Acquisitions and dispositions

12 Months Ended

Dec. 31, 2019

Acquisitions

The Company completed two acquisitions during 2019 at a net cash cost of $297,926. On December 31, 2019, the Company completed the acquisition of Thermoform Engineered Quality, LLC, and Plastique Holdings, LTD, (together "TEQ"), for $187,292, net of cash acquired. The operations acquired consist of three thermoforming and extrusion facilities in the United States along with a thermoforming operation in the United Kingdom and thermoforming and molded-fiber manufacturing in Poland, which together employ approximately 500 associates. The acquisition of TEQ provides a strong platform to further expand Sonoco's growing healthcare packaging business. Final consideration is subject to a post-closing adjustment for the change in working capital to the date of closing, which is expected to be completed by the end of the first quarter of 2020. The acquisition was financed using short-term credit facilities.

On August 9, 2019, the Company completed the acquisition of Corenso Holdings America, Inc. ("Corenso") for $110,634, net of cash acquired. Corenso is a leading manufacturer of uncoated recycled paperboard (URB) and high-performance cores used in the paper, packaging films, tape, and specialty industries. Corenso operates a 108,000-ton per year URB mill and core converting facility in Wisconsin Rapids, Wisconsin, as well as a core converting facility in Richmond, Virginia, expanding the Company's ability to produce a wide variety of sustainable coreboard grades. The acquisition was financed using available cash and short-term borrowings.

The preliminary fair values of the assets acquired and liabilities assumed in connection with the TEQ and Corenso acquisitions for the year ended December 31, 2019 are as follows:


	TEQ		Corenso
Trade Accounts Receivable	$	11,781	$	8,673
Inventories	4,262		8,707
Property, Plant and Equipment	42,005		36,928
Goodwill	75,595		43,427
Other intangible assets	56,170		29,170
Payable to suppliers	(4,965)		(5,963)
Other net tangible assets/(liabilities)	3,243		405
Deferred income taxes, net	(799)		(10,713)
Net assets	$	187,292	$	110,634

The amount of goodwill expected to be deductible for income tax purposes is $58,544 for TEQ and $0 for Corenso. Goodwill for TEQ and Corenso is comprised of the assembled workforce and increased access to certain markets. As the acquisition of TEQ was completed on December 31, 2019, none of its results are reflected in the Company's Consolidated Statement of income for the year ended December 31, 2019. Beginning in the first quarter of 2020, TEQ's results will be reflected in the Company's Consumer Packaging segment. Corenso's financial results from August 9, 2019 to December 31, 2019 are included in the Company's Paper and Industrial Converted Products segment.

The allocation of the purchase price of Corenso and TEQ to the tangible and intangible assets acquired and liabilities assumed was based on the Company's preliminary estimates of their fair value, relying on information currently available. Management is continuing to finalize its valuations of certain assets and liabilities listed in the table above, and expects to complete its valuations within one year of the date of the respective acquisitions.

The Company does not believe that the results of the business acquired in 2019 were material to the years presented, individually or in the aggregate, and are therefore not subject to the supplemental pro-forma information required by ASC 805. Accordingly, this information is not presented herein.

The Company completed three acquisitions during 2018 at a net cash cost of $278,777. On October 1, 2018, the Company completed the acquisition of the remaining 70 percent interest in Conitex Sonoco (BVI), Ltd. ("Conitex Sonoco") from Texpack Investments, Inc. ("Texpack") for total consideration of $134,847, including net cash payments of $127,782 and debt assumed of $7,065. Final consideration was subject to a post-closing adjustment for the change in working capital to the date of closing. This adjustment was settled in February 2019 for an additional cash payment to the seller of $84. The Conitex Sonoco joint venture was formed in 1998 with Texpack, a Spanish-based global provider of paperboard and paper-based packaging products. Conitex Sonoco produces uncoated recycled paperboard and tubes and cones for the global spun yarn industry, as well as adhesives, flexible intermediate bulk containers and corrugated pallets. Conitex Sonoco has approximately 1,250 employees across 13 manufacturing locations in 10 countries (principally in Asia), including four paper mills and seven cone and tube converting operations and two other production facilities. Also on October 1, 2018, the Company acquired a rigid paper facility in Spain ("Compositub") from Texpack Group Holdings B.V. for a cash payment of $9,956. Final consideration was subject to a post-closing adjustment for the change in working capital to the date of closing. This adjustment was settled in February 2019 for an additional cash payment to the seller of $371.

Immediately prior to the acquisition, the fair value of the Company's 30 percent interest in Conitex Sonoco was determined to be $52,543 with a carrying value of $57,327. As the carrying value of the investment exceeded its acquisition-date fair value, the investment was written down to

fair value resulting in a charge of $4,784 in "Selling, general and administrative expenses" on the Company's Consolidated Statements of Income for the year ended December 31, 2018. Additionally, foreign currency translation losses related to the Company's investment in Conitex Sonoco were reclassified out of accumulated other comprehensive loss resulting in a charge of $897 in "Selling, general and administrative expenses" on the Company's Consolidated Statements of Income for the year ended December 31, 2018.

