Discontinued Operations

9 Months Ended

Oct. 02, 2011

Discontinued Operations

Note 4. Discontinued Operations

We evaluate our businesses and product lines periodically for their strategic fit within our operations. In 2011, we decided to sell our Capsugel business. In connection with the decision to sell this business, for all periods presented, the operating results associated with this business have been reclassified into Discontinued operations––net of tax in the Condensed Consolidated Statements of Income, and the assets and liabilities associated with this business have been reclassified into Assets of discontinued operations and other assets held for sale and Liabilities of discontinued operations, as appropriate, in the Condensed Consolidated Balance Sheets.

On April 4, 2011, we announced that we had entered into an agreement to sell Capsugel to an affiliate of Kohlberg Kravis Roberts & Co. L.P. for approximately $2.4 billion in cash. The transaction closed on August 1, 2011.

The following amounts, substantially all of which relate to our Capsugel business, have been segregated from continuing operations and included in Discontinued operations—net of tax in our Condensed Consolidated Statements of Income:

	Three Months Ended						Nine Months Ended
(millions of dollars)	Oct. 2, 2011			Oct. 3, 2010			Oct. 2, 2011		Oct. 3, 2010
Revenues	$	116		$	176		$	507	$	545
Pre-tax (loss)/income from discontinued operations	$	(7	)	$	29		$	78	$	106
Provision for taxes on income(a)		6			3			39		30
(Loss)/income from discontinued operations––net of tax		(13	)		26			39		76
Pre-tax gain/(loss) on sale of discontinued operations		1,695			(12	)		1,683		(9	)
Provision/(benefit) for taxes on income(b)		367			(1	)		367		––
Discontinued operations––net of tax	$	1,315		$	15		$	1,355	$	67

(a) Includes a deferred tax expense of $13 million for the first nine months of 2011.

(b) Includes a deferred tax expense of $162 million for the third quarter and first nine months of 2011.

The following assets and liabilities, which in 2010 include the assets and liabilities related to our Capsugel business, have been segregated and included in Assets of discontinued operations and other assets held for sale and Liabilities of discontinued operations, as appropriate, in our Condensed Consolidated Balance Sheets:

(millions of dollars)	Oct. 2, 2011		Dec. 31, 2010
Accounts receivable	$	––	$	186
Inventories		––		130
Taxes and other current assets		12		47
Property, plant and equipment		110		1,009
Goodwill		––		19
Identifiable intangible assets		––		3
Taxes and other noncurrent assets		––		45
Assets of discontinued operations and other assets held for sale	$	122	$	1,439
Current liabilities	$	––	$	124
Other liabilities		––		27
Liabilities of discontinued operations	$	––	$	151

The net cash flows of our discontinued operations for each of the categories of operating, investing and financing activities were not significant for the first nine months of 2011 or 2010.