3. Discontinued operations and gain on sale

In February 2017, the Company completed the sale of its Technology Solutions (“TS”) business to Tech Data Corporation (the “Buyer”). Included in the gain on sale recorded upon completion of the sale were estimates for certain income taxes due on the gain and additional cash consideration expected from the Buyer related to a closing date net working capital sales price adjustment (the “closing date adjustment”). The Company is finalizing the closing date adjustment with the Buyer as provided for in the sales agreement and has included an estimate of this amount as primary component of the $305.1 million of prepaid and other current assets as of March 31, 2018. The final closing date adjustment, as determined through the established process outlined in the sales agreement, may be materially different from the Company’s estimate. The impact of any probable changes in the closing date adjustment will be recorded as an adjustment to the gain on sale from discontinued operations in the period such change occurs. During the third quarter of fiscal 2018, the Company made certain adjustments to the closing date estimates, which were not material and have been included as an adjustment to the gain on sale of discontinued operations classified within “Income (loss) from discontinued operations, net of tax” on the Consolidated Statements of Operations.

The income taxes associated with the gain will be impacted by the final geographic allocation of the sales price, which must be agreed to with the Buyer after determination of the closing date adjustment, as required in the sales agreement, and may be materially different from the Company’s estimates. The impact of any changes in estimated income taxes on the gain will be recorded as an adjustment to the gain on sale from discontinued operations in the period such change in estimate occurs. The Company currently expects the closing date adjustment to be finalized by the first half of fiscal 2019 and the income tax on the gain to be finalized by the end of fiscal 2019.

The Company received 2.8 million shares of the Buyer’s common stock at closing (the “Shares”), which has been recorded within “Marketable securities” on the Company’s Consolidated Balance Sheets. As of March 31, 2018, the Company had 0.9 million shares remaining, which had market value of $75.1 million. Unrealized and realized gains or losses due to changes in fair value based upon Level 1 quoted active market prices of the Shares are recorded in “Other income (expense), net” on the Consolidated Statements of Operations. The sales agreement includes time based contractual restrictions related to the Company’s sale of the Shares and as such, the Company entered into economic hedges to reduce the Company’s exposure to price fluctuations of the Shares during the restricted period, which fixes the net amount that the Company will realize upon the sale of the Shares. The Company records changes in fair value related to the economic share price hedges within “Other income (expense), net”, offsetting the changes in fair value of the underlying Shares. During the nine months ended March 31, 2018, the Company sold 1.9 million Shares, the net proceeds of which have been included in “Cash flows from investing activities – discontinued operations.”

In connection with the sale of the TS business, the Company entered into a Transition Services Agreement (“TSA”), pursuant to which the Buyer will pay the Company to provide certain information technology, distribution, facilities, finance and human resources related services for various periods of time depending upon the services not to exceed approximately two years from the closing date. Expenses incurred by the Company to provide such services under the TSA are classified within selling, general and administrative expenses and amounts billed to the Buyer to provide such services are classified as a reduction of such expenses. As of March 31, 2018, the Buyer has formally terminated substantially all TSA services outside of certain minor information technology services and all remaining TSA services are expected to be terminated by the first half of fiscal 2019.

Financial results of the TS business for the third quarter and nine months ended April 1, 2017 are presented as “Income (loss) from discontinued operations, net of tax” on the Consolidated Statements of Operations and are summarized as follows:


	Third Quarter Ended		Nine Months Ended
	April 1, 2017
	(Thousands)
Sales	$	1,056,676	$	5,432,140
Cost of sales		955,781		4,883,945
Gross profit		100,895		548,195
Selling, general and administrative expenses		105,622		430,003
Restructuring, integration and other expenses		(260)		7,280
Operating (loss) income		(4,467)		110,912
Interest and other expense, net		(13,662)		(24,292)
(Loss) income from discontinued operations before income taxes		(18,129)		86,620
Income tax expense		17,108		49,949
(Loss) income from discontinued operations, net of taxes		(35,237)		36,671
Gain on sales of discontinued operations, net of tax		217,088		217,088
Net income from discontinued operations, net of taxes	$	181,851	$	253,759

Included within selling, general and administrative expenses of discontinued operations was $8.3 million and $34.9 million of estimated corporate expenses, excluding general overhead, specific to or benefiting the TS business for the third quarter and nine months ended April 1, 2017, respectively.

The loss from discontinued operations, net of tax, in the third quarter and first nine months of fiscal 2018 substantially all relates to settlement losses associated with the Company’s pension plan due to former TS business employees requesting and receiving distributions from the Company’s pension plan during fiscal 2018 and the closing date adjustments discussed above. Refer to Note 9, “Pension plan,” for further information on the pension settlement losses.