Discontinued Operations

3 Months Ended

Mar. 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Assets Held for Sale

In order to obtain the approval of the European Commission for the acquisition of TelecityGroup, the Company and TelecityGroup have agreed to divest certain data centers, including the Company’s LD2 and certain data centers of TelecityGroup in the United Kingdom, Netherlands and Germany. There is no definitive agreement with any buyer or buyers and any such agreement will be subject to the approval of the European Commission. There can be no assurance as to the timing or amount of proceeds to be received in connection with the sale of all or any part of data centers to be divested in connection with the TelecityGroup acquisition. The assets and liabilities of LD2, which are included within the EMEA operating segment, were classified as held for sale in the fourth quarter of 2015 and, therefore, the corresponding depreciation and amortization expense was ceased at that time. This anticipated divestiture is not presented as discontinued operations in the consolidated statements of operations, because it does not represent a strategic shift in the Company's business, as the Company will continue operating similar businesses after the acquisition. During the three months ended March 31, 2016 and 2015, LD2 had revenue of $3,166,000 and $4,682,000, respectively, and net income recognized during these periods was insignificant.

During the fourth quarter of 2015, the Company entered into an agreement to sell a parcel of land in San Jose, California and reported the San Jose land parcel as asset held for sale in the accompanying consolidated balance sheet as of December 31, 2015. The sale was completed in February 2016.

The acquisition of TelecityGroup closed on January 15, 2016. Accordingly, the assets and liabilities of the TelecityGroup data centers that will be divested were included in assets and liabilities held for sale in the condensed consolidated balance sheet as of March 31, 2016. The results of operations for the TelecityGroup data centers that will be divested were classified as discontinued operations from January 15, 2016, the date the acquisition closed, through March 31, 2016.

When an asset is classified as held for sale, the asset's book value is evaluated and adjusted to the lower of its carrying amount or fair value less cost to sell. The determination of fair value for assets is dependent upon, among other factors, the potential sales transaction, composition of assets in the disposal group, the comparability of the disposal group to market transactions and negotiations with third party purchasers, etc. Such factors impact the range of potential fair values and the selection of the best estimates. As of the date of this quarterly report, the fair value of assets acquired as a result of the acquisition of TelecityGroup has not been finalized yet. The assets held for sale is based on the estimated selling price less the estimated cost to sell the assets. As of March 31, 2016 and December 31, 2015, the Company determined that assets held for sale had not been impaired.

The following table summarizes assets and liabilities that were classified in assets and liabilities held for sale as of March 31, 2016 and December 31, 2015 (in thousands):

	March 31, 2016			December 31, 2015
Accounts receivable	$	9,011		$	2,222
Other current assets	3,178			408
Property, plant and equipment	216,364			23,533
Goodwill	518,766			5,000
Intangible assets	206,644			784
Other assets	1,941			1,310
Total assets held for sale	955,904			$	33,257
Accounts payable, accrued expenses and estimated costs to sell	$	(56,367	)	$	(654	)
Accrued property, plant and equipment	—			(816		)
Current portion of capital lease and other financing obligation	(93		)	—
Other current liabilities	(4,048		)	(435		)
Capital lease and other financing obligations, less current portion	(56,896		)	—
Other liabilities	(7,167		)	(1,630		)
Total liabilities held for sale	$	(124,571	)	$	(3,535	)

Discontinued Operations

In order to obtain the approval of the European Commission for the acquisition of TelecityGroup, the Company and TelecityGroup have agreed to divest certain data centers, including the Company’s LD2 and certain data centers of TelecityGroup in the United Kingdom, Netherlands and Germany. Accounting guidance requires a business activity that, on acquisition, meets the criteria to be classified as held for sale be reported as a discontinued operation. Accordingly, the results of operations for the TelecityGroup data centers that will be divested have been reported as net income from discontinued operations, net of tax, from January 15, 2016, the date of the acquisition, through March 31, 2016 in the Company's condensed consolidated statement of operations.

The following table presents the financial results of the discontinued operations:

	Three months ended March 31, 2016
Revenues	$	20,581
Costs and operating expenses:
Cost of revenues	11,610
Sales and marketing	217
General and administrative	383
Total costs and operating expenses	12,210
Income from operations of discontinued operations	8,371
Interest and other, net	(469		)
Income from discontinued operations before income taxes	7,902
Income tax expense	(1,686		)
Income from discontinued operations, net of income taxes	$	6,216

Net cash used in operating activities for discontinued operations was $11,769,000 and net cash used in investing activities for discontinued operations was $23,428,000 for the period ended March 31, 2016.

No gain or loss on the disposition of the assets and liabilities of these data centers has been recognized in the condensed consolidated financial statements.