NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Nine
Months Ended
September 30, 2016
and
2015
(Unaudited)
Unless otherwise indicated, references in these notes to the unaudited condensed consolidated financial statements to “we,” “us,” “our,” “WhiteWave,” or the “Company” refer to The WhiteWave Foods Company’s operations, taken as a whole.
1. General
Nature of Our Business
— We are a leading consumer packaged food and beverage company focused on high-growth product categories that are aligned with emerging consumer trends. We manufacture, market and sell branded plant-based foods and beverages, coffee creamers and beverages, premium dairy products and organic produce. We sell products primarily in North America, Europe and through a joint venture in China. We focus on providing consumers with innovative, great-tasting food and beverage choices that meet their increasing desires for nutritious, flavorful, convenient, and responsibly-produced products. Our widely-recognized, leading brands distributed in North America include
Silk
,
So Delicious
and
Vega
plant-based foods and beverages,
International Delight
and
LAND O LAKES
coffee creamers and beverages,
Horizon Organic
and
Wallaby Organic
premium dairy products and
Earthbound Farm
organic salads, fruits and vegetables. Our popular plant-based foods and beverages brands in Europe include
Alpro
and
Provamel
.
Effective January 1, 2016, we report results of operations through
two
reportable segments: Americas Foods & Beverages and Europe Foods & Beverages. This reporting structure aligns with the way our Chief Operating Decision Maker ("CODM"), our CEO, monitors operating performance, allocates resources, and deploys capital. In 2015, we reported results of operations through
three
reportable segments: Americas Foods & Beverages, Americas Fresh Foods and Europe Foods & Beverages. In connection with our management restructure in early 2016, we consolidated the historical Americas Foods & Beverages and Americas Fresh Foods segments into a single Americas Foods & Beverages segment. Accordingly, prior year segment data has been recast to reflect this new segment structure.
Basis of Presentation
— The unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q (“Form 10-Q”) have been prepared on the same basis as the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended
December 31, 2015
, which was filed with the Securities and Exchange Commission ("SEC") on February 29, 2016.
As discussed in Note 16
The Proposed Merger with Danone
, on July 6, 2016 the Company entered into a merger agreement with Danone S.A., a
société anonyme
organized under the laws of France (“Danone”), as a result of which the Company is expected to become a wholly-owned subsidiary of Danone. Since the merger has not yet been completed, none of the unaudited condensed consolidated financial statements and related disclosures in this Form 10-Q consider the potential impact of the pending merger.
In our opinion, we have made all necessary adjustments (which generally include normal recurring adjustments) in order to present fairly, in all material respects, our consolidated 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 annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted pursuant to SEC rules and regulations applicable to quarterly reporting on Form 10-Q. The preparation of our unaudited condensed consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying footnotes. Actual results could differ from these estimates. Our results of operations for the
three and nine
months ended
September 30, 2016
and
2015
may not be indicative of our operating results for the full year. The unaudited condensed consolidated financial statements contained in this Form 10-Q should be read in conjunction with the audited consolidated financial statements for the year ended
December 31, 2015
contained in our Annual Report on Form 10-K for the year ended
December 31, 2015
.
Recently Issued Accounting Pronouncements
— In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09,
Revenue from Contracts with Customers: Topic 606
, to clarify the principles used to recognize revenue for all entities. In July 2015, the FASB approved a one-year deferral of the effective date of ASU 2014-09. In 2016, the FASB has issued the following additional guidance:
i)
ASU No. 2016-08,
Principal Versus Agent Considerations (Reporting Revenue Gross Versus Net),
which provides clarification when assessing whether an entity is a principal or agent in a revenue transaction, and impacts whether an entity reports revenue on a gross or net basis,
ii)
ASU No. 2016-10,
Identifying Performance Obligations and Licensing
, which amends the guidance in ASU 2014-09 regarding the identification of performance obligations and accounting for licenses of intellectual property,
iii)
ASU No. 2016-11,
Rescission of SEC
Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 Emerging Issues Task Force Meeting,
which rescinds specific SEC guidance related to revenue recognition currently codified in US GAAP as a result of the new revenue standard, and
iv)
ASU No. 2016-12,
Narrow-Scope Improvements and Practical Expedients,
which amends the guidance in ASU 2014-09 by providing practical expedients to simplify the transition to the new revenue standard and clarify certain aspects of the standard. The new guidance will be effective for annual and interim periods beginning on or after December 15, 2017 and will replace most existing revenue recognition guidance under U.S. GAAP when it becomes effective. The standard includes a five step model to determine when revenue should be recognized, which is when promised goods or services are transferred to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The standard allows several methods of adoption including either a full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements. Early adoption will be permitted as of the December 31, 2016 original effective date. We are currently evaluating the effects, if any, the adoption of this guidance will have on the Company's consolidated financial statements and the transition method that we will select to implement the new standard.
In August 2014, the FASB issued ASU No. 2014-15,
Presentation of Financial Statements—Going Concern
(Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern
, to provide guidance on management's responsibility to perform interim and annual assessments of an entity’s ability to continue as a going concern and to provide related disclosure requirements. This guidance applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. Adoption will require establishing a going concern assessment process to meet the standard. The adoption will not have an impact to the Company’s consolidated financial statements.
In July 2015, the FASB issued ASU No. 2015-11,
Simplifying the Measurement of Inventory.
This ASU discusses amendments to existing accounting guidance to modify the subsequent measurement of inventory. Under existing guidance, an entity measures inventory at the lower of cost or market, with market defined as replacement cost, net realizable value ("NRV"), or NRV less a normal profit margin. An entity uses current replacement cost provided that it is not above NRV (ceiling) or below NRV less a normal profit margin (floor). Amendments in the new guidance require an entity to subsequently measure inventory at the lower of cost or net realizable value and eliminates the need to determine replacement cost and evaluate whether it is above the ceiling or below the floor. NRV is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. For public business entities, the ASU is effective for interim and annual periods beginning after December 15, 2016. Early application is permitted for all entities and should be applied prospectively. We expect that the adoption of this guidance will not have any impact on the Company's consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
. This ASU requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. We are currently evaluating the effects adoption of this guidance will have on the Company’s consolidated financial statements and financial statement disclosures.
In March 2016, the FASB issued ASU No. 2016-09,
Improvements to Employee Share-Based Payment Accounting
, which simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new guidance will require companies to include excess tax benefits (deficiencies) as a component of income tax expense rather than additional paid-in capital. This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods. The impact ASU No. 2016-09 will have on the Company’s consolidated financial statements upon adoption will mainly depend on unpredictable future events, including the timing and value realized for future share-based transactions upon exercise/vesting versus the fair value at grant date, and will create additional benefit or expense to our consolidated statements of income.
In June 2016, the FASB issued ASU No. 2016-13,
Measurement of Credit Losses on Financial Instruments,
which provides changes on how companies measure and recognize credit losses on financial instruments. The new guidance will require companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of financial assets that are in the scope of the standard. The new standard is effective for public companies in fiscal years beginning after
December 31, 2019. We expect that the adoption of this guidance will not have any impact on the Company's consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15,
Classification of Certain Cash Receipts and Cash Payments
, which provides clarification on the treatment of certain cash receipts and cash payments on the statement of cash flows. The pronouncement provides clarification guidance on eight specific cash flow presentation issues that have developed due to diversity in practice. The issues include, but are not limited to, debt prepayment or extinguishment costs, proceeds from the settlement of insurance claims, and distributions received from equity method investees. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. We are currently evaluating transition date, but we do not expect that the adoption of this guidance will have any impact on the Company's consolidated financial statements.
2. Acquisitions
2016 Acquisitions
IPP
On June 2, 2016, the Company acquired Innovation Packaging and Process, S.A. DE C.V. ("IPP"). Founded in 2007, IPP is an aseptic beverage co-packer based in San Luis Potosi, Mexico. The Company purchased IPP for total cash consideration of
$18.1 million
. We funded this acquisition through cash provided from operations. Our preliminary purchase price allocation includes goodwill of
$12.3 million
, property, plant, and equipment of
$9.1 million
, intangible assets subject to amortization of
$0.6 million
related to customer relationships, and liabilities assumed net of working capital items of
$3.9 million
. Customer relationships are being amortized over a
3
year term.
The acquisition was accounted for using the acquisition method of accounting. Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their preliminary fair values. Certain estimated values for the acquisition are not yet finalized pending the final purchase price allocations, and as a result, the Company's estimates and assumptions are subject to change within the measurement period as valuations are finalized. We expect to finalize the allocation of the purchase price within
one year
of the acquisition.
IPP produces a wide variety of products for WhiteWave and third parties. The acquisition of IPP provides the ability to grow in Latin American markets by providing in-house manufacturing. We have included IPP's results of operations in our condensed consolidated statements of income in our Americas Foods & Beverages segment from the date of acquisition.
2015 Acquisitions
Wallaby
On August 30, 2015, we completed our acquisition of Wallaby Yogurt Company, Inc. ("Wallaby") for approximately
$122.4 million
in cash. We funded this acquisition with borrowings under our credit facility. Founded in 1994 and based in American Canyon, California, Wallaby is a leading manufacturer and distributor of organic dairy yogurt products including Greek and Australian style yogurts and Kefir beverages. The addition of Wallaby strengthened and expanded our growing yogurt portfolio and provided entry into several fast-growing yogurt categories. The acquisition also provided us with additional West Coast manufacturing capabilities and further expansion and growth opportunities. We have included Wallaby's results of operations in our condensed consolidated statements of income in our Americas Foods & Beverages segment from the date of acquisition.
The acquisition was accounted for using the acquisition method of accounting. Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their fair values. The fair values were determined by management based in part on an independent valuation of assets acquired, which includes intangible assets of approximately
$57.1 million
and relate primarily to tradenames. Intangible assets subject to amortization of approximately
$9.1 million
are being amortized over a
15
year term and relate primarily to customer relationships.
During the the
nine months ended
September 30, 2016
, we recorded
$6.3 million
of purchase accounting adjustments to goodwill primarily related to the finalization of the fair value of certain intangible assets. See Note 5 "Goodwill and Intangible Assets." As of
September 30, 2016
, the Company has finalized its purchase price allocations related to the acquisition of Wallaby.
Vega
On August 1, 2015, we completed our acquisition of Sequel Naturals Ltd, the company that owns the Vega brand ("Vega") and is a pioneer and leader in plant-based nutrition products, for approximately
$553.6 million
in cash funded by borrowings under our credit facility. Vega offers a broad range of plant-based nutrition products - primarily powdered shakes and snack bars. This acquisition extended the Company's Plant-based Foods and Beverages platform into nutritional powders and bars, and provided additional innovation opportunities. We have included Vega's results of operations in our condensed consolidated statements of income in our Americas Foods & Beverages segment from the date of acquisition.
The acquisition was accounted for using the acquisition method of accounting. Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their fair values. The fair values were determined by management based in part on an independent valuation of assets acquired, which includes intangible assets of approximately
$296.9 million
and relate primarily to tradenames and customer relationships. Intangible assets subject to amortization of approximately
$106.9 million
are being amortized over a
15
year term and relate primarily to customer relationships.
For the
nine months ended
September 30, 2016
, we recorded
$4.4 million
of purchase accounting adjustments to goodwill primarily related to the finalization of certain income tax matters. See Note 5 "Goodwill and Intangible Assets." As of June 30, 2016, the Company has finalized its purchase price allocations related to the acquisition of Sequel Naturals Ltd.
EIEIO
On May 29, 2015, the Company acquired substantially all of the assets and liabilities of EIEIO, Inc. ("EIEIO"), the company that owns the Magicow brand and other brands, for
$40.2 million
in cash. We funded this acquisition with borrowings under our credit facility. EIEIO, which is based outside Austin, Texas, manufactures, markets and distributes bulk, bag-in-box and shelf stable creamers, coffee beverages and whip toppings. The acquisition of EIEIO expanded our portfolio of bulk coffee creamer and flavor dispensing products and provided new product capabilities to support growth in our away-from-home channel. EIEIO's results of operations have been included in our condensed consolidated statements of income of our Americas Foods & Beverages segment from the date of acquisition.
