Note 2 - Sale of Subsidiary; Discontinued Operations

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

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

2. Sale of Subsidiary; Discontinued Operations – On March 31, 2015, we and CRC Industries, Inc., a Pennsylvania corporation (“CRC”), entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) whereby we sold all of the issued and outstanding stock of our wholly owned subsidiary, ChemFree Corporation (“ChemFree”), to CRC (the “ChemFree Sale”). The purchase price for the all-cash sale was $21,600,000, subject to customary post-closing adjustments, including a working capital adjustment. The company retained all net cash of ChemFree as of the closing date. In the quarter ended March 31, 2015, the company recorded a gain on the sale of ChemFree of $18,746,000 and has retroactively classified the ChemFree operations as discontinued operations in all periods presented. The company intends to apply operating loss and capital loss carryforwards against the gain of sale and presently expects to incur an alternative minimum tax liability of approximately $181,000 on the transaction, which amount is included in liabilities of discontinued operations as of June 30, 2015. At the closing, a total of $3,300,000 of the purchase price was placed in escrow for purposes of securing our obligations to indemnify CRC and to refund a portion of the purchase price if ChemFree’s actual working capital amount on the closing date is less than the agreed upon target set forth in the Stock Purchase Agreement. Based on the initial post-closing working capital determination, we accrued $200,000 for a working capital adjustment, which amount was reflected in the gain on sale calculation reported in the Form 10-Q for the period ended March 31, 2015. In the quarter ended June 30, 2015, we expensed an additional $20,000 for the final working capital adjustment. In the quarter ended September 30, 2015, $880,000 that had been held as Restricted Cash – Current Portion related to the escrow was released to the company. The remaining escrow balance of $2,200,000, which will remain in escrow until September 30, 2016, is shown as Restricted Cash – Noncurrent Portion.

The following condensed financial information is provided for the ChemFree discontinued operations for the periods shown:

	Three Months Ended Sept. 30,				Nine Months Ended Sept. 30,
(unaudited, in thousands)	2015		2014		2015			2014
Net sales		--	$	2,678	$	2,902		$	7,967
Operating income (loss)		--		446		(3	)		682
Net income before income taxes		--		456		6			708
Income taxes		--		8		9			20
Net income (loss) from discontinued operations		--	$	448	$	(3	)	$	688

The major components of the assets and liabilities of discontinued operations presented separately on the balance sheet are as follows:

(in thousands, unaudited)	September 30, 2015		December 31, 2014
Major classes of assets included as part of discontinued operations:
Accounts receivable	$	--	$	1,276
Inventories		--		1,042
Property, plant & equipment		--		488
Other assets		--		206
Total assets of discontinued operations	$	--	$	3,012
Major classes of liabilities included as part of discontinued operations:
Accounts payable	$	--	$	190
Accrued payroll		--		152
Other current liabilities		181		284
Other liabilities		--		212
Total liabilities of discontinued operations	$	181	$	838