Condensed Consolidating Financial Information (Tables)

3 Months Ended

Dec. 31, 2016

Condensed Consolidating Financial Information

Schedule of Condensed Consolidating Balance Sheet

CONDENSED CONSOLIDATING BALANCE SHEET — September 30, 2016

			Non-				Eliminations
	Guarantor		guarantor		Parent		and		Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Reclassifications		Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	27,012	$	5,304	$	32,982	$	—	$	65,298
Trade receivables, net		145,443		6,641		—		—		152,084
Inventories		67,549		5,119		—		—		72,668
Current income taxes		—		—		59,989		(58,802)		1,187
Other		11,975		1,481		61		—		13,517
Total current assets		251,979		18,545		93,032		(58,802)		304,754
Property, plant and equipment, net		179,758		9,852		17,182		—		206,792
Other assets:
Goodwill		248,016		42,487		—		—		290,503
Intangible assets, net		282,239		36,923		—		—		319,162
Investments in subsidiaries		—		—		721,760		(721,760)		—
Intercompany accounts and notes		26,707		—		701,040		(727,747)		—
Deferred income taxes		—		23,083		57,053		(12,077)		68,059
Other		13,293		10,922		24,958		—		49,173
Total other assets		570,255		113,415		1,504,811		(1,461,584)		726,897
Total assets	$	1,001,992	$	141,812	$	1,615,025	$	(1,520,386)	$	1,238,443
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	27,659	$	1,301	$	1,251	$	—	$	30,211
Accrued personnel costs		14,945		519		29,902		—		45,366
Current income taxes		56,553		2,249		—		(58,802)		—
Other accrued liabilities		55,942		5,002		2,841		—		63,785
Current portion of long-term debt		—		—		7,785		—		7,785
Total current liabilities		155,099		9,071		41,779		(58,802)		147,147
Long-term liabilities:
Long-term debt, net		—		—		746,716		—		746,716
Income taxes		12,077		—		—		(12,077)		—
Intercompany accounts and notes		—		211,087		516,660		(727,747)		—
Other		4,581		16,941		19,708		—		41,230
Total long-term liabilities		16,658		228,028		1,283,084		(739,824)		787,946
Total liabilities		171,757		237,099		1,324,863		(798,626)		935,093
Redeemable non-controlling interest in consolidated subsidiary		—		13,363		—		—		13,363
Stockholders’ equity:
Common stock		—		—		74		—		74
Capital in excess of par value		711,755		52,429		733,292		(764,359)		733,117
Retained earnings (accumulated deficit)		118,480		(161,079)		(441,793)		42,599		(441,793)
Treasury stock		—		—		(1,411)		—		(1,411)
Total stockholders’ equity		830,235		(108,650)		290,162		(721,760)		289,987
Total liabilities and stockholders’ equity	$	1,001,992	$	141,812	$	1,615,025	$	(1,520,386)	$	1,238,443

CONDENSED CONSOLIDATING BALANCE SHEET — December 31, 2016

			Non-				Eliminations
	Guarantor		guarantor		Parent		and		Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Reclassifications		Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	27,568	$	7,661	$	35,629	$	—	$	70,858
Trade receivables, net		111,306		6,966		—		—		118,272
Inventories		75,253		5,213		—		—		80,466
Current income taxes		—		—		60,471		(58,566)		1,905
Other		11,924		491		409		—		12,824
Total current assets		226,051		20,331		96,509		(58,566)		284,325
Property, plant and equipment, net		194,299		9,743		8,597		—		212,639
Other assets:
Goodwill		252,553		43,654		—		—		296,207
Intangible assets, net		273,594		36,020		—		—		309,614
Investments in subsidiaries		—		—		739,326		(739,326)		—
Intercompany accounts and notes		51,464		—		667,380		(718,844)		—
Deferred income taxes		—		22,993		58,303		(11,929)		69,367
Other		12,155		10,982		24,906		—		48,043
Total other assets		589,766		113,649		1,489,915		(1,470,099)		723,231
Total assets	$	1,010,116	$	143,723	$	1,595,021	$	(1,528,665)	$	1,220,195
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	24,205	$	1,119	$	668	$	—	$	25,992
Accrued personnel costs		10,598		472		20,378		—		31,448
Current income taxes		56,164		2,402		—		(58,566)		—
Other accrued liabilities		54,077		4,916		2,628		—		61,621
Total current liabilities		145,044		8,909		23,674		(58,566)		119,061
Long-term liabilities:
Long-term debt, net		—		—		740,402		—		740,402
Intercompany accounts and notes		—		212,135		506,709		(718,844)		—
Other		17,512		17,564		21,367		(11,929)		44,514
Total long-term liabilities		17,512		229,699		1,268,478		(730,773)		784,916
Total liabilities		162,556		238,608		1,292,152		(789,339)		903,977
Redeemable non-controlling interest in consolidated subsidiary		—		13,524		—		—		13,524
Stockholders’ equity:
Common stock		—		—		75		—		75
Capital in excess of par value		711,756		52,429		739,331		(764,360)		739,156
Retained earnings (accumulated deficit)		135,804		(160,838)		(435,126)		25,034		(435,126)
Treasury stock		—		—		(1,411)		—		(1,411)
Total stockholders’ equity		847,560		(108,409)		302,869		(739,326)		302,694
Total liabilities and stockholders’ equity	$	1,010,116	$	143,723	$	1,595,021	$	(1,528,665)	$	1,220,195

