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DISCONTINUED OPERATIONS | 9 Months Ended
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Sep. 30, 2024
Discontinued Operations and Disposal Groups [Abstract] |
DISCONTINUED OPERATIONS | DISCONTINUED OPERATIONS The Company presents a disposition of a component, being an operating or reportable segment, business unit, subsidiary or asset group, that represents a strategic shift that has or will have a major effect on the Company’s operations and financial results as discontinued operations when the components meet the criteria to be classified as held for sale. The following operations have been presented as discontinued operations. Brands Transaction On October 25, 2024, the Company and its subsidiary bebe stores, inc. (“bebe”) have completed a transaction for their brand assets yielding approximately $235,955 in cash proceeds. At the closing of the transaction, the Company transferred and contributed its interests in the assets and intellectual property related to the licenses of several brands, including Hurley, Justice, Scotch & Soda, Catherine Malandrino, English Laundry, Joan Vass, Kensie, Limited Too and Nanette Lepore to a securitization vehicle, receiving approximately $189,300 in net proceeds in connection with the financing transaction. bebe sold its interests in the assets and intellectual property related to the licenses of the bebe and Brookstone brands (the “Sale”) for approximately $46,624 in net cash proceeds. Upon closing the transaction proceeds of $22,188 was used to pay off the then outstanding balance of the bebe Credit Agreement in full (see Note 11) and $224 of loan related pay off expenses. The pending brands transaction by bebe at September 30, 2024, which closed on October 25, 2024 resulted in a write down of the fair value in the amount of approximately $(20,043) being recorded at September 30, 2024 for the Sale of the bebe Brands. In addition, upon completion of the Secured Financing of the Brand Interests, the Company will deconsolidate the ownership of the Brand Interests and the Company’s ownership in the Brand Interest will be reported as a non-controlling equity method investment that is estimated to have nominal value as a result of the liquidation preferences and notes that were issued as part of the Secured Financing and upon deconsolidation a loss at September 30, 2024 in the amount of approximately $(133,000) was recorded in the quarter ending September 30, 2024. The brand assets, which was historically reported within All Other category - generating operating revenues from the Company's majority owned subsidiary that licenses the trademarks and intellectual properties from the six brands: Catherine Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too and Nanette Lepore. The brand assets also generated other income from dividends the Company received from the equity ownership of investments that range from 10% to 50% in companies that license the trademark and intellectual property of bebe and Brookstone brands (equity ownership of bebe stores, inc., our majority owned subsidiary). The Company concluded that the brand assets met the criteria to be classified as held-for-sale in September 2024. The Company analyzed the quantitative and qualitative factors relevant to the divestiture of the brand assets, including the fair value adjustments and dividends received from the brand assets significance to the overall net income and earnings per share, and determined that those conditions for discontinued operations presentation had been met. As such, the financial position, results of operations and cash flows of that business are reported as discontinued operations in the accompanying condensed consolidated financial statements. Prior period amounts have been adjusted to reflect discontinued operations presentation. Great American Group On November 15, 2024, the Company entered into an equity purchase agreement, dated October 13, 2024 (the “Equity Purchase Agreement”), to sell 53% ownership stake in the Appraisal and Valuation Services, Real Estate, and Retail, Wholesale & Industrial Solutions businesses (collectively, the "Great American Group") to Oaktree and/or its affiliates (collectively, “Oaktree”), a global asset manager. Subject to the terms and conditions set forth in, the Equity Purchase Agreement, the Company conducted an internal reorganization and contributed all of the interests in the “Great American Group”), to Great American NewCo. At the Closing, (i) Oaktree received (a) all of the outstanding class A preferred limited liability units of Great American