Attached files

file filename
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-99.2 - UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS - SNYDER'S-LANCE, INC.d457145dex992.htm

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The unaudited pro forma condensed combined balance sheet as of September 29, 2012 combines the historical consolidated balance sheets of Snyder’s-Lance, Inc. (“Snyder’s-Lance” or “the Company”) as of September 29, 2012 and of Snack Factory, LLC and Princeton Vanguard, LLC (collectively, “Snack Factory”) as of September 30, 2012 and gives effect to the transaction as if it had been completed on September 29, 2012.

The unaudited pro forma condensed combined statement of income for the fiscal year ended December 31, 2011 gives effect to the transaction as if it had been completed on January 2, 2011, the first day of Snyder’s-Lance’s 2011 fiscal year. Snyder’s-Lance’s audited consolidated statement of income for the fiscal year ended December 31, 2011 has been combined with Snack Factory’s audited consolidated statement of income for the fiscal year then ended.

The unaudited pro forma condensed combined statement of income for the nine months ended September 29, 2012 combines the historical condensed consolidated statement of income of Snyder’s-Lance for the nine months ended September 29, 2012 and Snack Factory’s unaudited condensed combined statement of income for the nine months ended September 30, 2012, and gives effect to the transaction as if it had been completed on January 2, 2011, the first day of Snyder’s-Lance’s 2011 fiscal year.

The historical consolidated financial statement information has been adjusted to give pro forma effect to events that are (i) directly attributable to the transaction, (ii) factually supportable and (iii) with respect to the statements of income, expected to have a continuing impact on the combined results. All pro forma financial statements use Snyder’s-Lance’s period-end dates and no adjustments were made to Snack Factory’s information for its different period-end dates.

The unaudited pro forma condensed combined financial information was prepared in accordance with the regulations of the SEC. The pro forma adjustments reflecting the completion of the transaction are based upon the acquisition method of accounting in accordance with ASC 805 and upon the assumptions set forth in the notes to the unaudited pro forma condensed combined financial information. The unaudited pro forma condensed combined balance sheet has been adjusted to reflect the preliminary allocation of the estimated purchase price to identifiable net assets acquired including an amount for goodwill representing the difference between the purchase price and the fair value of the identifiable net assets. The final allocation of the purchase price will be determined after completion of an analysis of the fair value of Snack Factory’s assets and liabilities. Accordingly, the final acquisition accounting adjustments may be materially different from the unaudited pro forma adjustments.

The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of the financial condition or results of operations of future periods or the financial condition or results of operations that actually would have been realized had the entities been a single company during the periods presented or the results that the combined company will experience after the transaction. The unaudited pro forma condensed combined financial information does not give effect to the potential impact of current financial conditions, regulatory matters or any anticipated synergies, operating efficiencies or cost savings that may be associated with the acquisition.

The unaudited pro forma condensed combined financial information should be read in conjunction with the following information:

 

   

Notes to the unaudited pro forma condensed combined financial information.

 

   

Current Report on Form 8-K filed December 20, 2012.

 

   

Unaudited interim financial statements of Snyder’s-Lance as of and for the quarter and nine months ended September 29, 2012, which are included in the Form 10-Q filing for the quarter ended September 29, 2012, as filed with the SEC.

 

   

Audited financial statements of Snyder’s-Lance as of and for the year-ended December 31, 2011, which are included in the Form 10-K filing for the year-ended December 31, 2011, as filed with the SEC.

 

   

Audited financial statements of Snack Factory as of and for the year-ended December 31, 2011, which are included as an exhibit to the Form 8-K filed December 20, 2012.

 

   

Unaudited financial statements of Snack Factory as of and for the nine months ended September 30, 2012, which are included as an exhibit to the Form 8-K filed December 20, 2012.

 

1


Pro Forma Condensed Combined Balance Sheets

As of September 29, 2012 (Unaudited)

 

(in thousands)

  Historical
Snyder’s-
Lance, Inc.
    Historical
Snack Factory
    Reclassifications     Pro Forma
Adjustments
    Pro Forma  
ASSETS          

Current assets:

         

Cash and cash equivalents

  $ 8,800      $ 851        $ (4,356 )(D)    $ 5,295   

Accounts receivable, net of allowances

    139,569        9,416        1,191 (A)        150,176   

Inventories

    109,025        8,402            117,427   

Income tax receivable

    —          —              —     

Deferred income taxes

    9,298        —            54 (I)      9,352   

Assets held for sale

    11,439        —              11,439   

Prepaid expenses and other current assets

    21,902        168            22,070   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    300,033        18,837        1,191        (4,302     315,759   

