Discontinued Operations

3 Months Ended

Dec. 31, 2012

Discontinued Operations

Discontinued Operations

3. Discontinued Operations

Headwaters assessed the strategic fit of its various operations and is pursuing divestiture of certain businesses in the energy technology segment which do not align with its long-term strategy. In September 2011, the Board of Directors committed to a plan to sell the coal cleaning business, which was part of the energy technology segment, and at that time the business met all the criteria for classification as held for sale and presentation as a discontinued operation. Accordingly, the assets and liabilities associated with the coal cleaning business have been reflected as held for sale in the accompanying consolidated balance sheets. The results of Headwaters’ coal cleaning operations have been presented as discontinued operations for all periods.

Certain summarized information for the discontinued coal cleaning business is presented in the following table.

	Three Months Ended December 31,
(in thousands)	2011			2012
Revenue	$	5,291		$	4,249
Loss from operations of discontinued operations before income taxes	$	(10,468	)	$	(1,998	)
Income tax provision	0			0
Loss from discontinued operations, net of income taxes	$	(10,468	)	$	(1,998	)

Current assets held for sale consist primarily of accounts receivable and inventory. Non-current assets held for sale consist of approximately $1.9 million of property, plant and equipment and $5.9 million of other assets as of September 30, 2012 and approximately $2.0 million of property, plant and equipment and $5.9 million of other assets as of December 31, 2012, all of which are recorded at the lower of historical carrying amount or fair value. Liabilities associated with assets held for sale consist primarily of accrued liabilities.

During the December 2012 quarter, Headwaters sold two coal cleaning facilities for potential consideration to be received in the future, primarily in the form of production royalties and deferred purchase price, totaling a maximum of approximately $10.0 million, which amount would be received over a number of years, depending upon future plant production levels. No gain or loss was recognized on this transaction. In January 2013, Headwaters sold all of the remaining eight facilities for cash proceeds of approximately $3.8 million plus potential consideration to be received in the future, primarily in the form of production royalties and deferred purchase price, totaling a maximum of approximately $48.0 million, which amount would be received over a number of years, depending upon future plant production levels. In accordance with the terms of the asset purchase agreement, the buyer of the facilities agreed to assume certain lease and asset retirement obligations and Headwaters agreed to identify 1.0 million tons of feedstock for one of the sold facilities during the next 30 months. Headwaters is subject to a $7 per ton liability for each ton below the 1.0 million ton obligation that is not identified. Headwaters currently expects to recognize a gain on the January 2013 sale transaction, which will be recorded in the March 2013 quarter.