Condensed Consolidating Financial Information (Tables)

6 Months Ended

Mar. 31, 2016

Condensed Consolidating Financial Information

Schedule of condensed consolidating balance sheet

CONDENSED CONSOLIDATING BALANCE SHEET — September 30, 2015

			Non-				Eliminations
	Guarantor		guarantor		Parent		and		Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Reclassifications		Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	25,819	$	3,577	$	113,201	$	—	$	142,597
Trade receivables, net		129,095		5,289		—		—		134,384
Inventories		52,699		2,375		—		—		55,074
Current income taxes		—		—		143,305		(142,976)		329
Other		10,666		144		1,017		—		11,827
Total current assets		218,279		11,385		257,523		(142,976)		344,211
Property, plant and equipment, net		164,413		9,978		11,327		—		185,718
Other assets:
Goodwill		147,330		30,869		—		—		178,199
Intangible assets, net		116,479		27,239		—		—		143,718
Investments in subsidiaries		55,844		—		372,864		(428,708)		—
Intercompany accounts and notes		57,793		—		637,046		(694,839)		—
Deferred income taxes		—		25,204		79,763		(12,115)		92,852
Other		11,243		2,291		20,787		—		34,321
Total other assets		388,689		85,603		1,110,460		(1,135,662)		449,090
Total assets	$	771,381	$	106,966	$	1,379,310	$	(1,278,638)	$	979,019
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	23,619	$	1,114	$	573	$	—	$	25,306
Accrued personnel costs		14,542		501		37,501		—		52,544
Accrued interest		—		—		2,295		—		2,295
Current income taxes		137,502		5,474		—		(142,976)		—
Other accrued liabilities		39,604		6,380		3,502		—		49,486
Current portion of long-term debt		—		—		4,250		—		4,250
Total current liabilities		215,267		13,469		48,121		(142,976)		133,881
Long-term liabilities:
Long-term debt, net		—		—		558,080		—		558,080
Income taxes		15,091		—		3,614		(12,115)		6,590
Intercompany accounts and notes		—		178,179		516,660		(694,839)		—
Other		1,481		13,897		14,808		—		30,186
Total long-term liabilities		16,572		192,076		1,093,162		(706,954)		594,856
Total liabilities		231,839		205,545		1,141,283		(849,930)		728,737
Redeemable non-controlling interest in consolidated subsidiary		—		12,431		—		—		12,431
Stockholders’ equity:
Common stock		—		—		74		—		74
Capital in excess of par value		486,069		54,470		728,843		(540,715)		728,667
Retained earnings (accumulated deficit)		53,473		(165,480)		(489,889)		112,007		(489,889)
Treasury stock		—		—		(1,001)		—		(1,001)
Total stockholders’ equity		539,542		(111,010)		238,027		(428,708)		237,851
Total liabilities and stockholders’ equity	$	771,381	$	106,966	$	1,379,310	$	(1,278,638)	$	979,019

CONDENSED CONSOLIDATING BALANCE SHEET — March 31, 2016

			Non-				Eliminations
	Guarantor		guarantor		Parent		and		Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Reclassifications		Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	15,989	$	3,192	$	39,310	$	—	$	58,491
Trade receivables, net		99,911		6,241		—		—		106,152
Inventories		62,367		3,713		—		—		66,080
Current income taxes		—		—		155,502		(153,072)		2,430
Other		10,089		266		807		—		11,162
Total current assets		188,356		13,412		195,619		(153,072)		244,315
Property, plant and equipment, net		171,457		10,179		12,741		—		194,377
Other assets:
Goodwill		204,301		41,866		—		—		246,167
Intangible assets, net		124,403		37,359		—		—		161,762
Investments in subsidiaries		—		—		441,624		(441,624)		—
Intercompany accounts and notes		97,656		—		621,480		(719,136)		—
Deferred income taxes		—		25,045		76,746		(18,165)		83,626
Other		12,937		2,396		25,074		—		40,407
Total other assets		439,297		106,666		1,164,924		(1,178,925)		531,962
Total assets	$	799,110	$	130,257	$	1,373,284	$	(1,331,997)	$	970,654
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	18,568	$	1,240	$	209	$	—	$	20,017
Accrued personnel costs		11,604		241		23,544		—		35,389
Accrued interest		—		—		2,241		—		2,241
Current income taxes		146,927		6,145		—		(153,072)		—
Other accrued liabilities		45,967		3,778		2,363		—		52,108
Current portion of long-term debt		—		—		4,250		—		4,250
Total current liabilities		223,066		11,404		32,607		(153,072)		114,005
Long-term liabilities:
Long-term debt, net		—		—		553,330		—		553,330
Income taxes		21,090		5		—		(18,165)		2,930
Intercompany accounts and notes		—		202,476		516,660		(719,136)		—
Other		1,033		16,570		16,657		—		34,260
Total long-term liabilities		22,123		219,051		1,086,647		(737,301)		590,520
Total liabilities		245,189		230,455		1,119,254		(890,373)		704,525
Redeemable non-controlling interest in consolidated subsidiary		—		12,275		—		—		12,275
Stockholders’ equity:
Common stock		—		—		74		—		74
Capital in excess of par value		471,779		52,029		730,525		(523,984)		730,349
Retained earnings (accumulated deficit)		82,142		(164,502)		(475,363)		82,360		(475,363)
Treasury stock		—		—		(1,206)		—		(1,206)
Total stockholders’ equity		553,921		(112,473)		254,030		(441,624)		253,854
Total liabilities and stockholders’ equity	$	799,110	$	130,257	$	1,373,284	$	(1,331,997)	$	970,654

