XML 22 R11.htm IDEA: XBRL DOCUMENT v3.21.2
Discontinued Operations
 9 Months Ended
Sep. 30, 2021
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations
3. Discontinued Operations

The results of GMSL, ICS, Beyond6, and CIG and the related expenses directly attributable to the entities were reported as discontinued operations. Summarized operating results of the discontinued operations are as follows (in millions):

Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Revenue$— $146.8 $1.7 $478.4 
Life, accident and health earned premiums, net— 28.6 55.7 86.8 
Net investment income— 46.7 92.4 147.1 
Realized/unrealized gains (losses) on investments— 0.7 5.1 (18.8)
Total revenue— 222.8 154.9 693.5 
Cost of revenue— 139.9 0.8 457.5 
Policy benefits, changes in reserves, and commissions— 59.6 126.0 195.0 
Selling, general and administrative— 11.3 21.1 50.4 
Depreciation and amortization— (2.0)(11.0)(5.3)
Income (loss) from operations— 14.0 18.0 (4.1)
Interest expense— (1.9)(0.5)(9.8)
Loss on sale and liquidation of subsidiaries(200.3)— (159.9)(39.3)
Income from equity investees— — — 0.5 
Other loss— (3.8)(3.1)(2.0)
Pre-tax (loss) income from discontinued operations(200.3)8.3 (145.5)(54.7)
Income tax expense— (0.1)(4.4)(0.7)
(Loss) income from discontinued operations$(200.3)$8.2 $(149.9)$(55.4)
Sale of CIG

The sale of CIG closed on July 1, 2021 to Continental General Holdings LLC, an entity controlled by Michael Gorzynski, a director of the Company and, as of September 30, 2021, a beneficial owner of approximately 6.6% of the Company's outstanding common stock who has also served as executive chairman of Continental since October 2020. The Insurance segment, which primarily consisted of a closed block of long-term care insurance, had a book value, inclusive of intercompany eliminations, at the time of the sale of $544.0 million, inclusive of $344.0 million of Accumulated other comprehensive income ("AOCI"). The carrying value of the Insurance segment at the time of sale excluded cash of $62.5 million and investments of $26.7 million which were distributed to the Company through an extraordinary dividend immediately prior to the sale. The extraordinary dividend was approved by our domestic regulator in connection with the approval of the sale. The amount included in AOCI was reversed from equity at the time of the sale and offset the loss recognized.

While several factors impacted the fair value of the Insurance segment at the end of 2019, following discussions with our domestic regulator, changes in the asset management fee arrangement and expectations of future dividends primarily and ultimately resulted in the full impairment of the goodwill associated with the Insurance segment during the year ended December 31, 2019. While these factors did not have a major impact on the operations of the stand-alone business, they did have a significant impact on the economic benefit that could be realized by the Company.

As a result of the factors described above, combined with the risks associated with the long-term care insurance industry, the Company exited the segment and sold the business resulting in a $200.8 million loss on the sale of CIG.

Sale of GMSL

The sale of GMSL closed on February 28, 2020. At the time of the sale, the Company recorded a $39.3 million loss on the sale and recognized $31.3 million of Accumulated other comprehensive loss. During the fourth quarter of 2020, the Company recognized a gain on sale of $2.4 million as a result of the cash collateralized bonding facility release. During the first quarter of 2021, the Company recognized a gain of $1.2 million as a result of an indemnity release.

The net proceeds from the sale of GMSL were used to repay $15.0 million of the then outstanding balance under the Revolving Credit Agreement and redeem $76.9 million aggregate principal amount of the Company's 11.5% senior secured notes due 2021 (the "2021 Senior Secured Notes"), plus accrued and unpaid interest since December 1, 2019 (the last regularly scheduled interest payment date).

