Invacare 2015 Annual Report Download - page 84

INVACARE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
FS-12
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 gain of $22,761,000 pre-
tax in the third quarter of 2013, which represented the excess of the net sales price over the book value of the assets and liabilities
of Champion. The sale of this business was 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 gain recorded by the company reflects
the company's estimated final purchase adjustments.
In 2013, the net sales of the discontinued operation of Champion were $15,857,000 and earnings before income taxes were
$3,156,000. Results for Champion include an interest expense allocation from continuing operations to discontinued operations
of $449,000 in 2013, 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.
On August 29, 2014, the company sold Altimate Medical, Inc. (Altimate), its manufacturer of stationary standing assistive
devices for use in patient rehabilitation, to REP Acquisition Corporation for $23,000,000 in cash, which was subject to final post-
closing adjustments. Altimate had been operated on a stand-alone basis and reported as part of the North America/HME segment
of the company. The company recorded a gain of $17,069,000 pre-tax in the third quarter of 2014, which represented the excess
of the net sales price over the book value of the assets and liabilities of Altimate. The sale of this business was 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 2014. The gain recorded by the company reflects the company's estimated final purchase adjustments. The
assets and liabilities of Altimate were the following as of the date of the sale, August 29, 2014, and as of December 31, 2013 (in
thousands):
August 29,
2014
Trade receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,019
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,954
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
Other Intangibles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,047
Assets sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,442
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 425
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316
Liabilities sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 741
The net sales of the Altimate discontinued operations were $11,778,000 and $17,854,000 for 2014 and 2013, respectively,
and earnings before income taxes were $2,796,000 and $5,118,000, respectively for the same periods. Results for Altimate include
an interest expense allocation from continuing operations to discontinued operations of $202,000 and $323,000 for 2014 and 2013,
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.
The company recorded total expenses related to the discontinued operations noted above of $8,801,000, of which $8,405,000
were paid as of December 31, 2015.
The company recorded an incremental intra-period tax allocation expense to discontinued operations for 2015, 2014 and
2013 representing the cumulative intra-period allocation expense to discontinued operations based on the company's domestic
taxable loss related to continuing operations for 2015, 2014 and 2013.
The company has classified ISG, Champion and Altimate as a discontinued operations for all periods presented.