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Discontinued Operations | 12 Months Ended
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Apr. 30, 2021
Discontinued Operations. |
Discontinued Operations | 2. Discontinued Operations ​ On June 29, 2018, the Company completed the sale of substantially all of the assets and related liabilities of its efficient energy systems business segment (the “EES Business”) to Webasto Charging Systems, Inc. (“Webasto”) pursuant to an Asset Purchase Agreement (the “Purchase Agreement”) between Webasto and the Company. In accordance with the terms of the Purchase Agreement, as amended by a side letter agreement executed at the closing, the Company received cash consideration of $31,994,000 upon closing, which resulted in a gain of $11,420,000 and has been recorded in gain on sale of business, net of tax in the consolidated statements of income. During the year ended April 30, 2019, the Company recorded a reduction to the gain resulting from a working capital adjustment of $486,000. During the year ended April 30, 2020, the Company and Webasto engaged an independent accounting firm to resolve a working capital dispute with a maximum exposure of $922,000 pursuant to the terms of the Purchase Agreement. In June 2020, the independent accounting firm determined the final adjustment to the working capital dispute to be $341,000 which has been recorded net of tax as a loss of discontinued operations in the consolidated statements of income for the year ended April 30, 2020. ​ The Company is entitled to receive additional cash consideration of $6,500,000 (the “Holdback”) upon tendering consents to assignment of two remaining customer contracts to Webasto. The Holdback was not recorded in the Company’s consolidated financial statements as the amount was not realized or realizable as of April 30, 2021. The Company’s satisfaction of the requirements for the payment of the Holdback is currently in dispute. ​ On February 22, 2019, Webasto filed a lawsuit, which was amended in April 2019, alleging several claims against the Company for breach of contract, indemnity, and bad faith, including allegations regarding inaccuracy of certain diligence disclosures, failure to provide certain consents to contract assignments and related to a previously announced product recall. Webasto seeks to recover the costs of the recall and other damages totaling a minimum of $6,500,000 in addition to attorneys’ fees, costs, and punitive damages. On August 16, 2019, the Company filed a counterclaim against Webasto seeking payment of the Holdback and declaratory relief regarding Webasto’s cancellation of an assigned contract. Webasto again amended the complaint in May 2021 to include additional claims. The Company has not filed an answer to Webasto’s amended complaint filed in May 2021. The Company believes that the allegations are generally meritless and is mounting a vigorous defense. In order to avoid the future cost, expense, and distraction of continued litigation, the Company engaged in settlement negotiations with Webasto, however, the negotiations did not result in a settlement of any of the Company’s or Webasto’s claims. As a result of the settlement negotiations, the Company established a litigation reserve, which reserve reflects the scope of a rejected offer intended to communicate the Company’s serious and good faith intention to attempt to reach a settlement for the stated purposes. The offer did not reflect the Company’s view of the merits of the claims made, and the Company continues to vigorously defend all claims. However, as a result of the preparation of the good faith offer and the Company’s willingness to pursue settlement for that amount, the Company recorded litigation reserve expenses in the amount of $9,300,000 during the year ended April 30, 2021 recorded in other expense on the consolidated statements of operations. ​ During the three months ended October 27, 2018, Webasto filed a recall report with the National Highway Traffic Safety Administration that named certain of the Company’s EES products as subject to the recall. The Company is continuing to assess the facts giving rise to the recall. Under the terms of the Purchase Agreement, the Company may be responsible for certain costs of such recall of named products the Company manufactured, sold or serviced prior to the closing of the sale of the EES Business. On August 14, 2019, Benchmark Electronics, Inc. (“Benchmark”), the company that assembled the products subject to the recall, served a demand for arbitration to the Company and Webasto, and a third-party part supplier pursuant to its contracts with the Company and Webasto, respectively. The Company filed a responsive pleading in the Benchmark arbitration on October 29, 2019, consisting of a general denial, affirmative defenses, and a reservation of the right to file counter-claims at a later date. Webasto challenged the validity of the Benchmark arbitration by filing an action in New York Superior Court. In December 2019, Webasto and Benchmark reached a settlement of their disputed claims. Benchmark withdrew its Notice of Arbitration against Webasto and the Company, but reserved its right to pursue indemnity claims against suppliers. The recall remains a significant part of the Webasto lawsuit. ​ Concurrent with the execution of the Purchase Agreement, the Company entered into a transition services agreement (the “TSA”) to provide certain general and administrative services to Webasto for a defined period. Income from performing services under the TSA was $38,000, $551,000 and $2,758,000 and has been recorded in other income, net in the consolidated statements of income for the fiscal years ended April 30, 2021, 2020 and 2019, respectively. ​ The Company determined that the EES Business met the criteria for classification as an asset held for sale as of April 30, 2018 and represents a strategic shift in the Company’s operations. Therefore, the results of operations of the EES Business are reported as discontinued operations for all periods presented. The table below presents the statements of income data for the EES Business (in thousands). ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year Ended April 30,
​ | ​ | 2021 | ​ | 2020 | ​ | 2019
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net sales | ​ | $ | — | ​ | $ | — | ​ | $ | 4,256
Cost of sales | ​ |  | — | ​ |  | — | ​ |  | 5,097
Gross margin | ​ |  | — | ​ |  | — | ​ |  | (841)
Selling, general and administrative | ​ |  | — | ​ |  | — | ​ |  | 1,515
Research and development | ​ |  | — | ​ |  | — | ​ |  | 1,072
Other income, net | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 1
Loss from discontinued operations before income taxes | ​ |  | — | ​ |  | — | ​ |  | (3,427)
Benefit for income taxes | ​ | ​ | — | ​ | ​ | - | ​ | ​ | (463)
Net loss from discontinued operations | ​ | $ | — | ​ | $ | — | ​ | $ | (2,964)
(Loss) gain on sale of business, net of tax (benefit) expense of $(76) and $2,444 for the year ended April 30, 2020 and April 30, 2019, respectively | ​ | ​ | — | ​ | ​ | (265) | ​ | ​ | 8,490
Net (loss) income from discontinued operations | ​ | $ | — | ​ | $ | (265) | ​ | $ | 5,526
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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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