Discontinued Operations

9 Months Ended

Sep. 30, 2020

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued OperationsDuring the fourth quarter of 2019, we entered into an agreement to sell the Fairbanks Morse division, which comprised our entire Power Systems segment. The sale of Fairbanks Morse to an affiliate of funds managed by private equity firm Arcline Investment Management closed on January 21, 2020 for a sales price of $450.0 million. The pre-tax gain on the disposition of

Fairbanks Morse was $274.3 million. We have reported, for all periods presented, the financial condition, results of operations, and cash flows of Fairbanks Morse as discontinued operations in the accompanying financial statements.

Tax expense of $65.9 million on the sale of discontinued operations was recorded for the nine months ended September 30, 2020. This is a decrease in tax expense of $1.9 million in the quarter ended September 30, 2020, which is due to the increase of the foreign derived intangible income ("FDII") tax benefit and a decrease in the global intangible low taxed income ("GILTI") tax expense that are allocated to discontinued operations.

For the quarters and nine months ended September 30, 2020 and 2019, the results of operations for Fairbanks Morse were as follows:

	Quarters Ended   September 30,				Nine Months Ended   September 30,
	2020		2019		2020		2019
	(in millions)
Net sales	$	—	$	74.7	$	7.6	$	203.1
Cost of sales	—		57.4		7.6		155.6
Gross profit	—		17.3		—		47.5
Operating expenses:
Selling, general, and administrative expenses	—		7.0		1.5		20.3
Other	—		0.8		(0.1)		0.8
Total operating expenses	—		7.8		1.4		21.1
Income (loss) from discontinued operations before income taxes	—		9.5		(1.4)		26.4
Income tax benefit (expense)	—		(2.6)		0.3		(6.9)
Income (loss) from discontinued operations, net of taxes	—		6.9		(1.1)		19.5
Gain from sale of discontinued operations, net of taxes	1.9		—		208.4		—
Income from discontinued operations, net of taxes	$	1.9	$	6.9	$	207.3	$	19.5

The major classes of assets and liabilities for Fairbanks Morse as of December 31, 2019 are shown below:

(in millions)
Assets:
Accounts receivable	$	107.8
Inventories	60.2
Property, plant, and equipment	63.0
Goodwill	11.8
Other assets	11.3
Total assets of discontinued operations	$	254.1
Liabilities:
Accounts payable	$	36.9
Accrued expenses	48.2
Other liabilities	4.4
Total liabilities of discontinued operations	$	89.5