Condensed Consolidating Financial Information (Tables)

12 Months Ended

Sep. 30, 2014

Condensed Consolidating Financial Information

Schedule of condensed consolidating balance sheet

CONDENSED CONSOLIDATING BALANCE SHEET—September 30, 2013

(in thousands)	Guarantor Subsidiaries			Parent Company			Eliminations and Reclassifications			Headwaters Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	70,747		$	4,569		$	—		$	75,316
Trade receivables, net		109,868									109,868
Inventories		37,383									37,383
Deferred income taxes		25,828			17,895			(29,687	)		14,036
Other		6,548			732						7,280
Total current assets		250,374			23,196			(29,687	)		243,883
Property, plant and equipment, net		155,499			4,120			—			159,619
Other assets:
Goodwill		137,198									137,198
Intangible assets, net		139,797									139,797
Investments in subsidiaries					282,979			(282,979	)		—
Intercompany accounts and notes		360,482			637,046			(997,528	)		—
Deferred income taxes		53,228			22,179			(75,407	)		—
Other		22,300			21,212						43,512
Total other assets		713,005			963,416			(1,355,914	)		320,507
Total assets	$	1,118,878		$	990,732		$	(1,385,601	)	$	724,009
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	21,051		$	759		$	—		$	21,810
Accrued personnel costs		14,622			33,124						47,746
Accrued interest					16,077						16,077
Current and deferred income taxes		20,073			9,734			(29,687	)		120
Other accrued liabilities		52,898			2,370						55,268
Current portion of long-term debt					7,553						7,553
Total current liabilities		108,644			69,617			(29,687	)		148,574
Long-term liabilities:
Long-term debt					449,420						449,420
Income taxes		80,877			19,167			(75,407	)		24,637
Intercompany accounts and notes		637,046			360,482			(997,528	)		—
Other		9,332			7,636						16,968
Total long-term liabilities		727,255			836,705			(1,072,935	)		491,025
Total liabilities		835,899			906,322			(1,102,622	)		639,599
Stockholders' equity:
Common stock					73						73
Capital in excess of par value		458,498			720,828			(458,498	)		720,828
Retained earnings (accumulated deficit)		(175,519	)		(635,972	)		175,519			(635,972	)
Treasury stock					(519	)					(519	)
Total stockholders' equity		282,979			84,410			(282,979	)		84,410
Total liabilities and stockholders' equity	$	1,118,878		$	990,732		$	(1,385,601	)	$	724,009

CONDENSED CONSOLIDATING BALANCE SHEET—September 30, 2014

(in thousands)	Guarantor Subsidiaries			Non-guarantor Subsidiaries		Parent Company			Eliminations and Reclassifications			Headwaters Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	33,552		$	5,764	$	113,226		$	—		$	152,542
Trade receivables, net		113,940			5,390								119,330
Inventories		48,482			2,151								50,633
Deferred income taxes		15,509			289		18,427			(23,149	)		11,076
Other		9,286			168		1,082						10,536
Total current assets		220,769			13,762		132,735			(23,149	)		344,117
Property, plant and equipment, net		162,458			11,674		7,979			—			182,111
Other assets:
Goodwill		145,068			30,518								175,586
Intangible assets, net		131,150			28,713								159,863
Investments in subsidiaries							406,327			(406,327	)		—
Intercompany accounts and notes		381,082					637,045			(1,018,127	)		—
Deferred income taxes		41,658					22,928			(64,586	)		—
Other		14,388			1,381		25,981						41,750
Total other assets		713,346			60,612		1,092,281			(1,489,040	)		377,199
Total assets	$	1,096,573		$	86,048	$	1,232,995		$	(1,512,189	)	$	903,427
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	25,643		$	956	$	427		$	—		$	27,026
Accrued personnel costs		13,483			418		35,001						48,902
Accrued interest							18,273						18,273
Current income taxes		23,198			319					(23,149	)		368
Other accrued liabilities		36,811			3,006		1,940						41,757
Total current liabilities		99,135			4,699		55,641			(23,149	)		136,326
Long-term liabilities:
Long-term debt							599,579						599,579
Income taxes		65,133			893		21,802			(64,586	)		23,242
Intercompany accounts and notes		572,356			4,061		441,710			(1,018,127	)		—
Other		16,167			774		11,645						28,586
Total long-term liabilities		653,656			5,728		1,074,736			(1,082,713	)		651,407
Total liabilities		752,791			10,427		1,130,377			(1,105,862	)		787,733
Redeemable non-controlling interest in consolidated subsidiary					13,252								13,252
Stockholders' equity:
Common stock							74						74
Capital in excess of par value		458,498			60,453		723,824			(519,127	)		723,648
Retained earnings (accumulated deficit)		(114,716	)		1,916		(620,688	)		112,800			(620,688	)
Treasury stock							(592	)					(592	)
Total stockholders' equity		343,782			62,369		102,618			(406,327	)		102,442
Total liabilities and stockholders' equity	$	1,096,573		$	86,048	$	1,232,995		$	(1,512,189	)	$	903,427

