Discontinued Operations

12 Months Ended

Sep. 30, 2020

Discontinued Operations and Disposal Groups [Abstract]

In fiscal year 2018, the Board of Directors formed a committee of independent directors, referred to as the strategic direction committee, to consider, negotiate and approve or disapprove a sale transaction of the Cable TV segment ("Cable transaction") to Leveling 8, Inc. (“Leveling 8”), a company controlled by David Chymiak. Mr. Chymiak is a director and substantial shareholder of the Company, and he was the Chief Technology Officer and President of Tulsat LLC until the closing of the sale. After extensive due diligence efforts, in December 2018, the strategic direction committee approved and executed a stock purchase agreement of the Cable TV segment to Leveling 8, which required stockholder approval.

Shareholders voted in favor of the Cable transaction on May 29, 2019 for a selling price of $10.3 million and the sale was completed on June 30, 2019. The purchase price consisted of $3.9 million of cash at closing (subject to a working capital adjustment estimated at $1.1 million), less the $2.1 million of cash proceeds from the sale of the Sedalia, Missouri and Warminster, Pennsylvania facilities already received (see discussion below) and a $6.4 million promissory note to be paid in semi-annual installments over five years with an interest rate of 6.0%. The calculation of the pretax loss of the Cable transaction was as follows, in thousands:


Contract price	$	10,314
Less: Real estate sales	2,075
Less: Working capital adjustment	1,111
Net purchase price	7,128
Assets sold:
Accounts receivable	2,038
Inventories	10,259
Prepaids and other assets	73
Property and equipment, net	336
	12,706
Liabilities transferred:
Accounts payable	1,306
Accrued expenses	467
	1,773
Net assets sold	10,933
Pretax loss on sale of net assets of Cable TV segment	$	(3,805)

In addition to the real estate sold as part of the Cable transaction, the Company sold the Broken Arrow, Oklahoma facility to Mr. Chymiak, for a purchase price of $5.0 million payable in cash at closing. The sale closed on November 29, 2018, and generated a pretax gain of approximately $1.4 million.

The total pretax gain related to the sale of all real estate facilities, including the Cable transaction and the Broken Arrow facility, is as follows, in thousands:


Aggregate purchase price	$	7,075
Less: Book value of real estate facilities	4,763
Pretax gain	$	2,312

As a result of the Cable transaction and the three real estate facility sales to David Chymiak, the Company received total proceeds of $14.2 million and recorded a pretax loss on the sales of $1.5 million for the year ended September 30, 2019 as follows, in thousands:


Proceeds:
Cash received from real estate facility sales	$	7,075
Cash received from sale of Cable TV segment	753
Promissory note from sale of Cable TV segment	6,375
Total proceeds	14,203
Book value of assets sold:
Cable TV segment	10,932
Real estate facilities	4,763
Total book value of assets sold	15,695
Pretax loss on sale of discontinued operations	$	(1,492)

The cash received from the Cable transaction of $0.7 million resulted from the down payment of $1.8 million due at the closing less the working capital adjustment of $1.1 million. The Company received $2.6 million under the promissory note during the year ended September 30, 2020. The remaining promissory note, which is collateral under the Company's note payable with its primary lender, is scheduled to be received by the Company in semi-annual installments over five years including interest of 6% as follows, in thousands:


Fiscal year 2021	$	1,400
Fiscal year 2022	940
Fiscal year 2023	940
Fiscal year 2024	495
Total proceeds	$	3,775

The Company did not have income related to the discontinued operations during the year ended September 30, 2020. Loss from discontinued operations, net of tax and the loss on sale of discontinued operations, net of tax, of the Cable TV segment business which are presented in total as loss from discontinued operations, net of tax in the Company’s consolidated statements of operations for the year ended September 30, 2019 is as follows, in thousands:


	September 30, 2019
Total net sales	$	13,743

Cost of sales	10,097
Operating, selling, general and administrative expenses	3,412
Other expenses	2
Income from discontinued operations	232
Loss on sale of discontinued operations	(1,491)
Income tax provision	8
Loss from discontinued operations, net of tax	$	(1,267)