Condensed Consolidating Financial Information (Tables)

6 Months Ended

Mar. 31, 2014

Condensed Consolidating Financial Information

Schedule of condensed consolidating balance sheet

CONDENSED CONSOLIDATING BALANCE SHEET — September 30, 2013

	Guarantor			Parent			Eliminations and			Headwaters
(in thousands)	Subsidiaries			Company			Reclassifications			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 — March 31, 2014

	Guarantor			Non- guarantor			Parent			Eliminations and			Headwaters
(in thousands)	Subsidiaries			Subsidiaries			Company			Reclassifications			Consolidated

ASSETS

Current assets:
Cash and cash equivalents	$	84,860		$	3,094		$	66,279		$	—		$	154,233
Trade receivables, net	79,604			4,415									84,019
Inventories	49,658			1,479									51,137
Current and deferred income taxes	25,138						15,062			(25,216		)	14,984
Other	8,959			146			2,286						11,391
Total current assets	248,219			9,134			83,627			(25,216		)	315,764

Property, plant and equipment, net	153,629			10,881			5,651			—			170,161

Other assets:
Goodwill	138,377			30,112									168,489
Intangible assets, net	133,693			24,838									158,531
Investments in subsidiaries							357,449			(357,449		)	—
Intercompany accounts and notes	317,994						637,046			(955,040		)	—
Deferred income taxes	52,903						21,724			(74,627		)	—
Other	14,500			903			26,850						42,253
Total other assets	657,467			55,853			1,043,069			(1,387,116		)	369,273

Total assets	$	1,059,315		$	75,868		$	1,132,347		$	(1,412,332	)	$	855,198

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	17,268		$	727		$	499		$	—		$	18,494
Accrued personnel costs	8,157			849			28,052						37,058
Accrued interest							19,351						19,351
Current and deferred income taxes	22,490			180			4,272			(26,942		)	—
Other accrued liabilities	42,909			1,601			3,041						47,551
Total current liabilities	90,824			3,357			55,215			(26,942		)	122,454

Long-term liabilities:
Long-term debt							599,500						599,500
Income taxes	79,453						17,007			(74,627		)	21,833
Intercompany accounts and notes	577,855			1,672			375,513			(955,040		)	—
Other	12,923						10,978						23,901
Total long-term liabilities	670,231			1,672			1,002,998			(1,029,667		)	645,234
Total liabilities	761,055			5,029			1,058,213			(1,056,609		)	767,688

Non-controlling interest in consolidated subsidiary				13,376									13,376

Stockholders’ equity:
Common stock							73						73
Capital in excess of par value	458,498			57,519			722,414			(516,017		)	722,414
Retained earnings (accumulated deficit)	(160,238		)	(56		)	(647,718		)	160,294			(647,718		)
Treasury stock							(635		)				(635		)
Total stockholders’ equity	298,260			57,463			74,134			(355,723		)	74,134

Total liabilities and stockholders’ equity	$	1,059,315		$	75,868		$	1,132,347		$	(1,412,332	)	$	855,198

Schedule of condensed consolidating statement of operations

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended March 31, 2013

	Guarantor			Parent						Headwaters
(in thousands)	Subsidiaries			Company			Eliminations			Consolidated

Revenue:
Light building products	$	84,778		$	—		$	—		$	84,778
Heavy construction materials	54,014									54,014
Energy technology	2,196									2,196
Total revenue	140,988			—			—			140,988

Cost of revenue:
Light building products	64,126									64,126
Heavy construction materials	43,396									43,396
Energy technology	1,055									1,055
Total cost of revenue	108,577			—			—			108,577

Gross profit	32,411			—			—			32,411

Operating expenses:
Amortization	5,288									5,288
Selling, general and administrative	23,327			4,912						28,239
Total operating expenses	28,615			4,912			—			33,527

Operating income (loss)	3,796			(4,912		)	—			(1,116		)

Other income (expense):
Net interest expense	(44		)	(11,095		)				(11,139		)
Equity in earnings of subsidiaries				5,172			(5,172		)	—
Other, net	167			35						202
Total other income (expense), net	123			(5,888		)	(5,172		)	(10,937		)

Income (loss) from continuing operations before income taxes	3,919			(10,800		)	(5,172		)	(12,053		)

Income tax benefit (provision)	(770		)	2,540						1,770

Income (loss) from continuing operations	3,149			(8,260		)	(5,172		)	(10,283		)

Income from discontinued operations, net of income taxes	2,023									2,023

Net income (loss)	$	5,172		$	(8,260	)	$	(5,172	)	$	(8,260	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended March 31, 2014

	Guarantor			Non- guarantor			Parent						Headwaters
(in thousands)	Subsidiaries			Subsidiaries			Company			Eliminations			Consolidated