NewCo (which will have a 7.5% cash coupon and a 7.5% payment-in-kind coupon) (the “Class A Preferred Units”) and (b) common limited liability units of Great American NewCo (the “Common Units”) representing 52.6% of the issued and outstanding common limited liability units in Great American NewCo for a purchase price of approximately $203,000 (with an initial liquidation preference of approximately $203,000). The Company retains (a) 93.2% of the issued and outstanding class B preferred limited liability company units of Great American NewCo (which will have a 2.3% payment-in-kind coupon and an initial aggregate liquidation preference of approximately $183,000) (the “Class B Preferred Units”) and (b) 44.2% of the issued and outstanding Common Units. The remaining 6.8% of issued and outstanding Class B Preferred Units and 3.2% of issued and outstanding Common Units will be held by certain minority investors. Following the completion of the transactions, the Company launched a partnership with Oaktree and contributed all of the interests in the Appraisal and Valuation Services, Retail, Wholesale & Industrial Solutions and Real Estate businesses into Great American Holdings, LLC, a newly formed holding company ("Great American NewCo"). At the closing, the Company received total consideration consisting of approximately $203,000 in cash, subject to certain purchase price adjustments, Class B Preferred Units of Great American NewCo with an initial aggregate liquidation preference of approximately $183,000, and Class A Common Units of Great American NewCo representing approximately 47% of the total outstanding common units. Upon closing the transaction, the Company recognized a gain on the sale of approximately $235,000 in the fourth quarter of 2024. The Great American Group, which was historically reported within the Auction and Liquidation segment—providing auction and liquidation services to help clients dispose of assets that include multi-location retail inventory, wholesale inventory, trade fixtures, machinery and equipment, intellectual property, and real property—and within the Financial Consulting segment—offering bankruptcy, financial advisory, forensic accounting, real estate consulting, and valuation and appraisal services—will be divested. The Company intends to use the net after-tax proceeds from this transaction to repay certain debt obligations and focus on the core operating subsidiaries. The Company concluded that the Great American Group met the criteria to be classified as held-for-sale in September 2024. The Company analyzed the quantitative and qualitative factors relevant to the sale of the Great American Group, including the significance of the operating income generated from the appraisal, real estate consulting and auction and liquidation operations to the overall net income (loss), net (loss) income per share, and net assets, and determined that those conditions for discontinued operations presentation had been met. As such, the financial position, results of operations and cash flows of that business are reported as discontinued operations in the accompanying condensed consolidated financial statements. Prior period amounts have been adjusted to reflect discontinued operations presentation. At the closing of the transaction, the Company entered into a Transition Services Agreement, pursuant to which the Company will provide certain transition services to Great American NewCo relating for the Great American Group for a period of up to one year from the Closing. Additionally, the Company entered into a credit agreement, pursuant to which an affiliate of the Company, as lender, will provide to Great American NewCo, as borrower, a first lien secured revolving credit facility of up to $25,000 for general corporate purposes, subject to the terms and conditions set forth therein, which had an outstanding balance of $1,751 at closing, and (iv)entered into promissory notes which totaled $15,332 related to capital requirements for certain retail liquidation engagements that were ongoing as of closing. On November 15, 2024, in connection with the GA Group Transaction as described above, the asset based credit facility with Wells Fargo Bank, National Association (the “Credit Agreement”) with a maximum borrowing limit of $200,000 and a maturity date of April 20, 2027, which provided for cash advances and the issuance of letters of credit on retail liquidation engagements under the credit facility was terminated. There were no outstanding balances on this credit facility as of September 30, 2024 and December 31, 2023 or at the time of termination. The major classes of assets and liabilities included in discontinued operations were as follows (in thousands):
