-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FobS53eKHrcOiOVjUG4zBLbRUgJSqV0LbRyOe+SQUiLqL+KUJcejsNovN2EIO1mh cbzMLCIY8eoQwKpnxOkcYQ== 0001038838-04-000640.txt : 20040722 0001038838-04-000640.hdr.sgml : 20040722 20040722060140 ACCESSION NUMBER: 0001038838-04-000640 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040722 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040722 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEADWATERS INC CENTRAL INDEX KEY: 0001003344 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PRODUCTS OF PETROLEUM & COAL [2990] IRS NUMBER: 870547337 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27808 FILM NUMBER: 04925414 BUSINESS ADDRESS: STREET 1: 10653 SOUTH RIVERFRONT PARKWAY STREET 2: SUITE 300 CITY: SOUTH JORDAN STATE: UT ZIP: 84095 BUSINESS PHONE: 801-984-9400 MAIL ADDRESS: STREET 1: 10653 SOUTH RIVERFRONT PARKWAY STREET 2: SUITE 300 CITY: SOUTH JORDAN STATE: UT ZIP: 84095 FORMER COMPANY: FORMER CONFORMED NAME: COVOL TECHNOLOGIES INC DATE OF NAME CHANGE: 19951113 8-K 1 form8k072204.txt FORM 8-K DATED JULY 22, 2004 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 July 22, 2004 ------------------------------------------------- Date of Report (Date of earliest event reported) HEADWATERS INCORPORATED ----------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 0-27808 87-0547337 -------------------------------- ------------------------ -------------------- (State or other jurisdiction of (Commission File Number) (IRS Employer incorporation) Identification No.) 10653 South River Front Parkway, Suite 300 South Jordan, UT 84095 ------------------------------------------ (Address of principal executive offices) (Zip Code) (801) 984-9400 --------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable ------------------------------------------------------------- (Former name or former address, if changed since last report) This Current Report on Form 8-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and our future results that are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Forward-looking statements include Headwaters' expectations as to the managing and marketing of coal combustion products, operations of facilities utilizing alternative fuel technologies, the marketing of synthetic fuels, the availability of tax credits, the availability of feed stocks, the receipt of licensing fees, royalties, and product sales revenues, the development, commercialization, and financing of new technologies and other strategic business opportunities and acquisitions, including without limitation, other information about Headwaters. Actual results may vary materially from such expectations. Words such as "expects," "anticipates," "targets," "goals," "projects," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances, are forward-looking. For a discussion of the factors that could cause actual results to differ from expectations, please see the captions entitled "Forward-looking Statements" and "Risk Factors" in Item 7 of our Form 10-K for the year ended September 30, 2003, and the Risk Factors described in Item 5 of our Form 8-K dated May 25, 2004 and in our Form S-3 filed on July 20, 2004. There can be no assurance that our results of operations will not be adversely affected by such factors. Unless legally required, we undertake no obligation to revise or update any forward-looking statements for any reason. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the applicable report. Item 7: Financial Statements and Exhibits. (c) The following exhibit is included herewith: 99 Press release announcing Headwaters' results for the quarter ended June 30, 2004 Item 12: Results of Operations and Financial Condition. On July 22, 2004, we issued our June 2004 quarterly earnings press release. A copy of that press release is attached hereto as Exhibit 99. Pursuant to Securities and Exchange Commission Release No. 33-8216 dated March 27, 2003, the information provided in Exhibit 99 is being furnished under Item 12 of Form 8-K. The information in Exhibit 99 shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filing of Headwaters, whether made before or after the date hereof, regardless of any general incorporation language in such filing. In the press release, we use the terms "EBITDA" and "current ratio." These financial measures are widely accepted financial indicators used by certain investors and financial analysts to assess and compare financial performance, and EBITDA is an integral part of Headwaters' debt covenants. