Attached files
file | filename |
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8-K/A - FORM 8-K/A - SNYDER'S-LANCE, INC. | d457145d8ka.htm |
EX-23 - CONSENT OF MCGLADREY LLP - SNYDER'S-LANCE, INC. | d457145dex23.htm |
EX-99.1 - AUDITED COMBINED FINANCIAL STATEMENTS - SNYDER'S-LANCE, INC. | d457145dex991.htm |
EX-99.3 - UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION OF SNYDER'S-LANCE - SNYDER'S-LANCE, INC. | d457145dex993.htm |
Exhibit 99.2
Snack Factory, LLC and
Princeton Vanguard, LLC
Unaudited Condensed Combined Financial Statements
as of September 30, 2012 and December 31, 2011
and for the Nine Months Ended September 30, 2012 and 2011
1
Snack Factory, LLC and Princeton Vanguard, LLC
Index
Condensed Combined Balance Sheets as of September 30, 2012 (Unaudited) and December 31, 2011 |
3 | |||
Condensed Combined Statements of Income (Unaudited) for the Nine Months Ended September 30, 2012 and 2011 |
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Condensed Combined Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2012 and 2011 |
5 | |||
Notes to Condensed Combined Financial Statements (Unaudited) |
6 |
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Snack Factory, LLC and Princeton Vanguard, LLC
Condensed Combined Balance Sheets
As of September 30, 2012 (Unaudited) and December 31, 2011
September 30, 2012 |
December 31, 2011 |
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ASSETS |
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Current Assets: |
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Cash |
$ | 851,217 | $ | 1,792 | ||||
Accounts receivable, net of allowances of $1,203,257 and $1,238,269, respectively |
9,416,313 | 7,309,659 | ||||||
Inventories |
8,402,135 | 6,169,181 | ||||||
Prepaid expenses and other current assets |
166,952 | 40,565 | ||||||
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Total current assets |
18,836,617 | 13,521,197 | ||||||
Property and Equipment, net |
273,701 | 319,052 | ||||||
Other Assets |
116,273 | 318,605 | ||||||
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Total assets |
$ | 19,226,591 | $ | 14,158,854 | ||||
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LIABILITIES AND MEMBERS EQUITY |
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Current Liabilities: |
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Revolving loan |
$ | | $ | 2,797,083 | ||||
Current portion of long-term debt |
1,625,000 | 1,640,000 | ||||||
Current portion of other long-term liabilities |
205,000 | 102,500 | ||||||
Accounts payable |
5,272,384 | 3,569,191 | ||||||
Accrued expenses |
908,284 | 894,433 | ||||||
Share-based compensation liability |
6,106,000 | 528,000 | ||||||
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Total current liabilities |
14,116,668 | 9,531,207 | ||||||
Long-term liabilities |
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Long-term debt |
7,625,000 | 8,720,000 | ||||||
Other long-term liabilities |
| 307,500 | ||||||
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Total long-term liabilities |
7,625,000 | 9,027,500 | ||||||
Total liabilities |
21,741,668 | 18,558,707 | ||||||
Commitments (Note 4) |
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Members deficiency |
(2,515,077 | ) | (4,399,853 | ) | ||||
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Total liabilities and members deficiency |
$ | 19,226,591 | $ | 14,158,854 | ||||
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See Notes to Condensed Combined Financial Statements.
3
Snack Factory, LLC and Princeton Vanguard, LLC
Condensed Combined Statements of Income (Unaudited)
Nine months Ended September 30, 2012 and 2011
2012 | 2011 | |||||||
Gross Sales |
$ | 90,862,122 | $ | 54,908,652 | ||||
Sales Incentives, Discounts and Allowances |
(11,406,629 | ) | (7,612,772 | ) | ||||
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Net sales |
79,455,493 | 47,295,880 | ||||||
Cost of Goods Sold |
49,353,650 | 29,614,904 | ||||||
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Gross profit |
30,101,843 | 17,680,976 | ||||||
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Operating Expenses: |
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Selling, general and administrative expenses |
23,160,460 | 12,031,619 | ||||||
Related party management fees |
750,000 | 750,000 | ||||||
Depreciation and amortization |
602,267 | 167,398 | ||||||
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Total operating expenses |
24,512,727 | 12,949,017 | ||||||
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Income from operations |
5,589,116 | 4,731,959 | ||||||
Other Income (Expense): |
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Other income |
69,098 | 62,326 | ||||||
Interest expense |
(341,964 | ) | (645,487 | ) | ||||
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Net income |
$ | 5,316,250 | $ | 4,148,798 | ||||
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See Notes to Condensed Combined Financial Statements.
