Fair Value Of Financial Instruments

12 Months Ended

Sep. 30, 2011

Fair Value Of Financial Instruments

Fair Value Of Financial Instruments

8. Fair Value of Financial Instruments

Headwaters' financial instruments consist primarily of cash and cash equivalents, trade receivables, accounts payable and long-term debt. All of these financial instruments except long-term debt are either carried at fair value in the consolidated balance sheets or are short-term in nature. Accordingly, the carrying values for those financial instruments as reflected in the consolidated balance sheets closely approximate their fair values.

All of Headwaters' outstanding long-term debt as of September 30, 2010 and 2011 was fixed-rate. Using fair values for the debt, the aggregate fair value of Headwaters' long-term debt as of September 30, 2010 would have been approximately $495.0 million, compared to a carrying value of $469.9 million, and the aggregate fair value as of September 30, 2011 would have been approximately $427.0 million, compared to a carrying value of $527.8 million.

Fair value "Level 2" estimates for long-term debt were based primarily on discounted future cash flows using estimated current risk-adjusted borrowing rates for similar instruments. The fair values for long-term debt differ from the carrying values primarily due to interest rates that differ from current market interest rates and differences between Headwaters' common stock price at the balance sheet measurement dates and the conversion prices for the convertible senior subordinated notes.