Discontinued Operations

Sale of Photovoltaics Business

On September 17, 2014, EMCORE entered into the Photovoltaics Agreement with SolAero pursuant to which the Company agreed to sell the Photovoltaics Business for $150.0 million in cash, subject to a working capital adjustment. On December 10, 2014, EMCORE completed the Photovoltaics Asset Sale.

The financial results of the Photovoltaics Business are reported as discontinued operations for the fiscal years ended September 30, 2015, 2014 and 2013, respectively. In connection with this transaction, we sold net assets of $60.3 million to SolAero and incurred transaction costs of $2.7 million. During the fiscal year ended September 30, 2015, we recognized a gain of $56.8 million, net of tax on the sale of the Photovoltaics Business which is recorded within discontinued operations in the consolidated statements of operations and comprehensive income. During the fiscal year ended September 30, 2015, we made a payment of $0.1 million to SolAero to complete the working capital adjustment under the Photovoltaic Agreement. During the fiscal year ended September 30, 2015, we recognized gains of $0.4 million associated with the settlement of outstanding obligations on retained product warranties associated with the Photovoltaics Business.

We have classified the assets and liabilities that were sold as "assets of discontinued operations" and "liabilities of discontinued operations" within current and non-current assets and liabilities, respectively, on the consolidated balance sheets as of September 30, 2014. As of September 30, 2014, the carrying amount of goodwill related to the Photovoltaics Business was $20.4 million and this balance was reclassified to non-current assets of discontinued operations. No assets and liabilities of the Photovoltaics Business that were sold remain on the consolidated balance sheet as of September 30, 2015.

The following table presents the aggregate carrying amounts of the major classes of assets and liabilities related to the Photovoltaics Business as of September 30, 2015 and 2014:



	As of		As of
(in thousands)	September 30, 2015		September 30, 2014
Assets of discontinued operations:
Accounts receivable, net of allowance of $0	$	—	$	17,827
Inventory	—		7,203
Prepaid expenses and other current assets	—		1,512
Current assets of discontinued operations	—		26,542

Property, plant and equipment, net	—		26,660
Goodwill	—		20,384
Other non-current assets, net	—		254
Non-current assets of discontinued operations	—		47,298
Total assets of discontinued operations	$	—	$	73,840
Liabilities of discontinued operations:
Accounts payable	$	—	$	4,640
Accrued expenses and other current liabilities	—		5,398
Current liabilities of discontinued operations	—		10,038

Asset retirement obligations	—		720
Non-current liabilities of discontinued operations	—		720
Total liabilities of discontinued operations	$	—	$	10,758

The following table presents the statements of operations for the discontinued operations of the Photovoltaics Business:



	For the Fiscal Years Ended September 30,
(in thousands)	2015			2014			2013
Revenue	$	12,614		$	73,226		$	71,170
Cost of revenue	8,245			52,317			52,806
Gross profit	4,369			20,909			18,364
Operating expense	2,240			6,654			5,107
Other income	779			17			90
Gain on sale of equity method investment	—			—			4,800
Gain on sale of discontinued operations	86,958			—			—
Income from discontinued operations before income tax	89,866			14,272			18,147
Income tax expense	(28,700		)	(5,412		)	(4,536		)
Income from discontinued operations, net of tax	$	61,166		$	8,860		$	13,611

In March 2013, we sold certain solar assets and our ownership interest in Emcore Solar New Mexico (“ESNM”) to Suncore for $1.5 million. In June 2013, we entered into an agreement to transfer our 40% registered ownership interest in Suncore to San'an for a purchase price of $4.8 million. Upon completion of the share transfer, the Company recognized $3.3 million of deferred revenue from Suncore as well as the resulting gain of $4.8 million on our registered ownership interest which was recorded within discontinued operations.

