company and (iv) increase the performance of individual executives.
PRINCIPAL COMPENSATION ELEMENTS
For fiscal 2000 the principal elements of the Company's executive
compensation were base pay, short-term cash incentive compensation and
stock-based incentives. To determine guidelines for each of these elements of
compensation, the Company has, for many years, maintained specific salary grade
levels and corresponding pay ranges for every salaried position in the Company.
Such salary ranges are periodically benchmarked against external salary survey
data, including comparable compensation data for numerous diversified
manufacturing and residential construction companies. The Committee believes
that such surveys provide a reliable standard for measuring the Company's
compensation practices. As part of this benchmarking process, the Company
reviews and evaluates its executive pay structure with outside compensation
consultants to confirm the validity of the executive salary ranges and to
conform such structure with competitive market levels for several key positions,
including the Chief Executive Officer.
BASE SALARY
The Committee annually reviews and approves the base salary of each
executive officer. In determining salary adjustments, the Committee considers
the responsibilities associated with the position, individual contribution and
performance and applicable external salary survey data.
EXECUTIVE BONUSES
The Company's executive officers are eligible for annual cash bonuses under
the Company's Annual Incentive Plan for Key Employees (the "Incentive Plan").
The Incentive Plan utilizes targets based on operating income and return on
assets employed objectives to determine bonus funding pools for key corporate
and subsidiary employees. Bonuses paid to employees of the Company's operating
subsidiaries are based on the relative performances of each of the Company's
operating subsidiaries, and bonuses paid to corporate employees are based on the
performance of the Company as a whole.
Mr. Huge received a bonus of $150,000 upon his resignation on May 8, 2000
pursuant to his employment agreement with the Company, and Mr. Almy was awarded
a bonus of $230,000 upon his resignation on June 21, 2000 (representing a bonus
under the Incentive Plan for the year ended May 31, 2000) pursuant to his
separation agreement with the Company. Messrs. Durham and Burton were not
eligible to participate in the Incentive Plan, and Mr. Hyatt did not receive a
bonus under the Incentive Plan due to his resignation on March 23, 2000.
The bonus paid to Mr. Scott-Hansen, who retired June 30, 2000, was
determined under a Management Incentive Compensation Plan for the executives of
AIMCOR.
14
<PAGE>
STOCK-BASED COMPENSATION
The Committee believes that equity ownership by management is beneficial in
aligning the interests of management and the Company's stockholders for the
purpose of enhancing stockholder value. To this end, in July 1995 the Company
adopted the 1995 Stock Plan and in September 1997 amended the 1995 Stock Plan to
provide for additional shares of Common Stock.
The purpose of the 1995 Stock Plan is to provide stock based awards as
components of executive compensation to assure external competitiveness of total
compensation, encourage equity ownership by key executives, motivate executives
to improve long-term stock performance, and align executives' interests with the
enhancement of stockholder value.
Under the 1995 Stock Plan, grants are made periodically by the Committee
based on recommendations of the Chief Executive Officer (with the exception of
grants to the Chief Executive Officer) and the advice of the Committee's outside
consultant, taking into consideration the respective responsibilities of each
position, external stock-based compensation survey data, and the strategic and
operational goals and performance of each participant. Awards to the Chief
Executive Officer are determined separately by the Committee and are based on,
among other things, the Committee's perception of expected future contributions
by the Chief Executive Officer to the Company's long-term performance.
The exercise price for all options granted during fiscal 2000 were at the
then market value of the Common Stock based on an average of the high and low
prices on the date of the grant, or a price higher than market value. The
exercise price of awards granted, the life of such awards, vesting of awards and
other terms and conditions of awards granted under the 1995 Stock Plan are
determined by the Committee, in its discretion. Options must expire not more
than 10 years from their date of grant.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the
tax deductibility by a company of compensation in excess of $1 million paid to
any of its five most highly compensated executive officers. However,
performance-based compensation that has been approved by stockholders is
excluded from the $1 million limit if, among other requirements, the
compensation is payable only upon attainment of pre-established, objective
performance goals and the board committee that establishes such goals consists
only of "outside directors" as defined in Section 162(m). All of the members of
the Committee qualify as "outside directors." The Committee intends to maximize
the extent of tax deductibility of executive compensation under the provisions
of Section 162(m) so long as doing so is compatible with its determinations as
to the most appropriate methods and approaches for the design and delivery of
compensation. In September 1997 the stockholders approved the Incentive Plan
which is intended to ensure that amounts paid under such plan are deductible for
federal income tax purposes.