As a result of the repayment of $15.0 million Revolving Credit Agreement, the Company allocated the following interest and the amortization of deferred financing costs for the three and nine months ended September 30, 2021 and 2020 associated with the principal prepayment from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statement of Operations:

Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Interest expense$— $— $— $0.2 
Amortization of deferred financing costs and original issuance discount$— $— $— $0.1 

As a result of the mandatory redemption of $76.9 million of 2021 Senior Secured Notes, the Company allocated the following pro-rata interest and amortization of deferred financing costs and original issuance discount for the three and nine months ended September 30, 2021 and 2020, from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statements of Operations:

Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Interest expense$— $— $— $2.2 
Amortization of deferred financing costs and original issuance discount$— $— $— $0.2 

Sale of ICS

The sale of ICS and its subsidiary, Go2 Tel, Inc., closed on October 31, 2020. The Company recorded a $0.9 million gain on the sale and recognized $8.2 million of accumulated other comprehensive loss related to the realization of foreign currency translation of PTGi International Carrier Services Ltd., which was essentially liquidated in conjunction with the sale. The proceeds were used for general corporate purposes.

Sale of Beyond6
On December 31, 2020, the Company announced a plan to sell Beyond6 to an affiliate of Mercuria Investments US, Inc., pursuant to an Agreement and Plan of Merger (the "Merger Agreement") among Beyond6, Greenfill, Inc., a Delaware corporation ("Parent"), Greenfill Merger Inc., a newly-formed Delaware corporation and wholly-owned subsidiary of Parent, and an affiliate of INNOVATE as the Stockholder Representative for the Beyond6 stockholders. The sale closed on January 15, 2021. During the first quarter of 2021, the Company recognized a $39.2 million gain on the sale. During the third quarter of 2021, as a result of releases of related escrows and hold backs, the Company recognized an additional $0.5 million gain on the sale.

A portion of the proceeds from the sale of Beyond6 were used to repay $15.0 million of the then outstanding balance under the Revolving Credit Agreement and repay $27.9 million of the Company's 2021 Senior Secured Notes.

As a result of the repayment of $15.0 million Revolving Credit Agreement, the Company allocated the following interest and amortization of deferred financing costs and original issue discount for the three and nine months ended September 30, 2021 and 2020 associated with the principal prepayment from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statements of Operations:

Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Interest expense$— $0.3 $0.1 $0.5 
Amortization of deferred financing costs and original issuance discount$— $0.1 $— $0.1 

As a result of the repayment of $27.9 million of the 2021 Senior Secured Notes, the Company allocated the following pro-rata interest and amortization of deferred financing costs and original issuance discount for the three and nine months ended September 30, 2021 and 2020, from continuing operations to discontinued operations on the Company’s Condensed Consolidated Statements of Operations:

Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Interest expense$— $0.8 $0.3 $2.4 
Amortization of deferred financing costs and original issuance discount$— $0.1 $— $0.3 
Summarized assets and liabilities of the discontinued operations are as follows (in millions):
September 30,
2021		December 31,
2020
 
Assets
Current assets
Cash and cash equivalents$— $195.2 
Accounts receivable, net— 13.6 
Other current assets1.5 8.7 
Total current assets1.5 217.5 
Investments— 4,610.2 
Recoverable from reinsurers— 957.5 
Deferred tax asset— 1.4 
Property, plant and equipment, net— 90.5 
Goodwill— 2.1 
Intangibles, net— 11.7 
Other assets— 51.2 
Total assets held for sale$1.5 $5,942.1 
Liabilities
Current liabilities
 Accounts payable $— $2.6 
 Accrued liabilities— 35.8 
Current portion of debt obligations— 5.7 
 Other current liabilities — 7.4 
Total current liabilities— 51.5 
Life, accident and health reserves— 4,627.5 
Annuity reserves— 228.8 
Value of business acquired— 199.8 
Deferred tax liability— 136.5 
Debt obligations— 50.6 
Other liabilities— 12.0 
Total liabilities held for sale$— $5,306.7 

In addition, as of September 30, 2021, the Company had $0.7 million of assets from its Infrastructure segment classified as Assets held for sale in continuing operations.