8-K 1 form8k082801.txt 8-K DATED AUGUST 28, 2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 August 28, 2001 ------------------------------------------------ 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.) 11778 South Election Road, Suite 210 Draper, UT 84020 -------------------------------------- (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.) Certain statements in this Report constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. As such, actual results may vary materially from such expectations. For a discussion of certain factors that could cause actual results to differ from expectations, please see the information set forth under the caption entitled "Forward-Looking Statements" in PART I, ITEM 2 of Headwaters' Quarterly Report on Form 10-Q for the quarter ended March 31, 2002. There can be no assurance that Headwaters' results of operations will not be adversely affected by such factors. Headwaters undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinion only as of the date hereof. This Form 8-K provides pro forma information for the year ended September 30, 2001 with respect to Headwaters' August 28, 2001 acquisition of Hydrocarbon Technologies, Inc. This information supplements the pro forma information provided in the Form 8-K filed July 18, 2002 regarding Headwaters' proposed acquisition of Industrial Services Group, Inc. Item 2. Probable Acquisition of Industrial Services Group, Inc. On July 15, 2002, Headwaters signed a definitive agreement to acquire 100% of the stock of Industrial Services Group, Inc. ("ISG"). Reference is made to Headwaters' Form 8-K filing dated July 18, 2002 for more information. Acquisition of Hydrocarbon Technologies, Inc. On August 28, 2001, Headwaters completed a 100% acquisition of Hydrocarbon Technologies, Inc. ("HTI"). Reference is made to Headwaters' Form 8-K filing dated September 12, 2001 for more information. Item 7. Financial Statements and Exhibits (b) The following unaudited pro forma financial information for Headwaters Incorporated is included herein: Introduction to Pro Forma Financial Information Pro Forma Condensed Combined Statement of Income for the Year Ended September 30, 2001 Notes to Pro Forma Condensed Combined Statement of Income 2 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, 2002 /s/ Kirk A. Benson ----------------------------- Kirk A. Benson Chief Executive Officer and Principal Executive Officer HEADWATERS INCORPORATED INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION (dollar and share amounts in thousands) On July 15, 2002, Headwaters signed a definitive agreement to acquire 100% of the stock of Industrial Services Group, Inc. ("ISG"). On August 28, 2001, Headwaters completed a 100% acquisition of Hydrocarbon Technologies, Inc. ("HTI"). For more information about these transactions, please see Headwaters' Forms 8-K filed September 12, 2001 and July 18, 2002. The following pro forma combined statement of operations for the year ended September 30, 2001 gives effect to the probable acquisition of ISG and the actual acquisition of HTI as if they had occurred on October 1, 2000. The pro forma combined statement of operations for the year ended September 30, 2001 combines Headwaters' and HTI's historical results for the year ended September 30, 2001 with ISG's historical results for the year ended December 31, 2001. The pro forma combined statement of operations is presented for illustrative purposes only. Such information does not purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred on the date indicated, nor is it indicative of the results that may be expected in future periods. The pro forma adjustments are based upon information and assumptions available at the time of filing this Form 8-K. The pro forma information should be read in conjunction with the accompanying notes thereto.
HEADWATERS INCORPORATED UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME For the year ended September 30, 2001 Pro Forma Historical ISG Pro Forma HTI Combined (thousands of dollars and shares, -------------------------- Pro Forma Combined Historical Pro Forma With ISG except per share amounts) Headwaters ISG Adjustments With ISG HTI Adjustments and HTI ----------------------------------- ------------- ----------- ----------- ---------- -------------- ----------- ------------ (Year ended (Year ended (Year ended September 30, December 31, September 30, 2001) 2001) 2001 Revenue: License fees $ 20,765 $ 20,765 $ 20,765 Product sales 22,407 $ 184,161 206,568 206,568 Service revenues 990 32,070 33,060 $ 3,402 36,462 Other 1,302 1,302 247 1,549 -------- --------- -------- --------- -------- ------ --------- Total revenue 45,464 216,231 261,695 3,649 265,344 -------- --------- -------- --------- -------- ------ --------- Operating costs and expenses: Cost of products sold, excluding depreciation 14,524 135,810 150,334 150,334 Cost of services sold and other operating costs, excluding depreciation 2,858 22,417 25,275 4,565 29,840 Depreciation and amortization 261 15,810 $ 266 A (4,041) B 12,296 188 118 G 647 H 13,249 Selling, general and administrative 5,790 25,019 30,809 1,249 32,058 Research and development 2,400 2,308 4,708 499 5,207 -------- --------- -------- --------- -------- ------ --------- Total operating costs and expenses 25,833 201,364 (3,775) 223,422 6,501 765 230,688 -------- --------- -------- --------- -------- ------ --------- Operating income (loss) 19,631 14,867 3,775 