The acquisition was accounted for using the acquisition method of accounting. Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their fair values. The fair values were determined by management based in part on an independent valuation of assets acquired, which includes intangible assets of approximately
$21.8 million
and relate primarily to tradenames and customer relationships. Intangible assets subject to amortization of approximately
$10.2 million
are being amortized over a
15
year term and relate primarily to customer relationships. As of June 30, 2016, the Company has finalized its purchase price allocations related to the acquisition of EIEIO.
The following table summarizes the allocation of the purchase price to the fair value of assets acquired and liabilities assumed for the fiscal 2015 acquisitions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EIEIO
|
|
Vega
|
|
Wallaby
|
|
|
May 29, 2015
|
|
August 1, 2015
|
|
August 30, 2015
|
|
|
(In thousands)
|
|
Assets acquired:
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
1,546
|
|
|
$
|
5,235
|
|
|
$
|
1,740
|
|
|
Inventories
|
3,050
|
|
|
18,379
|
|
|
2,252
|
|
|
Other current assets
|
1,951
|
|
|
18,886
|
|
|
5,245
|
|
|
Property, plant and equipment
|
554
|
|
|
650
|
|
|
11,492
|
|
|
Trademarks
|
11,600
|
|
|
189,963
|
|
|
48,036
|
|
|
Intangible assets with finite lives
|
10,160
|
|
|
106,920
|
|
|
9,058
|
|
|
Other long-term assets
|
—
|
|
|
1,779
|
|
|
50
|
|
|
Liabilities assumed:
|
|
|
|
|
|
|
Accounts payable and other accruals
|
2,296
|
|
|
12,802
|
|
|
1,542
|
|
|
Deferred taxes
|
—
|
|
|
76,739
|
|
|
—
|
|
|
Other long-term liabilities
|
173
|
|
|
7,581
|
|
|
1,031
|
|
|
Total identifiable net assets
|
26,392
|
|
|
244,690
|
|
|
75,300
|
|
|
Goodwill
|
13,810
|
|
|
308,942
|
|
|
47,052
|
|
|
Total purchase price
|
$
|
40,202
|
|
|
$
|
553,632
|
|
|
$
|
122,352
|
|
Goodwill is calculated as the excess of consideration paid over the net assets acquired and represents synergies, organic growth and other benefits that are expected to arise from integrating the acquired businesses into our operations. Goodwill related to the 2016 and 2015 acquisitions is recorded in the Americas Foods & Beverages segment. Goodwill related to EIEIO and Wallaby is tax deductible. None of the goodwill recorded in the Vega or IPP acquisitions is tax deductible.
The following table summarizes unaudited supplemental pro forma consolidated results of operations as if we acquired EIEIO, Vega and Wallaby on January 1, 2015. No pro forma unaudited consolidated results of operations is presented for the
three
and
nine
months ended
September 30, 2016
or the corresponding prior periods related to the IPP acquisition as their results are not material to the condensed consolidated results of the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2015
|
|
Nine months ended September 30, 2015
|
|
|
(In thousands, except share data)
|
|
Net sales
|
$
|
1,024,720
|
|
|
$
|
2,955,693
|
|
|
Income before income taxes
|
76,886
|
|
|
202,578
|
|
|
Diluted earnings per common share
|
$
|
0.32
|
|
|
$
|
0.76
|
|
The historical financial information has been adjusted to give effect to the pro forma adjustments. These adjustments are based upon currently available information and certain assumptions. Therefore, the pro forma consolidated results are not necessarily indicative of what the Company’s consolidated results of operations actually would have been had it completed the acquisitions on January 1, 2015. The historical results included in the pro forma consolidated results do not purport to project future results of operations of the combined companies nor do they reflect the expected realization of any cost savings or revenue synergies associated with the acquisitions. The pro forma consolidated results reflect purchase accounting adjustments primarily related to depreciation and amortization expense, as well as interest expense, tax expense and acquisition related costs.
3. Joint Venture with China Mengniu Dairy Company
On January 5, 2014, the Company entered into a joint venture agreement with China Mengniu Dairy Company Limited (“Mengniu”), a leading Chinese dairy company. The joint venture manufactures, markets and sells a range of premium plant-
based beverage products in China. Under the terms of the agreement, the Company owns a
49%
stake in the venture while Mengniu owns a
51%
stake.
Based on the joint venture agreement, the Company has the ability to exert significant influence over the operations and financial policies of the joint venture and has in-substance common stock in the joint venture. Thus, the joint venture is accounted for as an equity-method investment.
No
contributions were made during the
three and nine
months ended
September 30, 2016
. The joint venture has a credit facility with Mengniu of Chinese yuan (CNY)
120 million
(
$18.0 million
USD) and, in 2016, entered into a new credit facility with Mengniu for up to an additional CNY of
90 million
(
$13.5 million
USD), for total capacity of CNY
210 million
(
$31.5 million
USD). The current facility is expected to support its liquidity requirements for 2016. We guarantee up to
49%
on the total commitment amount of this credit facility or Chinese yuan
102.9 million
(
$15.4 million
USD). As of
September 30, 2016
, the joint venture had borrowed Chinese yuan
190 million
(
$28.5 million
USD) under this facility.
4. Inventories
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
December 31,
2015
|
|
|
(In thousands)
|
|
Raw materials and supplies
|
$
|
141,105
|
|
|
$
|
120,922
|
|
|
Finished goods
|
154,978
|
|
|
149,815
|
|
|
Total
|
$
|
296,083
|
|
|
$
|
270,737
|
|
5. Goodwill and Intangible Assets
The changes in the carrying amount of goodwill for the
nine
months ended
September 30, 2016
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas Foods & Beverages
|
|
Europe Foods & Beverages
|
|
Total
|
|
|
(In thousands)
|
|
Balance at December 31, 2015
|
$
|
1,278,753
|
|
|
$
|
136,569
|
|
|
$
|
1,415,322
|
|
|
Acquisitions
|
12,257
|
|
|
—
|
|
|
12,257
|
|
|
Purchase price adjustments
(1)
|
(10,492
|
)
|
|
—
|
|
|
(10,492
|
)
|
|
Foreign currency translation
|
14,322
|
|
|
3,863
|
|
|
18,185
|
|
|
Balance at September 30, 2016
|
$
|
1,294,840
|
|
|
$
|
140,432
|
|
|
$
|
1,435,272
|
|
____________________________________
(1) Purchase price adjustments are the result of adjustments made for the finalization of the fair value of certain intangible assets and the finalization of certain income tax matters.
The gross carrying amount and accumulated amortization of our intangible assets, other than goodwill, as of
September 30, 2016
and
December 31, 2015
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
December 31, 2015
|
|
|
Gross
carrying
amount
|
|
Accumulated
amortization
|
|
Net carrying
amount
|
|
Gross
carrying
amount
|
|
Accumulated
amortization
|
|
Net carrying
amount
|
|
|
(In thousands)
|
|
Intangible assets with indefinite lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
(1)
|
$
|
790,067
|
|
|
$
|
—
|
|
|
$
|
790,067
|
|
|
$
|
777,718
|
|
|
$
|
—
|
|
|
$
|
777,718
|
|
|
Intangible assets with finite lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer-related and other
(1)
|
283,008
|
|
|
(54,223
|
)
|
|
228,785
|
|
|
270,801
|
|
|
(39,828
|
)
|
|
230,973
|
|
|
Supplier relationships
|
12,000
|
|
|
(2,640
|
)
|
|
9,360
|
|
|
12,000
|
|
|
(1,920
|
)
|
|
10,080
|
|
|
Non-compete agreements
(1)
|
1,337
|
|
|
(835
|
)
|
|
502
|
|
|
1,267
|
|
|
(592
|
)
|
|
675
|
|
|
Trademarks
|
968
|
|
|
(966
|
)
|
|
2
|
|
|
968
|
|
|
(965
|
)
|
|
3
|
|
|
Total
|
$
|
1,087,380
|
|
|
$
|
(58,664
|
)
|
|
$
|
1,028,716
|
|
|
$
|
1,062,754
|
|
|
$
|
(43,305
|
)
|
|
$
|
1,019,449
|
|
____________________________________
(1) The change in the carrying amount is the result of foreign currency translation and purchase accounting adjustments.
Amortization expense on finite-lived intangible assets for the three months ended
September 30, 2016
and
2015
was
$5.2 million
and
$4.9 million
, respectively. Amortization expense on finite-lived intangible assets for the
nine months ended
September 30, 2016
and
2015
was
$15.5 million
and
$10.7 million
, respectively.
6. Income Taxes
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.
The effective tax rate for the three months ended
September 30, 2016
was
32.5%
compared to
29.3%
for the three months ended
September 30, 2015
. The effective tax rate for the
nine months ended
September 30, 2016
was
33.2%
compared to
33.1%
for the
nine months ended
September 30, 2015
. The increase in the effective tax rates for the three and nine month comparative periods was due primarily to a decrease in favorable return to provision adjustments in 2015 related to changes in estimates associated with a credit for qualified research activities and an increase in the U.S. manufacturing deduction. The increase in the effective tax rate was partially offset by changes in the mix of income before income taxes between the U.S. and foreign countries, which were principally driven by an increase in the investment deduction in Belgium and the generally lower foreign tax rates associated with our Vega acquisition. Changes in the relative profitability of our operating segments, as well as changes to federal, state and foreign tax laws may cause the rate to change from historical rates.
7. Debt and Capital Lease Obligations
Our outstanding debt and capital lease obligations as of
September 30, 2016
and
December 31, 2015
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
December 31, 2015
|
|
|
|
Amount
outstanding
|
|
Interest
rate
|
|
Amount
outstanding
|
|
Interest
rate
|
|
|
|
(In thousands, except percentages)
|
|
|
Senior secured credit facilities
|
$
|
1,623,550
|
|
|
2.39
|
%
|
*
|
$
|
1,627,000
|
|
|
2.54
|
%
|
*
|
|
Senior unsecured notes
|
500,000
|
|
|
5.38
|
%
|
|
500,000
|
|
|
5.38
|
%
|
|
|
Capital lease obligations
|
20,622
|
|
|
|
|
21,635
|
|
|
|
|
|
Other borrowings
|
—
|
|
|
|
|
5,133
|
|
|
3.70
|
%
|
|
|
Less current portion
|
(46,374
|
)
|
|
|
|
(51,449
|
)
|
|
|
|
|
Less debt issuance costs
|
(20,582
|
)
|
|
|
|
(23,379
|
)
|
|
|
|
|
Total long-term debt
|
$
|
2,077,216
|
|
|
|
|
$
|
2,078,940
|
|
|
|
|
____________________________________
* Represents a weighted average rate, including applicable interest rate margins.
Senior Secured Credit Facilities
The Company maintains a credit agreement (the “Credit Agreement”) with Bank of America, N.A. as administrative agent, JPMorgan Chase Bank, N.A., as syndication agent, and the other lenders party thereto. The Credit Agreement governs our senior secured credit facilities, consisting of a
five
-year
$1.0 billion
revolving credit facility commitment, a
five
-year
$750 million
term loan A-1, and a
seven
-year
$750 million
term loan A-2.
As of
September 30, 2016
, we had outstanding borrowings of
$1.6 billion
under our
$2.5 billion
senior secured credit facilities consisting of
$157.3 million
outstanding under the revolving credit facility, a
$721.9 million
principal balance under term loan A-1, and a
$744.4 million
principal balance under term loan A-2. We have
$9.0 million
in outstanding letters of credit issued under our revolving credit facilities. We have additional borrowing capacity of approximately
$833.7 million
under our senior secured credit facilities, which amount will vary over time depending on our financial covenants and operating performance.
The senior secured credit facilities are secured by security interests and liens on substantially all of our domestic assets, and are guaranteed by our material domestic subsidiaries. As of
September 30, 2016
, borrowings under the revolving credit facility and term loan A-1 bore interest at a rate of LIBOR plus
1.75%
and the term loan A-2 at a rate of LIBOR plus
2.00%
per annum.
