BUSINESS DISPOSITIONS
There were no material dispositions in 2013 and 2012.
Huntington Ingalls Industries, Inc. (HII)
Effective March 31, 2011, the company completed the spin-off to its shareholders of HII. HII was formed to operate the company's former shipbuilding business. The company made a pro rata distribution to its shareholders of one share of HII common stock for every six shares of the company’s common stock held on the record date of March 30, 2011, or 48.8 million shares of HII common stock. HII paid a $1.4 billion cash contribution to the company. There was no gain or loss recognized as a result of the spin-off transaction.
Prior to the completion of the spin-off, the company and HII entered into a Separation and Distribution Agreement dated March 29, 2011, and several other agreements that govern the post-separation relationship. These agreements generally provide that each party is responsible for its respective assets, liabilities and obligations following the spin-off, including employee benefits, intellectual property, information technology, insurance and tax-related assets and liabilities.
In connection with the spin-off, the company incurred $28 million of non-deductible transaction costs for the year ended December 31, 2011, which were included in discontinued operations.
Discontinued Operations
Earnings for the former shipbuilding business and an adjustment to the gain from a previous divestiture, are reported as discontinued operations, as presented in the following table:
|
| | | | |
| | Year Ended December 31, |
$ in millions | | 2011 |
Sales | |
| $1,646 |
|
Earnings from discontinued operations | | 59 |
|
Income tax expense | | (28 | ) |
Earnings, net of tax | | 31 |
|
Gain on divestiture, net of income tax expense of $1 | | 1 |
|
Earnings from discontinued operations, net of tax | |
| $ 32 |
|
Tax rates on discontinued operations vary from the company’s effective tax rate generally due to the non-deductibility of goodwill for tax purposes and the effects, if any, of capital loss carryforwards.
There were no assets or liabilities related to these discontinued operations included in the consolidated statements of financial position as of December 31, 2013, 2012 or 2011.
