Note 2: Discontinued Operations

On July 1, 2016, LSB completed the sale of all the stock of Climate Control Group Inc. (an indirect subsidiary that conducted LSB’s Climate Control Business) pursuant to the terms of the stock purchase agreement. Additionally, pursuant to the stock purchase agreement, we agreed to have a certain portion of the purchase price proceeds deposited in an indemnity escrow account. In conjunction with the Climate Control Business sale, we entered into a transition services agreement (“TSA”), pursuant to which, among other things, we agreed to provide certain information technology, payroll, legal, tax and other general services, which services have been completed. At June 30, 2017 and December 31, 2016, our accounts receivable includes approximately $2.7 million representing an indemnity escrow balance. Additionally, at June 30, 2017 and December 31, 2016, our current and noncurrent accrued and other liabilities include approximately $3.7 million and $5.5 million, respectively, relating primarily to estimated contingent liabilities, costs associated with the TSA and severance agreements associated with the sale of the Climate Control Business.

Summarized results of discontinued operations are as follows for:

	June 30,			June 30,
	Three Months Ended			Six Months Ended
	2016			2016
	(In Thousands)

Net sales	$	71,982		$	138,609
Cost of sales		47,724			93,178
Selling, general and administrative expense		17,301			32,719
Transaction costs		1,985			2,535
Other expense (income), net		(25	)		117
Income from operations of discontinued operations		4,997			10,060
Benefit for income taxes (1)		(17,782	)		(13,543	)
Income from discontinued operations, including taxes	$	22,779		$	23,603

(1)

The structure of the Climate Control Business sale will allow for additional tax basis to be recovered than was previously recorded as a deferred tax asset. The tax benefit associated with this additional tax basis was recorded in discontinued operations in the second quarter of 2016 consistent with the period the Climate Control Business subsidiaries were designated as held for sale.

Summarized condensed cash flow information of discontinued operations is as follows for the six months ended June 30, 2016 (in thousands):

Deferred income taxes	$	(12,809	)
Depreciation and amortization of property, plant and equipment	$	1,607
Stock-based compensation	$	573
Expenditures for property, plant and equipment	$	273
Software and software development costs	$	675