DISCONTINUED OPERATIONS:

3 Months Ended

Jun. 30, 2016

DISCONTINUED OPERATIONS:

DISCONTINUED OPERATIONS:

4.DISCONTINUED OPERATIONS:

IT Infrastructure Management business (“ITO”)

During fiscal 2016, the Company completed the sale of its ITO business to Charlesbank Capital Partners and M/C Partners. The business qualified for treatment as discontinued operations during fiscal 2016. Accordingly, the results of operations, cash flows, and the balance sheet amounts pertaining to ITO, for all periods reported, have been classified as discontinued operations in the condensed consolidated financial statements.

Summary results of operations of ITO for the three months ended June 30, 2015, 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 Three months ended
	June 30,
	2016		2015
Major classes of line items constituting earnings from discontinued operations, net of tax:
Revenues	$	—	$	52,580
Cost of revenue		—		40,568
Gross profit		—		12,012
Operating expenses:
Sales and marketing		—		998
General and administrative		—		3,768
Total operating expenses		—		4,766
Income from discontinued operations		—		7,246
Interest expense		—		(564)
Other, net		—		(3)
Earnings from discontinued operations before income taxes		—		6,679
Income taxes		—		2,536
Earnings from discontinued operations, net of tax	$	—	$	4,143

ITO was 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, are 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.  For the quarter ended June 30, 2016, cash inflows and outflows related to the agreements, included in cash flows from operating activities in the condensed consolidated statements of cash flows, were $1.8 million and $1.5 million, respectively.  Revenues and expenses related to the agreements, included in income (loss) from continued operations in the condensed consolidated statements of operations, were $1.7 million and $1.4 million, respectively.