Note 4—Acquisitions

The Company accounts for acquisitions using the acquisition method of accounting. The results of operations of the acquisitions are included in the consolidated results from their respective dates of acquisition. The purchase price of each acquisition is allocated to the tangible assets, liabilities, and identifiable intangible assets acquired based on their estimated fair values.

Chicago Paper Tube and Can Co.

On January 26, 2016, the Company completed the acquisition of Chicago Paper Tube & Can Co. (“CPT”). The acquisition of CPT provides the Company with high-end, round rigid packaging capability in North America. Consideration in the transaction consisted of cash totaling $8,189, net of cash acquired, and was funded from existing cash balances. CPT’s operations, which are included in the North America operating segment, are not material to the Company’s consolidated financial statements.

BluePrint Media Limited

On July 1, 2015, the Company completed the acquisition of BP Media, Ltd. (“BluePrint”). The acquisition of BluePrint provides the Company with pre-press and digital services in the European market, facilitating the processes surrounding translation and interchangeability of print content for foreign locations. In addition, BluePrint provides the Company with an established sales presence in the media markets in Europe, which will enable the Company to serve the European needs of global media releases. BluePrint had annual revenue of approximately $23,000 in its most recently completed year prior to the acquisition. Consideration in the transaction consisted of cash totaling £1,587 (approximately $2,496 at the transaction date exchange rate), net of cash acquired. The purchase price was funded from existing cash balances. Subject to the provisions in the agreement, additional consideration of £1,000 (approximately $1,340 at current period-end exchange rates) is payable on June 30, 2018. Further consideration of 25% of the acquired businesses EBITDA, as defined in the share purchase agreement, for the three fiscal years ending June 30, 2018 is also payable to the sellers, subject to the achievement of a minimum EBITDA. The Company estimated £944 (approximately $1,265 at current period-end exchange rates) as the fair value of such contingent consideration as of the acquisition date. BluePrint’s operations, which are included in the Europe operating segment, are not material to the Company’s consolidated financial statements.

Presentation Products Group

On February 28, 2015, the Company acquired 100% of the outstanding Class A Common Units of Presentation Products Group (“Presentation Products”) for an aggregate purchase price of approximately $15,615 in cash. The Company acquired Presentation Products to expand its manufacturing operations and sourcing expertise in rigid packaging. Presentation’s operations, which are included in the Europe operating segment, are not material to the Company’s consolidated financial statements.

AGI Shorewood

On November 21, 2014, the Company acquired the Non-European Folding Carton and Lithographic Printing Business of AGI Global Holdings Coöperatief U.A. and the US Folding Carton and Lithographic Printing Business of Atlas AGI Holdings LLC (collectively, “ASG”) for an aggregate purchase price of approximately $133,794 in cash. The purchase price was funded with borrowings under the Company’s Credit Agreement (see Note 13). The Company acquired ASG to further expand the Company’s global network and customer base. The following table summarizes the components of the purchase price for ASG.



Assets
Cash and cash equivalents	$	19,401
Accounts receivable		76,435
Inventories		32,851
Prepaid expenses and other current assets		6,142
Deferred income taxes		15,322
Property, plant and equipment		49,470
Other long-term assets		3,610
Less: Liabilities
Current liabilities		(62,869)
Other long-term liabilities		(6,568)

Purchase price	$	133,794

Armstrong Packaging Limited

On July 8, 2014, the Company acquired 100% of Armstrong Packaging Limited (“Armstrong”) for an aggregate purchase price of approximately $12,747 in cash. The Company acquired Armstrong to expand the Company’s global platform for luxury packaging, gift sets, travel retail, and commemorative editions. Armstrong’s product development and rigid box manufacturing complements the Company’s existing manufacturing, creative design, project management, and global sourcing capabilities. Armstrong’s operations, which are included in the Europe operating segment, are not material to the Company’s consolidated financial statements.

Acquisition of Integrated Print Solutions and Jet Lithocolor

On April 4, 2014, the Company completed the acquisitions of 70% of Integrated Printing Solutions (“IPS”) and all of Jet Lithocolor (“Jet”) to create a comprehensive end-to-end solution for the credit, debit, gift, loyalty and insurance card markets. The acquisitions solidify the Company’s market position by adding a full complement of card production capabilities to our existing creative services, decorative technologies and sustainable solutions. These capabilities include laminated card production, imaging, affixing, direct mail and fulfillment. Furthermore, the acquisitions provide a fully integrated supply chain for cards, carriers, multi-packs and point-of-purchase displays in a range of materials, with turnkey resources for design, production and distribution for open and closed-loop card programs. IPS and Jet had annual sales of approximately $34,000 and $61,000, respectively, for the twelve months ending immediately prior to the date of the acquisition. IPS and Jet’s operations, which are included in the North America operating segment, are not material to the Company’s consolidated financial statements.

Chesapeake/Multi Packaging Solutions Merger

On February 14, 2014, MDP and the Carlyle Group (“Carlyle”) entered into a Combination Agreement, whereby MDP contributed 100% of the outstanding equity of Mustang to a subsidiary of Chesapeake Finance 2, Ltd. (“CF2”), in exchange for a 50% equity interest in CF2. The other 50% equity interest in CF2 is held by funds advised by Carlyle. CF2 emerged from the Merger as the new Parent entity, incorporated under the laws of England and Wales. Subsequent to the Merger, the name of CF2 was changed to Multi Packaging Solutions Global Holdings Limited.

