DISCONTINUED OPERATIONS
In December 2008, we announced strategic initiatives to improve our competitive advantage and drive long-term profitable growth. As part of these initiatives, we decided to discontinue SCS operations in South America and Europe. In 2009, we ceased SCS service operations in Brazil, Argentina, Chile and European markets. Accordingly, results of these operations, financial position and cash flows are separately reported as discontinued operations for all periods presented in the Consolidated Financial Statements and notes thereto.
Summarized results of discontinued operations were as follows:
|
| | | | | | | | | | | | |
| | Years ended December 31, |
| | 2013 | | 2012 | | 2011 |
| | (In thousands) |
Pre-tax loss from discontinued operations | | $ | (5,450 | ) | | $ | (2,226 | ) | | $ | (1,185 | ) |
Income tax benefit (expense) | | 46 |
| | 11,306 |
| | (406 | ) |
(Loss) earnings from discontinued operations, net of tax | | $ | (5,404 | ) | | $ | 9,080 |
| | $ | (1,591 | ) |
Results of discontinued operations in 2013, 2012 and 2011 included $5 million, $3 million and $2 million, respectively, of pre-tax losses related to adverse legal developments and professional and administrative fees associated with our discontinued South American operations. As previously disclosed, we were assessed $5 million (before and after tax) in prior years for certain state operating tax credits utilized between 2001 and 2003. During 2013, we received an adverse tax ruling related to this matter. We incurred and paid $2 million to the Brazilian tax authority to settle all of these state operating tax-credit assessments. Results of discontinued operations in 2012 also included $1 million of pre-tax income related to the sub-lease of a European SCS facility as well as a tax benefit of $11 million resulting from the expiration of a statute of limitations. Results of discontinued operations in 2011 also included $1 million of pre-tax income from a favorable prior year insurance claim development.
The following is a summary of assets and liabilities of discontinued operations:
|
| | | | | | | | |
| | December 31, 2013 | | December 31, 2012 |
| | (In thousands) |
Total assets, primarily deposits (included in other assets) | | $ | 3,627 |
| | $ | 4,460 |
|
Total liabilities, primarily contingent accruals (included in other non-current liabilities) | | $ | 4,501 |
| | $ | 5,329 |
|
Although we discontinued our South American operations in 2009, we continue to be party to various federal, state and local legal proceedings involving labor matters, tort claims and tax assessments. We have established loss provisions for any matters where we believe a loss is probable and can be reasonably estimated. Other than with respect to the matters discussed below, for matters where a reserve has not been established and for which we believe a loss is reasonably possible, as well as for matters where a reserve has been recorded but for which an exposure to loss in excess of the amount accrued is reasonably possible, we believe that such losses will not have a material effect on our consolidated financial statements.
In Brazil, in addition to the settlement noted above for tax years 2001 through 2003, we were previously assessed $5 million (before and after tax) in prior years for various federal income taxes and social contribution taxes for the 1997 and 1998 tax years. We successfully overturned these federal tax assessments in the lower courts; however, there is a reasonable possibility that these rulings could be reversed and we would be required to pay the assessments. We believe it is more likely than not that our position will ultimately be sustained if appealed and no amounts have been reserved for these matters. We are entitled to indemnification for a portion of any resulting liability on these federal tax claims which, if honored, would reduce the estimated loss.
