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DIVESTITURES | 6 Months Ended
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Apr. 03, 2022
Discontinued Operations and Disposal Groups [Abstract] |
DIVESTITURES | DIVESTITURES The following table summarizes the components of Income from Discontinued Operations, Net of Tax in the accompanying Condensed Consolidated Statements of Income for the three and six month periods ended April 3, 2022 and April 4, 2021:
|  | Three Month Periods Ended |  | Six Month Periods Ended
(in millions) |  | April 3, 2022 |  | April 4, 2021 |  | April 3, 2022 |  | April 4, 2021
Income from discontinued operations before income taxes – HHI |  | $ | 71.0 |  |  | $ | 69.6 |  |  | $ | 130.9 |  |  | $ | 163.7 |
Loss from discontinued operations before income taxes – Other |  | (3.1) |  |  | (1.0) |  |  | (3.4) |  |  | (1.3) |
Interest on corporate debt allocated to discontinued operations |  | 11.0 |  |  | 11.8 |  |  | 21.4 |  |  | 24.5 |
Income from discontinued operations before income taxes |  | 56.9 |  |  | 56.8 |  |  | 106.1 |  |  | 137.9 |
Income tax expense from discontinued operations |  | 15.8 |  |  | 16.5 |  |  | 26.2 |  |  | 40.4 |
Income from discontinued operations, net of tax |  | 41.1 |  |  | 40.3 |  |  | 79.9 |  |  | 97.5 |
Income (loss) from discontinued operations, net of tax attributable to noncontrolling interest |  | 0.1 |  |  | — |  |  | 0.5 |  |  | (0.2) |
Income from discontinued operations, net of tax attributable to controlling interest |  | $ | 41.0 |  |  | $ | 40.3 |  |  | $ | 79.4 |  |  | $ | 97.7 |
Interest from corporate debt allocated to discontinued operations includes interest expense from Term Loans required to be paid down using proceeds received on disposal on sale of a business, and interest expense from corporate debt not directly attributable to or related to other operations based on the ratio of net assets of the disposal group held for sale to the consolidated net assets of the Company plus consolidated debt, excluding debt assumed in transaction, required to be repaid, or directly attributable to other operations of the Company. Corporate debt, including Term Loans required to be paid down, are not classified as held for sale as they are not directly attributable to the identified disposal group. HHI On September 8, 2021, the Company entered into a definitive Asset and Stock Purchase Agreement (the "ASPA") with ASSA ABLOY AB ("ASSA") to sell its HHI segment for cash proceeds of $4.3 billion, subject to customary purchase price adjustments. The Company's assets and liabilities associated with the HHI disposal group have been classified as held for sale and the respective operations have been classified as discontinued operations and reported separately for all periods presented. The ASPA provides that ASSA will purchase the equity of certain subsidiaries of the Company, and acquire certain assets and assume certain liabilities of other subsidiaries used or held for the purpose of the HHI business. The Company and ASSA have made customary representations and warranties and have agreed to customary covenants relating to the acquisition. Among other things, prior to the consummation of the acquisition, the Company will be subject to certain business conduct restrictions with respect to its operation of the HHI business. The Company and ASSA have agreed to indemnify each other for losses arising from certain breaches of the ASPA and for certain other matters. In particular, the Company has agreed to indemnify ASSA for certain liabilities relating to the assets retained by the Company, and ASSA has agreed to indemnify the Company for certain liabilities assumed by ASSA, in each case as described in the ASPA. The Company and ASSA have agreed to enter into related agreements ancillary to the acquisition that will become effective upon the consummation of the acquisition, including a customary transition services agreements and reverse transition services agreements. The consummation of the acquisition is subject to certain customary closing conditions, including, among other things, (i) the absence of a material adverse effect on HHI, (ii) the expiration or termination of required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, (iii) the receipt of certain other antitrust