Condensed Consolidating Financial Information

12 Months Ended

Sep. 30, 2012

Condensed Consolidating Financial Information

Condensed Consolidating Financial Information

16. Condensed Consolidating Financial Information

        Headwaters' 7-5/8% senior secured notes are jointly and severally, fully and unconditionally guaranteed by Headwaters Incorporated and by all of Headwaters' wholly-owned domestic subsidiaries. The non-guaranteeing entities include primarily joint ventures in which Headwaters has a non-controlling ownership interest. Separate stand-alone financial statements and disclosures for Headwaters Incorporated and each of the guarantor subsidiaries are not presented because the guarantees are full and unconditional and the guarantor subsidiaries have joint and several liability.

        There are no significant restrictions on the ability of Headwaters Incorporated to obtain funds from the guarantor subsidiaries nor on the ability of the guarantor subsidiaries to obtain funds from Headwaters Incorporated or other guarantor subsidiaries. The non-guaranteeing entities represent less than 3% of consolidated assets, stockholders' equity, revenues, income from continuing operations before taxes and cash flows from operating activities. Accordingly, the following condensed consolidating financial information does not present separately the non-guarantor entities' information.

CONDENSED CONSOLIDATING BALANCE SHEET—September 30, 2011

(in thousands)	Guarantor Subsidiaries			Parent Company			Eliminations and Reclassifications			Headwaters Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	36,122		$	14,688		$	—		$	50,810
Trade receivables, net		90,931									90,931
Inventories		33,247									33,247
Current and deferred income taxes		13,734			12,720			(23,367	)		3,087
Assets held for sale		6,777									6,777
Other		6,617			337						6,954
Total current assets		187,428			27,745			(23,367	)		191,806
Property, plant and equipment, net		164,446			263			—			164,709
Other assets:
Intangible assets, net		164,221									164,221
Goodwill		116,671									116,671
Assets held for sale		22,446			2,000						24,446
Investments in subsidiaries and intercompany accounts		311,527			146,971			(458,498	)		—
Intercompany notes		(637,046	)		637,046						—
Deferred income taxes		89,158			21,670			(110,828	)		—
Other		43,639			22,745						66,384
Total other assets		110,616			830,432			(569,326	)		371,722
Total assets	$	462,490		$	858,440		$	(592,693	)	$	728,237
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	18,397		$	582		$	—		$	18,979
Accrued personnel costs		10,677			12,353						23,030
Accrued interest					18,336						18,336
Liabilities associated with assets held for sale		7,470									7,470
Current and deferred income taxes		24,569			(1,202	)		(23,367	)		—
Other accrued liabilities		43,544			1,843						45,387
Current portion of long-term debt					9,014						9,014
Total current liabilities		104,657			40,926			(23,367	)		122,216
Long-term liabilities:
Long-term debt					518,789						518,789
Income taxes		99,951			26,786			(110,828	)		15,909
Liabilities associated with assets held for sale		5,507									5,507
Other		3,158			5,922						9,080
Total long-term liabilities		108,616			551,497			(110,828	)		549,285
Total liabilities		213,273			592,423			(134,195	)		671,501
Stockholders' equity:
Common stock		209,346			61			(209,346	)		61
Capital in excess of par value		249,152			637,547			(249,152	)		637,547
Retained earnings (accumulated deficit)		(209,270	)		(371,591	)					(580,861	)
Other		(11	)								(11	)
Total stockholders' equity		249,217			266,017			(458,498	)		56,736
Total liabilities and stockholders' equity	$	462,490		$	858,440		$	(592,693	)	$	728,237

