Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Sep. 30, 2016 | Oct. 31, 2016 | Mar. 31, 2016 | |
Document and Entity Information | |||
Entity Registrant Name | HEADWATERS INC | ||
Entity Central Index Key | 1,003,344 | ||
Document Type | 10-K | ||
Document Period End Date | Sep. 30, 2016 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --09-30 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $ 1,426,230,580 | ||
Entity Common Stock, Shares Outstanding | 74,154,101 | ||
Document Fiscal Year Focus | 2,016 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2016 | Sep. 30, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 65,298 | $ 142,597 |
Trade receivables, net | 152,084 | 134,384 |
Inventories | 72,668 | 55,074 |
Current income taxes | 1,187 | 329 |
Other | 13,517 | 11,827 |
Total current assets | 304,754 | 344,211 |
Property, plant and equipment, net | 206,792 | 185,718 |
Other assets: | ||
Goodwill | 290,503 | 178,199 |
Intangible assets, net | 319,162 | 143,718 |
Deferred income taxes | 68,059 | 92,852 |
Other | 49,173 | 34,321 |
Total other assets | 726,897 | 449,090 |
Total assets | 1,238,443 | 979,019 |
Current liabilities: | ||
Accounts payable | 30,211 | 25,306 |
Accrued personnel costs | 45,366 | 52,544 |
Other accrued liabilities | 63,785 | 51,781 |
Current portion of long-term debt | 7,785 | 4,250 |
Total current liabilities | 147,147 | 133,881 |
Long-term liabilities: | ||
Long-term debt, net | 746,716 | 558,080 |
Other | 41,230 | 36,776 |
Total long-term liabilities | 787,946 | 594,856 |
Total liabilities | 935,093 | 728,737 |
Commitments and contingencies | ||
Redeemable non-controlling interest in consolidated subsidiary | 13,363 | 12,431 |
Stockholders' equity: | ||
Common stock, $0.001 par value; authorized 200,000 shares; issued and outstanding: 73,896 shares at September 30, 2015 (including 83 shares held in treasury) and 74,153 shares at September 30, 2016 (including 105 shares held in treasury) | 74 | 74 |
Capital in excess of par value | 733,117 | 728,667 |
Retained earnings (accumulated deficit) | (441,793) | (489,889) |
Treasury stock | (1,411) | (1,001) |
Total stockholders' equity | 289,987 | 237,851 |
Total liabilities and stockholders' equity | $ 1,238,443 | $ 979,019 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2016 | Sep. 30, 2015 |
CONSOLIDATED BALANCE SHEETS | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized shares | 200,000,000 | 200,000,000 |
Common stock, issued shares | 74,153,000 | 73,896,000 |
Common stock, outstanding shares | 74,153,000 | 73,896,000 |
Common stock, held in treasury (in shares) | 105,000 | 83,000 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Revenue: | |||||||||||
Revenue | $ 291,591 | $ 262,466 | $ 202,332 | $ 218,418 | $ 272,717 | $ 243,294 | $ 179,725 | $ 199,597 | $ 974,807 | $ 895,333 | $ 791,447 |
Cost of revenue: | |||||||||||
Total cost of revenue | 686,606 | 625,442 | 565,754 | ||||||||
Gross profit | 85,522 | 83,531 | 54,877 | 64,271 | 90,301 | 76,762 | 47,141 | 55,687 | 288,201 | 269,891 | 225,693 |
Operating expenses: | |||||||||||
Selling, general and administrative | 156,898 | 149,623 | 137,650 | ||||||||
Amortization | 20,593 | 18,161 | 21,319 | ||||||||
Total operating expenses | 177,491 | 167,784 | 158,969 | ||||||||
Operating income | 110,710 | 102,107 | 66,724 | ||||||||
Other income (expense): | |||||||||||
Net interest expense | (42,424) | (64,219) | (46,329) | ||||||||
Other, net | 4,149 | (218) | (348) | ||||||||
Total other income (expense), net | (38,275) | (64,437) | (46,677) | ||||||||
Income from continuing operations before income taxes | 72,435 | 37,670 | 20,047 | ||||||||
Income tax benefit (provision) | 96,800 | (22,756) | 94,458 | (3,574) | |||||||
Income from continuing operations | 49,679 | 132,128 | 16,473 | ||||||||
Income (loss) from discontinued operations, net of income taxes | 84 | (460) | (415) | ||||||||
Net income | $ 16,873 | $ 17,785 | $ 2,384 | $ 12,721 | $ 126,774 | $ 23,008 | $ (25,198) | $ 7,084 | 49,763 | 131,668 | 16,058 |
Net income attributable to non-controlling interest | (1,667) | (869) | (774) | ||||||||
Net income attributable to Headwaters Incorporated | $ 48,096 | $ 130,799 | $ 15,284 | ||||||||
Basic income per share attributable to Headwaters Incorporated: | |||||||||||
From continuing operations (in dollars per share) | $ 0.65 | $ 1.79 | $ 0.21 | ||||||||
From discontinued operations (in dollars per share) | 0 | (0.01) | (0.01) | ||||||||
Basic income per share (in dollars per share) | $ 0.21 | $ 0.23 | $ 0.03 | $ 0.17 | $ 1.72 | $ 0.30 | $ (0.34) | $ 0.09 | 0.65 | 1.78 | 0.20 |
Diluted income per share attributable to Headwaters Incorporated: | |||||||||||
From continuing operations (in dollars per share) | 0.64 | 1.74 | 0.21 | ||||||||
From discontinued operations (in dollars per share) | 0 | (0.01) | (0.01) | ||||||||
Diluted income per share (in dollars per share) | $ 0.21 | $ 0.23 | $ 0.03 | $ 0.17 | $ 1.68 | $ 0.30 | $ (0.34) | $ 0.09 | $ 0.64 | $ 1.73 | $ 0.20 |
Building products | |||||||||||
Revenue: | |||||||||||
Revenue | $ 594,281 | $ 523,643 | $ 472,434 | ||||||||
Cost of revenue: | |||||||||||
Total cost of revenue | 423,910 | 367,163 | 336,283 | ||||||||
Construction materials | |||||||||||
Revenue: | |||||||||||
Revenue | 370,439 | 352,263 | 309,337 | ||||||||
Cost of revenue: | |||||||||||
Total cost of revenue | 258,478 | 249,077 | 224,888 | ||||||||
Energy technology | |||||||||||
Revenue: | |||||||||||
Revenue | 10,087 | 19,427 | 9,676 | ||||||||
Cost of revenue: | |||||||||||
Total cost of revenue | $ 4,218 | $ 9,202 | $ 4,583 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Common stock | Capital in excess of par value | Retained earnings (accumulated deficit) | Treasury stock | Total |
Balances at Sep. 30, 2013 | $ 73 | $ 720,828 | $ (635,972) | $ (519) | $ 84,410 |
Balances (in shares) at Sep. 30, 2013 | 73,149 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Issuance of common stock pursuant to employee stock purchase plan | $ 1 | 758 | 759 | ||
Issuance of common stock pursuant to employee stock purchase plan (in shares) | 78 | ||||
Issuance of restricted stock, net of cancellations | $ 0 | 0 | |||
Issuance of restricted stock, net of cancellations (in shares) | 150 | ||||
Exercise of stock appreciation rights and restricted stock units | $ 0 | 0 | |||
Exercise of stock appreciation rights and restricted stock units (in shares) | 133 | ||||
Stock-based compensation | 2,165 | 2,165 | |||
Net (4), 22, and 22 share increase (decrease) in treasury stock held for deferred compensation plan obligations, at cost for the years ended 2014, 2015, and 2016 respectively | 73 | (73) | 0 | ||
Adjustment of estimated redemption value of non-controlling interest in consolidated subsidiary | (176) | (176) | |||
Net income attributable to Headwaters Incorporated | 15,284 | 15,284 | |||
Balances at Sep. 30, 2014 | $ 74 | 723,648 | (620,688) | (592) | 102,442 |
Balances (in shares) at Sep. 30, 2014 | 73,510 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Issuance of common stock pursuant to employee stock purchase plan | $ 0 | 804 | 804 | ||
Issuance of common stock pursuant to employee stock purchase plan (in shares) | 58 | ||||
Issuance of restricted stock, net of cancellations | $ 0 | 0 | |||
Issuance of restricted stock, net of cancellations (in shares) | 112 | ||||
Exercise of stock appreciation rights and restricted stock units | $ 0 | 0 | |||
Exercise of stock appreciation rights and restricted stock units (in shares) | 216 | ||||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | 980 | 980 | |||
Stock-based compensation | 2,826 | 2,826 | |||
Net (4), 22, and 22 share increase (decrease) in treasury stock held for deferred compensation plan obligations, at cost for the years ended 2014, 2015, and 2016 respectively | 409 | (409) | 0 | ||
Net income attributable to Headwaters Incorporated | 130,799 | 130,799 | |||
Balances at Sep. 30, 2015 | $ 74 | 728,667 | (489,889) | (1,001) | $ 237,851 |
Balances (in shares) at Sep. 30, 2015 | 73,896 | 73,896 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Issuance of common stock pursuant to employee stock purchase plan | $ 0 | 873 | $ 873 | ||
Issuance of common stock pursuant to employee stock purchase plan (in shares) | 55 | ||||
Issuance of restricted stock, net of cancellations | $ 0 | 0 | |||
Issuance of restricted stock, net of cancellations (in shares) | 90 | ||||
Exercise of stock appreciation rights | $ 0 | 0 | |||
Exercise of stock appreciation rights (in shares) | 112 | ||||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | (14) | (14) | |||
Stock-based compensation | 3,181 | 3,181 | |||
Net (4), 22, and 22 share increase (decrease) in treasury stock held for deferred compensation plan obligations, at cost for the years ended 2014, 2015, and 2016 respectively | 410 | (410) | 0 | ||
Net income attributable to Headwaters Incorporated | 48,096 | 48,096 | |||
Balances at Sep. 30, 2016 | $ 74 | $ 733,117 | $ (441,793) | $ (1,411) | $ 289,987 |
Balances (in shares) at Sep. 30, 2016 | 74,153 | 74,153 |
CONSOLIDATED STATEMENTS OF CHA6
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - shares shares in Thousands | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY | |||
Increase (decrease) in treasury stock held for deferred compensation plan obligations (in shares) | 22 | 22 | (4) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Cash flows from operating activities: | |||
Net income | $ 49,763 | $ 131,668 | $ 16,058 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 62,518 | 53,973 | 55,134 |
Interest expense related to amortization of debt issue costs and debt discount | 3,973 | 6,180 | 2,175 |
Debt pre-payment premiums | 5,395 | 18,320 | |
Stock-based compensation | 3,181 | 2,826 | 2,165 |
Deferred income taxes | 22,779 | (96,742) | 1,666 |
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | (723) | (1,543) | |
Net loss (gain) on disposition of property, plant and equipment | (1,476) | 49 | 95 |
Gain on acquired assets held for sale | (4,450) | ||
Change in fair value of contingent consideration | (800) | ||
Asset impairments | 1,815 | ||
Net loss of unconsolidated joint ventures | 43 | 262 | 529 |
Decrease (increase) in trade receivables | (1,102) | (14,194) | 517 |
Increase in inventories | (432) | (1,007) | (2,347) |
Decrease in accounts payable and accrued liabilities | (11,453) | (11,557) | (12,586) |
Other changes in operating assets and liabilities, net | (6,913) | (6,527) | (178) |
Net cash provided by operating activities | 120,303 | 81,708 | 65,043 |
Cash flows from investing activities: | |||
Business acquisitions, net of cash acquired | (342,362) | (5,650) | (95,604) |
Investments in unconsolidated joint ventures | (125) | (1,875) | |
Purchase of property, plant and equipment | (53,099) | (36,859) | (35,799) |
Proceeds from disposition of property, plant and equipment | 9,445 | 915 | 905 |
Proceeds from sale of acquired assets held for sale | 6,200 | ||
Net decrease in long-term receivables and deposits | 273 | 3,450 | 7,445 |
Net change in other assets | (1,843) | (597) | (1,556) |
Net cash used in investing activities | (381,386) | (38,866) | (126,484) |
Cash flows from financing activities: | |||
Net proceeds from issuance of long-term debt | 343,453 | 414,675 | 146,650 |
Payments on long-term debt | (155,135) | (449,799) | (7,792) |
Debt pre-payment premiums | (5,395) | (18,320) | |
Dividends paid to non-controlling interest in consolidated subsidiary | (735) | (1,690) | (950) |
Employee stock purchases | 873 | 804 | 759 |
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | 723 | 1,543 | |
Net cash provided by (used in) financing activities | 183,784 | (52,787) | 138,667 |
Net increase (decrease) in cash and cash equivalents | (77,299) | (9,945) | 77,226 |
Cash and cash equivalents, beginning of period | 142,597 | 152,542 | 75,316 |
Cash and cash equivalents, end of period | 65,298 | 142,597 | 152,542 |
Supplemental schedule of non-cash investing and financing activities: | |||
Increase in accrued liabilities for acquisition-related commitment | 12,000 | 2,614 | |
Purchase of assets in exchange for future obligations | 5,669 | 4,203 | 2,875 |
Supplemental disclosure of cash flow information: | |||
Cash paid for interest | 39,312 | 58,681 | 42,572 |
Cash paid for income taxes | $ 4,427 | $ 3,295 | $ 1,729 |
Description of Business and Org
Description of Business and Organization | 12 Months Ended |
Sep. 30, 2016 | |
Description of Business and Organization | |
Description of Business and Organization | 1. Description of Business and Organization Headwaters Incorporated (Headwaters) is a building materials company incorporated in Delaware, providing products and services in two core business segments. The building products segment designs, manufactures, and sells a wide variety of building products, including exterior vinyl siding accessories (such as shutters, mounting blocks, and vents), manufactured architectural stone, roofing materials, concrete block and windows. Revenues from Headwaters’ building products businesses are diversified geographically and also by end use, including new housing construction and residential repair and remodeling, as well as commercial construction. The construction materials segment is the nationwide leader in the management and marketing of coal combustion products (CCPs), including fly ash, which is primarily sold directly to concrete manufacturers who use it as a mineral admixture for the partial replacement of portland cement in concrete, and synthetic gypsum. Headwaters’ CCPs business is comprised of a nationwide supply, storage and distribution network. Headwaters also provides services to electric utilities related to the management of CCPs. In addition to the two building materials segments described above, Headwaters also has a non‑core energy technology segment which has been focused on reducing waste and increasing the value of energy‑related feedstocks, primarily in the areas of low‑value oil and coal. In oil, Headwaters’ heavy oil upgrading process uses a liquid catalyst precursor to generate a highly active molecular catalyst to convert low‑value residual oil into higher‑value distillates that can be further refined into gasoline, diesel and other products. In coal, Headwaters owned and operated coal cleaning facilities that separate ash from waste coal to provide a refined coal product that is higher in Btu value and lower in impurities than the feedstock coal. As described in Note 13, Headwaters disposed of its remaining coal cleaning facilities in January 2013 and the results of Headwaters’ coal cleaning operations have been presented as discontinued operations for all periods. Headwaters’ fiscal year ends on September 30 and unless otherwise noted, references to years refer to Headwaters’ fiscal year rather than a calendar year. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Sep. 30, 2016 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Principles of Consolidation — The consolidated financial statements include the accounts of Headwaters, all of its subsidiaries and other entities in which Headwaters has a controlling interest. In accordance with the requirements of Accounting Standards Codification (ASC) Topic 810 Consolidation, Headwaters is required to consolidate any variable interest entities for which it is the primary beneficiary. For investments in entities in which Headwaters has a significant influence over operating and financial decisions (generally defined as owning a voting or economic interest of 20% to 50%), Headwaters applies the equity method of accounting. In instances where Headwaters’ investment is less than 20% and significant influence does not exist, investments are carried at cost. As of September 30, 2016, there are no material variable interest entities or equity‑method investments. All significant intercompany transactions and accounts are eliminated in consolidation. Use of Estimates — The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect i) the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and ii) the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. Segment Reporting, Major Customers and Other Concentrations of Risk — Headwaters currently operates three business segments: building products, construction materials and energy technology. Additional information about these segments is presented in Note 3. No customer accounted for over 10% of total revenue in any year presented and less than 10% of Headwaters’ revenue was from sales outside the United States. Approximately 10%, 9% and 9% of Headwaters’ total revenue and cost of revenue was for services in 2014, 2015 and 2016, respectively. Substantially all service‑related revenue for all periods was in the construction materials segment. Headwaters normally purchases a majority of the polypropylene, poly vinyl chloride (PVC) and polyethylene used in its resin‑based building products from a limited number of suppliers; however, these materials could be obtained from other suppliers if necessary and management currently believes any required change in suppliers would not be materially disruptive. Revenue Recognition and Cost of Revenue — Revenue from the sale of building products, CCPs and energy‑related products is recognized upon passage of title to the customer, which coincides with physical delivery and assumption of risk of loss by the customer. Estimated sales rebates and discounts pertaining to the sale of building products are provided for at the time of sale and are based primarily upon established policies and historical experience. Revenues include transportation charges and shipping and handling fees associated with delivering products and materials to customers when the transportation and/or shipping and handling is contractually provided for between the customer and Headwaters. Cost of revenue includes shipping and handling fees. CCP service revenues are primarily earned under long‑term contracts to dispose of residual materials created by coal‑fired electric power generation. Generally, revenues under long‑term site service contracts are recognized concurrently with the removal of material and are based on the volume of material removed at established prices per ton. Certain service revenue under these contracts is recognized on a time and materials basis in the period in which the services are performed. In compliance with contractual obligations, the cost of CCPs purchased from certain utilities is based on a percentage of the “net revenues” from sale of the CCPs purchased. Costs also include landfill fees and transportation charges to deliver non‑marketable CCPs to landfills. Cash and Cash Equivalents — Headwaters considers all short‑term, highly‑liquid investments with a maturity of three months or less when purchased to be cash equivalents. Certain cash and cash equivalents are deposited with financial institutions, and at times such amounts exceed insured depository limits. Receivables — Allowances are provided for uncollectible accounts and notes when deemed necessary. Such allowances are based on an account‑by‑account analysis of collectability or impairment plus a provision for non‑customer specific defaults based upon historical collection experience. Headwaters performs periodic credit evaluations of its customers but collateral is not required for trade receivables. Collateral is generally required for notes receivable, which were not material during the periods presented. Inventories — Inventories are stated at the lower of cost or net realizable value. Cost includes direct material, transportation, direct labor and allocations of manufacturing overhead costs and is determined primarily using the first‑in, first‑out method. Excess and obsolete inventory reserves are based on historical experience and amounts expected to be realized for slow-moving and obsolete inventory. Property, Plant and Equipment — Property, plant and equipment are recorded at cost. For significant self‑constructed assets, cost includes direct labor and interest. Expenditures for major improvements are capitalized; expenditures for maintenance, repairs and minor improvements are charged to expense as incurred. Assets are depreciated using primarily the straight‑line method over their estimated useful lives, limited to the lease terms for improvements to leased assets. The units‑of‑production method is used to depreciate certain building products segment assets. Upon the sale or retirement of property, plant and equipment, any gain or loss on disposition is reflected in results of operations and the related asset cost and accumulated depreciation are removed from the respective accounts. Intangible Assets and Goodwill — Intangible assets consist primarily of identifiable intangible assets obtained in connection with acquisitions. With the exception of certain indefinite-lived trade names, intangible assets are amortized using the straight‑line method, Headwaters’ best estimate of the pattern of economic benefit, over their estimated useful lives. Goodwill consists of the excess of the purchase price for acquired businesses over the fair value of assets acquired, net of liabilities assumed. As described in more detail in Note 6, in accordance with ASC Topic 350 Intangibles—Goodwill and Other, goodwill and indefinite‑lived intangible assets are not amortized, but are tested at least annually for impairment. Amortizable intangible assets are tested for impairment only when an indicator of impairment exists. Valuation of Long‑Lived Assets — Headwaters evaluates the carrying value of long‑lived assets, including amortizable intangible assets, as well as the related depreciation and amortization periods, to determine whether adjustments to carrying amounts or to estimated useful lives are required based on current events and circumstances. The carrying value of a long‑lived asset is considered impaired when the anticipated cumulative undiscounted cash flow from that asset is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long‑lived asset. Debt Issue Costs and Debt Repayment Premiums — Debt issue costs represent direct costs incurred for the issuance of long‑term debt and, except for costs related to the ABL Revolver (see Note 7), are reflected as a reduction of the carrying value of the respective long-term debt to which they relate. Debt issue costs related to the ABL Revolver are classified in other assets because the ABL Revolver has not been drawn since inception. Debt issue costs are amortized to interest expense over the terms of the respective debt using the effective interest method. When debt is repaid early, the portion of unamortized debt issue costs related to the early principal repayment is written off and included in interest expense. Any premiums associated with the repayment of debt are also charged to interest expense. Financial Instruments — Derivatives are recorded in the consolidated balance sheet at fair value, as required by ASC Topic 815 Derivatives and Hedging. Accounting for changes in the fair value of a derivative depends on the intended use of the derivative, which is established at inception. For derivatives designated as cash flow hedges and which meet the effectiveness guidelines of ASC Topic 815, changes in fair value, to the extent effective, are recognized in other comprehensive income until the hedged item is recognized in earnings. Hedge effectiveness is measured at least quarterly based on the relative changes in fair value between the derivative contract and the hedged item over time. Any change in fair value of a derivative resulting from ineffectiveness, or an excluded component of the gain or loss, is recognized immediately and is recorded as interest expense. Headwaters formally documents all hedge transactions at inception of the contract, including identification of the hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction. This process includes linking the derivatives that are designated as hedges to specific assets, liabilities, firm commitments or forecasted transactions. Headwaters also formally assesses the effectiveness of any hedging instruments on an ongoing basis. Historically, Headwaters has entered into hedge agreements primarily to limit its exposure for interest rate movements and certain commodity price fluctuations. In connection with the issuance of certain convertible senior subordinated notes, Headwaters entered into convertible note hedge and warrant transactions for the purpose of effectively increasing the common stock conversion price. This convertible note hedge terminated when the notes were repaid in full in 2014. Since that time, and as of September 30, 2016, Headwaters has had no material hedge agreements or other derivatives in place. Asset Retirement Obligations — From time to time Headwaters incurs asset retirement obligations associated with the restoration of certain CCP disposal sites. Headwaters records its legal obligations associated with the retirement of long‑lived assets in accordance with the requirements of ASC Topic 410 Asset Retirements and Environmental Obligations. The fair value of a liability for an asset retirement obligation is recognized in the consolidated financial statements when the asset is placed in service. At such time, the fair value of the liability is estimated using discounted cash flows. In subsequent periods, the retirement obligation is accreted to its estimated future value as of the asset retirement date through charges to operating expenses. An asset equal in value to the retirement obligation is also recorded as a component of the carrying amount of the long‑lived asset and is depreciated over the asset’s useful life. As of September 30, 2015 and 2016, CCP asset retirement obligations totaled $0. However, as described in Note 13, one of Headwaters’ subsidiaries is performing permit reclamation responsibilities at a former coal cleaning facility site. As of September 30, 2015 and 2016, approximately $7.4 million and $9.3 million, respectively, was accrued for this reclamation liability. Income Taxes — Headwaters files a consolidated federal income tax return with substantially all of its subsidiaries. Income taxes are determined on an entity‑by‑entity basis and are accounted for in accordance with ASC Topic 740 Income Taxes. Headwaters recognizes deferred tax assets or liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in income tax returns. Deferred tax assets or liabilities are determined based upon the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to apply when the differences are expected to be settled or realized. Deferred income tax assets are periodically reviewed for recoverability based on current events, and valuation allowances are provided as necessary. Expenses for interest and penalties related to income taxes are classified within the income tax provision. Advertising Costs — Advertising costs are expensed as incurred, except for the cost of certain materials which are capitalized and amortized to expense as the materials are distributed. Total advertising costs were approximately $10.3 million, $10.0 million and $11.7 million in 2014, 2015 and 2016, respectively. Warranty Costs — Provision is made for warranty costs at the time of sale, based upon established policies and historical experience. Contingencies — In accounting for legal matters and other contingencies, Headwaters follows the guidance in ASC Topic 450 Contingencies, under which loss contingencies are accounted for based upon the likelihood of an impairment of an asset or the incurrence of a liability. If a loss contingency is “probable” and the amount of loss can be reasonably estimated, it is accrued. If a loss contingency is “probable” but the amount of loss cannot be reasonably estimated, disclosure is made. If a loss contingency is “reasonably possible,” disclosure is made, including the potential range of loss, if determinable. Loss contingencies that are “remote” are neither accounted for nor disclosed. Gain contingencies are given no accounting recognition until realized, but are disclosed if material. Headwaters records legal fees associated with loss contingencies when incurred and does not record estimated future legal fees. Stock‑Based Compensation — Headwaters uses the fair value method of accounting for stock‑based compensation required by ASC Topic 718 Compensation—Stock Compensation. ASC Topic 718 requires companies to expense the value of equity‑based awards. Stock‑based compensation expense is reported within the same expense line items as used for cash compensation expense. Excess tax benefits resulting from exercise of stock options and stock appreciation rights (SARs) are reflected as necessary in the consolidated statement of changes in stockholders’ equity and in financing cash flows in the statement of cash flows. Headwaters recognizes compensation expense equal to the grant‑date fair value of stock‑based awards for all awards expected to vest, over the period during which the related service is rendered by grantees. The fair value of stock‑based awards is determined primarily using the Black‑Scholes‑Merton option pricing model (B‑S‑M model), adjusted where necessary to account for specific terms of awards that the B‑S‑M model does not have the capability to consider; for example, awards which have a cap on allowed appreciation. For such awards, the output determined by the B‑S‑M model has been reduced by an amount determined by a Quasi‑Monte Carlo simulation to reflect the reduction in fair value associated with the appreciation cap or other award feature. The B‑S‑M model was developed for use in estimating the fair value of traded options that have no vesting restrictions and that are fully transferable. Option valuation models require the input of certain subjective assumptions, including expected stock price volatility and expected term. For stock‑based awards, Headwaters primarily uses the “graded vesting” or accelerated method to allocate compensation expense over the requisite service periods. Estimated forfeiture rates are based largely on historical data and were 1% during the periods presented, including as of September 30, 2016. Earnings per Share Calculation — Earnings per share (EPS) has been computed based on the weighted‑average number of common shares outstanding. Diluted EPS computations reflect the increase in weighted‑average common shares outstanding that would result from the assumed exercise of outstanding stock‑based awards calculated using the treasury stock method, and the assumed conversion of convertible securities using the if‑converted method, when such stock‑based awards or convertible securities are dilutive. In accordance with the requirements of ASC Topic 260 Earnings Per Share, the diluted EPS calculations consider all of the following as assumed proceeds in using the treasury stock method to calculate whether and to what extent options and SARs are dilutive: i) the amount employees must pay upon exercise; plus ii) the average amount of unrecognized compensation cost during the period attributed to future service; plus iii) the amount of tax benefits, if any, that would be credited to additional paid‑in capital if the award were to be exercised. Recent Accounting Pronouncements — In September 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (ASC Topic 805, Business Combinations). This standard simplifies the accounting for adjustments made to provisional amounts recognized in a business combination so that revisions of previously reported information about the fair values of assets acquired and liabilities assumed need not be recognized retrospectively. Headwaters adopted this standard effective as of October 1, 2016. While there was no effect upon adoption, due to the acquisitions consummated in 2016, some of which have been provisionally accounted for as described in Note 4, the adoption of this standard could have a material effect on how changes to those provisional amounts are accounted for in future periods if adjusted. In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes (ASC Topic 740). This new rule was issued to simplify the presentation of deferred income taxes to require that all deferred income tax assets and liabilities be classified as noncurrent in the balance sheet. Early application of ASU 2015-17 is permitted and Headwaters elected to adopt the ASU effective as of December 31, 2015, with retrospective application to the September 30, 2015 balance sheet. The effect of the adoption of ASU 2015-17 was to reclassify net deferred income tax assets of approximately $23.4 million as of September 30, 2015 as noncurrent instead of current. Accordingly, total current assets in the September 30, 2015 balance sheet were reduced by that amount, and total other assets were increased by the same amount. There was no effect on total assets or on net income. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (ASC Topic 230, Statement of Cash Flows), which addresses the appropriate classification of certain cash flows as operating, investing, or financing. Among other things, ASU 2016-15 addresses classification of debt prepayment or extinguishment costs and contingent consideration payments made following a business combination. Headwaters adopted ASU 2016-15 effective as of September 30, 2016 which required retrospective application for all prior periods presented. The effect of early adoption of ASU 2016-15 was to increase cash flows from operating activities and decrease cash flows from financing activities by approximately $18.3 million in 2015 and by $5.4 million in 2016. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASC Topic 606). This new revenue standard creates a single source of revenue guidance for all companies in all industries and is more principles-based than current revenue guidance. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASU 2014-09. The mandatory adoption date of ASC 606 for Headwaters is now October 1, 2018. There are two methods of adoption allowed, either a “full” retrospective adoption or a “modified” retrospective adoption. Headwaters currently believes the impact of adopting ASC 606 will not be material to either past or future periods as it relates to the building products and energy technology segments, but is still evaluating the potential impact the new standard will have on the construction materials segment. Adoption of the new standard could require expanded disclosures. In February 2016, the FASB issued ASU 2016-02, Leases (ASC Topic 842). This new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the Statement of Income. The mandatory adoption date of ASC 842 for Headwaters is October 1, 2019. A modified retrospective transition approach is required for leases existing at, or entered into, after the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. Headwaters currently expects that upon adoption of ASC 842, ROU assets and lease liabilities will be recognized in the balance sheet in amounts that will be material. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (ASC Topic 718, Compensation—Stock Compensation), which changes how companies account for certain aspects of share-based payments to employees. Among other things, the new rules eliminate the requirement to record excess tax benefits in additional paid-in capital and instead require all such tax benefits to be recorded in the income statement. Most of the amendments are mandatory while one, how to account for forfeitures, requires a policy election. Different methods of adoption are required for the various amendments and early adoption is permitted, but all of the amendments must be adopted in the same period. The adoption date for Headwaters can be no later than October 1, 2017, which is when Headwaters currently expects to adopt the new rules. Headwaters continues to evaluate ASU 2016-09 and at the current time does not know what effects adoption of the new standard will have on its financial statements and whether the impact will be material. In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory (ASC Topic 740, Income Taxes), which will require an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. This ASU is effective for Headwaters on October 1, 2018 with early adoption permitted. Headwaters has not yet evaluated the effect, if any, that ASU 2016-16 will have on its financial statements. Headwaters has reviewed other recently issued accounting standards which have not yet been adopted in order to determine their potential effect, if any, on the results of operations or financial position of Headwaters. Based on the review of these other recently issued standards, Headwaters does not currently believe that any of those accounting pronouncements will have a significant effect on its current or future financial position, results of operations, cash flows or disclosures. Reclassifications — Certain prior period amounts, including the changes described above for the adoption of new accounting standards, have been reclassified to conform to the current period’s presentation. The reclassifications had no effect on net income, but did affect total assets and total liabilities as well as the classification of certain cash flows in the consolidated statements of cash flows. |
