Hormel Foods 2014 Annual Report Download - page 46

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Note C
Earnings Per Share Data
The reported net earnings attributable to the Company were
used when computing basic and diluted earnings per share for
all years presented. A reconciliation of the shares used in the
computation is as follows:
(in thousands) 2014 2013 2012
Basic weighted-average
shares outstanding 263,812 264,317 263,466
Dilutive potential
common shares 6,404 5,907 5,425
Diluted weighted-average
shares outstanding 270,216 270,224 268,891
For fiscal years 2014, 2013, and 2012, a total of 0.4 million, 0.4
million, and 2.2 million weighted-average outstanding stock
options, respectively, were not included in the computation of
dilutive potential common shares since their inclusion would
have had an antidilutive effect on earnings per share.
Note D
Acquisitions
On August 11, 2014, the Company acquired CytoSport
Holdings, Inc. (CytoSport) of Benicia, California for a prelim-
inary purchase price of $424.3 million in cash. The purchase
price is preliminary pending final working capital and other
purchase accounting adjustments, and was funded by the
Company with cash on hand and by utilizing funds from its
revolving line of credit. The agreement provides for a potential
additional payment of up to $20.0 million subject to meeting
specific financial performance criteria over the next two years.
The Company has recognized $10.3 million related to this
potential payment as of October 26, 2014, based on the current
estimated fair value determined by an independent appraisal.
The acquisition was accounted for as a business combination
using the acquisition method. The Company has estimated
the acquisition date fair values of the assets acquired and
liabilities assumed, using independent appraisals and other
analyses, and is in the process of determining final working
capital adjustments. Therefore, a preliminary allocation of the
purchase price to the acquired assets, liabilities, and goodwill
is presented in the table below.
(in thousands)
Accounts receivable $ 37,541
Inventory 62,246
Prepaid and other assets 3,133
Property, plant and equipment 8,119
Intangible assets 183,607
Goodwill 263,829
Current liabilities (52,298)
Long-term liabilities (25,182)
Deferred taxes (56,667)
Purchase price $ 424,328
The liabilities shown above include $15.0 million representing
potential payments owed under a supplier agreement, which
are contingent on future production levels.
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, manufacturing synergies, and
the potential to expand presence in alternate channels. The
goodwill balance is not expected to be deductible for income
tax purposes. The goodwill and intangible assets have been
allocated to the Specialty Foods and International & Other
reporting segments.
Operating results for this acquisition have been included in
the Company’s Consolidated Statements of Operations from
the date of acquisition and are reflected in the Specialty Foods
reporting segment. The acquisition contributed $73.5 million
of net sales since the date of acquisition.
The Company recognized approximately $4.8 million of trans-
action costs in fiscal year 2014 related to the acquisition and
the charges were reported in selling, general and administra-
tive expense in the Consolidated Statement of Operations.
CytoSport is the maker of Muscle Milk® products and is a lead-
ing provider of premium protein products in the sports nutri-
tion category. CytoSport’s brands align with the Company’s
focus on protein while further diversifying the Company’s
portfolio.
On November 26, 2013, the Company acquired the China
based SKIPPY® peanut butter business from Conopco, Inc.
(doing business as Unilever United States Inc.), of Englewood
Cliffs, N.J. for a final purchase price of $41.9 million in cash.
This acquisition included the Weifang, China manufacturing
facility and all sales in Mainland China. The purchase price
was funded by the Company with cash on hand.