18.

Quarterly Financial Data (unaudited)

Summarized unaudited quarterly financial data for 2010 and 2011 is as follows.


	2010 ⁽⁸⁾
*(in thousands, except per-share data)*	First quarter			Second quarter			Third quarter			Fourth quarter ⁽³⁾			Full year
Net revenue ⁽¹⁾	$	130,796		$	115,734		$	173,814		$	177,869		$	598,213
Gross profit ⁽¹⁾		34,239			30,206			54,494			52,853			171,792
Net income (loss) ⁽¹⁾		(13,898	)		(13,030	)		1,508			(24,062	)		(49,482	)
Basic and diluted earnings (loss) per share ⁽²⁾		(0.23	)		(0.22	)		0.03			(0.40	)		(0.83	)

	2011 ⁽⁸⁾
*(in thousands, except per-share data)*	First quarter			Second quarter ⁽⁴⁾			Third quarter			Fourth quarter ⁽⁵⁾			Full year
Net revenue ⁽¹⁾	$	136,435		$	115,041		$	162,360		$	178,118		$	591,954
Gross profit ⁽¹⁾		32,444			22,914			45,691			48,874			149,923
Net loss ^(1)(6)(7)		(20,687	)		(156,154	)		(6,348	)		(46,732	)		(229,921	)
Basic and diluted earnings (loss) per share ⁽²⁾		(0.34	)		(2.58	)		(0.10	)		(0.77	)		(3.80	)

⁽¹⁾	Headwaters' revenue is seasonal, with higher revenues typically occurring in the third and fourth quarters than in the first and second quarters. As a result, profitability is also usually higher in the last half of the year than in the first half of the year.

⁽²⁾

In accordance with ASC Topic 260 Earnings Per Share, EPS is computed independently for each of the four fiscal quarters in a year. The basic and diluted EPS computed for certain years do not equal the sum of the four quarterly computations due to the combination of profitable quarters and loss quarters and / or rounding conventions.

⁽³⁾	In the fourth quarter of 2010, Headwaters recorded an asset impairment charge of $34.5 million. (see Note 6).

⁽⁴⁾	In the second quarter of 2011, Headwaters recorded an asset impairment charge of $37.0 million (see Note 6), a litigation accrual for $15.0 million (see Note 14), and incremental interest expense related to the senior secured debt refinancing of $68.9 million (see Note 7).

⁽⁵⁾	In the fourth quarter of 2011, Headwaters recorded an asset impairment charge of $35.0 million (see Note 6).

⁽⁶⁾	In 2011, Headwaters recorded restructuring costs of $17.9 million (see Note 13). These restructuring costs were approximately $1.0 million, $4.8 million, $0.4 million and $11.7 million for the first, second, third and fourth quarters of the year, respectively.

⁽⁷⁾

In 2011, Headwaters recorded a full valuation allowance on its net amortizable deferred tax assets and recorded a minimal income tax benefit even though there was a pre-tax loss of approximately $134.1 million. The reported income tax rate for 2011 of near 0% is due to not recognizing benefit for pre-tax losses and tax credits (see Note 9).

⁽⁸⁾

In the fourth quarter of 2011, Headwaters committed to a plan to sell its coal cleaning business and met all the criteria for presentation of this business as a discontinued operation (see Note 4). Accordingly, the results of Headwaters' coal cleaning operations have been presented as discontinued for all periods presented, which changed the amounts reported in the quarters shown in the table above for net revenue and gross profit. Also, as a result of significant restructuring costs incurred in the fourth quarter of 2011, Headwaters reclassified certain costs incurred in prior 2011 quarters to be consistent with the fourth quarter presentation (see Note 13). As a result of these two changes, net revenue and gross profit as reported in the table above are different from the amounts originally reported in Headwaters' 2010 Form 10-K and in Forms 10-Q for 2010 and 2011, as shown below.


	2010
*(in thousands)*	First quarter		Second quarter		Third quarter		Fourth quarter		Full year
Net revenue, as originally reported	$	139,646	$	128,154	$	192,181	$	194,718	$	654,699
Net revenue, as revised and reported above		130,796		115,734		173,814		177,869		598,213
Gross profit, as originally reported		29,385		27,526		54,964		51,440		163,315
Gross profit, as revised and reported above		34,239		30,206		54,494		52,853		171,792

	2011
*(in thousands)*	First quarter		Second quarter		Third quarter		Fourth quarter		Full year
Net revenue, as originally reported	$	154,701	$	127,135	$	172,257		n/a		n/a
Net revenue, as revised and reported above		136,435		115,041		162,360		n/a		n/a
Gross profit, as originally reported		32,815		17,542		40,460		n/a		n/a
Gross profit, as revised and reported above		32,444		22,914		45,691		n/a		n/a