Note 3 - Discontinued Operations

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Note 3. Discontinued Operations

As of June 30, 2020, our Factoring reportable segment was classified as discontinued operations as it: (i) was a component of the entity, (ii) met the criteria as held for sale, and (iii) had a material effect on the Company's operations and financial results. On July 8, 2020, we closed on the disposition of substantially all of the operations and assets of TFS, which included substantially all of the assets and operations of our Factoring reportable segment. The sale consisted primarily of $103.3 million of net accounts receivable, which included $108.7 million of gross accounts receivable, less advances and rebates of $5.4 million. 

We have reflected the former Factoring reportable segment as discontinued operations in the condensed consolidated statements of operations for all periods presented. Prior periods have been adjusted to conform to the current presentation.

The following table summarizes the results of our discontinued operations for the three and nine months ended September 30, 2020 and 2019:

(in thousands)	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2020			2019		2020			2019
Total revenue	$	142		$	2,455	$	5,397		$	6,561
Operating expenses		(3,601	)		515		(2,571	)		1,327
Operating income		3,743			1,940		7,968			5,234
Interest expense		-			794		1,948			2,073
Income before income taxes		3,743			1,146		6,020			3,161
Income tax expense		955			293		1,535			807
Net income from discontinued operations, net of tax	$	2,788		$	853	$	4,485		$	2,354

Operating expenses for the three and nine months ended September 30, 2020 include the $3.7 million gain on disposition of the Factoring segment Portfolio.

Interest expense not directly attributable to or related to other operations has been allocated to discontinued operations in a manner consistent with debt needed to finance the net average funds employed by the Factoring reportable segment, multiplied by the Company’s weighted average interest rate.

The following table summarizes the major classes of assets and liabilities included as discontinued operations as of  September 30, 2020 and December 31, 2019:

(in thousands)	September 30, 2020		December 31, 2019
Current assets:
Accounts receivable, net of allowance of $0 in 2020 and $408 in 2019	$	-	$	86,620
Other short-term assets		21,094		-
Current assets of discontinued operations		21,094		86,620
Current liabilities:
Accounts payable		20,226		6,245
Current liabilities of discontinued operations	$	20,226	$	6,245

In accordance with the amended purchase agreement, $19.6 million was recorded as an asset and liability for the fair market value of the Triumph stock received that is payable to Triumph. In October 2020, the Company sold the Triumph stock acquired as part of the amended purchase agreement for $28.1 million and remitted the proceeds to Triumph upon settlement.

The net cash flows for operating activities related to discontinued operations provided $10.0 million and used $25.9 million for the nine months ended September 30, 2020 and 2019, respectively. There were $108.4 million investing and no financing cash flows related to discontinued operations for the nine months September 30, 2020 and no investing or financing cash flows related to discontinued operations for the same period in 2019.

The following unaudited summary information is presented on a consolidated pro forma basis as if the Factoring assets were sold as of January 1, 2019.

(in thousands)	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2020		2019			2020			2019
Total revenue	$	210,830	$	220,459		$	613,333		$	654,832
Income (loss) from continuing operations		4,713		(4,042	)		(21,540	)		4,961
Income (loss) per basic share from continuing operations	$	0.28	$	(0.22	)	$	(1.24	)	$	0.27
Income (loss) per diluted share from continuing operations	$	0.27	$	(0.22	)	$	(1.24	)	$	0.27

Refer to Note 1, “Significant Accounting Policies” of the accompanying condensed consolidated financial statements for further information about the amended TFS purchase agreement.