COMPENSATION OF CHAIRMEN OF THE BOARD AND CHIEF EXECUTIVE OFFICERS
Mr. Burton joined the Company as Chairman of the Board, President and Chief
Executive Officer on April 24, 2000. The Board of Directors, after due
consideration, agreed that Mr. Burton's base compensation would be at a rate of
$900,000 per annum. In setting Mr. Burton's compensation the Board considered
factors such as Mr. Burton's individual experience, expertise in his prior
position, anticipated contribution to the Company and pay practices in effect
for chief executive officers generally. Mr. Burton resigned on August 2, 2000
and, in addition to his compensation paid to the date of his resignation, was
paid a lump sum of $2,353,222 pursuant to his Separation Agreement with the
Company.
The options to purchase an aggregate of 1,000,000 shares of Common Stock
granted to Mr. Burton on April 24, 2000 pursuant to the 1995 Stock Plan were
forfeited upon his resignation on August 2, 2000. Mr. Burton was also afforded
the right to acquire $2 million of Common Stock at $8.25, the closing market
price of the Common Stock on March 10, 2000, the date on which Mr. Burton
conditionally accepted
15
<PAGE>
employment with the Company. Mr. Burton exercised such right on April 24, 2000
and acquired 242,425 shares of Common Stock at an aggregate price of $2,000,006.
Pursuant to his Separation Agreement, the Company purchased such shares from
Mr. Burton for $2,000,006 on August 7, 2000.
Mr. Durham, who acted as Chairman of the Board, President and Chief
Executive Officer from April 3, 2000 until April 24, 2000, received no cash
compensation from the Company for his services. Mr. Durham's sole compensation
was the grant by the Company of options to purchase 40,000 shares of Common
Stock at $7.8125 per share, the average market value of the Common Stock as of
April 3, 2000, the date of his appointment as Chairman, President and Chief
Executive Officer.
Mr. Hyatt resigned from his employment with the Company effective as of
March 23, 2000 and entered into a Retirement and Consulting Agreement with the
Company, which includes the following provisions: a severance payment to him of
$3.9 million in April 2000; the right to exercise all outstanding options
(whether or not yet exercisable); deferred compensation of $100,000 for each of
the three years following his resignation in lieu of the contributions that the
Company would have made on his behalf to the Company's Profit Sharing and
Supplemental Profit Sharing Plans had he not resigned from the Company; and
office space and secretarial support until he commences other employment. The
Agreement also provides that for a period of three years from his resignation,
Mr. Hyatt will be paid an annual consulting fee of $100,000 and will render to
the Company such services of an advisory or consulting nature as the Company may
reasonably require. The Agreement also contains a covenant prohibiting, during
the term of the Agreement and for a period of one year after its termination,
Mr. Hyatt's engagement in a business in competition with the Company or its
subsidiaries.
SUMMARY
The Committee believes that the mix of market-based salaries, significant
variable cash incentives for short-term performance, and long-term incentives in
the form of stock-based awards which provide the potential for equity ownership
in the Company represents a balance that will enable the Company to attract and
retain key executive talent necessary for long-term growth. The Committee
further believes that this program strikes an appropriate balance between the
interests of stockholders and needs of the Company in operating its businesses.
COMPENSATION COMMITTEE
James L. Johnson, Chairman
Howard L. Clark, Jr.
Perry Golkin
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires executive officers and directors,
and persons who beneficially own more than ten percent (10%) of the Company's
Common Stock to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission ("SEC"). Executive
officers, directors and greater than ten percent (10%) beneficial owners are
required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements applicable to
its executive officers and directors were complied with during the fiscal year
ended May 31, 2000.
16
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following tables furnish information, as of August 21, 2000 as to:
(i) shares of Common Stock beneficially owned by each nominee for director and
each executive officer of the Company named in the Summary Compensation Table
herein; (ii) shares of Common Stock beneficially owned by all current directors
and executive officers of the Company as a group; and (iii) the name and address
of each person known by the Company to be the beneficial owner of more than five
percent (5%) of the outstanding shares of Common Stock. Except as indicated
below, to the knowledge of the Company, each person indicated in the following
tables has sole voting and investment power as to the shares shown.
OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENT OF COMMON
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED STOCK OUTSTANDING(1)
------------------------ ------------------ --------------------
<S> <C> <C>
Robert F. Amter........................................ 0 *
Director
Donald N. Boyce........................................ 20,000(2) *
Director and Interim Chairman, President and Chief
Executive Officer
Howard L. Clark, Jr.................................... (3) (3)
Director
Perry Golkin........................................... 13,958,589(4)(5) 30.1(4)(5)
Director
James L. Johnson....................................... 10,000 *
Director
Scott C. Nuttall....................................... 0 *
Director
Wayne W. Robinson...................................... 0 *
Director
Neil A. Springer....................................... 0 *
Director
Michael T. Tokarz...................................... 13,958,589(4)(5) 30.1(4)(5)
Director
Richard E. Almy........................................ 177,060(6) *
Former Executive Vice President and Chief Operating
Officer
Robert G. Burton(7).................................... 0 *
Former Chairman, Chief Executive Officer and President
G. Robert Durham(8).................................... 100,000(9) *
Former Chairman, Chief Executive Officer and President
Ralph E. Fifield....................................... 84,804(10) *
Executive Vice President of the Company and President
of United States Pipe and Foundry Company, Inc. a
subsidiary of the Company
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENT OF COMMON
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED STOCK OUTSTANDING(1)
------------------------ ------------------ --------------------
<S> <C> <C>
Peter Scott-Hansen..................................... 39,255(11) *
Former President of Applied Industrial Materials
Corporation, a subsidiary of the Company
Arthur W. Huge(12)..................................... 13,933(13) *
Former Executive Vice President and Chief Financial
Officer
Kenneth E. Hyatt(14)................................... 506,480(5)(15) 1.1
Former Chairman, Chief Executive Officer and President
Robert W. Michael...................................... 134,043(5)(16) *
Senior Vice President and Group Executive; President of
Jim Walter Homes, Inc. a subsidiary of the Company
All current directors and executive officers as a group
(19 individuals)..................................... 14,457,322(5)(17) 31.2
</TABLE>
------------------------
* LESS THAN 1% OF OUTSTANDING COMMON STOCK
(1) To calculate each executive officer's percentage of beneficial ownership, we
include in the numerator and denominator those shares underlying options
beneficially owned by that executive officer. Options held by other
executive officers, however, are disregarded in this calculation. Therefore,
in this table, the denominator used in calculating beneficial ownership
among executive officers may differ.
(2) Includes 10,000 shares owned by Mr. Boyce's wife.
(3) Mr. Clark is Vice Chairman of Lehman Brothers, Inc. See "Ownership of
Principal Stockholders" below for information concerning ownership of shares
by Lehman Brothers, Inc.'s affiliate, Lehman Brothers Holdings, Inc.
(4) Messrs. Tokarz and Golkin are general partners of KKR Associates, L.P.,
which is the sole general partner of each of JWC Associates, L.P., JWC
Associates II, L.P. and KKR Partners II, L.P. (the "KKR Investors") and
Channel One Associates, L.P. ("Channel One"), and thus Messrs. Tokarz and
Golkin may be deemed to be beneficial owners of the shares owned by the KKR
Investors and Channel One (see "Ownership of Principal Stockholders" below).
Messrs. Tokarz and Golkin disclaim beneficial ownership of such shares. The
number of shares of Common Stock includes 3,553,380 shares of Common Stock
held in an escrow account established on September 13, 1995 for the benefit
of the KKR Investors pursuant to the Plan of Reorganization. Each of the KKR
Investors currently has the power to vote a portion of such shares. See
Footnote (5) below and Footnote (1) under "Ownership of Principal
Stockholders" below. For so long as the KKR Investors have the power to
exercise voting rights with respect to such escrowed shares, or if all such
escrowed shares were distributed to the KKR Investors, Messrs. Tokarz and
Golkin may be deemed to be beneficial owners of such 3,553,380 escrowed
shares of Common Stock. Messrs. Tokarz and Golkin disclaim beneficial
ownership of such shares.