38,273 (2,852) (765) 34,656 -------- --------- -------- --------- -------- ------ --------- Other income (expense): Interest and net investment income 726 455 1,181 6 (26) I 1,161 Interest expense (224) (22,948) 22,232 C (15,400) D (16,340) (126) 26 I (16,440) Losses on notes receivable and equity investments (6,265) (6,265) (6,265) Other, net 600 21 621 (426) (7) J 447 K 635 -------- --------- -------- --------- -------- ------ --------- Total other expense, net (5,163) (22,472) 6,832 (20,803) (546) 440 (20,909) -------- --------- -------- --------- -------- ------ --------- Income (loss) before income taxes 14,468 (7,605) 10,607 17,470 (3,398) (325) 13,747 Income tax benefit 7,049 1,428 (2,627) E 5,850 37 130 E 6,017 -------- --------- -------- --------- -------- ------ --------- Net income (loss) $ 21,517 $ (6,177) $ 7,980 $ 23,320 $ (3,361) $ (195) $ 19,764 ======== ========= ======== ========= ======== ====== ========= Basic net income per common share $ 0.94 $ 0.94 $ 0.78 ======== ========= ========= Diluted net income per common share $ 0.87 $ 0.88 $ 0.72 ======== ========= ========= Weighted-average shares outstanding: Basic 22,787 2,000 F 24,787 544 L 25,331 ======== ======== ========= ====== ========= Diluted 24,637 2,000 F 26,637 675 L 27,312 ======== ======== ========= ====== ========= See accompanying notes.
HEADWATERS INCORPORATED NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (dollar and share amounts in thousands, except per share amounts) 1. Basis of Presentation The pro forma condensed combined financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and certain footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations; however, management believes that the disclosures are adequate to make the information presented not misleading. 2. Acquisition of Hydrocarbon Technologies, Inc. ("HTI") and Probable Acquisition of Industrial Services Group, Inc. On July 15, 2002, Headwaters signed a definitive agreement to acquire 100% of the stock of Industrial Services Group, Inc. ("ISG"). On August 28, 2001, Headwaters completed a 100% acquisition of Hydrocarbon Technologies, Inc. ("HTI"). For more information about these transactions, please see Headwaters' Forms 8-K filed September 12, 2001 and July 18, 2002. 3. Pro Forma Financial Statements and Adjustments The pro forma combined statement of operations for the year ended September 30, 2001 gives effect to the probable acquisition of ISG and the actual acquisition of HTI as if they had occurred on October 1, 2000. The pro forma combined statement of operations for the year ended September 30, 2001 combines Headwaters' and HTI's historical results for the year ended September 30, 2001 with ISG's historical results for the year ended December 31, 2001. The pro forma combined statement of operations is presented for illustrative purposes only. Such information does not purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred on the date indicated, nor is it indicative of the results that may be expected in future periods. The pro forma adjustments are based upon information and assumptions available at the time of filing this Form 8-K. The pro forma condensed combined financial statements give effect to the following pro forma adjustments: A Amortization on increase in recorded value of ISG's identifiable intangible assets, calculated using the straight-line method and a 20-year life. B Elimination of ISG's historical non-deductible goodwill amortization. There is no amortization of the assumed goodwill, due to the implementation requirements of SFAS 142. C Elimination of ISG's interest on long-term debt to be retired by Headwaters at closing and on additional ISG debt that was extinguished in January 2002. D Adjustment to record interest on new $220,000 long-term debt issuance by Headwaters, calculated using an assumed 7.0% effective interest rate, which includes the amortization of estimated debt issuance costs of $7,000. The effect of a 1/8% change in the interest rate would be $275 per year. E Income tax effect of P&L-related pro forma adjustments, calculated using a combined effective federal and state income tax rate of approximately 40%. F The pro forma combined net income per share amounts are based on (i) Headwaters' historical weighted-average number of common shares outstanding, plus (ii) the shares to be issued at the acquisition date for ISG (2,000). G Depreciation on increase in value of HTI buildings and equipment. H Amortization of HTI's identifiable intangible assets, calculated using the straight-line method and a 15-year life. I Elimination of interest income and interest expense on note receivable due to Headwaters from HTI. J Elimination of HTI's historical amortization of goodwill and negative goodwill. K Elimination of HTI's non-recurring acquisition-related direct costs. L The pro forma combined net income per share amounts are based on (i) Headwaters' historical weighted-average number of common shares outstanding, plus (ii) the shares to be issued at the acquisition date for ISG (2,000), plus (iii) 593 shares outstanding for an additional 11/12 of the year from the HTI acquisition on August 28, 2001. Additionally, for the computation of the diluted per-share computation, the effect of the shares issuable upon exercise of the options to acquire Headwaters common stock issued in exchange for outstanding vested HTI options, using the treasury stock method (143), was included for 11/12 of the year.