Discontinued Operations

3 Months Ended

Mar. 31, 2017

Discontinued Operations And Disposal Groups [Abstract]

Discontinued Operations

Note 3 Discontinued Operations

On March 25, 2017, we entered into a definitive agreement to sell our Diversey Care division and the food hygiene and cleaning business within our Food Care division for gross proceeds of USD equivalent $3.2 billion, subject to customary closing conditions. The transaction is expected to be completed in the third quarter of 2017. The transaction is expected to generate approximately $2.5 billion in net cash, on an after tax basis. We intend to use the cash generated from this transaction to repay debt and maintain our credit profile, repurchase shares to minimize earnings dilution, and fund core growth initiatives, including potential complementary acquisitions to our Food Care and Product Care divisions.

The sale of Diversey will allow us to enhance our strategic focus on the Food Care and Product Care divisions and simplify our operating structure. We have classified the operating results from this business, together with certain costs related to the divestiture transaction, as discontinued operations, net of tax, in the condensed consolidated statements of operations for the three months March 31, 2017 and 2016. Assets and liabilities of this business are classified as “held for sale” in the condensed consolidated balance sheets as of March 31, 2017 and December 31, 2016.

Summary operating results of Diversey were as follows:

	Three Months Ended
	March 31,
(In millions)	2017			2016
Net sales	$	581.7		$	584.7
Cost of sales		330.5			330.9
Gross profit		251.2			253.8
Selling, general and administrative expenses		198.9			211.4
Amortization expense of intangible assets acquired		17.7			18.7
Operating profit		34.6			23.7
Other expense, net		(2.9	)		(4.0	)
Earnings from discontinued operations before income tax    provision (benefit)		31.7			19.7
Income tax provision (benefit)		21.1			(7.8	)
Net earnings from discontinued operations	$	10.6		$	27.5

For the three months ended March 31, 2017, net earnings from discontinued operations was negatively impacted by $19.5 million of tax expense related to a change in the repatriation strategy of foreign earnings. For the three months ended March 31, 2016, net earnings from discontinued operations was favorably impacted by $9.3 million primarily from a benefit related to repatriation strategy and the release of reserves.

The carrying value of the major classes of assets and liabilities of Diversey were as follows:

	March 31,		December 31,
(In millions)	2017		2016
Assets:
Cash and cash equivalents	$	30.0	$	30.0
Receivables, net		436.2		438.2
Inventories		227.9		203.2
Other receivables		82.8		70.3
Prepaid expenses and other current assets		87.8		80.6
Property and equipment, net		172.6		170.6
Goodwill		986.8		972.8
Intangible assets, net		653.9		669.9
Non-current deferred tax assets		43.0		50.7
Other non-current assets		167.4		162.0
Total assets held for sale	$	2,888.4	$	2,848.3
Liabilities:
Short-term borrowings	$	20.6	$	9.6
Current portion of long-term debt		30.5		31.1
Accounts payable		359.9		346.5
Other current liabilities		260.0		296.1
Long term debt		175.5		175.7
Deferred tax liabilities		107.7		56.3
Other non-current liabilities		261.2		269.0
Total liabilities held for sale	$	1,215.4	$	1,184.3

The following table presents selected financial information regarding cash flows of Diversey that are included within discontinued operations in the consolidated statements of cash flows:

	Three Months Ended
	March 31,
(In millions)	2017		2016
Non-cash items included in net earnings from discontinued operations:
Depreciation and amortization	$	23.4	$	25.7
Share-based incentive compensation		3.3		2.8
Profit sharing expense		1.0		0.8
Provision for bad debt		1.3		1.4
Capital expenditures		3.4		7.8

The amounts disclosed in the tables above have been excluded from disclosures unless otherwise noted.

Acquisitions

On April 1, 2017 the Diversey Care division  acquired the UVC disinfection portfolio of  Daylight Medical, a manufacturer of innovative medical devices. The preliminary fair value of the consideration transferred was approximately $28.7 million which included $3.5 million of cash paid at closing as well as a preliminary fair value of $25.2 milllion related to noncontingent considerations which will be paid in the future and a preliminary fair value for liability-classified contingent consideration . The assets and liabilities acquired as part of the acquisition will be classified as held for sale on the Condensed Consolidated Balance Sheet in future periods.