Acquisition

Dispensing Systems Acquisition

On April 6, 2017, we acquired the specialty closures and dispensing systems operations of WestRock Company, now operating under the name Silgan Dispensing Systems, or SDS. SDS is a leading global supplier of highly engineered triggers, pumps, sprayers and dispensing closure solutions for food, health care, garden, home and beauty products. It operates a global network of thirteen facilities across North America, Europe, South America and Asia. SDS represents a strategically important acquisition for us, providing us with an opportunity to expand our closures franchise. SDS is included in our Closures segment as of the acquisition date.

For the year ended December 31, 2016, SDS generated net sales of approximately $570 million. We acquired SDS for a purchase price in cash of $1.022 billion, net of cash acquired. The purchase price is subject to adjustment for working capital, indebtedness and certain other items. We incurred acquisition related costs for SDS totaling $24.4 million, including $9.8 million and $23.0 million for the three and six months ended June 30, 2017, respectively, which are included in selling, general and administrative expenses in our Condensed Consolidated Statements of Income. We funded the purchase price for this acquisition through term and revolving loan borrowings under our amended and restated senior secured credit facility, including a term loan of $800 million. See Note 7 for further information.

The initial purchase price has been allocated to assets acquired and liabilities assumed based on estimated fair values at the date of acquisition using valuation techniques including the income, cost and market approaches, primarily using Level 3 inputs (as defined in Note 8). The purchase price allocation is preliminary and subject to change pending a final valuation of the assets and liabilities, including property, plant and equipment and intangible assets, and the related tax impact of any adjustments to such valuations.

The allocated fair value of assets acquired and liabilities assumed are summarized as follows (in thousands):



Trade accounts receivable	$	109,494
Inventories	79,705
Property, plant and equipment	253,708
Other intangible assets	245,000
Other assets	40,396
Trade accounts payable and accrued liabilities	(81,783		)
Deferred income taxes	(122,544		)
Other liabilities	(25,340		)
Total identifiable net assets	498,636
Goodwill	523,456
Cash paid at closing, net of cash acquired	$	1,022,092

Goodwill of $523.5 million consists largely of our increased capacity to serve our global customers and achieve operational synergies and has been assigned to our closures segment. A portion of the goodwill is expected to be deductible for income tax purposes. Other intangible assets consist of customer relationships of $220.0 million with an estimated remaining life of 22 years and technology know-how of $25.0 million with an estimated remaining life of 7 years. Acquired property, plant and equipment are being depreciated on a straight-line basis with estimated remaining lives of up to 35 years.

Our consolidated results of operations for the three and six months ended June 30, 2017 included the results for SDS since the acquisition date. Net sales from the SDS operations of $142.7 million were included in our Condensed Consolidated Statements of Income for the three and six months ended June 30, 2017. SDS's income from operations since the acquisition date was $7.7 million, including the pre-tax unfavorable impact of the $11.9 million charge related to the inventory write-up for SDS as a result of purchase accounting in connection with the acquisition.

Pro Forma Information

The following unaudited pro forma financial information includes our historical results of operations for the three and six months ended June 30, 2017 and 2016 and gives pro forma effect to the SDS acquisition as if it had been completed as of January 1, 2016. The pro forma results of operations include interest expense related to incremental borrowings used to finance the acquisition and adjustments to depreciation and amortization expense for the valuation of property, plant and equipment and intangible assets. Net income for the three and six months ended June 30, 2017 excludes the unfavorable impact of the initial inventory write-up of $11.9 million before income taxes in each of the periods and acquisition related costs of $9.8 million and $23.0 million before income taxes, respectively. Net income for the six months ended June 30, 2016 includes the unfavorable impact of the initial inventory write-up and acquisition related costs of $11.9 million and $24.4 million before income taxes, respectively. The pro forma results of operations do not give effect to potential synergies or additional costs resulting from the integration of SDS with our existing operations.

The unaudited pro forma financial information for the three and six months ended June 30, 2017 and 2016 is not intended to represent or be indicative of our consolidated results of operations or financial condition that would have been reported had the SDS acquisition been completed as of the beginning of the periods presented, nor should it be taken as indicative of our future consolidated results of operations or financial condition.



	Three Months Ended				Six Months Ended
	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016
	(Dollars in thousands, except per share data)

Net sales	$	1,029,398	$	1,026,040	$	1,981,187	$	1,963,011
Net income	$	42,089	$	41,430	$	80,846	$	48,851

Earnings per share:
Basic net income per share	$	0.38	$	0.34	$	0.73	$	0.40
Diluted net income per share	$	0.38	$	0.34	$	0.73	$	0.40