CONDENSED CONSOLIDATING BALANCE SHEET—September 30, 2012

(in thousands)	Guarantor Subsidiaries			Parent Company			Eliminations and Reclassifications			Headwaters Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	44,111		$	9,671		$	—		$	53,782
Trade receivables, net		102,006									102,006
Inventories		31,588									31,588
Current and deferred income taxes		16,168			17,827			(23,122	)		10,873
Assets held for sale		5,864									5,864
Other		10,426			157						10,583
Total current assets		210,163			27,655			(23,122	)		214,696
Property, plant and equipment, net		157,477			2,229			—			159,706
Other assets:
Intangible assets, net		143,911									143,911
Goodwill		116,671									116,671
Assets held for sale		7,807									7,807
Investments in subsidiaries and intercompany accounts		362,569			95,929			(458,498	)		—
Intercompany notes		(637,046	)		637,046						—
Deferred income taxes		70,285			18,309			(88,594	)		—
Other		15,645			22,501						38,146
Total other assets		79,842			773,785			(547,092	)		306,535
Total assets	$	447,482		$	803,669		$	(570,214	)	$	680,937
LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable	$	17,389		$	88		$	—		$	17,477
Accrued personnel costs		14,678			32,370						47,048
Accrued interest					16,267						16,267
Liabilities associated with assets held for sale		8,640									8,640
Current and deferred income taxes		19,232			4,680			(23,122	)		790
Other accrued liabilities		48,760			2,186						50,946
Total current liabilities		108,699			55,591			(23,122	)		141,168
Long-term liabilities:
Long-term debt					500,539						500,539
Income taxes		89,025			21,648			(88,594	)		22,079
Liabilities associated with assets held for sale		9,966									9,966
Other		4,100			6,214						10,314
Total long-term liabilities		103,091			528,401			(88,594	)		542,898
Total liabilities		211,790			583,992			(111,716	)		684,066
Stockholders' equity (net capital deficiency):
Common stock					61						61
Capital in excess of par value		458,498			640,047			(458,498	)		640,047
Retained earnings (accumulated deficit)		(222,806	)		(420,303	)					(643,109	)
Treasury stock					(128	)					(128	)
Total stockholders' equity (net capital deficiency)		235,692			219,677			(458,498	)		(3,129	)
Total liabilities and stockholders' equity (net capital deficiency)	$	447,482		$	803,669		$	(570,214	)	$	680,937

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended September 30, 2010

(in thousands)	Guarantor Subsidiaries			Parent Company			Headwaters Consolidated
Revenue:
Light building products	$	316,884		$	—		$	316,884
Heavy construction materials		258,264						258,264
Energy technology		9,418						9,418
Total revenue		584,566			—			584,566
Cost of revenue:
Light building products		227,637						227,637
Heavy construction materials		192,785						192,785
Energy technology		5,999						5,999
Total cost of revenue		426,421			—			426,421
Gross profit		158,145			—			158,145
Operating expenses:
Amortization		22,218						22,218
Research and development		8,182						8,182
Selling, general and administrative		83,741			20,272			104,013
Asset impairments		3,462						3,462
Total operating expenses		117,603			20,272			137,875
Operating income (loss)		40,542			(20,272	)		20,270
Other income (expense):
Net interest expense		(169	)		(71,013	)		(71,182	)
Intercompany interest income (expense)		(24,489	)		24,489			—
Other, net		18,169						18,169
Total other income (expense), net		(6,489	)		(46,524	)		(53,013	)
Income (loss) from continuing operations before income taxes		34,053			(66,796	)		(32,743	)
Income tax benefit (provision)		(24,662	)		36,325			11,663
Income (loss) from continuing operations		9,391			(30,471	)		(21,080	)
Loss from discontinued operations, net of income taxes		(28,402	)					(28,402	)
Net loss	$	(19,011	)	$	(30,471	)	$	(49,482	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended September 30, 2011

(in thousands)	Guarantor Subsidiaries			Parent Company			Headwaters Consolidated
Revenue:
Light building products	$	314,062		$	—		$	314,062
Heavy construction materials		253,300						253,300
Energy technology		20,602						20,602
Total revenue		587,964			—			587,964
Cost of revenue:
Light building products		238,377						238,377
Heavy construction materials		193,006						193,006
Energy technology		10,648						10,648
Total cost of revenue		442,031			—			442,031
Gross profit		145,933			—			145,933
Operating expenses:
Amortization		22,359						22,359
Research and development		6,451						6,451
Selling, general and administrative		98,845			12,513			111,358
Asset impairments and restructuring costs		16,113			1,817			17,930
Total operating expenses		143,768			14,330			158,098
Operating income (loss)		2,165			(14,330	)		(12,165	)
Other income (expense):
Net interest expense		(16	)		(126,236	)		(126,252	)
Intercompany interest income (expense)		(24,333	)		24,333			—
Other, net		4,314						4,314
Total other income (expense), net		(20,035	)		(101,903	)		(121,938	)
Loss from continuing operations before income taxes		(17,870	)		(116,233	)		(134,103	)
Income tax benefit (provision)		369			(198	)		171
Loss from continuing operations		(17,501	)		(116,431	)		(133,932	)
Loss from discontinued operations, net of income taxes		(95,989	)					(95,989	)
Net loss	$	(113,490	)	$	(116,431	)	$	(229,921	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended September 30, 2012

