-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ObIm+UVhihApM0G/E/LwecfS0dOeCmGPyKluFWTaJllKj+yLDVTn0HO7E6JKTEm/ a+QQYOebhMg1JHhuncxAcw== 0001038838-03-000236.txt : 20030424 0001038838-03-000236.hdr.sgml : 20030424 20030423185604 ACCESSION NUMBER: 0001038838-03-000236 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030424 ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20030424 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEADWATERS INC CENTRAL INDEX KEY: 0001003344 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PRODUCTS OF PETROLEUM & COAL [2990] IRS NUMBER: 870547337 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27808 FILM NUMBER: 03660916 BUSINESS ADDRESS: STREET 1: 10653 SOUTH RIVERFRONT PARKWAY STREET 2: SUITE 300 CITY: SOUTH JORDAN STATE: UT ZIP: 84095 BUSINESS PHONE: 801-984-9400 MAIL ADDRESS: STREET 1: 10653 SOUTH RIVERFRONT PARKWAY STREET 2: SUITE 300 CITY: SOUTH JORDAN STATE: UT ZIP: 84095 FORMER COMPANY: FORMER CONFORMED NAME: COVOL TECHNOLOGIES INC DATE OF NAME CHANGE: 19951113 8-K 1 form8k042403.txt FORM 8-K DATED APRIL 24, 2003 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 April 24, 2003 ------------------------------------------------ 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 (Commission File Number) (IRS Employer of incorporation) Identification No.) 10653 South River Front Parkway, Suite 300 South Jordan, UT 84095 -------------------------------------------------- (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 December 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. Item 9. Information Being Furnished Under Item 12 In accordance with Securities and Exchange Commission Release No. 33-8216, the following information, which is intended to be furnished under Item 12, "Results of Operations and Financial Condition," is instead being furnished under Item 9, "Regulation FD Disclosure." This information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. On April 24, 2003, Headwaters announced its results for the quarter ended March 31, 2003. The full text of this announcement follows. HEADWATERS INCORPORATED ANNOUNCES RESULTS FOR SECOND QUARTER - FISCAL 2003 o Second Quarter Earnings Per Share of $0.24 o Six Month Earnings Per Share Up 32% to $0.53 o Long Term Debt Reduced by $5 Million SOUTH JORDAN, UTAH, APRIL 24, 2003 - HEADWATERS INCORPORATED (NASDAQ: HDWR), today announced results for the quarter and six months ended March 31, 2003. Highlights for the second quarter of fiscal 2003 included: o Quarterly revenue increase of 240% to $86.1 million. o Continued strong demand for fly ash and other coal combustion products. o Record sales of chemical reagents - 96% quarterly increase. o Record tons of solid alternative fuel sold - 88% quarterly increase. o Continued accelerated repayment of acquisition debt. Total revenue for the March 2003 quarter was $86.1 million, an increase of 240% over total revenue of $25.3 million for the March 2002 quarter. Net income for the March 2003 quarter was $6.8 million, or $0.24 per diluted share, compared to $5.5 million, or $0.21 per diluted share for the March 2002 quarter. Total revenue for the six months ended March 31, 2003 was $174.8 million, an increase of 300% over total revenue of $43.7 million for the six months ended March 31, 2002. Net income for the six months ended March 31, 2003 was $14.8 million, or $0.53 per diluted share, compared to $10.2 million, or $0.40 per diluted share for the six months ended March 31, 2002, an increase of 32%. Effective September 19, 2002 Headwaters acquired Industrial Services Group, Inc. ("ISG"), the nation's largest marketer and manager of coal combustion products. Accordingly, ISG's results of operations are included in the March 2003 three- and six-month results, but not in the March 2002 results. ISG's revenues were $42.9 million for the March 2003 quarter and $92.2 million for the six months ended March 31, 2003. Chemical reagent sales increased 96% to $33.1 million in the second quarter of fiscal 2003, compared to $16.9 million for the same period in 2002. License fees for the quarter increased 35% to $8.9 million, up from $6.6 million in 2002. For the respective six-month periods, chemical reagent sales increased 128% to $62.2 million in 2003, compared to $27.3 million in 2002. License fees for the six-month period increased 43% to $17.7 million, up from $12.4 million in 2002. Summary income statement data for the three- and six-month periods ended March 31, 2002 and 2003 is shown below:
