(3) ACQUISITIONS

Webster Industries

On October 14, 2011, the Company completed the acquisition of substantially all of the assets and specified liabilities of Webster, a national manufacturer and distributor of retail and institutional private label food and trash bags, for a purchase price of approximately $25.9 million which was subject to a post-closing true-up and a corresponding purchase price adjustment (up to a maximum of $1.3 million downwards, although no limit upwards). 5% of the purchase price was held in escrow until the final net current asset adjustment was determined (see below). An additional 17.5% of the purchase price is being held in escrow regarding indemnification obligations, with specified amounts released after approximately 18 months and three years after closing, with remaining amounts generally released four years after closing. The Company financed the transaction through a combination of cash on hand and availability under its Credit Facility. The assets included approximately $32.0 million of net current assets, based upon a preliminary estimate of fair value.

During February 2012, the Company settled the net current asset adjustment with Chelsea Industries (the "seller"), Webster's former parent. The full 5% escrow amount was distributed to seller, and additionally the Company paid approximately $749,000 on February 15, 2012. The amount has been reflected as an increase to the purchase price bringing the purchase price to $26.7 million, before expenses. At October 31, 2011, the Company estimated the net current asset true-up to be an additional $0.6 million owed by the Company to Chelsea Industries and included said amount in the estimated purchase price.

The purchase of Webster provides the Company entry into a new market with significant cross-selling potential. The acquisition resulted in a gain on bargain purchase as the seller was motivated to sell the assets of Webster since they were no longer a core part of the seller's business. The Company believes it will have the opportunity to achieve significant cost savings, realized principally from improved resin purchasing and other synergies throughout the combined organization.

The acquisition has been accounted for using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The following table summarizes the preliminary amounts recognized for assets acquired and liabilities assumed as of the acquisition date and the revised amounts based on the settlement of the net current asset adjustment. The fair value allocated to property, plant and equipment and pension liability is still preliminary due to the short duration since the acquisition date and will be finalized as soon as possible but no later than one year from the acquisition date.


	Preliminary Allocation At April 30, 2012		Preliminary Allocation At October 31, 2011
	(in thousands)
Accounts receivable	$	18,030	$	18,030
Inventories		23,770		23,799
Other current assets		781		700
Property, plant and equipment		7,144		7,144
Intangible assets		2,005		2,005

Total identifiable assets acquired		51,730		51,678
Accounts payable		5,398		5,494
Accrued expenses		5,033		5,015
Pension liability		930		893
Deferred income tax liability		5,386		5,403

Total liabilities assumed		16,747		16,805
Net identifiable assets acquired		34,983		34,873
Purchase price		26,697		26,560

Gain on bargain purchase	$	8,286	$	8,313

The reduction of $27,000 in the gain on bargain purchase was recognized in other, net in the consolidated statement of operations for the six months ended April 30, 2012 reflecting revisions to the fair value estimates of the assets acquired and liabilities assumed. The gain on bargain purchase remains subject to further adjustment as the Company completes its analysis of the fair value of Webster's property, plant and equipment and pension liability.

In addition to the $0.7 million of acquisition-related costs expensed in fiscal 2011, the Company recognized approximately $0.2 million and $0.6 million of acquisition-related costs in the three and six months ended April 30, 2012, respectively. These costs were expensed when incurred and are recorded in general and administrative expenses in the consolidated statement of operations for the three and six months ended April 30, 2012.

The following unaudited pro forma information summarizes the results of operations for the three and six months ended April 30, 2011, as if the Webster acquisition had been completed as of November 1, 2010. The pro forma information below gives effect to actual operating results prior to the acquisition. The pro forma information includes: adjustments for additional interest expense related to the borrowings made under the Credit Facility to finance the acquisition and acquisition-related fees; depreciation expense based on the preliminary assessment of fair value of the newly acquired property, plant and equipment using the Company's depreciation policy; amortization expense related to identifiable intangible assets using the straight-line method over a weighted average life of 12 years; the increase in the LIFO reserve related to the Webster inventory added to the Company's LIFO layers; and the application of the Company's effective tax rate on Webster's pre-tax earnings. Also included in the pro forma net income for the six months ended April 30, 2011 is the gain on bargain purchase of $8.3 million, based on the estimated fair values of assets acquired and liabilities assumed at October 14, 2011 and $0.7 million of acquisition-related costs. These pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisition had occurred as of November 1, 2010 or that may be obtained in the future.


	For the Three Months Ended April 30, 2011			For the Six Months Ended April 30, 2011
	unaudited (in thousands)
Net sales	$	280,289		$	529,956
Operating income	$	3,264		$	1,404
Net (loss) income	$	(1,450	)	$	3,620