Invacare 2013 Annual Report Download - page 49

I-43
The net sales of the discontinued operation of ISG were $18,498,000, $341,606,000 and $299,491,000 for 2013, 2012 and
2011, respectively. Earnings before income taxes for the discontinued operation of ISG were $402,000, $16,238,000 and
$14,725,000 for 2013, 2012 and 2011, respectively. The Company continues to sell products to the acquirer of ISG.
On January 17, 2014, the Company received a claim for approximately $1,352,000 from the acquirer of ISG. The claim
alleges a breach of the purchase agreement, specifically that the inventories sold were not entirely useable or saleable in the ordinary
course of business. The Company believes this claim is without merit and intends to contest this claim vigorously. As of the date
of this filing, the Company is unable to estimate the outcome of this matter.
On August 6, 2013, the Company sold Champion, its domestic medical recliner business for dialysis clinics, to Champion
Equity Holdings, LLC for $45,000,000 in cash, which was subject to final post-closing adjustments. Champion had been operated
on a stand-alone basis and reported as part of the IPG segment of the Company. The Company recorded a pre-tax gain of $22,761,000
in the third quarter of 2013, which represents the excess of the net sales price over the book value of the assets and liabilities of
Champion. The sale of this business is dilutive to the Company's results. The Company utilized the proceeds from the sale to
reduce debt outstanding under its revolving credit facility in the third quarter of 2013. The Company recorded expenses related
to the sale of $2,130,000, of which $1,499,000 was paid as of December 31, 2013. The gain recorded by the Company reflects
the Company's estimated final purchase adjustments.
The assets and liabilities of Champion were the following as of the date of the sale, August 6, 2013, and as of December 31,
2012 (in thousands):
August 6,
2013 December 31, 2012
Trade receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,030 $ 2,375
Inventories, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,689 1,617
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 21
Property and Equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309 237
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,277 16,277
Assets sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,397 $ 20,527
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 936 $ 475
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352 318
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 200
Liabilities sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,288 $ 993
The net sales of the discontinued operation of Champion were $15,857,000, $22,767,000 and $19,209,000 for 2013, 2012
and 2011, respectively. Earnings before income taxes for the discontinued operation of Champion were $3,156,000, $4,274,000
and $3,342,000, respectively. Results for Champion include an interest expense allocation from continuing operations to
discontinued operations of $449,000, $792,000 and $853,000, respectively, as proceeds from the sale were required to be utilized
to pay down debt. The interest allocation was based on the net proceeds assumed to pay down debt applying the Company's average
interest rates for the periods presented.
In addition, in accordance with ASC 350, when a portion of a reporting entity that constitutes a business is disposed of,
goodwill associated with that business should be included in the carrying amount of the net assets of the business sold in determining
the gain or loss on the disposal. As such, the Company allocated additional goodwill of $16,205,000 to Champion from the
continuing operations of the IPG segment based on the relative fair value of Champion as compared to the remaining IPG reporting
unit.
The Company recorded an incremental intra-period tax allocation expense to discontinued operations in 2013 representing
the cumulative intra-period allocation expense to discontinued operations.
The Company has classified ISG and Champion as a discontinued operation for all periods presented.
Unless otherwise noted, the following discussion of the Company and its segments exclude the discontinued operations of
ISG and Champion.