2.	Acquisitions and Disposals

Disposal of OCTG Business

On March 30, 2014 the Company completed the sale of substantially all of the assets and liabilities associated with the OCTG business conducted by the Company at its manufacturing facilities in Bossier City, Louisiana and Houston, Texas, excluding the real property located in Houston, Texas. These facilities were previously included within the Company’s Tubular Products Group. Total consideration of $42.7 million was paid by the buyer, resulting in a loss on sale of $12.1 million recorded in the three months ended March 31, 2014. The calculation of the loss on sale included a writedown of $4.4 million of goodwill. Of the proceeds received, $4.3 million was placed in escrow to secure the Company’s indemnification obligations under the purchase agreement, $5.0 million was used to repay capital leases related to and secured by certain assets at the Bossier City, Louisiana manufacturing facility, and $1.8 million was used to pay for transaction costs, resulting in net proceeds paid to the Company at closing of $31.6 million.

During the three months ended September 30, 2014, an additional loss of $1.4 million on the sale of the OCTG business was recorded, due primarily to the net working capital adjustment settled between the Company and the buyer in September 2014. For the nine months ended September 30, 2014, loss on disposal of the OCTG business was $13.5 million, and net proceeds from the sale were $29.8 million.

In connection with the sale, the Company and the purchaser entered into a six-month lease of the real property located in Houston, Texas and the Company granted the purchaser an option to purchase the property under certain circumstances. In September 2014, the lease on the Houston property was extended an additional three months.

The table below presents the components of the balance sheet accounts associated with the OCTG business as of December 31, 2013 (in thousands). All sold assets and liabilities were transferred to the buyer as of March 30, 2014.


	December 31, 2013
Assets:
Trade and other receivables, net	$	11,673
Inventories		44,668
Prepaid expenses and other		206

Total current assets		56,547
Property and equipment, net		11,509

Total assets		68,056


Liabilities:
Current portion of capital lease obligations		1,289
Accounts payable		3,013
Accrued liabilities		1,466
Deferred revenue		4,505

Total current liabilities		10,273
Capital lease obligations, less current portion		4,075

Total liabilities	$	14,348

The table below presents the operating results for the Company’s discontinued operations (in thousands). These operating results for the three month and nine month periods ended September 30, 2014 do not necessarily reflect what they would have been had the OCTG business not been classified as a discontinued operation.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Net sales	$	—		$	24,495		$	22,225		$	86,553
Cost of sales		(46	)		26,937			24,331			90,252

Gross profit (loss)		46			(2,442	)		(2,106	)		(3,699	)
Selling, general and administrative expense		—			416			396			1,117

Operating income (loss)		46			(2,858	)		(2,502	)		(4,816	)
Interest income		—			47			—			47
Interest expense		—			(84	)		(99	)		(265	)
Loss on sale of business		(1,414	)		—			(13,497	)		—

Loss before income taxes		(1,368	)		(2,895	)		(16,098	)		(5,034	)
Income tax benefit		(531	)		(1,177	)		(4,378	)		(1,860	)

Loss on discontinued operations	$	(837	)	$	(1,718	)	$	(11,720	)	$	(3,174	)

Acquisition of Permalok Corporation

On December 30, 2013 the Company acquired 100% of the outstanding shares of capital stock of Permalok Corporation (“Permalok”), a fabricator of steel piping utilizing the Permalok interlocking pipe joining system. Total consideration (net of cash received) of $15.7 million was paid to the owners of the business, resulting in the recording of $5.3 million of goodwill, none of which is expected to be deductible for tax purposes. Contingent consideration of $17,000 and $2.7 million is recorded in accrued liabilities and other long-term liabilities as of September 30, 2014, respectively. Contingent consideration was initially recorded based on the estimated present value of the probability weighted revenue projections for the three fiscal years following the acquisition date. In the second quarter of 2014, an adjustment to contingent consideration was recorded based on revised estimates, which resulted in a $0.9 million reduction in cost of sales during the three months ended June 30, 2014. In the third quarter of 2014, an additional adjustment to contingent consideration was recorded based on further revised estimates, which resulted in a $0.9 million and $1.7 million reduction in cost of sales during the three and nine months ended September 30, 2014, respectively.