DISCONTINUED OPERATIONS AND OTHER BUSINESS DISPOSITIONS

In October 2016, we completed a strategic review of our international markets in connection with our efforts to optimize our global footprint and focus on the markets that we believe have the greatest potential to benefit our long-term financial performance. Based on that review, we decided to focus our business on 15 core countries and to pursue strategic alternatives for our operations in the remaining 11 countries, which were primarily based in Asia and Latin America. The dispositions of our operations in those 11 countries were completed between November 2016 and March 2017.

A business disposition that represents a strategic shift and has (or will have) a major effect on our operations and financial results is reported as a discontinued operation. We determined that the decision reached by management and our Board of Directors to exit those 11 non-core countries, which comprised a substantial majority of the operations outside of North America and EMEA, represented a strategic shift in our business. Additionally, based on our review of quantitative and qualitative factors relevant to the dispositions, we determined that the disposition of the businesses in those countries would have a major effect on our operations and financial results. As such, the results of operations and cash flows for the operations in those countries, including the gains and losses on the dispositions and related income tax effects, are presented as discontinued operations in the accompanying condensed consolidated financial statements for the three and nine months ended September 30, 2017.

Dispositions Completed in 2017

In connection with our strategic initiative to exit non-core countries as discussed above, we sold an 83% controlling stake in our subsidiary in Israel and sold our subsidiaries in Argentina, Chile, Colombia, Peru, Mexico, Brazil, Singapore and Hong Kong during the first quarter 2017. We recognized a net pretax loss on those dispositions of $1.6 million, which consisted of the following (in thousands):



Net consideration received:
Fair value of minority investments retained or acquired	$	2,021
Cash proceeds received	3,462
Cash proceeds receivable	2,000
Less: transaction costs	1,394
Total net consideration received	6,089
Cumulative translation gain reclassified to earnings	14,718
Less: Net book value upon closing of the transactions	14,958
Less: Indemnification liabilities ⁽¹⁾	5,365
Less: Unfavorable contract liability for transition services	2,114
Loss on dispositions	$	(1,630	)


(1)	See Note 9, Commitments and Contingencies, for additional information about the indemnification liabilities.

Results of Discontinued Operations

The following table summarizes the major classes of line items included in income (loss) from discontinued operations, net of tax, for the three and nine months ended September 30, 2017 (in thousands):



	Three Months Ended September 30, 2017 ⁽¹⁾			Nine Months Ended September 30, 2017 ⁽²⁾
Service revenue	$	—		$	12,602
Product revenue	—			2,962
Service cost of revenue	—			(2,557		)
Product cost of revenue	—			(3,098		)
Marketing expense	—			(1,239		)
Selling, general and administrative expense	(500		)	(11,784		)
Restructuring	—			(778		)
Other income, net	—			3,852
Income (loss) from discontinued operations before loss on dispositions and provision for income taxes	(500		)	(40		)
Loss on dispositions	(362		)	(1,630		)
Provision for income taxes	—			(81		)
Income (loss) from discontinued operations, net of tax	$	(862	)	$	(1,751	)


(1)	Selling, general and administrative expense from discontinued operations for the three months ended September 30, 2017 primarily related to increases to contingent liabilities under indemnification agreements. See Note 9, Commitments and Contingencies, for information about indemnification obligations related to discontinued operations.


(2)	The income (loss) from discontinued operations before loss on dispositions and provision for income taxes for the nine months ended September 30, 2017 includes the results of each business through its respective disposition date.