In accordance with the terms of the Merger Agreement, Chesapeake issued shares of Chesapeake stock for all of the outstanding shares of MPS. Additionally, MPS paid Chesapeake an equalization payment of approximately $101,917. Chesapeake, an international manufacturer of consumer packaging, is a leading supplier of printed folding cartons, ridged cartons, tubes, booklets, leaflets and labels, as well as other specialist packaging to the pharmaceutical, healthcare, confectionery, spirits, agrichemical and food markets with annual sales of approximately $841,323. This Merger creates an extensive global network strategically positioned to service the healthcare, consumer, personal care, confectionery, premium drinks, and multi-media markets with manufacturing locations in the United States, Europe, and Asia. The merger was accounted for as a reverse acquisition in accordance with ASC 805, whereby MPS was the accounting acquirer. The equity of the Successor was adjusted to reflect the exchange of shares pursuant to the Merger Agreement.

The Company recorded Chesapeakes’s assets and liabilities based on their estimated fair values at the date of the Merger. The assets included intangible assets related to customer relationships and technology. The fair value estimates for the assets and liabilities assumed were based on estimates and analysis using widely recognized valuation models. The goodwill comprised of expected synergies from combining Chesapeake’s operations with that of the Company, reduction in future combined research and development expenses and overall overhead costs. The goodwill is not deductible for tax purposes.

The operations of the acquired Chesapeake business are included in the Company’s consolidated statements of operations and comprehensive income (loss) since February 14, 2014. For the period from August 15, 2013 through June 30, 2014, $306,928 is included in the consolidated net sales and $(11,345) in the consolidated net income (loss).

The allocation of the purchase price to the fair value of the assets and liabilities assumed is as follows:


Assets
Cash and cash equivalents	$	35,175
Accounts receivable		107,246
Inventories		90,001
Prepaid expenses and other current assets		16,532
Deferred income taxes		10,730
Property, plant and equipment		290,528
Other assets		1,847
Intangible assets		261,748
Goodwill		201,632
Less: Liabilities
Current liabilities		(168,259)
Debt		(487,781)
Deferred income taxes		(57,125)
Other long-term liabilities		(28,015)
Purchase price	$	274,259

MDP Transaction

On August 15, 2013, the Predecessor and its primary shareholder, IPC/Packaging LLC (solely in its capacity as shareholder representative), entered into the Transaction under which the Predecessor was purchased by Mustang, an entity controlled by funds advised by MDP. Following completion of the Transaction, Mustang owned 100% of the outstanding equity of the Predecessor.

MDP acquired 100% of the stock of the Predecessor for an aggregate purchase price of approximately $646,749. The purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The fair value estimates for the assets and liabilities assumed were based on estimates and analysis using widely recognized valuation models. The purchase price allocation included acquired intangible assets related to customer relationships and photo library. The excess of the purchase price over the fair value of net assets acquired was allocated to goodwill which is not deductible for income tax purposes.

The allocation of the purchase price to the fair value of assets acquired and liabilities assumed is as follows:


Assets
Cash and cash equivalents	$	16,646
Accounts receivable		70,985
Inventories		51,668
Prepaid expenses and other current assets		5,878
Deferred income taxes		3,438
Property, plant and equipment		147,845
Other assets		4,588
Intangible assets		229,052
Goodwill		269,084
Less: Liabilities
Current liabilities		(70,122)
Deferred income taxes		(73,678)
Other long-term liabilities		(8,635)
Purchase price	$	646,749

The consolidated statement of cash flows excludes certain non-cash activity of the Company on August 15, 2013 resulting from the Transaction. The following table reconciles the Predecessor’s ending cash at August 14, 2013 to the Successor’s beginning cash at August 15, 2013:


Cash at August 14, 2013 (Predecessor)	$	22,653
Issuance of common stock		160,750
Issuance of long-term debt, net		465,561
Settlement of Predecessor debt		(369,047)
Settlement of Predecessor equity and option holders		(244,240)
Settlement of transaction and other fees		(19,031)
Cash at August 15, 2013 (Successor)	$	16,646

Pro Forma Financial Information

The following table provides unaudited pro forma net sales, net income (loss) and earnings (loss) per share data, as if the acquisitions of Presentation Products, ASG, Armstrong, IPS, Jet, Chesapeake and the MDP Transaction occurred as of July 1, 2013. Unaudited pro forma financial information is not provided for the fiscal year ended June 30, 2016 as the fiscal 2016 acquisitions were not material to the consolidated financial statements.


	For the fiscal year ended June 30,
	2015		2014
Net sales	$	1,807,513	$	1,902,429
Net income (loss)	$	14,172	$	(120,420)
Earnings (loss) per share - basic and diluted	$	0.22	$	(1.94)

CD Cartondruck AG

The Company had deferred consideration relating to the June 9, 2011 purchase of Cartondruck that was subject to satisfaction of certain employment contingencies. The value of the contingent consideration was recorded as compensation expense on a straight-line basis over the period of a required employment agreement. The Company had a restricted cash balance at June 30, 2015 related to this arrangement in the amount of $1,985, which is recorded in other assets on the accompanying consolidated balance sheets. On June 13, 2016 the restricted cash that was held in escrow was released to the sellers as required. Additionally, an additional “earnout” payment would have been payable based on the future performance of the acquired company. On June 13, 2016 the Company and the sellers agreed that no additional payment was due under this “earnout” arrangement. In connection with the resolution of these contingencies in June 2016 and the final payments made, the Company recorded a $320 reduction of expense, which is included within stock based and deferred compensation expense in the consolidated statements of operations and comprehensive income (loss).