Annual report pursuant to Section 13 and 15(d)

Discontinued Operations

v2.4.0.6
Discontinued Operations
 12 Months Ended
Jan. 31, 2013
Discontinued Operations and Disposal Groups [Abstract]  
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

3. 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 are included in discontinued operations in our consolidated statements of operations and comprehensive income (loss).

 

On May 21, 2012, we completed the sale of our Media Services business, 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 in escrow by an escrow agent, of which $4.0 million was tied to a specific indemnity matter and $1.7 million was related to a general indemnity provision. Avail also held another $1.0 million for the payment of certain intercompany indebtedness between ODG and SeaChange as part of the transaction. As part of the agreement with Avail, we were also potentially required to pay Avail $1.5 million which we included in other liabilities, long-term on our consolidated balance sheet at the time of the acquisition. We recorded a $16.0 million loss in our consolidated statements of operations and comprehensive income (loss) from the sale of ODG in the first half of fiscal 2013, primarily related to goodwill impairment. 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 the first 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;
· a $0.3 million reduction of the $1.0 million intercompany indebtedness due from Avail; and

· a reduction in other liabilities on our consolidated balance sheets for the $1.5 million obligation.

 

On January 31, 2013, we signed the third amendment to the ODG purchase agreement that resulted in:

 

· the release of $2.0 million of the amount held in escrow for the specific indemnification matter which we received on February 4, 2013; and
· the release to us from the escrow for the specific indemnification matter in the amount of $0.8 million on May 1, 2013 and June 1, 2013, with the remaining $0.4 million to be received on July 1, 2013.

  

The aforementioned amendments resulted in a net decrease in the loss on sale of ODG of approximately $0.5 million during the fourth quarter of fiscal 2013.

 

Lastly, the financial results from 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 from the Media Services segment are included as discontinued operations in our consolidated statements of operations and comprehensive income (loss).

 

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

 

    For the Fiscal Year Ended January 31, 2013     For the Fiscal Year Ended January 31, 2012     For the Fiscal Year Ended January 31, 2011  
    Servers and
Storage		     Media
Services		     Total
Discontinued
Operations		     Servers and
Storage		     Media
Services		     Total
Discontinued
Operations		     Servers and
Storage		     Media
Services		     Total
Discontinued
Operations		  
Revenues:                                        
Products   $ 1,031     $ -     $ 1,031     $ 6,159     $ -     $ 6,159     $ 9,524     $ -     $ 9,524  
Services     835       9,315       10,150       5,720       32,913       38,633       5,516       28,032       33,548  
Total revenues   $ 1,866     $ 9,315     $ 11,181     $ 11,879     $ 32,913     $ 44,792     $ 15,040     $ 28,032     $ 43,072  
(Loss) income from discontinued operations:                                                                        
(Loss) income from discontinued operations, before tax   $ (1,854 )   $ (194 )   $ (2,048 )   $ (2,400 )   $ 2,109     $ (291 )   $ (2,115 )   $ 984     $ (1,131 )
Income tax provision (benefit)     84       (13 )     71       100       312       412       100       (210 )     (110 )
Income in investment in affiliates     -       (174 )     (174 )     -       92       92       -       (82 )     (82 )
(Loss) income from discontinued operations, after tax   $ (1,938 )   $ (355 )   $ (2,293 )   $ (2,500 )   $ 1,889     $ (611 )   $ (2,215 )   $ 1,112     $ (1,103 )

 

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  
Deferred tax assets, long-term     -       343       343  
Other assets     108       -       108  
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:                        
Deferred tax liabilities, long-term     -       214       214  
Other non-current liabilities     -       525       525  
Total non-current liabilities related to discontinued operations   $ -     $ 739     $ 739