-----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, Al4xmrzzOsS87tXDrAE0Sw6+RJWRlk2WhMbU4zNooyintyV+kO6pkOTtxdGJ+/s1 VLjDFySFRj5FGz3naHtMLQ== 0001038838-05-000949.txt : 20051108 0001038838-05-000949.hdr.sgml : 20051108 20051108082035 ACCESSION NUMBER: 0001038838-05-000949 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20051108 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20051108 DATE AS OF CHANGE: 20051108 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: 001-32459 FILM NUMBER: 051184777 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 form8k110805.txt FORM 8-K DATED NOVEMBER 8, 2005 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 Date of Report (Date of earliest event reported): November 8, 2005 Headwaters Incorporated ----------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 1-32459 87-0547337 - ---------------------------- ------------- ---------------------- (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification Number) 10653 South River Front Parkway, Suite 300 South Jordan, UT 84095 -------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (801) 984-9400 Not Applicable ------------------------------------------------------------ (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Certain statements contained in this Current Report on Form 8-K are forward-looking statements within the meaning of federal securities laws and Headwaters intends that such forward-looking statements be subject to the safe-harbor created thereby. Forward-looking statements include Headwaters' expectations as to the managing and marketing of coal combustion products, the production and marketing of building materials and products, the licensing of technology and chemical sales to alternative fuel facilities, the receipt of product sales, license fees and royalty revenues, the development, commercialization, and financing of new technologies and other strategic business opportunities and acquisitions, and other information about Headwaters. Such statements that are not purely historical by nature, including those statements regarding Headwaters' future business plans, the operation of facilities, the availability of tax credits, the availability of feedstocks, and the marketability of the coal combustion products, building products, and synthetic fuel, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and our future results that are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Actual results may vary materially from such expectations. Words such as "expects," "anticipates," "targets," "goals," "projects," "believes," "seeks," "estimates," or variations of such words and similar expressions, are intended to identify such forward-looking statements. Any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances, are forward-looking. In addition to matters affecting the coal combustion products, alternative fuel, and building products industries or the economy generally, factors which could cause actual results to differ from expectations stated in forward-looking statements include, among others, the risk factors described in Item 7 in Headwaters' Annual Report on Form 10-K for the fiscal year ended September 30, 2004, Quarterly Reports on Form 10-Q, and other periodic filings and prospectuses. Although Headwaters believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that our results of operations will not be adversely affected by such factors. Unless legally required, we undertake no obligation to revise or update any forward-looking statements for any reason. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Item 1.01. Entry into a Material Definitive Agreement. ------------------------------------------ On October 26, 2005, Headwaters and it senior secured lenders amended the credit agreement for Headwaters' senior first lien term loan. The amendment permits Headwaters to participate in joint venture investments, subject to certain conditions, and increases the amount of capital expenditures Headwaters may make each year for the remaining term of the loan. The amendment is attached hereto as Exhibit 10.93.2. Item 2.02. Results of Operations and Financial Condition. --------------------------------------------- On November 8, 2005, we issued our September 30, 2005 earnings press release. A copy of that press release is attached hereto as Exhibit 99.1. The information in Item 2.02 of this Current Report, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed "filed" for the purposes of -2- Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in Item 2.02 of this Current Report, including Exhibit 99.1 attached hereto, shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, except as shall be expressly set forth by specific reference in such a filing. Item 7.01. Regulation FD Disclosure. ------------------------- To supplement our condensed consolidated financial statements presented in accordance with generally accepted accounting principles ("GAAP"), we use a non-GAAP measure called EBITDA. EBITDA is net income adjusted by adding net interest expense, income taxes, depreciation and amortization ("EBITDA"). Management uses EBITDA internally to measure the amount of cash generated by Headwaters and to make decisions about the amount of capital expenditures Headwaters will make and where to allocate capital. EBITDA is also provided to enhance the user's overall understanding of our current financial performance, our ability to service our debt, our compliance with current debt covenants and our ability to fund future growth. Therefore, we believe that EBITDA provides useful information to our investors regarding our performance and overall results of operations. The EBITDA measure presented in the press release may not be comparable to similarly titled measures presented by other companies. The information in Item 7.01 of this Current Report, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in Item 7.01 of this Current Report, including Exhibit 99.1 attached hereto, shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, except as shall be expressly set forth by specific reference in such a filing. Item 