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Acquisitions and Divestitures | 3 Months Ended
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Mar. 31, 2024
Business Combination and Asset Acquisition [Abstract] |
Acquisitions and Divestitures | Acquisitions and Divestitures Acquisitions As previously disclosed, on December 1, 2023, the Company completed the acquisition of Inapel Embalagens Ltda. (“Inapel”), a manufacturer of single-layer and multilayer materials for flexible packaging in Brazil, for net consideration of $64,544, including $59,228 of cash paid at closing and additional obligations to the seller totaling $5,316 that will be paid throughout 2024. This additional purchase consideration is recorded in “Payable to suppliers” in the Company’s Condensed Consolidated Balance Sheet as of March 31, 2024. With the acquisition of Inapel, the Company added approximately 500 employees and two manufacturing locations in the São Paulo region of Brazil. The financial results of Inapel are included in the Company’s Consumer Packaging segment. The Company’s initial allocation of the assets acquired and liabilities assumed in the acquisition of Inapel, as well as revised preliminary fair values reflecting adjustments made during the measurement period, are as follows:
| Initial Allocation |  | Measurement Period Adjustments |  | Preliminary Allocation
Trade accounts receivable | $ | 30,301 |  |  | $ | (133) |  |  | $ | 30,168 |
Other receivables | 6,088 |  |  | 70 |  |  | 6,158 |
Inventories | 9,269 |  |  | — |  |  | 9,269 |
Prepaid expenses | 1,430 |  |  | — |  |  | 1,430 |
Property, plant and equipment | 11,456 |  |  | 17,459 |  |  | 28,915 |
Right of use asset - operating leases | 217 |  |  | — |  |  | 217 |
Other intangible assets | 8,653 |  |  | (1,094) |  |  | 7,559 |
Goodwill | 15,704 |  |  | (7,130) |  |  | 8,574 |
Other assets | 793 |  |  | — |  |  | 793 |
Payable to suppliers | (15,899) |  |  | 3,058 |  |  | (12,841) |
Accrued expenses and other | (5,733) |  |  | (1,350) |  |  | (7,083) |
Noncurrent operating lease liabilities | (117) |  |  | — |  |  | (117) |
Deferred income taxes | (2,934) |  |  | (5,564) |  |  | (8,498) |
Total purchase price, net of cash acquired | $ | 59,228 |  |  | $ | 5,316 |  |  | $ | 64,544 |
The allocation of the purchase price of Inapel to the tangible and intangible assets acquired and liabilities assumed, as reflected under the heading “Preliminary Allocation” in the table above, is based on the Company’s preliminary determinations of fair value using information currently available. Management is continuing to finalize its valuation of certain assets and liabilities including, but not limited to, inventory; property, plant and equipment; goodwill; other intangible assets; and deferred income taxes. The Company expects to complete its valuations within one year of the date of acquisition. Goodwill for Inapel, none of which is expected to be deductible for income tax purposes, is primarily attributable to the assembled workforce and synergies of the combined organization. On September 8, 2023, the Company completed the acquisition of the remaining 65% interest in RTS Packaging, LLC (“RTS Packaging”) from joint venture partner WestRock Company (“WestRock”) and the acquisition of a paper mill in Chattanooga, Tennessee (the “Chattanooga Mill”) from WestRock for net cash consideration of $313,388. In December 2023, the Company agreed to a final working capital settlement of $452, which was paid to WestRock in January 2024. Prior to completing the acquisitions, the Company held a 35% ownership interest in the RTS Packaging joint venture which was formed in 1997 and combined the former protective packaging operations of WestRock and Sonoco to market recycled paperboard to glass container manufacturers and producers of wine, liquor, food, and pharmaceuticals. The financial results of RTS Packaging and the Chattanooga Mill are included in the Company’s Industrial Paper Packaging segment. The following table provides a summary of the purchase consideration (as defined under Accounting Standards Codification (“ASC”) 805) transferred for the acquisitions of the remaining interest in RTS Packaging and the Chattanooga Mill:
| Purchase Consideration
Cash consideration, net of cash acquired | $ | 313,388 |
Fair value of previously held interest in RTS Packaging | 59,472 |
Final working capital adjustment | 452 |
Settlement of preexisting relationships | 1,235 |
Purchase consideration transferred | $ | 374,547 |
The Company’s initial allocation of the assets acquired and liabilities assumed in the acquisitions of the remaining interest in RTS Packaging and the Chattanooga Mill, as well as revised preliminary fair values reflecting adjustments made during the measurement period, are as follows:
| Initial Allocation |  | Measurement Period Adjustments |  | Preliminary Allocation
Trade accounts receivable | $ | 17,488 |  |  | $ | — |  |  | $ | 17,488 |
Other receivables | — |  |  | — |  |  | — |
Inventories | 20,209 |  |  | (947) |  |  | 19,262 |
Prepaid expenses | 2,720 |  |  | (589) |  |  | 2,131 |
Property, plant and equipment | 73,483 |  |  | 753 |  |  | 74,236 |
Right of use asset - operating leases | 34,604 |  |  | 290 |  |  | 34,894 |
Other intangible assets | 199,560 |  |  | (8,995) |  |  | 190,565 |
Goodwill | 92,657 |  |  | 14,909 |  |  | 107,566 |
Other assets | 2,465 |  |  | (412) |  |  | 2,053 |
Payable to suppliers | (7,320) |  |  | — |  |  | (7,320) |
Accrued expenses and other | (15,167) |  |  | (25) |  |  | (15,192) |
Notes payable and current portion of long-term debt | (24) |  |  | — |  |  | (24) |
Noncurrent operating lease liabilities | (29,905) |  |  | — |  |  | (29,905) |
Pension and other postretirement benefits | (10,761) |  |  | (768) |  |  | (11,529) |
Long-term debt | (1,942) |  |  | — |  |  | (1,942) |
Deferred income taxes | (3,419) |  |  | (2,502) |  |  | (5,921) |
