Annual report pursuant to Section 13 and 15(d)

Note 4 - Discontinued Operations

v3.7.0.1
Note 4 - Discontinued Operations
 12 Months Ended
Dec. 31, 2016
Notes to Financial Statements  
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]
 
4.
Discontinued Operations
 
On
December
22,
2015,
the Company completed the Company's sale of substantially all of the assets, the goodwill and ongoing business comprising the Company’s CSO business to Publicis Healthcare Solutions, Inc., formerly known as Publicis Touchpoint Solutions, Inc. (the “Buyer”), pursuant to the Asset Purchase Agreement, dated as of
October
30,
2015,
by and between the Buyer and the Company (the “Asset Purchase Agreement”), for an aggregate cash purchase price at the closing of approximately
$28.5
million (the “Closing Purchase Price”), subject to a post-closing working capital adjustment, and the assumption by the Buyer of certain specified liabilities. The Closing Purchase Price includes a
$25.5
million cash payment (the “Base Cash Payment”), and an estimated closing date working capital adjustment cash payment of
$3
million. Under the Asset Purchase Agreement, the Company was also entitled to receive an earn-out payment in
2017
equal to
one
-
third
of the
2016
revenues generated by the Commercial Services Business under certain specified contracts and client relationships, less the amount of the Base Cash Payment. The Company will not receive the earn-out payment discussed above.
 
The Company used the net proceeds from the transactions contemplated by the Asset Purchase Agreement to pay the balance of the outstanding loan under the Credit Agreement and related fees, as described further in Note
17,
Long-Term Debt.
 
In connection with the closing of the transactions contemplated by the Asset Purchase Agreement, on
December
22,
2015,
the Company entered into a transition services agreement with the Buyer, pursuant to which the Company provided certain services to the Buyer for up to
six
months following the closing, and a restrictive covenant agreement with the Buyer, pursuant to which, among other things, the Company would be prohibited from competing with the Commercial Services Business until
December
31,
2020.
 
The Asset Purchase Agreement also required the Company change its name, and, as a result the Company changed its name from “PDI, Inc.” to “Interpace Diagnostics Group, Inc.”
 
A reconciliation of the gain on sale for the Company's CSO business for the years ended
December
31,
2016
and
2015
is as follows:
 
   
Gain on Sale
 
(in thousands)
  
2016
   
2015
 
Purchase price
   $
-
    $
25,467
 
Working capital adjustment
    
1,326
     
3,067
 
Total consideration
    
1,326
     
28,534
 
Assets and liabilities sold, net
    
-
     
(5,311
 )
Transaction costs
    
-
     
(1,806
 )
Gain on sale
   $
1,326
 **   $
21,417
*
 
 
* Does not include
$0.2
million gain on sale of the Group DCA business in
2015
 
** In
2016,
the gain on sale was used to offset liabilities owed to the Buyer which resulted in net cash proceeds of approximately
$0.1
million.
 
 
As a result of the sale, the gain on sale and all operations from the CSO business were classified as discontinued operations for all periods presented. On
December
31,
2014,
the Company classified Group DCA as held-for-sale and wrote the assets of the business down to their fair values as the assets have become impaired. In the
first
quarter of
2015,
the Company recorded a gain on sale of its Group DCA business of
$0.2
million. On
December
29,
2011,
the Company entered into an agreement to sell certain assets of its Pharmakon business unit to Informed Medical Communications, Inc. Informed in exchange for potential future royalty payments and an ownership interest in Informed. In the
fourth
quarter of
2012,
the Company wrote-off all of the assets related to the sale of Pharmakon to Informed as it believes that these assets have become impaired. On
July
19,
2010,
the Board approved closing the TVG business unit. The Company notified employees and issued a press release announcing this decision on
July
20,
2010.
The Consolidated Statements of Comprehensive Loss reflect the presentation of Commercial Services, Group DCA, Pharmakon, and TVG as discontinued operations in all periods presented.
 
The table below presents the significant components of Commercial Services, Group DCA's, Pharmakon's and TVG’s results included in
Loss from Discontinued Operations, Net of Tax
in the consolidated statements of comprehensive loss for the years ended
December
 
31,
2016
and
2015.
 
   
For the Years Ended December 31,
  
   
2016
   
2015
 
Revenue, net
   $
1,644
    $
134,850
 
                 
(Loss) income from discontinued operations
    
(886
 )    
10,341
 
Gain on sale of assets
    
1,326
     
21,634
 
Income from discontinued operations, before tax
    
440
      
31,975
 
Income tax expense
    
362
      
12,261
 
Income from discontinued operations, net of tax
   $
78
     $
19,714
 
 
The assets and liabilities classified as discontinued operations relate to Commercial Services, Group DCA, Pharmakon, and TVG. As of
December
 
31,
2016
and
December
 
31,
2015,
these assets and liabilities are in the accompanying balance sheets as follows:
 
   
For the Years Ended December 31,
  
   
2016
    
2015
  
   
CSO
    
DCA/
TVG
    
Total
    
CSO
    
DCA/
TVG
    
Total
  
Accounts receivable, net
   $
-
    $
-
    $
-
    $
3,296
    $
-
    $
3,296
 
Unbilled receivable, net
    
-
     
-
     
-
     
16
     
-
     
16
 
Other
    
-
     
-
     
-
     
2,062
     
-
     
2,062
 
Current assets from discontinued operations
    
-
     
-
     
-
     
5,374
     
-
     
5,374
 
Property and equipment, net
    
-
     
-
     
-
     
190
     
-
     
190
 
Other
   
-
     
14
     
14
     
-
     
150
     
150
 
Long-term assets from discontinued operations
    
-
     
14
     
14
     
190
     
150
     
340
 
Total assets
   $
-
    $
14
    $
14
    $
5,564
    $
150
    $
5,714
 
                                                 
Accounts payable
   $
890
    $
-
    $
890
    $
3,767
    $
-
    $
3,767
 
Unearned contract revenue
    
-
     
-
     
-
     
11
     
-
     
11
 
Accrued salary and bonus
    
1,272
      
-
     
1,272
      
3,036
     
-
     
3,036
 
Other
    
1,966
     
-
     
1,966
     
5,092
     
358
     
5,450
 
Current liabilities from discontinued operations
    
4,128
      
-
     
4,128
      
11,906
     
358
     
12,264
 
Total liabilities
   $
4,128
     $
-
    $
4,128
     $
11,906
    $
358
    $
12,264