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Business Acquisitions
 12 Months Ended
Dec. 31, 2016
Business Combinations [Abstract]  
Business Acquisitions
Business Acquisitions

On October 28, 2015, the Company acquired Argotec Intermediate Holdings, LLC, or Argotec, through an Equity Interest Purchase Agreement entered into, by and among the Company, SWM Argotec, LLC, an indirect wholly-owned subsidiary of the Company, Argotec Intermediate Holdings Two LLC, and certain equity holders of Argotec Holdings LLC. The acquisition of Argotec expanded and diversified SWM's global presence in advanced materials and is now a part of the Company's AMS segment.

Total consideration paid by the Company was $282.7 million in cash, subject to certain customary post-closing adjustments, primarily for the adjusted value of working capital at the acquisition date. The acquisition was financed using borrowings under the Company's Amended Credit Agreement, see Note 12. Debt, for additional information.

The consideration paid for Argotec and the fair values of the assets acquired and liabilities assumed as of the October 28, 2015 acquisition date were as follows ($ in millions):

 
Fair Value as of October 28, 2015
Cash and cash equivalents
$
2.7

Accounts receivable
16.1

Inventory
16.3

Other current assets
0.1

Property, plant and equipment
15.9

Other noncurrent assets
0.9

Identifiable intangible assets
130.5

Total assets
182.5

 
 
Accounts payable
4.6

Accrued expenses
4.5

 
 
Net assets acquired
173.4

 
 
Goodwill
109.3

 
 
Cash paid
$
282.7



The Company used the income, market, or cost approach (or a combination thereof) for the valuation as appropriate, and used valuation inputs in these models and analyses that were based on market participant assumptions. Market participants are considered to be buyers and sellers in the principal or most advantageous market for the asset or liability. For certain items, the carrying amount was determined to be a reasonable approximation of fair value based on information available to SWM management. The fair value of receivables acquired from Argotec on October 28, 2015 was $16.1 million, with gross contractual amounts receivable of $16.8 million. Acquired inventories and property, plant and equipment were recorded at their fair values. Acquired intangible assets are primarily customer relationships, trade names and non-competition agreements.

Properties acquired included a manufacturing and related facility, land and leased sites that include leasehold improvements, and machinery and equipment for use in manufacturing operations. Management valued properties using the cost approach supported where available by observable market data which included consideration of obsolescence. One of the properties acquired, the Argotec-Stevens facility in Easthampton, Massachusetts with an estimated fair value of $1.0 million, was held for sale as of the acquisition date and during the fourth quarter of 2015 came under contract for sale to a third party. The sale of this property was completed in April 2016 and no gain or loss was recognized on the disposition.
 

Intangible assets acquired included trade names that are both business-to-business and business-to-consumer. In addition to these intangible assets, the Company acquired a number of customer relationships in the aeronautical, transportation, graphics, medical and industrial markets. Management valued intangible assets using the relief from royalty and multi-period excess earnings methods, both forms of the income approach supported by observable market data for peer companies. The following table shows the fair values assigned to intangible assets ($ in millions):

 
Fair Value as of October 28, 2015
 
Weighted-Average Amortization Period (Years)
Amortizable intangible assets:
 
 
 
Customer relationships
115.9

 
15
Non-competition agreements
1.7

 
4
Indefinite-lived intangible assets:
 
 
 
Trade names
12.9

 
Indefinite
Total
$
130.5

 



In connection with the acquisition, the Company recorded goodwill, which represents the excess of the consideration transferred over the fair value of tangible and intangible assets acquired, net of liabilities assumed. The goodwill is attributed primarily to Argotec's revenue growth from combining the SWM and Argotec business and workforce as well as the benefits of access to different markets and customers. Goodwill from the Argotec acquisition was assigned to the AMS reportable segment. The goodwill from this acquisition was determined on the basis of the preliminary fair values of the assets and liabilities identified as part of the transaction and is expected to be deductible for tax purposes.

In 2016 and 2015, the Company recognized $0.4 million and $1.8 million in direct and indirect acquisition-related costs. In 2015, the Company incurred $7.4 million in financing costs related to the acquisition. Direct and indirect acquisition-related costs were expensed as incurred and are included in the General Expense line item in the Consolidated Statements of Income. Financing costs related to expanding the Credit Agreement have been capitalized and will be amortized in Interest Expense over the life of the Credit Agreement.

The amounts of the acquisition's Net Sales and Income from Continuing Operations included in the Company's Consolidated Statements of Income for the year ended December 31, 2015, and the unaudited pro forma Net Sales and Income from Continuing Operations of the combined entity had the acquisition date been January 1, 2014 are as follows ($ in millions):
 
 
Net Sales
 
Income from Continuing Operations
Actual from October 28, 2015 - December 31, 2015
 
$
22.3

 
$
0.9

 
 
 
 
 
2015 Supplemental Pro Forma from January 1, 2015 - December 31, 2015
 
859.7

 
90.2

 
 
 
 
 
2014 Supplemental Pro Forma from January 1, 2014 - December 31, 2014
 
896.2

 
90.7