SHAREHOLDERS SHAREHOLDERS PRESENTATIONPRESENTATIONPRESENTATIONPRESENTATION

June 30 2011June 30, 2011

FORWARD LOOKING STATEMENTSFORWARD LOOKING STATEMENTS

Certain statements contained in this press release are forward-looking statements within the meaning of federal securities laws and Headwaters intends that such forward-looking statements be subject to the safe-harbor created thereby. Forward-looking statements include Headwaters’

t ti t th i d k ti f l b ti d t th d ti d k ti f b ildi t i l d d t thexpectations as to the managing and marketing of coal combustion products, the production and marketing of building materials and products, the production and marketing of cleaned coal, the licensing of residue hydrocracking technology and catalyst sales to oil refineries, the availability of refined coal tax credits, the development, commercialization, and financing of new technologies and other strategic business opportunities and acquisitions, and other information about Headwaters. Such statements that are not purely historical by nature, including those statements regarding Headwaters’ future business plans, the operation of facilities, the availability of feedstocks, and the marketability of the coal combustion products, building products, cleaned coal, catalysts, and the availability of tax credits, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and our future results that are based on current expectations, estimates,Private Securities Litigation Reform Act of 1995 regarding future events and our future results that are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Actual results may vary materially from such expectations. Words such as “may,” “should,” “intends,” “plans,” “expects,” “anticipates,” “targets,” “goals,” “projects,” “believes,” “seeks,” “estimates,” “forecasts,” or variations of such words and similar expressions, or the negative of such terms, may help identify such forward-looking statements. Any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances, are forward-looking. In addition to matters affecting the coal combustion products, building products, and energy industries or the economy generally, factors that could cause actual results to differ from expectations stated in forward-looking statements include, among others, the factors described in the caption entitled “Risk Factors” in Item 1A in Headwaters’ Annual Report on Form 10-K for the fiscal year ended September 30, 2010, Quarterly Reports on Form 10-Q, and other periodic filings and prospectuses.

Although Headwaters believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that our results of operations will not be adversely affected by such factors. Unless legally required, we

d t k bli ti t i d t f d l ki t t t f R d ti d t t l d liundertake no obligation to revise or update any forward-looking statements for any reason. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Our internet address is www.headwaters.com. There we make available, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our reports can be accessed through the investor relations section of our web site.

HEADWATERS NEW VISIONNEW VISION STATEMENT

Improving Lives Through Improving Lives Through Innovative Innovative

Advancements inAdvancements inAdvancements in Advancements in Construction MaterialsConstruction Materials

Application Application –– Design Design –– PurposePurpose

3

BUSINESS OVERVIEWBUSINESS OVERVIEW

HEADWATERS INCORPORATED

Low-cost producer of Leading market positions Clear market leader in

Headwaters Energy Services (HES)

Headwaters Light Building Products (HBP)

Headwaters Resources (HRI)

Low cost producer of high-quality coal Innovative product development Well-positioned alternative energy

platform Refined coal products qualify for tax

Leading market positions Diversified revenue stream Innovative product development

expertise Unmatched national distribution

network

Clear market leader in fly ash Increasing market share Unrivaled national footprint Attractive long-term market

fundamentalscredits Efficient manufacturing

Margins among highest in peer group

Strong margins and cash flow

FY 2010 Revenue of $655 MillionRevenue Breakdown Diversified End Markets

HBP HRI

EBITDA Margins(Before asset impairments)

HBP HRIUtilities Services

Coal Sales/Other

Institutional Construction

19.9%16.5% Commerical Construction

New Residential

Construction

5HES9.1%

HES

Infrastructure Construction

Residential Repair/

Remodeling

HEADWATERS LIGHTHEADWATERS LIGHTBUILDING PRODUCTSBUILDING PRODUCTSBUILDING PRODUCTSBUILDING PRODUCTS

FISCAL YEAR 2010FISCAL YEAR 2010▪▪ Revenue: $317 millionRevenue: $317 million

48% f T l R48% f T l R▪▪ 48% of Total Revenue48% of Total Revenue

HEADWATERS LIGHT BUILDING PRODUCTSD f ibl P iti i Att ti M k tDefensible Positions in Attractive Markets

