Investment in Joint Venture

12 Months Ended

Dec. 31, 2012

Equity Method Investments and Joint Ventures [Abstract]

Investment in Joint Venture

INVESTMENT IN JOINT VENTURE

On July 4, 2010, the Company entered into a joint venture with Cooper Industries, plc (“Cooper”), combining certain of the Company’s hand tool businesses with Cooper’s Tools business to form a new entity called Apex Tool Group, LLC (“Apex”). The 2009 sales, on a combined basis, of the two tools businesses contributed to Apex were approximately $1.2 billion. During the period that Cooper and the Company owned Apex, each of Cooper and the Company owned a 50% interest in Apex and had an equal number of representatives on Apex’s Board of Directors. Neither joint venture partner controlled the significant operating and financing activities of Apex. Upon the closing of the joint venture formation, Apex simultaneously obtained a credit facility and term debt financing and used $45 million of the term debt financing to purchase from the Company certain assets of the Company’s hand tool businesses. In addition to the cash received for the purchase of these assets, the Company recorded a receivable from Apex of $45 million upon closing which has been fully paid. As of the closing of the joint venture formation, the Company deconsolidated the financial results of its contributed businesses and began accounting for its investment in the joint venture based on the equity method of accounting.

In accordance with accounting standards applicable to non-controlling interests in subsidiaries, the Company recognized a $232 million after-tax gain ($0.34 per diluted share) during the third quarter of 2010 associated with the transaction. The gain is computed as the difference between the book value of the contributed businesses that were deconsolidated and the fair value of the consideration received in exchange, including the 50% interest in Apex and the cash and receivables received from Apex in connection with the transaction as indicated in the table below ($ in millions):

Fair value of consideration received:
Fair value of 50% equity interest received	$	480.0
Cash received	45.2
Receivable from joint venture	44.8
Total fair value of consideration received	570.0
Less book value of net assets contributed	(279.0		)
Pre-tax gain on contribution to joint venture	291.0
Income tax expense	(58.8		)
After-tax gain on contribution to joint venture	$	232.2

As a result of the Company’s continuing involvement with the joint venture, the contributed businesses were not presented as a discontinued operation. The Company recorded its equity in the earnings of Apex in an amount equal to $70 million , $67 million and $23 million for the three years ended December 31, 2012, 2011 and 2010, respectively, reflecting its 50% ownership position.

Sales and operating profit generated by the contributed business prior to the closing of the transaction and included in the Company’s consolidated results of operations during the year ended December 31, 2010 were $316 million and $42 million, respectively.

In February 2013, the Company and Cooper sold Apex to an unrelated third party for approximately $1.6 billion. The Company expects to realize after-tax net proceeds of approximately $650 million and recognize an after-tax gain of approximately $138 million or $0.19 per diluted share from the sale in the first quarter of 2013.