Noncurrent assets:

         

Fixed assets, net of accumulated depreciation

    324,913        274          (246 )(J)      324,941   

Goodwill

    369,932        —            171,527 (E)      541,459   

Other intangible assets, net

    379,871        —            162,990 (F)      542,861   

Other noncurrent assets

    22,557        116          1,325 (K)      23,998   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 1,397,306      $ 19,227      $ 1,191      $ 331,294      $ 1,749,018   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY          

Current liabilities:

         

Accounts payable

  $ 51,412      $ 5,272          $ 56,684   

Accrued compensation

    25,312        6,106        519 (B)      (6,106 )(G)      25,831   

Accrued selling costs

    14,325        —          1,242 (A)        15,567   

Income tax payable

    484        —              484   

Other payables and accrued liabilities

    35,789        1,114        (570 )(A, B)      (205 )(L)      36,128   

Current portion of long-term debt

    4,347        1,625          (1,625 )(H)      4,347   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

    131,669        14,117        1,191        (7,936     139,041   

Noncurrent liabilities:

         

Long-term debt

    191,551        7,625          332,375 (H)      531,551   

Deferred income taxes

    176,943        —            4,340 (I)      181,283   

Other noncurrent liabilities

    23,475        —            —          23,475   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    523,638        21,742        1,191        328,779        875,350   

Commitments and contingencies

    —          —              —     

Stockholders’ equity:

         

Common stock

    57,228        —              57,228   

Preferred stock, no shares outstanding

    —          —              —     

Additional paid-in capital

    743,519        —              743,519   

Retained earnings

    54,053        (2,515       2,515 (M)      54,053   

Accumulated other comprehensive income

    16,225        —              16,225   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

    871,025        (2,515     —          2,515        871,025   

Noncontrolling interests

    2,643        —              2,643   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

    873,668        (2,515     —          2,515        873,668   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

  $ 1,397,306      $ 19,227      $ 1,191      $ 331,294      $ 1,749,018   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Condensed Combined Financial Information.

 

2


Pro Forma Condensed Combined Statements of Income

For the Year Ended December 31, 2011 (Unaudited)

 

(in thousands, except share and per share data)

  Historical
Snyder’s-
Lance, Inc.
    Historical
Snack Factory
    Reclassifications     Pro Forma
Adjustments
    Pro Forma  

Net revenue

  $ 1,635,036      $ 70,127      $ —          $ 1,705,163   

Cost of sales

    1,065,107        44,081        (5,773 )(C)        1,103,415   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

    569,929        26,046        5,773        —          601,748   

Selling, general and administrative

    495,267        19,154        5,773 (C)      4,787 (N)      524,981   

Other expense/(income), net

    4,257        (83         4,174   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before interest and income taxes

    70,405        6,975        —          (4,787     72,593   

Interest expense, net

    10,560        871          5,915 (O)      17,346   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    59,845        6,104        —          (10,702     55,247   

Income tax expense

    21,104        —            (1,816 )(P)      19,288   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

    38,741        6,104        —          (8,886     35,959   

Net income attributable to noncontrolling interests

    483        —              483   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to shareholders

  $ 38,258      $ 6,104      $ —        $ (8,886   $ 35,476   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share

  $ 0.57            $ 0.53   

Weighted average shares outstanding - basic

    67,400,000              67,400,000   

Diluted earnings per share

  $ 0.56            $ 0.52   

Weighted average shares outstanding - diluted

    68,478,000              68,478,000   

See Notes to Condensed Combined Financial Information.

 

3


Pro Forma Condensed Combined Statements of Income

For the Nine Months Ended September 29, 2012 (Unaudited)

 

(in thousands, except share and per share data)

  Historical
Snyder’s-
Lance, Inc.
    Historical
Snack Factory
    Reclassifications     Pro Forma
Adjustments
    Pro Forma  

Net revenue

  $ 1,198,808      $ 79,456      $ —          $ 1,278,264   

Cost of sales

    802,568        49,354        (6,885 )(C)        845,037   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

    396,240        30,102        6,885        —          433,227   

Selling, general and administrative

    324,864        24,513        6,885 (C)      (2,909 )(N, Q, R)      353,353   

Gain on sale of route businesses, net

    (21,596     —              (21,596

Other expense/(income), net

    83        (69         14   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before interest and income taxes

    92,889        5,658        —          2,909        101,456   

Interest expense, net

    6,258        342          4,132 (O)      10,732   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    86,631        5,316        —          (1,223     90,724   

Income tax expense

    34,930        —            1,617 (P)      36,547   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

    51,701        5,316        —          (2,840     54,177   

Net income attributable to noncontrolling interests

    397        —              397   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to shareholders

  $ 51,304      $ 5,316      $ —        $ (2,840   $ 53,780   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share

  $ 0.75            $ 0.79   

Weighted average shares outstanding - basic

    68,268,000              68,268,000   

Diluted earnings per share

  $ 0.74            $ 0.78   

Weighted average shares outstanding - diluted

    69,190,000              69,190,000   

See Notes to Condensed Combined Financial Information.

