Note 3 - Discontinued Operations

6 Months Ended

Mar. 31, 2025

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

3. Discontinued Operations

Plan to Sell B Medical Systems Business

During the first quarter of fiscal year 2025, following approval by the Board of Directors of the Company, the Company publicly announced its plan to sell the B Medical Systems business. The B Medical Systems business operates as a separate business unit within the Company and operated as its own operating and reportable segment called the B Medical Systems segment focused on the manufacturing and distribution of temperature-controlled storage and transportation solutions in international markets to governments, health institutions, and non-government organizations. This action is intended to simplify the Company's portfolio and allow management to focus on driving revenue growth and profitability in its core businesses. The decision followed work by the Board of Directors to evaluate strategic, operational and financial opportunities to maximize stockholder value. The Company anticipates entering into a definitive agreement to sell its B Medical Systems business by November 2025.

The Company determined that the B Medical Systems segment met the “held for sale” criteria and “discontinued operations” criteria in accordance with FASB ASC 205 as of November 12, 2024. Results related to the B Medical Systems segment are included within discontinued operations. The Condensed Consolidated Balance Sheet and Condensed Consolidated Statements of Operations, and the notes to the Condensed Consolidated Financial Statements, were retroactively reclassified for all periods presented to reflect the discontinuation of the B Medical Systems segment in accordance with FASB ASC 205.

The Company measured the B Medical Systems segment at the lower of carrying value or fair value less cost to sell and recorded $24 million of loss on assets held for sale during the three months ended March 31, 2025. The estimated fair value of the B Medical Systems segment was derived based on the income approach and the market approach which were weighted equally at 50% each. The discounted cash flow method, or “DCF Method”, was used in the income approach which reflected the Company’s assumptions regarding revenue growth rates, forecasted gross profit margins, operating expenses, capital expenditures, discount rates, terminal period growth rates, economic and market trends, and other expectations about the anticipated operating results of the B Medical Systems segment. The guideline company method was used in the market approach and publicly traded companies in similar line of business were identified and used in an analysis to estimate the fair value. The noncash loss on assets held for sale is included in “Loss from discontinued operations, net of tax” on the Condensed Consolidated Statements of Operations for the three and six months ended March 31, 2025 and is included as a valuation allowance or contra-asset account within “Noncurrent assets held for sale” on the Condensed Consolidated Balance Sheets as of March 31, 2025.

The following table presents the financial results of the B Medical Systems segment, included within discontinued operations (in thousands):

	Three Months Ended March 31,						Six Months Ended March 31,
	2025			2024			2025			2024
Revenue
Products	$	15,886		$	20,245		$	30,174		$	29,931
Services		1,320			2,534			4,623			5,440
Total revenue		17,206			22,779			34,797			35,371
Cost of revenue
Products		10,118			17,642			21,540			27,698
Services		1,415			2,415			4,721			5,183
Total cost of revenue		11,533			20,057			26,261			32,881
Gross profit		5,673			2,722			8,536			2,490
Operating expenses
Research and development		1,201			973			2,836			2,153
Selling, general and administrative		7,729			9,256			13,916			17,943
Impairment of goodwill and intangible assets		-			111,317			-			111,317
Loss on assets held for sale		24,187			-			24,187			-
Restructuring charges		364			3,917			678			4,251
Total operating expenses		33,481			125,463			41,617			135,664
Operating loss		(27,808	)		(122,741	)		(33,081	)		(133,174	)
Interest income (expense), net		(15	)		85			(10	)		212
Other income (expense), net		(604	)		518			(74	)		682
Loss before income taxes		(28,427	)		(122,138	)		(33,165	)		(132,280	)
Income tax benefit		(6,536	)		(1,460	)		(7,355	)		(3,070	)
Loss from discontinued operations, net of tax	$	(21,891	)	$	(120,678	)	$	(25,810	)	$	(129,210	)

The following table presents the significant non-cash items and capital expenditures for the discontinued operations with respect to the B Medical Systems segment that are included in the Condensed Consolidated Statements of Cash Flows (in thousands):

	Three Months Ended March 31,				Six Months Ended March 31,
	2025		2024		2025		2024
Depreciation and amortization	$	-	$	7,733	$	3,846	$	14,952
Capital expenditures		371		751		1,128		1,997
Impairment of goodwill		-		111,317		-		111,317
Loss on assets held for sale		24,187		-		24,187		-

The carrying value of the assets and liabilities of the discontinued operations with respect to the B Medical Systems segment reflected as “held for sale” on the Condensed Consolidated Balance Sheets as of  March 31, 2025 and September 30, 2024 was as follows (in thousands):

