Note 2 - Discontinued Operations

9 Months Ended

Sep. 26, 2015

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

2. Discontinued Operations

In June 2015, we sold all of the outstanding stock of BMS for $8.0 million, comprised of a $5.5 million in cash and up to $2.5 million of contingent consideration. The sales price is subject to a working capital adjustment and, as a result, adjustments to the loss from sale reported below are possible.

In June 2014, we sold substantially all the assets of our video camera business, Cohu Electronics for $9.5 million in cash and $0.5 million in contingent consideration. Our decision to sell these two non-core businesses resulted from management’s determination that they were no longer a strategic fit within our organization.

As part of the divestiture of BMS we recorded a long-term contingent consideration receivable that has been classified as Level 3 in the fair value hierarchy. See Note 4, “Financial Instruments Measured at Fair Value” for additional information on the three-tier fair value hierarchy.

The contingent consideration represents the estimated fair value of future payments we are due based on BMS achieving annual revenue targets in certain years as specified in the sale agreement. We determined the initial value of the contingent consideration by using the Monte Carlo simulation model and any future changes to the fair value of the contingent consideration will be recognized in earnings.

Balance sheet information for BMS presented as discontinued operations is summarized as follows

(in thousands)

:

	December 27,
	2014
Assets:
Accounts receivable, net	$	3,156
Inventories		6,345
Other current assets		817
Total assets	$	10,318
Liabilities:
Deferred Profit	$	504
Other accrued current liabilities		2,279
Total current liabilities		2,783
Noncurrent liabilities		706
Total liabilities	$	3,489

Operating results of our discontinued operations is summarized as follows

(in thousands)

:

	Three Months Ended						Nine Months Ended
	September 26,			September 27,			September 26,			September 27,
	2015			2014			2015			2014
Net sales:
Mobile microwave equipment segment	$	-		$	2,868		$	6,965		$	11,113
Video camera segment		-			-			-			5,460
	$	-		$	2,868		$	6,965		$	16,573
Operating loss before income taxes:
Mobile microwave equipment segment		-			(2,598	)		(1,963	)		(5,062	)
Video camera segment		-			-			-			(242	)
		-			(2,598	)		(1,963	)		(5,304	)
Loss from sale of BMS		(222	)		-			(3,232	)		-
Gain from sale of Cohu Electronics		-			-			-			4,133
Loss before taxes		(222	)		(2,598	)		(5,195	)		(1,171	)
Income tax provision		-			(105	)		6			-
Loss, net of tax	$	(222	)	$	(2,493	)	$	(5,201	)	$	(1,171	)

During the third quarter of 2015, we recognized $0.2 million in additional loss from the disposal of BMS resulting from current period adjustments to contingent consideration and working capital as referenced above. We are still working to finalize the final working capital adjustment and additional adjustments may be required.

In connection with the disposal of our two business segments we incurred divestiture-related costs that would not have been incurred otherwise. These costs consist of legal and investment banking advisory services, success based compensation arrangements and certain other items that are incremental to normal operating charges and were expensed as incurred. These costs are included in the gain (loss) from sale amounts presented above. Divestiture-related costs associated with the sale of BMS incurred in the first six months of 2015 totaled $1.0 million and similar costs associated with the sale of Cohu Electronics incurred in the first six months of 2014 totaled $0.8 million. There were no divestiture-related costs incurred during the third quarter of 2015 or 2014.