Acquisitions

(a) Summary of Recent Acquisitions

Composite Engineering, Inc.

On July 2, 2012, the Company acquired Composite Engineering, Inc. (“CEi”) for approximately $164.2 million. The purchase price included consideration of $135.0 million in cash and 4.0 million shares of the Company's common stock, valued at $5.94 per share on July 2, 2012, or $23.8 million. As security for CEi's indemnification obligations, $10.7 million of the cash paid was placed into an escrow account. The Company was paid $1.0 million from the escrow account for working capital adjustments in July 2013, at which time the remaining escrow was released to the sellers. Also included in the purchase consideration was $5.5 million paid to retire certain pre-existing CEi debt and settle pre-existing accounts receivable from CEi. There was no contingent purchase consideration associated with the acquisition of CEi.

The Company made an election under Section 338(h)(10) of the Internal Revenue Code, which resulted in tax deductible goodwill related to this transaction. The Company estimated that the tax deductible goodwill and intangibles resulting from the election will approximate $136.3 million, to be available for deduction against Federal and California state income taxes over a 15-year period.

Certain CEi personnel entered into long-term employment agreements with the Company and on July 2, 2012, the Company granted restricted stock units (“RSUs”) for an aggregate 2.0 million shares of common stock as long-term retention inducement grants. The RSUs had an estimated value of $11.9 million on the grant date, vest on the fourth anniversary of the closing of the CEi acquisition, or earlier upon the occurrence of certain events, and are being accounted for as compensation expense over such four-year period. As of December 28, 2014, 520,000 shares remain unvested and not forfeited.

To fund the acquisition of CEi, on May 14, 2012, the Company sold 20.0 million shares of its common stock at a purchase price of $5.00 per share in an underwritten public offering. The Company received gross proceeds of approximately $100.0 million and net proceeds of approximately $97.0 million after deducting underwriting fees and other offering expenses. The Company used the net proceeds from this offering to fund a portion of the purchase price for the acquisition of CEi. In addition, the Company used borrowings of $40.0 million from its revolving line of credit to partially fund the purchase price of CEi.

CEi is a vertically integrated manufacturer and developer of unmanned aerial target systems and composite structures used for national security programs. Its drones are designed to replicate some of the most lethal aerial threats facing warfighters and strategic assets. CEi's customers include U.S. agencies and foreign governments. CEi is a part of the US reportable segment.

The excess of the purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed in the acquisition was allocated to goodwill. The value of the goodwill represents the value the Company expects to be created by enabling it to strategically expand its strengths in the areas of design, engineering, development, manufacturing and production of unmanned aerial targets, and by enabling the Company to realize significant cross selling opportunities.

The transaction was accounted for using the acquisition method of accounting, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The following table summarizes the fair values of the major assets acquired and liabilities assumed as of the acquisition date (in millions):



Cash	$	8.9
Accounts receivable	9.3
Inventoried costs	12.3
Other current assets	8.9
Property and equipment	8.1
Intangible assets	38.0
Goodwill	104.2
Total assets	189.7
Current liabilities	(25.7		)
Net assets acquired	$	164.0

The amounts of revenue and operating income of CEi included in the Company's Consolidated Statement of Operations and Comprehensive Loss for the year ended December 30, 2012 was $68.2 million and $1.6 million, respectively.

Critical Infrastructure Business

On December 30, 2011, the Company acquired selected assets of a critical infrastructure security and public safety system integration business (the “Critical Infrastructure Business”) for approximately $18.8 million.

The Critical Infrastructure Business designs, engineers, deploys, manages and maintains specialty security systems at some of the most strategic asset and critical infrastructure locations in the U.S. Additionally, these security systems are typically integrated into command and control system infrastructure or command centers. Approximately 15% of the revenues of the Critical Infrastructure Business are recurring in nature due to the operation, maintenance or sustainment of the security systems once deployed. The Critical Infrastructure Business is part of the Company's PSS reportable segment.

The excess of the purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed in the acquisition was allocated to goodwill. The value of the goodwill represents the value the Company expects to be created by enabling it to strategically expand its strengths in the areas of homeland security solutions and will also enable the Company to realize significant cross selling opportunities and increase its sales of higher margin, fixed-price products.



Accounts receivable	$	23.4
Other assets	0.5
Intangible assets	2.0
Goodwill	2.6
Total assets	28.5
Current liabilities	(9.7		)
Net assets acquired	$	18.8

The goodwill recorded in this transaction is tax deductible.

Pro Forma Financial Information

The following tables summarize the supplemental Condensed Consolidated Statements of Operations and Comprehensive Loss information on an unaudited pro forma basis as if the acquisitions of CEi, and the Critical Infrastructure Business occurred on December 25, 2011 and include adjustments that were directly attributable to the foregoing transactions or were not expected to have a continuing impact on the Company. Both acquisitions were included in the results of operations for the full years ended December 29, 2013 and December 28, 2014. There are no material, nonrecurring pro forma adjustments directly attributable to the business combinations included in the reported pro forma revenue and operations for 2012. The pro forma results are for illustrative purposes only for the applicable period and do not purport to be indicative of the actual results that would have occurred had the transactions been completed as of the beginning of the period, nor are they indicative of results of operations that may occur in the future (all amounts, except per share amounts are in millions):



	Year Ended December 30, 2012
Pro forma revenues	$	1,019.5
Pro forma net loss before tax	(132.0		)
Pro forma net loss	(130.4		)
Net loss attributable to the registrant	(112.9		)
Basic and diluted pro forma loss per share	$	(2.31	)

The pro forma financial information reflects acquisition related expenses incurred, pro forma adjustments for the additional amortization associated with finite-lived intangible assets acquired, additional incremental interest expense, stock compensation related to the RSUs granted in the CEi transaction, and the related tax expense.

These adjustments are as follows (in millions except per share data):



	Year Ended December 30, 2012
Intangible amortization	$	16.2
Net change in stock compensation expense	2.2
Increase in weighted average common shares outstanding for shares issued and not already included in the weighted average common shares outstanding	9.6