	March 31, 2025			September 30, 2024
Assets
Cash and cash equivalents	$	27,025		$	30,899
Accounts receivable, net		13,061			16,438
Inventories		33,800			36,333
Prepaid expenses and other current assets		5,868			5,224
Current assets held for sale	$	79,754		$	88,894
Property, plant and equipment, net	$	45,609		$	47,032
Intangibles, net		116,230			122,988
Other assets		3,390			3,774
Valuation allowance		(24,266	)		-
Noncurrent assets held for sale	$	140,963		$	173,794
Liabilities
Accounts payable	$	9,247		$	11,089
Deferred revenue		2,082			1,485
Accrued warranty and retrofit costs		4,969			4,916
Accrued compensation and benefits		3,428			2,929
Accrued income taxes		706			4,012
Accrued expenses and other current liabilities		8,501			5,619
Current liabilities held for sale	$	28,933		$	30,050
Long-term deferred tax liabilities		28,108			36,093
Long-term operating lease liabilities		1,877			2,109
Other long-term liabilities		3,102			3,994
Noncurrent liabilities held for sale	$	33,087		$	42,196

Disposition of Semiconductor Business

On February 1, 2022, the Company completed the sale of the semiconductor automation business for $2.9 billion in cash to Thomas H. Lee Partners, L.P. On July 1, 2019, the Company completed the sale of the semiconductor cryogenics business for $659.8 million to Edwards Vacuum LLC (a member of the Atlas Copco Group) (“Edwards”). Both the semiconductor automation business and the semiconductor cryogenics business are considered discontinued operations. The Company still may have certain indemnification obligations pursuant to claims made under the definitive agreement it entered into with Edwards in connection with the Company’s sale of its semiconductor cryogenics business in the fourth quarter of fiscal year 2018. In the third quarter of fiscal year 2020, Edwards asserted claims for indemnification under the definitive agreement relating to alleged breaches of representations and warranties relating to customer warranty claims and inventory (the “2020 Claim”). In addition, in January 2023, Edwards filed a lawsuit against the Company in the Supreme Court of the State of New York in the County of New York seeking indemnification from the Company under such definitive agreement for $1.0 million and other related damages, including interest and attorney’s fees, arising from a third-party claim that was included as part of their initial claims (the “2023 Claim”).

In April 2023, the Company responded to and filed a counterclaim against Edwards for the 2023 Claim alleging breach of the definitive agreements by Edwards and seeking a declaratory judgment. During the third quarter of fiscal year 2023, the Company and Edwards entered into a settlement agreement related to the 2023 Claim to avoid the costs and uncertainties of potential litigation. Under the settlement agreement, the Company paid Edwards $0.8 million from one of the indemnification escrows established at closing of the sale in return for the release of the 2023 Claim and the release to the Company of $1.0 million from a separate indemnification escrow. The Company accrued a liability of $2.5 million for the 2020 Claim and 2023 Claim of which $0.8 million was paid during the third quarter of fiscal year 2023. The Company accrued an additional liability of $0.4 million for the 2020 Claim during the three months ended  March 31, 2025 resulting in a total accrual of $2.1 million as of March 31, 2025. 

The Company had been informed that Edwards sought recovery for the 2020 Claim from the representation and warranty insurance Edwards obtained in connection with the closing of the sale of the semiconductor cryogenics business. During the first quarter of fiscal year 2025, the Company was further informed that Edwards agreed to a payment under such insurance for claimed amounts in excess of the applicable indemnification deductibles established under the definitive agreement, but less than the total of claimed amounts submitted for recovery. Although management believes that any indemnifiable losses in excess of the applicable deductibles established in the definitive agreement would be covered by such insurance, Edwards is seeking recovery from the Company for claimed amounts purportedly not covered, or inadequately covered, by such insurance (the “Claim for Uncovered Amounts”). The Company cannot determine the probability of any losses or outcome of the Claim for Uncovered Amounts including the amount of any indemnifiable losses, if any, resulting from this claim. The Company, however, does not believe that this claim will have a material adverse effect on its consolidated financial position or results of operations, in each case, for continuing operations. Any potential expense incurred by the Company for these claims would be reflected in discontinued operations.

In the event of unexpected subsequent developments and given the inherent unpredictability of these matters, there can be no assurance that the Company’s assessment of these claims will reflect the ultimate outcome, and an adverse outcome in these matters could, from time to time, have a material adverse effect on the Company’s consolidated financial position or results of operations in particular quarterly or annual periods.