Headwaters Inc. (HW, Financial) filed Quarterly Report for the period ended 2010-12-31.
Headwaters Inc has a market cap of $340.3 million; its shares were traded at around $5.6 with and P/S ratio of 0.5. Hedge Fund Gurus that owns HW: George Soros of Soros Fund Management LLC, Jim Simons of Renaissance Technologies LLC. Mutual Fund and Other Gurus that owns HW: Mario Gabelli of GAMCO Investors.
Energy Technology Segment. Energy technology revenues consisted primarily of coal sales related to our coal cleaning business. Revenues in both 2009 and 2010 also include equity earnings from our joint venture investment in an ethanol plant located in North Dakota and catalyst sales, and revenues in 2009 include equity earnings from our joint venture investment in a hydrogen peroxide plant in South Korea which was sold in late fiscal 2010. Segment revenues for 2010 were $21.8 million with a corresponding gross profit of $2.1 million. Segment revenues for 2009 were $12.5 million with a corresponding gross profit (loss) of $(1.7) million. Coal sales increased in 2010 as compared to 2009 due to both increased coal shipments and an increase in the average revenue per ton sold, from $34 in 2009 to $39 in 2010. The increase in revenue per ton sold is due primarily to an improved metallurgical coal market. Cost of revenue related to our coal cleaning business exceeded revenue in 2009 due primarily to low coal prices and ongoing start-up and ramp-up costs for newly-constructed and renovated coal cleaning facilities that were placed in service in late calendar 2008. Equity earnings in our joint ventures were $0.6 million in 2010 compared to $2.8 million in 2009.
Net interest expense decreased from $17.4 million in 2009 to $17.0 million in 2010 due primarily to i) approximately $2.6 million of accelerated debt discount and debt issue costs associated with the early repayment of our former senior secured debt and substantially all of the 2.875% convertible senior subordinated notes in 2009; and ii) reduced interest related to a much lower average outstanding balance of the 16% convertible senior subordinated notes in 2010; largely offset by i) approximately $2.3 million of premiums and accelerated debt discount and debt issue costs associated with the early repayment of $10.0 million of our 16% notes in 2010; and ii) higher interest expense related to $328.3 million of new 11.375% senior secured notes issued in October 2009 that was outstanding during all of the December 2010 quarter and only part of the December 2009 quarter, along with a lower average balance of former lower interest rate senior secured debt that was outstanding during part of the December 2009 quarter. Interest expense in fiscal 2011 is currently expected to total approximately $60.0 million.
Summary of Cash Flow Activities. Net cash used by operating activities in the December 2010 quarter (2010) was $(5.2) million, compared to net cash provided by operating activities of $25.7 million in the December 2009 quarter (2009). The net loss in 2010 exceeded the net loss in 2009 primarily due to the difference in income taxes between the two periods. In 2009, the reported income tax benefit of $8.6 million was approximately 38% of the pre-tax loss of $(22.5) million, while in 2010, we reported income tax expense of $(1.6) million, or approximately 8% of the pre-tax loss of $(19.1) million. There was also a difference in cash flow in excess of $25.0 million from changes in working capital and other operating accounts between the two quarters, primarily related to trade receivables, accrued interest and income taxes.
Capital expenditures are limited by the terms of our ABL Revolver to $55.0 million in 2011 and $60.0 million in 2012. As of December 31, 2010, we were committed to spend approximately $0.6 million on capital projects that were in various stages of completion. In the 2009 and 2010 quarters, we realized $3.5 million and $0.4 million, respectively, of proceeds from the sale of property, plant and equipment, most of which represented non-strategic assets in our light building products segment. In the 2009 and 2010 quarters, we had net increases of approximately $2.1 million and $0.8 million, respectively, for primarily long-term receivables in the light building products and heavy construction materials segments. In 2010, we acquired certain assets and assumed certain liabilities of two privately-held companies in the light building products industry for total consideration of approximately $2.5 million.
Financing Activities. In October 2009, we issued new senior secured notes aggregating approximately $328.3 million, for net proceeds of approximately $316.2 million. We used most of the proceeds to repay all of our obligations under the former senior secured credit facility and virtually all of the outstanding 2.875% convertible senior subordinated notes. In connection with the termination of the former credit facility and early repayment of the debt, we wrote off all remaining related debt issue costs, aggregating approximately $2.0 million. In addition, in connection with consultations related to recapitalization transactions that occurred in 2009 and other periods, we incurred $3.3 million of costs that were expensed during the December 2009 quarter, which amount is included in selling, general and administrative expenses in the statement of operations. Also in October 2009, we entered into a $70.0 million ABL Revolver for which we incurred approximately $2.5 million of debt issue costs in the quarter. Significant terms of the new senior secured notes and the ABL Revolver, as well as our convertible senior subordinated notes, are described in Note 5 to the consolidated financial statements and in the Form 10-K.
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Headwaters Inc has a market cap of $340.3 million; its shares were traded at around $5.6 with and P/S ratio of 0.5. Hedge Fund Gurus that owns HW: George Soros of Soros Fund Management LLC, Jim Simons of Renaissance Technologies LLC. Mutual Fund and Other Gurus that owns HW: Mario Gabelli of GAMCO Investors.
