Quarterly report pursuant to Section 13 or 15(d)

CHANGES IN BUSINESS

v3.20.2
CHANGES IN BUSINESS
6 Months Ended
Jun. 30, 2020
CHANGES IN BUSINESS  
CHANGES IN BUSINESS

NOTE 5—CHANGES IN BUSINESS

Discontinued Operations

Electrical Solutions

During the fourth quarter of 2017, the Company made the decision to exit and sell its Electrical Solutions segment (which was comprised solely of Koontz-Wagner Custom Controls Holdings LLC (“Koontz-Wagner”), a wholly owned subsidiary of the Company) in an effort to reduce the Company’s outstanding term debt. The Company determined that the decision to exit this segment met the definition of a discontinued operation. As a result, this segment has been presented as a discontinued operation for all periods presented.

On July 11, 2018, Koontz-Wagner filed a voluntary petition for relief under Chapter 7 of Title 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of Texas. The filing was for Koontz-Wagner only, not for the Company as a whole, and was completely separate and distinct from the Williams business and operations. As a result of the July 11, 2018 bankruptcy of Koontz-Wagner, the Company recorded $11.4 million of exit costs, consisting of a lease guarantee, liability for salary and benefit continuation and a pension withdrawal liability, which were included in loss from discontinued operations in the Company’s consolidated statements of operations for the year ended December 31, 2018. The Company satisfied the liability related to the lease guarantee settlement and substantially all of the salary and benefit continuation liability through cash payments by the end of 2018. Certain claims that the Chapter 7 Trustee might assert on behalf of the Koontz-Wagner bankruptcy estate are now time-barred by operation of the U.S. Bankruptcy Code. The pension liability is expected to be satisfied by annual cash payments of $0.3 million each, paid in quarterly installments, which began in 2018 and will continue to be paid over the next eighteen years.

Mechanical Solutions

During the third quarter of 2017, the Company made the decision to exit and sell substantially all of the operating assets and liabilities of its Mechanical Solutions and determined that the decision to exit this segment met the definition of a discontinued operation. As a result, this segment, including TOG Manufacturing Company, Inc., has been presented as a discontinued operation for all periods presented.

In connection with the sale of its Mechanical Solutions segment during 2017, the Company entered into a transition services agreement with the purchaser to provide certain accounting and administrative services for an initial period of nine months. In April 2019, the purchaser of the Company’s former Mechanical Solutions segment went into receivership and in connection with this event, the Company recognized a write down to the estimated fair value of its amounts due under the transition services agreement of $0.2 million in the three months ended March 31, 2019. At the time the purchaser went into receivership, the Company also had remaining balances of $0.2 million and $0.8 million included in other current assets and other current liabilities, respectively, on its condensed consolidated balance sheet. In November 2019, the Company executed, and the U.S. Bankruptcy Court for the Northern District of Oklahoma approved, an agreement with the purchaser to settle the disputes related to the remaining asset and liability. As a result, the Company recorded a net gain of $0.4 million, which was included in other (income) expense, net on its consolidated statement of operations for the year ended December 31, 2019.

As of June 30, 2020 and December 31, 2019, the Company did not have any assets related to its Electrical and Mechanical Solutions’ discontinued operations. The following table presents a reconciliation of the carrying amounts of major classes of liabilities of Electrical and Mechanical Solutions’ discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

  

June 30, 2020

 

December 31, 2019

Liabilities:

 

 

 

 

 

 

Other current liabilities

 

$

339

 

$

340

Current liabilities of discontinued operations

 

 

339

 

 

340

Liability for pension obligation

 

 

2,730

 

 

2,708

Liability for uncertain tax positions

 

 

1,692

 

 

1,778

Long-term liabilities of discontinued operations

 

 

4,422

 

 

4,486

Total liabilities of discontinued operations

 

$

4,761

 

$

4,826

 

The following table presents a reconciliation of the major classes of line items constituting the net income (loss) from discontinued operations. In accordance with GAAP, the amounts in the table below do not include an allocation of corporate overhead.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

(in thousands)

  

2020

  

2019

 

2020

  

2019

General and administrative expenses

 

$

 5

 

$

 4

 

$

 6

 

$

14

Loss on disposal - Electrical Solutions

 

 

45

 

 

 —

 

 

45

 

 

 —

Interest expense

 

 

52

 

 

53

 

 

105

 

 

107

Loss from discontinued operations before income tax

 

 

(102)

 

 

(57)

 

 

(156)

 

 

(121)

Income tax benefit

 

 

(98)

 

 

(776)

 

 

(80)

 

 

(748)

Income (loss) from discontinued operations 

 

$

(4)

 

$

719

 

$

(76)

 

$

627