HEADWATERS INCORPORATED 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:
CEO COMMENTARY - KIRK A. BENSON
"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.
CFO COMMENTARY - DON P. NEWMAN
"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. www.headwaters.com
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