Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Mar. 31, 2017 | Apr. 21, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | HEADWATERS INC | |
Entity Central Index Key | 1,003,344 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 74,977,737 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2017 | Sep. 30, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 58,128 | $ 65,298 |
Trade receivables, net | 133,725 | 152,084 |
Inventories | 89,997 | 72,668 |
Current income taxes | 2,681 | 1,187 |
Other | 10,076 | 13,517 |
Total current assets | 294,607 | 304,754 |
Property, plant and equipment, net | 218,399 | 206,792 |
Other assets: | ||
Goodwill | 300,265 | 290,503 |
Intangible assets, net | 306,304 | 319,162 |
Deferred income taxes | 66,532 | 68,059 |
Other | 43,530 | 49,173 |
Total other assets | 716,631 | 726,897 |
Total assets | 1,229,637 | 1,238,443 |
Current liabilities: | ||
Accounts payable | 28,159 | 30,211 |
Accrued personnel costs | 38,886 | 45,366 |
Other accrued liabilities | 55,584 | 63,785 |
Current portion of long-term debt | 7,785 | |
Total current liabilities | 122,629 | 147,147 |
Long-term liabilities: | ||
Long-term debt, net | 741,048 | 746,716 |
Other | 44,498 | 41,230 |
Total long-term liabilities | 785,546 | 787,946 |
Total liabilities | 908,175 | 935,093 |
Commitments and contingencies | ||
Redeemable non-controlling interest in consolidated subsidiary | 13,458 | 13,363 |
Stockholders' equity: | ||
Common stock, $0.001 par value; authorized 200,000 shares; issued and outstanding: 74,153 shares at September 30, 2016 (including 105 shares held in treasury) and 74,978 shares at March 31, 2017 (including 103 shares held in treasury) | 75 | 74 |
Capital in excess of par value | 739,905 | 733,117 |
Retained earnings (accumulated deficit) | (430,585) | (441,793) |
Treasury stock | (1,391) | (1,411) |
Total stockholders' equity | 308,004 | 289,987 |
Total liabilities and stockholders' equity | $ 1,229,637 | $ 1,238,443 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Thousands | Mar. 31, 2017 | Sep. 30, 2016 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized shares | 200,000 | 200,000 |
Common stock, issued shares | 74,978 | 74,153 |
Common stock, outstanding shares | 74,978 | 74,153 |
Common stock, held in treasury (in shares) | 103 | 105 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Revenue: | ||||
Revenue | $ 259,293 | $ 202,332 | $ 514,868 | $ 420,750 |
Cost of revenue: | ||||
Total cost of revenue | 188,786 | 147,455 | 373,742 | 301,602 |
Gross profit | 70,507 | 54,877 | 141,126 | 119,148 |
Operating expenses: | ||||
Selling, general and administrative | 49,394 | 37,882 | 94,375 | 72,764 |
Amortization | 6,438 | 4,815 | 12,736 | 9,381 |
Total operating expenses | 55,832 | 42,697 | 107,111 | 82,145 |
Operating income (loss) | 14,675 | 12,180 | 34,015 | 37,003 |
Other income (expense): | ||||
Net interest expense | (8,222) | (8,056) | (17,141) | (16,273) |
Other, net | 1,973 | (12) | 2,127 | (81) |
Total other income (expense), net | (6,249) | (8,068) | (15,014) | (16,354) |
Income from continuing operations before income taxes | 8,426 | 4,112 | 19,001 | 20,649 |
Income tax provision | (3,300) | (1,500) | (7,200) | (5,100) |
Income from continuing operations | 5,126 | 2,612 | 11,801 | 15,549 |
Income (loss) from discontinued operations, net of income taxes | 6 | (228) | 159 | (444) |
Net income | 5,132 | 2,384 | 11,960 | 15,105 |
Net income attributable to non-controlling interest | (591) | (283) | (752) | (579) |
Net income attributable to Headwaters Incorporated | $ 4,541 | $ 2,101 | $ 11,208 | $ 14,526 |
Basic income (loss) per share attributable to Headwaters Incorporated: | ||||
From continuing operations (in dollars per share) | $ 0.06 | $ 0.03 | $ 0.15 | $ 0.21 |
From discontinued operations (in dollars per share) | 0 | 0 | 0 | (0.01) |
Basic income per share (in dollars per share) | 0.06 | 0.03 | 0.15 | 0.20 |
Diluted income (loss) per share attributable to Headwaters Incorporated: | ||||
From continuing operations (in dollars per share) | 0.06 | 0.03 | 0.15 | 0.20 |
From discontinued operations (in dollars per share) | 0 | 0 | 0 | (0.01) |
Diluted income per share (in dollars per share) | $ 0.06 | $ 0.03 | $ 0.15 | $ 0.19 |
Building products | ||||
Revenue: | ||||
Revenue | $ 140,716 | $ 98,101 | $ 275,757 | $ 199,696 |
Cost of revenue: | ||||
Total cost of revenue | 99,782 | 69,639 | 196,311 | 139,191 |
Construction materials | ||||
Revenue: | ||||
Revenue | 116,037 | 102,849 | 236,028 | 219,097 |
Cost of revenue: | ||||
Total cost of revenue | 87,948 | 77,347 | 176,212 | 161,624 |
Energy technology | ||||
Revenue: | ||||
Revenue | 2,540 | 1,382 | 3,083 | 1,957 |
Cost of revenue: | ||||
Total cost of revenue | $ 1,056 | $ 469 | $ 1,219 | $ 787 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - 6 months ended Mar. 31, 2017 - 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, 2016 | $ 74 | $ 733,117 | $ (441,793) | $ (1,411) | $ 289,987 |
Balances (in shares) at Sep. 30, 2016 | 74,153 | 74,153 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Issuance of common stock pursuant to employee stock purchase plan | $ 0 | 336 | $ 336 | ||
Issuance of common stock pursuant to employee stock purchase plan (in shares) | 17 | ||||
Exercise of stock appreciation rights | $ 1 | 1 | |||
Exercise of stock appreciation rights (in shares) | 808 | ||||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | 5,571 | 5,571 | |||
Stock-based compensation | 901 | 901 | |||
Net 2 share decrease in treasury stock held for deferred compensation plan obligations, at cost | (20) | 20 | 0 | ||
Net income attributable to Headwaters Incorporated | 11,208 | 11,208 | |||
Balances at Mar. 31, 2017 | $ 75 | $ 739,905 | $ (430,585) | $ (1,391) | $ 308,004 |
Balances (in shares) at Mar. 31, 2017 | 74,978 | 74,978 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) shares in Thousands | 6 Months Ended |
Mar. 31, 2017shares | |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY | |
Increase (decrease) in treasury stock held for deferred compensation plan obligations (in shares) | (2) |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Sep. 30, 2016 | |
Cash flows from operating activities: | |||||
Net income | $ 5,132 | $ 2,384 | $ 11,960 | $ 15,105 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||||
Depreciation and amortization | 18,365 | 14,115 | 36,207 | 27,897 | |
Interest expense related to amortization of debt issue costs and debt discount | 700 | 600 | 1,606 | 1,184 | |
Debt pre-payment premiums | 0 | 93 | |||
Stock-based compensation | 400 | 800 | 901 | 1,521 | |
Deferred income taxes | 7,099 | 8,643 | |||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | (5,860) | (97) | |||
Net gain on disposition of property, plant and equipment | (216) | (46) | |||
Net loss of unconsolidated joint venture | 19 | 26 | |||
Decrease in trade receivables | 19,682 | 33,538 | |||
Increase in inventories | (14,958) | (4,066) | |||
Decrease in accounts payable and accrued liabilities | (19,413) | (36,372) | |||
Other changes in operating assets and liabilities, net | (2,357) | (2,985) | |||
Net cash provided by (used in) operating activities | 34,670 | 44,441 | |||
Cash flows from investing activities: | |||||
Business acquisitions, net of cash acquired | (10,530) | (96,457) | |||
Purchase of property, plant and equipment | (14,193) | (13,197) | (29,733) | (20,882) | |
Proceeds from disposition of property, plant and equipment | 626 | 404 | |||
Net decrease (increase) in long-term receivables and deposits | 4,890 | (1,729) | |||
Net change in other assets | 2,368 | (3,817) | |||
Net cash provided by (used in) investing activities | (32,379) | (122,481) | |||
Cash flows from financing activities: | |||||
Payments on long-term debt | (15,000) | (5,874) | |||
Debt pre-payment premiums | 0 | (93) | |||
Dividends paid to non-controlling interest in consolidated subsidiary | (657) | (735) | |||
Employee stock purchases | 336 | 539 | |||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | 5,860 | 97 | |||
Net cash provided by (used in) financing activities | (9,461) | (6,066) | |||
Net increase (decrease) in cash and cash equivalents | (7,170) | (84,106) | |||
Cash and cash equivalents, beginning of period | 65,298 | 142,597 | $ 142,597 | ||
Cash and cash equivalents, end of period | $ 58,128 | $ 58,491 | $ 58,128 | $ 58,491 | $ 65,298 |
Nature of Operations and Basis
Nature of Operations and Basis of Presentation | 6 Months Ended |
Mar. 31, 2017 | |
Nature of Operations and Basis of Presentation | |
Nature of Operations and Basis of Presentation | 1. Nature of Operations and Basis of Presentatio 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 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. Beginning in the December 2016 quarter, Headwaters is now reporting the regional concrete block business in the construction materials segment. 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 12, Headwaters disposed of its remaining coal cleaning facilities in 2013 and the results of Headwaters’ coal cleaning operations have been presented as discontinued operations for all periods. Basis of Presentation – Headwaters’ fiscal year ends on September 30 and unless otherwise noted, references to years refer to Headwaters’ fiscal year rather than a calendar year. The unaudited interim condensed consolidated financial statements include the accounts of Headwaters, all its subsidiaries and other entities in which Headwaters has a controlling interest. All significant intercompany transactions and accounts are eliminated in consolidation. Due to the seasonality of most of Headwaters’ operations and other factors, the consolidated results of operations for any particular period are not indicative of the results to be expected for a full fiscal year. During the six months ended March 31, 2016 and 2017, approximately 9% of Headwaters’ total revenue and cost of revenue was for services. Substantially all service-related revenue for both periods was in the construction materials segment. The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (SEC) for quarterly reports on Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included, which consist of normal recurring adjustments. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Headwaters’ Annual Report on Form 10-K for the year ended September 30, 2016 (Form 10-K) and its Quarterly Report on Form 10-Q for the quarter ended December 31, 2016. Recent Accounting Pronouncements – 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 consolidated 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. The adoption date for Headwaters is no later than October 1, 2017. Different methods of adoption are required for the various amendments and early adoption is permitted, but all the amendments must be adopted in the same period. Headwaters is evaluating ASU 2016-09 and at the current time expects that adoption of the new standard will require changes in how tax benefits from exercise of stock appreciation rights and vesting of restricted stock are accounted for, as well as changes in the calculation of dilutive securities in the diluted earnings per share computation. Due to the pending Boral transaction described in Note 11, which Headwaters currently believes is likely to be completed prior to October 1, 2017, it is probable that this standard may not need to be implemented. 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 consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (ASC Topic 350, Intangibles—Goodwill and Other), which eliminates Step 2 from the goodwill impairment test. Headwaters has early adopted this standard and will apply it for all future goodwill impairment tests performed; however, as described in more detail in the Form 10-K, Headwaters expects to perform a qualitative evaluation under step 0 in future goodwill impairment tests and currently believes it is unlikely that any further testing will be necessary. Headwaters has reviewed other recently issued accounting standards which have not yet been adopted 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 to report the concrete block business with the construction materials segment, have been reclassified to conform to the current period’s presentation. The reclassifications had no effect on net income or on total assets. |
Segment Reporting
Segment Reporting | 6 Months Ended |
Mar. 31, 2017 | |
Segment Reporting | |
Segment Reporting | 2. 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. Historically and for all of fiscal 2016, the block product business was a part of the building products segment. However, commencing in the December 2016 quarter, the construction materials segment includes the block product business. This reporting change has been made because of the following changes, as well as others, in management and operations, all of which became operative effective as of October 1, 2016: · The chief operating decision maker makes operating and resource allocation decisions considering the combined financial information for construction materials and the block group, which have similar economic characteristics; · The block group management and accounting personnel report to the construction materials segment’s management; · Certain operational activities for the construction materials and block group are being closely coordinated to capture synergies and improve efficiencies. For example, the transportation groups were brought together to promote backhauling, reduce repair and maintenance costs, and minimize down time. Construction materials management also provides oversight for certain other operational activities; and · Fly ash storage is being initiated at block production sites to facilitate substitution of fly ash for portland cement used in manufacturing block products. 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 commercial construction sales and 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 12, 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. 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 income from continuing operations 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. Three Months Ended March 31, 2016 Building Construction Energy (in thousands) products materials technology Corporate Totals Segment revenue $ 98,101 $ 102,849 $ 1,382 $ $ 202,332 Depreciation and amortization $ (9,117) $ (4,523) $ (324) $ (151) $ (14,115) Operating income (loss) $ 6,344 $ 13,691 $ (1,163) $ (6,692) $ 12,180 Net interest expense (8,056) Other income (expense), net (12) Income tax provision (1,500) Income from continuing operations 2,612 Loss from discontinued operations, net of income taxes (228) Net income $ 2,384 Capital expenditures $ 6,854 $ 5,487 $ $ 856 $ 13,197 Segment assets as of September 30, 2016 $ 676,012 $ 385,595 $ 43,412 $ 133,424 $ 1,238,443 Three Months Ended March 31, 2017 Building Construction Energy (in thousands) products materials technology Corporate Totals Segment revenue $ 140,716 $ 116,037 $ 2,540 $ $ 259,293 Depreciation and amortization $ (11,867) $ (5,441) $ (378) $ (679) $ (18,365) Operating income (loss) $ 11,383 $ 15,195 $ (1,489) $ (10,414) $ 14,675 Net interest expense (8,222) Other income (expense), net 1,973 Income tax provision (3,300) Income from continuing operations 5,126 Income from discontinued operations, net of income taxes 6 Net income $ 5,132 Capital expenditures $ 9,356 $ 4,122 $ $ 657 $ 14,193 Segment assets as of March 31, 2017 $ 700,035 $ 372,932 $ 41,295 $ 115,375 $ 1,229,637 Six Months Ended March 31, 2016 Building Construction Energy (in thousands) products materials technology Corporate Totals Segment revenue $ 199,696 $ 219,097 $ 1,957 $ $ 420,750 Depreciation and amortization $ (17,977) $ (8,963) $ (647) $ (310) $ (27,897) Operating income (loss) $ 18,019 $ 34,054 $ (2,884) $ (12,186) $ 37,003 Net interest expense (16,273) Other income (expense), net (81) Income tax provision (5,100) Income from continuing operations 15,549 Loss from discontinued operations, net of income taxes (444) Net income $ 15,105 Capital expenditures $ 11,255 $ 7,869 $ $ 1,758 $ 20,882 Six Months Ended March 31, 2017 Building Construction Energy (in thousands) products materials technology Corporate Totals Segment revenue $ 275,757 $ 236,028 $ 3,083 $ $ 514,868 Depreciation and amortization $ (23,582) $ (10,706) $ (533) $ (1,386) $ (36,207) Operating income (loss) $ 22,783 $ 33,793 $ (3,302) $ (19,259) $ 34,015 Net interest expense (17,141) Other income (expense), net 2,127 Income tax provision (7,200) Income from continuing operations 11,801 Income from discontinued operations, net of income taxes 159 Net income $ 11,960 Capital expenditures $ 20,756 $ 7,400 $ $ 1,499 $ 29,733 |
