DISCONTINUED OPERATIONS AND DIVESTITURES
Discontinued Operations
The components of discontinued operations for the years ended December 31 are as follows:
|
| | | | | | | | | | | | |
In millions | | 2013 | | 2012 | | 2011 |
Net revenues | | $ | 1,889.9 |
| | $ | 2,046.6 |
| | $ | 2,093.4 |
|
Pre-tax earnings (loss) from operations | | $ | 84.7 |
| | $ | 379.5 |
| | $ | 355.7 |
|
Pre-tax gain (loss) on sale | | — |
| | 2.3 |
| | (57.7 | ) |
Tax benefit (expense) | | (71.4 | ) | | (129.8 | ) | | (71.9 | ) |
Discontinued operations, net of tax | | $ | 13.3 |
| | $ | 252.0 |
| | $ | 226.1 |
|
Discontinued operations by business for the years ended December 31 are as follows:
|
| | | | | | | | | | | | |
In millions | | 2013 | | 2012 | | 2011 |
Allegion, net of tax | | $ | 12.4 |
| | $ | 254.2 |
| | $ | 275.7 |
|
Other discontinued operations, net of tax | | 0.9 |
| | (2.2 | ) | | (49.6 | ) |
Discontinued operations, net of tax | | $ | 13.3 |
| | $ | 252.0 |
| | $ | 226.1 |
|
Allegion Spin Off
On December 1, 2013, the Company completed the previously announced separation of its commercial and residential security businesses by distributing the related ordinary shares of Allegion, on a pro rata basis, to the Company's shareholders of record as of November 22, 2013. On the Distribution Date, each of the Company's shareholders received one ordinary share of Allegion for every three ordinary shares of the Company held by such shareholder on the Record Date. After the Distribution Date, the Company does not beneficially own any Allegion ordinary shares (other than approximately 7,045 shares received in a deferred compensation trust upon the spin-off as a result of the trust holding ordinary shares of Ingersoll-Rand plc as of the Record Date) and Allegion is an independent publicly traded company.
The results of our commercial and residential security businesses are presented as a discontinued operation on the Consolidated Statement of Comprehensive Income and Consolidated Statement of Cash Flows for all periods presented. The balance sheet of the commercial and residential security business has been reclassified to held for spin-off at December 31, 2012. The statement of equity of the commercial and residential security business is included within our Consolidated Statement of Equity through December 1, 2013.
Net revenues and after-tax earnings of Allegion for the year ended December 31 were as follows:
|
| | | | | | | | | | | |
In millions | 2013 | | 2012 | | 2011 |
Net revenues | $ | 1,889.9 |
| | $ | 2,046.6 |
| | $ | 2,021.2 |
|
After-tax earnings (loss) from operations * | $ | 12.4 |
| | $ | 254.2 |
| | $ | 275.7 |
|
* Included in After-tax earnings (loss) from operations for the year ended December 31, 2013 and 2012 are spin costs of $128 million and $5.7 million, respectively, and tax charges of $148.2 million. Also, the 2013 results include a $111.4 million non-cash goodwill impairment charge. See below for further discussion of the impairment.
During the third quarter of 2013, the Company determined that it was required to complete the first step of the two-step impairment test related to the former Security Technologies -Europe, Middle East, India and Africa (EMEIA) reporting unit. The results of the impairment test indicated that the estimated fair value of the Security Technologies-EMEIA reporting unit was less than its carrying value; consequently, the Company performed the second step of the impairment test to quantify the amount of the non-cash, goodwill impairment charge. For the three months ended September 30, 2013, the Company recorded a non-cash, pre-tax goodwill impairment charge of $111.4 million ($106.2 million after-tax). This charge is recorded within Allegion's After-tax earnings (loss) from operations for the year ended December 31, 2013.
The components of Allegion assets and liabilities recorded as held for spin-off on the Consolidated Balance Sheet at December 31, 2012 are as follows:
|
| | | | |
In millions | | December 31,
2012 |
Assets | |
|
Current assets | | $ | 726.1 |
|
Property, plant and equipment, net | | 226.5 |
|
Goodwill | | 646.3 |
|
Intangible assets, net | | 150.5 |
|
Other assets and deferred income taxes | | 68.0 |
|
Assets held for spin-off | | $ | 1,817.4 |
|
Liabilities | |
|
Current liabilities | | $ | 362.9 |
|
Noncurrent liabilities | | 168.9 |
|
Liabilities held for spin-off | | $ | 531.8 |
|
In November 2013, prior to the spin-off, the commercial and residential security businesses borrowed $1,274.2 million. The proceeds of the borrowing remained with the Company. On December 1, 2013 we made a distribution of $(0.5) million to the Company's shareholders in connection with the spin-off of Allegion. The distribution included $1,953.7 million of assets, $1,974.2 million of liabilities, $61.1 million of accumulated other comprehensive loss and $41.1 million of noncontrolling interest.
