Discontinued Operations

9 Months Ended

Aug. 02, 2015

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

On December 1, 2014, the Company completed the sale of its Computer Systems segment to NewNet Communication Technologies, LLC ("NewNet"), a Skyview Capital, LLC, portfolio company. The Company met all of the criteria to classify that segment's assets and liabilities as held for sale in the fourth quarter of fiscal year 2014. The results of the Computer Systems segment are presented as discontinued operations and excluded from continuing operations and from segment results for all periods presented. 

The proceeds of the transaction are a $10.0 million note bearing interest at one half percent (0.5 percent) per year due in four years and convertible into a capital interest of up to 20% in NewNet. The Company may convert the note at any time and is entitled to receive early repayment in the event of certain events such as a change in control of NewNet. The proceeds are in exchange for the ownership of Volt Delta Resources, LLC and its operating subsidiaries, which comprised the Company's Computer Systems segment, and payment of $4.0 million by the Company during the first 45 days following the transaction. An additional payment is anticipated to be made between the parties based on the difference between the actual transaction date working capital amount and $6.0 million (the contractually agreed upon working capital amount). The note was valued at $8.4 million on the transaction date which approximates its fair value. The resulting discount will be amortized over four years with an effective interest rate of 5.1%.

As of August 2, 2015 the unamortized discount for the note is $1.4 million and the interest income resulting from the amortization for the three and nine months ended August 2, 2015 is $0.1 million and $0.3 million, respectively.

The Company recognized a loss on disposal of $1.2 million from the sale transaction in the first quarter of 2015. The total related costs associated with this transaction were $2.2 million comprised of $0.9 million in severance costs, $0.9 million of professional fees and $0.4 million of lease obligation costs. These costs are recorded in discontinued operations in the Condensed Consolidated Statements of Operations. As of August 2, 2015, $1.9 million has been paid and $0.3 million remains payable and is included in accrued insurance and other in the Condensed Consolidated Balance Sheets.

The following table reconciles the major classes of net assets and liabilities classified as held for sale in the Condensed Consolidated Balance Sheet (in thousands):

	November 2, 2014
Assets included as part of discontinued operations
Cash and cash equivalents	$	282
Trade accounts receivable, net	10,535
Recoverable income taxes	921
Prepaid insurance and other assets	9,251
Property, equipment and software, net	3,231
Total assets of the disposal group classified as held for sale in the Condensed Consolidated Balance Sheet	$	24,220
Liabilities included as part of discontinued operations
Accrued compensation	$	2,272
Accounts payable	992
Accrued taxes other than income taxes	649
Accrued insurance and other	5,794
Deferred revenue	9,419
Total liabilities of the disposal group classified as held for sale in the Condensed Consolidated Balance Sheet	$	19,126

Deferred tax assets of $6,842 are included above in prepaid insurance and other assets as of November 2, 2014. Deferred tax liabilities of $3,834 are included above in accrued insurance and other as of November 2, 2014.

The following table reconciles the major line items in the Condensed Consolidated Statements of Operations for discontinued operations (in thousands):

	Three Months Ended					Nine Months Ended
	August 2, 2015		August 3, 2014			August 2, 2015			August 3, 2014
Loss from discontinued operations
Net revenue	$	—	$	14,322		$	4,708		$	45,247
Cost of revenue	—		13,572			5,730			41,307
Selling, administrative and other operating costs	—		4,519			1,388			15,137
Restructuring and other related costs	—		(25		)	1,709			598
Other (income) expense, net	—		289			(978		)	1,403
Loss from discontinued operations	—		(4,033		)	(3,141		)	(13,198		)
Loss on disposal of discontinued operations	—		—			(1,187		)	—
Total loss from discontinued operations	—		(4,033		)	(4,328		)	(13,198		)
Income tax provision (benefit)	—		(148		)	191			(45		)
Total loss from discontinued operations that is presented in the Condensed Consolidated Statements of Operations	$	—	$	(3,885	)	$	(4,519	)	$	(13,153	)