Discontinued Operations

6 Months Ended

Jul. 02, 2017

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Disposition of Businesses and Assets

As part of the Company’s continuing efforts to focus on higher growth opportunities, the Company has discontinued certain businesses. When the discontinued operations represent a strategic shift that will have a major effect on the Company's operations and financial statements, the Company has accounted for these businesses as discontinued operations and accordingly, has presented the results of operations and related cash flows as discontinued operations. Any business deemed to be a discontinued operation prior to the adoption of ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of An Entity, continues to be reported as a discontinued operation, and the results of operations and related cash flows are presented as discontinued operations for all periods presented. Any remaining assets and liabilities of these businesses have been presented separately, and are reflected within assets and liabilities of discontinued operations in the accompanying condensed consolidated balance sheets as of July 2, 2017 and January 1, 2017.

On May 1, 2017 (the "Closing Date"), the Company completed the sale of its Medical Imaging business to Varex Imaging Corporation ("Varex") pursuant to the terms of the Master Purchase and Sale Agreement, dated December 21, 2016 (the “Agreement”), by and between the Company and Varian Medical Systems, Inc. ("Varian") and the subsequent Assignment and Assumption Agreement, dated January 27, 2017, between Varian and Varex, pursuant to which Varian assigned its rights under the Agreement to Varex. On the Closing Date, the Company received consideration of approximately $277.4 million for the sale of the Medical Imaging business, subject to post-closing working capital adjustments. In the second quarter of fiscal year 2017, the Company recorded a pre-tax gain of $180.4 million and income tax expense of $36.8 million related to the sale of the Medical Imaging business in discontinued operations and dispositions. The corresponding tax liability was recorded within the other tax liabilities in the condensed consolidated balance sheet and the Company expects to utilize tax attributes to minimize the tax liability.

Following the closing, the Company is providing certain customary transitional services during a period of up to 12 months. Commercial transactions between the parties following the closing of the transaction are not expected to be significant.

Beginning in the fourth quarter of fiscal year 2016, the Company presented its Medical Imaging business as discontinued operations in the Company's consolidated financial statements. Financial information in this report relating to the three and six months ended July 3, 2016 has been retrospectively adjusted to reflect this discontinued operation. The results of discontinued operations during the three and six months ended July 2, 2017 include the results of the Medical Imaging business through April 30, 2017.

The summary pre-tax operating results of the discontinued operations, were as follows for the three and six months ended:

	Three Months Ended					Six Months Ended
	July 2, 2017			July 3, 2016		July 2, 2017		July 3, 2016
	(In thousands)
Revenue	$	8,249		$	36,458	$	44,343	$	77,224
Cost of revenue	8,138			24,729		32,933		50,484
Selling, general and administrative expenses	1,926			3,042		5,869		6,049
Research and development expenses	1,294			3,139		4,891		6,953
Restructuring and contract termination charges, net	—			621		—		621
(Loss) income from discontinued operations before income taxes	$	(3,109	)	$	4,927	$	650	$	13,117

The table below provides a reconciliation of the carrying amounts of the major classes of assets and liabilities of the discontinued operations to the amounts presented separately in the consolidated balance sheets at July 2, 2017 and January 1, 2017.

	July 2, 2017		January 1, 2017
	(In thousands)
Current assets of discontinued operations:
Accounts receivable	$	—	$	28,400
Inventories	—		26,977
Prepaid income taxes	—		425
Other current assets	—		3,183
Total current assets of discontinued operations	—		58,985
Property, plant and equipment, net	—		25,219
Intangible assets	—		3,292
Goodwill	—		38,794
Other assets, net	—		1,084
Long-term assets of discontinued operations	—		68,389
Total assets of discontinued operations	$	—	$	127,374
Current liabilities of discontinued operations:
Accounts payable	$	—	$	16,770
Accrued restructuring and contract termination charges	—		209
Accrued expenses and other current liabilities	6,373		9,992
Total current liabilities of discontinued operations	6,373		26,971
Deferred income taxes	—		7,851
Long-term liabilities	—		7,109
Total long-term liabilities	—		14,960
Total liabilities of discontinued operations	$	6,373	$	41,931