Segment Reporting
Segment Reporting | 12 Months Ended |
Sep. 30, 2016 | |
Segment Reporting | |
Segment Reporting | 3. Segment Reporting Headwaters currently operates three business segments: building products, construction materials and energy technology. These segments are managed and evaluated separately by management due to differences in their operations, products and services. Revenues for the building products segment consist of product sales to wholesale and retail distributors, contractors and other users of building products. Revenues for the construction materials segment consist primarily of CCP sales to ready-mix concrete businesses, with a smaller amount from services provided to coal-fueled electric generating utilities. Continuing revenues for the energy technology segment consist primarily of catalyst sales to oil refineries. As described in Note 13, Headwaters sold all of its coal cleaning facilities in 2012 and 2013 and the results of operations have been reflected as discontinued operations in the accompanying statements of income for all periods. Intersegment sales are immaterial. Historically, and for all years presented, the block product business has been a part of the building products segment. However, commencing in the December 2016 quarter, the construction materials segment will include the block product business. This change is being made because of changes in management and operations, all of which became operative effective as of October 1, 2016. The following segment information has been prepared in accordance with ASC Topic 280 Segment Reporting. Segment performance is evaluated primarily on revenue and operating income, although other factors are also used, such as Adjusted EBITDA, a non-GAAP financial measure. Headwaters defines Adjusted EBITDA as net income plus net interest expense, income taxes, depreciation and amortization, stock‑based compensation, cash‑based compensation tied to stock price, goodwill and other impairments, and other non‑routine adjustments that arise from time to time. Segment costs and expenses considered in deriving segment operating income include cost of revenue, amortization, and segment‑specific selling, general and administrative expenses. Amounts included in the Corporate column represent expenses that are not allocated to any segment and include administrative departmental costs and general corporate overhead. Segment assets reflect those specifically attributable to individual segments and primarily include cash, accounts receivable, inventories, property, plant and equipment, goodwill and intangible assets. Certain other assets are included in the Corporate column. The net operating results of the discontinued coal cleaning business are reflected in the single line item for discontinued operations. 2014 Building Construction Energy (in thousands) products materials technology Corporate Totals Segment revenue $ $ $ $ $ Depreciation and amortization $ $ $ $ $ Operating income (loss) $ $ $ $ $ Net interest expense Other income (expense), net Income tax provision Income from continuing operations Loss from discontinued operations, net of income taxes Net income $ Capital expenditures $ $ $ $ $ Segment assets $ $ $ $ $ 2015 Building Construction Energy (in thousands) products materials technology Corporate Totals Segment revenue $ $ $ $ $ Depreciation and amortization $ $ $ $ $ Operating income (loss) $ $ $ $ $ Net interest expense Other income (expense), net Income tax benefit Income from continuing operations Loss from discontinued operations, net of income taxes Net income $ Capital expenditures $ $ $ $ $ Segment assets $ $ $ $ $ 2016 Building Construction Energy (in thousands) products materials technology Corporate Totals Segment revenue $ $ $ $ $ Depreciation and amortization $ $ $ $ $ Operating income (loss) $ $ $ $ $ Net interest expense Other income (expense), net Income tax provision Income from continuing operations Income from discontinued operations, net of income taxes Net income $ Capital expenditures $ $ $ $ $ Segment assets $ $ $ $ $ |
Acquisitions
Acquisitions | 12 Months Ended |
Sep. 30, 2016 | |
Acquisitions | |
Acquisitions | 4. Acquisitions Entegra — On December 12, 2013, Headwaters acquired 80% of the equity interests of Roof Tile Acquisition, LLC, a privately-held Florida-based company in the building products industry, which sells its products primarily under the Entegra brand. Entegra’s results of operations have been included with Headwaters’ consolidated results beginning December 13, 2013. Entegra is a leading manufacturer of concrete roof tiles and accessories which are sold primarily in Florida. The acquisition of Entegra provides additional product offerings to Headwaters’ current roofing products portfolio. Headwaters believes the strategic location of Entegra’s centralized manufacturing plant in Florida, the quality of its contractor/customer relationships, and the scope of its products and services provide a competitive advantage. Marketing to Entegra customers provides Headwaters the opportunity to expand existing sales and distribution within Florida, which is one of the fastest growing states in the U.S. in terms of population. Total consideration paid for Entegra was approximately $57.5 million, all of which was cash. Direct acquisition costs, consisting primarily of fees for legal services, totaled approximately $0.4 million and were included in selling, general and administrative expense in the statement of income for fiscal 2014. Headwaters has the right, but not the obligation, to acquire the non-controlling 20% equity interest in Entegra for a stipulated multiple of EBITDA adjusted for certain prescribed items. This call right is exercisable at any time after five years following the date of acquisition, unless certain defined events occur prior to that time, in which case the right is exercisable earlier. The non-controlling owners have the right, but not the obligation, to require Headwaters to acquire the non-controlling 20% equity interest, again for a stipulated multiple of EBITDA adjusted for certain prescribed items. This put right became exercisable in June 2015. The Entegra acquisition has been accounted for as a business combination in accordance with the requirements of ASC 805 Business Combinations. The following table sets forth the estimated fair values of assets acquired and liabilities assumed as of the acquisition date: (in thousands) Current assets $ Current liabilities Property, plant and equipment Intangible assets: Customer relationships (15 year life) Trade name (indefinite life) Goodwill Net assets acquired Less redeemable non-controlling interest Net assets attributable to Headwaters $ Entegra’s future growth attributable to new customers, geographic presence and assembled workforce are additional assets that are not separable and which contributed to recorded goodwill, most of which is tax deductible over 15 years. Gerard — On May 16, 2014, Headwaters acquired certain assets and assumed certain liabilities of the roofing products business of Metals USA Building Products, L.P., which products are sold under the Gerard and Allmet brands. Gerard’s results of operations are being reported within the building products segment and have been included with Headwaters’ consolidated results beginning May 16, 2014. Gerard is one of the largest manufacturers of stone coated metal roofing materials in the U.S. and sells niche roofing products that combine profiles resembling tile, shake, or slate with a fire proof material and a low lifetime installed cost. The acquisition of Gerard increases the number of specialty niche roofing products that Headwaters provides to its core customers and is an area of focus for Headwaters. With the addition of Gerard, Headwaters now has three product categories in niche roofing, including resin-based composite, concrete, and metal, which could increase opportunities for cross selling. Besides broadening the niche roofing product lines, Gerard also expands Headwaters geographic footprint in the roofing category. Total consideration paid for Gerard was approximately $27.6 million, all of which was cash. Direct acquisition costs, consisting primarily of fees for legal services, totaled approximately $0.3 million and were included in selling, general and administrative expense in the statement of income for fiscal 2014. The Gerard acquisition has been accounted for as a business combination in accordance with the requirements of ASC 805 Business Combinations. The following table sets forth the estimated fair values of assets acquired and liabilities assumed as of the acquisition date: (in thousands) Current assets $ Current liabilities Property, plant and equipment Intangible assets: Customer relationships (15 year life) Trade name (indefinite life) Goodwill Long-term liabilities Net assets acquired $ Gerard’s future growth attributable to new customers, geographic presence and assembled workforce are additional assets that are not separable and which contributed to recorded goodwill, most of which is tax deductible over 15 years. Roofing Businesses Acquired in 2016 – On November 13, 2015, Headwaters acquired 100% of the equity interests in several related companies, together which comprise a stone-coated metal roofing business located in California known as Metro Roof Products. On December 3, 2015, Headwaters acquired certain assets and assumed certain liabilities of Enviroshake Inc., a Canadian company that manufactured composite roofing products, primarily in the U.S. and Canada. These acquisitions are expected to expand Headwaters’ presence in the niche roofing products sector. Combined consideration paid for the two roofing acquisitions, net of cash acquired, was approximately $57.0 million. Direct acquisition costs were not material. Results of operations are being reported within the building products segment and have been included with Headwaters’ consolidated results beginning November 13, 2015 and December 3, 2015, respectively. Metro sells stone-coated metal roofing products in the U.S., with an aesthetic resemblance to tile, shake, slate, or asphalt, but which offer the strength and durability of steel. Metro sells to both distributors and contractors. Enviroshake is a composite roofing product that replicates the look of cedar shake, cedar shingle and slate and uses a direct distribution model to market and sell its products to customers. The acquisitions of Metro and Enviroshake increase the number of specialty niche roofing products that Headwaters provides to its core customers and is an area of continuing focus for Headwaters. The roofing acquisitions have been accounted for as business combinations in accordance with the requirements of ASC 805 Business Combinations. The following table sets forth the combined estimated fair values of assets acquired and liabilities assumed for the acquisitions as of the acquisition dates, using available information and assumptions Headwaters deems to be reasonable at the current time. Headwaters is in the process of finalizing all of the estimated amounts shown below, including the third-party valuations of the fair values of the acquired intangible assets; therefore, the provisional measurements shown in the table are subject to change: (in thousands) Current assets $ Current liabilities Property, plant and equipment Intangible assets: Customer relationships (12 year life) Trade names (indefinite life) Intellectual property (15 year life) Goodwill Long-term liabilities Net assets acquired $ The process of identifying and valuing the intangible assets that were acquired has not been completed. When those intangible assets have been identified and valued, and estimated useful lives are determined, amortization of the intangible assets will be adjusted effective as of the acquisition dates. Future growth attributable to such things as new customers, geographic presence and assembled workforce are additional assets that are not separable and which contributed to recorded goodwill, most of which is expected to be tax deductible over a 15-year period. Synthetic Materials – On March 17, 2016, Headwaters acquired 100% of the equity interests in a synthetic gypsum processing and marketing business known as Synthetic Materials, LLC (SynMat), with operations in several locations in the Eastern U.S. This acquisition is expected to expand Headwaters’ presence in the CCP industry. Consideration paid on the date of acquisition, net of cash acquired, was approximately $33.2 million. In addition to the net cash paid as of the acquisition date, approximately $12.0 million of liabilities have been recorded for future estimated payments, all of which are expected to be made within 12 months from the acquisition date. Direct acquisition costs were not material. Results of operations are being reported within the construction materials segment and have been included with Headwaters’ consolidated results beginning March 17, 2016. Synthetic gypsum is used as a substitute for mined gypsum with application in the manufacture of wallboard and cement and as an agricultural soil amendment, among other uses. SynMat is a leading processor of synthetic gypsum and Headwaters expects marketing and operational synergies in the combination of Headwaters' current CCP operations with those of SynMat. The SynMat acquisition has been accounted for as a business combination in accordance with the requirements of ASC 805 Business Combinations. The following table sets forth the estimated fair values of assets acquired and liabilities assumed as of the acquisition date, using available information and assumptions Headwaters deems to be reasonable at the current time. Headwaters is in the process of finalizing all of the estimated amounts shown below, including the third-party valuations of the fair values of the acquired intangible assets; therefore, the provisional measurements shown in the table are subject to change: (in thousands) Current assets $ Current liabilities Property, plant and equipment Intangible assets: Contracts (20-year life) Customer relationships (15 year life) Trade names (indefinite life) Goodwill Net assets acquired $ The process of identifying and valuing the intangible assets that were acquired has not been completed. When those intangible assets have been identified and valued, and estimated useful lives are determined, amortization of the intangible assets will be adjusted effective as of the acquisition date. Future growth attributable to such things as new customers, geographic presence and assembled workforce are additional assets that are not separable and which contributed to recorded goodwill, all of which is expected to be tax deductible over a 15-year period. Krestmark — On August 19, 2016, Headwaters acquired substantially all of the assets and assumed certain liabilities of Krestmark Industries, L.P. Krestmark is a Texas-based business that manufactures and sells high quality vinyl windows in the U.S. Krestmark’s branded window products are sold to a diverse customer base of homebuilders, lumber yards, and distributors. This acquisition is a natural extension of Headwaters’ focus on supplying customers and homeowners with attractive products for the exterior of the home. Krestmark’s results of operations are being reported within the building products segment and have been included with Headwaters’ consolidated results beginning August 20, 2016. Total consideration paid on the date of acquisition, was $240.0 million, which is subject to adjustment for the final calculation of acquisition-date working capital. The working capital adjustment is currently expected to be finalized in the December 2016 quarter. Approximately $4.6 million of the initial consideration paid represents prepaid compensation for certain Krestmark employees with retention bonus obligations over periods of up to two years from the acquisition date. This amount has been recorded as prepaid compensation in the consolidated balance sheet and is being amortized to expense over the two-year retention period. Direct acquisition costs were not material. The Krestmark acquisition has been accounted for as a business combination in accordance with the requirements of ASC 805 Business Combinations. The following table sets forth the estimated fair values of assets acquired and liabilities assumed as of the acquisition date, using available information and assumptions Headwaters deems to be reasonable at the current time. Headwaters is in the process of finalizing all of the estimated amounts shown below, including the third-party valuations of the fair values of the acquired intangible assets; therefore, the provisional measurements shown in the table are subject to change. The table does not include any amounts for the prepaid compensation described above. (in thousands) Current assets $ Current liabilities Property, plant and equipment Intangible assets: Customer relationships (20 year life) Trade name (indefinite life) Non-competition agreements (7 year life) Goodwill Net assets acquired $ The process of identifying and valuing the intangible assets that were acquired is in the early stages and has not been completed. When those intangible assets have been identified and valued, and estimated useful lives are determined, amortization of the intangible assets will be adjusted effective as of the acquisition date. Future growth attributable to such things as new customers, geographic presence and assembled workforce are additional assets that are not separable and which contributed to recorded goodwill, substantially all of which is expected to be tax deductible over a 15-year period. Other — During the March 2014 quarter, Headwaters acquired the assets of a company in the construction materials industry located in the Northeast U.S. for initial cash consideration of approximately $3.1 million. This acquisition increased Headwaters’ supply of fly ash and bottom ash, improving its competitive position in that region. During the September 2014 quarter, Headwaters acquired the assets of another company in the construction materials industry located in the Southeast U.S. for cash consideration of approximately $7.4 million. This acquisition increased Headwaters’ supply of CCPs produced by industrial boilers and has strengthened the ability to meet customers’ needs along the Gulf Coast. During the September 2015 quarter, Headwaters acquired the assets of a company in the building products industry located in Texas for initial cash consideration of approximately $4.5 million. This acquisition strengthens Headwaters’ ability to market its block products in the central Texas region. During the March 2016 quarter, Headwaters acquired certain decking manufacturing assets for cash consideration of approximately $6.3 million. The assets have been relocated to one of Headwaters’ current manufacturing sites. This acquisition provides an opportunity to expand distribution to existing customers, develop additional decking related products, and increase Headwaters’ product and manufacturing expertise. During the June 2016 quarter, Headwaters’ minority-owned subsidiary acquired for initial cash consideration of $10.4 million all of the equity interests in several related companies, together which comprise a concrete roof tile business which had operations primarily in Florida. This acquisition is expected to expand Headwaters’ presence in that niche roofing sector in Florida. Certain assets acquired in this acquisition are being held for sale and while provisional estimated values have been ascribed to those assets, at the current time there is significant uncertainty regarding the fair values of the assets. Accordingly, those provisional values could change in the future when final determinations of fair value for purchase accounting purposes have been completed. Gains on assets held for sale of approximately $4.5 million, net of $2.0 million of income taxes, have been recognized in other income in Headwaters’ consolidated statement of income for 2016 and it is currently expected that additional gains could be realized in future periods as future sales transactions are consummated. Investments in entities in which Headwaters has a significant influence over operating and financial decisions are accounted for using the equity method of accounting. Headwaters acquired 100% of one such equity method investee in the December 2014 quarter for a cash payment of approximately $1.2 million. As a result of Headwaters obtaining a controlling financial interest, the investee has been consolidated within the building products segment. Headwaters’ goodwill from all acquisitions plus all indefinite-lived trade names are tested for impairment annually. In addition, all acquired goodwill and intangible assets are subject to review for impairment if indicators of potential impairment develop in the future. Combined Financial Information — The actual revenue included in Headwaters’ consolidated statements of income for 2014, 2015 and 2016 from the acquisitions that occurred in each fiscal year was approximately $47.6 million, $3.2 million and $49.3 million, respectively, and the actual earnings (loss) (including non-controlling interest) included in Headwaters’ consolidated statements of income for 2014, 2015 and 2016 was approximately $5.2 million, $(1.2) million and $4.7 million, respectively. The following unaudited information presents the pro forma consolidated revenue and net income for Headwaters for the years indicated as if the 2014 acquisitions had been included in Headwaters’ consolidated results of operations beginning October 1, 2012, the 2015 acquisitions had been included in Headwaters’ consolidated results of operations beginning October 1, 2013 and the 2016 acquisitions had been included in Headwaters’ consolidated results of operations beginning October 1, 2014. Unaudited (in thousands) 2014 2015 2016 Pro forma revenue $ $ $ Pro forma net income $ $ $ The above unaudited pro forma results have been calculated by combining the historical results of Headwaters and the acquired businesses as if all acquisitions had occurred as of October 1 of the fiscal year prior to the respective acquisition dates, and then adjusting the income tax provisions as if they had been calculated on the resulting, combined results. The pro forma results include estimates for intangible asset amortization for the 2015 acquisitions which are subject to change when the final asset values have been determined. The pro forma results reflect elimination of the following 2014 expenses (since for purposes of the pro forma presentation they would be reflected in 2013 instead of in 2014): $0.7 million of direct acquisition costs and $1.2 million of nonrecurring expense related to the fair value adjustments to acquisition-date inventories. There were no material 2015 expenses reflected in 2014 instead of in 2015. The pro forma results reflect the following 2016 expenses in 2015 instead of 2016: $0.9 million of direct acquisition costs and $1.1 million of nonrecurring expense related to the fair value adjustment to acquisition-date inventory. For all periods presented, historical depreciation and amortization expense of the acquired companies was adjusted to reflect the acquisition date fair value amounts of the related assets. No other material pro forma adjustments were deemed necessary, either to conform the acquisitions to Headwaters’ accounting policies or for any other situation. The pro forma information is not necessarily indicative of the results that would have been achieved had the transactions occurred on the dates indicated or that may be achieved in the future. Non-controlling Interest in Consolidated Subsidiary — As described above, Headwaters acquired 80% of the equity interests of Entegra, and the non-controlling owners have the right to require Headwaters to acquire the non-controlling 20% equity interest. This put right is not deemed to be a freestanding financial instrument and because it is not solely within the control of Headwaters, the non-controlling interest does not qualify as permanent equity and has been reported outside the stockholders’ equity section of the balance sheet as temporary, or mezzanine, equity. The value of the non-controlling interest was affected by the lack of control as well as the estimated fair values of the put and call rights. Because there is no fixed redemption date for the put right, Headwaters compares quarterly the carrying value of the non-controlling interest to its estimated redemption value. The estimated redemption value is calculated based on the EBITDA formula described previously to determine the price that would be paid if the put right were to have been exercised at the end of the reporting period. If applicable, the carrying amount is increased, but not decreased, to the estimated redemption value. The following table summarizes the activity of the non-controlling interest during the three-year period ended September 30, 2016: (in thousands) Estimated fair value as of acquisition date $ Net income attributable to non-controlling interest Dividends paid to non-controlling interest Adjustment of estimated redemption value Balance as of September 30, 2014 Net income attributable to non-controlling interest Dividends paid to non-controlling interest Balance as of September 30, 2015 Net income attributable to non-controlling interest Dividends paid to non-controlling interest Balance as of September 30, 2016 $ |
Current Assets and Current Liab
Current Assets and Current Liabilities | 12 Months Ended |
Sep. 30, 2016 | |
Current Assets and Current Liabilities | |
Current Assets and Current Liabilities | 5. Current Assets and Current Liabilities Receivables — Activity in the trade receivables allowance account was as follows for the three‑year period ended September 30, 2016: Balance at beginning Charged Accounts Balance at (in thousands) of year to expense written off end of year 2014 $ $ $ $ 2015 2016 Inventories — Inventories consisted of the following at September 30: (in thousands) 2015 2016 Raw materials $ $ Finished goods $ $ Approximately $16.5 million of the increase in inventories in 2016 was a result of the acquisitions described in Note 4. Warranty Liabilities — Activity in the warranty liability account was as follows for the three-year period ended September 30, 2016: Balance at Changes in Additions Balance at beginning Charged prior year From Payments end of (in thousands) of year to expense estimates acquisitions for claims year 2014 $ $ $ $ $ $ 2015 — 2016 Other Accrued Liabilities — Other accrued liabilities consisted of the following at September 30: (in thousands) 2015 2016 Products and services received but not yet invoiced $ $ Acquisition liabilities Other $ $ |
Long-Lived Assets
Long-Lived Assets | 12 Months Ended |
Sep. 30, 2016 | |
Long-Lived Assets | |
Long-Lived Assets | 6. Long‑Lived Assets Property, Plant and Equipment — Property, plant and equipment consisted of the following at September 30: Estimated (in thousands of dollars) useful lives 2015 2016 Land and improvements - 40 years $ $ Buildings and improvements - 40 years Equipment and vehicles - 20 years Dies and molds - 20 years Construction in progress — Less accumulated depreciation Net property, plant and equipment $ $ Depreciation expense was approximately $33.8 million, $35.8 million and $41.9 million in 2014, 2015 and 2016, respectively. Intangible Assets — Headwaters’ identified intangible assets are being amortized over the estimated useful lives shown in the table below. The table also summarizes the gross carrying amounts and related accumulated amortization of intangible assets as of September 30: 2015 2016 Gross Gross Estimated Carrying Accumulated Carrying Accumulated (in thousands of dollars) useful lives Amount Amortization Amount Amortization Trade names Indefinite $ $ — $ $ — Intellectual property 15 years — — — Contracts - 20 years Customer relationships - 20 years Trade names 20 years Patents and patented technologies - 19 years Other - 17 years $ $ $ $ The above table includes provisional amounts for certain intangible assets acquired in 2016 because the process of identifying and valuing those assets has not been completed. Total amortization expense related to intangible assets was approximately $21.3 million, $18.2 million and $20.6 million in 2014, 2015 and 2016, respectively. The primary reason for the decrease in amortization expense from 2014 to 2015 is that certain assets have been fully amortized. Total estimated annual amortization expense for 2017 through 2021 is shown in the following table: Year ending September 30: (in thousands) 2017 $ 2018 2019 2020 2021 Goodwill — Changes in the carrying amount of goodwill, by segment, are as follows for the two‑year period ended September 30, 2016: Building Construction (in thousands) products materials Total Balances as of September 30, 2014 $ $ $ Goodwill related to 2015 acquisitions — Adjustments to previously recorded amounts for 2014 acquisitions Balances as of September 30, 2015 Goodwill related to 2016 acquisitions Adjustments to previously recorded amounts for 2015 acquisitions — Balances as of September 30, 2016 $ $ $ Impairment Testing — In accordance with the requirements of ASC Topic 350 Intangibles—Goodwill and Other, Headwaters does not amortize goodwill or indefinite‑lived intangible assets, all of which relate to acquisitions. However, Headwaters is required to periodically test these assets for impairment at least annually, or sooner if indicators of possible impairment arise. Headwaters performs its annual impairment testing during the fourth quarter of its fiscal year using a June 30 test date and a one‑ to three‑step process. Headwaters’ reporting units for purposes of impairment testing are the same as its operating segments. Headwaters evaluates qualitative factors, including macroeconomic conditions, industry and market considerations, overall financial performance and cost factors, to determine whether it is necessary to perform step 1 of the two‑step impairment test. This qualitative evaluation is commonly referred to as “step 0.” After assessing the appropriate qualitative factors, only if it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, is it necessary to perform step 1. Step 1 of impairment testing consists of determining and comparing the fair value of a reporting unit, calculated primarily using discounted expected future cash flows, to the carrying value of the reporting unit. If step 1 is failed for a reporting unit, indicating a potential impairment, Headwaters is required to complete step 2, which is a more detailed test to calculate the implied fair value of goodwill and indefinite-lived intangible assets, and compare that value to the carrying value. If the carrying value of goodwill and indefinite-lived assets exceeds the implied fair value, an impairment loss is required to be recorded. For all years presented, Headwaters performed a step 0 qualitative evaluation for both the construction materials and building products reporting units and concluded that it was more likely than not that the fair values exceeded the carrying amounts of goodwill and indefinite-lived assets. Accordingly, further step 1 and step 2 testing for impairment was not required to be performed. |
Long-term Debt
Long-term Debt | 12 Months Ended |
Sep. 30, 2016 | |
Long-term Debt | |