(in 000's of dollars, except per-share data) Quarter Ended March 31 Six Months Ended March 31 -------------------------------- ------------------------------------ ------------------------------------ 2002 2003 2002 2003 -------------------------------- ----------------- ------------------ ----------------- ------------------ Total revenue $25,256 $86,053 $43,678 $174,762 Operating income $7,435 $16,768 $14,617 $34,746 Net income $5,459 $6,789 $10,186 $14,841 Diluted income per share $0.21 $0.24 $0.40 $0.53 -------------------------------- ----------------- ------------------ ----------------- ------------------
Covol Fuels' Performance During the March 2003 quarter, Covol Fuels' licensees sold 9.8 million tons of solid alternative fuel. This compares to 5.2 million tons sold in the March 2002 quarter, an 88% increase, and 8.4 million tons in the December 2002 quarter, a 17% increase. Covol Fuels sold 25.7 million pounds of chemical reagent in the March 2003 quarter, compared to 13.7 million pounds in the March 2002 quarter, an 88% increase, and 22.6 million pounds in the December 2002 quarter, a 14% increase. Of the 9.8 million tons of solid alternative fuel sold during the quarter, Headwaters reported royalty income on 7.6 million tons, resulting in average revenues per ton of $1.18. The 9.8 million tons of fuel sold was produced at 24 of 28 licensed facilities, resulting in average quarterly production of 0.41 million tons per facility. The highest number of tons produced from any one facility in the quarter was 0.80 million, and the lowest was 0.14 million. All of Headwaters' licensee facilities are now producing solid alternative fuel. Covol Fuels sold 25.7 million pounds of chemical reagent to a total of 34 facilities. Of the 34 facilities, 19 were licensee facilities and 15 were solely chemical reagent customers. ISG's Performance During the March 2003 quarter of integrated operations, ISG performed at expected levels even though operations were negatively impacted during the first two quarters of fiscal 2003 by above normal rain in Texas and northern California and severe winter weather conditions in certain other locations. ISG's business is seasonal with its strongest operations from May through October. Typically, ISG's strongest quarter ends September 30th and its slowest quarter ends March 31st. The following table highlights the seasonality of the ISG business: Operating Operating Quarter Ended Revenue Income Margin ------------------- ------------- --------------- --------------- Dec. 2001 $51,221 $3,098 6% Mar. 2002 $44,556 $1,172 3% Jun. 2002 $62,147 $6,843 11% Sep. 2002 $66,838 $7,105 11% The combination of the December 2001 and the March 2002 quarters' operations represents less than 43% of the total revenue and less than 24% of the total operating income for fiscal 2002. Operating margins are better in the June and September quarters because of fixed cost operating leverage, wherein fixed costs remain relatively constant as revenue increases. During the March 2003 quarter, revenue from ISG's coal combustion products ("CCP") segment was $31.2 million with a gross margin of 24.9% compared to $33.1 million with a gross margin of 25.2% for the March 2002 quarter. The total tons of high value CCPs sold in the March 2003 quarter were 961,000 compared to 976,000 for the March 2002 quarter. The change in quarterly shipments of high value CCPs was primarily due to unusually rainy weather in Texas. Revenues from the manufactured products segment were $11.7 million during the March 2003 quarter, with a gross margin of 24.2%, compared to revenue of $11.2 million and a gross margin of 22.1% for the March 2002 quarter. This represents a 10% improvement in the gross margin which resulted from restructuring activities at the manufacturing products facilities. Combined Pro Forma and Integration Summary income statement data for the three- and six-month periods ended March 31, 2003 and pro forma data that combines Headwaters with ISG for the three- and six-month periods ended March 31, 2002 are shown below:
(in 000's of dollars, except per-share data) Quarter Ended March 31 Six Months Ended March 31 -------------------------------- ------------------------------------ ------------------------------------ 2002 (pro forma) 2003 2002 (pro forma) 2003 -------------------------------- -------------------- --------------- --------------------- -------------- Total revenue $69,812 $86,053 $139,455 $174,762 Operating income $8,540 $16,768 $19,753 $34,746 Net income $3,958 $6,789 $8,486 $14,841 Diluted income per share $0.14 $0.24 $0.31 $0.53
