Assets Held For Sale

3 Months Ended

Apr. 01, 2023

Asset, Held-for-Sale, Not Part of Disposal Group [Abstract]

Assets Held For Sale

ASSET HELD-FOR-SALE AND DIVESTITURE

Asset Held-For-Sale

On October 11, 2022, the Company entered into a definitive agreement with Infineum USA L.P. (“Infineum”) for the sale of its Pipeline and Industrials Materials (“PIM”) business, which became part of the Company with the acquisition of CMC Materials. The PIM business reports into the Specialty Chemicals and Engineered Materials segment of the Company. Effective February 10, 2023, the Company terminated the definitive agreement. In accordance with the terms of the agreement, the Company received a $12.0 million termination fee from Infineum in the first quarter of 2023 and incurred a transaction adviser fee of $1.1 million. The net amount of $10.9 million is recorded in Other (income) expense, net in the condensed consolidated statement of operations. At the time of the termination, the transaction had not received clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”).

During the fourth quarter of 2022, the related assets and liabilities were classified as held-for-sale in the Company’s consolidated balance sheet and measured at the lower of their carrying amount or fair value less cost to sell. The assets and liabilities continue to be classified as held-for-sale at April 1, 2023.

The planned disposition of the PIM business did not meet the criteria to be classified as a discontinued operation in the Company’s financial statements since the disposition did not represent a strategic shift that had, or will have, a major effect on the Company’s operations and financial results.

Assets-held-for sale comprise the following as of April 1, 2023:

(In thousands)
Assets:	April 1, 2023
Accounts Receivable	$	25,838
Inventory	23,674
Other current assets	396
Property, Plant and Equipment, net	109,865
Intangible assets, net	76,692
Goodwill	10,213
Other assets	1,254
Total assets-held-for sale	$	247,932
Liabilities:
Accounts payable	$	4,829
Accrued expenses	5,447
Long-term liabilities	1,341
Total liabilities-held-for sale	$	11,617

Income before income taxes attributable to the PIM business was $8.6 million for the three months ended April 1, 2023.

Divestiture

During the first quarter of 2023, the Company announced entry into a definitive agreement to sell QED Technologies International, Inc. (“QED”), which offers magnetorheological finishing polishing and subaperture stitching interferometry metrology manufacturing solutions. QED was a part of Specialty Chemicals and Engineered Materials segment and became part of the Company with the acquisition of CMC Materials.

The Company completed the divestiture of the QED on March 1, 2023 and received proceeds of $134.8 million after adjustments with respect to cash, working capital, indebtedness and transaction expenses. The disposition of QED did not meet the criteria to be classified as a discontinued operation in the Company’s financial statements since the disposition did not represent a strategic shift that had a major effect on the Company’s operations and financial results. The following table summarizes the fair value of the sale proceeds received in connection with the divestiture, which are subject to further post-closing adjustment:

(In thousands)	April 1, 2023
Fair value of sale consideration	$	137,500
Preliminary working capital adjustment	1,602
Cash transferred to the buyer on the closing balance sheet	(1,465)
Direct costs to sell	(2,780)
Fair value of sale consideration	$	134,857

The net sales proceeds received from the QED business divestiture presented under cash flows from investing activities represent the cash portion of the sale consideration, which was determined as the fair value of sale consideration reduced by the amount held in escrow. We expect that the amount held in escrow should be paid out within the next six months. The following table summarizes the different components of net proceeds received from the QED business divestiture presented under Cash flows from investing activities:

(In thousands)	April 1, 2023
Fair value of sale consideration	$	134,857
Amount held in escrow	1,330
Net sales proceeds received from business divestiture	$	133,527

The carrying amount of net assets associated with the QED business was approximately $148.5 million. The major classes of assets and liabilities sold consisted of the following:

(In thousands)	April 1, 2023
Assets:
Trade accounts receivable, net	$	4,818
Inventories, net	8,658
Other current assets	5,743
Property, plant and equipment, net	2,663
Goodwill	89,271
Intangible assets, net	48,661
ROU assets	806
Other long-term assets	37
Total assets	$	160,657
Liabilities:
Accounts payable	$	1,340
Short-term lease obligation	271
Accrued expenses and other current liabilities	6,922
Payroll and related costs	1,557
Long-term lease obligation	517
Other long-term liabilities	1,551
Total liabilities	$	12,158

As a result of the QED divestiture, the Company recognized a pre-tax loss of approximately $13.6 million presented in selling, general and administrative expenses on the Condensed Consolidated Statements of Operations for the quarter ended April 1, 2023. The Company also recognized the income tax expense associated with the QED divestiture of approximately $17.0 million based on preliminary estimates as of April 1, 2023.