Discontinued Operations and Related Restructuring Charges

9 Months Ended

Sep. 30, 2012

Discontinued Operations and Related Restructuring Charges [Abstract]

DISCONTINUED OPERATIONS AND RELATED RESTRUCTURING CHARGES

(3) DISCONTINUED OPERATIONS AND RELATED RESTRUCTURING CHARGES

On May 24, 2011, the Company approved a plan to close its Cleo manufacturing facility located in Memphis, Tennessee. The Company exited the Memphis facility in December 2011. In connection with this restructuring plan which was completed by March 31, 2012, the Company recorded restructuring charges of $6,749,000 during fiscal 2012 primarily related to severance of 433 employees and facility closure costs. Additionally, there was a non-cash reduction of $177,000 related to severance that was less than originally estimated, which was included in restructuring expenses in fiscal 2012. During the three and six months ended September 30, 2012, the Company made payments of $187,000 and $612,000, respectively, primarily for costs related to severance. Additionally, there was a reduction in the restructuring accrual of $63,000 and $92,000 during the three and six months ended September 30, 2012, respectively, for costs that were less than originally estimated. As of September 30, 2012, the remaining liability of $126,000 was classified in current liabilities of discontinued operations in the accompanying condensed consolidated balance sheet and will be paid through fiscal 2013.

Selected information relating to the aforementioned restructuring follows (in thousands):

	Employee Termination Costs			Facility and Other Costs			Total
Restructuring reserve as of March 31, 2012	$	750		$	80		$	830
Cash paid		(585	)		(27	)		(612	)
Non-cash reductions		(45	)		(47	)		(92	)
Restructuring reserve as of September 30, 2012	$	120		$	6		$	126

On September 9, 2011, the Company sold the Cleo Christmas gift wrap business and certain Cleo assets to Impact. Impact acquired the Christmas gift wrap portion of Cleo’s business and certain of Cleo’s assets relating to such business, including certain equipment, contract rights, customer lists, intellectual property and other intangible assets. Cleo’s remaining assets, including accounts receivable and inventory, were excluded from the sale. Cleo retained the right and obligation to fulfill all customer orders for Cleo Christmas gift wrap products for Christmas 2011. The purchase price was $7,500,000, of which $2,000,000 was paid to Cleo in cash at closing. The remainder of the purchase price was paid through the issuance by Impact of an unsecured subordinated promissory note, which provides for quarterly payments of interest at 7% and principal payments as follows: $500,000 on March 1, 2012; $2,500,000 on March 1, 2013; and all remaining principal and interest on March 1, 2014. All interest payments to date and the $500,000 principal payment due on March 1, 2012 were paid when due. As of September 30, 2012, $2,500,000 of this note receivable was recorded in other current assets and $2,500,000 of this note receivable was recorded in other long term assets in the accompanying condensed consolidated balance sheet.

As a result of the sale of its Cleo Christmas gift wrap business, the Company has reported these operations, including operating income of the business and all exit activities, as discontinued operations, as shown in the following table (in thousands):

	Three Months Ended September 30,					Six Months Ended September 30,
	2012		2011			2012			2011
Operating income (loss) (A)	$	56	$	2,436		$	(30	)	$	(861	)
Exit costs		63		(1,157	)		92			(4,199	)
Exit costs – equipment sale		0		825			0			825
Gain on sale of business to Impact		0		5,849			0			5,849
Discontinued operations, before income taxes		119		7,953			62			1,614
Income tax expense		38		2,782			18			565
Discontinued operations, net of tax	$	81	$	5,171		$	44		$	1,049

(A) During the quarter ended June 30, 2011, the Company recorded a write down of inventory to net realizable value of $2,498,000, which was included in cost of sales of the discontinued operations. During the quarter ended September 30, 2011, the Company was able to sell certain of the inventory written down during the quarter ended June 30, 2011 for amounts greater than its adjusted carrying value resulting in higher gross profit of $563,000 of the discontinued operations for the quarter ended September 30, 2011.

The following table presents the carrying values of the major accounts of discontinued operations that are included in the condensed consolidated balance sheet (in thousands):

	September 30, 2012		March 31, 2012		September 30, 2011
Accounts receivable, net	$	0	$	78	$	23,543
Inventories		126		105		13,837
Other current assets		0		0		481
Total assets attributable to discontinued operations	$	126	$	183	$	37,861
Customer programs	$	254	$	237	$	1,095
Restructuring reserve		126		830		1,698
Other current liabilities		344		1,323		6,592
Total liabilities associated with discontinued operations	$	724	$	2,390	$	9,385