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Equity Method Investee

9 Months Ended

Jun. 30, 2012

13. Equity Method Investee

Investments in entities in which Headwaters has a significant influence over operating and financial decisions are accounted for using the equity method of accounting. One such equity method investee was Blue Flint Ethanol LLC (Blue Flint). Effective January 1, 2012, Headwaters sold its interest in Blue Flint for approximately $18.5 million. Subsequent to Headwaters’ initial investment in Blue Flint, equity earnings in excess of $15.0 million were recorded that increased Headwaters’ carrying value of the investment to an amount that was in excess of the sales proceeds. As a result, in December 2011, a non-cash loss of approximately $6.3 million was recorded in other expense in the statement of operations.

- Definition

The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.

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