Discontinued Operations

9 Months Ended

Sep. 30, 2019

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

C. DISCONTINUED OPERATIONS

On September 6, 2019, we completed the sale of UK Window Group ("UKWG"), a manufacturer and distributor of windows and doors, for proceeds of approximately $8 million, of which $2 million net of cash disposed was received upon sale. The remaining $6 million was accounted for as a note receivable that is expected to be collected within the next two years. In connection with the sale, we recognized a loss of $70 million for both the three-month and nine-month periods ended September 30, 2019, which is included in (loss) income from discontinued operations, net in the condensed consolidated statements of operations.

Additionally, on September 29, 2019, we entered into a definitive agreement to sell Milgard Manufacturing Incorporated ("Milgard"), a manufacturer and distributor of windows and doors, for approximately $725 million. The closing of the sale is expected to occur during the fourth quarter of 2019, subject to customary closing conditions and regulatory review, and we expect to recognize a gain on the divestiture of approximately $395 million.

We determined that the assets and liabilities for Milgard and UKWG met the held for sale criteria in accordance with ASC 205-20, Discontinued Operations, as of September 30, 2019. Accordingly, these businesses' held for sale assets and liabilities were reclassified in the condensed consolidated balance sheets at September 30, 2019 and December 31, 2018 to assets held for sale or liabilities held for sale. We ceased recording depreciation for the held for sale assets upon meeting the held for sale criteria.

Furthermore, we determined that the combined sale of UKWG and the planned disposition of Milgard represents a strategic shift that will have a major effect on our operations and financial results. These businesses represented all of our window businesses and all remaining businesses in the Windows and Other Specialty Products segment. As a result, these businesses are presented in discontinued operations separate from continuing operations for all periods presented. In addition, depreciation and amortization, capital expenditures, and significant non-cash operating and investing activities related to discontinued operations are separately disclosed.

C. DISCONTINUED OPERATIONS (Concluded)

The major classes of line items constituting (loss) income from discontinued operations, net, in millions:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net sales	$	172		$	197		$	515		$	575
Cost of sales	137			153			408			450
Gross profit	35			44			107			125
Selling, general and administrative expenses	29			30			93			93
Impairment charge for goodwill (A)	—			—			7			—
Other income (expense), net	—			—			—			1
Income from discontinued operations	6			14			7			33
(Loss) on disposal of discontinued    operations	(70		)	—			(70		)	—
(Loss) income before income tax	(64		)	14			(63		)	33
Income tax benefit (expense) (B)	6			(4		)	(1		)	(10		)
(Loss) income from discontinued     operations, net	$	(58	)	$	10		$	(64	)	$	23

(A) In the first quarter of 2019, we recognized a $7 million non-cash goodwill impairment charge related to a decline in the long-term outlook of our windows and doors business in the United Kingdom.

(B)     The unusual relationship between income tax benefit (expense) and (loss) income before income tax for 2019 resulted primarily from a loss

on the sale of UKWG providing no foreign tax benefit.

The carrying amount of major classes of assets and liabilities included as part of the Milgard and UKWG discontinued operations, were as follows, in millions:

	September 30, 2019		December 31, 2018
Cash and cash investments	$	5	$	6
Receivables	60		85
Prepaid expenses and other	13		18
Inventories	33		42
Property and equipment, net	151		186
Operating lease right-of-use assets	30		—
Goodwill	199		206
Other intangible assets, net	112		117
Total assets classified as held for sale	$	603	$	660
Accounts payable	$	66	$	75
Accrued liabilities	74		74
Other liabilities	133		108
Total liabilities classified as held for sale	$	273	$	257

Other selected financial information for Milgard and UKWG during the period owned by us, were as follows, in millions:

	Nine Months Ended
	September 30, 2019		September 30, 2018
Depreciation and amortization	$	17	$	17
Capital expenditures	15		15
ROU assets obtained in exchange for new lease obligations	3		—