ASSETS HELD FOR SALE AND PROPERTY NOT IN USE

In connection with the Company’s June 8, 2007, acquisition of substantially all of the assets of Portrait Corporation of America (“PCA”) and certain of its affiliates and assumption of certain liabilities of PCA (the “PCA Acquisition”), the Company acquired a manufacturing facility located in Matthews, North Carolina, and excess parcels of land located in Charlotte, North Carolina. In fiscal 2008, the Company ceased use of the excess parcels of land and the manufacturing facility, respectively, and committed to a plan to sell such assets as they were no longer required by the business. The Company had been actively marketing these assets for sale; however, they did not meet the criteria for “held for sale accounting” under FASB ASC Topic 360, “Property, Plant and Equipment” (“ASC Topic 360”). Accordingly, the Company presented these assets within Property and equipment (“Property not in use”), subject to depreciation as applicable, between the periods November 13, 2010 and April 28, 2012.

The major classes of assets included in Property not in use at February 4, 2012 are as follows:



in thousands	February 4, 2012
Land	$	996
Buildings and building improvements (1)	2,405

Property not in use	$	3,401


(1)	Cumulative depreciation expense of $210,000 related to the buildings and building improvements is included in the total accumulated depreciation and amortization line in the Interim Consolidated Balance Sheet at February 4, 2012.

During the second quarter of 2012, the Company reevaluated the "held for sale accounting" classification criteria and, based on offers received for the Matthews, North Carolina facility and certain requirements imposed by the Second Amendment to the Credit Agreement, the Matthews facility and excess parcels of land were reclassified from Property and equipment (“Property not in use”) to Assets held for sale on the Interim Consolidated Balance Sheet as of July 21, 2012. In addition, the Company determined the processing facility in Charlotte, North Carolina also met the criteria for “held for sale accounting” under ASC Topic 360, and reclassified those assets from Property and equipment to Assets held for sale as of July 21, 2012.

At the time an asset qualifies for “held for sale accounting”, the asset is evaluated to determine whether or not the carrying value exceeds its fair value less cost to sell. Any loss as a result of the carrying value being in excess of fair value less cost to sell is recorded in the period the asset meets “held for sale accounting”. Management judgment is required to assess the criteria required to meet “held for sale accounting” and estimate the expected net amount recoverable upon sale. During the second quarter of 2012, the Company valued the Matthews facility based on the contract offer received on the property. The Company valued the Charlotte facility and excess parcels of land based on verbal offers received on the properties. Based on this analysis, the Company determined the carrying values of the Matthews and Charlotte facilities exceeded the estimates of each facility's fair value less cost to sell by approximately $413,000 and $1,672,000, respectively, and recorded charges in the Impairments line in the Interim Consolidated Statements of Operations for the 40 weeks ended November 10, 2012.

During the third quarter of 2012, the Company completed the sales of the Matthews and Charlotte facilities and recorded a loss on disposal of $16,000 and $87,000, respectively, in the Other charges line in the Interim Consolidated Statements of Operations for the 16 and 40 weeks ended November 10, 2012.