Discontinued Operations and Divestitures

9 Months Ended

Sep. 28, 2018

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations and Divestitures

4. Discontinued Operations and Divestitures

Discontinued Operations

Specialty Generics Disposal Group: On February 22, 2018, the Specialty Generics Disposal Group met the criteria for held for sale classification and discontinued operation presentation upon commencement of a process to dispose of the group.

The following table summarizes the financial results of the Specialty Generics Disposal Group presented in the unaudited condensed consolidated statements of income:

	Three Months Ended					Nine Months Ended
	September 28, 2018		September 29, 2017			September 28, 2018		September 29, 2017
Major line items constituting income from discontinued operations:
Net sales	$	159.9	$	193.3		$	536.4	$	668.6
Cost of sales	107.3		125.3			336.1		384.5
Selling, general and administrative expenses	29.4		19.3			73.8		56.6
Research and development expenses	7.6		12.6			36.8		46.3
Restructuring charges, net	0.1		(1.1		)	5.3		5.8
Non-restructuring impairment charges	2.0		—			2.0		—
Other income, net	—		0.6			0.3		4.4
Income from discontinued operations	13.5		37.8			82.7		179.8
Income tax expense	2.3		26.6			18.1		42.6
Income from discontinued operations, net of income taxes	$	11.2	$	11.2		$	64.6	$	137.2

The following table summarizes the assets and liabilities of the Specialty Generics Disposal Group that are classified as held for sale on the unaudited condensed consolidated balance sheets:

	September 28, 2018		December 29, 2017
Carrying amounts of major classes of assets included as part of discontinued operations:
Accounts receivable	$	189.0	$	170.4
Inventories	205.9		211.7
Property, plant and equipment, net	561.7		553.6
Intangible assets, net	110.3		114.0
Other current and non-current assets	69.9		84.5
Total assets classified as held for sale in the balance sheet	$	1,136.8	$	1,134.2
Carrying amounts of major classes of liabilities included as part of discontinued operations:
Accounts payable	$	39.0	$	36.0
Other current and non-current liabilities	143.4		126.6
Total liabilities classified as held for sale in the balance sheet	$	182.4	$	162.6

The following table summarizes significant cash and non-cash transactions of the Specialty Generics Disposal Group that are included within the unaudited condensed consolidated statements of cash flows for the respective periods:

	Three Months Ended				Nine Months Ended
	September 28, 2018		September 29, 2017		September 28, 2018		September 29, 2017
Depreciation, including accelerated depreciation	$	0.6	$	15.3	$	12.1	$	45.7
Amortization	—		3.9		1.7		14.6
Capital expenditures	5.9		11.1		21.7		41.7

All other notes to the unaudited condensed consolidated financial statements that were impacted by this discontinued operation have been reclassified accordingly.

Nuclear Imaging: On January 27, 2017, the Company completed the sale of its Nuclear Imaging business to IBA Molecular ("IBAM") for approximately $690.0 million before tax impacts, including up-front consideration of approximately $574.0 million, up to $77.0 million of contingent consideration and the assumption of certain liabilities. The Company recorded a pre-tax gain on the sale

of the Nuclear Imaging business of $362.8 million during the nine months ended September 29, 2017, which excluded any potential proceeds from the contingent consideration and reflects a charge of $0.6 million during the three months ended September 29, 2017 primarily as a result of ongoing working capital adjustments associated with the purchase agreement. During the nine months ended September 28, 2018 the Company received a total of $15.0 million in contingent consideration related to the sale of the Nuclear Imaging business, consisting of a $6.0 million cash payment and the issuance of $9.0 million par value non-voting preferred equity certificates. The preferred equity certificates accrue interest at a rate of 10.0% per annum and are redeemable on the retirement date of July 27, 2025, or earlier if elected by the issuer, for cash at a price equal to the par value and any accrued but unpaid interest. The Company recorded tax expense of $1.5 million associated with the $6.0 million contingent consideration cash payment. The $9.0 million in preferred equity certificates is presented as a non-cash investing activity on the unaudited condensed consolidated statement of cash flows. The $13.5 million of contingent consideration received, net of tax, was recorded as income from discontinued operations.