4
Snack Factory, LLC and Princeton Vanguard, LLC
Condensed Combined Statements of Cash Flows (Unaudited)
Nine months Ended September 30, 2012 and 2011
2012 | 2011 | |||||||
Cash Flows From Operating Activities: |
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Net Income |
$ | 5,316,250 | $ | 4,148,798 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
602,267 | 167,398 | ||||||
Share-based compensation |
5,578,000 | | ||||||
Allowance for doubtful accounts and discounts |
(35,012 | ) | 517,990 | |||||
Changes in assets and liabilities: |
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Increase in accounts receivable |
(2,071,642 | ) | (1,687,914 | ) | ||||
Increase in inventories |
(2,232,954 | ) | (762,108 | ) | ||||
Increase in prepaid expenses and other current assets |
(126,386 | ) | (199,801 | ) | ||||
Increase/(decrease) in accounts payable |
1,703,192 | (530,979 | ) | |||||
Increase in accrued expenses |
13,851 | 942,774 | ||||||
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Net cash provided by operating activities |
8,747,566 | 2,596,158 | ||||||
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Cash Used In Investing Activity - purchases of property and equipment |
(86,539 | ) | (67,218 | ) | ||||
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Cash Flows From Financing Activities: |
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Repayments of long-term debt |
(1,110,000 | ) | (1,230,000 | ) | ||||
Borrowings from revolving loan |
15,579,669 | 14,644,775 | ||||||
Repayments of revolving loan |
(18,376,752 | ) | (14,190,916 | ) | ||||
Member contributions |
290,000 | | ||||||
Member distributions |
(3,721,474 | ) | (2,094,127 | ) | ||||
Payment of deferred financing fees |
(268,045 | ) | (4,294 | ) | ||||
Payments of other long-term liabilities |
(205,000 | ) | | |||||
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Net cash used in financing activities |
(7,811,602 | ) | (2,874,562 | ) | ||||
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Net increase/(decrease) in cash |
849,425 | (345,622 | ) | |||||
Cash: |
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Beginning |
1,792 | 348,298 | ||||||
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Ending |
$ | 851,217 | $ | 2,676 | ||||
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Supplemental Disclosure of Cash Flow Information: |
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Cash paid for interest |
$ | 341,964 | $ | 645,487 | ||||
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See Notes to Condensed Combined Financial Statements.
5
Snack Factory, LLC and Princeton Vanguard, LLC
Notes to Condensed Combined Financial Statements (Unaudited)
Note 1. | Basis of Presentation |
The combined financial statements include the accounts of Snack Factory, LLC and Princeton Vanguard, LLC (collectively, the Company). Snack Factory, LLC and Princeton Vanguard, LLC are wholly owned subsidiaries of The Snack Factory, LLC. All intercompany accounts and transactions have been eliminated in the combination. Certain prior year amounts have been reclassified for consistent presentation.
On October 11, 2012, The Snack Factory, LLC sold to S-L Snacks National, LLC its equity interests in Snack Factory, LLC and Princeton Vanguard, LLC. Immediately prior to the closing, The Snack Factory, LLC and certain of its affiliates completed a series of restructuring transactions, the effect of which was to transfer approximately 7.26% of the outstanding equity interests of Snack Factory, LLC and Princeton Vanguard, LLC to VMG Snack Factory Blocker, Inc., a corporation affiliated with The Snack Factory, LLC. In addition to its direct purchase of the remaining outstanding equity interests of Snack Factory, LLC and Princeton Vanguard, LLC, S-L Snacks National, LLC also purchased all of the outstanding shares of VMG Snack Factory Blocker, Inc., thereby acquiring all of the outstanding equity interests of Snack Factory, LLC and Princeton Vanguard, LLC.