Schedule of condensed consolidating statement of income

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended March 31, 2015

			Non-
	Guarantor		guarantor		Parent				Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Eliminations		Consolidated
Revenue:
Building products	$	95,935	$	10,471	$	—	$	—	$	106,406
Construction materials		67,498		—		—		—		67,498
Energy technology		5,821		—		—		—		5,821
Total revenue		169,254		10,471		—		—		179,725
Cost of revenue:
Building products		72,416		7,065		—		—		79,481
Construction materials		50,738		—		—		—		50,738
Energy technology		2,365		—		—		—		2,365
Total cost of revenue		125,519		7,065		—		—		132,584
Gross profit		43,735		3,406		—		—		47,141
Operating expenses:
Selling, general and administrative		26,636		1,618		6,097		—		34,351
Amortization		4,191		369		—		—		4,560
Total operating expenses		30,827		1,987		6,097		—		38,911
Operating income (loss)		12,908		1,419		(6,097)		—		8,230
Other income (expense):
Net interest expense		(60)		—		(35,905)		—		(35,965)
Equity in earnings of subsidiaries		—		—		12,325		(12,325)		—
Other, net		(62)		29		—		—		(33)
Total other income (expense), net		(122)		29		(23,580)		(12,325)		(35,998)
Income from continuing operations before income taxes		12,786		1,448		(29,677)		(12,325)		(27,768)
Income tax benefit (provision)		(1,300)		(140)		4,220		—		2,780
Income from continuing operations		11,486		1,308		(25,457)		(12,325)		(24,988)
Loss from discontinued operations, net of income taxes		—		(210)		—		—		(210)
Net income		11,486		1,098		(25,457)		(12,325)		(25,198)
Net income attributable to non-controlling interest		—		(259)		—		—		(259)
Net income attributable to Headwaters Incorporated	$	11,486	$	839	$	(25,457)	$	(12,325)	$	(25,457)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended March 31, 2016

			Non-
	Guarantor		guarantor		Parent				Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Eliminations		Consolidated
Revenue:
Building products	$	116,782	$	12,413	$	—	$	—	$	129,195
Construction materials		71,755		—		—		—		71,755
Energy technology		1,382		—		—		—		1,382
Total revenue		189,919		12,413		—		—		202,332
Cost of revenue:
Building products		84,482		8,692		—		—		93,174
Construction materials		53,812		—		—		—		53,812
Energy technology		469		—		—		—		469
Total cost of revenue		138,763		8,692		—		—		147,455
Gross profit		51,156		3,721		—		—		54,877
Operating expenses:
Selling, general and administrative		29,331		1,859		6,692		—		37,882
Amortization		4,446		369		—		—		4,815
Total operating expenses		33,777		2,228		6,692		—		42,697
Operating income (loss)		17,379		1,493		(6,692)		—		12,180
Other income (expense):
Net interest expense		5		(3)		(8,058)		—		(8,056)
Equity in earnings of subsidiaries		—		—		11,021		(11,021)		—
Other, net		(82)		70		—		—		(12)
Total other income (expense), net		(77)		67		2,963		(11,021)		(8,068)
Income (loss) from continuing operations before income taxes		17,302		1,560		(3,729)		(11,021)		4,112
Income tax benefit (provision)		(6,720)		(610)		5,830		—		(1,500)
Income from continuing operations		10,582		950		2,101		(11,021)		2,612
Loss from discontinued operations, net of income taxes		—		(228)		—		—		(228)
Net income		10,582		722		2,101		(11,021)		2,384
Net income attributable to non-controlling interest		—		(283)		—		—		(283)
Net income attributable to Headwaters Incorporated	$	10,582	$	439	$	2,101	$	(11,021)	$	2,101