Alpro Revolving Credit Facility
On June 29, 2015, Alpro entered into a revolving credit facility not to exceed
€30.0 million
or its currency equivalent. The facility is unsecured and guaranteed by the Company. The facility is available for working capital and other general purposes of Alpro and for the issuance of up to
€30.0 million
letters of credit or its currency equivalent. At
September 30, 2016
and
December 31, 2015
, there were no outstanding borrowings.
Vega Revolving Credit Facility
In April, 2016, Vega increased the limit on its uncommitted revolving credit facility from
$10.0 million
Canadian dollars ("CAD") to not exceed
$15.0 million
CAD. The facility is unsecured and guaranteed by the Company. The facility is available for working capital and other general purposes of Vega. At
September 30, 2016
, there were
no
outstanding borrowings under this facility. At
December 31, 2015
, there was
$7.1 million
CAD (
$5.1 million
USD) outstanding in borrowings under the facility.
Senior Unsecured Notes
In 2014, we issued
$500.0 million
in aggregate principal amount of senior notes. The notes mature on October 1, 2022 and bear interest at a rate of
5.375%
per annum payable on April 1 and October 1 of each year.
Capital Lease Obligations
We are party to leases of certain operating facilities and equipment under capital lease arrangements which bear interest at rates from
3.1%
to
8.0%
and have expiration dates through
2033
. These assets are included in property, plant, and equipment, net, in the condensed consolidated balance sheets.
8. Derivative Financial Instruments and Fair Value Measurement
The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by derivative instruments include interest rate risk, foreign currency risk and commodity price risk. Derivative contracts are entered into for periods consistent with the related underlying exposure and do not constitute positions independent of those exposures. The Company does not enter into derivative instruments for trading or speculative purposes.
Credit risk under these arrangements is believed to be remote as the counterparties to the derivatives are major financial institutions; however, if any of the counterparties to the derivative agreements become unable to fulfill their obligation, we may lose the financial benefits of these arrangements.
Interest Rates
In connection with our initial public offering, on October 31, 2012, Dean Foods novated to us certain of its interest rate swaps (the “2017 swaps”) with a notional value of
$650 million
and a maturity date of
March 31, 2017
. The 2017 swaps effectively change the interest payments on a portion of our debt from variable-rate, based on short term LIBOR, to fixed-rate payments. We are the sole counterparty to the financial institutions under these swap agreements and are directly responsible for any required settlements, and the sole beneficiary of any receipts of funds, pursuant to their terms. We are subject to market risk with respect to changes in the underlying benchmark interest rate that impact the fair value of the 2017 swaps.
The following table summarizes the terms of the 2017 swap agreements as of
September 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
Fixed Interest Rates
|
|
Expiration Date
|
|
Notional Amount
|
|
|
|
|
|
(In thousands)
|
|
2.75% to 3.19%
|
|
March 31, 2017
|
|
$
|
650,000
|
|
We have not designated such contracts as hedging instruments; therefore, the 2017 swap agreements are marked to market at the end of each reporting period and a derivative asset or liability is recorded in our condensed consolidated balance sheets. We recorded
gains
/(losses) on these contracts of
$0.5 million
and
$(2.1) million
for the
three and nine
months ended
September 30, 2016
, respectively. For the
three and nine
months ended
September 30, 2015
, losses on these contracts were
$2.3 million
and
$7.1 million
, respectively. Gains and losses are recorded in other expense, net in our condensed consolidated statements of income. A summary of these open swap agreements recorded at fair value in our condensed consolidated balance sheets at
September 30, 2016
and
December 31, 2015
is included in the fair value table below.
Commodities
We are exposed to commodity price fluctuations, including organic and conventional milk, butterfat, almonds, organic and non-genetically modified (“non-GMO”) soybeans, coconut, cashews, sweeteners, and other commodity costs used in the manufacturing, packaging, and distribution of our products, including utilities, natural gas, resin, and diesel fuel. 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
eighteen month's
anticipated requirements, depending on the ingredient or commodity, but can be longer in limited cases. These contracts are considered normal purchases.
In addition to entering into forward purchase contracts, from time to time we may purchase over-the-counter hedge contracts from qualified financial institutions for commodities associated with the production and distribution of our products. Certain of these contracts offset the risk of increases in our commodity costs and are designated as cash flow hedges when appropriate. As of
September 30, 2016
, we have not entered into any commodity cash flow hedges.
Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to commodity price risk but do not meet the authoritative guidance for hedge accounting. From time to time, the Company enters into commodity forward contracts to fix the price of natural gas and diesel fuel purchases and other commodities at a future delivery date. Changes in the fair value of derivatives not designated in hedging relationships are recorded to cost of sales and selling, distribution, and marketing expenses in our condensed consolidated statements of income depending on commodity type. We recorded gains/(losses) on these contracts of
$(0.9) million
and
$1.3 million
for the
three and nine
months ended
September 30, 2016
, respectively. For the
three and nine
months ended
September 30, 2015
, we recorded losses of
$8.0 million
and
$8.9 million
, respectively. As of
September 30, 2016
, the Company had outstanding contracts for the purchase of
19.9 million
gallons of diesel expiring throughout 2016 and 2017. A summary of our open commodities contracts recorded at fair value in our condensed consolidated balance sheets at
September 30, 2016
and
December 31, 2015
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.
Foreign Currency
Our international operations represented approximately
19%
of net sales for the
nine
months ended
September 30, 2016
and
2015
. Sales in foreign countries, as well as certain expenses related to those sales, are transacted in currencies other than our reporting currency, the U.S. dollar. Our foreign currency exchange rate risk primarily consists of the Euro, British pound, Canadian dollar, Mexican peso and Chinese yuan related to net sales and expenses in currencies other than the functional
currency of the business. We may, from time to time, employ derivative financial instruments to manage our exposure to fluctuations in foreign currency rates or enter into forward currency exchange contracts to hedge our net investment and intercompany payable or receivable balances in foreign operations. These contracts are designated as cash flow hedges and are recorded as an asset or liability in our condensed consolidated balance sheets at fair value with an offset to accumulated other comprehensive loss to the extent the hedge is effective. Derivative gains and losses included in accumulated other comprehensive loss are reclassified into earnings as the underlying transaction occurs. As of
September 30, 2016
, the Company had an aggregate U.S. dollar equivalent of
$256.3 million
of U.S. dollar foreign currency contracts outstanding, expiring throughout 2016 and 2017 for an intercompany note receivable and commodity purchases denominated in a currency other than the functional currency. Any ineffectiveness in our foreign currency exchange hedges is recorded as an adjustment to cost of goods sold in our condensed consolidated statements of income. There was no material hedge ineffectiveness related to our foreign currency exchange contracts designated as hedging instruments during the
three and nine
months ended
September 30, 2016
and
2015
.
Fair Value - Derivatives
As of
September 30, 2016
and
December 31, 2015
, derivatives recorded at fair value in our condensed consolidated balance sheets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets
|
|
Derivative liabilities
|
|
|
September 30,
2016
|
|
December 31,
2015
|
|
September 30,
2016
|
|
December 31,
2015
|
|
|
(In thousands)
|
|
Derivatives designated as Hedging Instruments
|
|
|
|
|
|
|
|
|
Foreign currency contracts - current
(1)(3)
|
$
|
1,761
|
|
|
$
|
483
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
Total
|
1,761
|
|
|
483
|
|
|
10
|
|
|
—
|
|
|
Derivatives not designated as Hedging Instruments
|
|
|
|
|
|
|
|
|
Interest rate swap contracts - current
(1)
|
—
|
|
|
—
|
|
|
7,852
|
|
|
15,228
|
|
|
Commodities contracts - current
(1)
|
936
|
|
|
—
|
|
|
3,484
|
|
|
11,093
|
|
|
Commodities contracts - noncurrent
(2)
|
380
|
|
|
—
|
|
|
—
|
|
|
1,551
|
|
|
Interest rate swap contracts - noncurrent
(2)
|
—
|
|
|
—
|
|
|
—
|
|
|
3,142
|
|
|
Total
|
$
|
1,316
|
|
|
$
|
—
|
|
|
$
|
11,336
|
|
|
$
|
31,014
|
|
|
Total derivatives
|
$
|
3,077
|
|
|
$
|
483
|
|
|
$
|
11,346
|
|
|
$
|
31,014
|
|
____________________________________
|
|
|
|
(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, respectively, in our condensed consolidated balance sheets.
|
|
|
|
|
(2)
|
Derivative assets and liabilities that have settlement dates greater than 12 months from the respective balance sheet date were included in identifiable intangible and other assets, net and other long-term liabilities, respectively, in our condensed consolidated balance sheets.
|
|
|
|
|
(3)
|
$1.6 million
of the derivative asset balance as of September, 30 2016 relates to a foreign currency hedge on an intercompany note for which the change in fair value offsets the impact of the note being re-measured into the functional currency.
|
Gains on derivatives designated as cash flow hedges reclassified from accumulated other comprehensive loss into income for the
three and nine
months ended
September 30, 2016
and
2015
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(In thousands)
|
|
Realized gains/(losses) on foreign currency contracts
(1)
|
$
|
(31
|
)
|
|
$
|
623
|
|
|
$
|
24
|
|
|
$
|
982
|
|
____________________________________
(1) Recorded in cost of sales in our condensed consolidated statements of income. See Note 10 "Accumulated Other Comprehensive Loss."
Based on current exchange rates, we estimate that $
1.8 million
in net
gains
of hedging activity related to our foreign currency contracts will be reclassified from accumulated other comprehensive loss to operating results 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 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.
|
A summary of our financial assets and liabilities subject to recurring fair value measurements and the basis for that measurement according to the levels in the fair value hierarchy as of
September 30, 2016
and
December 31, 2015
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value as of September 30, 2016
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
(In thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
Cash equivalents
|
$
|
88
|
|
|
$
|
88
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Supplemental Executive Retirement Plan investments
|
3,747
|
|
|
3,747
|
|
|
—
|
|
|
—
|
|
|
Qualifying insurance policies
(1)
|
11,001
|
|
|
—
|
|
|
—
|
|
|
11,001
|
|
|
Foreign currency contracts
|
1,761
|
|
|
—
|
|
|
1,761
|
|
|
—
|
|
|
Commodities contracts
|
1,316
|
|
|
—
|
|
|
1,316
|
|
|
—
|
|
|
Deferred compensation investments
|
5,079
|
|
|
—
|
|
|
5,079
|
|
|
—
|
|
|
Total assets
|
$
|
22,992
|
|
|
$
|
3,835
|
|
|
$
|
8,156
|
|
|
$
|
11,001
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
Commodities contracts
|
3,484
|
|
|
—
|
|
|
3,484
|
|
|
—
|
|
|
Interest rate swap contracts
|
7,852
|
|
|
—
|
|
|
7,852
|
|
|
—
|
|
|
Total liabilities
|
$
|
11,346
|
|
|
$
|
—
|
|
|
$
|
11,346
|
|
|
$
|
—
|
|
____________________________________
(1) Change in value since December 31, 2015 due to foreign currency translation.
There were no transfers between the three levels of the fair value hierarchy during the nine months ended
September 30, 2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value as of December 31, 2015
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
(In thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
Cash equivalents
|
$
|
107
|
|
|
$
|
107
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Supplemental Executive Retirement Plan investments
|
3,164
|
|
|
3,164
|
|
|
—
|
|
|
—
|
|
|
Qualifying insurance policies
|
10,631
|
|
|
—
|
|
|
—
|
|
|
10,631
|
|
|
Foreign currency contracts
|
483
|
|
|
—
|
|
|
483
|
|
|
—
|
|
|
Deferred compensation investments
|
4,359
|
|
|
—
|
|
|
4,359
|
|
|
—
|
|
|
Total assets
|
$
|
18,744
|
|
|
$
|
3,271
|
|
|
$
|
4,842
|
|
|
$
|
10,631
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Commodities contracts
|
$
|
12,644
|
|
|
$
|
—
|
|
|
$
|
12,644
|
|
|
$
|
—
|
|
|
Interest rate swap contracts
|
18,370
|
|
|
—
|
|
|
18,370
|
|
|
—
|
|
|
Total liabilities
|
$
|
31,014
|
|
|
$
|
—
|
|
|
$
|
31,014
|
|
|
$
|
—
|
|
We sponsor
two
deferred compensation plans, Pre-2005 Executive Deferred Compensation Plan and Post-2004 Executive Deferred Compensation Plan, under which certain employees with a base compensation of at least
$150,000
may elect to defer receiving payment for a portion of their salary and bonus until periods after their retirements or upon separation from service. The investments are classified as trading securities and the assets related to these plans are primarily invested in money mutual funds and are held at fair value. We classify these assets as Level 2 as fair value can be corroborated based on quoted market prices for identical or similar instruments in markets that are not active. Changes in the fair value are recorded in general and administrative expense in our condensed consolidated statements of income.
