Discontinued Operations, Sale of Assets and Assets Held for Sale

9 Months Ended

Sep. 28, 2013

Discontinued Operations, Sale of Assets and Assets Held for Sale

Discontinued Operations, Sale of Assets and Assets Held for Sale

Note 2.  Discontinued Operations, Sale of Assets and Assets Held for Sale

Discontinued Operations

On January 29, 2013, we entered into an agreement to sell our OCP and DES businesses to CCL Industries Inc. (“CCL”).  As part of the agreement with CCL, we agreed to enter into a supply agreement at closing, pursuant to which CCL would purchase certain pressure-sensitive label stock, adhesives and other base material products for up to six years after closing. While the supply agreement is expected to continue generating revenues and cash flows from the OCP and DES businesses, our continuing involvement in the OCP and DES operations is not expected to be significant to us as a whole.

On July 1, 2013, we completed the sale for a total purchase price of $500 million ($484 million net of cash provided) and entered into an amendment to the purchase agreement, which, among other things, increased the target net working capital amount and amended provisions related to employee matters and indemnification. We continue to be subject to certain indemnification provisions under the terms of the purchase agreement.  In addition, the tax liability associated with the loss on sale is subject to completion of tax return filings in the jurisdictions where the OCP and DES businesses operated.

Included in the loss on sale, net of tax, were $2.7 million of additional proceeds related to certain post-closing adjustments and $5.5 million of selling costs, both of which were settled in October 2013.

The operating results of these discontinued operations and loss on sale were as follows:

	Three Months Ended					Nine Months Ended
(In millions)	September 28, 2013			September 29, 2012		September 28, 2013			September 29, 2012
Net sales	$	–		$	257.2	$	380.5		$	682.2
Income (loss) before taxes, including divestiture-related and restructuring costs	4.1			34.4		(10.6		)	56.2
Provision for (benefit from) income taxes	2.9			12.0		(.8		)	19.4
Income (loss) from discontinued operations, net of tax before loss on sale	1.2			22.4		(9.8		)	36.8
Loss on sale, net of tax provision of $68.9	(16.7		)	–		(16.7		)	–
(Loss) income from discontinued operations, net of tax	$	(15.5	)	$	22.4	$	(26.5	)	$	36.8

The income before taxes, including divestiture-related and restructuring costs, for the three months ended September 28, 2013 included a curtailment gain associated with our postretirement health and welfare benefit plans, partially offset by divestiture-related costs.  Refer to Note 6, “Pension and Other Postretirement Benefits,” for information regarding the curtailment gain.

The (loss) income from discontinued operations, net of tax, reflected the elimination of certain corporate cost allocations. The income tax provision included in the net loss on sale reflects tax versus book basis differences, primarily associated with goodwill.

Net sales from continuing operations to discontinued operations were $.8 million and $44.8 million for the three and nine months ended September 28, 2013, respectively, and $24.7 million and $72.8 million for the three and nine months ended September 29, 2012, respectively.  These sales have been included in “Net sales” in the unaudited Consolidated Statements of Income.

The assets and liabilities of the OCP business were classified as “held for sale” since December 29, 2012, as we continued to pursue the sale of this business through the end of 2012 and into 2013.  The assets and liabilities of the DES business were classified as “held for sale” since the first quarter of 2013 in connection with our agreement to sell both businesses to CCL, as discussed above.  The carrying values of the major classes of assets and liabilities of the OCP business that were classified as “held for sale” were as follows:

(In millions)	December 29, 2012
Assets
Trade accounts receivable, net	$	119.0
Inventories, net	57.2
Other current assets	7.7
Total current assets	183.9
Property, plant and equipment, net	79.5
Goodwill	167.9
Other intangibles resulting from business acquisitions, net	32.5
Other assets	8.4
	$	472.2
Liabilities
Accounts payable	$	31.2
Other current liabilities	113.1
Total current liabilities	144.3
Non-current liabilities	16.2
	$	160.5

Sale of Assets and Assets Held for Sale

In March 2013, we entered into an agreement to sell the property and equipment of our corporate headquarters in Pasadena, California for approximately $20 million.  In April 2013, we completed the sale and recognized a pre-tax gain of $10.9 million in “Other expense, net” in the unaudited Consolidated Statements of Income. In conjunction with the sale, we entered into a short-term leaseback arrangement with the buyer.  The initial term of the lease is nine months with two optional three-month extensions.  Refer to Note 15, “Commitments and Contingencies,” for information regarding the lease of our new corporate headquarters.

In the third quarter of 2013, we classified certain properties and equipment that we are in the process of selling as “held for sale” in the Condensed Consolidated Balance Sheets at September 28, 2013.  The carrying value of these assets was $6.3 million as of September 28, 2013.