BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Mar. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE A – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation/Principles of Consolidation

The accompanying Condensed Consolidated Financial Statements of ARC Group Worldwide, Inc. and Subsidiaries (together, the “Company”, “we”, “us”, “our”, or “ARC”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates and assumptions, which could differ materially from actual results. In addition, certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed, or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, the financial statements include all adjustments (which are of a normal and recurring nature) necessary for the fair presentation of the results of the interim periods presented. These Condensed Consolidated Financial Statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2013 and other financial information filed with the SEC.

The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company’s fiscal year begins July 1 and ends June 30; the quarters for interim reporting consist of thirteen weeks, therefore, the quarter end will not always coincide with the date of the calendar month.

Prior to August 8, 2012, the Company operated as a diversified manufacturing holding company active in metal injection molding, specialty hermetic seals, and flanges and fittings and operated under two reportable business segments:

· Precision Components Group, consisting of FloMet LLC (“FloMet”) and Tekna Seal LLC (“Tekna Seal”); and

· Flanges and Fittings Group, consisting of General Flange & Forge LLC (“GF&F”) and TubeFit LLC (“TubeFit”).

Subsequent to the Acquisitions on August 8, 2012 (as defined below), the Company operated three reportable business segments, with an addition of a fourth reportable business segment, the 3DMT Group, established during the second quarter of fiscal year 2014:

· Precision Components Group, consisting of Advanced Forming Technology, Inc. and AFT-Hungary Kft. (together “AFT”), FloMet, and Tekna Seal;

· Flanges and Fittings Group, consisting of GF&F and TubeFit;

· Wireless Group, consisting of ARC Wireless, Inc., ARC Wireless LLC, and ARC Wireless Ltd. (collectively, “ARC Wireless”); and

· 3DMT Group, consisting of 3D Material Technologies LLC (“3DMT”) and the existing tooling product line.

During the third quarter of fiscal year 2013, the Company made the decision to discontinue the operations of TubeFit, which was previously included within its Flanges and Fittings segment. Consequently, the Company has classified the results of operations of TubeFit as a discontinued operation for all periods presented.

On April 14, 2014, the Company’s Board of Directors declared a stock dividend and all references to share and per share amounts in the consolidated financial statements and accompanying notes to the consolidated financial statements have been retroactively restated to reflect the 1.5:1 stock dividend, see Note P.

Significant Business Acquisitions

On August 8, 2012, ARC completed the acquisitions of Quadrant Metals Technologies LLC (“QMT”) and AFT (referred to herein as the “QMT Acquisition” and the “AFT Acquisition” and collectively, the “Acquisitions”).

For reasons detailed below, the accompanying financial statements include the results of operations of ARC, QMT, and AFT for periods subsequent to the Acquisitions; for periods prior to the Acquisitions, the results of operations are presented only for QMT.

The QMT Acquisition

Effective August 8, 2012, the Company issued common stock in exchange for 100% of the issued and outstanding membership interest of QMT (equal to 10,074,250 shares of ARC’s common stock after giving effect to the 1.5:1 stock dividend, see Note P). The QMT Acquisition was accounted for as a reverse acquisition under generally accepted accounting principles, whereby QMT was deemed to be the accounting acquirer in the acquisition. The shares of common stock issued to QMT pursuant to the merger are presented as having been outstanding since July 1, 2011.

As a result, the financial statements for periods prior to August 8, 2012 reflect only the operations of QMT. The accompanying financial statements present the previously issued shares of ARC common stock as having been issued pursuant to the merger on August 8, 2012. All transactions between divisions and/or wholly owned subsidiaries of the Company have been eliminated in the financial statements.

In connection with the QMT Acquisition, the Company sold 143,762 shares of ARC’s Common Stock (after giving effect to the 1.5:1 stock dividend, see Note P) to Carret P.T., LP in consideration for a cash investment in ARC of $449 thousand. The purchase price for the reverse acquisition of $10.2 million was derived from the ARC common stock equal to 3,963,532 shares (after giving effect to the 1.5:1 stock dividend, see Note P) at the August 8, 2012 stock price.

With regard to the assets acquired during the reverse merger of ARC by QMT, ARC’s historical accumulated deficit for periods prior to August 8, 2012, in the amount of $10.2 million was eliminated against additional paid in capital. The acquisition was accounted for using the purchase method of accounting and, accordingly, the Company’s consolidated balance sheet as of June 30, 2013, includes the impact of the acquisition.

For ARC, the fair value of the identifiable assets acquired and liabilities assumed of $10.6 million exceeded the fair value of the purchase price of the business of $10.2 million. As a result, the Company reassessed the recognition and measurement of identifiable assets acquired and liabilities assumed and concluded that the valuation procedures and resulting measures were appropriate. Accordingly, the ARC reverse acquisition has been accounted for as a bargain purchase and, as a result, the Company recognized a gain of $0.4 million associated with the reverse acquisition. The gain is included in the line item “Gain on Bargain Purchase” in the 2013 Consolidated Statement of Operations.

The AFT Acquisition

Effective August 8, 2012, the Company acquired all the issued and outstanding shares of AFT for approximately $40.6 million. The AFT Acquisition was completed through the payment of cash totaling $7.0 million, bank facility funds of $18.1 million, and a convertible note payable to Precision Castparts Corp. (“PCC”) in the amount of $15.5 million, net of interest discount.

The total adjusted purchase price of AFT was allocated to the tangible and intangible assets acquired based upon their respective fair values at the acquisition date, with the excess purchase price allocated to goodwill for AFT in the amount of $4.7 million. The goodwill arising from the AFT Acquisition consists of synergies and economies of scale expected from the QMT and AFT Acquisitions. The goodwill recognized is expected to be deductible for income tax purposes. For AFT, third party consultants were retained to perform valuation techniques to establish valuation for property and equipment, and identifiable intangible assets.

Pro forma Financial Information (Unaudited)

The historical operating results of ARC and AFT have not been included in the Company’s historical consolidated operating results prior to their acquisition dates. The following unaudited pro forma information presents the combined results of continuing operations for the three and nine months ended March 31, 2013 as if the acquisition had been completed on July 1, 2012 and giving effect to the 1.5:1 stock dividend paid on May 1, 2014.

(In thousands, except per share data)	Three Month Period Ended March 31, 2013			Nine Month Period Ended March 31, 2013
Revenue	$	18,248		$	52,422
Income from Continuing Operations	$	1,020		$	1,095
Loss from Discontinued Operations		(268	)		(408	)
Net Income (Loss)	$	752		$	687
Income per Common Share for Continuing Operations	$	0.07		$	0.08
Loss per Common Share for Discontinued Operations		(0.02	)		(0.03	)
Basic and Diluted Net Income per Common Share	$	0.05		$	0.05