Discontinued Operations |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Discontinued Operations [Abstract] | |
| Discontinued Operations | NOTE 3 – DISCONTINUED OPERATIONS On March 11, 2020, the Company sold the remainder of its Suttle business lines, including the SoHo, MediaMAX, and SpeedStar brands and inventory as well as working capital, certain capital equipment, intellectual property, and customer relationships to Oldcastle Infrastructure, Inc. (“Oldcastle”) for $8,000,000, with a working capital adjustment 90 days after close. Oldcastle will operate the majority of the acquired Suttle business through its wholly-owned subsidiary, Primex Technologies, Inc. The Company received proceeds of $8,900,000 and recorded a gain on the sale of $2,247,000 during 2020. Concurrent with the closing of the transaction, the Company and Oldcastle entered into a Transition Services Agreement (“TSA”) under which Suttle continued to manufacture products for Oldcastle for six months, to ensure seamless supply and quality assurance to the existing customer base. Concurrently with the closing of the transaction and the TSA, the Company and Oldcastle also entered into a lease agreement under which Oldcastle agreed to lease two buildings in Hector, Minnesota, where Suttle had conducted operations. Base rents under the lease agreement range from $6,970 to $7,180 per month. The presentation of discontinued operations with respect to this Suttle sale has been retrospectively applied to all prior periods presented. On August 2, 2021, the Company and Lantronix, Inc. (“Lantronix”) completed the sale by CSI to Lantronix of all of the issued and outstanding stock of CSI’s wholly owned subsidiary, Transition Networks, Inc., and the entire issued share capital of its wholly owned subsidiary, Transition Networks Europe Limited (collectively with Transition Networks, Inc., the “TN Companies”), pursuant to a securities purchase agreement dated April 28, 2021 (“E&S Sale Transaction”). The Company received net proceeds of $23,630,000, which included a working capital adjustment of $(1,376,000) and recorded a gain on sale of $13,455,000 during the third quarter of 2021. The presentation of discontinued operations with respect to this E&S Sale Transaction has been retrospectively applied to all prior periods presented.Under the securities purchase agreement, Lantronix has also agreed to pay CSI, if earned, earnout payments of up to $7.0 million payable following two successive 180-day intervals after the closing of the E&S Sale Transaction based on revenue targets for the business of the TN Companies as specified in the securities purchase agreement, subject to certain adjustments and allocations as further described in the securities purchase agreement. Concurrently with the closing of the transaction, CSI and Lantronix entered into a transition services agreement under which CSI will perform administrative and IT services, and lease office, warehouse and production space to Lantronix at CSI’s Minnetonka, Minnesota facility for a period of up to twelve months. On August 31, 2021, the Company entered into a purchase agreement with Winport Holdings, LLC for the sale of the Company’s real and personal property located in Hector, Minnesota including the lease with Oldcastle for $900,000. The Company recorded a $100,000 impairment loss on these assets in order to write down the assets to the fair value less the costs to sell and recorded the assets as held for sale at September 30, 2021. The assets of the discontinued operations classified as held for sale are as follows: September 30, 2021 December 31, 2020 Cash and cash equivalents $ — $ 303,000 Trade accounts receivable — 5,775,000 Inventories — 8,561,000 Other current assets — 439,000Total current assets $ — $ 15,078,000 Property, plant, and equipment $ 846,000 $ 1,154,000Right of use asset 129,000Total noncurrent assets $ 846,000 $ 1,283,000 Total assets held for sale $ 846,000 $ 16,361,000 Accounts payable $ — $ 1,669,000Accrued compensation and benefits — 767,000Operating lease liability — 86,000Other accrued liabilities — 1,206,000Total current liabilities $ — $ 3,728,000 Operating lease liability $ — $ 30,000Total noncurrent liabilities $ — $ 30,000 Total liabilities held for sale $ — $ 3,758,000 The financial results of the discontinued operations are as follows: Three Months Ended September 30 Nine Months Ended September 30 2021 2020 2021 2020Sales $ 2,806,000 $ 9,067,000 $ 20,478,000 $ 30,354,000Cost of sales 1,789,000 5,027,000 11,774,000 17,894,000Selling, general and administrative expenses 1,044,000 2,848,000 7,090,000 10,310,000Transaction costs 982,000 — 2,141,000 —Impairment loss 100,000 — 100,000 —Restructuring expenses 1,287,000 194,000 1,287,000 958,000Gain on sale of assets (13,455,000) (19,000) (13,455,000) (2,057,000)Foreign currency translation loss 642,000 — 642,000 —Other expense 4,000 61,000 61,000 317,000Operating income before income taxes 10,413,000 956,000 10,838,000 2,932,000Income tax expense 2,000 (5,000) 2,000 —Income from discontinued operations $ 10,411,000 $ 961,000 $ 10,836,000 $ 2,932,000 During the three and nine months ended September 30, 2021, the Company recorded $1,529,000 in restructuring expense, with $1,287,000 in discontinued operations. This consisted of severance and related benefits costs due to the sale of the E&S segment. The Company incurred $958,000 in restructuring costs during the nine months ended September 30, 2020 related to severance and related benefits due to the sale of Suttle’s business lines. The Company paid $1,169,000 in restructuring charges during the first nine months of 2021 and had $612,000 in restructuring accruals recorded in accrued compensation and benefits at September 30, 2021 that are expected to be paid during 2021 and 2022. |