Pro forma quarterly combined revenues grew 23% from $69.8 million to $86.1 million, operating income grew 98% from $8.5 million to $16.8 million, and net income increased by 70% from $4.0 million to $6.8 million. For the six-month periods ended March 31, 2002 and 2003, pro forma combined revenues grew 25% from $139.5 million to $174.8 million, operating profits grew 76% from $19.8 million to $34.7 million, and net income increased by 74% from $8.5 million to $14.8 million. The integration with ISG is proceeding on schedule and Headwaters continues to believe that the integration will be completed by the June 2003 quarter. During the March 2003 quarter, Headwaters' and ISG's corporate offices were consolidated into one location. The information technology and accounting systems for Covol Fuels and ISG's CCP operations have been fully consolidated under the same application software. Employee benefits, compensation, and human resources policies have been standardized and fully integrated. Debt In connection with the acquisition of ISG, Headwaters incurred $175 million of long-term debt, consisting of $155 million of senior debt and $20 million of subordinated debt. During the March 2003 quarter, Headwaters repaid a total of $5.2 million of senior debt, which, when combined with the $9.9 million of senior debt repaid in the December 2002 quarter, represents a 9% reduction in long-term debt incurred to acquire ISG. Because of the early repayment of this debt, Headwaters accelerated the amortization of $90,000 of debt discount and capitalized debt issuance costs during the March 2003 quarter and $455,000 for the six months ended March 31, 2003. The following table highlights certain debt coverage and balance sheet ratios using the pro forma trailing twelve months ("TTM") earnings before interest, taxes, depreciation and amortization ("EBITDA"), results:
September 2002 December 2002 March 2003 ----------------------------------------------- --------------------- -------------------- ---------------- Total Indebtedness to EBITDA 2.43 2.10 1.97 EBITDA to Required Interest Payments 5.65 6.16 6.22 Current Ratio 1.24 1.28 1.25 Total Debt to Total Assets 0.47 0.46 0.44
Headwaters' goal in fiscal 2003 is to reduce the ratio of total indebtedness to TTM pro forma EBITDA to 1.8 or less. Because of the strong cash flow generated by Headwaters in the March 2003 quarter, it continues to believe that this goal can be achieved. Headwaters intends to repay $10 to $15 million of the senior debt in the June quarter, reducing the total acquisition debt to $145 to $150 million. Commentary and Outlook "We are pleased with the quarter, particularly with the cash flow strength of the Company. We have completed the seasonally slowest two quarters of our fiscal year. We look forward to the June and September quarters where we expect to report record quarterly results," said Kirk A. Benson, Chairman and Chief Executive Officer. Based on its financial performance for the six months ended March 31, 2003, Headwaters believes that it will be able to achieve its earnings forecast of $1.28 to $1.32 per diluted share for fiscal 2003, reflecting a growth rate of between 36% and 40% over fiscal 2002 results. Management will host a conference call with a simultaneous webcast today at 11:00 a.m. Eastern/9:00 a.m. Mountain to discuss the Company's financial results and business outlook. The call will be available live via the Internet by accessing Headwaters' web site at www.hdwtrs.com and clicking on the Investor Relations section. To listen to the live broadcast, please go to the web site at least fifteen minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, an online replay will be available for 90 days on www.hdwtrs.com, or a phone replay will be available through May 1, 2003, by dialing (800) 642-1687 or (706) 645-9291 and entering the passcode 9806082. About Headwaters Incorporated Headwaters Incorporated is a world leader in providing technology and services that maximize the value of fossil fuels. The Company is focused on providing services to energy companies, conversion of fossil fuels into alternative energy products, and generally adding value to energy. Headwaters generates revenue from managing coal combustion products (CCPs) and from licensing its innovative chemical technology to produce an alternative fuel. Through its CCP business and its solid alternative fuels business, the Company earns a growing revenue stream that provides the capital needed to expand and acquire synergistic new business opportunities. Forward Looking Statements Certain statements contained in this document may be deemed to be forward-looking statements under federal securities laws, and Headwaters intends that such forward-looking statements be subject to the safe-harbor created thereby. Such forward-looking statements relate to: (i) the growth of Headwaters' revenues, earnings, or earnings per share; (ii) the expectation that operating results will be higher for the June and September quarters; (iii) the ability of Headwaters to sustain the earnings stream from its alternative fuels, coal combustion products, and other