Headwaters Incorporated F2Q10 (Qtr End 03/31/10) Earnings Call Transcript

Headwaters Incorporated F2Q10 (Qtr End 03/31/10) Earnings Call Transcript
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Headwaters Incorporated (HW)

F2Q10 (Qtr End 03/31/10) Earnings Call Transcript

May 4, 2010 11:00 am ET

Executives

Tricia Ross – IR, Financial Profiles

Sharon Madden – VP, IR

Steve Stewart – CFO

Kirk Benson – Chairman and CEO

Bill Gehrmann – President, Headwaters Resources, Inc.

Jack Lawless – President, Headwaters Construction Materials, Inc.

Analysts

Steven Sanders – Stephens Inc.

John Quealy – Canaccord Adams

Pearce Hammond – Simmons & Co

Dan Mannes – Avondale Partners, LLC

P

resentation

Operator

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Previous Statements by HW
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» Headwaters Incorporated F3Q09 (Qtr End 06/30/09) Earnings Call Transcript

Good morning. My name is Melissa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Headwaters Incorporated second quarter 2010 earnings call. All lines have been place on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. Ms. Tricia Ross of Financial Profiles, you may begin your conference.

Tricia Ross

Thank you.

Welcome everyone to the Headwaters Incorporated second quarter fiscal 2010 conference call. If you do not receive a copy of this morning's financial results press release, please contact my office and we would get onto you right away at 310-478-20700. Without further delay, I would now like to turn over the call to Sharon Madden, Headwaters VP of Investor Relations.

S

haron Madden

Thank you, Tricia. Good morning everyone and thank you for joining us today as we report Headwaters fiscal 2010 second quarter results.

On today's Steve Stewart, Headwaters Chief Financial Officer will update you on the financial results for the quarter followed by Kirk Benson, Headwaters Chairman and Chief Executive Officer who will discuss second quarter results for Headwaters operating segment. Also joining are Bill Gehrmann, President of Headwaters Resources; and Jack Lawless President of Headwaters Construction Materials.

Now for the best part, so before we get started I need to remind you that certain statements made during the call including statements relating to our expected future business and financial performance maybe considered forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act as of 1934 both amended.

Forward-looking statements by their nature address matters that are to different degrees uncertain. These uncertainties which are described in more detail in the annual and quarterly reports filed with the SEC may cause our actual future results to be materially different than those expressed in our forward-looking statements whether as a result of new information, further events or otherwise, except as maybe required by law. You may find Headwaters annual report on Form 10-K, our quarterly report on Form 10-Q, and other SEC filings readily available from the SEC's website, Headwaters website or directly from the Company itself.

I will now turn the call over to Steve Stewart. Steve?

Steve Stewart

Thank you, Sharon, and good morning everyone and thank you for joining us this morning on our second quarter earnings call. Attached to the press release that Tricia mentioned are condensed consolidated financial statements. That includes statements of operations for the quarter and the six months ended March 31, 2010 and 2009. We've also included their balance sheet as of the quarter-end March 31, 2010 and our fiscal year-end of September 30, 2009. My comments are derived primarily from those condensed consolidated financial statements.

We expect to file our Form 10-Q this week. We believe the indications of stabilization that we first noticed in our September 2009 fourth quarter appeared to be continuing into the March 2010 quarter even in light of the continued weakness in new housing and residential revolving markets, and the noticeable slowdown commercial construction and infrastructure activities that directly impacts our sales of fly ash.

However, these signs of stabilization have not yet resolved for the noticeable increases in sales and revenue. While we did see noticeable improvement in revenues in the March month, this could be a response to the poor weather conditions experienced in January and February with March being a catch up month.

We continue to be cautious in our expectations and believe we were correct in forecasting 2010 revenues to be essentially flat in comparison to 2009. However, we continue to believe we will realize improved operating results in 2010 because of operational improvements and cost reductions implemented in fiscal 2009 along with new items that are being identified and implemented in fiscal 2010.

Total consolidates revenues in the March 2010 quarter decreased by approximately $9.5 million or 6.5% when compared to the 2009 quarter, but our gross profit improved by $4.9 million or 21.6% when compared to 2009, and our operating loss improved by $8.4 million, which was a 66% improvement when you exclude the 2009 goodwill impairment.

I believe the improvement in our gross profit and operating loss confirms are discussions about the financial effect of the operational improvements in cost reductions implemented in fiscal 2009, which are carrying into the current fiscal year along with the cost reductions being implemented in 2010.

We continue to have a healthy balance sheet over 90% of Headwaters total debt has a maturity in calendar 2014 and with the balance of that due to be repaid in June of 2012. We currently have a $70 million asset-based revolving credit facility that as of March 31st, 2010 was undrawn and we had a borrowing base capacity of approximately $55 million.

At March 31, 2010 we had approximately $70 million of cash on our balance sheet, which provides Headwaters with approximately $125 million of liquidity. The working capital asset that support the ABL facility fluctuate during the year with the low point normally occurring in the March quarter and the high point normally occurring towards the end of the September quarter.

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