Acquisitions
Acquisitions | 6 Months Ended |
Mar. 31, 2017 | |
Acquisitions | |
Acquisitions | 3. Acquisitions Roofing Businesses – 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 manufactures and sells 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 is a manufacturer of stone-coated metal roofing materials in the U.S., selling products 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 manufactures composite roofing products that replicate 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: (in thousands) Current assets $ 7,402 Current liabilities (1,565) Property, plant and equipment 3,138 Intangible assets: Customer relationships (12-year life) 3,670 Trade names (indefinite life) 4,801 Intellectual property (20-year life) 10,026 Goodwill 34,284 Long-term liabilities (4,761) Net assets acquired $ 56,995 The roofing acquisitions’ 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 were recorded for future estimated payments, of which $5.0 million was paid during the March 2017 quarter. 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: (in thousands) Current assets $ 3,965 Current liabilities (1,515) Property, plant and equipment 3,710 Intangible assets: Contracts (20-year life) 15,430 Customer relationships (15-year life) 2,690 Trade names (indefinite life) 3,900 Goodwill 4,988 Net assets acquired $ 33,168 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 $240.1 million. Approximately $4.6 million of the 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 $ 20,731 Current liabilities (3,884) Property, plant and equipment 5,597 Intangible assets: Customer relationships (20-year life) 109,300 Trade name (indefinite life) 36,600 Non-competition agreements (7-year life) 2,410 Goodwill 69,309 Net assets acquired $ 240,063 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, substantially all of which is expected to be tax deductible over a 15-year period. Other – 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’ majority-owned subsidiary acquired for 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, were recognized in other income in Headwaters’ consolidated statement of income for the year ended September 30, 2016; and gains totaling approximately $1.9 million were recognized in other income during the six months ended March 31, 2017. It is currently expected that additional gains could be realized in future periods as future sales transactions are consummated. During the March 2017 quarter, Headwaters acquired all the equity interests in a small windows company located in the Atlanta area, for initial cash consideration of approximately $5.9 million. Non-controlling Interest in Consolidated Subsidiary – In fiscal 2014, 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 the carrying value of the non-controlling interest to its estimated redemption value. The estimated redemption value is calculated based on a prescribed EBITDA formula 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 six months ended March 31, 2017: (in thousands) Balance as of September 30, 2016 13,363 Net income attributable to non-controlling interest 752 Dividends paid to non-controlling interest (657) Balance as of March 31, 2017 $ 13,458 |
Inventories
Inventories | 6 Months Ended |
Mar. 31, 2017 | |
Inventories | |
Inventories | 4. Inventories Inventories consisted of the following at: (in thousands) September 30, 2016 March 31, 2017 Raw materials $ 22,333 $ 26,117 Finished goods 50,335 63,880 $ 72,668 $ 89,997 |
Intangible Assets
Intangible Assets | 6 Months Ended |
Mar. 31, 2017 | |
Intangible Assets | |
Intangible Assets | 5. Intangible Assets The following table summarizes the gross carrying amounts and related accumulated amortization of intangible assets as of: September 30, 2016 March 31, 2017 Gross Gross Estimated Carrying Accumulated Carrying Accumulated (in thousands of dollars) useful lives Amount Amortization Amount Amortization Trade names Indefinite $ 63,245 $ — $ 62,574 $ — Intellectual property 20 years 10,102 — 10,026 654 Contracts 15 - 20 years 127,520 76,029 125,130 76,697 Customer relationships 5 - 20 years 227,909 67,493 226,779 73,912 Trade names 20 years 66,755 39,744 66,755 41,413 Patents and patented technologies 7 - 19 years 5,401 2,875 6,347 3,180 Other 5 - 17 years 7,035 2,664 7,549 3,000 $ 507,967 $ 188,805 $ 505,160 $ 198,856 The above table includes preliminary amounts for some of the intangible assets acquired in 2016 and 2017 because the process of identifying and valuing those assets has not been completed. Total amortization expense related to intangible assets was approximately $4.8 million and $6.4 million for the March 2016 and 2017 quarters, respectively, and approximately $9.4 million and $12.7 million for the six months ended March 31, 2016 and 2017, respectively. Total estimated annual amortization expense for 2017 through 2022 is shown in the following table; however, the amounts will change once the intangible assets for the 2016 and 2017 acquisitions are identified and valuations are finalized. Year ending September 30: (in thousands) 2017 $ 24,716 2018 24,928 2019 23,906 2020 19,802 2021 19,687 2022 19,436 |
Long-term Debt
Long-term Debt | 6 Months Ended |
Mar. 31, 2017 | |
Long-term Debt | |
Long-term Debt | 6. Long-term Debt The total undiscounted face amount of Headwaters’ outstanding long-term debt was approximately $768.8 million as of September 30, 2016 and $753.8 million as of March 31, 2017. As of those dates, the discounted carrying value of long-term debt consisted of the following: September 30, March 31, (in thousands) 2016 2017 Senior secured term loan, due March 2022 (face amount $768,804 as of September 30, 2016 and $753,804 as of March 31, 2017) $ 754,501 $ 741,048 Less current portion (7,785) — Carrying amount of long-term debt, net of discounts and debt issue costs $ 746,716 $ 741,048 Senior Secured Term Loan – In March 2015, Headwaters entered into a 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 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. In December 2016, Headwaters prepaid $15.0 million of the scheduled quarterly repayments and as a result as of March 31, 2017 has no current portion of long-term debt. The associated accelerated debt issuance and debt discount costs, totaling approximately $0.2 million, were charged to interest expense. 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 March 31, 2017, 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. Headwaters was not required to make any prepayments under these requirements during the six months ended March 31, 2017. 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 March 31, 2017. ABL Revolver – Since entering into the ABL Revolver, Headwaters has not borrowed any funds under the arrangement and has no borrowings outstanding as of March 31, 2017. 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 March 31, 2017, Headwaters had secured letters of credit under the ABL Revolver of approximately $10.6 million for various purposes and had availability under the ABL Revolver of approximately $57.4 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 March 31, 2017, the interest rate on those borrowings would have been approximately 2.7%. 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 March 31, 2017. Interest and Debt Maturities – During the March 2016 and 2017 quarters, Headwaters incurred total interest costs of approximately $8.3 million and $8.3 million, respectively, including approximately $0.6 million and $0.7 million, respectively, of non-cash interest expense. During the six months ended March 31, 2016 and 2017, Headwaters incurred total interest costs of approximately $16.7 million and $17.3 million, respectively, including approximately $1.2 million and $1.6 million, respectively, of non-cash interest expense. 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 amortization of debt discount and debt issue costs, was approximately 4.0% at September 30, 2016 and March 31, 2017. Except for required repayments of the Term Loan Facility beginning in the September 2018 quarter of approximately $1.9 million per quarter, Headwaters has no debt maturities until March 2022. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 6 Months Ended |
Mar. 31, 2017 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | 7. 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 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. |
Income Taxes
Income Taxes | 6 Months Ended |
Mar. 31, 2017 | |
Income Taxes | |
Income Taxes | 8. Income Taxes Headwaters’ estimated effective income tax rate for continuing operations for the fiscal year ending September 30, 2017, exclusive of discrete items, is currently expected to be approximately 39%. This estimated rate was used to record income taxes for the six months ended March 31, 2017. For the six months ended March 31, 2016, Headwaters also used an estimated effective income tax rate for continuing operations of 39%. The estimated effective income tax rate for both periods differs from the statutory rate primarily due to state income taxes, partially offset by research and development tax credits. Headwaters recognized tax benefit for discrete items of $3.0 million and $0.2 million for the six months ended March 31, 2016 and 2017, respectively, which did not affect the calculation of the estimated effective income tax rates for the respective fiscal years. The discrete items were due primarily to unrecognized state income tax benefits that were reversed due to audit periods that closed. As of March 31, 2017, Headwaters’ U.S. and state NOL and capital loss carryforwards totaled approximately $34.1 million (tax effected). The NOLs expire from 2017 to 2037. In addition, there are approximately $27.7 million of tax credit carryforwards as of March 31, 2017, which expire from 2025 to 2037. 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 | 6 Months Ended |
Mar. 31, 2017 | |
Equity Securities and Stock-Based Compensation | |
Equity Securities and Stock-Based Compensation | 9. Equity Securities and Stock-Based Compensation Treasury Shares Held for Deferred Compensation Obligation – Until December 2016, in accordance with the terms of the Directors’ Deferred Compensation Plan (DDCP), non-employee directors could elect to defer certain compensation and choose from various options how the deferred compensation would be invested. One of the investment options was Headwaters common stock. When a director chose Headwaters stock as an investment option, Headwaters purchased the common stock in accordance with the director’s request and is holding the shares until the deferred compensation obligation becomes payable, normally when the director retires from the Board. At such time, the shares held by Headwaters will be distributed to the director in satisfaction of the obligation. Headwaters has accounted 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 March 31, 2017, the treasury stock and related deferred compensation obligation had fair values of approximately $2.4 million, which was $1.0 million higher than the carrying values at cost. In December 2016, in connection with the announcement of the Boral transaction (see Note 11), the DDCP plan was modified to eliminate Headwaters stock as an investment option, although prior stock purchases were unaffected by the change. Stock-Based Compensation – Stock-based compensation expense was approximately $0.8 million and $0.4 million for the March 2016 and 2017 quarters, respectively, and $1.5 million and $0.9 million for the six months ended March 31, 2016 and 2017, respectively. As of March 31, 2017, there was approximately $1.6 million of total compensation cost related to unvested awards not yet recognized, which will be recognized in future periods in accordance with applicable vesting terms. 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. |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share | |
Earnings Per Share | 10. Earnings Per Share The following table sets forth the computations of basic and diluted EPS for the periods 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. Three Months Ended Six Months Ended March 31, March 31, (in thousands, except per-share amounts) 2016 2017 2016 2017 Numerator: Income from continuing operations $ 2,612 $ 5,126 $ 15,549 $ 11,801 Income from continuing operations attributable to non-controlling interest (283) (591) (579) (752) Numerator for basic and diluted earnings per share from continuing operations — income from continuing operations attributable to Headwaters Incorporated 2,329 4,535 14,970 11,049 Numerator for basic and diluted earnings per share from discontinued operations — income (loss) from discontinued operations, net of income taxes (228) 6 (444) 159 Numerator for basic and diluted earnings per share — net income attributable to Headwaters Incorporated $ 2,101 $ 4,541 $ 14,526 $ 11,208 Denominator: Denominator for basic earnings per share — weighted-average shares outstanding 73,818 74,835 73,804 74,536 Effect of dilutive securities — shares issuable upon exercise of options and SARs and vesting of restricted stock 1,147 1,291 Denominator for diluted earnings per share — weighted-average shares outstanding after assumed exercises and vesting 75,341 75,982 75,353 75,827 Basic income (loss) per share attributable to Headwaters Incorporated: From continuing operations $ 0.03 $ 0.06 $ 0.21 $ 0.15 From discontinued operations $ 0.03 $ 0.06 $ 0.20 $ 0.15 Diluted income (loss) per share attributable to Headwaters Incorporated: From continuing operations $ 0.03 $ 0.06 $ 0.20 $ 0.15 From discontinued operations $ 0.03 $ 0.06 $ 0.19 $ 0.15 Anti-dilutive securities not considered in diluted EPS calculation: Stock-settled SARs 256 — 292 36 Stock options — — 36 — |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies | |
Commitments and Contingencies | 11. Commitments and Contingencies Significant new commitments, material changes in commitments and ongoing contingencies as of March 31, 2017, not disclosed elsewhere, are as follows: Boral Transaction – On November 20, 2016, Headwaters entered into an Agreement and Plan of Merger (the Merger Agreement) with Boral Limited, an Australian corporation (Boral), whereby Headwaters agreed to be acquired by Boral (the Merger). At closing, each share of Headwaters’ common stock, par value $0.001 per share, issued and outstanding immediately prior to the effective time (subject to certain exceptions for common stock held by Boral, Headwaters or their subsidiaries, Headwaters restricted shares to be converted to cash and any shares for which dissenters’ rights have been perfected) will be automatically cancelled and converted into the right to receive $24.25 in cash, without interest and less any applicable withholding taxes. If the Merger is not consummated on or before September 1, 2017, the $24.25 per share cash payment shall be increased (subject to the satisfaction of certain conditions) by $0.09 each month (subject to pro-ration) thereafter that the Merger is not consummated, through the date of November 30, 2017. At the effective time of the Merger (i) each Headwaters stock option, whether vested or unvested, that is outstanding immediately prior to the effective time of the Merger will be canceled and the holder thereof will be entitled only to receive a cash payment, without interest, in an amount equal to the excess, if any, of the merger consideration over the applicable exercise price for each share of Headwaters common stock subject to such Headwaters stock option; (ii) each Headwaters stock appreciation right, whether vested or unvested, that is outstanding immediately prior to the effective time of the Merger will be canceled and the holder thereof will be entitled only to receive a cash payment, without interest, in an amount equal to the excess, if any, of the merger consideration over the applicable base price for each share of Headwaters common stock subject to such Headwaters stock appreciation right; (iii) each unvested Headwaters restricted share that is outstanding immediately prior to the effective time of the Merger will be canceled and the holder thereof will be entitled only to receive a cash payment, without interest, in an amount equal to the merger consideration; and (iv) each Headwaters restricted stock unit, whether vested or unvested, that is outstanding immediately prior to the effective time of the Merger will be canceled and the holder thereof will be entitled only to receive a cash payment, without interest, in an amount equal to the merger consideration. The respective boards of directors of both Headwaters and Boral have unanimously approved the Merger Agreement and Headwaters’ stockholders adopted the Merger Agreement at a special meeting of stockholders held on February 3, 2017. The Merger Agreement contains customary representations and warranties for both Headwaters and Boral, and Headwaters has agreed to customary covenants, including covenants and agreements relating to the conduct of Headwaters’ business and operations up to the date of closing. Consummation of the Merger is subject to customary conditions, including without limitation, (i) the expiration or early termination of the waiting period applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and clearance under the Committee on Foreign Investment in the United States (CFIUS) and the Investment Canada Act (Canada) R.S.C., 1985, c.28 (1st Supp.), as amended (ICA), and any regulations issued thereunder; and (ii) the absence of any law or order that prevents, makes illegal or prohibits the Merger. The parties satisfied the CFIUS closing condition on February 16, 2017 and satisfied the ICA closing condition on March 7, 2017. Each party’s obligation to consummate the Merger is subject to certain other customary conditions, including (a) the accuracy of the other party’s representations and warranties (subject to certain materiality qualifications) and (b) performance in all material respects by the other party of its obligations contained in the Merger Agreement. In addition, Boral’s obligations to consummate the Merger are subject to the absence of a Company Material Adverse Effect as defined in the Merger Agreement. Consummation of the Merger is not subject to a financing condition. In addition, the Merger Agreement contains a customary “no shop” provision that, in general, restricts Headwaters’ ability to solicit from, discuss with or provide any information to, any third parties regarding or in connection with any alternative acquisition proposal from any such third party. The Merger Agreement contains certain customary termination rights for Headwaters and Boral. The Merger Agreement may be terminated by either Boral or Headwaters if, among other things, (i) the Merger is not consummated on or before November 30, 2017; or (ii) the Merger becomes subject to a final, non-appealable law or order that restrains, makes illegal or prohibits the Merger. Upon termination of the Merger Agreement under certain specified circumstances, Headwaters will be required to pay Boral a termination fee of $65.0 million. In addition, under certain specified circumstances, Headwaters has agreed to reimburse Boral for its reasonable expenses in connection with the Merger Agreement and the transactions contemplated thereby, subject to certain specified caps, which reimbursed expenses would be credited against any termination fee that may subsequently be paid to Boral by Headwaters. The Merger Agreement also provides that Boral will be required to pay Headwaters a reverse termination fee of $75.0 million under certain specified circumstances. The foregoing summary of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement filed as Exhibit 2.2 to Headwaters’ Current Report on Form 8-K filed with the SEC on November 21, 2016 and incorporated herein by reference. Additional information related to the Merger and the Merger Agreement is set forth in Headwaters’ Current Report on Form 8-K filed with the SEC on November 21, 2016. Compensation Arrangements – Cash Performance Unit Awards. The Compensation Committee has approved various grants of performance unit awards to certain officers and employees, to be settled in cash, based on the achievement of certain stipulated goals, all of which are described in detail in the Form 10-K. During the December 2016 quarter, the Committee modified the terms of outstanding performance unit awards to eliminate adjustment for cash flows generated in subsequent periods if the Boral transaction closes. Also during the December 2016 quarter, the Committee approved grants of performance unit awards based upon the generation of Adjusted EBITDA during fiscal 2017, or through the date of closing the Boral transaction, if earlier. Generally, payment for these awards will be made 50% within 30 days of the closing date of the Boral transaction and 50% six months after the closing date. Otherwise, vesting will occur 50% at the end of fiscal 2018 and 50% at the end of fiscal 2019. Executive Change in Control Agreements. As disclosed in the Form 10-K and in the December 2016 Form 10-Q, the Compensation Committee has approved certain Executive Change in Control Agreements. If terminations associated with a change in control would have occurred on March 31, 2017, 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 $39.9 million (of which approximately $3.9 million has been expensed and accrued). Retention Agreements. As a result of entering into the Merger Agreement with Boral, Headwaters entered into retention agreements with certain employees to facilitate the continued employment of those employees through and beyond the closing date. Under the terms of most of the retention agreements, the employees must be continuously employed from the date of the agreement through the date that is six months after the closing date of the merger, at which time retention payments are due the employees. Additionally, under certain conditions these retention payments could still be payable six months following a termination of the Merger Agreement by Boral. Total commitments under these retention agreements aggregate approximately $6.8 million, virtually none of which has been expensed due to the lack of certainty of a closing date. It is currently expected that the estimated amounts to be paid will be expensed over the requisite period once a closing date (or alternatively, a termination date) has been determined with some probability. Severance Payments. In addition to the retention payment obligations described above, Headwaters has also agreed to make severance payments to certain employees who are terminated as a consequence of the Boral transaction closing. It is not possible to estimate either the timing or the amount of any severance related payments that could be made in future periods. Property, Plant and Equipment – As of March 31, 2017, Headwaters was committed to spend approximately $5.2 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 $(2.1) million and $1.0 million of expense (credit) for legal matters during the six months ended March 31, 2016 and 2017, respectively. Costs for outside legal counsel comprised a majority of Headwaters’ litigation-related costs in the periods 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 therefore has recorded a liability of $0 as of March 31, 2017. The substantial claims and damages sought by claimants 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 contaminated the air and 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 claimed by one plaintiff who is typical of all but seven plaintiffs are not cognizable. All but seven Plaintiffs have asserted in discovery that they were not seeking personal injury damages except emotional distress. The remaining claims in the case consist of loss of enjoyment of property by 74 people who were minors in 2004 and one adult who claims a personal injury related to breathing. 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. The motion is expected to be heard in May 2017. 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. However, in January 2017 the West Virginia Supreme Court ordered a hearing regarding a statutory defense. The hearing was held in March 2017 but no decision has been issued. All proceedings in the trial court have been stayed pending the decision. Headwaters has filed claims for defense and indemnity with several of its insurers. 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). Beginning in early 2011, 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 in 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. 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. Discovery is underway. Trial is set for 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 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 certain Headwaters subsidiaries within the construction materials segment (HCM), 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 HCM 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 HCM 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 HCM’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. Trial is set for November 2017. 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 | 6 Months Ended |
Mar. 31, 2017 | |
Discontinued Operations | |
Discontinued Operations | 12. Discontinued Operations In 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 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 shown in the following table: Three Months Ended Six Months Ended March 31, March 31, (in thousands) 2016 2017 2016 2017 Gain (loss) from discontinued operations before income taxes $ $ $ $ Income tax benefit (provision) Income (loss) from discontinued operations, net of income taxes $ (228) $ 6 $ (444) $ 159 The gain (loss) from operations reflected in the table above represents primarily the activity related to certain litigation which commenced prior to disposal of the business. Certain of this litigation was settled favorably to Headwaters during the March 2016 quarter, resulting in a gain. In accordance with terms of the settlement agreement, Headwaters received additional consideration in the December 2016 quarter and could receive additional cash receipts in the future, dependent primarily upon future coal sales by the buyer. These potential cash receipts, including the above revenue amounts, are being recognized in the periods when received. 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, including the reported amounts reflected in the table. 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 future plant 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 are being accounted for in the periods if and when any such amounts are received. 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 currently performing permit reclamation responsibilities at one site. As of September 30, 2016 and March 31, 2017, approximately $9.3 million and $8.7 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 | 6 Months Ended |
Mar. 31, 2017 | |
Related Party Transaction | |
Related Party Transaction | 13. Related Party Transactions During the six months ended March 31, 2017, Headwaters was involved in the following transactions with related parties. One of Headwaters’ subsidiaries purchased approximately $1.6 million of supplies from a vendor owned by an employee of the subsidiary. During the March 2017 quarter, another subsidiary loaned approximately $1.4 million to the President of the subsidiary, which non-interest bearing loan was repaid before March 31, 2017. |
Condensed Consolidating Financi
Condensed Consolidating Financial Information | 6 Months Ended |
Mar. 31, 2017 | |
Condensed Consolidating Financial Information | |
Condensed Consolidating Financial Information | 14. 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, 2016 Non- Eliminations Guarantor guarantor Parent and Headwaters (in thousands) Subsidiaries Subsidiaries Company Reclassifications Consolidated ASSETS Current assets: Cash and cash equivalents $ 27,012 $ 5,304 $ 32,982 $ — $ 65,298 Trade receivables, net 145,443 6,641 — — 152,084 Inventories 67,549 5,119 — — 72,668 Current income taxes — — 59,989 (58,802) 1,187 Other 11,975 1,481 61 — 13,517 Total current assets 251,979 18,545 93,032 (58,802) 304,754 Property, plant and equipment, net 179,758 9,852 17,182 — 206,792 Other assets: Goodwill 248,016 42,487 — — 290,503 Intangible assets, net 282,239 36,923 — — 319,162 Investments in subsidiaries — — 721,760 (721,760) — Intercompany accounts and notes 26,707 — 701,040 (727,747) — Deferred income taxes — 23,083 57,053 (12,077) 68,059 Other 13,293 10,922 24,958 — 49,173 Total other assets 570,255 113,415 1,504,811 (1,461,584) 726,897 Total assets $ 1,001,992 $ 141,812 $ 1,615,025 $ (1,520,386) $ 1,238,443 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 27,659 $ 1,301 $ 1,251 $ — $ 30,211 Accrued personnel costs 14,945 519 29,902 — 45,366 Current income taxes 56,553 2,249 — (58,802) — Other accrued liabilities 55,942 5,002 2,841 — 63,785 Current portion of long-term debt — — 7,785 — 7,785 Total current liabilities 155,099 9,071 41,779 (58,802) 147,147 Long-term liabilities: Long-term debt, net — — 746,716 — 746,716 Income taxes 12,077 — — (12,077) — Intercompany accounts and notes — 211,087 516,660 (727,747) — Other 4,581 16,941 19,708 — 41,230 Total long-term liabilities 16,658 228,028 1,283,084 (739,824) 787,946 Total liabilities 171,757 237,099 1,324,863 (798,626) 935,093 Redeemable non-controlling interest in consolidated subsidiary — 13,363 — — 13,363 Stockholders’ equity: Common stock — — — 74 Capital in excess of par value 711,755 52,429 733,292 (764,359) 733,117 Retained earnings (accumulated deficit) 118,480 (161,079) (441,793) 42,599 (441,793) Treasury stock — — (1,411) — (1,411) Total stockholders’ equity 830,235 (108,650) 290,162 (721,760) 289,987 Total liabilities and stockholders’ equity $ 1,001,992 $ 141,812 $ 1,615,025 $ (1,520,386) $ 1,238,443 CONDENSED CONSOLIDATING BALANCE SHEET — March 31, 2017 Non- Eliminations Guarantor guarantor Parent and Headwaters (in thousands) Subsidiaries Subsidiaries Company Reclassifications Consolidated ASSETS Current assets: Cash and cash equivalents $ 29,344 $ 8,783 $ 20,001 $ — $ 58,128 Trade receivables, net 127,396 6,329 — — 133,725 Inventories 84,506 5,491 — — 89,997 Current income taxes — — 69,089 (66,408) 2,681 Other 8,814 613 649 — 10,076 Total current assets 250,060 21,216 89,739 (66,408) 294,607 Property, plant and equipment, net 200,191 9,761 8,447 — 218,399 Other assets: Goodwill 256,611 43,654 — — 300,265 Intangible assets, net 270,779 35,525 — — 306,304 Investments in subsidiaries — — 827,541 (827,541) — Intercompany accounts and notes 116,699 — 602,353 (719,052) — Deferred income taxes — 22,618 58,299 (14,385) 66,532 Other 10,177 8,842 24,511 — 43,530 Total other assets 654,266 110,639 1,512,704 (1,560,978) 716,631 Total assets $ 1,104,517 $ 141,616 $ 1,610,890 $ (1,627,386) $ 1,229,637 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 26,528 $ 1,157 $ 474 $ — $ 28,159 Accrued personnel costs 9,950 371 28,565 — 38,886 Current income taxes 63,019 3,389 — (66,408) — Other accrued