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HEADWATERS INCORPORATED Registrant Date: July 22, 2004 /s/ Kirk A. Benson --------------------------------- Kirk A. Benson Chief Executive Officer (Principal Executive Officer) EX-99 2 ex99form8k072204.txt PRESS RELEASE DATED JULY 22, 2004 Exhibit 99 HEADWATERS INCORPORATED REPORTS RESULTS FOR THIRD QUARTER OF FISCAL 2004 o Record Third Quarter Earnings Per Share of $0.47 o Quarterly Revenue Increased 26% to $134 Million o Fiscal Year 2004 Earnings Forecast Range Increased to $1.75 to $1.90 SOUTH JORDAN, UTAH, July 22, 2004 - HEADWATERS INCORPORATED (NASDAQ: HDWR), today announced results for its third fiscal 2004 quarter ended June 30, 2004. Highlights for the third quarter of fiscal 2004 included: o Acquisition of VFL Technologies strengthened coal combustion products operations. o Acquisition of Eldorado Stone improved margins in construction materials segment. o Successful issuance of $172.5 million of 2 - 7/8% convertible debt providing low-cost, long- term capital. o Collected receivable from escrowed Section 29 funds. o Agreement to purchase Southwest Concrete Products - acquisition closed in July. Total revenue for the June 2004 quarter was $134.3 million, up 26% from $106.4 million reported in the June 2003 quarter. Operating income increased 28% to $27.8 million from $21.8 million for the June 2003 quarter. Net income increased to $16.1 million or $0.47 per diluted share, compared with $10.5 million or $0.37 per diluted share in the prior year's third quarter. Total revenue for the nine months ended June 30, 2004 was $355.3 million, up 26% from $281.2 million reported for the nine months ended June 30, 2003. Operating income increased 56% to $87.9 million from $56.5 million for the nine months ended June 30, 2003. Net income for the nine months ended June 30, 2004 increased to $44.8 million or $1.38 per diluted share, compared with $25.4 million or $0.90 per diluted share for the nine months ended June 30, 2003. The net income increase, in part, reflects the impact of several events that -more- Headwaters Incorporated Page 2 of 5 occurred in the March 2004 quarter, including the license fee revenue recognized from funds held in an escrow account, resulting in diluted earnings per share of approximately $0.25. CCP Segment Performance During the June 2004 quarter, revenues from ISG's coal combustion products ("CCPs") segment were $58.7 million with a gross margin of 28% compared to $46.0 million of revenue with a gross margin of 28% for the June 2003 quarter. The results for the June 2004 quarter include the operations of VFL Technology, which contributed revenue of $7.7 million. Shipments of high quality fly ash products for the June 2004 quarter totaled approximately 1,800,000 tons, compared to approximately 1,570,000 tons in the June 2003 quarter, resulting in a 15% increase in tons of fly ash sold. Construction Materials Segment Performance Revenues from the construction materials segment were $26.8 million during the June 2004 quarter, with a gross margin of 28%, compared to revenue of $13.3 million and a gross margin of 24% for the June 2003 quarter. The 2004 third quarter revenues included Eldorado Stone's month of June revenues of $13.6 million. Eldorado Stone will have a more pronounced effect on this segment's operations in the September 2004 quarter, when its results will be included for the entire quarter. Covol Fuels' Performance Chemical reagent sales decreased 2% to $35.3 million, compared to $35.9 million in 2003. Covol Fuels' license fees for the June 2004 quarter increased 33% to $13.4 million from $10.1 million in 2003. The increase in license fees resulted primarily from one licensee. In 2003, the earned license fees from this licensee were not recognized as revenue due to unresolved tax contingencies that were resolved during the March 2004 quarter. The receivable relating to revenues recognized in the March quarter was collected in the June quarter. During the June 2004 quarter, Covol Fuel's licensees sold 10.4 million tons of solid alternative fuel. This compares to 10.4 million tons sold in the June 2003 quarter and 10.0 million tons in the March 2004 quarter. Covol Fuels sold 26.0 million pounds of chemical reagent in the June 2004 quarter, compared to 27.9 million pounds in the June 2003 quarter and 23.8 million pounds in the March 2004 quarter. The 10.4 million tons of fuel sold was produced at 23 of the 28 licensed facilities, resulting in average quarterly production of 452,000 tons per facility. The highest number of tons produced from any one facility