Disposed and Discontinued Operations

9 Months Ended

Sep. 30, 2019

Disposed and Discontinued Operations

DISPOSED AND DISCONTINUED OPERATIONS

NOTE 4.    DISPOSED AND DISCONTINUED OPERATIONS

Disposed Operations

In May 2019, we sold our grid-tied central solar inverter services business to Bold Renewables Holdings, LLC (“Buyer”) for $1.00 dollar and assumption of our initial product warranty and our extended warranty service obligations. In connection with this transaction, we entered into a Loan and Security Agreement with the Buyer. Under this agreement, we initially loaned $2.8 million to the buyer at closing and have made available an additional $5.25 million that may be borrowed in the future, subject to certain operating and liquidity covenants, for operating needs over the next ten years. The borrowings under the Loan and Security Agreement bear interest at 0% for the first seven years and 5% thereafter. Additionally, the Loan and Security Agreement provides for early payment discounts of 50% during the first three years, 45% for years four and five and 40% thereafter up to 30 days prior to the maturity of the Loan and Security Agreement. A discount on the initial $2.8 million funding under the Loan and Security Agreement of $2.3 million has

been recognized as a reduction to the gain recognized on the sale. As a result of the transaction, we reduced our liabilities held in discontinued operations approximately $10.9 million related to initial product warranty and reduced Other liabilities of our continuing operations of approximately $22.0 million related to extended warranty service obligations as well as other assets and liabilities associated with the continuing grid-tied central solar inverter service and repair business. A $14.8 million non-cash gain was recognized in Other income (expense) from continuing operations and an $8.6 million non-cash gain, net of tax expense of $2.4 million, was recognized in Income from discontinued operations.

Discontinued Operations

In December 2015, we completed the wind down of engineering, manufacturing and sales of our solar inverter product line (the "inverter business"). Accordingly, the results of our inverter business have been reflected as "Income (loss) from discontinued operations, net of income taxes" on our Consolidated Statements of Operations for all periods presented herein.

The effect of our sales of extended inverter warranties to our customers continues to be reflected in deferred revenue in our Consolidated Balance Sheets. Deferred revenue for extended inverter warranties and the associated costs of warranty service will be reflected in Sales and Cost of goods sold, respectively, from continuing operations in future periods in our Consolidated Statement of Operations, as the deferred revenue, is earned and the associated services are rendered. Extended warranties related to the inverter product line are no longer offered.

The significant items included in "Income (loss) from discontinued operations, net of income taxes" are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Sales	$	—	$	—	$	—	$	—
Cost of sales		(700)		—		(900)		(88)
Total operating expense		133		—		514		31
Operating income from discontinued operations		567		—		386		57
Other income (expense)		(84)		(258)		10,835		(261)
Income (loss) from discontinued operations before income taxes		483		(258)		11,221		(204)
Provision (benefit) for income taxes		108		113		2,531		22
Income (loss) from discontinued operations, net of income taxes	$	375	$	(371)	$	8,690	$	(226)

Assets and Liabilities of discontinued operations within the Condensed Consolidated Balance Sheets are comprised of the following:

	September 30,		December 31,
	2019		2018
Cash and cash equivalents	$	—	$	5,251
Other current assets		—		406
Inventories		84		198
Current assets of discontinued operations	$	84	$	5,855
Other assets	$	—	$	67
Deferred income tax assets		755		5,917
Non-current assets of discontinued operations	$	755	$	5,984
Accounts payable and other accrued expenses	$	—	$	350
Accrued warranty		910		4,936
Current liabilities of discontinued operations	$	910	$	5,286
Accrued warranty	$	903	$	10,429
Other liabilities		142		286
Non-current liabilities of discontinued operations	$	1,045	$	10,715