9.01. Financial Statements and Exhibits. --------------------------------- (c) Exhibits. Exhibit 10.93.2: Amendment No. 4 to the Credit Agreement among Headwaters and various lenders dated as of October 26, 2005 Exhibit 99.1: Press release announcing Headwaters' financial results for the quarter and fiscal year ended September 30, 2005 -3- 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. Date: November 8, 2005 HEADWATERS INCORPORATED (Registrant) By: /s/ Kirk A. Benson ------------------------------ Kirk A. Benson Chief Executive Officer (Principal Executive Officer) -4- EX-10.93.2 2 ex10932form8k110805.txt EXECUTION COPY AMENDMENT NO. 4 TO THE CREDIT AGREEMENT Dated as of October 26, 2005 AMENDMENT NO. 4 TO THE CREDIT AGREEMENT (this "Amendment No. 4") among Headwaters Incorporated, a Delaware corporation (the "Borrower"), the Lenders (as hereinafter defined) party hereto, Morgan Stanley & Co. Incorporated ("MS&Co."), as collateral agent (the "Collateral Agent"), and Morgan Stanley Senior Funding, Inc. ("Morgan Stanley"), as administrative agent (the "Administrative Agent"; together with the Collateral Agent, the "Agents"). PRELIMINARY STATEMENTS: (1) The Borrower, certain financial institutions and other persons from time to time parties thereto (collectively, the "Lenders"), the Agents, JPMorgan Chase Bank, N.A. ("JPMCB") (as successor to JPMorgan Chase Bank), as syndication agent, and Morgan Stanley and J.P. Morgan Securities Inc., as joint lead arrangers and joint bookrunners, have entered into that certain Credit Agreement dated as of September 8, 2004 (as amended and modified pursuant to consents dated November 6, 2004 and December 16, 2004, Amendment No. 2 to the Credit Agreement dated March 14, 2005 and Amendment No. 3 to the Credit Agreement dated May 19, 2005, the "Credit Agreement"; capitalized terms used herein but not defined shall be used herein as defined in the Credit Agreement). (2) The Borrower, the Agents and the Required Lenders have agreed, subject to the terms and conditions hereinafter set forth, to amend the Credit Agreement in certain respects as set forth below. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the parties hereto hereby agree as follows: SECTION 1. Amendment of Credit Agreement. The Credit Agreement is, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 2 of this Amendment No. 4, hereby amended as follows: (a) Section 1.1 of the Credit Agreement is hereby amended by (i) adding to the end of the definition of "Subsidiary", immediately before the period, the following proviso: "; provided that no JV Entity shall be considered a "Subsidiary" of the Borrower for any purpose under this Agreement, including, without limitation, for purposes of the covenants set forth in Sections 6.21, 6.22 and 6.23". (ii) inserting the following new definitions in the appropriate alphabetical position: " "JV Entity" means a JV Subsidiary or a JV Subsidiary Holding Company." " "JV Subsidiary" means (i) Blue Flint Ethanol, LLC formed on June 3, 2005 and (ii) any Subsidiary formed or invested in by the Borrower or one of its Subsidiaries after October 26, 2005 pursuant to Section 6.13.4." " "JV Subsidiary Holding Company" means each direct or indirect Subsidiary of the Borrower that holds the Equity Interests in a JV Subsidiary in accordance with Section 6.31 and that does not own any assets other than Equity Interests in one or more JV Subsidiaries." (b) Section 6.13.4 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "6.13.4 Investments in joint ventures or Persons in which the Borrower or any Subsidiary owns less than 100% of the issued and outstanding equity interests thereof, including the Investments described in Schedule 6.13(B), provided that (a) Investments made pursuant to this Section 6.13.4 after June 1, 2005 shall not exceed in the aggregate $85,000,000 outstanding at any time (giving effect to any returns in respect of such Investment actually received by the Borrower or another Credit Party in cash) and (b) Investments pursuant to this Section 6.13.4 shall be made in compliance with Section 6.31; provided further that (i) both before and after such Investment, on a pro forma basis, the Borrower would have been in compliance with its financial covenants set forth in Sections 6.21, 6.22 and 6.23 for the four fiscal quarter period reflected in the compliance certificate most recently delivered to the Administrative Agent pursuant to Section 6.1.3 prior to the consummation of such Investment (giving effect to such Investment and all Indebtedness funded in connection therewith as if made on the first day of such period) and (ii) no Default or Unmatured Default is occurring or continuing or would result from such Investment (including all Indebtedness funded in connection therewith)." (c) Section 6.23 of the Credit Agreement is hereby amended by deleting the table that appears therein in its entirety and replacing it with the following: "For fiscal year: Capital Expenditures ---------------- -------------------- 2005 $62,000,000 2006 $72,000,000 2007 through 2011 $75,000,000". (d) A new Section 6.33 is added to the Credit Agreement to read as follows: 6.33 JV Entities Separateness. The Borrower shall comply, and cause each of its Subsidiaries and each JV Entity to comply, with the following: 6.33.1 To the extent that any JV Entity has cash, each JV Entity will maintain its own deposit account or accounts, separate from those of the Borrower and its Subsidiaries, with commercial banking institutions and ensure that its funds will not be used for other than its corporate uses, nor will such funds be commingled with the funds of any of the Borrower and its Subsidiaries and vice versa. 6.33.2 Each JV Entity will maintain a separate address from the address of any of the Borrower and its Subsidiaries and vice versa, or to the extent any JV Entity may have offices in the same location as any of the Borrower and its Subsidiaries, maintain a fair and appropriate allocation of additional, incremental overhead costs among them, with each such entity bearing its fair share of such expense. 