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ACQUISITIONS AND DIVESTITURES | 6 Months Ended
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Apr. 30, 2019
Business Combinations [Abstract] |
ACQUISITIONS AND DIVESTITURES | ACQUISITIONS AND DIVESTITURES Acquisitions On February 11, 2019, the Company completed its acquisition of Caraustar (the "Caraustar Acquisition"), a leader in the production of uncoated recycled paperboard and coated recycled paperboard, with a variety of applications that include tubes and cores and a diverse mix of specialty products. The total purchase price for this acquisition, net of cash acquired was $1,834.9 million. The Company incurred transaction costs of $62.0 million to complete this acquisition. Of this amount, $35.2 million was recognized in the condensed consolidated statements of income as of April 30, 2019 and the remaining $26.8 million in transaction costs was capitalized in accordance with ASC 470, "Debt", and is presented as part of the condensed consolidated balance sheets as of April 30, 2019. Income statement impacts included $12.0 million, in the Acquisition-Related Costs financial statement line item, $21.9 million in the and Debt Extinguishment Charges financial statement line item, and $1.3 million in the Interest Expense financial statement line item for the portion of the capitalized costs amortized through April 30, 2019. Balance sheet impacts includes $17.9 million within Long-Term Debt and $8.9 million within Other Long-Term Assets. The following table summarizes the consideration transferred to acquire Caraustar and the preliminary valuation of identifiable assets acquired and liabilities assumed at the acquisition date.
(in millions) |
Fair value of consideration transferred |
Cash consideration | $ | 1,834.9 |
Recognized amounts of identifiable assets acquired and liabilities assumed |
Accounts receivable | 147.0 |
Inventories | 103.9 |
Prepaid and other current assets | 21.5 |
Intangibles | 717.1 |
Other long-term assets | 1.3 |
Properties, plants and equipment | 521.3 |
Total assets acquired | 1,512.1 |
Accounts payable | (99.5 | )
Accrued payroll and employee benefits | (42.9 | )
Other current liabilities | (21.8 | )
Long-term deferred tax liability | (185.7 | )
Pension and postretirement obligations | (67.1 | )
Other long-term liabilities | (12.7 | )
Total liabilities assumed | (429.7 | )
Total identifiable net assets | $ | 1,082.4 |
Goodwill | $ | 752.5 |
The Company recognized goodwill related to this acquisition of $752.5 million. The goodwill recognized in this acquisition is attributable to the acquired assembled workforce, expected synergies, and economies of scale, none of which qualify for recognition as a separate intangible asset. Caraustar will be reported within the Paper Packaging & Services segment to which the goodwill was assigned. The goodwill is not expected to be deductible for tax purposes. Acquired property, plant and equipment will be depreciated over its estimated remaining useful lives on a straight-line basis. The fair value for acquired customer relationship intangibles was determined as of the acquisition date based on estimates and judgments regarding expectations for the future after-tax cash flows arising from the follow-on revenue from customer relationships that existed on the acquisition date over their estimated lives, including the probability of expected future contract renewals and revenue, less a contributory assets charge, all of which is discounted to present value. The fair value of the trade name intangible assets were determined utilizing the relief from royalty method which is a form of the income approach. Under this method, a royalty rate based on observed market royalties is applied to projected revenue supporting the trade names and discounted to present value using an appropriate discount rate. Acquired intangible assets will be amortized over the estimated useful lives, primarily on a straight-line basis. The following table summarizes the preliminary purchase price allocation and weighted average remaining useful lives for identifiable intangible assets acquired:
(in millions) | Preliminary Fair Value | Weighted Average Estimated Useful Life
Customer relationships | $ | 700.0 |  | 15.0
Trademarks | 15.0 |  | 3.0
Other | 2.1 |  | 1.2
Total intangible assets | $ | 717.1 |  |
The Company has not yet finalized the determination of the fair value of assets acquired and liabilities assumed, including income taxes and contingencies. The Company expects to finalize these amounts within one year of the acquisition date. The estimate of fair value and purchase price allocation were based on information available at the time of closing the acquisition, and the Company continues to evaluate the underlying inputs and assumptions that are being used in fair value estimates. Accordingly, these preliminary estimates are subject to adjustments during the measurement period, not to exceed one year, based upon new information obtained about facts and circumstances that existed as of the date of closing the acquisition. Caraustar's results of operations have been included in the Company's financial statements for the period subsequent to the acquisition date of February 11, 2019. Caraustar contributed net sales of $293.3 million and net income attributable to Greif, Inc. of $7.7 million for the three and six months ended April 30, 2019. The following unaudited supplemental pro forma data presents consolidated information as if the acquisition had been completed on November 1, 2017. These amounts were calculated after adjusting Caraustar's results to reflect interest expense incurred on the debt to finance the acquisition, additional depreciation and amortization that would have been charged assuming the fair value of property, plant and equipment and intangible assets had been applied from November 1, 2017, the adjusted tax expense, and related transaction costs of $35.2 million. These adjustments also include an additional charge of $9.0 million in the six month period ended April 30, 2018 for the fair value adjustment for inventory acquired.