Additionally, we maintain a Supplemental Executive Retirement Plan (“SERP”), which is a nonqualified deferred compensation arrangement for our executive officers and other employees earning compensation in excess of the maximum compensation that can be taken into account with respect to our 401(k) plan. The SERP is designed to provide these employees with retirement benefits that are equivalent, as a percentage of total compensation, to the benefits provided to other employees. The investments are classified as trading securities and are primarily invested in money market funds and held at fair value. We classify these assets as Level 1 as fair value can be corroborated based on quoted market prices for identical instruments in active markets. Changes in the fair value are recorded in general and administrative expense in our condensed consolidated statements of income.
Our assets and liabilities recorded at fair value on a recurring basis include cash equivalent money market funds. Due to their near-term maturities, the carrying amounts of trade accounts receivable and accounts payable are considered equivalent to fair value. In addition, because the interest rates on our senior secured credit facilities are variable, their fair values approximate their carrying values.
We estimate the fair value of our senior unsecured notes primarily using quoted market prices in markets that are not active. As of
September 30, 2016
, the carrying value and fair value of the Company's borrowings was
$500.0 million
and
$570.0 million
, respectively. See Note 7 "Debt and Capital Lease Obligations." As of December 31, 2015, the carrying value and fair value of the Company's borrowings was
$500.0 million
and
$521.3 million
, respectively. If measured at fair value in the condensed consolidated balance sheets, our senior unsecured notes would be classified in Level 2 of the fair value hierarchy.
The fair value of our interest rate swaps is determined based on the notional amounts of the swaps and the forward LIBOR curve relative to the fixed interest rates under the swap agreements. The fair value of our commodities contracts is based on the quantities and fixed prices under the agreements and quoted forward commodity prices. The fair value of our foreign currency contracts is based on the notional amounts and rates under the contracts and observable market forward exchange rates. 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 market transactions of spot currency rates and forward currency prices. We did not significantly change our valuation techniques from prior periods.
Our qualified pension plan investments are comprised of qualifying insurance policies and the guaranteed premiums are invested in the general assets of the insurance company. We classify these assets as Level 3 as there is little or no market data to support the fair value. The qualifying insurance policies are valued at the amount guaranteed by the insurer to pay out the insured benefits. The funding policy is to contribute assets at least equal in amount to regulatory minimum requirements. Funding is based on legal requirements, tax considerations, and investment opportunities. See Note 11 “Employee Retirement Plans.”
9. Share-Based Compensation
Under the Amended and Restated 2012 Stock Incentive Plan (the "2012 SIP"), a total of
26,850,000
shares of our common stock were reserved for issuance upon the exercise of stock options or the vesting of restricted stock units (“RSUs”), performance stock units ("PSUs") or restricted stock awards that may be issued to our employees, non-employee directors and consultants. The 2012 SIP also permits awards of stock appreciation rights (“SARs”) and phantom shares as part of our long-term incentive compensation program. In general, awards granted to our employees under the 2012 SIP 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 anniversary of the grant date. Unvested awards vest immediately in the following circumstances: (i) an employee retires after reaching the age of
65
, (ii) in certain cases upon an employee’s death or qualified disability, (iii) an employee with
10
years of service retires after reaching the age of
55
, or (vi) upon a change of control, except for PSUs and all equity awards granted after 2014 to the Company's executive officers.
Upon the completion of the acquisition of the Company by Danone S.A., all of the Company's outstanding share-based compensation awards will vest. See Note 16
The Proposed Merger with Danone
for further discussion.
Share-Based Compensation Expense
The following table summarizes the share-based compensation expense recognized for the Company’s equity and liability classified plans in the
three and nine
months ended
September 30, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(In thousands)
|
|
Equity awards:
|
|
|
|
|
|
|
|
|
Stock options
|
$
|
1,541
|
|
|
$
|
2,353
|
|
|
$
|
7,249
|
|
|
$
|
9,410
|
|
|
RSUs
|
2,603
|
|
|
3,676
|
|
|
11,289
|
|
|
13,277
|
|
|
PSUs
|
1,374
|
|
|
1,075
|
|
|
6,242
|
|
|
4,850
|
|
|
Equity awards share-based compensation expense
|
5,518
|
|
|
7,104
|
|
|
24,780
|
|
|
27,537
|
|
|
|
|
|
|
|
|
|
|
|
Liability awards:
|
|
|
|
|
|
|
|
|
Phantom shares
|
—
|
|
|
62
|
|
|
13
|
|
|
802
|
|
|
SARs
|
357
|
|
|
(282
|
)
|
|
1,126
|
|
|
4,693
|
|
|
Liability awards share-based compensation expense
|
357
|
|
|
(220
|
)
|
|
1,139
|
|
|
5,495
|
|
|
Total share-based compensation expense
|
$
|
5,875
|
|
|
$
|
6,884
|
|
|
$
|
25,919
|
|
|
$
|
33,032
|
|
Share-based compensation expense is recorded within general and administrative expense. Except for PSUs, this expense is recognized 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 anniversary of the grant date, unless the employee has reached the retirement age of
65
or is
55
years of age and has
10
years of service, in which case all share-based compensation expense is recognized at the time of grant.
Stock Options
Under the terms of the 2012 SIP, our employees may be granted options to purchase our common stock at a price equal to the market price on the date the option is granted. The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model with the following assumptions:
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
|
2016
|
|
2015
|
|
Expected volatility
|
28% - 29%
|
|
28% - 29%
|
|
Expected dividend yield
|
0%
|
|
0%
|
|
Expected option term
|
6 years
|
|
6 years
|
|
Risk-free rate of return
|
1.14% to 1.70%
|
|
1.45% to 1.82%
|
|
Forfeiture rate
|
—%
|
|
—%
|
Since the Company’s common stock did not have a long history of being publicly traded at grant date, the expected term was determined under the simplified method, using an average of the contractual term and vesting period of the stock options. For stock options granted in 2015 and thereafter, the expected volatility assumption was calculated based on a blend of compensation peer group analysis of stock price volatility with a
six
-year look back period ending on the grant date, and the Company's current implied stock price volatility. For stock options granted prior to 2015, the expected volatility assumption was calculated based solely on a compensation peer group analysis of stock price volatility with a
six
-year look back period ending on the grant date. The risk-free rates were based on the average implied yield available on
five
-year and
seven
-year U.S. Treasury issues. The forfeiture rates are based on historical rates and the Company elected to use a
0%
forfeiture rate due to historically immaterial forfeiture rates. We have not paid, and do not anticipate paying, a cash dividend on our common stock.
The following table summarizes stock option activity during the
nine
months ended
September 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of options
|
|
Weighted average
exercise price
|
|
Weighted average
contractual life in years
|
|
Aggregate
intrinsic value
|
|
Options outstanding at January 1, 2016
|
9,440,803
|
|
|
$
|
19.14
|
|
|
|
|
|
|
Granted
|
813,267
|
|
|
$
|
36.59
|
|
|
|
|
|
|
Forfeited, canceled and expired
(1)
|
(53,119
|
)
|
|
$
|
40.59
|
|
|
|
|
|
|
Exercised (including tax withholding)
(1)
|
(1,115,518
|
)
|
|
$
|
19.83
|
|
|
|
|
|
|
Options outstanding at September 30, 2016
|
9,085,433
|
|
|
$
|
20.49
|
|
|
5.51
|
|
$
|
308,323,353
|
|
|
Options vested and expected to vest at September 30, 2016
|
9,085,433
|
|
|
$
|
20.49
|
|
|
5.51
|
|
$
|
308,323,353
|
|
|
Options exercisable at September 30, 2016
|
7,499,147
|
|
|
$
|
17.42
|
|
|
4.84
|
|
$
|
277,562,397
|
|
____________________________________
|
|
|
|
(1)
|
Pursuant to the terms of the 2012 SIP, options that are forfeited, canceled or expired may be available for future grants; however
shares delivered to or withheld by the Company for the payment of the exercise price of an option and/or tax withholding related to an exercise, and shares subject to an option that are not issued upon the net exercise of such option, are not added back to the pool of shares available for future awards.
|
During the
nine
months ended
September 30, 2016
, we received
$9.4 million
of cash from stock option exercises. At
September 30, 2016
, there is
$8.4 million
of unrecognized stock option expense, all of which is related to non-vested awards. This compensation expense is expected to be recognized over the weighted-average remaining vesting period of
1.66
years.
Restricted Stock Units
RSUs are issued to certain senior employees under the 2012 SIP as part of our long-term incentive program. An RSU represents the right to receive one share of common stock in the future. RSUs have
no
exercise price. RSUs granted to employees vest ratably over
three years
.
The following table summarizes RSU activity during the
nine
months ended
September 30, 2016
:
|
|
|
|
|
|
|
|
RSUs outstanding January 1, 2016
|
839,252
|
|
|
RSUs granted
|
409,415
|
|
|
Shares issued upon vesting of RSUs (including tax withholding)
(1)
|
(443,594
|
)
|
|
RSUs canceled
(1)
|
(33,659
|
)
|
|
RSUs outstanding at September 30, 2016
|
771,414
|
|
|
Weighted average grant date fair value per share
|
$
|
34.99
|
|
__________________________________
|
|
|
|
(1)
|
Pursuant to the terms of the 2012 SIP, RSUs that are canceled or forfeited before they vest may be available for future grants; however
shares delivered to or withheld by the Company for the payment of the employee's tax withholding related to an RSU vesting are not added back to the pool of shares available for future awards.
|
At
September 30, 2016
, there is
$14.1 million
of total unrecognized RSU expense, all of which is related to unvested awards. This compensation expense is expected to be recognized over the weighted-average remaining vesting period of
1.68
years.
Performance Stock Units
In February 2015 and 2016, we granted PSUs to our executive officers under the 2012 SIP as part of our long-term incentive compensation program. PSUs vest based on a comparison of the Company’s diluted adjusted EPS growth over the
three
-year performance period to the diluted adjusted EPS growth of companies in the S&P 500 over the same period. In the first year, one third of the PSUs will vest based on our diluted adjusted EPS growth in that year compared to the
one
-year diluted adjusted EPS growth of S&P 500 companies. In the second year, one third of the PSUs will vest based on our cumulative diluted adjusted EPS growth over the past two years compared to the cumulative
two
-year diluted adjusted EPS growth of S&P 500 companies. In the third year, one third of the PSUs will vest based on our cumulative diluted adjusted EPS growth over the past three years compared to the cumulative three-year diluted adjusted EPS growth of S&P 500 companies. PSUs will be converted to common stock upon vesting and the payout range is
0
to
200%
.
We recognize share-based compensation expense in the condensed consolidated statements of income over the
three
year performance period based on the Company’s estimated relative performance for each vesting tranche. Accordingly, for the grant made each year we recognize
100%
of the estimated first year expense,
50%
of the estimated second year expense and
33.3%
of the estimated third year expense. As of
September 30, 2016
, based upon our assessment of our relative performance versus the S&P 500, the 2015 PSU awards have been expensed based upon a target payout
188%
for the year two tranche (2015-2016) and
158%
for the year three tranche (2015-2017). As of
September 30, 2016
, the 2016 PSU awards have been expensed based upon a target payout assumption of
175%
for year one tranche (2016-2017),
138%
for tranche year two (2016-2018), and
125%
for tranche year three (2016-2019).
