Discontinued Operations

12 Months Ended

Jun. 30, 2014

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

During the fourth quarter of fiscal 2014, the Company conducted a strategic review of the Mercury Intelligence Systems (“MIS”) business unit which encompassed an assessment of MIS' financial performance and contemporaneous future financial projections. The Company, with Board of Director's approval, concluded that a plan to divest the MIS business unit would be in the best interests of the Company and its shareholders.

The Company's MIS business unit met the "held for sale" criteria in accordance with FASB ASC 205. As the Company does not anticipate continuing involvement in the operations of MIS after its divestiture, the MIS operating results have been reported as a discontinued operation for all periods presented.

The classification as "held for sale" is considered a triggering event for impairment testing under FASB ASC 350 and FASB ASC 360. However, since the Company conducts its annual goodwill impairment testing in its fiscal fourth quarter, which coincided with the plan to divest the MIS business unit, the “held for sale” triggering event did not constitute a separate goodwill impairment test under FASB ASC 350 (see Note H). The triggering event, however, did require separate impairment testing of the MIS asset group’s long-lived assets under FASB ASC 360.

The annual goodwill impairment testing conducted in the fourth quarter of fiscal 2014 determined the MIS reporting unit's carrying value of goodwill exceeded its implied fair value, resulting in a $6,687 impairment charge. The impairment charge is reflected within discontinued operations of the Company's accompanying consolidated financial statements. The failure of the first step of the goodwill impairment test was driven by a decline in forecasted results of the MIS reporting unit. The fair value of the MIS reporting unit from the first step of the goodwill impairment test exceeded the fair value of the assets and liabilities of the MIS reporting unit, as determined by the second step of the goodwill impairment test. Testing of the valuation of long-lived assets of the MIS asset group indicated no impairment, as the estimated undiscounted cash flows of the MIS asset group, less estimated costs to sell, significantly exceeded its carrying value.

MIS is considered its own operating segment and was previously aggregated with MDS into one reportable segment based on similar economic and qualitative factors in accordance with FASB ASC 280. As MIS is a discontinued operation, the results of MIS have been excluded from the MDS reportable segment.  Accordingly, the revenues, costs of revenue, operating expenses, assets and liabilities of MIS have been reported separately in the Consolidated Statements of Operations and Comprehensive Income (Loss) and Consolidated Balance Sheets for all periods presented. The discontinued operation's balances in the Consolidated Balance Sheets do not reflect intercompany receivable balances of MIS, and the results of discontinued operations do not reflect interest expense or the allocation of the Company's corporate general and administrative expenses.

The amounts reported in (loss) income from discontinued operations, net of income taxes were as follows:

	For the Years Ended June 30,
	2014			2013			2012
Net revenues of discontinued operations	$	9,414		$	14,560		$	7,859
Costs of discontinued operations:
Cost of revenues	6,356			10,050			5,511
Selling, general and administrative	3,029			2,815			1,534
Research and development	585			83			—
Amortization of intangible assets	495			495			248
Restructuring and other charges	26			(4		)	109
Impairment of goodwill	6,687			—			—
(Loss) income from discontinued operations before income taxes	(7,764		)	1,121			457
Tax (benefit) provision	(411		)	547			161
(Loss) income from discontinued operations	$	(7,353	)	$	574		$	296

The amounts reported as assets and liabilities of the discontinued operations were as follows:

	June 30,
	2014		2013
Accounts receivable, net	$	925	$	1,269
Unbilled receivables and costs in excess of billings	248		477
Deferred income taxes	77		138
Prepaid expenses and other current assets	124		135
Property and equipment, net	475		557
Goodwill	2,283		8,970
Intangible assets, net	2,062		2,558
Other non-current assets	39		20
Assets of discontinued operations	$	6,233	$	14,124
Accounts payable	$	127	$	40
Accrued expenses	802		884
Accrued compensation	689		730
Deferred income taxes	818		1,069
Liabilities of discontinued operations	$	2,436	$	2,723

The depreciation, amortization, capital expenditures and significant operating and investing non-cash items of the discontinued operations were as follows:

	For the Years Ended June 30,
	2014		2013		2012
Depreciation	$	160	$	47	$	22
Amortization of acquired intangible assets	$	495	$	495	$	248
Capital expenditures	$	78	$	408	$	34
Impairment of goodwill	$	6,687	$	—	$	—
Stock-based compensation expense	$	245	$	86	$	44

Fiscal 2012 financial information included in the above tables only represents six months of activity for MIS based on the timing of the PDI acquisition.