NOTE 8

DIVESTITURES AND DISCONTINUED OPERATIONS

Divestiture of SYA

On July 29, 2014, the Company completed the sale of our wholly-owned subsidiary, SYA. SYA was a professional engineering and environmental consulting services company and was included in the Company’s Services Segment. In accordance with ASU 2014-08, the divestiture of SYA has been reported in continuing operations for all periods presented. The purchaser of SYA paid approximately $1,300,000 for 100% of the capital stock and $60,000 as an adjustment to the purchase price for excess working capital with $50,000 of such consideration placed in escrow for a period of one year to cover any claims by the purchaser for indemnification for certain limited types of losses incurred by the purchaser following the closing.  The proceeds received were used to pay down our revolver and used for working capital. As of December 31, 2014, expenses related to the sale of SYA totaled approximately $96,000. The Company recorded a loss on the sale of SYA of approximately $53,000 (net of taxes of $0), which included a final excess working capital adjustment of approximately $42,000. The loss on the sale of $53,000 was included in “other” expense on our Consolidated Statements of Operations. In 2013, SYA had net revenues of $2,564,736 and a net loss of $621,288.

Discontinued Operations

The Company’s discontinued operations consist of all our subsidiaries included in our Industrial Segment: (1) subsidiaries divested in 2011 and prior, (2) two previously closed locations, and (3) our PFSG facility.

On August 14, 2013, our PFSG facility incurred fire damage which left it non-operational. Certain equipment and portions of the building structures were damaged, which resulted in the Company recognizing an impairment charge of fixed assets for approximately $130,000. The Company carries general liability, pollution, property and business interruption, and workers compensation insurance with a maximum deductible of approximately $300,000. Total incurred costs through December 31, 2013 relating to the fire, inclusive of the impairment charge, was $6,859,000. For the year ended December 31, 2013, the Company had received $3,664,000 of insurance proceeds and recorded an insurance recovery receivable of $2,995,000 as we had determined that receipt of reimbursement of these expenses from our insurer was probable in accordance with its insurance policies.

On June 20, 2014, the Company entered into a settlement agreement and release with one of its insurance carriers, resulting in receipt of approximately $3,850,000 in insurance settlement proceeds, which was used to pay down the Company’s Revolving Credit facility. On November 10, 2014, the Company received approximately $391,000 from another insurance carrier. Additionally, $1,500,000 of insurance proceeds were paid directly to the vendors working on the clean-up of the facility.

The table below shows the total costs incurred and insurance proceeds received through December 31, 2014 relating to the fire:

(1) Inclusive of $1,500,000 paid directly to vendors

In 2014, the Company elected not to rebuild the PFSG facility, which resulted in a triggering event under ASC 360. Based on our long-lived asset impairment test, the Company concluded that tangible asset impairments existed for PFSG and therefore recorded approximately $723,000 of asset impairment charges for the twelve months ended December 31, 2014, which is included in “Income (loss) from discontinued operations, net of taxes” in the Consolidated Statements of Operations. No remaining intangible assets exist at PFSG at December 31, 2014. The Company continues to market our PFSG facility for sale.

The following table summarizes the results of discontinued operations for the years ended December 31, 2014 and 2013. Income tax expense for 2013 included a charge to tax expense of approximately $1,164,000 to provide a full valuation allowance on our net deferred tax assets.

Assets related to discontinued operations totaled $701,000 and $4,481,000 as of December 31, 2014, and 2013, respectively, and liabilities related to discontinued operations totaled $2,727,000 and $4,596,000 as of December 31, 2014 and 2013, respectively.

The following table presents the major classes of assets and liabilities of discontinued operations that are classified as held for sale as of December 31, 2014 and December 31, 2013. The held for sale assets and liabilities may differ at the closing of a sale transaction from the reported balances as of December 31, 2014:

⁽¹⁾net of allowance for doubtful accounts of $0 and $13,000 as of December 31, 2014 and December 31, 2013, respectively.

⁽²⁾net of accumulated depreciation of $0 and $45,000 as of December 31, 2014 and 2013, respectively.

The following table presents the major classes of assets and liabilities of discontinued operations that are not held for sale as of December 31, 2014 and December 31, 2013:

⁽¹⁾net of accumulated depreciation of $10,000 and $10,000 as of December 31, 2014 and 2013, respectively

Environmental Liabilities

We have four remediation projects, which are currently in progress at our Perma-Fix of Dayton, Inc. (“PFD”), Perma-Fix of Memphis, Inc. (“PFM” – closed location), PFSG, and Perma-Fix of Michigan, Inc. (“PFMI” – closed location) subsidiaries. The Company divested PFD in 2008; however, the environmental liability of PFD was retained by the Company upon the divestiture of PFD. These remediation projects principally entail the removal/remediation of contaminated soil and, in most cases, the remediation of surrounding ground water. All of the remedial clean-up projects in question were an issue for that facility for years prior to our acquisition of the facility and were recognized pursuant to a business combination and recorded as part of the purchase price allocation to assets acquired and liabilities assumed. Three of the facilities (PFD, PFM, and PFSG) are Resource Conservation and Recovery Act (“RCRA”) permitted facilities, and as a result, the remediation activities are closely reviewed and monitored by the applicable state regulators.

At December 31, 2014, we had total accrued environmental remediation liabilities of $1,016,000, of which $728,000 is recorded as a current liability, which reflects a decrease of $15,000 from the December 31, 2013 balance of $1,031,000. The net decrease of $15,000 represents payments on remediation projects at the PFSG location. The December 31, 2014 current and long-term accrued environmental liabilities at December 31, 2014 are summarized as follows (in thousands):