Disposals

12 Months Ended

Dec. 31, 2021

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the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

Brazil Oil & Gas Cable Business

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 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.

Grass Valley

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. We wrote down the carrying value of Grass Valley and recognized asset impairments totaling $113.0 million and $521.4 million in 2020 and 2019, respectively. 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.

We completed the sale of Grass Valley to Black Dragon Capital on July 2, 2020 and recognized a loss of $9.9 million, net of $7.5 million income tax expense. The terms of the sale included 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. 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.

The seller’s note accrues PIK interest at an annual rate of 8.5%. During the year ended December 31, 2021, the seller’s note accrued interest of $13.9 million, which we reserved for based on our expected loss allowance methodology. During 2021, we sold the seller's note to a third party for $62.0 million and recognized a gain on sale of approximately $27.0 million.

The following table summarizes the operating results of the disposal group up to the July 2, 2020 disposal date for the years ended December 31, 2020 and 2019, respectively:


	Years Ended December 31,
	2020		2019
	(In thousands)
Revenues	$	109,195	$	360,496
Cost of sales	(70,199)		(208,173)
Gross profit	38,996		152,323
Selling, general and administrative expenses	(39,947)		(93,796)
Research and development expenses	(15,083)		(37,172)
Amortization of intangibles	—		(12,782)
Asset impairment of discontinued operations	(113,007)		(521,441)
Interest expense, net	(432)		(819)
Non-operating pension cost	(169)		(221)
Loss before taxes	$	(129,642)	$	(513,908)

The disposal group recognized depreciation and amortization expense of approximately $0.0 million and $23.7 million during the years ended December 31, 2020 and 2019, respectively. The disposal group also had capital expenditures of approximately $16.7 million and $29.4 million during the years ended December 31, 2020 and 2019, respectively. Furthermore, the disposal group incurred stock-based compensation expense/(credits) of $(0.9) million and $0.9 million during the years ended December 31, 2020 and 2019, respectively. The disposal group did not have any significant non-cash charges for investing activities during the years ended December 31, 2020 and 2019.