Note 11. 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 October 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 retains 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 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 at closing subsequently reduced by net liquidity adjustments approximating $22,000. 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, Inc. 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 Company has identified one Company owned facility within the printing segment that the Company intends to sell. This facility does not house any of the Company’s operations other than its limited warehousing use. This facility is carried at its carrying amount of $257,000 and is reported as assets held for sale on the Company’s balance sheets at October 31, 2014. The Company believes the carrying amount to currently be lower than the estimated fair value less cost to sell.

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 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, 2014, 2013, and 2012, was approximately $0, $615,000, and $837,000. The Company had no discontinued operations for the year ended October 31, 2014.

	Twelve Months Ended October 31,
		2014
		Printing		Herald-Dispatch		Total
Net sales	$	-	$	-	$	-
(Loss) earnings from discontinued operations		-		-		-
Income tax benefit (expense)		-		-		-
Gain (loss) on sale of discontinued operations		-		-		-
Income tax (expense) benefit on sale		-		-		-
Net earnings (loss) from discontinued operations		-		-		-

	Twelve Months Ended October 31,
		2013
		Printing		Herald-Dispatch		Total
Net sales	$	2,190,236	$	8,954,004	$	11,144,240
(Loss) earnings from discontinued operations		(746,581	)	491,367		(255,214	)
Income tax benefit (expense)		250,670		(184,608	)	66.062
(Loss) gain on sale of discontinued operations		(103,802	)	547,106		443.304
Income tax benefit (expense) on sale		34,338		(205,548	)	(171,210	)
Net (loss) earnings from discontinued operations		(565,375	)	648,317		82,942

	Twelve Months Ended October 31,
		2012
		Printing		Herald-Dispatch		Total
Net sales	$	19,118,500	$	13,991,752	$	33,110,252
(Loss) from discontinued operations		(700,817	)	(9,579,038	)	(10,279,855	)
Income tax benefit (expense)		-		-
Gain on sale of discontinued operations		1,567,231		-		1,567,231
Income tax on sale (expense)		-		-		-
Net earnings (loss) from discontinued operations		866,414		(9,579,038	)	(8,712,624	)

The major classes of assets and liabilities held for sale and of discontinued operations included in the Consolidated Balance Sheets are as follows:

		Held for sale		Discontinued Operations		Total		Held for sale		Discontinued Operations		Total
		October 31, 2014						October 31, 2013
Assets:
Accounts Receivable	$	-	$	-	$	-	$	-	$	124,231	$	124,231
Inventories		-		-		-		-		-		-
Other current assets		-		-		-		-		-		-
Property and equipment, net		256,832		-		256,832		369,073		-		369,073
Other Assets		-		-		-		-		-		-
Total current assets		256,832		-		256,832		369,073		124,231		493,304
Property and equipment, net		-		-		-		-		-		-
Other assets		-		-		-		-		-		-
Total non-current assets		-		-		-		-		-		-
Total assets held for sale/discontinued operations	$	256,832	$	-	$	256,832	$	369,073	$	124,231	$	493,304

Liabilities:
Accounts payable	$	-	$	-	$	-	$	-	$	-	$	-
Deferred revenue		-		-		-		-		-		-
Accrued payroll and commissions		-		-		-		-		-		-
Taxes accrued and withheld		-		-		-		-		315		315
Accrued expenses		-		-		-		-		-		-
Debt (see Note 3)		-		-		-		-		-		-
Total current liabilities		-		-		-		-		315		315
Total non-current liabilities debt		-		-		-		369,073		123,916		492,989
Total liabilities held for sale/discontinued operations	$	-	$	-	$	-	$	369,073	$	124,231	$	493,304

At October 31, 2013, the Company had two properties and accounts receivable classified as held for sale. Pursuant to applicable guidance, the Company also classified a like amount of the carrying values of these assets, which represents debt, to liabilities held for sale.

During 2014, the company sold and received funds for a property classified as held for sale. The Company obtained a release from its creditor and these funds were not used for debt repayment. The Company anticipates similar treatment for future sales of the remaining property held for sale at October 31, 2014, and thus did not reclassify debt to liabilities held for sale.

In addition to historical practice, the Company’s Management determined, considering conservatism and materiality, that reporting debt as a liability held for sale that is associated with an asset held for sale may not be the best presentation as the asset’s ultimate sale was not certain.