Discontinued Operations

6 Months Ended

Jul. 03, 2021

Discontinued Operations

Note B - Discontinued Operations

Note B – Discontinued Operations

We have determined that the companies included in our Diversified Products segment no longer fit with our long-term strategy and we have initiated the process of selling the companies within the Diversified Products segment. Selling the companies within this segment will allow management to focus on our core capabilities and offerings.

The Diversified Products segment met the criteria to be held for sale and furthermore, we determined that the assets held for sale qualify for discontinued operations. As such, the financial results of the Diversified Products segment are reflected in our unaudited condensed consolidated statements of operations as discontinued operations for all periods presented. Additionally, current and non-current assets and liabilities of discontinued operations are reflected in the unaudited condensed consolidated balance sheets for both periods presented.

Summarized Financial Information of Discontinued Operations

The following table represents income from discontinued operations, net of tax:

	Three Months Ended						Six Months Ended
	July 3, 2021			June 27, 2020			July 3, 2021			June 27, 2020
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net sales	$	13,693,457		$	9,325,609		$	25,017,899		$	22,805,124
Cost of products sold		(11,139,886	)		(9,179,960	)		(21,044,606	)		(20,833,343	)
Gross margin		2,553,571			145,649			3,973,293			1,971,781
Selling and administrative expenses		(1,280,570	)		(5,131,259	)		(2,313,397	)		(6,444,713	)
Restructuring costs		(10,583,078	)		-			(10,583,078	)		-
Operating loss		(9,310,077	)		(4,985,610	)		(8,923,182	)		(4,472,932	)
Interest expense		(144,715	)		(151,639	)		(320,429	)		(358,553	)
Loss from discontinued operations before income taxes		(9,454,792	)		(5,137,249	)		(9,243,611	)		(4,831,485	)
Income tax benefit		2,225,658			1,168,011			2,175,946			1,115,512
Loss from discontinued operations, net of tax	$	(7,229,134	)	$	(3,969,238	)	$	(7,067,665	)	$	(3,715,973	)

The following table represents the assets and liabilities from discontinued operations:

	July 3, 2021		January 2, 2021
	(unaudited)
Cash	$	1,635,481	$	809,809
Accounts receivable		8,578,397		5,944,922
Inventory		10,426,383		9,990,656
Prepaid expenses		1,086,981		1,192,530
Property, plant and equipment, net		11,428,744		13,813,553
Patents and other intangibles net of accumulated amortization		-		6,935
Goodwill		-		5,900,837
Right of use assets		112,217		173,364
Total assets of discontinued operations	$	33,268,203	$	37,832,606
Current assets of discontinued operations¹	$	33,268,203	$	17,937,917
Non-current assets of discontinued operations		-		19,894,689
Total assets of discontinued operations	$	33,268,203	$	37,832,606
Accounts payable	$	3,515,373	$	2,196,101
Accrued compensation		2,069,474		960,074
Current portion of lease liability		101,243		125,049
Other long-term liabilities		10,974		48,315
Total liabilities of discontinued operations	$	5,697,064	$	3,329,539
Current liabilities of discontinued operations¹	$	5,697,064	$	3,281,224
Non-current liabilities of discontinued operations		-		48,315
Total liabilities of discontinued operations	$	5,697,064	$	3,329,539
¹ The total assets and liabilities of discontinued operations are presented as current in the July 3, 2021 balance sheet as we expect to sell the discontinued operations and collect proceeds within one year.