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 APA. 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/discontinued operations at October 31, 2012 and July 31, 2013. The Company recorded an impairment charge in fiscal 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. As part of the Company’s revised restructuring plan submitted to the Company’s secured lenders in July 2012 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 October 31, 2012 (These assets were sold in December 2012).

The Company recorded an impairment charge of approximately $309,000 in fiscal 2012 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 Chapman Printing-Huntington 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, 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 sold substantially all of the assets of its Blue Ridge Printing, Co., Inc. ("Blue Ridge") subsidiary on June 25, 2013 to BRP Company, Inc. pursuant to an Asset Purchase Agreement. The Company received approximately $942,000 net of commissions. Blue Ridge has 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 Blue Ridge are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented.

On July 12, 2013, the Company’s wholly owned subsidiary Champion Publishing sold substantially all the assets of its newspaper operations (The “Herald-Dispatch”) headquartered in Huntington, West Virginia to HD Media Company, LLC pursuant to an Asset Purchase Agreement. The Company received approximately $9,700,000 net of selling commissions and pro-rated taxes. The Herald-Dispatch has historically been accounted for in the Company’s newspaper segment representing this segments only operating entity. In accordance with the applicable accounting guidance for the disposal of long-lived assets, the results of The Herald Dispatch are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented.

The following is selected financial information included in net earnings (loss) from discontinued operations for three divisions classified within the printing segment and the Herald-Dispatch previously classified within the newspaper segment until the sale of this segment. The financial information reflects interest on 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 three months ended July 31, 2013 and 2012 was $167,000 and $206,000 and for the nine months ended July 31, 2013 and 2012 was $612,000 and $648,000.

	Three Months Ended July 31,
		2013
		Printing		Herald-Dispatch		Total
Net sales	$	295,687	$	2,364,072	$	2,659,759
(Loss) earnings from discontinued operations		(136,306	)	50,994		(85,312	)
Income tax benefit (expense)		46,144		(18,995	)	27,149
Gain (loss) on sale of discontinued operations		(103,802	)	547,106		443,304
Income tax (expense) benefit on sale		35,116		(203,797	)	(168,681	)
Net earnings (loss) from discontinued operations		(158,848	)	375,308		216,460

	Three Months Ended July 31,
		2012
		Printing		Herald-Dispatch		Total
Net sales	$	4,720,994	$	3,300,243	$	8,021,237
Earnings (loss) from discontinued operations		(264,606	)	279,254		14,648
Income tax benefit (expense)		-		-		-
Gain on sale of discontinued operations		905,425		-		905,425
Income tax (expense) on sale		-		-		-
Net earnings from discontinued operations		640,819		279,254		920,073

	Nine Months Ended July 31,
		2013
		Printing		Herald-Dispatch		Total
Net sales	$	2,190,475	$	8,954,006	$	11,144,481
(Loss) earnings from discontinued operations		(738,571	)	491,369		(247,202	)
Income tax benefit (expense)		250,527		(183,035	)	67,492
Gain (loss) on sale of discontinued operations		(103,802	)	547,106		443,304
Income tax (expense) benefit on sale		35,116		(203,797	)	(168,681	)
Net earnings (loss) from discontinued operations		(556,730	)	651,643		94,913

	Nine Months Ended July 31,
		2012
		Printing		Herald-Dispatch		Total
Net sales	$	17,293,622	$	10,586,232	$	27,879,854
(Loss) from discontinued operations		(290,915	)	(8,424,557	)	(8,715,472	)
Income tax benefit (expense)		-		-		-
Gain on sale of discontinued operations		905,425		-		905,425
Income tax (expense) on sale		-		-		-
Net earnings (loss) from discontinued operations		614,510		(8,424,557	)	(7,810,047	)

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
		July 31, 2013						October 31, 2012
Assets:
Accounts receivable	$	-	$	144,681	$	144,681	$	-	$	2,454,406	$	2,454,406
Inventories		-		-		-		-		706,584		706,584
Other current assets		-		7,158		7,158		-		109,940		109,940
Property and equipment, net		369,073		-		369,073		1,219,073		5,276,348		6,495,421
Other assets		-		-		-		-		5,128,469		5,128,469
Total current assets		369,073		151,839		520,912		1,219,073		13,675,747		14,894,820
Property and equipment, net		-		-		-		-		-		-
Other assets		-		-		-		-		-		-
Total noncurrent assets		-		-		-		-		-		-
Total assets held for sale/discontinued operations	$	369,073	$	151,839	$	520,912	$	1,219,073	$	13,675,747	$	14,894,820

Liabilities:
Accounts payable	$	-	$	27,936	$	27,936	$	-	$	836,869	$	836,869
Deferred revenue		-		-		-		-		663,496		663,496
Accrued payroll and commissions		-		-		-		-		382,550		382,550
Taxes accrued and withheld		-		44,414		44,414		-		335,476		335,476
Accrued expenses		-		-		-		-		76,661		76,661
Debt (see Note 5)		369,073		79,489		448,562		1,219,073		11,603,132		12,822,205
Total current liabilities		369,073		151,839		520,912		1,219,073		13,898,184		15,117,257
Total noncurrent liabilities		-		-		-		-		-		-
Total liabilities held for sale/discontinued operations	$	369,073	$	151,839	$	520,912	$	1,219,073	$	13,898,184	$	15,117,257