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Acquisitions | 3 Months Ended
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Mar. 31, 2012
Acquisitions [Abstract] |
Acquisitions | Note 4. Acquisitions Blackstone Acquisition On January 28, 2011, the closing date of the Acquisition described in Note 1 “Description of Business and Basis of Presentation”, the following events occurred:
| • |  | Each share of Predecessor Polymer’s common and preferred stock outstanding immediately prior to the Acquisition was cancelled and converted into the right to receive up to $18.16 in cash for each share, without interest. A portion of the purchase price, approximately $2.91 per share, was deposited in an escrow fund to cover liabilities, costs and expenses related to the application of the personal holding company (“PHC”) rules of the Internal Revenue Code of 1986, as amended (the “Code”) (the “PHC Matter”);
| • |  | Each outstanding restricted share or restricted share unit convertible into Predecessor Polymer common stock outstanding immediately prior to the Acquisition vested (if unvested) and was cancelled in exchange for the right to receive cash for the excess of up to $18.16 in cash for each share, without interest. As discussed previously, approximately $2.91 per share was deposited in an escrow fund for the PHC Matter;
| • |  | Each outstanding option to acquire Predecessor Polymer common stock outstanding immediately prior to the Acquisition vested (if unvested) and was cancelled in exchange for the right to receive cash for the excess of up to $18.16 in cash for each share, without interest, over the $6.00 per share exercise price of the option. As discussed previously, approximately $2.91 per share was deposited in an escrow fund for the PHC Matter;
| • |  | Successor Polymer received $259.9 million in equity contributions and became a wholly-owned subsidiary of Holdings. See Note 16 “Shareholders’ Equity” for further information;
| • |  | Successor Polymer issued $560.0 million aggregate principal amount of 7.75% senior secured notes due 2019 (the “Senior Secured Notes”). The Senior Secured Notes are fully, unconditionally and jointly and severally guaranteed on a senior secured basis by each of Polymer’s wholly-owned domestic subsidiaries. See Note 9 “Debt” and Note 22 “Financial Guarantees and Condensed Consolidating Financial Statements” for further information;
| • |  | Successor Polymer entered into a senior secured asset-based revolving credit facility (the “ABL Facility”) to provide for borrowings not to exceed $50.0 million, subject to borrowing base availability, with a maturity of four years. See Note 9 “Debt” for further information; and
| • |  | Successor Polymer repaid approximately $333.9 million of the Company’s pre-Acquisition indebtedness. See Note 9 “Debt” for further information.
On October 28, 2011, Polymer Group and the Stockholder Representative (as defined in the Merger Agreement) directed the release of $20.2 million from the escrow fund relating to the expiration of the statute of limitations for the 2004 tax year in accordance with the terms of the Merger Agreement, resulting in a remaining escrow amount of $44.3 million as of that date. On November 23, 2011, the Internal Revenue Service (“IRS”) issued a favorable ruling to the Company determining that the Company was not a Personal Holding Company for the years in question. On December 1, 2011, based on the issuance of the favorable ruling by the IRS, the respective parties agreed to allow the release of the remaining amount in the escrow fund, net of certain expenses The Acquisition resulted in a 100% change in ownership of Polymer and is being accounted for in accordance with ASC 805, “Business Combinations” (“ASC 805”). Accordingly, the assets acquired and liabilities assumed, excluding deferred income taxes, were recorded using their fair value as of January 28, 2011. The purchase price paid and related costs and transaction fees incurred by Blackstone have been accounted for in Polymer’s consolidated financial statements. The allocation of purchase price to the assets and liabilities as of January 28, 2011 was determined by management with the assistance of outside valuation experts in the fourth quarter of 2011. Outside experts primarily assisted the Company in determining the fair value of its inventories, property, plant and equipment and intangible assets. The Company had used preliminary estimates of the fair value of assets acquired and liabilities assumed during the first three quarters of fiscal 2011. Pursuant to the guidance of ASC 805-10-25-13, the Company determined, during the completion of its fiscal year 2011 financial statements and footnotes, that retroactive adjustments to the Company’s previously reported quarterly unaudited 2011 financial results was appropriate to give effect to the finalization of the valuation work and thus the first quarter 2011 financial results included herein reflect those retroactive adjustments. The following table summarizes the acquisition costs, including professional fees and other related costs, and the assets acquired and liabilities assumed, based on their fair values (in thousands):
At January 28, 2011: |  | (In thousands) |  |  |  |
