Note P - Discontinued Operations

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

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").  As a result, 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 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)	2020		2019		2018
Net sales	$	-	$	-	$	-
Cost of sales		-		-		65
Other income (expense)		-		2,126		-
Earnings from discontinued operations before provision for income taxes		-		2,126		65
Provision for income taxes from discontinued operations		-		446		14
Earnings from discontinued operations, net of tax	$	-	$	1,680	$	51

During the third quarter of 2019, the Company recognized Other income from the settlement of a lawsuit for breach of contract.  

The Consolidated Statements of Cash Flows do not present the cash flows from discontinued operations separately from cash flows from continuing operations.  Cash (used in) operating activities from discontinued operations was $0,  $(1,052,000), and $(636,000) for the years ended December 31, 2020, 2019, and 2018, respectively. Cash provided by investing activities related to discontinued operations was $0,  $3,107,000, and $6,290,000 for the years ended December 31, 2020, 2019, and 2018, 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. During the fourth quarter of 2018, the lease agreement was amended to incorporate additional facilities that the Company built for Drylock.  The amended lease provides for an initial term of approximately 14 years, and allows for successive three-year renewal periods, as well as options to terminate the lease early after five and ten years. The amended lease also provides for adjustments to the rental payments based on certain price indices, taxes, and space occupied. The Company estimates that annual payments under the lease will total $1,837,000. The amounts received from Drylock for rental income are recorded in Other Income on the Consolidated Statements of Comprehensive Income.