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Discontinued Operations
 6 Months Ended
Dec. 03, 2011
Discontinued Operations [Abstract]  
Discontinued Operations

5. DISCONTINUED OPERATIONS

Arrow Transaction

On March 1, 2011, we completed the sale of the assets primarily used or held for use in, and certain liabilities of, our RF, Wireless and Power Division ("RFPD"), as well as certain other Company assets, including our information technology assets, to Arrow Electronics, Inc. ("Arrow") in exchange for $238.8 million, which included an estimated pre-closing working capital adjustment of approximately $27.0 million ("the Transaction.") The final purchase price was subject to a post-closing working capital adjustment.

On June 29, 2011, we received notification from Arrow seeking a post-closing working capital adjustment, which would reduce the purchase price by approximately $4.2 million. We recorded the working capital adjustment of $4.2 million in our results from discontinued operations during our fourth quarter of fiscal 2011. During the first quarter of fiscal 2012, we agreed to approximately $3.9 million of the proposed working capital adjustment and adjusted our results from discontinued operations during the first quarter of fiscal 2012. During the second quarter of fiscal 2012, we paid Arrow $3.9 million to settle the agreed upon working capital adjustment.

 

Financial Summary – Discontinued Operations

Summary financial results for the first three and six months ended December 3, 2011, and November 27, 2010, are presented in the following table (in thousands):

 

     Three Months      Six Months  
     Dec 3, 2011     Nov 27, 2010      Dec 3, 2011     Nov 27, 2010  

Net sales

    $ 816      $ 108,786       $ 1,691      $ 208,420   

Gross profit (loss)

      (105 )      23,120         (374 )      44,320   

Selling, general, and administrative expenses

      54        15,014         (422 )      27,764   

Interest expense, net

      —          101         —          268   

Purchase price adjustment

      (25 )      —           (292 )      —     

Income tax provision (benefit)

      665        714         (1,463 )      1,074   

Income (loss) from discontinued operations, net of tax

    $ (799 )    $ 7,291       $ 1,803      $ 15,214   

Net sales and gross profit (loss) for the three and six months ended December 3, 2011, reflect our financial results relating to the Manufacturing Agreement with Arrow that we entered into in connection with the Transaction. Pursuant to the three-year agreement, we agreed to continue to manufacture certain RFPD products for Arrow. Selling, general, and administrative expenses for the six months ended December 3, 2011, reflect a benefit of $0.4 million for adjustments recorded due to changes in our estimates related to liabilities for our discontinued operations. During the first quarter of fiscal 2012, in connection with an examination by the Internal Revenue Service, we reduced our deferred tax liability by $2.1 million related to our un-repatriated foreign earnings based on a determination of the amount of earnings and profits remaining in certain foreign subsidiaries after the Arrow transaction. During the second quarter of fiscal 2012, we recorded approximately $0.8 million of additional tax provision which represents return to provision adjustments and other tax adjustments.

In accordance with ASC 205-20, the allocation of interest expense to discontinued operations of other consolidated interest that is not directly attributable to, or related to, other operations of the entity is permitted but not required. The consolidated interest that cannot be attributable to other operations of the entity is allocated based on the ratio of net assets to be sold or discontinued to the total consolidated net assets. We appropriately allocated approximately $0.1 million and $0.3 million of interest expense to discontinued operations for the three and six months ended November 27, 2010, respectively, using the ratio of net assets that we sold or that became discontinued to total assets.

Assets and liabilities classified as discontinued operations on our unaudited consolidated balance sheets as of December 3, 2011, and May 28, 2011, include the following (in thousands):

 

     Dec 3, 2011      May 28, 2011  

Accounts receivable

    $ —         $ 2,356   

Inventories

      1,143         1,152   

Prepaid expenses and other assets

      126         110   

Current deferred income taxes

      400         400   
  

 

 

     

 

 

  

Discontinued operations - Assets

    $ 1,669       $ 4,018   
  

 

 

     

 

 

  

Accrued liabilities - current (1)

   $ 4,881       $ 15,897   

Long-term income tax liabilities - non-current

      1,572         1,622   
  

 

 

     

 

 

  

Discontinued operations - Liabilities

    $ 6,453       $ 17,519   
  

 

 

     

 

 

  

(1) Included in accrued liabilities as of December 3, 2011, is a payable to Arrow for cash collections of $2.2 million, a payable due to Arrow of $0.4 million, $0.9 million of other accrued liabilities, including severance, and $2.1 million related to the tax error, offset by a receivable due to us from Arrow for transition services of $0.7 million.

In accordance with ASC 230, Statement of Cash Flows, entities are permitted but not required to separately disclose, either in the statement of cash flows or footnotes to the financial statements, cash flows pertaining to discontinued operations.

Entities that do not present separate operating cash flows information related to discontinued operations must do so consistently for all periods presented, which may include periods long after the sale or liquidation of the operation. We currently do not have cash balances that were specific to RFPD and as a result, we believe that it is appropriate not to present separate cash flows from discontinued operations on our statement of cash flows.