Fiscal 2010 Revenue of $317 MillionPercentage of Revenue

Manufactures one of the most authentic architectural stone products

Provides siding accessories and professional tools for exterior

g

Manufactured StoneSiding Accessories, Roofing and Tools

authentic architectural stone products in the world

Multiple national brands for optimal customer segmentation

National manufacturing platform

professional tools for exterior residential home improvement and construction

Low cost competitive manufacturing advantage

29%48%

g p Diversified customer base

Major supplier of products to Lowe’s and Home Depot

23%

Offers a variety of concrete based masonry unit products

Regional branding

Texas Concrete Block

7

g g

Regional distribution

Low cost producer

LEADING MARKET POSITIONS IN NICHE PRODUCT CATEGORIESPRODUCT CATEGORIES

Siding AccessoriesNational

Manufactured StoneNational

Texas Concrete BlockRegional

8%5%2% 3%

30%29%8%

11%Eldorado

82%Core BP

SWC

Other

30% Cultured Stone

Coronado

Other

82% Pinckney

Ply Gem

Girardin

Other

8

Source: management estimates

HIGH-QUALITY PRODUCT OFFERINGSLeading Building Products Brands

Remodel

45%

25%

30%New Residential

Commerical/

Comprehensive Set of Products for Construction Applications

25% Commerical/ Institutional

Trim and Accessories Roofing and Accessories

Shutters Specialty Siding

Stone Veneer

Concrete Block

9

Egress Systems

PRODUCT LEADERSHIPPRODUCT LEADERSHIPContinuous Investment in Product Development

Develop and introduce new niche products featuring:– Early stage product life cycle

Faster than average growth

Light Building Products Revenue Contribution from New Products

and Brands

15%

20% 20%22%

20%

25%– Faster than average growth– Examples

o Specialty sidingo Functional shutters

9%

15%

10%

15%o Dutch Quality and Stone Craft brands

o Synthetic slate roofing Leverage the most extensive 4%

0%

5%

2005 2006 2007 2008 2009 2010

Leverage the most extensive distribution system in the industry

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SUSTAINABILITY WITHIN BUILDING PRODUCTSPRODUCTS

Headwaters Light Building Products division is committed to continuous improvement in its processes and products

– Tapco utilizes roughly 99% of its internal regrind material in various productsFoundry is purchasing up to– Foundry is purchasing up to 30% to 35% recycled raw materials

– SCP incorporates fly ash in up t 25% f it d t dto 25% of its products, and internal regrind is added to all gray products

– Eldorado Stone incorporates fly ash and internal regrind into over 20% of its products

Fly Ash Magnified 90x

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LIGHT BUILDING PRODUCTSGENERATES HIGHER MARGINS RELATIVE TO PEERSGENERATES HIGHER MARGINS RELATIVE TO PEERS

Average EBITDA margin (Calendar 2007-2009)

17%

15%

20%

10%

5%

10%

0%

HBP Peer group median

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Note: The peer group median margins reflect the margins of CPG, Trex, Owens Corning, Ply Gem, Masco, Associated Materials, and USG.

NEW HOUSING STARTS

2,000

2,500

Historical Housing Starts Median Starts10 Year 1,65425 Year 1,47750 Year 1,472

1,000

1,500

,

n th

ousa

nds)

0

500Star

ts (i

Lowest point in 50 Years

1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010Single-Family Multifamily

125,000)

Total U.S Households – Driver for Housing Demand

50,000

75,000

100,000

useh

olds

in (0

00's

)

130

25,000

47 50 53 56 59 62 65 68 71 74 77 80 83 86 89 92 95 98 01 04 07 10

Tota

l Hou

NEW HOUSING MARKET – IN PROCESS OF STABILIZINGSTABILIZING

A li d thl H i St t Si O t 2009

580 557609 616 626

672

578537 541

608 610534 529

596549 560

629700

rts (0

00s)

