Note 2 - Acquisition of M.C. Healthcare Products Inc.

12 Months Ended

Sep. 29, 2012

Business Combination Disclosure [Text Block]

2.    ACQUISITION OF M.C. HEALTHCARE PRODUCTS INC.

On December 9, 2011, we acquired, through a new wholly-owned subsidiary, substantially all of the assets of M.C. Healthcare Products Inc. (“MCHP” or "M.C. Healthcare") for approximately $9,800,000, including cash of approximately $7,980,000 at the time of closing and approximately $354,000 for the post-closing working capital adjustment, paid in January 2012, plus 100,000 shares of Span-America common stock valued at approximately $1,441,000.  MCHP manufactures medical bed frames and related products.  We funded the acquisition through a combination of cash on hand, proceeds from the sale of securities available for sale and proceeds of approximately $6,500,000 from our revolving credit facility.  No cash was acquired.  The excess of the consideration transferred over the net tangible and intangible assets was reflected as goodwill of $2,500,000.

The allocation of the total consideration to the fair value of the assets acquired and liabilities assumed in U.S. dollars as of December 9, 2011 is as follows:

Receivables	$	1,800,000
Inventories		2,210,000
Intangibles		3,980,000
Other current assets		60,000
Equipment		300,000
Goodwill		2,530,000
Liabilities assumed		(1,070,000	)
Contingent consideration		(70,000	)
Deferred tax liability		(50,000	)
	$	9,690,000

For the period from December 9, 2011, the date of the acquisition, through September 29, 2012, MCHP contributed net revenues of approximately $10,284,000 and operating income of approximately $964,000.  These results are included in the Consolidated Financial Statements.

Pro-forma information for the years ended September 29, 2012 and October 1, 2011 as if the purchase had occurred on October 2, 2010 are below.  See Form 8-K/A filed on February 24, 2012 for additional information.

	2012		2011
Pro-forma net revenues	$	78,540,000	$	64,890,000
Pro-forma net income		5,350,000		4,770,000
Pro-forma net income per diluted share	$	1.81	$	1.62