Discontinued Operations and Dispositions

12 Months Ended

Dec. 31, 2019

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations and Dispositions

NOTE 4. DISCONTINUED OPERATIONS AND DISPOSITIONS

Divestiture of A&S Business

On March 7, 2018, we entered into a definitive agreement to combine four of our operating companies from our Automation & Specialty platform (the “A&S Business”) with Altra Industrial Motion Corp. (“Altra”) in a tax-efficient Reverse Morris Trust transaction. The A&S Business includes the market-leading brands of Kollmorgen, Thomson, Portescap and Jacobs Vehicle Systems that were previously reported within our Industrial Technologies segment. On October 1, 2018, we completed the split-off of the A&S Business. The total consideration received was $2.7 billion and consisted of (i) $1.3 billion through a fully-subscribed exchange offer, in which we accepted and subsequently retired 15,824,931 shares of our own common stock from our stockholders in exchange for the 35,000,000 shares of common stock of Stevens Holding Company, Inc.; (ii) $1.0 billion in cash paid to us for the direct sales of certain assets and liabilities of the A&S Business; (iii) $250 million as part of a non-cash debt-for-debt exchange that reduced outstanding indebtedness of Fortive, which was inclusive of accrued interest and related fees; and (iv) $150 million in cash paid to us by Stevens Holding Company, Inc. as a dividend. We recognized an after-tax gain on the transaction of $1.9 billion.

The accounting requirements for reporting the disposition of the A&S Business as a discontinued operation were met when the separation and merger were completed. Accordingly, the accompanying consolidated financial statements for all periods presented reflect this business as discontinued operations.

We incurred approximately $77 million of pretax transaction-related costs associated with the divestiture during the year ended December 31, 2018, which was primarily for professional fees. These amounts are recorded in the Gain (loss) on disposition of discontinued operations before income taxes component of Earnings from discontinued operations, net of income taxes.

We are providing certain support services under transition services agreements, and the impact of these services on our consolidated financial statements was immaterial.

The key components of income from discontinued operations for the years ended December 31 were as follows ($ in millions):

	2019			2018			2017
Sales	$	6.1		$	750.5		$	900.0
Cost of sales	(6.2		)	(438.9		)	(522.9		)
Selling, general, and administrative expenses	—			(92.3		)	(124.5		)
Research and development expenses	—			(26.9		)	(36.7		)
Gain (loss) on disposition of discontinued operations before income taxes	(2.1		)	1,909.9			—
Interest expense and other	—			(4.6		)	(5.3		)
Earnings (loss) before income taxes	(2.2		)	2,097.7			210.6
Income taxes	15.7			(102.2		)	(50.4		)
Earnings from discontinued operations, net of income taxes	$	13.5		$	1,995.5		$	160.2

Interest expense related to the debt retired as part of the debt-for-debt exchange was allocated to discontinued operations for all periods presented.

The following table summarizes the major classes of assets and liabilities of discontinued operations that were included in the Company’s accompanying Consolidated Balance Sheets as of December 31 ($ in millions):

	2019		2018
ASSETS
Accounts receivable, net	$	—	$	4.2
Inventories	—		4.4
Other current assets	3.2		21.4
Total current assets, discontinued operations	3.2		30.0
Total assets, discontinued operations	$	3.2	$	30.0
LIABILITIES
Current liabilities:
Trade accounts payable	$	—	$	9.2
Accrued expenses and other current liabilities	—		21.5
Total current liabilities, discontinued operations	—		30.7
Total liabilities, discontinued operations	$	—	$	30.7

Combination of the Tektronix Video Business with Telestream

On July 20, 2019, we completed the combination of the Tektronix Video test and monitoring equipment business (“Tektronix Video Business”) with Telestream, LLC (the “Combined Business”), a portfolio company of Genstar Capital LLC. We recognized a pretax gain of $41 million upon the combination, and hold a 33% equity stake in the Combined Business. This transaction did not meet the criteria for discontinued operations reporting, and therefore the operating results of the Tektronix Video Business prior to the combination with Telestream are included in continuing operations for all periods presented. At December 31, 2019, the carrying amount of the investment in the Combined Business, included in other assets in the accompanying Consolidated Balance Sheet, was $82 million. For the year ended December 31, 2019, the loss from our equity investment in the Combined Business recorded in Other non-operating expenses, net in the accompanying Consolidated Statements of Earnings was $4 million.