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DIVESTITURES | 9 Months Ended
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Jul. 02, 2023
Discontinued Operations and Disposal Groups [Abstract] |
DIVESTITURES | DIVESTITURES The following table summarizes the components of Income from Discontinued Operations, Net of Tax in the Condensed Consolidated Statements of Income for the three and nine month periods ended July 2, 2023 and July 3, 2022:
|  | Three Month Periods Ended |  | Nine Month Periods Ended
(in millions) |  | July 2, 2023 |  | July 3, 2022 |  | July 2, 2023 |  | July 3, 2022
Income from discontinued operations before income taxes – HHI |  | $ | 32.5 |  |  | $ | 57.9 |  |  | $ | 136.9 |  |  | $ | 188.9 |
Gain on sale of discontinued operations before income taxes – HHI |  | 2,824.9 |  |  | — |  |  | 2,824.9 |  |  | — |
Loss from discontinued operations before income taxes – Other |  | (0.2) |  |  | (0.2) |  |  | (2.2) |  |  | (3.6) |
Interest expense on corporate debt allocated to discontinued operations |  | 15.4 |  |  | 11.9 |  |  | 49.4 |  |  | 33.3 |
Income from discontinued operations before income taxes |  | 2,841.8 |  |  | 45.8 |  |  | 2,910.2 |  |  | 152.0 |
Income tax expense from discontinued operations |  | 810.0 |  |  | 15.9 |  |  | 837.5 |  |  | 42.2 |
Income from discontinued operations, net of tax |  | 2,031.8 |  |  | 29.9 |  |  | 2,072.7 |  |  | 109.8 |
Net income from discontinued operations attributable to noncontrolling interest |  | 0.2 |  |  | 0.2 |  |  | 0.3 |  |  | 0.7 |
Net income from discontinued operations attributable to controlling interest |  | $ | 2,031.6 |  |  | $ | 29.7 |  |  | $ | 2,072.4 |  |  | $ | 109.1 |
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 the 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. Hardware and Home Improvement ("HHI") On September 8, 2021, the Company entered into a definitive Asset and Stock Purchase Agreement (the "Purchase Agreement") with ASSA ABLOY AB ("ASSA") to sell its HHI segment for cash proceeds of $4.3 billion, subject to customary purchase price adjustments. On June 20, 2023, the Company completed its divestiture of its HHI segment resulting in the recognition of a gain on sale of $2,824.9 million included as a component of Income From Discontinued Operations, Net of Tax. The Company's assets and liabilities associated with the HHI disposal group prior to the transaction close were classified as held for sale and the respective operations were classified as discontinued operations and reported separately during the three and nine month period ended July 2, 2023 and July 3, 2022 through the transaction close. The Purchase Agreement provides ASSA to 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. The Company and ASSA have agreed to indemnify each other for losses arising from certain breaches of the Purchase Agreement 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 Purchase Agreement. The Company and ASSA have agreed to enter into related agreements ancillary to the acquisition that became effective upon the consummation of the acquisition, including a customary transition services agreement and providing for both forward and reverse transition services. The consummation of the acquisition was not subject to any financing condition. The following table summarizes the assets and liabilities of the HHI disposal group classified as held for sale as September 30, 2022:
(in millions) |  | September 30, 2022
Assets |  |
Trade Receivables |  | $ | 135.5 |
Other receivables |  | 6.7 |
Inventories |  | 327.1 |
Prepaid expenses and other current assets |  | 33.1 |
Property, plant and equipment, net |  | 166.6 |
Operating lease assets |  | 63.6 |
Deferred charges and other |  | 11.7 |
Goodwill |  | 698.6 |
Intangible assets, net |  | 373.8 |
Total assets of business held for sale |  | $ | 1,816.7 |
Liabilities |  |
Current portion of long-term debt |  | $ | 1.4 |
Accounts payable |  | 224.7 |
Accrued wages and salaries |  | 32.7 |
Other current liabilities |  | 79.9 |
Long-term debt, net of current portion |  | 54.6 |
Long-term operating lease liabilities |  | 46.9 |
Deferred income taxes |  | 10.1 |
Other long-term liabilities |  | 13.4 |
Total liabilities of business held for sale |  | $ | 463.7 |
The following table summarizes the components of income from discontinued operations before income taxes associated with the HHI divestiture for the three and nine month periods ended July 2, 2023 and July 3, 2022, through the transaction close date:
|  | Three Month Periods Ended |  | Nine Month Periods Ended
(in millions) |  | July 2, 2023 |  | July 3, 2022 |  | July 2, 2023 |  | July 3, 2022
Net sales |  | $ | 296.4 |  |  | $ | 417.0 |  |  | $ | 1,042.5 |  |  | $ | 1,212.4 |
Cost of goods sold |  | 203.6 |  |  | 284.0 |  |  | 701.6 |  |  | 797.4 |
