Business Combination

9 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Business Combination

Note 9 – Business Combination

On February 28, 2011, the Company purchased substantially all of the assets of The Pac-Kit Safety Equipment Company, a leading manufacturer of first aid kits for the industrial, safety, transportation and marine markets. The Company purchased the accounts receivable, inventory, equipment and intangible assets of Pac-Kit for approximately $3.4 million, less liabilities assumed of $310,000, using funds borrowed under the Company’s revolving loan agreement with Wells Fargo.

The Company recorded $1.9 million for assets acquired including accounts receivable, inventory and fixed assets, as well as $1.5 million for intangible assets, consisting of customer relationships and the Pac-Kit trade name. During the nine months ended September 30, 2011, the Company incurred approximately $125,000, of integration and transaction costs associated with the acquisition.  These costs were recorded in selling, general and administrative expenses.  The Company did not incur any of these expenses during the three months ended September 30, 2011.

The purchase price was allocated to assets acquired and liabilities assumed as follows (in thousands):

Assets:
Accounts Receivable	$	592
Inventory	$	1,196
Equipment	$	150
Intangible Assets	$	1,500
Total assets	$	3,438
Liabilities
Accounts Payable		310

Unaudited proforma net sales for the three and nine months ended September 30, 2011 attributable to Pac-Kit were approximately $1.6 million and $4.0 million, respectively. Unaudited proforma net sales attributable to Pac-Kit for the comparable period in 2010 were approximately $1.3 million and $3.4 million, respectively.  The nine month period ended September 30, 2011 represents a comparable period based on the acquisition date.

Unaudited proforma net income, attributable to Pac-Kit, for the three months ended September 30, 2011 was approximately $100,000.  Unaudited proforma net income, excluding one time transaction and integration costs of $125,000, for the nine months ended September 30, 2011, attributable to Pac-Kit was approximately $225,000. Net income for the comparable periods in 2010 was immaterial to the Company’s financial statements.

Assuming Pac-Kit was acquired on January 1, 2011, unaudited proforma net sales and net income for the nine months ended September 30, 2011 attributable to Pac-Kit were approximately $4.8 million and $255,000, respectively. Assuming Pac-Kit was acquired on January 1, 2011, unaudited proforma net sales for the comparable period in 2010 were approximately $4.2 million.  Unaudited proforma net income for the comparable period in 2010 was immaterial to the Company’s consolidated financial statements.