3.	Discontinued Operations

On July 27, 2016, we entered into a Membership Interest Purchase Agreement (the "Purchase Agreement") with Sharecare, Inc. ("Sharecare") and Healthways SC, LLC ("Healthways SC"), a newly formed Delaware limited liability company and wholly owned subsidiary of the Company, pursuant to which Sharecare acquired the TPHS business, which closed effective July 31, 2016 ("Closing").

At Closing, Sharecare delivered to the Company an Adjustable Convertible Equity Right (the "ACER") with an initial face value of $30.0 million, which will be convertible into shares of common stock of Sharecare 24 months after Closing at an initial conversion price of $249.87 per share, subject to customary adjustment for stock splits, stock dividends and other reorganizations of Sharecare. Additionally, pursuant to the Purchase Agreement, we paid Sharecare $25.0 million in cash at Closing to fund projected losses of the TPHS business during the year following Closing (the "Transition Year").

The Purchase Agreement provided for post-closing adjustments based on (i) net working capital (which resulted in an increase in the face amount of the ACER due to a net working capital surplus, as further discussed below), (ii) negative cash flows of the TPHS business during the Transition Year in excess of $25.0 million (which could have resulted in a reduction in the face amount of the ACER up to a maximum reduction of $20.0 million but did not result in any reduction, as further discussed below), and (iii) any successful claims for indemnification by Sharecare (which may result in a reduction in the face amount of the ACER, unless the Company elects, in its sole discretion, to satisfy any such successful claims with cash payments).

During the year ended December 31, 2016, we recorded the ACER net of the $20.0 million face value maximum negative cash flow adjustment, or $10.0 million face value, at its estimated fair value of $2.7 million as of Closing. InMay 2017, we entered into an agreement with Sharecare regarding the final working capital amount delivered at Closing, which resulted in a final net working capital surplus of $9.8 million and a corresponding increase to the face value of the ACER (per the terms of the Purchase Agreement), bringing the adjusted face value of the ACER to $39.8 million. We recorded the $9.8 million of additional face value at its estimated fair value of $2.6 million in May 2017. Finally, in September 2017, Sharecare indicated that the contingency was resolved with respect to the portion of the ACER (having a face value of $20.0 million) subject to the negative cash flows adjustment described above, and we recorded it at its estimated fair value of $5.5 million. Therefore, as of September 30, 2017, we have recorded the $39.8 million face value of the ACER at an estimated carrying value of $10.8 million, which is classified as an equity receivable included in other assets.

Pursuant to Sharecare's acquisition of the TPHS business, our ownership interest in the joint venture with Gallup (the "Gallup Joint Venture") was transferred to Sharecare. We agreed with Sharecare to be responsible for two-thirds of the remaining payment obligations in respect of the purchase price to be paid in connection with Sharecare's acquisition of additional membership interest in the Gallup Joint Venture. As of September 30, 2017, the remaining obligation totaled $0.8 million and was included in accrued liabilities.

The terms of the Purchase Agreement also impacted other existing contractual commitments, including the elimination of the minimum fee requirements under our technology services outsourcing agreement with HP Enterprise Services, LLC.

The following table presents financial results of the TPHS business included in "loss from discontinued operations" for the three and nine months ended September 30, 2017 and 2016.

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)		2017			2016		2017			2016

Revenues	$	—		$	23,146		$	—		$	151,897
Cost of services		103			29,003			362			172,725
Selling, general & administrative expenses		137			5,954			294			18,069
Depreciation and amortization		—			3,392			—			24,967
Restructuring and related charges		—			264			—			8,688
Distribution from joint venture		—			—			98			—
Pretax loss on discontinued operations	$	(240	)	$	(15,467	)	$	(558	)	$	(72,552	)
Pretax loss on release of cumulative translation adjustment ⁽¹⁾		—			—			(3,044	)		—
Pretax income (loss) on sale of TPHS business		5,226			(42,209	)		4,782			(205,390	)
Total pretax income (loss) on discontinued operations	$	4,986		$	(57,676	)	$	1,180		$	(277,942	)
Income tax benefit		(1,533	)⁽²⁾		(106,751	)⁽³⁾		(1,445	)⁽²⁾		(98,460	)
Income (loss) from discontinued operations, net of income tax	$	6,519		$	49,075		$	2,625		$	(179,482	)

(1)	During the second quarter of 2017, we substantially liquidated foreign entities that were part of our TPHS business, resulting in a release of the cumulative translation adjustment of $3.0 million into loss from discontinued operations.

(2)	Income tax benefit for the three months and nine months ended September 30, 2017 includes the effect of a change in the estimate of net U.S. tax incurred on foreign activity classified as discontinued operations.

(3)

$68.6 million of the income tax benefit from discontinued operations of $106.8 million recognized in the three months ended September 30, 2016 relates to the release of the valuation allowance on deferred tax assets generated from the net operating losses incurred by the TPHS business for the period January 1, 2016 through the July 31, 2016 closing date.

The depreciation, amortization and significant operating and investing non-cash items of the discontinued operations were as follows:

	Nine Months Ended September 30,
(In thousands)	2017		2016
Depreciation and amortization on discontinued operations	$	—	$	24,967
Capital expenditures on discontinued operations		—		10,258
Share-based compensation on discontinued operations		—		10,165