Exhibit 99.1
NEWS BULLETIN
RE: Headwaters Incorporated
FROM: 10653 South Riverfront Parkway, Suite 300
South Jordan, UT 84095
FINANCIAL (801) 984-9400
RELATIONS BOARD NASDAQ: HDWR
- --------------------------------------------------------------------------------
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 10, 2004
HEADWATERS INCORPORATED ANNOUNCES
RECORD RESULTS FOR FISCAL 2004
o 43% Increase in Revenues to $554 Million
o 76% Increase in Net Income to $64 Million
o Fiscal Year 2004 Diluted Earnings per Share of $1.95
o Record Quarterly Revenues and Net Income
SOUTH JORDAN, UTAH, November 10, 2004 - HEADWATERS INCORPORATED (NASDAQ: HDWR),
today announced results for its fourth quarter and fiscal year ended September
30, 2004. Highlights for the fourth quarter of fiscal 2004 included:
o Acquisition of Tapco improves Headwaters' construction
materials infrastructure, distribution network, and margins.
o Acquisition of Southwest Concrete Products strengthens
Headwaters' presence in the Texas institutional / commercial
construction block market.
o Joint venture with Degussa marks a milestone in the
development of Headwaters' nanocatalyst technologies.
Highlights for Fiscal 2004 included:
o Organic earnings per share growth for the year (excluding the
effect of Fiscal 2004 acquisitions) exceeded 34%.
o Revenues, earnings and cash flow further diversified through
strategic acquisitions of industry leading, high margin
businesses.
o Significantly enhanced platform for continued growth in 2005.
o Generated $95 million of cash flow from operations.
- more -
Headwaters Incorporated
Page 2 of 7
Total revenue for the fourth quarter ended September 2004, which included the
effect of acquisitions, was $198.6 million, up 86% from $106.5 million reported
in the September 2003 quarter. Operating income increased 94% to $39.9 million
from $20.6 million for the September 2003 quarter. Net income increased to $19.5
million or $0.57 per diluted share, compared with $11.2 million or $0.40 per
diluted share in the prior year's fourth quarter.
Total revenue for the year ended September 30, 2004 was $554.0 million, up 43%
from $387.6 million reported for the year ended September 30, 2003. Operating
income for the year ended September 30, 2004 increased 66% to $127.8 million
from $77.1 million for the year ended September 30, 2003. Net income for the
year ended September 30, 2004 increased to $64.3 million or $1.95 per diluted
share, compared with $36.6 million or $1.30 per diluted share for the year ended
September 30, 2003. The earnings per share increase includes one-time license
fee revenue recognized in the March quarter from funds held in an escrow
account, resulting in an increase of approximately $0.25 of diluted earnings per
share.
Construction Materials Performance
Revenues from the construction materials segment were $84.1 million during the
September 2004 quarter, with a gross margin (gross margin percentage is
calculated as follows: subtract cost of revenues from revenues, and divide the
number so derived by revenues) of 34%, compared to revenue of $13.3 million and
a gross margin of 24% for the September 2003 quarter. The 2004 fourth quarter
revenues included three months of operations from Eldorado Stone and Southwest
Concrete Products ("SCP") acquired in June and early July 2004, respectively,
but only 23 days of Tapco's revenues (acquisition date of September 8, 2004).
Tapco will have a greater effect on this segment's operations in future
quarters, when its results will be included for the entire period. All of the
acquired companies have a pronounced seasonal impact on Headwaters' revenue and
net income. The seasonality has a more significant impact on net income than on
revenues because of the relationship between fixed and variable costs.
CCP Performance
During the September 2004 quarter, revenues from Headwaters' coal combustion
products ("CCPs") segment were $66.8 million with a gross margin of 29% compared
to revenue of $54.5 million with a gross margin of 29% for the September 2003
quarter. Sales of high value coal combustion products for the September 2004
quarter totaled approximately 2.1 million tons, compared to approximately 1.9
million tons in the September 2003 quarter, resulting in an 11% increase in tons
of high value coal combustion products sold. The U.S. market for CCPs continues
to demonstrate increasing awareness of the environmental and economic benefits
of high value fly ash.
