4. Disposed and Discontinued Operations
Management evaluates Dover's businesses periodically for their strategic fit within Dover's operations. Accordingly, in 2012, the Company announced its intention to divest DEK International and Everett Charles Technologies (including the Multitest business, collectively "ECT") within the Printing & Identification segment, which serve the electronic assembly and test markets. These businesses were reclassified to discontinued operations in the fourth quarter of 2012.
Summarized results of the Company’s discontinued operations are as follows:
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| | | | | | | | | | | |
| Years Ended December 31, |
| 2013 | | 2012 | | 2011 |
Revenue | $ | 393,184 |
| | $ | 434,460 |
| | $ | 1,136,997 |
|
| | | | | |
Loss on sale, including impairments, net of tax | $ | (35,473 | ) | | $ | (50,818 | ) | | $ | (4,743 | ) |
| | | | | |
Earnings from operations before taxes | 17,867 |
| | 34,517 |
| | 132,675 |
|
Benefit (provision) for income taxes | 54,930 |
| | (5,748 | ) | | (5,875 | ) |
Earnings from operations, net of tax | 72,797 |
| | $ | 28,769 |
| | $ | 126,800 |
|
| | | | | |
Earnings (loss) from discontinued operations, net of tax | $ | 37,324 |
| | $ | (22,049 | ) | | $ | 122,057 |
|
2013 - In 2013, in connection with a change in goodwill reporting units within discontinued operations resulting from the Company's expected manner of disposing of its electronic test and assembly businesses, the Company was required to allocate goodwill to these individual reporting units based upon relative current fair values. This process resulted in a benefit of $25,520 in the discontinued operations deferred income tax provision for 2013 as a result of the elimination of certain deferred tax liabilities. The Company recorded a goodwill impairment charge of $54,532 ($44,188 after tax) at ECT in 2013 in connection with the anticipated sale of this business. This charge was a write-down of the carrying value to fair value, based on the current estimated sales price.
The Company completed the sale of ECT in the fourth quarter of 2013 for total proceeds of $92,694, which resulted in an after-tax loss on sale of $2,804. Included in the sale proceeds is a note receivable from the buyer of $20,000, which the Company expects to collect within the next five years. This receivable is reflected in Other assets and deferred charges on the Consolidated Balance Sheet at December 31, 2013.
In 2013, the Company signed a definitive agreement to sell DEK. Based on the anticipated proceeds from this sale, the Company recognized an impairment loss of $14,001 in the fourth quarter of 2013, which includes goodwill impairment of the related reporting unit of $9,251, of which none is deductible for tax purposes. Management plans to complete the sale of this business in the first half of 2014.
The net earnings from operations of $72,797 reflects the net earnings of DEK and ECT prior to sale, as well as $54,827 of discrete tax benefits principally related to the conclusion of certain federal, state and international tax audits and $18,279 of interest on tax obligations in foreign jurisdictions.
2012 - The net earnings from operations of $28,769 reflects net earnings from operations generated by these two businesses, as well as various expense and accrual adjustments relating to other discontinued operations. This activity was more than offset by a goodwill impairment charge determined in connection with the anticipated sale of ECT, at which time the Company recognized a goodwill impairment charge of $63,819 ($51,854 after tax), representing a write-down of the reporting unit's carrying value of goodwill to its fair value.
2011 - In 2011, the Company sold three businesses, Paladin Brands, Crenlo LLC, and Heil Trailer International, that had operated within the Engineered Systems segment for total cash proceeds of $512,122. These businesses were reclassified to discontinued operations in the third and fourth quarters of 2011. The 2011 net earnings from discontinued operations reflects net operating earnings generated by the two businesses discontinued in 2012 and the three business sold in 2011, coupled with tax benefits of $17,960 relating primarily to discrete tax items settled or resolved during the year.
Net earnings from discontinued operations also includes a $4,743 loss on the 2011 sale of the three businesses, inclusive of a after-tax goodwill impairment charge of $76,072, representing a write-down of the carrying value of the associated reporting unit's goodwill to its fair value.
Assets and liabilities of discontinued operations are summarized below:
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| | | | | | | |
| December 31, 2013 | | December 31, 2012 |
Assets of Discontinued Operations | | | |
Accounts receivable (1) | $ | 121,094 |
| | $ | 63,229 |
|
Inventories, net | 17,779 |
| | 51,252 |
|
Prepaid and other current assets | 28,381 |
| | 10,263 |
|
Total current assets | 167,254 |
| | 124,744 |
|
Property, plant and equipment, net | 6,468 |
| | 31,935 |
|
Goodwill and intangible assets, net | 145,681 |
| | 238,657 |
|
Other assets and deferred charges | 1,319 |
| | 2,209 |
|
Total assets | $ | 320,722 |
| | $ | 397,545 |
|
| | | |
Liabilities of Discontinued Operations | |
| | |
|
Accounts payable (1) | $ | 108,772 |
| | $ | 22,613 |
|
Other current liabilities | 21,445 |
| | 34,592 |
|
Total current liabilities | 130,217 |
| | 57,205 |
|
Deferred income taxes | 14,783 |
| | 64,853 |
|
Other liabilities | 37,626 |
| | 86,900 |
|
Total liabilities | $ | 182,626 |
| | $ | 208,958 |
|
At December 31, 2013 and December 31, 2012, the assets and liabilities of discontinued operations relate primarily to DEK and ECT, coupled with tax-related accruals and unrecognized benefits, as well as other accruals for compensation, legal, environmental, and warranty contingencies.
| |
(1) | Amounts include estimated credits and liabilities associated with tax obligations in foreign jurisdictions resulting from value-added tax for the Multitest business within ECT. Accounts receivable includes $93,598 of credits. Accounts payable includes $76,443 of liabilities and $18,279 of interest. This matter is expected to be resolved in 2014. |
