Note 14 – 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 deferred consideration up to a maximum payment of 9 million British pounds. In the definitive purchase and sale agreement for the sale of these assets, the Company provided standard representations and warranties as well as indemnification to the buyer of the Wallop operation. The Company is obligated to indemnify the buyer for certain losses of up to 5.0 million British pounds, if, among other things, the Company breaches the representations and warranties. In the first quarter of fiscal 2018, the Company received notification of a claim from the buyer of the Wallop operation alleging breaches of representations and warranties primarily associated with defective products and late product deliveries. Although a loss is possible, the amount of any loss related to this claim cannot be estimated at this time. The Company does not expect the possible loss to have a material effect on the Company’s financial position. The deferred 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 times a specified percentage ranging from 26.5% to 31%. The earn-out payment is estimated to be 4.8 million British pounds, or $6.7 million, at March 30, 2018. The Company was notified in December 2017 that it earned 1.3 million British pounds, or $1.8 million, in deferred consideration, half of which was paid to the Company in the second quarter of fiscal 2018 and the remaining half of which is expected to be paid in the third quarter of fiscal 2018, in accordance with the terms of the purchase and sale agreement.

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 $0.1 million loss from discontinued operations in the second quarter of fiscal 2018 and no loss from discontinued operations in the second quarter of fiscal 2017. During the first six months of fiscal 2018 and 2017, the company incurred a loss from discontinued operations of $0.2 million and $5.4 million, respectively. Included in the loss of $5.4 million for the first six months of fiscal 2017 was a $4.3 million loss on Wallop assets held for sale, principally due to a reduction in the estimated sale price and the effect of changes of foreign currency exchange rates. There was no significant change to the estimated sale price in the second quarter of fiscal 2018.

The operating results of the discontinued operations for the three-month period ended March 30, 2018, consisted of the following:

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

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

Operating earnings (loss)		869		-		(1,207	)		(50	)		(388	)
Tax expense (benefit)		10		-		(308	)		(13	)		(311	)
Income (loss) from discontinued operations	$	859	$	-	$	(899	)	$	(37	)	$	(77	)

Included in Operating Earnings (Loss):
Gain (loss) on net assets held for sale	$	801	$	-	$	505		$	-		$	1,306

The operating results of the discontinued operations for the three-month period ended March 31, 2017, consisted of the following:

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

Net Sales	$	2,268		$	-		$	-		$	-		$	2,268

Operating earnings (loss)		752			(2	)		(1,269	)		(289	)		(808	)
Tax expense (benefit)		(191	)		-			(482	)		(101	)		(774	)
Income (loss) from discontinued operations	$	943		$	(2	)	$	(787	)	$	(188	)	$	(34	)

Included in Operating Earnings (Loss):
Gain (loss) on net assets held for sale	$	54		$	-		$	265		$	-		$	319
Gain on sale of discontinued operations		1,188			-			-			-			1,188

The operating results of the discontinued operations for the six-month period ended March 30, 2018, consisted of the following:

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

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

Operating earnings (loss)		883		-		(1,490	)		(50	)		(657	)
Tax expense (benefit)		33		-		(434	)		(13	)		(414	)
Income (loss) from discontinued operations	$	850	$	-	$	(1,056	)	$	(37	)	$	(243	)

Included in Operating Earnings (Loss):
Gain (loss) on net assets held for sale	$	750	$	-	$	645		$	-		$	1,395

The operating results of the discontinued operations for the six-month period ended March 31, 2017, consisted of the following:

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

Net Sales	$	4,964		$	-	$	-		$	-		$	4,964

Operating earnings (loss)		(119	)		893		(6,616	)		(893	)		(6,735	)
Tax expense (benefit)		(430	)		-		(623	)		(312	)		(1,365	)
Income (loss) from discontinued operations	$	311		$	893	$	(5,993	)	$	(581	)	$	(5,370	)

Included in Operating Earnings (Loss):
Gain (loss) on net assets held for sale	$	(86	)	$	-	$	(4,323	)	$	-		$	(4,409	)
Gain on sale of discontinued operations		1,188			-		-			-			1,188

Assets and Liabilities Held for Sale within the Consolidated Balance Sheet at March 30, 2018, are comprised of the following:

In Thousands	Avionics &		Sensors &		Advanced
	Controls		Systems		Materials		Total

Other current assets	$	-	$	-	$	4,300	$	4,300
Current Assets of Businesses Held for Sale		-		-		4,300		4,300

Net property, plant and equipment		5,262		-		-		5,262
Other assets		-		-		8,856		8,856
Non-Current Assets of Businesses Held for Sale		5,262		-		8,856		14,118

Accounts payable		-		-		30		30
Accrued liabilities		-		-		4,499		4,499
Current Liabilities of Businesses Held for Sale		-		-		4,529		4,529

Deferred income tax liabilities		-		-		2,787		2,787
Other liabilities		-		-		320		320
Non-Current Liabilities of Businesses Held for Sale		-		-		3,107		3,107

Net Assets of Businesses Held for Sale	$	5,262	$	-	$	5,520	$	10,782

Assets and Liabilities Held for Sale within the Consolidated Balance Sheet at September 29, 2017, were comprised of the following:

In Thousands	Avionics &		Sensors &		Advanced
	Controls		Systems		Materials		Total

Other current assets	$	-	$	-	$	6,501	$	6,501
Current Assets of Businesses Held for Sale		-		-		6,501		6,501

Net property, plant and equipment		5,262		-		-		5,262
Other assets		-		-		8,072		8,072
Non-Current Assets of Businesses Held for Sale		5,262		-		8,072		13,334

Accounts payable		-		-		138		138
Accrued liabilities		-		-		7,046		7,046
Current Liabilities of Businesses Held for Sale		-		-		7,184		7,184

Deferred income tax liabilities		-		-		1,404		1,404
Other liabilities		-		-		320		320
Non-Current Liabilities of Businesses Held for Sale		-		-		1,724		1,724

Net Assets of Businesses Held for Sale	$	5,262	$	-	$	5,665	$	10,927