The following table summarizes the financial results of the Nuclear Imaging business presented in the unaudited condensed consolidated statements of income:

	Three Months Ended			Nine Months Ended
	September 29, 2017			September 29, 2017
Major line items constituting income from discontinued operations:
Net sales	$	—		$	31.6
Cost of sales	—			15.6
Selling, general and administrative expenses	—			7.8
Other	—			(0.2		)
Income from discontinued operations	—			8.4
(Loss) gain on divestiture of discontinued operations	(0.6		)	362.8
(Loss) income from discontinued operations, before income taxes	(0.6		)	371.2
Income tax (benefit) expense	(0.1		)	5.2
(Loss) income from discontinued operations, net of income taxes	$	(0.5	)	$	366.0

During the three months ended September 29, 2017, there was income tax benefit of $0.1 million associated with the $0.6 million loss recognized on divestiture. During the nine months ended September 29, 2017, there was income tax expense of $0.9 million associated with the $362.8 million gain on divestiture and a $4.3 million income tax expense associated with the $8.4 million income from discontinued operations. The tax impact of the gain recognized on divestiture was favorably impacted by a benefit from permanently deductible items.

The Company incurred $0.3 million of capital expenditures related to the Nuclear Imaging business that are included within the unaudited condensed consolidated statements of cash flows for the nine months ended September 29, 2017.

All other notes to the unaudited condensed consolidated financial statements that were impacted by this discontinued operation have been reclassified accordingly.

Divestitures

PreveLeak/Recothrom: On March 16, 2018, the Company completed the sale of a portion of its Hemostasis business, inclusive of its PreveLeak™ Surgical Sealant ("PreveLeak") and RECOTHROM^® Thrombin topical (Recombinant) ("Recothrom") products to Baxter International, Inc. ("Baxter") for approximately $185.0 million, with a base payment of $153.0 million, inclusive of existing inventory and subject to a closing inventory adjustment, with the remainder in potential future milestones. Baxter assumed other expenses, including contingent liabilities associated with PreveLeak. During the nine months ended September 28, 2018, the Company recorded a pre-tax loss on the sale of $0.6 million, which excluded any potential proceeds from the attainment of future milestones and reflected a post-sale closing inventory adjustment of $13.7 million. The financial results of the PreveLeak and Recothrom operations are presented within continuing operations as this divestiture did not meet the criteria for discontinued operations presentation.

As part of the divestiture and calculation of the gain, the Company wrote off intangible assets of $49.9 million and goodwill of $51.5 million, from the Specialty Brands segment, ascribed to the PreveLeak and Recothrom operations. The remaining items included in the loss calculation are primarily attributable to inventory transferred, contingent consideration transferred and transaction costs incurred by the Company.

Intrathecal Therapy: On March 17, 2017, the Company completed the sale of its Intrathecal Therapy business to Piramal Enterprises Limited's subsidiary in the United Kingdom ("U.K."), Piramal Critical Care ("Piramal"), for approximately $203.0 million, including fixed consideration of $171.0 million and contingent consideration of up to $32.0 million. The $171.0 million of fixed consideration consisted of $17.0 million received at closing and a $154.0 million note receivable that was due one year from the transaction closing date. During the nine months ended September 29, 2017, the Company recorded a pre-tax gain on the sale of the business of $56.6 million, which excluded any potential proceeds from the contingent consideration and reflects a post-sale adjustment of $0.4 million during the three months ended September 29, 2017. On February 28, 2018, the Company received $154.0 million from Piramal for the settlement of the aforementioned note receivable. The financial results of the Intrathecal Therapy business are presented within continuing operations as this divestiture did not meet the criteria for discontinued operations presentation.

As part of the divestiture and calculation of the gain, the Company wrote off intangible assets of $48.7 million and goodwill of $49.8 million, from the Specialty Brands segment, ascribed to the Intrathecal Therapy business. The Company is committed to reimburse up to $7.3 million of product development expenses incurred by Piramal, of which $3.1 million was included in accrued and other current liabilities on the unaudited condensed consolidated balance sheet as of September 28, 2018. The remaining items included in the gain calculation are attributable to inventory transferred and transaction costs incurred by the Company.