Discontinued Operations

6 Months Ended

Dec. 31, 2014

Discontinued Operations and Disposal Groups [Abstract]

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.

As of June 30, 2014, the Company's MIS operating segment met the "held for sale" criteria in accordance with FASB ASC 205. As the Company will not have continuing involvement in the operations of MIS after its divestiture in January 2015, the MIS operating results have been reported as a discontinued operation for all periods presented. On January 23, 2015, the Company completed the sale of the MIS operating segment.

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 from discontinued operations, net of income taxes were as follows:

	Three Months Ended December 31,						Six Months Ended December 31,
	2014			2013			2014			2013
Net revenues of discontinued operations	$	1,321		$	2,158		$	3,160		$	5,372
Costs of discontinued operations:
Cost of revenues	951			1,545			2,176			3,736
Selling, general and administrative	600			809			1,247			1,588
Research and development	105			89			276			121
Amortization of intangible assets	124			124			248			248
Acquisition costs and other related expenses	76			—			109			—
Impairment of goodwill	2,283			—			2,283			—
Loss from discontinued operations before income taxes	(2,818		)	(409		)	(3,179		)	(321		)
Tax benefit	(197		)	(151		)	(340		)	(111		)
Loss from discontinued operations, net of income taxes	$	(2,621	)	$	(258	)	$	(2,839	)	$	(210	)

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

	December 31, 2014		June 30, 2014
Accounts receivable, net	$	452	$	925
Unbilled receivables and costs in excess of billings	133		248
Deferred income taxes	88		77
Prepaid income taxes	340		—
Prepaid expenses and other current assets	82		124
Property and equipment, net	387		475
Goodwill	—		2,283
Intangible assets, net	1,815		2,062
Other non-current assets	33		39
Assets of discontinued operations	$	3,330	$	6,233
Accounts payable	$	5	$	127
Accrued expenses	1,041		802
Accrued compensation	537		689
Deferred income taxes	724		818
Liabilities of discontinued operations	$	2,307	$	2,436

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

	Three Months Ended December 31,				Six Months Ended December 31,
	2014		2013		2014		2013
Depreciation	$	45	$	39	$	89	$	77
Amortization of intangible assets	$	124	$	124	$	248	$	248
Capital expenditures	$	—	$	18	$	—	$	18
Impairment of goodwill	$	2,283	$	—	$	2,283	$	—
Stock-based compensation expense	$	62	$	101	$	126	$	148

During the three months ended December 31, 2014, the Company began exclusive negotiations with a potential buyer of MIS. Based primarily on these negotiations, the Company determined that the MIS reporting unit’s carrying value of goodwill exceeded its implied fair value, resulting in a goodwill impairment charge of $2,283. The impairment charge is reflected within discontinued operations of the Company’s accompanying consolidated financial statements.

On January 23, 2015, the Company completed the sale of the MIS operating segment for a selling price approximating the net book value of the business after the goodwill impairment charge recorded in the second fiscal quarter of 2015.