| Brands Transaction |  | Great American Group |  | Total
| September 30, 2024
ASSETS | (Unaudited)
Cash and cash equivalents | $ | 585 |  |  | $ | 8,650 |  |  | $ | 9,235 |
Securities and other investments owned, at fair value | 174,753 |  |  | — |  |  | 174,753 |
Accounts receivable, net | 2,924 |  |  | 12,038 |  |  | 14,962 |
Prepaid expenses and other assets | 2 |  |  | 2,645 |  |  | 2,647 |
Operating lease right-of-use assets | — |  |  | 235 |  |  | 235 |
Property and equipment, net | — |  |  | 5 |  |  | 5 |
Goodwill | — |  |  | 5,688 |  |  | 5,688 |
Other intangible assets, net | 84,176 |  |  | — |  |  | 84,176 |
Total assets | $ | 262,440 |  |  | $ | 29,261 |  |  | $ | 291,701 |
LIABILITIES |  |  |  |  |
Accounts payable | $ | — |  |  | $ | 1,471 |  |  | $ | 1,471 |
Accrued expenses and other liabilities | 1,308 |  |  | 15,556 |  |  | 16,864 |
Deferred revenue | 546 |  |  | 72 |  |  | 618 |
Operating lease liabilities | — |  |  | 257 |  |  | 257 |
Total liabilities | $ | 1,854 |  |  | $ | 17,356 |  |  | $ | 19,210 |
|  |  |  |  |  |  | Brands Transaction |  | Great American Group |  | Total
|  |  | December 31, 2023
ASSETS |  |  | (Unaudited)
Cash and cash equivalents |  |  |  |  |  |  | $ | 845 |  |  | $ | 8,429 |  |  | $ | 9,274 |
Securities and other investments owned, at fair value |  |  |  |  |  |  | 283,057 |  |  | — |  |  | 283,057 |
Accounts receivable, net |  |  |  |  |  |  | 3,232 |  |  | 11,228 |  |  | 14,460 |
Prepaid expenses and other assets |  |  |  |  |  |  | — |  |  | 1,655 |  |  | 1,655 |
Operating lease right-of-use assets |  |  |  |  |  |  | — |  |  | 438 |  |  | 438 |
Goodwill |  |  |  |  |  |  | — |  |  | 5,688 |  |  | 5,688 |
Other intangible assets, net |  |  |  |  |  |  | 123,769 |  |  | — |  |  | 123,769 |
Total assets |  |  |  |  |  |  | $ | 410,903 |  |  | $ | 27,438 |  |  | $ | 438,341 |
LIABILITIES |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  |  |  |  |  |  | $ | — |  |  | $ | 558 |  |  | $ | 558 |
Accrued expenses and other liabilities |  |  |  |  |  |  | 1,193 |  |  | 25,350 |  |  | 26,543 |
Due to related parties and partners |  |  |  |  |  |  | — |  |  | 251 |  |  | 251 |
Deferred revenue |  |  |  |  |  |  | 724 |  |  | 205 |  |  | 929 |
Operating lease liabilities |  |  |  |  |  |  | — |  |  | 475 |  |  | 475 |
Total liabilities |  |  |  |  |  |  | $ | 1,917 |  |  | $ | 26,839 |  |  | $ | 28,756 |
Revenues and income (loss) from discontinued operations were as follows (in thousands):
| Brands Transaction |  | Great American Group |  | Total
| Three Months Ended September 30, |  | Three Months Ended September 30, |  | Three Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023 |  | 2024 |  | 2023
Revenues: |  |  |  |  |  |  |  |  |  |  |
Services and fees | $ | 4,136 |  |  | $ | 4,304 |  |  | $ | 33,605 |  |  | $ | 29,623 |  |  | $ | 37,741 |  |  | $ | 33,927 |
Sale of goods | — |  |  | — |  |  | 6,893 |  |  | 65,117 |  |  | 6,893 |  |  | 65,117 |
Total revenues | 4,136 |  |  | 4,304 |  |  | 40,498 |  |  | 94,740 |  |  | 44,634 |  |  | 99,044 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |
Direct cost of services | — |  |  | — |  |  | 13,732 |  |  | 15,234 |  |  | 13,732 |  |  | 15,234 |
Cost of goods sold | — |  |  | — |  |  | 6,558 |  |  | 35,836 |  |  | 6,558 |  |  | 35,836 |
Selling, general and administrative expenses | 950 |  |  | 791 |  |  | 13,288 |  |  | 18,576 |  |  | 14,238 |  |  | 19,367 |
Total operating expenses | 950 |  |  | 791 |  |  | 33,578 |  |  | 69,646 |  |  | 34,528 |  |  | 70,437 |
Operating income | 3,186 |  |  | 3,513 |  |  | 6,920 |  |  | 25,094 |  |  | 10,106 |  |  | 28,607 |
Other income (expense): |  |  |  |  |  |  |  |  |  |  |
Interest income | — |  |  | — |  |  | 2 |  |  | — |  |  | 2 |  |  | — |
Dividend income | 8,899 |  |  | 9,503 |  |  | — |  |  | — |  |  | 8,899 |  |  | 9,503 |
Realized and unrealized gains (losses) on investments | (113,234) |  |  | 1,926 |  |  | — |  |  | — |  |  | (113,234) |  |  | 1,926 |
Loss on disposal | (39,500) |  |  | — |  |  | — |  |  | — |  |  | (39,500) |  |  | — |
Interest expense | (690) |  |  | — |  |  | (8,841) |  |  | (7,736) |  |  | (9,531) |  |  | (7,736) |
(Loss) income from discontinued operations before income taxes | (141,339) |  |  | 14,942 |  |  | (1,919) |  |  | 17,358 |  |  | (143,258) |  |  | 32,300 |
(Provision for) benefit from income taxes | 6,983 |  |  | (4,648) |  |  | (2,471) |  |  | (3,911) |  |  | 4,512 |  |  | (8,559) |
(Loss) income from discontinued operations, net of income taxes | $ | (134,356) |  |  | $ | 10,294 |  |  | $ | (4,390) |  |  | $ | 13,447 |  |  | $ | (138,746) |  |  | $ | 23,741 |
