DISCONTINUED OPERATIONS

9 Months Ended

Sep. 30, 2013

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

NOTE 3—DISCONTINUED OPERATIONS

On August 16, 2011, the Company entered into an equity purchase agreement to sell its Quality Assurance (“QA”) business to Underwriters Laboratories (“UL”) for $275,000 plus assumed cash. The QA business provided consumer product testing, inspection, auditing and consulting services that enabled retailers and manufacturers to determine whether products and facilities met applicable safety, regulatory, quality, performance, social and ethical standards. In addition, the Company and UL entered into a transition services agreement, pursuant to which the Company agreed to provide certain services to UL following the closing of the sale, including accounting, tax, legal, payroll and employee benefit services. UL agreed to provide certain information technology services to the Company pursuant to such agreement. On September 1, 2011, the Company completed the sale of the QA business for total net cash proceeds of $283,376, which included $8,376 of estimated cash assumed in certain QA locations. On September 1, 2011, pursuant to the terms and conditions of the equity purchase agreement, as amended, the Company transferred the applicable assets, liabilities, subsidiaries and employees of the QA business to Nutmeg Holdings, LLC (“Nutmeg”) and STR International, LLC (“International,” and together with Nutmeg and their respective subsidiaries, the “Nutmeg Companies”), and immediately thereafter sold its equity interest in each of the Nutmeg Companies to designated affiliates of UL. The Company decided to sell the QA business in order to focus exclusively on the solar encapsulant opportunity and to seek further product offerings related to the solar industry, as well as other growth markets related to the Company’s polymer manufacturing capabilities, and to retire its long–term debt.

In the fourth quarter of 2011, the Company received $2,727 in additional cash proceeds from UL related to the finalization of the excess cash and working capital adjustments in accordance with the purchase agreement.

In accordance with ASC 250–20–Presentation of Financial Statements–Discontinued Operations and ASC 740–20–Income Taxes–Intraperiod Tax Allocation, the accompanying Condensed Consolidated Statements of Comprehensive Loss and Condensed

Consolidated Cash Flows present the results of the QA business as discontinued operations. Prior to the sale, the QA business was a segment of the Company. The Company has no continuing involvement in the operations of the QA business and does not have any direct cash flows from the QA business subsequent to the sale. Accordingly, the Company has presented the QA business as discontinued operations in these condensed consolidated financial statements.

As anticipated and in conjunction with the closing of the sale of the QA business, the Company became non–compliant with certain debt covenants that required the repayment of all debt outstanding at that time. Therefore and in order to sell assets of the QA business free and clear of all liens under the 2007 Credit Agreements, on September 1, 2011, the Company terminated the 2007 Credit Agreements and used approximately $237,732 from the proceeds of the sale to repay all amounts due to Credit Suisse AG, as administrative agent and collateral agent. In connection with the payoff of all the existing debt, the Company also wrote off $3,586 of the remaining unamortized deferred financing costs associated with the 2007 Credit Agreements.

Out of Period Adjustment

During the third quarter of 2012, the taxable gain associated with the sale of the Company’s QA business was finalized in conjunction with filing the Company’s 2011 income tax returns. As part of this process, the Company identified and recorded an income tax benefit to discontinued operations of $4,246. The Company determined that $1,629 of this benefit was an error that should have been recorded in 2011.

The Company has determined that the error was not quantitatively or qualitatively material to the annual or interim periods in 2011 and the resulting correction was not material to its annual results for the year ended December 31, 2012.

The following tables set forth the operating results of the QA business presented as a discontinued operation for the three and nine months ended September 30, 2013 and 2012, respectively:

	Three Months EndedSeptember 30,				Nine Months EndedSeptember 30,
	2013		2012		2013		2012
Net sales	$	—	$	—	$	—	$	—
Loss from operations before income tax benefit	$	—	$	—	$	—	$	—
Estimated gain on sale before income tax expense	—		—		—		—
Net earnings before income tax expense	$	—	$	—	$	—	$	—
Income tax benefit	$	—	$	4,246	$	—	$	4,246