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Six Months Ended March 31, 2015

			Non-
	Guarantor		guarantor		Parent				Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Eliminations		Consolidated
Revenue:
Building products	$	202,328	$	21,612	$	—	$	—	$	223,940
Construction materials		148,902		—		—		—		148,902
Energy technology		6,480		—		—		—		6,480
Total revenue		357,710		21,612		—		—		379,322
Cost of revenue:
Building products		148,934		14,739		—		—		163,673
Construction materials		110,249		—		—		—		110,249
Energy technology		2,572		—		—		—		2,572
Total cost of revenue		261,755		14,739		—		—		276,494
Gross profit		95,955		6,873		—		—		102,828
Operating expenses:
Selling, general and administrative		52,438		3,192		10,750		—		66,380
Amortization		8,309		737		—		—		9,046
Total operating expenses		60,747		3,929		10,750		—		75,426
Operating income (loss)		35,208		2,944		(10,750)		—		27,402
Other income (expense):
Net interest expense		(104)		—		(47,813)		—		(47,917)
Equity in earnings of subsidiaries		—		—		34,125		(34,125)		—
Other, net		(142)		(160)		—		—		(302)
Total other income (expense), net		(246)		(160)		(13,688)		(34,125)		(48,219)
Income from continuing operations before income taxes		34,962		2,784		(24,438)		(34,125)		(20,817)
Income tax benefit (provision)		(2,570)		(270)		5,820		—		2,980
Income from continuing operations		32,392		2,514		(18,618)		(34,125)		(17,837)
Loss from discontinued operations, net of income taxes		(67)		(210)		—		—		(277)
Net Income		32,325		2,304		(18,618)		(34,125)		(18,114)
Net income attributable to non-controlling interest		—		(504)		—		—		(504)
Net income attributable to Headwaters Incorporated	$	32,325	$	1,800	$	(18,618)	$	(34,125)	$	(18,618)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Six Months Ended March 31, 2016

			Non-
	Guarantor		guarantor		Parent				Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Eliminations		Consolidated
Revenue:
Building products	$	236,427	$	24,613	$	—	$	—	$	261,040
Construction materials		157,753		—		—		—		157,753
Energy technology		1,957		—		—		—		1,957
Total revenue		396,137		24,613		—		—		420,750
Cost of revenue:
Building products		169,076		17,257		—		—		186,333
Construction materials		114,482		—		—		—		114,482
Energy technology		787		—		—		—		787
Total cost of revenue		284,345		17,257		—		—		301,602
Gross profit		111,792		7,356		—		—		119,148
Operating expenses:
Selling, general and administrative		57,025		3,553		12,186		—		72,764
Amortization		8,644		737		—		—		9,381
Total operating expenses		65,669		4,290		12,186		—		82,145
Operating income (loss)		46,123		3,066		(12,186)		—		37,003
Other income (expense):
Net interest expense		(95)		(3)		(16,175)		—		(16,273)
Equity in earnings of subsidiaries		—		—		29,647		(29,647)		—
Other, net		(125)		44		—		—		(81)
Total other income (expense), net		(220)		41		13,472		(29,647)		(16,354)
Income from continuing operations before income taxes		45,903		3,107		1,286		(29,647)		20,649
Income tax benefit (provision)		(17,130)		(1,210)		13,240		—		(5,100)
Income from continuing operations		28,773		1,897		14,526		(29,647)		15,549
Loss from discontinued operations, net of income taxes		—		(444)		—		—		(444)
Net Income		28,773		1,453		14,526		(29,647)		15,105
Net income attributable to non-controlling interest		—		(579)		—		—		(579)
Net income attributable to Headwaters Incorporated	$	28,773	$	874	$	14,526	$	(29,647)	$	14,526

