Discontinued Operations

12 Months Ended

Dec. 31, 2012

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

Media Business

On May 11, 2012, the Company announced that its Board of Directors was exploring strategic alternatives with respect to the Company's Media business, including the SourceForge, Slashdot and Freecode websites. The Company and its advisers evaluated a range of options to maximize shareholder value, including, but not limited to, selling the Media business. On September 17, 2012, Geeknet, Inc. entered into a Purchase Agreement with Dice and two of Dice’s subsidiaries, (collectively, the “Buyers”) pursuant to which the Buyers purchased the Company’s Media business segment, including the SourceForge, Slashdot and Freecode websites (the “Purchased Business”) and assumed certain related liabilities.

In accordance with the terms of the Purchase Agreement, the Buyers paid to the Company $20.0 million in cash, of which $3.0 million was deposited by the Buyers into an escrow account for a period of twelve months after the Closing Date in order to secure the Company’s indemnification obligations to the Buyers for breaches of the Company’s representations, warranties, covenants and other obligations under the Purchase Agreement.

The Purchase Agreement contains customary representations, warranties and covenants.  Subject to certain exceptions and limitations, each party has agreed to indemnify the other for breaches of representations, warranties and covenants and other specified matters.  The Purchase Agreement generally limits the Company's liability for breaches of representations and warranties made in the Purchase Agreement to an aggregate of $10.0 million. The Purchase Agreement also contains covenants requiring the Company not to solicit or hire certain employees of the Buyers or compete with the Purchased Business for a period of three years.  The Company and Dice have also agreed to provide certain transition services to one another through December 31, 2013.

The following shows revenues, gross profit and income from discontinued operations, net of tax from discontinued operations:

	Year Ended December 31,
	2012			2011		2010
Revenue	$	13,797		$	20,409	$	18,284
Gross profit	$	10,421		$	15,503	$	11,674
(Loss) income from discontinued operations	$	(1,509	)	$	2,986	$	(805	)
Gain (loss) on sale of discontinued operations	13,712			—		(55		)
Income tax provision (benefit) from discontinued operations	101			1,054		(265		)
Income (loss) from discontinued operations, net of tax	$	12,102		$	1,932	$	(595	)

Gross profit and (loss) income from discontinued operations do not include corporate costs that were allocated to the Company's Media segment. The $13.7 million gain on the sale of the Media business is the selling price of $20.0 million less the carrying value of certain assets and liabilities assumed by the Buyers, offset by transaction costs of $1.1 million. The carrying value of the total assets and total liabilities included in the Purchased Business were $8.3 million and $3.1 million, respectively.

The gain on disposal assumes a full recovery of the $3.0 million held in escrow. The gain and results from discontinued operations for the year ended December 31, 2012 was subject to adjustments based upon final allocation of revenues and expenses to the Company and the Buyers. Final settlement of transition services will occur during 2013.

The tax provision (benefit) recorded on discontinued operations for the years ended December 31, 2012, 2011 and 2010 represents the tax based upon the with and without. The 2012 tax provision is significantly lower than the statutory rate as a result of net operating losses with a full valuation allowance. The tax provision for 2011 is offset by a tax benefit in continuing operations. The 2010 tax benefit represents use of available tax credits.

Included in (loss) income from discontinued operations, net of tax for the year ended December 31, 2010 was a loss of $0.2 million from the sale of the Media business' website Geek.com that had been acquired earlier in the year.