Condensed Consolidating Financial Information

3 Months Ended

Dec. 31, 2012

Condensed Consolidating Financial Information

Condensed Consolidating Financial Information

14.  Condensed Consolidating Financial Information

Headwaters’ 7-5/8% senior secured notes are jointly and severally, fully and unconditionally guaranteed by Headwaters Incorporated and by all of Headwaters’ wholly-owned domestic subsidiaries. The non-guaranteeing entities include primarily joint ventures in which Headwaters has a non-controlling ownership interest. Separate stand-alone financial statements and disclosures for Headwaters Incorporated and each of the guarantor subsidiaries are not presented because the guarantees are full and unconditional and the guarantor subsidiaries have joint and several liability.

There are no significant restrictions on the ability of Headwaters Incorporated to obtain funds from the guarantor subsidiaries nor on the ability of the guarantor subsidiaries to obtain funds from Headwaters Incorporated or other guarantor subsidiaries. The non-guaranteeing entities represent less than 3% of consolidated assets, stockholders’ equity, revenues, income from continuing operations before taxes and cash flows from operating activities. Accordingly, the following condensed consolidating financial information does not present separately the non-guarantor entities’ information.

CONDENSED CONSOLIDATING BALANCE SHEET — September 30, 2012

	Guarantor			Parent			Eliminationsand			Headwaters
(in thousands)	Subsidiaries			Company			Reclassifications			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	44,111		$	9,671		$	—		$	53,782
Trade receivables, net	102,006									102,006
Inventories	31,588									31,588
Current and deferred income taxes	16,168			17,827			(23,122		)	10,873
Assets held for sale	5,864									5,864
Other	10,426			157						10,583
Total current assets	210,163			27,655			(23,122		)	214,696
Property, plant and equipment, net	157,477			2,229						159,706
Other assets:
Intangible assets, net	143,911									143,911
Goodwill	116,671									116,671
Assets held for sale	7,807									7,807
Investments in subsidiaries and intercompany accounts	362,569			95,929			(458,498		)	—
Intercompany notes				637,046			(637,046		)	—
Deferred income taxes	70,285			18,309			(88,594		)	—
Other	15,645			22,501						38,146
Total other assets	716,888			773,785			(1,184,138		)	306,535
Total assets	$	1,084,528		$	803,669		$	(1,207,260	)	$	680,937
LIABILITIES AND STOCKHOLDERS’ EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable	$	17,389		$	88		$	—		$	17,477
Accrued personnel costs	14,678			32,370						47,048
Accrued interest				16,267						16,267
Current and deferred income taxes	19,232			4,680			(23,122		)	790
Liabilities associated with assets held for sale	8,640									8,640
Other accrued liabilities	48,760			2,186						50,946
Total current liabilities	108,699			55,591			(23,122		)	141,168
Long-term liabilities:
Long-term debt				500,539						500,539
Income taxes	89,025			21,648			(88,594		)	22,079
Liabilities associated with assets held for sale	9,966									9,966
Intercompany notes	637,046						(637,046		)	—
Other	4,100			6,214						10,314
Total long-term liabilities	740,137			528,401			(725,640		)	542,898
Total liabilities	848,836			583,992			(748,762		)	684,066
Stockholders’ equity (net capital deficiency):
Common stock				61						61
Capital in excess of par value	458,498			640,047			(458,498		)	640,047
Retained earnings (accumulated deficit)	(222,806		)	(420,303		)				(643,109		)
Treasury stock				(128		)				(128		)
Total stockholders’ equity (net capital deficiency)	235,692			219,677			(458,498		)	(3,129		)
Total liabilities and stockholders’ equity (net capital deficiency)	$	1,084,528		$	803,669		$	(1,207,260	)	$	680,937

