Discontinued Operations

9 Months Ended

Jun. 30, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

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, prior to a working capital adjustment of $0.1 million. On December 10, 2014, EMCORE completed the Photovoltaics Asset Sale.

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 three months ended December 31, 2014, we recognized a gain of $56.8 million, net of tax on the sale of the Photovoltaics Business which was recorded within discontinued operations in the condensed consolidated statements of operations and comprehensive income.

On December 22, 2015, we settled all of the outstanding rights and obligations of a solar power venture in Spain, including outstanding non-current receivables, for a payment of $0.7 million. The outstanding non-current receivables had a net book value of $0 at the time of settlement as they were fully allowed for previously. The resulting gain was recorded in the discontinued operations of the Photovoltaics Business for the nine months ended June 30, 2016.

No assets and liabilities of the Photovoltaics Business that were sold remain on the condensed consolidated balance sheet as of June 30, 2016 and September 30, 2015. The financial results of the Photovoltaics Business are reported as discontinued operations for the three and nine months ended June 30,2016 and 2015.

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

	For the three months ended June 30,						For the nine months ended June 30,
(in thousands)	2016			2015			2016			2015
Revenue	$	—		$	—		$	—		$	12,614
Cost of revenue	—			—			—			8,245
Gross profit	—			—			—			4,369
Operating (income) expense	(17		)	(374		)	(838		)	2,057
Other income	—			—			—			779
Gain on sale of discontinued operations	—			(64		)	—			86,958
Income from discontinued operations before income tax benefit (expense)	17			310			838			90,049
Income tax benefit (expense)	23			1,105			(5		)	(28,821		)
Income from discontinued operations, net of tax	$	40		$	1,415		$	833		$	61,228

Included in discontinued operations during the three and nine months ended June 30, 2016 were $0 and $0.1 million, respectively, of New Mexico incentive tax credits received. The credits received resulted in cash refunds. There were no incentive tax credits received during the three and nine months ended June 30, 2015.

Sale of Digital Products Business

On October 22, 2014, EMCORE entered into an Asset Purchase Agreement with NeoPhotonics, pursuant to which the Company sold 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 adjustments. On January 2, 2015, EMCORE completed the sale of the Digital Products Business for $1.5 million in cash and an adjusted Promissory Note balance 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.

During the nine months ended June 30, 2015, we recognized a gain of $2.0 million on the sale of the Digital Products Business which was recorded within discontinued operations in the condensed consolidated statements of operations and comprehensive income.

In December 2015, we entered into an agreement to terminate our lease and related obligations associated with a facility in Newark, California which we abandoned effective February 2016 following the sale of the Digital Products Business for a payment of $0.2 million. As a result of this agreement, we recorded a gain of $0.3 million on the lease termination in the discontinued operations of the Digital Products Business during the nine months ended June 30, 2016. See Note 8 - Accrued Expenses and Other Current Liabilities.

Included in cost of revenue for the nine months ended June 30, 2016 is $0.4 million due to a reduction in expected product warranty liabilities from a settlement agreement associated with the Digital Products Business.

During the nine months ended June 30, 2016, we recognized the deferred gain of $3.4 million and reversal of other liabilities of $0.4 million, that had been recorded as of September 30, 2015, resulting in a credit of $3.8 million to deferred gain on sale of assets within discontinued operations of the Digital Products Business as the result of the favorable ruling from the SEI arbitration. See Note 11 - Commitments and Contingencies.

No assets or liabilities from the Digital Products Business remain on the condensed consolidated balance sheet as of June 30, 2016 and September 30, 2015. The financial results of the Digital Products Business are reported as discontinued operations for the three and nine months ended June 30, 2016 and 2015.

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

	For the three months ended June 30,						For the nine months ended June 30,
(in thousands)	2016			2015			2016			2015
Revenue	$	—		$	89		$	—		$	11,944
Cost of revenue	—			27			(494		)	9,138
Gross profit	—			62			494			2,806
Operating expense (income)	45			(11		)	(285		)	3,147
Recognition of previously deferred gain on sale of assets	—			—			3,804			—
Gain on sale of discontinued operations	—						—			1,994
(Loss) income from discontinued operations before income tax benefit (expense)	(45		)	73			4,583			1,653
Income tax benefit (expense)	128			488			(28		)	2,361
Income from discontinued operations	$	83		$	561		$	4,555		$	4,014