liabilities 48,764 3,328 3,492 — 55,584 Total current liabilities 148,261 8,245 32,531 (66,408) 122,629 Long-term liabilities: Long-term debt, net — — 741,048 — 741,048 Intercompany accounts and notes — 212,343 506,709 (719,052) — Other 19,501 16,960 22,422 (14,385) 44,498 Total long-term liabilities 19,501 229,303 1,270,179 (733,437) 785,546 Total liabilities 167,762 237,548 1,302,710 (799,845) 908,175 Redeemable non-controlling interest in consolidated subsidiary — 13,458 — — 13,458 Stockholders’ equity: Common stock — — — 75 Capital in excess of par value 786,669 49,802 740,081 (836,647) 739,905 Retained earnings (accumulated deficit) 150,086 (159,192) (430,585) 9,106 (430,585) Treasury stock — — (1,391) — (1,391) Total stockholders’ equity 936,755 (109,390) 308,180 (827,541) 308,004 Total liabilities and stockholders’ equity $ 1,104,517 $ 141,616 $ 1,610,890 $ (1,627,386) $ 1,229,637 CONDENSED CONSOLIDATING STATEMENT OF INCOME Three Months Ended March 31, 2016 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Revenue: Building products $ 85,688 $ 12,413 $ — $ — $ 98,101 Construction materials 102,849 — — — 102,849 Energy technology 1,382 — — — 1,382 Total revenue 189,919 12,413 — — 202,332 Cost of revenue: Building products 60,947 8,692 — — 69,639 Construction materials 77,347 — — — 77,347 Energy technology 469 — — — 469 Total cost of revenue 138,763 8,692 — — 147,455 Gross profit 51,156 3,721 — — 54,877 Operating expenses: Selling, general and administrative 29,331 1,859 6,692 — 37,882 Amortization 4,446 369 — — 4,815 Total operating expenses 33,777 2,228 6,692 — 42,697 Operating income (loss) 17,379 1,493 (6,692) — 12,180 Other income (expense): Net interest income (expense) 5 (3) (8,058) — (8,056) Equity in earnings of subsidiaries — — 11,021 (11,021) — Other, net (82) 70 — — (12) Total other income (expense), net (77) 67 2,963 (11,021) (8,068) Income (loss) from continuing operations before income taxes 17,302 1,560 (3,729) (11,021) 4,112 Income tax benefit (provision) (6,720) (610) 5,830 — (1,500) Income from continuing operations 10,582 950 2,101 (11,021) 2,612 Loss from discontinued operations, net of income taxes — (228) — — (228) Net income 10,582 722 2,101 (11,021) 2,384 Net income attributable to non-controlling interest — (283) — — (283) Net income attributable to Headwaters Incorporated $ 10,582 $ 439 $ 2,101 $ (11,021) $ 2,101 CONDENSED CONSOLIDATING STATEMENT OF INCOME Three Months Ended March 31, 2017 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Revenue: Building products $ 126,151 $ 14,565 $ — $ — $ 140,716 Construction materials 116,037 — — — 116,037 Energy technology 2,540 — — — 2,540 Total revenue 244,728 14,565 — — 259,293 Cost of revenue: Building products 89,404 10,378 — — 99,782 Construction materials 87,948 — — — 87,948 Energy technology 1,056 — — — 1,056 Total cost of revenue 178,408 10,378 — — 188,786 Gross profit 66,320 4,187 — — 70,507 Operating expenses: Selling, general and administrative 37,053 1,927 10,414 — 49,394 Amortization 5,952 486 — — 6,438 Total operating expenses 43,005 2,413 10,414 — 55,832 Operating income (loss) 23,315 1,774 (10,414) — 14,675 Other income (expense): Net interest income (expense) 3 (2) (8,223) — (8,222) Equity in earnings of subsidiaries — — 15,928 (15,928) — Other, net 94 1,879 — — 1,973 Total other income (expense), net 97 1,877 7,705 (15,928) (6,249) Income (loss) from continuing operations before income taxes 23,412 3,651 (2,709) (15,928) 8,426 Income tax benefit (provision) (9,130) (1,420) 7,250 — (3,300) Income from continuing operations 14,282 2,231 4,541 (15,928) 5,126 Income from discontinued operations, net of income taxes — 6 — — 6 Net income 14,282 2,237 4,541 (15,928) 5,132 Net income attributable to non-controlling interest — (591) — — (591) Net income attributable to Headwaters Incorporated $ 14,282 $ 1,646 $ 4,541 $ (15,928) $ 4,541 CONDENSED CONSOLIDATING STATEMENT OF INCOME Six Months Ended March 31, 2016 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Revenue: Building products $ 175,083 $ 24,613 $ — $ — $ 199,696 Construction materials 219,097 — — — 219,097 Energy technology 1,957 — — — 1,957 Total revenue 396,137 24,613 — — 420,750 Cost of revenue: Building products 121,934 17,257 — — 139,191 Construction materials 161,624 — — — 161,624 Energy technology 787 — — — 787 Total cost of revenue 284,345 17,257 — — 301,602 Gross profit 111,792 7,356 — — 119,148 Operating expenses: Selling, general and administrative 57,025 3,553 12,186 — 72,764 Amortization 8,644 737 — — 9,381 Total operating expenses 65,669 4,290 12,186 — 82,145 Operating income (loss) 46,123 3,066 (12,186) — 37,003 Other income (expense): Net interest expense (95) (3) (16,175) — (16,273) Equity in earnings of subsidiaries — — 29,647 (29,647) — Other, net (125) 44 — — (81) Total other income (expense), net (220) 41 13,472 (29,647) (16,354) Income from continuing operations before income taxes 45,903 3,107 1,286 (29,647) 20,649 Income tax benefit (provision) (17,130) (1,210) 13,240 — (5,100) Income from continuing operations 28,773 1,897 14,526 (29,647) 15,549 Loss from discontinued operations, net of income taxes — (444) — — (444) Net income 28,773 1,453 14,526 (29,647) 15,105 Net income attributable to noncontrolling interest — (579) — — (579) Net income attributable to Headwaters Incorporated $ 28,773 $ 874 $ 14,526 $ (29,647) $ 14,526 CONDENSED CONSOLIDATING STATEMENT OF INCOME Six Months Ended March 31, 2017 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Revenue: Building products $ 246,230 $ 29,527 $ — $ — $ 275,757 Construction materials 236,028 — — — 236,028 Energy technology 3,083 — — — 3,083 Total revenue 485,341 29,527 — — 514,868 Cost of revenue: Building products 174,182 22,129 — — 196,311 Construction materials 176,212 — — — 176,212 Energy technology 1,219 — — — 1,219 Total cost of revenue 351,613 22,129 — — 373,742 Gross profit 133,728 7,398 — — 141,126 Operating expenses: Selling, general and administrative 71,065 4,051 19,259 — 94,375 Amortization 11,346 1,390 — — 12,736 Total operating expenses 82,411 5,441 19,259 — 107,111 Operating income (loss) 51,317 1,957 (19,259) — 34,015 Other income (expense): Net interest expense (121) (4) (17,016) — (17,141) Equity in earnings of subsidiaries — — 33,493 (33,493) — Other, net 20 2,107 — — 2,127 Total other income (expense), net (101) 2,103 16,477 (33,493) (15,014) Income (loss) from continuing operations before income taxes 51,216 4,060 (2,782) (33,493) 19,001 Income tax benefit (provision) (19,610) (1,580) 13,990 — (7,200) Income from continuing operations 31,606 2,480 11,208 (33,493) 11,801 Income from discontinued operations, net of income taxes — 159 — — 159 Net income 31,606 2,639 11,208 (33,493) 11,960 Net income attributable to noncontrolling interest — (752) — — (752) Net income attributable to Headwaters Incorporated $ 31,606 $ 1,887 $ 11,208 $ (33,493) $ 11,208 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Six Months Ended March 31, 2016 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Cash flows from operating activities: Net income $ 28,773 $ 1,453 $ 14,526 $ (29,647) $ 15,105 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 26,084 1,503 310 — 27,897 Interest expense related to amortization of debt issue costs and debt discount — — 1,184 — 1,184 Debt pre-payment premiums — — 93 — 93 Stock-based compensation 537 — 984 — 1,521 Deferred income taxes 6,809 159 1,675 — 8,643 Tax benefit from exercise of stock appreciation rights and vesting of restricted stock (95) — (2) — (97) Net loss (gain) on disposition of property, plant and equipment (49) 3 — — (46) Net loss of unconsolidated joint venture — 26 — — 26 Equity in earnings of subsidiaries — — (29,647) 29,647 — Decrease (increase) in trade receivables 34,198 (660) — — 33,538 Increase in inventories (3,097) (969) — — (4,066) Decrease in accounts payable and accrued liabilities (17,680) (3,178) (15,514) — (36,372) Other changes in operating assets and liabilities, net (9,522) 3,109 3,428 — (2,985) Net cash provided by (used in) operating activities 65,958 1,446 (22,963) — 44,441 Cash flows from investing activities: Business acquisitions (73,800) (22,657) — — (96,457) Purchase of property, plant and equipment (18,856) (268) (1,758) — (20,882) Proceeds from disposition of property, plant and equipment 404 — — — 404 Net increase in long-term receivables and deposits (1,546) (22) (161) — (1,729) Net change in other assets (1,443) (109) (2,265) — (3,817) Net cash used in investing activities (95,241) (23,056) (4,184) — (122,481) Cash flows from financing activities: Payments on long-term debt — — (5,874) — (5,874) Debt pre-payment premiums — — (93) — (93) Dividends paid to non-controlling interest in consolidated subsidiary — (735) — — (735) Employee stock purchases 390 20 129 — 539 Tax benefit from exercise of stock appreciation rights and vesting of restricted stock 95 — 2 — 97 Intercompany transfers 18,968 21,940 (40,908) — Net cash provided by (used in) financing activities 19,453 21,225 (46,744) — (6,066) Net decrease in cash and cash equivalents (9,830) (385) (73,891) — (84,106) Cash and cash equivalents, beginning of period 25,819 3,577 113,201 — 142,597 Cash and cash equivalents, end of period $ 15,989 $ 3,192 $ 39,310 $ — $ 58,491 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Six Months Ended March 31, 2017 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Cash flows from operating activities: Net income $ 31,606 $ 2,639 $ 11,208 $ (33,493) $ 11,960 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 32,584 2,237 1,386 — 36,207 Interest expense related to amortization of debt issue costs and debt discount — — 1,606 — 1,606 Stock-based compensation 327 — 574 — 901 Deferred income taxes 3,097 465 3,537 — 7,099 Tax benefit from exercise of stock appreciation rights and vesting of restricted stock — — (5,860) — (5,860) Net loss (gain) on disposition of property, plant and equipment (223) 7 — — (216) Net loss of unconsolidated joint venture — 19 — — 19 Equity in earnings of subsidiaries — — (33,493) 33,493 Decrease in trade receivables 19,370 312 — — 19,682 Increase in inventories (14,448) (510) — — (14,958) Decrease in accounts payable and accrued liabilities (15,864) (2,087) (1,462) — (19,413) Other changes in operating assets and liabilities, net (13,849) 870 10,622 — (2,357) Net cash provided by (used in) operating activities 42,600 3,952 (11,882) — 34,670 Cash flows from investing activities: Business acquisitions, net of cash acquired (10,530) — — — (10,530) Purchase of property, plant and equipment (27,561) (673) (1,499) — (29,733) Proceeds from disposition of property, plant and equipment 597 29 — — 626 Net decrease (increase) in long-term receivables and deposits 1,731 (8) 3,167 — 4,890 Net change in other assets (346) 2,207 507 — 2,368 Net cash provided by (used in) investing activities (36,109) 1,555 2,175 — (32,379) Cash flows from financing activities: Payments on long-term debt — — (15,000) — (15,000) Dividends paid to non-controlling interest in consolidated subsidiary — (657) — — (657) Employee stock purchases 235 27 74 — 336 Tax benefit from exercise of stock appreciation rights and vesting of restricted stock — — 5,860 — 5,860 Intercompany transfers (4,394) (1,398) 5,792 — Net cash used in financing activities (4,159) (2,028) (3,274) — (9,461) Net increase (decrease) in cash and cash equivalents 2,332 3,479 (12,981) — (7,170) Cash and cash equivalents, beginning of period 27,012 5,304 32,982 — 65,298 Cash and cash equivalents, end of period $ 29,344 $ 8,783 $ 20,001 $ — $ 58,128 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Segment Reporting | |
Schedule of Segment Reporting | Three Months Ended March 31, 2016 Building Construction Energy (in thousands) products materials technology Corporate Totals Segment revenue $ 98,101 $ 102,849 $ 1,382 $ $ 202,332 Depreciation and amortization $ (9,117) $ (4,523) $ (324) $ (151) $ (14,115) Operating income (loss) $ 6,344 $ 13,691 $ (1,163) $ (6,692) $ 12,180 Net interest expense (8,056) Other income (expense), net (12) Income tax provision (1,500) Income from continuing operations 2,612 Loss from discontinued operations, net of income taxes (228) Net income $ 2,384 Capital expenditures $ 6,854 $ 5,487 $ $ 856 $ 13,197 Segment assets as of September 30, 2016 $ 676,012 $ 385,595 $ 43,412 $ 133,424 $ 1,238,443 Three Months Ended March 31, 2017 Building Construction Energy (in thousands) products materials technology Corporate Totals Segment revenue $ 140,716 $ 116,037 $ 2,540 $ $ 259,293 Depreciation and amortization $ (11,867) $ (5,441) $ (378) $ (679) $ (18,365) Operating income (loss) $ 11,383 $ 15,195 $ (1,489) $ (10,414) $ 14,675 Net interest expense (8,222) Other income (expense), net 1,973 Income tax provision (3,300) Income from continuing operations 5,126 Income from discontinued operations, net of income taxes 6 Net income $ 5,132 Capital expenditures $ 9,356 $ 4,122 $ $ 657 $ 14,193 Segment assets as of March 31, 2017 $ 700,035 $ 372,932 $ 41,295 $ 115,375 $ 1,229,637 Six Months Ended March 31, 2016 Building Construction Energy (in thousands) products materials technology Corporate Totals Segment revenue $ 199,696 $ 219,097 $ 1,957 $ $ 420,750 Depreciation and amortization $ (17,977) $ (8,963) $ (647) $ (310) $ (27,897) Operating income (loss) $ 18,019 $ 34,054 $ (2,884) $ (12,186) $ 37,003 Net interest expense (16,273) Other income (expense), net (81) Income tax provision (5,100) Income from continuing operations 15,549 Loss from discontinued operations, net of income taxes (444) Net income $ 15,105 Capital expenditures $ 11,255 $ 7,869 $ $ 1,758 $ 20,882 Six Months Ended March 31, 2017 Building Construction Energy (in thousands) products materials technology Corporate Totals Segment revenue $ 275,757 $ 236,028 $ 3,083 $ $ 514,868 Depreciation and amortization $ (23,582) $ (10,706) $ (533) $ (1,386) $ (36,207) Operating income (loss) $ 22,783 $ 33,793 $ (3,302) $ (19,259) $ 34,015 Net interest expense (17,141) Other income (expense), net 2,127 Income tax provision (7,200) Income from continuing operations 11,801 Income from discontinued operations, net of income taxes 159 Net income $ 11,960 Capital expenditures $ 20,756 $ 7,400 $ $ 1,499 $ 29,733 |
Acquisitions (Tables)
Acquisitions (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Acquisitions | |
Schedule of activity of non-controlling interest | (in thousands) Balance as of September 30, 2016 13,363 Net income attributable to non-controlling interest 752 Dividends paid to non-controlling interest (657) Balance as of March 31, 2017 $ 13,458 |
Roofing Businesses | |
Acquisitions | |
Schedule of estimated fair values of assets acquired and liabilities assumed as of the acquisition date | (in thousands) Current assets $ 7,402 Current liabilities (1,565) Property, plant and equipment 3,138 Intangible assets: Customer relationships (12-year life) 3,670 Trade names (indefinite life) 4,801 Intellectual property (20-year life) 10,026 Goodwill 34,284 Long-term liabilities (4,761) Net assets acquired $ 56,995 |
SynMat | |
Acquisitions | |
Schedule of estimated fair values of assets acquired and liabilities assumed as of the acquisition date | (in thousands) Current assets $ 3,965 Current liabilities (1,515) Property, plant and equipment 3,710 Intangible assets: Contracts (20-year life) 15,430 Customer relationships (15-year life) 2,690 Trade names (indefinite life) 3,900 Goodwill 4,988 Net assets acquired $ 33,168 |
Krestmark Industries | |
Acquisitions | |
Schedule of estimated fair values of assets acquired and liabilities assumed as of the acquisition date | (in thousands) Current assets $ 20,731 Current liabilities (3,884) Property, plant and equipment 5,597 Intangible assets: Customer relationships (20-year life) 109,300 Trade name (indefinite life) 36,600 Non-competition agreements (7-year life) 2,410 Goodwill 69,309 Net assets acquired $ 240,063 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Inventories | |
