Discontinued Operations

12 Months Ended

Jun. 30, 2015

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”) operating segment 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 operating segment would be in the best interests of the Company and its shareholders. On January 23, 2015, the Company completed the sale of MIS.

In fiscal 2014, the Company's MIS operating segment met the "held for sale" criteria in accordance with FASB ASC 205. As the Company did not anticipate continuing involvement in the operations of MIS after its divestiture, the MIS operating results had been reported as a discontinued operation for all periods presented.

The classification as "held for sale" was considered a triggering event for impairment testing under FASB ASC 350 and FASB ASC 360. However, since the Company conducted its annual goodwill impairment testing in its fourth quarter of fiscal 2014, which coincided with the plan to divest the MIS operating segment, 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 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 was 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 became a discontinued operation in the fourth quarter of fiscal 2014, the results of MIS had been excluded from the MDS reportable segment.  Accordingly, the revenues, costs of revenue, operating expenses, assets and liabilities of MIS have been reported separately as discontinued operations 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.

During the second quarter of fiscal 2015, the Company determined that the MIS reporting unit's carrying value of goodwill exceeded its implied fair value, resulting in a further goodwill impairment charge of $2,283. This impairment charge is reflected within discontinued operations of the Company's accompanying fiscal 2015 consolidated financial statements.

On January 23, 2015, the Company completed the sale of MIS for approximately $1,600. The sale resulted in net proceeds of $885 and a loss on disposal of $892, which is reflected within discontinued operations of the Company's accompanying consolidated financial statements. The Company does not have continuing involvement in the operations of MIS after its divestiture.

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

	For the Years Ended June 30,
	2015			2014			2013
Net revenues of discontinued operations	$	3,493		$	9,414		$	14,560
Costs of discontinued operations:
Cost of revenues	2,385			6,356			10,050
Selling, general and administrative	1,958			3,029			2,815
Research and development	305			585			83
Amortization of intangible assets	279			495			495
Restructuring and other charges	—			26			(4		)
Impairment of goodwill	2,283			6,687			—
(Loss) income from discontinued operations before income taxes	(3,717		)	(7,764		)	1,121
Loss on disposal of discontinued operations before income taxes	(892		)	—			—
Tax (benefit) provision	(549		)	(411		)	547
(Loss) income from discontinued operations	$	(4,060	)	$	(7,353	)	$	574

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

	June 30,
		2014
Accounts receivable, net		$	925
Unbilled receivables and costs in excess of billings		248
Deferred income taxes		77
Prepaid expenses and other current assets		124
Property and equipment, net		475
Goodwill		2,283
Intangible assets, net		2,062
Other non-current assets		39
Assets of discontinued operations		$	6,233
Accounts payable		$	127
Accrued expenses		802
Accrued compensation		689
Deferred income taxes		818
Liabilities of discontinued operations		$	2,436

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,
	2015		2014		2013
Depreciation	$	100	$	160	$	47
Amortization of intangible assets	$	279	$	495	$	495
Capital expenditures	$	—	$	78	$	408
Impairment of goodwill	$	2,283	$	6,687	$	—
Stock-based compensation expense	$	88	$	245	$	86