Schedule of Condensed Consolidating Statement of Income

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Three Months Ended December 31, 2015

			Non-
	Guarantor		guarantor		Parent				Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Eliminations		Consolidated
Revenue:
Building products	$	89,395	$	12,200	$	—	$	—	$	101,595
Construction materials		116,248		—		—		—		116,248
Energy technology		575		—		—		—		575
Total revenue		206,218		12,200		—		—		218,418
Cost of revenue:
Building products		60,987		8,565		—		—		69,552
Construction materials		84,277		—		—		—		84,277
Energy technology		318		—		—		—		318
Total cost of revenue		145,582		8,565		—		—		154,147
Gross profit		60,636		3,635		—		—		64,271
Operating expenses:
Selling, general and administrative		27,694		1,694		5,494		—		34,882
Amortization		4,198		368		—		—		4,566
Total operating expenses		31,892		2,062		5,494		—		39,448
Operating income (loss)		28,744		1,573		(5,494)		—		24,823
Other income (expense):
Net interest expense		(100)		—		(8,117)		—		(8,217)
Equity in earnings of subsidiaries		—		—		18,626		(18,626)		—
Other, net		(43)		(26)		—		—		(69)
Total other income (expense), net		(143)		(26)		10,509		(18,626)		(8,286)
Income from continuing operations before income taxes		28,601		1,547		5,015		(18,626)		16,537
Income tax benefit (provision)		(10,410)		(600)		7,410		—		(3,600)
Income from continuing operations		18,191		947		12,425		(18,626)		12,937
Loss from discontinued operations, net of income taxes		—		(216)		—		—		(216)
Net income		18,191		731		12,425		(18,626)		12,721
Net income attributable to non-controlling interest		—		(296)		—		—		(296)
Net income attributable to Headwaters Incorporated	$	18,191	$	435	$	12,425	$	(18,626)	$	12,425

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Three Months Ended December 31, 2016

			Non-
	Guarantor		guarantor		Parent				Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Eliminations		Consolidated
Revenue:
Building products	$	120,079	$	14,962	$	—	$	—	$	135,041
Construction materials		119,991		—		—		—		119,991
Energy technology		543		—		—		—		543
Total revenue		240,613		14,962		—		—		255,575
Cost of revenue:
Building products		84,778		11,751		—		—		96,529
Construction materials		88,264		—		—		—		88,264
Energy technology		163		—		—		—		163
Total cost of revenue		173,205		11,751		—		—		184,956
Gross profit		67,408		3,211		—		—		70,619
Operating expenses:
Selling, general and administrative		34,012		2,124		8,845		—		44,981
Amortization		5,394		904		—		—		6,298
Total operating expenses		39,406		3,028		8,845		—		51,279
Operating income (loss)		28,002		183		(8,845)		—		19,340
Other income (expense):
Net interest expense		(124)		(2)		(8,793)		—		(8,919)
Equity in earnings of subsidiaries		—		—		17,565		(17,565)		—
Other, net		(74)		228		—		—		154
Total other income (expense), net		(198)		226		8,772		(17,565)		(8,765)
Income (loss) from continuing operations before income taxes		27,804		409		(73)		(17,565)		10,575
Income tax benefit (provision)		(10,480)		(160)		6,740		—		(3,900)
Income from continuing operations		17,324		249		6,667		(17,565)		6,675
Income from discontinued operations, net of income taxes		—		153		—		—		153
Net income		17,324		402		6,667		(17,565)		6,828
Net income attributable to non-controlling interest		—		(161)		—		—		(161)
Net income attributable to Headwaters Incorporated	$	17,324	$	241	$	6,667	$	(17,565)	$	6,667

Schedule of Condensed Consolidating Statement of Cash Flows

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Three Months Ended December 31, 2015

