- Leading building products company
with double-digit top-line growth and top-quartile margin
performance
- Revenue tailwinds across business,
especially evident in construction materials segment
- Best-in-class customer/distribution
base
- High margin products and exposure to
large diversified end-uses with growth opportunities
- De-leveraging balance sheet through
strong cash generation and earnings growth
- 2015 Adjusted EBITDA guidance of
$155 million to $165 million
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:
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
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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