Business Combinations

12 Months Ended

Dec. 31, 2019

BUSINESS COMBINATIONS

2019

On August 1, 2019, the Company completed the acquisition of Artistic, a diversified producer of folding cartons and CRB. The acquisition included two converting facilities located in Auburn, Indiana and Elgin, Illinois and one CRB paperboard mill located in White Pigeon, Michigan. The Company paid $52.5 million using existing cash and borrowings under its revolving credit facility. The acquisition accounting for the Artistic acquisition is preliminary as the Company is still reviewing the measurement of tangible and intangible assets. Management believes that the purchase price attributable to goodwill represents the benefits expected as the acquisition was made to continue to integrate paperboard from the Company’s mills, to expand its product offering and to further optimize the Company’s supply chain footprint.

Tangible assets and liabilities were valued as of the acquisition date using a market analysis and intangible assets were valued using a discounted cash flow analysis, which represents a Level 3 measurement. The Company recorded $6.5 million related to identifiable intangible assets (customer relationships), $38.5 million related to tangible assets (primarily working capital, land/buildings and equipment) and $7.5 million related to goodwill. Goodwill was recorded in the Americas Paperboard Packaging segment.

During 2019, Net Sales and Income from Operations from the Artistic acquisition were $31.2 million and $2.0 million, respectively.

2018

On January 1, 2018, the Company completed the NACP Combination. The NACP business produces SBS and paper-based foodservice products. The NACP business included two SBS mills located in Augusta, Georgia and Texarkana, Texas, three converting facilities in the U.S. and one in the U.K.

Total consideration for the NACP Combination, including debt assumed of $660 million, was $1.8 billion. Management believes that the purchase price attributable to goodwill represents the benefits expected, as the acquisition was made to continue to expand the Company's product offering, integrate paperboard from the Company's mills and to further optimize the Company's supply chain footprint.

On September 30, 2018, the Company completed the Letica Foodservice acquisition. The acquisition included two facilities in Clarksville, Tennessee and Pittston, Pennsylvania, focused on the production of paperboard-based cold and hot cups and cartons. The Company paid approximately $95 million using existing cash and borrowings under its revolving credit facility.

On June 12, 2018, the Company completed the PFP acquisition. The Company paid approximately $34 million using existing cash and borrowings under its revolving credit facility. The acquisition included two manufacturing facilities in Lebanon, Tennessee and Lancaster, Texas, focused on the production of paperboard-based air filter frames.

The acquisition accounting for the NACP Combination, PFP and the Letica Foodservice acquisitions as of December 31, 2018 was as follows:


In millions	Amounts Recognized as of Acquisition Date		Measurement Period Adjustments		Amounts Recognized as of Acquisition Dates (as adjusted)
Purchase Price^(a)	$	1,241.7	$	(40.9)	$	1,200.8
Assumed Debt^(b)	660.0		—		660.0
Total Purchase Consideration	$	1,901.7	$	(40.9)	$	1,860.8


Receivables, Net	145.3		—		145.3
Inventories, Net	314.2		0.8		315.0

Other Current Assets	20.9		(9.2)		11.7
Property, Plant and Equipment, Net	1,242.6		32.0		1,274.6

Intangible Assets, Net^(c)	136.6		13.5		150.1
Other Assets	6.0		(6.0)		—

Total Assets Acquired	1,865.6		31.1		1,896.7
Accounts Payable	112.6		—		112.6
Compensation and Employee Benefits	21.0		(5.7)		15.3
Current Liabilities	18.0		(0.1)		17.9
Other Noncurrent Liabilities	38.7		(1.7)		37.0
Total Liabilities Assumed	190.3		(7.5)		182.8
Net Assets Acquired	1,675.3		38.6		1,713.9
Goodwill	226.4		(79.5)		146.9
Total Estimated Fair Value of Net Assets Acquired	$	1,901.7	$	(40.9)	$	1,860.8

^(a) Includes a $123.5 million adjustment for discounting the purchase price for lack of marketability of the membership interests issued for the NACP Combination and measurement period adjustments of $40.5 million, related to working capital true-ups, offset by pension settlements.

^(b)Assumed Debt was valued at fair market value based on quoted market prices (Level 2 inputs) obtained from independent pricing services.

^(c)Intangible Assets, Net consists of customer relationships which are generally amortized using either a straight-lined method, when the amortization pattern is not reliably determinable, or an accelerated method, generally over approximately 20 years. The value of customer relationships was determined using a discounted cash flow model, which includes an approximate 5% attrition rate. Beyond the twenty-year life, the present value of cash flows were not meaningful.

As of December 31, 2018, the acquisition accounting for the NACP Combination and PFP Acquisition was complete and the acquisition accounting for Letica Foodservice was preliminary based on the estimated fair values of all assets and liabilities as of the acquisition date.

During the quarter ended March 31, 2019, the acquisition accounting for Letica Foodservice was finalized, resulting in an approximately $5 million reduction in the value of property, plant and equipment.

The following unaudited pro forma consolidated results of operations data assumes that the NACP Combination occurred as of the beginning of the period presented. This pro forma data is based on historical information and does not necessarily reflect the actual results that would have occurred, nor is it indicative of future results of operations.


In millions, except per share data	Year Ended December 31, 2017
Net Sales	$	5,912.5
Net Income	490.9

Net Sales and Income from Operations from the NACP Combination was $1,407.1 million and $134.7 million, respectively, for the year ended December 31, 2018. Total Assets increased as a result of the NACP Combination for the Paperboard Mills and Americas Paperboard Packaging reportable segments by approximately $1.5 billion and $0.6 billion, respectively, as compared to December 31, 2017.

During 2018, Net Sales and Loss from Operations from the Letica Foodservice and PFP acquisitions were $42.4 million and $1.4 million, respectively.

In connection with the NACP Combination, the Company entered into agreements with IP for transition services, fiber procurement fees and corrugated products and ink supply. Payments to IP for the year ended December 31, 2019 under these agreements were $0.1 million, $12.4 million (related to pass through wood purchases of approximately $229.1 million) and $26.6 million, respectively. Payments to IP for the year ended December 31, 2018 under these agreements were $22.0 million, $15.9 million (related to pass through wood purchases of approximately $194 million) and $28.5 million, respectively. In addition, approximately $4 million and $6 million of payments were made for purchases unrelated to these agreements for the year ended December 31, 2019 and 2018, respectively.

2017

As disclosed in "Note 1 - General Information," in 2017, the Company acquired Seydaco, Norgraft, and Carton Craft, which are referred to collectively as the "2017 Acquisitions," for a total purchase price of approximately $189 million.