(in thousands)	Guarantor Subsidiaries			Parent Company			Headwaters Consolidated
Revenue:
Light building products	$	339,632		$	—		$	339,632
Heavy construction materials		281,672						281,672
Energy technology		11,483						11,483
Total revenue		632,787			—			632,787
Cost of revenue:
Light building products		241,669						241,669
Heavy construction materials		210,158						210,158
Energy technology		5,893						5,893
Total cost of revenue		457,720			—			457,720
Gross profit		175,067			—			175,067
Operating expenses:
Amortization		20,675						20,675
Research and development		8,006						8,006
Selling, general and administrative		84,479			25,359			109,838
Restructuring costs		2,145						2,145
Total operating expenses		115,305			25,359			140,664
Operating income (loss)		59,762			(25,359	)		34,403
Other income (expense):
Net interest expense		(80	)		(52,598	)		(52,678	)
Intercompany interest income (expense)		(25,945	)		25,945			—
Other, net		(9,972	)		2,479			(7,493	)
Total other income (expense), net		(35,997	)		(24,174	)		(60,171	)
Income (loss) from continuing operations before income taxes		23,765			(49,533	)		(25,768	)
Income tax benefit (provision)		(1,482	)		821			(661	)
Income (loss) from continuing operations		22,283			(48,712	)		(26,429	)
Loss from discontinued operations, net of income taxes		(35,819	)					(35,819	)
Net loss	$	(13,536	)	$	(48,712	)	$	(62,248	)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended September 30, 2010

(in thousands)	Guarantor Subsidiaries			Parent Company			Headwaters Consolidated
Cash flows from operating activities:
Net loss	$	(19,011	)	$	(30,471	)	$	(49,482	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		60,265			133			60,398
Asset impairments		37,962						37,962
Interest expense related to amortization of debt issue costs and debt discount					16,027			16,027
Stock-based compensation		3,083			1,932			5,015
Deferred income taxes		(3,795	)		(13,465	)		(17,260	)
Net gains of unconsolidated joint ventures		(17,523	)					(17,523	)
Net gain on disposition of property, plant and equipment		(683	)					(683	)
Increase in trade receivables		(868	)					(868	)
Decrease in inventories		52						52
Increase (decrease) in accounts payable and accrued liabilities		(7,165	)		17,165			10,000
Other changes in operating assets and liabilities, net		(14,694	)		33,806			19,112
Net cash provided by operating activities		37,623			25,127			62,750
Cash flows from investing activities:
Purchase of property, plant and equipment and payments for acquisitions		(26,880	)		(27	)		(26,907	)
Proceeds from disposition of property, plant and equipment		3,802						3,802
Proceeds from sale of interests in unconsolidated joint venture and other cash payments from unconsolidated joint venture		17,844						17,844
Net decrease (increase) in long-term receivables and deposits		(8,613	)		1,000			(7,613	)
Net change in other assets		(290	)		(224	)		(514	)
Net cash provided by (used in) investing activities		(14,137	)		749			(13,388	)
Cash flows from financing activities:
Net proceeds from issuance of long-term debt					316,187			316,187
Payments on long-term debt					(288,795	)		(288,795	)
Other debt issue costs					(2,456	)		(2,456	)
Employee stock purchases		629			123			752
Net cash provided by financing activities		629			25,059			25,688
Net increase in cash and cash equivalents		24,115			50,935			75,050
Cash and cash equivalents, beginning of year		(2,947	)		18,881			15,934
Cash and cash equivalents, end of year	$	21,168		$	69,816		$	90,984