approvals in certain specified foreign jurisdictions (the conditions contained in (ii) and (iii) together, the “Antitrust Conditions”), (iv) the accuracy of the representations and warranties of the parties generally subject to a customary material adverse effect standard (as described in the ASPA) or other customary materiality qualifications), (v) the absence of governmental restrictions on the consummation of the acquisition in certain jurisdictions, and (vi) material compliance by the parties with their respective covenants and agreements under the ASPA. The consummation of the transaction is not subject to any financing condition. The Company is engaged with antitrust regulators in the ongoing regulatory review of the transaction. Although the timing and outcome of the regulatory process cannot be predicted, the Company currently expects the merger review process to last for several months. As such, though there can be no assurance when the transaction will close, if at all, the Company does expect the transaction to close before September 2022. The ASPA also contains certain termination rights, including the right of either party to terminate the ASPA if the consummation of the acquisition has not occurred on or before December 8, 2022 (the “Termination Date”). Further, if the acquisition has not been consummated by the Termination Date and all conditions precedent to ASSA's obligation to consummate the acquisition have otherwise been satisfied except for one or more of the Antitrust Conditions, then ASSA would be required to pay the Company a termination fee of $350 million. The following table summarizes the assets and liabilities of the HHI disposal group classified as held for sale as of April 3, 2022 and September 30, 2021:
(in millions) |  | April 3, 2022 |  | September 30, 2021
Assets |  |  |  |
Trade receivables, net |  | $ | 152.0 |  |  | $ | 130.2 |
Other receivables |  | 7.8 |  |  | 12.1 |
Inventories |  | 401.1 |  |  | 332.2 |
Prepaid expenses and other current assets |  | 41.2 |  |  | 39.1 |
Property, plant and equipment, net |  | 157.3 |  |  | 143.5 |
Operating lease assets |  | 65.8 |  |  | 55.5 |
Deferred charges and other |  | 8.4 |  |  | 11.7 |
Goodwill |  | 711.3 |  |  | 710.9 |
Intangible assets, net |  | 374.9 |  |  | 374.8 |
Total assets of business held for sale |  | $ | 1,919.8 |  |  | $ | 1,810.0 |
Liabilities |  |  |  |
Current portion of long-term debt |  | $ | 1.3 |  |  | $ | 1.5 |
Accounts payable |  | 242.6 |  |  | 206.6 |
Accrued wages and salaries |  | 28.0 |  |  | 41.7 |
Other current liabilities |  | 74.3 |  |  | 75.9 |
Long-term debt, net of current portion |  | 54.0 |  |  | 54.4 |
Long-term operating lease liabilities |  | 52.7 |  |  | 48.6 |
Deferred income taxes |  | 8.2 |  |  | 7.8 |
Other long-term liabilities |  | 14.6 |  |  | 17.8 |
Total liabilities of business held for sale |  | $ | 475.7 |  |  | $ | 454.3 |
The following table summarizes the components of income from discontinued operations before income taxes associated with the HHI divestiture in the accompanying Condensed Consolidated Statements of Operations for the three and six month periods ended April 3, 2022 and April 4, 2021:
|  | Three Month Periods Ended |  | Six Month Periods Ended
(in millions) |  | April 3, 2022 |  | April 4, 2021 |  | April 3, 2022 |  | April 4, 2021
Net sales |  | $ | 420.8 |  |  | $ | 389.5 |  |  | $ | 795.4 |  |  | $ | 798.2 |
Cost of goods sold |  | 275.4 |  |  | 248.1 |  |  | 520.4 |  |  | 488.8 |
Gross profit |  | 145.4 |  |  | 141.4 |  |  | 275.0 |  |  | 309.4 |
Operating expenses |  | 72.3 |  |  | 69.9 |  |  | 139.5 |  |  | 140.3 |
Operating income |  | 73.1 |  |  | 71.5 |  |  | 135.5 |  |  | 169.1 |
Interest expense |  | 0.8 |  |  | 0.9 |  |  | 1.7 |  |  | 1.7 |
Other non-operating expense, net |  | 1.3 |  |  | 1.0 |  |  | 2.9 |  |  | 3.7 |
Income from discontinued operations before income taxes |  | $ | 71.0 |  |  | $ | 69.6 |  |  | $ | 130.9 |  |  | $ | 163.7 |