 

4


Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

1. DESCRIPTION OF THE TRANSACTION

On October 11, 2012, the Company completed the acquisition of all the issued and outstanding shares and membership interests of Snack Factory. The unaudited pro forma condensed combined financial information reflects the acquisition for an estimated purchase price of $342.9 million. The purchase was funded primarily by a new $325 million term loan that matures in September 2016. Additional funding of $15.0 million was provided by existing revolving credit facilities with the remainder funded by cash on hand.

 

2. BASIS OF PRESENTATION

The acquisition will be accounted for under the acquisition method of accounting in accordance with ASC Topic 805-10, “Business Combinations — Overall” (“ASC 805-10”). Snyder’s-Lance will account for the transaction by using the Company’s historical information and accounting policies and adding the assets and liabilities of Snack Factory as of the completion date of the acquisition at their respective fair values.

The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates. The excess of the purchase price over the estimated amounts of identifiable assets and liabilities of Snack Factory as of the effective date of the acquisition will be allocated to goodwill in accordance with ASC 805-10. The purchase price allocation is subject to finalization of the Company’s analysis of the fair value of the assets and liabilities of Snack Factory as of the effective date of the acquisition. Accordingly, the purchase price allocation in the unaudited pro forma condensed combined financial information is preliminary and will be adjusted upon completion of the final valuation. Such adjustments could be material.

For purposes of measuring the estimated fair value of the assets acquired and liabilities assumed as reflected in the unaudited pro forma condensed combined financial statements, the Company used the guidance in ASC Topic 820-10, “Fair Value Measurement and Disclosure — Overall” (“ASC 820-10”), which established a framework for measuring fair values. ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Market participants are assumed to be buyers and sellers in the principal (most advantageous) market for the asset or liability. Additionally, under ASC 820-10, fair value measurements for an asset assume the highest and best use of that asset by market participants. Use of different estimates and judgments could yield different results.

 

3. ESTIMATE OF THE ASSETS AND LIABILITIES TO BE ASSUMED

The following is a preliminary estimate of the assets to be acquired and the liabilities to be assumed by Snyder’s-Lance in the acquisition, reconciled to the estimated purchase price (in thousands):

 

Book value of net assets acquired at September 29, 2012

   $ (2,515

Adjustments to:

  

Establish our estimate of identifiable intangible assets resulting from the transaction

     162,990   

Establish our estimate of goodwill resulting from the transaction

     171,527   

Eliminate long-term debt including current portion excluded from the acquisition

     9,250   

Eliminate other non-current liabilities excluded from the acquisition

     205   

Recognize deferred tax impact of preliminary valuation adjustments

     (4,286

Eliminate accrued compensation excluded from the acquisition

     6,106   

Eliminate deferred financing costs excluded from the acquisition

     (104

Fixed assets for preliminary valuation

     (246
  

 

 

 

Total acquisition cost allocated

   $ 342,927   
  

 

 

 

 

5


Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

4. RECLASSIFICATIONS

Certain reclassifications have been made to Snack Factory’s historical financial statements to conform to Snyder’s-Lance’s presentation as follows:

Item (A): Snyder’s-Lance records trade spending returns and allowances within accrued selling costs while historical Snack Factory recorded them as a reduction to accounts receivable ($1.2 million) and within other payables and liabilities ($0.1 million). Reclassifications have been made to Snack Factory’s pro forma balance sheet to conform to Snyder’s-Lance’s presentation.

Item (B): Snyder’s-Lance records accrued bonuses within accrued compensation while historical Snack Factory recorded them within other payables and accrued liabilities. A reclassification has been made to Snack Factory’s pro forma balance sheet to conform to Snyder’s-Lance’s presentation.

Item (C): Snyder’s-Lance records freight out associated with the sale of the Company’s products within selling, general and administrative expenses while historical Snack Factory recorded these expenses within cost of sales. Reclassifications have been made to Snack Factory’s pro forma statements of income to conform to Snyder’s-Lance’s presentation.

