Discontinued Operations, Divestitures and Acquisitions

Discontinued Operations

On March 25, 2017, we entered into a definitive agreement to sell our Diversey Care division and the food hygiene and cleaning business within our Food Care division (collectively, "Diversey") for gross proceeds of USD equivalent of $3.2 billion, subject to customary closing conditions. The transaction was completed on September 6, 2017. During 2018, we recorded an additional net gain on the sale of Diversey of $38.5 million, net of taxes. This was related to the final net working capital settlement as well as the release of tax indemnity reserves upon expiration of statute of limitations.

We have classified the operating results of Diversey, together with certain costs related to the divestiture transaction, as discontinued operations, net of tax, in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2017.

Summary operating results of Diversey were as follows:




(In millions)	Three Months Ended June 30, 2017			Six Months Ended June 30, 2017
Net sales	$	651.2		$	1,232.9
Cost of sales	369.9			700.4
Gross profit	281.3			532.5
Selling, general and administrative expenses⁽¹⁾	197.9			399.1
Amortization expense of intangible assets acquired⁽¹⁾	4.6			22.3
Restructuring and other charges⁽²⁾	3.8			1.5
Operating profit	75.0			109.6
Other expense, net	(5.1		)	(8.0		)
Earnings from discontinued operations before income tax provision⁽¹⁾⁽³⁾	69.9			101.6
Income tax (benefit) provision from discontinued operations⁽¹⁾⁽²⁾	(5.2		)	15.9
Net earnings from discontinued operations, net of tax	$	75.1		$	85.7

⁽¹⁾

For the three and six months ended June 30, 2017, there was a revision to net earnings from discontinued operations, net of tax, on the Condensed Consolidated Statement of Operations related to depreciation and amortization on Diversey assets held for sale. As a result, selling, general and administrative expenses decreased $6.1 million, amortization expenses of intangible assets acquired decreased $16.5 million and income tax provision from discontinued operations increased $6.2 million.


⁽²⁾	During the three and six months ended June 30, 2017, a reclassification of restructuring expenses from continuing operations to discontinued operations was made. Refer to the Condensed Consolidated Statements of Operations for additional information.


⁽³⁾	For the three and six months ended June 30, 2017, net earnings from discontinued operations was impacted by a $5.2 million benefit and $15.9 million expense, respectively, related to a change in the repatriation strategy of foreign earnings offset by a favorable earnings mix in jurisdictions with lower rates.

The following table presents selected financial information regarding cash flows of Diversey that are included within discontinued operations in the Condensed Consolidated Statements of Cash Flows:



(In millions)	Six Months Ended June 30, 2017
Non-cash items included in net earnings from discontinued operations:
Depreciation and amortization	$	27.7
Share-based incentive compensation	6.0
Profit sharing expense	1.5
Provision for bad debt	1.7
Capital expenditures	9.7

The amounts disclosed in the tables above have been excluded from the Notes to Condensed Consolidated Financial Statements unless otherwise noted.

Divestitures

Divestiture of Embalagens Ltda.

On August 1, 2017, we entered into an agreement to sell our polystyrene food tray business in Guarulhos, Brazil for a gross purchase price of R$26.9 million (or $8.2 million as of the closing date of March 19, 2018). The purchase price is subject to working capital, cash and debt adjustments. For the three and six months ended June 30, 2018, the Company recognized an immaterial net loss on sale and a net gain on the sale of $1.0 million, respectively, within other expense, net on the Condensed Consolidated Statements of Operations.

Acquisitions

Acquisition of Fagerdala

On October 2, 2017, the Company acquired Fagerdala Singapore Pte Ltd. ("Fagerdala"), a manufacturer and fabricator of polyethylene foam based in Singapore, to join its Product Care division. We acquired 100% of Fagerdala shares for estimated consideration of S$144.2 million, or $106.2 million, net of cash acquired of $13.3 million, inclusive of purchase price adjustments which will be finalized in 2018. We acquired Fagerdala to leverage its manufacturing footprint in Asia, expertise in foam manufacturing and fabrication, and commercial organization to grow sales in the consumer electronics, medical equipment and devices, automotive, temperature assurance, and e-commerce fulfillment sectors.

The following table summarizes the consideration transferred to acquire Fagerdala and the preliminary allocation of the purchase price among the assets acquired and liabilities assumed.



	Preliminary Allocation		Measurement Period			Revised Preliminary Allocation
(In millions)	As of October 2, 2017		Adjustments			As of June 30, 2018
Total consideration transferred	$	106.6	$	(0.4	)	$	106.2

Assets:
Cash and cash equivalents	13.3					13.3
Trade receivables, net	22.4					22.4
Inventory, net	10.0		0.1			10.1
Prepaid expenses and other current assets	8.4					8.4
Property and equipment, net	23.3					23.3
Intangible assets, net	41.4		0.7			42.1
Goodwill	39.3		(0.6		)	38.7
Assets	$	158.1	$	0.2		$	158.3
Liabilities:
Short-term borrowings	14.0					14.0
Accounts payable	6.9					6.9
Other current liabilities	15.1		0.9			16.0
Long-term debt, less current portion	3.8					3.8
Non-current deferred taxes	11.7		(0.3		)	11.4
Liabilities	$	51.5	$	0.6		$	52.1

The valuation of property and equipment, net and intangible assets is preliminary. We expect to complete the valuation in the third quarter of 2018. All of the goodwill is allocated to the Product Care reporting unit. The $42.1 million fair value allocated to definite-lived intangible assets consists primarily of $25.4 million of customer relationships with a useful life of seventeen years, $10.6 million of trademarks and tradenames with a useful life of fifteen years and various acquired technologies of $6.1 million with useful lives of thirteen years.

Acquisition of Deltaplam

On August 1, 2017, the Food Care division acquired Deltaplam Embalagens Indústria e Comércio Ltda ("Deltaplam"), a family owned and operated Brazilian flexible packaging manufacturer. The preliminary fair value of the consideration transferred was approximately $25.8 million. We recorded the fair value of the assets acquired and liabilities assumed on the acquisition date, which included $8.1 million of goodwill and $7.4 million of intangible assets. As of June 30, 2018, the final fair value of the consideration transferred was $25.3 million, which included $9.7 million of goodwill and $5.9 million of intangible assets.