Discontinued Operations & Gain on the Sale of the ASO Business Unit

6 Months Ended

Dec. 31, 2015

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations & Gain on the Sale of the ASO Business Unit

Discontinued Operations & Gain on the Sale of the ASO Business Unit

In August 2014, the Company completed the sale of substantially all of its assets used in the Company’s former ASO business unit (the “Asset Sale”) to Lockheed Martin Corporation (the “Buyer”) for an agreed-upon sales price of $61.0 million, less a working capital adjustment. The net sales price was $59.3 million, which included a working capital adjustment of $1.7 million. As of December 31, 2015, the Company has received cash of $53.2 million and has recorded a receivable of $6.1 million for the indemnity holdback. The indemnity holdback is being held in escrow under the terms of an escrow agreement until February 2016 (the 18-month anniversary of the consummation of the transaction). We expect the indemnity holdback will be released in full in February 2016. As of the date of this filing, there are no claims against the indemnity holdback amount that we are aware of. The ASO business consisted of (i) ownership, operation, and maintenance of spacecraft processing facilities in Titusville, Florida and Vandenberg Air Force Base, California (“VAFB”); (ii) supporting government and commercial customers processing complex communication, earth observation, and deep space satellite launches; (iii) designing and building spacecraft processing equipment and facilities; and (iv) providing propellant services including designing, building, and testing propellant service equipment for fueling spacecraft.

Additionally, as part of the Asset Sale, the Company used a portion of the proceeds to pay off the outstanding balance of its term loan of $5.7 million, which was secured by certain assets of the ASO business. As such, 100% of the interest expense on the debt was allocated to discontinued operations in the amount of $62 thousand for the six months ended December 31, 2014.

The sale of our former ASO business, which was previously reported within our former ASO business unit segment, resulted in a pre-tax gain of $25.4 million ($20.6 million after-tax) for the year ended June 30, 2015. The pre-tax gain on this sale reflects the excess of the sum of the cash proceeds received over the net book value of the net assets of the Company’s former ASO business.

The total pre-tax gain on the sale for the year ended June 30, 2015, includes the following (in thousands):

Cash proceeds from the sale of the ASO business	$	53,189
Receivable for indemnity holdback	6,100
Liabilities assumed by the Buyer	2,478
Net book value of assets sold	(36,175		)
Other	(156		)
Gain on sale of our former ASO business	$	25,436

Even though we were a party to a transition services agreement that expired on August 22, 2015, we have determined that the continuing cash flows generated by this agreement did not constitute significant continuing involvement in the operations of our former ASO business. As such, the operating results and cash flows related to our former ASO business have been separately reflected as discontinued operations for the quarter and six months ended December 31, 2014.

The following table provides a reconciliation of the major components of income of our former ASO business to the amounts reported in the condensed consolidated statements of operations (in thousands): 

	Three Months Ended   December 31,					Six Months Ended   December 31,
	2015		2014			2015		2014
Major line items constituting income of discontinued operations
Revenue	$	—	$	—		$	—	$	2,807
Cost of revenue	—		—			—		(1,313		)
Selling, general and administrative	—		—			—		(128		)
Other expense, net	—		—			—		(63		)
Gain on sale of discontinued operations (1)	—		—			—		25,630
Income tax expense	—		(184		)	—		(2,562		)
Gain on discontinued operations	$	—	$	(184	)	$	—	$	24,371

1. An adjustment of $194 thousand was made during the last quarter of fiscal year 2015.