Note 11 – Discontinued Operations

The Company’s board of directors previously approved the plan to sell certain non-core business units including Wallop Defence Systems, Ltd. (Wallop), a manufacturer of flare countermeasure devices; a small distribution business; and a small manufacturing business.

On May 4, 2016, the Company sold certain assets of Wallop for 2.5 million British pounds and contingent consideration of up to a maximum payment of 9 million British pounds. The contingent consideration is payable based upon receipt of acceptable orders during a three year period ending May 3, 2019, and is equal to the amount of the acceptable order multiplied by a specified percentage ranging from 26.5% to 31%. The contingent consideration amount was estimated to be 5.7 million British pounds at June 30, 2017. On June 2, 2017, the Company sold additional assets of Wallop for 0.7 million euros to be collected in the fourth quarter of fiscal 2017.

On March 28, 2017, the Company sold a small manufacturing business for $0.6 million and a note receivable of $2.4 million, resulting in a gain on sale of the business of $0.8 million. The note receivable is due March 28, 2021, with an interest rate of 2.05%.

The Company incurred a $0.8 million loss from discontinued operations in the third quarter of fiscal 2017 compared to $8.7 million loss from discontinued operations in the third quarter of fiscal 2016. During the first nine months of fiscal 2017 and 2016, the Company incurred a loss from discontinued operations of $6.2 million and $15.5 million, respectively. Included in the loss of $6.2 million for the first nine months of fiscal 2017 was a $3.6 million loss on Wallop’s assets held for sale, principally due to a reduction in the estimated sale price and the effect of changes in foreign currency exchange rates. There was no significant change to the estimated sale price in the third quarter of fiscal 2017.

The operating results of the discontinued operations for the three month period ended June 30, 2017, consisted of the following:

In Thousands	Avionics &			Sensors &		Advanced
	Controls			Systems		Materials			Other			Total

Net Sales	$	-		$	-	$	270		$	-		$	270

Operating earnings (loss)		(594	)		-		(598	)		(3	)		(1,195	)
Tax expense (benefit)		(62	)		-		(318	)		-			(380	)
Income (loss) from discontinued operations	$	(532	)	$	-	$	(280	)	$	(3	)	$	(815	)

Included in Operating Earnings (Loss):
Gain (loss) on net assets held for sale	$	163		$	-	$	709		$	-		$	872
Gain (loss) on sale of discontinued operations		(395	)		-		-			-			(395	)

The operating results of the discontinued operations for the nine month period ended June 30, 2017, consisted of the following:

In Thousands	Avionics &			Sensors &		Advanced
	Controls			Systems		Materials			Other			Total

Net Sales	$	4,964		$	-	$	270		$	-		$	5,234

Operating earnings (loss)		(713	)		893		(7,214	)		(896	)		(7,930	)
Tax expense (benefit)		(492	)		-		(941	)		(312	)		(1,745	)
Income (loss) from discontinued operations	$	(221	)	$	893	$	(6,273	)	$	(584	)	$	(6,185	)

Included in Operating Earnings (Loss):
Gain (loss) on net assets held for sale	$	77		$	-	$	(3,614	)	$	-		$	(3,537	)
Gain (loss) on sale of discontinued operations		793			-		-			-			793

The operating results of the discontinued operations for the three month period ended July 1, 2016, consisted of the following:

In Thousands	Avionics &			Sensors &			Advanced
	Controls			Systems			Materials			Other			Total

Net Sales	$	3,577		$	-		$	456		$	-		$	4,033

Operating earnings (loss)		(1,184	)		(71	)		(5,908	)		(251	)		(7,414	)
Tax expense (benefit)		570			(83	)		876			(87	)		1,276
Income (loss) from discontinued operations	$	(1,754	)	$	12		$	(6,784	)	$	(164	)	$	(8,690	)

Included in Operating Earnings (Loss):
Gain (loss) on net assets held for sale	$	(2,411	)	$	-		$	(1,912	)	$	-		$	(4,323	)

The operating results of the discontinued operations for the nine month period ended July 1, 2016, consisted of the following:

In Thousands	Avionics &			Sensors &			Advanced
	Controls			Systems			Materials			Other			Total

Net Sales	$	13,638		$	-		$	5,229		$	-		$	18,867

Operating earnings (loss)		785			(378	)		(14,775	)		(262	)		(14,630	)
Tax expense (benefit)		1,256			(83	)		(223	)		(87	)		863
Income (loss) from discontinued operations	$	(471	)	$	(295	)	$	(14,552	)	$	(175	)	$	(15,493	)

Included in Operating Earnings (Loss):
Gain (loss) on net assets held for sale	$	(2,355	)	$	-		$	(5,540	)	$	-		$	(7,895	)

Assets and Liabilities Held for Sale within the Consolidated Balance Sheet at June 30, 2017, are comprised of the following:

In Thousands	Avionics &		Sensors &		Advanced
	Controls		Systems		Materials		Total

Other current assets	$	-	$	-	$	3,868	$	3,868
Current Assets of Businesses Held for Sale		-		-		3,868		3,868

Net property, plant and equipment		5,262		-		-		5,262
Other assets		-		-		4,995		4,995
Non-Current Assets of Businesses Held for Sale		5,262		-		4,995		10,257

Accounts payable		-		-		385		385
Accrued liabilities		-		-		86		86
Current Liabilities of Businesses Held for Sale		-		-		471		471

Deferred income tax liabilities		-		-		1,365		1,365
Other liabilities		-		-		320		320
Non-Current Liabilities of Businesses Held for Sale		-		-		1,685		1,685

Net Assets of Businesses Held for Sale	$	5,262	$	-	$	6,707	$	11,969

Assets and Liabilities Held for Sale within the Consolidated Balance Sheet at September 30, 2016, were comprised of the following:

In Thousands	Avionics &			Sensors &		Advanced
	Controls			Systems		Materials		Total

Accounts receivable, net	$	2,588		$	-	$	4,093	$	6,681
Inventories		8,070			-		398		8,468
Prepaid expenses		127			-		103		230
Income tax refundable		-			-		71		71
Current Assets of Businesses Held for Sale		10,785			-		4,665		15,450

Net property, plant and equipment		5,368			-		2,869		8,237
Intangibles, net		-			-		1,856		1,856
Deferred income tax benefits		(392	)		-		400		8
Other assets		-			-		1,299		1,299
Non-Current Assets of Businesses Held for Sale		4,976			-		6,424		11,400

Accounts payable		441			-		1,463		1,904
Accrued liabilities		7,000			-		1,909		8,909
Current Liabilities of Businesses Held for Sale		7,441			-		3,372		10,813

Other liabilities		-			-		320		320
Non-Current Liabilities of Businesses Held for Sale		-			-		320		320

Net Assets of Businesses Held for Sale	$	8,320		$	-	$	7,397	$	15,717