Long-term Debt | 7. Long‑Term Debt The total undiscounted face amount of Headwaters’ outstanding long‑term debt was approximately $573.9 million as of September 30, 2015 and $768.8 million as of September 30, 2016. As of those dates, the discounted carrying value of long‑term debt consisted of the following: (in thousands) 2015 2016 Senior secured term loan, due March 2022 (face amount $423,938 as of September 30, 2015 and $768,804 as of September 30, 2016) $ $ 754,501 7¼% Senior notes, due January 2019 (face amount $150,000) — Carrying amount of long-term debt, net of discounts and debt issue costs Less current portion Long-term debt $ $ Senior Secured Term Loan — In March 2015, Headwaters entered into a new Term Loan Facility, under which a senior secured loan for $425.0 million was obtained. In August 2016, Headwaters entered into an Incremental Amendment to the Term Loan Facility for an additional senior secured loan totaling $350.0 million. The entire combined loan will mature in March 2022. The Term Loan Facility requires scheduled quarterly repayments in an aggregate annual amount equal to approximately 1.0% of the original combined principal amounts (subject to reduction for certain permitted prepayments), with the balance due at maturity. Headwaters determined that the $350.0 million incremental amendment constituted a debt modification. As described below, a portion of the proceeds was used to redeem the remaining outstanding $99.0 million of the 7¼% Senior Notes. The Term Loan Facility allows Headwaters to request one or more incremental term loans and certain other types of incremental debt in an aggregate amount not to exceed $150.0 million plus an additional amount which is dependent on Headwaters’ pro forma net leverage ratio, as defined. Any additional borrowings are contingent upon the receipt of commitments by existing or additional lenders. Borrowings under the Term Loan Facility bear interest at a rate equal to, at Headwaters’ option, either (a) a base rate determined by reference to the highest of (i) the publicly announced prime rate of the administrative agent, (ii) the federal funds rate plus 0.50%, and (iii) the eurocurrency (LIBO) rate for a one-month interest period plus 1.0%, subject in all cases to a 2.0% floor; or (b) a eurocurrency (LIBO) rate determined by reference to the cost of funds for eurocurrency deposits in dollars, subject to a 1.0% floor; plus, in each case, an applicable margin of 3.0% for any eurocurrency loan and 2.0% for any alternate base rate loan. Interest is payable quarterly, and as of September 30, 2016, the interest rate on borrowings under the Term Loan Facility was 4.0%. Headwaters may voluntarily repay outstanding loans under the Term Loan Facility at any time without premium or penalty, other than customary breakage costs with respect to LIBO rate loans, which shall be subject to a prepayment premium of 1.0%. The Term Loan Facility requires Headwaters to prepay outstanding term loans, subject to certain exceptions, with (i) up to 50% of Headwaters’ annual excess cash flow, as defined, to the extent such excess cash flow exceeds $1.0 million, commencing with fiscal year 2016, with such required prepayment to be reduced by the amount of voluntary prepayments of term loans and certain other types of senior secured debt; (ii) 100% of the net cash proceeds of certain non-ordinary course asset sales; and (iii) 100% of the net cash proceeds of certain issuances of debt. The Term Loan Facility is secured by substantially all assets of Headwaters, except that the obligations have a second priority position with respect to the assets that secure Headwaters’ ABL Revolver, primarily consisting of certain trade receivables and inventories of Headwaters’ building products and construction materials segments. The Term Loan Facility contains customary covenants restricting the ability of Headwaters to incur additional debt and liens on assets, prepay future new subordinated debt, merge or consolidate with another company, sell all or substantially all assets, make investments and pay dividends or distributions, among other things. The Term Loan Facility contains customary events of default, including with respect to a change in control of Headwaters. Headwaters was in compliance with all covenants as of September 30, 2016. The net proceeds from the initial borrowing under the Term Loan Facility were approximately $414.7 million, after giving effect to original issue discount of approximately $2.1 million and transaction costs of approximately $8.2 million. As described below, the net proceeds from the original borrowing under the Term Loan Facility were primarily used to pay the redemption price for all of the outstanding 7-5/8% senior secured notes. The net proceeds from the incremental 2016 borrowing under the Term Loan Facility were approximately $341.6 million after giving effect to original issue discount of approximately $0.9 million and transaction costs of approximately $7.5 million, which consisted of $1.8 million in non-capitalizable costs charged to interest expense and $5.7 million of debt issuance costs. As described below, a portion of the net proceeds from the incremental borrowing under the Term Loan Facility were used to pay the redemption price for all of the remaining outstanding 7¼% Senior Notes. Most of the remaining proceeds were used to acquire Krestmark as described in Note 4. ABL Revolver — Since entering into the ABL Revolver, Headwaters has not borrowed any funds under the arrangement and has no borrowings outstanding as of September 30, 2016. Availability under the ABL Revolver cannot exceed $70.0 million, which includes a $35.0 million sub‑line for letters of credit and a $10.5 million swingline facility. Availability under the ABL Revolver is further limited by the borrowing base valuations of the assets of Headwaters’ building products and construction materials segments which secure the borrowings, currently consisting of certain trade receivables and inventories. In addition to the first lien position on these assets, the ABL Revolver lenders have a second priority position on substantially all other assets of Headwaters. As of September 30, 2016, Headwaters had secured letters of credit under the ABL Revolver of approximately $8.6 million for various purposes and had availability under the ABL Revolver of approximately $59.4 million. The ABL Revolver terminates in March 2020. There is a contingent provision for early termination at any time within three months prior to the earliest maturity date of the senior secured Term Loan Facility at which time any amounts borrowed must be repaid. Outstanding borrowings under the ABL Revolver accrue interest at Headwaters’ option, at either i) the London Interbank Offered Rate (LIBOR) plus 1.5%, 1.75% or 2.0%, depending on Headwaters’ average net excess availability under the ABL; or ii) the “Base Rate” plus 0.25%, 0.5% or 0.75%, again depending on average net excess availability. The base rate is subject to a floor equal to the highest of i) the prime rate, ii) the federal funds rate plus 0.5%, and iii) the 30-day LIBO rate plus 1.0%. Fees on the unused portion of the ABL Revolver range from 0.25% to 0.375%, depending on the amount of the credit facility which is utilized. If there would have been borrowings outstanding under the ABL Revolver as of September 30, 2016, the interest rate on those borrowings would have been approximately 2.4%. The ABL Revolver contains restrictions and covenants common to such agreements, including limitations on the incurrence of additional debt and liens on assets, prepayment of subordinated debt, merging or consolidating with another company, selling assets, making acquisitions and investments and the payment of dividends or distributions, among other things. In addition, if availability under the ABL Revolver is less than 12.5%, Headwaters is required to maintain a monthly fixed charge coverage ratio of at least 1.0x for the preceding twelve‑ month period. Headwaters was in compliance with all covenants as of September 30, 2016. 7¼% Senior Notes — In December 2013, Headwaters issued $150.0 million of 7¼% senior notes. Pursuant to open market transactions during the March 2016 quarter, Headwaters repurchased and cancelled approximately $3.75 million of the 7¼% senior notes. In July 2016, Headwaters redeemed $47.25 million of these notes at a redemption price equal to 103.625% of the principal amount. In September 2016, Headwaters redeemed the remaining $99.0 million of the notes at a redemption price equal to 103.625% of the principal amount. The associated premiums and accelerated debt issue costs for all of the transactions, aggregating approximately $7.0 million, were charged to interest expense. 7-5/8% Senior Secured Notes — In 2011, Headwaters issued $400.0 million of 7-5/8% senior secured notes. In March 2015, Headwaters irrevocably deposited with the trustee of the notes an amount sufficient to pay and discharge all obligations under the notes and the related indenture, which discharge the trustee acknowledged. This discharge resulted in a loss on extinguishment of debt of approximately $21.3 million, comprised of the early repayment premium of approximately $15.3 million, interest to the April 2015 redemption date totaling approximately $2.5 million, and accelerated amortization of unamortized debt issue costs of approximately $3.5 million. The loss on debt extinguishment is reflected as interest expense in Headwaters’ statement of income for 2015. Convertible Senior Subordinated Notes — Pursuant to open market transactions in February 2015, Headwaters repurchased and canceled substantially all of the outstanding 8.75% convertible senior subordinated notes, aggregating approximately $49.0 million. Premiums and accelerated amortization of debt discount and debt issue costs aggregating approximately $3.5 million were paid and charged to interest expense. Headwaters’ Chairman and CEO was a holder of $1.16 million of the 8.75% notes, which holding was purchased in the open market. Due to immateriality, the remaining balance of these convertible notes was included with other accrued liabilities in the consolidated balance sheet as of September 30, 2015. The notes matured in the March 2016 quarter in normal course and were repaid. Interest Costs and Debt Maturities — During 2014, Headwaters incurred total interest costs of approximately $46.9 million, including approximately $2.2 million of non‑cash interest expense. During 2015, Headwaters incurred total interest costs of approximately $64.9 million, including approximately $6.2 million of non-cash interest expense. During 2016, Headwaters incurred total interest costs of approximately $43.3 million, including approximately $4.0 million of non-cash interest expense. As described above, approximately $21.3 million and $7.0 million of interest expense incurred in 2015 and 2016, respectively resulted from the early repayment of the 7-5/8% senior secured notes and the 7¼% senior notes. In 2016, there was also approximately $3.1 million of non-routine interest expense associated with other debt transactions. Neither capitalized interest nor interest income was material for any period presented. The weighted-average interest rate on the face amount of outstanding long-term debt, excluding amortizable debt discount and debt issue costs, was approximately 5.2% at September 30, 2015 and 4.0% at September 30, 2016. Except for the required repayments of the Term Loan Facility of approximately $1.9 million per quarter, Headwaters has no debt maturities until March 2022. Future maturities of long-term debt as of September 30, 2016 are shown in the following table: Year Ended September 30, (in thousands) 2017 $ 2018 2019 2020 2021 Thereafter Total long-term debt $ |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 12 Months Ended |
Sep. 30, 2016 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | 8. Fair Value of Financial Instruments Headwaters’ material financial instruments consist primarily of cash and cash equivalents, trade receivables, accounts payable and long‑term debt. All of these financial instruments except some long‑term debt are either carried at fair value in the consolidated balance sheets or are short‑term in nature. Accordingly, the carrying values for those financial instruments as reflected in the consolidated balance sheets closely approximate their fair values. As of September 30, 2015, only the 7¼% senior notes had a fixed rate and the aggregate fair value of this debt as of September 30, 2015 would have been approximately $156.4 million, compared to a carrying value of $147.8 million. As of September 30, 2016, none of Headwaters’ outstanding long-term debt is fixed rate. Fair value “Level 2” estimates for long-term debt were based primarily on price estimates from broker-dealers. |
Income Taxes
Income Taxes | 12 Months Ended |
Sep. 30, 2016 | |
Income Taxes | |
Income Taxes | 9. Income Taxes Headwaters recorded income tax expense of approximately $3.6 million in 2014. For 2014, Headwaters recorded a full valuation allowance on its net amortizable deferred tax assets and accordingly, did not recognize benefit for tax credit carryforwards, net operating loss (NOL) carryforwards or other deferred tax assets, except to the extent of earnings. The reported 18% effective tax rate for 2014 was due primarily to state income taxes in certain state jurisdictions. In 2015, Headwaters recorded an income tax benefit of approximately $94.5 million, primarily due to the release of approximately $109.3 million of the valuation allowance established in prior years. A valuation allowance is required when there is significant uncertainty as to the realizability of deferred tax assets. Realization of deferred tax assets is dependent upon Headwaters’ ability to generate sufficient taxable income within the carryforward periods provided for in the tax law for each tax jurisdiction. Headwaters considered the following possible sources of taxable income when assessing the realization of its deferred tax assets: · future reversals of existing taxable temporary differences; · future taxable income or loss, exclusive of reversing temporary differences and carryforwards; · tax-planning strategies; and · taxable income in prior carryback years. Headwaters considered both positive and negative evidence in determining the continued need for a valuation allowance, including the following: Positive evidence: · Current forecasts indicated that Headwaters would generate pre-tax income and taxable income in the future. · Headwaters had a three-year cumulative income as of September 30, 2015. · A majority of Headwaters’ tax attributes have significant carryover periods of 20 years or more. Negative evidence: · Headwaters operates in cyclical industries that are difficult to forecast. Headwaters placed more weight on objectively verifiable evidence than on other types of evidence and management believed that available positive evidence outweighed the available negative evidence. Management therefore determined that Headwaters met the “more likely than not” threshold that NOLs, tax credits and other deferred tax assets will be realized. Accordingly, a full valuation allowance was no longer deemed to be required as of September 30, 2015. A valuation allowance of approximately $10.1 million was maintained against capital loss carryforwards, certain state NOL carryforwards, and certain tax credit carryforwards as of September 30, 2015. All of the factors Headwaters considered in evaluating whether and when to release all or a portion of the deferred tax asset valuation allowance involved significant judgment. For example, there are many different interpretations of “cumulative income or losses in recent years” which can be used. Also, significant judgment is involved in making projections of future financial and taxable income, especially because Headwaters’ financial results are significantly dependent upon industry trends, including new housing construction, repair and remodeling, and infrastructure construction. Most of the end use categories in which Headwaters sells its products and services are currently in varying states of recovery from the historic downturn experienced several years ago; however, it is not possible to accurately predict whether recovery will continue, and if it does, at what rate and for how long. Headwaters recorded income tax expense of approximately $22.8 million in 2016. The reported 31% effective rate for 2016 is the result of Headwaters being subject to normal statutory rates following the valuation allowance reversal in 2015. The reported effective tax rate is less than the statutory rate primarily due to unrecognized income tax benefits that were reversed due to audit periods that closed and changes to prior year estimated amounts for research and development tax credits. As of September 30, 2016, Headwaters’ U.S. and state NOL and capital loss carryforwards totaled approximately $43.0 million (tax effected). The NOLs expire from 2017 to 2036. In addition, there are approximately $27.4 million of tax credit carryforwards as of September 30, 2016, which expire from 2025 to 2036. A valuation allowance of approximately $10.4 million was recorded against capital loss carryforwards, certain state NOL carryforwards, and certain tax credit carryforwards as of September 30, 2016. The income tax provision consisted of the following for the years ended September 30: (in thousands) 2014 2015 2016 Current tax benefit (provision): Federal $ $ $ State Total current tax provision Deferred tax benefit (provision): Federal State Change in valuation allowance Total deferred tax benefit (provision) Total income tax benefit (provision) $ $ $ The provision for income taxes differs from the amount computed using the statutory federal income tax rate due to the following: (in thousands) 2014 2015 2016 Tax provision at U.S. statutory rate $ $ $ State income taxes, net of federal tax effect Valuation allowance Non-deductible executive compensation — Tax credits Unrealized gains — — Unrecognized tax benefits Other Income tax benefit (provision) $ $ $ The components of Headwaters’ deferred income tax assets and liabilities were as follows as of September 30: (in thousands) 2015 2016 Deferred tax assets: NOL and capital loss carryforwards $ $ Tax credit carryforwards Estimated liabilities Stock-based compensation Debt repurchase premium Reserves and allowances Other Valuation allowances Total deferred tax assets Deferred tax liabilities: Property, plant and equipment basis differences Goodwill and intangible asset basis differences Total deferred tax liabilities Net deferred tax asset $ $ A reconciliation of the change in the amount of gross unrecognized income tax benefits, not including interest and penalties, is as follows: (in thousands) 2014 2015 2016 Gross unrecognized income tax benefits at beginning of year $ $ $ Changes based on tax positions related to the current year — Increases for tax positions related to prior years — Settlements — — Lapse of statute of limitations Gross unrecognized income tax benefits at end of year $ $ $ During 2014, Headwaters accrued approximately $0.1 million of liabilities for interest and penalties. During 2015, Headwaters released approximately $0.2 million of liabilities for interest and penalties. During 2016, Headwaters released approximately $1.8 million of liabilities for interest and penalties and as of September 30, 2016, approximately $0.7 million was accrued for the payment of interest and penalties. Changes to the estimated liability during 2014, 2015 and 2016 were primarily the result of the expiration of statute of limitation time periods. As of September 30, 2016, approximately $2.8 million of unrecognized income tax benefits would affect the 2016 effective tax rate if released into income. The calculation of tax liabilities involves uncertainties in the application of complex tax regulations in multiple tax jurisdictions. Headwaters currently has open tax years subject to examination by the IRS and state tax authorities for the years 2013 through 2016. Headwaters recognizes potential liabilities for anticipated tax audit issues in the U.S. and state tax jurisdictions based on estimates of whether, and the extent to which, additional taxes and interest will be due. If events occur (or do not occur) as expected and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when it is determined the liabilities are no longer required to be recorded in the consolidated financial statements. If the estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense would result. It is reasonably possible that the amount of Headwaters’ unrecognized income tax benefits could change significantly within the next 12 months. These changes could be the result of Headwaters’ ongoing tax audits, the settlement of outstanding audit issues or the lapse of tax statutes of limitation. However, due to the issues being examined, at the current time, an estimate of the range of reasonably possible outcomes cannot be made, beyond amounts currently accrued. |
Equity Securities and Stock-Bas
Equity Securities and Stock-Based Compensation | 12 Months Ended |
Sep. 30, 2016 | |
Equity Securities and Stock-Based Compensation | |
Equity Securities and Stock-Based Compensation | 10. Equity Securities and Stock‑Based Compensation Authorized Stock — In addition to the 200.0 million shares of authorized common stock, Headwaters also has 10.0 million shares of authorized preferred stock. No preferred stock was issued or outstanding as of September 30, 2016 or at any time during the periods presented. Shelf Registration — In August 2015, Headwaters filed a universal shelf registration statement with the SEC. A prospectus supplement describing the terms of any future securities to be issued is required to be filed before any offering can commence under the registration statement. Treasury Shares Held for Deferred Compensation Obligation — In accordance with the terms of the Directors’ Deferred Compensation Plan (DDCP), non‑employee directors can elect to defer certain compensation and choose from various options how the deferred compensation will be invested. One of the investment options is Headwaters common stock. When a director chooses Headwaters stock as an investment option, Headwaters purchases the common stock in accordance with the director’s request and holds the shares until such time as the deferred compensation obligation becomes payable, normally when the director retires from the Board. At such time, the shares held by Headwaters are distributed to the director in satisfaction of the obligation. Headwaters accounts for the purchase of common stock as treasury stock, at cost. The corresponding deferred compensation obligation is reflected in capital in excess of par value. Changes in the fair value of the treasury stock are not recognized. As of September 30, 2016, the treasury stock and related deferred compensation obligation had fair values of approximately $1.8 million, which was $0.4 million higher than the carrying values at cost. Grants and Cancellations of Stock Incentive Awards — The Compensation Committee of Headwaters’ Board of Directors (the Committee) approved grants of approximately 0.5 million, 0.3 million and 0.3 million stock‑based awards during 2014, 2015 and 2016, respectively. The awards consisted of stock‑settled SARs and restricted stock granted to officers and employees. All stock‑based awards for the years 2014 through 2016 and subsequent thereto were granted under the stockholder-approved 2010 Incentive Compensation Plan, and all of the SARs vest over an approximate three‑year period, have an exercise price equal to the fair market value of Headwaters’ common stock on the dates of grant and a contractual term of 10 years. Vesting of the SARs and restricted stock granted prior to September 30, 2015 was subject to 60‑day average stock price hurdles that precluded vesting unless the stock price exceeded by predetermined amounts the stock prices on the dates of grant, which thresholds must be reached prior to the final vest dates. The stock price thresholds for all of those SAR and restricted stock grants were met. Vesting of the SARs and restricted stock granted in fiscal 2016 was subject to a ratio of adjusted EBITDA compared to 1.5 times cash interest expense added to capital expenditures, which threshold must be reached when computed quarterly on a trailing 12-month basis beginning at the end of the fiscal year prior to the final vest date. The adjusted EBITDA ratio threshold was met at September 30, 2016. When exercised by grantees, stock‑settled SARs are settled in Headwaters’ common stock. Headwaters has also granted cash‑settled SARs as described in Note 12. Stock‑Based Compensation — Stock‑based compensation expense was approximately $2.2 million in 2014, $2.8 million in 2015 and $3.2 million in 2016. The total income tax benefit recognized for stock‑based compensation in the consolidated statements of income was $0 for 2014, $1.0 million for 2015, and $1.1 million for 2016. Valuation Assumptions — The fair values of stock‑settled SARs have been estimated using the B‑S‑M model. The following table summarizes the assumptions used in determining the fair values of these awards for the years indicated. 2014 2015 2016 Expected stock volatility % % % Risk-free interest rates 1.4% - 2.0 % 1.0% - 1.7 % 1.6% - 2.0 % Expected lives (beyond vest dates) 4 years 4 years 6 years Dividend yield % % % Expected stock price volatility was estimated primarily using historical volatilities of Headwaters’ stock. Implied volatilities of traded options on Headwaters’ stock, volatility predicted by other models, and an analysis of volatilities used by other public companies in comparable lines of business to Headwaters were also considered. Risk‑free interest rates used were the U.S. Treasury bond yields with terms corresponding to the expected terms of the awards being valued. In estimating expected lives, Headwaters considered the contractual and vesting terms of awards, along with historical experience; however, due to insufficient pertinent historical data from which to reliably estimate expected lives, Headwaters used estimates based on the “simplified method” set forth by the SEC in Staff Accounting Bulletins No. 107 and 110, where expected life is estimated by summing the award’s vesting term and contractual term and dividing that result by two. Insufficient historical data from which to more reliably estimate expected lives is expected to exist for the foreseeable future due to the varying terms of awards granted in recent and past years, along with other factors. Equity Compensation Plans — Headwaters has five equity compensation plans under which outstanding awards have been granted, four of which have been approved by stockholders. In connection with stockholder approval of the newest plan, the 2010 Incentive Compensation Plan (2010 ICP), Headwaters agreed to not issue any additional stock‑based awards under any of its other existing incentive compensation plans. Following the grants of equity‑based awards made subsequent to September 30, 2016, approximately 3.5 million shares were available for future grants under the 2010 ICP. Headwaters uses newly issued shares to meet its obligations to issue stock when awards are exercised. The Committee, or in its absence the full Board, administers and interprets all equity compensation plans. This Committee is authorized to grant stock‑based awards and other awards both under the plans and outside of any plan to eligible employees, officers, directors, and consultants of Headwaters. Terms of awards granted under the plans, including vesting requirements, are determined by the Committee and historically have varied significantly. Most outstanding awards granted under the plans vest over a three-year period, expire ten years from the date of grant and are not transferable other than by will or by the laws of descent and distribution. Stockholder Approval of Equity Compensation Plans — The following table presents information related to stockholder approval of equity compensation plans as of September 30, 2016: (in thousands of shares) Shares remaining Weighted-average available for future Maximum shares exercise price of issuance under existing to be issued upon outstanding equity compensation plans exercise of options options and other (excluding shares reflected Plan Category and other awards awards in the first column) Plans approved by stockholders $ Plan not approved by stockholders — Total $ Stock Options — The following table summarizes the activity for all of Headwaters’ stock options: Weighted- Weighted- average average remaining Aggregate exercise contractual term intrinsic (in thousands, except per-share amounts) Shares price in years value Outstanding at September 30, 2013 $ Forfeited or expired Outstanding at September 30, 2014 $ $ Forfeited or expired Outstanding at September 30, 2015 $ $ Forfeited or expired Outstanding at September 30, 2016 $ $ Exercisable at September 30, 2014 $ $ Exercisable at September 30, 2015 $ $ Exercisable at September 30, 2016 $ $ SARs — The following table summarizes the activity for all of Headwaters’ stock‑settled SARs: Weighted- Weighted- average average remaining Aggregate threshold contractual term intrinsic (in thousands, except per-share amounts) Shares price in years value Outstanding at September 30, 2013 $ Granted Exercised Forfeited or expired Outstanding at September 30, 2014 $ $ Granted $ Exercised Forfeited or expired Outstanding at September 30, 2015 $ $ Granted $ Exercised Forfeited or expired Outstanding at September 30, 2016 $ $ Exercisable at September 30, 2014 $ $ Exercisable at September 30, 2015 $ $ Exercisable at September 30, 2016 $ $ The weighted‑average grant‑date fair value of SARs granted was $4.40, $6.41 and $9.37 in 2014, 2015 and 2016, respectively. The total intrinsic value of SARs exercised was approximately $1.1 million, $3.9 million and $2.1 million in 2014, 2015 and 2016, respectively. Other Stock‑Based Awards and Unrecognized Compensation Cost — In addition to the SARs granted as reflected in the table above, during 2014 through 2016 Headwaters also issued approximately 0.2 million shares of restricted common stock to officers and employees, all of which vests over an approximate three‑year period. The restricted stock was issued at no cost to the recipients and compensation expense equal to the trading price of the stock on the dates of grant is therefore recognized over the respective vesting periods, which also represent the requisite service periods. The following table summarizes the activity for Headwaters’ nonvested restricted stock during 2016: Weighted- average grant date (in thousands of shares) Shares fair value Outstanding at beginning of year $ Granted Vested Forfeited Outstanding at end of year $ Headwaters also recognizes compensation expense in connection with its Employee Stock Purchase Plan (ESPP). Compensation expense related to restricted stock and the ESPP was approximately $0.9 million, $1.4 million and $1.6 million in 2014, 2015 and 2016, respectively. As of September 30, 2016, there was approximately $2.5 million of total compensation cost related to unvested awards not yet recognized, which will be recognized over a weighted‑average period of approximately 1.7 years. |
Earnings Per Share
Earnings Per Share | 12 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share | |
Earnings Per Share | 11. Earnings Per Share The following table sets forth the computations of basic and diluted EPS for the years indicated, reflecting the amounts attributable to Headwaters and excluding the amounts attributable to the non-controlling interest in Entegra. In accordance with ASC 260, income from continuing operations for each period is used as the control number in determining whether potentially dilutive common shares should be included in the diluted earnings per share computations for those periods, even when the effect of doing so is anti‑dilutive to the other per‑share amounts. (in thousands, except per-share amounts) 2014 2015 2016 Numerator: Income from continuing operations $ $ $ Income from continuing operations attributable to non-controlling interest Adjustment of estimated redemption value of non-controlling interest — — Numerator for basic and diluted earnings per share from continuing operations — income from continuing operations attributable to Headwaters Incorporated Numerator for basic and diluted earnings per share from discontinued operations — income (loss) from discontinued operations, net of income taxes Numerator for basic and diluted earnings per share — net income attributable to Headwaters Incorporated $ $ $ Denominator: Denominator for basic earnings per share — weighted-average shares outstanding Effect of dilutive securities — shares issuable upon exercise of options and SARs and vesting of restricted stock Denominator for diluted earnings per share — weighted-average shares outstanding after assumed exercises and vesting Basic income per share attributable to Headwaters Incorporated: From continuing operations $ $ $ From discontinued operations — $ $ $ Diluted income per share attributable to Headwaters Incorporated: From continuing operations $ $ $ From discontinued operations — $ $ $ Anti-dilutive securities not considered in diluted EPS calculation: Stock-settled SARs Stock options Restricted stock — |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies | |
Commitments and Contingencies | 12. Commitments and Contingencies Commitments and contingencies as of September 30, 2016 not disclosed elsewhere, are as follows. Leases — Headwaters has noncancellable operating leases for certain facilities and equipment. These leases, most of which are in the construction materials segment, currently are set to expire in various years through 2033, but many have renewal options under which the lease term can be extended. Rental expense was approximately $33.4 million, $34.4 million and $36.2 million in 2014, 2015 and 2016, respectively. As of September 30, 2016, minimum rental payments due under these leases are as follows: Year ending September 30, (in thousands) 2017 $ 2018 2019 2020 2021 Thereafter $ Purchase Commitments — Certain CCP contracts with suppliers require Headwaters to make minimum purchases of CCP materials. Actual purchases under contracts with minimum requirements were approximately $20.3 million, $32.7 million and $44.8 million in 2014, 2015 and 2016, respectively. As of September 30, 2016, minimum future purchase requirements are as follows: Year ending September 30, (in thousands) 2017 $ 2018 2019 2020 2021 Thereafter $ Compensation Arrangements — Employment Agreements. Headwaters has entered into employment agreements with its Chief Executive Officer (CEO), Chief Financial Officer (CFO) and five other employees. The agreements have original terms of approximately three to five years and the CEO and CFO agreements are renewable for one‑year terms. The CEO’s agreement calls for supplemental retirement contributions equal to 72.5% of his salary during a portion of the term of the agreement and 42.5% thereafter. The aggregate commitment for salaries and other obligations for all future periods as of September 30, 2016, assuming no renewals, is approximately $5.4 million. The agreements also provide for certain termination benefits. If the officers’ and employees’ employment would have terminated on September 30, 2016 (but not by reason of a change in control, which is described hereafter), the aggregate termination benefits as of that date would have been approximately $12.0 million, of which approximately $4.1 million has been expensed and accrued. Executive Change in Control Agreements. The Compensation Committee (Committee) has approved “Executive Change in Control Agreements” with certain officers and employees. Upon a change in control, as defined, the agreements provide for immediate vesting and exercisability of all outstanding stock‑based awards. In addition, if termination of employment occurs within a specified period of a change in control, the agreements provide for i) severance pay equal to a stipulated multiple of the sum of the person’s current annual salary plus a bonus component based on either past bonuses paid or the target bonus for the fiscal year in which the change in control occurs; and ii) continuance of health and other benefits and perquisites for a stipulated period following the change in control. Further, if any long‑term cash awards are not continued, payment shall be made based on the pro‑rated level of performance achieved as of the end of the most recently completed fiscal quarter. If terminations associated with a change in control would have occurred on September 30, 2016, the cash severance payments due to the officers and employees (including amounts due under long‑term cash awards and the estimated costs of continuing benefits and perquisites) and the excess of the market value of unvested stock‑based awards on that date above related exercise prices would have aggregated approximately $24.5 million (of which approximately $9.9 million has been expensed and accrued). Cash Performance Unit Awards. In 2014, the Committee approved grants of performance unit awards to certain officers and employees, to be settled in cash, based on the achievement of cash flow generated during 2014. For purposes of these awards, cash flow is generally defined as operating income plus depreciation, amortization and asset impairments, reduced by capital expenditures. The number of awards granted was determined using a target compensation amount for each participant and was adjusted, subject to prescribed limitations, based on the actual cash flow generated during the 2014 performance year, using a threshold/target/maximum adjustment structure. The awards provided for 50% vesting as of September 30, 2015 and 50% vesting as of September 30, 2016, provided the participant was still employed by Headwaters on those vest dates. The terms of the awards also provided for i) adjustment for changes in Headwaters’ average stock price for the 60 days prior to and including September 30, 2014 as compared to Headwaters’ average stock price for the 60 days prior to and including September 30, 2013, and ii) potential further adjustment based on cash flows generated in the two years subsequent to the year of grant, or base performance year. Approximately $5.1 million of expense was recorded for the 2014 awards in 2014. In 2015 and 2016, the Committee approved grants of performance unit awards to certain officers and employees for cash flow generated during those fiscal years, with terms similar to the 2014 awards described above. Approximately $8.6 million and $3.5 million of expense was recognized for these awards during 2015 and 2016, which amounts are subject to adjustment, depending on cash flows generated in future years. As of September 30, 2016, approximately $13.7 million was accrued for all performance unit awards outstanding but unpaid as of that date. Cash‑Settled SAR Grants. In 2012, the Committee approved grants to certain officers and employees of approximately 1.0 million cash‑settled SARs, none of which remain outstanding as of September 30, 2016, the termination date of these awards. These SARs, which were considered liability awards, vested in annual installments through September 30, 2014 and were settled in cash upon exercise by the employee. In 2011, the Committee approved grants to certain employees of approximately 0.4 million cash‑settled SARs, none of which remained outstanding as of September 30, 2015, the termination date of these awards. Compensation expense/(income) for all cash-settled SARs was approximately $4.6 million for 2014, $3.1 million for 2015 and $(0.1) million for 2016. Employee Benefit Plans — In addition to standard health and life insurance programs, Headwaters has six employee benefit plans that were operative during the years presented: the 401(k) Profit Sharing Plan (401(k) Plan), the 2000 Employee Stock Purchase Plan (ESPP), the Incentive Bonus Plan (IBP), the Deferred Compensation Plan (DCP), the 2010 Incentive Compensation Plan (2010 ICP) and an Executive Retirement Program (ERP). Substantially all employees of Headwaters are eligible to participate in the 401(k) Plan and the ESPP after meeting length of service requirements. Only designated employees are eligible to participate in the IBP, DCP, 2010 ICP and ERP. The total expense for all of Headwaters’ benefit plans combined, including all general and discretionary bonuses and cash‑settled SARs, but excluding stock‑settled SARs and ESPP expenses (which are included in stock‑based compensation) and standard health and life insurance programs, was approximately $26.7 million, $34.8 million and $23.8 million in 2014, 2015 and 2016, respectively. 401(k) Plan. Under the terms of the 401(k) Plan, eligible employees may elect to make tax‑deferred contributions of up to 50% of their compensation, subject to statutory limitations. Headwaters has a “safe harbor” 401(k) plan which requires a mandatory minimum employer match of employee contributions and immediate vesting of employer contributions. Headwaters is not required to be profitable to make the matching contributions. ESPP. The ESPP provides eligible employees with an opportunity to purchase Headwaters common stock on favorable terms and to pay for such purchases through payroll deductions. Approximately 4.3 million shares of common stock have been reserved for issuance under the ESPP and approximately 2.3 million shares remain available for future issuance as of September 30, 2016. In accordance with terms of the ESPP, participating employees purchase shares of stock directly from Headwaters, which provides newly‑issued shares to meet its commitment. The ESPP is intended to comply with Section 423 of the Internal Revenue Code, but is not subject to the requirements of ERISA. Employees purchase stock through payroll deductions of 1% to 10% of cash compensation, subject to certain limitations, which stock is purchased in a series of quarterly offerings. The cost per share to the employee is 85% of the stock’s fair market value at the end of each quarterly offering period. IBP. The IBP, the specifics of which are approved annually by the Committee, provides for annual cash bonuses to be paid if Headwaters accomplishes certain financial goals and if participating employees meet individual goals. DCP. The DCP is a nonqualified plan that allows eligible employees to make tax‑deferred contributions of up to 50% of their base compensation and 100% of their incentive compensation. Headwaters may match employee contributions up to a designated maximum rate, which matching contributions have historically vested after three years of plan eligibility. Headwaters also matches (similar to the “safe harbor” 401(k) match discussed above) certain employee contributions, again with immediate vesting of employer contributions. Headwaters is not required to be profitable to make the matching contributions. 2010 ICP. Following stockholder approval of the 2010 ICP, Headwaters has issued long-term cash and equity awards under that plan. Significant obligations under the 2010 ICP include i) the cash performance unit awards described above; ii) the cash‑settled SAR grants described above; and iii) grants of certain stock‑based awards described in Note 10. ERP. In 2013, Headwaters initiated the ERP to provide retirement benefits to designated officers and employees. There is no formal plan document governing this program, which operates and is funded at the sole discretion of the Committee. Although it is the current intent of the Committee to consider funding the ERP annually, there is no obligation to make contributions in any amount for any period, irrespective of whether Headwaters is profitable. Headwaters’ contributions to participants in the ERP vest 20% per year once a participant reaches the age of 61 and become fully vested at age 65. Self Insurance — Headwaters has adopted self‑insured medical insurance plans that cover substantially all employees. There is stop‑loss coverage for amounts in excess of approximately $0.2 million per individual per year. Headwaters also self insures for workers’ compensation claims in most states, limited by stop‑loss coverage which begins for amounts in excess of $0.35 million per occurrence and approximately $5.0 million in the aggregate annually. Headwaters has contracted with third‑party administrators to assist in the payment and administration of claims. Insurance claims are recognized as expense when incurred and include an estimate of costs for claims incurred but not reported at the balance sheet date. As of September 30, 2016, approximately $5.9 million was accrued for medical and workers’ compensation claims incurred on or before September 30, 2016 that have not been paid or reported. Property, Plant and Equipment — As of September 30, 2016, Headwaters was committed to spend approximately $3.6 million on capital projects that were in various stages of completion. Legal Matters — Headwaters has ongoing litigation and asserted claims which have been incurred during the normal course of business, including the specific matters discussed below. Headwaters intends to vigorously defend or resolve these matters by settlement, as appropriate. Management does not currently believe that the outcome of these matters will have a material adverse effect on Headwaters’ operations, cash flow or financial position. Headwaters incurred approximately $5.1 million, $2.2 million and $(1.4) million of expense (credit) for legal matters in 2014, 2015 and 2016, respectively. Except for 2014, when $2.8 million of expense was recorded for potential losses, costs for outside legal counsel comprised a majority of Headwaters’ litigation‑related costs in the years presented. Headwaters currently believes the range of potential loss for all unresolved legal matters, excluding costs for outside counsel, is from $0 up to the amounts sought by claimants and has recorded a liability as of September 30, 2016 of $0. The substantial claims and damages sought by claimants in excess of this amount are not currently deemed to be probable. Headwaters’ outside counsel and management currently believe that unfavorable outcomes of outstanding litigation beyond the amount accrued are neither probable nor remote. Accordingly, management cannot express an opinion as to the ultimate amount, if any, of Headwaters’ liability, nor is it possible to estimate what litigation‑related costs will be in future periods. The specific matters discussed below raise difficult and complex legal and factual issues, and the resolution of these issues is subject to many uncertainties, including the facts and circumstances of each case, the jurisdiction in which each case is brought, and the future decisions of juries, judges, and arbitrators. Therefore, although management believes that the claims asserted against Headwaters in the named cases lack merit, there is a possibility of material losses in excess of the amount accrued if one or more of the cases were to be determined adversely against Headwaters for a substantial amount of the damages asserted. It is possible that a change in the estimate of probable liability could occur, and the changes could be material. Additionally, as with any litigation, these proceedings require that Headwaters incur substantial costs, including attorneys’ fees, managerial time and other personnel resources, in pursuing resolution. Fentress Families Trust. VFL Technology Corporation (VFL), acquired by HRI in 2004, provides services related to fly ash management to Virginia Electric and Power Company (VEPCO). In February 2012, 383 plaintiffs, most of whom are residents living in the City of Chesapeake, Virginia, filed a complaint in the State of Virginia Chesapeake Circuit Court against 15 defendants, including VEPCO and related companies, and certain other persons associated with the Battlefield Golf Course, including owners, developers, contractors, and others, including VFL and Headwaters, alleging causes of action for nuisance and negligence. The complaint alleges that fly ash used to construct the golf course was carried in the air and contaminated surface water exposing plaintiffs to dangerous chemicals and causing personal injury and property damage. Plaintiffs’ complaint seeks injunctive relief and damages of approximately $850.0 million for removal and remediation of the fly ash and the water supply, $1.9 billion for vexation, $8.0 million and other unspecified amounts for personal injuries, and $55.0 million as damages to properties, plus prejudgment interest, attorney fees, and costs. In a related case, other plaintiffs have filed a separate lawsuit asserting the same claims against the same defendants claiming additional damages totaling approximately $307.2 million. In August 2013 the court ruled on VEPCO’s demurrer ordering that claims for personal injury or property damage based upon allegations of groundwater contamination were dismissed but that claims of nuisance and negligence based upon allegations of air-borne ash and contaminated surface water would not be dismissed. In March 2016, the court responded to VFL’s motion, ruling that (i) the statute of limitations barred nuisance and negligence claims of all plaintiffs who are not minors and who are not making personal injury claims, and (ii) emotional distress damages are not cognizable. Plaintiffs moved to amend their complaints, but the motion was denied in August 2016. All but seven Plaintiffs have asserted in discovery that they were not seeking personal injury damages except emotional distress. These cases are based on substantially the same alleged circumstances asserted in complaints filed by the plaintiffs in 2009 and voluntarily dismissed in 2010. Discovery is underway. HRI has filed claims for defense and indemnity with several of its insurers. In 2010, HRI filed suit in the United States District Court for the District of Utah against two insurers that denied coverage based on allegations in the 2009 Fentress complaints. The District Court ruled in the insurers’ favor, which ruling was affirmed in October 2014 by the United States Court of Appeals for the Tenth Circuit. Another insurer continues to pay for the defense of the underlying cases under a reservation of rights. The relatively novel fly ash claims of the plaintiffs together with multiple insurance policies and policy periods make insurance coverage issues complex and uncertain. Moreover, plaintiffs’ total claims exceed the potential limits of insurance available to HRI. Because resolution of the litigation is uncertain, legal counsel and management cannot express an opinion as to the ultimate amount, if any, of HRI’s liability, or the insurers’ obligation to indemnify HRI against loss, if any. CPM. In August 2015, CPM Virginia, LLC (CPM), the Battlefield Golf Course developer, filed a complaint in the State of Virginia Richmond Circuit Court against VEPCO, VFL, and Headwaters related to construction of the golf course described in the Fentress Families Trust case. The complaint alleges breach of contract, fraud, misrepresentation, estoppel, nuisance, breach of warranties, negligence, and interference with prospective business advantage. CPM’s complaint seeks $840 million in compensatory damages plus attorney fees and costs. VFL has moved to dismiss based on a failure to timely serve the suit on VFL. In September 2015, CPM filed a separate complaint in the State of Virginia Chesapeake Circuit Court against VFL and Headwaters also related to construction of the golf course described in the Fentress Families Trust case, alleging breach of contract and seeking declaratory judgment and compensatory damages in the amount of $0.5 million plus attorney fees and costs. CPM alleges that HRI should indemnify CPM for past and future expenses incurred in defending against the Fentress complaints. Because resolution of the CPM litigation is uncertain, legal counsel and management cannot express an opinion as to the ultimate amount, if any, of VFL or Headwaters’ liability, or the insurers’ obligation to indemnify VFL and Headwaters against loss, if any. Clary. In August 2014, 77 plaintiffs filed suit in the State of West Virginia Circuit Court of Mason County against four defendants, including American Electric Power Co., Inc., Ohio Power Company and an individual. Plaintiffs claim injury resulting from exposure to coal combustion waste from the Gavin Power Plant in Cheshire, Ohio while working as employees of contractors in the Gavin landfill. Plaintiffs claim wrongful death, failure to warn and protect, negligence per se, negligence, negligent infliction of emotional distress, heightened duty, strict liability, battery, fraud, fraudulent concealment, misrepresentation and related causes of action, seeking unspecified damages for medical monitoring and other costs, loss of consortium, lost wages, personal injuries, and punitive damages. In September 2015, the Ohio Power Company filed a third-party complaint against Headwaters and two other entities who were contractors to Ohio Power Company. Ohio Power Company claims that the third-party defendant contractors operated the Gavin landfill and that plaintiffs are former employees or family members of the third-party defendants. Ohio Power Company denies the plaintiffs’ allegations, but states that Headwaters and the other third-party defendants are required to indemnify Ohio Power and provide contribution to the extent that Ohio Power is found liable to plaintiffs, including interest, attorney fees, and costs. In April 2016, the case was reassigned to the State of West Virginia Mass Litigation Panel. Discovery is underway. The court’s scheduling order has set trial to begin in September 2017. Because resolution of the litigation is uncertain, legal counsel and management cannot express an opinion as to the ultimate amount, if any, of Headwaters’ liability, or whether insurers have an obligation to indemnify Headwaters against loss, if any. John River Cartage . In January 2012 John River Cartage, Inc. filed suit in the State of Louisiana 18 th Judicial District, Parish Pointe Coupee against Louisiana Generation, LLC, (LaGen), NRG Energy, Inc., and Headwaters Resources, Inc. (HRI). At the time of action, HRI provided CCP management services to LaGen in connection with LaGen’s power generating plant located in New Roads, Louisiana. Plaintiff had been a subcontractor to a previous contractor to LaGen. Plaintiff’s original complaint alleged that LaGen and HRI conspired to convert certain materials at the power plant and violation of Louisiana unfair trade practices law. In September 2015, the court allowed plaintiff to amend its complaint to allege that HRI and LaGen violated Louisiana antitrust law. Discovery is underway. Plaintiff seeks lost profits from sales of the allegedly converted materials, damages to cover debts arising from Plaintiff’s business failure, disgorgement of financial benefits, loss of Plaintiff’s business valuation, and treble damages and attorney fees, as well as unspecified equitable relief. HRI answered the complaint denying the allegations. Trial is set for April 2017. Because resolution of the litigation is uncertain, legal counsel and management cannot express an opinion as to the ultimate amount, if any, of HRI’s liability. Building Products Matters. There are litigation and pending and threatened claims made against certain subsidiaries within Headwaters’ building products segment, with respect to several products manufactured and sold by its subsidiaries for application by contractors on residential and commercial buildings. The plaintiffs or claimants in these matters typically allege that the structures have suffered damage from water penetration due to some alleged failure of the roofing or wall product. The claims most often involve alleged liabilities associated with certain roofing, stucco, and architectural stone products which are produced and sold by certain subsidiaries of Headwaters. Building products litigation and claims typically cite damages for alleged personal injuries, property damage, economic loss, unfair business practices and punitive damages. Claims made against Headwaters and its subsidiaries generally have been paid by their insurers, subject to Headwaters’ payment of deductibles or self-insured retentions, although such insurance carriers typically have issued “reservation of rights” letters. There is no guarantee of insurance coverage or continuing coverage. These and future proceedings may result in substantial costs to Headwaters and its subsidiaries, including attorney fees, managerial time and other personnel resources and costs. Adverse resolution of these proceedings could have a materially negative effect on Headwaters’ businesses, financial condition, and results of operation, and its ability to meet its financial obligations. Although Headwaters carries general and product liability insurance, subject to exclusions and self-insured retentions, Headwaters cannot assure that such insurance coverage will remain available, that Headwaters’ insurance carriers will remain viable, will accept claims or that the insured amounts will cover all claims in excess of self-insured retentions. Future rate increases may also make such insurance uneconomical for Headwaters to maintain. Because resolution of the litigation, claims, and insurance coverage is uncertain, legal counsel and management cannot express an opinion as to the ultimate amount, if any, of Headwaters’ or its subsidiaries’ liability. Construction Materials Matters . In addition, there are litigation and pending and threatened claims made against HRI within Headwaters’ construction materials segment, with respect to coal combustion products. The plaintiffs or claimants in these matters have alleged that inhalation or other exposure to fly ash is unsafe, and that HRI has failed to warn about the alleged dangers of fly ash exposure and the use of adequate protection, resulting in personal injury, contamination of land and water, and diminution in property value. The Fentress Family Trust and Clary cases summarized above are examples of these types of claims. The application of relatively novel fly ash claims to insurance policies is complex and uncertain and HRI has had limited success in tendering defense of such claims to insurers, which is dependent upon the alleged facts and specific policy terms. Adverse resolution of these claims and insurance coverage disputes could have a materially negative effect on Headwaters’ businesses, financial condition, and results of operation, and its ability to meet its financial obligations. Because resolution of the litigation, claims, and insurance coverage disputes is uncertain, legal counsel and management cannot express an opinion as to the ultimate amount, if any, of HRI’s liability. Discontinued Coal Cleaning Operations. The following litigation relates to the discontinued coal cleaning business: RLF Chinook Properties. In September 2015, RLF Chinook Properties, LLC filed suit in the State of Indiana Circuit Court of Clay against Covol Fuels No. 2, LLC, Headwaters Energy Services Corp., other Covol companies (collectively, “Covol”), as well as BRC Chinook, LLC and other BRC affiliates (collectively, “BRC”). Covol entered into a coal recovery agreement with plaintiff in 2007 with respect to coal at the RLF Chinook site. Covol assigned the coal recovery agreement to BRC in 2013. Plaintiff alleges that BRC has failed to fulfill certain obligations under the coal recovery agreement, including failure to submit reclamation plans to State of Indiana for approval and to restore and reclaim the site per the approved plan. Plaintiff alleges that Covol is liable for the claimed breaches under the coal recovery agreement, and seeks unspecified damages, together with attorney fees and costs. Covol has answered the complaint denying the allegations. Because resolution of the litigation is uncertain, legal counsel and management cannot express an opinion as to the ultimate amount, if any, of Covol’s liability. Other. Headwaters and its subsidiaries are also involved in other legal proceedings that have arisen in the normal course of business. Because resolution of these proceedings is uncertain, legal counsel and management cannot express an opinion as to the ultimate amount, if any, of Headwaters’ liability. |
Discontinued Operations
Discontinued Operations | 12 Months Ended |
Sep. 30, 2016 | |
Discontinued Operations | |
Discontinued Operations | 13. Discontinued Operations In September 2011, the Board of Directors committed to a plan to sell Headwaters’ coal cleaning business, which was part of the energy technology segment. At that time the business met all of the criteria for classification as held for sale and presentation as a discontinued operation. Following the sale of all remaining coal cleaning facilities in January 2013, there are no remaining assets held for sale. The results of operations for the coal cleaning business have been presented as discontinued operations for all periods presented and certain summarized information for the discontinued business is presented in the following table: (in thousands) 2014 2015 2016 Gain (loss) from discontinued operations before income taxes $ $ $ Income tax benefit (provision) Income (loss) from discontinued operations, net of income taxes $ $ $ During 2016, certain litigation which commenced prior to disposal of the business was settled favorably to Headwaters, resulting in a gain of approximately $3.6 million, some of which represents the reversal of an accrual recorded in a prior period. Headwaters sold all of its coal cleaning facilities in 2012 and 2013, and recognized estimated gains on the sales dates. Subsequent to the dates of sale, adjustments of the previously recognized estimated gains on the sales transactions have been recorded and these are included in the amounts in the table above. Headwaters currently expects that additional adjustments to the recognized gains and losses may be recorded in the future as certain contingencies are resolved. For all sales transactions, a majority of the consideration was in the form of potential production royalties and deferred purchase price, which amounts are dependent upon the buyer’s future production levels. Potential future production royalties and deferred purchase price on the sales transactions were not considered as being probable in the original gain calculations and have been accounted for in the periods when such amounts were received. During 2014, Headwaters received approximately $4.7 million in deferred purchase price payments, royalties and the collection of certain receivables which had been reserved. In accordance with the terms of the asset purchase agreement for one of the sales transactions, the buyer of the coal cleaning facilities agreed to assume the lease and reclamation obligations related to certain of the facilities. Subsequent to the date of sale, the Headwaters subsidiaries which sold the facilities amended the purchase agreement to provide the buyer with additional time to make payments, as well as fulfill contractual requirements related to the assumed reclamation obligations. One of Headwaters’ subsidiaries is performing permit reclamation responsibilities at one site. As of September 30, 2015 and 2016, approximately $7.4 million and $9.3 million, respectively, was accrued for this reclamation liability. Headwaters currently expects to continue to reflect as discontinued operations all activity related to the former coal cleaning business, at least until such time as the significant reclamation obligation is satisfied. |
Related Party Transaction
Related Party Transaction | 12 Months Ended |
Sep. 30, 2016 | |
Related Party Transaction | |
Related Party Transaction | 14. Related Party Transactions In addition to transactions disclosed elsewhere, Headwaters was involved in the following transactions with related parties. A current officer (and former owner) of one of Headwaters’ operating subsidiaries made a direct investment of $500,000 in one of the subsidiary’s customers prior to Headwaters acquiring the subsidiary in 2016. The investment remained in place as of September 30, 2016. In addition, also prior to the date of acquisition, the officer deposited $1,000,000 in a bank account that collateralizes a line of credit used by the customer in its business operations, which arrangement also existed at September 30, 2016. Sales to that customer in 2016, from the date of acquisition through September 30, 2016, were less than $0.1 million. A director of Headwaters, who retired from the Board in 2014, was also a principal in one of the insurance brokerage companies Headwaters uses to purchase certain insurance benefits for its employees. Commissions paid to that company by providers of insurance services to Headwaters totaled approximately $0.1 million in 2014. Until December 2013, when the contract was terminated, a majority of one of Headwaters’ subsidiary’s transportation needs was provided by a company, two of the principals of which are related to an officer of the subsidiary. Costs incurred were approximately $1.4 million in 2014. |
Condensed Consolidating Financi
Condensed Consolidating Financial Information | 12 Months Ended |
Sep. 30, 2016 | |
Condensed Consolidating Financial Information | |
Condensed Consolidating Financial Information | 15. Condensed Consolidating Financial Information Headwaters’ borrowings under the Term Loan Facility (and the 7¼% senior notes until they were fully repaid in September 2016) are jointly and severally, fully and unconditionally guaranteed by Headwaters Incorporated and by substantially all of Headwaters’ 100%‑owned domestic subsidiaries. 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. Non-guaranteeing entities include subsidiaries that are not 100% owned, foreign subsidiaries and joint ventures in which Headwaters has a non-controlling ownership interest. CONDENSED CONSOLIDATING BALANCE SHEET—September 30, 2015 Non- Eliminations Guarantor guarantor Parent and Headwaters (in thousands) Subsidiaries Subsidiaries Company Reclassifications Consolidated ASSETS Current assets: Cash and cash equivalents $ $ $ $ — $ Trade receivables, net — — Inventories — — Current income taxes — — Other — Total current assets Property, plant and equipment, net — Other assets: Goodwill — — Intangible assets, net — — Investments in subsidiaries — — Intercompany accounts and notes — — Deferred income taxes — Other — Total other assets Total assets $ $ $ $ $ LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ $ $ $ — $ Accrued personnel costs — Current income taxes — — Other accrued liabilities — Current portion of long-term debt — — — Total current liabilities Long-term liabilities: Long-term debt, net — — — Intercompany accounts and notes — — Other Total long-term liabilities Total liabilities Redeemable non-controlling interest in consolidated subsidiary — — — Stockholders’ equity: Common stock — — — Capital in excess of par value Retained earnings (accumulated deficit) Treasury stock — — — Total stockholders’ equity Total liabilities and stockholders’ equity $ $ $ $ $ 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 $ $ $ $ — $ Trade receivables, net — — Inventories — — Current income taxes — — Other — Total current assets Property, plant and equipment, net — Other assets: Goodwill — — Intangible assets, net — — Investments in subsidiaries — — — Intercompany accounts and notes — — Deferred income taxes — Other — Total other assets Total assets $ $ $ $ $ LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ $ $ $ — $ Accrued personnel costs — Current income taxes — — Other accrued liabilities — Current portion of long-term debt — — — Total current liabilities Long-term liabilities: Long-term debt, net — — — Income taxes — — — Intercompany accounts and notes — — Other — Total long-term liabilities Total liabilities Redeemable non-controlling interest in consolidated subsidiary — — — Stockholders’ equity: Common stock — — — Capital in excess of par value Retained earnings (accumulated deficit) Treasury stock — — — Total stockholders’ equity Total liabilities and stockholders’ equity $ $ $ $ $ CONDENSED CONSOLIDATING STATEMENT OF INCOME Year Ended September 30, 2014 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Revenue: Building products $ $ $ — $ — $ Construction materials — — — Energy technology — — — Total revenue — — Cost of revenue: Building products — — Construction materials — — — Energy technology — — — Total cost of revenue — — Gross profit — — Operating expenses: Selling, general and administrative — Amortization — — Total operating expenses — Operating income (loss) — Other income (expense): Net interest expense — Intercompany interest income (expense) — — — Equity in earnings of subsidiaries — — — Other, net — — Total other income (expense), net Income from continuing operations before income taxes Income tax benefit (provision) — Income from continuing operations Loss from discontinued operations, net of income taxes — — — Net income Net income attributable to non-controlling interest — — — Net income attributable to Headwaters Incorporated $ $ $ $ $ CONDENSED CONSOLIDATING STATEMENT OF INCOME Year Ended September 30, 2015 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Revenue: Building products $ $ $ — $ — $ Construction materials — — — Energy technology — — — Total revenue — — Cost of revenue: Building products — — Construction materials — — — Energy technology — — — Total cost of revenue — — Gross profit — — Operating expenses: Selling, general and administrative — Amortization — — Total operating expenses — Operating income (loss) — Other income (expense): Net interest expense — — Intercompany interest income (expense) — — Equity in earnings of subsidiaries — — — Other, net — — Total other income (expense), net Income (loss) from continuing operations before income taxes Income tax benefit (provision) — Income from continuing operations Loss from discontinued operations, net of income taxes — — Net income Net income attributable to non-controlling interest — — — Net income attributable to Headwaters Incorporated $ $ $ $ $ CONDENSED CONSOLIDATING STATEMENT OF INCOME Year Ended September 30, 2016 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Revenue: Building products $ $ $ — $ — $ Construction materials — — — Energy technology — — — Total revenue — — Cost of revenue: Building products — — Construction materials — — — Energy technology — — — Total cost of revenue — — Gross profit — — Operating expenses: Selling, general and administrative — Amortization — — Total operating expenses — Operating income (loss) — Other income (expense): Net interest expense — Intercompany interest income (expense) — — — Equity in earnings of subsidiaries — — — Other, net — — Total other income (expense), net Income from continuing operations before income taxes Income tax benefit (provision) — Income from continuing operations Income from discontinued operations, net of income taxes — — — Net income Net income attributable to non-controlling interest — — — Net income attributable to Headwaters Incorporated $ $ $ $ $ CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Year Ended September 30, 2014 Non- Guarantor Guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Cash flows from operating activities: Net income $ $ $ $ $ Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization — Interest expense related to amortization of debt issue costs and debt discount — — — Stock-based compensation — — Deferred income taxes — — Net loss on disposition of property, plant and equipment — Asset impairments — — — Net loss of unconsolidated joint ventures — — — Equity in earnings of subsidiaries — — Decrease (increase) in trade receivables — — Decrease (increase) in inventories — — Increase (decrease) in accounts payable and accrued liabilities — Other changes in operating assets and liabilities, net — Net cash provided by (used in) operating activities — Cash flows from investing activities: Business acquisitions — — Investments in unconsolidated joint ventures — — — Purchase of property, plant and equipment — Proceeds from disposition of property, plant and equipment — — — Net decrease in long-term receivables and deposits — — Net change in other assets — — Net cash used in investing activities — Cash flows from financing activities: Net proceeds from issuance of long-term debt — — — Payments on long-term debt — — — Dividends paid to non-controlling interest in consolidated subsidiary — — — Employee stock purchases — — Intercompany transfers — Net cash provided by (used in) financing activities — Net increase (decrease) in cash and cash equivalents — Cash and cash equivalents, beginning of year — Cash and cash equivalents, end of year $ $ $ $ — $ CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Year Ended September 30, 2015 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Cash flows from operating activities: Net income $ $ $ $ $ Adjustments to reconcile net income to net cash provided by (used in) operating activities: — Depreciation and amortization — Interest expense related to amortization of debt issue costs and debt discount — — — Debt pre-payment premiums — — — Stock-based compensation — — Deferred income taxes — Tax benefit from exercise of stock appreciation rights and vesting of restricted stock — — Net loss (gain) on disposition of property, plant and equipment — — Net loss of unconsolidated joint ventures — — — Equity in earnings of subsidiaries — — Decrease (increase) in trade receivables — — Increase in inventories — — Increase (decrease) in accounts payable and accrued liabilities — Other changes in operating assets and liabilities, net — Net cash provided by (used in) operating activities — Cash flows from investing activities: Business acquisition — — — Investments in unconsolidated joint venture — — — Purchase of property, plant and equipment — Proceeds from disposition of property, plant and equipment — — Net decrease in long-term receivables and deposits — — Net change in other assets — — Net cash used in investing activities — Cash flows from financing activities: Net proceeds from issuance of long-term debt — — — Payments on long-term debt — — — Debt pre-payment premiums — — — Dividends paid to non-controlling interest in consolidated subsidiary — — — Employee stock purchases — Tax benefit from exercise of stock appreciation rights and vesting of restricted stock — — Intercompany transfers — Net cash provided by (used in) financing activities — Net decrease in cash and cash equivalents — Cash and cash equivalents, beginning of year — Cash and cash equivalents, end of year $ $ $ $ — $ CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Cash flows from operating activities: Net income $ $ $ $ $ Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization — Interest expense related to amortization of debt issue costs and debt discount — — — Debt pre-payment premiums — — — Stock-based compensation — Deferred income taxes — Tax benefit from exercise of stock appreciation rights and vesting of restricted stock — — Net loss (gain) on disposition of property, plant and equipment — — Gain on acquired assets held for sale — — — Change in fair value of contingent consideration — — — Net loss of unconsolidated joint ventures — — — Equity in earnings of subsidiaries — — Increase in trade receivables — — Increase in inventories — — Increase (decrease) in accounts payable and accrued liabilities — Other changes in operating assets and liabilities, net — Net cash provided by (used in) operating activities — Cash flows from investing activities: Business acquisitions, net of cash acquired — — Purchase of property, plant and equipment — Proceeds from disposition of property, plant and equipment — — Proceeds from sale of acquired assets held for sale — — — Net decrease (increase) in long-term receivables and deposits — Net change in other assets — Net cash used in investing activities — Cash flows from financing activities: Net proceeds from issuance of long-term debt — — — Payments on long-term debt — — — Debt pre-payment premiums — — — Dividends paid to non-controlling interest in consolidated subsidiary — — Employee stock purchases — Tax benefit from exercise of stock appreciation rights and vesting of restricted stock — — Intercompany transfers — Net cash provided by (used in) financing activities — Net increase (decrease) in cash and cash equivalents — Cash and cash equivalents, beginning of year — Cash and cash equivalents, end of year $ $ $ $ — $ |