Headwaters Energy Services Performance
Chemical reagent sales increased 13% in the September 2004 quarter to $34.2
million, compared to $30.3 million in the September 2003 quarter. Energy
Services' license fees for the September 2004 quarter increased 70% to $13.4
million from $7.9 million in 2003.
During the September 2004 quarter, Energy Services' licensees sold 10.3 million
tons of solid alternative fuel. This compares to 9.4 million tons sold in the
-more-
Headwaters Incorporated
Page 3 of 7
September 2003 quarter and 10.4 million tons sold in the June 2004 quarter.
Energy Services sold 25.2 million pounds of chemical reagent in the September
2004 quarter, compared to 22.5 million pounds in the September 2003 quarter and
26.0 million pounds in the June 2004 quarter. The 10.3 million tons of fuel sold
was produced at 23 of the 28 licensed facilities, resulting in average quarterly
production of 468,000 tons per facility. The highest number of tons produced
from any one facility in the quarter was 857,000, and the lowest was 23,000.
Energy Services sold chemical reagent to a total of 31 facilities. Of the 31
facilities, 18 were licensee facilities and 13 were solely chemical reagent sale
facilities.
In addition, Headwaters purchased a minority interest in a Section 29 facility
currently operating in West Virginia. Energy Services will provide reagent to
the facility. Headwaters will begin to recognize its portion of the operating
expenses and the tax credits generated by the facility in the December 2004
quarter. The net effect of the annual operating expenses and the tax credits is
expected to be a positive contribution of $0.08 - $0.09 diluted earnings per
share, based upon current operating levels at the facility and projections
prepared from this information.
Growth Profile
Headwaters acquired VFL Technologies on April 9, 2004, Eldorado Stone on June 2,
2004, SCP on July 2, 2004, and Tapco Holdings on September 8, 2004. These
acquisitions significantly broaden the scope of products and services Headwaters
offers, particularly in the construction materials segment. Consistent with
Headwaters' diversification strategy, revenue from the Section 29 business of
Energy Services has declined as a percentage of total revenue. On a pro forma
basis, including all of the fiscal 2004 acquisitions as if they had occurred on
October 1, 2003, Headwaters' revenue that is dependent on Section 29 has
declined from over 90% in 2002 to approximately 23% for the year ended September
30, 2004.
The following table shows the actual, organic, and pro forma percentage growth
in net income during the quarter and fiscal year over the same period in Fiscal
2003. The organic information assumes none of the acquisitions occurred in
Fiscal 2004 and the pro forma information assumes all of the acquisitions
occurred on October 1, 2003.
Actual Organic Pro forma
- -------------------------------------- ------------ ------------ -------------
Quarter ended September 30, 2004 74% 25% 105%
- -------------------------------------- ------------ ------------ -------------
Year ended September 30, 2004 76% 58% 99%
- -------------------------------------- ------------ ------------ -------------
Technology Innovation Group and New Product Development
Highlights of Headwaters technology development during fiscal 2004 include the
following:
o Successful completion of pilot plant testing on HC3
nanocatalyst heavy oil upgrading technology.
o Joint venture with Degussa for pilot plant testing of
Headwaters hydrogen peroxide nanocatalyst.
o Construction of Flexcrete manufacturing facility - currently
on track for completion by January.
-more-
Headwaters Incorporated
Page 4 of 7
o Installation of ammonia slip mitigation technology on a
commercial scale.
o Direct coal liquefaction payment received from Shenhua and
continuation of construction of the first commercial facility
using Headwaters' technology.
o Successful completion of pilot plant tests for use of
nanocatalysts to reduce NOX.
o Joint venture with Rentech resulting in state-of-the-art gas
to liquids technology.
