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Headwaters Incorporated Provides Business Update at 2015 Analyst and Investor Day Conference

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HEADWATERS INCORPORATED (NYSE:HW) , a building products company dedicated to improving lives through innovative advancements in construction materials, today announced highlights from its Thirteenth Annual Analyst and Investor Day, that was held Friday, March 6, 2015 in New York City, NY.

The event featured a business strategy overview by Chairman and Chief Executive Officer Kirk A. Benson. Other commentary included specialty presentations on both Headwaters’ Construction Materials segment, and its Stone and Specialty Roofing divisions. The Investor Day concluded with a financial overview presented by Chief Financial Officer, Don P. Newman. Select highlights follow:


“Headwaters is a leading building products company experiencing strong financial performance across all of its product categories, including double-digit growth in revenue, Adjusted EBITDA, and operating income,” said Kirk A. Benson, Chairman and Chief Executive Officer of Headwaters. “Our current financial performance places us in the upper quartile for Adjusted EBITDA margins among our peers and ongoing momentum in earnings power and scale built into the business. Our business objective is to grow our revenue and maintain strong margins. To accomplish our objective, there are four key elements to our strategy: expand product sales to our core customers; provide a total experience solution to our customers; leverage our established sales and marketing coverage; and continuously standardize, improve and leverage our common infrastructure.

“We are well positioned to take advantage of improving end-use demand for our products across our businesses, and in many cases may outgrow the markets. In our Building Products segment, we enjoy strong positions in many high margin, specialty exterior, interior, and outdoor product lines. We believe end-use demand for our products is recovering from the down cycle, leaving us with potential significant growth ahead. Headwaters should be able to outpace market growth as we focus on our existing core customers, bringing exciting new products to the forefront, such as our newly introduced Eldorado Natural Stone and our Specialty Roofing offerings. We also possess one of the premier building products distribution systems in the industry. Approximately 80% of our building products revenue comes from our distributor relationships that we have had for over ten years. Our robust distributor network and long-term relationships allow us to place our new product offerings with our customers as we’ve successfully demonstrated with our trimboard product sales.”

Mr. Benson also commented on the tailwinds in Headwaters’ Construction Materials segment, including increased market demand for portland cement as demand in the United States is expected to exceed supply by 2016. Fly ash utilization tracks very closely to cement consumption, so growth in cement consumption benefits fly ash sales. As supply of portland cement tightens relative to demand, higher substitution rates of fly ash should also result.


“Headwaters is differentiating itself from a growth and performance standpoint. Our December 2014 quarter was our fourteenth consecutive quarter of year-over-year revenue and Adjusted EBITDA growth, continuing momentum that began with the stabilization of construction markets in 2011,” said Don P. Newman, Chief Financial Officer of Headwaters. “Following double-digit compound annual revenue growth from 2011 through 2014, our first quarter of fiscal 2015, ending December 31, 2014, saw revenues grow 21 percent, Adjusted EBITDA grow 39%, and Adjusted EPS grow 143%. Further, gross margin, operating margin, and Adjusted EBITDA margin expanded 320 basis points, 500 basis points, and 230 basis points, respectively.

“Since 2011, we have grown revenue 41%, grown Adjusted EBITDA more than 90%, and expanded Adjusted EBITDA margin 470 basis points; performance reflecting exposure to growth end markets, increased revenue and product demand, and strong contribution margins.

“We recently updated our Adjusted EBITDA guidance for fiscal year 2015 to $155 million to $165 million, representing growth of between 12% and 20% over 2014 levels. We expect top line growth in all major product categories and free cash flow of more than $50 million. Capital expenditures are anticipated to be in the range of $40 million, including investment in equipment to support new products, as well as revenue growth in the Stone division and Construction Materials segment.”

Mr. Newman commented that Headwaters remains committed to reducing debt levels, noting the Company reached the top-end of its net debt to Adjusted EBITDA ratio goal range of 2.5x to 3.0x in the December 2014 quarter, and repaid substantially all of its nearly $50 million of outstanding 8.75% convertible notes in February.

Most recently, the Company announced it is planning to refinance its $400 million of 7.625% senior secured bonds (due April 2019) through a Term Loan B. The refinancing should extend maturities, reduce cash interest cost, and enable Headwaters to efficiently repay debt from future free cash flows.

Mr. Newman further stated, “Nearly 90% of our product end-use segments have exposure to construction activities, including new residential, repair and remodel, commercial and institutional, and infrastructure, all of which are forecast to grow at healthy rates in the coming years. We see potential tailwinds in costs associated with oil and natural gas prices, such as PVC, polypropylene and diesel. Continued recovery of demand for products, coupled with strong demand and pricing dynamics for fly ash, create potential for strong cash flow. Tax shields, such as net operating loss carryforwards and tax credits, could significantly reduce income taxes on as much as $250 million of pre-tax profits, further enhancing potential future cash flow.”

Headwaters Incorporated

Headwaters Incorporated is improving lives through innovative advancements in construction materials through application, design, and purpose. Headwaters is a diversified growth company providing products, technologies and services to the construction materials and building products markets. Through its coal combustion products, building products, and energy businesses, the Company has been able to improve sustainability by transforming underutilized resources into valuable products.


This press release contains forward-looking statements relating to Headwaters’ operations that are based on management’s current expectations, estimates and projections about the industries in which Headwaters operates. Words such as “may,” “should,” “anticipates,” “expects,” “intends,” “plans,” “targets,” “forecasts,” “projects,” “believes,” “seeks,” “schedules,” “estimates,” “budgets,” “goals,” “outlook” and similar expressions are intended to help identify such forward-looking statements. Forward-looking statements include Headwaters’ expectations as to the managing and marketing of coal combustion products, the production and marketing of building products, the sales to oil refineries of residue hydrocracking catalysts, the development, commercialization, and financing of new products and other strategic business opportunities and acquisitions, and other information about Headwaters which are not purely historical by nature, including those statements regarding Headwaters’ future business plans, the operation of facilities, the availability of feedstocks, and the marketability of the coal combustion products, building products and catalysts. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, many of which are beyond the Company’s control and are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Unless legally required, Headwaters undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are: changing feedstock and energy prices; actions of competitors or regulators; technological developments; potential disruption of the Company’s production facilities, transportation networks and information technology systems due to war, terrorism, malicious attack, civil accidents, political events, civil unrest or severe weather; potential environmental liability or product liability under existing or future laws and litigation; potential liability resulting from other pending or future litigation; changed accounting rules under generally accepted accounting principles promulgated by rule-setting bodies; and the factors set forth under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q and other periodic reports. In addition, such results could be affected by general domestic and international economic and political conditions and other unpredictable or unknown factors not discussed in this press release which could have material adverse effects on forward-looking statements.

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