Atkore International Holdings Inc.

CIK:0001521722|SEC Filings

Discontinued Operations

3 Months Ended

Dec. 27, 2013

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations and Dispositions

In August 2013, the Company determined that the Brazil business was no longer strategic to the Company. On August 26, 2013, Atkore International, a subsidiary of the Company, entered into a Share Purchase Agreement (the “Agreement”) with Atkore International Indústria e Comércio de Aço e Materiais Elétricos Ltda. (the “Subsidiary”), Panatlantica S.A. (“Buyer”) and Allied Switzerland GmbH (“Seller”). Pursuant to the Agreement, Seller agreed to sell to Buyer all of the shares of the Subsidiary for 98,700,000 Brazilian Reais. The operations and cash flows of the Brazil business have been segregated from continuing operations and presented as discontinued operations for all of the periods presented. Atkore will not have any continuing involvement in the operations after the disposal transaction. The results of Brazil operations previously were included within the Global Pipe, Tube & Conduit segment. The Purchase Price will be paid in four installments, with 60% of the Purchase Price paid at closing and 13.33% of the Purchase Price paid on each of the nine, 12 and 18 month anniversaries of the closing. On September 23, 2013, the Company completed the sale. The total loss, net of tax, from the sale was $20 million.

The following tables present the operating results of the Company’s discontinued operations for the three months ended December 27, 2013 and December 28, 2012 ($ in millions):



	Three months ended December 27, 2013		Three months ended December 28, 2012
Net sales	$	—	$	30
Cost and expenses	$	—	29
Operating income	—		1
Interest income, net	—		—
Income before income tax	—		1
Income tax expense	—		—
Income from discontinued operations	$	—	$	1
Loss from disposal of discontinued business assets, net of tax	—		—
Income from discontinued operations and disposal net of income tax expense of $0 and $0, respectively	$	—	$	1

The following table shows an analysis of assets and liabilities of discontinued operations as of December 27, 2013 and September 27, 2013 ($ in millions):



	December 27, 2013		September 27, 2013
Current assets	$	—	$	—
Property, plant and equipment, net	—		—
Other assets	—		—
Total assets of discontinued operations	—		—
Current liabilities	$	—	$	2
Total liabilities of discontinued operations	$	—	$	2

Included in current liabilities of discontinued operations at September 27, 2013 was $2 million related to accrued and other current liabilities. In the three months ended December 27, 2013, $2 million was paid to settle this liability.

In October 2010, the Company was notified of an assessment by the Rio Grande do Sul State Treasury Secretariat related to the appropriateness of certain value-added tax credits taken in Brazil during the periods 2005 to 2007. The Brazilian government alleges that the Company owes approximately $10 million in taxes, penalties and interest. The Company has vigorously defended the matter based on its belief that its position was in accordance with the applicable law based in part upon the findings of the third party that assisted the Company in documenting and responding to the notice. During the third quarter of fiscal year 2012, the administrative court of Rio Grande do Sul State issued two unfavorable rulings against the Company. In October 2012, the Rio Grande do Sul Treasury Secretariat announced a tax amnesty program that would significantly lessen the Company’s potential loss in this matter by reducing assessed penalties and interest by 75% and 40%, respectively. The Company elected to participate in this program and reached a final agreement with the Treasury Secretariat on November 28, 2012 and settled this matter for $6 million in December 2012. As described in Note 9, under the terms of the Investment Agreement, Tyco has agreed to indemnify and hold harmless the Company and its subsidiaries from and against any taxes of the Company with respect to any tax period ending on or before the closing of the Transactions, as well as all tax liabilities relating to events or transactions occurring on or prior to the closing date of the Transactions. Accordingly, the Company received a $6 million payment related to the Company’s right to be indemnified by Tyco in connection with this matter in December 2012.

Dispositions

The Company has classified several buildings and an investment in an unconsolidated joint venture as held for sale on the accompanying consolidated balance sheet as of December 27, 2013 and September 27, 2013. The components of assets held for sale at December 27, 2013 and September 27, 2013 consisted of the following ($ in millions):



	December 27, 2013		September 27, 2013
Property, plant and equipment, net	$	8	$	7
Other assets	3		3
Assets held for sale	$	11	$	10

In January 2012, the Company entered into a share purchase agreement pursuant to which the Company would sell its minority ownership share in Abahsain-Cope Saudi Arabia Ltd. for cash consideration of approximately $10 million, which was paid into an escrow account in May 2012. The escrow remains in the name of the buyer, and the Company retains the benefit of the investment until all deliverables are met. The carrying value of the investment is $3 million and is classified as held for sale. The consideration is to be distributed incrementally from the escrow as certain milestones are reached. The Company will recognize the gain on the sale upon completion of all of the milestones. On April 30, 2013, the Company received the first tranche of payments of $2 million. On December 26, 2013, the Company received the second tranche of payments of $3 million.

