Hormel Foods 2013 Annual Report Download - page 45

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and has determined final working capital adjustments.
Therefore, an allocation of the purchase price to the acquired
assets, liabilities, and goodwill is presented in the table below.
At January 31, 2013 (in thousands)
Inventory $ 49,156
Property, plant and equipment 48,461
Intangible assets 264,500
Goodwill 303,597
Current liabilities (299)
Purchase price $ 665,415
Goodwill is calculated as the excess of the purchase price
over the fair value of the net assets recognized. The goodwill
recorded as part of the acquisition primarily reflects the value
of the assembled workforce, cost synergies, and the potential
to integrate and expand existing product lines. The goodwill
balance is expected to be deductible for income tax purposes.
The goodwill and intangible assets have been allocated to
the Grocery Products and International & Other reporting
segments.
The Company recognized approximately $7.7 million of trans-
action costs (excluding transitional service expenses) related
to the acquisition and the charges were reported in selling,
general and administrative expense in the Consolidated
Statement of Operations.
Operating results for this acquisition have been included in
the Company’s Consolidated Statements of Operations from
the date of acquisition (i.e. beginning in the second quarter)
and are primarily reflected in the Grocery Products and
International & Other reporting segments. The acquisition
contributed $94.8 million of net sales for the fourth quarter
and $272.8 million of net sales since the date of acquisition.
Pro forma results are not presented, as the acquisition was
not considered material to the consolidated Company.
On November 26, 2013, subsequent to the end of the fiscal
year, the Company also completed the acquisition of the
China based SKIPPY® peanut butter business for an additional
investment of $41.4 million. The purchase price is preliminary
subject to working capital and tax adjustments. Operating
results for this acquisition will be included in the Company’s
Consolidated Statements of Operations from the date of
acquisition and will be reflected in the International & Other
reporting segment.
SKIPPY® is a well-established brand that allows the Company
to expand its presence in the center of the store with a
non-meat protein product and reinforces the Company’s
balanced product portfolio. The acquisition also provides the
opportunity to strengthen the Company’s global presence and
complements the international sales strategy for the SPAM®
family of products.
NOTE E
INVENTORIES
Principal components of inventories are:
October 27, October 28,
(in thousands) 2013 2012
Finished products $ 544,858 $ 494,298
Raw materials and work-in-process 248,411 267,877
Materials and supplies 174,708 188,346
Total $ 967,977 $ 950,521
NOTE F
GOODWILL AND INTANGIBLE ASSETS
The changes in the carrying amount of goodwill for the fiscal years ended October 27, 2013, and October 28, 2012, are presented
in the table below. The additions during the fiscal year ended October 27, 2013 are entirely due to the acquisition of the United
States based SKIPPY® peanut butter business on January 31, 2013.
Grocery Refrigerated Specialty International
(in thousands) Products Foods JOTS Foods & Other Total
Balance as of October 30, 2011 $ 123,316 $ 96,652 $ 203,214 $ 207,028 $ 674 $ 630,884
Goodwill acquired – (9) – – – (9)
Balance as of October 28, 2012 $ 123,316 $ 96,643 $ 203,214 $ 207,028 $ 674 $ 630,875
Goodwill acquired 199,626 – – – 103,971 303,597
Balance as of October 27, 2013 $ 322,942 $ 96,643 $ 203,214 $ 207,028 $ 104,645 $ 934,472