saputo inc. annexe 51-102a4 déclaration d`acquisition d`entreprise

Transcription

SAPUTO INC.
ANNEXE 51-102A4
DÉCLARATION D’ACQUISITION D’ENTREPRISE
SAPUTO INC.
ANNEXE 51-102A4
Rubrique 1 – Identification de la Société
1.1 Dénomination et adresse de la Société
Saputo inc.
6869, boulevard Métropolitain Est
Saint-Léonard (Québec)
H1P 1X8
1.2 Membre de la haute direction
Louis-Philippe Carrière, FCPA
Vice-président exécutif, Finances et administration
Téléphone : 514-328-6662
Rubrique 2 – Détails de l’acquisition
2.1 Nature de l’entreprise acquise
Le 3 janvier 2013, Saputo inc. (la « Société ») a conclu l’acquisition de Morningstar Foods, LLC (« Morningstar »),
une filiale de Dean Foods Company (« Dean Foods »), aux termes d’une convention d’acquisition de participation
datée du 2 décembre 2012.
Morningstar fabrique une gamme de produits laitiers et non laitiers ayant une durée de conservation prolongée,
notamment de la crème et de la crème à café, des mélanges à crème glacée, de la crème à fouetter, de la crème à
fouetter en aérosol, des cafés glacés, de la crème demi-grasse, des produits laitiers à valeur ajoutée, ainsi que des
produits de culture bactérienne tels que de la crème sure et du fromage cottage. Ces produits sont fabriqués sous
diverses marques de commerce et marques privées et sont vendus à l’échelle du pays par l’intermédiaire d’une
équipe de vente interne et de représentants indépendants. La clientèle de Morningstar comprend des détaillants,
des chaînes nationales de restaurants à service rapide, des épiceries, des magasins à grande surface et des
distributeurs partout aux États-Unis. Morningstar génère des revenus annuels d’environ 1,6 G$, compte environ
2 000 employés et exploite 10 installations de fabrication situées dans neuf États.
2.2 Date d’acquisition
La date d’acquisition de Morningstar est le 3 janvier 2013.
2.3 Contrepartie
La Société a acquis Morningstar de Dean Foods pour une contrepartie en espèces totale de 1 439 849 000 $,
sous réserve des ajustements du fonds de roulement habituels. Le prix d’achat a été financé au moyen de la
trésorerie disponible et d’une nouvelle facilité d’emprunt bancaire à terme de quatre ans d’un montant de
1 200 000 000 $.
2.4 Effet sur la situation financière
L’acquisition de Morningstar vient s’ajouter aux activités de la Division Produits laitiers (USA) de Saputo et ses
résultats devraient accroître immédiatement son bénéfice. Grâce à cette acquisition, la Société pourra tirer parti du
réseau national de fabrication et de distribution de Morningstar et optimiser ses services d’un océan à l’autre.
Cette transaction agrandit l’éventail des produits proposés aux clients américains et élargit les perspectives
d’acquisitions futures de la Société.
Actuellement, la Société ne prévoit pas effectuer ni proposer des changements significatifs à ses affaires
(structure organisationnelle, personnel ou direction) ou à celles de Morningstar qui auraient une incidence sur la
performance financière et la situation financière de la Société, sauf les changements qui découlent de l’apport des
résultats d’exploitation de Morningstar à la situation financière consolidée de la Société pour les périodes se
terminant après la date d’acquisition, ainsi que de l’inclusion d’un emprunt bancaire à terme pour financer
l’acquisition.
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SAPUTO INC.
ANNEXE 51-102A4
2.5 Évaluations antérieures
Aucune.
2.6 Parties à l’opération
L’autre partie à la transaction d’acquisition de Morningstar n’était pas une personne informée, une personne ayant
des liens avec la Société ou un membre du même groupe que celle-ci.
2.7 Date de la déclaration
Le 28 mars 2013
Rubrique 3 – États financiers
Les états financiers qui suivent ont été joints à cette déclaration d’acquisition d’entreprise :
3.1 États financiers de Morningstar Foods, LLC
a)
Les états financiers combinés audités de Morningstar Foods, LLC pour les exercices terminés les
31 décembre 2012 et 2011, joints à titre d’Annexe A.
Les états financiers combinés audités (les « états financiers annuels ») et les notes complémentaires de
Morningstar Foods, LLC ont été préparés conformément aux principes comptables généralement reconnus
des États-Unis (les « PCGR des États-Unis »), et ils sont présentés en dollars américains. Les états financiers
annuels ci-joints comprennent le rapport de l’auditeur indépendant et reflètent la situation financière et les
résultats financiers aux 31 décembre 2012 et 2011 et pour les exercices terminés à ces dates.
b)
Les états financiers combinés résumés non audités de Morningstar Foods, LLC au 30 septembre 2012 et au
31 décembre 2011 et pour les périodes de neuf mois terminées les 30 septembre 2012 et 2011, joints à titre
d’Annexe B.
Les états financiers combinés résumés intermédiaires non audités (les « états financiers intermédiaires non
audités ») et les notes complémentaires au 30 septembre 2012 et au 31 décembre 2011 et pour les périodes
de neuf mois terminées les 30 septembre 2012 et 2011 ont également été préparés conformément aux PCGR
des États-Unis, et ils sont présentés en dollars américains.
3.2 États financiers consolidés résumés pro forma non audités de la Société
a) Le bilan consolidé intermédiaire résumé pro forma non audité de la Société au 31 décembre 2012, joint à titre
d’Annexe C.
Le bilan consolidé intermédiaire résumé pro forma non audité tient compte de l’acquisition comme si elle avait
eu lieu le 31 décembre 2012, soit la date des plus récents états financiers consolidés intermédiaires résumés
non audités publiés par la Société. Le bilan consolidé intermédiaire résumé pro forma non audité au
31 décembre 2012 a été préparé selon les méthodes comptables de la Société, qui sont conformes aux
Normes internationales d’information financière (les « IFRS ») et sont présentées dans les états financiers
consolidés au 31 mars 2012 de la Société, lesquels peuvent être obtenus sur SEDAR à l’adresse
www.sedar.com.
b) L’état consolidé résumé des résultats pro forma non audité de la Société pour l’exercice terminé le 31 mars
2012, joint à titre d’Annexe D.
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SAPUTO INC.
ANNEXE 51-102A4
L’état consolidé résumé des résultats pro forma non audité pour l’exercice terminé le 31 mars 2012 a été
préparé selon les méthodes comptables de la Société, qui sont conformes aux IFRS et sont présentées dans
les états financiers consolidés au 31 mars 2012 de la Société.
c) L’état consolidé intermédiaire résumé des résultats pro forma non audité de la Société pour la période de neuf
mois terminée le 31 décembre 2012, joint à titre d’Annexe E.
L’état consolidé intermédiaire résumé des résultats pro forma non audité de la Société pour la période de neuf
mois terminée le 31 décembre 2012 a été préparé selon les méthodes comptables de la Société, qui sont
conformes aux IFRS et sont présentées dans les états financiers consolidés au 31 mars 2012 de la Société.
Énoncés prospectifs
Les états financiers consolidés résumés pro forma non audités présentés dans ce rapport ne reflètent pas
nécessairement les résultats qui auraient été obtenus si l’acquisition avait été conclue aux dates indiquées, et ils
ne sont pas nécessairement représentatifs de la situation financière et des résultats futurs de la Société après
l’acquisition.
Les états financiers consolidés résumés pro forma non audités présentés dans ce rapport ne tiennent pas compte
des coûts d’intégration, des économies de coûts d’opération et d’autres éléments qui pourraient s’être produits si
l’acquisition avait été effectuée avant le 3 janvier 2013.
Ce rapport contient des énoncés prospectifs au sens de la législation en valeurs mobilières, y compris des
énoncés à l’effet que la Société tire parti du réseau national de fabrication et de distribution de Morningstar et
qu’elle optimise ses services d’un océan à l’autre. Ces énoncés sont fondés, entre autres, sur les hypothèses, les
attentes, les estimations, les objectifs, les projets et les intentions de la Société à la date des présentes.
Ces énoncés prospectifs portent notamment sur les objectifs à court et à moyen terme de la Société, ses
perspectives, ses projets commerciaux et ses stratégies pour atteindre ces objectifs, ainsi que sur ses convictions,
ses projets, ses objectifs et ses attentes. Les énoncés se reconnaissent à l’emploi de termes comme « pouvoir »,
« devoir », « croire », « prévoir », « planifier », « s’attendre à », « estimer », « continuer » ou « proposer » à la
forme affirmative ou négative, à l’emploi du conditionnel ou du futur, et à l’emploi d’autres termes semblables.
De par leur nature, les énoncés prospectifs sont exposés à un certain nombre de risques et d’incertitudes. Les
résultats réels peuvent être très différents des conclusions données dans ces énoncés prospectifs. Par
conséquent, la Société ne peut garantir que les énoncés prospectifs se réaliseront. Les hypothèses, les attentes et
les estimations qui ont servi à la préparation des énoncés prospectifs et les risques qui pourraient entraîner un
écart important entre les résultats réels et les attentes comprennent, entre autres, la capacité de la Société à
réaliser les avantages attendus de l’acquisition de Morningstar, les difficultés d’intégration ou d’autres difficultés
semblables et l’efficacité de la plateforme de contrôle interne à l’égard de l’information financière de Morningstar,
ainsi que les risques présentés dans les documents déposés par la Société auprès des organismes canadiens de
réglementation des valeurs mobilières à l’occasion. De plus, les ajustements finaux de la répartition du prix d’achat
pourraient avoir une incidence sur les justes valeurs attribuées aux actifs et aux passifs, et les résultats pourraient
différer de façon importante des états financiers consolidés résumés pro forma non audités.
Les énoncés prospectifs sont fondés sur les estimations, les attentes et les hypothèses actuelles de la direction,
que cette dernière estime raisonnables à la date des présentes, et par conséquent, sont sujets à changement par
la suite. Vous ne devez pas accorder une importance indue à ces énoncés ni vous y fier à une autre date.
À moins que la législation en valeurs mobilières l’exige, la Société ne s’engage nullement à mettre à jour ou à
réviser ces énoncés prospectifs, verbaux ou écrits, qu’elle peut faire ou qui peuvent être faits pour son compte, à
l’occasion, à la suite d’une nouvelle information, d’événements à venir ou autrement.
Page 3
Annexe A
ÉTATS FINANCIERS COMBINÉS ANNUELS AUDITÉS
DE MORNINGSTAR FOODS, LLC
SAPUTO INC. DÉCLARATION D’ACQUISITION D’ENTREPRISE
Page 4
Morningstar Foods
(DefinedasMorningstarFoodsLLCandsubsidiaries
andtheDeanFoodsCompany’sRockfordfacility)
CombinedFinancialStatements
asofandfortheYearsEnded
December31,2012and2011
MORNINGSTARFOODS
TABLEOFCONTENTS
Page
COMBINED BALANCE SHEETS AS OF DECEMBER 31, 2012 AND 2011
3
COMBINED STATEMENTS OF OPERATIONS FOR THE
YEARS ENDED DECEMBER 31, 2012 AND 2011
4
COMBINED STATEMENTS OF COMPREHENSIVE INCOME FOR THE
5
COMBINED STATEMENTS OF INVESTED EQUITY FOR THE
6
COMBINED STATEMENTS OF CASH FLOWS FOR THE
7
NOTES TO COMBINED FINANCIAL STATEMENTS AS OF AND FOR THE
8–39
INDEPENDENTAUDITORS’REPORT
To the Board of Directors of Dean Foods Company
Dallas, Texas
We have audited the accompanying combined financial statements of Morningstar Foods (Defined as
Morningstar Foods LLC and subsidiaries and the Dean Foods Company’s Rockford Facility), both of
which are under common ownership and common management, which comprise the combined balance
sheets as of December 31, 2012 and 2011, and the related combined statements of operations,
comprehensive income, invested equity and cash flows for the years then ended, and the related notes to
the combined financial statements.
Management’sResponsibilityfortheCombinedFinancialStatements
Management is responsible for the preparation and fair presentation of these combined financial
statements in accordance with accounting principles generally accepted in the United States of America;
this includes the design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of combined financial statements that are free from material misstatement, whether
due to fraud or error.
Auditors’Responsibility
Our responsibility is to express an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the combined financial statements are free of material misstatement. An audit involves
performing procedures to obtain audit evidence about the amounts and disclosures in the combined
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment
of the risks of material misstatement of the combined financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the Company’s
preparation and fair presentation of the combined financial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the
combined financial statements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the combined financial statements referred to above present fairly, in all material respects,
the financial position of Morningstar Foods as of December 31, 2012 and 2011, and the results of its
operations and its cash flows for the years then ended in accordance with accounting principles generally
accepted in the United States of America.
OtherMatter
As discussed in Note 1 to the combined financial statements, the financial statements include allocations
of expenses from Dean Foods Company. These allocations may not be reflective of the actual level of
costs which would have been incurred had the Company operated as a separate entity from Dean Foods
Company.
Dallas, Texas
March 7, 2013
-2-
MORNINGSTARFOODS
COMBINEDBALANCESHEETS
ASOFDECEMBER31,2012AND2011
(Inthousands)
December31,
2012
2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Receivables, net of allowance of $189 and $501
Inventories
Deferred income taxes
Prepaid expenses and other current assets
$
Total current assets
PROPERTY, PLANT AND EQUIPMENT, Net
DEFERRED INCOME TAXES
IDENTIFIABLE INTANGIBLE AND OTHER ASSETS, Net
GOODWILL
TOTAL ASSETS
6,644
74,667
68,144
16,095
6,084
$
4
73,847
67,159
4,846
8,547
171,634
154,403
181,567
183,090
-
1,823
36,102
37,342
306,095
306,095
$ 695,398
$ 682,753
$ 97,921
790
97
$ 107,297
11,082
21,837
98,808
140,216
LIABILITIESANDINVESTEDEQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses
Related party payables
Current portion of debt
Total current liabilities
LONG-TERM DEBT
-
OTHER LONG-TERM LIABILITIES
164
68,556
63,419
8,040
6,982
COMMITMENTS AND CONTINGENCIES (Note 15)
INVESTED EQUITY:
Parent’s net investment
Accumulated other comprehensive loss
Total invested equity
TOTAL LIABILITIES AND INVESTED EQUITY
See notes to combined financial statements.
-3-
520,608
(614)
472,344
(372)
519,994
471,972
$ 695,398
$ 682,753
MORNINGSTARFOODS
COMBINEDSTATEMENTSOFOPERATIONS
FORTHEYEARSENDEDDECEMBER31,2012AND2011
(Inthousands)
YearEndedDecember31,
2012
2011
NET SALES
$ 1,434,551
$ 1,402,399
300,245
342,560
NET SALES TO RELATED PARTIES
RELATED PARTY FEES
1,993
Total net sales
-
1,736,789
1,744,959
1,457,854
1,501,640
278,935
243,319
OPERATING COSTS AND EXPENSES:
Selling and distribution
General and administrative
Related party license expense
Amortization of intangibles
Facility closing and reorganization costs
Other operating expense (income)
93,829
71,872
36,034
2,923
3,547
4,551
85,270
49,119
42,680
2,923
(19,130)
Total operating costs and expenses
212,756
160,862
66,179
82,457
6,754
6,526
6,754
6,526
INCOME BEFORE INCOME TAXES
59,425
75,931
INCOME TAX EXPENSE
21,146
27,330
COST OF SALES
GROSS PROFIT
OPERATING INCOME
OTHER EXPENSE:
Interest expense
Total other expense
NET INCOME
$
-4-
38,279
$
48,601
MORNINGSTARFOODS
COMBINEDSTATEMENTSOFCOMPREHENSIVEINCOME
(Inthousands)
2012
2011
NET INCOME
$ 38,279
$ 48,601
OTHER COMPREHENSIVE LOSS, Net of tax:
Net change in fair value of derivative instruments
Net change in minimum pension liability
(15)
(227)
(294)
Other comprehensive loss, net of tax
(242)
(294)
COMPREHENSIVE INCOME
$ 38,037
-5-
$ 48,307
MORNINGSTARFOODS
COMBINEDSTATEMENTSOFINVESTEDEQUITY
(Inthousands)
Parent’s
Net
Investment
BALANCE AT DECEMBER 31, 2010
$ 554,186
Net income
Change in Parent’s investment, net
Share-based compensation funded by Parent
Net income
$ (78)
Total
Invested
Equity
$ 554,108
48,601
-
48,601
(132,370)
-
(132,370)
1,927
Other comprehensive loss:
Change in minimum pension liability, net of tax of $183
Accumulated
Other
Comprehensive
Loss
-
-
(294)
472,344
(372)
1,927
(294)
471,972
38,279
-
38,279
7,513
-
7,513
2,472
-
2,472
Other comprehensive loss:
Change in minimum pension liability, net of tax of $142
Change in fair value of derivative instruments net of
tax of $10
-
(227)
(227)
-
(15)
(15)
$ 520,608
-6-
$ (614)
$ 519,994
MORNINGSTARFOODS
COMBINEDSTATEMENTSOFCASHFLOWS
(Inthousands)
2012
2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
Share-based compensation expense funded by Parent
Loss (Gain) on divestitures and other, net
Other
Changes in operating assets and liabilities, net of acquisitions
and divestitures:
Receivables, net
Inventories
Prepaid expenses and other assets
Related party payable
$
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property, plant and equipment
Proceeds from divestitures
Proceeds from sale of fixed assets
Net cash (used in) provided by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in parent’s net investment
Payments on capital lease obligations
Proceeds from receivables-backed facility
Payments for receivables-backed facility
Net cash used in financing activities
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
38,279
$
25,643
2,472
3,093
(4,137)
668
26,438
1,927
(21,301)
(2,827)
137
(820)
(985)
1,018
(13,222)
(10,292)
(7,989)
(6,249)
3,335
5,993
444
41,717
48,509
(26,464)
1,039
(20,318)
81,807
191
(25,425)
61,680
12,252
(314)
230,957
(252,547)
(131,560)
(224)
405,994
(384,402)
(9,652)
(110,192)
6,640
CASH AND CASH EQUIVALENTS, Beginning of period
48,601
(3)
4
7
CASH AND CASH EQUIVALENTS, End of period
$
6,644
$
4
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest
$
6,754
$
6,526
$
25,673
$
29,954
Cash paid for taxes, net
-7-
MORNINGSTARFOODS
NOTESTOCOMBINEDFINANCIALSTATEMENTS
ASOFANDFORTHEYEARSENDEDDECEMBER31,2012AND2011
1.
