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Discontinued operations
 12 Months Ended
Dec. 31, 2012
Discontinued operations

Note 2—Discontinued operations:

On December 28, 2012, we completed the sale of our Furniture Components segment to a competitor of that segment for proceeds (net of expenses) of approximately $58.0 million in cash. We recognized a pre-tax gain of approximately $29.6 million on the disposal of these operations ($27.6 million, net of income taxes of approximately $1.9 million). Such pre-tax gain includes income of $12.7 million associated with the reclassification out of accumulated other comprehensive income related to foreign currency translation. The income taxes associated with the pre-tax gain on disposal is significantly less than the U.S. statutory income tax rate of 35% due principally to the utilization of foreign tax credits, the benefit of which had previously not been recognized in part because such benefit did not meet the “more-likely-than-not” recognition criteria and in part because we have not previously elected to claim a credit with respect to foreign income taxes paid because our tax elections are consistent with the elections of Contran and Contran had not previously elected to claim a credit. Our Furniture Components segment primarily sold products with lower average margins and higher commodity raw material content than other segments of our business. We believe disposing of our furniture components segment will enable us to focus more effort on continuing to develop the remaining portion of our business that we believe has greater opportunity for higher returns and with less volatility in the cost of commodity raw materials.

Selected financial data for the operations of the disposed Furniture Components segment is presented below:

 

     Years ended December 31,  
     2010     2011     2012  
     (In thousands)  

Net sales

    $ 59,125      $ 59,021      $ 60,722   
  

 

 

    

 

 

    

 

 

  

Operating income

    $ 3,447      $ 9,061      $ 7,364   

Other income, net

      43        66        25   

Interest expense

      —         (82 )      (105 ) 
  

 

 

    

 

 

    

 

 

  

Income before income taxes

      3,490        9,045        7,284   

Income tax expense

      (3,877 )      (4,876 )      (3,484 ) 
  

 

 

    

 

 

    

 

 

  

Net income (loss)

    $ (387 )    $ 4,169      $ 3,800   
  

 

 

    

 

 

    

 

 

  

 

In accordance with generally accepted accounting principles, the assets and liabilities relating to the Furniture Components segment were eliminated from the 2012 Consolidated Balance Sheet at the date of sale. We have reclassified our Consolidated Statements of Income to reflect the disposed operations as discontinued operations for all periods presented. We have not reclassified our Consolidated Balance Sheet or our Consolidated Statements of Cash Flows to reflect discontinued operations.

Major classes of assets and liabilities of disposed operations included in our December 31, 2011 Balance Sheet are as follows:

 

     December 31, 2011  
     (In thousands)  

Cash

    $ 6,337   

Receivables, net

      6,087   

Inventories

      7,568   

Other current assets

      570   

Goodwill and other intangibles

      12,052   

Property and equipment, net

      17,424   

Other noncurrent assets

      312   
  

 

 

  

Total assets

    $ 50,350   
  

 

 

  

Current liabilities

    $ 7,858   

Noncurrent liabilities

      3,294   
  

 

 

  

Total liabilities

    $ 11,152   
  

 

 

  

In conjunction with the sale of our Furniture Components segment, the buyer was not interested in retaining certain undeveloped land located in Taiwan owned by our Taiwanese Furniture Component subsidiary. We had no additional use for the undeveloped land in Taiwan and therefore expected the land to be sold to a third party with CompX receiving the net proceeds. Based on the legal form of how we completed the disposal transaction, our interest in such land is represented by a $3.0 million promissory note receivable at December 31, 2012, issued to us by our former Taiwanese subsidiary which retained legal ownership in the land to facilitate the future sale of the land to a third party. The proceeds from a future sale of the land are required to be used to settle the note receivable. During the first quarter of 2013, an agreement was entered into with a third party to sell the land which is expected to be substantially completed by the end of the first quarter. The value of the note receivable as of December 31, 2012, represents the expected net proceeds less disposal costs based on the land sale agreement with the third party which represents a Level 2 input as defined by ASC 820-10-35. Such note receivable is classified as part of prepaids and other current assets in our Consolidated Balance Sheet at December 31, 2012.