Quarterly Financial Data (unaud
Quarterly Financial Data (unaudited) | 12 Months Ended |
Sep. 30, 2016 | |
Quarterly Financial Data (unaudited) | |
Quarterly Financial Data (unaudited) | 16. Quarterly Financial Data (unaudited) Summarized unaudited quarterly financial data for 2015 and 2016 is as follows. 2015(1)(2) First Second Third Fourth (in thousands, except per-share amounts) quarter quarter quarter quarter Full year Net revenue $ $ $ $ $ Gross profit Net income (loss) (3)(4) Basic earnings (loss) per share (5) Diluted earnings (loss) per share (5) 2016(1)(2) First Second Third Fourth (in thousands, except per-share amounts) quarter quarter quarter quarter Full year Net revenue $ $ $ $ $ Gross profit Net income (4) Basic earnings per share (5) Diluted earnings per share (5) (1) Headwaters’ revenue is seasonal, typically with higher revenues in the third and fourth quarters of the fiscal year than in the first and second quarters. As a result, profitability is also usually higher in the last half of the fiscal year than in the first half of the year. (2) As described in Note 4, Headwaters acquired several businesses during 2015 and 2016 and these acquisitions have affected to a certain extent the comparability of the above information. (3) As described in Note 9, through the June 2015 quarter, Headwaters recorded a full valuation allowance on its net amortizable deferred tax assets and recorded income tax expense due to the combination of recognizing benefit for deferred tax assets only to the extent of projected fiscal year earnings, plus state income taxes in certain state jurisdictions. In the September 2015 quarter, Headwaters released a majority of the valuation allowance on NOL and tax credit carryforwards and certain other deferred tax assets. Approximately $96.8 million of the release represents a non-routine income tax benefit, which when combined with the 2015 utilization of $12.5 million, resulted in a total change in the valuation allowance of $109.3 million recorded in the year. (4) As described in Note 7, Headwaters incurred approximately $24.8 million of non-routine extinguishment loss related to early repayments of debt in the March 2015 quarter and $8.7 million of non-routine extinguishment loss and non-capitalizable debt issuance costs in the September 2016 quarter. (5) In accordance with ASC Topic 260 Earnings Per Share, EPS is computed independently for each of the four quarters in a fiscal year. The basic and diluted EPS computed for certain years may not equal the sum of the four quarterly computations due to the combination of profitable quarters and loss quarters and / or rounding conventions. |
Summary of Significant Accoun24
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Sep. 30, 2016 | |
Summary of Significant Accounting Policies | |
Principles of Consolidation | Principles of Consolidation — The consolidated financial statements include the accounts of Headwaters, all of its subsidiaries and other entities in which Headwaters has a controlling interest. In accordance with the requirements of Accounting Standards Codification (ASC) Topic 810 Consolidation, Headwaters is required to consolidate any variable interest entities for which it is the primary beneficiary. For investments in entities in which Headwaters has a significant influence over operating and financial decisions (generally defined as owning a voting or economic interest of 20% to 50%), Headwaters applies the equity method of accounting. In instances where Headwaters’ investment is less than 20% and significant influence does not exist, investments are carried at cost. As of September 30, 2016, there are no material variable interest entities or equity‑method investments. All significant intercompany transactions and accounts are eliminated in consolidation. |
Use of Estimates | Use of Estimates — The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect i) the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and ii) the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. |
Segment Reporting, Major Customers and Other Concentrations of Risk | Segment Reporting, Major Customers and Other Concentrations of Risk — Headwaters currently operates three business segments: building products, construction materials and energy technology. Additional information about these segments is presented in Note 3. No customer accounted for over 10% of total revenue in any year presented and less than 10% of Headwaters’ revenue was from sales outside the United States. Approximately 10%, 9% and 9% of Headwaters’ total revenue and cost of revenue was for services in 2014, 2015 and 2016, respectively. Substantially all service‑related revenue for all periods was in the construction materials segment. Headwaters normally purchases a majority of the polypropylene, poly vinyl chloride (PVC) and polyethylene used in its resin‑based building products from a limited number of suppliers; however, these materials could be obtained from other suppliers if necessary and management currently believes any required change in suppliers would not be materially disruptive. |
Revenue Recognition and Cost of Revenue | Revenue Recognition and Cost of Revenue — Revenue from the sale of building products, CCPs and energy‑related products is recognized upon passage of title to the customer, which coincides with physical delivery and assumption of risk of loss by the customer. Estimated sales rebates and discounts pertaining to the sale of building products are provided for at the time of sale and are based primarily upon established policies and historical experience. Revenues include transportation charges and shipping and handling fees associated with delivering products and materials to customers when the transportation and/or shipping and handling is contractually provided for between the customer and Headwaters. Cost of revenue includes shipping and handling fees. CCP service revenues are primarily earned under long‑term contracts to dispose of residual materials created by coal‑fired electric power generation. Generally, revenues under long‑term site service contracts are recognized concurrently with the removal of material and are based on the volume of material removed at established prices per ton. Certain service revenue under these contracts is recognized on a time and materials basis in the period in which the services are performed. In compliance with contractual obligations, the cost of CCPs purchased from certain utilities is based on a percentage of the “net revenues” from sale of the CCPs purchased. Costs also include landfill fees and transportation charges to deliver non‑marketable CCPs to landfills. |
Cash and Cash Equivalents | Cash and Cash Equivalents — Headwaters considers all short‑term, highly‑liquid investments with a maturity of three months or less when purchased to be cash equivalents. Certain cash and cash equivalents are deposited with financial institutions, and at times such amounts exceed insured depository limits. |
Receivables | Receivables — Allowances are provided for uncollectible accounts and notes when deemed necessary. Such allowances are based on an account‑by‑account analysis of collectability or impairment plus a provision for non‑customer specific defaults based upon historical collection experience. Headwaters performs periodic credit evaluations of its customers but collateral is not required for trade receivables. Collateral is generally required for notes receivable, which were not material during the periods presented. |
Inventories | Inventories — Inventories are stated at the lower of cost or net realizable value. Cost includes direct material, transportation, direct labor and allocations of manufacturing overhead costs and is determined primarily using the first‑in, first‑out method. Excess and obsolete inventory reserves are based on historical experience and amounts expected to be realized for slow-moving and obsolete inventory. |
Property, Plant and Equipment | Property, Plant and Equipment — Property, plant and equipment are recorded at cost. For significant self‑constructed assets, cost includes direct labor and interest. Expenditures for major improvements are capitalized; expenditures for maintenance, repairs and minor improvements are charged to expense as incurred. Assets are depreciated using primarily the straight‑line method over their estimated useful lives, limited to the lease terms for improvements to leased assets. The units‑of‑production method is used to depreciate certain building products segment assets. Upon the sale or retirement of property, plant and equipment, any gain or loss on disposition is reflected in results of operations and the related asset cost and accumulated depreciation are removed from the respective accounts. |
Intangible Assets and Goodwill | Intangible Assets and Goodwill — Intangible assets consist primarily of identifiable intangible assets obtained in connection with acquisitions. With the exception of certain indefinite-lived trade names, intangible assets are amortized using the straight‑line method, Headwaters’ best estimate of the pattern of economic benefit, over their estimated useful lives. Goodwill consists of the excess of the purchase price for acquired businesses over the fair value of assets acquired, net of liabilities assumed. As described in more detail in Note 6, in accordance with ASC Topic 350 Intangibles—Goodwill and Other, goodwill and indefinite‑lived intangible assets are not amortized, but are tested at least annually for impairment. Amortizable intangible assets are tested for impairment only when an indicator of impairment exists. |
Valuation of Long-Lived Assets | Valuation of Long‑Lived Assets — Headwaters evaluates the carrying value of long‑lived assets, including amortizable intangible assets, as well as the related depreciation and amortization periods, to determine whether adjustments to carrying amounts or to estimated useful lives are required based on current events and circumstances. The carrying value of a long‑lived asset is considered impaired when the anticipated cumulative undiscounted cash flow from that asset is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long‑lived asset. |
Debt Issue Costs and Debt Repayment Premiums | Debt Issue Costs and Debt Repayment Premiums — Debt issue costs represent direct costs incurred for the issuance of long‑term debt and, except for costs related to the ABL Revolver (see Note 7), are reflected as a reduction of the carrying value of the respective long-term debt to which they relate. Debt issue costs related to the ABL Revolver are classified in other assets because the ABL Revolver has not been drawn since inception. Debt issue costs are amortized to interest expense over the terms of the respective debt using the effective interest method. When debt is repaid early, the portion of unamortized debt issue costs related to the early principal repayment is written off and included in interest expense. Any premiums associated with the repayment of debt are also charged to interest expense. |
Financial Instruments | Financial Instruments — Derivatives are recorded in the consolidated balance sheet at fair value, as required by ASC Topic 815 Derivatives and Hedging. Accounting for changes in the fair value of a derivative depends on the intended use of the derivative, which is established at inception. For derivatives designated as cash flow hedges and which meet the effectiveness guidelines of ASC Topic 815, changes in fair value, to the extent effective, are recognized in other comprehensive income until the hedged item is recognized in earnings. Hedge effectiveness is measured at least quarterly based on the relative changes in fair value between the derivative contract and the hedged item over time. Any change in fair value of a derivative resulting from ineffectiveness, or an excluded component of the gain or loss, is recognized immediately and is recorded as interest expense. Headwaters formally documents all hedge transactions at inception of the contract, including identification of the hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction. This process includes linking the derivatives that are designated as hedges to specific assets, liabilities, firm commitments or forecasted transactions. Headwaters also formally assesses the effectiveness of any hedging instruments on an ongoing basis. Historically, Headwaters has entered into hedge agreements primarily to limit its exposure for interest rate movements and certain commodity price fluctuations. In connection with the issuance of certain convertible senior subordinated notes, Headwaters entered into convertible note hedge and warrant transactions for the purpose of effectively increasing the common stock conversion price. This convertible note hedge terminated when the notes were repaid in full in 2014. Since that time, and as of September 30, 2016, Headwaters has had no material hedge agreements or other derivatives in place. |
Asset Retirement Obligations | Asset Retirement Obligations — From time to time Headwaters incurs asset retirement obligations associated with the restoration of certain CCP disposal sites. Headwaters records its legal obligations associated with the retirement of long‑lived assets in accordance with the requirements of ASC Topic 410 Asset Retirements and Environmental Obligations. The fair value of a liability for an asset retirement obligation is recognized in the consolidated financial statements when the asset is placed in service. At such time, the fair value of the liability is estimated using discounted cash flows. In subsequent periods, the retirement obligation is accreted to its estimated future value as of the asset retirement date through charges to operating expenses. An asset equal in value to the retirement obligation is also recorded as a component of the carrying amount of the long‑lived asset and is depreciated over the asset’s useful life. As of September 30, 2015 and 2016, CCP asset retirement obligations totaled $0. However, as described in Note 13, one of Headwaters’ subsidiaries is performing permit reclamation responsibilities at a former coal cleaning facility site. As of September 30, 2015 and 2016, approximately $7.4 million and $9.3 million, respectively, was accrued for this reclamation liability. |
Income Taxes | Income Taxes — Headwaters files a consolidated federal income tax return with substantially all of its subsidiaries. Income taxes are determined on an entity‑by‑entity basis and are accounted for in accordance with ASC Topic 740 Income Taxes. Headwaters recognizes deferred tax assets or liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in income tax returns. Deferred tax assets or liabilities are determined based upon the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to apply when the differences are expected to be settled or realized. Deferred income tax assets are periodically reviewed for recoverability based on current events, and valuation allowances are provided as necessary. Expenses for interest and penalties related to income taxes are classified within the income tax provision. |
Advertising Costs | Advertising Costs — Advertising costs are expensed as incurred, except for the cost of certain materials which are capitalized and amortized to expense as the materials are distributed. Total advertising costs were approximately $10.3 million, $10.0 million and $11.7 million in 2014, 2015 and 2016, respectively. |
Warranty Costs | Warranty Costs — Provision is made for warranty costs at the time of sale, based upon established policies and historical experience. |
Contingencies | Contingencies — In accounting for legal matters and other contingencies, Headwaters follows the guidance in ASC Topic 450 Contingencies, under which loss contingencies are accounted for based upon the likelihood of an impairment of an asset or the incurrence of a liability. If a loss contingency is “probable” and the amount of loss can be reasonably estimated, it is accrued. If a loss contingency is “probable” but the amount of loss cannot be reasonably estimated, disclosure is made. If a loss contingency is “reasonably possible,” disclosure is made, including the potential range of loss, if determinable. Loss contingencies that are “remote” are neither accounted for nor disclosed. Gain contingencies are given no accounting recognition until realized, but are disclosed if material. Headwaters records legal fees associated with loss contingencies when incurred and does not record estimated future legal fees. |
Stock-Based Compensation | Stock‑Based Compensation — Headwaters uses the fair value method of accounting for stock‑based compensation required by ASC Topic 718 Compensation—Stock Compensation. ASC Topic 718 requires companies to expense the value of equity‑based awards. Stock‑based compensation expense is reported within the same expense line items as used for cash compensation expense. Excess tax benefits resulting from exercise of stock options and stock appreciation rights (SARs) are reflected as necessary in the consolidated statement of changes in stockholders’ equity and in financing cash flows in the statement of cash flows. Headwaters recognizes compensation expense equal to the grant‑date fair value of stock‑based awards for all awards expected to vest, over the period during which the related service is rendered by grantees. The fair value of stock‑based awards is determined primarily using the Black‑Scholes‑Merton option pricing model (B‑S‑M model), adjusted where necessary to account for specific terms of awards that the B‑S‑M model does not have the capability to consider; for example, awards which have a cap on allowed appreciation. For such awards, the output determined by the B‑S‑M model has been reduced by an amount determined by a Quasi‑Monte Carlo simulation to reflect the reduction in fair value associated with the appreciation cap or other award feature. The B‑S‑M model was developed for use in estimating the fair value of traded options that have no vesting restrictions and that are fully transferable. Option valuation models require the input of certain subjective assumptions, including expected stock price volatility and expected term. For stock‑based awards, Headwaters primarily uses the “graded vesting” or accelerated method to allocate compensation expense over the requisite service periods. Estimated forfeiture rates are based largely on historical data and were 1% during the periods presented, including as of September 30, 2016. |
Earnings per Share Calculation | Earnings per Share Calculation — Earnings per share (EPS) has been computed based on the weighted‑average number of common shares outstanding. Diluted EPS computations reflect the increase in weighted‑average common shares outstanding that would result from the assumed exercise of outstanding stock‑based awards calculated using the treasury stock method, and the assumed conversion of convertible securities using the if‑converted method, when such stock‑based awards or convertible securities are dilutive. In accordance with the requirements of ASC Topic 260 Earnings Per Share, the diluted EPS calculations consider all of the following as assumed proceeds in using the treasury stock method to calculate whether and to what extent options and SARs are dilutive: i) the amount employees must pay upon exercise; plus ii) the average amount of unrecognized compensation cost during the period attributed to future service; plus iii) the amount of tax benefits, if any, that would be credited to additional paid‑in capital if the award were to be exercised. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements — In September 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (ASC Topic 805, Business Combinations). This standard simplifies the accounting for adjustments made to provisional amounts recognized in a business combination so that revisions of previously reported information about the fair values of assets acquired and liabilities assumed need not be recognized retrospectively. Headwaters adopted this standard effective as of October 1, 2016. While there was no effect upon adoption, due to the acquisitions consummated in 2016, some of which have been provisionally accounted for as described in Note 4, the adoption of this standard could have a material effect on how changes to those provisional amounts are accounted for in future periods if adjusted. In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes (ASC Topic 740). This new rule was issued to simplify the presentation of deferred income taxes to require that all deferred income tax assets and liabilities be classified as noncurrent in the balance sheet. Early application of ASU 2015-17 is permitted and Headwaters elected to adopt the ASU effective as of December 31, 2015, with retrospective application to the September 30, 2015 balance sheet. The effect of the adoption of ASU 2015-17 was to reclassify net deferred income tax assets of approximately $23.4 million as of September 30, 2015 as noncurrent instead of current. Accordingly, total current assets in the September 30, 2015 balance sheet were reduced by that amount, and total other assets were increased by the same amount. There was no effect on total assets or on net income. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (ASC Topic 230, Statement of Cash Flows), which addresses the appropriate classification of certain cash flows as operating, investing, or financing. Among other things, ASU 2016-15 addresses classification of debt prepayment or extinguishment costs and contingent consideration payments made following a business combination. Headwaters adopted ASU 2016-15 effective as of September 30, 2016 which required retrospective application for all prior periods presented. The effect of early adoption of ASU 2016-15 was to increase cash flows from operating activities and decrease cash flows from financing activities by approximately $18.3 million in 2015 and by $5.4 million in 2016. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASC Topic 606). This new revenue standard creates a single source of revenue guidance for all companies in all industries and is more principles-based than current revenue guidance. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASU 2014-09. The mandatory adoption date of ASC 606 for Headwaters is now October 1, 2018. There are two methods of adoption allowed, either a “full” retrospective adoption or a “modified” retrospective adoption. Headwaters currently believes the impact of adopting ASC 606 will not be material to either past or future periods as it relates to the building products and energy technology segments, but is still evaluating the potential impact the new standard will have on the construction materials segment. Adoption of the new standard could require expanded disclosures. In February 2016, the FASB issued ASU 2016-02, Leases (ASC Topic 842). This new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the Statement of Income. The mandatory adoption date of ASC 842 for Headwaters is October 1, 2019. A modified retrospective transition approach is required for leases existing at, or entered into, after the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. Headwaters currently expects that upon adoption of ASC 842, ROU assets and lease liabilities will be recognized in the balance sheet in amounts that will be material. In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (ASC Topic 718, Compensation—Stock Compensation), which changes how companies account for certain aspects of share-based payments to employees. Among other things, the new rules eliminate the requirement to record excess tax benefits in additional paid-in capital and instead require all such tax benefits to be recorded in the income statement. Most of the amendments are mandatory while one, how to account for forfeitures, requires a policy election. Different methods of adoption are required for the various amendments and early adoption is permitted, but all of the amendments must be adopted in the same period. The adoption date for Headwaters can be no later than October 1, 2017, which is when Headwaters currently expects to adopt the new rules. Headwaters continues to evaluate ASU 2016-09 and at the current time does not know what effects adoption of the new standard will have on its financial statements and whether the impact will be material. In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory (ASC Topic 740, Income Taxes), which will require an entity to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. This ASU is effective for Headwaters on October 1, 2018 with early adoption permitted. Headwaters has not yet evaluated the effect, if any, that ASU 2016-16 will have on its financial statements. Headwaters has reviewed other recently issued accounting standards which have not yet been adopted in order to determine their potential effect, if any, on the results of operations or financial position of Headwaters. Based on the review of these other recently issued standards, Headwaters does not currently believe that any of those accounting pronouncements will have a significant effect on its current or future financial position, results of operations, cash flows or disclosures. |
Reclassifications | Reclassifications — Certain prior period amounts, including the changes described above for the adoption of new accounting standards, have been reclassified to conform to the current period’s presentation. The reclassifications had no effect on net income, but did affect total assets and total liabilities as well as the classification of certain cash flows in the consolidated statements of cash flows. |
Segment Reporting (Tables)
Segment Reporting (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Segment Reporting | |
Schedule of Segment Reporting | 2014 Building Construction Energy (in thousands) products materials technology Corporate Totals Segment revenue $ $ $ $ $ Depreciation and amortization $ $ $ $ $ Operating income (loss) $ $ $ $ $ Net interest expense Other income (expense), net Income tax provision Income from continuing operations Loss from discontinued operations, net of income taxes Net income $ Capital expenditures $ $ $ $ $ Segment assets $ $ $ $ $ 2015 Building Construction Energy (in thousands) products materials technology Corporate Totals Segment revenue $ $ $ $ $ Depreciation and amortization $ $ $ $ $ Operating income (loss) $ $ $ $ $ Net interest expense Other income (expense), net Income tax benefit Income from continuing operations Loss from discontinued operations, net of income taxes Net income $ Capital expenditures $ $ $ $ $ Segment assets $ $ $ $ $ 2016 Building Construction Energy (in thousands) products materials technology Corporate Totals Segment revenue $ $ $ $ $ Depreciation and amortization $ $ $ $ $ Operating income (loss) $ $ $ $ $ Net interest expense Other income (expense), net Income tax provision Income from continuing operations Income from discontinued operations, net of income taxes Net income $ Capital expenditures $ $ $ $ $ Segment assets $ $ $ $ $ |
Acquisitions (Tables)
Acquisitions (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Acquisitions | |
Schedule of pro forma consolidated revenue and net income | Unaudited (in thousands) 2014 2015 2016 Pro forma revenue $ $ $ Pro forma net income $ $ $ |
Schedule of activity of non-controlling interest | (in thousands) Estimated fair value as of acquisition date $ Net income attributable to non-controlling interest Dividends paid to non-controlling interest Adjustment of estimated redemption value Balance as of September 30, 2014 Net income attributable to non-controlling interest Dividends paid to non-controlling interest Balance as of September 30, 2015 Net income attributable to non-controlling interest Dividends paid to non-controlling interest Balance as of September 30, 2016 $ |
Entegra | |
Acquisitions | |
Schedule of estimated fair values of assets acquired and liabilities assumed as of the acquisition date | (in thousands) Current assets $ Current liabilities Property, plant and equipment Intangible assets: Customer relationships (15 year life) Trade name (indefinite life) Goodwill Net assets acquired Less redeemable non-controlling interest Net assets attributable to Headwaters $ |
Gerard | |
Acquisitions | |
Schedule of estimated fair values of assets acquired and liabilities assumed as of the acquisition date | (in thousands) Current assets $ Current liabilities Property, plant and equipment Intangible assets: Customer relationships (15 year life) Trade name (indefinite life) Goodwill Long-term liabilities Net assets acquired $ |
Roofing Businesses | |
Acquisitions | |
Schedule of estimated fair values of assets acquired and liabilities assumed as of the acquisition date | (in thousands) Current assets $ Current liabilities Property, plant and equipment Intangible assets: Customer relationships (12 year life) Trade names (indefinite life) Intellectual property (15 year life) Goodwill Long-term liabilities Net assets acquired $ |
SynMat | |
Acquisitions | |
Schedule of estimated fair values of assets acquired and liabilities assumed as of the acquisition date | (in thousands) Current assets $ Current liabilities Property, plant and equipment Intangible assets: Contracts (20-year life) Customer relationships (15 year life) Trade names (indefinite life) Goodwill Net assets acquired $ |
Krestmark Industries | |
Acquisitions | |
Schedule of estimated fair values of assets acquired and liabilities assumed as of the acquisition date | (in thousands) Current assets $ Current liabilities Property, plant and equipment Intangible assets: Customer relationships (20 year life) Trade name (indefinite life) Non-competition agreements (7 year life) Goodwill Net assets acquired $ |
Current Assets and Current Li27
Current Assets and Current Liabilities (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Current Assets and Current Liabilities | |
Schedule of allowance for trade receivables | Balance at beginning Charged Accounts Balance at (in thousands) of year to expense written off end of year 2014 $ $ $ $ 2015 2016 |
Schedule of components of inventory | (in thousands) 2015 2016 Raw materials $ $ Finished goods $ $ |
Schedule of activity in the warranty liability account | Balance at Changes in Additions Balance at beginning Charged prior year From Payments end of (in thousands) of year to expense estimates acquisitions for claims year 2014 $ $ $ $ $ $ 2015 — 2016 |