The following table summarizes PSU activity during the
nine
months ended
September 30, 2016
:
|
|
|
|
|
|
|
|
PSUs outstanding January 1, 2016
|
107,358
|
|
|
PSUs granted
|
155,846
|
|
|
Shares issued upon vesting of PSUs
(1)
|
(71,580
|
)
|
|
PSUs canceled
(1)
|
—
|
|
|
PSUs outstanding at September 30, 2016
|
191,624
|
|
|
Weighted average grant date fair value per share
|
$
|
37.16
|
|
__________________________________________
|
|
|
|
(1)
|
Pursuant to the terms of the 2012 SIP, PSUs that are canceled or forfeited before they vest may be available for future grants; however shares delivered to or withheld by the Company for the payment of the employee's tax withholding related to a PSU vesting are not added back to the pool of shares available for future awards. Shares issued upon vesting of PSUs on April 18, 2016 were
71,580
, which represented
200%
payout.
|
At
September 30, 2016
there is
$2.3 million
of total unrecognized PSU expense, all of which is related to unvested awards. This compensation expense is expected to be recognized over the weighted-average remaining vesting period of
1.40
years.
Phantom Shares
We previously granted phantom shares under the 2012 SIP as part of our long-term incentive compensation program, which are similar to RSUs in that they are based on the price of WhiteWave stock and vest ratably over a
three
-year period, but are cash-settled based upon the value of WhiteWave stock at each vesting period. The fair value of the awards was re-measured at each reporting period. As of March 31, 2016 all phantom shares have been cash settled.
Stock Appreciation Rights
We previously granted SARs under the 2012 SIP as part of our long-term incentive compensation program, which are similar to stock options in that they are based on the price of WhiteWave stock and vest ratably over a
three
-year period, but are cash-settled based upon the value of WhiteWave stock at the exercise date. We have not granted any SARs since 2013 and all outstanding SARs are fully vested.
The fair value of the awards is re-measured at each reporting period. A liability has been recorded in current liabilities in our condensed consolidated balance sheets totaling
$1.8 million
and
$2.7 million
as of
September 30, 2016
and
December 31, 2015
, respectively. The following table summarizes SARs activity during the
nine
months ended
September 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
SARs
|
|
Weighted
average
exercise price
|
|
Weighted average
contractual life in years
|
|
Aggregate
intrinsic value
|
|
SARs outstanding at January 1, 2016
|
122,031
|
|
|
$
|
16.45
|
|
|
|
|
|
|
Granted
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
Forfeited and canceled
(1)
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
Exercised
|
(74,397
|
)
|
|
$
|
16.44
|
|
|
|
|
|
|
SARs outstanding at September 30, 2016
|
47,634
|
|
|
$
|
16.45
|
|
|
6.16
|
|
$
|
1,809,028
|
|
|
SARs vested and expected to vest at September 30, 2016
|
47,634
|
|
|
$
|
16.45
|
|
|
6.16
|
|
$
|
1,809,028
|
|
|
SARs exercisable at September 30, 2016
|
47,634
|
|
|
$
|
16.45
|
|
|
6.16
|
|
$
|
1,809,028
|
|
_____________________________________
|
|
|
|
(1)
|
Pursuant to the terms of the 2012 SIP, SARs that are canceled or forfeited may be available for future grants.
|
10. Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss by component for the
three
months ended
September 30, 2016
were as follows (net of tax):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
instruments
(1)
|
|
Defined benefit pension plan
(2)
|
|
Foreign currency translation adjustment
|
|
Total
|
|
|
|
|
(In thousands)
|
|
|
|
Balance at July 1, 2016
|
$
|
(649
|
)
|
|
$
|
(778
|
)
|
|
$
|
(106,575
|
)
|
|
$
|
(108,002
|
)
|
|
Other comprehensive income/(loss) before reclassifications
|
245
|
|
|
(14
|
)
|
|
488
|
|
|
719
|
|
|
Amounts reclassified from accumulated other comprehensive income/(loss)
|
(79
|
)
|
|
5
|
|
|
—
|
|
|
(74
|
)
|
|
Other comprehensive income/(loss), net of tax benefit of $61
|
166
|
|
|
(9
|
)
|
|
488
|
|
|
645
|
|
|
Balance at September 30, 2016
|
$
|
(483
|
)
|
|
$
|
(787
|
)
|
|
$
|
(106,087
|
)
|
|
$
|
(107,357
|
)
|
____________________________________
|
|
|
|
(1)
|
The accumulated other comprehensive loss reclassification components affect cost of sales. See Note 8 “Derivative Financial Instruments and Fair Value Measurement.”
|
|
|
|
|
(2)
|
The accumulated other comprehensive loss reclassification components are related to amortization of unrecognized actuarial losses and prior service costs which are both included in the computation of net periodic pension cost. See Note 11 “Employee Retirement Plans.”
|
The changes in accumulated other comprehensive loss by component for the
nine
months ended
September 30, 2016
were as follows (net of tax):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
instruments
(1)
|
|
Defined benefit pension plan
(2)
|
|
Foreign currency translation adjustment
|
|
Total
|
|
|
|
|
(In thousands)
|
|
|
|
Balance at January 1, 2016
|
$
|
505
|
|
|
$
|
(761
|
)
|
|
$
|
(131,278
|
)
|
|
$
|
(131,534
|
)
|
|
Other comprehensive income/(loss) before reclassifications
|
(964
|
)
|
|
(29
|
)
|
|
25,191
|
|
|
24,198
|
|
|
Amounts reclassified from accumulated other comprehensive income/(loss)
|
(24
|
)
|
|
3
|
|
|
—
|
|
|
(21
|
)
|
|
Other comprehensive income/(loss), net of tax benefit of $17
|
(988
|
)
|
|
(26
|
)
|
|
25,191
|
|
|
24,177
|
|
|
Balance at September 30, 2016
|
$
|
(483
|
)
|
|
$
|
(787
|
)
|
|
$
|
(106,087
|
)
|
|
$
|
(107,357
|
)
|
____________________________________
|
|
|
|
(1)
|
The accumulated other comprehensive loss reclassification components affect cost of sales. See Note 8 “Derivative Financial Instruments and Fair Value Measurement.”
|
|
|
|
|
(2)
|
The accumulated other comprehensive loss reclassification components are related to amortization of unrecognized actuarial losses and prior service costs which are both included in the computation of net periodic pension cost. See Note 11 “Employee Retirement Plans.”
|
The changes in accumulated other comprehensive loss by component for the
three
months ended
September 30, 2015
were as follows (net of tax):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
instruments
(1)
|
|
Defined benefit pension plan
(2)
|
|
Foreign currency translation adjustment
|
|
Total
|
|
|
|
|
(In thousands)
|
|
|
|
Balance at July 1, 2015
|
$
|
837
|
|
|
$
|
(1,888
|
)
|
|
$
|
(87,090
|
)
|
|
$
|
(88,141
|
)
|
|
Other comprehensive income/(loss) before reclassifications
|
(2,132
|
)
|
|
17
|
|
|
(13,305
|
)
|
|
(15,420
|
)
|
|
Amounts reclassified from accumulated other comprehensive income/(loss)
|
623
|
|
|
(24
|
)
|
|
—
|
|
|
599
|
|
|
Other comprehensive income/(loss), net of tax benefit of $296
|
(1,509
|
)
|
|
(7
|
)
|
|
(13,305
|
)
|
|
(14,821
|
)
|
|
Balance at September 30, 2015
|
$
|
(672
|
)
|
|
$
|
(1,895
|
)
|
|
$
|
(100,395
|
)
|
|
$
|
(102,962
|
)
|
____________________________________
|
|
|
|
(1)
|
The accumulated other comprehensive loss reclassification components affect cost of sales. See Note 8 “Derivative Financial Instruments and Fair Value Measurement.”
|
|
|
|
|
(2)
|
The accumulated other comprehensive loss reclassification components are related to amortization of unrecognized actuarial losses and prior service costs which are both included in the computation of net periodic pension cost. See Note 11 “Employee Retirement Plans.”
|
The changes in accumulated other comprehensive loss by component for the
nine
months ended
September 30, 2015
were as follows (net of tax):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
instruments
(1)
|
|
Defined benefit pension plan
(2)
|
|
Foreign currency translation adjustment
|
|
Total
|
|
|
|
|
(In thousands)
|
|
|
|
Balance at January 1, 2015
|
$
|
774
|
|
|
$
|
(2,050
|
)
|
|
$
|
(59,842
|
)
|
|
$
|
(61,118
|
)
|
|
Other comprehensive income/(loss) before reclassifications
|
(2,428
|
)
|
|
227
|
|
|
(40,553
|
)
|
|
(42,754
|
)
|
|
Amounts reclassified from accumulated other comprehensive income/(loss)
|
982
|
|
|
(72
|
)
|
|
—
|
|
|
910
|
|
|
Other comprehensive income/(loss), net of tax benefit of $181
|
(1,446
|
)
|
|
155
|
|
|
(40,553
|
)
|
|
(41,844
|
)
|
|
Balance at September 30, 2015
|
$
|
(672
|
)
|
|
$
|
(1,895
|
)
|
|
$
|
(100,395
|
)
|
|
$
|
(102,962
|
)
|
____________________________________
|
|
|
|
(1)
|
The accumulated other comprehensive loss reclassification components affect cost of sales. See Note 8 “Derivative Financial Instruments and Fair Value Measurement.”
|
|
|
|
|
(2)
|
The accumulated other comprehensive loss reclassification components are related to amortization of unrecognized actuarial losses and prior service costs which are both included in the computation of net periodic pension cost. See Note 11 “Employee Retirement Plans.”
|
11. Employee Retirement Plans
We provide employee retirement benefits under 401(k) and defined benefit plans. Additionally, we contribute to
one
multi-employer pension plan on behalf of certain employees. We have defined benefit pension plans for certain of our Europe Foods and Beverages segment employees, under which the benefits are based on years of service and employee compensation.
The components of net periodic benefit cost for our pension plans for the
three and nine
months ended
September 30, 2016
and
2015
are detailed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(In thousands)
|
|
Components of net periodic benefit cost:
|
|
|
|
|
|
|
|
|
Service cost
|
$
|
404
|
|
|
$
|
444
|
|
|
$
|
1,214
|
|
|
$
|
1,332
|
|
|
Interest cost
|
95
|
|
|
84
|
|
|
285
|
|
|
252
|
|
|
Expected return on plan assets
|
(71
|
)
|
|
(68
|
)
|
|
(211
|
)
|
|
(204
|
)
|
|
Amortization:
|
|
|
|
|
|
|
|
|
Unrecognized net loss
|
1
|
|
|
24
|
|
|
3
|
|
|
72
|
|
|
Net periodic benefit cost
|
$
|
429
|
|
|
$
|
484
|
|
|
$
|
1,291
|
|
|
$
|
1,452
|
|
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 operating leases, which are primarily for operating facilities, office space, and equipment, have lease terms ranging from
one
to
14
years. Rent expense was
$9.4 million
and
$8.4 million
for the three months ended
September 30, 2016
and
2015
, respectively, and
$27.5 million
and
$18.7 million
for the
nine months ended
September 30, 2016
and
2015
, respectively. The Company leases certain operating facilities and equipment under capital lease arrangements. These assets are included in property, plant, and equipment, net, on the condensed consolidated balance sheets.
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, including soybeans and organic raw milk. We enter into these
contracts from time to time to ensure a sufficient supply of raw materials. In addition, we have contractual obligations to purchase various services that are part of our production and distribution process.
Litigation, Investigations, and Audits
The Company is involved in various litigation, investigations, and audit proceedings in the normal course of business. It is management’s opinion, after consultation with counsel and a review of the facts, that a material adverse effect on the financial position, liquidity, or results of operations, or cash flows of the Company is not probable or reasonably possible.