The accompanying unaudited Condensed Combined Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These condensed financial statements should be read in conjunction with the audited financial statements and notes for the year ended December 31, 2011. In our opinion, these Condensed Combined Financial Statements reflect all adjustments, consisting of only normal, recurring accruals, necessary to present fairly our Condensed Combined Financial Statements for the interim periods presented herein. The consolidated results of operations for the nine months ended September 30, 2012, are not necessarily indicative of the results to be expected for the full year.
Note 2. | Summary of Significant Accounting Policies |
Nature of Business: Snack Factory, LLC develops, markets and distributes a variety of healthy snack food products under the Pretzel Crisps brand name. The Companys products are distributed to a variety of channels including wholesalers, club stores, grocery retailers, and convenience stores, predominately in the United States. The Companys products are primarily manufactured by a co-packer in Wisconsin. Princeton Vanguard, LLC holds the trade names, trademarks, recipes, and patents for Snack Factory and its related products.
Cash: The Company maintains cash at banks which, at times, may exceed federally insured limits. For the purposes of reporting cash flows, cash consists of funds in checking and bank deposit accounts maintained at financial institutions.
Accounts Receivable: Accounts receivables are recorded at the invoiced amounts less allowances for discounts or incentive credits expected to be granted, and doubtful receivables. Amounts are considered past due when payment is not received within the stated credit terms. The allowance for doubtful accounts is the Companys best estimate of the probable credit losses in the Companys recorded balances.
Inventories: Inventories are stated at the lower of cost or market using the first-in, first-out valuation method. Inventories consist of raw materials and finished goods. The Company identifies slow-moving or obsolete material and records what it estimates to be the appropriate loss provision. Under the terms of the agreement with the Companys major supplier and co-packer (the co-packer), the Company takes title to finished goods inventory upon delivery to the Companys third-party warehouses.
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Snack Factory, LLC and Princeton Vanguard, LLC
Notes to Condensed Combined Financial Statements (Unaudited)
As of September 30, 2012, and December 31, 2011, inventories consisted of the following:
September 30, 2012 |
December 31, 2011 |
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Finished goods |
$ | 7,838,751 | $ | 5,899,560 | ||||
Raw materials |
563,384 | 269,621 | ||||||
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$ | 8,402,135 | $ | 6,169,181 | |||||
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Property and Equipment: Property and equipment is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets ranging from three to seven years. Leasehold improvements are amortized over the shorter of the useful life or the term of the lease.
Impairment of Long-Lived Assets: The Company evaluates long-lived assets, which include equipment, furniture and leasehold improvements, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset are less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value. No impairment was required to be recognized at September 30, 2012 or December 31, 2011.
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition: Revenue from the sale of products to the Companys customers is recognized upon shipment. The Company offers its customers a variety of sales and incentive programs including promotional scan-down discounts, coupons, and slotting fees. Incentives that result in an identifiable benefit to the Company, where the value can be reasonably estimated, are included as a component of expenses. Incentives that do not meet these criteria are included as a reduction of revenue. All sales incentives have been included in sales incentives, discounts and allowances in the condensed combined statements of income for the nine months ended September 30, 2012 and 2011. Term discounts extended to customers are recognized as a reduction of sales when the sale is recorded. The Company sells its products to customers without the right of return and is not obligated to accept any returns.
Shipping and Handling: Shipping and handling charges are not billed to customers and are included as a component of cost of goods sold. These costs amounted to $6,399,700 and $3,597,699 for the nine months ended September 30, 2012 and 2011, respectively.
Advertising: Advertising costs are charged to operations when incurred and amounted to $1,246,688 and $158,904 for the nine months ended September 30, 2012 and 2011, respectively.
Income Taxes: As limited liability entities, the Companys taxable income or loss is allocated to members in accordance with their respective percentage ownership. Therefore, no provision or liability for income taxes has been included in the condensed combined financial statements.
Management evaluates the Companys tax positions in conjunction with Financial Accounting Standards Board guidance on accounting for uncertainty in income taxes. The Company concluded that it has taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance. With few exceptions, the Company is no longer subject to income tax examinations by U.S. federal, state or local tax authorities for years before 2009.
