ACQUISITIONS

9 Months Ended

Sep. 30, 2015

Business Combinations [Abstract]

ACQUISITIONS

The Company accounts for all business combinations in accordance with Financial Accounting Standards Board ("FASB") ASC 805, “Business Combinations” (“ASC 805”), using the acquisition method of accounting. Under this method, assets and liabilities, including any remaining non-controlling interests, are recognized at fair value at the date of acquisition. The excess of the purchase price over the fair value of assets acquired, net of liabilities assumed, and non-controlling interests is recognized as goodwill. Certain adjustments to the assessed fair values of the assets, liabilities, or non-controlling interests made subsequent to the acquisition date, but within the measurement period, which is up to one year, are recorded as adjustments to goodwill. Any adjustments subsequent to the measurement period are recorded in income. Results of operations of the acquired entity are included in the Company’s results from the date of the acquisition onward and include amortization expense arising from acquired tangible and intangible assets. The Company expenses all costs as incurred related to an acquisition in the condensed consolidated statements of income.

Sterling

On March 1, 2015, the Company acquired all of the common stock of Sterling for $5.4 million in cash and 425,005 shares of the common stock of AIRI. The common stock was valued at $9.89 per share, which was the closing share price on February 27, 2015. The cash consideration is subject to adjustment for working capital changes. The Company has also entered into employment and non-compete agreements for two and three year periods with three of the principals of Sterling. The Company financed the acquisition of Sterling with the proceeds from the issuance of Term Loan D (see Note 6).

At the time of acquisition, Sterling had capital lease obligations for equipment with a remaining balance of approximately $1.3 million. On April 21, 2015, the Company refinanced the $1.3 million capital lease obligation with the same financing company. This refinancing generated approximately $500,000 of cash for the Company. The Company is still in the process of finalizing the fair values of the Sterling acquisition transaction and is still in the measurement period as defined under ASC 805. Accordingly, during the nine months ended September 30, 2015, the Company had a revision to the previously recorded purchase price allocation, and has increased the fair value of the goodwill acquired by $1.3 million with a corresponding increase in capital lease obligations. At the date of the capital lease refinancing transaction, the Company had approximately $1.8 million due under the refinanced obligation. This capital lease obligation has been accounted for and summarized with the remainder of the Company's capital leases as disclosed in Note 6.

Sterling founded in 1941 manufactures components for aircraft and ground turbine engines.

The acquisition of Sterling was accounted for under ASC 805. The provisional purchase price allocation is set forth below.

Fair value of tangible assets acquired	$	8,281,000
Goodwill		3,346,000
Cash acquired		588,000
Liabilities assumed		(2,538,000	)
Total	$	9,677,000

Compac

On September 1, 2015, the Company, through its wholly-owned subsidiary WMI, acquired certain assets, including production equipment, inventory and intangible assets, of Compac in an asset acquisition for $1.2 million in cash plus a working capital adjustment of $271,000.

Compac located in Bay Shore, New York specializes in the manufacture of RFI/EMI (Radio Frequency Interference – Electro-Magnetic Interference) shielded enclosures for electronic components.

In connection with the asset purchase, the Company has assumed Compac’s lease for its Bay Shore facility which extends through April 30, 2018 and has annual rent of approximately $80,000, which is offset by rent received from the sub-tenant of approximately $20,000 per year.

The acquisition of Compac was accounted for under ASC 805. The provisional purchase price allocation is set forth below.

Fair value of tangible assets acquired	$	406,000
Intangible assets		600,000
Goodwill		560,000
Liabilities assumed		(95,000	)
Total	$	1,471,000

The below table sets forth selected proforma financial information as if AMK and Sterling were owned for the three and nine months ended September 30, 2015 and 2014.

	Three Months Ended
	September 30, 2015		September 30, 2014
Net Sales	$	21,076,000	$	19,651,000
Income (loss) from operations	$	26,000	$	869,000
	Nine Months Ended
	September 30, 2015		September 30, 2014
Net Sales	$	58,783,000	$	54,865,000
Income (loss) from operations	$	711,000	$	1,482,000

The below table sets forth selected financial information for the 2014 and 2015 acquisitions, which are included in our reported results of operations, for the three and nine months ended September 30, 2015 and 2014.

Three Months Ended September 30, 2015
	WPI		EPC			ECC		AMK			Sterling			Compac
Net Sales	$	282,000	$	1,363,000		$	147,000	$	1,129,000		$	1,853,000		$	86,000
Income (loss) from operations	$	72,000	$	(184,000	)	$	44,000	$	(193,000	)	$	(570,000	)	$	3,000
Three Months Ended September 30, 2014
	WPI		EPC			ECC		AMK			Sterling			Compac
Net Sales	$	264,000	$	1,341,000		$	65,000		-			-			-
Income (loss) from operations	$	54,000	$	481,000		$	10,000		-			-			-
Nine Months Ended September 30, 2015
	WPI		EPC			ECC		AMK			Sterling			Compac
Net Sales	$	639,000	$	3,269,000		$	504,000	$	3,043,000		$	5,152,000		$	86,000
Income (loss) from operations	$	177,000	$	(79,000	)	$	152,000	$	(1,299,000	)	$	(585,000	)	$	3,000
Nine Months Ended September 30, 2014
	WPI		EPC			ECC		AMK			Sterling			Compac
Net Sales	$	803,000	$	1,618,000		$	65,000		-			-			-
Income (loss) from operations	$	234,000	$	577,000		$	10,000		-			-			-