Discontinued operations

12 Months Ended

Dec. 31, 2020

Discontinued operations

Discontinued operations

4.  DISCONTINUED OPERATIONS

On April 8, 2020, the Company completed the sale of the MDA Business to Neptune Acquisition Inc., a corporation existing under the laws of the Province of British Columbia and an affiliate of Northern Private Capital Ltd. (“MDA Purchaser”), for an aggregate purchase price of $729 million (C$1.0 billion) (“MDA Transaction”). The Company recognized an after-tax gain on disposal of discontinued operations of $317 million, net of $12 million in taxes, on the MDA Transaction for the year ended December 31, 2020. The tax on the MDA Transaction is primarily due to the estimated U.S. federal Base Erosion and Anti-Abuse Tax (“BEAT”) and California legislation suspending the use of net operating loss (“NOL”) carryforwards. The gain on the MDA Transaction includes a reclassification primarily related to the foreign currency translation adjustment balance of $68 million from Accumulated other comprehensive (loss) income. See Note 12 for details on the use of proceeds from the MDA Transaction.

In addition, the Company and the MDA Purchaser entered into a Transition Services Agreement pursuant to which the MDA Purchaser will receive certain services (“Services”). The Services will be provided based on an agreed upon fee arrangement through April 8, 2021.

The Company determined that as of December 29, 2019, the MDA Business met the criteria to be classified as held for sale. The MDA business was a separate reportable segment prior to the announcement of the MDA Transaction and constituted all the Company’s Canadian operations. As the MDA Transaction represented a strategic shift that had a major effect on the Company’s operations, the MDA Business results met the criteria to be reported as discontinued operations in accordance with ASC 205-20 – Discontinued Operations.

The assets and liabilities of MDA are classified as held for sale in the Consolidated Balance Sheet for the year ended December 31, 2019 with results classified as discontinued operations in the Consolidated Statements of Operations and the Consolidated Statements of Cash Flows for all periods presented. For the year ended December 31, 2020, the Company has reported the operating results and cash flows related to the MDA Business through April 7, 2020.

Income (loss) from discontinued operations, net of tax for the MDA Business in the Consolidated Statements of Operations consists of the following:

	Year Ended
	December 31,
	2020 1		2019			2018
Revenues:
Product	$	44	$	206	$	238
Service		42		161		182
Total revenues	$	86	$	367	$	420
Costs and expenses:
Product costs, excluding depreciation and amortization	$	38	$	149	$	149
Service costs, excluding depreciation and amortization		24		84		114
Selling, general and administrative		13		88		59
Depreciation and amortization		4		11		10
Impairment loss		12		12		477
Operating (loss) income		(5)		23		(389)
Interest expense, net		1		1		1
Other (income) expense, net 2		(34)		3		—
Income (loss) before taxes		28		19		(390)
Income tax benefit		(4)		(7)		(13)
Income (loss) from operations of discontinued operations, net of tax		32		26		(377)
Gain on disposal of discontinued operations, net of tax		317		—		—
Income (loss) from discontinued operations, net of tax	$	349	$	26	$	(377)

¹For the year ended December 31, 2020, MDA Business results are presented through April 7, 2020.

² Other (income) expense, net includes the $39 million recovery of the previously recorded liability in relation to the Company’s dispute with the Ukrainian Customer for the year ended December 31, 2020.

The Company performed its annual goodwill impairment analysis as of October 1, 2019. This analysis was updated upon announcement of the MDA Transaction for the year ended December 31, 2019. The Company concluded that there were no impairment indicators related to goodwill at either of the dates the impairment analyses were performed. For the year ended December 31, 2018, as a result of triggering events identified, which included a sustained decline in the Company’s stock price, the Company recorded a $477 million non-cash goodwill impairment charge. There were no goodwill impairment charges recognized for the year ended December 31, 2020.

MDA holds an investment in a privately held company in which it does not have significant influence and the fair value of which cannot be reliably measured through external indicators. The investment is evaluated quarterly for impairment. In 2019, the Company noted an observable price change related to its investment and, as a result, recorded an impairment loss of $12 million. There were no investment impairment losses recognized for the years ended December 31, 2020 or 2018.

The carrying amounts of the major classes of assets and liabilities, which are classified as held for sale in the Consolidated Balance Sheet, are as follows:

	December 31,
	2019
Assets
Cash and cash equivalents	$	45
Trade and other receivables, net		168
Deferred tax assets		117
Property, plant and equipment		29
Intangible assets		27
Goodwill		310
Other assets 1		55
Current assets held for sale	$	751
Liabilities
Accounts payable	$	88
Accrued liabilities		18
Accrued compensation and benefits		21
Contract liabilities		29
Pension and other postretirement benefit liabilities		21
Other liabilities 2		53
Current liabilities held for sale	$	230

¹Other assets include income tax receivables, operating lease assets, prepaid and other current assets.

²Other liabilities include operating and finance lease liabilities, current income taxes payable and other current liabilities.