Discontinued Operations

12 Months Ended

Dec. 31, 2021

Discontinued Operations and Disposal Groups [Abstract]

Sale of Advanced Circuits

On October 13, 2021, the Company, as the representative (the “Sellers Representative”) of the holders (the “AC Sellers”) of stock and options of Advanced Circuits, a majority owned subsidiary of the Company, entered into a definitive Agreement and Plan of Merger (the “AC Agreement”) with Tempo Automation, Inc. (“AC Buyer”), Aspen Acquisition Sub, Inc. (“AC Merger Sub”) and Advanced Circuits, pursuant to which AC Buyer will acquire all of the issued and outstanding securities of Advanced Circuits, the parent company of the operating entity, Advanced Circuits, Inc., through a merger of AC Merger Sub with and into Advanced Circuits, with Advanced Circuits surviving the merger and becoming a wholly owned subsidiary of AC Buyer (the “AC Merger”). Under the terms of the AC Agreement, the AC Sellers will receive consideration in the amount of $310 million, composed of $240 million in cash and $70 million in common stock of a publicly traded special purpose acquisition company (“SPAC”) selected by AC Buyer to acquire AC Buyer (the “SPAC Transaction”) upon the closing of the transaction, excluding certain working capital and other adjustments. In addition, the AC Sellers may receive 2.4 million additional shares of SPAC common stock within five years, subject to SPAC stock price performance. The Company owns approximately 67% of the outstanding stock of Advanced Circuits on a fully diluted basis and expects to receive approximately 77% of the gross consideration payable under the AC Agreement. This amount is in respect of the Company’s outstanding loans to Advanced Circuits and its equity interests in Advanced Circuits. The closing of the transaction is expected to occur in the second quarter of 2022, however, there can be no assurances that all of the conditions to closing, which include the closing of the SPAC transaction, will be satisfied.

The sale of Advanced Circuits met the criteria for the assets to be classified as held for sale as of December 31, 2021, and is presented as discontinued operations in the accompanying consolidated financial statements for all periods presented. Summarized results of operations of Advanced Circuits are as follows (in thousands):


	Year ended December 31, 2021		Year ended December 31, 2020		Year ended December 31, 2019
Net sales	$	90,487	$	88,075	$	90,791
Gross profit	41,049		38,838		41,506
Operating income	25,232		22,891		25,680
Income from continuing operations before income taxes (1)	24,933		22,738		25,560
Provision for income taxes	3,419		3,431		3,896
Income from discontinued operations (1)	$	21,514	$	19,307	$	21,664

(1) The results of operations for the years ended December 31, 2021, 2020 and 2019, each exclude $7.2 million,$5.8 million and $6.5 million, respectively, of intercompany interest expense.

The following table presents summary balance sheet information of ACI that is presented as held for sale as of December 31, 2021 and 2020 (in thousands):


	December 31, 2021		December 31, 2020
Assets
Cash and cash equivalents	$	3,610	$	6,379
Accounts receivable, net	9,447		6,967
Inventories, net	3,660		3,373
Prepaid expenses and other current assets	430		417
Current assets held for sale	$	17,147	$	17,136
Property, plant and equipment, net	8,083		9,465
Goodwill	66,668		66,668
Intangible assets, net	23		62
Other non-current assets	7,502		8,533
Non-current assets held for sale (1)	$	82,276	$	84,728

Liabilities
Accounts payable	$	3,798	$	2,476
Accrued expenses	3,718		5,042
Due to related party	125		125
Other current liabilities	1,526		1,526
Current liabilities held for sale	$	9,167	$	9,169
Deferred income taxes	13,419		13,890
Other non-current liabilities	6,487		7,645
Non-current liabilities held for sale (1)	$	19,906	$	21,535
Noncontrolling interest held for sale	$	(2,614)	$	(7,175)

(1) The closing of the transaction is expected to occur in the second quarter of 2022, and therefore all assets and liabilities have been classified as current on the consolidated balance sheet for the year ended December 31, 2021.