| Three Months Ended April 30, |  | Six Months Ended April 30,
(in millions, except per share amounts) | 2019 |  | 2018 |  | 2019 |  | 2018
Pro forma net sales | $ | 1,244.8 |  |  | $ | 1,302.2 |  |  | $ | 2,474.0 |  |  | $ | 2,517.2 |
Pro forma net (loss) income attributable to Greif, Inc. | $ | 7.2 |  |  | $ | 39.4 |  |  | $ | 28.0 |  |  | $ | 46.0 |
Basic earnings per share attributable to Greif, Inc. common shareholders: |  |  |  |  |  |  |
Class A common stock | $ | 0.12 |  |  | $ | 0.67 |  |  | $ | 0.48 |  |  | $ | 0.79 |
Class B common stock | $ | 0.18 |  |  | $ | 1.00 |  |  | $ | 0.71 |  |  | $ | 1.17 |
Diluted earnings per share attributable to Greif, Inc. common shareholders: |  |  |  |  |  |  |
Class A common stock | $ | 0.12 |  |  | $ | 0.67 |  |  | $ | 0.48 |  |  | $ | 0.79 |
Class B common stock | $ | 0.18 |  |  | $ | 1.00 |  |  | $ | 0.71 |  |  | $ | 1.17 |
The unaudited supplemental pro forma financial information is based on the Company's preliminary assignment of purchase price and therefore subject to adjustment upon finalizing the purchase price assignment. The pro forma data should not be considered indicative of the results that would have occurred if the acquisition and related financing had been consummated on the assumed completion dates, nor are they indicative of future results. Divestitures For the six months ended April 30, 2019, the Company completed one divestiture of a non-U.S. business in the Rigid Industrial Packaging & Services segment, liquidated one non-strategic non-U.S. business in the Rigid Industrial Packaging & Services segment, and deconsolidated one wholly-owned non-U.S. business in the Rigid Industrial Packaging & Services segment. The loss on disposal of businesses was $1.7 million for the six months ended April 30, 2019. Proceeds from divestitures that were completed in fiscal year 2015 and collected during the six months ended April 30, 2019 were $0.8 million. The Company has $2.4 million of notes receivable recorded from the sale of businesses. For the six months ended April 30, 2018 , the Company completed no divestitures. Proceeds from divestitures that were completed in fiscal year 2017 and collected during the six months ended April 30, 2018 were $0.5 million. Proceeds from divestitures that were completed in fiscal year 2015 and collected during the six months ended April 30, 2018 were $0.9 million. The Company has $2.9 million of notes receivable recorded from the sale of businesses. None of the above-referenced divestitures in 2019 or 2018 qualified as discontinued operations as they do not, individually or in the aggregate, represent a strategic shift that has had a major impact on the Company's operations or financial results.

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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 -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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