Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

v3.5.0.2
Discontinued Operations
 9 Months Ended
Sep. 30, 2016
Discontinued Operations

2. Discontinued Operations

Sale of the Gaiam Brand segment

On May 4, 2016 we sold our 51.4% equity interest in Natural Habitat, Inc. (“Natural Habitat”), our eco-travel subsidiary, in exchange for $12.85 million in cash, and recognized a gain of $10.3 million as disclosed in our Current Report on Form 8-K filed May 10, 2016.

On July 1, 2016, we sold the assets and liabilities of our Gaiam Brand business in exchange for a gross purchase price of $167.0 million, subject to closing expenses and post-closing adjustments, as disclosed in our Current Reports on Form 8-K filed May 10, 2016 and July 8, 2016. Our Gaiam Brand business previously constituted the majority of our consolidated revenues and expenses, and consisted of Gaiam branded yoga, fitness and wellness consumer products, and content (excluding the streaming rights).

The Gaiam Brand business and our interest in our eco-travel subsidiary constituted all the assets and liabilities of our Gaiam Brand segment.

Discontinued Operations

The assets and liabilities, operating results, and cash flows of our Gaiam Brand segment are presented as discontinued operations, separate from our continuing operations, for all periods presented in these interim condensed consolidated financial statements and footnotes, unless otherwise indicated. Discontinued operating results for 2015 also include legal expenses associated with the sale of our former DVD distribution business to Cinedigm. We were involved in arbitration with Cinedigm associated with the sale, which was settled during 2015.

The major components of assets and liabilities of our discontinued operations were as follows:

 

(in thousands)

    December 31,
2015 		 

Current assets:

   

Cash

    $ 12,605   

Accounts receivable, net

      26,441   

Inventory, less allowances

      17,302   

Other current assets

      12,512   
  

 

 

  

Total current assets of discontinued operations

    $ 68,860   
  

 

 

  

Property, equipment and media library, net

      6,237   

Goodwill and other intangibles, net

      5,497   

Other assets

      3,599   
  

 

 

  

Total noncurrent assets of discontinued operations

    $ 15,333   
  

 

 

  

Current liabilities:

   

Accounts payable and accrued liabilities

    $ 32,214   
  

 

 

  

Total current liabilities of discontinued operations

    $ 32,214   
  

 

 

  

 

The income from discontinued operations amounts as reported on our condensed consolidated statements of operations were comprised of the following amounts:

 

     For the Three Months Ended
September 30, 		    For the Nine Months Ended
September 30, 		 

(in thousands, except per share data)

    2016     2015     2016     2015  
     (unaudited)     (unaudited)  

Net revenue

    $ —        $ 47,799      $ 52,627      $ 120,192   

Cost of goods sold

      —          28,839        32,975        70,816   
  

 

 

    

 

 

    

 

 

    

 

 

  

Gross profit

      —          18,960        19,652        49,376   
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating expenses

      1,042        25,765        33,641        55,897   
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from operations

      (1,042 )      (6,805 )      (13,989 )      (6,521 ) 

Other (expense) income

      —          (352 )      234        (457 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) before income taxes and noncontrolling interest

      (1,042 )      (7,157 )      (13,755 )      (6,978 ) 

Income tax expense (benefit)

      (4,989 )      447        (4,831 )      621   

Income (loss) from discontinued operations attributable to the
non-controlling interest, net of tax

      —          (550 )      (310 )      (566 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from the operation of discontinued operations

      3,947        (8,154 )      (9,234 )      (8,165 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Gain on disposal of discontinued operations:

         

Gain on sale of Gaiam Brand segment

      114,499        —          124,826        —     

Write-off of assets impacted by, but not included in sale

      3,740        —          3,740        —     

Income tax expense

      14,111        —          14,111        —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from discontinued operations, net of tax

    $ 100,595      $ (8,154 )    $ 97,741      $ (8,165 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Prior to its divestiture in May 2016, Natural Habitat used derivative instruments to manage a portion of its exposure to changes in currency exchange rates due to payments made to foreign tour operators. The cash flow effects of these derivative contracts during 2016 are included in Net cash used in operating activities—discontinued operations in the Statements of Cash Flows. Realized and unrealized gains and losses on currency derivatives without hedge accounting designation are included in Income from discontinued operations, net of tax in the accompanying condensed consolidated statements of operations. For the three and nine month periods ended September 30, 2016 the gain recognized was $0.0 million and $1.3 million, respectively. The asset related to the fair value of the hedging instrument was included in current assets of discontinued operations in the accompanying condensed consolidated balance sheet prior to the sale.