BUSINESS AND BASIS OF PRESENTATION
Business — Morningstar Foods is a leading U.S. manufacturer of extended shelf life (“ESL”) creams
and creamers, beverages and cultured dairy products with an emphasis on foodservice and private label
retail customers. These products include half and half, whipping cream, ice cream mix, value-added
milks, sour cream and cottage cheese under an array of private labels and the Friendship® brand.
Unless otherwise indicated, references in the report to “we,” “us”, “our” or “the Company” refer to the
Morningstar Foods operations.
On December 2, 2012, Dean Foods Company (“Dean Foods”) entered into an agreement to sell
Morningstar Foods LLC, which excludes Dean Foods’ facility located in Rockford, Illinois (“Rockford
facility”). The sale closed on January 3, 2013 for $1.45 billion, and a portion of the proceeds was used
by Dean Foods to retire outstanding debt under their senior secured credit facility. See Note 17
“Subsequent Events.” We did not receive any proceeds as part of the sale transaction.
Basis of Presentation — Our historical Combined Financial Statements have been prepared on a
carve-out basis in accordance with U.S. generally accepted accounting principles (“GAAP”) and are
derived from Dean Foods’ consolidated financial statements and accounting records using the historical
results of operations and assets and liabilities attributed to our operations, and includes allocations of
expenses from Dean Foods. Our Combined Financial Statements include Morningstar Foods LLC and
its subsidiaries, along with the Rockford facility, which has historically been managed by us but is
owned by another Dean Foods subsidiary. See Note 5 “Property, Plant and Equipment.” Our combined
results are not necessarily indicative of our future performance and do not reflect what our financial
performance would have been had we been a stand-alone company during the periods presented.
Dean Foods historically provided certain corporate services to us, and costs associated with these
functions have been allocated to us. These allocations include costs related to corporate services, such as
executive management, supply chain, information technology, legal, finance and accounting, investor
relations, human resources, risk management, tax, treasury and other services, as well as stock-based
compensation expense attributable to our employees and an allocation of stock-based compensation
attributable to employees of Dean Foods. The costs of such services have been allocated to us based on
the allocation method most relevant to the service provided, primarily based on relative percentage of
total net sales, relative percentage of headcount or specific identification. The total amount of these
allocations from Dean Foods was approximately $48.5 million (which includes $22.9 million of
transaction costs related to the sale of the Company) and $26.8 million in the years ended December 31,
2012 and 2011, respectively. These cost allocations are primarily reflected within general and
administrative expenses in our Combined Statements of Operations. Management believes these
expenses have been allocated to us using a reasonable allocation methodology.
The allocations may not reflect the expense we would have incurred as a stand-alone company for the
periods presented. Actual costs that may have been incurred if we had been a stand-alone company
would depend on a number of factors, including the chosen organizational structure, what functions
were outsourced or performed by employees and strategic decisions made in certain areas.
-8-
The total invested equity represents Dean Foods’ interest in our recorded net assets. The parent’s net
investment balance represents the cumulative net investment by Dean Foods in us through that date,
including any prior net income or loss or other comprehensive income or loss attributed to us and
contributions received from or distributions made to Dean Foods. Current income tax liabilities are
deemed to be remitted in cash to Dean Foods in the period the related income tax expense is recorded.
Certain transactions between us and other related parties that are subsidiaries of Dean Foods, including
allocated expenses and settlement of intercompany transactions, are also included in Dean Foods’ net
investment.
Invested equity in the Combined Balance Sheets includes net receivables from affiliates of Dean Foods
of $147.0 million and $157.0 million as of December 31, 2012 and 2011, respectively.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Combination — The Combined Financial Statements have been prepared for the Company as it was
historically managed as a component of Dean Foods.
All intercompany transactions and balances have been eliminated in combination. All transactions and
balances between us and other subsidiaries of Dean Foods are reported as related party transactions in
the Combined Financial Statements. All sales and financing transactions with Dean Foods and its
subsidiaries are considered to be settled for cash in the Combined Statement of Cash Flows at the time
the transaction is recorded.
Use of Estimates — The preparation of our Combined Financial Statements in conformity with U.S.
GAAP requires us to use our judgment to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the
Combined Financial Statements and the reported amounts of net sales and expenses during the reporting
period. Actual results could differ from these estimates under different assumptions or conditions.
Cash and Cash Equivalents — As of December 31, 2012 and 2011, cash is comprised of cash held in
bank accounts. We receive day-to-day cash management services from Dean Foods. See Note 16
“Related Party Transactions and Continuing Relationships.”
We consider temporary investments with an original maturity of three months or less to be cash
equivalents.
Inventories — Inventories are stated at the lower of cost or market. Our products are valued using the
first-in, first-out method. The costs of finished goods inventories include raw materials, direct labor,
indirect production, and overhead costs. Reserves for obsolete or excess inventory are not material.
Property, Plant and Equipment — Property, plant and equipment are stated at acquisition cost, plus
capitalized interest on borrowings during the actual construction period of major capital projects as
allocated from Dean Foods. Expenditures for repairs and maintenance that do not improve or extend the
life of the assets are expensed as incurred. Depreciation is calculated using the straight-line method
typically over the following range of estimated useful lives of the assets:
Asset
UsefulLife
Buildings
Machinery and equipment
Leasehold improvements
15 to 40 years
3 to 20 years
Over the shorter of the term of the applicable lease
agreement or useful life
-9-
Goodwill and Intangible Assets — Our goodwill and identifiable intangible assets have resulted from
acquisitions. Upon acquisition, the purchase price is first allocated to identifiable assets and liabilities,
including customer-related intangible assets and trademarks, with any remaining purchase price
recorded as goodwill. Goodwill and trademarks with indefinite lives are not amortized.
A trademark is determined to have an indefinite life if it has a history of strong sales and cash flow
performance that we expect to continue for the foreseeable future. If these perpetual trademark criteria
are not met, the trademarks are amortized over their expected useful lives. Determining the expected life
of a trademark is based on a number of factors including the competitive environment, trademark
history, and anticipated future trademark support.
Identifiable intangible assets, other than indefinite-lived trademarks, are typically amortized over the
following range of estimated useful lives:
Asset
UsefulLife
Customer relationships
Certain finite-lived trademarks
Noncompete agreements
5 to 15 years
5 to 15 years
Over the shorter of the term of the agreement or
useful life
Impairment — In accordance with accounting standards related to goodwill and other intangibles
assets, we do not amortize goodwill and other intangible assets determined to have indefinite useful
lives. Instead, we conduct impairment tests on our goodwill and indefinite-lived trademarks annually
and when circumstances indicate that the carrying value may not be recoverable. To determine whether
impairment exists related to our indefinite-lived intangible assets, we primarily utilize a discounted
future cash flow analysis.
In evaluating goodwill for impairment, we are permitted under the accounting guidance to first assess
qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than
50 percent) that the fair value of a reporting unit is less than its carrying amount. If we conclude that it is
not more likely than not that the fair value of the Company is less than its carrying value, then no further
testing of the goodwill is required. However, if we conclude that it is more likely than not that the fair
value of the Company is less than its carrying value, then we perform a two-step goodwill impairment
test to identify potential goodwill impairment and measure the amount of goodwill impairment to be
recognized, if any.
A qualitative assessment of goodwill was performed during 2012. We assessed economic conditions and
industry and market considerations, in addition to the overall financial performance of the Company.
Based on the results of our assessment, we determined that it was not more likely than not that the
Company had a carrying value in excess of its fair value. Accordingly, no further goodwill testing was
completed, and we did not recognize any impairment charges related to goodwill during 2012 and 2011.
Long-lived assets, including property, plant, and equipment and definite-lived intangible assets, are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable and prior to any goodwill impairment test. Indicators of impairment
could include significant changes in business environment or the planned closure of a facility.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an
asset to future net cash flows expected to be generated by the asset. If the carrying amount of an asset
exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the
carrying amount of the asset exceeds the fair value of the asset. In 2012, the approval and completion of
- 10 -
the closure of our Sulphur Springs, Texas cultured production facility, resulted in the write down of
property, plant and equipment of $2.6 million. See Note 14 “Facility Closing and Reorganization Costs.”
There were no indicators of impairment of long-lived assets identified in 2011.
Share-Based Compensation — Certain of our employees participate in share-based compensation
plans sponsored by Dean Foods that are settled in Dean Foods’ common stock or cash. Share-based
compensation expense is recognized for Dean Foods equity awards granted to our employees ratably
over the vesting period based on their grant date fair value. The fair value of option awards is estimated
at the date of grant using the Black-Scholes valuation model. The fair value of restricted stock unit
awards is equal to the closing price of Dean Foods’ stock on the date of grant. Compensation expense is
recognized only for equity awards expected to vest. Dean Foods estimate forfeitures at the date of grant
based on its historical experience and future expectations. Share-based compensation expense is
included within general and administrative expense in our Combined Statements of Operations. See
Note 11 “Share-Based Compensation.”
Employee Benefit Plans — We participate in Dean Foods’ various employee benefit plans, which
consist of Dean Foods’ consolidated defined benefit plan and defined contribution plan (including
various employee savings and profit sharing plans), and we contribute to various multiemployer pension
plans on behalf of certain of our employees.
We account for our employees’ participation in the Dean Foods’ employee defined benefit plan as a
multiemployer plan and record the contribution to the pension plan or allocation of net periodic pension
cost associated with our employees.
For our separate, stand-alone benefit plan, we recognize the overfunded or underfunded status as an
asset or liability on our Combined Balance Sheets and recognize changes in the funded status in the year
in which changes occur, through accumulated other comprehensive income (loss). The funded status is
measured as the difference between the fair value of plan assets and the projected benefit obligation.
Actuarial gains and losses and prior service costs and credits that have not been previously recognized as
a component of net periodic benefit cost are recorded as a component of accumulated other
comprehensive income (loss). Plan assets and obligations are measured as of December 31 of each year.
See Note 13 “Employee Retirement and Profit Sharing Plans.”
Revenue Recognition, Sales Incentives and Accounts Receivable — Sales are recognized when
persuasive evidence of an arrangement exists, the price is fixed or determinable, the product has been
delivered to the customer, and there is a reasonable assurance of collection of the sales proceeds. Sales
are recorded net of allowances for returns, trade programs and prompt pay, and other discounts. These
programs include rebates, shelf-price reductions, coupons, and other trade promotional activities. These
programs are considered reductions in the price of our products and thus are recorded as reductions to
gross sales. Some of these incentives are recorded by estimating incentive costs based on our historical
experience and expected levels of performance of the trade promotion. We maintain liabilities at the end
of each period for the estimated incentive costs incurred but unpaid for these programs. Differences
between estimated and actual incentive costs are normally insignificant and are recognized in earnings in
the period such differences are determined.
We provide credit terms to customers generally ranging up to 30 days, perform ongoing credit
evaluations of our customers, and maintain allowances for potential credit losses based on our historical
experience. Estimated product returns have not historically been material.
- 11 -
Related Party Sales — Sales to other subsidiaries of Dean Foods of raw materials and the finished
products that we manufacture have been reflected as related party sales in our Combined Financial
Statements. These transactions have historically taken place at an agreed upon price, which may not be
equivalent to the terms that would prevail in an arm’s-length transaction.
Effective November 1, 2012, we entered into an agreement with The WhiteWave Foods Company
(“WhiteWave”), a majority owned subsidiary of Dean Foods, which transferred to us responsibility for
the sales and associated costs of its aerosol whipped topping and other non-core products. WhiteWave
remits to us the cash representing the net profit collected from their product sales until such time as the
sales are transitioned to us. The net effect of the agreement is reflected as related party fees in our
Combined Statements of Operations. See Note 16 “Related Party Transactions and Continuing
Relationships.”
Advertising Expense — We market our products through advertising, including coupons and other
promotional activities. Advertising expense, which includes marketing and packaging development
costs, is charged to income during the period incurred. Advertising expense totaled $2.4 million and
$2.2 million during 2012 and 2011, respectively.
Shipping and Handling Fees — Our shipping and handling costs are included in both cost of sales and
selling and distribution expense in our Combined Statements of Operations, depending on the nature of
such costs. In cost of sales, we include inventory warehouse costs and product loading and handling
costs at Company-owned facilities. Costs associated with shipping products to customers through
third-party carriers and third-party inventory warehouse costs are included in selling and distribution
expense. Shipping and handling costs totaled $66.3 million and $61.0 million during 2012 and 2011,
respectively.
Insurance Accruals — We participate in Dean Foods’ various insurance programs, which consist of
selected levels of property and casualty risks, primarily related to employee health care, workers’
compensation claims, and other casualty losses. Many of these potential losses are covered under
conventional insurance programs with third-party carriers with high deductible limits. In other areas,
Dean Foods is self-insured with stop-loss coverage. Accrued liabilities for incurred but not reported
losses related to these retained risks are calculated based upon loss development factors, which
contemplate a number of factors including claims history and expected trends. These loss development
factors are developed by Dean Foods in consultation with external insurance brokers and actuaries.
At December 31, 2012 and 2011, we recorded accrued liabilities related to these retained risks in the
amounts of $8.4 million and $7.5 million, respectively, including both current and long-term liabilities.
Research and Development — Our research and development activities, which are performed at one of
Dean Foods subsidiaries’ research and development facility, primarily consist of generating and testing
new product concepts, new flavors, and packaging. Our research and development expense totaled
approximately $5 million for both 2012 and 2011 and was based on an allocation of total Dean Foods
research and development costs. Research and development costs are included in general and
administrative expenses in our Combined Statements of Operations.
Income Taxes — Income taxes have been prepared on a separate return basis as if the Company was a
stand-alone entity. However, as a result of being included in the Dean Foods’ U.S. consolidated federal
income tax return and Dean Foods’ payment of taxes, our U.S. federal and state current income tax
liabilities are included in parent’s net investment in our Combined Balance Sheets. All of our operations
are included in the preparation of our consolidated income tax calculation.
- 12 -
Deferred income taxes arise from temporary differences between amounts recorded in the Combined
Financial Statements and tax basis of assets and liabilities using enacted tax rates in effect for the years
in which the differences are expected to reverse. Deferred tax assets, including the benefit of net
operating loss and tax credit carryforwards, are evaluated based on the guidelines for realization and are
reduced by a valuation allowance if deemed necessary.
We recognize the income tax benefit from an uncertain tax position when it is more likely than not that,
based on technical merits, the position will be sustained upon examination, including resolutions of any
related appeals or litigation processes. We recognize accrued interest related to uncertain tax positions as
a component of income tax expense. Penalties, if incurred, are recognized as a component of operating
income.
Recently Issued Accounting Pronouncements — In May 2011, in an effort to assist in the
convergence of U.S. GAAP and International Financial Reporting Standards (“IFRS”), the Financial
Accounting Standards Board (“FASB”) issued an Accounting Standards Update related to “Fair Value
Measurements: Amendments to Achieve Common Fair Value Measurements and Disclosure
Requirements in U.S. GAAP and IFRSs.” The standard expands existing disclosure requirements for fair
value measurements and makes certain other amendments, including a requirement to categorize, by
level in the fair value hierarchy, items that are required to be disclosed, but not measured, at fair value.
We adopted this standard as of January 1, 2012, and its adoption did not have a material effect on our
Combined Financial Statements.
In September 2011, the FASB issued an Accounting Standards Update related to “Testing Goodwill for
Impairment.” The new guidance permits entities to make a qualitative assessment of whether it is more
likely than not that a reporting unit’s fair value is less than its carrying amount before applying the
two-step goodwill impairment test. Unless an entity concludes that it is more likely than not that the fair
value of a reporting unit is less than its carrying amount, it would not be required to perform the
two-step impairment test for that reporting unit. We adopted this standard as of January 1, 2012, and its
adoption did not have a material effect on our Combined Financial Statements.
In July 2012, the FASB issued an Accounting Standards Update related to “Testing Indefinite-Lived
Intangibles for Impairment.” The purpose of the update is to simplify the guidance for testing
indefinite-lived intangible assets for impairment and permits entities to first assess qualitative factors to
determine whether it is necessary to perform the quantitative impairment test. Unless an entity
determines, through its qualitative assessment, that is more likely than not that an indefinite-lived
intangible asset is impaired, it would not be required to calculate the fair value of the asset. This
standard is effective for annual and interim impairment tests of indefinite-lived intangible assets
performed in fiscal years beginning after September 15, 2012, and early adoption is permitted. This
standard did not have an impact on our annual indefinite-lived asset impairment testing process in 2012
as we did not elect to perform a qualitative assessment.
3.
DIVESTITURES
In the fourth quarter of 2010, we entered into an agreement to sell our yogurt operations. These
operations did not meet the requirements to be accounted for as discontinued operations as the
operations did not have discrete cash flow information and therefore did not meet the definition of a
component of an entity. We completed the sale of our yogurt operations for cash proceeds of
$81.9 million on April 1, 2011 and used the proceeds for additional debt repayments for Dean Foods.
- 13 -
We recorded a net pre-tax gain of $19.2 million during the year ended December 31, 2011, related to
this divestiture, which includes $2.1 million of related transaction costs. The gain was recorded in other
operating expense (income) in our Combined Statements of Operations.
4.
INVENTORIES
The following table summarizes inventories, net of reserves of $229,000 and $225,000 as of
December 31, 2012 and 2011 (in thousands):
December31,
2012
2011
5.
Raw materials and supplies
Finished goods
$ 28,960
39,184
$ 29,537
37,622
Total
$ 68,144
$ 67,159
PROPERTY, PLANT AND EQUIPMENT
The following table summarizes property, plant and equipment as of December 31, 2012 and 2011 (in
thousands):
December31,
2012
2011
Land
Buildings
Construction in progress
$
Less accumulated depreciation
Total
9,288
102,506
6,888
291,064
6,365
$
9,695
98,033
7,090
291,867
6,626
416,111
413,311
(234,544)
(230,221)
$ 181,567
$ 183,090
Depreciation expense amounted to $22.7 million and $23.5 million in 2012 and 2011, respectively.
Other non-cash additions for accrued property, plant and equipment were $593,000 and $313,000 in
2012 and 2011, respectively.