Indebtedness
In connection with the Tapco acquisition in September 2004, Headwaters
restructured its senior debt by repaying its then-existing senior debt and
entering into a new senior secured credit facility, the details of which were
finalized in October 2004. The major components of Headwaters' long term debt
structure are as follows:
(in millions) Amount Interest Rate Maturity
- ------------------------------------------------- ------------------- --------------------- -----------------------
Senior secured first lien term loan $640.0 LIBOR + 3.25% April 2011
Second lien term loan $150.0 LIBOR + 5.5% September 2012
Senior subordinated convertible debt $172.5 2.875% June 2011
Senior revolving credit facility (none of which
is outstanding) $60.0 LIBOR + 2.5% September 2009
- ------------------------------------------------- ------------------- --------------------- -----------------------
The following table highlights certain debt coverage and balance sheet ratios
using period end balances and the trailing twelve months ("TTM") earnings before
net interest expense, taxes, depreciation and amortization ("EBITDA"):
Pro forma
9/30/03 6/30/04 9/30/04
- ---------------------------------------- ------------- ----------- -------------
Total Indebtedness to EBITDA(a) 1.53 1.88 4.16
EBITDA to Required Interest Payments(a) 7.73 15.79 4.60
Current Ratio(a) 1.19 1.58 1.30
Total Debt to Equity(a) 0.96 0.80 3.16
- ---------------------------------------- ------------- ----------- -------------
(a) See "Total long-term debt, before amortized debt discount," and
"Current Ratio" calculations in financial tables that follow. The pro forma
September 2004 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 is derived as follows (in
millions of dollars): 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
When Headwaters provided its fiscal 2005 earnings forecast on September 8, 2004,
it indicated that the "forecast could be adjusted based upon the results of
FASB's Emerging Issues Task Force's ("EITF") review of contingent convertible
debt instruments." In October 2004, the EITF issued its final determination that
the shares represented by contingently convertible securities must be included
in fully diluted earnings per share calculations for periods ending after
-more-
Headwaters Incorporated
Page 5 of 7
December 15, 2004. Accordingly, Headwaters will include 5.75 million additional
shares in its EPS calculation, on an if-converted basis, commencing with the
December 31, 2004 quarter and will retroactively restate earnings for its June
30, 2004 and September 30, 2004 quarters. The following table illustrates the
impact of the EITF ruling and also presents Headwaters' revised forecast for
earnings for 2005. Headwaters' original guidance of $2.20 to $2.30 was revised
upwards by $0.08 - $0.09 to account for the acquisition of a partial interest in
a synthetic fuel facility and upwards by approximately $0.03 to reflect
continued strong performance of its business units.
Expected amounts without EITF Retroactive adoption to
accounting change June 2004 of EITF Ruling
- ------------------------------------------------------ --------------------------------- -----------------------------
Net Income for Fiscal 2004 $64.3 million $64.3 million
Fiscal 2004 Diluted Earnings Per Share $1.95 $1.88
Less: One-time earnings events in the
March 31, 2004 quarter ($0.25) ($0.25)
EPS without one-time earnings events $1.70 $1.63
Revised Earnings Per Share Forecast $2.28 to $2.39 $2.00 to $2.10
- ------------------------------------------------------ --------------------------------- -----------------------------
The EITF ruling has no substantive effect on Headwaters' business operations,
operating income, net income, or cash flow. If the EITF Ruling were adopted
retroactive to October 1, 2003 as if the convertible notes were issued then, the
"without one-time earnings events" earnings per share would be approximately
$1.44 and would result in a growth rate of 39% to 46% when compared to the
Fiscal 2005 diluted earnings per share guidance of $2.00 to $2.10, respectively.