Purchase price of outstanding equity |  |  |  |  |  | $ | 403,496 |
Acquisition related costs: |  |  |  |  |  |  |  |
Included in selling, general and administrative expenses: |  |  |  |  |  |  |  |
January 1, 2012 through March 31, 2012 |  | $ | 361 |  |  |  |  |
January 29, 2011 through December 31, 2011 |  |  | 27,919 |  |  |  |  |
January 2, 2011 through January 28, 2011 |  |  | 6,137 |  |  |  |  |
January 3, 2010 through January 1, 2011 |  |  | 6,388 |  |  |  | 40,805 |
Deferred financing costs |  |  |  |  |  |  | 19,252 |
Total acquisition related costs |  |  |  |  |  | $ | 60,057 |
Allocation of purchase price: |  |  |  |  |  |  |  |
Cash |  |  |  |  |  | $ | 70,771 |
Accounts receivable |  |  |  |  |  |  | 130,359 |
Inventory |  |  |  |  |  |  | 122,006 |
Net assets of discontinued business operation |  |  |  |  |  |  | 17,284 |
Other current assets, including restricted cash of $31.1 million |  |  |  |  |  |  | 82,787 |
Property, plant and equipment |  |  |  |  |  |  | 468,449 |
Intangible assets: |  |  |  |  |  |  |  |
Technology |  | $ | 31,900 |  |  |  |  |
Trade names |  |  | 23,500 |  |  |  |  |
Customer relationships |  |  | 16,500 |  |  |  |  |
Patents and other intangibles |  |  | 92 |  |  |  | 71,992 |
Goodwill |  |  |  |  |  |  | 86,376 |
Tax indemnification asset |  |  |  |  |  |  | 16,221 |
Other noncurrent assets |  |  |  |  |  |  | 30,264 |
Total assets acquired |  |  |  |  |  | $ | 1,096,509 |
Total current liabilities, excluding current portion of debt and deferred tax liability |  |  |  |  |  | $ | 230,480 |
Current portion of long-term debt |  |  |  |  |  |  | 3,586 |
Long-term debt |  |  |  |  |  |  | 359,010 |
Deferred tax liability |  |  |  |  |  |  | 36,792 |
Other long-term liabilities |  |  |  |  |  |  | 55,898 |
Noncontrolling interest in PGI net assets |  |  |  |  |  |  | 7,247 |
Total liabilities assumed |  |  |  |  |  | $ | 693,013 |
Net assets acquired |  |  |  |  |  | $ | 403,496 |
The goodwill of $86.4 million arising from the Acquisition represents the excess of the purchase price over specifically identified tangible and intangible assets. Stated differently, the goodwill of $86.4 million represents the synergistic value of the Company’s tangible and intangible assets that Merger Sub paid over the historic net asset value of the Company. The following table reflects our allocation of the $86.4 million of goodwill and acquired intangible assets of $72.0 million by our reportable segments (in thousands):
|  | Goodwill |  |  | Technology |  |  | Trade names and Trademarks |  |  | Customer Relationships |  |  | Patents and Other Intangibles |  |  | Total |
Nonwovens |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
US Nonwovens |  | $ | 21,166 |  |  | $ | 7,817 |  |  | $ | 5,758 |  |  | $ | 4,044 |  |  | $ | — |  |  | $ | 38,785 |
Europe Nonwovens |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 92 |  |  |  | 92 |
Latin America Nonwovens |  |  | 25,262 |  |  |  | 9,329 |  |  |  | 6,873 |  |  |  | 4,826 |  |  |  | — |  |  |  | 46,290 |
Asia Nonwovens |  |  | 39,948 |  |  |  | 14,754 |  |  |  | 10,869 |  |  |  | 7,630 |  |  |  | — |  |  |  | 73,201 |
Total Nonwovens |  |  | 86,376 |  |  |  | 31,900 |  |  |  | 23,500 |  |  |  | 16,500 |  |  |  | 92 |  |  |  | 158,368 |
Oriented Polymers |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Corporate |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
|  | $ | 86,376 |  |  | $ | 31,900 |  |  | $ | 23,500 |  |  | $ | 16,500 |  |  | $ | 92 |  |  | $ | 158,368 |
As this was a stock acquisition, there is no tax basis in the amounts recorded through purchase accounting as intangible assets (including goodwill); and therefore, there is no tax benefit associated with these assets. The Company recognized a tax indemnification asset of $16.2 million in the opening balance sheet to reflect an offsetting asset for the recorded $16.2 million PHC liability. The $16.2 million asset is supported by the $64.5 million amount of the purchase price that was distributed by the acquirer to the escrow agent associated with the PHC Matter. Transaction-related expenditures for legal and professional services of $0.4 million, $24.2 million and $6.1 million were reported in Special charges, net in the Consolidated Statements of Operations during the three months ended March 31, 2012, the two months ended April 2, 2011 and the one month ended January 28, 2011, respectively. China-Noncontrolling Interest Acquisition of Nanhai On May 26, 2010, the Company signed an equity transfer agreement (the “Agreement”) to purchase the 20% noncontrolling interest in Nanhai, subject to Chinese government regulatory approval. Pursuant to the Agreement, the Company deposited $1.5 million into an escrow account with a bank to serve as a performance guarantee. On March 9, 2011, the Company received regulatory approval of the transaction and subsequently completed the noncontrolling interest acquisition for a purchase price of $7.2 million. In accordance with ASC 810 “Consolidation” (“ASC 810”), the Company accounted for this transaction as an equity transaction, as the Company had been the 80% controlling interest shareholder since the second quarter of 1999. Thus, no gain or