The balances disclosed in the preceding table include amounts related to the Rockford facility, which we
use in our operations. The assets related to the Rockford facility will be retained by Dean Foods when
Morningstar Foods is sold. See Note 1 “Business and Basis of Presentation.”
- 14 -
The following table summarizes the Rockford facility’s property, plant and equipment as of
December31,
2012
2011
Land
Buildings
$
Total
6.
156
3,524
8,940
-
$
156
3,492
8,543
10
12,620
12,201
(7,635)
(7,256)
$ 4,985
$ 4,945
GOODWILL AND INTANGIBLE ASSETS
The following table summarizes changes in the carrying amount of goodwill for the years ended
December31,
2012
2011
Beginning balance
Divestitures (1)
$ 306,095
-
$ 308,982
(2,887)
Ending balance
$ 306,095
$ 306,095
(1) In the fourth quarter of 2010, we entered into an agreement to sell our yogurt operations. In connection with
this divestiture, goodwill was allocated to these operations and recorded as assets held for sale. In the first
quarter of 2011, an additional $2.9 million of goodwill was allocated to these operations. See Note 3
“Divestitures.”
There were no accumulated goodwill impairment charges during 2012 or 2011.
- 15 -
The following table summarizes the gross carrying amount and accumulated amortization of our
intangible assets other than goodwill as of December 31, 2012 and 2011 (in thousands):
December31,
2012
Gross
Carrying
Amount
Intangible assets with
indefinite lives:
Trademarks
finite lives:
Total
$ 11,541
2011
Accumulated
Amortization
$
-
Net
Carrying
Amount
Gross
Carrying
Amount
$ 11,541
$ 11,541
Accumulated
Amortization
$
-
Net
Carrying
Amount
$ 11,541
41,685
410
(20,338)
(410)
21,347
-
41,685
410
(17,415)
(410)
24,270
-
$ 53,636
$ (20,748)
$ 32,888
$ 53,636
$ (17,825)
$ 35,811
Amortization expense on intangible assets was $2.9 million for each of the years ended December 31,
2012 and 2011. Estimated aggregate intangible asset amortization expense is $2.9 million for each of the
years from 2013 through 2016, and $2.7 million for 2017.
7.
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The following table summarizes accounts payable and accrued expenses as of December 31, 2012 and
2011 (in thousands):
December31,
2012
2011
8.
Accounts payable
Payroll and benefits
Health insurance, workers’ compensation and
other insurance costs
Current derivative liability
Other accrued liabilities
$ 62,480
16,815
$ 74,026
13,118
2,746
956
14,924
2,427
1,476
16,250
Total
$ 97,921
$ 107,297
INCOME TAXES
Income taxes have been prepared on a separate return basis as if the Company was a stand-alone entity.
The Company, however, is included in the Dean Foods’ U.S. consolidated federal income tax return and
also files some U.S. state income tax returns on a combined basis with Dean Foods.
- 16 -
The following table presents the components of income tax expense (benefit) (in thousands):
2012
2011
Current income taxes:
Federal
State
Total current income tax expense
Deferred income taxes:
Federal
State
Total deferred income tax benefit
Total income tax expense
$ 22,731
2,578
$ 26,125
4,061
25,309
30,186
(4,848)
685
(1,760)
(1,096)
(4,163)
(2,856)
$ 21,146
$ 27,330
The following table is a reconciliation of income tax expense computed at the U.S. federal statutory tax
rate to income tax expense reported in our Combined Statements of Operations (in thousands, except
percentages):
2012
2011
Amount
Percentage
Amount
Percentage
Tax expense at statutory rate
State income taxes
Domestic manufacturing deduction
Other
$ 20,799
2,121
(1,961)
187
35.0 %
3.6
(3.3)
0.3
$ 26,576
1,927
(1,131)
(42)
35.0 %
2.6
(1.5)
(0.1)
Total
$ 21,146
35.6 %
$ 27,330
36.0 %
- 17 -
The following table summarizes the tax effects of temporary differences giving rise to deferred income
tax assets (liabilities) (in thousands):
December31,
2012
2011
Deferred income tax assets:
Accrued liabilities
Transaction costs
State tax credit carryforwards
Receivables and inventories
Share-based compensation
State net operating loss carryforwards
Other
$
Deferred income tax liabilities:
Intangible assets
Property, plant and equipment
Net deferred income tax liability
4,022
8,514
5,199
3,140
2,399
586
480
$
3,403
5,927
3,258
2,355
711
339
24,340
15,993
(45,769)
(31,032)
(40,229)
(32,514)
(76,801)
(72,743)
$ (52,461)
$ (56,750)
The following table summarizes the classification of net deferred tax assets (liabilities) in our Combined
Balance Sheets (in thousands):
December31,
2012
2011
Current assets
Noncurrent assets
Noncurrent liabilities
$ 16,095
(68,556)
$
4,846
1,823
(63,419)
Total
$ (52,461)
$ (56,750)
At December 31, 2012, we had $586,000 of tax-effected state net operating loss carryforwards, which
will expire in 2019-2022 if not used, and $5.2 million of state tax credit carryforwards, $0.5 million of
which will expire in 2020-2025 if not used, and $4.7 million of which do not expire. Although these
items are subject to certain limitations, we have not established a valuation allowance because we
believe it is more likely than not that all of the deferred tax assets related to these carryforwards will be
realized.
- 18 -
The following table is a reconciliation of gross unrecognized tax benefits, including interest, recorded in
other long-term liabilities in our Combined Balance Sheets (in thousands):
2012
2011
Balance at January 1
Increases in tax positions for current year
Increases in tax positions for prior years
Decreases in tax positions for prior years
Settlement of tax matters
Lapse of applicable statutes of limitations
$ 1,034
13
(164)
(213)
$
Balance at December 31
$
$ 1,034
670
802
454
22
(23)
(221)
Of the unrecognized tax benefits balance at December 31, 2012, $594,000 would impact our effective
tax rate and $76,000 represents tax positions for which the ultimate deductibility is highly certain but for
which there is uncertainty about the timing of such deductibility. Due to the impact of deferred income
tax accounting, the disallowance of the shorter deductibility period would not affect our effective tax
rate but would accelerate payment of cash to the applicable taxing authority. We do not expect any
material changes to our liability for uncertain tax positions during the next 12 months.
We recognize accrued interest related to uncertain tax positions as a component of income tax expense.
Penalties, if incurred, are recorded in general and administrative expenses in our Combined Statements
of Operations. Income tax expense for 2012 and 2011 included a net benefit from interest expense, net
of tax, of $55,000 and $45,000, respectively. Our liability for uncertain tax positions included accrued
interest of $92,000 and $187,000 at December 31, 2012 and 2011, respectively.
As of December 31, 2012, the Dean Foods’ U.S. consolidated federal income tax returns for 2009
through 2011 are under examination by the Internal Revenue Service and the 2007 tax return is under a
limited scope examination. State income tax returns are generally subject to examination for a period of
three to five years after filing. We have various state income tax returns in the process of examination,
appeals, or settlement.
9.
DEBT
The following table summarizes our outstanding debt as of December 31, 2012 and 2011 (in thousands,
except percentages):
December31,
2012
Amount
Outstanding
Receivables-backed facility
Capital lease obligations
$
Less current portion
Total long-term portion
$
97
Interest
Rate
0.00 %
$ 21,590
411
97
22,001
(97)
(21,837)
-
* Represents a weighted-average rate, including applicable interest rate margins, for
indebtedness outstanding under the receivables securitization facility.
- 19 -
2011
Amount
Outstanding
$
164
Interest
Rate
1.31 % *
Receivables-Backed Facility — In 2004, we began participating in Dean Foods’ receivables-backed
facility. We sold certain of our accounts receivable to a wholly-owned entity that is intended to be
bankruptcy-remote. The entity transferred the receivables to third-party asset-backed commercial paper
conduits sponsored by major financial institutions. The securitization was treated as a borrowing for
accounting purposes. We were the beneficiary and obligor for all borrowings and repayments under our
portion of the Dean Foods facility. On September 28, 2011, Dean Foods amended the terms of the
agreement to extend the liquidity termination date to September 25, 2013, to include the ability to issue
letters of credit of up to $300 million under the facility, and to amend certain other terms.
The total amount of receivables sold to the entity as of December 31, 2012 and December 31, 2011 was
$nil million and $72.5 million, respectively, which are reported in our Combined Balance Sheets.
During 2012 and 2011, we borrowed $230.9 million and $406.0 million, and subsequently repaid
$252.5 million and $384.4 million under the facility, respectively. The outstanding debt balance
securitized by the Company’s accounts receivable as of December 31, 2012 and 2011 was $nil million
and $21.6 million, respectively and is recorded in our Combined Balance Sheets. Effective November 1,
2012, we were no longer participants in the Dean Foods receivables securitization program. Receivables
sold by us to the bankruptcy-remote entity on or prior to October 31, 2012 will continue to be collected
by Dean Foods; however, any receivables generated by us subsequent to November 1, 2012 were not
sold into the receivables securitization program, and no receivables previously sold into the facility have
been included in the determination of Dean Foods’ ability to re-borrow under the facility.
Capital Lease Obligations — Our capital leases represent machinery and equipment financing
obligations, which are payable in monthly installments of principal and interest and are collateralized by
the assets financed. See Note 15 “Commitments and Contingencies.”
10. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Derivative Financial Instruments
Commodities — We are exposed to commodity price fluctuations, including milk, butterfat, sweeteners,
utilities, natural gas, diesel fuel, and other commodity costs used in the manufacturing, packaging and
distribution of our products. To secure adequate supplies of materials and bring greater stability to the
cost of ingredients and their related manufacturing, packaging and distribution, we routinely enter into
forward purchase contracts and other purchase arrangements with suppliers. Under the forward purchase
contracts, we commit to purchasing agreed-upon quantities of ingredients and commodities at
agreed-upon prices at specified future dates. The outstanding purchase commitment for these
commodities at any point in time typically ranges from one month’s to one year’s anticipated
requirements, depending on the ingredient or commodity. These contracts are considered normal
purchases.
In addition to entering into forward purchase contracts, from time to time we may purchase over-thecounter contracts with our qualified banking partners or exchange-traded commodity futures contracts
for raw materials that are ingredients of our products or components of such ingredients. Certain of the
contracts offset the risk of increases in our commodity costs, and are designated as hedging instruments
when appropriate. Primarily at the direction of certain of our customers, we may execute other contracts
related to certain customer pricing arrangements. We have not designated such contracts as hedging
instruments; therefore, the contracts are marked to market at each reporting period and a derivative asset
or liability is recorded on our Combined Balance Sheet. These contracts are generally offset by
economic contracts we have purchased to limit the variability in our operations. A summary of open
commodities contracts recorded at fair value in our Combined Balance Sheets at December 31, 2012 and
2011 is included in the table below.
- 20 -
Although we may utilize forward purchase contracts and other instruments to mitigate the risks related
to commodity price fluctuation, such strategies do not fully mitigate commodity price risk. Adverse
movements in commodity prices over the terms of the contracts or instruments could decrease the
economic benefits we derive from these strategies.
The following table summarizes our derivatives recorded at fair value in our Combined Balance Sheets
as of December 31, 2012 and 2011 (in thousands):
In thousands
December31,
DerivativeAssets
DerivativeLiabilities
2012
2011
2012
2011
Derivatives designated as Hedging Instruments
Commodities contracts — current (1)
Derivatives not designated as Hedging Instruments
Commodities contracts — current (1)
$
Total derivatives
-
$
-
$
25
$
-
1,329
2,467
931
1,476
$ 1,329
$ 2,467
$ 956
$ 1,476
(1) Derivative assets and liabilities that have settlement dates equal to or less than 12 months from the
respective balance sheet date were included in prepaid expenses and other current assets and accounts
payable and accrued expenses in our Combined Balance Sheets.
All derivative assets and liabilities designated as hedging instruments were settled as of December 31,
2011. Any gains and losses on derivatives designated as cash flow hedges reclassified from accumulated
other comprehensive income into income during 2012 and 2011 were immaterial.
Fair Value Measurements — Fair value is an exit price, representing the amount that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants. As such, fair value is a market-based measurement that should be determined based on
assumptions that market participants would use in pricing an asset or liability. As a basis for considering
assumptions, we follow a three-tier fair value hierarchy, which prioritizes the inputs used in measuring
fair value as follows:
 Level 1 — Quoted prices for identical instruments in active markets.
 Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or
similar instruments in markets that are not active and model-derived valuations, in which all
significant inputs are observable in active markets.
 Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting
entity to develop its own assumptions.
The following table summarizes our derivative assets and liabilities measured at fair value on a recurring
basis as of December 31, 2012 (in thousands):
Fairvalueasof
December31,2012
Level1
Level2
Level3
Asset — commodities contracts
$ 1,329
$
-
$ 1,329
$
-
Liability — commodities contracts
$ 956
$
-
$ 956
$
-
- 21 -
Fairvalueasof
December31,2011
Level1
Level2
Level3
$ 2,467
$
-
$ 2,467
$
-
$ 1,476
$
-
$ 1,476
$
-
The fair value of our commodities contracts is based on the quantities and fixed prices under the
agreements and quoted forward commodity prices. We classify these instruments in Level 2 because
quoted market prices can be corroborated utilizing observable benchmark market rates at commonly
quoted intervals and observable current and forward commodity market prices on active exchanges. We
did not significantly change our valuation techniques from prior periods.
Due to their near-term maturities, the carrying amounts of accounts receivable and accounts payable are
considered equivalent to fair value. In addition, because the interest rates on our debt are variable, their
fair values approximate their carrying values.
11. SHARE-BASED COMPENSATION
Certain of the Company’s employees participate in share-based compensation plans sponsored by Dean
Foods. These plans provide employees with restricted stock units or options to purchase shares of Dean
Foods’ common stock. Given that the Company’s employees directly benefit from participation in these
plans, the expense incurred by Dean Foods for stock and options granted specifically to our employees
has been reflected in general and administrative expense in our Combined Statements of Operations.
These amounts were based on the awards and terms previously granted to our employees, but may not
reflect the equity awards or results that we would have experienced or expect to experience as a
stand-alone company. Additionally, share-based compensation expenses related to the corporate
employees of Dean Foods were allocated based on the Company’s percentage of Dean Foods’ total
sales. The share and unit data presented in the tables below only reflect the costs that were directly
attributable to the Company’s employees and none of the allocated expenses of Dean Foods’ corporate
employees. Allocated expense for Dean Foods’ corporate employees totaled $2.3 million and
$2.1 million for the years ended December 31, 2012 and 2011, respectively.
Stock Award Plans — As of December 31, 2012, the Company’s employees participated in two Dean
Foods employee equity award plans. These plans, which are the 1997 Stock Option and Restricted Stock
Plan and the Dean Foods Company 2007 Stock Incentive Plan (the “2007 Plan”), provide for grants of
stock options, restricted stock units, and other stock-based awards to employees, officers, and directors.
Options and other stock-based awards vest in accordance with provisions set forth in the applicable
award agreements. The remaining shares available for grant under the historical plans are granted
pursuant to the terms and conditions of the 2007 Plan.
Under the Dean Foods stock award plans, certain of the Company’s employees are granted stock options
and restricted stock units. The following details of options and stock units activity and expenses relates
to the direct employees of our Company who participated in the various Dean Foods equity award plans.
Stock Options — Under the terms of the stock option plans, the Company’s employees may be granted
options to purchase Dean Foods’ common stock at a price equal to the market price on the date the
option is granted. In general, Dean Foods’ employee options vest one-third on the first anniversary of
the grant date, one-third on the second anniversary of the grant date, and one-third on the third
- 22 -
anniversary of the grant date. All unvested options vest immediately upon a change in control of Dean
Foods and in the following additional circumstances: (i) an employee with 10 years of service retires
after reaching the age of 55; (ii) an employee retires after reaching the age of 65; and (iii) in certain
cases upon death or qualified disability.
Share-based compensation expense for stock options is recognized ratably over the vesting period. The
following table summarizes the assumptions used to estimate the fair value of each option award on the
date of grant using the Black-Scholes valuation model:
2012
2011
Expected volatility
Expected dividend yield
Expected option term
Risk-free rate of return
44 %
0%
5 years
0.62%-0.89%
41 %
0%
5 years
1.32%-2.30%
The expected term of the options represents the estimated period of time until exercise and is based on
historical experience of similar awards, giving consideration to contractual terms (generally ten years),
vesting schedules, and expectations of future employee and director behavior. Expected stock price
volatility is based on a combination of historical volatility of Dean Foods stock and expectations with
regard to future volatility. The risk-free rates are based on the implied yield available on U.S. Treasury
zero-coupon issues with an equivalent remaining term. Dean Foods has not historically declared or paid
a regular cash dividend on its common stock.
The following table summarizes stock option activity during the year ended December 31, 2012:
Options
Weighted
Average
ExercisePrice
Weighted
Average
ContractualLife
Aggregate
Intrinsic
Value
Options outstanding
at January 1, 2012
Granted
Forfeited and cancelled (1)
Exercised
Transferred (2)
697,542
81,551
(51,563)
(65,933)
38,097
Options outstanding
at December 31, 2012
699,694
20.83
4.98
$ 667,089
Options vested and expected
to vest at December 31, 2012
696,168
20.88
3.48
$ 746,993
552,418
22.42
4.79
$
559,540
23.03
4.08
$ 43,684
Options exercisable
Options exercisable
$ 20.86
12.07
16.28
13.49
21.48
460
(1) Pursuant to the terms of the Dean Foods’ stock option plans, options that are forfeited or cancelled may be
available for future grants.
(2) Transferred options represent options outstanding at the time certain employees transferred to or from other
Dean Foods’ divisions.
