Note 11. SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2011

Note 11. SUBSEQUENT EVENTS

On October 4, 2011, the Company sold certain assets and liabilities related to the DISCO division of Continental Commercial Products, LLC to DISCO Acquisition Corp., a Pennsylvania corporation and an affiliate of Cellucap Manufacturing Company, for $19.0 million, subject to pre-closing and post-closing adjustments based on working capital levels, an indemnification escrow of $475,000 and a deferred lease maintenance adjustment of $10,000 (the “Sale Event”). The Company used net proceeds from the transaction to reduce its outstanding balance under the PNC Credit Agreement. The sale of the DISCO division met the criteria for classification as discontinued operations and held for sale as of September 30, 2011, in accordance with GAAP; therefore, the Company has classified the results of the DISCO division as discontinued operations for all periods presented, and the assets and liabilities of the DISCO division as held for sale. Selected financial data for discontinued operations is summarized as follows (amounts in thousands):

	Three Months Ended				Nine Months Ended
	September 30,		October 1,		September 30,		October 1,
	2011		2010		2011		2010

Net sales	$	4,185	$	4,157	$	12,622	$	12,278

Pre-tax operating income	$	917	$	974	$	2,852	$	2,673

The components of assets and liabilities held for sale are as follows (amounts in thousands):

	September 30,		December 31,
	2011		2010
Assets
Accounts receivable, net	$	2,185	$	2,033
Inventories, net		1,426		1,441
Other current assets		18		16
Intangibles, net		628		698
Property and equipment, net		52		105
	$	4,309	$	4,293

Liabilities
Accounts payable	$	1,174	$	975
Accrued compensation		52		56
Accrued expenses		424		314
	$	1,650	$	1,345

On October 4, 2011, Continental Commercial Products, LLC, Glit/Gemtex, Ltd. and 3254018 Nova Scotia Limited (collectively, the “Borrowers”), wholly owned subsidiaries of the Company, entered into a Loan and Security Agreement with the PrivateBank and Trust Company (the “PB Loan Agreement”). The PB Loan Agreement provides the Company a $20.0 million revolving credit facility, including a $3.0 million sub-limit for letters of credit and a $2.5 million sub-limit for capital expenditures (“CapEx Sublimit”). The proceeds of the Borrowers’ initial borrowing under the PB Loan Agreement were used to repay the PNC Credit Agreement and pay fees and expenses related to the negotiation and consummation of the credit facility. All extensions of credit under the PB Loan Agreement are collateralized by a first priority security interest in and lien upon substantially all present and future assets and properties of the Company and the Borrowers. The Company guarantees the obligations of the Borrowers under the PB Loan Agreement.

The PB Loan Agreement has an expiration date of September 29, 2014 and its borrowing base is determined by eligible inventory and accounts receivable. The Company’s borrowing base under the PB Loan Agreement is reduced by the outstanding amount of standby and commercial letters of credit and any outstanding borrowings under the CapEx Sublimit.

Borrowings under the PB Loan Agreement bear interest at a per annum rate equal to the sum of the Prime Rate Revolving Loans Applicable Margin plus the Prime Rate (each as defined in the PB Loan Agreement), or at a per annum rate equal to the sum of the LIBOR Rate Revolving Loans Applicable Margin plus the LIBOR Rate (each as defined in the PB Loan Agreement). An unused commitment fee of 50 basis points per annum is payable monthly on the average unused amount of the PB Loan Agreement. The PB Loan Agreement includes a financial covenant regarding fixed charge coverage ratio.

In connection with the execution of the PB Loan Agreement, the PNC Credit Agreement, dated as of May 26, 2010, as amended, and the related Ex-Im Agreement, were terminated effective October 4, 2011, and all amounts outstanding under those agreements were paid in full.