CONDENSED CONSOLIDATING BALANCE SHEET — December 31, 2012

	Guarantor			Parent			Eliminationsand			Headwaters
(in thousands)	Subsidiaries			Company			Reclassifications			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	39,517		$	38,903		$	—		$	78,420
Trade receivables, net	70,916									70,916
Inventories	39,153									39,153
Current and deferred income taxes	16,168			17,827			(22,453		)	11,542
Assets held for sale	4,289									4,289
Other	10,636			1,039						11,675
Total current assets	180,679			57,769			(22,453		)	215,995
Property, plant and equipment, net	159,447			2,877						162,324
Other assets:
Intangible assets, net	138,975									138,975
Goodwill	153,001									153,001
Assets held for sale	7,899									7,899
Investments in subsidiaries and intercompany accounts	345,394			113,104			(458,498		)	—
Intercompany notes				637,046			(637,046		)	—
Deferred income taxes	70,285			18,061			(88,346		)	—
Other	15,764			22,772						38,536
Total other assets	731,318			790,983			(1,183,890		)	338,411
Total assets	$	1,071,444		$	851,629		$	(1,206,343	)	$	716,730
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	15,027		$	259		$	—		$	15,286
Accrued personnel costs	7,125			22,289						29,414
Accrued interest				10,077						10,077
Current and deferred income taxes	19,576			2,877			(22,453		)	0
Liabilities associated with assets held for sale	6,183									6,183
Other accrued liabilities	44,667			1,628						46,295
Total current liabilities	92,578			37,130			(22,453		)	107,255
Long-term liabilities:
Long-term debt				501,271						501,271
Income taxes	89,057			21,397			(88,346		)	22,108
Liabilities associated with assets held for sale	5,655									5,655
Intercompany notes	637,046						(637,046		)	—
Other	3,876			7,043						10,919
Total long-term liabilities	735,634			529,711			(725,392		)	539,953
Total liabilities	828,212			566,841			(747,845		)	647,208
Stockholders’ equity:
Common stock				73						73
Capital in excess of par value	458,498			718,622			(458,498		)	718,622
Retained earnings (accumulated deficit)	(215,266		)	(433,715		)				(648,981		)
Treasury stock				(192		)				(192		)
Total stockholders’ equity	243,232			284,788			(458,498		)	69,522
Total liabilities and stockholders’ equity	$	1,071,444		$	851,629		$	(1,206,343	)	$	716,730

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended December 31, 2011

	Guarantor			Parent			Headwaters
(in thousands)	Subsidiaries			Company			Consolidated
Revenue:
Light building products	$	73,334		$	—		$	73,334
Heavy construction materials	63,138						63,138
Energy technology	955						955
Total revenue	137,427			—			137,427
Cost of revenue:
Light building products	55,330						55,330
Heavy construction materials	47,098						47,098
Energy technology	557						557
Total cost of revenue	102,985			—			102,985
Gross profit	34,442			—			34,442
Operating expenses:
Amortization	5,505						5,505
Research and development	1,854						1,854
Selling, general and administrative	18,169			3,113			21,282
Restructuring costs	1,388						1,388
Total operating expenses	26,916			3,113			30,029
Operating income (loss)	7,526			(3,113		)	4,413
Other income (expense):
Net interest expense	(19		)	(12,437		)	(12,456		)
Other, net	(6,162		)	2,025			(4,137		)
Total other income (expense), net	(6,181		)	(10,412		)	(16,593		)
Income (loss) from continuing operations before income taxes	1,345			(13,525		)	(12,180		)
Income tax benefit (provision)	189			(1,289		)	(1,100		)
Income (loss) from continuing operations	1,534			(14,814		)	(13,280		)
Loss from discontinued operations, net of income taxes	(10,468		)				(10,468		)
Net loss	$	(8,934	)	$	(14,814	)	$	(23,748	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended December 31, 2012

