Acquisitions

12 Months Ended

Dec. 31, 2022

Business Combination and Asset Acquisition [Abstract]

Acquisitions

Acquisitions

SipWell Acquisition

On December 30, 2021, Eden Springs Netherlands B.V., a wholly-owned subsidiary of the Company ("Eden"), completed the acquisition of Sip-Well NV, the leading distributor of water solutions in Belgium (the "SipWell Acquisition"). The total cash consideration paid by Eden in the SipWell Acquisition was $53.1 million, subject to adjustments for any non-permitted leakage since a locked box date. The SipWell Acquisition was funded through a combination of incremental borrowings under the Company’s Revolving Credit Facility (as defined below) and cash on hand.

The SipWell Acquisition strengthens the Company's presence in Western and Central Europe. The Company has accounted for this transaction as a business combination which requires that assets acquired and liabilities assumed be measured at their acquisition date fair values.

An allocation of the total cash consideration paid of $53.1 million has been made to the major categories of assets acquired and liabilities assumed based on management's estimates of their fair values as of the acquisition date. The excess of the purchase price over the aggregate fair values was recorded as goodwill. Measurement period adjustments recorded during the year ended December 31, 2022 include adjustments to other long-term liabilities for uncertain tax positions and a review of the respective fair values, adjustments to operating and financing lease right-of-use assets and obligations based on a review of acquired leases, an adjustment to deferred taxes related to final valuations, and adjustments to cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, and accounts payable and accrued liabilities based on a review of the respective fair values as of the date of acquisition. The measurement period adjustments did not have a material effect on our results of operations in prior periods.

The table below presents the total cash consideration allocation of the estimated acquisition date fair values of the assets acquired and liabilities assumed:

(in millions of U.S. dollars)	Originally Reported		Measurement Period Adjustments		Acquired Value
Cash and cash equivalents	$	6.8	$	(1.7)	$	5.1
Accounts receivable	1.3		(0.1)		1.2
Inventories	0.1		—		0.1
Prepaid expenses and other current assets	0.2		1.7		1.9
Property, plant and equipment	21.7		(3.0)		18.7
Operating lease right-of-use-assets	0.4		1.1		1.5
Goodwill	38.1		4.7		42.8
Intangible assets	20.0		—		20.0
Current maturities of long-term debt	(1.6)		0.7		(0.9)
Accounts payable and accrued liabilities	(9.9)		1.1		(8.8)
Current operating lease obligations	(0.4)		(0.3)		(0.7)
Long-term debt	(17.7)		2.3		(15.4)
Operating lease obligations	—		(0.8)		(0.8)
Deferred tax liabilities	(5.9)		0.5		(5.4)
Other long-term liabilities	—		(6.2)		(6.2)
Total	$	53.1	$	—	$	53.1

During the year ended January 1, 2022, the Company incurred $0.3 million of acquisition-related costs associated with the SipWell Acquisition, which are included in acquisition and integration expenses in the Consolidated Statement of Operations.

Intangible Assets

In our determination of the fair value of intangible assets, we consider, among other factors, the best use of acquired assets, analysis of historical financial performance and estimates of future performance of the acquired business’ products. The estimated fair values of identified intangible assets are calculated considering both market participant assumptions, using an income approach, as well as estimates and assumptions provided by Primo management and management of the acquired business.

The estimated fair value of customer relationships represent future after-tax discounted cash flows that will be derived from sales to existing customers of the acquired business as of the date of acquisition. Critical assumptions used in our valuation of customer relationships for SipWell include, but are not limited to, anticipated future cash flows, customer attrition rate and risk adjusted discount rate. Anticipated future cash flows assumption reflects projected revenue growth rates, EBITDA margins, and capital expenditures.

The estimated fair value of trademarks and trade names represent the future projected cost savings associated with the premium and brand image obtained as a result of owning the trademark or trade name as opposed to obtaining the benefit of the trademark or trade name through a royalty or rental fee. Critical assumptions used in our valuation of trademarks and trade names include, but are not limited to, projected revenue growth rates, weighted-average terminal growth rate, risk adjusted discount rate and royalty rate.

The following table sets forth the components of identified intangible assets associated with the SipWell Acquisition and their estimated weighted average useful lives:

(in millions of U.S. dollars)	Estimated Fair Market Value		Estimated Useful Life
Customer relationships	$	11.5	19 years
Trade names	8.3		Indefinite
Software	0.2		3 years
Total	$	20.0

Goodwill

Goodwill is calculated as the excess of the purchase consideration transferred over the fair value of the identifiable assets acquired less the liabilities assumed.

The primary factors that contributed to the recognition of goodwill are cash flow projections that include expected future earnings, projections of growth and expected cost synergies resulting from integration of SipWell into our operations. The goodwill recognized as part of the SipWell Acquisition was allocated to the Europe reporting segment, none of which is expected to be tax deductible.