Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. GRAPHIC PACKAGING HOLDING CO (1408075) 10-Q published on Oct 23, 2018 at 1:19 pm
Reporting Period: Sep 29, 2018
On September 30, 2018, the Company acquired substantially all the assets of the foodservice business of Letica Corporation, a subsidiary of RPC Group PLC ("Letica Foodservice"), a producer of paperboard-based cold and hot cups and cartons. The acquisition includes two facilities located in Clarksville, Tennessee and Pittston, Pennsylvania. Letica Foodservice is included in the Americas Paperboard Packaging reportable segment.
The acquisition accounting for the NACP Combination and the Letica Foodservice and PFP acquisitions are preliminary based on the estimated fair values as of the combination date and are subject to adjustments in subsequent periods once the third party valuations are finalized. The preliminary acquisition accounting for the NACP Combination and the Letica Foodservice and PFP acquisitions is as follows:
(a) Intangible Assets, Net consists of customer relationships which are generally amortized using an accelerated method over approximately 20 years. The value of customer relationships was determined using a discounted cash flow model, which includes an approximate 5% attrition rate. Beyond the twenty year life, the present value of cash flows were not meaningful.
As disclosed in the Company’s financial statements in “Note 8 - Income Taxes” of the Notes to the Consolidated Financial Statements of the Company’s 2017 Annual Report on Form 10-K, the Company recorded provisional amounts in its 2017 financial statements to reflect the federal, state and foreign impacts of The Tax Cuts and Jobs Act (“The Act”) as well as to the balance of the Company’s deferred tax assets and liabilities. These amounts remain provisional and subject to the Securities and Exchange Commission's Staff Accountant Bulletin 118 as of September 30, 2018. The Company recorded an additional tax benefit of approximately $11 million during the nine months ended September 30, 2018 related to the one-time transition tax on earnings of certain foreign subsidiaries. The estimate still remains provisional as the Company is still analyzing certain provisions of The Act and guidance issued by Treasury and the Internal Revenue Service associated with the one-time transition tax. The Company will file its 2017 U.S. federal income tax return reflecting the one-time transition tax during the fourth quarter of 2018. No other changes to the provisional amounts recorded in the 2017 financial statements were made during the nine months ended September 30, 2018.
During the three months ended September 30, 2018, the Company assessed the need to maintain a valuation allowance on the net deferred tax assets of one of its foreign subsidiaries in France and, based on new evidence, has determined that it is more likely than not that the net deferred tax assets will be realized through the generation of future taxable income. Appropriate consideration was given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. The Company concluded that the net deferred tax assets would be realized in future years and recorded a discrete benefit during the three months ended September 30, 2018 of approximately $2 million.