Discontinued Operations

3 Months Ended

Mar. 29, 2020

Discontinued Operations and Disposal Groups [Abstract]

We classify assets and liabilities as held for sale (disposal group) when management, having the authority to approve the action, commits to a plan to sell the disposal group, the sale is probable within one year, and the disposal group is available for immediate sale in its present condition. We also consider whether an active program to locate a buyer has been initiated, whether the disposal group is marketed actively for sale at a price that is reasonable in relation to its current fair value, and whether actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

During the fourth quarter of 2019, we committed to a plan to sell Grass Valley, and at such time, met all of the criteria to classify the assets and liabilities of this business as held for sale. Furthermore, we determined a divestiture of Grass Valley represents a strategic shift that is expected to have a major impact on our operations and financial results. As a result, the Grass Valley disposal group, which was included in our Enterprise Solutions segment, is reported within discontinued operations. The Grass Valley disposal group excludes certain Grass Valley pension liabilities that we expect to retain. We also ceased depreciating and amortizing the assets of the disposal group once they met the held for sale criteria during the fourth quarter of 2019. We intend to complete the sale of the Grass Valley disposal group during 2020.

We wrote down the carrying value of Grass Valley and recognized asset impairments totaling $23.2 million in the three months ended March 29, 2020. We determined the estimated fair values of the assets and of the reporting unit by calculating the present values of their estimated future cash flows.

The following table summarizes the operating results of the disposal group for the three months ended ended March 29, 2020 and March 31, 2019:


	Three Months Ended
	March 29, 2020		March 31, 2019

	(In thousands)
Revenues	$	51,049	$	87,035
Cost of sales	(35,202)		(49,163)
Gross profit	15,847		37,872
Selling, general and administrative expenses	(17,519)		(24,831)
Research and development expenses	(8,499)		(10,907)
Amortization of intangibles	—		(5,178)
Asset impairment of discontinued operations	(23,197)		—
Interest expense, net	(206)		(206)
Non-operating pension income (cost)	(85)		(56)
Loss before taxes	$	(33,659)	$	(3,306)

The disposal group also had capital expenditures of approximately $7.9 million and $5.8 million during the three months ended March 29, 2020 and March 31, 2019, respectively. Furthermore, the disposal group incurred stock-based compensation expense (income) of ($0.9 million) and $0.3 million during the three months ended March 29, 2020 and March 31, 2019, respectively. The disposal group did not have any significant non-cash charges for investing activities during the three months ended March 29, 2020 or March 31, 2019.

The following table provides the major classes of assets and liabilities of the disposal group as of March 29, 2020 and December 31, 2019:


	March 29, 2020		December 31, 2019

	(In thousands)
Assets:
Cash and cash equivalents	$	42,742	$	18,405
Receivables, net	88,895		117,386
Inventories, net	53,635		55,002
Other current assets	46,659		35,187
Plant, property, and equipment, less accumulated depreciation	59,200		61,233
Operating lease right-of-use assets	15,050		16,902
Goodwill	25,306		26,707
Intangible assets, less accumulated depreciation	139,055		143,459
Deferred income taxes	57,868		59,560
Other long-lived assets	19,357		21,652
Impairment of disposal group	(203,555)		(180,358)
Total Assets of discontinued operations	$	344,212	$	375,135
Liabilities:
Accounts payable	$	42,683	$	52,425
Accrued liabilities	63,838		83,349
Postretirement benefits	5,310		6,224
Deferred income taxes	3,925		2,740
Long-term operating lease liabilities	18,357		20,459
Other long-term liabilities	1,342		5,082
Total Liabilities of discontinued operations	$	135,455	$	170,279

The disposal group also had $30.3 million and $42.3 million of accumulated other comprehensive losses as of March 29, 2020 and December 31, 2019, respectively.