(5) Includes 6,234, 4,363 and 3,553,380 shares of Common Stock held in an escrow
account for the benefit of Mr. Hyatt, Mr. Michael and the KKR Investors,
respectively, established on September 13, 1995 pursuant to the Plan of
Reorganization. To the extent that certain contingencies regarding Federal
income tax claims of the Company are resolved satisfactorily, such escrowed
shares will be distributed to such persons under the Plan of Reorganization.
To the extent such matters are not settled satisfactorily, some or all of
the escrowed shares may be returned to the Company and canceled. Until such
matters are finally determined, such persons will have the power to exercise
voting rights with respect to such respective escrowed shares of Common
Stock. For so long as such persons have the
18
<PAGE>
power to exercise voting rights with respect to such escrowed shares, or if
all such escrowed shares were distributed to such persons, such persons will
be deemed to beneficially own such escrowed shares of Common Stock.
(6) Includes options to purchase 159,666 shares exercisable currently or within
60 days of August 21, 2000. Mr. Almy resigned on June 21, 2000.
(7) Mr. Burton was appointed Chairman, Chief Executive Officer and President on
April 24, 2000 and resigned on August 2, 2000.
(8) Mr. Durham was appointed Chairman, Chief Executive Officer and President on
April 3, 2000 and resigned on April 24, 2000.
(9) All of these shares represent options to purchase a total of 100,000 shares,
exercisable currently or within 60 days of August 21, 2000.
(10) Includes options to purchase 75,000 shares exercisable currently or within
60 days of August 21, 2000.
(11) Includes options to purchase 3,333 shares exercisable currently or within
60 days of August 21, 2000. Mr. Scott-Hansen retired on June 30, 2000.
(12) Mr. Huge resigned on May 8, 2000.
(13) Shares of Common Stock owned as of May 31, 2000.
(14) Mr. Hyatt resigned as Chairman, Chief Executive Officer and President on
March 23, 2000.
(15) Includes options to purchase 500,000 shares exercisable currently or within
60 days of August 21, 2000.
(16) Includes options to purchase 110,000 shares exercisable currently or within
60 days of August 21, 2000.
(17) Includes 13,958,589 shares of Common Stock owned of record by the KKR
Investors and Channel One, which may be deemed to be beneficially owned by
Messrs. Tokarz and Golkin. See Footnotes (4) and (5) above. Does not include
shares of Common Stock owned by Lehman Brothers Holdings, Inc. See Footnote
(3) above. Also includes 367,666 shares purchasable by all current directors
and executive officers under stock options exercisable currently or within
60 days of August 21, 2000.
19
<PAGE>
OWNERSHIP OF PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the close of business on August 21,
2000, information as to those holders (other than officers and directors of the
Company), known to the Company to be the beneficial owners of more than 5% of
the outstanding shares of the Company's Common Stock. Except as indicated below,
to the knowledge of the Company, each stockholder indicated in the following
table has sole voting and investment power as to the shares shown.
<TABLE>
<CAPTION>
NAME AND COMPLETE MAILING ADDRESS NUMBER OF SHARES PERCENT OF CLASS
--------------------------------- ---------------- ----------------
<S> <C> <C>
The KKR Investors(1)........................................ 13,958,589 30.1
(JWC Associates, L.P., JWC Associates II, L.P.
and KKR Partners II, L.P.) and
Channel One Associates, L.P.
c/o Kohlberg Kravis Roberts & Co., L.P.
9 West 57th Street
New York, NY 10009
Asbestos Settlement Trust(2)................................ 5,470,662 11.8
Mellon Bank Center
919 Market Center
Wilmington, DE 19801
Lehman Brothers Holdings, Inc. ............................. 2,853,695 6.2
3 World Financial Center
New York, NY 10285
Samuel R. Shapiro........................................... 5,344,430 11.5
Shapiro Capital Management Company, Inc.(3)
Kaleidoscope Fund, L.P.
3060 Peachtree Road, N.W.
Atlanta, GA 30305
Leon G. Cooperman(4)........................................ 2,929,563 6.3
(Omega Capital Partners, L.P.,
Omega Institutional Partners, L.P.
Omega Overseas Partners, Ltd.
Omega Capital Investors, L.P.)