Schedule of other accrued liabilities | (in thousands) 2015 2016 Products and services received but not yet invoiced $ $ Acquisition liabilities Other $ $ |
Long-Lived Assets (Tables)
Long-Lived Assets (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Long-Lived Assets | |
Schedule of property, plant and equipment | Estimated (in thousands of dollars) useful lives 2015 2016 Land and improvements - 40 years $ $ Buildings and improvements - 40 years Equipment and vehicles - 20 years Dies and molds - 20 years Construction in progress — Less accumulated depreciation Net property, plant and equipment $ $ |
Schedule of gross carrying amounts and accumulated amortization of intangible assets | 2015 2016 Gross Gross Estimated Carrying Accumulated Carrying Accumulated (in thousands of dollars) useful lives Amount Amortization Amount Amortization Trade names Indefinite $ $ — $ $ — Intellectual property 15 years — — — Contracts - 20 years Customer relationships - 20 years Trade names 20 years Patents and patented technologies - 19 years Other - 17 years $ $ $ $ |
Schedule of total currently estimated annual amortization expense | Year ending September 30: (in thousands) 2017 $ 2018 2019 2020 2021 |
Schedule of goodwill | Building Construction (in thousands) products materials Total Balances as of September 30, 2014 $ $ $ Goodwill related to 2015 acquisitions — Adjustments to previously recorded amounts for 2014 acquisitions Balances as of September 30, 2015 Goodwill related to 2016 acquisitions Adjustments to previously recorded amounts for 2015 acquisitions — Balances as of September 30, 2016 $ $ $ |
Long-term Debt (Tables)
Long-term Debt (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Long-term Debt | |
Schedule of the discounted carrying value of long-term debt | (in thousands) 2015 2016 Senior secured term loan, due March 2022 (face amount $423,938 as of September 30, 2015 and $768,804 as of September 30, 2016) $ $ 754,501 7¼% Senior notes, due January 2019 (face amount $150,000) — Carrying amount of long-term debt, net of discounts and debt issue costs Less current portion Long-term debt $ $ |
Schedule of future maturities of long-term debt | Year Ended September 30, (in thousands) 2017 $ 2018 2019 2020 2021 Thereafter Total long-term debt $ |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Income Taxes | |
Schedule of income tax benefit (provision) | (in thousands) 2014 2015 2016 Current tax benefit (provision): Federal $ $ $ State Total current tax provision Deferred tax benefit (provision): Federal State Change in valuation allowance Total deferred tax benefit (provision) Total income tax benefit (provision) $ $ $ |
Schedule of benefit (provision) for income taxes computed using statutory federal income tax rate | (in thousands) 2014 2015 2016 Tax provision at U.S. statutory rate $ $ $ State income taxes, net of federal tax effect Valuation allowance Non-deductible executive compensation — Tax credits Unrealized gains — — Unrecognized tax benefits Other Income tax benefit (provision) $ $ $ |
Schedule of deferred income tax assets and liabilities | (in thousands) 2015 2016 Deferred tax assets: NOL and capital loss carryforwards $ $ Tax credit carryforwards Estimated liabilities Stock-based compensation Debt repurchase premium Reserves and allowances Other Valuation allowances Total deferred tax assets Deferred tax liabilities: Property, plant and equipment basis differences Goodwill and intangible asset basis differences Total deferred tax liabilities Net deferred tax asset $ $ |
Schedule of reconciliation of change in the amount of gross unrecognized income tax benefits | (in thousands) 2014 2015 2016 Gross unrecognized income tax benefits at beginning of year $ $ $ Changes based on tax positions related to the current year — Increases for tax positions related to prior years — Settlements — — Lapse of statute of limitations Gross unrecognized income tax benefits at end of year $ $ $ |
Equity Securities and Stock-B31
Equity Securities and Stock-Based Compensation (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Equity Securities and Stock-Based Compensation | |
Summary of assumptions used in determining the fair value awards | 2014 2015 2016 Expected stock volatility % % % Risk-free interest rates 1.4% - 2.0 % 1.0% - 1.7 % 1.6% - 2.0 % Expected lives (beyond vest dates) 4 years 4 years 6 years Dividend yield % % % |
Schedule of stockholder approval of equity compensation plans | (in thousands of shares) Shares remaining Weighted-average available for future Maximum shares exercise price of issuance under existing to be issued upon outstanding equity compensation plans exercise of options options and other (excluding shares reflected Plan Category and other awards awards in the first column) Plans approved by stockholders $ Plan not approved by stockholders — Total $ |
Summary of activity for stock options | Weighted- Weighted- average average remaining Aggregate exercise contractual term intrinsic (in thousands, except per-share amounts) Shares price in years value Outstanding at September 30, 2013 $ Forfeited or expired Outstanding at September 30, 2014 $ $ Forfeited or expired Outstanding at September 30, 2015 $ $ Forfeited or expired Outstanding at September 30, 2016 $ $ Exercisable at September 30, 2014 $ $ Exercisable at September 30, 2015 $ $ Exercisable at September 30, 2016 $ $ |
Summary of activity for stock settled SARs | Weighted- Weighted- average average remaining Aggregate threshold contractual term intrinsic (in thousands, except per-share amounts) Shares price in years value Outstanding at September 30, 2013 $ Granted Exercised Forfeited or expired Outstanding at September 30, 2014 $ $ Granted $ Exercised Forfeited or expired Outstanding at September 30, 2015 $ $ Granted $ Exercised Forfeited or expired Outstanding at September 30, 2016 $ $ Exercisable at September 30, 2014 $ $ Exercisable at September 30, 2015 $ $ Exercisable at September 30, 2016 $ $ |
Summary of activity for nonvested restricted stock | Weighted- average grant date (in thousands of shares) Shares fair value Outstanding at beginning of year $ Granted Vested Forfeited Outstanding at end of year $ |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share | |
Schedule of computation of basic and diluted EPS | (in thousands, except per-share amounts) 2014 2015 2016 Numerator: Income from continuing operations $ $ $ Income from continuing operations attributable to non-controlling interest Adjustment of estimated redemption value of non-controlling interest — — Numerator for basic and diluted earnings per share from continuing operations — income from continuing operations attributable to Headwaters Incorporated Numerator for basic and diluted earnings per share from discontinued operations — income (loss) from discontinued operations, net of income taxes Numerator for basic and diluted earnings per share — net income attributable to Headwaters Incorporated $ $ $ Denominator: Denominator for basic earnings per share — weighted-average shares outstanding Effect of dilutive securities — shares issuable upon exercise of options and SARs and vesting of restricted stock Denominator for diluted earnings per share — weighted-average shares outstanding after assumed exercises and vesting Basic income per share attributable to Headwaters Incorporated: From continuing operations $ $ $ From discontinued operations — $ $ $ Diluted income per share attributable to Headwaters Incorporated: From continuing operations $ $ $ From discontinued operations — $ $ $ Anti-dilutive securities not considered in diluted EPS calculation: Stock-settled SARs Stock options Restricted stock — |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies | |
Schedule of minimum rental payments due under leases | Year ending September 30, (in thousands) 2017 $ 2018 2019 2020 2021 Thereafter $ |
Schedule of future purchase requirements | Year ending September 30, (in thousands) 2017 $ 2018 2019 2020 2021 Thereafter $ |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Discontinued Operations | |
Schedule of information for the discontinued coal cleaning business | (in thousands) 2014 2015 2016 Gain (loss) from discontinued operations before income taxes $ $ $ Income tax benefit (provision) Income (loss) from discontinued operations, net of income taxes $ $ $ |
Condensed Consolidating Finan35
Condensed Consolidating Financial Information (Tables) | 12 Months Ended |
Sep. 30, 2016 | |
Condensed Consolidating Financial Information | |
Schedule of Condensed Consolidating Balance Sheet | CONDENSED CONSOLIDATING BALANCE SHEET—September 30, 2015 Non- Eliminations Guarantor guarantor Parent and Headwaters (in thousands) Subsidiaries Subsidiaries Company Reclassifications Consolidated ASSETS Current assets: Cash and cash equivalents $ $ $ $ — $ Trade receivables, net — — Inventories — — Current income taxes — — Other — Total current assets Property, plant and equipment, net — Other assets: Goodwill — — Intangible assets, net — — Investments in subsidiaries — — Intercompany accounts and notes — — Deferred income taxes — Other — Total other assets Total assets $ $ $ $ $ LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ $ $ $ — $ Accrued personnel costs — Current income taxes — — Other accrued liabilities — Current portion of long-term debt — — — Total current liabilities Long-term liabilities: Long-term debt, net — — — Intercompany accounts and notes — — Other Total long-term liabilities Total liabilities Redeemable non-controlling interest in consolidated subsidiary — — — Stockholders’ equity: Common stock — — — Capital in excess of par value Retained earnings (accumulated deficit) Treasury stock — — — Total stockholders’ equity Total liabilities and stockholders’ equity $ $ $ $ $ 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 $ $ $ $ — $ Trade receivables, net — — Inventories — — Current income taxes — — Other — Total current assets Property, plant and equipment, net — Other assets: Goodwill — — Intangible assets, net — — Investments in subsidiaries — — — Intercompany accounts and notes — — Deferred income taxes — Other — Total other assets Total assets $ $ $ $ $ LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ $ $ $ — $ Accrued personnel costs — Current income taxes — — Other accrued liabilities — Current portion of long-term debt — — — Total current liabilities Long-term liabilities: Long-term debt, net — — — Income taxes — — — Intercompany accounts and notes — — Other — Total long-term liabilities Total liabilities Redeemable non-controlling interest in consolidated subsidiary — — — Stockholders’ equity: Common stock — — — Capital in excess of par value Retained earnings (accumulated deficit) Treasury stock — — — Total stockholders’ equity Total liabilities and stockholders’ equity $ $ $ $ $ |
Schedule of Condensed Consolidating Statement of Income | CONDENSED CONSOLIDATING STATEMENT OF INCOME Year Ended September 30, 2014 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Revenue: Building products $ $ $ — $ — $ Construction materials — — — Energy technology — — — Total revenue — — Cost of revenue: Building products — — Construction materials — — — Energy technology — — — Total cost of revenue — — Gross profit — — Operating expenses: Selling, general and administrative — Amortization — — Total operating expenses — Operating income (loss) — Other income (expense): Net interest expense — Intercompany interest income (expense) — — — Equity in earnings of subsidiaries — — — Other, net — — Total other income (expense), net Income from continuing operations before income taxes Income tax benefit (provision) — Income from continuing operations Loss from discontinued operations, net of income taxes — — — Net income Net income attributable to non-controlling interest — — — Net income attributable to Headwaters Incorporated $ $ $ $ $ CONDENSED CONSOLIDATING STATEMENT OF INCOME Year Ended September 30, 2015 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Revenue: Building products $ $ $ — $ — $ Construction materials — — — Energy technology — — — Total revenue — — Cost of revenue: Building products — — Construction materials — — — Energy technology — — — Total cost of revenue — — Gross profit — — Operating expenses: Selling, general and administrative — Amortization — — Total operating expenses — Operating income (loss) — Other income (expense): Net interest expense — — Intercompany interest income (expense) — — Equity in earnings of subsidiaries — — — Other, net — — Total other income (expense), net Income (loss) from continuing operations before income taxes Income tax benefit (provision) — Income from continuing operations Loss from discontinued operations, net of income taxes — — Net income Net income attributable to non-controlling interest — — — Net income attributable to Headwaters Incorporated $ $ $ $ $ CONDENSED CONSOLIDATING STATEMENT OF INCOME Year Ended September 30, 2016 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Revenue: Building products $ $ $ — $ — $ Construction materials — — — Energy technology — — — Total revenue — — Cost of revenue: Building products — — Construction materials — — — Energy technology — — — Total cost of revenue — — Gross profit — — Operating expenses: Selling, general and administrative — Amortization — — Total operating expenses — Operating income (loss) — Other income (expense): Net interest expense — Intercompany interest income (expense) — — — Equity in earnings of subsidiaries — — — Other, net — — Total other income (expense), net Income from continuing operations before income taxes Income tax benefit (provision) — Income from continuing operations Income from discontinued operations, net of income taxes — — — Net income Net income attributable to non-controlling interest — — — Net income attributable to Headwaters Incorporated $ $ $ $ $ |
Schedule of Condensed Consolidating Statement of Cash Flows | CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Year Ended September 30, 2014 Non- Guarantor Guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Cash flows from operating activities: Net income $ $ $ $ $ Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization — Interest expense related to amortization of debt issue costs and debt discount — — — Stock-based compensation — — Deferred income taxes — — Net loss on disposition of property, plant and equipment — Asset impairments — — — Net loss of unconsolidated joint ventures — — — Equity in earnings of subsidiaries — — Decrease (increase) in trade receivables — — Decrease (increase) in inventories — — Increase (decrease) in accounts payable and accrued liabilities — Other changes in operating assets and liabilities, net — Net cash provided by (used in) operating activities — Cash flows from investing activities: Business acquisitions — — Investments in unconsolidated joint ventures — — — Purchase of property, plant and equipment — Proceeds from disposition of property, plant and equipment — — — Net decrease in long-term receivables and deposits — — Net change in other assets — — Net cash used in investing activities — Cash flows from financing activities: Net proceeds from issuance of long-term debt — — — Payments on long-term debt — — — Dividends paid to non-controlling interest in consolidated subsidiary — — — Employee stock purchases — — Intercompany transfers — Net cash provided by (used in) financing activities — Net increase (decrease) in cash and cash equivalents — Cash and cash equivalents, beginning of year — Cash and cash equivalents, end of year $ $ $ $ — $ CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Year Ended September 30, 2015 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Cash flows from operating activities: Net income $ $ $ $ $ Adjustments to reconcile net income to net cash provided by (used in) operating activities: — Depreciation and amortization — Interest expense related to amortization of debt issue costs and debt discount — — — Debt pre-payment premiums — — — Stock-based compensation — — Deferred income taxes — Tax benefit from exercise of stock appreciation rights and vesting of restricted stock — — Net loss (gain) on disposition of property, plant and equipment — — Net loss of unconsolidated joint ventures — — — Equity in earnings of subsidiaries — — Decrease (increase) in trade receivables — — Increase in inventories — — Increase (decrease) in accounts payable and accrued liabilities — Other changes in operating assets and liabilities, net — Net cash provided by (used in) operating activities — Cash flows from investing activities: Business acquisition — — — Investments in unconsolidated joint venture — — — Purchase of property, plant and equipment — Proceeds from disposition of property, plant and equipment — — Net decrease in long-term receivables and deposits — — Net change in other assets — — Net cash used in investing activities — Cash flows from financing activities: Net proceeds from issuance of long-term debt — — — Payments on long-term debt — — — Debt pre-payment premiums — — — Dividends paid to non-controlling interest in consolidated subsidiary — — — Employee stock purchases — Tax benefit from exercise of stock appreciation rights and vesting of restricted stock — — Intercompany transfers — Net cash provided by (used in) financing activities — Net decrease in cash and cash equivalents — Cash and cash equivalents, beginning of year — Cash and cash equivalents, end of year $ $ $ $ — $ CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Cash flows from operating activities: Net income $ $ $ $ $ Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization — Interest expense related to amortization of debt issue costs and debt discount — — — Debt pre-payment premiums — — — Stock-based compensation — Deferred income taxes — Tax benefit from exercise of stock appreciation rights and vesting of restricted stock — — Net loss (gain) on disposition of property, plant and equipment — — Gain on acquired assets held for sale — — — Change in fair value of contingent consideration — — — Net loss of unconsolidated joint ventures — — — Equity in earnings of subsidiaries — — Increase in trade receivables — — Increase in inventories — — Increase (decrease) in accounts payable and accrued liabilities — Other changes in operating assets and liabilities, net — Net cash provided by (used in) operating activities — Cash flows from investing activities: Business acquisitions, net of cash acquired — — Purchase of property, plant and equipment — Proceeds from disposition of property, plant and equipment — — Proceeds from sale of acquired assets held for sale — — — Net decrease (increase) in long-term receivables and deposits — Net change in other assets — Net cash used in investing activities — Cash flows from financing activities: Net proceeds from issuance of long-term debt — — — Payments on long-term debt — — — Debt pre-payment premiums — — — Dividends paid to non-controlling interest in consolidated subsidiary — — Employee stock purchases — Tax benefit from exercise of stock appreciation rights and vesting of restricted stock — — Intercompany transfers — Net cash provided by (used in) financing activities — Net increase (decrease) in cash and cash equivalents — Cash and cash equivalents, beginning of year — Cash and cash equivalents, end of year $ $ $ $ — $ |
Description of Business and O36
Description of Business and Organization (Details) | 12 Months Ended |
Sep. 30, 2016item | |
Nature of operations and basis of presentation | |
Number of building materials segments | 2 |
Summary of Significant Accoun37
Summary of Significant Accounting Policies (Details) $ in Millions | 12 Months Ended | ||
Sep. 30, 2016USD ($)segmentitem | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | |
Summary of Significant Accounting Policies | |||
Number of business segments | segment | 3 | ||
Percentage of revenue from services | 9.00% | 9.00% | 10.00% |
Asset retirement obligations | $ 0 | $ 0 | |
Number of reclamation obligations | item | 1 | ||
Advertising costs | $ 11.7 | 10 | $ 10.3 |
Coal Cleaning Business | |||
Summary of Significant Accounting Policies | |||
Number of reclamation obligations | item | 1 | ||
Accrued liability for reclamation obligations | $ 9.3 | $ 7.4 | |
Minimum | |||
Summary of Significant Accounting Policies | |||
Economic interest | 20.00% | ||
Estimated forfeiture rates | 1.00% | ||
Maximum | |||
Summary of Significant Accounting Policies | |||
Economic interest | 50.00% | ||
Ownership percentage - cost method | 20.00% | ||
Maximum | Revenue | Customer Concentration Risk | |||
Summary of Significant Accounting Policies | |||
Revenue accounted for, percentage | 10.00% | ||
Maximum | Revenue | Geographic Concentration Risk | |||
Summary of Significant Accounting Policies | |||
Revenue accounted for, percentage | 10.00% |
Summary of Significant Accoun38
Summary of Significant Accounting Policies - Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Adoption of recently issued accounting standards | |||
Deferred income taxes | $ 68,059 | $ 92,852 | |
Increase (decrease) in cash flows from operating activities | 120,303 | 81,708 | $ 65,043 |
Increase (decrease) in cash flows from financing activities | 183,784 | (52,787) | $ 138,667 |
New Accounting Pronouncement, Early Adoption Effect | Accounting Standards Update 2015-17 | |||
Adoption of recently issued accounting standards | |||
Current and Deferred Income Tax Assets | (23,400) | ||
Deferred income taxes | 23,400 | ||
New Accounting Pronouncement, Early Adoption Effect | Accounting Standards Update 2016-15 | |||
Adoption of recently issued accounting standards | |||
Increase (decrease) in cash flows from operating activities | 5,400 | 18,300 | |
Increase (decrease) in cash flows from financing activities | $ (5,400) | $ (18,300) |
Segment Reporting (Details)
Segment Reporting (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Sep. 30, 2016USD ($) | Jun. 30, 2016USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Sep. 30, 2015USD ($) | Jun. 30, 2015USD ($) | Mar. 31, 2015USD ($) | Dec. 31, 2014USD ($) | Sep. 30, 2016USD ($)segment | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | |
Segment Reporting | |||||||||||
Number of business segments | segment | 3 | ||||||||||
Segment revenue | $ 291,591 | $ 262,466 | $ 202,332 | $ 218,418 | $ 272,717 | $ 243,294 | $ 179,725 | $ 199,597 | $ 974,807 | $ 895,333 | $ 791,447 |
Depreciation and amortization | (62,518) | (53,973) | (55,134) | ||||||||
Operating income (loss) | 110,710 | 102,107 | 66,724 | ||||||||
Net interest expense | (42,424) | (64,219) | (46,329) | ||||||||
Other income (expense), net | 4,149 | (218) | (348) | ||||||||
Income tax benefit (provision) | 96,800 | (22,756) | 94,458 | (3,574) | |||||||
Income from continuing operations | 49,679 | 132,128 | 16,473 | ||||||||
Income (loss) from discontinued operations, net of income taxes | 84 | (460) | (415) | ||||||||
Net income | 16,873 | $ 17,785 | $ 2,384 | $ 12,721 | 126,774 | $ 23,008 | $ (25,198) | $ 7,084 | 49,763 | 131,668 | 16,058 |
Capital expenditures | 53,099 | 36,859 | 35,799 | ||||||||
Segment assets | 1,238,443 | 979,019 | 1,238,443 | 979,019 | 896,306 | ||||||
Building products | |||||||||||
Segment Reporting | |||||||||||
Segment revenue | 594,281 | 523,643 | 472,434 | ||||||||
Construction materials | |||||||||||
Segment Reporting | |||||||||||
Segment revenue | 370,439 | 352,263 | 309,337 | ||||||||
Energy technology | |||||||||||
Segment Reporting | |||||||||||
Segment revenue | 10,087 | 19,427 | 9,676 | ||||||||
Operating Segments | Building products | |||||||||||
Segment Reporting | |||||||||||
Segment revenue | 594,281 | 523,643 | 472,434 | ||||||||
Depreciation and amortization | (43,058) | (36,933) | (39,425) | ||||||||
Operating income (loss) | 65,365 | 64,418 | 46,888 | ||||||||
Capital expenditures | 38,569 | 25,454 | 25,307 | ||||||||
Segment assets | 729,014 | 412,867 | 729,014 | 412,867 | 411,968 | ||||||
Operating Segments | Construction materials | |||||||||||
Segment Reporting | |||||||||||
Segment revenue | 370,439 | 352,263 | 309,337 | ||||||||
Depreciation and amortization | (16,717) | (15,155) | (13,706) | ||||||||
Operating income (loss) | 76,099 | 64,984 | 51,503 | ||||||||
Capital expenditures | 7,159 | 5,855 | 5,721 | ||||||||
Segment assets | 332,593 | 294,057 | 332,593 | 294,057 | 325,140 | ||||||
Operating Segments | Energy technology | |||||||||||
Segment Reporting | |||||||||||
Segment revenue | 10,087 | 19,427 | 9,676 | ||||||||
Depreciation and amortization | (1,239) | (1,372) | (1,731) | ||||||||
Operating income (loss) | (2,514) | 731 | (6,829) | ||||||||
Capital expenditures | 14 | 325 | 473 | ||||||||
Segment assets | 43,412 | 45,671 | 43,412 | 45,671 | 22,674 | ||||||
Corporate, Non-Segment | |||||||||||
Segment Reporting | |||||||||||
Segment revenue | 0 | 0 | 0 | ||||||||
Depreciation and amortization | (1,504) | (513) | (272) | ||||||||
Operating income (loss) | (28,240) | (28,026) | (24,838) | ||||||||
Capital expenditures | 7,357 | 5,225 | 4,298 | ||||||||
Segment assets | $ 133,424 | $ 226,424 | $ 133,424 | $ 226,424 | $ 136,524 |
Acquisitions (Details)
Acquisitions (Details) $ in Thousands | Aug. 19, 2016USD ($) | Mar. 17, 2016USD ($) | Dec. 03, 2015USD ($)item | May 16, 2014USD ($) | Dec. 12, 2013USD ($) | Sep. 30, 2016USD ($)item | Jun. 30, 2016USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Sep. 30, 2015USD ($) | Jun. 30, 2015USD ($) | Mar. 31, 2015USD ($) | Dec. 31, 2014USD ($) | Sep. 30, 2014USD ($) | Mar. 31, 2014USD ($) | Sep. 30, 2016USD ($)item | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Nov. 13, 2015 |
Acquisitions | |||||||||||||||||||
Consideration paid net of cash acquired | $ 342,362 | $ 5,650 | $ 95,604 | ||||||||||||||||
Number of product categories in niche roofing | item | 3 | 3 | |||||||||||||||||
Estimated fair values of assets acquired and liabilities assumed | |||||||||||||||||||
Current liabilities | $ (12,400) | $ (400) | $ (12,400) | (400) | |||||||||||||||
Goodwill | 290,503 | 178,199 | $ 175,586 | 290,503 | 178,199 | 175,586 | |||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Gain on acquired assets held for sale | 4,450 | ||||||||||||||||||
Income tax expense (benefit) | (96,800) | 22,756 | (94,458) | 3,574 | |||||||||||||||
Revenue | 291,591 | $ 262,466 | $ 202,332 | $ 218,418 | 272,717 | $ 243,294 | $ 179,725 | $ 199,597 | 974,807 | 895,333 | 791,447 | ||||||||
Net income (loss) | 16,873 | 17,785 | 2,384 | 12,721 | 126,774 | $ 23,008 | $ (25,198) | 7,084 | 49,763 | 131,668 | 16,058 | ||||||||
Non-controlling interest in consolidated subsidiary | |||||||||||||||||||
Balance | 12,431 | 12,431 | |||||||||||||||||
Net income attributable to non-controlling interest | 1,667 | 869 | 774 | ||||||||||||||||
Adjustment of estimated redemption value | 176 | ||||||||||||||||||
Balance | 13,363 | 12,431 | 13,363 | 12,431 | |||||||||||||||
Acquisitions 2014 and 2015 and 2016 | |||||||||||||||||||
Pro forma consolidated revenue and net income | |||||||||||||||||||
Pro forma revenue | 1,096,658 | 1,061,072 | 835,864 | ||||||||||||||||
Pro forma net income | 65,049 | 145,291 | 20,409 | ||||||||||||||||
Acquisitions 2014 and 2015 and 2016 | Acquisition-related Costs | |||||||||||||||||||
Pro forma consolidated revenue and net income | |||||||||||||||||||
Fees for advisory, legal and other professional services | 900 | 700 | 900 | 700 | |||||||||||||||
Acquisitions 2014 and 2015 and 2016 | Fair Value Adjustment to Inventory | |||||||||||||||||||
Pro forma consolidated revenue and net income | |||||||||||||||||||
Nonrecurring expense related to the fair value adjustment to acquisition-date inventory | 1,100 | 1,200 | 1,100 | 1,200 | |||||||||||||||
Acquisitions 2,014 | |||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Revenue | 47,600 | ||||||||||||||||||
Net income (loss) | 5,200 | ||||||||||||||||||
Roof Tile Acquisition LLC | |||||||||||||||||||
Acquisitions | |||||||||||||||||||
Percentage of equity interests acquired | 80.00% | ||||||||||||||||||
Entegra | |||||||||||||||||||
Acquisitions | |||||||||||||||||||
Total cash consideration of acquisition | $ 57,500 | ||||||||||||||||||
Estimated fair values of assets acquired and liabilities assumed | |||||||||||||||||||
Current assets | 8,261 | ||||||||||||||||||
Current liabilities | (3,422) | ||||||||||||||||||
Property, plant and equipment | 10,589 | ||||||||||||||||||
Goodwill | 28,156 | ||||||||||||||||||
Net assets acquired | 70,784 | ||||||||||||||||||
Less redeemable non-controlling interest | (13,252) | (13,252) | (13,252) | ||||||||||||||||
Net assets attributable to Headwaters | $ 57,532 | ||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Period over which goodwill is expected to be deductible for tax purpose | 15 years | ||||||||||||||||||
Minimum period following the acquisition date after which remaining noncontrolling equity interest may be acquired | 5 years | ||||||||||||||||||
Pro forma consolidated revenue and net income | |||||||||||||||||||
Fees for advisory, legal and other professional services | 400 | 400 | |||||||||||||||||
Noncontrolling equity interest (as a percent) | 20.00% | ||||||||||||||||||
Non-controlling interest in consolidated subsidiary | |||||||||||||||||||
Balance | $ 12,431 | 13,252 | 12,431 | 13,252 | |||||||||||||||
Estimated fair value as of acquisition date | $ 13,252 | 13,252 | 13,252 | ||||||||||||||||
Net income attributable to non-controlling interest | 1,667 | 869 | 774 | ||||||||||||||||
Dividends paid to non-controlling interest | (735) | (1,690) | (950) | ||||||||||||||||
Adjustment of estimated redemption value | 176 | ||||||||||||||||||
Balance | $ 13,363 | 12,431 | 13,252 | 13,363 | 12,431 | 13,252 | |||||||||||||
Entegra | Trade names | |||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Indefinite lived intangible assets | 6,600 | ||||||||||||||||||
Entegra | Customer relationships | |||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Finite lived intangible assets | $ 20,600 | ||||||||||||||||||
Estimated useful lives of the identified intangible assets | 15 years | ||||||||||||||||||
Gerard | |||||||||||||||||||
Acquisitions | |||||||||||||||||||
Total cash consideration of acquisition | $ 27,600 | ||||||||||||||||||
Estimated fair values of assets acquired and liabilities assumed | |||||||||||||||||||
Current assets | 9,236 | ||||||||||||||||||
Current liabilities | (1,691) | ||||||||||||||||||
Property, plant and equipment | 8,314 | ||||||||||||||||||
Goodwill | 7,719 | ||||||||||||||||||
Long-term liabilities | (3,906) | ||||||||||||||||||
Net assets acquired | $ 27,572 | ||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Period over which goodwill is expected to be deductible for tax purpose | 15 years | ||||||||||||||||||
Pro forma consolidated revenue and net income | |||||||||||||||||||
Fees for advisory, legal and other professional services | 300 | $ 300 | |||||||||||||||||
Gerard | Trade names | |||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Indefinite lived intangible assets | $ 3,900 | ||||||||||||||||||
Gerard | Customer relationships | |||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Finite lived intangible assets | $ 4,000 | ||||||||||||||||||
Estimated useful lives of the identified intangible assets | 15 years | ||||||||||||||||||
Acquisitions 2,015 | |||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Revenue | 3,200 | ||||||||||||||||||
Net income (loss) | $ (1,200) | ||||||||||||||||||
Acquisitions 2,016 | |||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Revenue | 49,300 | ||||||||||||||||||
Net income (loss) | 4,700 | ||||||||||||||||||
Roofing Businesses | |||||||||||||||||||
Acquisitions | |||||||||||||||||||
Number of acquisitions aggregated | item | 2 | ||||||||||||||||||
Consideration paid net of cash acquired | $ 57,000 | ||||||||||||||||||
Estimated fair values of assets acquired and liabilities assumed | |||||||||||||||||||
Current assets | 7,402 | ||||||||||||||||||
Current liabilities | (1,455) | ||||||||||||||||||
Property, plant and equipment | 3,138 | ||||||||||||||||||
Goodwill | 27,218 | ||||||||||||||||||
Long-term liabilities | (3,015) | ||||||||||||||||||
Net assets acquired | $ 56,995 | ||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Period over which goodwill is expected to be deductible for tax purpose | 15 years | ||||||||||||||||||
Roofing Businesses | Trade names | |||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Indefinite lived intangible assets | $ 5,565 | ||||||||||||||||||
Roofing Businesses | Customer relationships | |||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Finite lived intangible assets | $ 8,040 | ||||||||||||||||||
Estimated useful lives of the identified intangible assets | 12 years | ||||||||||||||||||
Roofing Businesses | Intellectual property | |||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Finite lived intangible assets | $ 10,102 | ||||||||||||||||||
Estimated useful lives of the identified intangible assets | 15 years | ||||||||||||||||||
Metro Roof Products | |||||||||||||||||||
Acquisitions | |||||||||||||||||||
Percentage of equity interests acquired | 100.00% | ||||||||||||||||||
SynMat | |||||||||||||||||||
Acquisitions | |||||||||||||||||||
Percentage of equity interests acquired | 100.00% | ||||||||||||||||||
Consideration paid net of cash acquired | $ 33,200 | ||||||||||||||||||
Future estimated consideration payments accrued | 12,000 | ||||||||||||||||||
Estimated fair values of assets acquired and liabilities assumed | |||||||||||||||||||
Current assets | 3,965 | ||||||||||||||||||
Current liabilities | (1,491) | ||||||||||||||||||
Property, plant and equipment | 3,710 | ||||||||||||||||||
Goodwill | 4,414 | ||||||||||||||||||
Net assets acquired | $ 33,168 | ||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Period over which goodwill is expected to be deductible for tax purpose | 15 years | ||||||||||||||||||
SynMat | Trade names | |||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Indefinite lived intangible assets | $ 4,790 | ||||||||||||||||||
SynMat | Contracts | |||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Finite lived intangible assets | $ 15,220 | ||||||||||||||||||
Estimated useful lives of the identified intangible assets | 20 years | ||||||||||||||||||
SynMat | Customer relationships | |||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Finite lived intangible assets | $ 2,560 | ||||||||||||||||||
Estimated useful lives of the identified intangible assets | 15 years | ||||||||||||||||||
Krestmark Industries | |||||||||||||||||||
Acquisitions | |||||||||||||||||||
Total cash consideration of acquisition | $ 240,000 | ||||||||||||||||||
Estimated fair values of assets acquired and liabilities assumed | |||||||||||||||||||
Current assets | 20,731 | ||||||||||||||||||
Current liabilities | (3,884) | ||||||||||||||||||
Property, plant and equipment | 5,597 | ||||||||||||||||||
Goodwill | 66,539 | ||||||||||||||||||
Net assets acquired | $ 235,433 | ||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Period over which goodwill is expected to be deductible for tax purpose | 15 years | ||||||||||||||||||