6.33.3 Any JV Entity will issue separate financial statements prepared not less frequently than quarterly and prepared in accordance with GAAP (except for the omission of certain footnotes and other presentation items required by GAAP with respect to audited financial statements), which financial statements need not be separately audited or reviewed by an independent accounting firm. 6.33.4 Each JV Entity will be a corporate or limited liability company and each JV Entity will conduct its affairs strictly in accordance with its certificate of incorporation or formation and by-laws or limited liability company agreement (or similar constitutive documents) and observe all necessary, appropriate and customary company (or corporate) formalities, including, but not limited to, holding all regular and special members' and board of managers' (or stockholders' and directors' or other similar Persons') meetings appropriate to authorize all company (or corporate) action, keeping separate and accurate minutes of its meetings, passing all resolutions or consents necessary to authorize actions taken or to be taken, and maintaining accurate and separate books, records and accounts, including, but not limited to, payroll and intercompany transaction accounts, to the extent applicable. 6.33.5 Each JV Entity will refrain from assuming or guaranteeing any of the liabilities or pledging any of its assets for the benefit of any of the Borrower and its Subsidiaries and each of the Borrower and its Subsidiaries will refrain from assuming or guaranteeing any of the liabilities or pledging any of its assets for the benefit of any JV Entity or holding out its credit as being available to satisfy the obligations of any JV Entity. 6.33.6 Each JV Entity will use its best efforts to refrain from using the stationery of any of the Borrower and its Subsidiaries but instead effecting all written communications in its own name and vice versa; provided that in the event either (x) a JV Entity, on the one hand, or (y) any of the Borrower or any Subsidiary of the Borrower, on the other hand, (each of (x) and (y), a "Group") conducts business on behalf of any member of the other Group, such agency relationships shall be fully disclosed to applicable third parties when acting in such capacity. 6.33.7 Each JV Entity will conduct all its business in its own name and use its best efforts to avoid the appearance that it is conducting business on behalf of any of the Borrower and its Subsidiaries and vice versa; provided that in the event either (x) a JV Entity, on the one hand, or (y) any of the Borrower or any Subsidiary of the Borrower, on the other hand, (each of (x) and (y), a "Group") conducts business on behalf of any member of the other Group, such agency relationship shall be fully disclosed to applicable third parties when acting in such capacity. SECTION 2. Consent. Subject to the satisfaction of the conditions precedent set forth in Section 2 of this Amendment No. 4, the Required Lenders hereby consent to the release by the Collateral Agent of the pledge, assignment and security interest in the Equity Interests of Blue Flint Ethanol, LLC granted by the Credit Parties under the terms of the Collateral Documents. SECTION 3. Conditions to Effectiveness. This Amendment No. 4 and the amendments and consent contained herein shall become effective as of the date hereof (the "Amendment No. 4 Effective Date") when each of the conditions set forth in this Section 3 to this Amendment No. 4 shall have been fulfilled to the satisfaction of the Administrative Agent. (i) Execution of Counterparts. The Administrative Agent shall have received counterparts of this Amendment No. 4, duly executed and delivered on behalf of each of the Borrower and the Required Lenders, or, as to any of the foregoing parties, advice reasonably satisfactory to the Administrative Agent that such party has executed a counterpart of this Amendment No. 4. (ii) Guarantor Consent. The Administrative Agent shall have received the Consent attached hereto duly executed by each of the Guarantors. (iii) Payment of Fees and Expenses. The Borrower shall have paid all reasonable expenses (including the reasonable fees and expenses of Shearman & Sterling LLP) incurred in connection with the preparation, negotiation and execution of this Amendment No. 4 and other matters relating to the Credit Agreement from and after the last invoice to the extent invoiced. (iv) No Default or Unmatured Default shall have occurred and be continuing, or would occur as a result of the transactions contemplated by this Amendment No. 4. SECTION 4. Confirmation of Representations and Warranties(i) . Each of the Credit Parties hereby represents and warrants, on and as of the date hereof, that (a) the representations and warranties contained in the Credit Agreement are correct and true in all material respects on and as of the date hereof, before and after giving effect to this Amendment No. 4, as though made on and as of the date hereof, other than any such representations or warranties that, by their terms, refer to a specific date and (b) no Default or Unmatured Default has occurred and is continuing, or would occur as a result of the transactions contemplated by this Amendment No. 4. SECTION 5. Reference to and Effect on the Loan Documents. (a) On and after the effectiveness of this Amendment No. 4, each reference in the Credit Agreement to "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other transaction documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified by this Amendment No. 4. (b) The Credit Agreement, the Pledge and Security Agreement, the Notes and each of the other Loan Documents, as specifically amended by this Amendment No. 4, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. Without limiting the generality of the foregoing, the Collateral Documents and all of the Collateral described therein do and shall continue to secure the payment of all Obligations of the Credit Parties under the Loan Documents, in each case as amended by this Amendment No. 4. (c) The execution, delivery and effectiveness of this Amendment No. 4 shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or any Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. SECTION 6. Execution in Counterparts. This Amendment No. 4 may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment No. 4 by facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment No. 4. SECTION 7. Governing Law. This Amendment No. 4 shall be governed by, and construed in accordance with, the laws of the State of New York, and shall be subject to the jurisdictional and service provisions of the Credit Agreement, as if this were a part of the Credit Agreement. SECTION 8. Entire Agreement; Modification. This Amendment No. 4 constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, there being no other agreements or understandings, oral, written or otherwise, respecting such subject matter, any such agreement or understanding being superseded hereby, shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and may not be amended, extended or otherwise modified, except in a writing executed in whole or in counterparts by each party hereto. [Signatures follow.] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. HEADWATERS INCORPORATED By /s/ Scott K. Sorensen ---------------------------------------- Title: CFO MORGAN STANLEY SENIOR FUNDING, INC., as Administrative Agent and as a Lender By /s/ Eugene F. Martin ---------------------------------------- Title: Vice President MORGAN STANLEY & CO. INCORPORATED, as Collateral Agent By /s/ Eugene F. Martin ---------------------------------------- Title: Managing Director JPMORGAN CHASE BANK, N.A., as a Lender By /s/ David F. Howard ---------------------------------------- Title: Vice President [and other lenders] CONSENT Dated as of October 26, 2005 Reference is made to the Credit Agreement referred to in the foregoing Amendment No. 4 (capitalized terms used herein and not defined being used herein as defined in the Credit Agreement). Each of the undersigned, in its capacity as a Guarantor under the Guaranty Agreement and as a Grantor under the Pledge and Security Agreement, hereby (i) consents to the execution, delivery and performance of Amendment No. 4 and agrees that each of the Guaranty Agreement and the Pledge and Security Agreement is, and shall continue to be, in full force and effect and is hereby in all respects ratified and confirmed on the Amendment No. 4 Effective Date, except that, on and after the Amendment No. 4 Effective Date, each reference to "the Credit Agreement", "thereunder", "thereof", "therein" or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended and otherwise modified by Amendment No. 4 and (ii) confirms that the Collateral Documents to which each of the undersigned is a party and all of the Collateral described therein do, and shall continue to, secure the payment of all of the Secured Obligations. ACM BLOCK & BRICK GENERAL, INC., ACM BLOCK & BRICK PARTNER, LLC, ACM BLOCK & BRICK, LLC, ACM BLOCK & BRICK, LP, ACM FLEXCRETE, LP, ACM GEORGIA, INC., AMERICAN CONSTRUCTION MATERIALS, INC., BEST MASONRY & TOOL SUPPLY, INC., CHIHUAHUA STONE LLC, COVOL ENGINEERED FUELS, LC, COVOL SERVICES CORPORATION, DON'S BUILDING SUPPLY, L.P., EAGLE STONE & BRICK LLC, ELDORADO ACQUISITION, LLC, ELDORADO G-ACQUISITION CO., ELDORADO SC-ACQUISITION CO., ELDORADO STONE ACQUISITION CO., LLC, ELDORADO STONE CORPORATION, ELDORADO STONE FUNDING CO., LLC, ELDORADO STONE LLC, ELDORADO STONE OPERATIONS LLC, GLOBAL CLIMATE RESERVE CORPORATION, each as a Guarantor By /s/ Harlan M. Hatfield Name: Harlan M. Hatfield Title: Vice President HEADWATERS CLEAN COAL CORP., HEADWATERS HEAVY OIL, INC., HEADWATERS NANOKINETIX, INC., HEADWATERS OLYSUB CORPORATION, HEADWATERS TECHNOLOGY INNOVATION GROUP, INC., HTI CHEMICAL SUBSIDIARY, INC. HYDROCARBON TECHNOLOGIES, INC., ISG MANUFACTURED PRODUCTS, INC., ISG PARTNER, INC., ISG RESOURCES, INC., ISG SERVICES CORPORATION, ISG SWIFT CRETE, INC., L&S STONE LLC, L-B STONE LLC, LEWIS W. OSBORNE, INC., MAGNA WALL, INC., NORTHWEST PROPERTIES LLC, NORTHWEST STONE & BRICK CO., INC., NORTHWEST STONE & BRICK LLC, PALESTINE CONCRETE TILE COMPANY, L.P., STONECRAFT INDUSTRIES LLC, TEMPE STONE LLC, UNITED TERRAZZO SUPPLY CO., INC., VFL TECHNOLOGY CORPORATION, each as a Guarantor By /s/ Harlan M. Hatfield Name: Harlan M. Hatfield Title: Vice President ELDORADO FUNDING CO., as a Guarantor By /s/ Harlan M. Hatfield Name: Harlan M. Hatfield Title: Vice President TAPCO HOLDINGS, INC., TAPCO INTERNATIONAL CORPORATION, VANTAGE BUILDING PRODUCTS CORPORATION, MTP, INC., ATLANTIC SHUTTER SYSTEMS, INC., METAMORA PRODUCTS CORPORATION, METAMORA PRODUCTS CORPORATION OF ELKLAND, WAMCO CORPORATION, BUILDERS EDGE, INC., COMACO, INC., each as a Guarantor By /s/ Harlan M. Hatfield Name: Harlan M. Hatfield Title: Vice President EX-99.1 3 ex991form8k110805.txt PRESS RELEASE DATED NOVEMBER 8, 2005 NEWS BULLETIN RE: Headwaters Incorporated FROM: 10653 South River Front Parkway, Suite 300 South Jordan, UT 84095 FINANCIAL (801) 984-9400 RELATIONS BOARD NYSE: HW - -------------------------------------------------------------------------------- FOR FURTHER INFORMATION AT THE COMPANY: AT FINANCIAL RELATIONS BOARD: Sharon Madden Tricia Ross Director of Investor Relations Analyst Contact (801) 984-9400 (617) 520-7064 FOR IMMEDIATE RELEASE: November 8, 2005 HEADWATERS INCORPORATED ANNOUNCES RECORD RESULTS FOR FISCAL 2005 o 92% Increase in Revenue to $1.065 Billion o Net Income of $121.3 Million and Diluted EPS of $2.79 (including $0.39 of non-recurring EPS in the June quarter) o Debt Reduced by $318 Million During the Year to $654 Million o Fiscal 2006 Diluted EPS Guidance of $2.60 to $2.75 SOUTH JORDAN, UTAH, November 8, 2005 (NYSE: HW) - HEADWATERS INCORPORATED today announced results for its fourth quarter and fiscal year ended September 30, 2005. Highlights for the quarter include: o Repayment of $50 million of higher interest rate second lien debt o Executed (HC)3TM license for Canadian tar sands upgrader o Announced intention to build H2O2 demonstration plant Highlights for Fiscal 2005 include: o Generated fully diluted earnings per share growth in excess of 48% o Improved pro forma debt-to-EBITDA ratio from 4.16 to 2.36 o Generated $151 million of