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Discontinued Operations
 12 Months Ended
Dec. 31, 2014
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations
DISCONTINUED OPERATIONS
There were no new discontinued operations in 2014 or 2013.
For the year ended December 31, 2014, the Company recorded a net gain from discontinued operations and disposal of $0.7 million. The gain primarily related to adjustments of estimated product liability obligations of previously discontinued businesses, resulting from updated actuarial valuations.
For the year ended December 31, 2013, the Company recorded net losses from discontinued operations and disposal of $0.2 million. The losses primarily included expenses associated with special termination benefits provided to certain employees of the former FSTech Group that were retained to assist with transition services with the acquirer. Upon conclusion of these transition services, management initiated a voluntary separation plan (“VSP”), which resulted in expense of approximately $0.6 million being recognized in the year ended December 31, 2013 when the employees accepted the terms of the VSP. The net loss from discontinued operations and disposal for the year ended December 31, 2013 also includes certain adjustments relating to assets of other previously discontinued operations.
The following table summarizes the operating results of the Company’s discontinued operations:
(in millions)
2012
Federal Signal Technologies:
 
Net sales
$
87.0

Interest allocated to discontinued operations
4.8

Other costs and expenses
100.6

Loss before income taxes
(18.4
)
Income tax benefit
3.6

Loss from discontinued operations
$
(14.8
)

On June 21, 2012, the Company announced that it had signed a definitive agreement to sell the FSTech Group for $110.0 million, subject to working capital adjustments. In accordance with ASC Topic 360, Impairment and Disposal of Long-Lived Assets, the Company met held for sale criteria during the second quarter of 2012 and the FSTech Group was reported as a discontinued operation in the Company’s condensed consolidated financial statements. In accordance with ASC 360-10, net assets held for sale with a carrying value of $121.1 million were written down to fair value less cost to sell or $97.6 million (fair value of $101.0 million and costs to sell of $3.4 million). This write-down resulted in a $23.5 million loss for the six months ended June 30, 2012. The valuation methodology for the net assets held for sale was based upon a contract price which is an observable input (Level 2).
On September 4, 2012, the Company completed the disposition of the assets of the FSTech Group for $110.0 million in cash, subject to working capital adjustments in favor of the buyer of $5.9 million. The Company received $82.1 million in cash at closing and the remaining $22.0 million was placed into escrow as security for indemnification obligations provided by the Company pursuant to the sale agreement. Additionally, in the third quarter of 2012, the Company recognized an additional loss related to a change in its estimate of total proceeds to be received from escrowed amounts of $5.0 million, an increase in the carrying value of the FSTech Group through the date of divestiture of $0.8 million and additional costs to sell of approximately $0.5 million. The working capital adjustment, the additional loss related to the change in estimated proceeds to be received from escrowed amounts, the increase in the carrying value of the FSTech Group and the additional costs to sell resulted in an additional loss of $12.2 million for the third quarter of 2012. The Company recorded a total loss of $34.7 million on disposal for the year ended December 31, 2012.
A significant portion of the escrow identified for general indemnification obligations was held for a period of 18 months following the sale date with the remaining general escrow funds to be held for 36 months following the sale date.
During the year ended December 31, 2014, the Company received $7.4 million from the escrow identified for general indemnification obligations, which represents the full settlement of that component of the escrow. The net carrying amount of the escrow receivable, classified in other current assets, was $7.8 million at December 31, 2013. A loss of $0.4 million was recorded within gain (loss) from discontinued operations for the year ended December 31, 2014 upon settling a claim from the buyer.
If and when any additional amounts are received from the remaining general escrow funds, which totaled $4.0 million at December 31, 2014, the Company may recognize an adjustment to the gain (loss) from discontinued operations within its consolidated financial statements.
In accordance with ASC 205-20-45-6, Allocation of Interest to Discontinued Operations, the Company has allocated interest on debt that is required to be repaid as a result of a disposal transaction to discontinued operations. The consolidated financial statements for all periods presented have been recast to present the operating results of the FSTech Group and previously divested or exited businesses as discontinued operations.
The Company retains certain liabilities for discontinued operations prior to January 1, 2011, primarily for environmental remediation and product liability. Included in liabilities of discontinued operations at December 31, 2014 and 2013 is $1.3 million and $1.4 million, respectively, related to environmental remediation at the Pearland, Texas facility, and $3.0 million and $3.6 million, respectively, relating to estimated product liability obligations of the discontinued North American refuse truck body business.