- Initial term loan interest rate of
4.5%
- Weighted average interest rate
reduced to 5.2%
- Annual cash interest run rate
reduced to approximately $31 million
- Increases pro forma December 31,
2014 TTM Adjusted EPS to $1.00
HEADWATERS INCORPORATED (NYSE: HW), a building products
company dedicated to improving lives through innovative
advancements in construction materials, today announced that it has
entered into a new seven-year $425 million senior secured term loan
B facility ("Term Loan"). The Term Loan has an initial interest
rate of 4.50% based on LIBOR plus 350 basis points, with a 1.0%
LIBOR floor (3-month LIBOR is currently 27 bps). Headwaters is
using the proceeds of the Term Loan to redeem all of its
outstanding 7-5/8% Senior Secured Notes due 2019 in the aggregate
principal amount of $400 million (the “Senior Secured Notes”), to
pay transaction fees and expenses, and for general corporate
purposes.
The Term Loan matures in March 2022, an extension of three years
from the April 2019 maturity of our Senior Secured Notes. The Term
Loan does not contain any financial maintenance covenants and
provides Headwaters with substantial flexibility. More detail
regarding the Term Loan will be included in the Company’s related
Form 8-K to be filed with the Securities and Exchange
Commission.
The combination of repurchasing its 8.75% convertible notes in
February with refinancing the Senior Secured Notes reduced
Headwaters’ annual cash interest expense run rate to approximately
$31 million, from an annual run rate of approximately $47 million
at the end of the December 31, 2014 quarter. Headwaters’ pro forma
Adjusted EPS for the trailing twelve months ended December 31, 2014
was $1.00, assuming that as of January 1, 2014 our Senior Secured
Notes were refinanced and the Company’s outstanding 8.75%
convertible notes were repurchased. Headwaters’ weighted average
interest rate on long term debt has been reduced to 5.2%, down from
a weighted average interest rate of 7.6% at the end of the December
31, 2014 quarter.
In addition to interest savings and extended debt maturities,
the Term Loan allows for voluntary principal repayments without
early payment premiums. This enables Headwaters to more efficiently
de-leverage with free cash flow generated from operations.
The Company also recently amended its Asset Based Loan revolving
credit facility, extending its maturity to March 2020, while
improving pricing and flexibility.
Deutsche Bank AG New York Branch acted as Sole Arranger and Sole
Book-runner for the Term Loan.
This press release is not an offer to purchase or a solicitation
of an offer to redeem its 7-5/8% Senior Secured Notes due 2019. The
redemption of the Senior Secured Notes will be made only pursuant
to the terms set forth in the applicable notice of redemption,
which will be delivered to the registered holders of the Senior
Secured Notes.
Non-GAAP Financial Measure
One of the non-GAAP financial measures currently used by
Headwaters is Adjusted EPS. Headwaters currently defines Adjusted
EPS as diluted EPS from continuing operations plus the effect of
amortization expense related to acquired intangible assets and
other non-routine adjustments that arise from time to time, all as
detailed in the table that follows. In addition to the adjustments
we normally include to derive Adjusted EPS, the pro forma trailing
twelve months (TTM) Adjusted EPS reflected below eliminates (i) the
historical interest expense related to the Senior Secured Notes
that will be redeemed and repaid in full with proceeds from the new
Term Loan, and (ii) the historical interest expense related to the
8.75% convertible notes repurchased in February 2015, and includes
the annual estimated interest expense related to the new Term Loan
at its initial interest rate of 4.50%. All interest expense amounts
include the respective amortization of debt discount and debt issue
costs.
Adjusted EPS is used by management, investors and analysts to
measure operating performance, as a supplement to our consolidated
financial statements presented in accordance with generally
accepted accounting principles (GAAP). Our presentation of Adjusted
EPS is limited as an analytical tool, and should not be considered
in isolation, or as a substitute for analysis of our results as
reported under GAAP. Because the definition of Adjusted EPS varies
among companies and industries, our definition of this non-GAAP
financial measure may not be comparable to similarly-titled
measures used by other companies.
Headwaters’ calculation of pro forma TTM Adjusted EPS is
reflected in the following table. All amounts which follow are
presented on a continuing operations basis.
Reconciliation of Diluted EPS from
Continuing Operations to Pro forma TTM Adjusted EPS
(in millions, except per-share
amounts)
TwelveMonthsEnded12/31/2014
Numerator: Numerator for diluted earnings per
share from continuing operations in accordance with GAAP – income
from continuing operations attributable to Headwaters Incorporated
$24.3
Adjustments to numerator: Amortization expense
related to intangible assets 20.4
Non-routine customer and business
acquisition-related costs and adjustments
4.3
Cash-based compensation tied to stock price 6.5 Asset
impairments and write-offs 3.1 Interest expense related to
7-5/8% senior secured notes 31.4 Interest expense related to
8.75% convertible notes 4.9 Interest expense related to new
Term Loan
(20.6)
Income tax effect of above adjustments 0.7
Total adjustments to income from
continuing operations, net of income tax effect
50.7
Numerator for pro forma adjusted
diluted earnings per share from continuing operations
$75.0
Denominator for diluted earnings per
share in accordance with GAAP and for pro forma adjusted earnings
per share
74.8
Diluted income per share from
continuing operations in accordance with GAAP
$0.32
Effect of adjustments on diluted income per share calculation
0.68
Pro forma adjusted diluted income per
share from continuing operations (Pro forma Adjusted EPS)
$1.00
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
CAUTIONARY STATEMENTS RELEVANT TO
FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF “SAFE HARBOR”
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
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.
AT THE COMPANY:Headwaters IncorporatedSharon
MaddenVice President of Investor Relations(801) 984-9400orANALYST
CONTACT:Financial ProfilesTricia Ross(310) 622-8226
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