Discontinued Operations Discontinued Operations (Notes)

9 Months Ended

Sep. 30, 2014

Discontinued Operations [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure

DISCONTINUED OPERATIONS

On May 29, 2014, Avista Capital, the non-regulated subsidiary of Avista Corp., entered into a definitive agreement to sell its interest in Ecova to Cofely USA Inc., an indirect subsidiary of GDF SUEZ, a French multinational utility company, and an unrelated party to Avista Corp. The sales transaction was completed on June 30, 2014 for a sales price of $335.0 million in cash, less the payment of debt and other customary closing adjustments. At the closing of the transaction on June 30, 2014, Ecova became a wholly-owned subsidiary of Cofely USA Inc. and the Company will have no further involvement with Ecova after such date.

The purchase price of $335.0 million, as adjusted, was divided among the security holders of Ecova, including minority shareholders and option holders, pro rata based on ownership. Approximately $16.8 million (5 percent of the purchase price) will be held in escrow for 15 months from the closing of the transaction to satisfy certain indemnification obligations under the merger agreement, and an additional $1.5 million will be held in escrow pending resolution of adjustments to working capital (which is expected to occur before the end of 2014).

Avista Capital and Cofely USA Inc. agreed to make an election under Section 338(h)(10) of the Internal Revenue Code (Code) of 1986, as amended, with respect to the purchase and sale of Ecova to allocate the merger consideration among the assets of Ecova deemed to have been acquired in the merger.

When all escrow amounts are released, the sales transaction is expected to provide cash proceeds to Avista Corp., net of debt, payment to option and minority holders, income taxes and transaction expenses, of $133.2 million (see reconciliation below) and result in a net gain of $68.0 million. The Company expects to receive the full amount of its portion of the escrow accounts; therefore, the full amounts were included in the gain calculation.

The summary of cash proceeds associated with the sales transaction are as follows (in thousands):

	June 30, 2014
Reconciliation to Statement of Cash Flows
Contract price	$	335,000
Closing adjustments	4,402
Gross proceeds from sale (1)	339,402
Cash sold in the transaction	(95,932		)
Avista Corp. portion of proceeds held in escrow	(13,567		)
Gross proceeds from sale of Ecova, net of cash sold (per Statement of Cash Flows)	$	229,903
Reconciliation of expected net proceeds
Gross proceeds from sale (1)	$	339,402
Repayment of long-term borrowings under committed line of credit	(40,000		)
Payment to option holders and redeemable noncontrolling interests	(20,871		)
Payment to noncontrolling interests	(54,179		)
Transaction expenses withheld from proceeds	(5,390		)
Avista Corp. portion of proceeds held in escrow	(13,567		)
Net proceeds to Avista Capital at transaction closing	205,395
Estimated tax payments to be made in 2014	(85,756		)
Avista Corp. portion of proceeds held in escrow to be received in the future	13,567
Total net proceeds related to sales transaction	$	133,206

(1) Of this total amount, approximately $16.8 million will be held in escrow for 15 months from the transaction closing date for any indemnity claims and an additional $1.5 million will be held in escrow pending resolution of adjustments to working capital (which is expected to occur before the end of 2014).

Prior to the completion of the sales transaction, Ecova was a reportable business segment. The major classes of assets and liabilities and their carrying amounts immediately prior to the completion of the sales transaction were as follows:

	June 30, 2014
Assets:
Current Assets:
Cash and cash equivalents	$	95,932
Accounts and notes receivable-less allowances of $410	32,070
Investments and funds held for clients	114,598
Income taxes receivable	2,548
Other current assets	8,908
Total current assets	254,056
Other Non-current Assets:
Goodwill	71,123
Intangible assets-net of accumulated amortization of $42,266	37,185
Other property and investments-net	4,656
Total other non-current assets	112,964
Total assets	367,020
Liabilities:
Current Liabilities:
Accounts payable	72,453
Client fund obligations	115,333
Current portion of long-term debt	67
Other current liabilities	35,329
Total current liabilities	223,182
Long-term borrowings under committed line of credit	40,000
Other non-current liabilities	2,117
Total liabilities	$	265,299

Amounts reported in discontinued operations for 2013 and 2014 relate solely to the Ecova business segment. The following table presents amounts that were included in discontinued operations for the three and nine months ended September 30 (dollars in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
Revenues	$	—		$	46,398		$	87,534		$	133,365
Gain on sale of Ecova (1)	—			—			161,100			—
Transaction expenses and accelerated employee benefits (2)	86			—			9,062			—
Gain on sale of Ecova, net of transaction expenses	(86		)	—			152,038			—
Income (loss) before income taxes	(86		)	5,540			156,513			10,999
Income tax expense (benefit)	(31		)	2,092			85,741			4,178
Net income (loss) from discontinued operations	(55		)	3,448			70,772			6,821
Net income attributable to noncontrolling interests	—			(485		)	(187		)	(1,292		)
Net income (loss) from discontinued operations attributable to Avista Corp. shareholders	$	(55	)	$	2,963		$	70,585		$	5,529

(1) This represents the gross gain recorded to discontinued operations. The gain net of taxes and transactions expenses is $68.0 million.

(2) This represents Avista Corp.'s portion of the total transaction expenses. All transaction expenses paid on the Ecova sale were $11.0 million, of which $5.4 million were withheld from the net proceeds and the remainder were paid during the second and third quarter of 2014. The transaction expenses were for legal, accounting and other consulting fees and the accelerated employee benefits related to employee stock options which were settled in accordance with the Ecova equity plan.