Discontinued Agribusiness Operations and Other Assets Held for Sale

9 Months Ended

Sep. 30, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Agribusiness Operations and Assets Held for Sale

Discontinued Agribusiness Operations and Other Assets Held for Sale

During the third quarter of 2015, the Company sold substantially all of the assets used in its agribusiness segment to CHS Inc. (“CHS”) for a net selling price of $105.3 million. After repayment of $80.9 million of outstanding debt and $5.9 million in selling and other related costs of the sale, the Company received net proceeds of $18.4 million on the date of close.

The Company was required to deposit $10.2 million of such net proceeds in escrow accounts, $6 million of which secures general indemnification obligations through January 2017, and $4.2 million of which was associated with specified operational matters related to air quality and waste water permit issues (“operational escrow”). The Company resolved the air quality issue and received $2.4 million of the operational escrow amount in October 2015. However, in February 2016, the Company was notified that the relevant regulatory authorities had not approved the waste water permit at the levels required under the sale agreement. Consequently, the remaining $1.8 million of the operational escrow amount was released to CHS in full satisfaction of the matter, resulting in the Company recording the amount as additional loss on the sale of discontinued operations for the nine months ended September 30, 2016. Remaining amounts in escrow are reported as accounts receivable in the table below.

The Company also guaranteed up to $8 million for any indemnification claims in excess of the $6 million general indemnification escrow pursuant to the terms of a guaranty agreement with CHS, which was executed at the closing. This guaranty will remain in force for five years from the date of sale. The guaranty has been recorded at estimated fair value that reflects the Company’s expectation that no significant amounts will be paid out under the guaranty. However, any amounts paid by the Company to CHS in excess of the estimate will result in additional loss on the sale. Any assets in excess of the resolution of the outstanding matters, and after payment of remaining liabilities, are available to the Company for any corporate purposes.

The Company’s agribusiness segment has been classified as discontinued agribusiness operations in the accompanying condensed consolidated financial statements as of the earliest period presented. Consequently, prior periods presented have been recast from amounts previously reported to reflect the agribusiness segment as discontinued agribusiness operations.

The following table presents the details of the Company’s results from discontinued agribusiness operations included in the condensed consolidated statement of operations and comprehensive income or loss (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Revenue and other income:
Sales of canola oil and meal				$	9,600					$	82,267
Other				18						(50		)
Total revenue and other income				9,618						82,217
Cost of goods sold:
Cost of canola oil and meal sold				8,738						79,763
Depreciation				18						4,360
Other direct costs of production				1,155						5,938
Total cost of goods sold				9,911						90,061
Depreciation										95
Impairment loss on intangible and long-lived assets										1,875
Interest				428						3,259
Plant costs and overhead	$	18		9,504			$	102		16,447
Segment total expenses	18			19,843			102			111,737
Loss from discontinued agribusiness operations, net of tax	(18		)	(10,225		)	(102		)	(29,520		)
Income (loss) on sale of discontinued agribusiness operations, net of tax	2			(1,348		)	(1,858		)	(18,251		)
Net loss from discontinued agribusiness operations, net of tax	(16		)	(11,573		)	(1,960		)	(47,771		)
Net (income) loss from discontinued agribusiness operations attributable to noncontrolling interests				(16		)				1,730
Net loss from discontinued agribusiness operations attributable to PICO Holdings, Inc.	$	(16	)	$	(11,589	)	$	(1,960	)	$	(46,041	)

The following table presents the details of the Company’s assets and liabilities classified as held-for-sale in the condensed consolidated balance sheets (in thousands):

	September 30, 2016		December 31, 2015
Assets
Cash and cash equivalents	$	438	$	938
Accounts receivable	5,991		7,800
Other assets	82		55
Total agribusiness assets held-for-sale	6,511		8,793
Real estate (1)	3,400
Oil and gas assets (1)	989
Total assets held-for-sale	$	10,900	$	8,793
Liabilities
Total agribusiness liabilities held-for-sale	276		608
Oil and gas liabilities (1)	627
Total liabilities held-for-sale	$	903	$	608

⁽¹⁾ See Note 12 “Subsequent Events.”