Discontinued Operations

12 Months Ended

Dec. 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

On October 31, 2016, we completed the sale of our L&W business to ABC Supply for total cash consideration of $675 million inclusive of the final working capital adjustment and recorded a gain on the sale of $279 million.

For the year ended December 31, 2016, L&W met the criteria to be classified as held for sale and to be presented as a discontinued operation. Accordingly, we reclassified the results of operations and the cash flows of L&W to discontinued operations in our consolidated statements of income and consolidated statements of cash flows for all periods presented. Additionally, we reclassified the assets and liabilities of L&W to discontinued operations in our consolidated balance sheets.     

The summarized financial information related to L&W that has been excluded from continuing operations and reported as a discontinued operation is as follows:

(millions)	For the year ended December 31,
	2016(a)		2015		2014
Net sales	$	1,252	$	1,428	$	1,345
Cost of products sold	1,196		1,387		1,316
Gross profit	56		41		29
Selling and administrative expenses (b)	22		15		16
Operating profit	34		26		13
Income tax expense	12		11		—
Net income from discontinued operations (c)	$	22	$	15	$	13
Gain on sale of discontinued operations	$	279	$	—	$	—

(a) Operating results for 2016 are presented for the ten months ended October 31, 2016.

(b) The ten month period ended October 31, 2016 includes transaction costs of $8 million.

(c) Years ended December 31, 2016 and 2014 include net income from discontinued operations from our European business, which were sold in 2012.

The assets and liabilities related to discontinued operations as of December 31, 2015 are as follows:

(millions)	December 31, 2015
Accounts receivable, net	207
Inventories	95
Other current assets	4
Property, plant and equipment, net (a)	17
Intangible assets (a)	31
Other assets (a)	3
Total assets related to discontinued operations	$	357
Accounts payable	$	51
Accrued expenses	29
Other liabilities (a)	20
Total liabilities related to discontinued operations	$	100

(a) As of December 31, 2015, these balances are reflected as long-term in our consolidated balance sheet.

We retained responsibility for the benefits payable to employees of L&W from the USG pension and postretirement plans for the benefits accrued while employed by USG. As such, these liabilities are not reflected in liabilities related to discontinued operations. See Note 9 for further discussion. We also agreed to defend and indemnify L&W in connection with the pricing lawsuits. See Note 19 for discussion of the liability associated with the pricing lawsuits.

Additionally, upon the close of the sale, we entered into a supply agreement with L&W and a transition services agreement with ABC Supply to provide certain transition services. For the years ended December 31, 2016, 2015, and 2014, we recorded sales to L&W of $568 million, $531 million and $532 million that, prior to October 31, 2016, were eliminated in consolidation. We recorded a cash inflow of $102 million from L&W in the two months since the sale related to payments on trade receivables.