Hormel Foods 2015 Annual Report Download - page 46

44
NOTE B
Acquisitions
On July 13, 2015, the Company acquired Applegate Farms,
LLC (Applegate) of Bridgewater, New Jersey for a preliminary
purchase price of $774.1 million in cash. The purchase price
is preliminary pending fi nal purchase accounting adjustments,
and was funded by the Company with cash on hand and by
utilizing short-term fi nancing.
Applegate® is the No. 1 brand in natural and organic val-
ue-added prepared meats and this acquisition will allow the
Company to expand the breadth of its protein offerings to
provide consumers more choice in that fast growing category.
The acquisition was accounted for as a business combination
using the acquisition method. The Company is in the process
of obtaining an independent appraisal. Therefore, a prelimi-
nary allocation of the purchase price to the acquired assets,
liabilities, and goodwill is presented in the table below.
(in thousands)
Accounts receivable $ 25,574
Inventory 22,089
Prepaid and other assets 2,916
Property, plant and equipment 3,463
Intangible assets 275,900
Goodwill 488,476
Current liabilities (23,420)
Deferred taxes (20,935)
Purchase price $774,063
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 refl ects the
value of the potential to expand presence in the natural and
organic channels and the supply chain for natural and organic
products. A portion of the goodwill balance is expected to be
deductible for income tax purposes. The goodwill and intan-
gible assets have been allocated to the Refrigerated Foods
reporting segment.
The Company recognized approximately $9.0 million of trans-
action costs in fi scal year 2015 related to the acquisition and
the charges were reported in selling, general and adminis-
trative expense in the Company’s Consolidated Statements of
Operations.
Operating results for this acquisition have been included in
the Company’s Consolidated Statements of Operations from
the date of acquisition and are refl ected in the Refrigerated
Foods reporting segment. The acquisition contributed $92.8
million of net sales since the date of acquisition.
On August 11, 2014, the Company acquired CytoSport
Holdings, Inc. (CytoSport) of Benicia, California for a fi nal
purchase price of $420.9 million in cash. The purchase price
was funded by the Company with cash on hand and by utilizing
companies to recognize revenue to depict the transfer of
goods or services to customers in amounts that refl ect the
consideration to which the company expects to be entitled in
exchange for those goods or services. The new standard will
also result in enhanced disclosures about revenue, provide
guidance for transactions that were not previously addressed
comprehensively, and improve guidance for multiple-element
arrangements. On July 8, 2015, the FASB approved a one-year
deferral of the effective date. The new guidance is effective
for annual reporting periods beginning after December 15,
2017, including interim reporting periods within that reporting
period, and early adoption is not permitted. Accordingly, the
Company expects to adopt the provisions of this new account-
ing standard at the beginning of fi scal year 2019, and adoption
is not expected to have a material impact on the consolidated
fi nancial statements.
In April 2015, the FASB updated the guidance within ASC 835,
Interest. The update provides guidance on simplifying the
presentation of debt issuance cost. The amendments require
debt issuance costs related to a recognized debt liability be
presented in the balance sheet as a direct deduction from
the carrying amount of that debt liability. The new guidance
is effective for fi scal years beginning after December 15,
2015, and interim periods within those fi scal years, with early
adoption permitted. The Company expects to adopt the new
provisions of this accounting standard at the beginning of
fi scal year 2017, and is currently assessing the impact on its
consolidated fi nancial statements.
In April 2015, the FASB updated the guidance within ASC 715,
Compensation – Retirement Benefi ts. The update provides
guidance on simplifying the measurement date for defi ned
benefi t plan assets and obligations. The amendments allow
employers with fi scal year ends that do not coincide with a
calendar month end to make an accounting policy election to
measure defi ned benefi t plan assets and obligations as of the
end of the month closest to their fi scal year ends. The new
guidance is effective for fi scal years beginning after December
15, 2015, and interim periods within those fi scal years, with
early adoption permitted. The Company expects to adopt the
new provisions of this accounting standard at the beginning of
fi scal year 2017, and adoption is not expected to have a mate-
rial impact on its consolidated fi nancial statements.
In May 2015, the FASB updated the guidance within ASC 820,
Fair Value Measurements and Disclosures. The update provides
guidance on the disclosures for investments in certain entities
that calculate net asset value (NAV) per share (or its equiva-
lent). The amendments remove the requirement to categorize
within the fair value hierarchy all investments for which fair
value is measured using the NAV per share (or its equivalent)
as a practical expedient. The updated guidance is to be applied
retrospectively and is effective for annual reporting periods
beginning after December 15, 2015, and interim periods within
those fi scal years, with early adoption permitted. The Company
expects to adopt the provisions of this new accounting stan-
dard at the beginning of fi scal year 2017, and is currently
assessing the impact on its consolidated fi nancial statements.