Acquisitions

Providência Acquisition

On January 27, 2014, the Company announced that PGI Polímeros do Brazil, a Brazilian corporation and wholly-owned subsidiary of the Company ("PGI Acquisition Company"), entered into a Stock Purchase Agreement with Companhia Providência Indústria e Comércio, a Brazilian corporation ("Providência") and certain shareholders named therein. Pursuant to the terms and subject to the conditions of the Stock Purchase Agreement, PGI Acquisition Company agreed to acquire a 71.25% controlling interest in Providência (the “Providência Acquisition”). Providência is a leading manufacturer of nonwovens primarily used in hygiene applications as well as industrial and healthcare applications. Based in Brazil, Providência has three locations, including one in the United States.

The Providência Acquisition was completed on June 11, 2014 (the "Providência Acquisition Date") for an aggregate purchase price of $424.8 million and funded with the proceeds from borrowings under an incremental term loan amendment to the Company's existing Senior Secured Credit Agreement as well as the proceeds from the issuance of $210.0 million of 6.875% Senior Unsecured Notes due in 2019.

The components of the purchase price are as follows:



In thousands	Consideration
Cash consideration paid to selling shareholders	$	188,117
Cash consideration deposited into escrow	8,252
Deferred purchase price	47,931
Debt repaid	180,532
Total consideration	$	424,832

Total consideration paid included $47.9 million of deferred purchase price (the "Deferred Purchase Price"). The Deferred Purchase Price is held by the Company and relates to certain unaccrued tax claims of Providência (the "Providência Tax Claims"). The Deferred Purchase Price is denominated in Brazilian Reals (R$) and accretes at a rate of 9.5% per annum compounded daily. If the Providência Tax Claims are resolved in the Company's favor, the Deferred Purchase Price will be paid to the selling shareholders. However, if the Company or Providência incur actual tax liability in respect to the Providência Tax Claims, the amount of Deferred Purchase Price owed to the selling shareholders will be reduced by the amount of such actual tax liability. The Company will be responsible for any actual tax liability in excess of the Deferred Purchase Price and the cash consideration deposited into escrow. Based on the Company's best estimate, resolution of the Providência Tax Claims is expected to take longer than a year. As a result, the Deferred Purchase Price is classified as a noncurrent liability with accretion recognized within Interest expense.

As required by Brazilian law, PGI Acquisition Company filed a mandatory tender offer registration request with the Securities Commission of Brazil (Comissão de Valores Mobiliários or the “CVM”) in order to launch, as required by Brazilian law, after the CVM's approval, a tender offer to acquire the remaining 28.75% of the outstanding capital stock of Providência that is currently held by the minority shareholders (the “Mandatory Tender Offer”). The price per share to be paid to the minority shareholders in connection with the Mandatory Tender Offer will be substantially the same as paid to the selling shareholders upon acquisition of control, including the portion allocated to deferred purchase price and escrow. In addition, the Company voluntarily opted to amend the Mandatory Tender Offer to provide the minority shareholders with an alternative price structure with no escrow or deferred purchase price. Based on the alternative offer, the minority shareholders would receive an all-cash purchase price at closing. The Mandatory Tender Offer registration request is currently under review with the CVM. Once the Mandatory Tender Offer is approved and launched, the minority shareholders have the right, but not the obligation, to sell their remaining outstanding capital stock of Providência. Given such right of the minority shareholders, the Company determined that ASC 480, "Distinguishing Liabilities from Equity" ("ASC 480") requires the noncontrolling interest to be presented as mezzanine equity on the Consolidated Balance Sheets and adjusted to its estimated maximum redemption amount at each balance sheet date. Refer to Note 14, "Redeemable Noncontrolling Interest" for further information on the accounting of the redeemable noncontrolling interest.

The Providência Acquisition was recorded using the acquisition method of accounting in accordance with the accounting guidance for business combinations. As a result, the total purchase price was allocated to assets acquired and liabilities assumed based on the preliminary estimate of fair market value of such assets and liabilities at the Providência Acquisition Date. Any excess of the purchase price is recognized as goodwill, which is not expected to be deductible for tax purposes. During the second quarter of 2015, the Company finalized its fair market value estimates of assets acquired and liabilities assumed. The Company did not record any material measurement period adjustments related to the Providência Acquisition during the six months ended June 30, 2015.

Pro Forma Information

The following unaudited pro forma information for the three and six months ended June 28, 2014 assumes the acquisition of Providência occurred as of the beginning of 2013.



