DISCONTINUED OPERATIONS

6 Months Ended

Jun. 30, 2013

DISCONTINUED OPERATIONS [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

DISCONTINUED OPERATIONS

On February 1, 2012, the Company entered into a Community Pharmacy and Mail Business Purchase Agreement (the “2012 Asset Purchase Agreement”) by and among Walgreen Co. and certain subsidiaries (collectively, the "Buyers") and the Company and certain subsidiaries (collectively, the "Sellers") with respect to the sale of certain assets, rights and properties (the “Pharmacy Services Asset Sale”) relating to the Sellers' traditional and specialty pharmacy mail operations and community retail pharmacy stores.

Pursuant to the terms of the 2012 Asset Purchase Agreement, the Company received a total purchase price of approximately $173.8 million during 2012, including approximately $158.8 million at closing on May 4, 2012 (which included monies received for the inventories on hand attributable to the operations subject to the Pharmacy Services Asset Sale), and a subsequent purchase price payment of $15.0 million based on events related directly or indirectly to the Buyers' retention of certain business after the closing. Similarly, the Company may be required to refund up to approximately $6.4 million of cash received to the Buyers under certain circumstances, within the 14 months period following the closing. Any adjustment associated with this contingency will be recorded when the final amount retained or refunded is known. The $173.8 million purchase price excluded all accounts receivable and working capital liabilities relating to the operations subject to the Pharmacy Services Asset Sale, which were retained by the Company. Approximately $1.4 million of net accounts receivable and liabilities of $1.2 million related to the receivables remain at June 30, 2013.

As a result of the Pharmacy Services Asset Sale, the Company recognized a pretax gain of $101.6 million, net of transaction costs and other one-time charges as a result of the transaction in the year ended December 31, 2012. As of June 30, 2013 and December 31, 2012, there were accruals of $84 thousand and $134 thousand, respectively, related to these costs in accrued expenses and other current liabilities and other non-current liabilities on the Unaudited Consolidated Balance Sheets. The accrual activity consisted of the following (in thousands):

	Employee Severance and Other Benefits			Other Costs			Total
Balance as of December 31, 2012	$	45		$	89		$	134
Expenses	—			—			—
Cash payments	(9		)	(18		)	(27		)
Non-cash charges	—			(23		)	(23		)
Balance as of June 30, 2013	$	36		$	48		$	84

In addition, the Company and its subsidiaries and certain subsidiaries of the Buyers entered into an agreement concurrently with the Asset Purchase Agreement which provided that the Company ceased to be the sole fulfillment pharmacy for customers who came through the drugstore.com website. The agreement provided for a cash payment of $3.0 million to the Company and the payment of $2.9 million to the Buyers related to contingent consideration from the Company's 2010 acquisition of the prescription pharmacy business of DS Pharmacy, both of which occurred during the three months ended March 31, 2012.

The transaction included the sale of 27 community pharmacy locations, and certain assets of three community pharmacy locations, and three traditional and specialty mail service operations, which constituted all of the Company's operations in the community pharmacy and mail order lines of business. Two mail order locations that were not transferred as part of the Pharmacy Services Asset Sale were redeployed to provide infusion pharmacy services.  On May 4, 2012, the carrying value of the assets included in the Pharmacy Services Asset Sale were as follows (in thousands):

Inventory	$	30,560
Prepaid expenses and other current assets	299
Total current assets	30,859
Property and equipment, net	1,592
Goodwill	11,754
Intangible assets, net	2,503
Total assets	$	46,708

The operating results of the traditional and specialty pharmacy mail operations and community pharmacies for the three and six month periods ended June 30, 2013 and 2012, are summarized below. These results include costs related to the collection of remaining accounts receivable and costs of sunsetting related systems. Interest expense was not significant for the three and six months ended June 30, 2013 and interest expense was $0.2 million and $0.9 million for the three and six months ended June 30, 2012. Interest expense has been allocated to discontinued operations on the basis of the borrowing base that was reduced as a result of the Pharmacy Services Asset Sale and the working capital associated with the business that was disposed. Income tax expense of $5.1 million was allocated to discontinued operations for the three and six months ended June 30, 2012. No income tax expense was allocated to discontinued operations for the 2013 periods. Depreciation expense was no longer incurred on fixed assets included in the disposal group as of February 1, 2012, the date the Company entered into the Asset Purchase Agreement.

Discontinued Operations Results
(in thousands)
	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Revenue	$	(35	)	$	128,436		$	(55	)	$	466,539
Gross profit	$	(9	)	$	7,078		$	(77	)	$	30,038
Gain on sale, before income taxes	$	—		$	101,624		$	—		$	101,624
Impairment costs, employee severance and other benefit-related costs and other one-time charges	$	—		$	(13,032	)	$	—		$	(13,032	)
Income (loss) from discontinued operations, net of income taxes	$	(563	)	$	76,059		$	(1,221	)	$	75,379