Schedule of components of inventory | (in thousands) September 30, 2016 March 31, 2017 Raw materials $ 22,333 $ 26,117 Finished goods 50,335 63,880 $ 72,668 $ 89,997 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Intangible Assets | |
Schedule of gross carrying amounts and accumulated amortization of intangible assets | September 30, 2016 March 31, 2017 Gross Gross Estimated Carrying Accumulated Carrying Accumulated (in thousands of dollars) useful lives Amount Amortization Amount Amortization Trade names Indefinite $ 63,245 $ — $ 62,574 $ — Intellectual property 20 years 10,102 — 10,026 654 Contracts 15 - 20 years 127,520 76,029 125,130 76,697 Customer relationships 5 - 20 years 227,909 67,493 226,779 73,912 Trade names 20 years 66,755 39,744 66,755 41,413 Patents and patented technologies 7 - 19 years 5,401 2,875 6,347 3,180 Other 5 - 17 years 7,035 2,664 7,549 3,000 $ 507,967 $ 188,805 $ 505,160 $ 198,856 |
Schedule of total currently estimated annual amortization expense | Year ending September 30: (in thousands) 2017 $ 24,716 2018 24,928 2019 23,906 2020 19,802 2021 19,687 2022 19,436 |
Long-term Debt (Tables)
Long-term Debt (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Long-term Debt | |
Schedule of the discounted carrying value of long-term debt | September 30, March 31, (in thousands) 2016 2017 Senior secured term loan, due March 2022 (face amount $768,804 as of September 30, 2016 and $753,804 as of March 31, 2017) $ 754,501 $ 741,048 Less current portion (7,785) — Carrying amount of long-term debt, net of discounts and debt issue costs $ 746,716 $ 741,048 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share | |
Schedule of computation of basic and diluted EPS | Three Months Ended Six Months Ended March 31, March 31, (in thousands, except per-share amounts) 2016 2017 2016 2017 Numerator: Income from continuing operations $ 2,612 $ 5,126 $ 15,549 $ 11,801 Income from continuing operations attributable to non-controlling interest (283) (591) (579) (752) Numerator for basic and diluted earnings per share from continuing operations — income from continuing operations attributable to Headwaters Incorporated 2,329 4,535 14,970 11,049 Numerator for basic and diluted earnings per share from discontinued operations — income (loss) from discontinued operations, net of income taxes (228) 6 (444) 159 Numerator for basic and diluted earnings per share — net income attributable to Headwaters Incorporated $ 2,101 $ 4,541 $ 14,526 $ 11,208 Denominator: Denominator for basic earnings per share — weighted-average shares outstanding 73,818 74,835 73,804 74,536 Effect of dilutive securities — shares issuable upon exercise of options and SARs and vesting of restricted stock 1,147 1,291 Denominator for diluted earnings per share — weighted-average shares outstanding after assumed exercises and vesting 75,341 75,982 75,353 75,827 Basic income (loss) per share attributable to Headwaters Incorporated: From continuing operations $ 0.03 $ 0.06 $ 0.21 $ 0.15 From discontinued operations $ 0.03 $ 0.06 $ 0.20 $ 0.15 Diluted income (loss) per share attributable to Headwaters Incorporated: From continuing operations $ 0.03 $ 0.06 $ 0.20 $ 0.15 From discontinued operations $ 0.03 $ 0.06 $ 0.19 $ 0.15 Anti-dilutive securities not considered in diluted EPS calculation: Stock-settled SARs 256 — 292 36 Stock options — — 36 — |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Discontinued Operations | |
Schedule of information for the discontinued coal cleaning business | Three Months Ended Six Months Ended March 31, March 31, (in thousands) 2016 2017 2016 2017 Gain (loss) from discontinued operations before income taxes $ $ $ $ Income tax benefit (provision) Income (loss) from discontinued operations, net of income taxes $ (228) $ 6 $ (444) $ 159 |
Condensed Consolidating Finan29
Condensed Consolidating Financial Information (Tables) | 6 Months Ended |
Mar. 31, 2017 | |
Condensed Consolidating Financial Information | |
Schedule of Condensed Consolidating Balance Sheet | CONDENSED CONSOLIDATING BALANCE SHEET — September 30, 2016 Non- Eliminations Guarantor guarantor Parent and Headwaters (in thousands) Subsidiaries Subsidiaries Company Reclassifications Consolidated ASSETS Current assets: Cash and cash equivalents $ 27,012 $ 5,304 $ 32,982 $ — $ 65,298 Trade receivables, net 145,443 6,641 — — 152,084 Inventories 67,549 5,119 — — 72,668 Current income taxes — — 59,989 (58,802) 1,187 Other 11,975 1,481 61 — 13,517 Total current assets 251,979 18,545 93,032 (58,802) 304,754 Property, plant and equipment, net 179,758 9,852 17,182 — 206,792 Other assets: Goodwill 248,016 42,487 — — 290,503 Intangible assets, net 282,239 36,923 — — 319,162 Investments in subsidiaries — — 721,760 (721,760) — Intercompany accounts and notes 26,707 — 701,040 (727,747) — Deferred income taxes — 23,083 57,053 (12,077) 68,059 Other 13,293 10,922 24,958 — 49,173 Total other assets 570,255 113,415 1,504,811 (1,461,584) 726,897 Total assets $ 1,001,992 $ 141,812 $ 1,615,025 $ (1,520,386) $ 1,238,443 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 27,659 $ 1,301 $ 1,251 $ — $ 30,211 Accrued personnel costs 14,945 519 29,902 — 45,366 Current income taxes 56,553 2,249 — (58,802) — Other accrued liabilities 55,942 5,002 2,841 — 63,785 Current portion of long-term debt — — 7,785 — 7,785 Total current liabilities 155,099 9,071 41,779 (58,802) 147,147 Long-term liabilities: Long-term debt, net — — 746,716 — 746,716 Income taxes 12,077 — — (12,077) — Intercompany accounts and notes — 211,087 516,660 (727,747) — Other 4,581 16,941 19,708 — 41,230 Total long-term liabilities 16,658 228,028 1,283,084 (739,824) 787,946 Total liabilities 171,757 237,099 1,324,863 (798,626) 935,093 Redeemable non-controlling interest in consolidated subsidiary — 13,363 — — 13,363 Stockholders’ equity: Common stock — — — 74 Capital in excess of par value 711,755 52,429 733,292 (764,359) 733,117 Retained earnings (accumulated deficit) 118,480 (161,079) (441,793) 42,599 (441,793) Treasury stock — — (1,411) — (1,411) Total stockholders’ equity 830,235 (108,650) 290,162 (721,760) 289,987 Total liabilities and stockholders’ equity $ 1,001,992 $ 141,812 $ 1,615,025 $ (1,520,386) $ 1,238,443 CONDENSED CONSOLIDATING BALANCE SHEET — March 31, 2017 Non- Eliminations Guarantor guarantor Parent and Headwaters (in thousands) Subsidiaries Subsidiaries Company Reclassifications Consolidated ASSETS Current assets: Cash and cash equivalents $ 29,344 $ 8,783 $ 20,001 $ — $ 58,128 Trade receivables, net 127,396 6,329 — — 133,725 Inventories 84,506 5,491 — — 89,997 Current income taxes — — 69,089 (66,408) 2,681 Other 8,814 613 649 — 10,076 Total current assets 250,060 21,216 89,739 (66,408) 294,607 Property, plant and equipment, net 200,191 9,761 8,447 — 218,399 Other assets: Goodwill 256,611 43,654 — — 300,265 Intangible assets, net 270,779 35,525 — — 306,304 Investments in subsidiaries — — 827,541 (827,541) — Intercompany accounts and notes 116,699 — 602,353 (719,052) — Deferred income taxes — 22,618 58,299 (14,385) 66,532 Other 10,177 8,842 24,511 — 43,530 Total other assets 654,266 110,639 1,512,704 (1,560,978) 716,631 Total assets $ 1,104,517 $ 141,616 $ 1,610,890 $ (1,627,386) $ 1,229,637 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 26,528 $ 1,157 $ 474 $ — $ 28,159 Accrued personnel costs 9,950 371 28,565 — 38,886 Current income taxes 63,019 3,389 — (66,408) — Other accrued liabilities 48,764 3,328 3,492 — 55,584 Total current liabilities 148,261 8,245 32,531 (66,408) 122,629 Long-term liabilities: Long-term debt, net — — 741,048 — 741,048 Intercompany accounts and notes — 212,343 506,709 (719,052) — Other 19,501 16,960 22,422 (14,385) 44,498 Total long-term liabilities 19,501 229,303 1,270,179 (733,437) 785,546 Total liabilities 167,762 237,548 1,302,710 (799,845) 908,175 Redeemable non-controlling interest in consolidated subsidiary — 13,458 — — 13,458 Stockholders’ equity: Common stock — — — 75 Capital in excess of par value 786,669 49,802 740,081 (836,647) 739,905 Retained earnings (accumulated deficit) 150,086 (159,192) (430,585) 9,106 (430,585) Treasury stock — — (1,391) — (1,391) Total stockholders’ equity 936,755 (109,390) 308,180 (827,541) 308,004 Total liabilities and stockholders’ equity $ 1,104,517 $ 141,616 $ 1,610,890 $ (1,627,386) $ 1,229,637 |
Schedule of Condensed Consolidating Statement of Income | CONDENSED CONSOLIDATING STATEMENT OF INCOME Three Months Ended March 31, 2016 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Revenue: Building products $ 85,688 $ 12,413 $ — $ — $ 98,101 Construction materials 102,849 — — — 102,849 Energy technology 1,382 — — — 1,382 Total revenue 189,919 12,413 — — 202,332 Cost of revenue: Building products 60,947 8,692 — — 69,639 Construction materials 77,347 — — — 77,347 Energy technology 469 — — — 469 Total cost of revenue 138,763 8,692 — — 147,455 Gross profit 51,156 3,721 — — 54,877 Operating expenses: Selling, general and administrative 29,331 1,859 6,692 — 37,882 Amortization 4,446 369 — — 4,815 Total operating expenses 33,777 2,228 6,692 — 42,697 Operating income (loss) 17,379 1,493 (6,692) — 12,180 Other income (expense): Net interest income (expense) 5 (3) (8,058) — (8,056) Equity in earnings of subsidiaries — — 11,021 (11,021) — Other, net (82) 70 — — (12) Total other income (expense), net (77) 67 2,963 (11,021) (8,068) Income (loss) from continuing operations before income taxes 17,302 1,560 (3,729) (11,021) 4,112 Income tax benefit (provision) (6,720) (610) 5,830 — (1,500) Income from continuing operations 10,582 950 2,101 (11,021) 2,612 Loss from discontinued operations, net of income taxes — (228) — — (228) Net income 10,582 722 2,101 (11,021) 2,384 Net income attributable to non-controlling interest — (283) — — (283) Net income attributable to Headwaters Incorporated $ 10,582 $ 439 $ 2,101 $ (11,021) $ 2,101 CONDENSED CONSOLIDATING STATEMENT OF INCOME Three Months Ended March 31, 2017 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Revenue: Building products $ 126,151 $ 14,565 $ — $ — $ 140,716 Construction materials 116,037 — — — 116,037 Energy technology 2,540 — — — 2,540 Total revenue 244,728 14,565 — — 259,293 Cost of revenue: Building products 89,404 10,378 — — 99,782 Construction materials 87,948 — — — 87,948 Energy technology 1,056 — — — 1,056 Total cost of revenue 178,408 10,378 — — 188,786 Gross profit 66,320 4,187 — — 70,507 Operating expenses: Selling, general and administrative 37,053 1,927 10,414 — 49,394 Amortization 5,952 486 — — 6,438 Total operating expenses 43,005 2,413 10,414 — 55,832 Operating income (loss) 23,315 1,774 (10,414) — 14,675 Other income (expense): Net interest income (expense) 3 (2) (8,223) — (8,222) Equity in earnings of subsidiaries — — 15,928 (15,928) — Other, net 94 1,879 — — 1,973 Total other income (expense), net 97 1,877 7,705 (15,928) (6,249) Income (loss) from continuing operations before income taxes 23,412 3,651 (2,709) (15,928) 8,426 Income tax benefit (provision) (9,130) (1,420) 7,250 — (3,300) Income from continuing operations 14,282 2,231 4,541 (15,928) 5,126 Income from discontinued operations, net of income taxes — 6 — — 6 Net income 14,282 2,237 4,541 (15,928) 5,132 Net income attributable to non-controlling interest — (591) — — (591) Net income attributable to Headwaters Incorporated $ 14,282 $ 1,646 $ 4,541 $ (15,928) $ 4,541 CONDENSED CONSOLIDATING STATEMENT OF INCOME Six Months Ended March 31, 2016 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Revenue: Building products $ 175,083 $ 24,613 $ — $ — $ 199,696 Construction materials 219,097 — — — 219,097 Energy technology 1,957 — — — 1,957 Total revenue 396,137 24,613 — — 420,750 Cost of revenue: Building products 121,934 17,257 — — 139,191 Construction materials 161,624 — — — 161,624 Energy technology 787 — — — 787 Total cost of revenue 284,345 17,257 — — 301,602 Gross profit 111,792 7,356 — — 119,148 Operating expenses: Selling, general and administrative 57,025 3,553 12,186 — 72,764 Amortization 8,644 737 — — 9,381 Total operating expenses 65,669 4,290 12,186 — 82,145 Operating income (loss) 46,123 3,066 (12,186) — 37,003 Other income (expense): Net interest expense (95) (3) (16,175) — (16,273) Equity in earnings of subsidiaries — — 29,647 (29,647) — Other, net (125) 44 — — (81) Total other income (expense), net (220) 41 13,472 (29,647) (16,354) Income from continuing operations before income taxes 45,903 3,107 1,286 (29,647) 20,649 Income tax benefit (provision) (17,130) (1,210) 13,240 — (5,100) Income from continuing operations 28,773 1,897 14,526 (29,647) 15,549 Loss from discontinued operations, net of income taxes — (444) — — (444) Net income 28,773 1,453 14,526 (29,647) 15,105 Net income attributable to noncontrolling interest — (579) — — (579) Net income attributable to Headwaters Incorporated $ 28,773 $ 874 $ 14,526 $ (29,647) $ 14,526 CONDENSED CONSOLIDATING STATEMENT OF INCOME Six Months Ended March 31, 2017 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Revenue: Building products $ 246,230 $ 29,527 $ — $ — $ 275,757 Construction materials 236,028 — — — 236,028 Energy technology 3,083 — — — 3,083 Total revenue 485,341 29,527 — — 514,868 Cost of revenue: Building products 174,182 22,129 — — 196,311 Construction materials 176,212 — — — 176,212 Energy technology 1,219 — — — 1,219 Total cost of revenue 351,613 22,129 — — 373,742 Gross profit 133,728 7,398 — — 141,126 Operating expenses: Selling, general and administrative 71,065 4,051 19,259 — 94,375 Amortization 11,346 1,390 — — 12,736 Total operating expenses 82,411 5,441 19,259 — 107,111 Operating income (loss) 51,317 1,957 (19,259) — 34,015 Other income (expense): Net interest expense (121) (4) (17,016) — (17,141) Equity in earnings of subsidiaries — — 33,493 (33,493) — Other, net 20 2,107 — — 2,127 Total other income (expense), net (101) 2,103 16,477 (33,493) (15,014) Income (loss) from continuing operations before income taxes 51,216 4,060 (2,782) (33,493) 19,001 Income tax benefit (provision) (19,610) (1,580) 13,990 — (7,200) Income from continuing operations 31,606 2,480 11,208 (33,493) 11,801 Income from discontinued operations, net of income taxes — 159 — — 159 Net income 31,606 2,639 11,208 (33,493) 11,960 Net income attributable to noncontrolling interest — (752) — — (752) Net income attributable to Headwaters Incorporated $ 31,606 $ 1,887 $ 11,208 $ (33,493) $ 11,208 |