In thousands	Three Months Ended June 28, 2014			Six Months Ended June 28, 2014
Net sales	$	496,141		$	1,008,246
Net income (loss)	(36,496		)	(56,251		)

The unaudited pro forma information does not purport to be indicative of the results that actually would have been achieved had the operations been combined during the periods presented, nor is it intended to be a projection of future results or trends. Net sales and Operating income (loss) attributable to Providência was $68.4 million and $6.5 million for the three months ended June 30, 2015 and $142.0 million and $19.8 million for the six months ended June 30, 2015, respectively.

Dounor Acquisition

On March 25, 2015, the Company announced that PGI France Holdings SAS, a wholly-owned subsidiary of the Company, entered into an agreement to acquire Dounor SAS. (“Dounor”) for a purchase price of $59.6 million. The acquisition was completed on April 17, 2015 and funded through the Company's Senior Secured Credit Agreement, as amended. Located in France, Dounor is a manufacturer of specialty materials used in the hygiene, healthcare and industrial applications.

The acquisition of Dounor was recorded using the acquisition method of accounting in accordance with the accounting guidance for business combinations. As a result, the total purchase price was allocated to assets acquired and liabilities assumed based on the preliminary estimate of fair market value of such assets and liabilities at the date of acquisition. Any excess of the purchase price is recognized as goodwill, which is not expected to be deductible for tax purposes. The Company has not completed the detail valuation work necessary to finalize its valuation of assets acquired and liabilities assumed. Additional information related to acquired intangible assets, property, plant and equipment as well as accounting for certain tax matters is still pending. As a result, current amounts recorded are subject to adjustment as the Company finalizes its analysis. The Company expects to complete its final purchase price allocation during the third quarter of 2015.

The preliminary allocation of the purchase price is as follows:



In thousands	April 17, 2015
Cash	$	1,403
Accounts receivable	12,845
Inventory	2,346
Other current assets	1,499
Total current assets	18,093

Property, plant and equipment	45,410
Goodwill	14,002
Intangible assets	16,533
Other noncurrent assets	998
Total assets acquired	$	95,036

Current liabilities	$	19,673
Deferred income taxes	15,352
Other noncurrent liabilities	451
Total liabilities assumed	$	35,476
Net assets acquired	$	59,560

Cash, accounts receivable and current liabilities were stated at their historical carrying values, which approximate fair value, given the short-term nature of these assets and liabilities. The preliminary estimate of fair value for inventories was based on computations which considered many factors including the estimated selling price of the inventory, the cost to dispose of the inventory as well as the replacement cost of the inventory, where applicable. As a result, the Company increased the carrying value of inventory by less than $0.1 million. The preliminary estimate of fair value for property, plant and equipment was based on management's assessment of the acquired assets condition, as well as an evaluation of the current market value for such assets. In addition, the Company also considered the length of time over which the economic benefit of these assets is expected to be realized and adjusted the useful life of such assets accordingly as of the valuation date. As a result, the Company increased the carrying value of property, plant and equipment by $19.7 million.

The Company recorded an intangible asset, which consisted of a finite-lived customer relationships intangible asset with an estimated fair value of $6.9 million. The valuation was determined using an income approach methodology using the multi-period excess earnings method. The average estimated useful life of the intangible asset is considered to be 6.5 years, determined based upon various accounting studies, historical acquisition experience, economic factors and future cash flows. The Company preliminarily allocated $6.3 million to a finite-lived patent associated with its PPLZ technology. The valuation was determined using an income approach methodology using the multi-period excess earnings method. The average estimated useful life of the patent was determined based on the contractual end of its legal life. In addition, the Company preliminarily allocated $3.3 million to a finite-lived patent associated with its Softtech technology. The valuation was determined using an income approach methodology using the relief-from-royalty method. The average estimated useful life of the patent was determined based on the contractual end of its legal life. The excess of the purchase price over the amounts allocated to specific assets and liabilities is included in goodwill and has been allocated to the Europe segment. The premium in the purchase price paid for the acquisition of Dounor reflects the anticipated realization of operational and cost synergies.

Net sales and Operating income (loss) attributable to Dounor since the date of acquisition was $18.0 million and $0.8 million. In light of the size of Dounor, the expected costs and perceived benefits, presenting pro forma financial information of the combined entity under U.S. GAAP would involve undue cost and effort.