in the quarter was 793,000, and the lowest was 30,000. Covol Fuels sold chemical reagent to a total of 31 facilities. Of the 31 facilities, 18 were licensee facilities and 13 were solely chemical reagent sale facilities. Debt Activity As previously announced, Headwaters reduced its senior secured debt to $50 million as of March 31, 2004 and replaced this debt with a new $50 million conventional senior secured bank credit facility which included a $75 million revolver, reducing Headwaters borrowing rate by approximately 200 basis points. Headwaters borrowed $44 million on the revolver in June 2004 in connection with -more- Headwaters Incorporated Page 3 of 5 the acquisition of Eldorado Stone, but repaid the entire balance of the revolver prior to June 30, 2004. During the June 2004 quarter, Headwaters issued $172.5 million of 2-7/8% convertible senior subordinated notes due 2016 in connection with the acquisition of Eldorado Stone. The following table highlights certain debt coverage and balance sheet ratios using quarter end balances and the trailing twelve months ("TTM") earnings before net interest expense, taxes, depreciation and amortization ("EBITDA"): Sept. 2002 Jun. 2003 Sept. 2003 Jun. 2004 ---------- --------- ---------- --------- Total Indebtedness to EBITDAa 2.43 1.65 1.53 1.88 - --------------------------------------- --------- ------------------------------ EBITDA to Required Interest Payments(a) 5.65 6.85 7.73 15.79 - --------------------------------------- --------- ------------------------------ Current Ratioa 1.24 1.18 1.19 1.58 - --------------------------------------- --------- ------------------------------ Total Debt to Equitya 1.73 1.10 0.96 0.80 - --------------------------------------- --------- ------------------------------ (a) See "Reconciliation of Net Income to EBITDA," "Total long-term debt, before amortized debt discount," and "Current Ratio" calculations. Acquisition Activities Headwaters closed the acquisition of VFL Technology Corporation (VFL) on April 9, 2004. The acquisition broadens the scope of services Headwaters offers, as well as its client base, principally on the east coast. VFL manages a total of approximately 2 million tons of coal combustion products annually for a variety of applications. Coal ash utilization applications managed by VFL include replacement of portland cement, structural base for road construction, stabilization of municipal and industrial wastes, and flowable fills. It is anticipated that VFL will be integrated into Headwaters already existing coal combustion operations and will greatly strengthen operations in the Northeast. Headwaters closed the acquisition of Eldorado Stone on June 2, 2004. Eldorado is the second largest producer of manufactured stone in the United States. With over 1,600 distributors, Eldorado provides Headwaters with a national platform for expanded marketing of "green" building products, such as mortar and stucco made with reclaimed fly ash from coal combustion. Eldorado's acquisition will provide critical mass and improved margins in Headwaters' efforts to expand the use of fly ash in building products. Consistent with Headwaters' diversification strategy, revenue from the pre-combustion Section 29 business has declined as a percentage of total revenue. Headwaters' revenue dependent upon Section 29 has declined from 100% in 2002 to approximately 33% for the 12 months ended June 30, 2004, on a pro forma basis including the acquisitions of VFL and Eldorado Stone as if they had occurred on October 1, 2003. Commentary and Outlook Steven G. Stewart, Headwaters' Chief Financial Officer, stated, "We are very pleased with the financial performance of our business units during the June -more- Headwaters Incorporated Page 4 of 5 2004 quarter. Operating results were strong in the quarter in spite of some unusually bad weather conditions in several key operating areas. Due to the strong third quarter results, we are raising our earnings forecast for fiscal 2004 to a new range of $1.75 to $1.90. These earnings estimates include $0.25 of diluted earnings per share attributable to several events, including recognition of escrowed license fees, in the March 2004 quarter as previously disclosed." "The improvement in the economy is having a direct impact on our post-combustion businesses. It is highly likely that we will set a new record for fly ash shipments during 2004 as we continue to increase awareness of the value added nature of fly ash in concrete. Our acquisitions are performing as expected, resulting in increased earnings and