Discontinued Operations

12 Months Ended

Dec. 31, 2020

Discontinued Operations And Disposal Groups [Abstract]

2.Discontinued Operations

Effective as of December 9, 2020, we completed the sale of Nutrisystem to Kainos for an aggregate purchase price, after giving effect to customary indebtedness and cash adjustments, of approximately $558.9 million, which amount is subject to a customary working capital adjustment post-Closing. We estimate such working capital adjustment will result in additional proceeds to be received in 2021 of $2.8 million, which we have recorded in other current assets at December 31, 2020. Additionally, we incurred $11.2 million of transaction costs directly related to the disposition of Nutrisystem, resulting in estimated net proceeds, after post-Closing adjustment, of $550.5 million.

In accordance with ASC Topic 205, “Presentation of Financial Statements”, the Nutrition business met the criteria for discontinued operations at December 31, 2020, as it was a component of the Company and the sale represented a strategic shift in the Company’s operations and financial results. Accordingly, the results of operations of the Nutrition business have been classified as discontinued operations for 2019 and 2020, and the assets and liabilities as of December 31, 2019 have been reclassified to discontinued operations.

The following table presents the aggregate carrying amounts of the major classes of assets and liabilities related to the disposition of the Nutrition business:

(In thousands)	December 31, 2019
Accounts receivable, net	$	13,402
Inventories		36,150
Prepaid expenses		10,515
Other current assets		95
Current assets of discontinued operation		60,162

Property and equipment, net		29,333
Right-of-use assets		17,624
Intangible assets, net		660,637
Goodwill, net		319,956
Other assets		746
Long-term assets of discontinued operation		1,028,296
Total assets of discontinued operation	$	1,088,458

Accounts payable	$	18,381
Accrued salaries and benefits		6,184
Accrued liabilities		18,024
Deferred revenue		10,911
Income taxes payable		5,383
Current portion of lease liabilities		5,857
Current liabilities of discontinued operation		64,740

Long-term lease liabilities		11,816
Long-term deferred tax liability		156,624
Other long-term liabilities		971
Long-term liabilities of discontinued operation		169,411
Total liabilities of discontinued operation	$	234,151

The following table presents financial results of the Nutrition business included in “income (loss) from discontinued operations" for the years ended December 31, 2020 and 2019. Results of operations for the year ended December 31, 2018 for the Nutrition business are not included as the Company did not acquire the Nutrition business until March 8, 2019, and there is no impact of the sale on the year ended December 31, 2018.

	Year Ended December 31
(In thousands)	2020 ⁽¹⁾			2019 ⁽²⁾
Revenues	$	617,191		$	498,091
Cost of revenues		291,097			232,240
Marketing expenses		196,952			140,286
Selling, general and administrative expenses		59,093			56,840
Depreciation and amortization		35,957			43,638
Impairment loss		199,500			377,100
Restructuring and related charges		472			5,143
Interest expense ⁽³⁾		36,798			34,763
Pretax loss from discontinued operations		(202,678	)		(391,919	)
Loss on de-designation of cash flow hedges ⁽⁴⁾		(14,336	)		—
Write-off of deferred loan costs and debt discount ⁽³⁾		(8,946	)		—
Loss on sale of Nutrition business ⁽⁵⁾		(101,391	)		—
Total pretax loss on discontinued operations	$	(327,351	)	$	(391,919	)
Income tax benefit		(46,851	)		(59,881	)
Loss from discontinued operations, net of income tax benefit	$	(280,500	)	$	(332,038	)

(1)

Results include the period from January 1, 2020 through December 8, 2020.

(2)

Results include the period from March 8, 2019 (the date of acquisition) through December 31, 2019.

(3)

The term loans under our Credit Agreement were originated with the purchase of Nutrisystem on March 8, 2019. Following the disposition of Nutrisystem, we repaid $519.0 million of principal on the Term Loans under the terms of the Credit Agreement. In conjunction with the partial debt prepayment, we wrote off a portion of the related deferred loan costs and original issue discount. We allocated interest expense to discontinued operations based on the interest expense incurred from March 8, 2019 through December 8, 2020 related to $519.0 million of term loan debt, using our historical interest rates.

(4)

Represents loss recognized in the fourth quarter of 2020 in connection with the de-designation of cash flow hedging on interest rate swaps (see Note 13).

(5)

Consists of impairment losses of $90.2 million related to Nutrisystem goodwill (see Note 12), which includes post-Closing adjustments related to final settlement, and $11.2 million of transaction costs directly related to the disposition of Nutrisystem.

The depreciation, amortization and significant operating and investing non-cash items of the discontinued operations were as follows:

	Year Ended December 31
(In thousands)	2020			2019
Impairment of goodwill and intangible assets	$	199,500		$	377,100
Loss on sale of business		90,163			—
Depreciation and amortization		35,957			43,638
Loss on de-designation of cash flow hedges		14,336			—
Write-off of deferred loan costs and debt discount ⁽¹⁾		8,946			—
Capital expenditures on discontinued operations		6,794			10,168
Share-based compensation on discontinued operations		4,351			13,230
Deferred income taxes		(54,561	)		(68,488	)

(1)

Reflected on the consolidated statement of cash flows in the line items “Amortization and write-off of deferred loan costs” and “Amortization and write-off of debt discount”.