13. Segment, Geographic, and Customer Information
Effective January 1, 2016, we report results of operations through
two
reportable segments: Americas Foods & Beverages and Europe Foods & Beverages. This reporting structure aligns with the way our Chief Operating Decision Maker ("CODM"), our CEO, monitors operating performance, allocates resources, and deploys capital. In 2015, we reported results of operations through
three
reportable segments: Americas Foods & Beverages, Americas Fresh Foods and Europe Foods & Beverages. In connection with our management restructure in early 2016, we consolidated the historical Americas Foods & Beverages and Americas Fresh Foods segments into a single Americas Foods & Beverages segment. Accordingly, prior year segment data has been recast to reflect this new segment structure.
The Americas Foods & Beverages segment offers products in the plant-based foods and beverages, coffee creamers and beverages, premium dairy products and organic produce categories throughout North America. Our Europe Foods & Beverages segment offers plant-based food and beverage products throughout Europe. We sell our products to a variety of customers, including grocery stores, mass merchandisers, club stores, health food stores and convenience stores, as well as various away-from-home channels, including foodservice outlets, across North America and Europe. We sell our products in North America and Europe primarily through our direct sales force, independent brokers, regional brokers, and distributors. We utilize
twelve
manufacturing plants, multiple distribution centers, and
three
strategic co-packers across North America. Additionally, we have
three
plants across Europe in the United Kingdom, Belgium and France, each supported by an integrated supply chain. We also utilize third-party co-packers across Europe for certain products.
We evaluate the performance of our segments based on net sales and operating income. The amounts in the following tables are obtained from reports used by our chief operating decision maker. There are no significant non-cash items reported in segment profit or loss other than depreciation and amortization.
Expense related to share-based compensation has not been allocated to our segments and is reflected entirely within the caption “Corporate and other”.
The following table presents the summarized income statement amounts by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(In thousands)
|
|
Total net sales:
|
|
|
|
|
|
|
|
|
Americas Foods & Beverages
|
$
|
909,450
|
|
|
$
|
869,074
|
|
|
$
|
2,702,668
|
|
|
$
|
2,440,463
|
|
|
Europe Foods & Beverages
|
144,148
|
|
|
134,814
|
|
|
440,273
|
|
|
398,198
|
|
|
Total net sales
|
$
|
1,053,598
|
|
|
$
|
1,003,888
|
|
|
$
|
3,142,941
|
|
|
$
|
2,838,661
|
|
|
Operating income:
|
|
|
|
|
|
|
|
|
Americas Foods & Beverages
|
$
|
120,350
|
|
|
$
|
94,662
|
|
|
$
|
321,985
|
|
|
$
|
265,512
|
|
|
Europe Foods & Beverages
|
17,299
|
|
|
18,959
|
|
|
53,009
|
|
|
50,066
|
|
|
Total reportable segment operating income
|
137,649
|
|
|
113,621
|
|
|
374,994
|
|
|
315,578
|
|
|
Corporate and other
|
(28,322
|
)
|
|
(20,509
|
)
|
|
(81,002
|
)
|
|
(75,394
|
)
|
|
Total operating income
|
109,327
|
|
|
93,112
|
|
|
293,992
|
|
|
240,184
|
|
|
Other expense:
|
|
|
|
|
|
|
|
|
Interest expense
|
18,655
|
|
|
15,979
|
|
|
50,772
|
|
|
38,580
|
|
|
Other expense, net
|
940
|
|
|
2,549
|
|
|
4,668
|
|
|
7,337
|
|
|
Income before taxes
|
$
|
89,732
|
|
|
$
|
74,584
|
|
|
$
|
238,552
|
|
|
$
|
194,267
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
Americas Foods & Beverages
|
$
|
28,144
|
|
|
$
|
25,868
|
|
|
$
|
83,291
|
|
|
$
|
70,831
|
|
|
Europe Foods & Beverages
|
6,295
|
|
|
4,943
|
|
|
18,442
|
|
|
14,180
|
|
|
Corporate and other
|
580
|
|
|
527
|
|
|
1,674
|
|
|
1,664
|
|
|
Total depreciation and amortization
|
$
|
35,019
|
|
|
$
|
31,338
|
|
|
$
|
103,407
|
|
|
$
|
86,675
|
|
The following tables present sales amounts by product categories:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(In thousands)
|
|
Total net sales:
|
|
|
|
|
|
|
|
|
Americas Foods & Beverages
|
|
|
|
|
|
|
|
|
Plant-based foods and beverages
|
$
|
277,315
|
|
|
$
|
252,831
|
|
|
$
|
819,614
|
|
|
$
|
680,090
|
|
|
Coffee creamers and beverages
|
298,832
|
|
|
274,526
|
|
|
862,106
|
|
|
775,045
|
|
|
Premium dairy
|
205,566
|
|
|
195,165
|
|
|
605,055
|
|
|
547,897
|
|
|
Fresh foods
|
127,737
|
|
|
146,552
|
|
|
415,893
|
|
|
437,431
|
|
|
Americas Foods & Beverages net sales
|
909,450
|
|
|
869,074
|
|
|
2,702,668
|
|
|
2,440,463
|
|
|
|
|
|
|
|
|
|
|
|
Europe Foods & Beverages
|
|
|
|
|
|
|
|
|
Plant-based foods and beverages
|
144,148
|
|
|
134,814
|
|
|
440,273
|
|
|
398,198
|
|
|
Europe Foods & Beverages net sales
|
144,148
|
|
|
134,814
|
|
|
440,273
|
|
|
398,198
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
$
|
1,053,598
|
|
|
$
|
1,003,888
|
|
|
$
|
3,142,941
|
|
|
$
|
2,838,661
|
|
The following tables present assets and capital expenditures by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
December 31, 2015
|
|
|
(In thousands)
|
|
Assets:
|
|
|
|
|
Americas Foods & Beverages
|
$
|
3,669,413
|
|
|
$
|
3,555,988
|
|
|
Europe Foods & Beverages
|
668,867
|
|
|
605,843
|
|
|
Corporate
|
74,431
|
|
|
67,038
|
|
|
Total
|
$
|
4,412,711
|
|
|
$
|
4,228,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(In thousands)
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
Americas Foods & Beverages
|
$
|
39,068
|
|
|
$
|
32,787
|
|
|
$
|
94,319
|
|
|
$
|
125,313
|
|
|
Europe Foods & Beverages
|
34,977
|
|
|
21,620
|
|
|
72,088
|
|
|
59,443
|
|
|
Corporate
|
599
|
|
|
84
|
|
|
1,319
|
|
|
327
|
|
|
Total
|
$
|
74,644
|
|
|
$
|
54,491
|
|
|
$
|
167,726
|
|
|
$
|
185,083
|
|
Significant Customers
The Company had a single customer that represented
13.7%
and
14.0%
of its consolidated net sales in the three months ended
September 30, 2016
and
2015
, respectively. The same customer represented
13.0%
and
13.9%
of our consolidated net sales in the
nine months ended
September 30, 2016
and
2015
, respectively. Sales to this customer are primarily included in the Americas Foods & Beverages segment.
14. Earnings Per Share
Basic earnings per share is based on the weighted average number of common shares outstanding during each period. Diluted earnings per share is based on the weighted average number of common shares outstanding and the effect of all dilutive common stock equivalents outstanding during each period.
The following table reconciles the numerators and denominators used in the computations of both basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
(In thousands, except share and per share data)
|
|
Basic earnings per share computation:
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income
|
$
|
58,037
|
|
|
$
|
50,022
|
|
|
$
|
152,406
|
|
|
$
|
120,813
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average common shares
|
177,185,368
|
|
|
175,846,533
|
|
|
176,902,352
|
|
|
175,290,113
|
|
|
Basic earnings per share
|
$
|
0.33
|
|
|
$
|
0.28
|
|
|
$
|
0.86
|
|
|
$
|
0.69
|
|
|
Diluted earnings per share computation:
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income
|
$
|
58,037
|
|
|
$
|
50,022
|
|
|
$
|
152,406
|
|
|
$
|
120,813
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average common shares - basic
|
177,185,368
|
|
|
175,846,533
|
|
|
176,902,352
|
|
|
175,290,113
|
|
|
Stock option conversion
(1)
|
3,757,586
|
|
|
3,903,791
|
|
|
3,456,172
|
|
|
4,033,138
|
|
|
Stock units
(2)
|
568,381
|
|
|
694,197
|
|
|
594,045
|
|
|
683,451
|
|
|
Weighted average common shares - diluted
|
181,511,335
|
|
|
180,444,521
|
|
|
180,952,569
|
|
|
180,006,702
|
|
|
Diluted earnings per share
|
$
|
0.32
|
|
|
$
|
0.28
|
|
|
$
|
0.84
|
|
|
$
|
0.67
|
|
|
(1)
Anti-dilutive options excluded
|
32,888
|
|
448,961
|
|
|
209,328
|
|
|
359,955
|
|
|
(2)
Anti-dilutive RSUs excluded
|
0
|
|
7,706
|
|
|
100
|
|
|
2,597
|
|
15. Supplemental Guarantor Financial Information
In September of 2014, we issued debt securities that are guaranteed by certain of our
100%
owned subsidiaries. In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act of 1933, the following condensed consolidating financial statements present the balance sheets as of
September 30, 2016
and
December 31, 2015
, the statements of comprehensive income for the three and
nine months ended
September 30, 2016
and 2015, and the statements of cash flows for the
nine months ended
September 30, 2016
and 2015 for The WhiteWave Foods Company (referred to as “Parent” for the purpose of this note only), the combined guarantor subsidiaries, the combined non-guarantor subsidiaries and elimination adjustments necessary to arrive at the information for the Parent, guarantor subsidiaries and non-guarantor subsidiaries on a consolidated basis. Investments in subsidiaries are accounted for using the equity method for this presentation. All guarantors of our debt securities are also guarantors for our senior secured credit facilities. The guarantee is full and unconditional and joint and several. Our senior secured credit facilities are secured by security interest and liens on substantially all of our assets and the assets of our domestic subsidiaries and is presented in the Parent column of the accompanying condensed consolidating balance sheets as of
September 30, 2016
and
December 31, 2015
.
