Discontinued Operations—The Company periodically reviews its operations for businesses which may no longer be aligned with its enterprise initiatives and long-term objectives. As such, the Company may commit to a plan to exit or dispose of certain businesses and present them as discontinued operations. The following summarizes the Company's discontinued operations.
The Company has restated the statement of income and the notes to financial statements to present the operating results of the held for sale and previously divested businesses discussed below as discontinued operations. Additionally, the gains and losses on disposal related to the sale of operations and affiliates and discontinued operations have been reclassified in the statement of cash flows to conform to current year reporting.
Third Quarter 2013 Discontinued Operations - In February 2013, the Company announced that it was initiating a review process to explore strategic alternatives for its Industrial Packaging segment. In September 2013, the Company’s Board of Directors authorized a plan to commence a sale process for the Industrial Packaging segment. The Company classified the Industrial Packaging segment as held for sale beginning in the third quarter of 2013.
On February 6, 2014, the Company announced that it had signed a definitive agreement to sell its Industrial Packaging segment to The Carlyle Group for $3.2 billion. The transaction is subject to regulatory approval and customary closing conditions and is expected to close by mid-2014.
In the third quarter of 2013, the Company also committed to plans for the divestiture of a construction distribution business previously included in the Construction Products segment and a specialty coatings business previously included in the Polymers & Fluids segment. These businesses were classified as held for sale beginning in the third quarter of 2013. The specialty coatings business was sold in the fourth quarter of 2013. The Company expects to sell the construction distribution business by mid-2014.
First Quarter 2013 Discontinued Operations - In the first quarter of 2013, the Company committed to plans for the divestiture of two transportation related businesses and a machine components business previously included in the Specialty Products segment, two construction distribution businesses previously included in the Construction Products segment, and a chemical manufacturing business previously included in the Polymers & Fluids segment. These businesses were classified as held for sale beginning in the first quarter of 2013.
The Company also reclassified certain previously divested businesses as discontinued operations in the first quarter of 2013.
These included a consumer packaging business that was previously included in the Specialty Products segment, a packaging distribution business which was previously included in the former Industrial Packaging segment, and a welding manufacturing business previously included in the Welding segment.
In the second quarter of 2013, the Company divested one of the held for sale transportation related businesses, the machine components business, and the chemical manufacturing business. In the third quarter of 2013, the Company divested the second held for sale transportation related business. In the fourth quarter of 2013, the Company divested one construction distribution business. The Company expects to dispose of the remaining held for sale construction distribution business by mid-2014.
2011 Discontinued Operations - In April 2011, the Company entered into a definitive agreement to sell its finishing group of businesses included within the Specialty Products segment to Graco Inc. in a $650 million cash transaction. The sale of the finishing business to Graco was completed on April 2, 2012.
Additionally, in the second quarter of 2011, the Company’s Board of Directors approved plans to divest a consumer packaging business in the Specialty Products segment and an electronic components business in the Test & Measurement and Electronics segment. In the third quarter of 2012, the Company divested the consumer packaging business. The electronic components business was sold in the fourth quarter of 2011.
Results of the discontinued operations for the years ended December 31, 2013, 2012 and 2011 were as follows:
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| | | | | | | | | | | | |
In millions | | 2013 | | 2012 | | 2011 |
Operating revenues | | $ | 2,769 |
| | $ | 3,275 |
| | $ | 3,742 |
|
| | | | | | |
Income before income taxes | | $ | 186 |
| | $ | 886 |
| | $ | 451 |
|
Income tax expense | | (137 | ) | | (249 | ) | | (155 | ) |
Income from discontinued operations | | $ | 49 |
| | $ | 637 |
| | $ | 296 |
|
Included in income before income taxes from discontinued operations are net losses on disposal of $91 million in 2013, net gains of $499 million in 2012, and net losses of $4 million in 2011. The net losses in 2013 included a $39 million pre-tax loss related to the sale of one of the construction distribution businesses and a $20 million pre-tax loss related to the sale of one of the transportation businesses. The net gains in 2012 included a $452 million pre-tax gain on the sale of the finishing group of businesses. Also included in income before income taxes from discontinued operations in 2013 was a $42 million goodwill impairment charge recorded in connection with the anticipated sale of one of the transportation related businesses. In 2013, income tax expense from discontinued operations included $42 million of tax expense related to the legal restructuring of Industrial Packaging.
There were no held for sale businesses as of December 31, 2012. As of December 31, 2013, the assets and liabilities of the Industrial Packaging business and the two construction distribution businesses discussed above were included in assets and liabilities held for sale in the statement of financial position, as follows:
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| | | | |
In millions | | December 31, 2013 |
Trade receivables | | $ | 352 |
|
Inventories | | 244 |
|
Net plant and equipment | | 305 |
|
Goodwill and intangible assets | | 844 |
|
Other | | 91 |
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Total assets held for sale | | $ | 1,836 |
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| | |
Accounts payable | | $ | 87 |
|
Accrued expenses | | 139 |
|
Other | | 91 |
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Total liabilities held for sale | | $ | 317 |
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