positive cash flow from operations o Reduced Section 29 continuing revenue to less than 28% of total revenue o Reached $120 million settlement, plus ongoing revenue from positive resolution of AJG litigation Total revenue for the quarter ended September 2005 was $315.1 million, up 59% from $198.6 million reported for the September 2004 quarter. Operating income increased 76%, to $70.2 million in the September 2005 quarter compared to $39.9 million in the prior year quarter. Net income for the September 2005 quarter was $44.9 million or $0.95 of earnings per diluted share, using 48.7 million weighted-average shares outstanding. Net income for the September 2004 quarter was $19.5 million or $0.51 of earnings per diluted share, using 40.3 million weighted-average shares outstanding. Total revenue for the year ended September 30, 2005 was $1.065 billion, up 92% from $554 million reported for the year ended September 30, 2004. Operating income increased 85%, to $236.9 million for the year ended September 30, 2005 (including $26.9 million of non-recurring operating income, as described in our third quarter 2005 earnings release), versus $127.8 million for the year ended September 30, 2004 (including $20.1 million in non-recurring operating income). Net income for the year ended September 30, 2005 was $121.3 million or $2.79 of earnings per diluted share (including $0.39 of non-recurring earnings per share), compared to $64.3 million or $1.88 of earnings per diluted share for the year ended September 30, 2004 (including $0.25 of non-recurring earnings per share). Headwaters Construction Materials Performance Revenues from the Construction Materials segment during the quarter ended September 2005, increased $65.4 million or 78%, to $149.5 million versus $84.1 million for the prior fiscal quarter. Gross margin percentage increased from 33.8% for the September 2004 quarter to 34.2% for the 2005 quarter. The September 2005 quarter includes the operations of all of the entities acquired in 2004. In comparison, the September 2004 quarter includes less than one month's revenues from Tapco (the acquisition of Tapco occurred on September 8, 2004). For fiscal 2005, revenues increased $385.9 million, or 288%, from $134.0 million in fiscal 2004 to $519.9 million in fiscal 2005. On a pro forma basis, for the fiscal year comparison, revenues increased $62.5 million, or 13.7% from $457.4 million in fiscal 2004 on a pro forma basis to $519.9 million in fiscal 2005 on an actual basis. The Construction Materials segment has a pronounced seasonality associated with its business cycle and the acquisitions of Tapco and Eldorado have accentuated this seasonality. This seasonality has a more significant impact on operating income than on revenue due to the relationship between fixed and variable costs. Headwaters Resources Performance Revenues from Headwaters Resources or the coal combustion products ("CCPs") segment during the quarter ended September 2005 increased $9.0 million or 13%, from $66.8 million to $75.8 million versus the comparable 2004 quarter. Gross margin percentage increased from 27% to 28% versus the comparable 2004 quarter. For fiscal 2005, revenues increased $36.6 million or 17%, from $210.2 million in fiscal 2004 to $246.8 million in fiscal 2005. Sales of high-value coal combustion products for the September 2005 quarter totaled approximately 2.20 million tons, compared to approximately 2.08 million tons in the September 2004 quarter, resulting in a 6% increase in tons of high-value coal combustion products sold. Headwaters Energy Services Performance Chemical reagent sales increased $14.4 million, or 42%, in the September 2005 quarter to $48.6 million, compared to $34.2 million in the September 2004 quarter. Headwaters Energy Services' recurring license fees for the September 2005 quarter increased $15.0 million or 112%, from $13.4 million in fiscal 2004 to $28.4 million in fiscal 2005. The increase in license fee revenue in the September 2005 quarter resulted primarily from the settlement of the AJG litigation earlier in the year. Due to high oil costs, gross margins on chemical reagent sales in the September 2005 quarter were 27% compared to 33% in the September 2004 quarter. Headwaters expects continued pressure on reagent margins during the next fiscal year. In December 2004, Headwaters increased its minority interest in a Section 29 facility in West Virginia from approximately 9% to 19%. Energy Services now provides reagent to this facility and is currently recognizing its portion of the facility's operating expenses, included in "Other Income (Expense)," and the tax credits generated by the facility, included in "Income Tax Provision." In addition, in April 2005, Headwaters began operating two small alternative fuel facilities that are wholly owned. The tax credits from all of these facilities are the primary reason for the reduction in Headwaters' effective tax rate for fiscal 2005 to approximately 26%. In 2005, Headwaters does not believe that there will be any phase out of Section 29 based on high oil prices. It is too early to estimate the impact, if any, on Headwaters of a possible 2006 phase out of Section 29. Headwaters believes that if 2006 average oil prices are consistent with today's oil prices (November 7th light sweet crude for December delivery settled at $59.47 per barrel), there will be little or no phase out of Section 29. Nevertheless, the retroactive application of the Section 29 phase out provisions creates an environment of uncertainty and 2006 operational decisions will be made by facility owners later this year based on available information. If today's oil prices do not increase significantly in 2006, Headwaters believes that many facilities will continue to operate. At today's oil prices, Headwaters intends to operate its two small alternative fuel facilities. Headwaters Technology Innovation Group and New Product Development During the year, HTIG completed a number of major milestones in the commercialization process of its technologies. Most importantly, multiple pilot plant (HC3) tests were completed, providing the data necessary to move