Prepaid compensation for employee retention obligations | $ 4,600 | ||||||||||||||||||
Amortization period for prepaid compensation | 2 years | ||||||||||||||||||
Krestmark Industries | Trade names | |||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Indefinite lived intangible assets | $ 36,600 | ||||||||||||||||||
Krestmark Industries | Customer relationships | |||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Finite lived intangible assets | $ 107,500 | ||||||||||||||||||
Estimated useful lives of the identified intangible assets | 20 years | ||||||||||||||||||
Krestmark Industries | Noncompete agreements | |||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Finite lived intangible assets | $ 2,350 | ||||||||||||||||||
Estimated useful lives of the identified intangible assets | 7 years | ||||||||||||||||||
Other Business Acquisitions | |||||||||||||||||||
Acquisitions | |||||||||||||||||||
Total cash consideration of acquisition | $ 10,400 | $ 6,300 | $ 4,500 | $ 7,400 | $ 3,100 | ||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Income tax expense (benefit) | 2,000 | ||||||||||||||||||
Other Business Acquisitions | Other Income | |||||||||||||||||||
Intangible assets acquired: | |||||||||||||||||||
Gain on acquired assets held for sale | $ 4,500 | ||||||||||||||||||
Other Business Acquisitions | Equity Method Investee | |||||||||||||||||||
Acquisitions | |||||||||||||||||||
Total cash consideration of acquisition | $ 1,200 | ||||||||||||||||||
Percentage of equity interests acquired | 100.00% |
Current Assets and Current Li41
Current Assets and Current Liabilities (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Receivables | |||
Balance at beginning of year | $ 3,810 | $ 3,538 | $ 2,777 |
Charged to expense | 1,552 | 1,424 | 2,022 |
Accounts written off | (1,199) | (1,152) | (1,261) |
Balance at end of year | 4,163 | 3,810 | 3,538 |
Inventories | |||
Raw materials | 22,333 | 12,831 | |
Finished goods | 50,335 | 42,243 | |
Inventories | 72,668 | 55,074 | |
Increase in inventories | 432 | 1,007 | 2,347 |
Warranty Liabilities | |||
Balance at beginning of year | 6,768 | 7,219 | 2,141 |
Charged to expense | 1,393 | 2,020 | 1,992 |
Changes to prior year estimates | (265) | (461) | 32 |
Additions from acquisitions | 3,093 | 4,842 | |
Payments for claims | (1,651) | (2,010) | (1,788) |
Balance at end of year | 9,338 | 6,768 | $ 7,219 |
Other Accrued Liabilities | |||
Products and services received but not yet invoiced | 25,609 | 24,215 | |
Acquisition liabilities | 12,400 | 400 | |
Other | 25,776 | 27,166 | |
Other Accrued Liabilities, Current | 63,785 | $ 51,781 | |
Acquisitions 2,016 | |||
Inventories | |||
Increase in inventories | $ 16,500 |
Long-Lived Assets - Property, P
Long-Lived Assets - Property, Plant and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Property, Plant and Equipment | |||
Gross property, plant and equipment | $ 463,687 | $ 429,459 | |
Less accumulated depreciation | (256,895) | (243,741) | |
Net property, plant and equipment | 206,792 | 185,718 | |
Depreciation expense | 41,900 | 35,800 | $ 33,800 |
Land and Land Improvements | |||
Property, Plant and Equipment | |||
Gross property, plant and equipment | $ 12,380 | 15,904 | |
Land and Land Improvements | Minimum | |||
Property, Plant and Equipment | |||
Estimated useful lives | 15 years | ||
Land and Land Improvements | Maximum | |||
Property, Plant and Equipment | |||
Estimated useful lives | 40 years | ||
Building and Building Improvements | |||
Property, Plant and Equipment | |||
Gross property, plant and equipment | $ 70,724 | 69,645 | |
Building and Building Improvements | Minimum | |||
Property, Plant and Equipment | |||
Estimated useful lives | 5 years | ||
Building and Building Improvements | Maximum | |||
Property, Plant and Equipment | |||
Estimated useful lives | 40 years | ||
Equipment and Vehicles | |||
Property, Plant and Equipment | |||
Gross property, plant and equipment | $ 267,893 | 239,759 | |
Equipment and Vehicles | Minimum | |||
Property, Plant and Equipment | |||
Estimated useful lives | 3 years | ||
Equipment and Vehicles | Maximum | |||
Property, Plant and Equipment | |||
Estimated useful lives | 20 years | ||
Dies and Molds | |||
Property, Plant and Equipment | |||
Gross property, plant and equipment | $ 86,941 | 85,880 | |
Dies and Molds | Minimum | |||
Property, Plant and Equipment | |||
Estimated useful lives | 3 years | ||
Dies and Molds | Maximum | |||
Property, Plant and Equipment | |||
Estimated useful lives | 20 years | ||
Construction in Progress | |||
Property, Plant and Equipment | |||
Gross property, plant and equipment | $ 25,749 | $ 18,271 |
Long-Lived Assets - Intangible
Long-Lived Assets - Intangible Assets (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Gross carrying amount and accumulated amortization of intangible assets | |||
Total Gross Carrying Amount | $ 507,967 | $ 322,749 | |
Accumulated Amortization | 188,805 | 179,031 | |
Amortization expense related to intangible assets | 20,600 | 18,200 | $ 21,300 |
Contracts | |||
Gross carrying amount and accumulated amortization of intangible assets | |||
Gross Carrying Amount | 127,520 | 112,300 | |
Accumulated Amortization | $ 76,029 | 69,875 | |
Contracts | Minimum | |||
Gross carrying amount and accumulated amortization of intangible assets | |||
Estimated useful lives | 15 years | ||
Contracts | Maximum | |||
Gross carrying amount and accumulated amortization of intangible assets | |||
Estimated useful lives | 20 years | ||
Customer relationships | |||
Gross carrying amount and accumulated amortization of intangible assets | |||
Gross Carrying Amount | $ 227,909 | 109,078 | |
Accumulated Amortization | $ 67,493 | 57,844 | |
Customer relationships | Minimum | |||
Gross carrying amount and accumulated amortization of intangible assets | |||
Estimated useful lives | 5 years | ||
Customer relationships | Maximum | |||
Gross carrying amount and accumulated amortization of intangible assets | |||
Estimated useful lives | 20 years | ||
Trade names | |||
Gross carrying amount and accumulated amortization of intangible assets | |||
Estimated useful lives | 20 years | ||
Gross Carrying Amount | $ 66,755 | 66,960 | |
Accumulated Amortization | $ 39,744 | 36,554 | |
Intellectual property | |||
Gross carrying amount and accumulated amortization of intangible assets | |||
Estimated useful lives | 15 years | ||
Gross Carrying Amount | $ 10,102 | ||
Patents and Patented Technologies | |||
Gross carrying amount and accumulated amortization of intangible assets | |||
Gross Carrying Amount | 5,401 | 14,526 | |
Accumulated Amortization | $ 2,875 | 12,574 | |
Patents and Patented Technologies | Minimum | |||
Gross carrying amount and accumulated amortization of intangible assets | |||
Estimated useful lives | 6 years | ||
Patents and Patented Technologies | Maximum | |||
Gross carrying amount and accumulated amortization of intangible assets | |||
Estimated useful lives | 19 years | ||
Other | |||
Gross carrying amount and accumulated amortization of intangible assets | |||
Gross Carrying Amount | $ 7,035 | 4,585 | |
Accumulated Amortization | $ 2,664 | 2,184 | |
Other | Minimum | |||
Gross carrying amount and accumulated amortization of intangible assets | |||
Estimated useful lives | 5 years | ||
Other | Maximum | |||
Gross carrying amount and accumulated amortization of intangible assets | |||
Estimated useful lives | 17 years | ||
Trade names | |||
Gross carrying amount and accumulated amortization of intangible assets | |||
Gross Carrying Amount | $ 63,245 | $ 15,300 |
Long-Lived Assets - Future Annu
Long-Lived Assets - Future Annual Amortization (Details) $ in Thousands | Sep. 30, 2016USD ($) |
Total currently estimated annual amortization expense | |
2,017 | $ 25,047 |
2,018 | 25,002 |
2,019 | 23,980 |
2,020 | 19,898 |
2,021 | $ 19,868 |
Long-Lived Assets - Goodwill (D
Long-Lived Assets - Goodwill (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Schedule of changes in the carrying amount of goodwill | ||
Goodwill, Beginning Balance | $ 178,199 | $ 175,586 |
Goodwill related to acquisitions | 113,737 | 2,687 |
Adjustments to previous recorded amounts for prior year acquisitions | (1,433) | (74) |
Goodwill, Ending Balance | 290,503 | 178,199 |
Building products | ||
Schedule of changes in the carrying amount of goodwill | ||
Goodwill, Beginning Balance | 59,764 | 56,687 |
Goodwill related to acquisitions | 97,331 | 2,687 |
Adjustments to previous recorded amounts for prior year acquisitions | (1,433) | 390 |
Goodwill, Ending Balance | 155,662 | 59,764 |
Construction materials | ||
Schedule of changes in the carrying amount of goodwill | ||
Goodwill, Beginning Balance | 118,435 | 118,899 |
Goodwill related to acquisitions | 16,406 | |
Adjustments to previous recorded amounts for prior year acquisitions | (464) | |
Goodwill, Ending Balance | $ 134,841 | $ 118,435 |
Long-term Debt - Discounted Car
Long-term Debt - Discounted Carrying Values (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Aug. 31, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2013 |
Long-term debt | ||||||
Debt instrument, face amount | $ 768,800 | $ 573,900 | ||||
Carrying amount of long-term debt, net of discounts and debt issue costs | 754,501 | 562,330 | ||||
Less current portion | (7,785) | (4,250) | ||||
Long-term debt | 746,716 | 558,080 | ||||
Senior secured term loan, due March 2022 | ||||||
Long-term debt | ||||||
Debt instrument, face amount | 768,804 | 423,938 | $ 425,000 | |||
Carrying amount of long-term debt, net of discounts and debt issue costs | $ 754,501 | 414,490 | ||||
7.25% Senior notes, due January 2019 | ||||||
Long-term debt | ||||||
Debt instrument, face amount | 150,000 | $ 150,000 | ||||
Carrying amount of long-term debt, net of discounts and debt issue costs | $ 147,840 | |||||
Interest rate on long-term debt (as a percent) | 7.25% | 7.25% | 7.25% | 7.25% | 7.25% |
Long-term Debt - Senior Secured
Long-term Debt - Senior Secured Term Loan (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | ||||||||
Sep. 30, 2016 | Aug. 31, 2016 | Jul. 31, 2016 | Mar. 31, 2016 | Mar. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2011 | |
Long-term debt | ||||||||||
Debt instrument, face amount | $ 768,800 | $ 768,800 | $ 573,900 | |||||||
Net proceeds from issuance of long-term debt | 343,453 | 414,675 | $ 146,650 | |||||||
Interest expense associated with debt transactions | $ 3,100 | |||||||||
Term Loan Facility | ||||||||||
Long-term debt | ||||||||||
Percentage of original principal amount on which the aggregate amount of annual scheduled repayments is determined | 1.00% | |||||||||
Interest rate | 4.00% | 4.00% | ||||||||
Debt prepayment premium percentage | 1.00% | |||||||||
Maximum percentage of annual excess cash flow required to be used for prepayment | 50.00% | |||||||||
Annual excess cash flow threshold for required prepayment | $ 1,000 | |||||||||
Percentage of net cash proceeds of non-ordinary course asset sales required to be used for prepayment | 100.00% | |||||||||
Percentage of net cash proceeds of certain issuances of debt required to be used for prepayment | 100.00% | |||||||||
Term Loan Facility | Prime Rate | ||||||||||
Long-term debt | ||||||||||
Variable interest rate base | prime rate | |||||||||
Minimum floor variable percentage under terms of the debt agreement | 2.00% | |||||||||
Secondary variable rate margin (as a percent) | 2.00% | |||||||||
Term Loan Facility | Federal funds rate | ||||||||||
Long-term debt | ||||||||||
Variable interest rate base | federal funds rate | |||||||||
Interest rate margin (as a percent) | 0.50% | |||||||||
Minimum floor variable percentage under terms of the debt agreement | 2.00% | |||||||||
Secondary variable rate margin (as a percent) | 2.00% | |||||||||
Term Loan Facility | Eurocurrency rate (LIBO) | ||||||||||
Long-term debt | ||||||||||
Variable interest rate base | LIBO | |||||||||
Minimum floor variable percentage under terms of the debt agreement | 1.00% | |||||||||
Secondary variable rate margin (as a percent) | 3.00% | |||||||||
Term Loan Facility | Thirty Day LIBO | ||||||||||
Long-term debt | ||||||||||
Variable interest rate base | 30-day LIBO | |||||||||
Interest rate margin (as a percent) | 1.00% | |||||||||
Minimum floor variable percentage under terms of the debt agreement | 2.00% | |||||||||
Secondary variable rate margin (as a percent) | 3.00% | |||||||||
Senior secured term loan, due March 2022 | ||||||||||
Long-term debt | ||||||||||
Debt instrument, face amount | $ 768,804 | $ 425,000 | $ 768,804 | 423,938 | ||||||
Net proceeds from issuance of long-term debt | 414,700 | |||||||||
Original issue discount | 2,100 | |||||||||
Transaction costs | 8,200 | |||||||||
Incremental senior secured term loan, due March 2022 | ||||||||||
Long-term debt | ||||||||||
Debt instrument, face amount | $ 350,000 | |||||||||
Net proceeds from issuance of long-term debt | 341,600 | |||||||||
Original issue discount | 900 | |||||||||
Transaction costs | 7,500 | |||||||||
Interest expense associated with debt transactions | 1,800 | |||||||||
Debt issue costs | $ 5,700 | |||||||||
Incremental term loans | Maximum | ||||||||||
Long-term debt | ||||||||||
Maximum borrowing capacity | $ 150,000 | |||||||||
7.25% Senior notes, due January 2019 | ||||||||||
Long-term debt | ||||||||||
Debt instrument, face amount | $ 150,000 | $ 150,000 | ||||||||
Redemption of senior notes | $ 99,000 | $ 47,250 | $ 3,750 | |||||||
Interest rate on secured notes (as a percent) | 7.25% | 7.25% | 7.25% | 7.25% | 7.25% | 7.25% | ||||
Senior Secured Notes 7.625 Percent | ||||||||||
Long-term debt | ||||||||||
Debt instrument, face amount | $ 400,000 | |||||||||
Interest rate on secured notes (as a percent) | 7.625% | 7.625% | 7.625% | 7.625% |
Long-term Debt - ABL Revolver (
Long-term Debt - ABL Revolver (Details) $ in Millions | 12 Months Ended |
Sep. 30, 2016USD ($) | |
ABL Revolver | |
Long-term debt | |
Revolving credit arrangement amount outstanding | $ 0 |
Maximum borrowing capacity | 70 |
Current borrowing capacity | $ 59.4 |
Termination date based on the earliest maturity date of the specified long-term debt | 3 months |
Line of credit facility, interest rate at period end (as a percent) | 2.40% |
ABL Revolver | Minimum | |
Long-term debt | |
Line of credit facility unused capacity commitment fee percentage | 0.25% |
Specified percentage of availability below which a monthly fixed charge coverage ratio applies | 12.50% |
Coverage ratio | 1 |
ABL Revolver | Maximum | |
Long-term debt | |
Line of credit facility unused capacity commitment fee percentage | 0.375% |
ABL Revolver | London Interbank Offered Rate (LIBOR) | |
Long-term debt | |
Variable interest rate base | LIBOR |
Percentage points added to the reference rate, one | 1.50% |
Percentage points added to the reference rate, two | 1.75% |
Percentage points added to the reference rate, three | 2.00% |
ABL Revolver | Base Rate | |
Long-term debt | |
Variable interest rate base | Base Rate |
Percentage points added to the reference rate, one | 0.25% |
Percentage points added to the reference rate, two | 0.50% |
Percentage points added to the reference rate, three | 0.75% |
ABL Revolver | Prime Rate | |
Long-term debt | |
Variable interest rate base | prime rate |
ABL Revolver | Federal funds rate | |
Long-term debt | |
Variable interest rate base | federal funds rate |
Interest rate margin (as a percent) | 0.50% |
ABL Revolver | Thirty Day LIBO | |
Long-term debt | |
Variable interest rate base | 30-day LIBO |
Interest rate margin (as a percent) | 1.00% |
Letter of Credit | |
Long-term debt | |
Maximum borrowing capacity | $ 35 |
Outstanding standby letters of credit | 8.6 |
Swingline Facility | |
Long-term debt | |
Maximum borrowing capacity | $ 10.5 |
Long-term Debt - Senior Secur49
Long-term Debt - Senior Secured and Convertible Subordinated Notes (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||||||
Sep. 30, 2016 | Jul. 31, 2016 | Mar. 31, 2016 | Sep. 30, 2016 | Mar. 31, 2015 | Sep. 30, 2016 | Aug. 31, 2016 | Sep. 30, 2015 | Dec. 31, 2013 | Sep. 30, 2011 | |
Long-term debt | ||||||||||
Debt instrument, face amount | $ 768,800 | $ 768,800 | $ 768,800 | $ 573,900 | ||||||
Loss on extinguishment of debt | $ 8,700 | $ 24,800 | ||||||||
7.25% Senior notes, due January 2019 | ||||||||||
Long-term debt | ||||||||||
Interest rate on secured notes (as a percent) | 7.25% | 7.25% | 7.25% | 7.25% | 7.25% | 7.25% | 7.25% | |||
Debt instrument, face amount | $ 150,000 | $ 150,000 | ||||||||
Early repayment premium amount | $ 7,000 | |||||||||
Redemption of senior notes | $ 99,000 | $ 47,250 | $ 3,750 | |||||||
Redemption price as a percentage of principal amount redeemed | 103.625% | 103.625% | ||||||||
Senior Secured Notes 7.625 Percent | ||||||||||
Long-term debt | ||||||||||
Interest rate on secured notes (as a percent) | 7.625% | 7.625% | 7.625% | 7.625% | 7.625% | |||||
Debt instrument, face amount | $ 400,000 | |||||||||
Loss on extinguishment of debt | $ 21,300 | |||||||||
Early repayment premium amount | 15,300 | |||||||||
Early repayment of interest amount | 2,500 | |||||||||
Premiums and accelerated amortization of unamortized debt issue costs charged to interest expense | 3,500 | |||||||||
Convertible Senior Subordinated Notes 8.75 Percent Due 2016 | ||||||||||
Long-term debt | ||||||||||
Interest rate on secured notes (as a percent) | 8.75% | |||||||||
Redemption of senior notes | 49,000 | |||||||||
Premiums and accelerated amortization of unamortized debt issue costs charged to interest expense | $ 3,500 | |||||||||
Convertible Senior Subordinated Notes 8.75 Percent Due 2016 | Chairman and CEO | ||||||||||
Long-term debt | ||||||||||
Convertible senior subordinated notes | $ 1,160 |
Long-term Debt - Interest and D
Long-term Debt - Interest and Debt Maturities (Details) - USD ($) $ in Thousands | 12 Months Ended | ||||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | Aug. 31, 2016 | Mar. 31, 2016 | Dec. 31, 2013 | Sep. 30, 2011 | |
Long-term debt | |||||||
Interest expense | $ 43,300 | $ 64,900 | $ 46,900 | ||||
Non-cash interest expense | 3,973 | $ 6,180 | $ 2,175 | ||||
Interest expense associated with debt transactions | $ 3,100 | ||||||
Weighted average interest rate (as a percent) | 4.00% | 5.20% | |||||
Future maturities of long-term debt | |||||||
2,017 | $ 7,785 | ||||||
2,018 | 7,785 | ||||||
2,019 | 7,785 | ||||||
2,020 | 7,785 | ||||||
2,021 | 7,785 | ||||||
Thereafter | 729,879 | ||||||
Total long-term debt | 768,804 | ||||||
Term Loan Facility | |||||||
Long-term debt | |||||||
Required quarterly repayments due | 1,900 | ||||||
Senior Secured Notes, 7.625 Percent and 7.25 Percent | |||||||
Long-term debt | |||||||
Interest expense | $ 7,000 | $ 21,300 | |||||
Senior Secured Notes 7.625 Percent | |||||||
Long-term debt | |||||||
Interest rate on secured notes (as a percent) | 7.625% | 7.625% | 7.625% | ||||
7.25% Senior notes, due January 2019 | |||||||
Long-term debt | |||||||
Interest rate on secured notes (as a percent) | 7.25% | 7.25% | 7.25% | 7.25% | 7.25% |
Fair Value of Financial Instr51
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Aug. 31, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Dec. 31, 2013 |
Fair value of financial instruments | |||||
Carrying amount of long-term debt | $ 754,501 | $ 562,330 | |||
Outstanding long-term fixed rate debt | $ 0 | ||||
7.25% Senior notes, due January 2019 | |||||
Fair value of financial instruments | |||||
Debt Instrument, Interest Rate, Stated Percentage | 7.25% | 7.25% | 7.25% | 7.25% | 7.25% |
Carrying amount of long-term debt | $ 147,840 | ||||
7.25% Senior notes, due January 2019 | Level 2 | |||||
Fair value of financial instruments | |||||
Long-term debt, fair value | $ 156,400 |
Income Taxes - NOL and Capital
Income Taxes - NOL and Capital Loss Carryforwards (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Income tax | ||||
Income tax expense (benefit) | $ (96,800) | $ 22,756 | $ (94,458) | $ 3,574 |
Effective income tax rate (as a percent) | 31.00% | 18.00% | ||
Change in deferred tax valuation allowance | $ 208 | (109,277) | $ (7,994) | |
Cumulative period of income | 3 years | |||
Valuation allowance | 10,146 | $ 10,354 | 10,146 | |
Net operating and capital loss carryforwards | 67,505 | 43,038 | 67,505 | |
Tax credit carryforwards | $ 24,954 | $ 27,406 | $ 24,954 | |
Minimum | ||||
Income tax | ||||
Carryover period for deferred tax attributes | 20 years | |||
Operating loss carryforwards expiration date | Sep. 30, 2017 | |||
Tax credit carryforwards, expiration date | Sep. 30, 2025 | |||
Maximum | ||||
Income tax | ||||
Operating loss carryforwards expiration date | Sep. 30, 2036 | |||
Tax credit carryforwards, expiration date | Sep. 30, 2036 |
Income Taxes - Income Tax Provi
Income Taxes - Income Tax Provision (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Current tax benefit (provision): | ||||
Federal, Current | $ (272) | $ 8 | $ 65 | |
State, Current | 246 | (2,027) | (1,973) | |
Total current tax provision | (26) | (2,019) | (1,908) | |
Deferred tax benefit (provision): | ||||
Federal, Deferred | (23,332) | (14,100) | (10,956) | |
State, Deferred | 810 | 1,300 | 1,296 | |
Change in valuation allowance | (208) | 109,277 | 7,994 | |
Total deferred tax benefit (provision) | (22,730) | 96,477 | (1,666) | |
Income tax benefit (provision) | $ 96,800 | $ (22,756) | $ 94,458 | $ (3,574) |
Income Taxes - Reconciliation o
Income Taxes - Reconciliation of Provision to Federal Statutory Rate (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Tax provision at U.S. statutory rate | $ (25,352) | $ (13,185) | $ (7,016) | |
State income taxes, net of federal tax effect | (1,349) | (931) | (1,973) | |
Valuation allowance | (208) | 109,277 | 7,994 | |
Non-deductible executive compensation | (105) | (1,242) | ||
Tax credits | 1,741 | 186 | 305 | |
Unrealized gains | 1,558 | |||
Unrecognized tax benefits | 3,570 | 706 | 101 | |
Other | (2,716) | (1,490) | (1,743) | |
Income tax benefit (provision) | $ 96,800 | $ (22,756) | $ 94,458 | $ (3,574) |
Income Taxes - Deferred Income
Income Taxes - Deferred Income Tax Assets and Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Sep. 30, 2015 |
Income Taxes | ||
NOL and capital loss carryforwards | $ 43,038 | $ 67,505 |
Tax credit carryforwards | 27,406 | 24,954 |
Estimated liabilities | 23,439 | 19,240 |
Stock-based compensation | 5,480 | 5,903 |
Debt repurchase premium | 5,635 | 5,154 |
Reserves and allowances | 3,708 | 2,469 |
Other | 549 | 3,176 |
Valuation allowances | (10,354) | (10,146) |
Total deferred tax assets | 98,901 | 118,255 |
Property, plant and equipment basis differences | (18,630) | (15,797) |
Goodwill and intangible asset basis differences | (12,212) | (9,606) |
Total deferred tax liabilities | (30,842) | (25,403) |
Net deferred tax asset | $ 68,059 | $ 92,852 |
Income Taxes - Gross Unrecogniz
Income Taxes - Gross Unrecognized Income Tax Benefits (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Income Taxes | |||
Gross unrecognized income tax benefits at beginning of year | $ 5,002 | $ 4,497 | $ 4,552 |
Changes based on tax positions related to the current year | 122 | 25 | |
Increases for tax positions related to prior years | 1,437 | 1,055 | |
Settlements | (417) | ||
Lapse of statute of limitations | (3,082) | (575) | (55) |
Gross unrecognized income tax benefits at end of year | 3,062 | 5,002 | 4,497 |
Accrued liabilities for interest and penalties | (1,800) | $ (200) | $ 100 |
Interest and penalties accrued | 700 | ||
Unrecognized tax benefits that would impact effective tax rate | $ 2,800 |
Equity Securities and Stock-B57
Equity Securities and Stock-Based Compensation (Details) $ in Thousands | 12 Months Ended | ||
Sep. 30, 2016USD ($)shares | Sep. 30, 2015USD ($)shares | Sep. 30, 2014USD ($)shares | |
Equity Securities and Stock-based Compensation | |||
Common stock, authorized shares | 200,000,000 | 200,000,000 | |
Preferred stock, shares authorized | 10,000,000 | ||
Preferred stock, shares issued | 0 | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 | 0 |
Stock-based compensation | $ | $ 3,181 | $ 2,826 | $ 2,165 |
Total income tax benefit recognized for stock-based compensation | $ | $ 1,100 | $ 1,000 | $ 0 |
Awards granted vesting period | 3 years | ||
Contractual term | 10 years | ||
Stock Appreciation Rights (SARs) and Restricted Stock | |||
Equity Securities and Stock-based Compensation | |||
Board approved share-based award grants to officers, employees, and directors (in shares) | 300,000 | 300,000 | 500,000 |
Period of average stock price hurdles that precluded vesting | 60 days | ||
Multiple of cash interest expense used in calculating the thresholds for vesting | 1.5 | ||
Restricted stock | |||
Equity Securities and Stock-based Compensation | |||
Awards granted vesting period | 3 years | ||
2010 Incentive Compensation Plan | Stock Appreciation Rights (SARs) | |||
Equity Securities and Stock-based Compensation | |||
Awards granted vesting period | 3 years | ||
Contractual term | 10 years | ||
DDCP | |||
Equity Securities and Stock-based Compensation | |||
Treasury stock and related deferred compensation obligation at fair value | $ | $ 1,800 | ||
Amount that the fair values of treasury stock and related deferred compensation obligation exceed the carrying values at cost | $ | $ 400 |
Equity Securities and Stock-B58
Equity Securities and Stock-Based Compensation - Valuation Assumptions (Details) shares in Millions | 12 Months Ended | |||
Sep. 30, 2016item | Sep. 30, 2015 | Sep. 30, 2014 | Nov. 15, 2016shares | |
Equity Securities and Stock-based Compensation | ||||
Expected stock volatility | 55.00% | 60.00% | 60.00% | |
Risk-free interest rates, Minimum | 1.60% | 1.00% | 1.40% | |
Risk-free interest rates, Maximum | 2.00% | 1.70% | 2.00% | |
Expected lives (beyond vest dates) | 6 years | 4 years | 4 years | |
Dividend yield | 0.00% | 0.00% | 0.00% | |
Number of equity compensation plans | 5 | |||
Number of approved equity compensation plans | 4 | |||
Awards granted vesting period | 3 years | |||
Contractual term | 10 years | |||
2010 Incentive Compensation Plan | ||||
Equity Securities and Stock-based Compensation | ||||
Number of shares available for grant | shares | 3.5 |
Equity Securities and Stock-B59
Equity Securities and Stock-Based Compensation - Stockholder Approval Information (Details) shares in Thousands | 12 Months Ended |
Sep. 30, 2016$ / sharesshares | |
Equity Securities and Stock-based Compensation | |
Maximum shares to be issued upon exercise of options and other awards | 3,651 |
Weighted-average exercise price of outstanding options and other awards | $ / shares | $ 7.20 |
Shares remaining available for future issuance under existing equity compensation plans | 3,469 |
Plans Approved by Stockholders | |
Equity Securities and Stock-based Compensation | |
Maximum shares to be issued upon exercise of options and other awards | 3,448 |
Weighted-average exercise price of outstanding options and other awards | $ / shares | $ 6.73 |
Shares remaining available for future issuance under existing equity compensation plans | 3,469 |
Plans Not Approved by Stockholders | |
Equity Securities and Stock-based Compensation | |
Maximum shares to be issued upon exercise of options and other awards | 203 |
Weighted-average exercise price of outstanding options and other awards | $ / shares | $ 15.22 |
Equity Securities and Stock-B60
Equity Securities and Stock-Based Compensation - Stock Options (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Stock options | |||
Shares | |||
Outstanding, Beginning Balance | 96 | 181 | 618 |
Forfeited or expired | (72) | (85) | (437) |
Outstanding, Ending Balance | 24 | 96 | 181 |
Exercisable | 24 | 96 | 181 |
Weighted-average exercise price | |||
Beginning Balance | $ 27.99 | $ 30.17 | $ 27.42 |
Forfeited or expired | 32.80 | 32.62 | 26.28 |
Ending Balance | 13.57 | 27.99 | 30.17 |
Exercisable | $ 13.57 | $ 27.99 | $ 30.17 |
Additional Disclosures | |||
Weighted-average remaining contractual term, Outstanding | 1 year 1 month 6 days | 9 months 18 days | 1 year |
Weighted-average remaining contractual term, Exercisable | 1 year 1 month 6 days | 9 months 18 days | 1 year |
Aggregate intrinsic value, Outstanding | $ 80 | $ 126 | $ 0 |
Aggregate intrinsic value, Exercisable | $ 80 | $ 126 | $ 0 |
Stock Appreciation Rights (SARs) | |||
Shares | |||
Outstanding, Beginning Balance | 3,578 | 3,730 | 3,639 |
Granted | 173 | 234 | 314 |
Exercised | (195) | (344) | (146) |
Forfeited or expired | (81) | (42) | (77) |
Outstanding, Ending Balance | 3,475 | 3,578 | 3,730 |
Exercisable | 3,283 | 3,320 | 3,418 |
Weighted-average exercise price | |||
Beginning Balance | $ 7.52 | $ 7.31 | $ 7.25 |
Granted | 17.83 | 13.03 | 9.19 |
Exercised | 7.85 | 6.92 | 5.18 |
Forfeited or expired | 30.73 | 24.83 | 16.15 |
Ending Balance | 7.47 | 7.52 | 7.31 |
Exercisable | $ 6.98 | $ 7.21 | $ 7.21 |
Additional Disclosures | |||
Weighted-average remaining contractual term, Outstanding | 4 years 6 months | 5 years 1 month 6 days | 5 years 8 months 12 days |
Weighted-average remaining contractual term, Exercisable | 4 years 2 months 12 days | 4 years 9 months 18 days | 5 years 6 months |
Aggregate intrinsic value, Outstanding | $ 33,461 | $ 41,685 | $ 22,893 |
Aggregate intrinsic value, Exercisable | $ 33,161 | $ 39,793 | $ 21,604 |
Weighted-average grant-date fair value of SARs granted | $ 9.37 | $ 6.41 | $ 4.40 |
Total intrinsic value | $ 2,100 | $ 3,900 | $ 1,100 |
Equity Securities and Stock-B61
Equity Securities and Stock-Based Compensation - SARS and Restricted Stock (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions | 12 Months Ended | 36 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2016 | |
Equity Securities and Stock-based Compensation | ||||
Awards granted vesting period | 3 years | |||
Share-based compensation | ||||
Compensation expense related to restricted stock, restricted stock units and the ESPP | $ 1.6 | $ 1.4 | $ 0.9 | |
Total compensation cost related to unvested awards not yet recognized | $ 2.5 | $ 2.5 | ||
Weighted-average period for recognition of compensation cost | 1 year 8 months 12 days | |||
Restricted stock | ||||
Equity Securities and Stock-based Compensation | ||||
Awards granted vesting period | 3 years | |||
Nonvested shares | ||||
Shares Outstanding, Beginning Balance | 126 | |||
Shares, Granted | 90 | |||
Shares, Vested | (117) | |||
Shares, Forfeited | (1) | |||
Shares Outstanding, Ending Balance | 98 | 126 | 98 | |
Nonvested weighted-average grant date fair value | ||||
Beginning Balance | $ 11.51 | |||
Granted | 17.83 | |||
Vested | 12.66 | |||
Forfeited | 11.46 | |||
Ending Balance | $ 15.98 | $ 11.51 | $ 15.98 | |
Officers and Employees | Restricted stock | ||||
Nonvested shares | ||||
Shares, Granted | 200 |
Earnings Per Share - Basic and
Earnings Per Share - Basic and Diluted EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Numerator: | |||||||||||
Income from continuing operations | $ 49,679 | $ 132,128 | $ 16,473 | ||||||||
Income from continuing operations attributable to non-controlling interest | (1,667) | (869) | (774) | ||||||||
Adjustment of estimated redemption value of non-controlling interest in consolidated subsidiary | (176) | ||||||||||
Numerator for basic and diluted earnings per share from continuing operations — income from continuing operations attributable to Headwaters Incorporated | 48,012 | 131,259 | 15,523 | ||||||||
Numerator for basic and diluted earnings per share from discontinued operations - income (loss) from discontinued operations, net of income taxes | 84 | (460) | (415) | ||||||||
Numerator for basic and diluted earnings per share — net income attributable to Headwaters Incorporated | $ 48,096 | $ 130,799 | $ 15,108 | ||||||||
Denominator: | |||||||||||
Denominator for basic earnings per share - weighted-average shares outstanding | 73,842 | 73,570 | 73,160 | ||||||||
Effect of dilutive securities - shares issuable upon exercise of options and SARs and vesting of restricted stock | 1,573 | 2,032 | 1,291 | ||||||||
Denominator for diluted earnings per share - weighted-average shares outstanding after assumed exercises and vesting | 75,415 | 75,602 | 74,451 | ||||||||
Basic income per share attributable to Headwaters Incorporated: | |||||||||||
From continuing operations (in dollars per share) | $ 0.65 | $ 1.79 | $ 0.21 | ||||||||
From discontinued operations (in dollars per share) | 0 | (0.01) | (0.01) | ||||||||
Basic income per share (in dollars per share) | $ 0.21 | $ 0.23 | $ 0.03 | $ 0.17 | $ 1.72 | $ 0.30 | $ (0.34) | $ 0.09 | 0.65 | 1.78 | 0.20 |
Diluted income per share attributable to Headwaters Incorporated: | |||||||||||
From continuing operations (in dollars per share) | 0.64 | 1.74 | 0.21 | ||||||||
From discontinued operations (in dollars per share) | 0 | (0.01) | (0.01) | ||||||||
Diluted income per share (in dollars per share) | $ 0.21 | $ 0.23 | $ 0.03 | $ 0.17 | $ 1.68 | $ 0.30 | $ (0.34) | $ 0.09 | $ 0.64 | $ 1.73 | $ 0.20 |
Earnings Per Share - Anti-dilut
Earnings Per Share - Anti-dilutive Securities (Details) - shares shares in Thousands | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Stock Appreciation Rights (SARs) | |||
Earnings per Share | |||
Anti-dilutive securities not considered in diluted EPS calculation (in shares) | 273 | 1,258 | 2,279 |
Stock options | |||
Earnings per Share | |||
Anti-dilutive securities not considered in diluted EPS calculation (in shares) | 18 | 89 | 446 |
Restricted stock | |||
Earnings per Share | |||
Anti-dilutive securities not considered in diluted EPS calculation (in shares) | 66 | 126 |
Commitments and Contingencies -
Commitments and Contingencies - Leases (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Commitments and Contingencies | |||
Rental expense | $ 36,200 | $ 34,400 | $ 33,400 |
2,017 | 34,096 | ||
2,018 | 28,053 | ||
2,019 | 21,936 | ||
2,020 | 16,448 | ||
2,021 | 21,751 | ||
Thereafter | 54,898 | ||
Minimum rental payments, total | $ 177,182 | ||
Maximum | |||
Commitments and Contingencies | |||
Year in which lease with latest expiration is set to expire | 2,033 |
Commitments and Contingencies65
Commitments and Contingencies - Purchase Commitments (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Commitments and Contingencies | |||
Actual purchases made under contracts with minimum requirements | $ 44,800 | $ 32,700 | $ 20,300 |
2,017 | 25,845 | ||
2,018 | 24,670 | ||
2,019 | 25,218 | ||
2,020 | 25,784 | ||
2,021 | 25,961 | ||
Thereafter | 92,896 | ||
Future purchase requirements, total | $ 220,374 |
Commitments and Contingencies66
Commitments and Contingencies - Compensation Arrangements (Details) shares in Millions, $ in Millions | 12 Months Ended | |||||
Sep. 30, 2016USD ($)employeeshares | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Sep. 30, 2013 | Sep. 30, 2012shares | Sep. 30, 2011shares | |
Commitments and Contingencies | ||||||
Compensation benefit | $ (1.1) | $ (1) | $ 0 | |||
Employment Agreements | ||||||
Commitments and Contingencies | ||||||
Number of employees, excluding the CEO and CFO, with employment agreements | employee | 5 | |||||
Aggregate salary commitment for salaries and other obligations under all employment agreements assuming no agreements are renewed | $ 5.4 | |||||
Aggregate termination benefits | 12 | |||||
