Acquisitions

Acquisition of Coldenhove

On November 1, 2017, the Company purchased all of the outstanding equity of Coldenhove for approximately $45 million. The Company also paid approximately $3 million to extinguish Coldenhove's existing debt and certain other liabilities. The payment was funded with $17 million of cash on hand and borrowings of $31 million from the Global Revolving Credit Facilities. Coldenhove is a specialty materials manufacturer based in the Netherlands, with a leading position in digital transfer media and other technical products.

The Company accounted for the transaction using the acquisition method in accordance with ASC Topic 805, Business Combinations ("ASC Topic 805"). The preliminary allocation of the purchase price was based on estimates of the fair value of assets acquired and liabilities assumed as of November 1, 2017, and certain tax balances are subject to adjustment as additional information is obtained. The Company has up to 12 months from the closing of the acquisition to finalize its valuations. Changes to the valuation of tax assets and liabilities acquired may result in adjustments to the carrying value of tax assets and liabilities acquired or goodwill. Prior to the end of the one-year purchase price allocation period, if information becomes available which would indicate it is probable that such events attributable to these items had occurred as of the acquisition date and the amounts can be reasonably estimated, such items will be included in the final purchase price allocation and may result in an adjustment to the carrying value of tax assets and liabilities acquired or goodwill.

The following table summarizes the allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed as of December 31, 2017.



	December 31, 2017
Assets Acquired
Cash and cash equivalents	$	4.9
Accounts receivable	4.7
Inventories	12.7
Deferred income taxes	0.4
Prepaid and other current assets	0.2
Property, plant and equipment	31.2
Non-amortizable intangible assets	1.2
Amortizable intangible assets	4.7
Acquired goodwill	10.0
Other assets	0.1
Total assets acquired	70.1
Liabilities Assumed
Accounts payable	4.1
Accrued expenses	5.4
Contingent liability (1)	2.3
Deferred income taxes	3.5
Noncurrent employee benefits	4.9
Long-term debt	1.8
Other noncurrent obligations	0.1
Total liabilities assumed	22.1
Net assets acquired	$	48.0

(1) In conjunction with the acquisition, the Company assumed a contingent liability of $2.3 million related to the acquisition of direct customer relationships by Coldenhove, which amount is contingent on the growth of sales from these customer relationships. As of December 31, 2017, the liability amount is unchanged.

The Company estimated the fair value of the assets and liabilities acquired in accordance with ASC Topic 820, Fair Value Measurements and Disclosures ("ASC Topic 820"). The fair value of amortizable and non-amortizable intangible assets was estimated by applying a royalty rate to projected revenue, net of tax impacts and adjusted for present value considerations. The Company estimated the fair value of acquired property, plant and equipment using a combination of cost and market approaches. In general, the fair value of other acquired assets and liabilities was estimated using the cost basis of Coldenhove.

The excess of the purchase price over the estimated fair value of the tangible net assets and identifiable intangible assets acquired was recorded as acquired goodwill. The factors contributing to the amount of goodwill recognized are based on several strategic and synergistic benefits that are expected to be realized from the acquisition of Coldenhove. These benefits include entry into profitable new markets for performance materials and specialty papers with new capabilities and recognized brands and synergies from combining the business with Neenah's existing infrastructure. None of the goodwill recognized as part of the Coldenhove acquisition will be deductible for income tax purposes. All of the acquired goodwill was allocated to the Technical Products segment.

For the year ended December 31, 2017, the Company incurred $1.3 million of acquisition and restructuring costs. For the year ended December 31, 2017, the Company recorded net sales of $7.5 million and insignificant loss from operations before income taxes (excluding the acquisition related costs described above) for the acquired business.

The following selected unaudited pro forma consolidated statements of operations data for the year ended December 31, 2017 and 2016 was prepared as though the Coldenhove acquisition had occurred on January 1, 2016. The information does not reflect future events that may occur after December 31, 2017 or any operating efficiencies or inefficiencies that may result from the Coldenhove acquisition. Therefore, the information is not necessarily indicative of results that would have been achieved had the businesses been combined during the periods presented or the results that the Company will experience going forward.



	Year Ended December 31,
	2017		2016
Net sales	$	1,019.8	$	986.9
Operating income	108.9		116.7
Income from continuing operations	83.0		74.8
Income (loss) from discontinued operations	—		(0.4		)
Net income	83.0		74.4
Earnings (Loss) Per Common Share
Basic
Continuing operations	$	4.90	$	4.42
Discontinued Operations	—		(0.02		)
	$	4.90	$	4.40
Diluted
Continuing operations	$	4.84	$	4.34
Discontinued Operations	—		(0.02		)
	$	4.84	$	4.32

Acquisition of FiberMark

On August 1, 2015, the Company purchased all of the outstanding equity of FiberMark from American Securities for approximately $118 million. FiberMark is a specialty coatings and finishing company with a strong presence in luxury packaging and technical products.

The Company accounted for the transaction using the acquisition method in accordance with ASC Topic 805, Business Combinations ("ASC Topic 805"). The allocation of the purchase price was based on estimates of the fair value of assets acquired and liabilities assumed as of August 1, 2015.

The excess of the purchase price over the estimated fair value of the tangible net assets and identifiable intangible assets acquired was recorded as acquired goodwill. The factors contributing to the amount of goodwill recognized are based on several strategic and synergistic benefits that are expected to be realized from the acquisition of FiberMark. These benefits include entry into profitable new markets for premium packaging, performance materials and specialty papers with new capabilities and recognized brands, synergies from combining the business with Neenah's existing infrastructure, and the opportunity to accelerate sales growth in areas like premium packaging. None of the goodwill recognized as part of the FiberMark acquisition will be deductible for income tax purposes. However, the Company did acquire all of the tax attributes associated with the FiberMark assets and liabilities, including an insignificant amount of tax deductible goodwill.

Approximately $18.9 million, $6.2 million and $0.4 million of the goodwill acquired in the FiberMark acquisition was allocated to the Technical Products, Fine Paper and Packaging and Other segments, respectively.

For the year ended December 31, 2016, the Company incurred $4.3 million of integration and restructuring costs. For the year ended December 31, 2015, the Company incurred $5.3 million of acquisition and integration costs. For the year ended December 31, 2015, net sales and income from operations before income taxes for the acquired businesses were $58.1 million and $1.5 million (excluding the acquisition related costs described above), respectively.

In conjunction with the FiberMark acquisition, the Company identified various uncertain tax positions totaling $4.7 million. Such amount was reflected in the purchase price allocation as $3.7 million of goodwill and $1.0 million of other current assets.

The following selected unaudited pro forma consolidated statements of operations data for the year ended December 31, 2016 and 2015 was prepared as though the FiberMark acquisition had occurred on January 1, 2015. The information does not reflect future events that may occur after December 31, 2016 or any operating efficiencies or inefficiencies that may result from the FiberMark acquisition. Therefore, the information is not necessarily indicative of results that would have been achieved had the businesses been combined during the periods presented or the results that the Company will experience going forward.



	Year Ended December 31,
	2015
Net sales	$	984.0
Operating income	103.7
Income from continuing operations	61.7
Income (loss) from discontinued operations	(9.4		)
Net income	52.3
Earnings (Loss) Per Common Share
Basic
Continuing operations	$	3.65
Discontinued Operations	(0.56		)
	$	3.09
Diluted
Continuing operations	$	3.60
Discontinued Operations	(0.55		)
	$	3.05