Highlight of Business Operations:
Summary. Our total revenue for the December 2010 quarter was $154.7 million, up 11% from $139.6 million for the December 2009 quarter. Gross profit increased 12%, from $29.4 million in 2009 to $32.8 million in 2010. Our operating loss decreased from $(6.3) million in 2009 to $(2.5) million in 2010, and the net loss increased from $(13.9) million or a diluted loss per share of $(0.23) in 2009, to a net loss of $(20.7) million, or $(0.34) per diluted share, in 2010. If tax benefits were recognized on the same basis in 2010 as they were in 2009 (without a full valuation allowance), the net loss in the December 2010 quarter would have been $(10.2) million or $(0.17) per diluted share, a $0.06 or 26% improvement in earnings per share compared to 2009.Energy Technology Segment. Energy technology revenues consisted primarily of coal sales related to our coal cleaning business. Revenues in both 2009 and 2010 also include equity earnings from our joint venture investment in an ethanol plant located in North Dakota and catalyst sales, and revenues in 2009 include equity earnings from our joint venture investment in a hydrogen peroxide plant in South Korea which was sold in late fiscal 2010. Segment revenues for 2010 were $21.8 million with a corresponding gross profit of $2.1 million. Segment revenues for 2009 were $12.5 million with a corresponding gross profit (loss) of $(1.7) million. Coal sales increased in 2010 as compared to 2009 due to both increased coal shipments and an increase in the average revenue per ton sold, from $34 in 2009 to $39 in 2010. The increase in revenue per ton sold is due primarily to an improved metallurgical coal market. Cost of revenue related to our coal cleaning business exceeded revenue in 2009 due primarily to low coal prices and ongoing start-up and ramp-up costs for newly-constructed and renovated coal cleaning facilities that were placed in service in late calendar 2008. Equity earnings in our joint ventures were $0.6 million in 2010 compared to $2.8 million in 2009.
Net interest expense decreased from $17.4 million in 2009 to $17.0 million in 2010 due primarily to i) approximately $2.6 million of accelerated debt discount and debt issue costs associated with the early repayment of our former senior secured debt and substantially all of the 2.875% convertible senior subordinated notes in 2009; and ii) reduced interest related to a much lower average outstanding balance of the 16% convertible senior subordinated notes in 2010; largely offset by i) approximately $2.3 million of premiums and accelerated debt discount and debt issue costs associated with the early repayment of $10.0 million of our 16% notes in 2010; and ii) higher interest expense related to $328.3 million of new 11.375% senior secured notes issued in October 2009 that was outstanding during all of the December 2010 quarter and only part of the December 2009 quarter, along with a lower average balance of former lower interest rate senior secured debt that was outstanding during part of the December 2009 quarter. Interest expense in fiscal 2011 is currently expected to total approximately $60.0 million.
Summary of Cash Flow Activities. Net cash used by operating activities in the December 2010 quarter (2010) was $(5.2) million, compared to net cash provided by operating activities of $25.7 million in the December 2009 quarter (2009). The net loss in 2010 exceeded the net loss in 2009 primarily due to the difference in income taxes between the two periods. In 2009, the reported income tax benefit of $8.6 million was approximately 38% of the pre-tax loss of $(22.5) million, while in 2010, we reported income tax expense of $(1.6) million, or approximately 8% of the pre-tax loss of $(19.1) million. There was also a difference in cash flow in excess of $25.0 million from changes in working capital and other operating accounts between the two quarters, primarily related to trade receivables, accrued interest and income taxes.
Capital expenditures are limited by the terms of our ABL Revolver to $55.0 million in 2011 and $60.0 million in 2012. As of December 31, 2010, we were committed to spend approximately $0.6 million on capital projects that were in various stages of completion. In the 2009 and 2010 quarters, we realized $3.5 million and $0.4 million, respectively, of proceeds from the sale of property, plant and equipment, most of which represented non-strategic assets in our light building products segment. In the 2009 and 2010 quarters, we had net increases of approximately $2.1 million and $0.8 million, respectively, for primarily long-term receivables in the light building products and heavy construction materials segments. In 2010, we acquired certain assets and assumed certain liabilities of two privately-held companies in the light building products industry for total consideration of approximately $2.5 million.
Financing Activities. In October 2009, we issued new senior secured notes aggregating approximately $328.3 million, for net proceeds of approximately $316.2 million. We used most of the proceeds to repay all of our obligations under the former senior secured credit facility and virtually all of the outstanding 2.875% convertible senior subordinated notes. In connection with the termination of the former credit facility and early repayment of the debt, we wrote off all remaining related debt issue costs, aggregating approximately $2.0 million. In addition, in connection with consultations related to recapitalization transactions that occurred in 2009 and other periods, we incurred $3.3 million of costs that were expensed during the December 2009 quarter, which amount is included in selling, general and administrative expenses in the statement of operations. Also in October 2009, we entered into a $70.0 million ABL Revolver for which we incurred approximately $2.5 million of debt issue costs in the quarter. Significant terms of the new senior secured notes and the ABL Revolver, as well as our convertible senior subordinated notes, are described in Note 5 to the consolidated financial statements and in the Form 10-K.
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