- 23 -
The following table summarizes information about options outstanding and exercisable at December 31,
2012:
Rangeof
ExercisePrices
$10.30 to 10.35
12.07
14.25 to 14.56
15.99 to 18.30
18.96 to 19.98
20.07
20.19 to 25.37
25.68
26.29 to 30.11
30.64 to 31.90
OptionsOutstanding
Weighted
Weighted
Average
Average
Number
Contractual
Exercise
Outstanding
Life
Price
36,472
81,551
38,648
65,214
37,619
140,950
131,700
71,138
78,033
18,369
8.12
9.13
5.61
1.94
2.39
5.69
4.93
3.04
4.16
0.93
$ 10.35
12.07
14.49
17.75
19.88
20.07
24.16
25.68
29.87
31.65
OptionsExercisable
Weighted
Average
Number
Exercise
Exercisable
Price
21,083
60,648
37,619
140,950
131,700
71,138
78,033
18,369
$
14.44
17.88
19.88
20.07
24.16
25.68
29.87
31.65
The following table summarizes additional information regarding our stock option activity during 2012
and 2011(in thousands, except per share amount):
2012
2011
Weighted-average grant date fair value of options granted
Intrinsic value of options exercised
Fair value of shares vested
Tax benefit related to stock option expense
$ 4.72
216
389
119
$
4.04
15
519
174
During the year ended December 31, 2012, Deans Foods received $698,000 of cash from stock option
exercises by our direct participants in the Dean Foods incentive compensation plans.
At December 31, 2012, there was $331,000 of total unrecognized stock option expense, all of which is
related to non-vested awards of the Company’s employees who participated in the Dean Foods incentive
compensation plans. This compensation expense is expected to be recognized over the weighted-average
remaining vesting period of 1.8 years.
Restricted Stock Units — Restricted stock units are issued to certain senior employees as part of the
long-term incentive program. Each restricted stock unit represents the right to receive one share of Dean
Foods common stock in the future. Restricted stock units have no exercise price. Restricted stock units
granted to employees generally vest ratably over three years. All unvested restricted stock units vest
immediately upon a change in control of Dean Foods, and in the following additional circumstances:
(i) an employee with 10 years of service retires after reaching the age of 55; (ii) an employee retires after
reaching the age of 65; and (iii) in certain cases upon death or qualified disability.
- 24 -
The following table summarizes restricted stock unit activity during the year ended December 31, 2012:
Units
Stock units outstanding January 1, 2012
Stock units issued
Shares issued upon vesting of stock units
Stock units cancelled or forfeited (1)
Transferred (2)
141,295
57,248
(48,459)
(25,612)
597
Stock units outstanding at December 31, 2012
125,069
Weighted average grant date fair value
$
12.93
(1) Pursuant to the terms of the Dean Foods’ stock unit plans, employees have the option of forfeiting stock
units to cover their minimum statutory tax withholding when shares are issued. Stock units that are
cancelled or forfeited may be available for future grants.
(2) Transferred stock units are attributable to employees that transferred to or from other Dean Foods’ divisions.
The following table summarizes additional information about our stock unit grants and stock unit
expense during the years ended December 31, 2012 and 2011 (in thousands, except per share amount):
2012
2011
Weighted-average grant date fair value per share of
stock units granted
Tax benefit related to stock unit expense
$ 12.07
358
$
10.74
422
At December 31, 2012, there was $702,000 of total unrecognized stock unit expense, all of which is
related to nonvested awards. This compensation expense is expected to be recognized over the
weighted-average remaining vesting period 1.7 years.
Cash Performance Units — In 2010, Dean Foods began granting cash performance units (“CPUs”) to
employees as part of its long-term incentive compensation program under the terms of the 2007 Plan.
The CPU awards are cash-settled awards and are designed to link compensation of certain executive
officers and other key employees to Dean Foods’ performance over a three-year period. The
performance metric, as defined in the awards, is the performance of the Dean Foods stock price relative
to that of a peer group of companies. The range of payout under the awards is between 0% and 200%
and is payable in cash at the end of each respective performance period. The fair value of the awards is
measured at each reporting period. A liability related to these units has not been reflected in the
Combined Balance Sheets as it will be funded by Dean Foods.
- 25 -
The following table summarizes CPU activity during the year ended December 31, 2012:
Units
Outstanding at January 1, 2012
Granted
Converted/paid
Forfeited
$ 891,667
187,500
(816,667)
Outstanding at December 31, 2012
$ 262,500
Phantom Shares — In 2011, Dean Foods began granting phantom shares as part of its long-term
incentive compensation program, which are similar to restricted stock units in that they are based on the
price of Dean Foods stock and vest ratably over a three-year period, but are cash-settled based upon the
value of Dean Foods stock at each vesting period. All unvested phantom shares vest immediately upon a
change in control of Dean Foods and in the following additional circumstances: (i) an employee with
10 years of service retires after reaching the age of 55; (ii) an employee retires after reaching the age of
65; and (iii) in certain cases upon death or qualified disability. The fair value of the awards is
re-measured at each reporting period. A liability related to these units has not been reflected in the
Combined Balance Sheets as it will be funded by Dean Foods.
The following table summarizes the phantom share activity during the year ended December 31, 2012:
Shares
Granted
Converted/paid
Forfeited
Transferred (1)
99,353
93,604
(33,045)
(13,194)
22,969
Outstanding at December 31, 2012
169,687
WeightedAverage
GrantDate
FairValue
$
10.35
12.07
10.35
11.28
11.35
11.38
(1) Transferred stock units are attributable to employees that transferred to or from other
Share-Based Compensation Expense — The following table summarizes the share-based
compensation expense recognized for the Company’s direct participation in the Dean Foods incentive
compensation plan during the years ended December 31, 2012 and 2011 (in thousands):
2012
2011
Stock options
Restricted stock units
CPUs
Phantom shares
$ 311
932
175
1,054
$ 452
1,100
50
325
$ 2,472
$ 1,927
- 26 -
12. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table summarizes the components of accumulated other comprehensive loss, as reflected
in the Combined Statements of Invested Equity at December 31, 2012 and 2011 (in thousands):
December31,
2012
2011
Pension liability adjustment, net of tax
Fair value of derivative instruments, net of tax
$ (599)
(15)
$ (372)
-
Total accumulated other comprehensive loss
$ (614)
$ (372)
13. EMPLOYEE RETIREMENT AND PROFIT SHARING PLANS
Dean Foods sponsors various employee benefit plans, which consist of Dean Foods’ consolidated
defined benefit and defined contribution plans, including various employee savings and profit sharing
plans in which certain of our employees have historically participated. Substantially all full-time union
and non-union employees who have completed one or more years of service and have met other
requirements pursuant to the plans are eligible to participate in one or more of these plans, or in their
applicable multi-employer pension plan.
Expenses related to our employee’s participation in Dean Foods’ plans were determined by specifically
identifying the costs for the Company’s participants. These pension expenses were allocated to the
Company and reported in general and administrative expenses in our Combined Statements of
Operations. The amounts allocated for pension expenses in general and administrative expenses were
$447,000 and $410,000 for the years ended December 31, 2012 and 2011, respectively.
The accumulated benefit obligation, which is in excess of plan assets, for the Dean Foods’ plans in
which our employees participate was $316.5 million and $285.7 million as of December 31, 2012 and
2011, respectively
The following table summarizes our retirement and profit sharing plan expenses during 2012 and 2011
(in thousands):
2012
2011
Defined benefit plans (1)
Defined contribution plans
Multiemployer pension plans
$ 514
1,505
3,547
$ 435
1,828
3,411
Total
$ 5,566
$ 5,674
(1) Includes the allocated pension expense related to our employees’ participation in Dean Foods’
defined benefit plans.
Dean Foods Defined Benefit Plans — The benefits under Dean Foods’ defined benefit plans are based
on years of services and employee compensation. Dean Foods’ funding policy is to contribute annually
the minimum amount required under ERISA regulations plus additional amounts as management deems
appropriate.
- 27 -
M-Foods Dairy, LLC Defined Benefit Plans — We have a separate, stand-alone defined benefit
pension plan, and the benefits are based on years of service and employee compensation. Our funding
policy is to contribute annually the minimum amount required under ERISA regulations plus additional
amounts as management deems appropriate. Our defined benefit plan obligations are frozen as to future
participation or increases in projected benefit obligation. Many of these obligations were acquired in
prior strategic transactions. As an alternative to defined benefit plans, we offer defined contribution
plans sponsored by Dean Foods for eligible employees.
Included in accumulated other comprehensive income at December 31, 2012 and 2011, but not yet
recognized in net periodic pension cost are unrecognized actuarial losses of $972,000 ($599,000 net of
tax) and $603,000 ($372,000 net of tax), respectively. The actuarial losses included in accumulated other
comprehensive income and expected to be recognized in net periodic pension cost during the year ended
December 31, 2013 is $64,000 ($39,500 net of tax).
The following table reconciles the beginning and ending balances of the projected benefit obligation, the
fair value of plan assets and the funded status of the plan at December 31, 2012 and 2011 (in thousands):
2012
2011
Change in benefit obligation:
Benefit obligation at beginning of year
Interest cost
Actuarial loss
Benefits paid
$
2,461
110
415
(100)
$ 1,943
102
439
(23)
Benefit obligation at end of year
2,886
2,461
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Benefits paid
1,766
90
(100)
1,749
40
(23)
Fair value of plan assets at end of year
1,756
1,766
Funded status at end of year
$ (1,130)
$
(695)
We do not expect any plan assets to be returned to us during the year ended December 31, 2013. We do
not expect to contribute to the pension plan in 2013.
The underfunded status of the plan of $1.1 million and $695,000 at December 31, 2012 and 2011,
respectively, are recognized in our Combined Balance Sheets and are classified as a noncurrent accrued
pension liability.
The following table summarizes our key actuarial assumption used to determine benefit obligations as of
December 31, 2012 and 2011:
December31,
2012
2011
Weighted average discount rate
3.70 %
- 28 -
4.50 %
The weighted average discount rate reflects the rate at which our defined benefit plan obligations could
be effectively settled. The rate, which is updated annually with the assistance of an independent actuary,
uses a model that reflects a bond yield curve. The weighted average discount rate was decreased from
4.50% at December 31, 2011 to 3.70% at December 31, 2012, which will increase the net periodic
pension cost in 2013.
The following table summarizes our key actuarial assumptions used to determine net periodic pension
cost for 2012 and 2011:
2012
2011
Weighted average discount rate
Expected return on plan assets
4.50 %
4.40 %
5.28 %
4.40 %
The following table summarizes the components of our net periodic pension cost for 2012 and 2011 (in
thousands):
2012
2011
Components of net periodic pension cost:
Interest cost
Amortization of net loss
$ 110
(77)
34
$ 102
(77)
-
Net periodic pension cost
$
$
67
25
The overall expected long-term rate of return on plan assets is a weighted-average expectation based on
the targeted and expected portfolio composition. We consider historical performance and current
benchmarks to arrive at expected long-term rates of return in each asset category.
The following table summarizes the estimated pension plan benefit payments to participants for the next
ten years:
2013
2014
2015
2016
2017
Next five years
$
20,000
21,000
23,000
27,000
40,000
396,000
Fair value is an exit price, representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants. As such, fair value is a
market-based measurement that should be determined based on assumptions that market participants
would use in pricing an asset or liability. As a basis for considering assumptions, we follow a three-tier
fair value hierarchy, which prioritizes the inputs used in measuring fair value of our defined benefit
plans’ consolidated assets as follows:
 Level 1 — Quoted prices for identical instruments in active markets.
- 29 -
 Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or
 Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting
The following table summarizes fair values by category of inputs as of December 31, 2012 (in
thousands):
FairValueasof
December31,2012
Equity securities:
Index funds:
Equity funds(a)
Fixed income:
Diversified funds(b)
Other investments:
Insurance reserves
$
Total
Level1
113
$ -
1,230
-
413
-
$ 1,756
$ -
Level2
$ 113
Level3
$
1,230
-
413
$ 113
$ 1,643
(a) Represents a pooled/separate account comprised of approximately 90% U.S. large-cap stocks and 10% in
international stocks.
(b) Represents a pooled/separate account investment in the general investment accounts of two investment
managers. The accounts primarily invest in fixed income debt securities, such as high grade corporate
bonds, government bonds and asset-backed securities.
The following table summarizes fair values by category of inputs as of December 31, 2011 (in
thousands):
FairValueasof
December31,2011
Equity securities:
Index funds:
Equity funds(a)
Fixed income:
Diversified funds(b)
Other investments:
Insurance reserves
Level1
Level2
98
$ -
$ 98
1,271
-
-
1,271
397
-
-
397
$ 1,766
$ -
$
Total
$ 98
Level3
$
-
$ 1,668
(a) Represents a pooled/separate account comprised of approximately 90% U.S. large-cap stocks and 10% in
international stocks.
(b) Represents a pooled/separate account investment in the general investment accounts of two investment
managers. The accounts primarily invest in fixed income debt securities, such as high grade corporate
bonds, government bonds and asset-backed securities.
- 30 -
The following table reconciles the change in the fair value measurement of the defined benefit plans’
consolidated assets using Level 3 inputs during the years ended December 31, 2012 and 2011 (in
thousands):
Diversified
Funds
Balance at December 31, 2010
$ 1,249
Actual return on plan assets:
Relating to instruments still held at reporting date
Purchases, sales and settlements (net)
Transfers in and/or out of Level 3
60
(29)
(9)
1,271
Actual return on plan assets:
Relating to instruments still held at reporting date
Purchases, sales and settlements (net)
Transfers in and/or out of Level 3
16
(66)
9
$ 1,230
Insurance
Reserves
$ 378
19
397
16
$ 413
Total
$ 1,627
79
(29)
(9)
1,668
32
(66)
9
$ 1,643
Defined Contribution Plans — Certain of our non-union personnel may elect to participate in savings
and profit sharing plans sponsored by Dean Foods. These plans generally provide for salary reduction
contributions to the plans on behalf of the participants of between 1% and 20% of a participant’s annual
compensation and provide for employer matching and profit sharing contributions as determined by
Dean Foods’ board of directors. In addition, certain union hourly employees are participants in Dean
Foods’ company-sponsored defined contribution plans, which provide for employer contributions in
various amounts ranging from $24 to $91 per pay period per participant.
Multiemployer Pension Plans — We contribute to various multiemployer pension plans that cover
approximately 800 of our union employees. Such plans are administered by boards of trustees composed
of labor representatives and the management of the participating companies. The risks of participating in
a multiemployer plan are different from a single-employer plan in the following aspects:
 Assets contributed to a multiemployer plan by one employer may be used to provide benefits to
employees of other participating employers;
 If a participating employer stops contributing to the plan, the unfunded obligations of the plan may
be borne by the remaining participating employers; and
 If we choose to stop participating in one or more of our multiemployer plans, we may be required to
pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal
liability.
At this time, we have not established any significant liabilities because withdrawal from these plans is
not probable or reasonably possible.
- 31 -
Our participation in these multiemployer plans for the year ended December 31, 2012 is outlined in the
table below. Unless otherwise noted, the most recent Pension Protection Act (“PPA”) Zone Status
available in 2012 and 2011 is for the plans’ year-end at December 31, 2011 and December 31, 2010,
respectively. The zone status is based on information that we obtained from each plan’s Form 5500,
which is available in the public domain and is certified by the plan’s actuary. Among other factors, plans
in the red zone are generally less than 65% funded, plans in the yellow zone are less than 80% funded,
and plans in the green zone are at least 80% funded. The “FIP/RP Status Pending/Implemented” column
indicates plans for which a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either
pending or has been implemented. Federal law requires that plans classified in the yellow zone or red
zone adopt an FIP or RP, respectively, in order to improve the financial health of the plan. The
“Extended Amortization Provisions” column indicates plans that have elected to utilize the special
30-year amortization rules provided by the Pension Relief Act of 2010 to amortize its losses from 2008
as a result of turmoil in the financial markets. The last column in the table lists the expiration dates of
the collective-bargaining agreement(s) to which the plans are subject.
PensionFund
Western Conference
of Teamsters Pension
Plan (1)
New York State
Teamsters Conference
Pension & Retirement
Fund
United Food &
Commercial Workers
Intl Union — Industry
Pension Fund
Employer
Identification
Number
Pension
Plan
Number
PPAZoneStatus
2012
2011
FIP/RP
Status
Pending/
Implemented
Extended
Amortization
Provisions
Expiration
Dateof
Associated
Collective
Bargaining
Agreements
91-6145047
001
Green
Green
N/A
No
December 31, 2015 –
June 30, 2017
16-6063585
074
Red
Red
Implemented
No
October 26, 2014
51-6055922
001
Green
Green
N/A
Yes
July 29, 2015
(1) We are party to two collective bargaining agreements with respect to this plan. The agreement expiring in December 2015
is more significant as approximately 69% of our employee participants in this plan are covered by that agreement.
- 32 -
Information regarding our contributions to our multiemployer pension plans is shown in the table below.
There are no changes that materially affected the comparability of our contributions to the plans during
the years ended December 31, 2012 and 2011.
PensionFund
Western Conference
of Teamsters
Pension Plan (1)
New York State Teamsters
Conference Pension &
Retirement Fund (1)
United Food & Commercial
Workers Intl Union — Industry
Pension Fund (1)
Other Funds (2)
Morningstar
FoodsContributions
2012
2011
(Inthousands)
Employer
Identification
Number
Pension
Plan
Number
91-6145047
001
$ 1,796
$ 1,599
No
16-6063585
074
723
797
Yes
51-6055922
001
388
640
346
669
No
$ 3,547
$ 3,411
Total Contributions
Surcharge
Imposed(3)
(1) During the 2011 plan year, our contributions to these plans did not exceed 5% of total plan contributions. At
the date the financial statements were available to be issued, Forms 5500 were not available for the plan
years ending in 2012.
(2) Amounts shown represent our contributions to all other multiemployer pension and other postretirement
benefit plans, which are immaterial both individually and in the aggregate to our Combined Financial
Statements.
(3) Federal law requires that contributing employers to a plan in Critical Status pay to the plan a surcharge to
help correct the plan’s financial situation. The amount of the surcharge is equal to a percentage of the
amount we would otherwise be required to contribute to the plan and ceases once our related collective
bargaining agreements are amended to comply with the provisions of the rehabilitation plan.
14. FACILITY CLOSING AND REORGANIZATION COSTS
Approved plans and related charges are summarized as follows (in thousands):
2012
2011
Closure of facilities (1)
$
3,547
$
-
(1) In the first quarter of 2012, Dean Foods’ board of directors approved the closure of our Sulphur Springs,
Texas cultured production facility. Under this plan, production transitioned to several other Morningstar
facilities. This decision was based on the board’s determination that these operations did not adequately
support our strategic objectives. The plant closure was completed in May 2012. We expect to incur
additional charges related to this facility closure of $220,000, related to shutdown and other costs.