Schedule of Condensed Consolidating Statement of Cash Flows | CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Six Months Ended March 31, 2016 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Cash flows from operating activities: Net income $ 28,773 $ 1,453 $ 14,526 $ (29,647) $ 15,105 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 26,084 1,503 310 — 27,897 Interest expense related to amortization of debt issue costs and debt discount — — 1,184 — 1,184 Debt pre-payment premiums — — 93 — 93 Stock-based compensation 537 — 984 — 1,521 Deferred income taxes 6,809 159 1,675 — 8,643 Tax benefit from exercise of stock appreciation rights and vesting of restricted stock (95) — (2) — (97) Net loss (gain) on disposition of property, plant and equipment (49) 3 — — (46) Net loss of unconsolidated joint venture — 26 — — 26 Equity in earnings of subsidiaries — — (29,647) 29,647 — Decrease (increase) in trade receivables 34,198 (660) — — 33,538 Increase in inventories (3,097) (969) — — (4,066) Decrease in accounts payable and accrued liabilities (17,680) (3,178) (15,514) — (36,372) Other changes in operating assets and liabilities, net (9,522) 3,109 3,428 — (2,985) Net cash provided by (used in) operating activities 65,958 1,446 (22,963) — 44,441 Cash flows from investing activities: Business acquisitions (73,800) (22,657) — — (96,457) Purchase of property, plant and equipment (18,856) (268) (1,758) — (20,882) Proceeds from disposition of property, plant and equipment 404 — — — 404 Net increase in long-term receivables and deposits (1,546) (22) (161) — (1,729) Net change in other assets (1,443) (109) (2,265) — (3,817) Net cash used in investing activities (95,241) (23,056) (4,184) — (122,481) Cash flows from financing activities: Payments on long-term debt — — (5,874) — (5,874) Debt pre-payment premiums — — (93) — (93) Dividends paid to non-controlling interest in consolidated subsidiary — (735) — — (735) Employee stock purchases 390 20 129 — 539 Tax benefit from exercise of stock appreciation rights and vesting of restricted stock 95 — 2 — 97 Intercompany transfers 18,968 21,940 (40,908) — Net cash provided by (used in) financing activities 19,453 21,225 (46,744) — (6,066) Net decrease in cash and cash equivalents (9,830) (385) (73,891) — (84,106) Cash and cash equivalents, beginning of period 25,819 3,577 113,201 — 142,597 Cash and cash equivalents, end of period $ 15,989 $ 3,192 $ 39,310 $ — $ 58,491 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS Six Months Ended March 31, 2017 Non- Guarantor guarantor Parent Headwaters (in thousands) Subsidiaries Subsidiaries Company Eliminations Consolidated Cash flows from operating activities: Net income $ 31,606 $ 2,639 $ 11,208 $ (33,493) $ 11,960 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 32,584 2,237 1,386 — 36,207 Interest expense related to amortization of debt issue costs and debt discount — — 1,606 — 1,606 Stock-based compensation 327 — 574 — 901 Deferred income taxes 3,097 465 3,537 — 7,099 Tax benefit from exercise of stock appreciation rights and vesting of restricted stock — — (5,860) — (5,860) Net loss (gain) on disposition of property, plant and equipment (223) 7 — — (216) Net loss of unconsolidated joint venture — 19 — — 19 Equity in earnings of subsidiaries — — (33,493) 33,493 Decrease in trade receivables 19,370 312 — — 19,682 Increase in inventories (14,448) (510) — — (14,958) Decrease in accounts payable and accrued liabilities (15,864) (2,087) (1,462) — (19,413) Other changes in operating assets and liabilities, net (13,849) 870 10,622 — (2,357) Net cash provided by (used in) operating activities 42,600 3,952 (11,882) — 34,670 Cash flows from investing activities: Business acquisitions, net of cash acquired (10,530) — — — (10,530) Purchase of property, plant and equipment (27,561) (673) (1,499) — (29,733) Proceeds from disposition of property, plant and equipment 597 29 — — 626 Net decrease (increase) in long-term receivables and deposits 1,731 (8) 3,167 — 4,890 Net change in other assets (346) 2,207 507 — 2,368 Net cash provided by (used in) investing activities (36,109) 1,555 2,175 — (32,379) Cash flows from financing activities: Payments on long-term debt — — (15,000) — (15,000) Dividends paid to non-controlling interest in consolidated subsidiary — (657) — — (657) Employee stock purchases 235 27 74 — 336 Tax benefit from exercise of stock appreciation rights and vesting of restricted stock — — 5,860 — 5,860 Intercompany transfers (4,394) (1,398) 5,792 — Net cash used in financing activities (4,159) (2,028) (3,274) — (9,461) Net increase (decrease) in cash and cash equivalents 2,332 3,479 (12,981) — (7,170) Cash and cash equivalents, beginning of period 27,012 5,304 32,982 — 65,298 Cash and cash equivalents, end of period $ 29,344 $ 8,783 $ 20,001 $ — $ 58,128 |
Nature of Operations and Basi30
Nature of Operations and Basis of Presentation (Details) - segment | 6 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Nature of operations and basis of presentation | ||
Number of building materials segments | 2 | |
Percentage of total revenue and cost of revenue for services | 9.00% | 9.00% |
Segment Reporting (Details)
Segment Reporting (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2017USD ($) | Mar. 31, 2016USD ($) | Mar. 31, 2017USD ($)segment | Mar. 31, 2016USD ($) | Sep. 30, 2016USD ($) | |
Segment Reporting | |||||
Number of business segments | segment | 3 | ||||
Segment revenue | $ 259,293 | $ 202,332 | $ 514,868 | $ 420,750 | |
Depreciation and amortization | (18,365) | (14,115) | (36,207) | (27,897) | |
Operating income (loss) | 14,675 | 12,180 | 34,015 | 37,003 | |
Net interest expense | (8,222) | (8,056) | (17,141) | (16,273) | |
Other income (expense), net | 1,973 | (12) | 2,127 | (81) | |
Income tax provision | (3,300) | (1,500) | (7,200) | (5,100) | |
Income from continuing operations | 5,126 | 2,612 | 11,801 | 15,549 | |
Income (loss) from discontinued operations, net of income taxes | 6 | (228) | 159 | (444) | |
Net income | 5,132 | 2,384 | 11,960 | 15,105 | |
Capital expenditures | 14,193 | 13,197 | 29,733 | 20,882 | |
Segment assets | 1,229,637 | 1,238,443 | 1,229,637 | 1,238,443 | $ 1,238,443 |
Building products | |||||
Segment Reporting | |||||
Segment revenue | 140,716 | 98,101 | 275,757 | 199,696 | |
Construction materials | |||||
Segment Reporting | |||||
Segment revenue | 116,037 | 102,849 | 236,028 | 219,097 | |
Energy technology | |||||
Segment Reporting | |||||
Segment revenue | 2,540 | 1,382 | 3,083 | 1,957 | |
Operating Segments | Building products | |||||
Segment Reporting | |||||
Segment revenue | 140,716 | 98,101 | 275,757 | 199,696 | |
Depreciation and amortization | (11,867) | (9,117) | (23,582) | (17,977) | |
Operating income (loss) | 11,383 | 6,344 | 22,783 | 18,019 | |
Capital expenditures | 9,356 | 6,854 | 20,756 | 11,255 | |
Segment assets | 700,035 | 676,012 | 700,035 | 676,012 | |
Operating Segments | Construction materials | |||||
Segment Reporting | |||||
Segment revenue | 116,037 | 102,849 | 236,028 | 219,097 | |
Depreciation and amortization | (5,441) | (4,523) | (10,706) | (8,963) | |
Operating income (loss) | 15,195 | 13,691 | 33,793 | 34,054 | |
Capital expenditures | 4,122 | 5,487 | 7,400 | 7,869 | |
Segment assets | 372,932 | 385,595 | 372,932 | 385,595 | |
Operating Segments | Energy technology | |||||
Segment Reporting | |||||
Segment revenue | 2,540 | 1,382 | 3,083 | 1,957 | |
Depreciation and amortization | (378) | (324) | (533) | (647) | |
Operating income (loss) | (1,489) | (1,163) | (3,302) | (2,884) | |
Capital expenditures | 58 | 0 | 78 | 0 | |
Segment assets | 41,295 | 43,412 | 41,295 | 43,412 | |
Corporate, Non-Segment | |||||
Segment Reporting | |||||
Segment revenue | 0 | 0 | 0 | 0 | |
Depreciation and amortization | (679) | (151) | (1,386) | (310) | |
Operating income (loss) | (10,414) | (6,692) | (19,259) | (12,186) | |
Capital expenditures | 657 | 856 | 1,499 | 1,758 | |
Segment assets | $ 115,375 | $ 133,424 | $ 115,375 | $ 133,424 |
Acquisitions (Details)
Acquisitions (Details) $ in Thousands | Aug. 19, 2016USD ($) | Mar. 17, 2016USD ($) | Dec. 03, 2015USD ($)item | Mar. 31, 2017USD ($) | Jun. 30, 2016USD ($) | Mar. 31, 2016USD ($) | Mar. 31, 2017USD ($) | Mar. 31, 2016USD ($) | Sep. 30, 2016USD ($) | Nov. 13, 2015 | Sep. 30, 2014 |
Acquisitions | |||||||||||
Consideration paid net of cash acquired | $ 10,530 | $ 96,457 | |||||||||
Estimated fair values of assets acquired and liabilities assumed | |||||||||||
Goodwill | $ 300,265 | 300,265 | $ 290,503 | ||||||||
Intangible assets acquired: | |||||||||||
Income tax expense (benefit) | 3,300 | $ 1,500 | 7,200 | 5,100 | |||||||
Non-controlling interest in consolidated subsidiary | |||||||||||
Balance | 13,363 | ||||||||||
Net income attributable to non-controlling interest | 591 | 283 | 752 | $ 579 | |||||||
Dividends paid to non-controlling interest | (657) | ||||||||||
Balance | 13,458 | 13,458 | 13,363 | ||||||||
Entegra | |||||||||||
Acquisitions | |||||||||||
Percentage of equity interests acquired | 80.00% | ||||||||||
Intangible assets acquired: | |||||||||||
Noncontrolling equity interest (as a percent) | 20.00% | ||||||||||
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 | (1,565) | ||||||||||
Property, plant and equipment | 3,138 | ||||||||||
Goodwill | 34,284 | ||||||||||
Long-term liabilities | (4,761) | ||||||||||
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 | $ 4,801 | ||||||||||
Roofing Businesses | Customer relationships | |||||||||||
Intangible assets acquired: | |||||||||||
Finite lived intangible assets | $ 3,670 | ||||||||||
Estimated useful lives of the identified intangible assets | 12 years | ||||||||||
Roofing Businesses | Intellectual property | |||||||||||
Intangible assets acquired: | |||||||||||
Finite lived intangible assets | $ 10,026 | ||||||||||
Estimated useful lives of the identified intangible assets | 20 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 | ||||||||||
Payments of deferred consideration | 5,000 | ||||||||||
Estimated fair values of assets acquired and liabilities assumed | |||||||||||
Current assets | 3,965 | ||||||||||
Current liabilities | (1,515) | ||||||||||
Property, plant and equipment | 3,710 | ||||||||||
Goodwill | 4,988 | ||||||||||
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 | $ 3,900 | ||||||||||
SynMat | Contracts | |||||||||||
Intangible assets acquired: | |||||||||||
Finite lived intangible assets | $ 15,430 | ||||||||||
Estimated useful lives of the identified intangible assets | 20 years | ||||||||||
SynMat | Customer relationships | |||||||||||
Intangible assets acquired: | |||||||||||
Finite lived intangible assets | $ 2,690 | ||||||||||
Estimated useful lives of the identified intangible assets | 15 years | ||||||||||
Krestmark Industries | |||||||||||
Acquisitions | |||||||||||
Total cash consideration of acquisition | $ 240,100 | ||||||||||
Estimated fair values of assets acquired and liabilities assumed | |||||||||||
Current assets | 20,731 | ||||||||||
Current liabilities | (3,884) | ||||||||||
Property, plant and equipment | 5,597 | ||||||||||
Goodwill | 69,309 | ||||||||||
Net assets acquired | $ 240,063 | ||||||||||
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 | ||||||||||
Krestmark Industries | Maximum | |||||||||||
Intangible assets acquired: | |||||||||||
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 | $ 109,300 | ||||||||||
Estimated useful lives of the identified intangible assets | 20 years | ||||||||||
Krestmark Industries | Non-competition agreements | |||||||||||
Intangible assets acquired: | |||||||||||
Finite lived intangible assets | $ 2,410 | ||||||||||
Estimated useful lives of the identified intangible assets | 7 years | ||||||||||
Decking Manufacturing Assets | |||||||||||
Acquisitions | |||||||||||
Total cash consideration of acquisition | $ 6,300 | ||||||||||
Concrete Roof Tile Business | |||||||||||
Acquisitions | |||||||||||
Total cash consideration of acquisition | $ 10,400 | ||||||||||
Intangible assets acquired: | |||||||||||
Income tax expense (benefit) | 2,000 | ||||||||||
Concrete Roof Tile Business | Other Income | |||||||||||
Intangible assets acquired: | |||||||||||
Gain on acquired assets held for sale | $ 1,900 | $ 4,500 | |||||||||
Windows Company | |||||||||||
Acquisitions | |||||||||||
Total cash consideration of acquisition | $ 5,900 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Sep. 30, 2016 |
Inventories | ||
Raw materials | $ 26,117 | $ 22,333 |
Finished goods | 63,880 | 50,335 |
Inventories | $ 89,997 | $ 72,668 |
Intangible Assets - Gross Carry
Intangible Assets - Gross Carrying Amounts and Accumulated Amortization (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Sep. 30, 2016 | |
Gross carrying amount and accumulated amortization of intangible assets | |||||
Total Gross Carrying Amount | $ 505,160 | $ 505,160 | $ 507,967 | ||
Accumulated Amortization | 198,856 | 198,856 | 188,805 | ||
Amortization expense related to intangible assets | 6,400 | $ 4,800 | 12,700 | $ 9,400 | |
Trade names | |||||
Gross carrying amount and accumulated amortization of intangible assets | |||||
Gross Carrying Amount | 62,574 | $ 62,574 | 63,245 | ||
Intellectual property | |||||
Gross carrying amount and accumulated amortization of intangible assets | |||||
Estimated useful lives | 20 years | ||||
Gross Carrying Amount | 10,026 | $ 10,026 | 10,102 | ||
Accumulated Amortization | 654 | 654 | |||
Contracts | |||||
Gross carrying amount and accumulated amortization of intangible assets | |||||
Gross Carrying Amount | 125,130 | 125,130 | 127,520 | ||
Accumulated Amortization | 76,697 | 76,697 | 76,029 | ||
Customer relationships | |||||
Gross carrying amount and accumulated amortization of intangible assets | |||||
Gross Carrying Amount | 226,779 | 226,779 | 227,909 | ||
Accumulated Amortization | 73,912 | $ 73,912 | 67,493 | ||
Trade names | |||||
Gross carrying amount and accumulated amortization of intangible assets | |||||
Estimated useful lives | 20 years | ||||
Gross Carrying Amount | 66,755 | $ 66,755 | 66,755 | ||
Accumulated Amortization | 41,413 | 41,413 | 39,744 | ||
Patents and Patented Technologies | |||||
Gross carrying amount and accumulated amortization of intangible assets | |||||
Gross Carrying Amount | 6,347 | 6,347 | 5,401 | ||
Accumulated Amortization | 3,180 | 3,180 | 2,875 | ||
Other | |||||
Gross carrying amount and accumulated amortization of intangible assets | |||||
Gross Carrying Amount | 7,549 | 7,549 | 7,035 | ||
Accumulated Amortization | $ 3,000 | $ 3,000 | $ 2,664 | ||
Minimum | Contracts | |||||
Gross carrying amount and accumulated amortization of intangible assets | |||||
Estimated useful lives | 15 years | ||||
Minimum | Customer relationships | |||||
Gross carrying amount and accumulated amortization of intangible assets | |||||
Estimated useful lives | 5 years | ||||
Minimum | Patents and Patented Technologies | |||||
Gross carrying amount and accumulated amortization of intangible assets | |||||
Estimated useful lives | 7 years | ||||
Minimum | Other | |||||
Gross carrying amount and accumulated amortization of intangible assets | |||||
Estimated useful lives | 5 years | ||||
Maximum | Contracts | |||||
Gross carrying amount and accumulated amortization of intangible assets | |||||
Estimated useful lives | 20 years | ||||
Maximum | Customer relationships | |||||
Gross carrying amount and accumulated amortization of intangible assets | |||||
Estimated useful lives | 20 years | ||||
Maximum | Patents and Patented Technologies | |||||
Gross carrying amount and accumulated amortization of intangible assets | |||||
Estimated useful lives | 19 years | ||||
Maximum | Other | |||||
Gross carrying amount and accumulated amortization of intangible assets | |||||
Estimated useful lives | 17 years |
Intangible Assets - Future Annu
Intangible Assets - Future Annual Amortization (Details) $ in Thousands | Mar. 31, 2017USD ($) |
Total currently estimated annual amortization expense | |
2,017 | $ 24,716 |
2,018 | 24,928 |
2,019 | 23,906 |
2,020 | 19,802 |
2,021 | 19,687 |
2,022 | $ 19,436 |
Long-term Debt - Discounted Car
Long-term Debt - Discounted Carrying Values (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Sep. 30, 2016 | Mar. 31, 2015 |
Long-term debt | |||
Debt instrument, face amount | $ 753,800 | $ 768,800 | |
Less current portion | (7,785) | ||
Long-term debt | 741,048 | 746,716 | |
Senior secured term loan, due March 2022 | |||
Long-term debt | |||
Debt instrument, face amount | 753,804 | 768,804 | $ 425,000 |
Carrying amount of long-term debt, net of discounts and debt issue costs | 741,048 | 754,501 | |
Less current portion | 0 | (7,785) | |
Long-term debt | $ 741,048 | $ 746,716 |
Long-term Debt - Senior Secured
Long-term Debt - Senior Secured Term Loan (Details) - USD ($) $ in Thousands | 1 Months Ended | 6 Months Ended | ||||
Dec. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Sep. 30, 2016 | Aug. 31, 2016 | Mar. 31, 2015 | |
Long-term debt | ||||||
Debt instrument, face amount | $ 753,800 | $ 768,800 | ||||
Current portion of long-term debt | 7,785 | |||||
Repayments of long-term debt | 15,000 | $ 5,874 | ||||
Senior secured term loan, due March 2022 | ||||||
Long-term debt | ||||||
Debt instrument, face amount | 753,804 | 768,804 | $ 425,000 | |||
Percentage of original principal amount on which the aggregate amount of annual scheduled repayments is determined | 1.00% | |||||
Current portion of long-term debt | $ 0 | $ 7,785 | ||||
Repayments of long-term debt | $ 15,000 | |||||
