9. GOODWILL AND OTHER INTANGIBLE ASSETS

12 Months Ended

Oct. 31, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

9. Goodwill and Other Intangilbe Assets

9. GOODWILL AND OTHER INTANGIBLE ASSETS

Components of other intangible assets at October 31 consisted of:

	2012					2011
		Gross Carrying Amount		Accumulated Amortization	Wgt. Avg. Amort.Years		Gross Carrying Amount		AccumulatedAmortization	Wgt. Avg. Amort.Years
Amortized Intangible Assets:
Covenants Not to Compete	$	2,386,488	$	1,986,405	3.04	$	2,226,488	$	1,835,821	3.11
Customer Lists		7,821,186		6,339,881	2.41		7,428,733		5,522,370	2.63
Other Identifiable Intangibles		656,913		225,868	26.90		704,914		213,536	27.87
Total	$	10,864,587	$	8,552,154		$	10,360,135	$	7,571,727

Amortization expense for amortizable intangible assets for fiscal years 2012 and 2011, was $980,427 and $1,067,891, respectively.

Estimated amortization expense for the next five years is as follows:

Fiscal Year Ending October 31,
	2013	$	1,007,000
	2014		593,000
	2015		261,000
	2016		123,000
	2017		68,000

An assessment of the carrying value of goodwill was conducted as of October 31, 2012 and 2011.  In 2012, based on the analysis, it was determined that the carrying amount of goodwill exceeded the implied fair value of goodwill by $19,966,504 on the assessment date, resulting in a non-cash impairment loss of that amount for the year.  In 2011 it was determined that goodwill was not impaired.

The assessment of the carrying value of goodwill is a two step process. In step one, the fair value of the Company is determined, using a weighted average of three different approaches – quoted stock price (a market approach), value comparisons to publicly traded companies believed to have comparable reporting units (a market approach), and discounted net cash flow (an income approach).  This approach provided a reasonable estimation of the value of the Company and took into consideration the Company’s thinly traded stock and concentrated holdings, market comparable valuations, and expected results of operations. The Company compared the resulting estimated fair value to its carrying amount as of October 31, 2012 and determined that the carrying amount exceeded the fair value. Therefore, the Company proceeded to step two of the impairment testing process.    In step two, the Company allocated the estimated fair value to all of its assets and liabilities (including unrecognized intangible assets) as if the Company had been acquired in a business combination and the estimated fair value was the price paid. It then recognized an impairment loss in the amount by which the carrying value of goodwill exceeded the implied value of goodwill as determined in this allocation.  The Company is a single reporting unit as it does not have separate management of product lines and shares sales, purchasing and distribution resources among the lines.   The same assessment was done at October 31, 2011 and concluded the fair value exceeded the carrying amount, thus the second step of the impairment test was not necessary.  Other than the impairment charge, there were no other changes in goodwill in fiscal 2012 and there were no changes in goodwill in fiscal 2011.

In establishing fair market valuations in both step one and step two of the goodwill impairment testing process, the Company assumed a nontaxable hypothetical transaction considering the feasibility of an acquisition structure and whether the assumed structure would result in the highest and best use and would provide maximum value to the seller, including consideration of related tax implications.

Impairment was primarily the result of a decline in estimated fair value resulting from the income approach which relies on a discounted cash flow analysis of the Company’s projected cash flows as well as an analysis of comparable “guideline” companies. These valuations are reflective of the competitive business environment that the Company operates in. In addition, the Company has undertaken operating initiatives to increase its competitive advantage over the long term. These initiatives have increased operating expenses prior to generating anticipated sales which negatively impacted cash flow in the early years of the analysis. There was no event or other change in circumstance that would more likely than not reduce the fair value of the Company’s underlying net assets below their carrying amount prior to the annual impairment test.