Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

v2.4.0.6
Discontinued Operations
 9 Months Ended
Oct. 31, 2012
Discontinued Operations and Disposal Groups [Abstract]  
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

5. Discontinued Operations

 

On May 4, 2012 we completed the sale of our Broadcast Servers and Storage business and received a cash payment, net of certain adjustments, of $4.9 million and recorded a total gain in this transaction, net of tax in the amount of $1.5 million. The financial results from this divested business is included in discontinued operation in our consolidated statements of operations.

 

On May 21, 2012, we completed the sale of our Media Services business, On Demand Group (“ODG”), to Avail Media, Inc. (“Avail”) for a purchase price of approximately $27 million plus certain working capital adjustments. We received an initial cash payment of $21.8 million in May 2012, and as part of the purchase agreement, $5.7 million in cash was held by Avail in escrow, of which $4.0 million was tied to a specific indemnity matter and $1.7 million was related to a general indemnity provision. We also received a separate payment of $1.0 million for the payment of certain intercompany indebtedness between ODG and SeaChange as part of the transaction. We recorded a $16.0 million loss in our consolidated statements of operations from the sale of ODG in the first half of fiscal 2013. We also incurred investment advisor fees of approximately $1.0 million as well as legal fees that approximated $0.5 million related to the sale of ODG, which were expensed as incurred.

 

On November 26, 2012, we signed an amendment to the ODG purchase agreement that resulted in the release to us of the general escrow of $1.7 million which we received on November 30, 2012, an accelerated release to us of the specific indemnity escrow during the fourth quarter of fiscal 2013, and a reduction in a $1.0 million payment obligation from Avail. The amendment also released a potential future obligation of $1.5 million that is recorded in other liabilities, long-term on our consolidated balance sheet. This will result in a $0.5 million reduction of loss on sale of ODG which will be recorded in the fourth quarter of fiscal 2013. Lastly, the financial result for the sale of Media Services business included a non-cash goodwill impairment charge of $17.0 million that we recorded in the first quarter of fiscal 2013. The financial results for the Media Services segment are included as a discontinued operation in our consolidated statements of operations.

 

The following table details selected financial information for our former Broadcast Servers and Storage and Media Services business units: (amounts in thousands)

 

    Three Months Ended October 31, 2012     Nine Months Ended October 31, 2012  
    Servers and
Storage		     Media
Services		     Total
Discontinued
Operations		     Servers and
Storage		     Media
Services		     Total
Discontinued
Operations		  
Revenues(a):                                    
Products   $ 170     $ -     $ 170     $ 1,010     $ -     $ 1,010  
Services     56       -       56       782       9,315       10,097  
Total revenues   $ 226     $ -     $ 226     $ 1,792     $ 9,315     $ 11,107  
Income (loss) from discontinued operations:                                                
Income (loss) from discontinued operations, before tax   $ 183     $ -     $ 183     $ (2,101 )   $ (248 )   $ (2,349 )
Income tax provision     60       36       96       110       22       132  
Loss in investment in affiliates     -       -       -       -       (174 )     (174 )
Income (loss) from discontinued operations, after tax   $ 123     $ (36 )   $ 87     $ (2,211 )   $ (444 )   $ (2,655 )

 

    Three Months Ended October 31, 2011     Nine Months Ended October 31, 2011  
    Servers and
Storage		     Media
Services		     Total
Discontinued
Operations		     Servers and
Storage		     Media
Services		     Total
Discontinued
Operations		  
Revenues:                                    
Products   $ 1,039     $ -     $ 1,039     $ 5,240     $ -     $ 5,240  
Services     1,544       7,865       9,409       4,262       24,541       28,803  
Total revenues   $ 2,583     $ 7,865     $ 10,448     $ 9,502     $ 24,541     $ 34,043  
(Loss) income from discontinued operations:                                                
(Loss) income from discontinued operations, before tax   $ (755 )   $ (314 )   $ (1,069 )   $ (1,405 )   $ 499     $ (906 )
Income tax provision (benefit)     25       (135 )     (110 )     75       71       146  
Income in investment in affiliates     -       259       259       -       193       193  
(Loss) income from discontinued operations, after tax   $ (780 )   $ 80     $ (700 )   $ (1,480 )   $ 621     $ (859 )

 

 

(a) Represents revenues recoginzed during the current period that were deferred prior to the sale our Broadcast Servers and Storage business.

 

The major classes of assets and liabilities related to discontinued operations are as follows at January 31, 2012:

 

    January 31, 2012  
    Servers and
Storage 		    Media
Services 		    Total
Discontinued
Operations 		 
    (amounts in thousands)  
Assets                        
Current assets:                        
Accounts receivable   $ -     $ 8,371     $ 8,371  
Inventories, net     2,940       -       2,940  
Prepaid expenses and other current assets     170       2,725       2,895  
Total current assets related to discontinued operations   $ 3,110     $ 11,096     $ 14,206  
Non current assets:                        
Goodwill     594       19,226     $ 19,820  
Intangibles     -       1,329       1,329  
Property and equipment, net     1,653       10,404       12,057  
Other assets     108       343       451  
Total non-current assets related to discontinued operations   $ 2,355     $ 31,302     $ 33,657  
                         
Liabilities                        
Current liabilities:                        
Accounts payable   $ -     $ 1,148     $ 1,148  
Accrued expenses     -       6,140       6,140  
Deferred revenues     2,779       738       3,517  
Total current liabilities related to discontinued operations   $ 2,779     $ 8,026     $ 10,805  
Non-current liabilities:                        
Other non-current liabilities     -       739       739  
Total non-current liabilities related to discontinued operations   $ -     $ 739     $ 739