Schedule of condensed consolidating statement of operations

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended September 30, 2012

(in thousands)	Guarantor Subsidiaries			Parent Company			Eliminations		Headwaters Consolidated
Revenue:
Light building products	$	339,632		$	—		$	—	$	339,632
Heavy construction materials		281,672								281,672
Energy technology		11,483								11,483
Total revenue		632,787			—			—		632,787
Cost of revenue:
Light building products		241,669								241,669
Heavy construction materials		210,158								210,158
Energy technology		5,893								5,893
Total cost of revenue		457,720			—			—		457,720
Gross profit		175,067			—			—		175,067
Operating expenses:
Amortization		20,675								20,675
Selling, general and administrative		94,630			25,359					119,989
Total operating expenses		115,305			25,359			—		140,664
Operating income (loss)		59,762			(25,359	)		—		34,403
Other income (expense):
Net interest expense		(80	)		(52,598	)				(52,678	)
Intercompany interest income (expense)		(25,945	)		25,945					—
Equity in earnings (loss) of subsidiaries					(13,536	)		13,536		—
Other, net		(9,972	)		2,479					(7,493	)
Total other income (expense), net		(35,997	)		(37,710	)		13,536		(60,171	)
Income (loss) from continuing operations before income taxes		23,765			(63,069	)		13,536		(25,768	)
Income tax benefit (provision)		(1,482	)		821					(661	)
Income (loss) from continuing operations		22,283			(62,248	)		13,536		(26,429	)
Loss from discontinued operations, net of income taxes		(35,819	)							(35,819	)
Net loss	$	(13,536	)	$	(62,248	)	$	13,536	$	(62,248	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended September 30, 2013

(in thousands)	Guarantor Subsidiaries			Parent Company			Eliminations			Headwaters Consolidated
Revenue:
Light building products	$	394,324		$	—		$	—		$	394,324
Heavy construction materials		293,000									293,000
Energy technology		15,252									15,252
Total revenue		702,576			—			—			702,576
Cost of revenue:
Light building products		283,128									283,128
Heavy construction materials		219,996									219,996
Energy technology		6,970									6,970
Total cost of revenue		510,094			—			—			510,094
Gross profit		192,482			—			—			192,482
Operating expenses:
Amortization		20,230									20,230
Selling, general and administrative		96,478			21,363						117,841
Total operating expenses		116,708			21,363			—			138,071
Operating income (loss)		75,774			(21,363	)		—			54,411
Other income (expense):
Net interest expense		(54	)		(42,512	)					(42,566	)
Intercompany interest income (expense)		(23,434	)		23,434						—
Equity in earnings of subsidiaries					47,117			(47,117	)		—
Other, net		329			35						364
Total other income (expense), net		(23,159	)		28,074			(47,117	)		(42,202	)
Income from continuing operations before income taxes		52,615			6,711			(47,117	)		12,209
Income tax benefit (provision)		(4,350	)		426						(3,924	)
Income from continuing operations		48,265			7,137			(47,117	)		8,285
Loss from discontinued operations, net of income taxes		(1,148	)								(1,148	)
Net income	$	47,117		$	7,137		$	(47,117	)	$	7,137

