Disposition of Product Line

9 Months Ended

Sep. 30, 2012

Disposition of product Line [Abstract]

DISPOSITION OF PRODUCT LINE

(2) DISPOSITION OF PRODUCT LINE

On September 5, 2012, the Company and its PMG subsidiary sold the Halloween portion of PMG’s business and certain PMG assets relating to such business, including certain tangible and intangible assets associated with the Halloween portion of PMG’s business, to Gemmy. PMG’s remaining assets, including accounts receivable and inventory, were excluded from the sale. PMG retained the right and obligation to fulfill all customer orders for PMG Halloween products (such as Halloween masks, costumes, make-up and novelties) for the Halloween 2012 season. The estimated inventory remaining after the Halloween 2012 season has been reduced to its estimated net realizable value. The purchase price of $2,281,000 was paid to PMG at closing. In connection with the sale, the Company recorded charges of $5,368,000 during the second quarter of fiscal 2013 consisting of severance of 49 employees of $1,282,000, facility closure costs of $1,375,000, professional fees and other costs of $1,341,000 ($523,000 were costs of the transaction) and a non-cash write-down of assets of $1,370,000. Additionally, a portion of the goodwill associated with the PMG reporting unit was allocated to the business being sold. Such allocation was made on the basis of the fair value of the assets being sold relative to the overall fair value of the PMG reporting unit. This resulted in the Company recording a reduction of goodwill in the amount of $2,711,000 for the PMG reporting unit. There was also a non-cash charge of $966,000 related to the write-down of inventory to net realizable value which was recorded in costs of sales. Net sales of the Halloween business were $19,089,000 and $20,482,000 in the three months ended September 30, 2012 and 2011, respectively, and were $27,930,000 and $27,672,000 in the six months ended September 30, 2012 and 2011, respectively.

During the quarter ended September 30, 2012, the Company made payments and other adjustments of $869,000 primarily for professional fees and costs related to severance. As of September 30, 2012, $2,537,000 of the remaining liability was classified in current liabilities and $592,000 was classified in long-term obligations in the accompanying condensed consolidated balance sheet and will be paid through December 2015.