	Guarantor			Parent			Headwaters
(in thousands)	Subsidiaries			Company			Consolidated
Revenue:
Light building products	$	76,688		$	—		$	76,688
Heavy construction materials	68,158						68,158
Energy technology	4,727						4,727
Total revenue	149,573			—			149,573
Cost of revenue:
Light building products	56,501						56,501
Heavy construction materials	53,584						53,584
Energy technology	2,243						2,243
Total cost of revenue	112,328			—			112,328
Gross profit	37,245			—			37,245
Operating expenses:
Amortization	4,936						4,936
Research and development	1,606						1,606
Selling, general and administrative	19,887			4,784			24,671
Total operating expenses	26,429			4,784			31,213
Operating income (loss)	10,816			(4,784		)	6,032
Other income (expense):
Net interest expense	(14		)	(10,458		)	(10,472		)
Other, net	36						36
Total other income (expense), net	22			(10,458		)	(10,436		)
Income (loss) from continuing operations before income taxes	10,838			(15,242		)	(4,404		)
Income tax benefit (provision)	(1,300		)	1,830			530
Income (loss) from continuing operations	9,538			(13,412		)	(3,874		)
Loss from discontinued operations, net of income taxes	(1,998		)				(1,998		)
Net income (loss)	$	7,540		$	(13,412	)	$	(5,872	)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Three Months Ended December 31, 2011

	Guarantor			Parent			Headwaters
(in thousands)	Subsidiaries			Company			Consolidated
Cash flows from operating activities:
Net loss	$	(8,934	)	$	(14,814	)	$	(23,748	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	13,167			15			13,182
Interest expense related to amortization of debt issue costs and debt discount				3,049			3,049
Stock-based compensation	263			361			624
Net gain on disposition of property, plant and equipment	(123		)				(123		)
Gain on convertible debt repayment				(2,025		)	(2,025		)
Non-cash restructuring costs	646						646
Net loss of unconsolidated joint ventures	6,069						6,069
Decrease in trade receivables	30,606						30,606
Increase in inventories	(283		)				(283		)
Decrease in accounts payable and accrued liabilities	(10,551		)	(11,421		)	(21,972		)
Other changes in operating assets and liabilities, net	(24,362		)	21,201			(3,161		)
Net cash provided by (used in) operating activities	6,498			(3,634		)	2,864
Cash flows from investing activities:
Purchase of property, plant and equipment	(6,601		)	(18		)	(6,619		)
Proceeds from disposition of property, plant and equipment	136						136
Net change in other assets	(2,214		)	1,987			(227		)
Net cash provided by (used in) investing activities	(8,679		)	1,969			(6,710		)
Cash flows from financing activities:
Payments on long-term debt				(5,476		)	(5,476		)
Employee stock purchases	170			65			235
Net cash provided by (used in) financing activities	170			(5,411		)	(5,241		)
Net decrease in cash and cash equivalents	(2,011		)	(7,076		)	(9,087		)
Cash and cash equivalents, beginning of period	36,122			14,688			50,810
Cash and cash equivalents, end of period	$	34,111		$	7,612		$	41,723

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Three Months Ended December 31, 2012

	Guarantor			Parent			Headwaters
(in thousands)	Subsidiaries			Company			Consolidated
Cash flows from operating activities:
Net income (loss)	$	7,540		$	(13,412	)	$	(5,872	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	12,381			55			12,436
Interest expense related to amortization of debt issue costs and debt discount				1,219			1,219
Stock-based compensation	180			204			384
Net gain on disposition of property, plant and equipment	(261		)				(261		)
Decrease in trade receivables	32,164						32,164
Increase in inventories	(461		)				(461		)
Decrease in accounts payable and accrued liabilities	(19,464		)	(16,659		)	(36,123		)
Other changes in operating assets and liabilities, net	11,763			(19,495		)	(7,732		)
Net cash provided by (used in) operating activities	43,842			(48,088		)	(4,246		)
Cash flows from investing activities:
Payment for acquisition	(42,950		)				(42,950		)
Purchase of property, plant and equipment	(5,880		)	(673		)	(6,553		)
Proceeds from disposition of property, plant and equipment	296						296
Net change in other assets	(119		)	71			(48		)
Net cash used in investing activities	(48,653		)	(602		)	(49,255		)
Cash flows from financing activities:
Net proceeds from issuance of common stock				77,823			77,823
Employee stock purchases	217			99			316
Net cash provided by financing activities	217			77,922			78,139
Net increase (decrease) in cash and cash equivalents	(4,594		)	29,232			24,638
Cash and cash equivalents, beginning of period	44,111			9,671			53,782
Cash and cash equivalents, end of period	$	39,517		$	38,903		$	78,420