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended September 30, 2014

(in thousands)	Guarantor Subsidiaries			Non-guarantor Subsidiaries			Parent Company			Eliminations			Headwaters Consolidated
Revenue:
Light building products	$	438,473		$	33,961		$	—		$	—		$	472,434
Heavy construction materials		309,337												309,337
Energy technology		9,676												9,676
Total revenue		757,486			33,961			—			—			791,447
Cost of revenue:
Light building products		312,220			24,063									336,283
Heavy construction materials		224,888												224,888
Energy technology		4,583												4,583
Total cost of revenue		541,691			24,063			—			—			565,754
Gross profit		215,795			9,898			—			—			225,693
Operating expenses:
Amortization		20,231			1,088									21,319
Selling, general and administrative		108,602			4,209			24,839						137,650
Total operating expenses		128,833			5,297			24,839			—			158,969
Operating income (loss)		86,962			4,601			(24,839	)		—			66,724
Other income (expense):
Net interest expense		(349	)		(2	)		(45,978	)					(46,329	)
Intercompany interest income (expense)		(22,737	)					22,737						—
Equity in earnings of subsidiaries								62,719			(62,719	)		—
Other, net		(24	)		(324	)								(348	)
Total other income (expense), net		(23,110	)		(326	)		39,478			(62,719	)		(46,677	)
Income from continuing operations before income taxes		63,852			4,275			14,639			(62,719	)		20,047
Income tax benefit (provision)		(3,296	)		(923	)		645						(3,574	)
Income from continuing operations		60,556			3,352			15,284			(62,719	)		16,473
Loss from discontinued operations, net of income taxes		(415	)											(415	)
Net income		60,141			3,352			15,284			(62,719	)		16,058
Net income attributable to non-controlling interest					(774	)								(774	)
Net income attributable to Headwaters Incorporated	$	60,141		$	2,578		$	15,284		$	(62,719	)	$	15,284

Schedule of condensed consolidating statement of cash flows

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended September 30, 2012

(in thousands)	Guarantor Subsidiaries			Parent Company			Eliminations			Headwaters Consolidated
Cash flows from operating activities:
Net loss	$	(13,536	)	$	(62,248	)	$	13,536		$	(62,248	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		51,333			148						51,481
Interest expense related to amortization of debt issue costs and debt discount					14,184						14,184
Stock-based compensation		673			1,064						1,737
Deferred income taxes		199			(1	)					198
Net gain on disposition of property, plant and equipment		(538	)								(538	)
Gain on sale of discontinued operations, net of income taxes		(267	)								(267	)
Asset impairments		13,166									13,166
Net loss of unconsolidated joint ventures		9,314									9,314
Gain on convertible debt repayments					(2,479	)					(2,479	)
Equity in (earnings) loss of subsidiaries					13,536			(13,536	)		0
Increase in trade receivables		(9,792	)								(9,792	)
Decrease in inventories		2,954									2,954
Increase in accounts payable and accrued liabilities		9,646			17,797						27,443
Other changes in operating assets and liabilities, net		16,928			(15,912	)					1,016
Net cash provided by (used in)operating activities		80,080			(33,911	)		—			46,169
Cash flows from investing activities:
Business acquisitions		(996	)								(996	)
Proceeds from sale of investments in unconsolidated joint ventures		18,522									18,522
Purchase of property, plant and equipment		(24,419	)		(2,028	)					(26,447	)
Proceeds from disposition of property, plant and equipment		1,261									1,261
Proceeds from sale of discontinued operations		2,000									2,000
Net decrease (increase) in long-term receivables and deposits		24			(66	)					(42	)
Net change in other assets		(214	)		(492	)					(706	)
Net cash used in investing activities		(3,822	)		(2,586	)		—			(6,408	)
Cash flows from financing activities:
Payments on long-term debt					(36,334	)					(36,334	)
Debt issue costs					(1,090	)					(1,090	)
Employee stock purchases		462			173						635
Intercompany transfers		(68,731	)		68,731						0
Net cash provided by (used in) financing activities		(68,269	)		31,480			—			(36,789	)
Net increase (decrease) in cash and cash equivalents		7,989			(5,017	)		—			2,972
Cash and cash equivalents, beginning of year		36,122			14,688						50,810
Cash and cash equivalents, end of year	$	44,111		$	9,671		$	—		$	53,782

