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 asset purchase agreement also provided 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. The sale of the delayed assets was consummated during the second quarter of 2018 and resulted in no gain or loss. As a result of the aforementioned transactions, 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 2017 within earnings from discontinued operations.

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)	2019		2018		2017
Net sales	$	-	$	-	$	421
Cost of sales		-		65		(675)
Selling and general expenses		-		-		(25)
Gain on divestiture, net		-		-		11,413
Other income (expense)		2,126		-		2,753
Earnings from discontinued operations before provision for income taxes		2,126		65		13,887
Provision for income taxes from discontinued operations		446		14		4,242
Earnings from discontinued operations, net of tax	$	1,680	$	51	$	9,645

During the third quarter of 2019, the Company recognized Other income from the settlement of a lawsuit for breach of contract. 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)	2019		2018
Accounts receivable, net	$	-	$	375
Assets held for sale	$	-	$	375

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 $(1,052,000), $(636,000), and $(5,447,000) for the years ended December 31, 2019, 2018, and 2017, respectively. Cash provided by investing activities related to discontinued operations was $3,107,000, $6,290,000, and $61,891,000 for the years ended December 31, 2019, 2018, and 2017, 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 $1,832,000. The amounts received from Drylock for rental income are recorded in Other Income on the Consolidated Statements of Comprehensive Income.