Discontinued Operations

12 Months Ended

Apr. 30, 2015

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

3. Discontinued Operations

On June 12, 2012, the Company acquired PowerReviews, Inc. (“PowerReviews”) for total consideration of $150.8 million (See Note 6). On January 8, 2014, the Northern District of California, San Francisco Division (the “Court”) ruled that the Company’s acquisition of PowerReviews violated section 7 of the Clayton Act, 15 U.S.C. Section 18. On April 24, 2014, the Company entered into a Joint Stipulation with the U.S. Department of Justice (the “DOJ”) to resolve the DOJ’s claims and, together with the DOJ, the Company submitted a proposed order to the Court. Under the terms of the Joint Stipulation and the proposed order, the Company was required to divest all of the net assets of the PowerReviews business. On June 4, 2014, the Company entered into a definitive agreement to divest the assets of PowerReviews, pursuant to a Joint Stipulation with the Court for $30.0 million in cash, $4.5 million of which remains in escrow as a partial security for the Company’s indemnification obligations under the definitive agreement and is set to expire in July 2015 (See Note 15). As a result, PowerReviews revenues, related expenses and loss on disposal, net of tax, are components of “loss from discontinued operations, net of tax” in the consolidated statements of operations. Any reduction in proceeds of the escrow related to the divestiture agreement would be recorded as an additional loss. As of April 30, 2014, on the consolidated balance sheets, the assets and liabilities of the discontinued operations of PowerReviews were presented as ‘Assets held for sale’ and ‘Liabilities held for sale,’ respectively. The statement of cash flows is reported on a combined basis without separately presenting cash flows from discontinued operations for all periods presented.

As of April 30, 2015, there were no ‘Assets held for sale’ as the divestiture of the PowerReviews business was completed on July 2, 2014. The $4.5 million held in escrow is recorded as a receivable in “Prepaid expenses and other current assets” on the consolidated balance sheet as of April 30, 2015. As of April 30, 2015, the Company had not received any claims for indemnification under the definitive agreement.

The Company incurred a total loss on the disposal of the PowerReviews business of $10.7 million, of which $9.2 million was recognized as an estimated loss on disposal of discontinued operations during fiscal year 2014. The additional $1.5 million loss recognized in fiscal year 2015 was primarily caused by a decrease of $0.5 million in estimated cash proceeds as of April 30, 2014 and incremental transaction costs of $0.4 million.

Summarized results from discontinued operations were as follows (in thousands):

	Year Ended April 30,
	2015			2014			2013
Revenues from discontinued operations	$	2,535		$	17,011		$	13,484
Income (loss) from discontinued operations before income taxes	$	303		$	(1,106	)	$	(16,224	)
Income tax expense		23			22			25
Net income (loss) from discontinued operations		280			(1,128	)		(16,249	)
Loss on disposal of discontinued operations, net of tax		(1,537	)		(9,192	)		—
Loss from discontinued operations, net of tax	$	(1,257	)	$	(10,320	)	$	(16,249	)

The carrying amounts of the major classes of assets and liabilities of discontinued operations were as follows (in thousands):

	July 2,		April 30,
	2014		2014
ASSETS:
Restricted cash	$	104	$	—
Accounts receivable, net		1,097		1,036
Prepaid expenses and other current assets		48		49
Total current assets		1,249		1,085
Property and equipment, net		37		37
Goodwill		9,002		9,002
Acquired intangible assets, net		32,813		32,813
Total assets	$	43,101	$	42,937
LIABILITIES:
Accounts payable	$	76	$	221
Accrued expenses and other current liabilities		823		895
Deferred revenue		2,230		2,505
Total Liabilities	$	3,129	$	3,621

The Company recorded a loss on the disposal of discontinued operations of $1.5 million, net of tax, in fiscal year 2015 which was calculated as follows (in thousands):

Cash consideration	$	30,000
Less:
Basis in net assets as of July 2, 2014		39,972
Costs incurred directly attributable to the transaction		1,039
Loss before income taxes		(11,011	)
Income tax benefit		(282	)
Loss on disposal of discontinued operations, net of taxes		(10,729	)
Loss on disposal of discontinued operations, net of taxes, previously recognized		(9,192	)
Loss on disposal of discontinued operations, net of tax, recognized in current period	$	(1,537	)

The Company recorded a loss on the disposal of discontinued operations of $9.2 million, net of tax, in fiscal year 2014 which was calculated as follows (in thousands):

Estimated cash proceeds	$	30,500
Less:
Basis in net assets sold as of April 30, 2014		39,316
Estimated costs incurred directly attributable to the transaction		658
Estimated loss before income taxes		(9,474	)
Estimated income tax benefit		(282	)
Estimated loss on disposal of discontinued operations, net of taxes	$	(9,192	)

The carrying amount of assets held for sale in the consolidated balances sheet as of April 30, 2014 was calculated as follows (in thousands):

	April 30,
	2014
Total assets of discontinued operations	$	42,937
Estimated loss on disposal of discontinued operations, net of tax		(9,192	)
Assets held for sale	$	33,745