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended September 30, 2011

(in thousands)	Guarantor Subsidiaries			Parent Company			Headwaters Consolidated
Cash flows from operating activities:
Net loss	$	(113,490	)	$	(116,431	)	$	(229,921	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		64,143			87			64,230
Asset impairments and non-cash restructuring costs		86,447			255			86,702
Interest expense related to amortization of debt issue costs and debt discount					20,069			20,069
Stock-based compensation		1,875			1,783			3,658
Deferred income taxes		(9,953	)		9,919			(34	)
Net gains of unconsolidated joint ventures		(3,990	)					(3,990	)
Net gain on disposition of property, plant and equipment		(329	)					(329	)
Increase in trade receivables		(1,986	)					(1,986	)
Decrease in inventories		3,233						3,233
Increase (decrease) in accounts payable and accrued liabilities		11,228			(1,892	)		9,336
Other changes in operating assets and liabilities, net		6,890			(9,572	)		(2,682	)
Net cash provided by (used in) operating activities		44,068			(95,782	)		(51,714	)
Cash flows from investing activities:
Purchase of property, plant and equipment and payments for acquisitions		(29,847	)					(29,847	)
Proceeds from disposition of property, plant and equipment		556						556
Net decrease in long-term receivables and deposits		816						816
Net change in other assets		(1,184	)		(13	)		(1,197	)
Net cash used in investing activities		(29,659	)		(13	)		(29,672	)
Cash flows from financing activities:
Net proceeds from issuance of long-term debt					392,942			392,942
Payments on long-term debt					(352,449	)		(352,449	)
Employee stock purchases		545			174			719
Net cash provided by financing activities		545			40,667			41,212
Net increase (decrease) in cash and cash equivalents		14,954			(55,128	)		(40,174	)
Cash and cash equivalents, beginning of year		21,168			69,816			90,984
Cash and cash equivalents, end of year	$	36,122		$	14,688		$	50,810

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended September 30, 2012

(in thousands)	Guarantor Subsidiaries			Parent Company			Headwaters Consolidated
Cash flows from operating activities:
Net loss	$	(13,536	)	$	(48,712	)	$	(62,248	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		51,333			148			51,481
Asset impairments and non-cash restructuring costs		13,166						13,166
Interest expense related to amortization of debt issue costs and debt discount					14,184			14,184
Stock-based compensation		673			1,064			1,737
Deferred income taxes		199			(1	)		198
Net losses of unconsolidated joint ventures		9,314						9,314
Net gain on disposition of property, plant and equipment		(805	)					(805	)
Gain on convertible debt repayments					(2,479	)		(2,479	)
Increase in trade receivables		(9,792	)					(9,792	)
Decrease in inventories		2,954						2,954
Increase in accounts payable and accrued liabilities		9,646			17,797			27,443
Other changes in operating assets and liabilities, net		(49,803	)		52,819			3,016
Net cash provided by operating activities		13,349			34,820			48,169
Cash flows from investing activities:
Purchase of property, plant and equipment and payments for acquisitions		(25,415	)		(2,028	)		(27,443	)
Proceeds from disposition of property, plant and equipment		1,261						1,261
Proceeds from sale of interests in unconsolidated joint ventures		18,522						18,522
Net decrease (increase) in long-term receivables and deposits		24			(66	)		(42	)
Net change in other assets		(214	)		(492	)		(706	)
Net cash used in investing activities		(5,822	)		(2,586	)		(8,408	)
Cash flows from financing activities:
Payments on long-term debt					(36,334	)		(36,334	)
Other debt issue costs					(1,090	)		(1,090	)
Employee stock purchases		462			173			635
Net cash provided by (used in) financing activities		462			(37,251	)		(36,789	)
Net increase (decrease) in cash and cash equivalents		7,989			(5,017	)		2,972
Cash and cash equivalents, beginning of year		36,122			14,688			50,810
Cash and cash equivalents, end of year	$	44,111		$	9,671		$	53,782