Schedule of condensed consolidating statement of cash flows

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended March 31, 2015

			Non-
	Guarantor		guarantor		Parent				Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Eliminations		Consolidated
Cash flows from operating activities:
Net income	$	32,325	$	2,304	$	(18,618)	$	(34,125)	$	(18,114)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		24,223		1,421		212		—		25,856
Interest expense related to amortization of debt issue costs and debt discount		—		—		5,042		—		5,042
Stock-based compensation		496		—		843		—		1,339
Deferred income taxes		295		182		—		—		477
Net loss on disposition of property, plant and equipment		112		1		—		—		113
Gain on sale of discontinued operations, net of income taxes		45		196		—		—		241
Net loss of unconsolidated joint ventures		—		234		—		—		234
Equity in earnings of subsidiaries		—		—		(34,125)		34,125		0
Decrease (increase) in trade receivables		28,597		(250)		—		—		28,347
Decrease (increase) in inventories		(10,071)		(557)		—		—		(10,628)
Increase (decrease) in accounts payable and accrued liabilities		(23,170)		2,248		(26,658)		—		(47,580)
Other changes in operating assets and liabilities, net		2,554		(7,521)		(3,802)		—		(8,769)
Net cash provided by (used in) operating activities		55,406		(1,742)		(77,106)		—		(23,442)
Cash flows from investing activities:
Business acquisitions		(1,200)		—		—		—		(1,200)
Investments in unconsolidated joint ventures		(125)		—		—		—		(125)
Purchase of property, plant and equipment		(14,496)		(259)		(2,719)		—		(17,474)
Proceeds from disposition of property, plant and equipment		640		—		—		—		640
Net decrease in long-term receivables and deposits		2,584		—		1,066		—		3,650
Net change in other assets		(437)		—		93		—		(344)
Net cash used in investing activities		(13,034)		(259)		(1,560)		—		(14,853)
Cash flows from financing activities:
Net proceeds from issuance of long-term debt		—		—		414,675		—		414,675
Payments on long-term debt		—		—		(448,736)		—		(448,736)
Dividends paid to non-controlling interest in consolidated subsidiary		—		(927)		—		—		(927)
Employee stock purchases		342		16		106		—		464
Intercompany transfers		(39,633)		123		39,510		—		0
Net cash provided by (used in) financing activities		(39,291)		(788)		5,555		—		(34,524)
Net increase (decrease) in cash and cash equivalents		3,081		(2,789)		(73,111)		—		(72,819)
Cash and cash equivalents, beginning of year		33,552		5,764		113,226		—		152,542
Cash and cash equivalents, end of year	$	36,633	$	2,975	$	40,115	$	—	$	79,723

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended March 31, 2016

			Non-
	Guarantor		guarantor		Parent				Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Eliminations		Consolidated
Cash flows from operating activities:
Net income	$	28,773	$	1,453	$	14,526	$	(29,647)	$	15,105
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		26,084		1,503		310		—		27,897
Interest expense related to amortization of debt issue costs and debt discount		—		—		1,184		—		1,184
Stock-based compensation		537		—		984		—		1,521
Deferred income taxes		6,809		159		1,675		—		8,643
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock		(95)		—		(2)		—		(97)
Net loss (gain) on disposition of property, plant and equipment		(49)		3		—		—		(46)
Loss on sale of discontinued operations, net of income taxes		—		3,040		—		—		3,040
Net loss of unconsolidated joint ventures		—		26		—		—		26
Equity in earnings of subsidiaries		—		—		(29,647)		29,647		0
Decrease (increase) in trade receivables		34,198		(660)		—		—		33,538
Increase in inventories		(3,097)		(969)		—		—		(4,066)
Increase (decrease) in accounts payable and accrued liabilities		(17,680)		(3,178)		(15,514)		—		(36,372)
Other changes in operating assets and liabilities, net		(9,522)		69		3,428		—		(6,025)
Net cash provided by (used in) operating activities		65,958		1,446		(23,056)		—		44,348
Cash flows from investing activities:
Business acquisitions		(73,800)		(22,657)		—		—		(96,457)
Purchase of property, plant and equipment		(18,856)		(268)		(1,758)		—		(20,882)
Proceeds from disposition of property, plant and equipment		404		—		—		—		404
Net decrease in long-term receivables and deposits		(1,546)		(22)		(161)		—		(1,729)
Net change in other assets		(1,443)		(109)		(2,265)		—		(3,817)
Net cash used in investing activities		(95,241)		(23,056)		(4,184)		—		(122,481)
Cash flows from financing activities:
Payments on long-term debt		—		—		(5,874)		—		(5,874)
Dividends paid to non-controlling interest in consolidated subsidiary		—		(735)		—		—		(735)
Employee stock purchases		390		20		129		—		539
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock		95		—		2		—		97
Intercompany transfers		18,968		21,940		(40,908)		—		0
Net cash provided by (used in) financing activities		19,453		21,225		(46,651)		—		(5,973)
Net decrease in cash and cash equivalents		(9,830)		(385)		(73,891)		—		(84,106)
Cash and cash equivalents, beginning of year		25,819		3,577		113,201		—		142,597
Cash and cash equivalents, end of year	$	15,989	$	3,192	$	39,310	$	—	$	58,491