4. Dispositions
During 2012 and 2013, we determined various businesses were no longer core to our future operations and committed to a plan to dispose of these businesses. As a result, during 2013 we sold our acute infusion therapies line of business and various portions of our UBC line of business and during 2012 we sold EAV, Liberty and CYC. In accordance with applicable accounting guidance, we have also determined our European operations to be classified as held for sale. Prior to the sales of our acute infusion therapies line of business, EAV and Liberty, goodwill and intangible impairment charges were recorded. Below is a summary of 2013 and 2012 charges associated with these businesses and the impact to our consolidated statement of operations:
|
| | | | | | | | | | | | | | | |
| December 31, 2013 | | December 31, 2012 |
(in millions) | Gain recorded upon sale | | Goodwill & Intangible Impairments | | Gain
recorded
upon sale | | Goodwill &
Intangible
Impairments |
EAV | $ | — |
| | $ | — |
| | $ | 3.7 |
| | $ | (11.5 | ) |
Disposed UBC operations | | | | | | | |
Technology solutions and publications for biopharmaceutical companies | 18.3 |
| | — |
| | — |
| | — |
|
Health economics, outcomes research, data analytics and market access services | 11.4 |
| | — |
| | — |
| | — |
|
Specialty services for pre-market trials | 22.1 |
| | — |
| | — |
| | — |
|
Acute infusion therapies line of business | 0.5 |
| | (32.9 | ) | | — |
| | — |
|
Recorded in net loss from discontinued operations, net of tax | $ | 52.3 |
| | $ | (32.9 | ) | | $ | 3.7 |
| | $ | (11.5 | ) |
| | | | | | | |
Liberty | $ | — |
| | $ | — |
| | $ | 0.5 |
| | $ | (23.0 | ) |
CYC(1) | 3.5 |
| | — |
| | 14.3 |
| | — |
|
Recorded in selling, general and administrative | $ | 3.5 |
| | $ | — |
| | $ | 14.8 |
| | $ | (23.0 | ) |
| | | | | | | |
Total disposition charges | $ | 55.8 |
| | $ | (32.9 | ) | | $ | 18.5 |
| | $ | (34.5 | ) |
(1) Reflects the settlement of certain working capital balances in 2013.
Sale of our acute infusion therapies line of business. On November 1, 2013, we completed the sale of our acute infusion therapies line of business, which was included within our PBM segment before being classified as a discontinued operation as of September 30, 2013. During the fourth quarter of 2013, we recognized a gain on the sale of this business, net of the sale of its assets, which totaled $0.5 million. The gain is included in the “Net loss from discontinued operations, net of tax” line item in the accompanying consolidated statement of operations for the year ended December 31, 2013.
In 2013, in connection with entering into an agreement for the sale of the business, an impairment in the value of the related goodwill was identified. The impairment charge, which totaled $32.9 million, was recorded and reflects goodwill impairment and the subsequent write-down to fair market value. The fair value was determined utilizing the contracted sales price of the business (Level 2). The impairment charge is included in the “Net loss from discontinued operations, net of tax” line item in the accompanying consolidated statement of operations for the year ended December 31, 2013.
Sale of portions of UBC. On August 15, 2013, we completed the sale of the portion of our UBC business related to specialty services for pre-market trials located in Wayne, Pennsylvania. During the third quarter of 2013, we recognized a gain on the sale of this business which totaled $22.1 million. On July 1, 2013, we completed the sale of the portion of our UBC business related to providing health economics, outcomes research, data analytics and market access services located in Bethesda, Maryland. During the third quarter of 2013, we recognized a gain on the sale of this business which totaled $11.4 million. On June 7, 2013, we completed the sale of the portion of our UBC business which primarily provided technology solutions and publications for biopharmaceutical companies located in Horsham, United Kingdom. During the second quarter of 2013, we recognized a gain on the sale of this business which totaled $18.3 million. The gains on these businesses are included in the “Net loss from discontinued operations, net of tax” line item in the accompanying consolidated statement of operations for the year ended December 31, 2013. Our disposed UBC operations were included within our Other Business Operations segment before being classified as discontinued operations as of December 31, 2012.
Sale of EAV. On December 4, 2012, we completed the sale of our EAV line of business, which primarily provided home delivery pharmacy services in Germany. During the fourth quarter of 2012, we recognized a gain on the sale of this business, net of the sale of its assets, which totaled $3.7 million. The gain is included in the “Net loss from discontinued operations, net of tax” line item in the accompanying consolidated statement of operations for the year ended December 31, 2012. Prior to being classified as a discontinued operation, EAV was included in our Other Business Operations segment.
In 2012, the Company determined it was necessary to reassess carrying values of EAV’s assets and liabilities based on a change in business environment related to an adverse court ruling by the German high court in August 2012 and the expected disposal of EAV as a result of the ruling (Level 2). Based on the assessment, we recorded impairment charges associated with this line of business totaling $11.5 million to reflect the write-down of $2.0 million of goodwill and $9.5 million of intangible assets. These charges are included in the “Net loss from discontinued operations, net of tax” line item in the accompanying consolidated statement of operations for the year ended December 31, 2012.
