Headwaters to recognize account funds as revenues

SOUTH JORDAN — Energy technologies company Headwaters Inc. said Friday that after a tax audit of one of its licenses, it has decided to recognize revenues in its March quarter relating to certain funds previously deposited in an escrow account.

A licensee agreement called for the license fees earned by Headwaters over the last 2 1/2 years to be placed in an escrow account for the benefit of Headwaters pending resolution of an Internal Revenue Service audit of the licensee. There were no proposed adjustments to the tax credits claimed by the licensee, resulting in the current revenue recognition of license fees held in the escrow account.

Disbursements from the escrow account will occur after the IRS review is resolved, as defined in the license agreement.

The license fees to be recognized of approximately $25 million, when netted against certain related expenses, should result in an increase in earnings per diluted share for Headwaters' March quarter of between 20 cents and 25 cents. Headwaters will also recognize the recurring quarterly license fees from the licensee for the March quarter. The recurring licensee fees could contribute as much as 4 cents to 6 cents quarterly and are included in Headwaters' previously issued forecast of $1.50 to $1.60 of earnings per diluted share for fiscal 2004.