Discontinued Operations

6 Months Ended

Jun. 28, 2013

Discontinued Operations

2. Discontinued Operations

Beginning in 2011, the Company initiated a strategic review of its businesses to focus its growth priorities and simplify its business model. In June 2012, the Company committed to a plan for the sale of the Semiconductor Systems operating segment, sold under the GSI brand name, and Laser Systems product lines, sold under the Control Laser and Baublys brand names. The Company began accounting for these businesses as discontinued operations beginning in the second quarter of 2012. The Company includes all current and historical results of these businesses in income from discontinued operations, net of tax, in the accompanying consolidated statements of operations. The Company classified the assets and liabilities of discontinued operations for both the current and prior year in the consolidated balance sheets as current assets and current liabilities, respectively. The Company’s consolidated statements of cash flows include the cash flows from both continuing and discontinued operations.

In October 2012, the Company sold certain assets and liabilities of the Laser Systems business for $7.0 million to Hans Laser, subject to closing working capital adjustments, and recorded a $2.3 million gain in the consolidated statements of operations during the fiscal year ended December 31, 2012. The Company is currently in dispute with Hans Laser regarding the final working capital calculation and expects to resolve the working capital dispute in the third quarter of 2013. The Company currently does not believe a loss is probable. Accordingly, no accrual has been made in the Company’s accompanying consolidated financial statements with respect to this claim.

The Company retained the Orlando facility which manufactures Laser Systems products and is currently leasing the facility to Hans Laser under an operating agreement with was extended recently through October 2014. As of the end of the second quarter of 2013, it was determined that it was no longer probable that the facility would be sold within the next twelve months and, as a result, the facility was reclassified from assets of discontinued operations to property, plant and equipment.

In May 2013, the Company consummated the sale of certain assets and liabilities of the Semiconductor Systems business for $8.0 million in cash, subject to closing working capital adjustments. The Company recognized a $0.3 million loss on the sale, net of tax, in the consolidated statements of operations during the three and six months ended June 28, 2013.

The major components of the assets and liabilities of discontinued operations as of June 28, 2013 and December 31, 2012 are as follows (in thousands):

	June 28, 2013		December 31, 2012
Accounts receivable, net	$	—	$	2,981
Inventories		—		8,231
Other assets		1,894		694
Property, plant and equipment		—		5,712
Assets of discontinued operations	$	1,894	$	17,618
Accounts payable, accrued expenses and other current liabilities	$	—	$	3,474
Deferred revenue		—		1,570
Other liabilities		2,681		561
Liabilities of discontinued operations	$	2,681	$	5,605

Other assets of discontinued operations as of June 28, 2013 relate to the expected working capital adjustment to be received as a result of the sale of the Semiconductor Systems business. Other liabilities primarily relate to accrued severance owed to former Semiconductor Systems employees, cash owed to the buyer of the Semiconductor Systems business for receivables collected by the Company on behalf of the buyer and an accrual for the Laser Systems working capital adjustment.

The following table presents the operating results which are reported as discontinued operations in the Company’s consolidated statements of operations (in thousands):

	Three Months Ended					Six Months Ended
	June 28, 2013			June 29, 2012		June 28, 2013			June 29, 2012
Sales from discontinued operations	$	2,003		$	15,103	$	9,090		$	28,724
Income (loss) from discontinued operations before income taxes	$	(1,880	)	$	517	$	(1,142	)	$	852
Income (loss) from discontinued operations, net of tax	$	(1,384	)	$	414	$	(735	)	$	736
Loss on disposal of discontinued operations, net of tax	$	(311	)	$	—	$	(311	)	$	—