Sale of Real property

9 Months Ended

Jul. 01, 2011

Sale of Real property [Abstract]

Sale of Real property

3. Sale of Real Property

On December 22, 2010, the Company sold certain real property adjacent to its Newport Beach, California headquarters to Uptown Newport L.P. for $23.5 million, which consisted of $21.5 million in cash and a limited partnership interest in the property, which the Company has valued at $2.0 million. The property primarily consists of approximately 25 acres of land, and included two leased buildings, improvements and site development costs. The net book value of the property sold was as follows (in thousands):

	Predecessor
Land	$	1,662
Land and leasehold improvements, net		356
Buildings, net		5,610
Machinery and equipment, net		262
Site development costs		7,583
	$	15,473

The Company has continuing involvement with the property related to groundwater and soil remediation, and therefore at the time of the sale deferred the gain of $6.9 million on the monetary portion of the proceeds of the transaction, net of transaction costs of $0.4 million. The deferred gain was eliminated in the Merger purchase price allocation. Responsibility for soil remediation was transferred to Uptown Newport L.P. with the Company retaining certain obligations to assist in the soil remediation process for up to five years (or earlier under certain circumstances set forth in the agreement between the parties). Responsibility for groundwater remediation remains with the Company in perpetuity, however, upon receipt of a No Further Action letter (“NFA Letter”) from the appropriate government regulator indicating that the remediation is substantially complete is an indication that the risk of discovery of additional groundwater contamination is remote. The Company has accrued $2.0 million of reserves as of July 1, 2011 based on management’s best estimate of remaining remediation costs, of which $1.0 million is classified in long-term other liabilities.

The Company retained an approximately 7.5% limited partnership interest in the property that is recognized at an estimated fair value of $2.0 million. The limited partnership interest holds its limited partnership interest in Uptown Newport L.P., which will own, operate and develop the real property sold by the Company in December 2010. The Company has the option to sell its partnership interest to the developer at $2.0 million plus a 12% return, if Uptown Newport L.P obtains certain financing. The $2.0 million fair market value is derived in large part based on our expectation that the Company will be able to exercise its put option to sell its interest in the partnership within the next 12 months.