Condensed Consolidating Financial Information (Tables)

6 Months Ended

Mar. 31, 2017

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 — March 31, 2017

			Non-				Eliminations
	Guarantor		guarantor		Parent		and		Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Reclassifications		Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	29,344	$	8,783	$	20,001	$	—	$	58,128
Trade receivables, net		127,396		6,329		—		—		133,725
Inventories		84,506		5,491		—		—		89,997
Current income taxes		—		—		69,089		(66,408)		2,681
Other		8,814		613		649		—		10,076
Total current assets		250,060		21,216		89,739		(66,408)		294,607
Property, plant and equipment, net		200,191		9,761		8,447		—		218,399
Other assets:
Goodwill		256,611		43,654		—		—		300,265
Intangible assets, net		270,779		35,525		—		—		306,304
Investments in subsidiaries		—		—		827,541		(827,541)		—
Intercompany accounts and notes		116,699		—		602,353		(719,052)		—
Deferred income taxes		—		22,618		58,299		(14,385)		66,532
Other		10,177		8,842		24,511		—		43,530
Total other assets		654,266		110,639		1,512,704		(1,560,978)		716,631
Total assets	$	1,104,517	$	141,616	$	1,610,890	$	(1,627,386)	$	1,229,637
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	26,528	$	1,157	$	474	$	—	$	28,159
Accrued personnel costs		9,950		371		28,565		—		38,886
Current income taxes		63,019		3,389		—		(66,408)		—
Other accrued liabilities		48,764		3,328		3,492		—		55,584
Total current liabilities		148,261		8,245		32,531		(66,408)		122,629
Long-term liabilities:
Long-term debt, net		—		—		741,048		—		741,048
Intercompany accounts and notes		—		212,343		506,709		(719,052)		—
Other		19,501		16,960		22,422		(14,385)		44,498
Total long-term liabilities		19,501		229,303		1,270,179		(733,437)		785,546
Total liabilities		167,762		237,548		1,302,710		(799,845)		908,175
Redeemable non-controlling interest in consolidated subsidiary		—		13,458		—		—		13,458
Stockholders’ equity:
Common stock		—		—		75		—		75
Capital in excess of par value		786,669		49,802		740,081		(836,647)		739,905
Retained earnings (accumulated deficit)		150,086		(159,192)		(430,585)		9,106		(430,585)
Treasury stock		—		—		(1,391)		—		(1,391)
Total stockholders’ equity		936,755		(109,390)		308,180		(827,541)		308,004
Total liabilities and stockholders’ equity	$	1,104,517	$	141,616	$	1,610,890	$	(1,627,386)	$	1,229,637

Schedule of Condensed Consolidating Statement of Income

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Three Months Ended March 31, 2016

			Non-
	Guarantor		guarantor		Parent				Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Eliminations		Consolidated
Revenue:
Building products	$	85,688	$	12,413	$	—	$	—	$	98,101
Construction materials		102,849		—		—		—		102,849
Energy technology		1,382		—		—		—		1,382
Total revenue		189,919		12,413		—		—		202,332
Cost of revenue:
Building products		60,947		8,692		—		—		69,639
Construction materials		77,347		—		—		—		77,347
Energy technology		469		—		—		—		469
Total cost of revenue		138,763		8,692		—		—		147,455
Gross profit		51,156		3,721		—		—		54,877
Operating expenses:
Selling, general and administrative		29,331		1,859		6,692		—		37,882
Amortization		4,446		369		—		—		4,815
Total operating expenses		33,777		2,228		6,692		—		42,697
Operating income (loss)		17,379		1,493		(6,692)		—		12,180
Other income (expense):
Net interest income (expense)		5		(3)		(8,058)		—		(8,056)
Equity in earnings of subsidiaries		—		—		11,021		(11,021)		—
Other, net		(82)		70		—		—		(12)
Total other income (expense), net		(77)		67		2,963		(11,021)		(8,068)
Income (loss) from continuing operations before income taxes		17,302		1,560		(3,729)		(11,021)		4,112
Income tax benefit (provision)		(6,720)		(610)		5,830		—		(1,500)
Income from continuing operations		10,582		950		2,101		(11,021)		2,612
Loss from discontinued operations, net of income taxes		—		(228)		—		—		(228)
Net income		10,582		722		2,101		(11,021)		2,384
Net income attributable to non-controlling interest		—		(283)		—		—		(283)
Net income attributable to Headwaters Incorporated	$	10,582	$	439	$	2,101	$	(11,021)	$	2,101

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Three Months Ended March 31, 2017