Sale of Liberty. On December 3, 2012, we completed the sale of our Liberty line of business, which is included within our Other Business Operations segment. Liberty sells diabetes testing supplies and is located in Port St. Lucie, Florida. Following the sale, Express Scripts will work as a back-end pharmacy supplier for portions of the Liberty business for a minimum of two years. Therefore, the Company retains certain cash flows associated with Liberty following the sale which preclude classification of this business as a discontinued operation. During the fourth quarter of 2012, we recognized a gain on the sale of this business, net of the sale of its assets, which totaled $0.5 million. The gain is included in the SG&A line item in the accompanying consolidated statement of operations for the year ended December 31, 2012.
In 2012, as a result of our plan to dispose of Liberty, an impairment charge totaling $23.0 million was recorded against intangible assets. The fair value was determined utilizing the contracted sales price of the business (Level 2). This charge is included in the SG&A line item in the accompanying consolidated statement of operations for the year ended December 31, 2012. The write-down was comprised of impairments to customer relationships with a carrying value of $24.2 million and trade names with a carrying value of $6.6 million.
From the date of Merger through the date of disposal, Liberty’s revenue totaled $323.9 million and operating loss totaled $32.3 million. As Liberty was sold in 2012, no associated assets or liabilities were held as of December 31, 2012.
Sale of CYC. On September 14, 2012, we completed the sale of our CYC line of business, which is included within our Other Business Operations segment. Upon completion of the sale, we recognized a gain on the sale of this business, net of the sale of its assets, which totaled $14.3 million. The gain is included in the SG&A line item in the accompanying consolidated statement of operations for the year ended December 31, 2012. During the first quarter of 2013, certain working capital balances were settled, resulting in a $3.5 million gain. The gain is included in the SG&A line item in the accompanying consolidated statement of operations for the year ended December 31, 2013.
We determined that the results of operations for CYC for 2012 and 2011 were immaterial to both consolidated and segment results of operations, and we have therefore not presented these results separately as discontinued operations for the current or prior periods. Operating income (loss), including the gain associated with the sale, totaled $14.7 million and less than $(0.1) million for the years ended December 31, 2012 and 2011, respectively. Total assets for CYC as of December 31, 2011 were $36.9 million. The majority of these assets represented goodwill of $12.0 million and cash of $14.9 million. As these amounts represented less than 0.1% of total consolidated assets, the assets were not classified as held for sale within the consolidated balance sheet.
Held for sale classification of Europe. During the fourth quarter of 2012, we determined that our operations in Europe, which were included within our Other Business Operations segment, were not core to our future operations and committed to a plan to dispose of this business. As a result, this business was classified as discontinued as of December 31, 2012. Our European operations primarily consisted of clinical and specialty pharmacy management services. It is expected that our European operations will be shut down in the first half of 2014.
Select financial information. The results of operations for our acute infusion therapies line of business, portions of UBC, as defined above, EAV and our European operations are reported as discontinued operations for all periods presented in the accompanying consolidated statement of operations in accordance with applicable accounting guidance. As such, results of operations for the year ended December 31, 2013 and 2012 reflect these operations as discontinued. As the discontinued operations were acquired through the Merger, results of operations for the period beginning January 1, 2012 through April 1, 2012 do not include these operations in our accompanying consolidated statement of operations. Additionally, for all periods presented, cash flows of our discontinued operations are segregated in our accompanying consolidated statement of cash flows. Finally, assets and liabilities of these businesses held were segregated in our accompanying consolidated balances sheet as of December 31, 2013 and 2012. The major components of assets and liabilities of these discontinued operations are as follows:
|
| | | | | | | |
| December 31, |
(in millions) | 2013 | | 2012 |
Current assets | $ | 31.0 |
| | $ | 271.4 |
|
Goodwill | — |
| | 127.9 |
|
Other intangible assets, net | — |
| | 157.4 |
|
Other assets | — |
| | 22.5 |
|
Total assets | $ | 31.0 |
| | $ | 579.2 |
|
Current liabilities | $ | 1.3 |
| | $ | 150.7 |
|
Deferred taxes | — |
| | 44.9 |
|
Other liabilities | 0.1 |
| | 3.7 |
|
Total liabilities | $ | 1.4 |
| | $ | 199.3 |
|
Select statement of operations information. Certain information with respect to discontinued operations, as defined above, for the years ended December 31, 2013 and 2012 is summarized below. There were no discontinued operations for the year ended December 31, 2011.
|
| | | | | | | |
(in millions) | 2013 | | 2012 |
Revenues | $ | 521.2 |
| | $ | 702.3 |
|
Operating loss | (24.9 | ) | | (22.7 | ) |
Income tax expense from discontinued operations | (28.7 | ) | | (7.5 | ) |
Net loss from discontinued operations, net of tax | $ | (53.6 | ) | | $ | (32.3 | ) |
