4.DISCONTINUED OPERATIONS:

IT Infrastructure Management business (“ITO”)

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 fiscal 2016, 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 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 conditions. Due to the uncertainty of contingent payments, income 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 was $0.4 million, $1.3 million, and $1.7 million for the fiscal years ended March 31, 2016, 2015 and 2014, respectively. We used 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 fiscal years ended March 31, 2016, 2015 and 2014, respectively, are segregated and included in earnings from discontinued operations, net of tax, in the 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):

	2016			2015			2014
Major classes of line items constituting earnings from discontinued operations, net of tax:
Revenues	$	69,410		$	215,148		$	257,125
Cost of revenue	50,837			167,524			186,699

Gross profit	18,573			47,624			70,426

Operating expenses:
Sales and marketing	1,192			2,771			2,015
General and administrative	6,053			10,736			14,749
Gain on sale of discontinued operations	(9,349		)	—			—
Gains, losses and other items, net	367			2,037			4,746

Total operating expenses	(1,737		)	15,544			21,510

Income from discontinued operations	20,310			32,080			48,916

Interest expense	(681		)	(2,378		)	(3,000		)
Other, net	(230		)	(334		)	3

Earnings from discontinued operations before income taxes	19,399			29,368			45,919
Income taxes	3,598			11,973			17,587

Earnings from discontinued operations, net of tax	$	15,801		$	17,395		$	28,332

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 consolidated balance sheets. The following table is a reconciliation of the major classes of assets and liabilities of the discontinued operations (dollars in thousands):

	March 31, 2016		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	—		7,480
Deferred revenue	—		3,658
Long-term debt	—		6,684
Deferred income taxes	—		22,716
Other liabilities	—		6,377

Liabilities from discontinued operations	$	—	$	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. 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 and outflows related to the agreements, included in cash flows from operating activities in the consolidated statements of cash flows, were $4.7 million and $4.2 million, respectively, for the fiscal year ended March 31, 2016. Revenues and expenses related to the agreements, included in loss from continuing operations in the consolidated statements of operations, were $4.7 million and $4.6 million, respectively, for the fiscal year ended March 31, 2016.

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 during fiscal 2015. The results of operations, cash flows, and the balance sheet amounts pertaining to 2Touch have been classified as discontinued operations in the consolidated financial statements.

Summary results of operations of the 2Touch business unit for the fiscal years ended March 31, 2016, 2015 and 2014 are segregated and included in earnings from discontinued operations, net of tax, in the consolidated statements of operations and consists of (dollars in thousands):

	2016			2015			2014
Revenues	$	—		$	8,484		$	35,267


Earnings (loss) from discontinued operations before income taxes	$	(450	)	$	4		$	(2,189	)
Loss on sale of discontinued operations before income taxes	—			(1,888		)	—
Income taxes	—			—			—

Loss from discontinued operations, net of tax	$	(450	)	$	(1,884	)	$	(2,189	)

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 consolidated balance sheets and are as follows (dollars in thousands):

	March 31, 2016		March 31, 2015
Trade accounts receivable, net	$	—	$	112

Assets from discontinued operations	$	—	$	112


Other accrued expenses	—		1,008

Liabilities from discontinued operations	$	—	$	1,008