Annualized monthly Housing Starts Since Oct 2009

524 557 537 541 519 534 529479

549 523560

400500600

Hou

sing

sta

r

400

Oct‐09

Nov‐09

Dec‐09

Jan‐10

Feb‐10

Mar‐10

Apr‐10

May‐10

Jun‐10

Jul‐10

Aug‐10

Sep‐10

Oct‐10

Nov‐10

Dec‐10

Jan‐11

Feb‐11

Mar‐11

Apr‐11

May‐11

Jun‐11

Source: U.S. Census and NAHB Historical median since 1959: 1.5 million

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HEADWATERS RESOURCESHEADWATERS RESOURCESHEAVY CONSTRUCTION MATERIALS UTILIZING HEAVY CONSTRUCTION MATERIALS UTILIZING

COAL COMBUSTION PRODUCTSCOAL COMBUSTION PRODUCTS

FISCAL YEAR 2010FISCAL YEAR 2010FISCAL YEAR 2010FISCAL YEAR 2010 Revenue: $258 MillionRevenue: $258 Million 40% of Total Revenue40% of Total Revenue

HEAVY CONSTRUCTION MATERIALSCONVERTING RESIDUALS INTO VALUABLE PRODUCTSCONVERTING RESIDUALS INTO VALUABLE PRODUCTS

Why Fly Ash? Improved product performance

– More durableG t l t t th

y y

– Greater long-term strength– More workable and pumpable– Mitigates problems caused by

salts, chemicals, and somesalts, chemicals, and some aggregates

Cost savings– 20% to 60% less expensive

Positive environmental impacts– Reduces landfill utilization– Displaces portland cement

d ti hi h it

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production which emits approximately one ton of CO2 for every ton of product

HEAVY CONSTRUCTION MATERIALSHEAVY CONSTRUCTION MATERIALSCompetitive Advantages

Exclusive long-term contracts– ~100 power plants in 35 states– Complete utility service capabilities

Nationwide infrastructure– 22 fly ash terminals– ~50 sites with concrete quality fly50 sites with concrete quality fly

ash supply– ~250 trucks– ~1,080 railcars,

Technology advancements – Ammonia Slip– Carbon Fixation

Fly Ash Distribution Terminal,Riviera Beach, Florida

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– Carbon Fixation

INCREASED FLY ASH PENETRATION Fly ash shipments of 4.6 million tons in 2010

Fly ash has been taking market share from portland cement – Driven by regulatory initiatives and cost consciousness

HEADWATERS FLY ASH SHIPMENTS INCREASED FLY ASH SUBSTITUTION

6,000

7,000

(in thousands of tons)

16.0%

17.0%

18.0%

3,000

4,000

5,000

13.0%

14.0%

15.0%

0

1,000

2,000

10.0%

11.0%

12.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009

1818* Estimated Industry Data Provided by ACAA

LEADING FLY ASH MARKET SHAREHEADWATERS RESOURCES MARKET SHARE

ESTIMATED MARKET SHARE

42.0%

44.0%

46.0%

48.0%

34 0%

36.0%

38.0%

40.0%

* Estimated Industry Data Provided by ACAA30.0%

32.0%

34.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009

Headwaters has increased market share in fly ash

Headwaters controls approximately 50% of the fly ash market

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CEMENT FORECAST140

CEMENT FORECAST

100

120

M’s

)

80

etri

c To

ns (

MM

40

60

PCA’s Cement Consumption Forecast

Me

0

20

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

20

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

HEAVY CONSTRUCTION MATERIALS

• EPA announced final coal ash disposal regulations will not be

PROPOSED EPA REGULATIONS

proposed before 2012 at the earliest– Beneficial use of coal ash expected to remain exempt from regulation

– Headwaters Plant Services likely to benefit from proposed disposal regulationsHeadwaters Plant Services likely to benefit from proposed disposal regulations

• Congressional activity increasing to block “hazardous waste” regulatory option

EPA b d d b H A i i C i hibi di– EPA budget passed by House Appropriations Committee prohibits spending on regulation of coal ash as Subtitle C “hazardous waste”

– HR 2273 – a bipartisan bill passed by House Energy & Commerce Committee –directs states to enact enforceable permit programs modeled after municipal soliddirects states to enact enforceable permit programs modeled after municipal solid waste with backup EPA enforcement. Substantial state, utility and recycling support for the bill

