S. Discontinued operations
On December 6, 2013, the company completed the sale of its U.S. forestlands and related assets to Plum Creek, resulting in the recognition of a pre-tax gain of $780 million presented within discontinued operations on an after-tax basis. The company received total consideration of $934 million, of which approximately $74 million was paid in cash and $860 million was in the form of a ten-year term installment note. Using the installment note as collateral, the company received $774 million in proceeds under a non-recourse secured financing agreement with a bank on December 20, 2013. The results of the forestry and certain minerals-related businesses, as well as the gain, are reported in discontinued operations in the consolidated financial statements. These businesses were previously reported within the Community Development and Land Management segment.
On May 1, 2012, MeadWestvaco completed the spin-off of its C&OP business and subsequent merger of that business with ACCO Brands Corporation. MeadWestvaco shareholders received approximately one share of ACCO Brands Corporation stock for every three shares of MeadWestvaco stock they owned of record as of April 24, 2012, resulting in their collective ownership on May 1, 2012 of 50.5% of the outstanding common shares of ACCO Brands Corporation. In accordance with the terms of the transaction, MeadWestvaco received cash distributions on a tax-free basis totaling $460 million during April 2012 pursuant to loan proceeds from new debt obligations of the C&OP business. The net assets of the C&OP business included cash totaling $59 million pursuant to MeadWestvaco satisfying a working capital provision of the transaction, subject to certain post-closing adjustments. For the years ended December 31, 2012, 2011 and 2010, the operating results of the C&OP business are reported in discontinued operations in the consolidated statements of operations on an after-tax basis. The assets and liabilities of the C&OP business, including the debt obligations discussed above, were recorded as a dividend to MeadWestvaco’s shareholders and resulted in a $15 million decrease to consolidated shareholders’ equity as of May 1, 2012.
On February 1, 2011, the company completed the sale of its Envelope Products business for cash proceeds of $55 million. During 2010, the company recorded pre-tax charges of $19 million ($15 million after taxes) comprised of impairment of long-lived assets of $6 million, impairment of allocated goodwill of $7 million and a pension curtailment loss of $6 million. During 2011, the company recorded additional charges of $1 million ($1 million after taxes) primarily related to a working capital adjustment. The combined pre-tax charges recorded in 2010 and 2011 sum to $20 million ($16 million after taxes) and represent the total amount of loss on sale of the Envelope Products business. The operating results of this business, as well as the charges noted above, are reported in discontinued operations in the consolidated statements of operations on an after-tax basis. The results of operations and assets and liabilities of the Envelope Products business were previously included in the C&OP segment.
Below are amounts attributed to the above dispositions included in discontinued operations in the consolidated statements of operations.
| Year ended December 31, | ||||||||||||
| In millions, except per share amounts | 2013 | 2012 | 2011 | |||||||||
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Net sales |
$ | 154 | $ | 307 | $ | 900 | ||||||
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Cost of sales |
60 | 141 | 570 | |||||||||
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Selling, general and administrative expenses |
18 | 61 | 160 | |||||||||
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Interest expense |
2 | 8 | 20 | |||||||||
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Other income, net |
(798 | ) | (3 | ) | (3 | ) | ||||||
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Income before income taxes |
872 | 100 | 153 | |||||||||
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Income tax provision |
353 | 48 | 84 | |||||||||
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Net income |
$ | 519 | $ | 52 | $ | 69 | ||||||
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Net income per share |
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Basic |
$ | 2.93 | $ | 0.30 | $ | 0.41 | ||||||
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Diluted |
$ | 2.88 | $ | 0.29 | $ | 0.40 | ||||||
There were no assets and liabilities classified as discontinued operations in the consolidated balance sheet at December 31, 2013. The following table shows the major categories of assets and liabilities that are classified as discontinued operations in the consolidated balance sheet at December 31, 2012:
| In millions | December 31, 2012 | |||
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Accounts receivable, net |
$ | 2 | ||
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Inventories |
0 | |||
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Other current assets |
0 | |||
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Current assets |
2 | |||
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Property, plant, equipment and forestlands, net |
147 | |||
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Goodwill |
0 | |||
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Other assets |
0 | |||
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Non-current assets |
147 | |||
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Accounts payable |
2 | |||
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Accrued expenses |
3 | |||
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Notes payable and current maturities of long-term debt |
0 | |||
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Current liabilities |
5 | |||
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Other long-term liabilities |
3 | |||
In connection with certain business dispositions, MeadWestvaco has provided certain guarantees and indemnities to the respective buyers and other parties. These obligations include both potential environmental matters as well as certain contracts with third parties. The total aggregate exposure to the company for these matters could be up to $40 million. The company has evaluated the fair value of these guarantees and indemnifications which did not result in a material impact to the company’s consolidated financial statements.