Since 2002, Headwaters' business has reflected seasonality factors associated
with its construction materials and CCP segments. The acquisitions completed
during Fiscal 2004 added to the seasonality of Headwaters' business. Although it
has not been Headwaters' practice to provide quarterly estimates and the Company
does not intend to provide quarterly estimates going forward, management
believes it is important to provide some initial quarterly guidance for Fiscal
2005 to clarify the seasonality of Headwaters' business. Accordingly,
Headwaters' estimated quarterly revenue and earnings per share for Fiscal 2005,
as a percent of the respective estimated totals for the fiscal 2005 year, are as
follows:
Revenue Earnings Per Share
- ------------------------------------- ------------------- ----------------------
December 31, 2004 quarter 20% - 22% 13% - 15%
March 31, 2005 quarter 21% - 23% 16% - 18%
June 30, 2005 quarter 27% - 29% 31% - 33%
September 30, 2005 quarter 28% - 30% 36% - 38%
- ------------------------------------- ------------------- ----------------------
Steven G. Stewart, Headwaters' Chief Financial Officer, stated, "We have just
completed the best financial quarter and fiscal year in the history of
Headwaters. Our goal of diversifying the Company is clearly on track, having
reduced dependence on Section 29 to approximately 23% of pro forma revenue for
the year ended September 30, 2004, assuming all of the Fiscal 2004 acquisitions
had occurred on October 1, 2003. We utilized debt to further diversify our
dependency on Section 29 while increasing returns to our equity holders. We feel
-more-
Headwaters Incorporated
Page 6 of 7
confident in the strength and stability of our cash flows and our ability to
service our new debt levels."
"Through execution of our acquisition strategy and solid organic growth, our
operations and revenue have greatly expanded over the last year," said Kirk A.
Benson, Chairman and Chief Executive Officer. "We are finding additional
synergies as we proceed with the integration of the companies that are new to
Headwaters, and new product development from our Technology Innovation Group is
contributing to further revenue and earnings diversification. Our strong growth
outlook for Fiscal 2005 reflects both our strategic market positioning and
leadership in each of our business segments as well as the value of our business
model."
Management will host a conference call with a simultaneous web cast tomorrow 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 November 18, 2004 by dialing 800-642-1687 or 706-645-9291
and entering the pass code 2019680.
About Headwaters Incorporated
Headwaters Incorporated is a world leader in creating value through innovative
advancements in the utilization of natural resources. 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.
Pro Forma Information
The pro forma financial information is presented for illustrative purposes only
and does not purport to be indicative of the results of operations and which
actually would have resulted had the acquisitions occurred on October 1, 2003,
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 as of
the date hereof.
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, building products, operation of
facilities utilizing alternative fuel technologies, the marketing of synthetic
fuels, the receipt of licensing fees, royalties, and product sales 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
-more-
Headwaters Incorporated
Page 7 of 7
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, synthetic 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, 2003, 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.hdwtrs.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.
-Financial Tables to Follow-
-more-
HEADWATERS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except per-share amounts)
Quarter Ended September 30,
2003 2004 2004 2004
-----------------------------------------------------------
(ACTUAL) (PRO FORMA) (ACTUAL) (PRO FORMA)
(organic, (all acquisitions
excluding effect of for entire quarter)
2004 acquisitions)
Revenue:
Sales of chemical reagents $ 30,276 $ 34,210 $ 34,210 $ 34,210
License fees 7,880 13,445 13,445 13,445
Coal combustion products revenues 54,478 57,568 66,792 66,792
Sales of construction materials 13,308 13,536 84,066 135,172
Other revenues 529 134 134 134
-----------------------------------------------------------
Total revenue 106,471 118,893 198,647 249,753
-----------------------------------------------------------
Operating costs and expenses:
Cost of chemical reagents sold 21,321 22,985 22,985 22,985
Cost of coal combustion products revenues 38,511 39,676 47,246 47,246
Cost of construction materials sold (a) 10,154 11,890 55,645 (a) 84,702 (a)
Cost of other revenues 600 74 74 74
Depreciation and amortization 3,323 3,580 5,996 8,698
Research and development 1,503 2,205 2,205 2,205
Selling, general and administrative 10,455 14,139 24,595 30,655
-----------------------------------------------------------
Total operating costs and expenses 85,867 94,549 158,746 196,565
-----------------------------------------------------------
Operating income 20,604 24,344 39,901 53,188
Interest income (expense), net (3,465) 538 (6,256) (13,714)
Other income (expense), net 606 (2,041) (2,022) (2,218)
-----------------------------------------------------------
Income before income taxes 17,745 22,841 31,623 37,256
Income tax provision (6,500) (8,730) (12,085) (14,160)
-----------------------------------------------------------
Net income $ 11,245 $ 14,111 $ 19,538 $ 23,096
===========================================================
Basic earnings per share $ 0.41 $ 0.42 $ 0.59 $ 0.69
===========================================================
Diluted earnings per share $ 0.40 $ 0.41 $ 0.57 $ 0.67
===========================================================
Weighted average shares outstanding -- basic 27,321 33,237 33,237 33,237
===========================================================
Weighted average shares outstanding -- diluted 28,214 34,572 34,572 34,572
===========================================================
Note regarding pro forma information: The pro forma financial information is
presented for illustrative purposes only and does not purport to be indicative
of the results of operations which actually would have resulted had the
acquisitions not occurred, or occurred on October 1, 2003, 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 as of
the date hereof.
