Invacare 2015 Annual Report Download - page 83

INVACARE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
FS-11
Operations Held for Sale
On May 14, 2015, the company's board of directors authorized the company and Invacare Continuing Care, Inc., a Missouri
Corporation and wholly-owned subsidiary of the company ("ICC") to enter into an agreement to sell all the issued and outstanding
membership interests of Dynamic Medical Systems, LLC, a Nevada limited liability company, and Invacare Outcomes
Management, LLC, a Delaware limited liability company, each a wholly-owned subsidiary of ICC (“collectively the rentals
businesses”). The company determined on that date that the "held for sale" criteria of ASC 360-10-45-9 were met, and accordingly,
the assets and liabilities of the rentals businesses (long-lived asset disposal group) were shown at their carrying amounts, which
approximate their fair values. The rentals businesses had been operated on a stand-alone basis and reported as part of the Institutional
Products Group (IPG) segment of the company.
On July 2, 2015, ICC completed the sale (the "Transaction") of all the issued and outstanding membership interests in the
rentals businesses, pursuant to a Membership Interest Purchase Agreement (the “Purchase Agreement”) among the company, ICC
and Joerns Healthcare Parent, LLC, a Delaware limited liability company. The price paid to ICC for the rentals businesses was
approximately $15,500,000 in cash, which was subject to certain post-closing adjustments required by the Purchase Agreement.
Net proceeds from the Transaction were approximately $13,700,000, net of taxes and expenses. The company recorded a pre-tax
gain of approximately $24,000 in the third quarter of 2015, which represents the excess of the net sales price over the book value
of the assets and liabilities of the rentals businesses, as of the date of completion of the disposition. The company recorded expenses
related to the sale of the rentals businesses totaling $1,792,000, of which $1,244,000 have been paid as of December 31, 2015.
The sale of the rentals businesses was not dilutive to the company's results. The company utilized the net proceeds from the sale
to reduce debt outstanding under its credit agreement. The company determined that the sale of the rentals businesses did not meet
the criteria for classification as a discontinued operation in accordance with ASU 2014-08. The rentals businesses were treated as
held for sale as of June 30, 2015 until sold on July 2, 2015. As a result, the December 31, 2014 Balance Sheet was restated to
reflect this treatment.
The assets and liabilities of the rentals businesses that were sold and shown as held for sale in the company's Consolidated
Balance Sheets were comprised of the following (in thousands):
July 2,
2015
December 31,
2014
Trade receivables, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,834 $ 6,207
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412 315
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 221
Property and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,126 5,896
Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,518 4,692
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 57
Assets sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,142 $ 17,388
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 410 $ 225
Accrued expenses and other short-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,056 788
Liabilities sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,466 $ 1,013
Discontinued Operations
On December 21, 2012, in order to focus on its core equipment product lines, the company entered into an agreement to sell
ISG and determined on that date that the "held for sale" criteria of ASC 360-10-45-9 were met. On January 18, 2013, the company
completed the sale of the ISG medical supplies business to AssuraMed, Inc. for a purchase price of $150,800,000 in cash. ISG had
been operated on a stand-alone basis and reported as a reportable segment of the company. The company recorded a gain of
$59,402,000 pre-tax in 2013 which represented the excess of the net sales price over the book value of the assets and liabilities of
ISG, excluding cash. 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 first quarter of 2013. In 2013, the net sales of the discontinued
operation of ISG were $18,498,000 and earnings before income taxes were $402,000,