			Non-
	Guarantor		guarantor		Parent				Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Eliminations		Consolidated
Revenue:
Building products	$	126,151	$	14,565	$	—	$	—	$	140,716
Construction materials		116,037		—		—		—		116,037
Energy technology		2,540		—		—		—		2,540
Total revenue		244,728		14,565		—		—		259,293
Cost of revenue:
Building products		89,404		10,378		—		—		99,782
Construction materials		87,948		—		—		—		87,948
Energy technology		1,056		—		—		—		1,056
Total cost of revenue		178,408		10,378		—		—		188,786
Gross profit		66,320		4,187		—		—		70,507
Operating expenses:
Selling, general and administrative		37,053		1,927		10,414		—		49,394
Amortization		5,952		486		—		—		6,438
Total operating expenses		43,005		2,413		10,414		—		55,832
Operating income (loss)		23,315		1,774		(10,414)		—		14,675
Other income (expense):
Net interest income (expense)		3		(2)		(8,223)		—		(8,222)
Equity in earnings of subsidiaries		—		—		15,928		(15,928)		—
Other, net		94		1,879		—		—		1,973
Total other income (expense), net		97		1,877		7,705		(15,928)		(6,249)
Income (loss) from continuing operations before income taxes		23,412		3,651		(2,709)		(15,928)		8,426
Income tax benefit (provision)		(9,130)		(1,420)		7,250		—		(3,300)
Income from continuing operations		14,282		2,231		4,541		(15,928)		5,126
Income from discontinued operations, net of income taxes		—		6		—		—		6
Net income		14,282		2,237		4,541		(15,928)		5,132
Net income attributable to non-controlling interest		—		(591)		—		—		(591)
Net income attributable to Headwaters Incorporated	$	14,282	$	1,646	$	4,541	$	(15,928)	$	4,541

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Six Months Ended March 31, 2016

			Non-
	Guarantor		guarantor		Parent				Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Eliminations		Consolidated
Revenue:
Building products	$	175,083	$	24,613	$	—	$	—	$	199,696
Construction materials		219,097		—		—		—		219,097
Energy technology		1,957		—		—		—		1,957
Total revenue		396,137		24,613		—		—		420,750
Cost of revenue:
Building products		121,934		17,257		—		—		139,191
Construction materials		161,624		—		—		—		161,624
Energy technology		787		—		—		—		787
Total cost of revenue		284,345		17,257		—		—		301,602
Gross profit		111,792		7,356		—		—		119,148
Operating expenses:
Selling, general and administrative		57,025		3,553		12,186		—		72,764
Amortization		8,644		737		—		—		9,381
Total operating expenses		65,669		4,290		12,186		—		82,145
Operating income (loss)		46,123		3,066		(12,186)		—		37,003
Other income (expense):
Net interest expense		(95)		(3)		(16,175)		—		(16,273)
Equity in earnings of subsidiaries		—		—		29,647		(29,647)		—
Other, net		(125)		44		—		—		(81)
Total other income (expense), net		(220)		41		13,472		(29,647)		(16,354)
Income from continuing operations before income taxes		45,903		3,107		1,286		(29,647)		20,649
Income tax benefit (provision)		(17,130)		(1,210)		13,240		—		(5,100)
Income from continuing operations		28,773		1,897		14,526		(29,647)		15,549
Loss from discontinued operations, net of income taxes		—		(444)		—		—		(444)
Net income		28,773		1,453		14,526		(29,647)		15,105
Net income attributable to noncontrolling interest		—		(579)		—		—		(579)
Net income attributable to Headwaters Incorporated	$	28,773	$	874	$	14,526	$	(29,647)	$	14,526

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Six Months Ended March 31, 2017

			Non-
	Guarantor		guarantor		Parent				Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Eliminations		Consolidated
Revenue:
Building products	$	246,230	$	29,527	$	—	$	—	$	275,757
Construction materials		236,028		—		—		—		236,028
Energy technology		3,083		—		—		—		3,083
Total revenue		485,341		29,527		—		—		514,868
Cost of revenue:
Building products		174,182		22,129		—		—		196,311
Construction materials		176,212		—		—		—		176,212
Energy technology		1,219		—		—		—		1,219
Total cost of revenue		351,613		22,129		—		—		373,742
Gross profit		133,728		7,398		—		—		141,126
Operating expenses:
Selling, general and administrative		71,065		4,051		19,259		—		94,375
Amortization		11,346		1,390		—		—		12,736
Total operating expenses		82,411		5,441		19,259		—		107,111
Operating income (loss)		51,317		1,957		(19,259)		—		34,015
Other income (expense):
Net interest expense		(121)		(4)		(17,016)		—		(17,141)
Equity in earnings of subsidiaries		—		—		33,493		(33,493)		—
Other, net		20		2,107		—		—		2,127
Total other income (expense), net		(101)		2,103		16,477		(33,493)		(15,014)
Income (loss) from continuing operations before income taxes		51,216		4,060		(2,782)		(33,493)		19,001
Income tax benefit (provision)		(19,610)		(1,580)		13,990		—		(7,200)
Income from continuing operations		31,606		2,480		11,208		(33,493)		11,801
Income from discontinued operations, net of income taxes		—		159		—		—		159
Net income		31,606		2,639		11,208		(33,493)		11,960
Net income attributable to noncontrolling interest		—		(752)		—		—		(752)
Net income attributable to Headwaters Incorporated	$	31,606	$	1,887	$	11,208	$	(33,493)	$	11,208

