Discontinued Operations

3 Months Ended

Mar. 31, 2013

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

DISCONTINUED OPERATIONS

In December of 2011, we classified our Banking Security Systems Integration business unit as held for sale. Our discontinued operations reflect the operating results for the disposal group through the date of disposition. On October 1, 2012, we completed the sale of the Banking Security Systems Integration business unit for $3.5 million subject to closing adjustments related to a non-compete agreement and third-party consents. On October 1, 2012, we received cash proceeds of $1.2 million (net of selling costs) and a promissory note of $1.4 million from the purchaser. The note receivable is due in consecutive monthly installments beginning on November 1, 2012, with the last scheduled payment due on October 1, 2017. The promissory note bears interest at the 30 day LIBOR rate plus 5.5%. The selling price is also subject to a contingent consideration payment up to a maximum amount of $0.9 million. The contingent payment is based on the purchaser's revenues for the first year of its ownership of the Banking Security Systems Integration business unit. If these revenues exceed $10 million, we are entitled to a contingent payment amount of 10% of the revenues above $10 million, subject to certain adjustments, not to exceed a total contingent consideration payment of $0.9 million. The loss on sale of the Banking Security Systems Integration business unit of $15 thousand was recorded through discontinued operations on the Consolidated Statement of Operations for the year ended December 30, 2012.

The results for the three months ended March 25, 2012 have been reclassified to show the results of operations for the Banking Security Systems Integration business unit as discontinued operations, net of tax, on the Consolidated Statement of Operations. Below is a summary of these results:

(amounts in thousands)
Quarter (13 weeks) ended	March 25, 2012
Net revenue	$	3,700
Gross profit	567
Selling, general, and administrative expenses	887
Operating loss	(320		)
Loss from discontinued operations before income taxes	(320		)
Loss from discontinued operations, net of tax	$	(320	)

In December of 2012, our U.S. and Canada based CheckView^® business included in our Shrink Management Solutions segment met the criteria for classification as discontinued operations. The classification of this business as discontinued operations was determined to be a triggering event for testing goodwill impairment. As a result of this impairment test, we determined that there was a $3.3 million impairment charge of goodwill in our Shrink Management Solutions segment and a $0.3 million impairment of property, plant and equipment. These impairment charges were included in discontinued operations on the Consolidated Statement of Operations. After a full impairment of its long-lived assets, the remaining carrying value of our CheckView^® business as of March 31, 2013 exceeded its fair value by approximately $13.1 million.

Our discontinued operations reflect the operating results for the disposal group. Impairments in 2012 reflect write-downs to estimates of fair value less costs to sell the U.S. and Canada based CheckView^® business. These nonrecurring fair value measurements, which fall within Level 3 of the fair value hierarchy, were determined utilizing an expected selling price less costs to sell approach. On March 19, 2013, we entered into an asset purchase agreement for the sale of our U.S. and Canada based CheckView^® business for $5.4 million in cash, subject to a working capital adjustment to the extent that the net working capital of the business deviates from targeted working capital of $17.9 million.

The results for the three months ended March 31, 2013 and March 25, 2012 have been reclassified to show the results of operations for the U.S. and Canada based CheckView^® business as discontinued operations, net of tax, on the Consolidated Statement of Operations. Below is a summary of these results:

	Three Months
	(13 weeks) Ended
(amounts in thousands)	March 31, 2013			March 25, 2012
Net revenue	$	12,543		$	18,103
Gross profit	(25		)	3,336
Selling, general, and administrative expenses	2,318			3,372
Research and development	79			92
Operating loss	(2,422		)	(128		)
Loss from discontinued operations before income taxes	(2,422		)	(128		)
Loss from discontinued operations, net of tax	$	(2,556	)	$	(48	)

The assets and liabilities associated with this business have been adjusted to fair value, less costs to sell, and reclassified into assets of discontinued operations held for sale and liabilities of discontinued operations held for sale, as appropriate, on the Consolidated Balance Sheet. As of March 31, 2013 and December 30, 2012 the classification was as follows:

(amounts in thousands)	March 31, 2013		December 30, 2012
Accounts receivable, net	$	10,485	$	14,558
Inventories	8,169		9,721
Other assets	2,874		5,347
Deferred income taxes	—		238
Assets of discontinued operations held for sale	$	21,528	$	29,864
Accounts payable	$	2,727	$	3,413
Accrued compensation and related taxes	—		94
Other accrued expenses	5,100		5,600
Unearned revenues	524		581
Other liabilities	390		$	—
Liabilities of discontinued operations held for sale	$	8,741	$	9,688

Net cash flows of our discontinued operations from each of the categories of operating, investing, and financing activities were not significant.