88 Pine Street
Wall Street Plaza--31st Floor
New York, NY 10005
</TABLE>
------------------------
(1) The shares of Common Stock are owned of record by the KKR Investors as
follows: 9,309,427 shares are owned of record by JWC Associates, L.P.;
61,687 shares are owned of record by JWC Associates II, L.P.; and 225,675
shares are owned of record by KKR Partners II, L.P., including 3,446,979,
22,841, and 83,560 shares, respectively, held in an escrow account
established on September 13, 1995 pursuant to the Plan of Reorganization. To
the extent that certain contingencies regarding Federal income tax claims of
the Company are resolved satisfactorily, up to 3,553,380 of the escrowed
shares will be distributed to the KKR Investors under the Plan of
Reorganization. To the extent such matters are not settled satisfactorily,
some or all of the escrowed shares may be returned to the Company and
canceled. Until such matters are fully determined, the KKR Investors will
have the power to exercise voting rights with respect to such shares of
Common Stock. For so long as the KKR Investors have the power to exercise
voting rights with respect to all such escrowed shares, or if all such
escrowed shares were distributed to the KKR Investors, the KKR Investors
will beneficially own such 3,553,380 shares
20
<PAGE>
of Common Stock. The Company has been advised that as of August 21, 2000
Channel One owned of record 4,361,800 shares of Common Stock.
KKR Associates, L.P. is the sole general partner of each of the KKR
Investors and Channel One. The general partners of KKR Associates, L.P. are
Henry R. Kravis, George R. Roberts, Robert I. MacDonnell, Michael W.
Michelson, Paul E. Raether, Michael T. Tokarz, James H. Greene, Jr., Perry
Golkin, Scott M. Stuart and Edward A. Gilhuly, each of whom disclaims
beneficial ownership of such shares. See "Ownership of Directors and
Executive Officers" above.
(2) The Celotex Trust is subject to an agreement with the Company and Lehman
Brothers Inc. pursuant to which it is obligated to vote and execute written
consents with respect to the shares of Common Stock held by it in proportion
to the votes cast or consents executed and delivered by all other holders of
Common Stock on each matter voted on by stockholders. Identical restrictions
on the voting of Common Stock by the Celotex Trust are contained in the
Company's Amended and Restated Certificate of Incorporation and the Plan of
Reorganization.
(3) According to the Schedule 13G filed by Shapiro Capital Management
Company, Inc., Samuel R. Shapiro and the Kaleidoscope Fund, LP with the
Securities and Exchange Commission on April 10, 2000 (the "Shapiro 13G"),
advisory clients of Shapiro Capital Management Company, Inc. and the
Kaleidoscope Fund, LP own an aggregate of 5,313,830 shares of Common Stock.
According to the Shapiro 13G, Mr. Shapiro is the president and majority
shareholder of Shapiro Capital Management Company, Inc. and the Kaleidoscope
Fund, LP and exercises dispositive power over such shares and Mr. Shapiro's
wife owns 30,600 shares of Common Stock as to which Mr. Shapiro may be
deemed to be a beneficial owner.
(4) According to the Schedule 13G filed by Mr. Cooperman with the Securities and
Exchange Commission on February 9, 2000, the shares of Common Stock
beneficially owned by Mr. Cooperman are as follows: 799,860 shares are
beneficially owned by Omega Capital Partners, L.P.; 49,739 shares are
beneficially owned by Omega Institutional Partners, L.P.; 105,300 shares are
beneficially owned by Omega Capital Investors, L.P.; 1,231,835 shares are
beneficially owned by Omega Overseas Partners, Ltd.; and 742,829 shares are
beneficially owned by certain institutional clients for which Mr. Cooperman
serves as the discretionary investment advisor.
21
<PAGE>
STOCKHOLDER PROPOSAL
The Company has been advised that T. A. McKay & Co., Inc. ("McKay"), 630
Fifth Avenue, Suite 1956, New York, NY 10111, as fund manager of Simplon
Investments Limited and Simplon Partners L.P., intends to introduce the
following resolution at the Annual Meeting:
"Resolved: That the shareholders of Walter Industries, Inc. hereby request
and recommend that the Board of Directors take all necessary action to liquidate
Walter Industries, Inc. through the sale of all its operating businesses for
cash and use the proceeds to repay all of its outstanding debt, pay capital
gains taxes due, and make liquidating distributions to its shareholders."