loss was recognized on the transaction. Spain On December 2, 2009, the Company completed the initial phase of an acquisition from Grupo Corinpa, S.L. (“Grupo Corinpa”) of certain assets and the operations of the nonwovens businesses of Tesalca-99, S.A. and Texnovo, S.A. (together with Tesalca-99, S.A., “Tesalca-Texnovo” or the “Sellers”), which were headquartered in Barcelona, Spain (the “Spanish Transaction”). The acquisition was completed by the Company through PGI Spain, which operates as a wholly owned subsidiary of the Company. The acquired assets included the net operating working capital as of November 30, 2009 (defined as current assets less current liabilities excluding financial liabilities associated with the operations) valued at $10.9 million, the customer lists and the book of business. Concurrent with the Spanish Transaction, the Company entered into a seven year lease (beginning December 2, 2009 and ending December 31, 2016) with Tesalca-Texnovo that provided that PGI Spain was entitled to the full and exclusive use of the Sellers’ land, building and equipment during the term of the lease (the “Building and Equipment Lease”). PGI Spain was obligated to make total lease payments of approximately €29.0 million to Tesalca- Texnovo during the term of the Building and Equipment Lease. The first lease payment of approximately €1.25 million was made on March 31, 2010 and further quarterly payments of approximately €1.25 million were due for the first three years of the lease. Further, the quarterly lease payments for the remaining four years was to be approximately €0.9 million per quarter. Pursuant to ASC 840, “Leases” (“ASC 840”), the Building and Equipment Lease agreement has been accounted for as an operating lease. Furthermore, pursuant to ASC 840-20-25-2, PGI Spain began to recognize rent expense on a straight-line basis over the seven year lease term in Cost of goods sold in its Consolidated Statements of Operations. Further, as part of the Spanish Transaction, PGI Spain granted the Sellers a put option over the assets underlying the Building and Equipment Lease (the “Phase II Assets”) until December 31, 2012 (the “Put Option”). The Sellers’ right to exercise the Put Option was dependent upon a future financial performance target of PGI Spain. Furthermore, the Sellers granted PGI Spain a call option over the assets underlying the Phase II Assets, which was due to expire on December 31, 2012 (the “Call Option”). Consideration for the acquired assets consisted of approximately 1.049 million shares of the Company’s predecessor common stock (“Issued Securities”), which represented approximately 5.0% of the outstanding share capital of the Company on December 2, 2009, taking into account the Issued Securities. The Issued Securities were subject to certain restrictions, including that the Issued Securities were not registered pursuant to the Securities Act of 1933. On December 2, 2009, the fair value of the Issued Securities approximated $14.5 million. The Company had recorded intangible assets of €0.6 million and €1.8 million associated with customer relationships and goodwill, respectively, in the purchase price allocation. The Spain goodwill and customer relationships intangible assets were eliminated in the purchase accounting for the aforementioned Acquisition. On January 28, 2011, immediately prior to the aforementioned Acquisition, the Company exercised the Call Option and thus acquired the Phase II Assets, resulting in the termination of the Building and Equipment Lease (the “Spain Phase II Asset Purchase”). Consideration for the Spain Phase II Asset Purchase aggregated $41.2 million (€30.6 million). See Note 18 “Supplemental Cash Flow Information” for further discussion regarding the Spain Phase II Asset Purchase.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 141 -Paragraph 51, 52 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6909870&loc=d3e1500-128463 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6911361&loc=d3e7000-128479 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6911361&loc=d3e6927-128479 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6911361&loc=d3e7008-128479 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6909870&loc=d3e1490-128463 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6911361&loc=d3e6996-128479 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4922-128472 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4934-128472 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 141R -Appendix F -Paragraph F4 -Subparagraph e Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4926-128472 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6909870&loc=d3e1383-128463 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6909870&loc=d3e1392-128463 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6909870&loc=d3e1497-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 141R -Paragraph 67-73 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=6909870&loc=d3e1524-128463 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Emerging Issues Task Force (EITF) -Number 88-16 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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