cash flow," said Kirk A. Benson, Chairman and Chief Executive Officer. Management will host a conference call with a simultaneous webcast today at 11:00 a.m. Eastern/9:00 a.m. Mountain to discuss the Company's financial results and business outlook. The call will be available live via the Internet by accessing Headwaters' web site at www.hdwtrs.com and clicking on the Investor Relations section. To listen to the live broadcast, please go to the web site at least fifteen minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, an online replay will be available for 90 days on www.hdwtrs.com, or a phone replay will be available through July 29, 2004, at 11:59 p.m. ET by dialing 800-642-1687 or 706-645-9291 and entering the pass code 8771677. About Headwaters Incorporated Headwaters Incorporated is a world leader in creating value through innovative advancements in the utilization of natural resources. The Company is focused on providing services to energy companies, conversion of fossil fuels into alternative energy products, and generally adding value to energy. Headwaters generates revenue from managing coal combustion products (CCPs) and from licensing its innovative chemical technology to produce an alternative fuel. Through its CCP business and its solid alternative fuels business, the Company earns a growing revenue stream that provides the capital needed to expand and acquire synergistic new business opportunities. Forward Looking Statements Certain statements contained in this report are forward-looking statements within the meaning of federal securities laws and Headwaters intends that such forward-looking statements be subject to the safe-harbor created thereby. Forward-looking statements include Headwaters' expectations as to the managing and marketing of coal combustion products, building products, operation of facilities utilizing alternative fuel technologies, the marketing of synthetic fuels, the receipt of licensing fees, royalties, and product sales revenues, the development, commercialization, and financing of new technologies and other strategic business opportunities and acquisitions, and other information about Headwaters. Such statements that are not purely historical by nature, including those statements regarding Headwaters' future business plans, the operation of facilities, the availability of tax credits, the availability of feedstocks, and the marketability of the coal combustion products, building products, and synthetic fuel, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and our future results that are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Actual results may vary materially from such expectations. Words such as "expects," "anticipates," "targets," "goals," "projects," "believes," "seeks," "estimates," variations of such words, and similar expressions are intended to identify such forward-looking statements. Any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances, are forward-looking. -more- Headwaters Incorporated Page 5 of 5 In addition to matters affecting the coal combustion product, synthetic fuel, and building products industries or the economy generally, factors which could cause actual results to differ from expectations stated in forward-looking statements include, among others, the factors described in the captions entitled "Forward-looking Statements" and "Risk Factors" in Item 7 in Headwaters' Annual Report on Form 10-K for the fiscal year ended September 30, 2003, Quarterly Reports on Form 10-Q, and other periodic filings and prospectuses. Although Headwaters believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that our results of operations will not be adversely affected by such factors. Unless legally required, we undertake no obligation to revise or update any forward-looking statements for any reason. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Our internet address is www.hdwtrs.com. There we make available, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our reports can be accessed through the investor relations section of our web site. -Financial Tables to Follow-
