Discontinued Operations

12 Months Ended

Dec. 31, 2017

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

On July 1, 2016, we completed the sale of our North American Customer Communications business for cash consideration of $410.7 million, after giving effect to a $0.7 million adjustment agreed upon in December 2016 to settle working capital and other matters under the terms of the agreement. We recorded an estimated pretax gain of $341.5 million on the sale during 2016. In 2015, we entered into a sale and leaseback of our four North American Customer Communications’ production facilities which had resulted in a deferred gain. This remaining lease obligation was included in the sale of North American Customer Communications and the unamortizaed deferred gain was included within the pretax gain recorded on the sale.

In April 2016, we completed the sale of our U.K. Customer Communications’ Bristol production facilities for pretax proceeds totaling approximately $16.0 million. Concurrent with this sale, we leased back approximately two-thirds of the facilities under a 12-year lease. The rent payments and associated rent expense of the Bristol production facilities are approximately $0.7 million per year over the 12-year lease term.

In February 2017, we updated our impairment analysis utilizing new information received (level 3 in the fair value hierarchy) regarding our U.K. Customer Communications business which indicated the carrying value exceeded the fair value of the business. As a result, we recorded an impairment charge of $17.0 million, which is included as a component of discontinued operations for the year ended December 31, 2016. The impairment resulted in the write-down of goodwill and long-lived assets of the business based on the estimated fair value. There was no tax benefit recognized for this impairment charge as it is not expected to be deductible for tax purposes.

On May 4, 2017, we completed the sale of our U.K. Customer Communications business for cash consideration of approximately $43.6 million, after giving effect to a $0.3 million adjustment agreed upon in October 2017 to settle working capital and other matters under the terms of the agreement. We recorded a pretax gain of $2.6 million on the sale. The remaining lease obligation related to the sale and leaseback of the Bristol production facilities was included in the sale of U.K. Customer Communications.

We have classified the results of the two businesses sold as well as the gain realized upon sale as discontinued operations in our Consolidated Statement of Income and Consolidated Statement of Cash Flows for all periods presented. Additionally, the related assets and liabilities associated with our U.K. Customer Communications discontinued operations were classified as held for sale in our Consolidated Balance Sheet at December 31, 2016.

Pursuant to the terms of the North American transaction, we have provided certain information technology and operations processing activities to the North American Customer Communications business post-transaction and we expect to continue providing limited services for the next 3 years. Additionally, we will continue to incur costs for certain print-related services provided by the disposed business for an estimated period of 3 to 5 years following the transaction. The information technology and operations processing activities we performed after the sale of the business resulted in approximately $28.1 million of continuing cash inflows from the business sold and the costs incurred for certain print-related services provided by the business sold resulted in continuing cash outflows of approximately $50.3 million for the year ended December 31, 2017.

The revenues previously eliminated in consolidation that have continued post-transaction were approximately $25.9 million, $19.3 million and $13.8 million for the years ended December 31, 2017, 2016 and 2015, respectively. The expenses previously eliminated in consolidation that have continued post-transaction were approximately $51.3 million, $34.8 million and $19.3 million for the years ended December 31, 2017, 2016 and 2015, respectively. The revenues and expenses associated with these continued activities have been classified within continuing operations for all periods presented. The offsetting costs and revenues previously recorded within Customer Communications and eliminated in consolidation have been reclassified to discontinued operations for all periods presented.

As of December 31, 2017, all assets and liabilities previously classified as held for sale in our Consolidated Balance Sheet had been sold. The following table summarizes the assets and liabilities classified as held for sale in our Consolidated Balance Sheet as of December 31, 2016 (in millions):

	December 31,
	2016
Assets
Cash and cash equivalents	$	4.0
Accounts receivable	38.9
Unconsolidated affiliates	0.2
Properties, net	9.9
Intangible assets, net	11.2
Other assets	8.4
Total assets held for sale	$	72.6
Liabilities
Current portion of debt	$	0.4
Accounts payable	13.2
Accrued compensation and benefits	3.8
Deferred revenues and gains	0.8
Long-term debt	1.7
Income taxes payable	1.0
Other liabilities	9.2
Total liabilities held for sale	$	30.1

The following table summarizes the comparative financial results of discontinued operations which are presented as Income from discontinued operations, net of tax on our Consolidated Statement of Income (in millions):

	Year Ended December 31,
	2017		2016		2015
Operating revenues	$	53.4	$	389.0	$	608.0
Out-of-pocket reimbursements	12.8		409.0		743.1
Total revenues	66.2		798.0		1,351.1
Costs and expenses	63.8		747.6		1,247.3
Depreciation and amortization (including goodwill impairment)	—		28.9		30.9
Operating income	2.4		21.5		72.9
Interest expense	—		—		(0.3		)
Equity in earnings of unconsolidated affiliates	0.2		0.3		0.4
Net gain on business disposition	2.6		341.5		—
Income before income taxes	5.2		363.3		73.0
Income taxes	0.7		115.0		24.5
Income from discontinued operations, net of tax	$	4.5	$	248.3	$	48.5