HEADWATERS INC FROM:
RE: Headwaters Incorporated 10701 S. River Front Parkway, Suite 300
South Jordan, UT 84095 Phone: (801) 984-9400 NYSE: HW
FOR FURTHER INFORMATION
AT THE COMPANY:
Sharon Madden
Vice President of Investor Relations (801) 984-9400
ANALYST CONTACT:
Tricia Ross Financial Profiles (310) 622-8226
FOR IMMEDIATE RELEASE
Revenue Increased 9% to $218 Million
Adjusted EBITDA Increased 19% to $40 Million
Operating Income Increased 29% to $25 Million
Adjusted EPS Increased 65% to $0.28
Revenue increased 9% to $218 million, including 8% organic growth
Gross profit increased 15% and gross margin expanded by 150 basis points
Adjusted EBITDA increased 19% and Adjusted EBITDA margin expanded by 150 basis points
Building products revenue increased 12%, operating income increased 27%, and Adjusted EBITDA increased 21%
Construction materials revenue increased 6%, operating income increased 26%, and Adjusted EBITDA increased 21%
Completed four bolt-on acquisitions between September 2015 and January 2016
Raising 2016 Adjusted EBITDA guidance to a range of $180 million to $200 million
"The strength that we experienced in the fourth quarter of fiscal 2015 continued into the first quarter of 2016, driven by strong volume in our building products segment and strong pricing in our construction materials segment. The combination of these two factors led to 8% organic revenue growth and 19% growth in Adjusted EBITDA," said Kirk A. Benson, Chairman and Chief Executive Officer of Headwaters. "Typically margins are softer in the December and March quarters due to the seasonality of our markets. However, our consolidated Adjusted EBITDA margin expanded by 150 basis points from last year to a record 18.4% for a December quarter, and for our continuing business reached an all-time high for a twelve-month period at 18.8% for the trailing twelve months ended December 31. We anticipate continued margin expansion in 2016 compared to 2015, and several of our margin expansion opportunities will carry over into 2017. Our exceptional performance in the quarter, combined with four bolt-on acquisitions, enables us to raise 2016 Adjusted EBITDA guidance to a new range of $180 million to $200 million.
"While fly ash volumes were impacted by rain in the gulf coast during the quarter, demand for fly ash continues to be robust, and coupled with a favorable pricing environment, we were able to expand our Adjusted EBITDA margin by 300 basis points. We expect our 2016 construction materials margins will improve over 2015, led by product mix and pricing, and the first quarter was consistent with this trend. We continue to anticipate volume increases in the mid-single digits for the fiscal year as projects delayed by rain will be completed in subsequent quarters.
"We expect 2016 building products margin expansion to be driven by organic growth, continuous improvements, and synergies from bolt-on acquisitions. During our first quarter of 2016, building products Adjusted EBITDA margins expanded by 140 basis points over last year. We are optimistic that the bolt-on acquisitions completed over the past five months will lead to even further improvement in performance as we integrate these transactions into our operations."
Headwaters' first quarter 2016 consolidated revenue increased by 9% to $218.4 million from
$199.6 million for the first quarter of 2015, and gross profit increased by 15% to $64.3 million, compared to $55.7 million in 2015. Operating income improved from $19.2 million in 2015 to
$24.8 million in 2016, and Adjusted EBITDA increased by $6.4 million to $40.2 million, or 19% over 2015.
First quarter adjusted income from continuing operations was $21.1 million, or $0.28 per diluted share in 2016, compared to $12.7 million, or $0.17 per diluted share in 2015, representing increases of 65% year-over-year. On an unadjusted basis, income from continuing operations was $12.9 million, or $0.17 per diluted share, for the first quarter of 2016, compared to $7.1 million, or $0.09 per diluted share, for the first quarter of 2015, representing increases of more than 80% year-over-year. Discontinued operations were immaterial in both the 2015 and 2016 quarters. In addition to improvement in operations, income benefited from substantially lower interest expense due to 2015 debt refinancing and repayment.
First Quarter Business Segment HighlightsBusiness Segment | 2016 Revenue | 2016 Adjusted EBITDA | 2016 Adjusted EBITDA Margin | 2015 Adjusted EBITDA Margin |
Building Products | $131.8 million | $24.9 million | 18.9% | 17.5% |
Construction Materials | $86.0 million | $20.9 million | 24.3% | 21.3% |
Business Segment | 2016 Operating Income | 2015 Operating Income | 2016 Operating Income Margin | 2015 Operating Income Margin |
Building Products | $15.1 million | $11.9 million | 11.5% | 10.1% |
Construction Materials | $17.0 million | $13.5 million | 19.8% | 16.6% |
Headwaters' building products segment is a national brand leader in innovative building products through superior design, manufacturing and channel distribution. The segment markets a wide variety of niche building products, including siding accessories, manufactured architectural stone, block and specialty roofing products.
