Discontinued Operations

12 Months Ended

Dec. 31, 2018

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

NOTE 4. DISCONTINUED OPERATIONS

On March 7, 2018, we entered into a definitive agreement to combine four of our operating companies from our Automation & Specialty platform (the “A&S Business”) with Altra Industrial Motion Corp. (“Altra”) in a tax-efficient Reverse Morris Trust transaction. The A&S Business includes the market-leading brands of Kollmorgen, Thomson, Portescap and Jacobs Vehicle Systems that were previously reported within our Industrial Technologies segment. On October 1, 2018, we completed the split-off of the A&S Business. The total consideration received was $2.7 billion and consisted of (i) $1.3 billion through a fully-subscribed exchange offer, in which we accepted and subsequently retired 15,824,931 shares of our own common stock from our stockholders in exchange for the 35,000,000 shares of common stock of Stevens Holding Company, Inc.; (ii) $1.0 billion in cash paid to us for the direct sales of certain assets and liabilities of the A&S Business; (iii) $250.0 million as part of a non-cash debt-for-debt exchange that reduced outstanding indebtedness of Fortive, which was inclusive of accrued interest and related fees; and (iv) $150 million in cash paid to us by Stevens Holding Company, Inc. as a dividend. We recognized an after-tax gain on the transaction of $1.9 billion.

The accounting requirements for reporting the disposition of the A&S Business as a discontinued operation were met when the separation and merger were completed. Accordingly, the accompanying consolidated financial statements for all periods presented reflect this business as discontinued operations.

We incurred approximately $77 million of pretax transaction-related costs associated with the divestiture during the year ended December 31, 2018, which was primarily for professional fees. These amounts are recorded in the gain on disposition of discontinued operations before income taxes.

We are providing certain support services under transition services agreements, and the impact of these services on our consolidated and combined financial statements was immaterial.

The key components of income from discontinued operations for the years ended December 31 were as follows ($ in millions):

	2018			2017			2016
Sales	$	750.5		$	900.0		$	846.1
Cost of sales	(438.9		)	(522.9		)	(497.2		)
Selling, general and administrative expenses	(92.3		)	(124.5		)	(126.0		)
Research and development expenses	(26.9		)	(36.7		)	(33.8		)
Gain on disposition of discontinued operations before income taxes	1,909.9			—			—
Interest expense and other	(4.6		)	(5.3		)	(2.6		)
Earnings before income taxes	2,097.7			210.6			186.5
Income taxes	(102.2		)	(50.4		)	(54.4		)
Net earnings	$	1,995.5		$	160.2		$	132.1

Interest expense related to the debt retired as part of the debt-for-debt exchange was allocated to discontinued operations for all periods presented.

The following table summarizes the major classes of assets and liabilities of discontinued operations that were included in the Company’s accompanying Consolidated Balance Sheets as of December 31 ($ in millions):

	2018		2017
ASSETS
Trade accounts receivable, net	$	4.2	$	123.1
Inventories	4.4		73.9
Other current assets	21.4		6.8
Total current assets, discontinued operations	30.0		203.8
Property, plant and equipment, net	—		102.1
Goodwill	—		538.2
Other intangible assets, net	—		19.6
Other non-current assets	—		7.3
Total other assets, discontinued operations	—		667.2
Total assets, discontinued operations	$	30.0	$	871.0
LIABILITIES
Current liabilities:
Trade accounts payable	$	9.2	$	98.5
Accrued expenses and other current liabilities	21.5		59.5
Total current liabilities, discontinued operations	30.7		158.0
Other long-term liabilities	—		64.2
Total liabilities, discontinued operations	$	30.7	$	222.2