HEADWATERS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands, except per-share amounts) Quarter ended June 30, Nine months ended June 30, ------------------------------------ ------------------------------------ 2003 2004 2003 2004 ------------------------------------ ------------------------------------ Revenue: Sales of chemical reagents $ 35,908 $ 35,284 $ 98,099 $ 98,393 License fees 10,120 13,444 27,846 59,276 Coal combustion products revenues 46,005 58,670 115,460 143,363 Sales of construction materials 13,257 26,780 36,041 49,961 Other revenues 1,106 140 3,712 4,315 ------------------------------------ ------------------------------------ Total revenue 106,396 134,318 281,158 355,308 ------------------------------------ ------------------------------------ Operating costs and expenses: Cost of chemical reagents sold 25,271 23,784 66,065 66,804 Cost of coal combustion products revenues 33,217 42,089 84,635 102,835 Cost of construction materials sold 10,059 19,245 27,535 38,341 Cost of other revenues 1,186 45 3,318 362 Depreciation and amortization 3,409 5,065 9,660 11,572 Research and development 1,052 1,679 3,172 5,135 Selling, general and administrative 10,433 14,626 30,259 42,404 ------------------------------------ ------------------------------------ Total operating costs and expenses 84,627 106,533 224,644 267,453 ------------------------------------ ------------------------------------ Operating income 21,769 27,785 56,514 87,855 Interest income (expense), net (4,017) (1,265) (11,913) (12,253) Other income (expense), net (208) 275 (2,266) (2,118) ------------------------------------ ------------------------------------ Income before income taxes 17,544 26,795 42,335 73,484 Income tax provision (7,000) (10,735) (16,950) (28,705) ------------------------------------ ------------------------------------ Net income $ 10,544 $ 16,060 $ 25,385 $ 44,779 ==================================== ==================================== Basic earnings per share $ 0.39 $ 0.48 $ 0.94 $ 1.43 ==================================== ==================================== Diluted earnings per share $ 0.37 $ 0.47 $ 0.90 $ 1.38 ==================================== ==================================== Weighted average shares outstanding -- basic 27,192 33,118 27,003 31,287 ==================================== ==================================== Weighted average shares outstanding -- diluted 28,299 34,318 28,188 32,501 ==================================== ====================================
Reconciliation of Net Income to EBITDA for the trailing 12 months ended June 30, 2004: EBITDA for the trailing 12 months ended June 30, 2004 of $121,842 is derived as follows: net income of $56,025, plus net interest expense of $15,718, income taxes of $35,205, and depreciation and amortization of $14,894.
HEADWATERS INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands) September 30, June 30, Assets: 2003 2004 ------------------------------------ Current assets: Cash and short-term investments $ 21,653 $ 34,358 Trade receivables, net 52,399 75,247 Inventories 7,827 26,175 Other 6,005 15,394 ------------------------------------ Total current assets 87,884 151,174 Property, plant and equipment, net 52,743 86,693 Intangible assets, net 112,414 127,375 Goodwill 112,131 280,656 Debt issue costs and other assets 8,103 9,667 ------------------------------------ Total assets $ 373,275 $ 655,565 ==================================== Liabilities and Stockholders' Equity: Current liabilities: Accounts payable $ 17,177 $ 21,410 Accrued liabilities 29,056 64,070 Current portion of long-term debt 27,475 10,299 ------------------------------------ Total current liabilities 73,708 95,779 Long-term debt 104,044 219,282 Deferred income taxes 50,663 49,237 Other long-term liabilities 4,703 5,189 ------------------------------------ Total liabilities 233,118 369,487 ------------------------------------ Stockholders' equity: Common stock - par value 28 34 Capital in excess of par value 130,936 233,102 Retained earnings 12,213 56,992 Other, primarily treasury stock (3,020) (4,050) ------------------------------------ Total stockholders' equity 140,157 286,078 ------------------------------------ Total liabilities and stockholders' equity $ 373,275 $ 655,565 ==================================== The current ratio as of September 30, 2003 of 1.19 is derived by dividing total current assets of $87,884 by total current liabilities of $73,708. The current ratio as of June 30, 2004 of 1.58 is derived by dividing total current assets of $151,174 by total current liabilities of $95,779. Outstanding long-term debt before unamortized debt discount is calculated as follows: Current portion of long-term debt as shown above $ 27,475 $ 10,299 Long-term debt as shown above 104,044 219,282 Unamortized debt discount 3,404 0 ------------------------------------ Total long-term debt, before unamortized debt discount $ 134,923 $ 229,581 ====================================
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