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Walter Energy, Inc. \\ Corporate \\ Company History
History of Walter Energy
In 1946 James W. Walter borrowed $400 from his father, a citrus grower, and purchased a "shell," or unfinished home, for $895 from Tampa, Florida, builder, O.L. Davenport. When just three days later, the 23-year-old, newly married Walter sold the home to a passerby for a profit, he saw a way out of his $50-a-week truck-driving job and $50-a-month apartment. Walter convinced Davenport, also in his 20s, to take him on as a partner. As Walter remembered in Nation's Business in 1970, "we made out all right, but I thought we could move faster." Walter encouraged Davenport to run bigger advertisements featuring photographs of the homes; they sold more houses. Walter was enthusiastic about building the business even faster. Davenport was reluctant, and after two years, they dissolved the partnership of Davenport & Walter. The men decided to divide the business: one of them would take the assets of about $50,000, the other the business. Since Davenport was the founder, he first opted to take the business. A day after he made his decision, he told his partner he had changed his mind and chose the assets instead. Davenport took his share and bought a motel and small construction firm in Troy, Alabama. Jim Walter continued the business, now called the Walter Construction Company.
In the post-World War II era, housing was scarce. Jim Walter sold unfinished, traditionally constructed homes as affordable, alternative housing. The wood homes were built on concrete foundations or wood pilings. Each home was completely finished on the outside with an unfinished interior. Buyers installed plumbing, electrical systems, insulation, walls, and doors themselves. Homes were sold directly to owners prior to construction, through one of Jim Walter Homes Division sales offices.
In 1955 Jim Walter incorporated the Walter Construction Company as the Jim Walter Corporation. Three men who would be pivotal to the company's success through the coming decades had already joined the firm. James O. Alston came to the company in 1947 and was instrumental in its early growth. Alston was president of the corporation from 1963 to 1970, chairman of the homebuilding operation, and vice-chairman of the corporation by 1970. Arnold F. Saraw, a partner in Walter Construction, was secretary-treasurer of the corporation from 1955 to 1970. In 1970 he was promoted to senior vice-president, heading the corporate mortgage division. The third man, Joe B. Cordell, an accountant who joined the company in 1958 was vice-president and chief financial officer, becoming president in 1974 and chief executive officer in 1983.
Expansion into Mortgages in the 1950s
During the 1950s the company expanded and entered the mortgage business. Initially, financing was difficult. The turning point for the fledgling company came in 1956 when Chicago creditors Walter E. Heller & Company approved a $1 million line of credit. Jim Walter's mortgages, like his homes, were attractive to buyers who found more conventional sources too costly. Jim Walter Corporation's innovative financing plan was outlined in the May 19, 1987, edition of Financial World: "most of the houses ... are financed on the basis of ten percent fixed mortgages or installment notes maturing in up to 20 years. Unlike a conventional mortgage, ... Jim Walter's buyers spread the interest and principal payments evenly across the term to lessen its risk of defaults." Such mortgages were possible because the company required the purchaser to own the land on which the house was to be built. The equity in the land substituted for the traditional cash down payment. The company's mortgage portfolio was traditionally one of its strongest assets. The mortgage finance division maintained more than $1 billion in installment notes in the 1970s. By 1987 Jim Walter's $1.6 billion mortgage portfolio was larger than those of most Florida savings and loans. An evaluation performed in 1988 by Financial Security Assurance, in a maneuver designed to help Kohlberg Kravis Roberts (KKR) and Walter Industries refinance $1.2 billion in bank debt, put the value of Walter's mortgage portfolio at $1.75 billion.
Sales of Walter homes historically ran counter to other builders' sales due to the availability of low-cost financing. Low, fixed interest rates, combined with an affordable product, ensured that when housing starts were generally down and money was tight, buyers looked for alternatives such as those offered by Jim Walter. During 1982 Jim Walter built 10,000 of the 300,000 homes constructed that year. In 1986 Walter homes accounted for just 6,500 of the 500,000 homes built. The company tallied some of its best years during recessions in the housing industry.
From 1955 to 1962, Jim Walter Corporation was primarily involved in the building industry. Walter's only notable acquisition during the 1950s was the First National Bank in St. Petersburg, Florida, later sold. This foray was the start of a policy of diversification.
Diversification in the 1960s and 1970s
During the 1960s and 1970s, the company made a large number of acquisitions and mergers. Walter acquired no less than 15 different subsidiaries in the 1960s, ranging from building-materials and industrial-products manufacturers to a California savings and loan. The Celotex Corporation merger was initiated in 1962 and completed in 1964. A pioneer in sound insulation and a leading manufacturer of building products, Celotex also made a spray-on asbestos insulation. The company also acquired a sugar firm and an oil exploration company. Two paper companies acquired in 1968, Marquette Paper Corporation and Knight Paper Company, rounded out Jim Walter's early acquisitions.
On March 9, 1964, Jim Walter Corporation was first listed on the New York Stock Exchange. Shares initially sold for $.50. From 1969 until 1979, stockholders enjoyed positive results: dividends increased from $.40 to $1.80 per share; book value increased from $6.46 to $34 per share. By 1970, the shares had twice split three ways.
Over the course of the 1960s, over 200 competitors tried to emulate the company's success in the production of shell homes. By the end of the 1970s, Jim Walter, the originator of the concept, was the only one left and his "rags-to-riches" saga had become a part of Florida folklore. A Tampa cab driver, who did not recognize his passenger, regaled Jim Walter with the story of Jim's life. In 1968, on the 20th anniversary of the founding of the company, Jim Walter commemorated his beginnings by buying back the original shell house he had first owned for just three days in 1946.
In 1969 the company bought United States Pipe and Foundry Company of Birmingham, Alabama, for $135 million in stock and cash. By 1979, U.S. Pipe had increased profits five times over. In the July 13, 1979, issue of Forbes, Walter called the purchase "the quickest deal I ever made."
At the time of the acquisition, U.S. Pipe's modest coke operation and unmined coal reserves attracted little attention. By 1973, however, the Arab oil embargo made coal mining a potential bonanza. In 1976 the company created a subsidiary, Jim Walter Resources, Inc., to direct the company's mine-development program. Since Jim Walter knew home building but not mining, he hired experienced people to guide the mining division. The magnitude of the task, faced by a company with no experience in the difficult longwall mining that was required due to the depth of the coal, was daunting. The company's robust cash flow was able to absorb the crush of capital expenditures during the nearly ten years it took to make the mines operational.
During the 1970s Jim Walter continued to diversify the company, adding another dozen subsidiaries. By the end of the decade Jim Walter was involved in coal mining; marble, limestone, and granite quarrying; oil and gas production; gypsum and asbestos mining; a savings and loan association; an insurance company; a paper-marketing firm; water and waste-water pipe manufacturing; and retail jewelry. While the various mergers and acquisitions broadened Jim Walter's base of operations, the bulk of its revenues remained in the building industry, with more than 200,000 shell homes completed by 1979. Sales in 1979 exceeded $2 billion a year.
Rebranding and Name Change in 2009
In 2009, Walter Industries changed its name to Walter Energy and became a primarily “pure play” metallurgical coal company. In 2010 the Company’s headquarters moved from Tampa, Florida to Birmingham, Alabama. In April 2011, Walter Energy completed the acquisition of Western Coal Corp. in Northeast British Columbia for $3.3 billion and obtained a listing on the Toronto Stock Exchange. Included in the purchase were coal mines in West Virginia and Wales, UK.