On April 12, 2018, the Company completed the acquisition of Highland Packaging Solutions ("Highland"). Total consideration for this acquisition was $148,539, including net cash paid of $141,039, along with a contingent purchase liability of $7,500 payable in two annual installments if certain sales metrics are achieved. The first year's metric was met and the Company paid the first installment of $5,000 in 2019. The second installment of $2,500 is expected to be paid in the second quarter of 2020. The liability for the remaining installment is included in "Accrued expenses and other" on the Company's Consolidated Balance Sheet at December 31, 2019. Highland manufactures thermoformed plastic packaging for fresh produce and dairy products from a single production facility in Plant City, Florida, providing total packaging solutions for customers that include sophisticated engineered containers, flexographic printed labels, and inventory management through distribution warehouses in the Southeast and West Coast of the United States.

During the year ended December 31, 2019, the Company finalized its valuations of the assets acquired and liabilities assumed in acquisitions completed during 2018. As a result, the following measurement period adjustments were made to the previously disclosed provisional fair values of assets and liabilities acquired and are as follows:


	Conitex Sonoco		Compositub		Highland
Trade accounts receivable	$	(77)	$	203	$	—
Inventories	—		50		—
Property, plant and equipment	(199)		(1,026)		1,895
Goodwill	2,246		(566)		(1,895)
Other intangible assets	300		1,888		—
Accrued expenses and other	(1,782)		(138)		—
Other net tangible assets/(liabilities)	(404)		(40)		—
Additional cash consideration	$	84	$	371	$	—

Factors comprising the goodwill for Conitex Sonoco and Compositub, of which $2,000 and $1,965, respectively, is expected to be deductible for income tax purposes, include increased access to certain markets as well as the value of the assembled workforce. The financial results of Conitex Sonoco and Compositub are included in the Company's Paper and Industrial Converted Products segment and Consumer Packaging segment, respectively.

All of the goodwill for Highland is expected to be deductible for income tax purposes, and is comprised of increased access to certain markets as well as the value of the assembled workforce. Highland's financial results are included in the Company's Consumer Packaging segment and the business operates within the Company's global plastics division.

The Company does not believe that the results of the businesses acquired in 2018 were material to the years presented, individually or in the aggregate, and are therefore not subject to the supplemental pro-forma information required by ASC 805. Accordingly, this information is not presented herein.

The Company completed two acquisitions during 2017 at a net cash cost of $383,725. On July 24, 2017, the Company completed the acquisition of Clear Lam Packaging, Inc. ("Clear Lam") for $164,951, net of cash acquired. Final consideration was subject to an adjustment for working capital, which resulted in cash of $1,600 being returned to the Company in 2018. Clear Lam manufactures high barrier flexible and forming films used to package a variety of products for consumer packaged goods companies, retailers and other industrial manufacturers, with a focus on structures used for perishable foods. It has production facilities in Elk Grove Village, Illinois, and Nanjing, China. Clear Lam's financial results are included in the Company's Consumer Packaging segment.

On March 14, 2017, the Company completed the acquisition of Packaging Holdings, Inc. and subsidiaries, including Peninsula Packaging LLC ("Packaging Holdings"), for $218,774, net of cash acquired. Packaging Holdings manufactures thermoformed packaging for a wide range of whole fresh fruits, pre-cut fruits and produce, prepared salad mixes, as well as baked goods in retail supermarkets from five manufacturing facilities, including four in the United States and one in Mexico. Packaging Holding's financial results are included in the Company's Consumer Packaging segment and the business operates as the Peninsula brand of thermoformed packaging products within the Company's global plastics division.

Although neither of the acquisitions completed during 2017 were considered individually material, they were considered material on a combined basis. The following table presents the Company's estimated pro forma consolidated results for 2017, assuming both acquisitions had occurred January 1, 2016. This pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisitions had been completed as of the beginning of 2016, nor are they necessarily indicative of future consolidated results.


Consolidated Pro Forma Supplemental Information	Year Ended December 31, 2017
Packaging Holdings and Clear Lam	(unaudited)
Net sales	$	5,143,066
Net income attributable to Sonoco	$	178,205
Earnings per share:
Pro forma basic	$	1.78
Pro forma diluted	$	1.77

The pro forma information above does not project the Company’s expected results of any future period and gives no effect for any future synergistic benefits that may result from consolidating these subsidiaries or costs from integrating their operations with those of the Company. Pro forma information for 2017 includes adjustments to depreciation, amortization, interest expense, and income taxes. Acquisition-related costs of $4,345 and non-recurring expenses related to fair value adjustments to acquisition-date inventory of $5,750 were recognized in 2017 in connection with the acquisitions of Packaging Holdings and Clear Lam. These costs are excluded from 2017 pro forma net income.

The following table presents the aggregate, unaudited financial results for Packaging Holdings and Clear Lam from their respective dates of acquisition:


Packaging Holdings and Clear Lam Post-Acquisition	Year Ended December 31, 2017
Actual net sales	$	215,227
Actual net income	$	3,886

Acquisition-related costs of $8,842, $14,446 and $13,790 were incurred in 2019, 2018 and 2017, respectively. These costs, consisting primarily of legal and professional fees, are included in “Selling, general and administrative expenses” in the Company’s Consolidated Statements of Income. Acquisition-related costs incurred in 2018 also include the previously discussed charge related to the acquisition-date fair value remeasurement of the Company's 30 percent investment in Conitex Sonoco and the foreign currency translation losses related to this investment.

The Company has accounted for these acquisitions as business combinations under the acquisition method of accounting, in accordance with the business combinations subtopic of the Accounting Standards Codification and, accordingly, has included their results of operations in the Company’s consolidated statements of net income from the respective dates of acquisition.

Dispositions

There were no dispositions during the years ended 2019, 2018 or 2017.