Building products revenue increased 12%, from $117.5 million in the first quarter of 2015 to
$131.8 million in the first quarter of 2016, including 9% organic growth. In the first quarter of 2016, gross profit increased 16% to $38.7 million from $33.3 million in 2015, and operating income increased 27% to $15.1 million from $11.9 million. Adjusted EBITDA in the first quarter of 2016 increased 21% from $20.6 million in 2015 to $24.9 million.
Organic revenue growth was driven primarily by volume increases in siding, stone, and block, as we experienced strong demand in all three product categories. We were especially pleased with the continued strength in our non-residential Texas markets, offsetting any impact from low oil prices on residential construction. We are also expanding our product offering to include higher margin specialty block products with geographic reach beyond Texas, positioning our block group for growth in 2017. Further, organic growth in our siding group was the strongest we have experienced since 2006 and may indicate an increase in exterior remodeling trends.
Revenue growth contributed to margin increases in the 2016 quarter, with gross margin increasing by 100 basis points, and operating and Adjusted EBITDA margins increasing by 140 basis points. Also, several of our product groups continued to benefit from lower raw material, transportation and energy costs, which more than offset increased costs in other areas.
We have completed four additional bolt-on acquisitions in our building products segment through the end of January, including the small bolt-on block acquisition that we completed in September 2015. Two of the acquisitions were in roofing and will strengthen our presence in both the niche composite and stone-coated metal categories. We anticipate strong synergies from these two acquisitions as we consolidate our manufacturing footprint, improving efficiencies and our cost structure. The fourth acquisition that we completed in January added decking and railing to our two-step core customer offering. While the decking transaction is small, it provides us with an opportunity to expand distribution to existing customers, develop additional decking related products, and increase our product and manufacturing expertise.
Based on historical revenue information for the acquired businesses, we estimate a full year revenue impact of approximately $40 million. The total purchase price for these acquisitions was approximately $65 million, and the purchase price before synergies as a multiple of historical annual EBITDA was in the range of 7x to 9x.
Headwaters Resources is the largest domestic manager and marketer of coal combustion products (CCPs), including fly ash. Utilization of these materials improves performance of concrete and concrete construction products while creating significant environmental benefits.
First quarter 2016 revenues increased by 6% to $86.0 million, compared to $81.4 million in 2015. Service revenue represented approximately 21% of total segment revenue for the first quarter of 2016, as compared to 23% for the first quarter of 2015. Service revenue was 21% for all of fiscal 2015. The increase in revenue is primarily attributable to positive pricing for high-value CCPs.
The weighted average increase in CCP net pricing was higher in the December quarter than in the September quarter, a trend that started in early fiscal 2015. Year-over-year net pricing increases were nearly 8%, and we anticipate that the price increases will continue into the March quarter. The continued favorable pricing environment results from solid demand for high quality CCPs used to replace portland cement and continued resilience in portland cement demand and pricing.
Gross profit increased by 16% to $25.3 million in 2016, compared to $21.9 million in 2015, and gross margin increased by 260 basis points to 29.5%. Operating income increased $3.5 million, or 26%, from $13.5 million in 2015 to $17.0 million in 2016, with a 320 basis point increase in operating margin. Adjusted EBITDA increased $3.6 million from $17.3 million in 2015 to $20.9 million in 2016, or 21%. Adjusted EBITDA margin of 24.3% in the quarter represents an increase of 300 basis points as compared to last year, which was primarily attributable to the increase in revenues from high-value CCPs.
Our effective income tax rate for continuing operations for the 2016 fiscal year is currently estimated to be approximately 39%. In the prior year, our estimated effective income tax rate was approximately 10% because our net amortizable deferred tax assets were fully reserved, but in the September 2015 quarter we reversed most of the valuation allowance on NOL and tax credit
Headwaters Incorporated issued this content on 02 February 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 02 February 2016 16:02:14 UTC
Original Document: http://www.headwaters.com/data/upfiles/pressreleases/2.2.16 Q1 2016 Earnings Release.pdf
