Note 2 - Acquisition Subsequent To Year End (Unaudited)

12 Months Ended

Oct. 01, 2011

Business Combination Disclosure [Text Block]

2.    ACQUISITION SUBSEQUENT TO YEAR END (Unaudited)

On December 9, 2011, we acquired, through a new wholly-owned subsidiary, substantially all of the assets of M.C. Healthcare Products Inc. (MCHP) for CDN $8.0 million cash (US $7,881,773 at the U.S. dollar/Canadian dollar exchange rate quoted in the Wall Street Journal on December 9, 2011) plus 100,000 shares of Span-America common stock.  MCHP manufactures hospital bed frames and related products.  The purchase price is subject to certain working capital adjustments as set forth in the acquisition agreement. We funded the acquisition through a combination of cash on hand and proceeds from a renewal of our $10 million revolving credit facility that includes a temporary line-of-credit increase from $10 million to $13 million. See Note 10.  The assets purchased consist primarily of accounts receivable, inventory, manufacturing equipment and intellectual property.  Liabilities assumed consist primarily of accounts payable and accruals incurred in the normal course of business prior to the acquisition date.  The transaction is expected to result in goodwill of approximately CDN $6.5 million (approximately US $6.4 million at the U.S. dollar/Canadian dollar exchange rate quoted in the Wall Street Journal on December 9, 2011).  We will operate MCHP under the registered business name M.C. Healthcare Products, a division of Span Medical Products Canada Inc. (Span-Canada), which is a newly formed British Columbia corporation and wholly-owned subsidiary of Span-America Medical Systems, Inc.  Span-Canada will operate the business from MCHP’s 50,000 square foot manufacturing and showroom facility in Beamsville, Ontario under a five-year lease agreement with an option to buy or continue the lease at the end of the lease term.  See Note 20.  Span-Canada will offer continued employment to all 54 current MCHP employees under substantially the same terms and conditions as they are currently employed, with the exception of the president and majority shareholder who is retiring.  MCHP’s manufacturing employees are represented by the Sheet Metal Workers’ International Association, Local Union #540.  Span-Canada, by operation of Canadian labor law, assumed MCHP’s responsibilities under its collective agreement with the union and is the successor employer for purposes of that agreement.