Discontinued Operations

3 Months Ended

Jan. 31, 2016

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 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 which approximated its fair value. The resulting discount will be amortized over four years with an effective interest rate of 5.1%.

As of January 31, 2016, the unamortized discount for the note was $1.1 million and the interest income resulting from the amortization for the three months ended January 31, 2016 and February 1, 2015 was $0.1 million in both periods.

For the three months ended February 1, 2015, the Company recognized a loss on disposal of $1.2 million from the sale transaction. 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 January 31, 2016, $2.0 million has been paid and $0.2 million remains payable and is included in Accrued insurance and other in the Condensed Consolidated Balance Sheets.

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

	Three Months Ended February 1, 2015
Loss on discontinued operations
Net revenue	$	4,708
Cost of revenue	(5,730		)
Selling, administrative and other operating costs	(1,388		)
Restructuring and other related costs	(1,709		)
Other income (expense), net	978
Loss from discontinued operations	(3,141		)
Loss on disposal of discontinued operations	(1,187		)
Total loss from discontinued operations	(4,328		)
Income tax provision	191
Total loss from discontinued operations that is presented in the Condensed Consolidated Statements of Operations	$	(4,519	)