NOTE 3—DISCONTINUED OPERATIONS

In August 2017, the Company completed the sale of its Waterworks business. In accordance with ASC 205-20, “Discontinued Operations” and Accounting Standards Update (“ASU”) 2014-08, “Reporting discontinued operations and disclosure of disposals of components of an entity,” the results of Waterworks are classified as a discontinued operation. The presentation of discontinued operations includes revenues and expenses of the discontinued operations and gain/loss on the disposition of businesses, net of tax, as one line item on the Consolidated Statements of Operations and Comprehensive Income. All Consolidated Statements of Operations and Comprehensive Income presented have been revised to reflect this presentation.

In connection with presenting the Waterworks business unit as a discontinued operation in the second quarter of fiscal 2017, a net deferred tax asset of $323 million and corresponding income tax benefit for the difference in the Company’s stock basis versus its book carrying value of the Waterworks subsidiary was recorded in the second quarter of fiscal 2017. Upon recording the gain on the sale of Waterworks in the third quarter of fiscal 2017, the Company recognized a tax expense in discontinued operations, which included $323 million related to utilizing the deferred tax asset originally recorded in the second quarter of fiscal 2017.

The following table provides additional detail related to the results of operations of the discontinued operations (amounts in millions):


	Three Months Ended				Six Months Ended
	July 29, 2018		July 30, 2017		July 29, 2018		July 30, 2017
Net sales	$	—	$	746	$	—	$	1,403
Cost of sales		—		582		—		1,092
Gross Profit		—		164		—		311
Operating expenses:
Selling, general and administrative		—		100		—		197
Depreciation and amortization		—		3		—		6
Total operating expenses		—		103		—		203
Operating Income		—		61		—		108
(Gain) Loss on sales of businesses, net		(1)		—		(1)		—
Other (Income) expense, net		—		1		—		3
Income before provision (benefit) for income taxes		1		60		1		105
Provision (benefit) for income taxes		—		(301)		—		(283)
Income from discontinued operations, net of tax	$	1	$	361	$	1	$	388

The following table provides additional detail related to the net cash provided by operating and investing activities of the discontinued operations (amounts in millions):


	Six Months Ended
	July 29, 2018		July 30, 2017
Net cash flows provided by operating activities	$	—	$	17
Cash flows from investing activities:
Capital expenditures		—		(5)
Proceeds from sales of property and equipment, net		—		2
Net cash flows provided by (used in) investing activities	$	—	$	(3)