(18) Acquisitions

On December 31, 2012, the Company acquired substantially all of the assets of Packaging Alternatives Corporation (“PAC”), a Costa Mesa, California-based foam fabricator, for $5.7 million. PAC specialized in the fabrication of technical urethane foams primarily for the medical industry. This acquisition brings to the Company further access and expertise in fabricating technical urethane foams, a more significant presence on the west coast and a seasoned management team. The Company has leased the former PAC facility for a period of two years.

The following table summarizes the consideration paid and the acquisition date fair value of the assets acquired and liabilities assumed relating to each transaction:

	PAC
	31-Dec-2012
Consideration
Cash	$	4,400,000
Purchase holdback	600,000
Contingent note payable, at present value	692,000
Fair value of total consideration transferred	$	5,692,000
Acquisition costs (professional fees) included in SG&A	$	57,000
Recognized amounts of identifiable assets acquired:
Cash	$	803,425
Accounts receivable	1,374,853
Inventory	737,414
Other assets	54,422
Fixed assets	816,633
Non-compete	312,000
Customer list	1,537,000
Goodwill	557,594
Total identifiable net assets	6,193,341
Accounts payable	(312,207		)
Accrued Expenses	(189,134		)
Net assets acquired	$	5,692,000

With respect to the acquisition of selected assets of PAC, the Company acquired gross accounts receivable of $1,404,853, of which it deemed $30,000 to be uncollectible. It therefore recorded the accounts receivable at its fair market value of $1,374,853. With respect to the non-compete and customer list intangible assets acquired from PAC, the weighted average amortization period is five years. No residual balance is anticipated for any of the intangible assets.

Consideration for the net assets acquired includes a note payable to the Sellers in the amount of $800,000. The note is to be paid two years from the acquisition date, contingent upon the Company’s ability to retain PAC’s largest customer through this date. The note has been discounted to reflect imputed interest at 2% and a probability of payment of 90%.

The goodwill recorded of $533,000 will be reflected as goodwill in the Company’s Component Products segment. This amount approximates the amount of goodwill the Company expects to deduct for tax purposes. The goodwill reflects the excess of consideration to be paid over the fair value of the net assets acquired, and represents the value of the workforce as well as synergies expected to be realized.

The following table contains an unaudited pro forma condensed consolidated statement of operations for the years ended December 31, 2012, and 2011, as if the PAC acquisition had occurred at the beginning of 2011:

	Years Ended December 31
	2012		2011
	(Unaudited)		(Unaudited)
Sales	$	141,273,675	$	137,616,612
Net income	11,558,968		10,947,772
Earnings Per Share:
Basic	$	1.73	$	1.69
Diluted	1.64		1.56

The above unaudited pro forma information is presented for illustrative purposes only and may not be indicative of the results of operations that would have actually occurred had the PAC acquisition occurred as presented. In addition, future results may vary significantly from the results reflected in such pro forma information.