Discontinued Operations

9 Months Ended

Sep. 30, 2011

Discontinued Operations

Discontinued Operations

Note 3.              Discontinued Operations

In our Form 10-Q for the quarter ended March 31, 2011, filed May 9, 2011 with the Securities and Exchange Commission, we disclosed that we had incurred costs associated with the closure of our international operations in Germany and the Netherlands. We also disclosed that since we were not awarded any contracts under the Work Programme bidding process, we were considering various strategic alternatives for our international operation in the United Kingdom, which included its sale, liquidation or continuation.

On July 1, 2011, we sold our operation in the United Kingdom for one euro. We recorded a charge of $2.2 million in the second quarter of 2011 to adjust assets and liabilities to their net realizable value for this operation. Gross assets were $4.3 million and gross liabilities were $2.1 million prior to the charge taken.

In accordance with ASC 205-20, the closure and sale of these international operations have been accounted for as discontinued operations. Accordingly, the results of the international operations of our Workforce Services reportable segment for all periods reported, loss on sale and exit costs have been classified as discontinued operations, net of income taxes, in the accompanying condensed consolidated statements of income.

In connection with the closures of the Netherlands and Germany operations, we recorded charges of $1.5 million in the fourth quarter of 2010 and $1.4 million in the first quarter of 2011. These charges included exit costs for severance and lease obligations, as well as charges for vendor and customer claims. The following table describes the 2011 activity for only the exit cost liability, comprised of severance and lease obligations, as of September 30, 2011:

	Beginning							Ending
	Balance at		Accruals /		Payments /			Balance at
	January 1, 2011		(Reversals)		Other			Sept. 30, 2011
Severance obligations	$	481	$	—	$	(481	)	$	—
Lease terminations	—		831		(831		)	—
Total exit cost liability	$	481	$	831	$	(1,312	)	$	—

We expect no additional charges related to the closure and sale activities noted above. As of September 30, 2011, a liability of $0.6 million remains for the vendor and customer claims associated with the Netherlands and Germany closures.

Summarized financial information for the discontinued operations is set forth below:

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2011			2010			2011			2010
Revenues	$	—		$	4,850		$	4,465		$	15,374
Cost of services	—			4,634			5,688			12,425
Gross (loss) profit	—			216			(1,223		)	2,949
Operational general and administrative expense	(27		)	(1,868		)	(5,134		)	(5,341		)
Goodwill impairment charge	—			(13,843		)	—			(13,843		)
Other (expense) income (1)	(50		)	(68		)	(2,198		)	23
Interest expense, net	(42		)	(69		)	(159		)	(186		)
Loss from discontinued operations, before income taxes	(119		)	(15,632		)	(8,714		)	(16,398		)
Income tax benefit (2)	16,776			380			19,155			260
Income (loss) from discontinued operations, net of tax	$	16,657		$	(15,252	)	$	10,441		$	(16,138	)

(1) The nine months ended September 30, 2011 includes a $2.2 million charge for adjusting assets and liabilities to their net realizable value due to the sale of the operations in the United Kingdom on July 1, 2011, which was recorded in the three months ended June 30, 2011. The balance remaining for 2011 periods, as well as all of the 2010 periods, represents other miscellaneous income (expense).

(2)        The three and nine month periods ended September 30, 2011 include U.S. tax benefits of $17.6 million attributed to the discontinued international operations. During the third quarter, a U.S. tax election was made which changed the tax status and triggered the recognition of tax basis associated with international operations. Losses and deductions related to international operations previously recognized for book purposes have been recognized for tax purposes in the period ended September 30, 2011 as a result of the election.