Discontinued Operations

9 Months Ended

Sep. 30, 2020

Discontinued Operations and Disposal Groups [Abstract]

In August 2020, we entered into a Stock Purchase Agreement (the “SPA”) with affiliates of American Securities LLC for the sale of our Life Sciences business for an aggregate purchase price of up to $825 million, which includes a $755 million cash base purchase price and a potential earnout payment of up to $70 million. The cash base purchase price was subject to certain adjustments and was payable at the closing of the transaction, which occurred on October 6, 2020. See Note 19 for more information about the closing of the transaction. The earnout payment is subject to the performance of the Life Sciences business during the year ending December 31, 2022, measured by Adjusted EBITDA targets, as defined by the SPA. The Life Sciences business includes facilities that are engaged in the production of a variety of components, assemblies, and instruments, such as surgical knives, bioresorbable implants, surgical staples, cases and trays, orthopaedic implants and tools, laparoscopic devices, and drug delivery devices for the orthopaedics and medical/surgical end markets. The sale of the Life Sciences business furthers management’s strategy to improve liquidity and creates the financial flexibility to pursue key growth areas in the Mobile Solutions and Power Solutions segments.

In accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations, the operating results of the Life Sciences business are classified as discontinued operations. The presentation of discontinued operations includes revenues and expenses of the discontinued operations and will also include any gain on the disposition of the business, all net of tax, as one line item on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). The Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for all periods presented have been revised to reflect this presentation. Accordingly, the results of the Life Sciences business have been excluded from continuing operations and segment results for all periods presented in the condensed consolidated financial statements and the accompanying notes unless otherwise stated. The Condensed Consolidated Statements of Cash Flows include cash flows of the Life Sciences business in each line item unless otherwise stated.

The following table presents the results of operations of the discontinued operations.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net sales	$	68,525	$	93,438	$	223,944	$	269,981
Cost of sales (exclusive of depreciation and amortization shown separately below)	50,444		64,420		158,538		186,694
Selling, general and administrative expense	6,164		8,550		20,189		25,917

Depreciation and amortization	12,030		11,337		35,731		35,418

Goodwill impairment	—		—		146,757		—
Other operating expense (income), net	24		(94)		20		(114)
Income (loss) from operations	(137)		9,225		(137,291)		22,066
Interest expense	12,248		10,928		37,857		33,663
Loss on extinguishment of debt and write-off of debt issuance costs	1,388		—		1,388		2,391

Other expense (income), net	(234)		(535)		(325)		21
Loss from discontinued operations before costs of disposal and benefit for income taxes	(13,539)		(1,168)		(176,211)		(14,009)
Benefit for income taxes	39,954		149		59,598		2,159
Income (loss) from discontinued operations before costs of disposal	26,415		(1,019)		(116,613)		(11,850)
Costs of disposal of discontinued operations (1)	(6,598)		—		(7,956)		—
Benefit for income taxes on disposal costs	513		—		603		—
Income (loss) from discontinued operations, net of tax	$	20,330	$	(1,019)	$	(123,966)	$	(11,850)

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(1) Represents legal, accounting, and other incremental direct costs related to the sale of the Life Sciences business that were incurred prior to the closing of the sale.

Our credit facility required us to use proceeds from the sale of the Life Sciences business to prepay a portion of our existing debt. We paid $700 million in the aggregate on our term loans as described in Note 10. The prepayment was applied to debt in accordance with the prepayment provisions of the credit agreement immediately after the transaction closed on October 6, 2020. Average quarterly interest rates were multiplied by the required prepayment amounts to calculate interest expense to be reclassified to discontinued operations for all periods presented. Write-offs of credit facility debt issuance costs were allocated to discontinued operations by multiplying the ratio of the required prepayment amounts as a percentage of total outstanding principal by the total write-off charges in each period. Write-offs of credit facility debt issuance costs that have been allocated to discontinued operations are presented in the “Loss on extinguishment of debt and write-off of debt issuance costs” line the table above. The following table summarizes the amount of interest expense related to the credit facility that has been reclassified to discontinued operations.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Interest on debt	$	11,060	$	10,217	$	34,410	$	31,490
Amortization of debt issuance costs	1,215		812		3,692		2,478
Capitalized interest and other	(27)		(101)		(245)		(305)

Total interest expense of discontinued operations	$	12,248	$	10,928	$	37,857	$	33,663

The following table summarizes the carrying amounts of major classes of assets and liabilities of discontinued operations for each of the periods presented.


	September 30, 2020		December 31, 2019
Cash and cash equivalents	$	15,986	$	13,792
Accounts receivable, net	37,465		48,318
Inventories	49,646		51,644

Other current assets	3,042		3,246
Total current assets	106,139		117,000
Property, plant and equipment, net	114,364		118,536
Operating lease right-of-use assets	24,199		20,044
Goodwill	197,353		344,316
Intangible assets, net	188,584		211,847
Other non-current assets	261		311
Total non-current assets	524,761		695,054
Total assets held for sale (1)	$	630,900	$	812,054

Accounts payable	$	11,362	$	16,367
Accrued salaries, wages and benefits	15,709		14,844
Income tax payable	218		344
Current portion of operating lease liabilities	2,768		2,364
Other current liabilities	5,962		7,627
Total current liabilities	36,019		41,546
Deferred tax liabilities	55,728		61,338
Operating lease liabilities, net of current portion	22,333		18,405
Other non-current liabilities	6,752		4,456
Total non-current liabilities	84,813		84,199
Total liabilities held for sale (1)	$	120,832	$	125,745

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(1) As of September 30, 2020, all assets and liabilities held for sale are classified as current on the Condensed Consolidated Balance Sheet because they were expected to be sold within twelve months.

The following table presents the significant noncash items and cash paid for capital expenditures of discontinued operations for each period presented.


	Nine Months Ended September 30,
	2020		2019
Depreciation and amortization	$	35,731	$	35,418
Goodwill impairment	146,757		—
Amortization of debt issuance costs	3,692		2,478
Loss on extinguishment of debt and write-off of debt issuance costs	1,388		2,391
Acquisition of property, plant and equipment	7,626		16,358
Right-of-use assets obtained in exchange for new finance lease liabilities	695		1,208
Right-of-use assets obtained in exchange for new operating lease liabilities (1)	6,174		115

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(1) Includes new leases, renewals, and modifications.