Note 4 - Acquisition

6 Months Ended

Dec. 29, 2013

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

4. Acquisition

On December 2, 2013, the Company acquired certain draw wound assets and the associated business from American Drawtech, a division of Dillon Yarn Corporation (“Dillon”), pursuant to the exercise of an option granted to the Company under the terms of a commissioning agreement with Dillon, for $2,934, which amount included accounts payable and an accrued contingent liability.  The assets acquired include Dillon’s draw winding inventory and production machinery and equipment. This acquisition will increase the Company’s polyester production capacity and allow the Company to expand its presence in targeted industrial, belting, hose and thread markets by increasing its product offerings to include mid-tenacity flat yarns. Mr. Mitchel Weinberger, a member of the Board of Directors (the “Board”), is Dillon’s president and chief operating officer. Since the acquisition date, the business has generated $344 in net sales for the Company’s Polyester Segment.

The acquisition has been accounted for as a business combination, which requires assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date.  The Company concluded that the acquisition did not represent a material business combination. The Company's preliminary estimates of the fair value of the assets acquired, liabilities assumed and consideration transferred are as follows:

Assets:
Inventory	$	434
Machinery and equipment		835
Customer list		1,615
Non-compete agreement		50
Total assets	$	2,934
Liabilities:
Accounts payable	$	434
Contingent consideration		2,500
Total liabilities	$	2,934

The preliminary estimate for the contingent consideration liability represents the present value of the expected future payments due to Dillon over the five-year period following the acquisition date.  The payments are equal to one-half of the operating profit of the draw wound business, as calculated using an agreed upon definition. The preliminary assumptions for the contingent consideration liability were based on inputs not observable in the market and represent Level 3 fair value measurements. These estimates will be reviewed each quarter and any adjustment will be recorded through operating income.  The Company estimates that $500 of contingent consideration will be paid to Dillon over the next twelve months and has recorded this amount in accrued expenses, with the remainder of the contingent consideration liability recorded in other long-term liabilities. 

The customer list will be amortized over a nine year estimated useful life.  The non-compete agreement will be amortized over the five year term of the agreement.