Other Divestiture Activities |
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| Other Divestiture Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disposal Groups, Including Discontinued Operations, Disclosure [Text Block] |
Note 4. Discontinued Operations
On October 31, 2019, as part of our overall strategy to become a pure-play industrial tools and services company, the Company completed the previously announced sale of the businesses comprising its former Engineered Components & Systems ("EC&S") segment to wholly owned subsidiaries of BRWS Parent LLC, a Delaware limited liability company and affiliate of One Rock Capital Partners II, LP for a purchase price of approximately $214.5 million (which includes approximately $3.0 million to be paid in four equal quarterly installments after closing). In connection with the completion of the sale in the three months ended November 30, 2019, the Company recorded a net loss of $4.2 million comprised of a loss of $22.4 million representing the excess of the net assets (exclusive of deferred tax assets and liabilities associated with subsidiaries of the Company whose stock was sold as part of the transaction) as compared to the purchase price less costs to sell and the recognition in earnings of the cumulative effect of foreign currency exchange gains and losses during the quarter largely offset by an income tax benefit of $18.2 million associated with the write off of the net deferred tax liability on subsidiaries of the EC&S segment for which the stock was divested. The final loss on sale is subject to agreement with the buyer on working capital amounts at the time of the divestiture. The Company also recognized an additional $3.3 million of impairment & divestiture costs in the quarter associated with the accelerated vesting of restricted stock awards associated with employees terminated as part of the transaction and $2.7 million of additional divestiture charges which were necessary to complete the transaction.
During the first quarter of fiscal 2019, the Company determined that the Precision Hayes business (EC&S segment) was a non-core asset, did not align with the strategic objectives of the Company and, as a result, the Company committed to a plan to sell this business. The Company recorded $9.5 million of impairment & divestiture charges during the three months ended November 30, 2018 representing the excess of the net book value of the net assets held for sale less the anticipated proceeds, less costs to sell. Also, during the first fiscal quarter of fiscal 2019, the Company recognized $1.8 million of impairment & divestiture charges associated with the Cortland Fibron business representing the excess of the net book value of the net assets held for sale less the anticipated proceeds, net of transaction costs. Both divestitures were completed in the second quarter of fiscal 2019.
As the aforementioned divestitures were a part of our strategic shift to become a pure-play industrial tools and services company, the results of their operations (including the stated impairment & divestiture charges) are recorded as a component of "Loss from discontinued operations" in the Condensed Consolidated Statements of Operations for all periods presented. In addition, the assets and liabilities of the EC&S segment are recorded as "Assets from discontinued operations" and "Liabilities from discontinued operations", respectively, within the Consolidated Balance Sheets as of August 31, 2019.
The following is a summary of the assets and liabilities of discontinued operations (in thousands):
The following represents the detail of "Loss from discontinued operations, net of income taxes" within the Condensed Consolidated Statements of Operations (in thousands):
* "Loss from discontinued operations, net of income taxes" for the three months ended November 30, 2019, includes the results of the EC&S segment for the two month period ended October 31, 2019. As a result of the classification of the segment as assets and liabilities held for sale, the Company did not record amortization or depreciation expense in the results of operations in accordance with U.S. GAAP for the three months ended November 30, 2019. Furthermore, the Company excluded EC&S segment employees from the fiscal 2020 bonus compensation plan, hence there are no expenses associated with the plan for the three months ended November 30, 2019.
Note 5. Other Divestiture Activities
On September 20, 2019, the Company completed the sale of the UNI-LIFT product line, a component of our Milwaukee Cylinder business (IT&S segment) for net cash proceeds of $6.0 million, which resulted in an impairment & divestiture benefit of $4.6 million in the first quarter of fiscal 2020. An additional $1.5 million of contingent proceeds could be received in the future if the buyer is able to extend a long-term supply agreement with a significant customer of the business which had a change in control provision in their current contract. These contingent proceeds are not reflected within the condensed consolidated financial statements.
After the sale of the UNI-LIFT product line, the Company determined that the remaining Milwaukee Cylinder business was a non-core asset, did not align with the strategic objectives of the Company and, as a result, the Company committed to a plan to sell this business. Therefore at November 30, 2019, the Milwaukee Cylinder business met the held for sale criteria and the Condensed Consolidated Balance Sheet reflects the assets and liabilities held for sale, respectively, of the Milwaukee Cylinder business. The $1.7 million of Assets held for sale are comprised of $1.3 million of Accounts receivable, net, $0.3 million of Inventories, net and $0.1 million of Other long-term assets. The $1.7 million of Liabilities held for sale are comprised of $1.1 million of Trade accounts payable, $0.1 million of Accrued compensation and benefits, $0.2 million of Other current liabilities and $0.3 million of Other long-term liabilities. We recorded impairment & divestiture charges of $4.6 million in the three months ended November 30, 2019 comprised of impairment charges of $2.5 million representing the excess of net assets held for sale compared to the anticipated proceeds less costs to sell, $1.9 million associated with our requirement to withdraw from the multi-employer pension plan associated with that business and $0.2 million of other divestiture related charges. The Company completed the divestiture of the Milwaukee Cylinder business on December 2, 2019 for a negligible amount. The historical results of the Milwaukee Cylinder business, inclusive of the UNI-LIFT product line, (which had net sales of $2.9 million and $3.8 million in the three months ended November 30, 2019 and 2018, respectively) are not material to the condensed consolidated financial results.
On October 22, 2019, the Company completed the sale of the Connectors product line (IT&S segment) for net cash proceeds of $2.7 million, which resulted in an impairment & divestiture benefit of $1.3 million. The historical results of the Connectors product line (which had net sales of $0.2 million and $1.5 million in the three months ended November 30, 2019 and 2018, respectively) are not material to the condensed consolidated financial results.
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