Discontinued Operations

12 Months Ended

Sep. 30, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

(4) DISCONTINUED OPERATIONS

The Company previously announced strategic actions to streamline its portfolio, drive growth and accelerate value creation for shareholders. These plans consisted of divesting its network power systems business through a spinoff to shareholders or sale, and also exploring strategic alternatives, including potential sale, of its power generation, motors and drives businesses. As of July 29, 2016, the Company entered into an agreement to sell its network power systems business for $4.0 billion in cash, subject to certain post-closing adjustments, and will retain a subordinated interest in distributions, contingent upon the equity holders first receiving a threshold return on their initial investment. This business comprised the former Network Power segment and provides mission-critical infrastructure products and solutions and life cycle management services for vital applications in data centers, communication networks, and commercial/industrial environments. Also, on July 30, 2016, the Company entered into an agreement to sell its power generation, motors and drives businesses for a value of $1.2 billion, representing cash plus assumption of certain postretirement liabilities by the buyer, subject to post-closing adjustments. These businesses were previously reported in the Industrial Automation segment, and provide low, medium and high voltage alternators and other power generation equipment and commercial and industrial motors and drives, which are used in a wide variety of manufacturing and industrial applications. Both transactions are expected to close by the end of calendar year 2016 or shortly thereafter, subject to customary closing conditions and regulatory approvals. The results of operations for these businesses have been reclassified into discontinued operations and the assets and liabilities are reflected as held-for-sale for all periods presented.

The financial results of the network power systems business and the power generation, motors and drives businesses reported as discontinued operations for the years ending September 30, 2016, 2015 and 2014, were as follows:    

	Network Power Systems					Power Generation, Motors and Drives				Total
	2014			2015	2016	2014	2015	2016		2014		2015	2016
Net sales	$	4,868		4,426	4,378	1,974	1,668	1,368		6,842		6,094	5,746
Cost of sales	3,012			2,810	2,708	1,434	1,244	1,033		4,446		4,054	3,741
SG&A	1,205			1,143	1,101	346	306	269		1,551		1,449	1,370
Other deductions, net	668			222	172	20	15	149		688		237	321
Earnings (Loss) before income taxes	(17		)	251	397	174	103	(83	)	157		354	314
Income taxes	163			134	218	48	27	51		211		161	269
Earnings (Loss), net of tax	$	(180	)	117	179	126	76	(134	)	(54	)	193	45

Net earnings from discontinued operations include separation costs to execute the portfolio repositioning of $220 and $52 for 2016 and 2015, respectively. These costs include income tax expense of $143 in 2016 and $42 in 2015 for repatriation of cash from these businesses, reorganization of their legal structures prior to sale, and basis differences for book and tax. Separation costs also include legal, consulting, investment banking and other expenses of $77 and $10 for 2016 and 2015, respectively. In addition, net earnings for 2016 include a loss of $103 to write down the power generation, motors and drives businesses to the sales price less costs to sell, and lower expense of $24 due to ceasing depreciation and amortization for the discontinued businesses held-for-sale. Earnings for 2014 include a noncash goodwill impairment charge of $508 related to the network power systems business in Europe, which had been unable to meet its operating objectives due to a weak Western Europe economy and had an uncertain outlook.

Upon completion of the transactions, the Company preliminarily expects to recognize a pretax gain of approximately $500 and to break even after-tax, subject to finalization of several matters including separation costs to complete the transactions. In addition, the Company may incur U.S. tax costs of approximately $200 for repatriation of estimated sales proceeds of $1.5 billion expected to be received offshore in connection with the transactions. The Company's decision whether to repatriate these proceeds will be determined in connection with funding needs for the acquisition of Pentair's Valves & Controls non-U.S. operations.

The aggregate carrying amounts of the major classes of assets and liabilities classified as held-for-sale as of September 30, 2016 and 2015 are summarized as follows:

	Network Power Systems			Power Generation, Motors and Drives		Total
	2015		2016	2015	2016	2015	2016
Assets
Receivables, less allowances	$	1,121	1,202	328	290	1,449	1,492
Inventories	386		381	196	197	582	578
Other current assets	90		108	15	22	105	130
Property plant & equipment, net	362		352	294	259	656	611
Goodwill	2,144		2,111	662	580	2,806	2,691
Other noncurrent assets	557		473	67	55	624	528
Total assets held-for-sale	$	4,660	4,627	1,562	1,403	6,222	6,030
Liabilities
Accounts payable	$	611	664	210	176	821	840
Other current liabilities	599		620	146	141	745	761
Deferred taxes and other noncurrent liabilities	245		227	87	99	332	326
Total liabilities held-for-sale	$	1,455	1,511	443	416	1,898	1,927

The net cash provided by operating activities and net cash provided (used) by investing activities for the network power systems business and the power generation, motors and drives businesses for the years ending September 30, 2016, 2015 and 2014, were as follows:    

	Network Power Systems							Power Generation, Motors and Drives						Total
	2014			2015		2016		2014		2015		2016		2014		2015		2016
Cash provided by operating activities	$	507		378		343		186		111		39		693		489		382
Cash used in investing activities	$	(57	)	(48	)	(33	)	(49	)	(40	)	(44	)	(106	)	(88	)	(77	)

Cash provided by operating activities in 2016 was reduced by payments of $179 for separation costs.