Headwaters Incorporated Provides Business Update at 2014 Analyst and Investor Day Conference

  Headwaters Incorporated Provides Business Update at 2014 Analyst and   Investor Day Conference  • Reaffirms 2014 Adjusted EBITDA Guidance of $130 Million to $145 Million and                            45% Contribution Margins               • Reviews Growth Strategy and Future Value Drivers  Business Wire  SOUTH JORDAN, Utah -- March 10, 2014  HEADWATERS INCORPORATED (NYSE: HW), a building products company dedicated to improving lives through innovative advancements in construction materials, today announced highlights from its Twelfth Annual Analyst and Investor Day, which was held Friday, March 7, 2014 in New York City, NY.  The event featured a business strategy overview by Chairman and Chief Executive Officer Kirk A. Benson. Other presentations included an update on Headwaters’ Light Building Products and Heavy Construction Materials segments by Dave Ulmer and Bill Gehrmann, respectively. The Investor Day concluded with a financial overview and hypothetical mid-housing cycle scenario presented by Chief Financial Officer, Donald P. Newman. Select highlights from each speaker follow.  CEO COMMENTARY - KIRK A. BENSON  “Headwaters creates value for its customers by improving homes and concrete structures,” said Kirk A. Benson, Chairman and Chief Executive Officer of Headwaters. “We focus on niche, value-added building products that deliver high margins. Through our extensive and innovative product offerings, we believe we are the only company in the industry that can wrap the entire exterior of a home from top to bottom. Further, Headwaters produces more shutters than any other company, we are the largest supplier of gable vents in the country, the inventor of mounting blocks, and we estimate we are the largest manufacturer of architectural stone in the United States.  “An important strategic objective is to expand top-line organic growth by focusing on our core customers and growing our channel sales. We expect to execute our strategy by increasing the number of Headwaters products available to both core customers and other channels through internal development of new products like our Aledora roofing product, and disciplined, bolt-on niche building product acquisitions that meet our criteria and economic hurdles. As we have done with previous acquisitions, we intend to leverage our lean-focused culture and common infrastructure to drive down costs.  “Last fiscal year was strong for Headwaters, and we are confident with our 2014 guidance of Adjusted EBITDA in the range of $130 million to $145 million, which represents a 12% to 25% increase over FY 2013 levels. Even with the unfavorable weather conditions that have caused building delays and weaker sales in January and February, we are seeing positive indicators in all our end markets, including repair and remodel. While we expect improvements in the repair and remodel market, we have modeled very little end market growth into our guidance. As end markets improve, Headwaters believes that it is well positioned to capitalize on the opportunity and further accelerate growth.”  LIGHT BUILDING PRODUCTS - DAVE ULMER  “In our Light Building Products segment, we are well-positioned to grow both the top and bottom line,” said Dave Ulmer, President of Tapco International. “Our niche product categories are highly defensible, are based on leading brand names, enjoy extensive manufacturing capabilities, should benefit from our commitment to new product development, and support our total customer solution approach to relationships.  “While new residential construction clearly improved last year, we are optimistic that the repair and remodeling market will pick up this spring based on evidence of pent-up demand. Products related to siding have our highest EBITDA margins and have a 75 percent exposure to the repair and remodel market. We expect market share expansion and new siding and roofing products to be key growth drivers going forward. We also see organic growth opportunities in the $6 billion outdoor living market with our architectural stone products and, overall from further extension of our good, better, and best strategy.”  HEAVY CONSTRUCTION MATERIALS - BILL GEHRMANN  “We believe the long term fly ash substitution rate will continue its positive trend and could ultimately approach 25%, particularly as cement consumption expands beyond domestic production capacity capabilities,” said Bill Gehrmann, President of Headwaters Resources. “Other favorable tailwinds include the 2015 compliance date for new NESHAP regulations that could impact up to 10% of current U.S. portland cement production capacity. Cement prices are also forecast to increase significantly year-over-year between 2014 and 2016 to compensate for the increased regulatory costs.  “We believe there is plenty of head room to access high-quality supply even beyond peak 2007 levels. Our current supply of high-quality fly ash is up substantially from peak levels of 6.4 million tons in 2007.  “Our overall strategy in 2014 will be to leverage existing supply, compete for new supply, and grow product revenues by increasing both volume and price. We expect to implement price increases approximating 4% year-over-year, consistent with anticipated cement price increases. Headwaters' site services business is expected to see continued growth as well.  “Most importantly, we are very pleased that the regulatory overhang that has faced this segment of our business for many years is coming to an end. In a recent decree issued in February 2014, the EPA agreed to take ‘final action regarding proposed revision of RCRA Subtitle D regulations pertaining to coal combustion residuals,’ by December 19, 2014. In addition, the EPA released an exhaustive study that reaffirms its support for fly ash use in concrete.”  CFO COMMENTARY - DON NEWMAN  “We believe we are in the early innings of a recovery and have a number of value drivers in place,” said Don P. Newman, Chief Financial Officer of Headwaters. “We estimated a mid-cycle hypothetical scenario for our business based on assumptions of 1.5 million housing starts and approximately 100 million tons of portland cement volume. Our assumed mid-cycle scenario would represent a nearly 70 percent increase in Adjusted EBITDA and a nearly 40 percent increase in revenue, placing us near a $1 billion revenue business at mid-cycle.  “We have strong core margins in our light building products and heavy construction materials segments and they remain on track to continue their upward trends. Our continuous improvement initiatives should continue to drive efficiencies and lower costs, offsetting raw material price inflation. We expect contribution margins in the 45 percent range to further offset cost increases and drive operating income growth.  “We remain committed to de-leveraging our balance sheet through our operating performance and free cash flow generation and continue to progress toward our long-term leverage targets of 2.5x to 3.0x net debt to adjusted EBITDA.  “Other meaningful value drivers include our significant tax shields, including $190.4 million of pretax net operating loss carryforwards and $25.6 million of tax credit carryforwards. We have net after-tax value of approximately $124 million or $1.70 per share fully reserved on the balance sheet, reserves which we anticipate will be released in 2015. At some point, we also plan to divest of our energy technology business, a business that we expect to grow through adding customers in 2014 and 2015. For Headwaters it is a non-core asset, yet it is a very valuable technology to the right buyer.”  Guidance  Headwaters reaffirmed its guidance of expected 2014 Adjusted EBITDA of $130 million to $145 million.  About Headwaters Incorporated  Headwaters Incorporated is improving lives through innovative advancements in construction materials through application, design, and purpose. Headwaters is a diversified growth company providing products, technologies and services to the light building products and heavy construction materials industries. Through its building products and coal combustion products, the Company has been able to improve sustainability by transforming underutilized resources into valuable products. www.headwaters.com  Forward Looking Statements  Certain statements contained in this, and accompanying presentations, are forward-looking statements within the meaning of federal securities laws and Headwaters intends that such forward-looking statements be subject to the safe-harbor created thereby. Forward-looking statements include Headwaters’ expectations as to the managing and marketing of coal combustion products, the production and marketing of building products, the licensing of residue hydrocracking technology and catalyst sales to oil refineries, future financial performance, the development, commercialization, and financing of new technologies, and strategic business opportunities and acquisitions, and other information about Headwaters. Such statements that are not purely historical by nature, including those statements regarding Headwaters’ future business plans, the operation of facilities, the availability of feedstocks, and the marketability of the coal combustion products, building products, catalysts, and future financial performance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and our future results that are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Actual results may vary materially from such expectations. Words such as “may,” “should,” “intends,” “plans,” “expects,” “anticipates,” “targets,” “goals,” “projects,” “believes,” “seeks,” “assume,” “estimates,” “forecasts,” “scenario,” or variations of such words and similar expressions, or the negative of such terms, may help identify such forward-looking statements. Any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances, are forward-looking. In addition to matters affecting the coal combustion products, building products, and energy industries or the economy generally, factors that could cause actual results to differ from expectations stated in forward-looking statements include, among others, the factors described in the caption entitled “Risk Factors” in Item 1A in Headwaters’ Annual Report on Form 10-K for the fiscal year ended September 30, 2013, Quarterly Reports on Form 10-Q, and other periodic filings.  Although Headwaters believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that our results of operations will not be adversely affected by such factors. Unless legally required, we undertake no obligation to revise or update any forward-looking statements for any reason. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Our internet address is www.headwaters.com. There we make available, free of charge, our annual report on Form 10K, quarterly reports on Form 10Q, current reports on Form 8K and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our reports can be accessed through the investor relations section of our web site.  Contact:  Headwaters Incorporated AT THE COMPANY: Sharon Madden Vice President of Investor Relations (801) 984-9400 or ANALYST CONTACT: Financial Profiles Tricia Ross, (916) 939-7285