 

5. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The unaudited pro forma condensed combined balance sheet includes adjustments made to historical financial information that were calculated assuming the transaction had been completed as of September 29, 2012. We have based the unaudited pro forma adjustments upon available information and certain assumptions that we believe are reasonable under the circumstances. The adjustments reflect our preliminary estimates of the purchase price allocation, which may change upon finalization of appraisals and other valuation studies that are in process.

The unaudited pro forma condensed combined statement of income includes adjustments made to historical financial information that were calculated assuming the transaction had been completed as of January 2, 2011. The unaudited pro forma condensed combined financial information does not include the impact of potential cost savings or other operating efficiencies that could result from the acquisition.

The following items resulted in adjustments reflected in the unaudited pro forma condensed combined financial information:

Item (D): Reflects the adjustment to cash and cash equivalents necessary to complete the funding of the acquisition ($2.9 million) as well as the additional funding necessary at the acquisition date for deferred financing costs ($1.4 million).

Item (E): Reflects the estimate of goodwill included in the preliminary purchase price allocation.

Item (F): Reflects the estimated other intangible assets included in the preliminary purchase price allocation. A summary of the Company’s preliminary allocation to other intangible assets is as follows:

 

Customer Relationships - estimated useful life of 20 years

   $ 79,200   

Tradenames - indefinite-lived

     75,100   

Patents - estimated useful life of 11 years

     8,600   

Non-compete agreement - estimated useful life of 2 years

     90   
  

 

 

 

Total other intangible assets

   $ 162,990   
  

 

 

 

Item (G): Accrued compensation was adjusted to reflect our estimate of the specific liabilities incurred under the terms of the purchase agreement. The adjustment eliminates accrued compensation that was excluded from the acquisition as it was paid by the previous owners.

 

6


Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

Item (H): Reflects the adjustments to long-term debt in order to fund the acquisition. Total adjustments are as follows (in thousands):

 

New term loan used to fund the acquisition

   $ 325,000   

Borrowings from existing credit facilities used to fund the acquisition

     15,000   

Historical Snack Factory long-term debt which was paid off per the purchase agreement

     (7,625

Historical Snack Factory current portion of long-term debt which was paid off per the purchase agreement

     (1,625
  

 

 

 

Total pro forma adjustments to long-term debt

   $ 330,750   
  

 

 

 

Item (I): Reflects the adjustment to deferred income taxes for taxes primarily associated with the book in excess of tax basis of intangible assets reflected in the preliminary purchase price allocation.

Item (J): Reflects the adjustment to fixed assets in order to reflect the fair value of assets acquired.

Item (K): Reflects the adjustment necessary in order to add Snyder’s-Lance deferred financing costs incurred at the acquisition date which were not yet accrued at September 30, 2012 ($1.4 million). Pro forma adjustment is net of Snack Factory’s remaining deferred financing costs which were excluded from the acquisition.

Item (L): Other noncurrent liabilities were adjusted to reflect our estimate of the specific liabilities incurred under the terms of the purchase agreement. The adjustment eliminates other noncurrent liabilities that were excluded from the acquisition.

Item (M): Reflects the adjustment to eliminate historical Snack Factory equity.

Item (N): Reflects the adjustment necessary to record additional amortization expense based on the preliminary allocation of amortizable intangible assets. Total pro forma amortization was $4.8 million for the year ended December 31, 2011, and $3.6 million for the nine months ended September 29, 2012.

Item (O): Reflects the adjustment to interest expense, net of interest income consisting of incremental interest expense anticipated from the $325.0 million term loan and the $15.0 million increase in debt from borrowings under the existing credit facility. This interest expense was net of amounts recorded by historical Snack Factory which was associated with debt that was paid on the acquisition date. The calculated interest expense assumes a rate of interest of 1.92% for the term loan and 1.72% for the existing credit facility as these were the rates in effect at the time of the acquisition. The pro forma interest expense adjustment also includes additional deferred financing amortization as a result of the new term loan and is reduced for deferred financing expenses which had previously been recorded by historical Snack Factory.

Item (P): Reflects an adjustment to income taxes in order to record taxes on Snack Factory income at an estimated rate of 39.5%. In addition, income taxes were recorded on the pro forma adjustments at the same rate.

Item (Q): Reflects a reduction in selling, general and administrative expenses of $5.6 million for compensation expense recorded by historical Snack Factory which was specifically associated with the sale and was excluded from the liabilities acquired.

Item (R): Reflects a reduction in selling, general and administrative expenses of $0.9 million for acquisition-related expenses.

 

7