Discontinued Operations

9 Months Ended

Sep. 30, 2014

Discontinued Operations and Disposal Groups [Abstract]

Discontinuted Operations

Discontinued Operations

On December 21, 2012, in order to focus on its core product lines, the Company entered into an agreement to sell Invacare Supply Group (ISG) and accordingly, the Company determined on that date that the "held for sale" criteria of ASC 360-10-45-9 were met. On January 18, 2013, the Company completed the sale of the ISG medical supplies business to AssuraMed, Inc. for a purchase price of $150,800,000 in cash. ISG had been operated on a stand-alone basis and reported as a reportable segment of the Company. The Company recorded a gain of $59,402,000 pre-tax in the first quarter of 2013 which represented the excess of the net sales price over the book value of the assets and liabilities of ISG, excluding cash. The sale of this business was dilutive to the Company's results. The Company utilized the proceeds from the sale to reduce debt outstanding under its revolving credit facility in the first quarter of 2013. The Company recorded expenses related to the sale of $5,350,000, of which $5,230,000 were paid as of September 30, 2014. The net sales and earnings before income taxes of the ISG discontinued operation were $18,498,000 and $402,000, retrospectively, for the nine months endedSeptember 30, 2013.

On August 6, 2013, the Company sold Champion Manufacturing, Inc. (Champion), its domestic medical recliner business for dialysis clinics, to Champion Equity Holdings, LLC for $45,000,000 in cash, which was subject to final post-closing adjustments. Champion had been operated on a stand-alone basis and reported as part of the IPG segment of the Company. The Company recorded a gain of $22,761,000 pre-tax in the third quarter of 2013, which represented the excess of the net sales price over the book value of the assets and liabilities of Champion. The sale of this business was dilutive to the Company's results. The Company utilized the proceeds from the sale to reduce debt outstanding under its revolving credit facility in the third quarter of 2013. The Company recorded expenses related to the sale of $2,130,000, of which $1,537,000 were paid as of September 30, 2014. The gain recorded by the Company reflects the Company's estimated final purchase adjustments. The net sales of the Champion discontinued operations were $2,643,000 and $15,857,000, respectively, for the three and nine months endedSeptember 30, 2013 and earnings before income taxes were $484,000 and $3,156,000, respectively, for the same periods. Results for Champion include an interest expense allocation from continuing operations to discontinued operations of $78,000 and $449,000for the three and nine months endedSeptember 30, 2013 as proceeds from the sale were required to be utilized to pay down debt. The interest allocation was based on the net proceeds assumed to pay down debt applying the Company's average interest rates for the periods presented.

On August 29, 2014, the Company sold Altimate Medical, Inc. (Altimate), its manufacturer of stationary standing assistive devices for use in patient rehabilitation, to REP Acquisition Corporation for $23,000,000 in cash, which is subject to final post-closing adjustments. Altimate had been operated on a stand-alone basis and reported as part of the North America/HME segment of the Company. The Company recorded a gain of $17,069,000 pre-tax in the third quarter of 2014, which represented the excess of the net sales price over the book value of the assets and liabilities of Altimate. The sale of this business was dilutive to the Company's results. The Company utilized the proceeds from the sale to reduce debt outstanding under its revolving credit facility in the third quarter of 2014. The Company recorded expenses related to the sale of $1,300,000, of which $844,000 were paid as of September 30, 2014. The gain recorded by the Company reflects the Company's estimated final purchase adjustments.

The assets and liabilities of Altimate were the following as of the date of the sale, August 29, 2014, and as of December 31, 2013 (in thousands):

	August 29, 2014		December 31, 2013
Trade receivables, net	$	2,019	$	2,055
Inventories, net	1,954		1,703
Other current assets	246		10
Property and Equipment, net	176		181
Other Intangibles	1,047		1,530
Assets sold	$	5,442	$	5,479
Accounts payable	$	425	$	544
Accrued expenses	316		220
Liabilities sold	$	741	$	764

The net sales of the Altimate discontinued operations were $2,841,000 and $11,778,000, respectively, for the three and nine months endedSeptember 30, 2014 and earnings before income taxes were $634,000 and $2,796,000, respectively for the same periods. For the for the three and nine months endedSeptember 30, 2013, net sales were $4,597,000 and $13,714,000, respectively, while earnings before income taxes were $1,371,000 and $4,215,000, respectively. Results for Altimate include an interest expense allocation from continuing operations to discontinued operations of $52,000 and $202,000for the three and nine months endedSeptember 30, 2014 compared to $83,000 and $245,000for the three and nine months endedSeptember 30, 2013 as proceeds from the sale were required to be utilized to pay down debt. The interest allocation was based on the net proceeds assumed to pay down debt applying the Company's average interest rates for the periods presented.

The Company recorded an incremental intra-period tax allocation expense to discontinued operations for the nine months endedSeptember 30, 2014 and for the nine months endedSeptember 30, 2013 representing the cumulative intra-period allocation expense to discontinued operations based on the Company's September 30, 2014 and September 30, 2013 estimates of the projected domestic taxable loss related to continuing operations for 2014 and 2013.

The Company has classified ISG, Champion and Altimate as discontinued operations for all periods presented.