Brunswick Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Discontinued Operations

Discontinued Operations

12 Months Ended

Dec. 31, 2019

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Groups, Including Discontinued Operations, Disclosure [Text Block]

Discontinued Operations

On May 6, 2019, the Company announced that it reached an agreement to sell its Fitness business to KPS Capital Partners, LP. On June 27, 2019, the Company completed the sale. The Company determined that the sale of its Fitness business represented a strategic shift that had a major effect on the Company's operations and financial results. The Company no longer participates in the fitness industry and now solely focuses on its global marine portfolio. As a result, the Company classified the assets and liabilities of the Fitness business as held for sale on the Consolidated Balance Sheets for all prior periods. Additionally, this business, which was previously reported in the Company's Fitness segment, is being reported as discontinued operations in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows for all periods presented.

The sale of the Fitness business resulted in net proceeds of $473.7 million and an after-tax loss of $43.9 million, subject to a working capital adjustment. In connection with the sale of its Fitness business, the Company retained assets of $26.4 million primarily related to VAT receivables, and retained liabilities of $45.1 million primarily related to VAT payables, product warranty liabilities and certain employee benefits. As of December 31, 2019, retained assets and liabilities were $16.4 million and $30.5 million, respectively.

In connection with the sale of the Fitness business, the Company entered into a Transition Services Agreement (TSA) with the purchaser to provide certain support functions for a period of up to twelve months following the sale. The TSA is not material to the Company's consolidated financial statements. The Company does not have or anticipate having any significant continuing net cash flows associated with the Fitness business.

The following table discloses the results of operations of the business reported as discontinued operations for the year ended December 31, 2019, December 31, 2018 and December 31, 2017 respectively:



(in millions)	2019			2018			2017
Net sales	$	448.3		$	1,038.3		$	1,033.7
Cost of sales	334.6			764.3			720.1
Selling, general and administrative expense ^{(C) (D)}	113.3			206.1			177.9
Research and development expense	12.6			27.4			34.8
Restructuring, exit and impairment charges	138.3			26.1			32.8
Other (income), net	(0.3		)	(0.1		)	(0.2		)
(Loss) earnings from discontinued operations before income taxes ^{(B) (C) (D)}	(150.2		)	14.5			68.3
Income tax (benefit) provision	(32.7		)	2.6			23.2
(Loss) earnings from discontinued operations, net of tax ^{(B) (C) (D)}	(117.5		)	11.9			45.1
Loss on disposal of discontinued operations, net of tax ^(A)	(43.9		)	—			—
Net (loss) earnings from discontinued operations, net of tax	$	(161.4	)	$	11.9		$	45.1

(A) The Loss on disposal of discontinued operations, net of tax for the year ended December 31, 2019 includes a pre-tax loss of $51.3 million and a net tax benefit of $7.4 million.

(B) In the first quarter of 2019, the Company re-evaluated the fair value of the Fitness reporting unit and determined the fair value of the business was less than its carrying value. As a result, (Loss) Earnings from discontinued operations, net of tax, includes a $137.2 million ($103.0 million after tax) goodwill impairment charge for the year ended December 31, 2019.

(C) The Company recorded $16.5 million and $19.3 million for the year ended December 31, 2019 and December 31, 2018, respectively, of net costs incurred in connection with the sale of Fitness.

(D) The Company recorded adjustments to certain liabilities that were retained as part of the sale of the bowling businesses. As a result, (Loss) earnings from discontinued operations, net of tax, includes a gain of $3.0 million ($2.2 million after tax) for the year ended December 31, 2018.

There were no assets and liabilities held for sale related to discontinued operations as of December 31, 2019. The following table reflects the summary of assets and liabilities held for sale as of December 31, 2018 primarily related to the Fitness business included in discontinued operations:



(in millions)	December 31, 2018
Accounts and notes receivable, net	$	198.9
Net inventory	169.7
Prepaid expenses and other	8.6
Current assets held for sale	377.2

Net property ^(A)	110.9
Goodwill	389.8
Other intangibles, net	60.6
Other assets	49.0
Long-term assets held for sale	610.3
Assets held for sale	$	987.5

Accounts payable	$	69.7
Accrued expenses	185.3
Current liabilities held for sale	255.0

Other liabilities	99.6
Long-term liabilities held for sale	99.6
Liabilities held for sale	$	354.6

(A) As of December 31, 2018, the Company had $8.9 million of net long-term assets classified as held for sale that were not related to the business reported as discontinued operations.