– 44 U.S. Senators (12 Democrats and 32 Republicans) signed letter to President Ob lli f i k l i f l h di l l i ili i “

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Obama calling for quick resolution of coal ash disposal regulations utilizing “non-hazardous” approach

HEADWATERS TECHNOLOGY SEGMENTHEADWATERS TECHNOLOGY SEGMENT

FISCAL YEAR 2010FISCAL YEAR 2010FISCAL YEAR 2010FISCAL YEAR 2010 Revenue: $80 Million Revenue: $80 Million 12% f T t l R12% f T t l R 12% of Total Revenue12% of Total Revenue

COAL CLEANING OVERVIEWCONVERTING WASTE COAL INTO A VALUABLE PRODUCTCONVERTING WASTE COAL INTO A VALUABLE PRODUCT

Continuation of our waste coal 11 facilities (8 in operation)Strategic Rationale to be in Coal Cleaning HW Coal Cleaning Assets

Continuation of our waste coal expertise Synergies with Headwaters

Resources

( p )— Wet and dry processing

technologiesesou ces

Large addressable market– 3-5 bn tons of waste

Federal tax credit of $6 per tonFederal tax credit of $6 per ton Environmental benefits

– Solid waste utilization, land reclamation, emissions ,reductions from processed fuel

23Coal Recovery Facility (Dry Technology) Wellington, Utah

COAL CLEANING PRODUCTION & SALESCOAL CLEANING PRODUCTION & SALES600,000 

Production & Shipments

400,000 

500,000 

300,000 

,

Tons Production

Shipments

100 000

200,000 Shipments

0 

100,000 

F10 Q1 F10 Q2 F10 Q3 F10 Q4 F11 Q1 F11 Q2 F11 Q3

24

F10 Q1 F10 Q2 F10 Q3 F10 Q4 F11 Q1 F11 Q2 F11 Q3

FINANCIAL OVERVIEW FINANCIAL OVERVIEW

HEADWATERS’ PERFORMANCE

Headwaters Peers (50th Percentile)Gross Margin 24.9% 16.55%Operating Margin 3.0% (0.65%)1 Year TSR (0.7%) (15.83%)

• Headwaters’ Actions– Preserves equity value by completing two debt restructurings to avoid

covenant breach and possible bankruptcy– Significantly resets the organization, reducing headcount from 4,500 to

2,800 and taking over $50M out of the cost structure

• CEO Compensation– Independent compensation committee uses Mercer to set CEO

compensation at the 50th percentile

26

– ISS’s Statement – Company peer group analysis for base salary and target long-term incentive plan are both in the 50th percentile

REVENUEREVENUEExcludes Section 45K Results(dollars in millions)

$768$861 $858 $819

$

$1,000

$667 $655

$454$500

$750

$250

$0

2005 2006 2007 2008 2009 2010 YTD

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FISCAL 2010 EBITDA BY SEGMENTFISCAL 2010 EBITDA BY SEGMENT

$60 00

(dollars in millions)

$52.3 $51.4*

$40.00 

$60.00 

$7.2* $20.00 

$0.00 Light Building Products CCPs - Heavy

Construction MaterialsHES

*Without asset impairments

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Without asset impairments

CAPITAL STRUCTURECAPITAL STRUCTURE

(in thousands) Carrying Par(in thousands) Carrying ParDebt Value Value Rate

Senior Secured Debt 400,000$ 400,000$ 7.625%16.0% Convertible Debt 8,933 9,233 16.00%2.5% Convertible Debt 105,268 120,900 2.50%14.75% Convertible Debt 21,221 22,905 14.75%Total Debt 535,422$ 553,038$

EquityOutstanding Shares 60,858

Cash on Hand June 30, 2011 $34,852

29page 29

Improving Lives Through Improving Lives Through Innovative Advancements inInnovative Advancements inInnovative Advancements in Innovative Advancements in

Construction MaterialsConstruction MaterialsApplication Application –– Design Design –– PurposePurpose

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