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Discontinued Operations and Deconsolidation of Fenco
 12 Months Ended
Mar. 31, 2014
Discontinued Operations and Deconsolidation of Fenco [Abstract]  
Discontinued Operations and Deconsolidation of Fenco
3. 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” and also referred to herein as the “discontinued subsidiary”). Since FAPL owned 99% of Fapco prior to these acquisitions, the Company owned 100% of Fapco.

Between May 2011 and its bankruptcy in June 2013, Fenco had been attempting to turn around its business. However, 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, FAPL 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. As a result of the loss of control of Fenco and the subsequent filing of the petition for relief under the Bankruptcy Code, Fenco had effectively been disposed of and the Company did not and does not retain any continuing involvement in the operations of Fenco. The Company may be subject to claims relating to the bankruptcy (see Note 19).

The following table summarizes the effects on the 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
 
 
Net sales from discontinued operations for the fiscal years ended March 31, 2013 and 2012 were $193,115,000 and $185,136,000, respectively. A loss of approximately $5,910,000 was incurred from discontinued operations from April 1, 2013 to May 31, 2013. In addition, during the fiscal year ended March 31, 2014, the Company recorded a loss of approximately $20,464,000 in connection with the guarantee of obligations to certain Fenco suppliers and recorded related income tax benefits of $9,156,000.  In addition, an income tax benefit of $1,374,000 was included in the gain from deconsolidation of Fenco.