Discontinued Operations

12 Months Ended

Sep. 30, 2015

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)	2013			2014			2015
Revenue	$	4,386		$	0		$	0
Loss from operations of discontinued operations before income taxes	$	(3,752	)	$	(3,175	)	$	(496	)
Gain (loss) on disposal		(55	)		2,727			(229	)
Income tax benefit		2,659			33			265
Loss from discontinued operations, net of income taxes	$	(1,148	)	$	(415	)	$	(460	)

        In 2013, Headwaters recognized a tax benefit of approximately $2.7 million, due primarily to the reversal of unrecognized income tax benefits related to completion of the 2009 IRS audit. 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, adjustments of the previously recognized estimated gains on the sales transactions have been recorded, including the reported amounts reflected in the table above. Headwaters currently expects that additional adjustments to the recognized gains and losses may be recorded 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 was in the form of potential production royalties and deferred purchase price, which amounts are dependent upon future plant production levels. Potential future production royalties and deferred purchase price on the sales transactions were not considered as being probable in the original gain calculations and have been accounted for in the periods when such amounts were 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, the Headwaters subsidiaries which sold the facilities amended the purchase agreement to provide the buyer with additional time to make payments, as well as fulfill contractual requirements related to the assumed reclamation obligations. One of Headwaters' subsidiaries is performing permit reclamation responsibilities at one site. As of September 30, 2014 and 2015, approximately $8.0 million and $7.4 million, respectively, was accrued for this reclamation liability. Certain receivables due from the buyer have also been reserved 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 obligation is satisfied.