Note 4 - Acquisition

9 Months Ended

Mar. 30, 2014

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

4. Acquisition

On December 2, 2013, the Company acquired certain draw winding 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 increased the Company’s polyester production capacity and has allowed 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 Company’s Board of Directors (the “Board”), is Dillon’s president and chief operating officer.  Since the acquisition date, the business has generated $2,030 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 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 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 quarterly payments are equal to one-half of the operating profit of the draw winding business, as calculated using an agreed upon definition.  The assumptions used in estimating 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.  

See “Note 9. Intangible Assets, Net” for further discussion of the customer list and non-compete agreement.

See “Note 17. Fair Value of Financial Instruments and Non-Financial Assets and Liabilities” for further discussion of the recurring measurement of the contingent consideration.