XML 56 R12.htm IDEA: XBRL DOCUMENT v2.4.0.8
Discontinued Operations (Notes)
 9 Months Ended
Sep. 30, 2014
Discontinued Operations [Abstract]  
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]
5. Discontinued Operations

During the third quarter of 2014, the Company announced that it had reached an agreement to sell its Grid business in order to focus on its IIoT business and on future opportunities in this market. On September 30, 2014, the Company completed the sale of its Grid business to S&T AG, a publicly traded European IT systems provider.
 
The consideration received for the sale of the Grid business totaled approximately $4.9 million. Additionally, the Company could receive $1.0 million if the revenues of the Grid business exceed $50.0 million for the calendar year 2015. Based on the historical results of the Grid business and near-term estimates, management of the Company does not believe the sales targets will be achieved. Accordingly, the probability weighted fair value of the contingent consideration as of September 30, 2014 was deemed to be zero. The Company has entered into a sub-lease arrangement as well as a supply arrangement for a component of the technology sold to S&T AG. These arrangements each have a term of 39 months and each has been considered indirect cashflows as they were deemed to be not significant.

The sale of the Grid business resulted in a loss of $254,000, net of income taxes, recorded as loss on sale of discontinued operations for the three and nine months ended September 30, 2014.

The assets and liabilities of the Company's Grid division joint venture (see Note 16) were not included in the sale to S&T AG. The Company is in the process of negotiating the sale of the joint venture's remaining net assets and has recorded the fair value of the assets and liabilities of the joint venture as held for sale on the accompanying balance sheet at September 30, 2014. The remaining asset and liabilities principally relate to inventory, deferred revenues and the related deferred costs of sales and accrued liabilities.
 
As a result of restructuring activities during the third quarter of 2014, a total of $1.4 million of restructuring costs is included in loss from discontinued operations for the three and nine months ended September 30, 2014. Of this amount, approximately $83,000 has been paid as of September 30, 2014 and the remaining balance will be paid by the first quarter of 2015.
 
The Company has classified the results of operations of the Grid business as discontinued operations for all periods presented. The table below excludes certain shared overhead costs that were previosuly allocated to the Grid segment as ASC 205-20 prohibits the allocation of general overhead costs to discontinued operations. The results of operations of the Grid business are as follows:

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
Revenues (1)
$
5,467

 
$
7,837

 
$
18,392

 
$
34,693

Cost of revenues
3,433

 
3,764

 
11,774

 
20,760

Operating expenses
3,921

 
4,342

 
15,614

 
14,908

Loss from discontinued operations before income taxes
(1,887
)
 
(269
)
 
(8,996
)
 
(975
)
Income taxes
—

 
—

 
—

 
—

Loss on sale of Grid business
254

 
—

 
254

 
—

Net loss from discontinued operations, net of income taxes
$
(2,141
)
 
$
(269
)
 
$
(9,250
)
 
$
(975
)
Net loss from discontinued operations attributable to non-controlling interest, net of income taxes
$
179

 
$
266

 
$
535

 
$
590

Net loss from discontinued operations attributable to Echelon Corporation Stockholders, net of income taxes
$
(1,962
)
 
$
(3
)
 
$
(8,715
)
 
$
(385
)

(1) Includes related party amounts of zero and $2.0 million for the three months ended September 30, 2014 and 2013, respectively; and related party amounts of $112,000 and $4.4 million for the nine months ended September 30, 2014 and 2013, respectively.
    
The sale agreement contains certain indemnification provisions related to the Grid business whereby the Company may have obligations related to the period it owned the Grid business. The Company believes the estimated fair value of these indemnification provisions are minimal and accordingly, no liability is recorded for these indemnifications as of September 30, 2014.