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Business Combinations
 12 Months Ended
Dec. 31, 2011
Business Combinations
NOTE 4

Business Combinations

On December 27, 2010, we acquired Cellu Tissue for total consideration paid of $247.0 million. The purchase price included a $242.2 million cash payment for 100% of the issued and outstanding common stock of Cellu Tissue, and a $4.8 million cash payment to the holders of Cellu Tissue stock options and restricted stock, which represented $12 per share, less each option’s exercise price. The acquisition was financed with existing cash and proceeds from the issuance of $375 million of 7.125% Senior Notes due 2018 (see Note 10). The acquisition resulted in the recognition of $229.5 million of goodwill, which is not deductible for tax purposes. For fiscal year 2010, we included in our Consolidated Statements of Operations and Cash Flows $7.3 million of net sales and $6.3 million of operating losses from the Cellu Tissue operations after the December 27, 2010 acquisition date. Included in these losses were approximately $6.1 million of pre-tax employee severance expenses. Cellu Tissue’s consolidated results of operations from December 28, 2010 forward are included in our Consumer Products segment.

We allocated the purchase price to the net assets of Cellu Tissue acquired in the acquisition based on our estimates of the fair value of assets and liabilities as follows:

 

(In thousands)        Amount   

Current assets

      $ 128,079   

Property, plant and equipment

        276,499   

Goodwill

        229,533   

Intangibles

        56,400   

Other assets

        1,500   

 

  

Assets acquired

        692,011   

 

  

Current liabilities

        97,071   

Long-term debt, less current portion

        287,002   

Deferred income taxes

        60,221   

Other liabilities

        732   

 

  

Liabilities assumed

        445,026   

 

  

Net assets acquired

      $ 246,985   

 

  

We estimated the fair value of the assets and liabilities of Cellu Tissue utilizing information available at the time of acquisition. We considered outside third-party appraisals of the tangible and intangible assets to determine the applicable fair market values.

Long-term debt included the fair value of Cellu Tissue’s senior subordinated notes as of December 27, 2010, which were retired concurrently with the acquisition. We also repaid Cellu Tissue’s credit facility of $32.5 million. We assumed Cellu Tissue’s industrial revenue bonds of $15.6 million, which were subsequently redeemed in 2011 (see Note 10).

 

All costs associated with advisory, legal and other due diligence-related services performed in connection with acquisition-related activity are expensed as incurred. These costs were $20.4 million for 2010 and were recorded as selling, general and administrative expenses on the Consolidated Statements of Operations.

The following unaudited pro forma financial information presents the combined results of operations as if Cellu Tissue had been combined with us as of the beginning of 2009. The pro forma financial information includes the accounting effects of the business combination, including the adjustment of amortization of intangible assets, depreciation of property, plant and equipment, interest expense and elimination of intercompany sales, as if Cellu Tissue were actually combined with us as of the beginning of 2009. However, the information does not reflect the costs of any integration activities. The pro forma results include estimates and assumptions, which management believes are reasonable. The unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had Cellu Tissue been combined with us as of the beginning of 2009.

(In thousands; Unaudited)    2010      2009  

Pro forma net sales

    $  1,902,579       $ 1,761,350   

Pro forma net earnings

      88,713         191,514