Gross profit |  | 92.8 |  |  | 133.0 |  |  | 340.9 |  |  | 415.0 |
Operating expenses |  | 59.4 |  |  | 75.1 |  |  | 199.4 |  |  | 221.6 |
Operating income |  | 33.4 |  |  | 57.9 |  |  | 141.5 |  |  | 193.4 |
Interest expense |  | 0.7 |  |  | 0.9 |  |  | 2.4 |  |  | 2.5 |
Other non-operating expense (income), net |  | 0.2 |  |  | (0.9) |  |  | 2.2 |  |  | 2.0 |
Income from discontinued operations before income taxes |  | $ | 32.5 |  |  | $ | 57.9 |  |  | $ | 136.9 |  |  | $ | 188.9 |
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 nine month periods ended July 2, 2023 and July 3, 2022, through the transaction close date:
|  | Three Month Periods Ended |  | Nine Month Periods Ended
(in millions) |  | July 2, 2023 |  | July 3, 2022 |  | July 2, 2023 |  | July 3, 2022
Share based compensation |  | $ | 0.4 |  |  | $ | (0.1) |  |  | $ | 1.5 |  |  | $ | 3.9 |
Purchases of property, plant and equipment |  | 3.9 |  |  | 5.6 |  |  | 11.9 |  |  | 18.1 |
The Company and ASSA entered into related agreement that became effective upon the consummation of the transaction including a customary transition services agreement ("TSA") that 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; to support both the transferred HHI operations and the continuing operations of the Company. Charges associated with TSAs are recognized as bundled service costs under a fixed fee structure by the respective service or function and also include one time pass-through charges including warehousing, freight, among others. TSA charges are settled between the Company and ASSA on a net basis. Charges to ASSA are recognized as a reduction of the respective operating expense incurred by the Company and charges from ASSA are recognized as an operating expense depending upon the function supported by ASSA. The TSA has an overall expected time period of 12 months following the close of the transaction with variability in expiration dependent upon the completed transition of the respective service or function, and may provide up to 12 additional months for a total duration of up to 24 months. During the three and nine month period ended July 2, 2023, the Company recognized a net income of $1.0 million associated with TSA charges. Additionally, the Company and ASSA will receive cash and make payments on behalf of the respective counterparty's operations as part of the shared administrative functions, resulting in cash flow being commingled with the operating cash flow of the Company. The Company recognizes a net payable or receivable with ASSA for any outstanding TSA charges and net working capital attributable to commingled cash flow. As of July 2, 2023, the Company has a net payable of $34.3 million included in Accounts Payable on the Company's Condensed Consolidated Statement of Financial Position consisting of amounts due to ASSA for estimated purchase price settlement, cash flow settlement for commingled operations and net TSA charges including amounts subject to repayment by the Company. Further, the Company has recognized payables to ASSA related to indemnifications in accordance with the purchase agreement, primarily attributable to outstanding settlements with tax authorities and uncertain tax benefit obligations. As of July 2, 2023, the Company recognized $2.6 million, included within Other Long-Term Liabilities, on the Company’s Condensed Consolidated Statements of Financial Position. Other Loss from discontinued operations before income taxes – other includes incremental pre-tax loss for changes to tax and legal indemnifications and other agreed-upon funding under the acquisition agreements for the sale and divestiture of the 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, in each case as described in the acquisition agreements. 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. As of July 2, 2023 and September 30, 2022, the Company recognized $25.9 million and $22.3 million, respectively, related to indemnification payables in accordance with the acquisition agreements, primarily attributable to uncertain tax benefit obligations and outstanding settlements with tax authorities that were transferred and indemnified in accordance with the acquisition agreement, including $8.9 million and $7.0 million within Other Current Liabilities, respectively, and $17.0 million and $15.3 million, within Other Long-Term Liabilities, respectively, on the Company’s Condensed Consolidated Statements of Financial Position.

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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 -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 360 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//360/tableOfContent + Details
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