Headwaters Inc. has a market cap of $332 million; its shares were traded at around $5.51 with and P/S ratio of 0.5. Headwaters Inc. had an annual average earning growth of 11.4% over the past 5 years.HW is in the portfolios of George Soros of Soros Fund Management LLC, Bruce Kovner of Caxton Associates.
Highlight of Business Operations:We lowered the aggregate amount of indebtedness under our convertible notes by $64.2 million in fiscal 2009 by engaging in several exchanges of our convertible notes for common stock and new series of convertible notes bearing a higher interest rate. We also sold common stock in a public offering in September 2009 and used net proceeds of approximately $34.5 million to repay part of our former senior secured debt. In October 2009, we issued new senior secured notes aggregating approximately $328.3 million, for net proceeds of approximately $316.6 million. We used most of the proceeds to repay all of our remaining obligations under the former senior secured credit facility and virtually all of our outstanding 2.875% convertible senior subordinated notes. Also in October 2009, we entered into a $70.0 million ABL Revolver. Upon completion of these financings, we now have no debt maturities prior to 2014, unless the holders of the 16% convertible senior subordinated notes, totaling approximately $48.3 million, exercise their put option in 2012. We currently have approximately $90.0 million of cash on hand and additional liquidity is expected to be generated from operations over the next 12 months.
Summary. Our total revenue for 2009 was $139.6 million, down 16% from $166.2 million for 2008. Gross profit decreased 7%, from $31.6 million in 2008 to $29.4 million in 2009. Our operating loss decreased from $(9.2) million in 2008 to $(6.3) million in 2009, and the net loss increased from $(2.4) million, or a diluted loss per share of $(0.06), in 2008, to a net loss of $(13.9) million, or $(0.23) per diluted share, in 2009. The increase in net loss in 2009 was primarily due to the $17.6 million gain on debt extinguishment in 2008 and a $7.2 million increase in interest expense in 2009 as compared to 2008.
Operating Expenses. Research and development expense decreased by $1.5 million from 2008 to 2009, primarily because of decreased spending on our coal-to-liquids and hydrogen peroxide technologies. Selling, general and administrative expenses decreased $3.4 million, or 11%, to $28.2 million in 2009 from $31.6 million in 2008. The decrease in 2009 was due to reduced expenses in every significant category of expense except for professional services. The largest contributor of cost savings was personnel-related costs, totaling approximately $3.1 million, which decreased primarily because of headcount reductions. Professional services increased by approximately $2.5 million in 2009 due primarily to $3.3 million of consultation costs related to recapitalization transactions that occurred in 2009 and other periods. Due to cost-cutting activities initiated in fiscal 2009, we expect selling, general and administrative expenses for 2010 to be below comparable fiscal 2009 levels.
Financing Activities. In 2008, we exchanged approximately $80.9 million of our 2.875% convertible senior subordinated notes due 2016 for $63.3 million of new 16% convertible senior subordinated notes due 2016. A gain, recorded in other income (expense) in the accompanying consolidated statement of operations of approximately $17.6 million was recognized on the extinguishment of debt. Additionally, approximately $1.0 million of unamortized debt issue costs related to the extinguished $80.9 million of debt was charged to interest expense and approximately $1.0 million of new debt issue costs were incurred related to the 16% convertible notes.
In October 2009, we issued new senior secured notes aggregating approximately $328.3 million, for net proceeds of approximately $316.6 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. Because the amount outstanding under the former revolving credit arrangement as of September 30, 2009 ($25.0 million) was repaid with those proceeds, we classified it as long-term in the accompanying consolidated balance sheet. 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 in 2009, 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 2009. Significant terms of the new senior secured notes and the ABL Revolver, as well as all of our convertible senior subordinated notes are described in Note 6 to the consolidated financial statements.
The retrospective application of the new rules resulted in the following cumulative changes to the balance sheet as of September 30, 2009: a decrease of $0.7 million in debt issue costs; a decrease of $32.8 million in long-term debt; an increase of $11.8 million in the liability for deferred income taxes; a decrease in retained earnings (increase in accumulated deficit) of $25.7 million; and an increase in additional paid-in capital of $46.0 million. The retrospective application of the new rules resulted in an increase in interest expense of $1.5 million and $1.8 million and an increase in the loss per share of $(0.04) and $(0.03) for 2008 and 2009, respectively. The consolidated statements of cash flows were also affected by the change in interest expense, which resulted in increases in the reported net losses with corresponding increases in non-cash interest expense, of $1.5 million and $1.8 million for 2008 and 2009, respectively. There were no changes in the total cash provided by operating activities in any period.
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