|  |  |  |  |  |  | Brands Transaction |  | Great American Group |  | Total
|  |  |  |  |  |  | Nine Months Ended September 30, |  | Nine Months Ended September 30, |  | Nine Months Ended September 30,
|  |  |  |  |  |  |  |  |  |  |  |  | 2024 |  | 2023 |  | 2024 |  | 2023 |  | 2024 |  | 2023
Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Services and fees |  |  |  |  |  |  |  |  |  |  |  |  | $ | 13,675 |  |  | $ | 13,654 |  |  | $ | 66,962 |  |  | $ | 68,074 |  |  | $ | 80,637 |  |  | $ | 81,728 |
Sale of goods |  |  |  |  |  |  |  |  |  |  |  |  | — |  |  | — |  |  | 17,477 |  |  | 67,009 |  |  | 17,477 |  |  | 67,009 |
Total revenues |  |  |  |  |  |  |  |  |  |  |  |  | 13,675 |  |  | 13,654 |  |  | 84,439 |  |  | 135,083 |  |  | 98,114 |  |  | 148,737 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Direct cost of services |  |  |  |  |  |  |  |  |  |  |  |  | — |  |  | — |  |  | 18,060 |  |  | 21,815 |  |  | 18,060 |  |  | 21,815 |
Cost of goods sold |  |  |  |  |  |  |  |  |  |  |  |  | — |  |  | — |  |  | 14,306 |  |  | 36,506 |  |  | 14,306 |  |  | 36,506 |
Selling, general and administrative expenses |  |  |  |  |  |  |  |  |  |  |  |  | 2,832 |  |  | 2,721 |  |  | 37,520 |  |  | 40,515 |  |  | 40,352 |  |  | 43,236 |
Total operating expenses |  |  |  |  |  |  |  |  |  |  |  |  | 2,832 |  |  | 2,721 |  |  | 69,886 |  |  | 98,836 |  |  | 72,718 |  |  | 101,557 |
Operating income |  |  |  |  |  |  |  |  |  |  |  |  | 10,843 |  |  | 10,933 |  |  | 14,553 |  |  | 36,247 |  |  | 25,396 |  |  | 47,180 |
Other income (expense): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  |  |  |  |  |  |  |  |  |  |  | — |  |  | — |  |  | 4 |  |  | — |  |  | 4 |  |  | — |
Dividend income |  |  |  |  |  |  |  |  |  |  |  |  | 26,459 |  |  | 26,094 |  |  | — |  |  | — |  |  | 26,459 |  |  | 26,094 |
Realized and unrealized gains (losses) on investments |  |  |  |  |  |  |  |  |  |  |  |  | (108,304) |  |  | (7,940) |  |  | — |  |  | — |  |  | (108,304) |  |  | (7,940) |
Loss on disposal |  |  |  |  |  |  |  |  |  |  |  |  | (39,500) |  |  | — |  |  | — |  |  | — |  |  | (39,500) |  |  | — |
Interest expense |  |  |  |  |  |  |  |  |  |  |  |  | (2,102) |  |  | — |  |  | (25,781) |  |  | (21,492) |  |  | (27,883) |  |  | (21,492) |
(Loss) income from discontinued operations before income taxes |  |  |  |  |  |  |  |  |  |  |  |  | (112,604) |  |  | 29,087 |  |  | (11,224) |  |  | 14,755 |  |  | (123,828) |  |  | 43,842 |
(Provision for) benefit from income taxes |  |  |  |  |  |  |  |  |  |  |  |  | — |  |  | (7,388) |  |  | 1 |  |  | (3,911) |  |  | 1 |  |  | (11,299) |
(Loss) income from discontinued operations, net of income taxes |  |  |  |  |  |  |  |  |  |  |  |  | $ | (112,604) |  |  | $ | 21,699 |  |  | $ | (11,223) |  |  | $ | 10,844 |  |  | $ | (123,827) |  |  | $ | 32,543 |
Interest expense for discontinued operations is based upon the amount of debt that was required to be repaid as a result of the Brands Transaction and Great American Group transaction described above and amount to $9,531 and $7,736 for the three months ended September 30, 2024 and 2023, respectively, and $27,883 and $21,492 for the nine months ended September 30, 2024 and 2023, respectively. Cash flows from discontinued operations were as follows (in thousands):
| Nine Months Ended September 30,
| 2024 |  | 2023
Net cash from discontinued operations provided by (used in): |  |  |
Operating activities | $ | 32,707 |  |  | $ | 9,793 |
Investing activities | (5) |  |  | — |
Financing activities | (33,490) |  |  | (25,353) |
Effect of foreign currency on cash | 749 |  |  | (1,383) |
Net decrease in cash and cash equivalents | $ | (39) |  |  | $ | (16,943) |
Supplemental disclosures from cash flows were as follows (in thousands):
| Nine Months Ended September 30,
| 2024 |  | 2023
Interest paid - Continuing Operations | $ | 179,695 |  |  | $ | 219,797 |
Interest paid - Discontinued Operations | 25,726 |  |  | 12,076 |
Interest paid - Total | $ | 205,421 |  |  | $ | 231,874 |
Taxes paid - Continuing Operations | $ | 3,645 |  |  | 7,796 |
Taxes paid - Discontinued Operations | 2,173 |  |  | 2 |
Taxes paid - Total | $ | 5,818 |  |  | $ | 7,798 |

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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 -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/205-20/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 360 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/360/tableOfContent + Details
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