Assets and Liabilities Held for Sale

12 Months Ended

Oct. 30, 2016

Discontinued Operations and Disposal Groups [Abstract]

Assets and Liabilities Held for Sale

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 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 were 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 were 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 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. At October 30, 2016, the note is carried at net realizable value and the unamortized discount was $1.1 million. The Company and NewNet are actively negotiating the final working capital adjustment amount, along with certain minor indemnity claims. NewNet has taken exception with several components of the calculation. The Company believes its position on these items is consistent with the definitions outlined in the sale agreement. The Company does not believe the settlement of these differences will have a material impact on its financial statements or income from continuing operations. 

Given the Company’s current turnaround circumstances, the Company may consider monetizing the note prior to maturity in either a secondary market or an early extinguishment, if NewNet agrees, at some value less than the face amount and may offset a settlement on the working capital adjustment and indemnity claims against the Note. Accordingly, the Company has ceased accreting interest on the note until the dispute is resolved. The Company believes that any settlement of the note would not be materially different than its current carrying value.

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 and as of October 30, 2016 have been paid.

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
Loss from discontinued operations
Net revenue	$	4,708		$	59,369
Cost of services	5,730			54,358
Selling, administrative and other operating costs	1,388			19,290
Other (income) expense, net	731			1,533
Loss from discontinued operations	(3,141		)	(15,812		)
Loss on disposal of discontinued operations	(1,502		)	—
Loss from discontinued operations before income taxes	(4,643		)	(15,812		)
Income tax provision (benefit)	191			(211		)
Loss from discontinued operations that is presented in the Consolidated Statements of Operations	$	(4,834	)	$	(15,601	)

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. The timeline to complete a transaction has extended beyond the fourth quarter of fiscal 2016, with a sale expected in the second quarter of fiscal 2017.

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 disposal of Lakyfor, S.A. did 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. The sale occurred in the first quarter of fiscal 2016 for nominal proceeds and the Company recognized a loss on disposal of $0.1 million from the sale transaction.

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):

	October 30, 2016		November 1, 2015
Assets included as part of continuing operations
Cash and cash equivalents	$	—	$	1,537
Trade accounts receivable, net	13,553		15,671
Recoverable income taxes	15		165
Prepaid insurance and other assets	3,339		4,886
Property, equipment and software, net	178		189
Purchased intangible assets	495		495
Total major classes of assets as part of continuing operations - Maintech and Lakyfor, S.A. (1)	$	17,580	$	22,943
Liabilities included as part of continuing operations
Accrued compensation	$	2,432	$	3,509
Accounts payable	921		1,387
Accrued taxes other than income taxes	833		1,165
Accrued insurance and other	1,574		1,284
Total major classes of liabilities as part of continuing operations - Maintech and Lakyfor, S.A. (1)	$	5,760	$	7,345

⁽¹⁾ The Balance Sheet as of October 30, 2016 only includes Maintech.