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Discontinued Operations | 9 Months Ended
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Oct. 03, 2021
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued Operations | Assets Held for Sale 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the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. When we classify a disposal group as held for sale, we test for impairment. An impairment charge is recognized when the carrying value of the disposal group exceeds the estimated fair value, less costs to sell. We also cease depreciation and amortization for assets classified as held for sale. During the first quarter of 2021, we committed to a plan to sell our oil and gas cable business in Brazil that met all of the criteria to classify the assets and liabilities of this business, formerly part of the Industrial Solutions segment, as held for sale. At such time, the carrying value of the disposal group exceeded the fair value less costs to sell, which we determined based upon the expected sale price, by $3.4 million. Therefore, we recognized an impairment charge in Selling, General and Administrative Expenses equal to this amount in the first quarter of 2021. The impairment charge was excluded from Segment EBITDA of our Industrial Solutions segment. We completed the sale of our oil and gas cable business in Brazil during the second quarter of 2021 for $10.9 million, net of cash delivered with the business. During the third quarter of 2021, we entered into an agreement to sell and lease back certain Industrial Solutions segment real estate in Germany and met the criteria to classify the assets as held for sale. At such time, the carrying value of the assets exceeded the fair value less costs to sell, which we determined based upon the expected sale price, by $2.3 million. Therefore, we recognized an impairment charge in Selling, General and Administrative Expenses equal to this amount in the third quarter of 2021. The impairment charge was excluded from Segment EBITDA of our Industrial Solutions segment. We expect to close on the sale and lease back of the real estate in the fourth quarter of 2021. Discontinued Operations 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, the divestiture of Grass Valley represented a strategic shift that had 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, was reported within discontinued operations. The Grass Valley disposal group excluded certain Grass Valley pension liabilities that we retained. 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 completed the sale of Grass Valley to Black Dragon Capital on July 2, 2020 for gross cash consideration of $120.0 million, or approximately $56.2 million net of cash delivered with the business. The sale also included deferred consideration consisting of a $175.0 million seller’s note that is expected to mature in 2025, up to $88 million in PIK (payment-in-kind) interest on the seller’s note, and $178.0 million in potential earnout payments. The seller’s note accrues PIK interest at an annual rate of 8.5%. During the three and nine months ended October 3, 2021, the seller's note accrued interest of $3.9 million and $11.6 million, respectively, which we reserved for based on our expected loss allowance methodology. Based upon a third party valuation specialist using certain assumptions in a Monte Carlo analysis, the estimated fair value of the seller’s note is $34.9 million, which we recorded in Other Long-Lived Assets. We accounted for the earnout under a loss recovery approach and did not record an asset as of the disposal date. Any subsequent recognition of an earnout will be based on the gain contingency guidance. As part of the transaction, we also invested $3.0 million for a 9% equity interest in Grass Valley with the right to put the equity back to Black Dragon Capital. We exercised our right during the fourth quarter of 2020 and sold our 9% equity interest in Grass Valley to Black Dragon Capital for $2.7 million. We deconsolidated Grass Valley as of July 2, 2020 and accounted for our equity interest under the cost method for the period that we owned a 9% interest in Grass Valley. Grass Valley's operating results for periods after July 2, 2020 are not included in our Consolidated Financial Statements. The following table summarizes the operating results of the disposal group for the three and nine months ended September 27, 2020 (in thousands):
|  | Three Months Ended |  | Nine Months Ended
|  | September 27, 2020 |  | September 27, 2020
|  | (In Thousands)
Revenues |  | $ | 1,334 |  |  | $ | 109,195 |
Cost of sales |  | (1,008) |  |  | (70,199) |
Gross profit |  | 326 |  |  | 38,996 |
Selling, general and administrative expenses |  | (574) |  |  | (37,435) |
Research and development expenses |  | (610) |  |  | (15,083) |
Asset impairment of discontinued operations |  | — |  |  | (113,007) |
Interest expense, net |  | (12) |  |  | (432) |
Non-operating pension cost |  | 27 |  |  | (169) |
Loss before taxes |  | $ | (843) |  |  | $ | (127,130) |
We wrote down the carrying value of Grass Valley and recognized asset impairments totaling $113.0 million in the nine months ended September 27, 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 disposal group had capital expenditures of approximately $0.3 million and $16.7 million during the three and nine months ended September 27, 2020, respectively. The disposal group recognized credits to stock-based compensation of $0.0 million and $0.9 million during the three and nine months ended September 27, 2020, respectively. The disposal group did not have any significant non-cash charges for investing activities during the nine months ended September 27, 2020.

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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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