Sale of Liberty

On July 16, 2021, the Company, as majority stockholder of Liberty Safe Holding Corporation and as Sellers Representative, entered into a definitive Stock Purchase Agreement (the “Liberty Purchase Agreement”) with Independence Buyer, Inc. (“Liberty Buyer”), Liberty and the other holders of stock and options of Liberty to sell to Liberty Buyer all of the issued and outstanding securities of Liberty, the parent company of the operating entity, Liberty Safe and Security Products, Inc.

On August 3, 2021, Liberty Buyer and the Company, as Sellers Representative, entered into the Amendment to Stock Purchase Agreement (the “Liberty Amendment”) which amended the Liberty Purchase Agreement to, among other things, provide that, immediately prior to the closing, certain investors in Liberty will, instead of selling all of the shares of Liberty owned by them to Liberty Buyer, contribute a portion of such shares (the “Liberty Rollover Shares”) to an indirect parent company of Liberty Buyer in exchange for equity securities of such entity.

On August 3, 2021, Liberty Buyer completed the acquisition of all the issued and outstanding securities of Liberty (other than the Liberty Rollover Shares) pursuant to the Liberty Purchase Agreement and Liberty Amendment (the “Liberty Transaction”). The sale price of Liberty was based on an aggregate total enterprise value of $147.5 million, subject to customary adjustments. After the allocation of the sale proceeds to Liberty's non-controlling shareholders, the repayment of intercompany loans to the Company (including accrued interest) of $26.5 million, and the payment of transaction expenses of approximately $4.5 million, the Company received approximately $128.0 million of total proceeds from the sale at closing. The Company recognized a gain on the sale of Liberty of $72.8 million during the year ended December 31, 2021.

Summarized results of operations of Liberty for the previous years through the date of disposition are as follows (in thousands):


	For the period January 1, 2021 through disposition		Year ended December 31, 2020		Year ended December 31, 2019
Net sales	$	75,753	$	113,115	$	96,164
Gross profit	20,129		28,978		21,005
Operating income	9,175		16,826		8,526
Income from continuing operations before income taxes (1)	9,174		16,819		8,509
Provision for income taxes	1,509		3,288		932
Income from discontinued operations (1)	$	7,665	$	13,531	$	7,577

(1) The results of operations for the periods from January 1, 2021 through disposition and the years ended December 31, 2020 and 2019, each exclude $1.7 million, $3.5 million and $4.4 million, respectively, of intercompany interest expense.

The following table presents summary balance sheet information of Liberty that is presented as discontinued operations as of December 31, 2020 (in thousands):


	December 31, 2020
Assets
Cash and cash equivalents	$	4,342
Accounts receivable, net	18,812
Inventories, net	9,406
Prepaid expenses and other current assets	945
Current assets of discontinued operations	$	33,505
Property, plant and equipment, net	9,551
Goodwill	32,828
Intangible assets, net	3,020
Other non-current assets	8,473
Non-current assets of discontinued operations	$	53,872

Liabilities
Accounts payable	$	7,495
Accrued expenses	4,911
Due to related party	101
Other current liabilities	2,723
Current liabilities of discontinued operations	$	15,230
Deferred income taxes	1,815
Other non-current liabilities	9,320
Non-current liabilities of discontinued operations	$	11,135
Noncontrolling interest of discontinued operations	$	3,836

Sale of Clean Earth

On May 8, 2019, the Company, as majority stockholder of CEHI Acquisition Corporation ("Clean Earth" or CEHI") and as Sellers’ Representative, entered into a definitive Stock Purchase Agreement (the “Clean Earth Purchase Agreement”) with Calrissian Holdings, LLC (“Clean Earth Buyer”), CEHI, the other holders of stock and options of CEHI and, as Clean Earth Buyer’s guarantor, Harsco Corporation, pursuant to which Clean Earth Buyer would acquire all of the issued and outstanding securities of CEHI, the parent company of the operating entity, Clean Earth, Inc.

On June 28, 2019, Clean Earth Buyer completed the acquisition of all of the issued and outstanding securities of CEHI pursuant to the Clean Earth Purchase Agreement. The sale price for Clean Earth was based on an aggregate total enterprise value of $625 million and is subject to customary working capital adjustments. After the allocation of the sale proceeds to Clean Earth non-controlling equity holders, the repayment of intercompany loans to the Company (including accrued interest) of $224.6 million, and the payment of transaction expenses of approximately $10.7 million, the Company received approximately $327.3 million of total proceeds at closing related to our equity interests in Clean Earth. The Company recognized a gain on the sale of Clean Earth of $209.3 million during the year ended December 31, 2019.

