Note 5 - Morganton Sale

9 Months Ended

Oct. 04, 2015

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

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Morganton Sale

On July 9, 2015, the Company entered an asset purchase agreement (the “Agreement”) to sell certain assets used in the Company’s manufacturing facility in Morganton, North Carolina, to its largest customer, Meritor, Inc. (“Meritor”). The Company retained the Morganton plant’s axle shaft manufacturing lines and certain related assets, intellectual property and inventories, which was transitioned to the Company’s Louisville, Kentucky plant in October 2015. All other Morganton equipment, related assets and intellectual property were sold to Meritor (the “Morganton Sale”) for $10,500,000 in cash paid at the closing and other consideration. Meritor purchased related inventories and accounts receivable and assumed or released certain accounts payable and other accrued liabilities, for $2,000,000 (subject to customary post-closing adjustments to actual). Meritor also agreed to purchase the Morganton facility for $3,200,000. The total proceeds received of $15,700,000 in consideration for the Morganton sale was used to pay down the Company’s outstanding debt with PNC Bank, National Association (“PNC”). As a result of the Morganton sale, the Company recognized a gain of $7,744,000.

At closing, the parties also entered into a Meritor Note Amendment, whereby the Company has issued an additional secured obligation to Meritor of $412,000 on July 9, 2015. The parties also agreed to increase the Meritor Note by an additional $321,000 in September to reflect certain roof repairs required at the Morganton facility.

The Company repaid the Meritor Note on October 30, 2015. See Note 12 “Debt,” to the consolidated financial statements for more detail on the Meritor Note.