Acquisitions and Divestitures

3 Months Ended

Apr. 04, 2021

Acquisitions

On March 8, 2021, the Company completed the acquisition of TuboTec, a tube and core operation in Brazil, for total cash consideration of $841. The acquisition of TuboTec further strengthens the Company's leadership position in tubes and cores.

During the quarter ended April 4, 2021, the Company reached a final working capital settlement related to the August 3, 2020 acquisition of Can Packaging, a designer and manufacturer of sustainable paper packaging and related manufacturing equipment, based in Habsheim, France. Under the settlement, the Company made an additional cash payment of $1,512, recording an increase in goodwill on its Condensed Consolidated Balance Sheet at April 4, 2021. Goodwill for Can Packaging, none of which is expected to be deductible for income tax purposes, consists of increased access to certain markets. Can Packaging's financial results from the date acquired are included in the Company's Consumer Packaging segment.

The valuations of the assets acquired and liabilities assumed in the 2020 acquisitions of Can Packaging and a small tube and core operation in Jacksonville, Florida, were finalized in the first quarter of 2021. No additional measurement period adjustments were recorded during the first quarter of 2021.

The Company has accounted for its acquisitions as business combinations under the acquisition method of accounting, in accordance with the business combinations subtopic of the Accounting Standards Codification and has included the results of operations of the acquired businesses in the Company's Condensed Consolidated Statements of Income from their respective dates of acquisition.

Divestitures

On April 4, 2021, the Company completed the sale of its display and packaging business in the United States, part of the "All Other" group of businesses, to Hood Container Corporation for $80,000 in cash. This business provides design, manufacturing and fulfillment of point-of-purchase displays, as well as contract packaging services, for consumer product customers and has approximately 450 employees. Its operations include eight manufacturing and fulfillment facilities and four sales and design centers.

Assets and liabilities disposed of in the sale included the following:


	U.S. Display and Packaging
Trade accounts receivable	$	26,342
Inventories	8,434
Property, plant and equipment, net	9,551
Right of use asset - operating leases	11,627
Goodwill	53,039
Trade accounts payable	(10,735)
Accrued expenses	(1,030)
Operating lease liabilities	(12,343)
Other net tangible assets	716
	$	85,601

The selling price was adjusted at closing for certain transaction expenses and for anticipated differences between targeted levels of working capital and the projected levels at the time of closing. Although the sale was effective April 4, 2021, the last day of the quarter, the net cash proceeds of $79,704 were received on April 5, 2021; accordingly, the proceeds from the sale are considered noncash investing activity and included in "Other receivables" on the Company's Condensed Consolidated Balance Sheet at April 4, 2021. The Company anticipates that final working capital settlements will result in additional cash proceeds in the second quarter of 2021 of approximately $381. The Company recognized a loss on the sale of $(5,516), before tax.

The decision to sell the display and packaging business in the United States is part of the Company's efforts to simplify its operating structure to focus on growing its core Consumer and Industrial packaging businesses around the world. This sale is not expected to notably affect consolidated operating margin percentages, nor does it represent a strategic shift for the Company that will have a major effect on the entity’s operations and financial results. Consequently, the sale did not meet the criteria for reporting as a discontinued operation. The net proceeds from the sale are expected to be used for general corporate purposes.

The Company continually assesses its operational footprint as well as its overall portfolio of businesses and may consider the divestiture of plants and/or business units it considers to be suboptimal or nonstrategic.

Acquisition and Divestiture-Related Transaction Costs

Acquisition and divestiture-related transaction costs totaling $10,025 and $1,171 were incurred during the three months ended April 4, 2021 and March 29, 2020, respectively. These costs, consisting primarily of legal and professional fees, are included in “Selling, general and administrative expenses” in the Company’s Condensed Consolidated Statements of Income.