Condensed Consolidating Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
|
|
Parent
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated Total
|
|
|
|
(In thousands)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
3
|
|
|
$
|
4,672
|
|
|
$
|
47,815
|
|
|
$
|
—
|
|
|
$
|
52,490
|
|
|
Trade receivables, net of allowance
|
|
473
|
|
|
195,795
|
|
|
87,971
|
|
|
—
|
|
|
284,239
|
|
|
Inventories
|
|
—
|
|
|
255,117
|
|
|
48,140
|
|
|
(7,174
|
)
|
|
296,083
|
|
|
Prepaid expenses and other current assets
|
|
29,703
|
|
|
22,803
|
|
|
16,271
|
|
|
—
|
|
|
68,777
|
|
|
Intercompany receivables
|
|
1,914,669
|
|
|
802,197
|
|
|
6,761
|
|
|
(2,723,627
|
)
|
|
—
|
|
|
Total current assets
|
|
1,944,848
|
|
|
1,280,584
|
|
|
206,958
|
|
|
(2,730,801
|
)
|
|
701,589
|
|
|
Equity method investments
|
|
2,255
|
|
|
—
|
|
|
21,300
|
|
|
—
|
|
|
23,555
|
|
|
Investment in consolidated subsidiaries
|
|
2,405,870
|
|
|
1,008,175
|
|
|
—
|
|
|
(3,414,045
|
)
|
|
—
|
|
|
Property, plant, and equipment, net
|
|
5,795
|
|
|
897,393
|
|
|
300,981
|
|
|
—
|
|
|
1,204,169
|
|
|
Identifiable intangible and other assets, net
|
|
41,461
|
|
|
659,432
|
|
|
375,486
|
|
|
(28,253
|
)
|
|
1,048,126
|
|
|
Goodwill
|
|
—
|
|
|
982,922
|
|
|
452,350
|
|
|
—
|
|
|
1,435,272
|
|
|
Total Assets
|
|
$
|
4,400,229
|
|
|
$
|
4,828,506
|
|
|
$
|
1,357,075
|
|
|
$
|
(6,173,099
|
)
|
|
$
|
4,412,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
54,534
|
|
|
$
|
308,065
|
|
|
$
|
151,738
|
|
|
$
|
—
|
|
|
$
|
514,337
|
|
|
Current portion of debt and capital lease obligations
|
|
45,000
|
|
|
1,374
|
|
|
—
|
|
|
—
|
|
|
46,374
|
|
|
Income taxes payable
|
|
—
|
|
|
—
|
|
|
5,198
|
|
|
—
|
|
|
5,198
|
|
|
Intercompany payables
|
|
802,197
|
|
|
1,882,281
|
|
|
39,149
|
|
|
(2,723,627
|
)
|
|
—
|
|
|
Total current liabilities
|
|
901,731
|
|
|
2,191,720
|
|
|
196,085
|
|
|
(2,723,627
|
)
|
|
565,909
|
|
|
Long-term debt and capital lease obligations, net of debt issuance costs
|
|
2,057,968
|
|
|
19,248
|
|
|
—
|
|
|
—
|
|
|
2,077,216
|
|
|
Deferred income taxes
|
|
—
|
|
|
209,362
|
|
|
122,487
|
|
|
(28,253
|
)
|
|
303,596
|
|
|
Other long-term liabilities
|
|
24,171
|
|
|
2,306
|
|
|
23,154
|
|
|
—
|
|
|
49,631
|
|
|
Total liabilities
|
|
2,983,870
|
|
|
2,422,636
|
|
|
341,726
|
|
|
(2,751,880
|
)
|
|
2,996,352
|
|
|
Total shareholders' equity
|
|
1,416,359
|
|
|
2,405,870
|
|
|
1,015,349
|
|
|
(3,421,219
|
)
|
|
1,416,359
|
|
|
Total Liabilities and Shareholders' Equity
|
|
$
|
4,400,229
|
|
|
$
|
4,828,506
|
|
|
$
|
1,357,075
|
|
|
$
|
(6,173,099
|
)
|
|
$
|
4,412,711
|
|
Condensed Consolidating Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
Parent
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated Total
|
|
|
|
(In thousands)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
—
|
|
|
$
|
2,282
|
|
|
$
|
36,328
|
|
|
$
|
—
|
|
|
$
|
38,610
|
|
|
Trade receivables, net of allowance
|
|
2,649
|
|
|
200,808
|
|
|
54,091
|
|
|
—
|
|
|
257,548
|
|
|
Inventories
|
|
—
|
|
|
232,757
|
|
|
46,755
|
|
|
(8,775
|
)
|
|
270,737
|
|
|
Prepaid expenses and other current assets
|
|
15,442
|
|
|
11,070
|
|
|
13,270
|
|
|
—
|
|
|
39,782
|
|
|
Intercompany receivables
|
|
1,878,299
|
|
|
686,469
|
|
|
37,962
|
|
|
(2,602,730
|
)
|
|
—
|
|
|
Total current assets
|
|
1,896,390
|
|
|
1,133,386
|
|
|
188,406
|
|
|
(2,611,505
|
)
|
|
606,677
|
|
|
Equity method investments
|
|
2,983
|
|
|
—
|
|
|
27,789
|
|
|
—
|
|
|
30,772
|
|
|
Investment in consolidated subsidiaries
|
|
2,156,856
|
|
|
943,501
|
|
|
—
|
|
|
(3,100,357
|
)
|
|
—
|
|
|
Property, plant, and equipment, net
|
|
6,169
|
|
|
893,594
|
|
|
237,758
|
|
|
—
|
|
|
1,137,521
|
|
|
Identifiable intangible and other assets, net
|
|
34,441
|
|
|
663,101
|
|
|
365,316
|
|
|
(24,281
|
)
|
|
1,038,577
|
|
|
Goodwill
|
|
—
|
|
|
991,085
|
|
|
424,237
|
|
|
—
|
|
|
1,415,322
|
|
|
Total Assets
|
|
$
|
4,096,839
|
|
|
$
|
4,624,667
|
|
|
$
|
1,243,506
|
|
|
$
|
(5,736,143
|
)
|
|
$
|
4,228,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
47,713
|
|
|
$
|
374,483
|
|
|
$
|
127,517
|
|
|
$
|
—
|
|
|
$
|
549,713
|
|
|
Current portion of debt and capital lease obligations
|
|
45,000
|
|
|
1,415
|
|
|
5,034
|
|
|
—
|
|
|
51,449
|
|
|
Income taxes payable
|
|
—
|
|
|
—
|
|
|
3,043
|
|
|
—
|
|
|
3,043
|
|
|
Intercompany payables
|
|
710,984
|
|
|
1,866,496
|
|
|
25,250
|
|
|
(2,602,730
|
)
|
|
—
|
|
|
Total current liabilities
|
|
803,697
|
|
|
2,242,394
|
|
|
160,844
|
|
|
(2,602,730
|
)
|
|
604,205
|
|
|
Long-term debt and capital lease obligations, net of debt issuance costs
|
|
2,058,621
|
|
|
20,219
|
|
|
100
|
|
|
—
|
|
|
2,078,940
|
|
|
Deferred income taxes
|
|
—
|
|
|
200,642
|
|
|
116,965
|
|
|
(24,281
|
)
|
|
293,326
|
|
|
Other long-term liabilities
|
|
23,613
|
|
|
4,556
|
|
|
13,321
|
|
|
—
|
|
|
41,490
|
|
|
Total liabilities
|
|
2,885,931
|
|
|
2,467,811
|
|
|
291,230
|
|
|
(2,627,011
|
)
|
|
3,017,961
|
|
|
Total shareholders' equity
|
|
1,210,908
|
|
|
2,156,856
|
|
|
952,276
|
|
|
(3,109,132
|
)
|
|
1,210,908
|
|
|
Total Liabilities and Shareholders' Equity
|
|
$
|
4,096,839
|
|
|
$
|
4,624,667
|
|
|
$
|
1,243,506
|
|
|
$
|
(5,736,143
|
)
|
|
$
|
4,228,869
|
|
Condensed Consolidating Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2016
|
|
|
|
Parent
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated Total
|
|
|
|
(In thousands)
|
|
Net sales
|
|
$
|
—
|
|
|
$
|
886,351
|
|
|
$
|
209,720
|
|
|
$
|
(42,473
|
)
|
|
$
|
1,053,598
|
|
|
Cost of sales
|
|
—
|
|
|
588,308
|
|
|
125,134
|
|
|
(40,963
|
)
|
|
672,479
|
|
|
Gross profit
|
|
—
|
|
|
298,043
|
|
|
84,586
|
|
|
(1,510
|
)
|
|
381,119
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Selling, distribution and marketing
|
|
—
|
|
|
147,051
|
|
|
41,858
|
|
|
—
|
|
|
188,909
|
|
|
General and administrative
|
|
25,269
|
|
|
38,602
|
|
|
19,012
|
|
|
—
|
|
|
82,883
|
|
|
Total operating expenses
|
|
25,269
|
|
|
185,653
|
|
|
60,870
|
|
|
—
|
|
|
271,792
|
|
|
Operating (loss) income
|
|
(25,269
|
)
|
|
112,390
|
|
|
23,716
|
|
|
(1,510
|
)
|
|
109,327
|
|
|
Other (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
18,340
|
|
|
258
|
|
|
57
|
|
|
—
|
|
|
18,655
|
|
|
Other (income) expense, net
|
|
(42,407
|
)
|
|
42,265
|
|
|
1,082
|
|
|
—
|
|
|
940
|
|
|
Total other (income) expense
|
|
(24,067
|
)
|
|
42,523
|
|
|
1,139
|
|
|
—
|
|
|
19,595
|
|
|
Income (loss) before income taxes and equity in earnings of subsidiaries
|
|
(1,202
|
)
|
|
69,867
|
|
|
22,577
|
|
|
(1,510
|
)
|
|
89,732
|
|
|
Income tax (benefit) expense
|
|
(2,052
|
)
|
|
24,952
|
|
|
6,294
|
|
|
—
|
|
|
29,194
|
|
|
Income before loss in equity method investments and equity in earnings of subsidiaries
|
|
850
|
|
|
44,915
|
|
|
16,283
|
|
|
(1,510
|
)
|
|
60,538
|
|
|
Loss in equity method investments
|
|
260
|
|
|
—
|
|
|
2,241
|
|
|
—
|
|
|
2,501
|
|
|
Equity in earnings of consolidated subsidiaries
|
|
57,447
|
|
|
12,532
|
|
|
—
|
|
|
(69,979
|
)
|
|
—
|
|
|
Net income
|
|
58,037
|
|
|
57,447
|
|
|
14,042
|
|
|
(71,489
|
)
|
|
58,037
|
|
|
Other comprehensive income, net of tax
|
|
645
|
|
|
645
|
|
|
645
|
|
|
(1,290
|
)
|
|
645
|
|
|
Comprehensive income
|
|
$
|
58,682
|
|
|
$
|
58,092
|
|
|
$
|
14,687
|
|
|
$
|
(72,779
|
)
|
|
$
|
58,682
|
|
Condensed Consolidating Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2015
|
|
|
|
Parent
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated Total
|
|
|
|
(In thousands)
|
|
Net sales
|
|
$
|
—
|
|
|
$
|
861,699
|
|
|
$
|
161,062
|
|
|
$
|
(18,873
|
)
|
|
$
|
1,003,888
|
|
|
Cost of sales
|
|
—
|
|
|
576,277
|
|
|
92,764
|
|
|
(16,284
|
)
|
|
652,757
|
|
|
Gross profit
|
|
—
|
|
|
285,422
|
|
|
68,298
|
|
|
(2,589
|
)
|
|
351,131
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Selling, distribution and marketing
|
|
—
|
|
|
156,124
|
|
|
31,660
|
|
|
—
|
|
|
187,784
|
|
|
General and administrative
|
|
17,648
|
|
|
35,403
|
|
|
17,184
|
|
|
—
|
|
|
70,235
|
|
|
Total operating expenses
|
|
17,648
|
|
|
191,527
|
|
|
48,844
|
|
|
—
|
|
|
258,019
|
|
|
Operating (loss) income
|
|
(17,648
|
)
|
|
93,895
|
|
|
19,454
|
|
|
(2,589
|
)
|
|
93,112
|
|
|
Other (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
15,684
|
|
|
207
|
|
|
88
|
|
|
—
|
|
|
15,979
|
|
|
Other (income) expense, net
|
|
(27,700
|
)
|
|
30,666
|
|
|
(417
|
)
|
|
—
|
|
|
2,549
|
|
|
Total other (income) expense
|
|
(12,016
|
)
|
|
30,873
|
|
|
(329
|
)
|
|
—
|
|
|
18,528
|
|
|
Income (loss) before income taxes and equity in earnings of subsidiaries
|
|
(5,632
|
)
|
|
63,022
|
|
|
19,783
|
|
|
(2,589
|
)
|
|
74,584
|
|
|
Income tax (benefit) expense
|
|
(6,930
|
)
|
|
26,963
|
|
|
1,798
|
|
|
—
|
|
|
21,831
|
|
|
Income before loss in equity method investments and equity in earnings of subsidiaries
|
|
1,298
|
|
|
36,059
|
|
|
17,985
|
|
|
(2,589
|
)
|
|
52,753
|
|
|
Loss in equity method investments
|
|
236
|
|
|
—
|
|
|
2,495
|
|
|
—
|
|
|
2,731
|
|
|
Equity in earnings of consolidated subsidiaries
|
|
48,960
|
|
|
12,901
|
|
|
—
|
|
|
(61,861
|
)
|
|
—
|
|
|