(a) Cost of construction materials sold includes $3,170 and $4,773 of
depreciation expense for the 2004 actual and 2004 pro forma periods,
respectively.
Reconciliation of actual results to pro forma results for the quarter ended
September 30, 2004:
Headwaters' actual historical net income $ 19,538 $ 19,538
Net income of subsidiaries acquired in 2004 included in Headwaters'
2004 actual results, net of interest expense on new debt issued
to pay for acquisitions (5,427) n/a
Actual historical net income of subsidiaries acquired in 2004, for
the period from July 1, 2004 to acquisition date 6,463 A
Additional amortization expense for acquired intangible assets (2,285)B
Elimination of acquired subsidiaries' originally reported interest expense 5,035 C
Interest expense on new debt incurred by Headwaters to acquire subsidiaries (7,457)D
Income tax effect of above pro forma adjustments 1,802 E
---------- ------------
Pro forma net income shown above $ 14,111 $ 23,096
========== ============
A Tapco only, for the period from July 1, 2004 through September 7, 2004.
B Net increase in amortization expense for intangible assets acquired in Tapco
acquisition.
C Elimination of Tapco's interest on pre-acquisition debt retired by Headwaters
at closing.
D Adjustment to record interest on new long-term debt issued by Headwaters to
acquire Tapco.
E Income tax effect, calculated using a combined effective federal and state
income tax rate of approximately 38%.
HEADWATERS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except per-share amounts)
Year Ended September 30,
2003 2004 2004 2004
--------------------------------------------------------------
(ACTUAL) (PRO FORMA) (ACTUAL) (PRO FORMA)
(organic, (all acquisitions
excluding effect of for entire year)
2004 acquisitions)
Revenue:
Sales of chemical reagents $128,375 $132,603 $132,603 $132,603
License fees 35,726 72,721 72,721 72,721
Coal combustion products revenues 169,938 193,232 210,155 224,980
Sales of construction materials 49,350 49,941 134,027 457,387
Other revenues 4,241 4,449 4,449 4,449
-----------------------------------------------------------
Total revenue 387,630 452,946 553,955 892,140
-----------------------------------------------------------
Operating costs and expenses:
Cost of chemical reagents sold 87,386 89,789 89,789 89,789
Cost of coal combustion products revenues 123,146 136,673 150,080 161,139
Cost of construction materials sold (a) 37,689 41,780 94,566 (a) 292,109 (a)
Cost of other revenues 3,919 436 436 436
Depreciation and amortization 12,982 13,669 17,051 35,663
Research and development 4,674 7,340 7,340 7,340
Selling, general and administrative 40,715 53,711 66,936 119,361
-----------------------------------------------------------
Total operating costs and expenses 310,511 343,398 426,198 705,837
-----------------------------------------------------------
Operating income 77,119 109,548 127,757 186,303
Interest income (expense), net (15,377) (10,786) (18,509) (63,158)
Other income (expense), net (1,661) (4,093) (4,141) (4,639)
-----------------------------------------------------------
Income before income taxes 60,081 94,669 105,107 118,506
Income tax provision (23,450) (36,730) (40,790) (45,630)
-----------------------------------------------------------
Net income $ 36,631 $ 57,939 $ 64,317 $ 72,876
===========================================================
Basic earnings per share $ 1.35 $ 1.82 $ 2.02 $ 2.29
===========================================================
Diluted earnings per share $ 1.30 $ 1.75 $ 1.95 $ 2.21
===========================================================
Weighted average shares outstanding -- basic 27,083 31,774 31,774 31,774
===========================================================
Weighted average shares outstanding -- diluted 28,195 33,019 33,019 33,019
===========================================================
(a) Cost of construction materials sold includes $3,497 and $16,509 of
depreciation expense for the 2004 actual and 2004 pro forma periods,
respectively.