Revenue:
Light building products	$	85,108		$	9,031		$	—		$	—		$	94,139
Heavy construction materials	59,093												59,093
Energy technology	3,280												3,280
Total revenue	147,481			9,031			—			—			156,512

Cost of revenue:
Light building products	64,458			6,370									70,828
Heavy construction materials	45,669												45,669
Energy technology	1,464												1,464
Total cost of revenue	111,591			6,370			—			—			117,961

Gross profit	35,890			2,661			—			—			38,551

Operating expenses:
Amortization	5,123			362									5,485
Selling, general and administrative	25,610			1,142			5,765						32,517
Total operating expenses	30,733			1,504			5,765			—			38,002

Operating income (loss)	5,157			1,157			(5,765		)	—			549

Other income (expense):
Net interest expense	(146		)				(12,088		)				(12,234		)
Equity in earnings of subsidiaries							3,574			(3,574		)	—
Other, net	29			(61		)							(32		)
Total other income (expense), net	(117		)	(61		)	(8,514		)	(3,574		)	(12,266		)

Income (loss) from continuing operations before income taxes	5,040			1,096			(14,279		)	(3,574		)	(11,717		)

Income tax benefit (provision)	(1,571		)	(180		)	3,961						2,210

Income (loss) from continuing operations	3,469			916			(10,318		)	(3,574		)	(9,507		)

Loss from discontinued operations, net of income taxes	(575		)										(575		)

Net income (loss)	2,894			916			(10,318		)	(3,574		)	(10,082		)

Net income attributable to non-controlling interest				(236		)							(236		)

Net income (loss) attributable to Headwaters Incorporated	$	2,894		$	680		$	(10,318	)	$	(3,574	)	$	(10,318	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Six Months Ended March 31, 2013

	Guarantor			Parent						Headwaters
(in thousands)	Subsidiaries			Company			Eliminations			Consolidated

Revenue:
Light building products	$	161,466		$	—		$	—		$	161,466
Heavy construction materials	122,172									122,172
Energy technology	6,923									6,923
Total revenue	290,561			—			—			290,561

Cost of revenue:
Light building products	120,627									120,627
Heavy construction materials	96,980									96,980
Energy technology	3,298									3,298
Total cost of revenue	220,905			—			—			220,905

Gross profit	69,656			—			—			69,656

Operating expenses:
Amortization	10,224									10,224
Selling, general and administrative	44,820			9,696						54,516
Total operating expenses	55,044			9,696			—			64,740

Operating income (loss)	14,612			(9,696		)	—			4,916

Other income (expense):
Net interest expense	(58		)	(21,553		)				(21,611		)
Equity in earnings of subsidiaries				12,712			(12,712		)	—
Other, net	203			35						238
Total other income (expense), net	145			(8,806		)	(12,712		)	(21,373		)

Income (loss) from continuing operations before income taxes	14,757			(18,502		)	(12,712		)	(16,457		)

Income tax benefit (provision)	(2,070		)	4,370						2,300

Income (loss) from continuing operations	12,687			(14,132		)	(12,712		)	(14,157		)

Income from discontinued operations, net of income taxes	25									25

Net income (loss)	$	12,712		$	(14,132	)	$	(12,712	)	$	(14,132	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Six Months Ended March 31, 2014

	Guarantor			Non- guarantor			Parent						Headwaters
(in thousands)	Subsidiaries			Subsidiaries			Company			Eliminations			Consolidated

Revenue:
Light building products	$	176,445		$	10,706		$	—		$	—		$	187,151
Heavy construction materials	130,614												130,614
Energy technology	4,362												4,362
Total revenue	311,421			10,706			—			—			322,127

Cost of revenue:
Light building products	132,327			7,839									140,166
Heavy construction materials	100,434												100,434
Energy technology	2,083												2,083
Total cost of revenue	234,844			7,839			—			—			242,683

Gross profit	76,577			2,867			—			—			79,444

Operating expenses:
Amortization	10,229			362									10,591
Selling, general and administrative	48,411			1,395			10,938						60,744
Total operating expenses	58,640			1,757			10,938			—			71,335

Operating income (loss)	17,937			1,110			(10,938		)	—			8,109

Other income (expense):
Net interest expense	(167		)				(22,123		)				(22,290		)
Equity in earnings of subsidiaries							15,225			(15,225		)	—
Other, net	74			(94		)							(20		)
Total other income (expense), net	(93		)	(94		)	(6,898		)	(15,225		)	(22,310		)

Income (loss) from continuing operations before income taxes	17,844			1,016			(17,836		)	(15,225		)	(14,201		)

Income tax benefit (provision)	(3,350		)	(180		)	6,090						2,560

Income (loss) from continuing operations	14,494			836			(11,746		)	(15,225		)	(11,641		)

