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Description of Business and Basis of Presentation | 9 Months Ended
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Sep. 29, 2012
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Description of Business and Basis of Presentation | Description of Business and Basis of Presentation Description of Business Polymer Group, Inc. (“Polymer” or “PGI”) and its subsidiaries (together with PGI, the “Company”) is a leading global innovator, manufacturer and marketer of engineered materials, focused primarily on the production of nonwoven products. The Company has one of the largest global platforms in the industry, with thirteen manufacturing and converting facilities throughout the world, and a presence in nine countries. The Company’s main sources of revenue are the sales of primary and intermediate products to the hygiene, healthcare, wipes and industrial markets. Basis of Presentation Acquisition On January 28, 2011 (the “Merger Date”), pursuant to an Agreement and Plan of Merger dated as of October 4, 2010 (the “Merger Agreement”), Scorpio Merger Sub Corporation, a newly formed Delaware Corporation (“Merger Sub”), merged with and into Polymer, with Polymer surviving as a direct, wholly-owned subsidiary of Scorpio Acquisition Corporation, a Delaware corporation (“Parent”) (collectively the “Acquisition” or “Merger”). Parent’s sole asset is its 100% ownership of the stock of Polymer. Parent is owned 100% by Scorpio Holdings Corporation, a Delaware Corporation (“Holdings”). Certain private investment funds affiliated with The Blackstone Group (“Blackstone”), a private equity firm based in New York, along with its co-investors and certain members of the Company’s management, own 100% of the outstanding equity of Holdings. As a result, Polymer became a privately-held company. The Acquisition has been accounted for in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for business combinations and accordingly, the Company’s assets and liabilities, excluding deferred income taxes, were recorded using their fair value as of January 28, 2011. Although Polymer continued as the same legal entity after the Acquisition, the application of push down accounting represents the termination of the old reporting entity and the creation of a new one. In addition, the basis of presentation is not consistent between the successor and predecessor entities and the financial statements are not presented on a comparable basis. As a result, the accompanying consolidated statements of operations, cash flows and comprehensive income (loss) are presented for two different reporting entities: Successor — relates to the financial periods and balance sheets succeeding the Acquisition; and Predecessor — relates to the financial periods preceding the Acquisition (prior to January 28, 2011). Unless otherwise indicated, the “Company” as used throughout the remainder of the notes, refers to both the Successor and Predecessor. Basis of Consolidation The accompanying unaudited interim consolidated financial statements include the accounts of Polymer and all majority-owned subsidiaries after elimination of all significant intercompany accounts and transactions. The accounts of all foreign subsidiaries have been included on the basis of fiscal periods ended on the same dates as the accompanying consolidated financial statements. All amounts are presented in United States (“U.S.”) dollars, unless otherwise noted. The accompanying unaudited interim consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements of the Company and related notes contained in the Annual Report on Form 10-K for the period ended December 31, 2011. The Consolidated Balance Sheet data included herein as of December 31, 2011 have been derived from the audited consolidated financial statements included in the Annual Report on Form 10-K. In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to applicable rules and regulations. In the judgment of management, these unaudited interim consolidated financial statements include all adjustments of a normal recurring nature and accruals necessary for a fair presentation of such statements. The results of operations for the interim period are not necessarily indicative of the results which may be realized for the full year. Reclassifications Certain amounts previously presented in the consolidated financial statements and footnotes from prior periods have been reclassified to conform with the current period presentation. Adjustment for Out-of-Period Items The accompanying unaudited interim consolidated financial statements for the three and nine month periods ended September 29, 2012 include an out-of-period adjustment to properly reflect a VAT tax obligation due in a foreign jurisdiction. During the quarter ended September 29, 2012, management reevaluated its methodology for computing non-deductible VAT for imported raw materials and export sales for one of its China businesses for the period from fourth quarter 2006 through April 2011, and determined that its past methodology for computing the VAT due to the Chinese government was not in conformity with the applicable tax regulations. As a result, management determined that it was necessary to increase its VAT liability as of September 29, 2012, by approximately $1.3 million. For the three and nine months ended September 29, 2012, this adjustment had the effect of increasing Cost of goods sold by $1.3 million and decreasing Income tax expense by $0.1 million, thus decreasing Net income (loss) by $1.2 million for the three months ended September 29, 2012 and increasing Net loss attributable to Polymer Group, Inc. by $1.2 million for the nine months ended September 29, 2012. The effect on the September 29, 2012 Consolidated Balance Sheet was to recognize a $1.0 million increase in Accounts payable and accrued liabilities and a $0.2 million increase in Other non-current liabilities. This adjustment was not considered material to the Company's consolidated financial statements for the three and nine month periods ended September 29, 2012, or any prior period. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP and in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification” or “ASC”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the related disclosures within the accompanying notes. The accounting estimates that require management’s most significant and subjective judgments include the valuation of allowances for accounts receivable and inventory, the assessment of recoverability of long-lived assets and indefinite lived intangible assets, the recognition and measurement of severance-related liabilities, the recognition and measurement of current and deferred income tax assets and liabilities (including the measurement of uncertain tax positions), the valuation and recognition of share-based compensation, the valuation of obligations under the Company’s pension and postretirement benefit plans and the fair value of financial instruments and non-financial assets and liabilities. Actual results could differ from these estimates. These estimates are reviewed periodically to determine if a change is required. Shipping and Handling Costs Shipping and handling costs include costs to store goods prior to shipment, prepare goods for shipment and physically move goods from the Company’s sites to the customers’ premises. The cost of shipping and handling is charged to expense as incurred and is included in Selling, general and administrative expenses in the Consolidated Statements of Operations. Recent Accounting Standards In May 2011, the FASB issued ASU 2011-4 to amend certain guidance in ASC 820, “Fair Value Measurement”. This update provides guidance to improve the consistency of the fair value measurement and disclosure requirements between U.S. GAAP and International Financial Reporting Standards (“IFRS”). The provisions of this guidance changed certain of the fair value principles related to the highest and best use premise, the consideration of blockage factors and other premiums and discounts, the measurement of financial instruments held in a portfolio and instruments classified within shareholders’ equity. Further, the guidance provides additional disclosure requirements surrounding Level 3 fair value measurements, the uses of non-financial assets in certain circumstances and identification of the level in the fair value hierarchy used for assets and liabilities which are not recorded at fair value, but where fair value is disclosed. The Company adopted this guidance effective January 1, 2012. The adoption of this guidance did not have a significant effect on the Company’s consolidated financial statements. In June 2011, the FASB issued ASU 2011-5 to amend certain guidance in ASC 220, “Comprehensive Income”. This update requires total comprehensive income, the components of net income and the components of other comprehensive income to be presented either in a single continuous statement or in two separate but consecutive statements. Further, the guidance requires an entity to present reclassification adjustments from other comprehensive income to net income on the face of the financial statements. In December 2011, the FASB issued ASU 2011-12 which indefinitely deferred the requirement to present reclassification adjustments from other comprehensive income to net income on the face of the financial statements. The Company adopted this guidance effective January 1, 2012. The adoption of this guidance did not have a significant effect on the Company’s consolidated financial statements. In September 2011, the FASB issued ASU 2011-8 to amend certain guidance in ASC 350, “Intangibles - Goodwill and Other”. This update allows an entity the option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test for a reporting unit. If the entity elects the option and determines that the qualitative factors indicate that it is not more likely than not that a reporting unit’s fair value is less than its carrying amount, the entity is not required to calculate the fair value of the reporting unit and no further evaluation is necessary. The Company adopted this guidance effective January 1, 2012. The adoption of this guidance did not have a significant effect on the Company’s consolidated financial statements. In December 2011, the FASB issued ASU 2011-11 to amend certain guidance in ASC 210-20, “Balance Sheet: Offsetting”. This update enhances disclosures about financial instruments and derivative instruments that are either offset in accordance with U.S. GAAP or are subject to an enforceable master netting arrangement or similar agreement. The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods and should be applied retrospectively to all comparative periods presented. The Company is still assessing the potential impact of adoption. In July 2012, the FASB issued ASU 2012-02 to amend certain guidance in ASC 350, “Intangibles - Goodwill and Other”. This update allows an entity the option to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. The amended guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Though early adoption is permitted, the Company did not early adopt this guidance and is still assessing the potential impact of adoption.

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