ACQUISITIONS

2014 Acquisitions

Atlas Carpet Mills, Inc.

Effective March 19, 2014, the Company acquired all outstanding stock of Atlas Carpet Mills, Inc. ("Atlas") for total purchase price consideration of $18,759, including a cash payment of $16,543, accrued consideration relating to holdbacks for certain inventories and customer claims of $923 and accrued consideration for a working capital adjustment of $1,293. The Company financed the transaction with availability under its amended credit facility. The Company incurred direct acquisition costs of approximately $645 related to this acquisition. These incremental costs are classified as selling and administrative expenses in the Company's Consolidated Statements of Operations.

Atlas is a California-based manufacturer and marketer of high-end commercial broadloom and tile carpeting serving soft floorcovering markets. Atlas has a strong reputation for exceptional design, quality and service. This brand will be sold through the existing Atlas sales force and will serve to broaden the Company's product offerings for commercial applications along with the Company's Masland Contract and Masland Hospitality brands.

The purchase price consideration was as follows:



Cash paid	$	16,543
Accrued consideration for holdbacks	923
Accrued consideration for working capital adjustment	1,293
Total purchase price consideration	$	18,759

The acquisition was accounted for as a business combination which generally requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The acquisition did not represent a significant business combination. The fair value of the net assets acquired exceeded the purchase price resulting in a bargain purchase. The initial gain was subject to adjustment because the Company had not yet completed its evaluation and determination of the fair value, or fair value less cost to sell as applicable, of certain assets acquired and liabilities assumed, which included the final valuation and assessment of (i) property, plant and equipment acquired including assets held for sale and (ii) net working capital acquired. The Company completed these final valuations and assessments by the end of fiscal 2014. During 2014, based on further information, the Company retroactively applied adjustments to the initial provisional amounts to the first quarter of 2014. Such adjustments are presented in the table below. The most significant adjustment was to assets held for sale. The amount of assets held for sale was revised based on the final sale price. As a result of the adjustments, previously reported first quarter pre-tax earnings were increased by $2,193 ($1,360 after tax). The adjusted bargain gain recognized in the Consolidated Statement of Operations is $10,937 ($6,781 after tax).



	Originally						As
	Reported			Adjustments			Adjusted
Cash	$	2,466		$	—		$	2,466
Receivables	4,304			694			4,998
Inventories	11,511			(530		)	10,981
Other current assets	956			(159		)	797
Assets held for sale	3,250			1,902			5,152
Property, plant and equipment	6,929			(213		)	6,716
Finite intangible asset	3,300			—			3,300
Other assets	623			236			859
Accounts payable	(2,286		)	—			(2,286		)
Accrued expenses	(3,036		)	153			(2,883		)
Capital lease obligation	(404		)	—			(404		)
Fair value of net assets acquired	$	27,613		$	2,083		$	29,696
Total consideration	18,869			(110		)	18,759
Gain on purchase of business	$	(8,744	)	$	(2,193	)	$	(10,937	)

The Company believes that several factors were significant in the recognition of a gain from the acquisition of Atlas. Atlas had higher cost of dyeing due to the lack of capacity utilization and therefore needed to lower costs by combining dye facilities with another operation. In addition, Atlas had a higher cost of modular carpet tile manufacturing due to outsourcing the tile manufacturing operations. Therefore, Atlas would have had to make significant investments in product and manufacturing equipment to be competitive in the modular carpet manufacturing business. Finally, the Seller had the desire to see Atlas operated as an independent brand and organization in the future. All of these objectives were achieved by combining Atlas with the Company in a mutually advantageous relationship.

The Company determined that it is impracticable to provide comparative pro forma financial information related to the acquisition. Significant estimates of amounts to be included in pro forma financial information would be required and subject to an inordinate level of subjectivity. Net sales related to Atlas included in the Company’s Consolidated Statement of Operations from the date of the acquisition to December 27, 2014 was $37,620.

Burtco Enterprises, Inc.

Effective September 22, 2014, the Company acquired certain assets and assumed certain liabilities of Burtco Enterprises, Inc. ("Burtco") for total purchase price consideration of $2,549, including a cash payment of $2,430 and accrued consideration for a working capital adjustment of $119. The Company incurred direct acquisition costs of approximately $101 related to this acquisition. These incremental costs are classified as selling and administrative expenses in the Company's Consolidated Statements of Operations.