Interest rate | 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% | |||||
Accelerated amortization of debt discount and debt issuance costs, associated with partial debt repayment, included in interest expense | $ 200 | |||||
Senior secured term loan, due March 2022 | 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% | |||||
Senior secured term loan, due March 2022 | 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% | |||||
Senior secured term loan, due March 2022 | 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% | |||||
Senior secured term loan, due March 2022 | 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% | |||||
Incremental senior secured term loan, due March 2022 | ||||||
Long-term debt | ||||||
Debt instrument, face amount | $ 350,000 | |||||
Incremental term loans | ||||||
Long-term debt | ||||||
Maximum borrowing capacity | $ 150,000 |
Long-term Debt - ABL Revolver (
Long-term Debt - ABL Revolver (Details) $ in Millions | 6 Months Ended |
Mar. 31, 2017USD ($) | |
ABL Revolver | |
Long-term debt | |
Revolving credit arrangement amount outstanding | $ 0 |
Maximum borrowing capacity | 70 |
Current borrowing capacity | $ 57.4 |
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) | 2.70% |
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 | 10.6 |
Swingline Facility | |
Long-term debt | |
Maximum borrowing capacity | $ 10.5 |
Long-term Debt - Interest and D
Long-term Debt - Interest and Debt Maturities (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Sep. 30, 2016 | |
Long-term debt | |||||
Interest expense | $ 8,300 | $ 8,300 | $ 17,300 | $ 16,700 | |
Non-cash interest expense | $ 700 | $ 600 | $ 1,606 | $ 1,184 | |
Weighted average interest rate (as a percent) | 4.00% | 4.00% | 4.00% | ||
Senior secured term loan, due March 2022 | |||||
Long-term debt | |||||
Required quarterly repayments due | $ 1,900 |
Income Taxes - NOL and Capital
Income Taxes - NOL and Capital Loss Carryforwards (Details) - USD ($) $ in Millions | 6 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income tax | ||
Effective income tax rate (as a percent) | 39.00% | 39.00% |
Income tax benefit for discrete items | $ 0.2 | $ 3 |
Net operating and capital loss carryforwards | 34.1 | |
Tax credit carryforwards | $ 27.7 | |
Minimum | ||
Income tax | ||
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, 2037 | |
Tax credit carryforwards, expiration date | Sep. 30, 2037 |
Equity Securities and Stock-B41
Equity Securities and Stock-Based Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Equity Securities and Stock-Based Compensation | ||||
Treasury stock and related deferred compensation obligation at fair value | $ 2,400 | $ 2,400 | ||
Amount that the fair values of treasury stock and related deferred compensation obligation exceed the carrying values at cost | 1,000 | 1,000 | ||
Stock-based compensation | 400 | $ 800 | 901 | $ 1,521 |
Total compensation cost related to unvested awards not yet recognized | $ 1,600 | $ 1,600 |
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 | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Numerator: | ||||
Income from continuing operations | $ 5,126 | $ 2,612 | $ 11,801 | $ 15,549 |
Income from continuing operations attributable to non-controlling interest | (591) | (283) | (752) | (579) |
Numerator for basic and diluted earnings per share from continuing operations — income from continuing operations attributable to Headwaters Incorporated | 4,535 | 2,329 | 11,049 | 14,970 |
Numerator for basic and diluted earnings per share from discontinued operations - income (loss) from discontinued operations, net of income taxes | 6 | (228) | 159 | (444) |
Numerator for basic and diluted earnings per share — net income attributable to Headwaters Incorporated | $ 4,541 | $ 2,101 | $ 11,208 | $ 14,526 |
Denominator: | ||||
Denominator for basic earnings per share - weighted-average shares outstanding | 74,835 | 73,818 | 74,536 | 73,804 |
Effect of dilutive securities - shares issuable upon exercise of options and SARs and vesting of restricted stock | 1,147 | 1,523 | 1,291 | 1,549 |
Denominator for diluted earnings per share - weighted-average shares outstanding after assumed exercises and vesting | 75,982 | 75,341 | 75,827 | 75,353 |
Basic income (loss) per share attributable to Headwaters Incorporated: | ||||
From continuing operations (in dollars per share) | $ 0.06 | $ 0.03 | $ 0.15 | $ 0.21 |
From discontinued operations (in dollars per share) | 0 | 0 | 0 | (0.01) |
Basic income per share (in dollars per share) | 0.06 | 0.03 | 0.15 | 0.20 |
Diluted income (loss) per share attributable to Headwaters Incorporated: | ||||
From continuing operations (in dollars per share) | 0.06 | 0.03 | 0.15 | 0.20 |
From discontinued operations (in dollars per share) | 0 | 0 | 0 | (0.01) |
Diluted income per share (in dollars per share) | $ 0.06 | $ 0.03 | $ 0.15 | $ 0.19 |
Earnings Per Share - Anti-dilut
Earnings Per Share - Anti-dilutive Securities (Details) - shares shares in Thousands | 3 Months Ended | 6 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Stock Appreciation Rights (SARs) | |||
Earnings per Share | |||
Anti-dilutive securities not considered in diluted EPS calculation (in shares) | 256 | 36 | 292 |
Stock options | |||
Earnings per Share | |||
Anti-dilutive securities not considered in diluted EPS calculation (in shares) | 36 |
Commitments and Contingencies -
Commitments and Contingencies - Boral Transaction abd Compensation Arrangements (Details) - USD ($) $ / shares in Units, $ in Millions | Nov. 20, 2016 | Dec. 31, 2016 | Mar. 31, 2017 | Sep. 30, 2016 |
Boral Transaction | ||||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | $ 0.001 | |
Cash Performance Unit Awards, 2017 Grants | End of fiscal 2018 | ||||
Compensation arrangements | ||||
Percentage of performance units vesting | 50.00% | |||
Cash Performance Unit Awards, 2017 Grants | End of fiscal 2019 | ||||
Compensation arrangements | ||||
Percentage of performance units vesting | 50.00% | |||
Cash Performance Unit Awards, 2017 Grants | Within 30 days of merger closing date | ||||
Compensation arrangements | ||||
Percentage of performance unit payments due | 50.00% | |||
Cash Performance Unit Awards, 2017 Grants | Six months after merger closing date | ||||
Compensation arrangements | ||||
Percentage of performance unit payments due | 50.00% | |||
Merger Agreement | ||||
Boral Transaction | ||||
Merger cash price per share (in dollars per share) | 24.25 | |||
Per month increase in per share cash payment if the merger is not consummated by the specified date | $ 0.09 | |||
Termination fee if Company terminates agreement | $ 65 | |||
Merger Agreement | Boral | ||||
Boral Transaction | ||||
Termination fee if Boral terminates agreement | $ 75 | |||
Executive Change in Control Agreements | ||||
Compensation arrangements | ||||
Aggregate value of severance payments and excess of market value of stock-based awards | $ 39.9 | |||
Aggregate value of severance payments and excess of market value of stock-based awards expensed and accrued | $ 3.9 | |||
Retention Agreements | ||||
Compensation arrangements | ||||
Term employees are required to be continuously employed after the date of closing to be eligible for retention payments | 6 months | |||
Term employees are required to be continuously employed, under certain conditions, after the date of closing to be eligible for retention payments if the acquirer terminates the merger agreement | 6 months | |||
Aggregate amount of commitments under terms of retention agreements | $ 6.8 |
Commitments and Contingencies45
Commitments and Contingencies - Legal Matters (Details) $ in Millions | Feb. 29, 2012USD ($)plaintiffdefendant | Mar. 31, 2016plaintiff | Sep. 30, 2015USD ($)defendant | Aug. 31, 2015USD ($) | Aug. 31, 2014plaintiffdefendant | Mar. 31, 2017USD ($)plaintiff | Mar. 31, 2016USD ($) | Sep. 30, 2010item |
Commitments and Contingencies | ||||||||
Long term capital commitments on property, plant and equipment | $ 5.2 | |||||||
Legal Matters | ||||||||
Commitments and Contingencies | ||||||||
Legal fees | 1 | |||||||
Legal fees net of settlement of certain litigation | $ (2.1) | |||||||
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 | |||||||
Number of defendants | defendant | 15 | |||||||
Damages for removal and remediation of fly ash and water supply | $ 850 | |||||||
Damages for vexation | 1,900 | |||||||
Damages for others | 8 | |||||||
Damages for properties plus prejudgment interest, attorney fees and costs | 55 | |||||||
Additional damages sought by other plaintiffs | $ 307.2 | |||||||
Number of insurers who have denied coverage | item | 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 plaintiffs | plaintiff | 7 | 1 | ||||||
Loss of Enjoyment of Property | Fentress Families Trust | ||||||||
Commitments and Contingencies | ||||||||
Number of plaintiffs | plaintiff | 74 |
Discontinued Operations (Detail
Discontinued Operations (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Mar. 31, 2017USD ($) | Mar. 31, 2016USD ($) | Mar. 31, 2017USD ($)item | Mar. 31, 2016USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2013USD ($) | |
Discontinued operations | ||||||
Gain (loss) from operations of discontinued operations before income taxes | $ 6 | $ (353) | $ 249 | $ (699) | ||
Income tax benefit (provision) | 0 | 125 | (90) | 255 | ||
Income (loss) from discontinued operations, net of income taxes | 6 | $ (228) | $ 159 | $ (444) | ||
Coal Cleaning Business | Discontinued Operations, Disposed of by Sale | ||||||
Discontinued operations | ||||||
Remaining assets held for sale | $ 0 | |||||
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 | $ 8,700 | $ 8,700 | $ 9,300 |
Related Party Transaction (Deta
Related Party Transaction (Details) - Operating subsidiary $ in Millions | 3 Months Ended | 6 Months Ended |
Mar. 31, 2017USD ($) | Mar. 31, 2017USD ($) | |
Employee Owned Company | ||
Transaction with related parties | ||
Supplies purchased | $ 1.6 | |
President | ||
Transaction with related parties | ||
Amount of loan | $ 1.4 | $ 1.4 |
Repayment of loan | $ 1.4 |
Condensed Consolidating Finan48
Condensed Consolidating Financial Information (Details) | 6 Months Ended |
Mar. 31, 2017 | |
Long-term debt | |
Ownership percentage in guarantor subsidiaries | 100.00% |
Maximum percentage of ownership interest below which subsidiaries are considered non-guaranteeing | 100.00% |
7.25% Senior notes, due January 2019 | |
Long-term debt | |
Interest rate on long-term debt (as a percent) | 7.25% |
Condensed Consolidating Finan49
Condensed Consolidating Financial Information - Balance Sheets (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Sep. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 |
Current assets: | ||||
Cash and cash equivalents | $ 58,128 | $ 65,298 | $ 58,491 | $ 142,597 |
Trade receivables, net | 133,725 | 152,084 | ||
Inventories | 89,997 | 72,668 | ||
Current income taxes | 2,681 | 1,187 | ||
Other | 10,076 | 13,517 | ||
Total current assets | 294,607 | 304,754 | ||
Property, plant and equipment, net | 218,399 | 206,792 | ||
Other assets: | ||||
Goodwill | 300,265 | 290,503 | ||
Intangible assets, net | 306,304 | 319,162 | ||
Deferred income taxes | 66,532 | 68,059 | ||
Other | 43,530 | 49,173 | ||
Total other assets | 716,631 | 726,897 | ||
Total assets | 1,229,637 | 1,238,443 | 1,238,443 | |
Current liabilities: | ||||
Accounts payable | 28,159 | 30,211 | ||
Accrued personnel costs | 38,886 | 45,366 | ||
Other accrued liabilities | 55,584 | 63,785 | ||
Current portion of long-term debt | 7,785 | |||
Total current liabilities | 122,629 | 147,147 | ||
Long-term liabilities: | ||||
Long-term debt, net | 741,048 | 746,716 | ||
Other | 44,498 | 41,230 | ||
Total long-term liabilities | 785,546 | 787,946 | ||
Total liabilities | 908,175 | 935,093 | ||
Redeemable non-controlling interest in consolidated subsidiary | 13,458 | 13,363 | ||
Stockholders' equity: | ||||
Common stock | 75 | 74 | ||
Capital in excess of par value | 739,905 | 733,117 | ||
Retained earnings (accumulated deficit) | (430,585) | (441,793) | ||
Treasury stock | (1,391) | (1,411) | ||
Total stockholders' equity | 308,004 | 289,987 | ||
Total liabilities and stockholders' equity | 1,229,637 | 1,238,443 | ||
Consolidation, Eliminations | ||||
Current assets: | ||||
Current income taxes | (66,408) | (58,802) | ||
Total current assets | (66,408) | (58,802) | ||
Other assets: | ||||
Investments in subsidiaries | (827,541) | (721,760) | ||
Intercompany accounts and notes | (719,052) | (727,747) | ||
Deferred income taxes | (14,385) | (12,077) | ||
Total other assets | (1,560,978) | (1,461,584) | ||
Total assets | (1,627,386) | (1,520,386) | ||
Current liabilities: | ||||
Current income taxes | (66,408) | (58,802) | ||
Total current liabilities | (66,408) | (58,802) | ||
Long-term liabilities: | ||||
Deferred income taxes | (12,077) | |||
Intercompany accounts and notes | (719,052) | (727,747) | ||
Other | (14,385) | |||
Total long-term liabilities | (733,437) | (739,824) | ||
Total liabilities | (799,845) | (798,626) | ||
Stockholders' equity: | ||||
Capital in excess of par value | (836,647) | (764,359) | ||
Retained earnings (accumulated deficit) | 9,106 | 42,599 | ||
Total stockholders' equity | (827,541) | (721,760) | ||
Total liabilities and stockholders' equity | (1,627,386) | (1,520,386) | ||
Guarantor Subsidiaries | ||||
Current assets: | ||||
Cash and cash equivalents | 29,344 | 27,012 | 15,989 | 25,819 |
Trade receivables, net | 127,396 | 145,443 | ||
Inventories | 84,506 | 67,549 | ||
Other | 8,814 | 11,975 | ||
Total current assets | 250,060 | 251,979 | ||
Property, plant and equipment, net | 200,191 | 179,758 | ||
Other assets: | ||||
Goodwill | 256,611 | 248,016 | ||
Intangible assets, net | 270,779 | 282,239 | ||
Intercompany accounts and notes | 116,699 | 26,707 | ||
Other | 10,177 | 13,293 | ||
Total other assets | 654,266 | 570,255 | ||
Total assets | 1,104,517 | 1,001,992 | ||
Current liabilities: | ||||
Accounts payable | 26,528 | 27,659 | ||
Accrued personnel costs | 9,950 | 14,945 | ||
Current income taxes | 63,019 | 56,553 | ||
Other accrued liabilities | 48,764 | 55,942 | ||
Total current liabilities | 148,261 | 155,099 | ||
Long-term liabilities: | ||||
Deferred income taxes | 12,077 | |||
Other | 19,501 | 4,581 | ||
Total long-term liabilities | 19,501 | 16,658 | ||
Total liabilities | 167,762 | 171,757 | ||
Stockholders' equity: | ||||
Capital in excess of par value | 786,669 | 711,755 | ||
Retained earnings (accumulated deficit) | 150,086 | 118,480 | ||
Total stockholders' equity | 936,755 | 830,235 | ||
Total liabilities and stockholders' equity | 1,104,517 | 1,001,992 | ||
Non-Guarantor Subsidiaries | ||||
Current assets: | ||||
Cash and cash equivalents | 8,783 | 5,304 | 3,192 | 3,577 |
Trade receivables, net | 6,329 | 6,641 | ||
Inventories | 5,491 | 5,119 | ||
Other | 613 | 1,481 | ||
Total current assets | 21,216 | 18,545 | ||
Property, plant and equipment, net | 9,761 | 9,852 | ||
Other assets: | ||||
Goodwill | 43,654 | 42,487 | ||
Intangible assets, net | 35,525 | 36,923 | ||
Deferred income taxes | 22,618 | 23,083 | ||
Other | 8,842 | 10,922 | ||
Total other assets | 110,639 | 113,415 | ||
Total assets | 141,616 | 141,812 | ||
Current liabilities: | ||||
Accounts payable | 1,157 | 1,301 | ||
Accrued personnel costs | 371 | 519 | ||
Current income taxes | 3,389 | 2,249 | ||
Other accrued liabilities | 3,328 | 5,002 | ||
Total current liabilities | 8,245 | 9,071 | ||
Long-term liabilities: | ||||
Intercompany accounts and notes | 212,343 | 211,087 | ||
Other | 16,960 | 16,941 | ||
Total long-term liabilities | 229,303 | 228,028 | ||
Total liabilities | 237,548 | 237,099 | ||
Redeemable non-controlling interest in consolidated subsidiary | 13,458 | 13,363 | ||
Stockholders' equity: | ||||
Capital in excess of par value | 49,802 | 52,429 | ||
Retained earnings (accumulated deficit) | (159,192) | (161,079) | ||
Total stockholders' equity | (109,390) | (108,650) | ||