forward with the commercial scale test announced this week. Headwaters believes (HC)3 could ultimately result in increased production of approximately 350,000 to 600,000 barrels per day of light distillates from heavy oil feedstock material. Agreements for coal to liquid project analysis were signed in India, the Philippines, and China. Further, non-binding memorandums of understanding for development of coal-to-liquid projects were signed for two projects in the United States. Headwaters and its hydrogen peroxide development partner concluded that the pilot plant tests conducted during 2005 were successful and arranged for the construction of a demonstration facility. The operation of the demonstration facility will provide the engineering data necessary to use the technology in commercial scale plants. Headwaters anticipates multiple opportunities for the implementation of its technology. During the year, Headwaters successfully tested its reforming catalyst and demonstrated that it produced results significantly superior to existing reforming products. Use of Headwaters' reforming catalyst could not only produce high grade gasoline more efficiently, but also create up to 20% more hydrogen than is normally produced as a byproduct during the reforming reaction. Growth Profile The following table shows the actual and pro forma percentage growth in revenue, operating income, net income, and fully diluted EPS for the fiscal year 2005. The pro forma information assumes all of the acquisitions occurred on October 1, 2003. Actual Pro forma - ----------------------------- ---------------------- --------------------- Revenue 92% 19% Operating Income 85% 27% Net Income 89% 66% Diluted EPS 48% 26% - ----------------------------- ---------------------- --------------------- Seasonality Since 2002, Headwaters' business has reflected increased seasonality factors associated with its Construction Materials and CCP business segments. The acquisitions completed during fiscal 2004 added to the seasonality of the business. It has not been Headwaters' practice to provide quarterly estimates and the Company does not intend to provide quarterly estimates going forward. However, management believes it is important to provide some initial quarterly guidance for fiscal 2006 to clarify the seasonality of Headwaters' business. Accordingly, Headwaters' estimated quarterly revenue and earnings per share for fiscal 2006, as a percent of the respective estimated totals for the fiscal 2006 year, are as follows: Revenue Earnings Per Share - --------------------------------- --------------------- ------------------------ December 31, 2005 quarter 22% - 24% 20% - 22% March 31, 2006 quarter 21% - 23% 18% - 20% June 30, 2006 quarter 26% - 28% 28% - 30% September 30, 2006 quarter 27% - 29% 30% - 32% - --------------------------------- --------------------- ------------------------ Capital Structure / Indebtedness In addition to the early repayment of $197 million of its senior debt in March 2005 and $50 million of its second lien senior debt in May 2005, Headwaters repaid the remaining $50 million of its second lien debt in September 2005. In connection with this early payment, Headwaters recognized additional interest expense totaling approximately $2.2 million, representing acceleration of amortization of debt issuance costs and an early payment premium. The components of Headwaters' debt structure as of September 30, 2005 are as follows:
Amount (in millions) Outstanding Interest Rate Maturity - ------------------------------------------------ ----------------- ------------------------ ----------------- Senior secured first lien term loan $442.7 LIBOR + 2.25% April 2011 - ------------------------------------------------ ----------------- ------------------------ ----------------- Industrial Revenue Bond and other $8.8 4.5% to 6.25% Currently Callable - ------------------------------------------------ ----------------- ------------------------ ----------------- Senior revolving credit facility ($60.0 million available less out- $30.0 Prime + 0.75% September 2009 standing letters of credit of approximately $8.0) - ------------------------------------------------ ----------------- ------------------------ ----------------- Senior subordinated convertible debt $172.5 2.875% June 2011 - ------------------------------------------------ ----------------- ------------------------ ----------------- Total $654.0 - ------------------------------------------------ ----------------- ------------------------ -----------------
In October 2005 Headwaters and its senior secured lenders amended the credit agreement for Headwaters' senior first lien term loan. The amendment permits Headwaters to participate in joint venture investments, subject to certain conditions, and increases the amount of capital expenditures Headwaters may make each year for the remaining term of the loan. To supplement our condensed consolidated financial statements presented in accordance with generally accepted accounting principles ("GAAP"), we use a non-GAAP measure called EBITDA. EBITDA is net income adjusted by adding net interest expense, income taxes, depreciation and amortization ("EBITDA"). Management uses EBITDA internally to measure the amount of cash generated by Headwaters and to make decisions about the amount of capital expenditures Headwaters will make and where to allocate capital. EBITDA is also provided to enhance the user's overall understanding of our current financial performance, our ability to service our debt, our compliance with current debt covenants and our ability to fund future growth. Therefore, we believe that EBITDA provides useful information to our investors regarding our performance and overall results of operations. Our EBITDA measure presented here may not be comparable to similarly titled measures presented by other companies. The following related EBITDA table, highlights certain debt coverage and balance sheet ratios using period end balances and the trailing twelve months ("TTM") EBITDA:
(DOLLARS IN MILLIONS) - -------------------------------------------------- -------------- ---------------- ----------------- Actual Pro forma Actual 9/30/03 9/30/04 9/30/05 - -------------------------------------------------- -------------- ---------------- ----------------- EBITDA(a) $88.3 $233.8 $277.6 - -------------------------------------------------- -------------- ---------------- ----------------- Total Indebtedness to EBITDA(a) 1.49 4.16 2.36 - -------------------------------------------------- -------------- ---------------- ----------------- Current Ratio(a) 1.19 1.24 1.49 - -------------------------------------------------- -------------- ---------------- ----------------- Total Debt to Equity 0.94 3.16 0.95 - -------------------------------------------------- -------------- ---------------- -----------------
(a) See "Current Ratio" calculations in financial tables that follow. Actual EBITDA for 2003 of $88.3 million is derived as follows (in millions of dollars): Net income of $36.6 plus net interest expense of $15.4, income taxes of $23.4, and depreciation and amortization of $12.9. Actual EBITDA for 2005 of $277.6 million is derived as follows (in millions of dollars): Net income of $121.3 plus net interest expense of $57.4, income taxes of $42.5, and depreciation and amortization of $56.4. The September 30, 2004 pro forma calculation of Total Indebtedness to EBITDA assumes all of the 2004 acquisitions occurred on October 1, 2003. Pro forma EBITDA for the trailing twelve months ended September 30, 2004 of $233.8 million is derived as follows (in millions): Net income of $72.9 plus net interest expense of $63.1, income taxes of $45.6, and depreciation and amortization of $52.2. Commentary and Outlook Scott K. Sorensen, Headwaters' Chief Financial Officer, stated, "First off, I am delighted to have assumed the role of Chief Financial Officer at Headwaters on October 1st and see a very bright future for the Company. We are pleased to have completed a very strong year in 2005. Due to the continued operational strength we are experiencing, we are providing guidance for Fiscal 2006 in the range of $2.60 to $2.75. This guidance assumes no phase out of Section 29 during 2006." "We are very excited about the future at Headwaters," said Kirk A. Benson, Chairman and Chief Executive Officer. "Our plans to replace Section 29 revenue are well underway. Specifically, we have made progress in many of our pre-combustion activities, including coal cleaning and coal treatment. The early results of the (HC3) tests are positive and we have continuing strength in our building products segment." Management will host a conference call with a simultaneous web cast 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.headwaters.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.headwaters.com, or a phone replay will be available through November 15, 2005, by dialing 800-642-1687 or 706-645-9291 and entering the passcode 1926204. About Headwaters Incorporated Headwaters Incorporated is a world leader in creating value through innovative advancements in the utilization of natural resources. Headwaters is a diversified growth company providing products, technologies and services to the energy, construction and home improvement industries. Through its alternative energy, coal combustion products, and building materials businesses, the Company earns a growing revenue stream that provides the capital needed to expand and acquire synergistic new business opportunities. * The (HC)3 technology and trademarks are owned by Alberta Science and Research Authority and used through a license. Forward Looking Statements Certain statements contained in this report are forward-looking statements within the meaning of federal securities laws and Headwaters intends that such forward-looking statements be subject to the safe-harbor created thereby. Forward-looking statements include Headwaters' expectations as to the managing and marketing of coal combustion products, the production and marketing of building materials and products, the licensing of technology and chemical sales to alternative fuel facilities, the receipt of product sales, license fees and royalty revenues, the development, commercialization, and financing of new technologies and other strategic business opportunities and acquisitions, and other information about Headwaters. Such statements that are not purely historical by nature, including those statements regarding Headwaters' future business plans, the operation of facilities, the availability of tax credits, the availability of feedstocks, and the marketability of the coal combustion products, building products, and synthetic fuel, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and our future results that are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Actual results may vary materially from such expectations. Words such as "expects," "anticipates," "targets," "goals," "projects," "believes," "seeks," "estimates," variations of such words, and similar expressions are intended to identify such forward-looking statements. Any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances, are forward-looking. In addition to matters affecting the coal combustion product, alternative fuel, and building products industries or the economy generally, factors which could cause actual results to differ from expectations stated in forward-looking statements include, among others, the factors described in the captions entitled "Forward-looking Statements" and "Risk Factors" in Item 7 in Headwaters' Annual Report on Form 10-K for the fiscal year ended September 30, 2004, Quarterly Reports on Form 10-Q, and other periodic filings and prospectuses. Although Headwaters believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that our results of operations will not be adversely affected by such factors. Unless legally required, we undertake no obligation to revise or update any forward-looking statements for any reason. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Our internet address is www.headwaters.com. There we make available, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our reports can be accessed through the investor relations section of our web site.
