Note 5 - Assets and Liabilities Held for Sale

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

5. ASSETS AND LIABILITIES HELD FOR SALE

During the first half of 2019, the Company initiated plans to sell several entities as part of its ongoing strategic actions intended to generate higher returns and more predictable and sustainable long-term earnings growth.  Within Infrastructure Solutions, the Company initiated plans to divest its CIPP contracting businesses in Europe: Insituform Netherlands, Insituform Spain and Environmental Techniques.  See Note 14 for additional information on the sale of the CIPP contracting operations of Insituform Netherlands, effective October 11, 2019.  Within Corrosion Protection, the Company initiated plans to divest its interests in Corrpower, Aegion South Africa and United Mexico.  See Note 14 for additional information on the sale of the Company’s interest in United Mexico, effective October 11, 2019.  During the third quarter of 2019, the Company ended its negotiations with potential buyers for Corrpower and Aegion South Africa.  Accordingly, the relevant assets and liabilities for each of these entities was removed from held for sale and accounted for as held and used at September 30, 2019.  These entities will now be exited as part of the 2017 Restructuring.  Based on management's expectation of liquidation value, no additional impairment losses were recorded as a result of the change in accounting.  In the event the Company is unable to liquidate the assets and liabilities at a price that is less than favorable, the Company could incur a loss on disposal. 

The Company is currently in various stages of discussions with third parties for each of the remaining entities and believes that it is probable that a sale of each entity will occur in the second half of 2019 or early in 2020.

During 2018, the Company’s board of directors approved a plan to divest the assets and liabilities of Insituform Australia.  During the second quarter of 2019, the Company ended its negotiations with a potential third-party acquirer and began discussions with another third party.  Because of these new negotiations, management believes that it is probable that a sale will occur in the fourth quarter of 2019.

The relevant asset and liability balances at September 30, 2019 and December 31, 2018 are accounted for as held for sale and measured at the lower of carrying value or fair value less cost to sell.  Based on management’s expectation of fair value less cost to sell, the Company recorded an impairment of assets held for sale of $11.9 million in the Consolidated Statement of Operations during the second quarter of 2019.  Impairment charges of $5.1 million and $3.9 million were recorded for Insituform Australia and Insituform Netherlands, respectively, which are reported within the Infrastructure Solutions reportable segment, and $1.1 million and $1.8 million were recorded for Corrpower and United Mexico, respectively, which are reported within the Corrosion Protection reportable segment.  In the event the Company is unable to sell the assets and liabilities or sells them at a price or on terms that are less favorable, or at a higher cost than currently anticipated, the Company could incur additional impairment charges or a loss on disposal.

The following table provides the components of assets and liabilities held for sale (in thousands):

	September 30, 2019(1)			December 31, 2018(2)
Assets held for sale:
Current assets
Receivables, net	$	7,446		$	1,309
Retainage		481			15
Contract assets		9,431			1,777
Inventories		3,003			2,123
Prepaid expenses and other current assets		2,857			300
Total current assets		23,218			5,524
Property, plant & equipment, less accumulated depreciation		7,757			2,268
Goodwill		4,224			—
Intangible assets, less accumulated amortization		1,425			—
Operating lease assets		2,213			—
Deferred income tax assets		707			—
Other assets		87			—
Impairment of assets held for sale		(10,812	)		—
Total assets held for sale	$	28,819		$	7,792
Liabilities held for sale:
Current liabilities
Accounts payable	$	6,290		$	1,331
Accrued expenses		12,400			3,891
Contract liabilities		404			38
Current maturities of long-term debt		—			—
Total current liabilities		19,094			5,260
Operating lease liabilities		1,058			—
Other non-current liabilities		27			—
Total liabilities held for sale	$	20,179		$	5,260

⁽¹⁾  Includes Insituform Australia, Insituform Netherlands, Insituform Spain, Environmental Techniques and United Mexico.

⁽²⁾  Includes Insituform Australia.