Discontinued Operations

12 Months Ended

Dec. 31, 2013

Discontinued Operations

Note 2 – Discontinued operations:

In December 2012, we completed the sale of our Furniture Components segment for proceeds (net of expenses) of approximately $58.0 million in cash.  We recognized a pre-tax gain of approximately $29.6 million on the disposal of these operations ($27.6 million, net of income taxes of approximately $1.9 million).  Such pre-tax gain includes income of $12.7 million associated with the reclassification out of accumulated other comprehensive income related to foreign currency translation.  The income taxes associated with the pre-tax gain on disposal is significantly less than the U.S. statutory income tax rate of 35% principally due to the utilization of foreign tax credits, the benefit of which had previously not been recognized in part because such benefit did not meet the “more-likely-than-not” recognition criteria and in part because we have not previously elected to claim a credit with respect to foreign income taxes paid because our tax elections are consistent with the elections of Contran and Contran had not previously elected to claim a credit.  Our Furniture Components segment primarily sold products with lower average margins and higher commodity raw material content than other segments of our business.  We believe disposing of our furniture components segment has enabled us to focus more effort on continuing to develop the remaining portion of our business that we believe has greater opportunity for higher returns and with less volatility in the cost of commodity raw materials.

Selected financial data for the operations of the disposed Furniture Components segment is presented below:

	Years ended December 31,
	2011			2012
	(In thousands)
Net sales	$	59,021		$	60,722
Operating income	$	9,061		$	7,364
Other income, net		66			25
Interest expense		(82	)		(105	)
Income before income taxes		9,045			7,284
Income tax expense		(4,876	)		(3,484	)
Net income	$	4,169		$	3,800

In accordance with generally accepted accounting principles, the assets and liabilities relating to the Furniture Components segment were eliminated from the 2012 Consolidated Balance Sheet at the date of sale.  We have reclassified our Consolidated Statements of Income to reflect the disposed operations as discontinued operations for all periods presented.  We have not reclassified our December 31, 2011 or 2012 Consolidated Statements of Cash Flows to reflect discontinued operations.

In conjunction with the sale of our Furniture Components segment, the buyer was not interested in retaining certain undeveloped land located in Taiwan owned by our Taiwanese Furniture Component subsidiary.  We had no additional use for the undeveloped land in Taiwan and therefore expected the land to be sold to a third party with CompX receiving the net proceeds.  Based on the legal form of how we completed the disposal transaction, our interest in such land was represented by a $3.0 million promissory note receivable at December 31, 2012, issued to us by our former Taiwanese subsidiary which retained legal ownership in the land to facilitate the future sale of the land to a third party.  The proceeds from the sale of the land were required to be used to settle the note receivable.  In 2013 an agreement was entered into with a third party to sell the land for $3.0 million, all of which was received during 2013. The note receivable was classified as part of prepaids and other current assets in our Consolidated Balance Sheet at December 31, 2012.