(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 brought 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 through December 31, 2014.

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

PAC Acquisition	December 31, 2012

Consideration:
Cash	$	4,400
Purchase holdback	600
Contingent note payable, at present value	692
Fair value of total consideration transferred	$	5,692
Acquisition costs (professional fees) included in SG&A	$	57
Recognized amounts of identifiable assets acquired:
Cash	$	804
Accounts receivable	1,375
Inventory	737
Other assets	54
Fixed assets	793
Non-compete	312
Customer list	1,277
Goodwill	841
Total identifiable net assets	6,193
Accounts payable	(312		)
Accrued Expenses	(189		)
Net assets acquired	$	5,692

Due to a refinement of certain estimates made in the initial purchase price allocation, the Fixed assets, Customer list and Goodwill amounts noted above, were adjusted by approximately ($24,000), ($260,000) and $284,000, respectively, during the year ended December 31, 2013.

With respect to the acquisition of selected assets of PAC, the Company acquired gross accounts receivable of $1,405,000, of which it deemed $30,000 to be uncollectible. It therefore recorded the accounts receivable at its fair market value of $1,375,000. 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 95% and 90% for 2013 and 2012, respectively.

The goodwill recorded of $841,000 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 Consolidated Statement of Operations for the year ended December 31, 2013 includes the following operating results for PAC (in thousands):

	Year Ended
	December 31,
	2013
Sales	$	10,253
Operating income	438

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

	Years Ended December 31,
	2012 Proforma (Unaudited)		2011 Proforma (Unaudited)
Sales	$	141,274	$	137,617
Net income	11,559		10,948
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.