McKay has submitted the following statement in support of the resolution:
"When Walter Industries, Inc. emerged from Chapter 11 reorganization in
1995, its stock traded in the mid-teens. Since then, the Dow Jones Industrial
Average and the Standard & Poor's 500 Index have nearly tripled, while the price
of Walter Industries stock has declined to the $7 - 14 range.
None of the Walter Industries, Inc.'s five business units has any connection
to any of the other, making the combination difficult for management to oversee
effectively. This is evident from the disappointing results achieved by Aimcor
since its acquisition and the ongoing problems in the coal mining unit. None of
the businesses except for homebuilding is located anywhere near the corporate
headquarters in Tampa. Moreover, the collection of unrelated businesses makes
Walter Industries exceedingly difficult for investors to analyze and value
appropriately.
If Walter Industries were to be liquidated, we believe that cash
distributions in the $20 1/2 - 25 range, net of all taxes and debt repayment,
could be made. Therefore, we believe a liquidation of Walter Industries is in
the best interest of all of Walter Industries' shareholders."
The Company has been advised by McKay that investment funds managed by McKay
beneficially own 795,000 shares of Common Stock.
COMPANY'S RESPONSE IN OPPOSITION TO THE STOCKHOLDER PROPOSAL
The Board opposes the proposal because it believes that liquidation of the
Company is not in the best interests of stockholders. The proposal fails to
recognize significant changes within the Company since the proposal was
submitted. It is also based on the erroneous premise that the Company's various
operating businesses could be sold promptly at a substantial premium over the
current market price of the Common Stock.
Since April 2000, when the proposal was submitted, the Board has taken
significant actions, which it believes will provide long-term value to
stockholders. Among these actions is the installation of a new management team
and actions by that team to reduce costs and improve operations of the Company's
existing business. The management team consists of a group of experienced
executives with a proven track record of creating value for stockholders.
The Board believes that the Company's basic businesses are sound and, with
the help of new management, are capable of delivering increased earnings in
future years. The new management realizes the need to deal with under-performing
businesses (such as the Company's coal mining subsidiary), reduce costs and
optimize the value of the Company's portfolio of businesses. Management has
already announced that it intends to reduce overhead costs by $25,000,000 during
fiscal 2001. The Board believes the Company's new management, with its proven
track record and aggressive approach to cost reduction, will be able to
selectively realize value from the Company's businesses and yield long-term
value to stockholders.
22
<PAGE>
The Board believes that the proposal's premise that the sale of the
Company's various operating businesses and its subsequent liquidation can yield
this premium to current market value of the Common Stock lacks merit. McKay
presents no data, analyses or other factual support for its statement that the
Company's liquidation value, net of taxes and debt, is $20 1/2 to $25 per share.
The Board knows of no current, credible information that would support a present
liquidation value for the Company in this range. Liquidation of any business is
a lengthy and time consuming process, often yielding substantially less than
preliminary estimates of value. Attempting to liquidate the Company would likely
have a detrimental effect on its work force and customer base, depressing its
value and, accordingly, the amount of cash distributions to stockholders. The
Board believes that the long-term value of the Company to its stockholders can
best be realized as a going concern, not pursuant to a liquidation.
The approval of the stockholder proposal requires the affirmative vote of a
majority of the shares of Common Stock represented in person or by proxy at the
Annual Meeting. Abstentions from voting, as well as broker non-votes, will be
considered as votes cast against the proposal and, therefore, will have the same
effect as a vote against the liquidation of the Company. Unless otherwise
instructed, the proxy holders will vote the proxies held by them AGAINST the
stockholder proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE STOCKHOLDER PROPOSAL.
OTHER BUSINESS
The Board and management do not now intend to bring before the Annual
Meeting any matters other than those disclosed in the Notice of Annual Meeting
of Stockholders, nor do they know of any business which other persons intend to
present at the Annual Meeting. Should any other matter or business requiring a
vote of stockholders arise, the persons named in the enclosed proxy intend to
exercise the authority conferred by the proxy and vote the shares represented
thereby in respect of any such other matter or business in accordance with their
best judgment in the interest of the Company.