- 33 -
Activity with respect to facility closing and reorganization costs during the year ended December 31,
2012 is summarized below and includes items expensed as incurred (in thousands):
Accrued
Chargesat
December31,
2011
Cash charges:
Workforce reduction costs
Shutdown costs
Lease obligations after shutdown
Other
Subtotal
Noncash charges:
Write-down of assets
Other
Charges
Payments
Accrued
Chargesat
December31,
2012
$
-
$ 388
264
70
23
$ (388)
(264)
(70)
(23)
$
-
$
-
745
$ (745)
$
-
2,633
169
Total charges
$ 3,547
15. COMMITMENTS AND CONTINGENCIES
Lease and Purchase Obligations — We lease certain property, plant and equipment used in our
operations under both capital and operating lease agreements. Such leases, which are primarily for
machinery and equipment, have lease terms ranging from one to ten years. Certain lease agreements
require the payment of additional rentals based on units produced. Rent expense was $4.0 million and
$4.5 million for 2012 and 2011, respectively.
The following table summarizes future minimum payments at December 31, 2012, under non-cancelable
operating and capital leases with terms in excess of one year (in thousands):
Operating
Leases
Capital
Leases
2013
2014
2015
2016
2017
Thereafter
$ 2,138
1,707
1,154
924
694
1,674
$
97
-
Total minimum lease payments
$ 8,291
$
97
We have entered into various contracts, in the normal course of business, obligating us to purchase
minimum quantities of raw materials used in our production and distribution processes. We enter into
these contracts from time to time to ensure a sufficient supply of raw ingredients. In addition, we have
contractual obligations to purchase various services that are part of our production process.
- 34 -
Litigation, Investigations and Audits — We are not party to, nor are our properties the subject of, any
material pending legal proceedings. We are party from time to time to certain claims, litigations, audits
and investigations, which are not expected to have a material adverse impact on our financial position,
results of operations or cash flows.
16. RELATED PARTY TRANSACTIONS AND CONTINUING RELATIONSHIPS
Allocated Expenses — Dean Foods historically provided certain corporate services to us, and costs
associated with these functions have been allocated to us. These allocations include costs related to
corporate services, such as executive management, supply chain, information technology, legal, finance
and accounting, investor relations, human resources, risk management, tax, treasury, and other services,
as well as stock-based compensation expense attributable to our employees and an allocation of
stock-based compensation attributable to employees of Dean Foods. The costs of such services have
been allocated to us based on the allocation method most relevant to the service provided, primarily
based on relative percentage of total net sales, relative percentage of headcount, or specific
identification. The total amount of these allocations from Dean Foods was approximately $48.5 million
(which includes $22.9 million of transaction costs related to the sale of the Company) and $26.8 million
in the year ended December 31, 2012 and 2011. These cost allocations are primarily reflected within
general and administrative expenses in our Combined Statements of Operations. Management believes
these expenses have been allocated to us using a reasonable allocation methodology.
were outsourced or performed by employees and strategic decisions made in certain areas.
Cash Management — Dean Foods uses a centralized approach to cash management and financing of
operations. The Company’s cash has historically been available for use and regularly swept by Dean
Foods at its discretion. Dean Foods also funds the Company’s operating and investing activities as
needed. Transfers of cash, both to and from Dean Foods’ cash management system, are reflected as a
component of parent’s net investment in our Combined Balance Sheets.
Related Party Arrangements — Related party transactions and activities involving Dean Foods and its
subsidiaries have not always been consummated on terms equivalent to those that would prevail in an
arm’s-length transaction where conditions of competitive, free-market dealing may exist. Sales of our
raw materials and finished products that we manufacture for other subsidiaries of Dean Foods have been
reflected as related party sales in our Combined Financial Statements. These related party transactions
are included as part of parent’s net investment.
Certain related party transactions have historically been settled in cash and are reflected as related party
payables in our Combined Balance Sheets. The remaining related party transactions are settled by either
non-cash capital contributions from Dean Foods to us or non-cash capital distributions from us to Dean
Foods.
During the years ended December 31, 2012 and 2011, we utilized manufacturing facilities and resources
managed by affiliates of Dean Foods to conduct our business. The expenses associated with these
transactions, which primarily relate to co-packing certain of our products, are included in cost of sales in
our Combined Statements of Operations.
- 35 -
In connection and effective with the initial public offering of WhiteWave on October 31, 2012, we have
entered into agreements that formalize ongoing commercial arrangements we have with WhiteWave,
which are described below. Subsequent to year-end and in connection with Dean Foods’ sale of the
Company, the terms of these agreements were modified. See Note 17 “Subsequent Events.”
Transitional Sales Agreements
We entered into an agreement with WhiteWave, pursuant to which we transfer to WhiteWave
responsibility for sales and associated costs of certain WhiteWave products and associated costs over
a 15-month term. During this term, the Company provides certain transitional services to WhiteWave
which include, but are not limited to, taking and filling orders, collecting receivables, and shipping
products to WhiteWave’s customers. The Company remits to WhiteWave the net profit associated
with these product sales until such time as the sales are transitioned to WhiteWave. Since the
agreement’s effective date, the net profit associated with these product sales is $4.5 million and is
presented in other operating expense (income) in our Combined Statement of Operations. The net
profit results from sales of $12.2 million included in the Combined Statement of Operations.
We also entered into an agreement with WhiteWave pursuant to which they transfer to us
responsibility for the sales and associated costs of their aerosol whipped topping and other non-core
products over a 15-month term. During this term, WhiteWave provides certain transitional services to
us that include, but are not limited to, taking and filling orders and collecting receivables, and
shipping products to customers. WhiteWave remits to us the net profit associated with these product
sales until the sales are transitioned to us. The net effect of the agreement since its effective date is
reflected as a related party fee of $1.9 million in our Combined Statement of Operations, derived
from gross billings to customers by WhiteWave of $7.6 million for the period ended December 31,
2012.
Co-Packing Agreement
We entered into a manufacturing agreement with WhiteWave pursuant to which we continue
manufacturing various WhiteWave products. With the exception of the manufacture of aerosol
whipped topping and other non-core products, which are subject to this agreement for a term of up to
15 months, this agreement generally has a term of three to five years with respect to the various
product lines. We expect that approximately 10% to 11% of their products, calculated as a percentage
of cost of sales, will continue to be manufactured by us under this agreement. The agreement
modifies our historical intercompany arrangements and reflects new pricing. The effect of the
agreement since its effective date is an increase in sales of $0.6 million in our Combined Statement of
Operations for the period ended December 31, 2012.
Equipment Distribution and Leaseback Agreement
We entered into an agreement with certain Dean Foods subsidiaries, including WhiteWave, pursuant
to which we distributed and assigned all of our rights, title and interest in certain equipment at their
carrying value of $1.6 million at October 31, 2012. We leased back such equipment from WhiteWave
for an annual equipment lease cost of $435,000. This agreement is co-terminus with the Co-Packing
agreement entered into with WhiteWave. This agreement was terminated subsequent to December 31,
2012 pursuant to Dean Foods entering into an agreement to sell the Company. See Note 17
“Subsequent Events.”
- 36 -
Frederick Facility Agreement
On October 23,2012, we entered into an agreement with WhiteWave, pursuant to which WhiteWave has
the option to purchase, at a price as defined in the agreement, our real estate, manufacturing facility and
certain related assets located in Frederick, Maryland, should our current co-pack agreement with an
unrelated third party be cancelled, renewed at lower volumes or not renewed. This agreement was
terminated subsequent to December 31, 2012 pursuant to Dean Foods entering into an agreement to sell
the Company. See Note 17 “Subsequent Events.”
Termination of Intellectual Property License Agreement and Related Loan Agreement
Historically, the Company was party to a license agreement with a subsidiary of WhiteWave a
majority-owned subsidiary of Dean Foods, pursuant to which we had the right to use WhiteWave’s
intellectual property in the manufacture of certain products for a fee. For the years ended December 31,
2012 and 2011, related party license expense was recorded within operating income in our Combined
Statements of Operations in the amount of $36.0 million and $42.7 million, respectively.
As of December 31, 2012 and 2011, amounts outstanding under this license agreement totaled
$nil million and $11.1 million, respectively. These amounts are recorded separately as related party
payables within our Combined Balance Sheets.
In conjunction with the license agreement, a loan agreement was entered into, pursuant to which
WhiteWave extended a line of credit to us related to the license expense under the license agreement.
There have been no repayments of this loan to date and there are no future plans to make payment on the
outstanding balance; therefore, the principal and associated accrued interest is shown in Parent’s net
investment in our Combined Balance Sheets. On October 31, 2012, the license agreement was
terminated, and the related loan agreement was contributed to our capital, thereby formally releasing us
of any obligation. As of December 31, 2012 and 2011, amounts outstanding under this agreement totaled
$nil million and $305.3 million, respectively. The interest term on the loan from WhiteWave was
LIBOR plus 2% and was recorded in interest expense in our Combined Statements of Operations.
Interest expense on the loan for the years ended December 31, 2012 and 2011 was $6.4 million and
$6.1 million, respectively. We no longer pay license expense or related party interest expense associated
with these historical agreements. In addition, we entered into an agreement whereby WhiteWave
transferred to us certain intellectual property related to our products that was subject to the license
agreement so that we have the requisite intellectual property and manufacturing know-how to produce
and sell our products and brands. WhiteWave retained all intellectual property related to and necessary
for the production of their products and brands.
Transition Services Agreement
In connection with Dean Foods’ sale of the Company, WhiteWave entered into a separate transition
services agreement with us on November 20, 2012 to cover certain continued services provided by and
to us. Our services consist of freight and warehousing services, while WhiteWave primarily provides use
of research and development facilities.
Guarantees — We have entered into several guarantee agreements with Dean Foods whereby we have
historically guaranteed debt issued by Dean Foods on a joint and several basis. The aggregate unpaid
principal balance of the debt issued by Dean Foods that we guaranteed was approximately $2.2 billion as
of December 31, 2012. These guarantees remain in place until the related debt matures, which will occur
on varying dates through 2018, and if the issuer or the primary guarantor, as applicable, defaults on the
underlying debt, we may be required to satisfy the outstanding debt. As this is an intercompany
- 37 -
guarantee, we have not recognized any liability associated with this guarantee in our Combined
Financial Statements. These guarantees were terminated subsequent to December 31, 2012, pursuant to
the close of the sale of the Company. See Note 17 “Subsequent Events.”
17. SUBSEQUENT EVENTS
We have evaluated subsequent events after the balance sheet date of December 31, 2012 through
March 7, 2013, which is the date the financial statements were available to be issued.
Dean Foods entered into an agreement to sell Morningstar Foods LLC to Saputo Inc for $1.45 billion.
The sale closed on January 3, 2013, and a portion of the proceeds were used by Dean Foods to retire
outstanding debt under their senior secured credit facility. Due to the structure of the sale, the Rockford
facility will be retained by Dean Foods. Additionally, for tax purposes, the parties have elected to treat
the transaction as an asset sale. Therefore, the deferred income tax assets, including any carryforwards,
or deferred income tax liabilities were not transferred to Saputo as part of the sale.
In connection with the sale of the Company, we modified certain of the commercial agreements between
us and WhiteWave. These modifications, with the exception of the Asset Purchase Agreement, are
primarily timing modifications and will not have a material impact on our results of operations.
Asset Purchase Agreement
We agreed to terminate the Frederick Facility Agreement and amended the Equipment Distribution and
Leaseback Agreement to terminate the leaseback provisions and transfer the rights, title and interest in
the equipment from WhiteWave to us, for a net consideration of $60 million paid by Dean Foods,
concurrent with the close of the sale.
In connection with the sale of the Company, we also entered into agreements that formalize ongoing
commercial arrangements we have with Dean Foods and certain of its subsidiaries, which are described
below. These agreements became effective on January 1, 2013.
Co-packing Agreement
We have also entered into a manufacturing agreement with certain wholly-owned Dean Foods
subsidiaries pursuant to which we will continue manufacturing such subsidiary’s various products. This
agreement has a term of three years for all of the various product lines. The agreement modifies our
historical intercompany arrangements and reflects new pricing.
We have also entered into a manufacturing agreement with certain wholly-owned Dean Foods
subsidiaries, which includes a co-pack related to the Rockford facility, pursuant to which they will
continue manufacturing various products for us. This agreement has a term of eighteen months to three
years, depending on the product line.
Cream Supply Agreement
We entered into a supply agreement with certain wholly-owned Dean Foods subsidiaries pursuant to
which we continue to purchase cream from those Dean Foods subsidiaries for an initial term of up to
24 months, with an option for us to renew for up to four one-year terms. The pricing terms of this
agreement are consistent with the terms of our prior arrangements reflected in our historical financials,
and we do not believe they will have a material impact on our financial performance.
- 38 -
Intellectual Property Agreements
We entered into contribution agreements with wholly-owned Dean Foods subsidiaries pursuant to which
they will contribute and transfer ownership of certain intellectual property to us. We also entered into
license agreements with wholly-owned Dean Foods subsidiaries pursuant to which they will license
certain trademarks to us for a period of one year or until we stop using such trademarks, depending on
the specific trademarks, and to which we will license certain trademarks to them for a period of one to
five years depending on the product category.
Product Resale Agreement
We entered into an agreement with wholly-owned subsidiaries of Dean Foods, pursuant to which those
subsidiaries continue to purchase certain of our products for resale for a fixed initial term of five years
for all of the certain specified Morningstar products. This agreement modifies our historical
intercompany arrangements and reflects new pricing.
Transition Services Agreement
In connection with Dean Foods’ sale of the Company, we and Dean Foods entered into a transition
services agreement on January 3, 2013 to cover certain continued corporate services provided by Dean
Foods to us following completion of the sale. Dean Foods’ services consist primarily of supply chain,
information technology, legal, finance and accounting, human resources, risk management, tax, treasury,
and other transitional services. Dean Foods’ services continue for a specified initial term, unless
terminated earlier or extended according to the terms of the transition services agreement. We pay Dean
Foods mutually agreed-upon fees for their services.
******
- 39 -
Annexe B
ÉTATS FINANCIERS COMBINÉS RÉSUMÉS INTERMÉDIAIRES NON AUDITÉS
DE MORNINGSTAR FOODS, LLC
Page 5
Morningstar Foods
(Defined as Morningstar Foods LLC and Subsidiaries
and the Dean Foods Company’s Rockford Facility)
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
MORNINGSTAR FOODS
TABLE OF CONTENTS
Page
UNAUDITED CONDENSED COMBINED BALANCE SHEETS AS OF
SEPTEMBER 30, 2012 AND DECEMBER 31, 2011
3
UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
4
UNAUDITED CONDENSED COMBINED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
5
UNAUDITED CONDENSED COMBINED STATEMENTS OF INVESTED EQUITY FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
6
UNAUDITED CONDENSED COMBINED STATEMENTS OF CASH FLOWS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
7
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS:
1. Business and Basis of Presentation
2. Divestitures
3. Inventories
4. Property, Plant, and Equipment
5. Goodwill and Intangible Assets
6. Income Taxes
7. Debt
8. Derivative Financial Instruments and Fair Value Measurements
9. Share-Based Compensation
10. Employee Retirement Benefits and Profit-Sharing Plans
11. Facility Closing and Reorganization Costs
12. Commitments and Contingencies
13. Related-Party Transactions and Continuing Relationships
14. Subsequent Events
8
9
9
10
10
11
11
13
15
17
18
19
19
21
MORNINGSTAR FOODS
CONDENSED COMBINED BALANCE SHEETS
AS OF SEPTEMBER 30, 2012 AND DECEMBER 31, 2011
(Unaudited) (In thousands)
September 30,
2012
December 31,
2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Receivables — net of allowance of $264 and $501
Inventories
Prepaid expenses and other current assets
$
Total current assets
PROPERTY, PLANT AND EQUIPMENT, Net
IDENTIFIABLE INTANGIBLE AND OTHER ASSETS, Net
GOODWILL
TOTAL ASSETS
5
74,426
84,827
7,162
8,380
$
4
73,847
67,159
4,846
8,547
174,800
154,403
180,753
183,090
632
1,823
33,940
37,342
306,095
306,095
$ 696,220
$ 682,753
$ 112,040
10,728
106
$ 107,297
11,082
21,837
122,874
140,216
LIABILITIES AND INVESTED EQUITY
CURRENT LIABILITIES:
Current portion of debt
Total current liabilities
LONG-TERM DEBT
-
OTHER LONG-TERM LIABILITIES
COMMITMENTS AND CONTINGENCIES (Note 12)
INVESTED EQUITY:
Parent’s net investment
Accumulated other comprehensive loss
Total invested equity
TOTAL LIABILITIES AND INVESTED EQUITY
See notes to condensed combined financial statements.
