Discontinued Operations

12 Months Ended

Sep. 30, 2014

Discontinued Operations

Discontinued Operations

5. Discontinued Operations

        In September 2011, the Board of Directors committed to a plan to sell Headwaters' coal cleaning business, which was part of the energy technology segment. At that time the business met all of the criteria for classification as held for sale and presentation as a discontinued operation. Following the sale of all remaining coal cleaning facilities in January 2013, there are no remaining assets held for sale. The results of operations for the coal cleaning business have been presented as discontinued operations for all periods presented and certain summarized information for the discontinued business is presented in the following table.

(in thousands)	2012			2013			2014
Revenue	$	22,268		$	4,386		$	0
Loss from operations of discontinued operations before income taxes	$	(36,210	)	$	(3,752	)	$	(3,175	)
Gain (loss) on disposal		267			(55	)		2,727
Income tax benefit		124			2,659			33
Loss from discontinued operations, net of income taxes	$	(35,819	)	$	(1,148	)	$	(415	)

        In 2012, Headwaters recorded an impairment charge related to the coal cleaning business totaling $13.0 million. In 2013, Headwaters recognized a tax benefit of approximately $2.7 million, due primarily to the reversal of unrecognized income tax benefits related to audit periods that closed. 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, some adjustments of the previously recognized estimated gains on the sales transactions have been recognized, including the reported amounts reflected in the table above. Headwaters currently expects that additional adjustments to the estimated gains and losses may be recognized in the future as certain contingencies are resolved. The loss from operations reflected in the table includes expenses for certain litigation which commenced prior to disposal of the business.

        For all sales transactions, a majority of the consideration is in the form of potential production royalties and deferred purchase price, which amounts are dependent upon future plant production levels over several years. 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 when such amounts are received. During 2014, Headwaters received approximately $4.7 million in deferred purchase price payments, royalties and the collection of certain receivables which had been reserved.

        In accordance with the terms of the asset purchase agreement for one of the sales transactions, the buyer of the coal cleaning facilities agreed to assume the lease and reclamation obligations related to certain of the facilities. Subsequent to the date of sale, Headwaters amended the purchase agreement to provide the buyer with additional time to make payments to Headwaters, as well as fulfill contractual requirements related to the assumed reclamation obligations. As of September 30, 2014, Headwaters remains contingently liable for one of the assumed obligations and has accrued approximately $8.0 million to meet that contingent liability as necessary. Headwaters has also reserved certain receivables due from the buyer until such time as collection is more certain.

        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 contingency is resolved.