			Non-
	Guarantor		guarantor		Parent				Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Eliminations		Consolidated
Cash flows from operating activities:
Net income	$	18,191	$	731	$	12,425	$	(18,626)	$	12,721
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		12,877		746		159		—		13,782
Interest expense related to amortization of debt issue costs and debt discount		—		—		567		—		567
Stock-based compensation		259		—		449		—		708
Deferred income taxes		—		—		6,482		—		6,482
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock		(63)		—		(1)		—		(64)
Net loss (gain) on disposition of property, plant and equipment		(49)		2		—		—		(47)
Net loss of unconsolidated joint venture		—		13		—		—		13
Equity in earnings of subsidiaries		—		—		(18,626)		18,626		—
Decrease in trade receivables		43,227		294		—		—		43,521
Increase in inventories		(889)		(370)		—		—		(1,259)
Decrease in accounts payable and accrued liabilities		(20,444)		(735)		(13,255)		—		(34,434)
Other changes in operating assets and liabilities, net		2,153		205		(2,781)		—		(423)
Net cash provided by (used in) operating activities		55,262		886		(14,581)		—		41,567
Cash flows from investing activities:
Business acquisitions		(34,602)		(22,699)		—		—		(57,301)
Purchase of property, plant and equipment		(6,727)		(56)		(902)		—		(7,685)
Proceeds from disposition of property, plant and equipment		107		(12)		—		—		95
Net increase in long-term receivables and deposits		(1,178)		—		(123)		—		(1,301)
Net change in other assets		(78)		(38)		(1,241)		—		(1,357)
Net cash used in investing activities		(42,478)		(22,805)		(2,266)		—		(67,549)
Cash flows from financing activities:
Payments on long-term debt		—		—		(1,062)		—		(1,062)
Dividends paid to non-controlling interest in consolidated subsidiary		—		(355)		—		—		(355)
Employee stock purchases		275		11		88		—		374
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock		63		—		1		—		64
Intercompany transfers		(10,578)		22,401		(11,823)		—		0
Net cash provided by (used in) financing activities		(10,240)		22,057		(12,796)		—		(979)
Net increase (decrease) in cash and cash equivalents		2,544		138		(29,643)		—		(26,961)
Cash and cash equivalents, beginning of period		25,819		3,577		113,201		—		142,597
Cash and cash equivalents, end of period	$	28,363	$	3,715	$	83,558	$	—	$	115,636

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Three Months Ended December 31, 2016

			Non-
	Guarantor		guarantor		Parent				Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Eliminations		Consolidated
Cash flows from operating activities:
Net income	$	17,324	$	402	$	6,667	$	(17,565)	$	6,828
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		15,809		1,326		707		—		17,842
Interest expense related to amortization of debt issue costs and debt discount		—		—		930		—		930
Stock-based compensation		188		—		297		—		485
Deferred income taxes		—		90		3,820		—		3,910
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock		—		—		(5,257)		—		(5,257)
Net loss (gain) on disposition of property, plant and equipment		(117)		3		—		—		(114)
Net loss of unconsolidated joint venture		—		12		—		—		12
Equity in earnings of subsidiaries		—		—		(17,565)		17,565		0
Decrease (increase) in trade receivables		34,137		(325)		—		—		33,812
Increase in inventories		(7,972)		(155)		—		—		(8,127)
Decrease in accounts payable and accrued liabilities		(10,350)		(436)		(10,353)		—		(21,139)
Other changes in operating assets and liabilities, net		(10,388)		606		8,261		—		(1,521)
Net cash provided by (used in) operating activities		38,631		1,523		(12,493)		—		27,661
Cash flows from investing activities:
Purchase of property, plant and equipment		(14,470)		(228)		(842)		—		(15,540)
Proceeds from disposition of property, plant and equipment		137		25		—		—		162
Net decrease (increase) in long-term receivables and deposits		901		3		(53)		—		851
Net change in other assets		(308)		(14)		2,154		—		1,832
Net cash provided by (used in) investing activities		(13,740)		(214)		1,259		—		(12,695)
Cash flows from financing activities:
Payments on long-term debt		—		—		(15,000)		—		(15,000)
Employee stock purchases		235		27		75		—		337
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock		—		—		5,257		—		5,257
Intercompany transfers		(24,570)		1,021		23,549		—		0
Net cash provided by (used in) financing activities		(24,335)		1,048		13,881		—		(9,406)
Net increase in cash and cash equivalents		556		2,357		2,647		—		5,560
Cash and cash equivalents, beginning of period		27,012		5,304		32,982		—		65,298
Cash and cash equivalents, end of period	$	27,568	$	7,661	$	35,629	$	—	$	70,858