Discontinued Operations

9 Months Ended

Oct. 02, 2020

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

. DISCONTINUED OPERATIONSOn August 26, 2019, the Company completed the sale of its Distribution business for total cash consideration of approximately $700.0 million, excluding certain working capital adjustments which were finalized in the first quarter of 2020. The sale of the Distribution business was a result of the Company's shift in strategy to be a highly focused, technologically differentiated aerospace and engineered products company. As a result of the sale, the Distribution business met the criteria set forth in Accounting Standards Codification ("ASC") 205-20, Presentation of Financial Statements - Discontinued Operations, for discontinued operations.

3. DISCONTINUED OPERATIONS (CONTINUED)

Upon closing, the Company entered into a transition services agreement ("TSA") with the buyer, pursuant to which the Company agreed to support the information technology ("IT"), human resources and benefits, tax and treasury functions of the Distribution business for six to twelve months. The buyer has exercised the option to extend the support period for up to a maximum of an additional year for certain IT services. The buyer has the right to terminate individual services at any point over the renewal term and has begun to terminate certain services in the third quarter of 2020. Since the sale of the Distribution business, costs associated with the TSA were $16.2 million through October 2, 2020. The Company incurred $3.0 million and $11.5 million in costs associated with the TSA in the three-month and nine-month fiscal periods ended October 2, 2020. The Company incurred $1.2 million in costs associated with the TSA in both the three-month and nine-month fiscal periods ended September 27, 2019. These amounts were included in costs from transition services agreement on the Company's Condensed Consolidated Statements of Operations. Since the sale of the Distribution business, the Company earned $11.5 million in income associated with the TSA through October 2, 2020. The Company earned $1.8 million and $7.9 million in income associated with the TSA in the three-month and nine-month fiscal periods ended October 2, 2020. The Company earned $0.9 million in income associated with the TSA in both the three-month and nine-month fiscal periods ended September 27, 2019. These amounts were included in income from transition services on the Company's Condensed Consolidated Statements of Operations.

Since the sale of the Distribution business, cash outflows from the Company to its former Distribution business totaled $8.1 million through October 2, 2020, which primarily related to Distribution employee and employee-related costs incurred prior to the sale. Cash outflows from the Company to its former Distribution business after the sale totaled $0.3 million and $4.8 million for the nine-month fiscal periods ended October 2, 2020 and September 27, 2019, respectively. Since the sale of the Distribution business, cash inflows from the Company's former Distribution business to the Company totaled $16.1 million through October 2, 2020, which primarily related to cash received for services performed under the TSA and the $5.2 million working capital adjustment settled in the first quarter of 2020. Cash inflows from the Company's former Distribution business received in the nine-month fiscal period ended October 2, 2020 totaled $12.5 million. Cash inflows from the Company's former Distribution business received in the nine-month fiscal period ended September 27, 2019 were not material.

3. DISCONTINUED OPERATIONS (CONTINUED)

The results of operations for the Distribution business were included in discontinued operations on the Company's Condensed Consolidated Statement of Operations. The following table provides information regarding the results of discontinued operations:


	For the Three Months Ended				For the Nine Months Ended
	October 2, 2020		September 27, 2019		October 2, 2020		September 27, 2019
In thousands
Net sales from discontinued operations	$	—	$	167,634	$	—	$	748,451
Cost of sales from discontinued operations	—		120,485		—		536,749
Gross profit from discontinued operations	—		47,149		—		211,702
Selling, general and administrative expenses from discontinued operations	—		32,979		—		177,475
Net loss on sale of assets from discontinued operations	—		—		—		8
Operating income from discontinued operations	—		14,170		—		34,219
Interest expense, net from discontinued operations	—		5		—		25
Other income, net from discontinued operations	—		—		—		(12)
Earnings from discontinued operations before income taxes	—		14,165		—		34,206
Income tax expense	—		4,305		—		8,966
Earnings from discontinued operations before gain on disposal	—		9,860		—		25,240
Gain on disposal of discontinued operations, pretax	—		165,484		925		165,484
Income tax expense on gain on disposal	—		42,698		233		42,698
Gain on disposal of discontinued operations, net of tax	—		122,786		692		122,786
Earnings from discontinued operations	$	—	$	132,646	$	692	$	148,026

In the nine-month fiscal period ended October 2, 2020, the Company recorded a gain on disposal of discontinued operations as a result of the final settlement of the working capital adjustment, partially offset by transaction costs.