HEADWATERS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands, except per-share amounts) Quarter Ended September 30, Year Ended September 30, 2004 2005 2004 2005 ---------------------------- ---------------------------- Revenue: Construction materials $ 84,066 $ 149,459 $ 134,027 $ 519,926 Coal combustion products 66,792 75,847 210,155 246,819 Alternative energy 47,789 89,796 209,773 297,894 ---------------------------- ---------------------------- Total revenue 198,647 315,102 553,955 1,064,639 Operating costs and expenses: Construction materials 55,838 98,382 95,263 346,521 Coal combustion products 48,873 54,983 155,777 186,133 Alternative energy 23,059 49,853 90,225 140,973 Amortization 3,628 5,843 9,107 24,465 Research and development 2,274 2,512 7,605 12,621 Contract litigation settlement -- -- -- (38,252) Selling, general and administrative 25,074 33,288 68,221 155,305 ---------------------------- ---------------------------- Total operating costs and expenses 158,746 244,861 426,198 827,766 ---------------------------- ---------------------------- Operating income 39,901 70,241 127,757 236,873 Net interest expense (6,256) (11,465) (18,509) (57,433) Other income (expense), net (2,022) (4,119) (4,141) (15,632) ---------------------------- ---------------------------- Income before income taxes 31,623 54,657 105,107 163,808 Income tax provision (12,085) (9,780) (40,790) (42,530) ---------------------------- ---------------------------- Net income $ 19,538 $ 44,877 $ 64,317 $ 121,278 ============================ ============================ Basic earnings per share $ 0.59 $ 1.09 $ 2.02 $ 3.19 ============================ ============================ Diluted earnings per share $ 0.51 $ 0.95 $ 1.88 $ 2.79 ============================ ============================ Weighted average shares outstanding -- basic 33,237 41,340 31,774 37,993 ============================ ============================ Weighted average shares outstanding -- diluted 40,322 48,717 34,936 45,083 ============================ ============================ Note: Total depreciation and amortization was $8,814 and $15,113 for the quarters ended September 30, 2004 and 2005, respectively, and $20,189 and $56,376 for the years ended September 30, 2004 and 2005, respectively.
HEADWATERS INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands) September 30, Assets: 2004 2005 ---------------------------- Current assets: Cash and cash equivalents $ 20,851 $ 13,666 Trade receivables, net 129,899 174,127 Other receivable -- 70,000 Inventories 43,812 60,519 Other 36,001 36,762 ---------------------------- Total current assets 230,563 355,074 Property, plant and equipment, net 157,611 190,450 Intangible assets, net 297,818 276,248 Goodwill 815,396 811,545 Other assets 39,391 38,339 ---------------------------- Total assets $1,540,779 $1,671,656 ============================ Liabilities and Stockholders' Equity: Current liabilities: Accounts payable $ 29,238 $ 43,957 Accrued liabilities 99,065 141,574 Current portion of long-term debt 57,873 52,207 ---------------------------- Total current liabilities 186,176 237,738 Long-term debt 914,641 601,811 Deferred income taxes 121,469 108,449 Other long-term liabilities 10,338 37,345 ---------------------------- Total liabilities 1,232,624 985,343 ---------------------------- Stockholders' equity: Common stock - par value 34 42 Capital in excess of par value 235,581 489,602 Retained earnings 76,530 197,808 Other (3,990) (1,139) ---------------------------- Total stockholders' equity 308,155 686,313 ---------------------------- Total liabilities and stockholders' equity $1,540,779 $1,671,656 ============================ The current ratio as of September 30, 2004 of 1.24 is derived by dividing total current assets of $230,563 by total current liabilities of $186,176. The current ratio as of September 30, 2005 of 1.49 is derived by dividing total current assets of $355,074 by total current liabilities of $237,738.
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