businesses; (iv) the expectation that Headwaters' stock is undervalued or will increase in value in the future; (v) the identification and completion of any future acquisitions and the expectation that the value of such acquisitions will increase; (vi) the commercialization of any technology acquired or developed. Headwaters cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements contained herein. Such factors include, but are not limited to: (a) the availability of tax credits to us and our licensees under the tax code; (b) our dependence on licensees to use our technology; (c) collection of payments outstanding; (d) the company's ability to repay its debt and comply with covenants in financing agreements; limitations in the capital available to Headwaters to execute on its business plan, and the cost of that capital; (e) the ability of Headwaters to locate and close on attractive acquisition opportunities; (f)Headwaters' limited operating history with its new business strategy and its ability to sustain and manage its growth under that strategy; and (g) the success Headwaters in replacing and growing its financial performance before its legacy alternative fuels business decline. More information about potential factors which could affect either company's business and financial results is included in Headwaters' Annual Report on Form 10-K for the fiscal year ended Sept. 30, 2002, Quarterly Reports on Form 10-Q, and other periodic filings and prospectuses. All forward-looking statements are based on information available to Headwaters on the date hereof, and Headwaters assumes no obligation to update such statements. Investors and security holders may obtain a free copy of the Annual and Quarterly Reports and other documents filed by Headwaters with the Securities and Exchange Commission at the Commission's Web site at http://www.sec.gov. Free copies of Headwaters' Annual Report and other filings with the Commission may also be obtained by directing a request to smadden@hdwtrs.com.
HEADWATERS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (thousands of dollars and shares, except per-share amounts) Quarter Ended March 31, ------------------------------------------- 2002 2002 2003 ---------- ---------- ---------- Revenue: (PRO FORMA) (ACTUAL) (ACTUAL) Chemical reagent sales $ 16,944 $ 16,944 $ 33,123 License fees 6,626 6,626 8,948 CCP revenues 33,111 -- 31,168 Manufactured products sales 11,445 -- 11,700 Other 1,686 1,686 1,114 ---------- ---------- ---------- Total revenue 69,812 25,256 86,053 ---------- ---------- ---------- Operating costs and expenses: Cost of chemical reagents 11,640 11,640 21,782 Cost of CCP revenues 24,766 -- 23,422 Cost of manufactured products 8,918 -- 8,872 Cost of other revenues 2,026 2,026 1,135 Depreciation and amortization 3,371 333 3,167 Research and development 1,245 595 1,106 Selling, general and administrative 9,306 3,227 9,801 ---------- ---------- ---------- Total operating costs and expenses 61,272 17,821 69,285 ---------- ---------- ---------- Operating income 8,540 7,435 16,768 Interest expense, net (3,789) 13 (3,460) Other income (expense), net 1,634 1,351 (2,119) ---------- ---------- ---------- Income before income taxes 6,385 8,799 11,189 Income tax provision (2,427) (3,340) (4,400) ---------- ---------- ---------- Net income $ 3,958 $ 5,459 $ 6,789 ========== ========== ========== Basic net income per share $ 0.15 $ 0.23 $ 0.25 ========== ========== ========== Diluted net income per share $ 0.14 $ 0.21 $ 0.24 ========== ========== ========== Weighted average shares outstanding -- basic 26,024 23,924 26,983 ========== ========== ========== Weighted average shares outstanding -- diluted 27,556 25,456 28,101 ========== ========== ========== Reconciliation of actual results to pro forma results for the quarter ended March 31, 2002: Headwaters' historical net income as originally reported $ 5,459 ISG's historical net income as originally reported 20,478 Elimination of ISG extraordinary item (22,558) A Additional amortization expense on ISG's intangible assets (67) B Elimination of ISG's originally reported interest expense 4,896 C Interest expense on new debt incurred by Headwaters (3,860) D Income tax effect of above adjustments (390) E ---------- Pro forma net income shown above $ 3,958 ========== A Elimination of ISG's historical extraordinary gain on extinguishment of debt. B Amortization of increase in recorded value of ISG's identifiable intangible assets. C Elimination of ISG's interest on long-term debt retired by Headwaters at acquisition date. D Adjustment to record interest on new long-term debt issuance by Headwaters. E Income tax effect, calculated using a combined effective federal and state income tax rate of approximately 40%.
