12. Discontinued Operations and Assets Held for Sale

On July 2, 2012, the Company's wholly owned subsidiary Interform Corporation sold substantially all of the assets of its Consolidated Graphic Communications ("CGC") business headquartered in Bridgeville, Pennsylvania to Safeguard Acquisition, Inc. ("Safeguard") pursuant to an asset purchase agreement ("APA"). The Company received $3,100,000 in cash at closing and an additional $650,000 in the fourth quarter of 2012 comprising a settlement of both the working capital calculations and contractual hold back pursuant to the terms of the Asset Purchase Agreement. The Company had recorded a gain on the sale of such assets in the amount of $1.6 million reflecting the $3,750,000 in cash proceeds for 2012 as a component of discontinued operations.

The Interform subsidiary and the CGC operating division have historically been accounted for in the Company's printing segment. In accordance with the applicable accounting guidance for the disposal of long-lived assets, the results of CGC are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented.

As part of the Company's revised restructuring plan submitted to the Company's secured lenders in July 2012 the Company determined that another division within the printing segment met the criteria of an asset held for sale at July 31, 2012 (Donihe). Therefore, in accordance with applicable accounting guidance the Company has determined the associated assets and liabilities of this division should be classified as assets and liabilities held for sale at October 31, 2012. The Company recorded an impairment charge in 2012 of approximately $337,000 as a result of the measurement requirements associated with this division. This division's results have historically been accounted for in the Company's printing segment. In accordance with the applicable accounting guidance for the disposal of long-lived assets, these results are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented.

The Company has also identified certain long-lived assets that are being included as a component of assets held for sale for the Merten division ("Merten") which is currently expected to retain a sales presence in Cincinnati, Ohio at Merten. As part of the Company's revised restructuring plan submitted to the Company's secured lenders in July 2012 (Revised Restructuring Plan) the Company determined that certain printing segment assets met the criteria of an asset held for sale of Merten.

Therefore, in accordance with applicable accounting guidance the Company has determined certain long-lived assets of this division should be classified as assets held for sale at July 31, 2012 and October 31, 2012.

The Company recorded an impairment charge of approximately $309,000 as a result of the measurement requirements associated with assets classified as held for sale of the Merten division. The Merten results have historically been accounted for in the Company's printing segment. In accordance with the applicable accounting guidance since the Company currently intends to retain a sales presence in Cincinnati and is attempting to retain customers through a joint effort with its Chapman Printing-Lexington location, the operations of Merten would continue to be classified as continuing operations.

In December 2012, the Company completed the sale of substantially all of the property and equipment at Donihe and Merten for $1,050,000 million, net of commissions, and in December 2012, the Company completed the sale of Donihe real estate for $175,000.

The Company identified two Company owned facilities within the printing segment that the Company intends to sell as a result of the Company's Revised Restructuring Plan. These facilities are being carried at their carrying amount which the Company believes to currently be lower than the estimated fair value less cost to sell.

The Company is currently evaluating the sale or potential sale of either segments or divisions or operations within segments for each of the Company's three operating segments. Except as disclosed herein these evaluations have not met the applicable GAAP requirements for classification as assets held for sale at the balance sheet date of October 31, 2012 nor after the balance sheet but before the issuance of the Financial Statements.

The following is selected financial information included in net earnings (loss) from discontinued operations for two divisions classified within the printing segment and reflects interest on estimated debt required to be repaid as a result of these disposal transactions and excludes any general corporate overhead allocations. The interest expense allocated to discontinued operations for the year ended October 31, 2012, 2011, and 2010, was approximately $211,000, $270,000, and $272,000.

	Twelve months Ended October 31,
		2012						2011							2010
		CGC		Donihe		Total			CGC		Donihe		Total		CGC		Donihe		Total
Net sales	$	10,464,516	$	5,819,306	$	16,283,822		$	17,758,633	$	5,914,982	$	23,673,615	$	18,169,202	$	5,369,177	$	23,538,379
Earnings (loss) from discontinued operations		140,761		(563,621	)	(422,860	)		561,257		(126,888	)	434,369		417,752		84,770		502,522
Income tax (expense) benefit		(57,487	)	188,024		130,537			(231,239	)	47,152		(184,087	)	(173,033	)	(38,274	)	(211,307	)
Gain on sale of discontinued operations		1,567,231		-		1,567,231			-		-		-		-		-		-
Income tax (expense) on sale		(640,057	)	-		(640,057	)		-		-		-		-		-		-
Net earnings (loss) from discontinued operations		1,010,448		(375,597	)	634,851			330,018		(79,736	)	250,282		244,719		46,496		291,215

The major classes of assets and liabilities held for sale and of discontinued operations included in the Consolidated Balance Sheets are as follows (see Note 5 for discussion of debt allocated to liabilities held for sale/discontinued operations):

		Held for sale		Discontinued Operations		Total		Held for sale		Discontinued Operations		Total
		October 31, 2012						October 31, 2011
Assets:
Accounts Receivable	$	-	$	777,740	$	777,740	$	-	$	3,285,899	$	3,285,899
Inventories		-		283,467		283,467		-		1,476,792		1,476,792
Other current assets		-		-		-		-		13,542		13,542
Property and equipment, net		1,219,073		425,000		1,644,073		-		-		-
Total current assets		1,219,073		1,486,207		2,705,280		-		4,776,233		4,776,233
Property and equipment, net		-		-		-		1,741,725		840,159		2,581,884
Other assets		-		-		-		-		3,752		3,752
Total noncurrent assets		-		-		-		1,741,725		843,911		2,585,636
Total assets held for sale/discontinued operations	$	1,219,073	$	1,486,207	$	2,705,280	$	1,741,725	$	5,620,144	$	7,361,869

Liabilities:
Accounts payable	$	-	$	278,266	$	278,266	$	-	$	890,889	$	890,889
Deferred revenue		-		4,726		4,726		-		-		-
Accrued payroll and comissions		-		55,310		55,310		-		345,435		345,435
Taxes accrued and withheld		-		138,148		138,148		-		165,698		165,698
Accrued expenses		-		43,103		43,103		-		35,853		35,853
Debt (see Note 3)		1,219,073		966,654		2185,727		1,218,500		4,716,654		5,935,154
Total current liabilities		1,219,073		1,486,207		2,705,280		1,218,500		6,154,529		7,373,029
Total noncurrent liabilities		-		-		-		-		-		-
Total liabilities held for sale/discontinued operations	$	1,219,073	$	1,486,207	$	2,705,280	$	1,218,500	$	6,154,529	$	7,373,029