Discontinued Operations

12 Months Ended

Dec. 31, 2019

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

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the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.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 now reported within discontinued operations. The Grass Valley disposal group excludes certain Grass Valley pension liabilities that we expect to retain - see Note 28. We also ceased depreciating and amortizing the assets of the disposal group once they met the held for sale criteria in 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 $521.4 million in 2019. The impairment charge consisted of impairments to goodwill, customer relationships, and trademarks of $326.1 million, $14.4 million, and $1.6 million, respectively, as well as an impairment of the disposal group of $179.3 million ($180.4 million translated at year-end exchange rates). 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 years ended December 31, 2019, 2018, and 2017:

	Years Ended December 31,
	2019			2018			2017
	(In thousands)
Revenues	$	360,496		$	419,666		$	301,458
Cost of sales	(208,173		)	(241,164		)	(169,025		)
Gross profit	152,323			178,502			132,433
Selling, general and administrative expenses	(93,796		)	(114,567		)	(71,280		)
Research and development expenses	(37,172		)	(49,033		)	(45,582		)
Amortization of intangibles	(12,782		)	(23,689		)	(13,808		)
Asset impairment of discontinued operations	(521,441		)	—			—
Interest expense, net	(819		)	(720		)	(250		)
Non-operating pension cost	(221		)	(243		)	(153		)
Income (loss) before taxes	$	(513,908	)	$	(9,750	)	$	1,360

The disposal group recognized depreciation and amortization expense of approximately $23.7 million, $35.1 million, and $20.8 million during the years ended December 31, 2019, 2018, and 2017, respectively. The disposal group also had capital expenditures of approximately $29.4 million, $22.6 million, and $14.9 million during the years ended December 31, 2019, 2018, and 2017, respectively. Furthermore, the disposal group incurred stock-based compensation expense of $0.9 million, $1.4 million, and $1.5 million during the years ended December 31, 2019, 2018, and 2017, respectively. The disposal group did not have any significant non-cash charges for investing activities during the years ended December 31, 2019, 2018, and 2017.

The following table provides the major classes of assets and liabilities of the disposal group as of December 31, 2019 and 2018:

	December 31,
	2019			2018
	(In thousands)
Assets:
Cash and cash equivalents	$	18,405		$	13,156
Receivables, net	117,386			129,983
Inventories, net	55,002			51,416
Other current assets	35,187			25,167
Property, plant and equipment, less accumulated depreciation	61,233			55,010
Operating lease right-of-use assets	16,902			—
Goodwill	26,707			350,777
Intangible assets, less accumulated amortization	143,459			151,162
Deferred income taxes	57,469			29,559
Other long-lived assets	21,652			16,613
Impairment of disposal group	(180,358		)	—
Total Assets of discontinued operations	$	373,044		$	822,843
Liabilities:
Accounts payable	$	52,425		$	55,148
Accrued liabilities	83,349			91,880
Postretirement benefits	6,224			5,043
Deferred income taxes	2,740			3,834
Long-term operating lease liabilities	20,459			—
Other long-term liabilities	5,082			8,737
Total liabilities of discontinued operations	$	170,279		$	164,642

The disposal group also had $42.3 million of accumulated other comprehensive losses as of December 31, 2019.