Income from discontinued operations, net of income taxes	125												125

Net income (loss)	14,619			836			(11,746		)	(15,225		)	(11,516		)

Net income attributable to non-controlling interest				(230		)							(230		)

Net income (loss) attributable to Headwaters Incorporated	$	14,619		$	606		$	(11,746	)	$	(15,225	)	$	(11,746	)

Schedule of condensed consolidating statement of cash flows

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended March 31, 2013

	Guarantor			Parent						Headwaters
(in thousands)	Subsidiaries			Company			Eliminations			Consolidated

Cash flows from operating activities:
Net income (loss)	$	12,712		$	(14,132	)	$	(12,712	)	$	(14,132	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	25,449			133						25,582
Interest expense related to amortization of debt issue costs and debt discount				3,165						3,165
Stock-based compensation	381			440						821
Deferred income taxes	55									55
Net gain on disposition of property, plant and equipment	(673		)							(673		)
Gain on sale of discontinued operations, net of income taxes	(3,110		)							(3,110		)
Equity in earnings of subsidiaries				(12,712		)	12,712			—
Decrease in trade receivables	31,676									31,676
Increase in inventories	(5,960		)							(5,960		)
Decrease in accounts payable and accrued liabilities	(20,707		)	(7,627		)				(28,334		)
Other changes in operating assets and liabilities, net	22,303			(30,436		)				(8,133		)
Net cash provided by (used in) operating activities	62,126			(61,169		)	—			957

Cash flows from investing activities:
Payment for acquisition	(43,250		)							(43,250		)
Purchase of property, plant and equipment	(13,220		)	(1,187		)				(14,407		)
Proceeds from disposition of property, plant and equipment	789									789
Proceeds from sale of discontinued operations	3,813									3,813
Net decrease (increase) in long-term receivables and deposits	(1,490		)	691						(799		)
Net change in other assets	(295		)	(171		)				(466		)
Net cash used in investing activities	(53,653		)	(667		)	—			(54,320		)

Cash flows from financing activities:
Net proceeds from issuance of common stock				77,957						77,957
Payments on long-term debt				(15,217		)				(15,217		)
Employee stock purchases	319			135						454
Net cash provided by financing activities	319			62,875			—			63,194

Net increase in cash and cash equivalents	8,792			1,039			—			9,831

Cash and cash equivalents, beginning of period	44,111			9,671						53,782

Cash and cash equivalents, end of period	$	52,903		$	10,710		$	—		$	63,613

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended March 31, 2014

				Non-
	Guarantor			guarantor			Parent						Headwaters
(in thousands)	Subsidiaries			Subsidiaries			Company			Eliminations			Consolidated

Cash flows from operating activities:
Net income (loss)	$	14,619		$	836		$	(11,746	)	$	(15,225	)	$	(11,516	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	25,582			748			130						26,460
Interest expense related to amortization of debt issue costs and debt discount							1,153						1,153
Stock-based compensation	404						612						1,016
Deferred income taxes	214												214
Net gain on disposition of property, plant and equipment	328						45						373
Gain on sale of discontinued operations, net of income taxes	(3,117		)										(3,117		)
Net loss of unconsolidated joint ventures				133									133
Equity in earnings of subsidiaries							(15,225		)	15,225			—
Decrease in trade receivables	30,264			647									30,911
Decrease (increase) in inventories	(11,139		)	1,385									(9,754		)
Decrease in accounts payable and accrued liabilities	(21,882		)	(331		)	(1,385		)				(23,598		)
Other changes in operating assets and liabilities, net	(15,224		)	1,320			8,374						(5,530		)
Net cash provided by (used in) operating activities	20,049			4,738			(18,042		)	—			6,745

Cash flows from investing activities:
Payments for acquisitions	(3,100		)				(57,519		)				(60,619		)
Payments for investments in unconsolidated joint ventures				(1,000		)							(1,000		)
Purchase of property, plant and equipment	(13,505		)	(678		)	(1,761		)				(15,944		)
Proceeds from disposition of property, plant and equipment	358												358
Proceeds from sale of discontinued operations	4,666												4,666
Net decrease in long-term receivables and deposits	5,527						298						5,825
Net change in other assets	(192		)				216						24
Net cash used in investing activities	(6,246		)	(1,678		)	(58,766		)	—			(66,690		)

Cash flows from financing activities:
Net proceeds from issuance of long-term debt							146,200						146,200
Payments on long-term debt							(7,792		)				(7,792		)
Employee stock purchases	344						110						454
Net cash provided by financing activities	344			—			138,518			—			138,862

Net increase in cash and cash equivalents	14,147			3,060			61,710			—			78,917

Cash and cash equivalents, beginning of period	70,713			34			4,569						75,316

Cash and cash equivalents, end of period	$	84,860		$	3,094		$	66,279		$	—		$	154,233