Disposed and Discontinued Operations Discontinued Operations and Disposal Groups (Tables)

12 Months Ended

Dec. 31, 2017

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations

Management and the Board of Directors periodically conduct strategic reviews of the Company's businesses.

On November 28, 2017, the Company completed the sale of the Timing Device Business, part of the Precision Devices segment, to Microsemi Corporation for $130.0 million, plus purchase price adjustments for a net amount of $133.3 million. The Company recorded a gain of $62.3 million as a result of the sale, which included $0.4 million of gain amounts reclassified from Accumulated other comprehensive loss into earnings related to currency translation adjustments. The purchase price includes $10.0 million held in escrow that will be received nine months from the completion of the sale and is recorded in the Prepaid and other current assets line on the Consolidated Balance Sheet.

On July 7, 2016, the Company completed the sale of its Speaker and Receiver Product Line for $45.0 million in cash, less purchase price adjustments for a net amount received of $40.6 million. The Company recorded a loss of $25.6 million as a result of the sale, which included $26.9 million of loss amounts reclassified from Accumulated other comprehensive loss into earnings related to currency translation adjustments.

The results of operations and financial positions of the Timing Device Business and Speaker and Receiver Product Line have been reclassified to discontinued operations for all periods presented as these disposals represent strategic shifts that have a major effect on the Company's results of operations.

Summarized results of the Company's discontinued operations are as follows:

	Years Ended December 31,
(in millions)	2017			2016			2015
Revenues	$	92.2		$	156.4		$	331.0
Cost of goods sold	61.5			136.1			319.3
Impairment charges (1)	0.4			0.4			50.1
Restructuring charges - cost of goods sold	0.1			8.9			0.9
Gross profit (loss)	30.2			11.0			(39.3		)
Research and development expenses (1)	7.7			15.1			25.7
Selling and administrative expenses	18.5			26.9			58.3
Impairment charges (1)	—			—			143.3
Restructuring charges	0.2			3.4			3.5
Operating expenses	26.4			45.4			230.8
Other expense (income), net	1.3			(0.9		)	(0.6		)
(Gain) loss on sale of business	(62.3		)	25.6			—
Earnings (loss) from discontinued operations before taxes (2)	64.8			(59.1		)	(269.5		)
Provision for (benefit from) income taxes	3.0			3.0			(18.3		)
Earnings (loss) from discontinued operations, net of tax	$	61.8		$	(62.1	)	$	(251.2	)

⁽¹⁾ The Company evaluates long-lived assets for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. During the fourth quarter of 2015, it was determined that the Speaker and Receiver Product Line lacked a future path to profitability, which included a thorough evaluation of key assumptions including selling prices, product margins, as well as future product demand and suggested that the carrying value of the product line’s assets may be impaired. Through the utilization of undiscounted future cash flows to determine the fair value of the assets, the Company concluded that the fair values of the intangible assets and fixed assets associated with the Speaker and Receiver Product Line were less than their respective carrying values at December 31, 2015. As a result, the Speaker and Receiver Product Line's intangible assets and fixed assets were written down to their fair values and Knowles incurred pre-tax impairment charges of $143.3 million and $48.2 million, respectively. In addition, during the year ended December 31, 2015, Knowles incurred other pre-tax impairment charges of $4.1 million. These impairments were recorded within the discontinued operations line items as follows: $50.1 million in Impairment charges within Gross profit (loss), $2.2 million in Research and development expenses, and $143.3 million in Impairment charges within Operating expenses.

⁽²⁾ The Company's policy is to not allocate interest expense to discontinued operations unless it is directly attributable to the operations. The results of operations of the Timing Device Business and Speaker and Receiver Product Line did not have any such interest expense in the periods presented.

Assets and liabilities of discontinued operations are summarized below:

(in millions)	December 31, 2017		December 31, 2016
Assets of discontinued operations:
Cash and cash equivalents	$	—	$	2.8
Receivables, net of allowances of nil and $0.4, respectively	1.2		19.2
Inventories, net	—		17.4
Prepaid and other current assets	0.5		0.6
Total current assets	1.7		40.0
Property, plant, and equipment, net	—		13.3
Goodwill	—		23.0
Intangible assets, net	—		3.7
Other assets and deferred charges	—		0.1
Total assets (1)	$	1.7	$	80.1
Liabilities of discontinued operations:
Accounts payable	$	0.1	$	9.1
Other current liabilities	5.5		13.6
Total current liabilities	5.6		22.7
Deferred income taxes	—		0.1
Other liabilities	—		0.9
Total liabilities (1)	$	5.6	$	23.7

⁽¹⁾ In connection with the sale of the Timing Device Business, the Company retained certain obligations related to employees of the Timing Device Business. This arrangement results in maintaining asset and liability balances, which are expected to be settled in the next 12 months.

The following table presents the depreciation, amortization, and capital expenditures related to discontinued operations:

	Years Ended December 31,
(in millions)	2017		2016		2015
Depreciation	$	2.3	$	3.3	$	39.4
Amortization of intangible assets	$	1.2	$	1.4	$	23.9
Capital expenditures	$	2.1	$	6.5	$	26.3

There were no capital expenditures in accounts payable at December 31, 2017. Capital expenditures included in accounts payable at December 31, 2016 and 2015 were $0.1 million and $1.6 million, respectively.