-3-
164
63,177
63,419
8,088
6,982
-
-
502,393
(312)
472,344
(372)
502,081
471,972
$ 696,220
$ 682,753
MORNINGSTAR FOODS
CONDENSED COMBINED STATEMENTS OF OPERATIONS
Nine Months Ended September 30,
2012
2011
NET SALES
$1,062,526
$1,032,138
213,233
251,555
1,275,759
1,283,693
1,071,896
1,103,679
203,863
180,014
OPERATING COSTS AND EXPENSES:
Selling and distribution
General and administrative
Related party license expense
Amortization of intangibles
Facility closing and reorganization costs
Other operating income
68,154
41,986
32,043
2,192
3,619
-
61,747
36,698
31,598
2,192
(18,853)
Total operating costs and expenses
147,994
113,382
55,869
66,632
6,109
4,732
6,109
4,732
INCOME BEFORE INCOME TAXES
49,760
61,900
INCOME TAX EXPENSE
18,579
22,411
NET SALES TO RELATED PARTIES
Total net sales
COST OF SALES
GROSS PROFIT
OPERATING INCOME
OTHER EXPENSE:
Interest expense
Total other expense
NET INCOME
$
-4-
31,181
$
39,489
MORNINGSTAR FOODS
CONDENSED COMBINED STATEMENTS OF COMPREHENSIVE INCOME
2012
2011
NET INCOME
$ 31,181
OTHER COMPREHENSIVE INCOME, Net of tax:
Change in fair value of derivative instruments
Net change in minimum pension liability
45
15
Other comprehensive income, net of tax
60
COMPREHENSIVE INCOME
$ 31,241
-5-
$ 39,489
(34)
(34)
$ 39,455
MORNINGSTAR FOODS
CONDENSED COMBINED STATEMENTS OF INVESTED EQUITY
Parent’s
Net
Investment
Accumulated
Other
Comprehensive
Income (Loss)
Total
Invested
Equity
$ (372)
$ 471,972
$ 472,344
Net income
31,181
-
31,181
(3,590)
-
(3,590)
2,458
-
2,458
Other comprehensive income (loss):
Change in fair value of derivative instruments,
net of tax of $28
Changes in minimum pension liability, net of tax of $11
BALANCE AT SEPTEMBER 30, 2012
-
45
15
$ 502,393
Parent’s
Net
Investment
$ (312)
$ 502,081
Accumulated
Other
Comprehensive
Income (Loss)
Total
Invested
Equity
$ (78)
$ 554,108
$ 554,186
Net income
Other comprehensive income (loss):
Change in fair value of derivative instruments, net
of tax of $22
39,489
-
39,489
(96,756)
-
(96,756)
1,417
-
1,417
-
BALANCE AT SEPETMBER 30, 2011
$ 498,336
-6-
45
15
(34)
$ (112)
(34)
$ 498,224
MORNINGSTAR FOODS
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
2012
2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
(Gain) loss on divestitures and other, net
Other
Changes in operating assets and liabilities, net of acquisitions
and divestitures:
Receivables, net
Inventories
Prepaid expenses and other assets
$ 31,181
19,138
2,458
2,830
(1,405)
538
19,975
1,417
(21,465)
(4,951)
(225)
(649)
(17,668)
1,606
1,131
(354)
(17,125)
(16,922)
3,737
(5,457)
491
38,806
(1,036)
(18,225)
811
(13,189)
81,807
130
(17,414)
68,748
504
(305)
194,835
(216,425)
(98,293)
(184)
327,000
(296,236)
(21,391)
(67,713)
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property, plant and equipment
Proceeds from divestitures
Proceeds from sale of fixed assets
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in parent’s net investment
Payments on capital lease obligations
Proceeds from receivables-backed facility
Payments for receivables-backed facility
$ 39,489
Net cash used in financing activities
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1
(1)
CASH AND CASH EQUIVALENTS, Beginning of period
4
7
CASH AND CASH EQUIVALENTS, End of period
$
-7-
5
$
6
MORNINGSTAR FOODS
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(Unaudited)
1.
BUSINESS AND BASIS OF PRESENTATION
Business — Morningstar Foods is a leading U.S. manufacturer of extended shelf life (“ESL”) creams
and creamers, beverages and cultured dairy products with an emphasis on foodservice and private label
retail customers. These products include half and half, whipping cream, ice cream mix, value-added
milks, sour cream and cottage cheese under an array of private labels and the Friendship® brand.
Unless otherwise indicated, references in this report to “we,” “us”, “our” or “the Company” refer to
Morningstar Foods operations.
Basis of Presentation — The unaudited Condensed Combined Financial Statements have been prepared
on the same basis as the annual Combined Financial Statements. In our opinion, we have made all
necessary adjustments (which include normal recurring adjustments) in order to present fairly, in all
material respects, our combined financial position, results of operations, and cash flows as of the dates
and for the periods presented. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally accepted in the United
States of America (“GAAP”) have been omitted. Our results of operations for the nine-month periods
ended September 30, 2012 and 2011 may not be indicative of our operating results for the full year. The
unaudited Condensed Combined Financial Statements contained herein should be read in conjunction
with the annual Combined Financial Statements.
Our historical unaudited Condensed Combined Financial Statements have been prepared on a carve-out
basis in accordance with GAAP and are derived from Dean Foods Company’s (“Dean Foods”)
consolidated financial statements and accounting records using the historical results of operations and
assets and liabilities attributed to our operations, and includes allocations of expenses from Dean Foods.
Our unaudited Condensed Combined Financial Statements include Morningstar Foods LLC and its
subsidiaries, along with a Dean Foods facility located in Rockford, Illinois (“Rockford facility”), which
has historically been managed by us but is owned by another Dean Foods subsidiary (see Note 4). Our
combined results are not necessarily indicative of our future performance and do not reflect what our
financial performance would have been had we been a stand-alone company during the periods
presented.
Dean Foods currently provides certain corporate services to us, and costs associated with these functions
have been allocated to us. These allocations include costs related to corporate services, such as executive
management, supply chain, information technology, legal, finance and accounting, investor relations,
human resources, risk management, tax, treasury, and other services, as well as stock-based
compensation expense attributable to our employees and an allocation of stock-based compensation
attributable to employees of Dean Foods. The costs of such services have been allocated to us based on
the allocation method most relevant to the service provided, primarily based on relative percentage of
total net sales, relative percentage of headcount, or specific identification. The total amount of these
allocations from Dean Foods was approximately $25.8 million, which includes $4.5 million of
transaction costs related to the potential sale of Morningstar Foods, and $20.2 million in the nine months
ended September 30, 2012 and 2011, respectively. These cost allocations are primarily reflected within
general and administrative expenses in our unaudited Condensed Combined Statements of Operations.
-8-
Management believes these expenses have been allocated to us using a reasonable allocation
methodology.
were outsourced or performed by employees, and strategic decisions made in certain areas.
The total invested equity represents Dean Foods’ interest in our recorded net assets. The parent’s net
investment balance represents the cumulative net investment by Dean Foods in us through that date,
including any prior net income or loss or other comprehensive income or loss attributed to us and
contributions received from or distributions made to Dean Foods. Current income tax liabilities are
deemed to be remitted in cash to Dean Foods in the period the related income tax expense is recorded.
Certain transactions between us and other related parties that are subsidiaries of Dean Foods, including
allocated expenses and settlement of intercompany transactions, are also included in Dean Foods’ net
investment.
Invested equity in the unaudited Condensed Combined Balance Sheets includes net receivables from
affiliates of Dean Foods of $158.2 million and $157.0 million as of September 30, 2012 and
December 31, 2011, respectively.
2.
DIVESTITURES
In the fourth quarter of 2010, we entered into an agreement to sell our yogurt operations. These
operations did not meet the requirements to be accounted for as discontinued operations, as the
operations did not have discrete cash flow information and therefore did not meet the definition of a
component of an entity. We completed the sale of our yogurt operations for cash proceeds of $81.9
million on April 1, 2011 and used the proceeds for additional debt repayments for Dean Foods.
We recorded a net pre-tax gain of $19.2 million during the nine months ended September 30, 2011,
related to this divestiture, which includes $2.1 million of related transaction costs. The gain was
recorded in other operating income in our unaudited Condensed Combined Statements of Operations.
3.
INVENTORIES
The following table summarizes inventories, net of reserves of $190,000 and $225,000 as of
September 30, 2012 and December 31, 2011 (in thousands):
September 30, 2012
December 31, 2011
Raw materials and supplies
Finished goods
$ 30,933
53,894
$ 29,537
37,622
Total
$ 84,827
$ 67,159
-9-
4.
PROPERTY, PLANT AND EQUIPMENT
The following table summarizes property, plant and equipment as of September 30, 2012 and
December 31, 2011 (in thousands):
September 30, 2012
Land
Buildings
$
Total
9,891
98,580
6,880
296,007
13,455
December 31, 2011
$
9,695
98,033
7,090
291,867
6,626
424,813
413,311
(244,060)
(230,221)
$ 180,753
$ 183,090
Depreciation expense amounted to $16.9 million and $17.8 million for the nine month periods ended
September 30, 2012 and 2011, respectively.
The balances disclosed in the preceding table include amounts related to the Rockford facility, which we
use in our operations. The assets related to the Rockford facility will be retained by Dean Foods if
Morningstar Foods is distributed or sold (see Note 1).
The following table summarizes the Rockford facility’s property, plant and equipment as of
September 30, 2012 and December 31, 2011 (in thousands):
September 30, 2012
Land
Buildings
5.
December 31, 2011
$ 156
3,499
8,647
477
$ 156
3,492
8,543
10
12,779
12,201
(7,714)
(7,256)
Total
$5,065
$ 4,945
GOODWILL AND INTANGIBLE ASSETS
There were no changes in the goodwill balance from December 31, 2011 to September 30, 2012.
- 10 -
The following table summarizes the gross carrying amount and accumulated amortization of our
intangible assets other than goodwill as of September 30, 2012 and December 31, 2011 (in thousands):
September 30, 2012
Gross
Carrying
Amount
indefinite lives:
Trademarks
Intangible assets with finite
lives:
Total
$ 11,541
Accumulated
Amortization
$
-
December 31, 2011
Net
Carrying
Amount
Gross
Carrying
Amount
$ 11,541
$ 11,541
Accumulated
Amortization
$
-
Net
Carrying
Amount
$ 11,541
41,685
410
(19,607)
(410)
22,078
-
41,685
410
(17,415)
(410)
24,270
-
$ 53,636
$ (20,017)
$ 33,619
$ 53,636
$ (17,825)
$ 35,811
Amortization expense on intangible assets for both the nine months ended September 30, 2012 and 2011
was $2.2 million. Estimated aggregate intangible asset amortization expense is $2.9 million for each of
the years from 2012 through 2016.
6.
INCOME TAXES
Income taxes have been prepared on a separate return basis as if the Company was a stand-alone entity.
The Company, however, is included in the Dean Foods’ U.S. consolidated federal income tax return and
also files some U.S. state income tax returns on a combined basis with Dean Foods.
For each interim period, the Company estimates the effective tax rate expected to be applicable for the
full year and applies that rate to income before income taxes for the period. Additionally, the Company
records discrete income tax items in the period in which they are incurred.
7.
DEBT
The following table summarizes our outstanding debt as of September 30, 2012 and December 31, 2011
(in thousands, except percentages):
September 30, 2012
Amount
Interest
Outstanding
Rate
Receivables-backed facility
Capital lease obligations
$
Less current portion
Total long-term portion
$
December 31, 2011
Amount
Interest
Outstanding
Rate
106
$ 21,590
411
106
22,001
(106)
(21,837)
-
$
164
* Represents a weighted-average rate, including applicable interest rate margins, for indebtedness
outstanding under the receivables securitization facility.
- 11 -
1.31 % *
Receivables-Backed Facility — In 2004, we began participating in Dean Foods’ receivables-backed
facility. We sell certain of our accounts receivable to a wholly-owned entity that is intended to be
bankruptcy-remote. The entity transfers the receivables to third-party asset-backed commercial paper
conduits sponsored by major financial institutions. The securitization is treated as a borrowing for
accounting purposes. We are the beneficiary and obligor for all borrowings and repayments under our
portion of the Dean Foods facility. On September 28, 2011, Dean Foods amended the terms of the
agreement to extend the liquidity termination date to September 25, 2013, to include the ability to issue
letters of credit of up to $300 million under the facility, and to amend certain other terms.
The total amount of receivables sold to the entity as of September 30, 2012 was $74.6 million, which are
reported in our unaudited Condensed Combined Balance Sheets. During the first nine months of 2012,
we borrowed $194.8 million and subsequently repaid $216.4 million under the facility. The outstanding
debt balances securitized by the Company’s accounts receivable as of December 31, 2011 was
$21.6 million, which is recorded in our unaudited Condensed Combined Balance Sheets. There were no
borrowings under this facility as of September 30, 2012.
Effective November 1, 2012, we are no longer participants in the Dean Foods receivables securitization
program. Receivables sold by us to the bankruptcy-remote entity on or prior to October 31, 2012 will
continue to be collected by us; however, any receivables generated by us subsequent to November 1,
2012 will not be sold into the receivables securitization program, and no receivables previously sold into
the facility will be included in the determination of Dean Foods’ ability to re-borrow under the facility.
Capital Lease Obligations — Our capital leases represent machinery and equipment financing
obligations, which are payable in monthly installments of principal and interest and are collateralized by
the assets financed (see Note 12).
- 12 -
8.
DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Derivative Financial Instruments
Commodities — We are exposed to commodity price fluctuations, including milk, butterfat, sweeteners,
utilities, natural gas, diesel fuel and other commodity costs used in the manufacturing, packaging and
distribution of our products. To secure adequate supplies of materials and bring greater stability to the
cost of ingredients and their related manufacturing, packaging and distribution, we routinely enter into
forward purchase contracts and other purchase arrangements with suppliers. Under the forward purchase
contracts, we commit to purchasing agreed-upon quantities of ingredients and commodities at agreedupon prices at specified future dates. The outstanding purchase commitment for these commodities at
any point in time typically ranges from one month’s to one year’s anticipated requirements, depending
on the ingredient or commodity. These contracts are considered normal purchases under Accounting
Standard Codification 815 “Derivatives and Hedging.”
In addition to entering into forward purchase contracts, from time to time we may purchase over-thecounter contracts with our qualified banking partners or exchange-traded commodity futures contracts
for raw materials that are ingredients of our products or components of such ingredients. Certain of the
contracts offset the risk of increases in our commodity costs, and are designated as hedging instruments
when appropriate. Primarily at the direction of certain of our customers, we may execute other contracts
related to certain customer pricing arrangements. We have not designated such contracts as hedging
instruments; therefore, the contracts are marked to market at each reporting period and a derivative asset
or liability is recorded on our Combined Balance Sheet. These contracts are generally offset by
economic contracts we have purchased to limit the variability in our operations. A summary of open
commodities contracts recorded at fair value in our unaudited Condensed Combined Balance Sheets at
September 30, 2012 and December 31, 2011 is included in the table below.
Although we may utilize forward purchase contracts and other instruments to mitigate the risks related
to commodity price fluctuation, such strategies do not fully mitigate commodity price risk. Adverse
movements in commodity prices over the terms of the contracts or instruments could decrease the
economic benefits we derive from these strategies.
The following table summarizes our derivatives recorded at fair value in our unaudited Condensed
Combined Balance Sheets as of September 30, 2012 and December 31, 2011 (in thousands):
Derivative Assets
Derivative Liabilities
September 30, December 31, September 30, December 31,
2012
2011
2012
2011
Derivatives designated as Hedging
Instruments — Commodities
contracts — current (1)
Derivatives not designated as Hedging
Instruments — Commodities
contracts — current (1)
Total derivatives
$
$
73
$ -
709
2,467
782
$ 2,467
$ -
$
666
1,476
666
$ 1,476
(1) Derivative assets and liabilities that have settlement dates equal to or less than 12 months
from the respective balance sheet date were included in prepaid expenses and other current
assets and accounts payable and accrued expenses in our unaudited Condensed Combined
Balance Sheets.
- 13 -
$ -
There were no gains or losses on derivatives designated as cash flow hedges reclassified from
accumulated other comprehensive income into income for the nine months ended September 30, 2012
and 2011.
Based on current commodity prices, we estimate that $73,000 of hedging activity related to our
commodities contracts will be reclassified from accumulated other comprehensive income into income
within the next 12 months.
Fair Value Measurements — Fair value is an exit price, representing the amount that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants. As such, fair value is a market-based measurement that should be determined based on
assumptions that market participants would use in pricing an asset or liability. As a basis for considering
assumptions, we follow a three-tier fair value hierarchy, which prioritizes the inputs used in measuring
fair value as follows:
•
Level 1 — Quoted prices for identical instruments in active markets.
•
Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or
•
Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting
basis as of September 30, 2012 (in thousands):
Fair Value as of
September 30, 2012
Level 1
Level 2
Level 3
$ 782
$ -
$ 782
$ -
$ 666
$ -
$ 666
$ -
Fair Value as of
December 31, 2012
Level 1
Level 2
Level 3
$ 2,467
$ -
$ 2,467
$ -
$ 1,476
$ -
$ 1,476
$ -
The fair value of our commodities contracts is based on the quantities and fixed prices under the
agreements and quoted forward commodity prices. We classify these instruments in Level 2 because
quoted market prices can be corroborated utilizing observable benchmark market rates at commonly
quoted intervals and observable current and forward commodity market prices on active exchanges. We
did not significantly change our valuation techniques from prior periods.
- 14 -
Due to their near-term maturities, the carrying amounts of accounts receivable and accounts payable are
considered equivalent to fair value. In addition, because the interest rates on our debt are variable, their
fair values approximate their carrying values.
9.
SHARE-BASED COMPENSATION
Certain of the Company’s employees participate in share-based compensation plans sponsored by Dean
Foods. These plans provide employees with restricted stock units or options to purchase shares of Dean
Foods’ common stock. All share-based compensation expense is recorded in general and administrative
expense in our unaudited Condensed Combined Statements of Operations.
Stock Options — Share-based compensation expense for stock options is recognized ratably over the
vesting period. The following table summarizes the assumptions used to estimate the fair value of each
option award on the date of grant using the Black-Scholes valuation model:
Nine Months Ended September 30
2012
2011
Expected volatility
Expected dividend yield
Expected option term
Risk-free rate of return
44 %
0%
5 years
0.62–0.89%
41 %
0%
5 years
1.32–2.30%
The following table summarizes stock option activity for our employees during the first nine months of
2012:
Options
Weighted
Average
Exercise Price
Weighted
Average
Contractual Life
Aggregate
Intrinsic
Value
Options outstanding
at January 1, 2012
Granted
Forfeited and cancelled (1)
Exercised
697,542
81,551
(44,129)
(8,910)
Options outstanding
at September 30, 2012
726,054
20.32
5.50
$ 779,556
Options exercisable
at September 30, 2012
583,374
22.29
4.70
$ 178,370
$ 20.86
12.07
15.26
14.34
(1) Pursuant to the terms of the Dean Foods stock option plans, options that are forfeited or
cancelled may be available for future grants.
The weighted average grant date fair value of options granted to our employees during the nine months
ended September 30, 2012 and 2011 was $4.72 per share and $4.04 per share, respectively.
- 15 -
Restricted Stock Units — The following table summarizes restricted stock units activity during the
nine months ended September 30, 2012:
Units
Stock units outstanding at January 1, 2012
Stock units issued
Shares issued upon vesting of stock units
Stock units cancelled or forfeited (1)
141,295
57,248
(69,765)
(2,960)
Stock units outstanding at September 30, 2012
125,818
Weighted average grant date fair value
$ 13.06
(1) Pursuant to the terms of the Dean Foods stock unit plans, employees have the option of
forfeiting stock units to cover their minimum statutory tax withholding when shares are issued.
Stock units that are cancelled or forfeited may be available for future grants.