HEADWATERS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (thousands of dollars and shares, except per-share amounts) Six Months Ended March 31, ----------------------------------------------- 2002 2002 2003 ----------- ----------- ----------- Revenue: (PRO FORMA) (ACTUAL) (ACTUAL) Chemical reagent sales $ 27,287 $ 27,287 $ 62,191 License fees 12,442 12,441 17,726 CCP revenues 72,701 -- 69,454 Manufactured products sales 23,076 -- 22,784 Other 3,949 3,950 2,607 ----------- ----------- ----------- Total revenue 139,455 43,678 174,762 ----------- ----------- ----------- Operating costs and expenses: Cost of chemical reagents 18,869 18,869 40,793 Cost of CCP revenues 51,950 -- 51,418 Cost of manufactured products 18,328 -- 17,477 Cost of other revenues 2,922 2,922 2,132 Depreciation and amortization 6,688 664 6,251 Research and development 2,432 1,129 2,120 Selling, general and administrative 18,513 5,477 19,825 ----------- ----------- ----------- Total operating costs and expenses 119,702 29,061 140,016 ----------- ----------- ----------- Operating income 19,753 14,617 34,746 Interest expense, net (7,804) (54) (7,897) Other income (expense), net 2,248 2,093 (2,058) ----------- ----------- ----------- Income before income taxes 14,197 16,656 24,791 Income tax provision (5,711) (6,470) (9,950) ----------- ----------- ----------- Net income $ 8,486 $ 10,186 $ 14,841 =========== =========== =========== Basic net income per share $ 0.33 $ 0.43 $ 0.55 =========== =========== =========== Diluted net income per share $ 0.31 $ 0.40 $ 0.53 =========== =========== =========== Weighted average shares outstanding -- basic 25,858 23,758 26,909 =========== =========== =========== Weighted average shares outstanding -- diluted 27,434 25,334 28,133 =========== =========== =========== Reconciliation of actual results to pro forma results for the six months ended March 31, 2002: Headwaters' historical net income as originally reported $ 10,186 ISG's historical net income as originally reported 18,271 Elimination of ISG extraordinary item (22,558) A Elimination of ISG's amortization of goodwill through December 31, 2001 1,002 B Additional amortization expense on ISG's intangible assets (136) C Elimination of ISG's originally reported interest expense 10,691 D Interest expense on new debt incurred by Headwaters (7,910) E Income tax effect of above adjustments (1,060) F --------------- Pro forma net income shown above $ 8,486 =============== A Elimination of ISG's historical extraordinary gain on extinguishment of debt. B Elimination of ISG's historical non-deductible goodwill amortization, due to the implementation requirements of SFAS 142. C Amortization of increase in recorded value of ISG's identifiable intangible assets. D Elimination of ISG's interest on long-term debt retired by Headwaters at acquisition date. E Adjustment to record interest on new long-term debt issuance by Headwaters. F Income tax effect, calculated using a combined effective federal and state income tax rate of approximately 40%.
HEADWATERS INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (thousands of dollars) September 30, March 31, Assets: 2002 2003 ------------ ------------ Current assets: Cash and short-term investments $ 13,191 $ 10,668 Trade receivables, net 50,331 49,838 Inventories 8,442 10,131 Other 5,969 6,524 ------------ ------------ Total current assets 77,933 77,161 Property, plant and equipment, net 50,549 50,460 Notes and accrued interest receivable 4,593 2,458 Intangible assets, net 118,918 115,666 Goodwill 113,367 113,367 Debt issue costs and other assets 7,497 7,028 ------------ ------------ Total assets $ 372,857 $ 366,140 ============ ============ Liabilities and Stockholders' Equity: Current liabilities: Accounts payable $20,773 $19,455 Accrued liabilities 26,559 19,813 Current portion of long-term debt 15,578 22,387 ------------ ------------ Total current liabilities 62,910 61,655 Long-term debt 154,552 133,309 Deferred income taxes 51,357 51,136 Other long-term liabilities 5,442 4,819 ------------ ------------ Total liabilities 274,261 250,919 ------------ ------------ Stockholders' equity: Common stock - par value 27 28 Capital in excess of par value 126,265 127,966 Accumulated deficit (24,418) (9,577) Other, primarily treasury stock (3,278) (3,196) ------------ ------------ Total stockholders' equity 98,596 115,221 ------------ ------------ Total liabilities and stockholders' equity $ 372,857 $ 366,140 ============ ============
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: April 24, 2003 /s/ Kirk A. Benson ---------------------------- Kirk A. Benson Chief Executive Officer and Principal Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----