Discontinued Operations

3 Months Ended

Feb. 01, 2015

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 Company met all of the criteria to classify that segment's assets and liabilities as held for sale in the fourth quarter of fiscal year 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 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 note is valued at $8.4 million which approximates its fair value. The resulting discount will be amortized over four years with an effective interest rate of 5.1%.

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 consolidated statements of operations. As of February 1, 2015, $0.7 million has been paid and $1.5 million remains payable and is included in accrued compensation and accrued insurance and other in the Condensed Consolidated Balance Sheets.

The following table reconciles the major classes of net assets and liabilities classified as held for sale in the Condensed Consolidated Balance Sheet (in thousands):

	November 2, 2014
Assets included as part of discontinued operations
Cash and cash equivalents	$	282
Trade accounts receivable, net	10,535
Recoverable income taxes	921
Prepaid insurance and other assets	9,251
Property, equipment and software, net	3,231
Total assets of the disposal group classified as held for sale in the Condensed Consolidated Balance Sheets	$	24,220
Liabilities included as part of discontinued operations
Accrued compensation	$	2,272
Accounts payable	992
Accrued taxes other than income taxes	649
Accrued insurance and other	5,794
Deferred revenue	9,419
Total liabilities of the disposal group classified as held for sale in the Condensed Consolidated Balance Sheets	$	19,126

Deferred tax assets of $6,842 are included above in prepaid insurance and other assets as of November 2, 2014. Deferred tax liabilities of $3,834 are included above in accrued insurance and other as of November 2, 2014.

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			February 2, 2014
Loss on discontinued operations
Net revenue	$	4,708		$	15,520
Cost of revenue	(5,730		)	(13,145		)
Selling, administrative and other operating costs	(1,388		)	(5,493		)
Restructuring and other related costs	(1,709		)	(704		)
Other income (expense)	978			(568		)
Loss from discontinued operations	(3,141		)	(4,390		)
Loss on disposal of discontinued operations	(1,187		)	—
Total loss from discontinued operations	(4,328		)	(4,390		)
Income tax provision	191			2
Total loss from discontinued operations that is presented in the Condensed Consolidated Statements of Operations	$	(4,519	)	$	(4,392	)