Since 1979, Burtco has created high-quality, custom-crafted carpet designed for the hospitality industry. Burtco manufactures both wool and solution-dyed computer yarn placement (CYP) products that are used in public spaces and hotel guest rooms.

These products will broaden the product offerings for commercial applications under the Company's Masland Hospitality brand.

2013 Acquisition

Robertex Associates, Inc.

On June 30, 2013, the Company acquired Robertex Associates, Inc. ("Robertex") from Robert P. Rothman. The Company acquired all the outstanding shares of capital stock of Robertex for an aggregate purchase price of $7,334, which included cash, a seller-financed note and an accrued contingent liability. The seller-financed note consists of five annual payments of principal and interest. The accrued contingent liability is payable in five annual payments based upon incremental growth in gross margins of selected products for five years subsequent to the acquisition. The Company has incurred direct incremental costs of approximately $350 related to this acquisition. These incremental costs are classified in selling and administrative expenses in the Company's Consolidated Statements of Operations.

This acquisition is designed to increase the Company's market share in the wool markets it currently serves. Robertex produces wool floorcovering products.

The purchase price consideration was as follows:



Cash paid	$	2,278
Seller-financed note	3,749
Contingent consideration	1,307
Total purchase price	$	7,334

The acquisition was accounted for as a business combination which requires, among other things, that assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date. The acquisition did not represent a material business combination. The following table summarizes the estimates of fair values of the assets acquired and liabilities assumed as of June 30, 2013 based on the purchase price allocation. The components of the purchase price allocation consisted of the following:



Cash	$	108
Accounts receivable	115
Inventory	2,139
Other current assets	14
Property, plant and equipment	1,863
Finite intangible assets	2,222
Goodwill	1,709
Accounts payable	(643		)
Accrued expenses	(193		)
Total purchase price	$	7,334

2012 Acquisitions

Colormaster

On November 2, 2012, the Company acquired a continuous carpet dyeing facility ("Colormaster") in Calhoun, Georgia from Lineage PCR, Inc. for $6,562 which included cash, a seller financed note and the fair value of a five-year below market agreement to process certain of the seller's products on a commission basis. The Company incurred direct, incremental costs of $269 related to the acquisition which were expensed as incurred and included in general and administrative expenses in the Company's Consolidated Financial Statements. With the acquisition of these continuous dyeing assets, the Company has moved a significant volume of its dyeing production from its more costly beck dyeing process as well as developing future products that utilize the continuous dye process.

The purchase price consideration was as follows:



Cash paid	$	239
Seller-financed note	5,500
Below-market supply contract	823
Total purchase price	$	6,562

The acquisition was accounted for as a business combination which requires, among other things, that assets acquired and liabilities assumed 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 allocation of the purchase price was based on estimates of the fair value of the assets acquired as of November 2, 2012. The components of the purchase price allocation consisted of the following:



Property, plant and equipment	$	6,371
Inventory	173
Supplies	18
Purchase price	$	6,562

Crown Rug

On November 28, 2012, the Company acquired the specialized wool rug tufting equipment and related business ("Crown Rug") from Crown Manufacturing, Inc. for $2,580 which included cash, deferred payments and an accrued contingent liability. The deferred payment is payable in three equal annual installments and the accrued contingent liability is three annual payments based on sales volumes each year. The Company incurred direct incremental costs of $49 related to this acquisition which were classified in general and administrative expenses in the Company's Consolidated Financial Statements. The acquired assets were moved into the Company's facilities to meet internal requirements as well as to enter certain other markets not currently served by the Company. Prior to the acquisition of these assets from Crown Manufacturing, the Company utilized a significant portion of the related machinery capacity at Crown Manufacturing.

The purchase price consideration was as follows:



Cash paid	$	958
Deferred payments to seller	471
Contingent consideration	1,151
Total purchase price	$	2,580

The acquisition was accounted for as a business combination which requires, among other things, that assets acquired and liabilities assumed 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 allocation of the purchase price was based on estimates of the fair value of the assets acquired as of November 28, 2012. The components of the purchase price allocation consisted of the following:



Property, plant and equipment	$	590
Finite intangible assets	352
Goodwill	1,680
Accrued payable	(42		)
Purchase price	$	2,580