Total liabilities and stockholders' equity | 141,616 | 141,812 | ||
Parent | ||||
Current assets: | ||||
Cash and cash equivalents | 20,001 | 32,982 | $ 39,310 | $ 113,201 |
Current income taxes | 69,089 | 59,989 | ||
Other | 649 | 61 | ||
Total current assets | 89,739 | 93,032 | ||
Property, plant and equipment, net | 8,447 | 17,182 | ||
Other assets: | ||||
Investments in subsidiaries | 827,541 | 721,760 | ||
Intercompany accounts and notes | 602,353 | 701,040 | ||
Deferred income taxes | 58,299 | 57,053 | ||
Other | 24,511 | 24,958 | ||
Total other assets | 1,512,704 | 1,504,811 | ||
Total assets | 1,610,890 | 1,615,025 | ||
Current liabilities: | ||||
Accounts payable | 474 | 1,251 | ||
Accrued personnel costs | 28,565 | 29,902 | ||
Other accrued liabilities | 3,492 | 2,841 | ||
Current portion of long-term debt | 7,785 | |||
Total current liabilities | 32,531 | 41,779 | ||
Long-term liabilities: | ||||
Long-term debt, net | 741,048 | 746,716 | ||
Intercompany accounts and notes | 506,709 | 516,660 | ||
Other | 22,422 | 19,708 | ||
Total long-term liabilities | 1,270,179 | 1,283,084 | ||
Total liabilities | 1,302,710 | 1,324,863 | ||
Stockholders' equity: | ||||
Common stock | 75 | 74 | ||
Capital in excess of par value | 740,081 | 733,292 | ||
Retained earnings (accumulated deficit) | (430,585) | (441,793) | ||
Treasury stock | (1,391) | (1,411) | ||
Total stockholders' equity | 308,180 | 290,162 | ||
Total liabilities and stockholders' equity | $ 1,610,890 | $ 1,615,025 |
Condensed Consolidating Finan50
Condensed Consolidating Financial Information - Statements of Income (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Revenue: | ||||
Revenue | $ 259,293 | $ 202,332 | $ 514,868 | $ 420,750 |
Cost of revenue: | ||||
Total cost of revenue | 188,786 | 147,455 | 373,742 | 301,602 |
Gross profit | 70,507 | 54,877 | 141,126 | 119,148 |
Operating expenses: | ||||
Selling, general and administrative | 49,394 | 37,882 | 94,375 | 72,764 |
Amortization | 6,438 | 4,815 | 12,736 | 9,381 |
Total operating expenses | 55,832 | 42,697 | 107,111 | 82,145 |
Operating income (loss) | 14,675 | 12,180 | 34,015 | 37,003 |
Other income (expense): | ||||
Net interest expense | (8,222) | (8,056) | (17,141) | (16,273) |
Equity in earnings of subsidiaries | 0 | |||
Other, net | 1,973 | (12) | 2,127 | (81) |
Total other income (expense), net | (6,249) | (8,068) | (15,014) | (16,354) |
Income from continuing operations before income taxes | 8,426 | 4,112 | 19,001 | 20,649 |
Income tax benefit (provision) | (3,300) | (1,500) | (7,200) | (5,100) |
Income from continuing operations | 5,126 | 2,612 | 11,801 | 15,549 |
Income (loss) from discontinued operations, net of income taxes | 6 | (228) | 159 | (444) |
Net income | 5,132 | 2,384 | 11,960 | 15,105 |
Net income attributable to non-controlling interest | (591) | (283) | (752) | (579) |
Net income attributable to Headwaters Incorporated | 4,541 | 2,101 | 11,208 | 14,526 |
Building products | ||||
Revenue: | ||||
Revenue | 140,716 | 98,101 | 275,757 | 199,696 |
Cost of revenue: | ||||
Total cost of revenue | 99,782 | 69,639 | 196,311 | 139,191 |
Construction materials | ||||
Revenue: | ||||
Revenue | 116,037 | 102,849 | 236,028 | 219,097 |
Cost of revenue: | ||||
Total cost of revenue | 87,948 | 77,347 | 176,212 | 161,624 |
Energy technology | ||||
Revenue: | ||||
Revenue | 2,540 | 1,382 | 3,083 | 1,957 |
Cost of revenue: | ||||
Total cost of revenue | 1,056 | 469 | 1,219 | 787 |
Consolidation, Eliminations | ||||
Other income (expense): | ||||
Equity in earnings of subsidiaries | (15,928) | (11,021) | (33,493) | (29,647) |
Total other income (expense), net | (15,928) | (11,021) | (33,493) | (29,647) |
Income from continuing operations before income taxes | (15,928) | (11,021) | (33,493) | (29,647) |
Income from continuing operations | (15,928) | (11,021) | (33,493) | (29,647) |
Net income | (15,928) | (11,021) | (33,493) | (29,647) |
Net income attributable to Headwaters Incorporated | (15,928) | (11,021) | (33,493) | (29,647) |
Guarantor Subsidiaries | ||||
Revenue: | ||||
Revenue | 244,728 | 189,919 | 485,341 | 396,137 |
Cost of revenue: | ||||
Total cost of revenue | 178,408 | 138,763 | 351,613 | 284,345 |
Gross profit | 66,320 | 51,156 | 133,728 | 111,792 |
Operating expenses: | ||||
Selling, general and administrative | 37,053 | 29,331 | 71,065 | 57,025 |
Amortization | 5,952 | 4,446 | 11,346 | 8,644 |
Total operating expenses | 43,005 | 33,777 | 82,411 | 65,669 |
Operating income (loss) | 23,315 | 17,379 | 51,317 | 46,123 |
Other income (expense): | ||||
Net interest expense | 3 | 5 | (121) | (95) |
Other, net | 94 | (82) | 20 | (125) |
Total other income (expense), net | 97 | (77) | (101) | (220) |
Income from continuing operations before income taxes | 23,412 | 17,302 | 51,216 | 45,903 |
Income tax benefit (provision) | (9,130) | (6,720) | (19,610) | (17,130) |
Income from continuing operations | 14,282 | 10,582 | 31,606 | 28,773 |
Net income | 14,282 | 10,582 | 31,606 | 28,773 |
Net income attributable to Headwaters Incorporated | 14,282 | 10,582 | 31,606 | 28,773 |
Guarantor Subsidiaries | Building products | ||||
Revenue: | ||||
Revenue | 126,151 | 85,688 | 246,230 | 175,083 |
Cost of revenue: | ||||
Total cost of revenue | 89,404 | 60,947 | 174,182 | 121,934 |
Guarantor Subsidiaries | Construction materials | ||||
Revenue: | ||||
Revenue | 116,037 | 102,849 | 236,028 | 219,097 |
Cost of revenue: | ||||
Total cost of revenue | 87,948 | 77,347 | 176,212 | 161,624 |
Guarantor Subsidiaries | Energy technology | ||||
Revenue: | ||||
Revenue | 2,540 | 1,382 | 3,083 | 1,957 |
Cost of revenue: | ||||
Total cost of revenue | 1,056 | 469 | 1,219 | 787 |
Non-Guarantor Subsidiaries | ||||
Revenue: | ||||
Revenue | 14,565 | 12,413 | 29,527 | 24,613 |
Cost of revenue: | ||||
Total cost of revenue | 10,378 | 8,692 | 22,129 | 17,257 |
Gross profit | 4,187 | 3,721 | 7,398 | 7,356 |
Operating expenses: | ||||
Selling, general and administrative | 1,927 | 1,859 | 4,051 | 3,553 |
Amortization | 486 | 369 | 1,390 | 737 |
Total operating expenses | 2,413 | 2,228 | 5,441 | 4,290 |
Operating income (loss) | 1,774 | 1,493 | 1,957 | 3,066 |
Other income (expense): | ||||
Net interest expense | (2) | (3) | (4) | (3) |
Other, net | 1,879 | 70 | 2,107 | 44 |
Total other income (expense), net | 1,877 | 67 | 2,103 | 41 |
Income from continuing operations before income taxes | 3,651 | 1,560 | 4,060 | 3,107 |
Income tax benefit (provision) | (1,420) | (610) | (1,580) | (1,210) |
Income from continuing operations | 2,231 | 950 | 2,480 | 1,897 |
Income (loss) from discontinued operations, net of income taxes | 6 | (228) | 159 | (444) |
Net income | 2,237 | 722 | 2,639 | 1,453 |
Net income attributable to non-controlling interest | (591) | (283) | (752) | (579) |
Net income attributable to Headwaters Incorporated | 1,646 | 439 | 1,887 | 874 |
Non-Guarantor Subsidiaries | Building products | ||||
Revenue: | ||||
Revenue | 14,565 | 12,413 | 29,527 | 24,613 |
Cost of revenue: | ||||
Total cost of revenue | 10,378 | 8,692 | 22,129 | 17,257 |
Parent | ||||
Operating expenses: | ||||
Selling, general and administrative | 10,414 | 6,692 | 19,259 | 12,186 |
Total operating expenses | 10,414 | 6,692 | 19,259 | 12,186 |
Operating income (loss) | (10,414) | (6,692) | (19,259) | (12,186) |
Other income (expense): | ||||
Net interest expense | (8,223) | (8,058) | (17,016) | (16,175) |
Equity in earnings of subsidiaries | 15,928 | 11,021 | 33,493 | 29,647 |
Total other income (expense), net | 7,705 | 2,963 | 16,477 | 13,472 |
Income from continuing operations before income taxes | (2,709) | (3,729) | (2,782) | 1,286 |
Income tax benefit (provision) | 7,250 | 5,830 | 13,990 | 13,240 |
Income from continuing operations | 4,541 | 2,101 | 11,208 | 14,526 |
Net income | 4,541 | 2,101 | 11,208 | 14,526 |
Net income attributable to Headwaters Incorporated | $ 4,541 | $ 2,101 | $ 11,208 | $ 14,526 |
Condensed Consolidating Finan51
Condensed Consolidating Financial Information - Statements of Cash Flows (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Sep. 30, 2016 | |
Cash flows from operating activities: | |||||
Net income | $ 5,132 | $ 2,384 | $ 11,960 | $ 15,105 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||
Depreciation and amortization | 18,365 | 14,115 | 36,207 | 27,897 | |
Interest expense related to amortization of debt issue costs and debt discount | 700 | 600 | 1,606 | 1,184 | |
Debt pre-payment premiums | 0 | 93 | |||
Stock-based compensation | 400 | 800 | 901 | 1,521 | |
Deferred income taxes | 7,099 | 8,643 | |||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | (5,860) | (97) | |||
Net loss (gain) on disposition of property, plant and equipment | (216) | (46) | |||
Net loss of unconsolidated joint venture | 19 | 26 | |||
Equity in earnings of subsidiaries | 0 | ||||
Decrease (increase) in trade receivables | 19,682 | 33,538 | |||
Increase in inventories | (14,958) | (4,066) | |||
Decrease in accounts payable and accrued liabilities | (19,413) | (36,372) | |||
Other changes in operating assets and liabilities, net | (2,357) | (2,985) | |||
Net cash provided by (used in) operating activities | 34,670 | 44,441 | |||
Cash flows from investing activities: | |||||
Business acquisitions, net of cash acquired | (10,530) | (96,457) | |||
Purchase of property, plant and equipment | (14,193) | (13,197) | (29,733) | (20,882) | |
Proceeds from disposition of property, plant and equipment | 626 | 404 | |||
Net decrease (increase) in long-term receivables and deposits | 4,890 | (1,729) | |||
Net change in other assets | 2,368 | (3,817) | |||
Net cash provided by (used in) investing activities | (32,379) | (122,481) | |||
Cash flows from financing activities: | |||||
Payments on long-term debt | (15,000) | (5,874) | |||
Debt pre-payment premiums | 0 | (93) | |||
Dividends paid to non-controlling interest in consolidated subsidiary | (657) | (735) | |||
Employee stock purchases | 336 | 539 | |||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | 5,860 | 97 | |||
Intercompany transfers | 0 | 0 | |||
Net cash provided by (used in) financing activities | (9,461) | (6,066) | |||
Net increase (decrease) in cash and cash equivalents | (7,170) | (84,106) | |||
Cash and cash equivalents, beginning of period | 65,298 | 142,597 | $ 142,597 | ||
Cash and cash equivalents, end of period | 58,128 | 58,491 | 58,128 | 58,491 | 65,298 |
Consolidation, Eliminations | |||||
Cash flows from operating activities: | |||||
Net income | (15,928) | (11,021) | (33,493) | (29,647) | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||
Equity in earnings of subsidiaries | 15,928 | 11,021 | 33,493 | 29,647 | |
Guarantor Subsidiaries | |||||
Cash flows from operating activities: | |||||
Net income | 14,282 | 10,582 | 31,606 | 28,773 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||
Depreciation and amortization | 32,584 | 26,084 | |||
Stock-based compensation | 327 | 537 | |||
Deferred income taxes | 3,097 | 6,809 | |||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | (95) | ||||
Net loss (gain) on disposition of property, plant and equipment | (223) | (49) | |||
Decrease (increase) in trade receivables | 19,370 | 34,198 | |||
Increase in inventories | (14,448) | (3,097) | |||
Decrease in accounts payable and accrued liabilities | (15,864) | (17,680) | |||
Other changes in operating assets and liabilities, net | (13,849) | (9,522) | |||
Net cash provided by (used in) operating activities | 42,600 | 65,958 | |||
Cash flows from investing activities: | |||||
Business acquisitions, net of cash acquired | (10,530) | (73,800) | |||
Purchase of property, plant and equipment | (27,561) | (18,856) | |||
Proceeds from disposition of property, plant and equipment | 597 | 404 | |||
Net decrease (increase) in long-term receivables and deposits | 1,731 | (1,546) | |||
Net change in other assets | (346) | (1,443) | |||
Net cash provided by (used in) investing activities | (36,109) | (95,241) | |||
Cash flows from financing activities: | |||||
Employee stock purchases | 235 | 390 | |||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | 95 | ||||
Intercompany transfers | (4,394) | 18,968 | |||
Net cash provided by (used in) financing activities | (4,159) | 19,453 | |||
Net increase (decrease) in cash and cash equivalents | 2,332 | (9,830) | |||
Cash and cash equivalents, beginning of period | 27,012 | 25,819 | 25,819 | ||
Cash and cash equivalents, end of period | 29,344 | 15,989 | 29,344 | 15,989 | 27,012 |
Non-Guarantor Subsidiaries | |||||
Cash flows from operating activities: | |||||
Net income | 2,237 | 722 | 2,639 | 1,453 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||
Depreciation and amortization | 2,237 | 1,503 | |||
Deferred income taxes | 465 | 159 | |||
Net loss (gain) on disposition of property, plant and equipment | 7 | 3 | |||
Net loss of unconsolidated joint venture | 19 | 26 | |||
Decrease (increase) in trade receivables | 312 | (660) | |||
Increase in inventories | (510) | (969) | |||
Decrease in accounts payable and accrued liabilities | (2,087) | (3,178) | |||
Other changes in operating assets and liabilities, net | 870 | 3,109 | |||
Net cash provided by (used in) operating activities | 3,952 | 1,446 | |||
Cash flows from investing activities: | |||||
Business acquisitions, net of cash acquired | (22,657) | ||||
Purchase of property, plant and equipment | (673) | (268) | |||
Proceeds from disposition of property, plant and equipment | 29 | ||||
Net decrease (increase) in long-term receivables and deposits | (8) | (22) | |||
Net change in other assets | 2,207 | (109) | |||
Net cash provided by (used in) investing activities | 1,555 | (23,056) | |||
Cash flows from financing activities: | |||||
Dividends paid to non-controlling interest in consolidated subsidiary | (657) | (735) | |||
Employee stock purchases | 27 | 20 | |||
Intercompany transfers | (1,398) | 21,940 | |||
Net cash provided by (used in) financing activities | (2,028) | 21,225 | |||
Net increase (decrease) in cash and cash equivalents | 3,479 | (385) | |||
Cash and cash equivalents, beginning of period | 5,304 | 3,577 | 3,577 | ||
Cash and cash equivalents, end of period | 8,783 | 3,192 | 8,783 | 3,192 | 5,304 |
Parent | |||||
Cash flows from operating activities: | |||||
Net income | 4,541 | 2,101 | 11,208 | 14,526 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||
Depreciation and amortization | 1,386 | 310 | |||
Interest expense related to amortization of debt issue costs and debt discount | 1,606 | 1,184 | |||
Debt pre-payment premiums | 93 | ||||
Stock-based compensation | 574 | 984 | |||
Deferred income taxes | 3,537 | 1,675 | |||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | (5,860) | (2) | |||
Equity in earnings of subsidiaries | (15,928) | (11,021) | (33,493) | (29,647) | |
Decrease in accounts payable and accrued liabilities | (1,462) | (15,514) | |||
Other changes in operating assets and liabilities, net | 10,622 | 3,428 | |||
Net cash provided by (used in) operating activities | (11,882) | (22,963) | |||
Cash flows from investing activities: | |||||
Purchase of property, plant and equipment | (1,499) | (1,758) | |||
Net decrease (increase) in long-term receivables and deposits | 3,167 | (161) | |||
Net change in other assets | 507 | (2,265) | |||
Net cash provided by (used in) investing activities | 2,175 | (4,184) | |||
Cash flows from financing activities: | |||||
Payments on long-term debt | (15,000) | (5,874) | |||
Debt pre-payment premiums | (93) | ||||
Employee stock purchases | 74 | 129 | |||
Tax benefit from exercise of stock appreciation rights and vesting of restricted stock | 5,860 | 2 | |||
Intercompany transfers | 5,792 | (40,908) | |||
Net cash provided by (used in) financing activities | (3,274) | (46,744) | |||
Net increase (decrease) in cash and cash equivalents | (12,981) | (73,891) | |||
Cash and cash equivalents, beginning of period | 32,982 | 113,201 | 113,201 | ||
Cash and cash equivalents, end of period | $ 20,001 | $ 39,310 | $ 20,001 | $ 39,310 | $ 32,982 |