Termination benefits expensed and accrued | 4.1 | |||||
Executive Change in Control Agreements | ||||||
Commitments and Contingencies | ||||||
Aggregate value of severance payments and excess of market value of stock-based awards | 24.5 | |||||
Aggregate value of severance payments and excess of market value of stock-based awards expensed and accrued | $ 9.9 | |||||
Cash Performance Unit Awards, 2014 Grants | ||||||
Commitments and Contingencies | ||||||
Average stock price period | 60 days | 60 days | ||||
Number of years after date of grant for which terms may be adjusted based on cash flows generated during that period | 2 years | |||||
Amount recorded for performance unit award grants | $ 5.1 | |||||
Cash Performance Unit Awards 2013 Grants | ||||||
Commitments and Contingencies | ||||||
Percentage of performance units vested | 50.00% | 50.00% | ||||
Cash Performance Unit Awards, 2015 and 2016 Grants | ||||||
Commitments and Contingencies | ||||||
Amount recorded for performance unit award grants | $ 3.5 | $ 8.6 | ||||
Performance awards which remain accrued and unpaid | 13.7 | |||||
Stock Appreciation Rights (SARs) | ||||||
Commitments and Contingencies | ||||||
Compensation expense | $ 3.1 | $ 4.6 | ||||
Compensation benefit | $ (0.1) | |||||
Stock Appreciation Rights (SARs), 2011 Awards | ||||||
Commitments and Contingencies | ||||||
Grants approved by committee to employees for cash settled stock appreciation rights (in shares) | shares | 0.4 | |||||
Grants approved by committee to employees for cash settled stock appreciation rights that remain outstanding (in shares) | shares | 0 | |||||
Stock Appreciation Rights (SARS), 2012 Awards | ||||||
Commitments and Contingencies | ||||||
Grants approved by committee to employees for cash settled stock appreciation rights (in shares) | shares | 1 | |||||
Grants approved by committee to employees for cash settled stock appreciation rights that remain outstanding (in shares) | shares | 0 | |||||
Chief Executive Officer | Employment Agreements | ||||||
Commitments and Contingencies | ||||||
Term of renewal | 1 year | |||||
Percentage of salary on which supplemental retirement contributions are determined, first term | 72.50% | |||||
Percentage of salary on which supplemental retirement contributions are determined, remaining term | 42.50% | |||||
Chief Financial Officer | Employment Agreements | ||||||
Commitments and Contingencies | ||||||
Term of renewal | 1 year | |||||
Minimum | Employment Agreements | ||||||
Commitments and Contingencies | ||||||
Original term of employment agreements | 3 years | |||||
Maximum | Employment Agreements | ||||||
Commitments and Contingencies | ||||||
Original term of employment agreements | 5 years |
Commitments and Contingencies67
Commitments and Contingencies - Benefit Plans (Details) $ in Thousands, shares in Millions | 12 Months Ended | ||
Sep. 30, 2016USD ($)itemshares | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | |
Commitments and Contingencies | |||
Number of employee benefit plans | item | 6 | ||
Benefit plan expenses, net | $ 23,800 | $ 34,800 | $ 26,700 |
Percentage of compensation as tax-deferred contributions | 50.00% | ||
Vesting period for matching contributions | 3 years | ||
Percentage of tax-deferred contributions of base compensation | 50.00% | ||
Percentage of tax deferred contributions of incentive compensation | 100.00% | ||
Annual vesting percentage under profit sharing program | 20.00% | ||
Participant age at which vesting of employer contribution begins | item | 61 | ||
Participant age at which full vesting of employer contribution is complete | item | 65 | ||
Employee Share Purchase Plan | |||
Commitments and Contingencies | |||
Shares held in reserve for issuance | shares | 4.3 | ||
ESPP shares available for future issuance | shares | 2.3 | ||
Percentage of cost per share of the fair market value at the end of each quarterly offering period | 85.00% | ||
Minimum | Employee Share Purchase Plan | |||
Commitments and Contingencies | |||
Percentage of cash compensation | 1.00% | ||
Maximum | Employee Share Purchase Plan | |||
Commitments and Contingencies | |||
Percentage of cash compensation | 10.00% | ||
Self Insurance | |||
Commitments and Contingencies | |||
Stop-loss coverage per individual per year | $ 200 | ||
Stop-loss coverage per occurrence | 350 | ||
Annual aggregate stop-loss coverage | 5,000 | ||
Accrued medical and workers compensation claims | $ 5,900 |
Commitments and Contingencies68
Commitments and Contingencies - Legal Matters (Details) $ in Millions | 1 Months Ended | 12 Months Ended | ||||||
Sep. 30, 2015USD ($)defendant | Aug. 31, 2015USD ($) | Aug. 31, 2014plaintiffdefendant | Feb. 29, 2012USD ($)plaintiffdefendant | Sep. 30, 2016USD ($)plaintiff | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Sep. 30, 2010item | |
Commitments and Contingencies | ||||||||
Long term capital commitments on property, plant and equipment | $ 3.6 | |||||||
Amount accrued for potential losses | $ 2.8 | |||||||
Legal Matters | ||||||||
Commitments and Contingencies | ||||||||
Legal fees | $ 2.2 | $ 5.1 | ||||||
Legal fees net of settlement of certain litigation | (1.4) | |||||||
Total liability accrued | 0 | |||||||
Legal Matters | Minimum | ||||||||
Commitments and Contingencies | ||||||||
Potential loss for unresolved matters | $ 0 | |||||||
Fentress Families Trust | ||||||||
Commitments and Contingencies | ||||||||
Number of plaintiffs | plaintiff | 383 | 7 | ||||||
Number of defendants | defendant | 15 | |||||||
Damages for removal and remediation of fly ash and water supply | $ 850 | |||||||
Damages for vexation | 1.9 | |||||||
Damages for others | 8 | |||||||
Damages for properties plus prejudgment interest, attorney fees and costs | 55 | |||||||
Additional damages sought by other plaintiffs | $ 307.2 | |||||||
CPM Virginia LLC | ||||||||
Commitments and Contingencies | ||||||||
Loss contingency damages sought value | $ 0.5 | $ 840 | ||||||
Clary | ||||||||
Commitments and Contingencies | ||||||||
Number of plaintiffs | plaintiff | 77 | |||||||
Number of defendants | defendant | 4 | |||||||
Ohio Power Company | ||||||||
Commitments and Contingencies | ||||||||
Number of defendants | defendant | 2 | |||||||
Personal Injury Claims | Fentress Families Trust | ||||||||
Commitments and Contingencies | ||||||||
Number of insurers who have denied coverage | item | 2 |
Discontinued Operations (Detail
Discontinued Operations (Details) $ in Thousands | 12 Months Ended | |||
Sep. 30, 2016USD ($)item | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Jan. 31, 2013USD ($) | |
Discontinued operations | ||||
Gain (loss) from operations of discontinued operations before income taxes | $ 133 | $ (725) | $ (448) | |
Income tax benefit (provision) | (49) | 265 | 33 | |
Income (loss) from discontinued operations, net of income taxes | $ 84 | (460) | (415) | |
Number of reclamation obligations | item | 1 | |||
Coal Cleaning Business | ||||
Discontinued operations | ||||
Remaining assets held for sale | $ 0 | |||
Deferred purchase price and royalty payments received | $ 4,700 | |||
Number of sales transactions in which the buyer agreed to assume the lease and certain reclamation obligations | item | 1 | |||
Number of reclamation obligations | item | 1 | |||
Accrued liability for reclamation obligations | $ 9,300 | $ 7,400 | ||
Coal Cleaning Business | Discontinued Operations, Disposed of by Sale | ||||
Discontinued operations | ||||
Gain from settlement of litigation | $ 3,600 |
Related Party Transaction (Deta
Related Party Transaction (Details) - USD ($) | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2014 | |
Director | ||
Transaction with related parties | ||
Commissions paid related party by providers of insurance services | $ 100,000 | |
Immediate Family Member of Management or Principal Owner | ||
Transaction with related parties | ||
Cost incurred for transportation facility provided by related party | $ 1,400,000 | |
Operating subsidiary | Customer of operating subsidiary | ||
Transaction with related parties | ||
Sales | $ 100,000 | |
Operating subsidiary | Officer of operating subsidiary | Customer of operating subsidiary | ||
Transaction with related parties | ||
Direct investment in a customer | 500,000 | |
Funds deposited in bank account to collateralize a line of credit used by a customer | $ 1,000,000 |
Condensed Consolidating Finan71
Condensed Consolidating Financial Information (Details) | 12 Months Ended | ||||
Sep. 30, 2016 | Aug. 31, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Dec. 31, 2013 | |
Long-term debt | |||||
Ownership percentage in guarantor subsidiaries | 100.00% | ||||
7.25% Senior notes, due January 2019 | |||||
Long-term debt | |||||
Interest rate on long-term debt (as a percent) | 7.25% | 7.25% | 7.25% | 7.25% | 7.25% |
Condensed Consolidating Finan72
Condensed Consolidating Financial Information - Balance Sheets (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2013 |
Current assets: | ||||
Cash and cash equivalents | $ 65,298 | $ 142,597 | $ 152,542 | $ 75,316 |
Trade receivables, net | 152,084 | 134,384 | ||
Inventories | 72,668 | 55,074 | ||
Current income taxes | 1,187 | 329 | ||
Other | 13,517 | 11,827 | ||
Total current assets | 304,754 | 344,211 | ||
Property, plant and equipment, net | 206,792 | 185,718 | ||
Other assets: | ||||
Goodwill | 290,503 | 178,199 | 175,586 | |
Intangible assets, net | 319,162 | 143,718 | ||
Deferred income taxes | 68,059 | 92,852 | ||
Other | 49,173 | 34,321 | ||
Total other assets | 726,897 | 449,090 | ||
Total assets | 1,238,443 | 979,019 | 896,306 | |
Current liabilities: | ||||
Accounts payable | 30,211 | 25,306 | ||
Accrued personnel costs | 45,366 | 52,544 | ||
Other accrued liabilities | 63,785 | 51,781 | ||
Current portion of long-term debt | 7,785 | 4,250 | ||
Total current liabilities | 147,147 | 133,881 | ||
Long-term liabilities: | ||||
Long-term debt, net | 746,716 | 558,080 | ||
Other | 41,230 | 36,776 | ||
Total long-term liabilities | 787,946 | 594,856 | ||
Total liabilities | 935,093 | 728,737 | ||
Redeemable non-controlling interest in consolidated subsidiary | 13,363 | 12,431 | ||
Stockholders' equity: | ||||
Common stock | 74 | 74 | ||
Capital in excess of par value | 733,117 | 728,667 | ||
Retained earnings (accumulated deficit) | (441,793) | (489,889) | ||
Treasury stock | (1,411) | (1,001) | ||
Total stockholders' equity | 289,987 | 237,851 | 102,442 | 84,410 |
Total liabilities and stockholders' equity | 1,238,443 | 979,019 | ||
Consolidation, Eliminations | ||||
Current assets: | ||||
Current income taxes | (58,802) | (142,976) | ||
Total current assets | (58,802) | (142,976) | ||
Other assets: | ||||
Investments in subsidiaries | (721,760) | (428,708) | ||
Intercompany accounts and notes | (727,747) | (694,839) | ||
Deferred income taxes | (12,077) | (12,115) | ||
Total other assets | (1,461,584) | (1,135,662) | ||
Total assets | (1,520,386) | (1,278,638) | ||
Current liabilities: | ||||
Current income taxes | (58,802) | (142,976) | ||
Total current liabilities | (58,802) | (142,976) | ||
Long-term liabilities: | ||||
Income taxes | (12,077) | |||
Intercompany accounts and notes | (727,747) | (694,839) | ||
Other | (12,115) | |||
Total long-term liabilities | (739,824) | (706,954) | ||
Total liabilities | (798,626) | (849,930) | ||
Stockholders' equity: | ||||
Capital in excess of par value | (764,359) | (540,715) | ||
Retained earnings (accumulated deficit) | 42,599 | 112,007 | ||
Total stockholders' equity | (721,760) | (428,708) | ||
Total liabilities and stockholders' equity | (1,520,386) | (1,278,638) | ||
Guarantor Subsidiaries | Reportable Legal Entities | ||||
Current assets: | ||||
Cash and cash equivalents | 27,012 | 25,819 | 33,552 | 70,713 |
Trade receivables, net | 145,443 | 129,095 | ||
Inventories | 67,549 | 52,699 | ||
Other | 11,975 | 10,666 | ||
Total current assets | 251,979 | 218,279 | ||
Property, plant and equipment, net | 179,758 | 164,413 | ||
Other assets: | ||||
Goodwill | 248,016 | 147,330 | ||
Intangible assets, net | 282,239 | 116,479 | ||
Investments in subsidiaries | 55,844 | |||
Intercompany accounts and notes | 26,707 | 57,793 | ||
Other | 13,293 | 11,243 | ||
Total other assets | 570,255 | 388,689 | ||
Total assets | 1,001,992 | 771,381 | ||
Current liabilities: | ||||
Accounts payable | 27,659 | 23,619 | ||
Accrued personnel costs | 14,945 | 14,542 | ||
Current income taxes | 56,553 | 137,502 | ||
Other accrued liabilities | 55,942 | 39,604 | ||
Total current liabilities | 155,099 | 215,267 | ||
Long-term liabilities: | ||||
Income taxes | 12,077 | |||
Other | 4,581 | 16,572 | ||
Total long-term liabilities | 16,658 | 16,572 | ||
Total liabilities | 171,757 | 231,839 | ||
Stockholders' equity: | ||||
Capital in excess of par value | 711,755 | 486,069 | ||
Retained earnings (accumulated deficit) | 118,480 | 53,473 | ||
Total stockholders' equity | 830,235 | 539,542 | ||
Total liabilities and stockholders' equity | 1,001,992 | 771,381 | ||
Non-Guarantor Subsidiaries | Reportable Legal Entities | ||||
Current assets: | ||||
Cash and cash equivalents | 5,304 | 3,577 | 5,764 | 34 |
Trade receivables, net | 6,641 | 5,289 | ||
Inventories | 5,119 | 2,375 | ||
Other | 1,481 | 144 | ||
Total current assets | 18,545 | 11,385 | ||
Property, plant and equipment, net | 9,852 | 9,978 | ||
Other assets: | ||||
Goodwill | 42,487 | 30,869 | ||
Intangible assets, net | 36,923 | 27,239 | ||
Deferred income taxes | 23,083 | 25,204 | ||
Other | 10,922 | 2,291 | ||
Total other assets | 113,415 | 85,603 | ||
Total assets | 141,812 | 106,966 | ||
Current liabilities: | ||||
Accounts payable | 1,301 | 1,114 | ||
Accrued personnel costs | 519 | 501 | ||
Current income taxes | 2,249 | 5,474 | ||
Other accrued liabilities | 5,002 | 6,380 | ||
Total current liabilities | 9,071 | 13,469 | ||
Long-term liabilities: | ||||
Intercompany accounts and notes | 211,087 | 178,179 | ||
Other | 16,941 | 13,897 | ||
Total long-term liabilities | 228,028 | 192,076 | ||
Total liabilities | 237,099 | 205,545 | ||
Redeemable non-controlling interest in consolidated subsidiary | 13,363 | 12,431 | ||
Stockholders' equity: | ||||
Capital in excess of par value | 52,429 | 54,470 | ||
Retained earnings (accumulated deficit) | (161,079) | (165,480) | ||
Total stockholders' equity | (108,650) | (111,010) | ||
Total liabilities and stockholders' equity | 141,812 | 106,966 | ||
Parent Company | Reportable Legal Entities | ||||
Current assets: | ||||
Cash and cash equivalents | 32,982 | 113,201 | $ 113,226 | $ 4,569 |
Current income taxes | 59,989 | 143,305 | ||
Other | 61 | 1,017 | ||
Total current assets | 93,032 | 257,523 | ||
Property, plant and equipment, net | 17,182 | 11,327 | ||
Other assets: | ||||
Investments in subsidiaries | 721,760 | 372,864 | ||
Intercompany accounts and notes | 701,040 | 637,046 | ||
Deferred income taxes | 57,053 | 79,763 | ||
Other | 24,958 | 20,787 | ||
Total other assets | 1,504,811 | 1,110,460 | ||
Total assets | 1,615,025 | 1,379,310 | ||
Current liabilities: | ||||
Accounts payable | 1,251 | 573 | ||
Accrued personnel costs | 29,902 | 37,501 | ||
Other accrued liabilities | 2,841 | 5,797 | ||
Current portion of long-term debt | 7,785 | 4,250 | ||
Total current liabilities | 41,779 | 48,121 | ||
Long-term liabilities: | ||||
Long-term debt, net | 746,716 | 558,080 | ||
Intercompany accounts and notes | 516,660 | 516,660 | ||
Other | 19,708 | 18,422 | ||
Total long-term liabilities | 1,283,084 | 1,093,162 | ||
Total liabilities | 1,324,863 | 1,141,283 | ||
Stockholders' equity: | ||||
Common stock | 74 | 74 | ||
Capital in excess of par value | 733,292 | 728,843 | ||
Retained earnings (accumulated deficit) | (441,793) | (489,889) | ||
Treasury stock | (1,411) | (1,001) | ||
Total stockholders' equity | 290,162 | 238,027 | ||
Total liabilities and stockholders' equity | $ 1,615,025 | $ 1,379,310 |
Condensed Consolidating Finan73
Condensed Consolidating Financial Information - Statements of Income (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Revenue: | |||||||||||
Revenue | $ 291,591 | $ 262,466 | $ 202,332 | $ 218,418 | $ 272,717 | $ 243,294 | $ 179,725 | $ 199,597 | $ 974,807 | $ 895,333 | $ 791,447 |
Cost of revenue: | |||||||||||
Total cost of revenue | 686,606 | 625,442 | 565,754 | ||||||||
Gross profit | 85,522 | 83,531 | 54,877 | 64,271 | 90,301 | 76,762 | 47,141 | 55,687 | 288,201 | 269,891 | 225,693 |
Operating expenses: | |||||||||||
Selling, general and administrative | 156,898 | 149,623 | 137,650 | ||||||||
Amortization | 20,593 | 18,161 | 21,319 | ||||||||
Total operating expenses | 177,491 | 167,784 | 158,969 | ||||||||
Operating income | 110,710 | 102,107 | 66,724 | ||||||||
Other income (expense): | |||||||||||
Net interest expense | (42,424) | (64,219) | (46,329) | ||||||||
Equity in earnings of subsidiaries | 0 | 0 | 0 | ||||||||
Other, net | 4,149 | (218) | (348) | ||||||||
Total other income (expense), net | (38,275) | (64,437) | (46,677) | ||||||||
Income from continuing operations before income taxes | 72,435 | 37,670 | 20,047 | ||||||||
Income tax benefit (provision) | 96,800 | (22,756) | 94,458 | (3,574) | |||||||
Income from continuing operations | 49,679 | 132,128 | 16,473 | ||||||||
Income (loss) from discontinued operations, net of income taxes | 84 | (460) | (415) | ||||||||
Net income | $ 16,873 | $ 17,785 | $ 2,384 | $ 12,721 | $ 126,774 | $ 23,008 | $ (25,198) | $ 7,084 | 49,763 | 131,668 | 16,058 |
Net income attributable to non-controlling interest | (1,667) | (869) | (774) | ||||||||
Net income attributable to Headwaters Incorporated | 48,096 | 130,799 | 15,284 | ||||||||
Building products | |||||||||||
Revenue: | |||||||||||
Revenue | 594,281 | 523,643 | 472,434 | ||||||||
Cost of revenue: | |||||||||||
Total cost of revenue | 423,910 | 367,163 | 336,283 | ||||||||
Construction materials | |||||||||||
Revenue: | |||||||||||
Revenue | 370,439 | 352,263 | 309,337 | ||||||||
Cost of revenue: | |||||||||||
Total cost of revenue | 258,478 | 249,077 | 224,888 | ||||||||
Energy technology | |||||||||||
Revenue: | |||||||||||
Revenue | 10,087 | 19,427 | 9,676 | ||||||||
Cost of revenue: | |||||||||||
Total cost of revenue | 4,218 | 9,202 | 4,583 | ||||||||
Consolidation, Eliminations | |||||||||||
Other income (expense): | |||||||||||
Equity in earnings of subsidiaries | (69,408) | (54,350) | (62,719) | ||||||||
Total other income (expense), net | (69,408) | (54,350) | (62,719) | ||||||||
Income from continuing operations before income taxes | (69,408) | (54,350) | (62,719) | ||||||||
Income from continuing operations | (69,408) | (54,350) | (62,719) | ||||||||
Net income | (69,408) | (54,350) | (62,719) | ||||||||
Net income attributable to Headwaters Incorporated | (69,408) | (54,350) | (62,719) | ||||||||
Guarantor Subsidiaries | Reportable Legal Entities | |||||||||||
Revenue: | |||||||||||
Revenue | 918,736 | 851,028 | 757,486 | ||||||||
Cost of revenue: | |||||||||||
Total cost of revenue | 644,694 | 593,795 | 541,691 | ||||||||
Gross profit | 274,042 | 257,233 | 215,795 | ||||||||
Operating expenses: | |||||||||||
Selling, general and administrative | 119,702 | 115,423 | 108,602 | ||||||||
Amortization | 19,120 | 16,688 | 20,231 | ||||||||
Total operating expenses | 138,822 | 132,111 | 128,833 | ||||||||
Operating income | 135,220 | 125,122 | 86,962 | ||||||||
Other income (expense): | |||||||||||
Net interest expense | (306) | (205) | (349) | ||||||||
Intercompany interest income (expense) | (27,998) | (23,782) | (22,737) | ||||||||
Other, net | (434) | (56) | (24) | ||||||||
Total other income (expense), net | (28,738) | (24,043) | (23,110) | ||||||||
Income from continuing operations before income taxes | 106,482 | 101,079 | 63,852 | ||||||||
Income tax benefit (provision) | (41,371) | (48,213) | (3,296) | ||||||||
Income from continuing operations | 65,111 | 52,866 | 60,556 | ||||||||
Income (loss) from discontinued operations, net of income taxes | (67) | (415) | |||||||||
Net income | 65,111 | 52,799 | 60,141 | ||||||||
Net income attributable to Headwaters Incorporated | 65,111 | 52,799 | 60,141 | ||||||||
Guarantor Subsidiaries | Reportable Legal Entities | Building products | |||||||||||
Revenue: | |||||||||||
Revenue | 538,210 | 479,338 | 438,473 | ||||||||
Cost of revenue: | |||||||||||
Total cost of revenue | 381,998 | 335,516 | 312,220 | ||||||||
Guarantor Subsidiaries | Reportable Legal Entities | Construction materials | |||||||||||
Revenue: | |||||||||||
Revenue | 370,439 | 352,263 | 309,337 | ||||||||
Cost of revenue: | |||||||||||
Total cost of revenue | 258,478 | 249,077 | 224,888 | ||||||||
Guarantor Subsidiaries | Reportable Legal Entities | Energy technology | |||||||||||
Revenue: | |||||||||||
Revenue | 10,087 | 19,427 | 9,676 | ||||||||
Cost of revenue: | |||||||||||
Total cost of revenue | 4,218 | 9,202 | 4,583 | ||||||||
Non-Guarantor Subsidiaries | Reportable Legal Entities | |||||||||||
Revenue: | |||||||||||
Revenue | 56,071 | 44,305 | 33,961 | ||||||||
Cost of revenue: | |||||||||||
Total cost of revenue | 41,912 | 31,647 | 24,063 | ||||||||
Gross profit | 14,159 | 12,658 | 9,898 | ||||||||
Operating expenses: | |||||||||||
Selling, general and administrative | 8,956 | 6,174 | 4,209 | ||||||||
Amortization | 1,473 | 1,473 | 1,088 | ||||||||
Total operating expenses | 10,429 | 7,647 | 5,297 | ||||||||
Operating income | 3,730 | 5,011 | 4,601 | ||||||||
Other income (expense): | |||||||||||
Net interest expense | (35) | (2) | |||||||||
Intercompany interest income (expense) | (280) | ||||||||||
Other, net | 4,583 | (162) | (324) | ||||||||
Total other income (expense), net | 4,548 | (442) | (326) | ||||||||
Income from continuing operations before income taxes | 8,278 | 4,569 | 4,275 | ||||||||
Income tax benefit (provision) | (2,398) | (1,756) | (923) | ||||||||
Income from continuing operations | 5,880 | 2,813 | 3,352 | ||||||||
Income (loss) from discontinued operations, net of income taxes | 84 | (393) | |||||||||
Net income | 5,964 | 2,420 | 3,352 | ||||||||
Net income attributable to non-controlling interest | (1,667) | (869) | (774) | ||||||||
Net income attributable to Headwaters Incorporated | 4,297 | 1,551 | 2,578 | ||||||||
Non-Guarantor Subsidiaries | Reportable Legal Entities | Building products | |||||||||||
Revenue: | |||||||||||
Revenue | 56,071 | 44,305 | 33,961 | ||||||||
Cost of revenue: | |||||||||||
Total cost of revenue | 41,912 | 31,647 | 24,063 | ||||||||
Parent Company | Reportable Legal Entities | |||||||||||
Operating expenses: | |||||||||||
Selling, general and administrative | 28,240 | 28,026 | 24,839 | ||||||||
Total operating expenses | 28,240 | 28,026 | 24,839 | ||||||||
Operating income | (28,240) | (28,026) | (24,839) | ||||||||
Other income (expense): | |||||||||||
Net interest expense | (42,083) | (64,014) | (45,978) | ||||||||
Intercompany interest income (expense) | 27,998 | 24,062 | 22,737 | ||||||||
Equity in earnings of subsidiaries | 69,408 | 54,350 | 62,719 | ||||||||
Total other income (expense), net | 55,323 | 14,398 | 39,478 | ||||||||
Income from continuing operations before income taxes | 27,083 | (13,628) | 14,639 | ||||||||
Income tax benefit (provision) | 21,013 | 144,427 | 645 | ||||||||
Income from continuing operations | 48,096 | 130,799 | 15,284 | ||||||||
Net income | 48,096 | 130,799 | 15,284 | ||||||||
Net income attributable to Headwaters Incorporated | $ 48,096 | $ 130,799 | $ 15,284 |
Condensed Consolidating Finan74
Condensed Consolidating Financial Information - Statements of Cash Flows (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Cash flows from operating activities: | |||||||||||
Net income | $ 16,873 | $ 17,785 | $ 2,384 | $ 12,721 | $ 126,774 | $ 23,008 | $ (25,198) | $ 7,084 | $ 49,763 | $ 131,668 | $ 16,058 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||
Depreciation and amortization | 62,518 | 53,973 | 55,134 | ||||||||
Interest expense related to amortization of debt issue costs and debt discount | 3,973 | 6,180 | 2,175 | ||||||||
Debt pre-payment premiums | 5,395 | 18,320 | |||||||||
Stock-based compensation | 3,181 | 2,826 | 2,165 | ||||||||
Deferred income taxes | 22,779 | (96,742) | 1,666 | ||||||||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | (723) | (1,543) | |||||||||
Net loss (gain) on disposition of property, plant and equipment | (1,476) | 49 | 95 | ||||||||
Gain on acquired assets held for sale | (4,450) | ||||||||||
Change in fair value of contingent consideration | (800) | ||||||||||
Gain on convertible debt repayments | 5,395 | 18,320 | |||||||||
Asset impairments | 1,815 | ||||||||||
Net loss of unconsolidated joint ventures | 43 | 262 | 529 | ||||||||
Equity in earnings of subsidiaries | 0 | 0 | 0 | ||||||||
Decrease (increase) in trade receivables | (1,102) | (14,194) | 517 | ||||||||
Increase in inventories | (432) | (1,007) | (2,347) | ||||||||
Increase (decrease) in accounts payable and accrued liabilities | (11,453) | (11,557) | (12,586) | ||||||||
Other changes in operating assets and liabilities, net | (6,913) | (6,527) | (178) | ||||||||
Net cash provided by operating activities | 120,303 | 81,708 | 65,043 | ||||||||
Cash flows from investing activities: | |||||||||||
Business acquisitions | (342,362) | (5,650) | (95,604) | ||||||||
Investments in unconsolidated joint ventures | (125) | (1,875) | |||||||||
Purchase of property, plant and equipment | (53,099) | (36,859) | (35,799) | ||||||||
Proceeds from disposition of property, plant and equipment | 9,445 | 915 | 905 | ||||||||
Proceeds from sale of acquired assets held for sale | 6,200 | ||||||||||
Net decrease in long-term receivables and deposits | 273 | 3,450 | 7,445 | ||||||||
Net change in other assets | (1,843) | (597) | (1,556) | ||||||||
Net cash used in investing activities | (381,386) | (38,866) | (126,484) | ||||||||
Cash flows from financing activities: | |||||||||||
Net proceeds from issuance of long-term debt | 343,453 | 414,675 | 146,650 | ||||||||
Payments on long-term debt | (155,135) | (449,799) | (7,792) | ||||||||
Debt pre-payment premiums | (5,395) | (18,320) | |||||||||
Dividends paid to non-controlling interest in consolidated subsidiary | (735) | (1,690) | (950) | ||||||||
Employee stock purchases | 873 | 804 | 759 | ||||||||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | 723 | 1,543 | |||||||||
Intercompany transfers | 0 | 0 | 0 | ||||||||
Net cash provided by (used in) financing activities | 183,784 | (52,787) | 138,667 | ||||||||
Net increase (decrease) in cash and cash equivalents | (77,299) | (9,945) | 77,226 | ||||||||
Cash and cash equivalents, beginning of period | 142,597 | 152,542 | 142,597 | 152,542 | 75,316 | ||||||
Cash and cash equivalents, end of period | 65,298 | 142,597 | 65,298 | 142,597 | 152,542 | ||||||
Consolidation, Eliminations | |||||||||||
Cash flows from operating activities: | |||||||||||
Net income | (69,408) | (54,350) | (62,719) | ||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||
Equity in earnings of subsidiaries | 69,408 | 54,350 | 62,719 | ||||||||
Guarantor Subsidiaries | Reportable Legal Entities | |||||||||||
Cash flows from operating activities: | |||||||||||
Net income | 65,111 | 52,799 | 60,141 | ||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||
Depreciation and amortization | 57,972 | 50,538 | 52,716 | ||||||||
Stock-based compensation | 1,075 | 1,014 | 843 | ||||||||
Deferred income taxes | (40) | 7,850 | 1,062 | ||||||||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | (367) | ||||||||||
Net loss (gain) on disposition of property, plant and equipment | (1,543) | (70) | 44 | ||||||||
Change in fair value of contingent consideration | (800) | ||||||||||
Asset impairments | 1,815 | ||||||||||
Decrease (increase) in trade receivables | (1,068) | (14,295) | (90) | ||||||||
Increase in inventories | (68) | (783) | (3,927) | ||||||||
Increase (decrease) in accounts payable and accrued liabilities | 1,046 | (2,147) | (16,725) | ||||||||
Other changes in operating assets and liabilities, net | 9,046 | 41,952 | 34,649 | ||||||||
Net cash provided by operating activities | 130,364 | 136,858 | 130,528 | ||||||||
Cash flows from investing activities: | |||||||||||
Business acquisitions | (309,279) | (5,650) | (10,500) | ||||||||
Investments in unconsolidated joint ventures | (125) | ||||||||||
Purchase of property, plant and equipment | (44,871) | (30,972) | (30,672) | ||||||||
Proceeds from disposition of property, plant and equipment | 9,425 | 906 | 905 | ||||||||
Net decrease in long-term receivables and deposits | 534 | 2,382 | 7,145 | ||||||||
Net change in other assets | (1,348) | (718) | (2,275) | ||||||||
Net cash used in investing activities | (345,539) | (34,177) | (35,397) | ||||||||
Cash flows from financing activities: | |||||||||||
Dividends paid to non-controlling interest in consolidated subsidiary | (775) | ||||||||||
Employee stock purchases | 1,394 | 583 | 580 | ||||||||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | 367 | ||||||||||
Intercompany transfers | 215,382 | (110,997) | (132,872) | ||||||||
Net cash provided by (used in) financing activities | 216,368 | (110,414) | (132,292) | ||||||||
Net increase (decrease) in cash and cash equivalents | 1,193 | (7,733) | (37,161) | ||||||||
Cash and cash equivalents, beginning of period | 25,819 | 33,552 | 25,819 | 33,552 | 70,713 | ||||||
Cash and cash equivalents, end of period | 27,012 | 25,819 | 27,012 | 25,819 | 33,552 | ||||||
Non-Guarantor Subsidiaries | Reportable Legal Entities | |||||||||||
Cash flows from operating activities: | |||||||||||
Net income | 5,964 | 2,420 | 3,352 | ||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||
Depreciation and amortization | 3,042 | 2,922 | 2,146 | ||||||||
Stock-based compensation | 7 | ||||||||||
Deferred income taxes | 121 | (25,808) | 604 | ||||||||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | (965) | ||||||||||
Net loss (gain) on disposition of property, plant and equipment | 67 | 119 | 6 | ||||||||
Gain on acquired assets held for sale | (4,450) | ||||||||||
Net loss of unconsolidated joint ventures | 43 | 262 | 529 | ||||||||
Decrease (increase) in trade receivables | (34) | 101 | 607 | ||||||||
Increase in inventories | (364) | (224) | 1,580 | ||||||||
Increase (decrease) in accounts payable and accrued liabilities | (2,578) | 3,519 | 828 | ||||||||
Other changes in operating assets and liabilities, net | (2,370) | 18,016 | 129 | ||||||||
Net cash provided by operating activities | (552) | 362 | 9,781 | ||||||||
Cash flows from investing activities: | |||||||||||
Business acquisitions | (33,083) | ||||||||||
Investments in unconsolidated joint ventures | (1,875) | ||||||||||
Purchase of property, plant and equipment | (871) | (662) | (829) | ||||||||
Proceeds from disposition of property, plant and equipment | 20 | 9 | |||||||||
Proceeds from sale of acquired assets held for sale | 6,200 | ||||||||||
Net decrease in long-term receivables and deposits | (76) | ||||||||||
Net change in other assets | (140) | ||||||||||
Net cash used in investing activities | (27,950) | (653) | (2,704) | ||||||||
Cash flows from financing activities: | |||||||||||
Dividends paid to non-controlling interest in consolidated subsidiary | 40 | (1,690) | (950) | ||||||||
Employee stock purchases | (735) | 45 | |||||||||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | 965 | ||||||||||
Intercompany transfers | 30,924 | (1,216) | (397) | ||||||||
Net cash provided by (used in) financing activities | 30,229 | (1,896) | (1,347) | ||||||||
Net increase (decrease) in cash and cash equivalents | 1,727 | (2,187) | 5,730 | ||||||||
Cash and cash equivalents, beginning of period | 3,577 | 5,764 | 3,577 | 5,764 | 34 | ||||||
Cash and cash equivalents, end of period | 5,304 | 3,577 | 5,304 | 3,577 | 5,764 | ||||||
Parent Company | Reportable Legal Entities | |||||||||||
Cash flows from operating activities: | |||||||||||
Net income | 48,096 | 130,799 | 15,284 | ||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||
Depreciation and amortization | 1,504 | 513 | 272 | ||||||||
Interest expense related to amortization of debt issue costs and debt discount | 3,973 | 6,180 | 2,175 | ||||||||
Debt pre-payment premiums | 5,395 | 18,320 | |||||||||
Stock-based compensation | 2,099 | 1,812 | 1,322 | ||||||||
Deferred income taxes | 22,698 | (78,784) | |||||||||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | (356) | (578) | |||||||||
Net loss (gain) on disposition of property, plant and equipment | 45 | ||||||||||
Gain on convertible debt repayments | 5,395 | 18,320 | |||||||||
Equity in earnings of subsidiaries | (69,408) | (54,350) | (62,719) | ||||||||
Increase (decrease) in accounts payable and accrued liabilities | (9,921) | (12,929) | 3,311 | ||||||||
Other changes in operating assets and liabilities, net | (13,589) | (66,495) | (34,956) | ||||||||
Net cash provided by operating activities | (9,509) | (55,512) | (75,266) | ||||||||
Cash flows from investing activities: | |||||||||||
Business acquisitions | (85,104) | ||||||||||
Purchase of property, plant and equipment | (7,357) | (5,225) | (4,298) | ||||||||
Net decrease in long-term receivables and deposits | (185) | 1,068 | 300 | ||||||||
Net change in other assets | (355) | 121 | 719 | ||||||||
Net cash used in investing activities | (7,897) | (4,036) | (88,383) | ||||||||
Cash flows from financing activities: | |||||||||||
Net proceeds from issuance of long-term debt | 343,453 | 414,675 | 146,650 | ||||||||
Payments on long-term debt | (155,135) | (449,799) | (7,792) | ||||||||
Debt pre-payment premiums | (5,395) | (18,320) | |||||||||
Employee stock purchases | 214 | 176 | 179 | ||||||||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | 356 | 578 | |||||||||
Intercompany transfers | (246,306) | 112,213 | 133,269 | ||||||||
Net cash provided by (used in) financing activities | (62,813) | 59,523 | 272,306 | ||||||||
Net increase (decrease) in cash and cash equivalents | (80,219) | (25) | 108,657 | ||||||||
Cash and cash equivalents, beginning of period | $ 113,201 | $ 113,226 | 113,201 | 113,226 | 4,569 | ||||||
Cash and cash equivalents, end of period | $ 32,982 | $ 113,201 | $ 32,982 | $ 113,201 | $ 113,226 |
Quarterly Financial Data (una75
Quarterly Financial Data (unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2014 | |
Revenue | $ 291,591 | $ 262,466 | $ 202,332 | $ 218,418 | $ 272,717 | $ 243,294 | $ 179,725 | $ 199,597 | $ 974,807 | $ 895,333 | $ 791,447 |
Gross profit | 85,522 | 83,531 | 54,877 | 64,271 | 90,301 | 76,762 | 47,141 | 55,687 | 288,201 | 269,891 | 225,693 |
Net income (loss) | $ 16,873 | $ 17,785 | $ 2,384 | $ 12,721 | $ 126,774 | $ 23,008 | $ (25,198) | $ 7,084 | $ 49,763 | $ 131,668 | $ 16,058 |
Basic earnings (loss) per share (in dollars per share) | $ 0.21 | $ 0.23 | $ 0.03 | $ 0.17 | $ 1.72 | $ 0.30 | $ (0.34) | $ 0.09 | $ 0.65 | $ 1.78 | $ 0.20 |
Diluted earnings (loss) per share (in dollars per share) | $ 0.21 | $ 0.23 | $ 0.03 | $ 0.17 | $ 1.68 | $ 0.30 | $ (0.34) | $ 0.09 | $ 0.64 | $ 1.73 | $ 0.20 |
Income tax benefit (provision) | $ 96,800 | $ (22,756) | $ 94,458 | $ (3,574) | |||||||
Valuation allowance utilized in period | 12,500 | ||||||||||
Change in deferred tax valuation allowance | $ 208 | $ (109,277) | $ (7,994) | ||||||||
Loss on extinguishment of debt | $ 8,700 | $ 24,800 |