In addition, the Company has decided to sell several buildings. The Company has vacated the premises of the buildings and is actively searching for a buyer on the open market. During the three months ended December 27, 2013, the Company sold a building previously classified as assets held for sale for $1 million. In addition, a facility with a book value of $2 million located in France related to the Company's Acroba business was reclassified as assets held for sale during the three months ended December 27, 2013. During the three months ended December 28, 2012, the Company recorded a $1 million impairment charge based on the negotiated selling price. The Company determined the valuation of the buildings, which was classified within level 2 of the fair value hierarchy, utilizing the negotiated sales price. The carrying value of the buildings was $8 million and $7 million at December 27, 2013 and September 27, 2013, respectively. Subsequently, on December 30, 2013, the Company sold a building in Madison, Indiana classified as assets held for sale for $4 million.

Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	3 Months Ended
	Dec. 27, 2013	Dec. 28, 2012
Operating activities:
Net loss	$ (3,000,000)	$ (4,000,000)
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss from discontinued operations and disposal	0	(1,000,000)
Depreciation and amortization	15,000,000	13,000,000
Amortization of debt issuance costs	1,000,000	2,000,000
Gains (Losses) on Extinguishment of Debt	3,000,000	0
Deferred income taxes	(1,000,000)	(2,000,000)
Provision for losses on accounts receivable and inventory	1,000,000	1,000,000
Asset impairment charges		1,000,000
Other items	1,000,000
Changes in operating assets and liabilities, net of effects from acquisitions	(12,000,000)	(2,000,000)
Net cash provided by continuing operating activities	5,000,000	8,000,000
Net cash used for discontinued operating activities	(2,000,000)	(1,000,000)
Net cash provided by operating activities	3,000,000	7,000,000
Investing activities:
Capital expenditures	(5,000,000)	(3,000,000)
Proceeds from Sale of Property, Plant, and Equipment	1,000,000	0
Acquisitions of businesses, net of cash acquired	(40,000,000)
Payments for (Proceeds from) Other Investing Activities	3,000,000	0
Net cash used for continuing investing activities	(41,000,000)	(3,000,000)
Net cash provided by discontinued investing activities	0	0
Net cash used for investing activities	(41,000,000)	(3,000,000)
Financing activities:
Borrowings under Credit Facility	251,000,000	38,000,000
Repayments under Credit Facility	(192,000,000)	(38,000,000)
Proceeds from short-term debt	1,000,000	2,000,000
Repayments of short-term debt	(1,000,000)	(3,000,000)
Repayments of Long-term Debt	41,000,000	0
Payments of Financing Costs	(2,000,000)	0
Net cash provided by (used for) continuing financing activities	16,000,000	(1,000,000)
Net cash provided by discontinued financing activities	0	0
Net cash provided by (used for) financing activities	16,000,000	(1,000,000)
Effects of foreign exchange rate changes on cash and cash equivalents	0
(Decrease) increase in cash and cash equivalents	(22,000,000)	3,000,000
Cash and cash equivalents at beginning of period	55,000,000	52,000,000
Cash and cash equivalents at end of period	33,000,000	55,000,000
Supplementary Cash Flow information
Interest paid	2,000,000
Income taxes paid, net of refunds	1,000,000	1,000,000
Capital Expenditures Incurred but Not yet Paid	$ 1,000,000	$ 0

Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Millions, unless otherwise specified	Dec. 27, 2013	Sep. 27, 2013
Current Assets:
Cash and cash equivalents	$ 33	$ 55
Accounts receivable, less allowance for doubtful accounts of $3 and $3, respectively	192	205
Receivables due from Tyco International Ltd. and its affiliates (see Note 3)
Inventories, net (see Note 4)	272	245
Assets held for sale	11	10
Prepaid expenses and other current assets	38	42
Deferred income taxes	21	21
Total current assets	567	578
Property, plant and equipment, net (see Note 5)	264	260
Intangible assets, net (see Note 6)	306	295
Goodwill (see Note 6)	161	152
Deferred income taxes
Receivables due from Tyco International Ltd. and its affiliates (see Note 3)	16	16
Other assets	21	23
Assets Of Continuing Operations	1,335	1,324
Assets of Disposal Group, Including Discontinued Operation	0	0
Total Assets	1,335	1,324
Current Liabilities:
Borrowings under Credit Facility and Short-term debt (see Note 8)	121	62
Accounts payable	122	127
Income tax payable	2	1
Accrued and other current liabilities (see Note 7)	79	73
Total current liabilities	324	263
Long-term debt (see Note 8)	369	410
Deferred income taxes	81	82
Income tax payable	16	16
Pension liabilities	16	16
Other long-term liabilities	17	19
Liabilities Of Continuing Operations	823	806
Liabilities of Disposal Group, Including Discontinued Operation	0	2
Total Liabilities	823	808
Shareholder’s Equity:
Common shares, $.01 par value, 1,000 shares authorized, 100 shares issued and outstanding	0	0
Additional paid in capital	608	607
Accumulated deficit	(92)	(89)
Accumulated other comprehensive loss	(4)	(2)
Total Shareholder’s Equity	512	516
Total Liabilities and Shareholder’s Equity	$ 1,335	$ 1,324