Memorex 2013 Annual Report Download - page 66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
our strategic transformation that we announced during the fourth quarter of 2012 in conjunction with our plan to increase focus
on data storage and data security and were included in our CSA reporting segment. As a part of exiting these disposal
groups, we are selling the assets directly associated with these businesses, which primarily include inventory, tooling and
intangible assets. As a result of this decision, beginning in the first quarter of 2013, we classified these assets as held-for-sale
which is included in other current assets on our Consolidated Balance Sheets.
On October 15, 2013 we completed the sale of the Memorex consumer electronics business for $9.3 million of total
consideration consisting of two separate receivables from the purchaser. The first is a $3.8 million note receivable that
required a $0.9 million payment in December 2013 with the remainder to be paid by March 31, 2014. We received the
required $0.9 million cash payment during the fourth quarter of 2013, leaving a $2.9 million note receivable balance as of
December 31, 2013 which is recorded in other assets on our Consolidated Balance Sheets. The second receivable is for
$5.5 million and does not bear interest. This receivable requires payments between 2014 and 2018 in increasing annual
increments (ranging from $0.2 million in 2014 to $2.2 million in 2018). We recorded this receivable at its estimated fair value
which was calculated to be $4.0 million and as of December 31, 2013, $0.2 million and $3.8 million are recorded in other
current assets and other assets, respectively, on our Consolidated Balance Sheets. The sale of this business resulted in a net
gain of $0.9 million which was recorded as an element of discontinued operations as of December 31, 2013. Our arrangement
for the sale of this business also provides Imation with the ability to receive additional consideration through 2018 to the
extent the purchaser’s sales exceed certain thresholds. We will record this additional consideration, if any, only upon these
sales levels being achieved by the purchaser in the future.
We use the income approach in calculating the fair value of the $5.5 million non-interest bearing receivable associated
with this acquisition. Our expected cash flows are affected by various significant assumptions, including the discount rate and
cash flow projections. Our valuation as of December 31, 2013 utilized a discount rate of 9.0 percent.
On January 31, 2014 we completed the sale of the XtremeMac business. The sales price consisted of $0.3 million of
cash consideration received at closing and an interest-bearing note receivable of $0.3 million due on December 15, 2015. The
sales price also includes additional cash consideration estimated at $3.0 million to be received based on the proceeds the
purchaser is able to achieve from selling the acquired inventory. Based on the estimated value of the expected total
consideration received, we adjusted the carrying value of the XtremeMac disposal group as of December 31, 2013, and
recorded a charge of $1.2 million in the fourth quarter of 2013 bringing our total full-year 2013 impairment charge associated
with this disposal group to $6.7 million. The impairment charge is recorded as an element of discontinued operations.
The operating results for these businesses are presented in our Consolidated Statements of Operations as discontinued
operations for all periods presented and reflect revenues and expenses that are directly attributable to these businesses that
will be eliminated from ongoing operations. See Note 7 - Restructuring and Other for disclosure of severance expense that
was recorded relating to these planned divestitures. As of December 31, 2013, the XtremeMac assets are classified as held-
for-sale.
The key components of the results of discontinued operations were as follows:
Years Ended December 31,
2013 2012 2011
(In millions)
Net revenue ..................................................... $40.7 $ 92.9 $123.8
Gain on sale of discontinued businesses, net of income taxes ................ $ 0.9 $ — $ —
Loss from operations of discontinued businesses, before income taxes ......... (14.2) (17.7) (12.7)
Adjustment to carrying value of disposal group ........................... (6.7) — —
Income tax benefit ................................................ — (1.8) (1.2)
Loss from discontinued businesses, net of income taxes .................... $(20.0) $(15.9) $ (11.5)
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