Joanne M. Flood - Wiley GAAP - Financial Statement Disclosure Manual

The Company has presented the operating results of the European Home Décor Business as well as the entities to be sold within discontinued operations, net of tax in the consolidated statements of operations for all periods presented. The related assets and liabilities of the disposal groups are presented as current and non‐current assets and liabilities of discontinued operations in the consolidated balance sheets as of December 31, 20X1 and December 26, 20X2. Cash flows from the Company's discontinued operations are presented in the consolidated statements of cash flows for all periods. Certain portions of the former International Division assets and operations are being retained or did not meet the held for sale criteria at December 31, 20X2 and, therefore, remain in continuing operations.

The loss on classification as discontinued operations relating to the remaining entities was measured at the lower of carrying value or estimated fair value less costs to sell and is included in the valuation allowance in the balance sheet as shown below. Completion of the sale of the remaining international operations may be for amounts different from the current estimates and will be evaluated each reporting period until the dispositions are complete.

In accordance with the Company's annual goodwill impairment test $15 million of goodwill in the Australia/New Zealand reporting unit was considered impaired in the third quarter of 20X2 based on a decrease in the long‐term projected cash flows and related estimated terminal value of that business.

Restructuring charges incurred by the International Division that previously had been presented as part of Corporate costs have been included in the measurement and presentation of discontinued operations in all periods presented.

The SPA contains customary warranties of the Company and the Purchaser, with the Company's warranties limited to an aggregate of EURO 10 million. The Company will provide various transition and product sourcing services to the Purchaser for a period of 6 to 24 months under a separate agreement after the closing. Also, as part of the disposition, the Company retained responsibility for the frozen defined benefits pension plan in the United Kingdom.

As part of the European Home Décor Business sale transaction, the Purchaser shall indemnify and hold the Company harmless in connection with any guarantees in place as of September 23, 20X2 and given by Company in respect of the liabilities or obligations of the European Home Décor Business. Further, if the Purchaser wishes to terminate any such guarantee or cease to comply with any underlying obligation that is subject to such a guarantee, the Purchaser shall obtain an unconditional and irrevocable release of the guarantee. However, the Company is contingently liable in the event of a breach by the Purchaser of any such obligation. The Company does not believe it is probable it would be required to perform under any of these guarantees or such underlying obligations.

The major components of discontinued operations, net of tax presented in the consolidated statements of operations for the years ended December 31, 20X2 and December 26, 20X1 include the following.

Disposition of the European Home Décor Business on December 31, 20X2 resulted in a pretax loss on sale of $108 million and is included in the table above. The tax benefit associated with discontinued operations differs from the statutory rate due to the mix of earnings and loss in the various jurisdictions, the impact of various permanent items and other factors.

Assets and liabilities of discontinued operations presented in the consolidated balance sheets at December 31, 20X2, and December 26, 20X1 are included in the following table. Because the sale of the European Home Décor Business was completed before year‐end 20X2, the assets and liabilities of that business are not included as of December 31, 20X2.

Cash flows from discontinued operations included depreciation and amortization of $19 million, $30 million, and $36 million for the years ended December 31, 20X2 and December 26, 20X1 respectively, as well as capital expenditures of $9 million, $19 million, and $27 million for the years ended December 31, 20X2 and December 26, 20X1, respectively.

In fiscal year 20X7, we expanded into container shipping services as a new business sector to provide related transportation logistics services to customers in the United States and in Canada. We have signed cooperation agreements with ShipCo Canada to provide freight logistics services and container shipping services to them in the United States. To ensure effective and high‐quality services provided to our customers in the United States, we established a joint venture, LRB Shipping Center Corp., in the second quarter of fiscal 20X7 with a U.S. local freight forwarder, Meta Global Logistics Inc. The joint venture ended in December 20X7 and we continue to operate shipping business through our other subsidiaries. Since LRB Center's operating revenue was less than 1% of the Company's consolidated revenue and the termination did not constitute a strategic shift that would have a major effect on the Company's operations and financial results, the results of operations for LRB Center was not reported as discontinued operations in the financial statements.