XML 42 R9.htm IDEA: XBRL DOCUMENT v2.4.0.8
Discontinued Operations and Deconsolidation of Fenco
 3 Months Ended
Jun. 30, 2013
Discontinued Operations and Deconsolidation of Fenco [Abstract]  
Discontinued Operations and Deconsolidation of Fenco [Text Block]
2. Discontinued Operations and Deconsolidation of Fenco

In May 2011, the Company purchased (i) all of the outstanding equity of Fenwick Automotive Products Limited (“FAPL”), (ii) all of the outstanding equity of Introcan, Inc., a Delaware corporation (“Introcan”), and (iii) 1% of the outstanding equity of Fapco S.A. de C.V., a Mexican variable capital company (“Fapco”) (collectively, “Fenco”). Since FAPL owned 99% of Fapco prior to these acquisitions, the Company now owns 100% of Fapco.

Since the acquisition of Fenco on May 6, 2011, the Company had been implementing its undercar product line turnaround plan. Revenues generated by its undercar product line segment were not sufficient to enable Fenco to meet its operating expenses and otherwise implement its undercar product line turnaround plan. Fenco had recurring operating losses since the date of acquisition and had a working capital and equity deficiency.

In May 2013, Fenco appointed a new board of independent directors, hired an independent chief restructuring officer and all its previously existing officers resigned from FAPL. As a result of loss of control of Fenco, the Company deconsolidated the assets and liabilities of Fenco from its consolidated financial statements effective May 31, 2013. On June 10, 2013, each of FAPL, Introcan and Introcan’s subsidiaries, Flo-Pro Inc., LH Distribution Inc., Rafko Logistics Inc., Rafko Holdings Inc. and Rafko Enterprises Inc. (collectively, the “Fenco Entities”), filed a voluntary petition for relief under Chapter 7 of Title 11 of the United States Code (the “Bankruptcy Code”) in the U.S. Bankruptcy Court for the District of Delaware.

The following table summarizes the effects on the June 30, 2013 condensed consolidated balance sheet of the deconsolidation of Fenco effective May 31, 2013.

Cash
 
$
(170,000
)
Accounts receivable — net
  
(4,377,000
)
Inventory— net
  
(25,731,000
)
Inventory unreturned
  
(5,321,000
)
Deferred income taxes
  
(225,000
)
Prepaid expenses and other current assets
  
(2,436,000
)
Plant and equipment — net
  
(4,018,000
)
Long-term core inventory — net
  
(40,471,000
)
Other assets
  
(22,000
)
Reduction in total assets
 
$
(82,771,000
)
 
    
Accounts payable
 
$
(75,454,000
)
Accrued liabilities
  
(4,759,000
)
Customer finished goods returns accrual
  
(10,744,000
)
Other current liabilities
  
(1,761,000
)
Revolving loan - in default
  
(48,520,000
)
Term loan - in default
  
(10,000,000
)
Customer core returns accrual
  
(49,531,000
)
Other liabilities
  
(97,000
)
Reduction in total liabilties
 
$
(200,866,000
)
 
    
Gain from deconsolidation of Fenco
 
$
118,095,000
 

Fenco incurred losses of approximately $5,910,000 from this discontinued operation from April 1, 2013 to May 31, 2013. In addition, during the three months ended June 30, 2013, the Company recorded a loss of approximately $20,464,000 in connection with the guarantee of obligations to certain Fenco suppliers. In addition, the Company recorded related income tax benefits of $9,156,000 during the three months ended June 30, 2013.