P. DISCONTINUED OPERATIONS

On January 3, 2017, the Company and its wholly-owned subsidiary, Presto Absorbent Products, Inc. (“PAPI”), entered into an asset purchase agreement wherein substantially all PAPI assets were sold and certain liabilities were assigned to Drylock Technologies, LTD. (“Drylock”) in exchange for $68,448,000. The proceeds amount differs from the amount previously disclosed because of the customary post-closing adjustments that were finalized during the second quarter of 2017, totaling $1,448,000. The asset purchase agreement also provides for additional proceeds of $4,000,000 upon the sale of certain delayed assets, consisting of machinery and equipment that were the subject of an involuntary conversion, at a future date. As a result of this transaction, the Company classified its results of operations for all periods presented to reflect its Absorbent Products business as a discontinued operation and classified the assets and liabilities of its Absorbent Products business as held for sale. The Company’s pre-tax gain on the sale of $11,413,000, net of one-time transaction costs, was recorded in the first six months of 2017 within earnings from discontinued operations. This amount differs from the gain previously reported as a result of the post-closing adjustments mentioned above that were finalized in the second quarter of 2017.

The following table summarizes the results of the Absorbent Products business within discontinued operations for each of the periods presented:



	For the years ended December 31,
(in thousands)	2017		2016		2015
Net sales	$	421	$	76,555	$	72,041
Cost of sales		(675)		(70,848)		(71,897)
Selling and general expenses		(25)		(2,618)		(2,275)
Gain on divestiture, net		11,413		-		-
Other income (expense)		2,753		976		(1)
Earnings (loss) from discontinued operations before provision for income taxes		13,887		4,065		(2,132)
Provision for (benefit from) income taxes from discontinued operations		4,242		1,416		(466)
Earnings (loss) from discontinued operations, net of tax	$	9,645	$	2,649	$	(1,666)

The following table summarizes the major classes of assets and liabilities of the Absorbent Products business held for sale for each of the periods presented:




	Year Ended December 31,
(in thousands)	2017		2016
Accounts receivable, net	$	2,529	$	13,781
Inventories		-		10,747
Property, plant and equipment, net		3,660		34,365
Assets held for sale	$	6,189	$	58,893

Accounts payable	$	210	$	5,245
Accrued liabilities		-		1,008
Liabilities held for sale	$	210	$	6,253

The Consolidated Statements of Cash Flows do not present the cash flows from discontinued operations separately from cash flows from continuing operations. Cash provided by (used in) operating activities from discontinued operations was $(5,447,000), $4,477,000, and $4,733,000 for the years ended December 31, 2017, 2016, and 2015, respectively. Cash provided by (used in) investing activities related to discontinued operations was $61,891,000, $(1,139,000), and $(2,385,000) for the years ended December 31, 2017, 2016, and 2015, respectively.

In connection with the asset purchase agreement discussed above, the Company entered into a 10-year lease agreement with Drylock for a portion of its manufacturing and warehouse facilities. The lease agreement provided for total annual payments of $1,288,000 initially. It also provides Drylock an option for early termination of the lease after the initial five years and an option to modify the space subject to the agreement. Drylock elected the latter option as of June 30, 2017. The agreement provides as well for adjustments to the rental payments based on certain price indices. The Company also entered into a transition services agreement with Drylock which terminated at the end of 2017. The amounts received from Drylock for transition services and rental income are recorded in Other Income on the Consolidated Statements of Comprehensive Income.