Reconciliation of actual results to pro forma results for the year ended
September 30, 2004:
Headwaters' actual historical net income $ 64,317 $ 64,317
Net income of subsidiaries acquired in 2004 included in Headwaters'
2004 actual results, net of interest expense on new debt issued
to pay for acquisitions (6,378) n/a
Actual historical net income of subsidiaries acquired in 2004, for
the period from October 1, 2003 to acquisition dates 25,254 A
Additional amortization expense for acquired intangible assets (10,514)B
Elimination of acquired subsidiaries' originally reported interest expense 28,523 C
Interest expense on new debt incurred by Headwaters to acquire subsidiaries (44,188)D
Other pro forma adjustments 1,125
Income tax effect of above pro forma adjustments, plus income taxes on
acquired subsidiaries' results not historically subject to taxation 8,359 E
---------- ----------
Pro forma net income shown above $ 57,939 $ 72,876
========== ==========
A VFL's results for the period from October 1, 2003 through April 8, 2004, plus
Eldorado's results for the period from October 1, 2003 through June 1, 2004,
plus SCP's results for the period from October 1, 2003 through July 1, 2004,
plus Tapco's results for the period from October 1, 2003 through September 7,
2004.
B Net increase in amortization expense for intangible assets acquired.
C Elimination of acquired subsidiaries' interest on pre-acquisition debt retired
by Headwaters at closings.
D Adjustment to record interest on new long-term debt issued by Headwaters to
acquire subsidiaries.
E Income tax effect, calculated using a combined effective federal and state
income tax rate of approximately 39%, on pro forma adjustments; plus income
taxes on VFL's, Eldorado's, and SCP's historical pre-tax results which were
not historically subject to taxation.
HEADWATERS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands)
September 30,
----------------------------
2003 2004
----------------------------
Assets:
Current assets:
Cash and short-term investments $ 21,653 $ 27,586
Trade receivables, net 52,399 129,899
Inventories 7,827 43,812
Other 6,005 29,266
----------------------------
Total current assets 87,884 230,563
Property, plant and equipment, net 52,743 161,911
Intangible assets, net 112,414 298,803
Goodwill 112,131 815,396
Debt issue costs and other assets 8,103 34,106
----------------------------
Total assets $ 373,275 $1,540,779
============================
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $ 17,177 $ 30,838
Accrued liabilities 29,056 97,465
Current portion of long-term debt 27,475 49,167
----------------------------
Total current liabilities 73,708 177,470
Long-term debt 104,044 923,347
Deferred income taxes 50,663 121,469
Other long-term liabilities 4,703 10,338
----------------------------
Total liabilities 233,118 1,232,624
----------------------------
Stockholders' equity:
Common stock - par value 28 34
Capital in excess of par value 130,936 235,581
Retained earnings 12,213 76,530
Other, primarily treasury stock (3,020) (3,990)
----------------------------
Total stockholders' equity 140,157 308,155
----------------------------
Total liabilities and stockholders' equity $ 373,275 $1,540,779
============================
The current ratio as of September 30, 2004 of 1.30 is derived by dividing total
current assets of $230,563 by total current liabilities of $177,470. The
current ratio as of September 30, 2003 of 1.19 is derived by dividing total
current assets of $87,884 by total current liabilities of $73,708.
Outstanding long-term debt before unamortized debt discount is calculated as
follows:
Current portion of long-term debt as shown above $ 27,475 $ 49,167
Long-term debt as shown above 104,044 923,347
Unamortized debt discount 3,404 0
----------------------------
Total long-term debt, before unamortized debt discount $ 134,923 $ 972,514
============================