Discontinued Operations

12 Months Ended

Nov. 01, 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 comprise 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 will be made between the parties based on the comparison of the actual transaction date working capital amount to an expected working capital amount of $6.0 million (the contractually agreed upon working capital). The note was valued at $8.4 million on the transaction date which approximated fair value. The resulting discount is being amortized over four years with an effective interest rate of 5.1%.

As of November 1, 2015, the unamortized discount for the note is $1.3 million and the interest income resulting from the amortization for the twelve months ended November 1, 2015 was $0.4 million.

For the year ended November 1, 2015, the Company recognized a loss on disposal of $1.5 million. 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 Consolidated Statements of Operations. As of November 1, 2015, $2.0 million has been paid and $0.2 million remains payable and is included in Accrued Insurance and Other in the Consolidated Balance Sheets.

The following table reconciles the major classes of assets and liabilities classified as held for sale as part of discontinued operations in our Consolidated Balance Sheets (in thousands):

	November 1, 2015		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 major classes of assets of discontinued operations - Computer Systems	—		24,220
Other assets included in the disposal group classified as held for sale - Maintech and Lakyfor, S.A.	22,943		27,978
Total assets of the disposal group classified as held for sale in the Consolidated Balance Sheets	$	22,943	$	52,198
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 major classes of liabilities of discontinued operations - Computer Systems	—		19,126
Other liabilities included in the disposal group classified as held for sale - Maintech and Lakyfor, S.A.	7,345		9,261
Total liabilities of the disposal group classified as held for sale in the Consolidated Balance Sheets	$	7,345	$	28,387

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

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

	Year Ended
	November 1, 2015			November 2, 2014			November 3, 2013
Loss from discontinued operations, net of income taxes
Net revenue	$	4,708		$	59,369		$	73,465
Cost of revenue	5,730			54,358			65,680
Selling, administrative and other operating costs	1,388			19,290			24,314
Other (income) expense, net	731			1,533			4,056
Pretax loss of discontinued operations	(3,141		)	(15,812		)	(20,585		)
Loss on disposal of discontinued operations	(1,502		)	—			—
Total loss from discontinued operations	(4,643		)	(15,812		)	(20,585		)
Income tax provision (benefit)	191			(211		)	(2,453		)
Total loss from discontinued operations that is presented in the Consolidated Statements of Operations	$	(4,834	)	$	(15,601	)	$	(18,132	)

Assets and Liabilities Held for Sale

In October 2015, the Company's Board of Directors approved a plan to sell the Company’s information technology infrastructure services business (“Maintech”) and staffing services business in Uruguay ("Lakyfor, S.A.").

Maintech met all of the criteria to classify its assets and liabilities as held for sale in the fourth quarter of fiscal year 2015. The potential disposal of Maintech does not represent a strategic shift that will have a major effect on the Company’s operations and financial results and is, therefore, not classified as discontinued operations in accordance with ASU 2014-08. As part of the required evaluation under the held for sale guidance, the Company determined that the approximate fair value less costs to sell the operations exceeded the carrying value of the net assets and no impairment charge was recorded. At November 1, 2015, the Company expects a sale to take place within fiscal year 2016.

Lakyfor, S.A. met all of the criteria to classify its assets and liabilities as held for sale during the fourth quarter of fiscal year 2015.  The potential disposal of Lakyfor, S.A. does not represent a strategic shift that will have a major effect on the Company’s operations and financial results and is, therefore, not classified as discontinued operations in accordance with ASU 2014-08.  As part of the required evaluation under the held for sale guidance, the Company determined that the approximate fair value less costs to sell the operations was significantly lower than the carrying value of the net assets and an impairment charge of $0.7 million was recorded. At November 1, 2015, the Company expects a sale to take place in the first quarter of fiscal year 2016.

The following table reconciles the major classes of assets and liabilities classified as held for sale as part of continuing operations in our Consolidated Balance Sheets (in thousands):

	November 1, 2015		November 2, 2014
Assets included as part of continuing operations
Cash and cash equivalents	$	1,537	$	2,382
Trade accounts receivable, net	15,671		17,150
Recoverable income taxes	165		140
Prepaid insurance and other assets	4,886		6,009
Property, equipment and software, net	189		748
Purchased intangible assets	495		1,549
Total major classes of assets as part of continuing operations - Maintech and Lakyfor, S.A.	22,943		27,978
Other assets included as part of discontinued operations - Computer Systems	—		24,220
Total assets of the disposal group classified as held for sale in the Consolidated Balance Sheets	$	22,943	$	52,198
Liabilities included as part of continuing operations
Accrued compensation	$	3,509	$	3,511
Accounts payable	1,387		1,557
Accrued taxes other than income taxes	1,165		1,114
Accrued insurance and other	523		1,379
Deferred revenue	761		1,700
Total major classes of liabilities as part of continuing operations - Maintech and Lakyfor, S.A.	7,345		9,261
Other liabilities included as part of discontinued operations - Computer Systems	—		19,126
Total liabilities of the disposal group classified as held for sale in the Consolidated Balance Sheets	$	7,345	$	28,387