Annual report pursuant to Section 13 and 15(d)

Discontinued Operations

v2.4.0.8
Discontinued Operations
 12 Months Ended
Aug. 31, 2013
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations
Discontinued Operations
The Electrical segment is involved in the design, manufacture and distribution of a broad range of electrical products to the retail DIY, wholesale, OEM, solar, utility, marine and other harsh environment markets. The results of operations for the Electrical segment have been reported as discontinued operations in the accompanying consolidated statements of earnings for all periods presented as a result of the Company announcing its intention to divest this segment in the third quarter of fiscal 2013. The following table summarizes the results of the Electrical segment for each of the last three fiscal years (in thousands):
 
Year Ended August 31,
 
2013
 
2012
 
2011
 
Net sales
$
286,308

 
$
328,821

 
$
335,318

 
 
 
 
 
 
 
 
Operating profit
34,536

 
28,148

 
20,029

 
Impairment charge
(159,104
)
 
(62,464
)
 
—

 
Net loss on disposal (1)
—

 
—

 
(15,829
)
 
Income tax benefit (expense)
7,039

 
(3,670
)
 
(2,829
)
 
Income (loss) from discontinued operations, net of taxes
$
(117,529
)
 
$
(37,986
)
 
$
1,371

 

(1) During the second quarter of fiscal 2011, the Company completed the sale of the European Electrical business for total cash proceeds of $3.5 million, net of transaction costs. As a result of the sale transaction, the Company recognized a pre-tax loss on disposal of $15.8 million, including an $11.4 million charge to cover future lease payments on an unfavorable real estate lease used by the divested business.

During the third quarter of fiscal 2013, the Company committed to a plan to divest the entire Electrical segment. The divestiture will allow the Company to streamline its business portfolio and refocus on the remaining three segments in a way that better positions the Company to take advantage of its core competencies, current business model and global growth trends. As a result, the Company recognized a non-cash impairment charge in fiscal 2013 of $159.1 million, including a write-down of $137.8 million of goodwill and $21.3 million of indefinite lived intangible assets (tradename). The impairment charge represents the excess of the net book value of the assets held for sale over the estimated fair value, less selling costs. As a result of the impairment charge, there is no remaining goodwill associated with the Mastervolt business and $76.9 million for North American Electrical. The following is a summary of the August 31, 2013 assets and liabilities of the Electrical segment (in thousands):

Accounts receivable, net
 
$
41,247

Inventories, net
 
55,142

Property, plant & equipment, net
 
9,545

Goodwill
 
76,877

Other intangible assets, net
 
84,387

Other assets
 
5,408

Assets of discontinued operations
 
$
272,606

 
 
 
Trade accounts payable
 
$
19,824

Other current liabilities
 
12,984

Deferred income taxes
 
9,376

Other long-term liabilities
 
10,896

Liabilities of discontinued operations
 
$
53,080

During the fourth quarter of fiscal 2012, the Company recognized a $62.5 million pre-tax non-cash impairment charge related to the goodwill and indefinite lived intangible assets of the Electrical segment's Mastervolt business. The impairment was the result of business underperformance and volatility in the solar market. During the fourth quarter of fiscal 2012, industry-wide solar inverter inventory levels and production capacity exceeded demand, significant pricing competition existed and less favorable government incentive schemes were announced and implemented in Mastervolt's served European markets. This challenging economic and competitive environment, as well as uncertainty regarding the long-term strategic fit of the business had a significant adverse impact on projected long-term Mastervolt sales and profits. The impairment charge consisted of the write-down of $36.6 million of goodwill and $25.9 million of indefinite lived intangible assets (tradenames).