4.DISCONTINUED OPERATIONS:

IT Infrastructure Management business

On May 20, 2015, the Company announced it had entered into a definitive agreement to sell its ITO business to Charlesbank Capital Partners and M/C Partners. The sale was completed on July 31, 2015. Beginning in the first quarter of the current fiscal year, the Company began reporting the results of operations, cash flows, and the balance sheet amounts pertaining to ITO as a component of discontinued operations in the condensed consolidated financial statements. Prior to the discontinued operations classification, the ITO business unit was included in the IT Infrastructure Management segment in the Company’s segment results.

At the closing of the transaction, the Company received total consideration of $131.0 million ($140.0 million stated sales price less closing adjustments and transaction costs of $9.0 million). The Company may also receive up to a maximum of $50 million in contingent payments in future periods through 2020 subject to certain performance metrics of ITO. As the receipt of contingent payments under this provision is uncertain, any future receipts will be recorded upon resolution of the contingency as a component of income from discontinued operations. In addition, the Company has the right to participate in distributions of the divested entity above a defined amount. The Company reported a gain of $9.3 million on the sale, which is included in earnings from discontinued operations, net of tax.

The Company also entered into an agreement to amend its credit agreement (see Note 9 — Long-Term Debt). The effectiveness of the amendments contained in the agreement were conditioned on, among other things, the closing of the ITO disposition. Once the ITO disposition was completed and the amendment became fully effective, certain financial covenants in the credit agreement were modified for the quarters ending on September 30, 2015, December 31, 2015 and March 31, 2016. Additionally the Company is not entitled to declare or pay any dividends during this time and share repurchases will be limited to no more than $100 million depending on the Company’s leverage ratio. After March 31, 2016, the financial covenants and dividend and share repurchase limitations will return to the requirements in the credit agreement in effect prior to the amendment. In addition, the amendment revised certain definitions in the credit agreement to clarify the effect of acquisitions and dispositions on certain financial covenants.

On July 31, 2015, the Company applied $55.0 million of proceeds from the sale to repay outstanding Company indebtedness in order to comply with the Company’s existing credit agreement (see Note 9 — Long-Term Debt). The Company allocated interest expense associated with the $55.0 million repayment of Company indebtedness to the ITO discontinued operating business. Allocated interest expense for the nine months ended December 31, 2015 and 2014 was $0.4 million and $1.0 million, respectively. Allocated interest expense for the quarter ended December 31, 2014 was $0.3 million. The Company plans to use the remaining proceeds from the sale to fund expansion of its common stock repurchase program and for general corporate purposes.

Summary results of operations of ITO for the quarter and nine months ended December 31, 2015 and 2014, respectively, are segregated and included in earnings from discontinued operations, net of tax, in the condensed consolidated statements of operations. The following table is a reconciliation of the major classes of line items constituting earnings from discontinued operations, net of tax (dollars in thousands):

	For the quarter ended December 31						For the nine months ended December 31
	2015			2014			2015			2014
Major classes of line items constituting earnings from discontinued operations, net of tax:
Revenues	$	—		$	52,194		$	69,410		$	163,515
Cost of revenue	—			41,207			50,837			127,056

Gross profit	—			10,987			18,573			36,459

Operating expenses:
Sales and marketing	—			541			1,192			1,917
General and administrative	—			2,169			6,053			7,485
Loss (gain) on sale of discontinued operations	1,011			—			(9,349		)	—
Gains, losses and other items, net	—			795			—			1,215

Total operating expenses	1,011			3,505			(2,104		)	10,617

Income (loss) from discontinued operations	(1,011		)	7,482			20,677			25,842

Interest expense	—			(605		)	(681		)	(1,804		)
Other, net	—			(68		)	(230		)	(327		)

Earnings (loss) from discontinued operations before income taxes	(1,011		)	6,809			19,766			23,711
Income taxes	(490		)	2,672			4,076			9,300

Earnings (loss) from discontinued operations, net of tax	$	(521	)	$	4,137		$	15,690		$	14,411

