Discontinued Operations (Notes)

12 Months Ended

Dec. 31, 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 ("S&T"), a publicly traded European IT systems provider.

The consideration received for the sale of the Grid business totaled approximately $4.9 million. The Company could receive an additional $1.0 million if the revenues of the Grid business exceed $50 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 and December 31, 2014, was deemed to be zero. The Company also entered into a sub-lease arrangement as well as a supply arrangement for a component of the technology sold to S&T. These arrangements each have a term of 39 months and each has been considered indirect cashflows as they were deemed to be insignificant.

After the impairment charges taken in the second quarter of 2014 (see Notes 3 and 10), and net of transaction costs, the sale of the Grid business resulted in a loss of $254,000, recorded as loss on sale of discontinued operations for the year endedDecember 31, 2014.

The assets and liabilities of the Company's Grid division joint venture (see Note 18) were not included in the sale to S&T. 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 December 31, 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 year endedDecember 31, 2014. Of this amount, approximately $1.1 million has been paid as of December 31, 2014, and the remaining balance will be paid during the first half of 2015.

The Company has classified the results of operations of the Grid business as discontinued operations for the years ended December 31, 2014 and 2013. For years prior to 2013, the Company’s organizational structure was set up to report and track information for a single reporting unit, the Company as a whole. In late 2013, the Company underwent a reorganization into two operating segments, Grid and IIoT, which resulted in, among other things, a complex movement affecting a majority of the Company's employees, a significant modification to the Company's departmental organization structure, and a completely new way of presenting and reviewing operating performance for the new organizations. Prior to 2013, the Grid business was not deemed a component of the Company as operations and cashflows could not be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company. Therefore, the reporting of discontinued operations for 2012 is not appropriate as the operations and cashflows from the Grid business were not clearly distinguished from the rest of the Company prior to 2013.   Furthermore, for 2012 it was impracticable for us to break out the separate results for the Grid business as our company was organized and operating as a single segment and separate division specific financial information is unavailable.  

The table below provides a summary of the components of the net loss from discontinued operations for 2014 and 2013 and 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.

	Year ended December 31,
	2014			2013
Revenues (1) (2)	$	18,392		$	40,303
Cost of revenues	11,774			24,988
Operating expenses	15,614			18,994
Loss from discontinued operations before income taxes	(8,996		)	(3,679		)
Income taxes	—			—
Loss on sale of Grid business	(254		)	—
Net loss from discontinued operations, net of income taxes	(9,250		)	(3,679		)
Net loss from discontinued operations attributable to non-controlling interest, net of income taxes	535			808
Net loss from discontinued operations attributable to Echelon Corporation Stockholders, net of income taxes	$	(8,715	)	$	(2,871	)

⁽¹⁾ Includes related party amounts of $112,000 and $4.4 million for the years ended December 31, 2014 and 2013, respectively.

⁽²⁾ Revenues for the Grid business were $85.2 million for the year ended December 31, 2012

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 December 31, 2014.