Summarized operating results for Clean Earth for 2019 through the date of disposition were as follows (in thousands):


	For the period January 1, 2019 through disposition
Net sales	$	132,737
Gross profit	39,678
Operating income	6,232
Income before income taxes	5,880
Benefit for income taxes	(11,607)
Income from discontinued operations (1)	$	17,487

(1) The results of operations for the period from January 1, 2019 through the date of disposition, excludes $10.2 million of intercompany interest expense.

Sale of Manitoba Harvest

On February 19, 2019, the Company entered into a definitive agreement with Tilray, Inc. ("Tilray") and a wholly-owned subsidiary of Tilray, 1197879 B.C. Ltd. (“Tilray Subco”), to sell to Tilray, through Tilray Subco, all of the issued and outstanding securities of our majority owned subsidiary, Manitoba Harvest for total consideration of up to C$419 million. The completion of the sale of Manitoba Harvest was subject to approval by the British Columbia Supreme Court, which occurred on February 21, 2019. The sale closed on February 28, 2019. Subject to certain customary adjustments, the shareholders of Manitoba Harvest, including the Company, received the following from Tilray as consideration for their shares of Manitoba Harvest: (i) C$150 million in cash to the holders of preferred shares of Manitoba Harvest and the holders of common shares of Manitoba Harvest (“Common Holders”) and C$127.5 million in shares of class 2 Common Stock of Tilray (“Tilray Common Stock”) to the Common Holders on the closing date of the sale (the “Closing Date Consideration”), and (ii) C$50 million in cash and C$42.5 million in Tilray Common Stock to the Common Holders on the date that was six months after the closing date of the arrangement (the “Deferred Consideration”). The sale consideration also included a potential earnout of up to C$49 million in Tilray Common Stock to the Common Holders, if Manitoba Harvest achieved certain levels of U.S. branded gross sales of edible or topical products containing broad spectrum hemp extracts or cannabidiols prior to December 31, 2019. The threshold for the earnout was not achieved and no additional amount was recorded related to sale of Manitoba Harvest at December 31, 2019.

The cash portion of the Closing Date Consideration was reduced by the amount of the net indebtedness (including accrued interest) of Manitoba Harvest on the closing date of C$71.3 million ($53.7 million) and transaction expenses of approximately C$5.0 million. The Company's share of the net proceeds after accounting for the redemption of the noncontrolling shareholders and the payment of net indebtedness of Manitoba Harvest and transaction expenses was approximately $124.2 million in cash proceeds and in Tilray Common Stock. The Company recognized a gain on the sale of Manitoba Harvest of $121.7 million in the first quarter of 2019. In August 2019, the Company received the Deferred Consideration related to the sale. The Company's portion of the Deferred Consideration totaled $28.4 million in cash proceeds and $19.6 million in Tilray Common Stock.

The Tilray Common Stock consideration was issued in reliance on the exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act") and pursuant to exemptions from applicable securities laws of any state of the United States, such that any shares of Tilray Common Stock received by the Common Holders were freely tradeable. The Company sold the Tilray Common Stock received as part of the Closing Consideration during March 2019, recognizing a net loss of $5.3 million in Other income/ (expense) during

the quarter ended March 31, 2019. In August 2019, the Company sold the Tilray Common Stock received as part of the Deferred Consideration, recognizing a loss of $4.9 million in Other income/ (expense) during the quarter ended September 30, 2019.

Summarized operating results for Manitoba Harvest for 2019 through the date of disposition were as follows (in thousands):


	For the period January 1, 2019 through disposition
Net revenues	$	10,024
Gross profit	4,874
Operating loss	(1,118)
Loss before income taxes	(1,127)
Benefit for income taxes	(541)
Loss from discontinued operations (1)	$	(586)

(1) The results of operations for the period from January 1, 2019 through the date of disposition excludes $1.0 million of intercompany interest expense.