The carrying amounts of the major classes of assets and liabilities of ITO are segregated and included in assets from discontinued operations and liabilities from discontinued operations in the condensed consolidated balance sheets. The following table is a reconciliation of the major classes of assets and liabilities of the discontinued operations (dollars in thousands):

	December 31, 2015		March 31, 2015
Trade accounts receivable, net	$	—	$	35,743
Deferred income taxes	—		2,762
Other current assets	—		10,707
Property and equipment, net of accumulated depreciation and amortization	—		44,336
Goodwill	—		71,508
Purchased software licenses, net of accumulated amortization	—		3,943
Other assets, net	—		3,173

Assets from discontinued operations	$	—	$	172,172


Current installments of long-term debt	$	—	$	653
Trade accounts payable	—		8,857
Accrued expenses	2,728		7,480
Deferred revenue	—		3,658
Long-term debt	—		6,684
Deferred income taxes	—		22,716
Other liabilities	—		6,377

Liabilities from discontinued operations	$	2,728	$	56,425

ITO is a provider of managed hosting and cloud infrastructure services, optimized for mid-tier enterprises. The Company entered into certain agreements with ITO in which support services, including data center co-location services, will be provided from the Company to ITO, and from ITO to the Company upon the sale of that business. Additionally, the Company entered into certain other agreements with ITO to provide or receive leased office space. The terms of these agreements range from several months to the longest of which continues through July 2020. The agreements generally provide cancellation provisions, without penalty, at various times throughout the term. Cash inflows related to the agreements, included in cash flows from operating activities in the condensed consolidated statements of cash flows, were $2.0 million and $2.7 million, respectively, for the quarter and nine months ended December 31, 2015. Cash outflows related to the agreements, included in cash flows from operating activities in the condensed consolidated statements of cash flows, were $2.4 million and $2.5 million, respectively, for the quarter and nine months ended December 31, 2015. Revenues related to the agreements, included in loss from continued operations in the condensed consolidated statements of operations, were $1.8 million and $2.9 million, respectively, for the quarter and nine months ended December 31, 2015. Expenses related to the agreements, included in loss from continued operations in the condensed consolidated statements of operations, were $1.8 million and $3.0 million, respectively, for the quarter and nine months ended December 31, 2015.

U.K. call center operation

On May 30, 2014, the Company substantially completed the sale of its U.K. call center operation, 2Touch, to Parseq Ltd., a European business process outsourcing service provider. Some assets of the 2Touch operation were subject to a second closing, which occurred in March 2015, resulting in the complete disposal of the operation. The 2Touch business qualified for treatment as discontinued operations beginning in the first quarter of fiscal 2015. The results of operations, cash flows, and the balance sheet amounts pertaining to 2Touch have been classified as discontinued operations in the condensed consolidated financial statements.

Summary results of operations of the 2Touch business unit for the quarter and nine months ended December 31, 2015 and 2014 are segregated and included in earnings (loss) from discontinued operations, net of tax, in the condensed consolidated statements of operations and consists of (dollars in thousands):

	For the quarter ended December 31						For the nine months ended December 31
	2015			2014			2015			2014
Revenues	$	—		$	1,250		$	—		$	8,490

Operating expenses, excluding loss on sale of discontinued operations	$	450		$	1,568		$	450		$	8,513
Loss on sale of discontinued operations	—			—			—			1,875

Loss from discontinued operations before income taxes	$	(450	)	$	(318	)	$	(450	)	$	(1,898	)
Income taxes	—			—			—			—

Loss from discontinued operations, net of tax	$	(450	)	$	(318	)	$	(450	)	$	(1,898	)

The carrying amounts of the major classes of assets and liabilities of the 2Touch business unit are segregated and included in assets from discontinued operations and liabilities from discontinued operations in the condensed consolidated balance sheets and consists of (dollars in thousands):

	December 31, 2015		March 31, 2015
Trade accounts receivable, net	$	—	$	112

Assets from discontinued operations	$	—	$	112


Other accrued expenses	$	1,337	$	1,008

Liabilities from discontinued operations	$	1,337	$	1,008