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended September 30, 2013

(in thousands)	Guarantor Subsidiaries			Parent Company			Eliminations			Headwaters Consolidated
Cash flows from operating activities:
Net income (loss)	$	47,117		$	7,137		$	(47,117	)	$	7,137
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		52,027			290						52,317
Interest expense related to amortization of debt issue costs and debt discount					5,841						5,841
Stock-based compensation		765			938						1,703
Deferred income taxes		698									698
Net gain on disposition of property, plant and equipment		(649	)								(649	)
Loss on sale of discontinued operations, net of income taxes		55									55
Gain on convertible debt repayments					(35	)					(35	)
Equity in earnings of subsidiaries					(47,117	)		47,117			0
Increase in trade receivables		(5,035	)								(5,035	)
Decrease in inventories		2,221									2,221
Increase (decrease) in accounts payable and accrued liabilities		(5,637	)		1,419						(4,218	)
Other changes in operating assets and liabilities, net		31,000			(32,472	)					(1,472	)
Net cash provided by (used in) operating activities		122,562			(63,999	)		—			58,563
Cash flows from investing activities:
Business acquisitions		(43,250	)								(43,250	)
Purchase of property, plant and equipment		(26,940	)		(2,179	)					(29,119	)
Proceeds from disposition of property, plant and equipment		791									791
Proceeds from sale of discontinued operations		4,813									4,813
Net decrease (increase) in long-term receivables and deposits		(1,890	)		719						(1,171	)
Net change in other assets		(294	)		(143	)					(437	)
Net cash used in investing activities		(66,770	)		(1,603	)		—			(68,373	)
Cash flows from financing activities:
Proceeds from issuance of common stock					77,957						77,957
Payments on long-term debt					(47,355	)					(47,355	)
Employee stock purchases		539			203						742
Intercompany transfers		(29,695	)		29,695						0
Net cash provided by (used in) financing activities		(29,156	)		60,500			—			31,344
Net increase (decrease) in cash and cash equivalents		26,636			(5,102	)		—			21,534
Cash and cash equivalents, beginning of year		44,111			9,671						53,782
Cash and cash equivalents, end of year	$	70,747		$	4,569		$	—		$	75,316

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended September 30, 2014

(in thousands)	Guarantor Subsidiaries			Non-guarantor Subsidiaries			Parent Company			Eliminations			Headwaters Consolidated
Cash flows from operating activities:
Net income	$	60,141		$	3,352		$	15,284		$	(62,719	)	$	16,058
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		52,716			2,146			272						55,134
Interest expense related to amortization of debt issue costs and debt discount								2,175						2,175
Stock-based compensation		843						1,322						2,165
Deferred income taxes		1,062			604									1,666
Net loss on disposition of property, plant and equipment		44			6			45						95
Gain on sale of discontinued operations, net of income taxes		(2,727	)											(2,727	)
Asset impairments		1,815												1,815
Net loss of unconsolidated joint ventures					529									529
Equity in earnings of subsidiaries								(62,719	)		62,719			0
Decrease (increase) in trade receivables		(90	)		607									517
Decrease (increase) in inventories		(3,927	)		1,580									(2,347	)
Increase (decrease) in accounts payable and accrued liabilities		(17,364	)		828			3,311						(13,225	)
Other changes in operating assets and liabilities, net		33,349			129			(34,956	)					(1,478	)
Net cash provided by (used in) operating activities		125,862			9,781			(75,266	)		—			60,377
Cash flows from investing activities:
Business acquisitions		(10,500	)					(84,498	)					(94,998	)
Investments in unconsolidated joint ventures					(1,875	)								(1,875	)
Purchase of property, plant and equipment		(30,672	)		(829	)		(4,298	)					(35,799	)
Proceeds from disposition of property, plant and equipment		905												905
Proceeds from sale of discontinued operations		4,666												4,666
Net decrease in long-term receivables and deposits		7,145						300						7,445
Net change in other assets		(2,275	)					113						(2,162	)
Net cash used in investing activities		(30,731	)		(2,704	)		(88,383	)		—			(121,818	)
Cash flows from financing activities:
Net proceeds from issuance of long-term debt								146,650						146,650
Payments on long-term debt								(7,792	)					(7,792	)
Dividends paid to non-controlling interest in consolidated subsidiary					(950	)								(950	)
Employee stock purchases		580						179						759
Intercompany transfers		(132,872	)		(397	)		133,269						0
Net cash provided by (used in) financing activities		(132,292	)		(1,347	)		272,306			—			138,667
Net increase (decrease) in cash and cash equivalents		(37,161	)		5,730			108,657			—			77,226
Cash and cash equivalents, beginning of year		70,713			34			4,569						75,316
Cash and cash equivalents, end of year	$	33,552		$	5,764		$	113,226		$	—		$	152,542