(20) Assets Held for Sale and Discontinued Operations

Thermo Fluids Inc. (TFI)

On April 10, 2012, the Company completed the acquisition of all the issued and outstanding shares of TFI Holdings, Inc. and its wholly-owned subsidiary, Thermo Fluids Inc. (collectively, “TFI”), a route-based environmental services and waste recycling solutions provider that focuses on the collection and recycling of UMO and the sale of RFO from recovered UMO.

The aggregate purchase price of $246.0 million was comprised of approximately $230.2 million in cash, and 0.4 million shares of the Company’s common stock with a fair value of approximately $15.8 million, which shares were issued in a private placement and were held in escrow in respect of potential indemnification obligations of the sellers of TFI. In connection with the settlement of these indemnification obligations, the aggregate purchase price increased $0.6 million during the three months ended March 31, 2013. The escrow was settled and the shares remaining in escrow were released to the sellers of TFI in April 2013.

The acquisition of TFI was accounted for as a business combination under the acquisition method of accounting. The allocation of the aggregate purchase price, which was revised in the three months ended March 31, 2013 to reflect the final valuation, is summarized as follows:

 

Accounts receivable		$	13,808
Inventory			3,456
Other assets			1,431
Property, plant and equipment			23,685
Customer relationships			93,200
Vendor relationships			16,300
Other intangibles			1,400
Goodwill			145,031
Accounts payable and accrued liabilities			(13,045	)
Deferred income tax liabilities, net			(39,261	)
Total		$	246,005

The goodwill recognized was attributable to TFI’s assembled workforce and premium associated with the opportunity to further diversify the Company’s operations and service offerings.

In 2012 TFI completed an acquisition for a total aggregate purchase price of the acquired business of approximately $2.8 million consisting of cash consideration and contingent consideration of approximately $2.1 million and $0.7 million, respectively.

Following an assessment of various alternatives regarding its Industrial Solutions business in the third quarter of 2013 and a decision to focus exclusively on its Shale Solutions business, the Company’s board of directors approved and committed to a plan to divest TFI, which comprises its Industrial Solutions operating and reportable segment, in the fourth quarter of 2013. Based on currently available information, the Company expects the sale of TFI to be completed in the second quarter of 2014 and believes the carrying value of TFI at December 31, 2013 does not exceed its net realizable value. The results of operations of TFI are presented as discontinued operations in the Company’s Consolidated Statements of Operations for the years ended December 31, 2013 and 2012 (since its acquisition on April 10, 2012). The assets and liabilities related to TFI are presented separately as assets held for sale and liabilities of discontinued operations in the Company’s Consolidated Balance Sheets at December 31, 2013 and 2012.

The following table details selected financial information of discontinued operations related to TFI since its acquisition on April 10, 2012:

 

		Year Ended December 31,
		2013				2012
Revenue		$	116,263			$	95,312
Pretax (loss) income from operations			(98,237	)			13,279
Income tax expense			(14	)			(4,155	)
(Loss) income from discontinued operations		$	(98,251	)		$	9,124

The pretax loss from operations for the year ended December 31, 2013 includes a goodwill impairment charge of $98.5 million (Note 7).

The carrying value of the assets and liabilities of TFI that are classified as held for sale in the accompanying Consolidated Balance Sheets at December 31, 2013 and 2012 are as follows:

 

		December 31,
		2013				2012
Assets:
Cash and cash equivalents		$	429			$	1,435
Accounts receivable, net			15,620				13,901
Inventories, net			2,328				1,938
Prepaid expenses and other receivables			2,475				1,971
Other current assets			594				1,079
Total current assets held for sale			21,446				20,324
Property, plant and equipment, net			26,369				25,848
Intangible assets, net			92,935				110,822
Goodwill			48,000				139,915
Total long-term assets held for sale			167,304				276,585
Total assets held for sale		$	188,750			$	296,909
Liabilities:
Accounts payable		$	6,625			$	6,137
Accrued expenses			2,676				3,719
Current portion of contingent consideration			—				400
Total current liabilities of discontinued operations			9,301				10,256
Long-term liabilities of discontinued operations—deferred income taxes			32,389				40,596
Total liabilities of discontinued operations		$	41,690			$	50,852
Net assets held for sale		$	147,060			$	246,057

 

China Water

On September 30, 2011, the Company, through its wholly-owned subsidiary, China Water, entered into a Share Purchase Agreement by and among Pacific Water & Drinks (HK) Group Limited (f/k/a Sino Bloom Investments Limited), a Hong Kong company (“Buyer”), China Water, as Seller, and China Water Drinks (H.K.) Holdings Limited, a Hong Kong company (“Target”), pursuant to which China Water agreed to sell 100% of the equity interests in Target to Buyer in exchange for shares in Buyer equal to ten percent of the Buyer’s outstanding equity. Upon completion of the sale, the Company abandoned the remaining non-U.S. legal entities that were part of its original acquisition of China Water.

Selected financial information of the discontinued operations of China Water for the year ended December 31, 2011 is as follows:

 

Revenue		$	20,560
Pretax loss from operations			(4,881	)
Income tax expense			(100	)
Loss from operations			(4,981	)
Loss from disposal, net			(17,917	)
Loss from discontinued operations		$	(22,898	)