Sharon A. MaddenThank you, Tricia. Good morning, everyone, and thank you for joining us as we report our fourth quarter and fiscal 2011 year end results. Today's call will be conducted by Kirk Benson, Headwaters' Chairman and Chief Executive Officer; along with Don Newman, Headwaters' Chief Financial Officer. Also joining the call will be Bill Gehrmann, who is President of Headwaters Resources; and Dave Ulmer, who is President of Tapco International. Both will be reporting under individual business segments. As always, before we get started, I need to remind you about the forward-looking language in our press release and in our slides, that certain statements made during the call, including statements related to our expected future business and financial performance, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as 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, future events or otherwise, except as may be required by law. You may find Headwaters' annual report on Form 10-K, quarterly report on Form 10-Q and other SEC filings readily available from the SEC's website, Headwaters' website or directly from the company. I would now like to turn the call over to Kirk Benson. Kirk? Kirk A. Benson Thank you, Sharon. Thank you for your attendance with Headwaters year end conference call. I'd like to begin by making some overall comments on our year from Slide 2. Don Newman will then comment on the financials, followed by Dave Ulmer discussing light building products and Bill Gehrmann, discussing our heavy construction materials segment.
There were 3 themes that dominated 2011: First, our end markets continued to be soft at the bottom of the construction cycle, and we have not seen long-term trends that would consistently signal growth; second, we experienced increased costs, particularly in the December and March quarters, and those increases have carried over into the second half of the year. Fortunately, we were able to implement a price increase to our light building product segment that helped alleviate a portion of the cost increase; and third, we have restructured many parts of our business, reduced our cost structure, such that in flat revenue we expect 2012 margins to improve over 2011. We expect significant improvements in free cash flow in 2012.We experienced some notable achievements during the year. The senior debt refinancing in the second quarter greatly reduced our financial risk, extended debt maturities, increasing interest coverage and free cash flow. During the year, we repaid $24.4 million of high-rate convertible debt, reducing our total high coupon debt by more than half. Our adjusted EBITDA to run rate interest coverage ratio is now 2.2, indicating that we have sufficient cash cushion and minimal financial risk that could adapt if there are any additional disruptions in our end markets. We have gone through 2 restructuring efforts in 2011 in the second and fourth quarters. We believe that as a result of lower interest expense and improved operations, our free cash flow in 2012 should be in the range of $20 million to $30 million, allowing us to continue to repay our subordinated debt prior to maturity. We had exposure of approximately $20 million in the Internal Revenue Service audits, and the audits were successfully concluded during the year. Our cash interest expense pegged at an annualized level of $47.9 million and is now $37.7 million, representing an improvement of $10.2 million.
Although the sale of noncore assets has taken an extended period of time, the difficulty in selling unique assets was anticipated. We previously indicated that it would require an extensive effort to sell the assets. Nevertheless, we continue a progress and anticipate that the assets will be sold in 2012. As a result of our conviction that the assets will be sold and that we abandoned the concept of retaining tax credits, we were able to adopt discontinued operations accounting treatments to better focus the business on our continuing operations.Read the rest of this transcript for free on seekingalpha.com