Discontinued Operations

9 Months Ended

Sep. 30, 2021

Discontinued Operations And Disposal Groups [Abstract]

3.	Discontinued Operations

On October 18, 2020, we entered into a Stock Purchase Agreement (“Purchase Agreement”) with Kainos NS Holdings LP (“Parent”) and KNS Acquisition Corp., an indirect wholly owned subsidiary of Parent (“Purchaser,” and collectively with Parent, “Kainos”) to sell to Kainos all of the issued and outstanding capital stock of Nutrisystem, a wholly owned subsidiary of the Company.

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 was subject to a customary working capital adjustment post-closing. Such working capital adjustment was finalized in the second quarter of 2021 and resulted in additional proceeds of $2.7 million. Additionally, we incurred $11.2 million of transaction costs in 2020 directly related to the disposition of Nutrisystem, resulting in net proceeds, after post-closing adjustment, of $550.4 million.

In accordance with ASC Topic 205, “Presentation of Financial Statements”, the Nutrition business met the criteria for discontinued operations, 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 2020 and 2021.

The following table presents financial results of the Nutrition business included in “loss from discontinued operations" for the three and nine months ended September 30, 2021 and 2020.

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2021			2020			2021			2020
Revenues	$	—		$	159,428		$	—		$	518,066
Cost of revenues		—			75,213			—			243,658
Marketing expenses		—			43,574			—			173,687
Selling, general and administrative expenses ⁽¹⁾		1,252			17,034			2,797			47,558
Depreciation and amortization		—			10,653			—			33,895
Impairment loss		—			66,198			—			265,698
Restructuring and related charges		—			30			—			472
Interest expense ⁽²⁾		—			10,137			—			30,512
Pretax loss from discontinued operations		(1,252	)		(63,411	)		(2,797	)		(277,414	)
Loss on sale of Nutrition business ⁽³⁾		—			—			(96	)		—
Total pretax loss from discontinued operations		(1,252	)		(63,411	)		(2,893	)		(277,414	)
Income tax benefit		(320	)		(4,243	)		(739	)		(23,174	)
Loss from discontinued operations, net of income tax benefit	$	(932	)	$	(59,168	)	$	(2,154	)	$	(254,240	)

(1)

For the three and nine months ended September 30, 2021, expenses from discontinued operations primarily relate to legal and other professional fees and separation costs.

(2)

The term loans under our Prior Credit Agreement (as defined in Note 8) 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 our prior credit agreement. For the three and nine months ended September 30, 2020, we allocated interest expense to discontinued operations based on the interest expense incurred during such periods related to $519.0 million of term loan debt, using our historical interest rates.

(3)

Represents additional loss recognized in the second quarter of 2021 upon final settlement of the post-closing working capital adjustment, as described above.

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

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2021			2020			2021			2020
Impairment of goodwill and intangible assets	$	—		$	66,198		$	—		$	265,698
Depreciation and amortization		—			10,653			—			33,895
Capital expenditures on discontinued operations		—			1,803			—			5,617
Deferred income taxes (benefits)		(320	)		(6,346	)		(739	)		(30,702	)
Share-based compensation on discontinued operations		—			926			—			1,673