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BUSINESS COMBINATIONS AND EQUITY METHOD INVESTMENTS

6 Months Ended

Jul. 01, 2023

BUSINESS COMBINATIONS AND EQUITY METHOD INVESTMENTS

BUSINESS COMBINATIONS AND EQUITY METHOD INVESTMENTS

F. BUSINESS COMBINATIONS AND EQUITY METHOD INVESTMENTS

We completed the following acquisitions since the end of the second quarter of 2022, which were accounted for using the purchase or equity method. Dollars below are in thousands unless otherwise noted:


					Net
Company	Acquisition		Intangible		Tangible		Operating
Name	Date	Purchase Price	Assets		Assets		Segment
	December 6, 2022	$70,942 cash paid for 100% asset purchase	$	48,745	$	22,197	Packaging
Titan Corrugated, Inc. (Titan) and All Boxed Up, LLC	Located in Flower Mound, TX and founded in 2003, Titan’s primary products include boxes used in moving and storage, jumbo boxes for industrial products, corrugated shipping containers, and point-of-purchase displays. All Boxed Up distributes common box sizes manufactured by Titan throughout the United States. The combined companies had trailing 12-month sales through October 2022 of approximately $46.5 million.
	June 27, 2022	$69,791 cash paid for equity method investment	$	34,552	$	35,239	Packaging
Dempsey Wood Products, Inc. (Dempsey)	Located in Orangeburg, South Carolina and founded in 1988, Dempsey is a sawmill which produces products such as kiln dried finished lumber, industrial lumber, green cut stock lumber, pine chips and shavings, landscaping mulch, and sawdust. The Company had sales of approximately $69 million in 2021.

The intangible assets for the above investments have not been finalized and allocated to their respective identifiable asset and goodwill accounts. In aggregate, investments completed since the end of the second quarter of 2022 and not consolidated with other operations contributed approximately $23.8 million in net sales and $1.0 million in operating profits during the first six months of 2023.

As a result of the investment in Dempsey on June 27, 2022, we own 50% of the issued equity of that entity, and the remaining 50% of the issued equity is owned by the previous owners (“Sellers”). The investment in Dempsey is an unconsolidated variable interest entity and we have accounted for it using the equity method of accounting because we do not have a controlling financial interest in the entity. Per the contracts, the Sellers have a put right to sell their equity interest to us for $50 million and we have a call right to purchase the Seller’s equity interest for $70 million, which are both first exercisable in June 2025 and expire in June 2030. As of July 1, 2023, the carrying value of our investment in Dempsey is $64.3 million and is recorded in Other Assets. Our maximum exposure to loss consists of our investment amount and any contingent loss that may occur in the future as a result of a change in the fair value of Dempsey relative to the strike price of the put option.

The business combinations mentioned above were not significant to our operating results individually or in aggregate, and thus pro forma results for 2023 and 2022 are not presented.