Condensed Consolidating Financial Information

3 Months Ended

Dec. 31, 2011

Condensed Consolidating Financial Information

Condensed Consolidating Financial Information

14.  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.

CONDENSED CONSOLIDATING BALANCE SHEET — September 30, 2011

	Guarantor			Non- guarantor			Parent			Eliminationsand			Headwaters
(in thousands)	Subsidiaries			Subsidiaries			Company			Reclassifications			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	321,026			(9,499		)	146,971			(458,498		)	—
Intercompany notes	(637,046		)				637,046						—
Deferred income taxes	89,158						21,670			(110,828		)	—
Other	19,263			24,376			22,745						66,384
Total other assets	95,739			14,877			830,432			(569,326		)	371,722
Total assets	$	447,613		$	14,877		$	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 held for sale	7,470												7,470
Current and deferred income taxes	21,981			2,588			(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	102,069			2,588			40,926			(23,367		)	122,216
Long-term liabilities:
Long-term debt							518,789						518,789
Deferred income taxes	92,752			(27		)	22,319			(110,828		)	4,216
Unrecognized income tax benefits	7,226						4,467						11,693
Liabilities held for sale	5,507												5,507
Other	3,158						5,922						9,080
Total long-term liabilities	108,643			(27		)	551,497			(110,828		)	549,285
Total liabilities	210,712			2,561			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)	(221,597		)	12,327			(371,591		)				(580,861		)
Other				(11		)							(11		)
Total stockholders’ equity	236,901			12,316			266,017			(458,498		)	56,736
Total liabilities and stockholders’ equity	$	447,613		$	14,877		$	858,440		$	(592,693	)	$	728,237

CONDENSED CONSOLIDATING BALANCE SHEET — December 31, 2011

	Guarantor			Non- guarantor			Parent			Eliminationsand			Headwaters
(in thousands)	Subsidiaries			Subsidiaries			Company			Reclassifications			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	34,111		$	—		$	7,612		$	—		$	41,723
Trade receivables, net	60,748												60,748
Inventories	33,390												33,390
Current and deferred income taxes	13,734						12,720			(24,518		)	1,936
Assets held for sale	6,307												6,307
Other	9,876						1,157						11,033
Total current assets	158,166			—			21,489			(24,518		)	155,137
Property, plant and equipment, net	162,469			—			265			—			162,734
Other assets:
Intangible assets, net	158,801												158,801
Goodwill	116,671												116,671
Assets held for sale	25,547												25,547
Investments in subsidiaries and intercompany accounts	341,569			(9,499		)	126,428			(458,498		)	—
Intercompany notes	(637,046		)				637,046						—
Deferred income taxes	89,158						20,810			(109,968		)	—
Other	18,949			18,523			22,093						59,565
Total other assets	113,649			9,024			806,377			(568,466		)	360,584
Total assets	$	434,284		$	9,024		$	828,131		$	(592,984	)	$	678,455
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	12,654		$	—		$	373		$	—		$	13,027
Accrued personnel costs	7,836						9,954						17,790
Accrued interest							9,792						9,792
Liabilities held for sale	10,425												10,425
Current and deferred income taxes	20,405			3,414			792			(24,611		)	—
Other accrued liabilities	38,496						1,574			93			40,163
Current portion of long-term debt							9,095						9,095
Total current liabilities	89,816			3,414			31,580			(24,518		)	100,292
Long-term liabilities:
Long-term debt							513,610						513,610
Deferred income taxes	92,752						21,459			(109,968		)	4,243
Unrecognized income tax benefits	7,340			2			3,764						11,106
Liabilities held for sale	6,761												6,761
Other	2,929						5,656						8,585
Total long-term liabilities	109,782			2			544,489			(109,968		)	544,305
Total liabilities	199,598			3,416			576,069			(134,486		)	644,597
Stockholders’ equity:
Common stock	209,346						61			(209,346		)	61
Capital in excess of par value	249,152						638,406			(249,152		)	638,406
Retained earnings (accumulated deficit)	(223,812		)	5,608			(386,405		)				(604,609		)
Total stockholders’ equity	234,686			5,608			252,062			(458,498		)	33,858
Total liabilities and stockholders’ equity	$	434,284		$	9,024		$	828,131		$	(592,984	)	$	678,455

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended December 31, 2010

	Guarantor			Non-guarantor		Parent			Headwaters
(in thousands)	Subsidiaries			Subsidiaries		Company			Consolidated
Revenue:
Light building products	$	69,709		$	—	$	—		$	69,709
Heavy construction materials	63,215								63,215
Energy technology	2,896								2,896
Total revenue	135,820			—		—			135,820
Cost of revenue:
Light building products	53,849								53,849
Heavy construction materials	48,352								48,352
Energy technology	1,790								1,790
Total cost of revenue	103,991			—		—			103,991
Gross profit	31,829			—		—			31,829
Operating expenses:
Amortization	5,547								5,547
Research and development	1,945								1,945
Selling, general and administrative	20,096					4,298			24,394
Restructuring costs						980			980
Total operating expenses	27,588			—		5,278			32,866
Operating income (loss)	4,241					(5,278		)	(1,037		)
Other income (expense):
Net interest expense	14					(16,909		)	(16,895		)
Other, net	359			615					974
Total other income (expense), net	373			615		(16,909		)	(15,921		)
Income (loss) from continuing operations before income taxes	4,614			615		(22,187		)	(16,958		)
Income tax benefit (provision)	(805		)	718		(1,713		)	(1,800		)
Income (loss) from continuing operations	3,809			1,333		(23,900		)	(18,758		)
Loss from discontinued operations, net of income taxes	(1,929		)						(1,929		)
Net income (loss)	$	1,880		$	1,333	$	(23,900	)	$	(20,687	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended December 31, 2011

