Annual report pursuant to Section 13 and 15(d)

Note 8 - Discontinued Operations and Divestitures

v3.3.1.900
Note 8 - Discontinued Operations and Divestitures
 12 Months Ended
Dec. 31, 2015
Notes to Financial Statements  
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]
NOTE 8
DISCONTINUED OPERATIONS AND DIVESTITURES
 
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 which suffered a fire and explosion on August 14, 2013 and is currently undergoing regulatory closure. The Company carried general liability, pollution, property and business interruption, and workers compensation insurance with a maximum deductible of approximately $300,000. In June 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 for working capital purposes. The Company subsequently recorded a gain on insurance settlement of approximately $3,842,000 in connection with the fire and explosion at our PFSG facility. In 2014, the Company also recorded approximately $723,000 of asset impairment charges as result of the Company’s decision not to rebuild PFSG in accordance with ASC 360.
 
On May 11, 2015, PFSG received a Notice of Violation and proposed Consent Order (“CO”) from the Georgia Department of Natural Resources Environmental Protection Division (“GAEPD”), which alleged certain violations (resulting from the fire and explosion in 2013 and prior inspections of the facility) of Georgia hazardous waste management regulations and PFSG hazardous waste management permit. The proposed CO also established the process for formally closing the PFSG hazardous waste management facilities, should PFSG elect to do so; and proposed the assessment of a civil penalty. The final terms of the CO, including a $201,200 civil penalty, were executed on July 1, 2015. The civil penalty was paid by the Company and recorded during the second quarter of 2015. On August 28, 2015, the Company notified GAEPD its intent to close the PFSG facility; and on September 29, 2015, the Company submitted a draft Post-Closure Plan for review and approval by the GAEPD.
 
On June 4, 2015, the Perma-Fix of Michigan, Inc. (“PFMI”) entered into a letter of intent (“LOI”) to sell the property PFMI formerly operated for a sale price of approximately $450,000. PFMI is a closed location. As required by ASC 360, the Company concluded that asset impairment existed for PFMI and recorded approximately $150,000 in an asset impairment charge in the second quarter of 2015. On September 29, 2015, PFMI entered into a Purchase Agreement (the “Agreement”) for the sale of the property for a sales price of $450,000, which is subject to completion of a due diligence by the buyer during the first quarter of 2016, as amended. Upon execution of the Agreement, PFMI received a $20,000 deposit which is being held in an escrow account (recorded as restricted cash within discontinued operations) (see Note 17 - “Subsequent Event – PFMI” for further information of this Agreement).
 
During the fourth quarter of 2015, an arbitrator ordered the Company to pay approximately $1,278,000 to a contractor hired by the Company to perform emergency response services at our PFSG subsidiary resulting from the fire and explosion in 2013. As discussed above, PFSG is currently undergoing regulatory closure, subject to state and federal environmental permitting requirements. In arbitration, the contractor had sought payment of unpaid invoices totaling approximately $1,400,000 (which included interest of approximately $600,000) and contract penalties totaling approximately $800,000. In addition, the contractor claimed approximately $500,000 in attorney’s fees. On December 7, 2015, the Company was notified of the following Arbitrator’s award totaling approximately $1,278,000, which was paid on December 31, 2015: (a) $747,000 for unpaid invoices; (b) interest of $400,000; (c) attorney fees of $125,000; and (d) $6,000 in certain administrative fees in connection with the arbitration. The Company had previously accrued approximately $871,000 for this matter. The remaining charge of approximately $407,000 was recorded by the Company in 2015 (in the fourth quarter of 2015, with $400,000 recorded as interest expense.
 
The following table summarizes the results of discontinued operations for the years ended December 31, 2015 and 2014.
 
   
For The Year Ended December 31,
 
Amount in Thousands
  
2015
    
2014
  
                 
Interest expense
   $ (401 )   $ (6 )
Operating (loss) income from discontinued operations
     (1,915 )     (2,108 )
Gain on insurance settlement of discontinued operations
     —       3,842  
Income tax (benefit) expense
     (51 )     46  
(Loss) income from discontinued operations
     (1,864 )     1,688  
 
The following table presents the major class of assets of discontinued operations that are classified as held for sale as of December 31, 2015 and December 31, 2014. The held for sale assets may differ at the closing of a sale transaction from the reported balances as of December 31, 2015.
 
   
December 31,
    
December 31,
  
(Amounts in Thousands)
  
2015
    
2014
  
                 
Property
   $ 450     $ 600  
Total assets held for sale
   $ 450     $ 600  
 
The following table presents the major classes of assets and liabilities of discontinued operations that are not held for sale as of December 31, 2015 and December 31, 2014:
 
   
December 31,
    
December 31,
  
(Amounts in Thousands)
  
2015
    
2014
  
Current assets
 
 
 
 
 
 
 
 
Other assets
   $ 34       20  
Total current assets
     34       20  
Long-term assets
 
 
 
 
 
 
 
 
Property, plant and equipment, net
(1)
     81       81  
Total long-term assets
     81       81  
Total assets not held for sale
   $ 115     $ 101  
Current liabilities
 
 
 
 
 
 
 
 
Accounts payable
   $ 85     $ 947  
Accrued expenses and other liabilities
     437       462  
Environmental liabilities
     9       728  
Total current liabilities
     531       2,137  
Long-term liabilities
 
 
 
 
 
 
 
 
Closure liabilities
     173       302  
Environmental liabilities
     891       288  
Total long-term liabilities
     1,064       590  
Total liabilities not held for sale
   $ 1,595     $ 2,727  
 
(1)
net of accumulated depreciation of $10,000 for each period presented.
 
Environmental Liabilities
The Company has three remediation projects, which are currently in progress at our Perma-Fix of Dayton, Inc. (“PFD”), Perma-Fix of Memphis, Inc. (“PFM” – closed location), and PFSG (in closure status) 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. Remediation activities at our Perma-Fix of Michigan, Inc. subsidiary (“PFMI” – closed location) in Brownstown, Michigan, were completed in 2015. The remediation activities are closely reviewed and monitored by the applicable state regulators.
 
At December 31, 2015, we had total accrued environmental remediation liabilities of $900,000, of which $9,000 is recorded as a current liability, which reflects a decrease of $116,000 from the December 31, 2014 balance of $1,016,000. The net decrease of $116,000 represents payments on remediation projects at PFSG and PFM totaling approximately $78,000 and a decrease in reserve of $38,000 due to completion of remediation activities at our PFMI location. The December 31, 2015 current and long-term accrued environmental liability at December 31, 2015 is summarized as follows (in thousands).
 
   
Current
    
Long-term
    
 
  
   
Accrual
    
Accrual
     Total  
PFD
   $ 9     $ 60     $ 69  
PFM
     —       15       15  
PFSG
     —       816       816  
Total liability
   $ 9     $ 891     $ 900  
 
Divestiture of SYA
On July 29, 2014, the Company completed the sale of its 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, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity”, the divestiture of SYA was reported in continuing operations for all periods presented. T
he 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 $50,000 was recorded as restricted cash on the Company’s Consolidated Balance Sheets. The proceeds received were used to pay down our revolver and used for working capital. Expense 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. On August 4, 2015, the Company received the $50,000 which had been placed in escrow as discussed above.