Headwaters Ebbs on Forecast

The stock drops 6%.
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Headwaters

(HW)

said on Thursday that additional customers have idled production at their synthetic fuel facilities, bringing the total idled synthetic fuel lines to at least 23, representing 41% of it's fiscal 2005 reagent sales and license fees. Synthetic fuel production at these idled plants may resume, depending on various factors, including a reduction in oil prices or the potential enactment of federal legislation.

Headwaters participates in the synthetic fuel industry primarily by licensing its technology and selling chemical reagents to owners of synthetic fuel facilities.

Due to the uncertainty of oil prices and legislative action, the company now expects its fiscal 2006 earnings of $2 to $2.70 a share, even if no legislation is passed related to tax credits generated from the sale of qualified synthetic fuel and additional plants are idled.

To diversify itself from the risks associated with Section 45k, the company has over recent years developed a two part strategy. First, it has completed several acquisitions in the building products industry over the past five years. The second part of it's diversification strategy is to develop a portfolio of new energy and specialty chemical products.

The company's shares were trading at $29.50, down $1.90, or 6.1% Thursday.

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