Sale of Product Lines - Discontinued Operations

6 Months Ended

Jun. 30, 2015

Discontinued Operations and Disposal Groups [Abstract]

Sale of Product Lines - Discontinued Operations

5. SALE OF PRODUCT LINE - DISCONTINUED OPERATIONS

On April 22, 2014, we entered into an Agreement (the “BSA Agreement”) with Boston Semi Equipment LLC (“BSE”) and Boston Semi Automation LLC (“BSA”), a wholly owned subsidiary of BSE, pursuant to which we transferred our assets and certain liabilities related to our business of designing, manufacturing, marketing and servicing equipment used in the handling of integrated circuits (“test handler product line”) to BSA.

The BSA Agreement provides that BSA will pay to ATRM a royalty on all revenue related to the test handler product line through December 31, 2018. The royalty percentage was 13.50% for the three month period ended June 30, 2015 and decreases 0.75% each quarter thereafter. Royalties earned are subject to certain qualifications and adjustments. The first royalty payment covering the period April 22, 2014 through December 31, 2014 amounted to approximately $770,000 and was received in January 2015. The payment for royalties earned in the quarter ended March 31, 2015 amounted to approximately $142,000 and was received in May 2015. Future royalty payments are due 60 days after the end of each calendar quarter.

Following the sale of our RTP product line to Cascade in 2013 and the transfer of our test handler product line to BSA in April 2014, ATRM has no manufacturing operations remaining in North St. Paul, Minnesota. The original lease term for our North St. Paul facility, which consisted of approximately 45,000 square feet, was scheduled to expire on August 31, 2015. Approximately one-half of the space in this facility had been subleased to Cascade and BSA through the end of the lease term. We also entered into administrative services agreements with Cascade and BSA that provided for copier and computer network services through the end of the lease term. The remaining half of the facility was unutilized. As a result of the divestitures of our businesses in Minnesota, we determined that ATRM would not receive economic benefit from its facility, copier and IT equipment leases at its North St. Paul location over their remaining terms, and liabilities related to these contracts should be recorded at net settlement value at April 22, 2014 (the “cease-use date”). We recorded a charge of $264,000 related to these contracts in the quarter ended June 30, 2014. The accrued facility expense is included in “Other accrued liabilities” in our condensed consolidated balance sheet. See Note 12.

On May 1, 2015, we entered into an agreement with the owner of the leased facility in North St. Paul to accelerate the expiration of the lease from August 31, 2015 to May 1, 2015. We also entered into agreements with Cascade and BSA to terminate their subleases effective May 1, 2015. The early terminations of these agreements were executed at the request of the owner of the facility at no cost to ATRM. Effective May 1, 2015, we relocated our corporate office from the North St. Paul facility to a nearby suburb of St. Paul, MN where we lease office space on a month to month basis. As a result of the early termination of the North St. Paul facility lease and subleases, we recorded a gain of approximately $54,000 resulting from a reduction in the facility exit accrual. This gain is included in general and administrative expenses for the three and six month periods ended June 30, 2015.

Condensed operating results for the test handler product line are presented as discontinued operations in our consolidated statements of operations for the three and six month periods ended June 30, 2014 and are summarized below (in thousands):

	Three months ended June 30, 2014			Six months ended June 30, 2014
Net sales	$	218		$	2,376
Costs and expenses:
Cost of sales		150			1,400
Operating expenses		369			779
Total costs and expenses		519			2,179
Income (loss) from discontinued operations		(301	)		197
Gain on sale of discontinued operations		1,128			1,128
Income before income taxes		827			1,325
Income tax expense		(290	)		(464	)
Income from discontinued operations	$	537		$	861

The Company had no discontinued operations for the three and six months ended June 30, 2015.