837173--3/7/2008--WALTER_INDUSTRIES_INC

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Trade Names, Trademarks and Patents Risks Related to the Business Our business may suffer as a result of changes in general and local economic conditions and other factors beyond our control, which could depress demand for our products. Our business is subject to risk of price increases and fluctuations and delay in the delivery of raw materials and purchased components. We face significant competition in the industries in which we operate and this competition could harm our sales, profitability and cash flows. Our failure to retain our current customers and renew our existing customer contracts could adversely affect our business. If transportation for our coal becomes unavailable or uneconomic for our customers, our ability to sell coal could suffer. Coal mining is subject to inherent risks and is dependent upon many factors and conditions beyond our control, which may cause our profitability and our financial position to decline. Forecasts of future performance, reserve estimates and a decline in pricing could affect our revenues. Work stoppages and other labor relations matters may harm our business. The government extensively regulates our mining operations, which imposes significant costs on us, and future regulations could increase those costs or limit our ability to produce coal. Environmental, health and safety laws and regulations could subject us to liability for fines, clean-ups and other damages, require us to incur significant costs to modify our operations and increase our costs. The homebuilding industry is experiencing deteriorating conditions that may continue for an indefinite period and may further adversely affect our business and results of operations. Our revenues are seasonal due to weather conditions and the level of construction activity at different times of the year; we may not be able to generate revenues that are sufficient to cover our expenses during certain periods of the year. We are exposed to increased risks of delinquencies, defaults and losses on mortgages and loans associated with our strategy of providing credit or loans to lower credit grade borrowers. The credit facilities we utilize for short-term borrowings to fund our mortgage origination business will expire in 2008. Our strategy of securitizing our mortgage assets makes us dependent on the capital markets for liquidity and cash flow and exposes us to substantial risks. Our mortgage-backed and asset-backed securitizations require over-collateralization and credit enhancement, which may decrease our cash flow and net income. We are subject to a number of federal, local and state laws and regulations that may prohibit or restrict our homebuilding, financing or servicing in some regions or areas. We may be subject to product liability or warranty claims that could require us to make significant payments. Our homebuilding operations expose us to a variety of risks including liability for action of third parties. Economic conditions in Texas, North Carolina, Mississippi, Alabama and Florida have a material impact on our profitability because we conduct a significant portion of our business in these markets. Our expenditures for postretirement benefit and pension obligations are significant and could be materially higher than we have predicted if our underlying assumptions prove to be incorrect. We self-insure workers' compensation and certain medical and disability benefits, and greater than expected claims could reduce our profitability. Natural disasters and adverse weather conditions could disrupt our businesses and adversely affect our results of operations. We may be unsuccessful in identifying or integrating suitable acquisitions, which could impair our growth. We may be required to satisfy certain indemnification obligations to Mueller Water or may not be able to collect on indemnification rights from Mueller Water. Restrictive covenants in our debt instruments may limit our ability to engage in certain transactions and may diminish our ability to make payments on our indebtedness. We may have substantial additional federal tax liability for accounting adjustments related to our method of recognizing revenue on the sale of homes and interest on related instalment note receivables, as well as to federal income taxes allegedly owed.

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837173--3/7/2008--WALTER_INDUSTRIES_INC_/NEW/