Other long-term liabilities | (3,293) |  |  | 1,478 |  |  | (1,815) |
Net assets acquired | $ | 371,355 |  |  | $ | 3,192 |  |  | $ | 374,547 |
The initial allocation of the purchase price of the remaining interest in RTS Packaging and the Chattanooga Mill to the tangible and intangible assets acquired and liabilities assumed, as reflected in the table above, is based on the Company’s preliminary determination of their fair values using information currently available. Management is continuing to finalize its valuation of certain assets and liabilities including, but not limited to, inventory; property, plant and equipment; goodwill; other intangible assets; and deferred income taxes. The Company expects to complete its valuations within one year of the date of acquisition. Goodwill for RTS Packaging and the Chattanooga Mill, of which $87,191 is expected to be deductible for income tax purposes, is primarily attributable to the synergies of the combined organization and the assembled workforce. The Company has accounted for these acquisitions as business combinations under the acquisition method and has included the results of operations of the acquired businesses in the Company’s Condensed Consolidated Statements of Income for the three-month period ended March 31, 2024. The Company believes that these acquisitions were not material to the periods presented and are therefore not subject to the ASC 805 requirement to provide supplemental pro-forma financial information. Accordingly, this information is not presented herein. Divestiture of Businesses On April 1, 2024, subsequent to the end of the first quarter, the Company completed the sale of its Protective Solutions business (“Protexic”), which was part of the All Other group of businesses, to Black Diamond Capital Management, LLC for cash proceeds of $81,795. This business provided foam components and integrated material solutions for various industrial end markets. This sale was the result of the Company’s continuing evaluation of its business portfolio and is consistent with the Company’s strategic and investment priorities. The Company is finalizing its calculation but estimates that the gain on the disposition will be approximately $3,000 after recognizing foreign currency translation losses and remaining selling costs. The Company used the majority of the cash proceeds from the sale to pay down debt. The sale of the Protexic business did not represent a strategic shift for the Company and will not have a major effect on its operations or financial results. Consequently, this sale will not meet the criteria for reporting as a discontinued operation. On January 26, 2023, the Company completed the sale of its Sonoco Sustainability Solutions (“S3”) business, a provider of customized waste and recycling management programs and part of the Company’s Industrial Paper Packaging segment, to Northstar Recycling Co. (“Northstar”), for total cash proceeds of $13,839. An additional $1,500 of proceeds are being held in escrow and are expected to be released to the Company, pursuant to any indemnification claims, twenty months following the date of the divestiture. The Company wrote off net assets totaling $4,274 as part of the divestiture of the business, including $3,042 of allocated goodwill, and recognized a pretax gain of $11,065 during the first quarter of 2023, which is included in “Gain on divestiture of business and other assets” in the Company’s Condensed Consolidated Statements of Income. The escrow balance is reflected as a long-term receivable in “Other assets” in the Company’s Condensed Consolidated Balance Sheets as of March 31, 2024. The Company is also entitled to receive additional proceeds of $3,200 in the second quarter of 2024 if certain conditions are met. This contingent consideration will be recognized as an additional gain on the sale at the point the contingencies are resolved. On January 26, 2023, in connection with the sale of the S3 business, the Company acquired a 2.7% equity interest in Northstar valued at $5,000. This investment is being accounted for under the measurement alternative (i.e., cost less impairment, adjusted for any qualifying observable price changes). The sale of the S3 business did not represent a strategic shift for the Company or have a major effect on its operations or financial results. Consequently, this sale did not meet the criteria for reporting as a discontinued operation. Sale of Assets With the completion of Project Horizon, the Company’s project to convert the corrugated medium machine in Hartsville, South Carolina, to produce uncoated recycled paperboard, the Company now produces paper exclusively from recycled fibers and no longer requires natural tree fiber for production. Accordingly, on March 29, 2023, the Company sold its timberland properties, totaling approximately 55,000 acres, to Manulife Investment Management for net cash proceeds of $70,802. The Company disposed of assets with a net book value of $9,857 as part of the sale, and recognized a pretax gain from the sale of these assets of $60,945 during the three-month period ended April 2, 2023, which is included in “Gain on divestiture of business and other assets” in the Company’s Condensed Consolidated Statements of Income. Acquisition, Integration, and Divestiture-Related Costs Acquisition, integration, and divestiture-related costs totaled $5,661 and $5,188 during the three-month periods ended March 31, 2024 and April 2, 2023, respectively. These costs include legal and professional fees, as well as employee-related and other integration activity costs that are included in “Selling, general and administrative expenses” in the Company’s Condensed Consolidated Statements of Income.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent + Details
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