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Snack Factory, LLC and Princeton Vanguard, LLC
Notes to Condensed Combined Financial Statements (Unaudited)
Restricted Unit Awards: The Snack Factory, LLC grants restricted unit awards to employees and nonemployee consultants of Snack Factory, LLC. Restricted unit awards are recognized as compensation expense on a straight-line basis over the life of the vesting period. Compensation expense for restricted unit awards is based on the awards grant date fair value.
Subsequent Events: The Company has evaluated subsequent events through December 20, 2012, the date on which the financial statements were available to be issued (see Note 1).
Note 3. | Property and Equipment |
Property and equipment, net, as of September 30, 2012 and December 31, 2011 consists of the following:
September 30, 2012 |
December 31, 2011 |
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Machinery and Equipment |
$ | 273,326 | $ | 274,270 | ||||
Furniture and Fixtures |
148,310 | 148,310 | ||||||
Computer equipment and software |
216,577 | 130,240 | ||||||
Leasehold improvements |
44,152 | 43,100 | ||||||
Vehicles |
112,463 | 112,463 | ||||||
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794,828 | 708,383 | |||||||
Less accumulated depreciation |
(521,127 | ) | (389,331 | ) | ||||
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$ | 273,701 | $ | 319,052 | |||||
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Depreciation and amortization expense associated with property and equipment was $131,889 and $109,056 for the nine months ended September 30, 2012 and 2011, respectively.
Note 4. | Commitments |
Lease Commitments: The Company leases office and storage space in Skillman, New Jersey from a related party (see Note 7) under a lease agreement which expires on December 31, 2012. Future minimum lease payments due under this lease are $28,935 at September 30, 2012. Rent expense for the nine months ended September 30, 2012 and 2011 was $93,115 and $92,904, respectively.
Employment Contracts: On July 20, 2009, the Company entered into employment agreements with two executives and members of the Company for base salaries of $1,000,000 per annum through July 20, 2012. These agreements are automatically extended for one-year terms each year after July 20, 2012 unless terminated in writing by either party 90 days prior to expiration of the term. These agreements were extended on July 20, 2012, and will expire on December 31, 2012.
Share-based Compensation: At September 30, 2012, there are 378.31 nonemployee restricted unit awards outstanding of which 243.80 are vested. A share-based compensation cost of approximately $5,578,000 related to the fair value of outstanding vested units was charged against income during the nine months ended September 30, 2012 and is included in selling, general and administrative expenses in the accompanying condensed combined statements of income. The total liability related to these awards amounts to approximately $6,106,000 at September 30, 2012 and is included in current liabilities in the accompanying condensed combined balance sheets.
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Snack Factory, LLC and Princeton Vanguard, LLC
Notes to Condensed Combined Financial Statements (Unaudited)
Note 5. | Economic Dependency |
The Company has one supplier that manufactures substantially all of its products. The total cost of the services and products purchased from this supplier for the nine months ended September 30, 2012 and 2011 was $43,793,531 and $25,561,097, respectively. As of September 30, 2012 and December 31, 2011, accounts payable due to this supplier were approximately $2,118,836 and $736,189, respectively. If there were a significant interruption of this source of supply to the Company, it is likely that there would be a significant adverse impact on the Companys operations.
Note 6. | Concentration of Credit Risk |
The Company has two major customers that collectively accounted for approximately 42% and 40% of its sales for the nine months ended September 30, 2012 and 2011, respectively. The accounts receivable from these customers amounted to approximately 36% and 55% of the Companys total accounts receivable balance as of September 30, 2012 and December 31, 2011, respectively.
Note 7. | Related Party Transactions |
The Company has an agreement with an affiliate of a majority member of The Snack Factory, LLC for management advisory services at an annual fee of $1,000,000. Accrued and unpaid fees at December 31, 2011 amounted to $154,762. There were no accrued and unpaid fees at September 30, 2012. The Company also reimbursed this affiliate for expenses which were paid on behalf of the Company. The total reimbursement was $219,608 and $39,364 for the nine months ended September 30, 2012 and 2011, respectively. This agreement was terminated upon the change in control (see Note 1).
The Company leases office space from an affiliate of one of the members of The Snack Factory, LLC under a lease agreement through December 31, 2012 (see Note 4).
9