Sale of Digital Products Business

On October 22, 2014, EMCORE entered into the Digital Products Agreement with NeoPhotonics pursuant to which the Company agreed to sell certain assets, and transferred certain liabilities of the Company's Digital Products Business to NeoPhotonics for an aggregate purchase price of $17.5 million, subject to certain purchase price adjustments, consisting of $1.5 million in cash at closing and the Promissory Note. The Promissory Note provided that it would bear interest of 5.0% per annum for the first year and 13.0% per annum for the second year, payable semi-annually in cash, and would mature two years from the closing of the transaction. In addition, the Promissory Note was subject to prepayments under certain circumstances, and is secured by certain of the assets sold to NeoPhotonics in the transaction.

On January 2, 2015, EMCORE and NeoPhotonics entered into the APA Amendment. Among other things, the APA Amendment revised the nature and timing of the financial deliverable requirements of the Company to NeoPhotonics under the original Digital Products Agreement. The assets sold pursuant to the Digital Products Agreement included certain fixed assets, inventory, accounts receivable and intellectual property for the ITLA, micro-ITLA, T-TOSA and T-XFP product lines within the Company’s telecommunications business. On January 2, 2015, EMCORE completed the sale of the Digital Products Business. On April 16, 2015, EMCORE and NeoPhotonics entered into an agreement to adjust the purchase price resulting in an adjusted balance of the Promissory Note of $15.5 million. On April 17, 2015, NeoPhotonics paid in full the outstanding balance of the Promissory Note of $15.5 million, plus accrued interest of $0.2 million.

The financial results of the Digital Products Business are reported as discontinued operations for the fiscal years ended September 30, 2015, 2014 and 2013. In connection with this transaction, we sold net assets of $13.3 million to NeoPhotonics and incurred transaction costs of $1.6 million. During the fiscal year ended September 30, 2015, we recognized a gain of $2.0 million on the sale of the Digital Products Business which is recorded within discontinued operations in the consolidated statements of operations and comprehensive income.

We have classified the assets and liabilities that were sold within the descriptions "assets of discontinued operations" and "liabilities of discontinued operations" within current and non-current assets and liabilities, respectively, on the consolidated balance sheet as of September 30, 2014. No assets or liabilities from the Digital Products Business remain on the consolidated balance sheet as of September 30, 2015.

The following table presents the aggregate carrying amounts of the major classes of assets and liabilities related to the Digital Products Business as of September 30, 2015 and 2014:



	As of		As of
(in thousands)	September 30, 2015		September 30, 2014
Assets held for sale:
Accounts receivable, net of allowance of $0 and $17, respectively	$	—	$	14,268
Inventory	—		3,225
Prepaid expenses and other current assets	—		30
Current assets of discontinued operations	—		17,523

Property, plant and equipment, net	—		7,881
Other intangible assets, net	—		1,060
Non-current assets of discontinued operations	—		8,941
Total assets of discontinued operations	$	—	$	26,464
Liabilities held for sale:
Accounts payable	—		10,848
Accrued expenses and other current liabilities	—		38
Current liabilities of discontinued operations	$	—	$	10,886

The following table presents the statements of operations for the discontinued operations of the Digital Products Business:



	For the Fiscal Years Ended September 30,
(in thousands)	2015		2014			2013
Revenue	$	11,944	$	46,038		$	36,006
Cost of revenue	9,107		46,387			38,438
Gross profit (loss)	2,837		(349		)	(2,432		)
Operating expense	2,800		12,683			12,870
Flood-related insurance proceeds	—		—			(11,210		)
Gain on sale of discontinued operations	1,994		—			—
Income (loss) from discontinued operations before income tax	2,031		(13,032		)	(4,092		)
Income tax benefit	2,175		4,942			1,023
Income (loss) from discontinued operations	$	4,206	$	(8,090	)	$	(3,069	)

During the fiscal year ended September 30, 2013, we recorded flood-related insurance proceeds of $11.2 million within discontinued operations. See Note 11 - Impact of Thailand Flood for additional information.