DEADLINE FOR STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Stockholder proposals must conform to the Company's by-laws and the
requirements of the SEC. If a stockholder intends to present a proposal at the
2001 Annual Meeting, SEC rules require that the Company receive the proposal by
May 14, 2001, for possible inclusion in the Proxy Statement. If the date of the
2001 Annual Meeting changes by more than 30 days from October 19, 2001, then the
deadline is a reasonable time before the Company begins to print and mail its
proxy materials for the 2001 Annual Meeting. The Company will determine whether
to include a proposal in the Proxy Statement in accordance with SEC rules
governing the solicitation of proxies.
If a stockholder intends to nominate a candidate for director, the Company's
by-laws require that the Company receive timely notice of the nomination. A
nomination for the 2001 Annual Meeting will be considered timely if it is
received no earlier than July 1, 2001 and no later than July 21, 2001. The
notice of nomination must describe various matters specified in the Company's
by-laws, including the name and address of the stockholder making the
nomination, the number of shares held by the stockholder, each proposed nominee,
each of their occupations, and certain other information.
23
<PAGE>
Each notice must be given to the Secretary of the Company, whose address is
1500 N. Dale Mabry Highway, Tampa, Florida, 33607.
By Order of the Board of Directors
/s/ Edward A. Porter
EDWARD A. PORTER
Secretary
Walter Industries, Inc.
Tampa, Florida
September 11, 2000
24
<PAGE>
[LOGO]
WALTER INDUSTRIES, INC.
PROXY FOR 2000 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
D. N. Boyce, J. L. Johnson and M. T. Tokarz, or any of them, with full power of
substitution, are hereby authorized to represent and to vote the stock of the
undersigned at the Annual Meeting of Stockholders of Walter Industries, Inc. to
be held at the Hyatt Regency Westshore, 6200 Courtney Campbell Causeway, Tampa,
Florida, Meeting Room - Audubon II on Thursday, October 19, 2000 at 10:00 a.m.
or at any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ITEM 1, THE ELECTION OF ALL DIRECTOR NOMINEES AND FOR ITEM 2, THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AND AGAINST
ITEM 3, THE STOCKHOLDER PROPOSAL REQUESTING LIQUIDATION OF THE COMPANY.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
<PAGE>
<TABLE>
IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE MARK THE "WILL ATTEND" BLOCK: WILL ATTEND |_|
-----------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2 AND AGAINST ITEM 3.
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ITEM 1. ELECTION OF DIRECTORS
NOMINEES: D.N. BOYCE P. GOLKIN S.C. NUTTALL N.A. SPRINGER M.T. TOKARZ
R.F. AMTER H.L. CLARK J.L. JOHNSON W.W. ROBINSON
FOR ALL NOMINEES |_| WITHHOLD ALL NOMINEES |_| FOR ALL EXCEPT |_|
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[INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, PRINT THAT NOMINEE'S NAME ON THE LINE ABOVE]
-----------------------------------------------------------------------------------------------------------------------------
ITEM 2. Ratification of the appointment of ITEM 4. Upon any other business which may properly come
PricewaterhouseCoopers LLP as independent before the meeting or any adjournment thereof.
certified public accountants for the fiscal |----------------------------------------------------------------
year ending May 31, 2001. |PLEASE MARK, SIGN (EXACTLY AS NAME(S) APPEARS BELOW),
|DATE AND MAIL THIS PROXY CARD PROMPTLY IN THE POSTAGE
FOR |_| AGAINST |_| ABSTAIN |_| |PAID RETURN ENVELOPE PROVIDED. EXECUTORS, TRUSTEES,
------------------------------------------------------------|ADMINISTRATORS, ATTORNEYS, GUARDIANS, ETC., SHOULD SO
ITEM 3. A proposal made by one stockholder requesting |INDICATE WHEN SIGNING. CORPORATION PROXIES SHOULD BE
liquidation of the Company. |SIGNED BY AUTHORIZED OFFICERS.
|
FOR |_| AGAINST |_| ABSTAIN |_| |
------------------------------------------------------------|----------------------------------------------------------------
,2000
-----------------------------------------------------------
Date
----------------------------------------------------------------
Signature
----------------------------------------------------------------
Signature
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Title or Authority
REMOVE PROXY AT PERFORATION AND RETURN IN ENCLOSED BUSINESS REPLY ENVELOPE
</TABLE>