	Guarantor			Non-guarantor			Parent			Headwaters
(in thousands)	Subsidiaries			Subsidiaries			Company			Consolidated
Revenue:
Light building products	$	73,334		$	—		$	—		$	73,334
Heavy construction materials	63,138									63,138
Energy technology	955									955
Total revenue	137,427			—			—			137,427
Cost of revenue:
Light building products	55,330									55,330
Heavy construction materials	47,098									47,098
Energy technology	557									557
Total cost of revenue	102,985			—			—			102,985
Gross profit	34,442			—			—			34,442
Operating expenses:
Amortization	5,505									5,505
Research and development	1,854									1,854
Selling, general and administrative	18,169						3,113			21,282
Restructuring costs	1,388									1,388
Total operating expenses	26,916			—			3,113			30,029
Operating income (loss)	7,526						(3,113		)	4,413
Other income (expense):
Net interest expense	(19		)				(12,437		)	(12,456		)
Other, net	(270		)	(5,892		)	2,025			(4,137		)
Total other income (expense), net	(289		)	(5,892		)	(10,412		)	(16,593		)
Income (loss) from continuing operations before income taxes	7,237			(5,892		)	(13,525		)	(12,180		)
Income tax benefit (provision)	1,016			(827		)	(1,289		)	(1,100		)
Income (loss) from continuing operations	8,253			(6,719		)	(14,814		)	(13,280		)
Loss from discontinued operations, net of income taxes	(10,468		)							(10,468		)
Net loss	$	(2,215	)	$	(6,719	)	$	(14,814	)	$	(23,748	)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Three Months Ended December 31, 2010

	Guarantor			Non-guarantor			Parent			Headwaters
(in thousands)	Subsidiaries			Subsidiaries			Company			Consolidated
Cash flows from operating activities:
Net income (loss)	$	1,880		$	1,333		$	(23,900	)	$	(20,687	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	15,057						29			15,086
Interest expense related to amortization of debt issue costs and debt discount							3,237			3,237
Stock-based compensation	628						433			1,061
Deferred income taxes	(3		)	69			(194		)	(128		)
Net gain of unconsolidated joint ventures				(615		)				(615		)
Net gain on disposition of property, plant and equipment	(331		)							(331		)
Decrease in trade receivables	21,697									21,697
Decrease in inventories	1,007									1,007
Decrease in accounts payable and accrued liabilities	(14,156		)				(9,558		)	(23,714		)
Other changes in operating assets and liabilities, net	(8,186		)	(611		)	6,957			(1,840		)
Net cash provided by (used in) operating activities	17,593			176			(22,996		)	(5,227		)
Cash flows from investing activities:
Purchase of property, plant and equipment	(5,203		)							(5,203		)
Proceeds from disposition of property, plant and equipment	391									391
Net increase in long-term receivables and deposits	(785		)							(785		)
Payments for acquisitions	(2,500		)							(2,500		)
Net change in other assets	232			(176		)	91			147
Net cash provided by (used in) investing activities	(7,865		)	(176		)	91			(7,950		)
Cash flows from financing activities:
Payments on long-term debt							(10,044		)	(10,044		)
Employee stock purchases	178						57			235
Net cash provided by (used in) financing activities	178			—			(9,987		)	(9,809		)
Net increase (decrease) in cash and cash equivalents	9,906			0			(32,892		)	(22,986		)
Cash and cash equivalents, beginning of period	21,168			0			69,816			90,984
Cash and cash equivalents, end of period	$	31,074		$	0		$	36,924		$	67,998

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Three Months Ended December 31, 2011

	Guarantor			Non-guarantor			Parent			Headwaters
(in thousands)	Subsidiaries			Subsidiaries			Company			Consolidated
Cash flows from operating activities:
Net loss	$	(2,215	)	$	(6,719	)	$	(14,814	)	$	(23,748	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	13,167						15			13,182
Non-cash restructuring costs	646									646
Interest expense related to amortization of debt issue costs and debt discount							3,049			3,049
Stock-based compensation	263						361			624
Net loss of unconsolidated joint ventures				6,069						6,069
Net gain on disposition of property, plant and equipment	(123		)							(123		)
Gain on convertible debt repayment							(2,025		)	(2,025		)
Decrease in trade receivables	30,606									30,606
Increase in inventories	(283		)							(283		)
Decrease in accounts payable and accrued liabilities	(10,551		)				(11,421		)	(21,972		)
Other changes in operating assets and liabilities, net	(25,012		)	650			21,201			(3,161		)
Net cash provided by (used in) operating activities	6,498			—			(3,634		)	2,864
Cash flows from investing activities:
Purchase of property, plant and equipment	(6,601		)				(18		)	(6,619		)
Proceeds from disposition of property, plant and equipment	136									136
Net decrease (increase) in long-term receivables and deposits	(2,108		)				1,976			(132		)
Net change in other assets	(106		)				11			(95		)
Net cash provided by (used in) investing activities	(8,679		)	—			1,969			(6,710		)
Cash flows from financing activities:
Payments on long-term debt							(5,476		)	(5,476		)
Employee stock purchases	170						65			235
Net cash provided by (used in) financing activities	170			—			(5,411		)	(5,241		)
Net decrease in cash and cash equivalents	(2,011		)	0			(7,076		))	(9,087		)
Cash and cash equivalents, beginning of period	36,122			0			14,688			50,810
Cash and cash equivalents, end of period	$	34,111		$	0		$	7,612		$	41,723