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. We recorded a net gain on the sale of Diversey of $640.7 million, net of taxes of $197.5 million. During 2018, we recorded an additional net gain on the sale of Diversey of $42.8 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 Consolidated Statements of Operations for the years ended December 31, 2017 and 2016.

Summary operating results of Diversey were as follows:



	Year Ended December 31,
(In millions)	2017			2016
Net sales	$	1,669.0		$	2,567.0
Cost of sales	950.4			1,440.3
Gross profit	718.6			1,126.7
Selling, general and administrative expenses	538.3			859.2
Amortization expense of intangible assets acquired	23.9			79.9
Operating profit	156.4			187.6
Other expense, net	(17.0		)	(9.7		)
Earnings from discontinued operations before income tax provision (benefit)	139.4			177.9
Income tax provision (benefit) from discontinued operations⁽¹⁾	28.0			(16.2		)
Net earnings from discontinued operations	$	111.4		$	194.1

⁽¹⁾

For the year ended December 31, 2017, net earnings from discontinued operations included tax expense of $28.0 million, primarily driven by a change in our repatriation strategy and offset by a favorable earnings mix in jurisdictions with lower rates. For the year ended December 31, 2016, net earnings from discontinued operations were impacted by tax benefits of $16.2 million, primarily related to the release of reserves and favorable earnings mix in jurisdictions with lower tax rates.

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



	Year Ended December 31,
(In millions)	2017		2016
Non-cash items included in net earnings from discontinued operations:
Depreciation and amortization	$	29.3	$	111.4
Share-based incentive compensation	10.2		12.0
Profit sharing expense	3.0		2.9
Provision for bad debt	2.3		5.0
Capital expenditures	11.9		17.8

The amounts disclosed in the tables above have been excluded from disclosures unless otherwise noted.

On April 1, 2017, the Diversey Care division acquired the UVC disinfection portfolio of Daylight Medical, a manufacturer of innovative medical devices. The preliminary fair value of the consideration transferred was approximately $25.2 million which included $3.5 million of cash paid at closing as well as a preliminary fair value of $21.7 million related to $14.4 million of noncontingent consideration which will be paid in the future and a $7.3 million of preliminary fair value for liability-classified contingent consideration. The assets and liabilities acquired as part of the acquisition are transferred with the sale of Diversey.

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 closing date of March 19, 2018). The purchase price was subject to working capital, cash and debt adjustments, which were finalized in the fourth quarter of 2018 for R$1.6 million (or $0.4 million). For the year ended December 31, 2018, the Company recognized a net gain on the sale of $1.4 million, on the Consolidated Statements of Operations.

Acquisitions

Acquisition of AFP

On August 1, 2018, the Company acquired AFP, Inc., a leading, privately held fabricator of foam, corrugated, molded pulp and wood packaging solutions, to join its Product Care division. This acquisition further expands our protective packaging solutions in the electronics, transportation and industrial markets with custom-engineered applications. We acquired 100% of AFP shares for an estimated consideration of $74.1 million, excluding $2.9 million of cash acquired.

The following table summarizes the consideration transferred to acquire AFP 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 August 1, 2018		Adjustments			As of December 31, 2018
Total consideration transferred	$	70.8	$	3.3		$	74.1

Assets:
Cash and cash equivalents	2.9		—			2.9
Trade receivables, net	30.8		—			30.8
Inventories, net	7.1		0.1			7.2
Prepaid expenses and other current assets	0.7		—			0.7
Property and equipment, net	3.5		(0.4		)	3.1
Identifiable intangible assets, net	18.6		4.1			22.7
Goodwill	21.6		(2.0		)	19.6
Other non-current assets	0.7		(0.4		)	0.3
Total assets	$	85.9	$	1.4		$	87.3
Liabilities:
Current portion of long-term debt	—		0.1			0.1
Accounts payable	13.8		(2.2		)	11.6
Other current liabilities	1.3		—			1.3
Long-term debt, less current portion	—		0.2			0.2
Total liabilities	$	15.1	$	(1.9	)	$	13.2

The following tables summarizes the identifiable intangible assets, net and their useful life.



	Amount		Useful life
	(in millions)		(in years)
Customer relationships	$	18.6	11
Trademarks and tradenames	4.1		5
Total intangible assets with definite lives	$	22.7

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$144.7 million, or $106.2 million, net of cash acquired of $13.3 million, inclusive of purchase price adjustments which were finalized in the third quarter of 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 final allocation of the purchase price among the assets acquired and liabilities assumed.



	Preliminary Allocation		Measurement Period			Final Allocation
(In millions)	As of October 2, 2017		Adjustments			As of December 31, 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
Inventories, 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
Identifiable intangible assets, net	41.4		0.7			42.1
Goodwill	39.3		(1.5		)	37.8
Total assets	$	158.1	$	(0.7	)	$	157.4
Liabilities:
Short-term borrowings	14.0		—			14.0
Accounts payable	6.9		—			6.9
Other current liabilities	15.1		(0.1		)	15.0
Long-term debt, less current portion	3.8		—			3.8
Non-current deferred taxes	11.7		(0.2		)	11.5
Total liabilities	$	51.5	$	(0.3	)	$	51.2

The following tables summarizes the identifiable intangible assets, net and their useful life.



	Amount		Useful life
	(in millions)		(in years)
Customer relationships	$	25.4	17
Trademarks and tradenames	10.6		15
Technology	6.1		13
Total intangible assets with definite lives	$	42.1

Acquisition of Deltaplam

On August 1, 2017, the Company acquired Deltaplam Embalagens Indústria e Comércio Ltda ("Deltaplam"), a family owned and operated Brazilian flexible packaging manufacturer, to join its Food Care division. The preliminary fair value of 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 a preliminary allocation of $8.1 million of goodwill and $7.4 million of intangible assets. The final fair value of consideration transferred was $25.3 million, which included $9.7 million of goodwill and $5.9 million of intangible assets.