Discontinued Operations

9 Months Ended

Sep. 30, 2021

Discontinued Operations and Disposal Groups [Abstract]

In October 2020, we closed on the sale of our Life Sciences business under the terms of a Stock Purchase Agreement (the “SPA”) with affiliates of American Securities LLC for $753.3 million cash. The SPA includes a potential earnout payment of up to $70.0 million based on the performance of the Life Sciences business during the year ending December 31, 2022, measured by Adjusted EBITDA targets, as defined by the SPA. After working capital and other closing adjustments, we received cash proceeds at closing of $757.2 million in 2020 and paid $3.9 million to the buyer during the nine months ended September 30, 2021, for post-closing adjustments.

Under the terms of a transition services agreement, we provided certain support services after the sale. In accordance with the terms of the SPA, we agreed to indemnify the buyer for certain tax liabilities on its consolidated federal income tax return related to the Life Sciences business during the portion of the year ended December 31, 2020, prior to the change in ownership on October 6, 2020. We estimate that the tax indemnification will result in a payment of approximately $1.2 million to the buyer during the year ending December 31, 2021, and we have recorded this estimated obligation in the “Other current liabilities” line item on the Condensed Consolidated Balance Sheets as of September 30, 2021, and December 31, 2020.

In accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations, the operating results of the Life Sciences business are classified as discontinued operations. The presentation of discontinued operations includes revenues and expenses of the discontinued operations as well as any gain on the disposition of the business, all net of tax, as one line item on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). The Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for all historical periods presented have been revised to reflect this presentation. Accordingly, the results of the Life Sciences business have been excluded from continuing operations and segment results for all historical periods presented in the condensed consolidated financial statements and the accompanying notes unless otherwise stated. The Condensed Consolidated Statements of Cash Flows for historical periods include cash flows of the Life Sciences business in each line item unless otherwise stated.

The following table presents the operating results of the discontinued operations.


	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020


Net sales	$	68,525	$	223,944
Cost of sales (exclusive of depreciation and amortization shown separately below)	50,444		158,538
Selling, general, and administrative expense	6,164		20,189

Depreciation and amortization	12,030		35,731

Goodwill impairment	—		146,757
Other operating expense, net	24		20
Loss from operations	(137)		(137,291)
Interest expense	12,248		37,857
Loss on extinguishment of debt and write-off of debt issuance costs	1,388		1,388

Other income, net	(234)		(325)
Loss from discontinued operations before costs of disposal and benefit for income taxes	(13,539)		(176,211)
Benefit for income taxes	39,954		59,598
Income (loss) from discontinued operations before costs of disposal	26,415		(116,613)
Costs of disposal of discontinued operations (1)	(6,598)		(7,956)
Benefit for income taxes on costs of disposal	513		603
Income (loss) from discontinued operations, net of tax	$	20,330	$	(123,966)

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(1)Represents incremental direct costs related to the sale of the Life Sciences business that were incurred prior to the closing of the sale.

During the first quarter of 2020, our market capitalization declined to a level that was less than the net book value of our stockholders’ equity. The decline in market capitalization was a triggering event that caused us to perform a goodwill impairment analysis as of March 31, 2020. The carrying value of the Life Sciences reporting unit exceeded its estimated fair value as of March 31, 2020. As a result of our analysis, we recorded an impairment loss on goodwill of $146.8 million for Life Sciences. The judgments, assumptions, and estimates involved in the goodwill impairment analysis for the Life Sciences reporting unit are consistent with those discussed in Note 5.

Our previous credit facility, which was in place at the time, required us to use proceeds from the sale of the Life Sciences business to prepay a portion of our previous debt. We paid $700.0 million in the aggregate on our term loans immediately after the transaction closed on October 6, 2020. The prepayment was applied to debt in accordance with the prepayment provisions of the previous credit agreement, which was in place at the time. Average quarterly interest rates were multiplied by the required prepayment amounts to calculate interest expense to be reclassified to discontinued operations for historical periods presented. The following table summarizes the amount of interest expense related to the previous credit facility that has been reclassified to discontinued operations.


	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020


Interest on debt	$	11,060	$	34,410
Amortization of debt issuance costs	1,215		3,692
Capitalized interest	(114)		(519)
Other	87		274
Total interest expense of discontinued operations	$	12,248	$	37,857

The following table presents the significant noncash items and cash paid for capital expenditures of discontinued operations for the historical period presented.


	Nine Months Ended September 30, 2020
Depreciation and amortization	$	35,731
Goodwill impairment	146,757
Amortization of debt issuance costs	3,692
Loss on extinguishment of debt and write-off of debt issuance costs	1,388
Acquisition of property, plant and equipment	7,626
Right-of-use assets obtained in exchange for new finance lease liabilities	695
Right-of-use assets obtained in exchange for new operating lease liabilities (1)	6,174

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(1) Includes new leases, renewals, and modifications.