Cash Performance Units — Dean Foods grants cash performance units (“CPUs”) to employees as part
of our long-term incentive compensation program under the terms of the Dean Foods 2007 Stock
Incentive Plan. The CPU awards are cash-settled awards and are designed to link compensation of
certain executive officers and other key employees to Dean Foods’ performance over a three-year
period. The performance metric, as defined in the award, is the performance of the Dean Foods stock
price relative to that of a peer group of companies. The range of payout under the award is between 0%
and 200% and is payable in cash at the end of each respective performance period. The fair value of the
awards is measured at each reporting period. A liability related to these units has not been reflected in
the unaudited Condensed Combined Balance Sheet as it will be funded by Dean Foods.
The following table summarizes CPU activity during the first nine months of 2012:
Units
Granted
Converted/paid
Forfeited
891,667
187,500
(240,000)
Outstanding at September 30, 2012
839,167
Phantom Shares — Dean Foods grants phantom shares as part of our long-term incentive compensation
program, which are similar to restricted stock units in that they are based on the price of Dean Foods
stock and vest ratably over a three-year period, but are cash-settled based upon the value of Dean Foods
stock at each vesting period. The fair value of the awards is re-measured at each reporting period. A
liability related to these units has not been reflected in the unaudited Condensed Combined Balance
Sheet as it will be funded by Dean Foods.
- 16 -
The following table summarizes the phantom share activity during the first nine months of 2012:
Shares
Weighted-Average
Grant Date Fair
Value
Granted
Converted/paid
Forfeited
99,353
95,220
(32,311)
(5,589)
$ 10.35
12.07
10.35
11.27
Outstanding at Sepember 30, 2012
156,673
$ 11.40
Share-Based Compensation Expense — The following table summarizes the share-based
compensation expense recognized for the Company’s direct participation in the Dean Foods incentive
compensation plan during the nine months ended September 30, 2012 and 2011 (in thousands):
2012
2011
Stock options
Stock units
Cash performance units
Phantom shares
$ 237
734
661
826
$
361
812
26
218
$ 2,458
$ 1,417
10. EMPLOYEE RETIREMENT BENEFITS AND PROFIT SHARING PLANS
Dean Foods sponsors various employee benefit plans which consist of Dean Foods’ consolidated defined
benefit and defined contribution plans, including various employee savings and profit sharing plans.
Substantially all full-time union and non-union employees who have completed one or more years of
service and have met other requirements pursuant to the plans are eligible to participate in one or more
of these plans, or in their applicable multi-employer pension plan. Additionally, we contribute to various
multiemployer pension plans on behalf of our employees.
Dean Foods Defined Benefit Plans — We account for our employees’ participation in these Dean
Foods’ employee defined benefit plans as a multiemployer plan and record the contribution to the
pension plans or allocation of net periodic pension cost or benefit associated with our employees.
Accordingly, expenses related to these plans were determined by specifically identifying the costs for
the Company’s participants. These pension expenses were allocated to the Company and reported in
general and administrative expenses. The amounts allocated for pension expenses in general and
administrative expenses were $336,000 and $309,000 for each of the nine month periods ended
September 30, 2012 and 2011, respectively.
M-Foods Dairy, LLC Defined Benefit Plans — We have a separate, stand-alone defined benefit
pension plan, and the benefits are based on years of service and employee compensation. Our funding
policy is to contribute annually the minimum amount required under ERISA regulations plus additional
amounts as management deems appropriate. Our defined benefit plan obligations are frozen as to future
participation or increases in projected benefit obligation. Many of these obligations were acquired in
prior strategic transactions. As an alternative to defined benefit plans, we offer defined contribution
- 17 -
plans sponsored by Dean Foods for eligible employees. We do not expect to contribute to the pension
plan in 2012.
The following table summarizes the components of net periodic pension cost for the nine months ended
September 30, 2012 and 2011 (in thousands):
2012
2011
Components of net periodic pension cost:
Interest cost
Amortization:
Unrecognized net loss
$ 83
(58)
$ 77
(58)
-
25
Net periodic pension cost
$ 50
$ 19
11. FACILITY CLOSING AND REORGANIZATION COSTS
Approved plans within our multi-year initiatives and related charges are summarized as follows (in
thousands):
Nine Months Ended September 30
2012
2011
Closure of facilities (1)
$ 3,619
(1) In the first quarter of 2012, Dean Foods’ board of directors approved the closure of our
Sulphur Springs, Texas cultured production facility. Under this plan, production transitioned to
several other Morningstar facilities. This decision was based on the board’s determination that
these operations did not adequately support our strategic objectives. The plant closure was
completed in May 2012. We expect to incur additional charges related to this facility closure
of $264,000, related to shutdown and other costs.
- 18 -
$
-
Activity with respect to facility closing and reorganization costs during the nine months ended
September 30, 2012 is summarized below and includes items expensed as incurred (in thousands):
Accrued
Charges at
December 31,
2011
Cash charges:
Workforce reduction costs
Shutdown costs
Lease obligations after shutdown
Other
Subtotal
Noncash charges:
Write-down of assets
Other
$
-
$
-
Charges
$
Accrued
Charges at
September 30,
Payments
2012
583
205
12
11
$ (388)
(205)
(70)
(11)
$ 195
(58)
-
811
$ (674)
$ 137
2,633
175
Total charges
$ 3,619
12. COMMITMENTS AND CONTINGENCIES
Lease and Purchase Obligations — We lease certain property, plant and equipment used in our
operations under both capital and operating lease agreements. Such leases, which are primarily for
machinery and equipment, have lease terms ranging from one to ten years. Certain lease agreements
require the payment of additional rentals based on units produced. Rent expense was $2.9 million and
$3.5 million for the nine months ended September 30, 2012 and 2011, respectively.
We have entered into various contracts, in the normal course of business, obligating us to purchase
minimum quantities of raw materials used in our production and distribution processes. We enter into
these contracts from time to time to ensure a sufficient supply of raw ingredients. In addition, we have
contractual obligations to purchase various services that are part of our production process.
Litigation, Investigations and Audits — We are not party to, nor are our properties the subject of, any
material pending legal proceedings. We are party from time to time to certain claims, litigations, audits
and investigations, which are not expected to have a material adverse impact on our financial position,
results of operations or cash flows.
13. RELATED PARTY TRANSACTIONS AND CONTINUING RELATIONSHIPS
Allocated Expenses — Dean Foods currently provides certain corporate services to us, and costs
associated with these functions have been allocated to us. These allocations include costs related to
corporate services, such as executive management, supply chain, information technology, legal, finance
and accounting, investor relations, human resources, risk management, tax, treasury, and other services,
as well as stock-based compensation expense attributable to our employees and an allocation of stockbased compensation attributable to employees of Dean Foods. The costs of such services have been
allocated to us based on the allocation method most relevant to the service provided, primarily based on
relative percentage of total net sales, relative percentage of headcount or specific identification. The total
- 19 -
amount of these allocations from Dean Foods was approximately $25.8 million, which includes
$4.5 million of transaction costs related to the potential sale of Morningstar Foods, and $20.2 million in
the nine months ended September 30, 2012 and 2011, respectively. These cost allocations are primarily
reflected within general and administrative expenses in our unaudited Condensed Combined Statements
of Operations. Management believes these expenses have been allocated to us using a reasonable
allocation methodology.
were outsourced or performed by employees, and strategic decisions made in certain areas.
Cash Management — Dean Foods uses a centralized approach to cash management and financing of
operations. The Company’s cash is available for use and is regularly swept by Dean Foods at its
discretion. Dean Foods also funds the Company’s operating and investing activities as needed. Transfers
of cash, both to and from Dean Foods’ cash management system, are reflected as a component of
parent’s net investment in our unaudited Condensed Combined Balance Sheets.
Related Party Arrangements — Related party transactions and activities involving Dean Foods and its
subsidiaries are not always consummated on terms equivalent to those that would prevail in an arm’slength transaction where conditions of competitive, free-market dealing may exist. Sales of our raw
materials and finished products that we manufacture for other subsidiaries of Dean Foods have been
reflected as related party sales in our unaudited Condensed Combined Financial Statements. These
related party transactions are included as part of parent’s net investment.
Certain related party transactions are settled in cash and are reflected as related party payables in our
unaudited Condensed Combined Balance Sheets. The remaining related party transactions are settled by
either non-cash capital contributions from Dean Foods to us or non-cash capital distributions from us to
Dean Foods.
During the nine months ended September 30, 2012 and 2011, we utilized manufacturing facilities and
resources managed by affiliates of Dean Foods to conduct our business. The expenses associated with
these transactions, which primarily relate to co-packing certain of our products, are included in cost of
sales in our unaudited Condensed Combined Statements of Operations.
Intellectual Property License Agreement and Related Loan Agreement — The Company is party to
a license agreement with a subsidiary of The WhiteWave Foods Company (“WhiteWave”), a majorityowned Dean Foods subsidiary, pursuant to which we have the right to use WhiteWave’s intellectual
property in the manufacture of certain products for a fee. For the nine months ended September 30, 2012
and 2011, related party license expense was recorded within operating income in our unaudited
Condensed Combined Statements of Operations in the amount of $32.0 million and $31.6 million,
respectively.
In conjunction with the license agreement, a loan agreement was entered into, pursuant to which
WhiteWave extended a line of credit to us related to the license expense under the license agreement.
There have been no repayments of this loan to date and there are no future plans to make payments on
the outstanding balance; therefore, the principal and associated accrued interest is shown in parent’s net
investment in our unaudited Condensed Combined Balance Sheets. As of September 30, 2012 and
December 31, 2011, amounts outstanding under this agreement totaled $332.3 million and
$305.3 million, respectively. On October 31, 2012, the license agreement was terminated, and the
- 20 -
related loan agreement was contributed to our capital, thereby formally releasing the Company of any
obligation.
The interest term on the loan from WhiteWave is London InterBank Offered Rate, plus 2% and is
recorded in interest expense in our unaudited Condensed Combined Statements of Operations. Interest
expense on the loan for the nine months ended September 30, 2012 and 2011 was $5.8 million and
$4.4 million, respectively.
Guarantees — We have entered into several guarantee agreements with Dean Foods whereby we have
historically guaranteed debt issued by Dean Foods on a joint and several basis. The aggregate unpaid
principal balance of the debt issued by Dean Foods that is guaranteed by us was approximately
$3.3 billion as of September 30, 2012. These guarantees remain in place until the related debt matures,
which will occur on varying dates through 2018, and if the issuer or the primary guarantor, as
applicable, defaults on the underlying debt, the Company may be required to satisfy the outstanding
debt. As this is an intercompany guarantee, the Company has not recognized any liability associated
with this guarantee in its unaudited Condensed Combined Financial Statements.
14. SUBSEQUENT EVENTS
The Company has evaluated subsequent events after the balance sheet date of September 30, 2012
through December 4, 2012, which is the date the financial statements were available to be issued.
Effective November 1, 2012, we are no longer participants in the Dean Foods receivables securitization
program. Receivables sold by us to the bankruptcy-remote entity on or prior to October 31, 2012 will
continue to be collected by us; however, any receivables generated by us subsequent to November 1,
2012 will not be sold into the receivables securitization program, and no receivables previously sold into
the facility will be included in the determination of Dean Foods’ ability to re-borrow under the facility.
In connection with the initial public offering of WhiteWave, we have entered into agreements that
formalize ongoing commercial arrangements we have with WhiteWave. These agreements became
effective upon completion of WhiteWave’s initial public offering on October 31, 2012.
Transitional Sales Agreements — We have entered into an agreement with WhiteWave, pursuant to
which we will transfer back responsibility for sales of certain of its products and associated costs over a
15-month term. During this term, the Company will provide certain transitional services to WhiteWave,
which include, but are not limited to, taking and filling orders, collecting receivables, and shipping
products to WhiteWave's customers. The Company will remit to WhiteWave the cash representing the
net profit collected from these product sales until such time as the sales are transitioned to WhiteWave.
We have also entered into an agreement with WhiteWave pursuant to which they will transfer to us
responsibility for the sales and associated costs of their aerosol whipped topping and other non-core
products over a 15-month term. During this term, WhiteWave will provide certain transitional services
to us, which include, but are not limited to, taking and filling orders and collecting receivables.
WhiteWave will remit to us the net profit associated with these product sales until such time as the sales
are transitioned to us.
Manufacturing and Supply Agreements — We have entered into a manufacturing agreement with
WhiteWave pursuant to which we will continue manufacturing various products. With the exception of
the manufacture of aerosol whipped topping and other non-core products, which are subject to this
agreement for a term of up to 15 months, this agreement generally has a term of three to five years with
- 21 -
respect to the various product lines. The agreement modifies our historical intercompany arrangements
and reflects new pricing.
We have also entered into a manufacturing agreement with a wholly-owned Dean Foods subsidiary
pursuant to which we will continue manufacturing such subsidiary’s various products. This agreement
has a term of three years for all of the various product lines. The agreement modifies our historical
intercompany arrangements and reflects new pricing.
We have also entered into a manufacturing agreement with a wholly-owned Dean Foods subsidiary,
which includes a co-pack related to the Rockford facility, pursuant to which they will continue
manufacturing various products for us. This agreement has a term of eighteen months to three years,
depending on the product line.
Termination of Intellectual Property License Agreement and Related Loan Agreement — We have
entered into an agreement with WhiteWave pursuant to which we terminated the license agreement, and
the related loan agreement was contributed to our capital. In addition, we have entered into an agreement
with WhiteWave to effect the transfer of the intellectual property subject to the license agreement to us
(see Note 13).
Equipment Distribution and Leaseback Agreement — We have entered into an agreement with
certain Dean Foods subsidiaries, including WhiteWave, pursuant to which we will distribute and assign
all of our rights, title and interest in certain equipment at their carrying value of $1.6 million at
October 31, 2012. We will leaseback such equipment from WhiteWave for an annual equipment lease
cost of $435,000. This agreement is co-terminus with the manufacturing and supply agreement entered
into with WhiteWave. This agreement was amended pursuant to Dean Foods entering into an agreement
to sell the Company. See Potential Sale of Morningstar Foods below.
Cream Supply Agreement — We also have entered into a supply agreement with certain whollyowned Dean Foods subsidiaries pursuant to which we will continue to purchase cream from those Dean
Foods subsidiaries for an initial term of up to 24 months, with an option for us to renew for up to four
one-year terms. The pricing terms of this agreement are consistent with the terms of our prior
arrangements reflected in our historical financials, and we do not believe they will have a material
impact on our financial performance.
Frederick Facility Agreement — We have entered into an agreement with WhiteWave, pursuant to
which WhiteWave has the option to purchase, at a price as defined in the agreement, our real estate,
manufacturing facility and certain related assets located in Frederick, Maryland, should our current copack agreement with an unrelated third party be cancelled, renewed at lower volumes or not renewed.
This agreement was terminated pursuant to Dean Foods entering into an agreement to sell the Company.
See Potential Sale of Morningstar Foods below.
Potential Sale of Morningstar Foods — On December 2, 2012, Dean Foods Company entered into a
definitive agreement to sell our operations to Saputo Inc. for $1.45 billion. We expect the transaction to
close no later than the first quarter of 2013. As a condition of the sale, we amended certain terms of the
above commercial agreements, including the termination of the Frederick Facility Agreement and the
amendment of the Equipment Distribution and Leaseback Agreement to terminate the leaseback
provisions and transfer the rights, title and interest in the equipment from WhiteWave to us, for net
consideration of $60 million, concurrent with and contingent upon the close of the Morningstar Foods
sale.
******
- 22 -
Annexe C
BILAN CONSOLIDÉ INTERMÉDIAIRE RÉSUMÉ PRO FORMA NON AUDITÉ
AU 31 DÉCEMBRE 2012
(en milliers de dollars CAD)
0.9949
Saputo
Morningstar
Ajustements
Consolidées
inc.
Foods, LLC
pro forma
pro forma
ACTIF
Actif à court terme
Trésorerie et équivalents de trésorerie
274 064 $
2
(246 452) $
4a, 4e
Débiteurs
464 259
74 286
2
(2 729)
4a
535 816
Stocks
693 136
67 796
2
(2 543)
4a
758 389
108
-
52 473
6 053
4a
59 161
1 484 040
154 745
Impôts à recevoir
Frais payés d’avance et autres éléments d’actif
6 610 $
2
635
34 222 $
108
(251 089)
1 387 696
1 114 298
180 641
2
292 947
4a
1 587 886
Goodwill
732 428
304 534
2
499 962
4a
1 536 924
Marques de commerce et autres actifs incorporels
331 489
35 918
2
87 767
4a
455 174
20 048
-
7 682
16 013
Immobilisations
Autres éléments d’actif
Impôts différés
3 689 985 $
2, 4d
691 851 $
(16 013)
20 048
4a
613 574 $
7 682
4 995 410 $
PASSIF
Passif à court terme
Emprunts bancaires
134 574 $
Créditeurs et charges à payer
526 785
Impôts à payer
159 592
-
-
-
-
150 000
820 951
98 305
148 351
Tranche à court terme de la dette à long terme
Dette à long terme
Autres éléments de passif
Impôts différés
97 $
98 208
379 745
-
47 700
7 999
182 040
68 205
1 430 436
174 509
2
2
2
2, 4d
(97) $
(1 552)
4a
4a, 4g
134 574 $
623 441
159 592
4f
150 000
1 067 607
1 429 745
1 050 000
4f
770
4a
56 469
4a
182 040
(68 205)
1 130 916
2 735 861
CAPITAUX PROPRES
Capital-actions
Réserves
Bénéfices non distribués
651 576
(2 941)
1 610 914
(611)
517 953
2 259 549
517 342
3 689 985 $
691 851 $
Page 6
2, 4b
2, 4c
611
(517 953)
(517 342)
613 574 $
651 576
4a
4a
(2 941)
1 610 914
2 259 549
4 995 410 $
Annexe D
ÉTAT CONSOLIDÉ ANNUEL RÉSUMÉ
DES RÉSULTATS PRO FORMA NON AUDITÉ
POUR L’EXERCICE TERMINÉ LE 31 MARS 2012
(en milliers de dollars CAD, sauf les données par action)
Saputo
Morningstar
Ajustements
Consolidées
inc.