Beginning in September 2021, the Company ceased the recognition of depreciation and amortization of long-lived assets associated with the HHI disposal group classified as held for sale. Interest expense consists of interest from debt directly attributable to HHI operations that primarily consist of interest from finance leases. No impairment loss was recognized on the assets held for sale as the purchase price of the business less estimated cost to sell is more than its carrying value. The following table presents significant non-cash items and capital expenditures of discontinued operations from the HHI divestiture for the three and six month periods ended April 3, 2022 and April 4, 2021:
|  | Three Month Periods Ended |  | Six Month Periods Ended
(in millions) |  | April 3, 2022 |  | April 4, 2021 |  | April 3, 2022 |  | April 4, 2021
Depreciation and amortization |  | $ | — |  |  | $ | 8.5 |  |  | $ | — |  |  | $ | 17.1 |
Share based compensation |  | $ | 1.2 |  |  | $ | 1.2 |  |  | $ | 4.1 |  |  | $ | 2.4 |
Purchases of property, plant and equipment |  | $ | 7.5 |  |  | $ | 7.3 |  |  | $ | 12.4 |  |  | $ | 11.5 |
Other Income from discontinued operations before income taxes – Other includes incremental pre-tax loss on sale for changes to tax and legal indemnifications and other agreed-upon funding under the acquisition agreement for sale and divestiture of its Global Batteries & Lighting ("GBL") and Global Auto Care ("GAC") divisions to Energizer Holdings, Inc. ("Energizer") during the year ended September 30, 2019. The Company and Energizer agreed to indemnify each other for losses arising from certain breaches of the acquisition agreement and for certain other matters. The Company has agreed to indemnify for certain liabilities relating to the assets retained, and Energizer agreed to indemnify the Company for certain liabilities assumed, in each case as described in the acquisition agreements. As of April 3, 2022 and September 30, 2021, the Company recognized $26.5 million and $36.5 million, respectively, related to indemnification payables in accordance with the acquisition agreements, including $9.8 million and $17.3 million, respectively, within Other Current Liabilities, primarily attributable to current income tax indemnifications, and $16.7 million and $19.2 million, respectively, within Other Long-Term Liabilities on the Company’s Condensed Consolidated Statements of Financial Position, primarily attributable to income tax indemnifications associated with previously recognized uncertain tax benefits. Subsequently, effective January 2, 2020, Energizer closed its divestitures of the European based Varta® consumer battery business in the EMEA region to Varta AG and transferred all respective rights and indemnifications attributable to the Varta® consumer battery business provided by the GBL sale to Varta AG. The Company entered into a series of transaction service agreements ("TSA") and reverse TSAs with Energizer to support various shared back office administrative functions including finance, sales and marketing, information technology, human resources, real estate and supply chain, customer service and procurement. TSAs associated with the Varta® consumer battery business were transferred to Varta AG as part of the subsequent divestiture by Energizer. Charges associated with TSAs are recognized as bundled service costs under a fixed fee structure by the respective service or function and geographic location, including one-time pass-through charges for warehousing, freight, amongst others, with variable expiration dates up 24 months. Charges associated with TSAs and reverse TSAs are recognized as a reduction to or increase in the respective operating costs as a component of operating expense or cost of goods sold depending upon the functions supported by or provided to the Company. Additionally, due to the commingled nature of the shared administrative functions, cash would be received and/or paid on behalf of the respective counterparty's operations, resulting in cash flow being commingled with operating cash flow of the Company which would settle on a net basis with TSA charges. During the three month period ended April 4, 2021, the Company recognized net gain of $0.1 million, consisting of TSA charges of $0.1 million. During the six month period ended April 4, 2021, the Company recognized net loss of $1.7 million, consisting of TSA charges of $0.9 million and reverse TSA costs of $2.6 million. The Company exited all outstanding TSAs and reverse TSAs in January 2021.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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