Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

v2.4.0.6
Discontinued Operations
 3 Months Ended
Apr. 30, 2013
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 are included in discontinued operations in our consolidated statements of operations and comprehensive loss.

 

On May 21, 2012, we completed the sale of our Media Services business, On Demand Group (“ODG”), to Avail Media, Inc. (collectively known as Vubiquity) 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. Vubiquity 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 Vubiquity, we were also potentially required to pay them $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 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 Vubiquity; and
· a reduction in other liabilities long-term 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 (which we received on May 9, 2013), $0.8 million on June 1, 2013 and 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 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 and comprehensive loss.

  

The following table details selected financial information for our former Broadcast Servers and Storage and Media Services business units for the three months ended April 30, 2013 and 2012 (amounts in thousands):

 

    Three Months Ended April 30, 2013     Three Months Ended April 30, 2012  
    Servers and Storage     Media Services     Total
Discontinued Operations		     Servers and Storage     Media
Services		     Total
Discontinued Operations		  
Revenues:                                    
Products   $ 46     $              -     $                46     $ 839     $ -     $ 839  
Services     -       -       -       705       7,426       8,131  
Total revenues   $ 46     $ -     $ 46     $ 1,544     $ 7,426     $ 8,970  
Income (loss) from discontinued operations:                                                
Income (loss) from discontinued operations, before tax   $ 35     $ -     $ 35     $ (2,019 )   $ (158 )   $ (2,177 )
Income tax provision (benefit)     -       -       -       25       (49 )     (24 )
Loss in investment in affiliates     -       -       -       -       (142 )     (142 )
Income (loss) from discontinued operations, after tax   $ 35     $ -     $ 35     $ (2,044 )   $ (251 )   $ (2,295 )