Foods, LLC
pro forma
pro forma
Revenus
6 930 370 $
1 725 886 $
Coûts d’opération, excluant l’amortissement
Bénéfice avant intérêts, amortissement, dépréciation et impôts
sur les bénéfices
6 099 439
1 617 886
2
2, 4i
(75 810) $
(101 446)
830 931
108 000
101 943
26 444
Bénéfice d’exploitation
728 988
81 556
19 412
Dépréciation du goodwill
125 000
-
-
23 081
6 455
1 569
-
Bénéfice, avant impôts sur les bénéfices
579 338
75 101
Impôts sur les bénéfices
198 498
27 031
Bénéfice net
380 840 $
48 070 $
Amortissement
Intérêts sur la dette à long terme
Autres charges financières
4h
8 580 446 $
4h
7 615 879
25 636
2, 4i
2
6 224
23 175
964 567
4j-4l
829 956
125 000
4m
(5 604)
52 711
1 569
(3 763)
2
134 611
650 676
4n
1 841 $
219 925
430 751 $
Résultat par action
De base
1.89 $
0.24 $
0.01 $
4o
2.14 $
Dilué
1.86 $
0.23 $
0.01 $
4o
2.10 $
Page 7
Annexe E
ÉTAT CONSOLIDÉ INTERMÉDIAIRE RÉSUMÉ
DES RÉSULTATS PRO FORMA NON AUDITÉ
POUR LA PÉRIODE DE NEUF MOIS TERMINÉE LE 31 DÉCEMBRE 2012
(en milliers de dollars CAD, sauf les données par action)
Saputo
Morningstar
Ajustements
Consolidées
inc.
Foods, LLC
pro forma
pro forma
(60 128) $
4h
6 462 927 $
(89 466)
4h
5 727 317
Revenus
5 244 351 $
1 278 704 $
Bénéfice avant intérêts, amortissement et impôts sur
les bénéfices
4 613 259
1 203 524
631 092
75 180
81 061
19 182
550 031
55 998
17 381
6 123
1 858
-
-
1 858
Bénéfice, avant impôts sur les bénéfices
530 792
49 875
9 642
590 309
149 340
18 622
Bénéfice net
381 452 $
31 253 $
Amortissement
Bénéfice d’exploitation
Autres charges financières
2
2, 4i
29 338
2, 4i
5 319
735 610
4j-4l
24 019
2
2
14 377
715
105 562
630 048
4m
4n
8 927 $
37 881
168 677
421 632 $
Résultat par action
De base
1.93 $
0.16 $
0.04 $
4o
2.13 $
Dilué
1.90 $
0.16 $
0.04 $
4o
2.10 $
Page 8
NOTES COMPLÉMENTAIRES AUX ÉTATS FINANCIERS CONSOLIDÉS
RÉSUMÉS PRO FORMA NON AUDITÉS
(Les montants présentés dans les tableaux sont en milliers de dollars CAD, sauf pour les données sur les actions)
1.
Acquisition de Morningstar Foods, LLC
Saputo inc. (la « Société ») est une société publique incorporée et domiciliée au Canada. Les actions de la Société
sont inscrites à la Bourse de Toronto sous le symbole « SAP ». La Société produit, met en marché et distribue une
vaste gamme de produits laitiers au Canada, aux États-Unis, en Argentine et en Europe ainsi que des produits de
boulangerie au Canada. L’adresse du siège social de la Société est le 6869 boulevard Métropolitain Est, StLéonard (Québec) Canada, H1P 1X8.
Le 3 janvier 2013, la Société a conclu l’acquisition de Morningstar Foods, LLC (« Morningstar »), qui avait été
précédemment annoncée le 3 décembre 2012, auprès de Dean Foods Company pour une contrepartie en espèces
totale de 1 439 849 000 $, sous réserve des ajustements habituels du fonds de roulement. Morningstar fabrique
une gamme de produits laitiers et non laitiers ayant une durée de conservation prolongée, notamment de la crème
et de la crème à café, des mélanges à crème glacée, de la crème à fouetter, de la crème à fouetter en aérosol, des
cafés glacés, de la crème demi-grasse, des produits laitiers à valeur ajoutée, ainsi que des produits de culture
bactérienne tels que de la crème sure et du fromage cottage.
Le prix d’achat a été financé au moyen de la trésorerie disponible et d’une nouvelle facilité d’emprunt bancaire à
terme de quatre ans d’un montant de 1 200 000 000 $, laquelle est assujettie à des remboursements en capital
trimestriels de 37 500 000 $, avec un solde de 600 000 000 $ dû à l’échéance le 20 décembre 2016. La Société a
conclu des swaps de taux d’intérêt pour la durée totale de cette nouvelle facilité, qui portera intérêt à un taux de
1,41 % majoré de 0,85 % jusqu’à un maximum de 2,0 %, selon un ratio financier de la Société.
2.
Mode de présentation
Le bilan consolidé intermédiaire résumé pro forma non audité au 31 décembre 2012, l’état consolidé intermédiaire
résumé des résultats pro forma non audité pour la période de neuf mois terminée le 31 décembre 2012 et l’état
consolidé résumé des résultats pro forma non audité pour l’exercice terminé le 31 mars 2012 ont été préparés par
la Société conformément aux Normes internationales d’information financière (les « IFRS »). Sauf indication
contraire, tous les montants en dollars sont exprimés en dollars canadiens. De l’avis de la direction, ces états
financiers consolidés résumés pro forma non audités contiennent tous les ajustements nécessaires à la
présentation d’une image fidèle.
Bilan consolidé intermédiaire résumé pro forma non audité au 31 décembre 2012
Le bilan consolidé intermédiaire résumé pro forma non audité au 31 décembre 2012 a été préparé sur la base du
bilan consolidé intermédiaire résumé non audité de la Société au 31 décembre 2012, ainsi que sur la base du bilan
combiné audité de Morningstar au 31 décembre 2012, lequel a été préparé conformément aux PCGR des ÉtatsUnis et est présenté en dollars américains. Le bilan combiné audité de Morningstar a été converti en dollars
canadiens au taux de change de clôture au 31 décembre 2012 (1,0000 $ CA = 0,9949 $ US) et a été ajusté afin
que sa présentation soit conforme aux méthodes comptables de la Société, soit les IFRS.
État consolidé résumé des résultats pro forma non audité pour l’exercice terminé le 31 mars 2012
L’état consolidé résumé des résultats pro forma non audité pour l’exercice terminé le 31 mars 2012 a été préparé
sur la base des résultats des états financiers consolidés audités de la Société pour l’exercice terminé le 31 mars
2012, ainsi que sur la base des états financiers combinés audités de Morningstar pour l’exercice terminé le
31 décembre 2011. L’état combiné des résultats audité de Morningstar pour l’exercice terminé le 31 décembre
2011 a été converti en dollars canadiens au taux de change moyen pour la période annuelle (1,0000 $ CA =
0,9891 $ US) et a été ajusté afin que sa présentation soit conforme aux méthodes comptables de la Société, soit
les IFRS.
Page 9
État consolidé intermédiaire résumé des résultats pro forma non audité pour la période de neuf mois
terminée le 31 décembre 2012
L’état consolidé intermédiaire résumé des résultats pro forma non audité pour la période de neuf mois terminée le
31 décembre 2012 a été préparé sur la base des résultats de l’état consolidé intermédiaire résumé des résultats
non audité de la Société pour la période de neuf mois terminée le 31 décembre 2012, ainsi que sur la base de l’état
combiné résumé des résultats non audité de Morningstar pour la période de neuf mois terminée le 30 septembre
2012. L’état combiné résumé des résultats non audité de Morningstar pour la période de neuf mois terminée le
30 septembre 2012 a été converti en dollars canadiens au taux de change moyen pour la période de neuf mois
(1,0000 $ CA = 1,0023 $ US) et a été ajusté afin que sa présentation soit conforme aux méthodes comptables de la
Société, soit les IFRS.
3.
Méthodes comptables
Le bilan consolidé intermédiaire résumé pro forma non audité au 31 décembre 2012, l’état consolidé annuel
résumé des résultats pro forma non audité pour l’exercice terminé le 31 mars 2012 et l’état consolidé intermédiaire
résumé des résultats pro forma non audité pour la période de neuf mois terminée le 31 décembre 2012 ont été
préparés conformément à la note 3, « Principales méthodes comptables », des états financiers consolidés au
31 mars 2012 de la Société.
Page 10
4.
Ajustements de consolidation pro forma
Les états financiers consolidés résumés pro forma non audités comprennent les éléments suivants :
4a) Le tableau suivant reflète la répartition du prix d’achat selon la juste valeur estimative de l’actif net acquis le
3 janvier 2013, les ajustements du fonds de roulement et d’autres ajustements nécessaires pour éliminer les
actifs et passifs non acquis dans le cadre de l’acquisition :
Données
Ajustements de
révisées de
Données de
Installation
Morningstar au non acquise Morningstar au Juste valeur de la juste valeur et
du fonds de
31 décembre
de Rockford, 31 décembre l’actif net acquis
2012
2012
Illinois
le 3 janvier 2013
roulement1
ACTIF
Actif à court terme
Trésorerie et équivalents de trésorerie
Débiteurs
Stocks
Frais payés d’avance et autres
éléments d’actif
Immobilisations
Goodwill
Marques de commerce et autres actifs
incorporels
Impôts différés
PASSIF
Passif à court terme
Emprunts bancaires
Créditeurs et charges à payer
Autres éléments de passif
Impôts différés
CAPITAUX PROPRES
Réserves
Bénéfices non distribués
6 610 $
74 286
67 796
6 053
180 641
304 534
(17)
(4,960)
-
6 610 $
73 988
66 493
6 036
175 681
304 534
7 $
71 557
65 253
6 688
473 588
804 496
(6 603) $
(2 431)
(1 240)
(6 603) $
(2 729)
(2 543)
652
297 907
499 962
635
292 947
499 962
35 918
16 013
691 851 $
(6 578) $
35 918
16 013
685 273 $
123 685
1 545 274 $
87 767
(16 013)
860 001 $
87 767
(16 013)
853 423 $
97 $
98 208
7 999
68 205
174 509
- $
(3 364)
(3 364)
97 $
94 844
7 999
68 205
171 145
- $
96 656
8 769
105 425
(97) $
1 812
770
(68 205)
(65 720)
(97) $
(1 552)
770
(68 205)
(69 084)
(611)
517 953
517 342
691 851 $
(3 214)
(3 214)
(6 578) $
(611)
514 739
514 128
685 273 $
105 425 $
1 439 849 $
611
(514 739)
(514 128)
(579 848) $
611
(517 953)
(517 342)
(586 426) $
Prix d’achat
Contrepartie, montant net
Trésorerie
Dette à long terme
1
- $
(298)
(1,303)
Total des
ajustements
239 849 $
1 200 000
1 439 849 $
Les ajustements du fonds de roulement se rapportent aux variations du fonds de roulement entre le 31 décembre 2012 et le 3 janvier 2013, la date d’établissement des
soldes préliminaires à la date d'acquisition.
La répartition du prix d’achat présentée ci-dessus est préliminaire. La direction continue d’évaluer et de
réviser la juste valeur de l’actif net acquis. Puisque la Société continue d’évaluer les actifs acquis et les
passifs repris à la date de l’acquisition, la répartition du prix d’achat pourrait différer considérablement des
montants utilisés dans ces états financiers consolidés résumés pro forma non audités.
4b) Le cumul des autres éléments du résultat global ("Accumulated other comprehensive loss”) qui figure au bilan
audité de Morningstar au 31 décembre 2012 est présenté à titre de capitaux propres investis ("Invested
Equity"). Ce montant a été reclassé dans les réserves afin que sa présentation soit conforme à celle des
résultats de la Société.
4c) Les bénéfices non distribués (”Retained earnings”) qui figurent dans les états financiers audités de
Morningstar au 31 décembre 2012 sont présentés à titre d’investissement net de la société mère (“Parent’s
net investment“). Le solde de ce compte a été reclassé dans les bénéfices non distribués afin que sa
présentation soit conforme à celle des résultats de la Société.
Page 11
4d) Les actifs d’impôts différés (“Deferred income tax assets”) qui figurent dans les états financiers audités de
Morningstar au 31 décembre 2012 sont présentés à titre d’actifs à court terme. Ces soldes ont été reclassés
dans les actifs à long terme afin que leur présentation soit conforme aux IFRS.
4e) La Société a affecté 250 000 000 $ de trésorerie existante au financement de l’acquisition, moins un
ajustement de 11 193 000 $ des passifs pris en charge, plus un ajustement préliminaire du fonds de
roulement de 1 042 000 $. Ce paiement net a été déduit du solde existant de la trésorerie et des équivalents
de trésorerie.
4f) Dans le cadre de l’acquisition de Morningstar, la Société a engagé une dette additionnelle de
1 200 000 000 $, dont une tranche de 150 000 000 $ correspond à la tranche à court terme de la dette à long
terme. L’augmentation de 1 050 000 000 $ de la dette à long terme reflète le passif à long terme engagé par
la Société à la date d’acquisition. Se reporter aux notes 1 et 4m) pour en savoir plus sur les modalités de la
nouvelle dette.
4g) Les créditeurs et charges à payer incluent un passif à payer par la Société au nom du vendeur d’un montant
de 11 193 000 $ qui se rapporte aux obligations au titre des primes de maintien en poste, lesquelles ont été
définies dans la convention d’achat. Le montant est porté en diminution de la contrepartie totale versée.
4h) Les résultats financiers de Morningstar ont été ajustés afin de tenir compte des éléments suivants :
i.
ii.
iii.
iv.
v.
les résultats d’une installation située à Rockford, en Illinois, qui a été conservée par le vendeur, ont
été exclus;
les résultats liés aux catégories de produits conservées par le vendeur ont été exclus;
les résultats liés aux catégories de produits comptabilisées par le vendeur mais revenant à
Morningstar ont été inclus;
les résultats liés à un accord de coemballage conclu ont été inclus;
l’incidence de redevances facturées par le vendeur a été exclue, car la propriété intellectuelle sousjacente a été transférée à Morningstar.
Pour plus de détails sur ces ajustements, se reporter aux notes 1 et 17 des états financiers combinés annuels
audités de Morningstar Foods, LLC présentés à l’Annexe A de ce rapport.
L’incidence de ces ajustements s’établit comme suit :
Revenus
Coût des marchandises vendues
Répartition des redevances
Bénéfice avant intérêts, amortissement et impôts sur les bénéfices
Exercice terminé
le 31 mars 2012
$
(75 810)
(59 212)
(42 234)
Période de neuf mois
terminée le
31 décembre 2012
$
(60 128)
(57 393)
(32 073)
(101 446)
25 636
(89 466)
29 338
4i) Morningstar présentait son état des résultats selon les PCGR des États-Unis d’une façon équivalente à la
méthode des charges par fonction selon IAS 1, Présentation des états financiers (« IAS 1 »). La Société
présente son état des résultats selon la méthode des charges par nature conformément à IAS 1. Par
conséquent, les montants présentés ci-dessous ont été reclassés des coûts d’opération de Morningstar et
présentés séparément au poste amortissement :
Amortissement
Page 12
Exercice terminé
le 31 mars 2012
$
(26 444)
26 444
terminée le
31 décembre 2012
$
(19 182)
19 182
4j) La charge d’amortissement a été augmentée pour refléter l’amortissement additionnel qui découle de la
réévaluation à la juste valeur liée à la répartition du prix d’achat touchant les immobilisations acquises de
Morningstar au cours de la période de leur avantage prévu, ainsi que les ajustements de décomposition
nécessaires aux fins de conformité aux IFRS et aux méthodes comptables de la Société.
Amortissement
Exercice terminé
le 31 mars 2012
$
2 426
terminée le
31 décembre 2012
$
2 280
4k) La charge d’amortissement a été augmentée pour refléter l’amortissement additionnel qui découle de la
réévaluation à la juste valeur liée à la répartition du prix d’achat touchant les actifs incorporels acquis de
Morningstar au cours de la période de leur avantage prévu, et elle s’établit comme suit :
Amortissement
Exercice terminé
le 31 mars 2012
$
5 006
terminée le
31 décembre 2012
$
3 755
4l) La charge d’amortissement de Morningstar inclut une charge liée à une installation située à Rockford, en
Illinois, et à des actifs utilisés pour certaines catégories de produits conservées par le vendeur. Ces montants
ont été retirés des résultats consolidés et ils s’établissent comme suit :
Amortissement
Exercice terminé
le 31 mars 2012
$
(1 208)
terminée le
31 décembre 2012
$
(716)
4m) L’achat de Morningstar a été financé au moyen de la trésorerie disponible et d’une nouvelle facilité
d’emprunt bancaire à terme de quatre ans d’un montant de 1 200 000 000 $. Par suite de l’acquisition, la
Société a conclu des swaps de taux d’intérêt pour la durée totale de cette facilité, qui portera intérêt à un
taux de 1,41 % majoré de 0,85 % jusqu’à un maximum de 2,0 %, selon un ratio financier de la Société.
L’ajustement des charges d’intérêts sur la dette à long terme qui découle de la dette acquise s’établit
comme suit :
Page 13
Exercice terminé
le 31 mars 2012
$
23 175
terminée le
31 décembre 2012
$
14 377
4n) L’incidence de la charge d’impôts sur les bénéfices et les taux d’imposition effectifs consolidés pour les
éléments susmentionnés s’établissent comme suit :
Taux d’imposition effectif
Exercice terminé
le 31 mars 2012
$
(5 604)
33,8 %
terminée le
31 décembre 2012
$
715
28,6 %
4o) Le nombre moyen pondéré d’actions ordinaires en circulation et le nombre moyen pondéré dilué d’actions
ordinaires en circulation utilisés pour calculer le bénéfice par action de base et dilué s’établissent comme
suit :
Exercice terminé
le 31 mars 2012
Nombre moyen pondéré d’actions ordinaires en circulation
Nombre moyen pondéré dilué d’actions ordinaires en circulation
201 614 933
204 967 561
terminée le
31 décembre 2012
197 805 856
200 464 931
4p) La Société a engagé des coûts d’acquisition d’environ 10 000 000 $ pour l’acquisition de Morningstar,
lesquels n’ont pas été reflétés dans les états financiers pro forma car ils ne sont pas des coûts récurrents.
Page 14

saputo inc. annexe 51-102a4 déclaration d`acquisition d`entreprise

Transcription

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