ACQUISITIONS

On December 28, 2012, the Company acquired all of the outstanding equity of Valent Aerostructures, LLC, (“Valent”), a provider of complex sub-assemblies and machined parts to airframe manufacturers in the commercial aerospace, business and regional, and military industries, is headquartered in Kansas City, Missouri, and was accounted for under the acquisition method of accounting. Concurrent with the acquisition, the Company entered into a new credit agreement to fund the majority of the purchase price as described in Note 9. "Long-term Debt and Capital Lease Obligations." The Company also issued $15,000 in restricted common stock. Fifty percent of the shares issued for the acquisition are eligible to be converted in June of 2014, with the remaining shares eligible for conversion in December of 2015.

The operating results of Valent have been included in the Company’s Aerostructures segment from the date of acquisition and acquisition related costs of $5,107 have been included in acquisitions expense. The following table presents unaudited pro-forma consolidated operating results for the Company for the years ended December 31, 2012 and 2011, as if Valent had been acquired as of the beginning of the periods presented:



	December 31,
	2012		2011
Net sales	$	386,402	$	340,551
Net income	12,899		10,152

Management believes the integration of Valent with its business may provide synergistic benefits, including increased scale, complementary product offerings, the ability to compete for larger and more complex design-build projects and enhanced project management capabilities, allowing the Company to drive further growth from existing platforms.

The following table summarizes the final purchase price allocation for Valent at the date of acquisition:



Cash	$	44
Accounts receivable	16,769
Inventory	28,053
Prepaid expenses and other current assets	640
Fixed assets	56,075
Intangible assets	46,546
Other long-term assets	1,576
Goodwill	129,816
Current liabilities assumed	(25,187		)
Long-term liabilities assumed	(23,080		)
Cost of acquisition	$	231,252

Of the $46,546 of acquired intangible assets, $45,600 was assigned to customer relationships with a weighted average useful life of 20.3 years; and the remaining $946 consists of trade names, trademarks and other intangibles and have a weighted average useful life of 5.5 years. The fair value of the customer relationships was determined using the multi-period excess earnings method. The fair value of trade names and trademarks was determined using the cost method. These assets are being amortized using the straight-line method, which is expected to approximate the pattern of economic benefit of each intangible asset.

Establishment of the customer relationship asset at Valent considered an ongoing contract in place with Spirit AeroSystems. The terms of the contract do not provide for any minimum volumes to be ordered and include a termination for convenience clause in favor of the customer whereby the customer can exit the relationship with minimal notice. Given the contract with Spirit AeroSystems can be terminated at any time, the Company manages the customer contract-in-place and the customer relationship as an aggregate asset, and we believe the value of the contract-in-place is not separable from the value of the long-standing customer relationship asset.

The customer relationship with Spirit AeroSystems intangible asset was valued separately from Valent’s other customer relationship intangible assets. As part of the valuation of Valent’s customer relationship with Spirit AeroSystems intangible asset, the contractual nature of the relationship was considered and incorporated into the valuation. The contractual nature of the relationship was a factor in the selected discount rate (used in the multi-period excess earnings method), although the significance of the contract was modest due to the aforementioned contract provisions that provide no meaningful assurances of future business under the contract (i.e., no minimum volumes, and termination for convenience clause). These contractual provisions coupled with our review of historical contract renewal rates led to the life ultimately determined for the intangible asset.

On August 7, 2012, the Company acquired all of the shares of capital stock of TASS Inc. (“TASS”), an after-market engineering and support services firm. Headquartered in Kirkland, Washington, TASS delivers engineering solutions to aircraft manufacturers, airlines, Maintenance, Repair and Overhaul companies and leasing companies worldwide. The acquisition was funded by internal cash and by entering into a $1,000 note payable and was accounted for under the acquisition method of accounting. The pro-forma operating results, as if the Company had completed the acquisition at the beginning of the periods presented, are not material to the Company’s operations and are not presented.

Management believes the acquisition of TASS, together with other initiatives, will augment the Company’s long and successful history with Boeing products and provide the Company with a global presence in the aftermarket engineering arena. TASS also provides the Company the ability to internally source product support for parts manufactured by the Company in the global airline fleet.

The Company performed a valuation analysis to determine amounts allocated to the acquired assets and assumed liabilities, including various intangible assets. The following table summarizes the purchase price allocation for TASS at the date of acquisition:



Cash	$	617
Accounts receivable	1,979
Other assets	175
Fixed assets	196
Intangible assets	2,247
Goodwill	6,313
Current liabilities assumed	(1,247		)
Cost of acquisition	$	10,280

Of the $2,247 acquired intangible assets, $1,876 was assigned to customer relationships with a weighted average useful life of 11.9 years; and the remaining $371 consists of trademarks and other intangibles and have a weighted average useful life of 2.9 years. The fair value of the customer relationships was determined using the discounted cash flow method. The fair value of the trademarks was determined using the relief from royalty method.