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Business Combination - Mattress Fabric Segment
 6 Months Ended
Oct. 27, 2013
Business Combination - Mattress Fabric Segment
3.  Business Combination – Mattress Fabric Segment

On May 8, 2013, we entered into an asset purchase and consulting agreement with Bodet & Horst GMBH & Co. KG and certain affiliates (“Bodet & Horst”) that provides for, among other things, the purchase of equipment and certain other assets from Bodet & Horst and the restructuring of existing consulting and non-compete agreements pursuant to an earlier asset purchase and consulting agreement with Bodet & Horst dated August 11, 2008. This agreement was accounted for as a business combination in accordance with ASC Topic 805, Business Combinations. We agreed with Bodet & Horst to replace the prior non-compete agreement that prevented us from selling certain mattress fabrics and products to a leading manufacturer, which now allows us to make such sales. In addition, the prior consulting and non-compete agreement, under which Bodet & Horst agreed not to sell most mattress fabrics in North America, was replaced, expanded, and extended pursuant to the new asset purchase and consulting agreement.
 
The purchase price for the equipment and the other certain assets noted below was $2.6 million in cash.
 
Direct acquisition costs related to this business combination totaled $83,000.

The following table presents the allocation of the acquisition cost to the assets acquired based on their fair values:
 
         
(dollars in thousands)
   Fair Value  
Equipment
   $ 890    
Non-compete agreement (Notes 7 and 10)
     882    
Customer relationships (Notes 7 and 10)
     868    
    $ 2,640    

The company recorded its non-compete at its fair value based on a discounted cash flow valuation model. The company recorded its customer relationships at its fair value based on a multi-period excess earnings valuation model. This non-compete agreement will be amortized on a straight line basis over the fifteen year life of the agreement. The customer relationships will be amortized on a straight line basis over their useful life of seventeen years. The equipment will be amortized on a straight line basis over their useful life of seven years.

The following unaudited pro forma consolidated results of operations for the three and six month periods ending October 27, 2013 and October 28, 2012 have been prepared as if the acquisition of Bodet & Horst had occurred on April 30, 2012:

             
   
Three months ended
(dollars in thousands)                                                                                                                
   October 27, 2013   October 28, 2012
Net Sales                                                                                                                    
   $ 70,589     $ 68,027  
                 
Income from operations                                                                                                                            
     5,035       4,659  
                 
Net income                                                                                                                               
     3,096       8,192  
                 
Net income per share, basic                                                                                                                                           
     0.25       0.67  
                 
Net income per share, diluted                                                                                                                                           
     0.25       0.66  
                 
 
               
   
Six months ended
(dollars in thousands)  
October 27, 2013
   October 28, 2012
Net Sales   $ 140,730     $  139,678  
                 
Income from operations     11,009       10,129  
                 
Net income     6,326       11,675  
                 
Net income per share, basic     0.52       0.94  
                 
Net income per share, diluted     0.51       0.93  
                 
 
The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time, nor is it intended to be a projection of future results.