Schedule of Condensed Consolidating Statement of Cash Flows

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended March 31, 2016

			Non-
	Guarantor		guarantor		Parent				Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Eliminations		Consolidated
Cash flows from operating activities:
Net income	$	28,773	$	1,453	$	14,526	$	(29,647)	$	15,105
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		26,084		1,503		310		—		27,897
Interest expense related to amortization of debt issue costs and debt discount		—		—		1,184		—		1,184
Debt pre-payment premiums		—		—		93		—		93
Stock-based compensation		537		—		984		—		1,521
Deferred income taxes		6,809		159		1,675		—		8,643
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock		(95)		—		(2)		—		(97)
Net loss (gain) on disposition of property, plant and equipment		(49)		3		—		—		(46)
Net loss of unconsolidated joint venture		—		26		—		—		26
Equity in earnings of subsidiaries		—		—		(29,647)		29,647		—
Decrease (increase) in trade receivables		34,198		(660)		—		—		33,538
Increase in inventories		(3,097)		(969)		—		—		(4,066)
Decrease in accounts payable and accrued liabilities		(17,680)		(3,178)		(15,514)		—		(36,372)
Other changes in operating assets and liabilities, net		(9,522)		3,109		3,428		—		(2,985)
Net cash provided by (used in) operating activities		65,958		1,446		(22,963)		—		44,441
Cash flows from investing activities:
Business acquisitions		(73,800)		(22,657)		—		—		(96,457)
Purchase of property, plant and equipment		(18,856)		(268)		(1,758)		—		(20,882)
Proceeds from disposition of property, plant and equipment		404		—		—		—		404
Net increase in long-term receivables and deposits		(1,546)		(22)		(161)		—		(1,729)
Net change in other assets		(1,443)		(109)		(2,265)		—		(3,817)
Net cash used in investing activities		(95,241)		(23,056)		(4,184)		—		(122,481)
Cash flows from financing activities:
Payments on long-term debt		—		—		(5,874)		—		(5,874)
Debt pre-payment premiums		—		—		(93)		—		(93)
Dividends paid to non-controlling interest in consolidated subsidiary		—		(735)		—		—		(735)
Employee stock purchases		390		20		129		—		539
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock		95		—		2		—		97
Intercompany transfers		18,968		21,940		(40,908)		—		0
Net cash provided by (used in) financing activities		19,453		21,225		(46,744)		—		(6,066)
Net decrease in cash and cash equivalents		(9,830)		(385)		(73,891)		—		(84,106)
Cash and cash equivalents, beginning of period		25,819		3,577		113,201		—		142,597
Cash and cash equivalents, end of period	$	15,989	$	3,192	$	39,310	$	—	$	58,491

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended March 31, 2017

			Non-
	Guarantor		guarantor		Parent				Headwaters
(in thousands)	Subsidiaries		Subsidiaries		Company		Eliminations		Consolidated
Cash flows from operating activities:
Net income	$	31,606	$	2,639	$	11,208	$	(33,493)	$	11,960
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		32,584		2,237		1,386		—		36,207
Interest expense related to amortization of debt issue costs and debt discount		—		—		1,606		—		1,606
Stock-based compensation		327		—		574		—		901
Deferred income taxes		3,097		465		3,537		—		7,099
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock		—		—		(5,860)		—		(5,860)
Net loss (gain) on disposition of property, plant and equipment		(223)		7		—		—		(216)
Net loss of unconsolidated joint venture		—		19		—		—		19
Equity in earnings of subsidiaries		—		—		(33,493)		33,493		0
Decrease in trade receivables		19,370		312		—		—		19,682
Increase in inventories		(14,448)		(510)		—		—		(14,958)
Decrease in accounts payable and accrued liabilities		(15,864)		(2,087)		(1,462)		—		(19,413)
Other changes in operating assets and liabilities, net		(13,849)		870		10,622		—		(2,357)
Net cash provided by (used in) operating activities		42,600		3,952		(11,882)		—		34,670
Cash flows from investing activities:
Business acquisitions, net of cash acquired		(10,530)		—		—		—		(10,530)
Purchase of property, plant and equipment		(27,561)		(673)		(1,499)		—		(29,733)
Proceeds from disposition of property, plant and equipment		597		29		—		—		626
Net decrease (increase) in long-term receivables and deposits		1,731		(8)		3,167		—		4,890
Net change in other assets		(346)		2,207		507		—		2,368
Net cash provided by (used in) investing activities		(36,109)		1,555		2,175		—		(32,379)
Cash flows from financing activities:
Payments on long-term debt		—		—		(15,000)		—		(15,000)
Dividends paid to non-controlling interest in consolidated subsidiary		—		(657)		—		—		(657)
Employee stock purchases		235		27		74		—		336
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock		—		—		5,860		—		5,860
Intercompany transfers		(4,394)		(1,398)		5,792		—		0
Net cash used in financing activities		(4,159)		(2,028)		(3,274)		—		(9,461)
Net increase (decrease) in cash and cash equivalents		2,332		3,479		(12,981)		—		(7,170)
Cash and cash equivalents, beginning of period		27,012		5,304		32,982		—		65,298
Cash and cash equivalents, end of period	$	29,344	$	8,783	$	20,001	$	—	$	58,128