Other Discontinued Operations
The components of other discontinued operations for the years ended December 31 were as follows:
|
| | | | | | | | | | | |
In millions | 2013 | | 2012 | | 2011 |
Retained costs, net of tax | $ | 0.9 |
| | $ | (16.2 | ) | | $ | (34.8 | ) |
Net gain (loss) on disposals, net of tax | — |
| | 14.0 |
| | (14.8 | ) |
Discontinued operations, net of tax | $ | 0.9 |
| | $ | (2.2 | ) | | $ | (49.6 | ) |
On November 30, 2007, the Company completed the sale of its Bobcat, Utility Equipment and Attachments businesses (collectively, Compact Equipment) to Doosan Infracore for gross proceeds of approximately $4.9 billion, subject to post-closing purchase price adjustments. Compact Equipment manufactured and sold compact equipment, including skid-steer loaders, compact track loaders, mini-excavators and telescopic tool handlers; portable air compressors, generators and light towers; general-purpose light construction equipment; and attachments. The Company was in dispute regarding post-closing matters with Doosan Infracore. During the second quarter of 2011, the Company collected approximately $48.3 million of its outstanding receivable from Doosan Infracore related to certain purchase price adjustments. During the second quarter of 2012, Doosan Infracore paid the Company a total of $46.5 million to settle the outstanding receivable and remaining disputed post-closing matters.
Other discontinued operations, net of tax from previously sold businesses is mainly related to postretirement benefits, product liability, worker's compensation, and legal costs (mostly asbestos-related) and tax effects of post-closing purchase price adjustments.
Divested Operations
Hussmann Divestiture
On September 30, 2011, the Company completed a transaction to sell its Hussmann refrigerated display case business to a newly-formed affiliate (Hussmann Parent) of private equity firm Clayton Dubilier & Rice, LLC (CD&R). This transaction included the equipment business and certain of the service branches in the U.S. and Canada, and the equipment, service and installation businesses in Mexico, Chile, Australia, New Zealand, and Japan (Hussmann Business). The final transaction allowed Hussmann Parent the option to acquire the remaining North American Hussmann service and installation branches (Hussmann Branches). Hussmann Parent completed the acquisition of the Hussmann Branches on November 30, 2011. The Hussmann Business and Branches, which are reported as part of the Climate segment, manufacture, market, distribute, install, and service refrigerated display merchandising equipment, refrigeration systems, over the counter parts, and other commercial and industrial refrigeration applications.
The Hussmann Business divestiture was originally announced on April 21, 2011 and met the criteria for classification as held for sale treatment in accordance with GAAP during the first quarter of 2011. During the third quarter of 2011, the Company negotiated the final transaction to sell the Hussmann Business and Branches to CD&R in exchange for $370 million in cash, subject to purchase price adjustments, and common stock of Hussmann Parent, such that following the sale, CD&R would own cumulative convertible participating preferred stock of Hussmann Parent, initially representing 60% of the outstanding capital stock (on an as-converted basis) of Hussmann Parent, and the Company would own all of the common stock, initially representing the remaining 40% of the outstanding capital stock (on an as-converted basis) of Hussmann Parent. The Company's ownership of common stock of Hussmann Parent represents significant continuing involvement. Therefore, the results of the Hussmann Business and Branches are included in continuing operations for all periods presented. Based on these terms, the Company recorded a total pre-tax loss on sale/asset impairment charge of $646.9 million during the full year of 2011.
Results for the Hussmann Business and Branches for the years ended December 31, 2011 are as follows:
|
| | | | |
In millions | 2011* | |
Net revenues | $ | 818.5 |
| |
Gain (loss) on sale/asset impairment | (646.9 | ) | ** |
Net earnings (loss) attributable to Ingersoll-Rand plc | (513.1 | ) | |
Diluted earnings (loss) per share attributable to Ingersoll-Rand plc ordinary shareholders: | (1.51 | ) | |
* Results represent the operating results of Hussmann Business and Branches through their respective divestiture transaction dates.
** Included in Gain (loss) on sale/asset impairment for the year ended December 31, 2011 are transaction costs of $12.2 million.
Hussmann Parent is required to pay a quarterly preferred dividend payment to CD&R in the form of cash or additional preferred shares. The Company's ownership percentage as of December 31, 2013 was 37.2%. The Company's ownership interest in Hussmann Parent is reported using the equity method of accounting subsequent to September 30, 2011. The Company's equity investment in the Hussmann Parent is reported within Other noncurrent assets and the related equity earnings reported in Other, net within Net earnings.