Net income
|
|
50,022
|
|
|
48,960
|
|
|
15,490
|
|
|
(64,450
|
)
|
|
50,022
|
|
|
Other comprehensive loss, net of tax
|
|
(14,821
|
)
|
|
(14,821
|
)
|
|
(13,315
|
)
|
|
28,136
|
|
|
(14,821
|
)
|
|
Comprehensive income
|
|
$
|
35,201
|
|
|
$
|
34,139
|
|
|
$
|
2,175
|
|
|
$
|
(36,314
|
)
|
|
$
|
35,201
|
|
Condensed Consolidating Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2016
|
|
|
|
Parent
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated Total
|
|
|
|
(In thousands)
|
|
Net sales
|
|
$
|
—
|
|
|
$
|
2,648,427
|
|
|
$
|
583,376
|
|
|
$
|
(88,862
|
)
|
|
$
|
3,142,941
|
|
|
Cost of sales
|
|
—
|
|
|
1,784,066
|
|
|
342,754
|
|
|
(89,173
|
)
|
|
2,037,647
|
|
|
Gross profit
|
|
—
|
|
|
864,361
|
|
|
240,622
|
|
|
311
|
|
|
1,105,294
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Selling, distribution and marketing
|
|
—
|
|
|
445,653
|
|
|
117,565
|
|
|
—
|
|
|
563,218
|
|
|
General and administrative
|
|
73,041
|
|
|
116,769
|
|
|
58,274
|
|
|
—
|
|
|
248,084
|
|
|
Total operating expenses
|
|
73,041
|
|
|
562,422
|
|
|
175,839
|
|
|
—
|
|
|
811,302
|
|
|
Operating (loss) income
|
|
(73,041
|
)
|
|
301,939
|
|
|
64,783
|
|
|
311
|
|
|
293,992
|
|
|
Other (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
49,716
|
|
|
684
|
|
|
372
|
|
|
—
|
|
|
50,772
|
|
|
Other (income) expense, net
|
|
(115,534
|
)
|
|
118,208
|
|
|
1,994
|
|
|
—
|
|
|
4,668
|
|
|
Total other (income) expense
|
|
(65,818
|
)
|
|
118,892
|
|
|
2,366
|
|
|
—
|
|
|
55,440
|
|
|
Income (loss) before income taxes and equity in earnings of subsidiaries
|
|
(7,223
|
)
|
|
183,047
|
|
|
62,417
|
|
|
311
|
|
|
238,552
|
|
|
Income tax (benefit) expense
|
|
(1,298
|
)
|
|
66,777
|
|
|
13,811
|
|
|
—
|
|
|
79,290
|
|
|
(Loss) income before loss in equity method investments and equity in earnings of subsidiaries
|
|
(5,925
|
)
|
|
116,270
|
|
|
48,606
|
|
|
311
|
|
|
159,262
|
|
|
Loss in equity method investments
|
|
728
|
|
|
—
|
|
|
6,128
|
|
|
—
|
|
|
6,856
|
|
|
Equity in earnings of consolidated subsidiaries
|
|
159,059
|
|
|
42,789
|
|
|
—
|
|
|
(201,848
|
)
|
|
—
|
|
|
Net income
|
|
152,406
|
|
|
159,059
|
|
|
42,478
|
|
|
(201,537
|
)
|
|
152,406
|
|
|
Other comprehensive income, net of tax
|
|
24,177
|
|
|
24,177
|
|
|
24,177
|
|
|
(48,354
|
)
|
|
24,177
|
|
|
Comprehensive income
|
|
$
|
176,583
|
|
|
$
|
183,236
|
|
|
$
|
66,655
|
|
|
$
|
(249,891
|
)
|
|
$
|
176,583
|
|
Condensed Consolidating Statements of Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2015
|
|
|
|
Parent
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated Total
|
|
|
|
(In thousands)
|
|
Net sales
|
|
$
|
—
|
|
|
$
|
2,433,087
|
|
|
$
|
424,447
|
|
|
$
|
(18,873
|
)
|
|
$
|
2,838,661
|
|
|
Cost of sales
|
|
—
|
|
|
1,627,921
|
|
|
241,160
|
|
|
(16,284
|
)
|
|
1,852,797
|
|
|
Gross profit
|
|
—
|
|
|
805,166
|
|
|
183,287
|
|
|
(2,589
|
)
|
|
985,864
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Selling, distribution and marketing
|
|
—
|
|
|
438,177
|
|
|
91,679
|
|
|
—
|
|
|
529,856
|
|
|
General and administrative
|
|
67,965
|
|
|
102,244
|
|
|
45,615
|
|
|
—
|
|
|
215,824
|
|
|
Total operating expenses
|
|
67,965
|
|
|
540,421
|
|
|
137,294
|
|
|
—
|
|
|
745,680
|
|
|
Operating (loss) income
|
|
(67,965
|
)
|
|
264,745
|
|
|
45,993
|
|
|
(2,589
|
)
|
|
240,184
|
|
|
Other (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
37,543
|
|
|
796
|
|
|
241
|
|
|
—
|
|
|
38,580
|
|
|
Other (income) expense, net
|
|
(104,718
|
)
|
|
108,330
|
|
|
3,725
|
|
|
—
|
|
|
7,337
|
|
|
Total other (income) expense
|
|
(67,175
|
)
|
|
109,126
|
|
|
3,966
|
|
|
—
|
|
|
45,917
|
|
|
Income (loss) before income taxes and equity in earnings of subsidiaries
|
|
(790
|
)
|
|
155,619
|
|
|
42,027
|
|
|
(2,589
|
)
|
|
194,267
|
|
|
Income tax (benefit) expense
|
|
(3,469
|
)
|
|
60,920
|
|
|
6,776
|
|
|
—
|
|
|
64,227
|
|
|
Income before loss in equity method investments and equity in earnings of subsidiaries
|
|
2,679
|
|
|
94,699
|
|
|
35,251
|
|
|
(2,589
|
)
|
|
130,040
|
|
|
Loss in equity method investments
|
|
575
|
|
|
—
|
|
|
8,652
|
|
|
—
|
|
|
9,227
|
|
|
Equity in earnings of consolidated subsidiaries
|
|
118,709
|
|
|
24,010
|
|
|
—
|
|
|
(142,719
|
)
|
|
—
|
|
|
Net income
|
|
120,813
|
|
|
118,709
|
|
|
26,599
|
|
|
(145,308
|
)
|
|
120,813
|
|
|
Other comprehensive loss, net of tax
|
|
(41,844
|
)
|
|
(41,844
|
)
|
|
(40,319
|
)
|
|
82,163
|
|
|
(41,844
|
)
|
|
Comprehensive income (loss)
|
|
$
|
78,969
|
|
|
$
|
76,865
|
|
|
$
|
(13,720
|
)
|
|
$
|
(63,145
|
)
|
|
$
|
78,969
|
|
Condensed Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2016
|
|
|
|
|
|
|
Parent
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated Total
|
|
|
|
|
|
|
(In thousands)
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
11,932
|
|
|
$
|
89,497
|
|
|
$
|
105,560
|
|
|
$
|
—
|
|
|
$
|
206,989
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments for acquisitions, net of cash acquired of $833
|
|
—
|
|
|
(60
|
)
|
|
(17,313
|
)
|
|
—
|
|
|
(17,373
|
)
|
|
|
|
Payments for property, plant, and equipment
|
|
(1,259
|
)
|
|
(91,722
|
)
|
|
(74,745
|
)
|
|
—
|
|
|
(167,726
|
)
|
|
|
|
Intercompany contributions
|
|
(11,128
|
)
|
|
—
|
|
|
—
|
|
|
11,128
|
|
|
—
|
|
|
|
|
Proceeds from sale of fixed assets
|
|
—
|
|
|
251
|
|
|
8
|
|
|
—
|
|
|
259
|
|
|
|
|
|
Net cash used in investing activities
|
|
(12,387
|
)
|
|
(91,531
|
)
|
|
(92,050
|
)
|
|
11,128
|
|
|
(184,840
|
)
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany contributions
|
|
—
|
|
|
5,296
|
|
|
5,832
|
|
|
(11,128
|
)
|
|
—
|
|
|
|
|
Repayment of debt
|
|
(33,750
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33,750
|
)
|
|
|
|
Payments on capital lease obligations
|
|
—
|
|
|
(872
|
)
|
|
—
|
|
|
—
|
|
|
(872
|
)
|
|
|
|
Proceeds from revolver line of credit
|
|
574,400
|
|
|
—
|
|
|
77,542
|
|
|
—
|
|
|
651,942
|
|
|
|
|
Payments on revolver line of credit
|
|
(544,100
|
)
|
|
—
|
|
|
(82,980
|
)
|
|
—
|
|
|
(627,080
|
)
|
|
|
|
Proceeds from exercise of stock options
|
|
9,369
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,369
|
|
|
|
|
Minimum tax withholding paid on behalf of employees for share-based compensation
|
|
(12,883
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,883
|
)
|
|
|
|
Excess tax benefit from share-based compensation
|
|
7,848
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
7,858
|
|
|
|
|
Payment of deferred financing costs
|
|
(426
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(426
|
)
|
|
|
|
|
Net cash provided by financing activities
|
|
458
|
|
|
4,424
|
|
|
404
|
|
|
(11,128
|
)
|
|
(5,842
|
)
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
—
|
|
|
—
|
|
|
(2,427
|
)
|
|
—
|
|
|
(2,427
|
)
|
|
INCREASE IN CASH AND CASH EQUIVALENTS
|
|
3
|
|
|
2,390
|
|
|
11,487
|
|
|
—
|
|
|
13,880
|
|
|
Cash and cash equivalents, beginning of period
|
|
—
|
|
|
2,282
|
|
|
36,328
|
|
|
—
|
|
|
38,610
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
3
|
|
|
$
|
4,672
|
|
|
$
|
47,815
|
|
|
$
|
—
|
|
|
$
|
52,490
|
|
Condensed Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2015
|
|
|
|
|
|
|
Parent
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated Total
|
|
|
|
|
|
|
(In thousands)
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
41,984
|
|
|
$
|
103,850
|
|
|
$
|
23,211
|
|
|
$
|
—
|
|
|
$
|
169,045
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in equity method investments
|
|
(701
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(701
|
)
|
|
|
|
Payments for acquisition, net of cash acquired of $8,521
|
|
—
|
|
|
(159,208
|
)
|
|
(548,397
|
)
|
|
—
|
|
|
(707,605
|
)
|
|
|
|
Proceeds from acquisition adjustments
|
|
—
|
|
|
346
|
|
|
—
|
|
|
—
|
|
|
346
|
|
|
|
|
Payments for property, plant, and equipment
|
|
(245
|
)
|
|
(137,420
|
)
|
|
(59,231
|
)
|
|
—
|
|
|
(196,896
|
)
|
|
|
|
Intercompany contributions
|
|
(736,344
|
)
|
|
—
|
|
|
—
|
|
|
736,344
|
|
|
—
|
|
|
|
|
Proceeds from sale of fixed assets
|
|
—
|
|
|
2,152
|
|
|
6,779
|
|
|
—
|
|
|
8,931
|
|
|
|
|
|
Net cash used in investing activities
|
|
(737,290
|
)
|
|
(294,130
|
)
|
|
(600,849
|
)
|
|
736,344
|
|
|
(895,925
|
)
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany contributions
|
|
—
|
|
|
194,229
|
|
|
542,115
|
|
|
(736,344
|
)
|
|
—
|
|
|
|
|
Repayment of debt
|
|
(15,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,000
|
)
|
|
|
|
Payments on capital lease obligations
|
|
—
|
|
|
(875
|
)
|
|
—
|
|
|
—
|
|
|
(875
|
)
|
|
|
|
Proceeds from revolver line of credit
|
|
1,093,945
|
|
|
—
|
|
|
47,123
|
|
|
—
|
|
|
1,141,068
|
|
|
|
|
Payments on revolver line of credit
|
|
(389,600
|
)
|
|
—
|
|
|
(44,619
|
)
|
|
—
|
|
|
(434,219
|
)
|
|
|
|
Proceeds from exercise of stock options
|
|
13,815
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,815
|
|
|
|
|
Minimum tax withholding paid on behalf of employees for share-based compensation
|
|
(27,856
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,856
|
)
|
|
|
|
Excess tax benefit from share-based compensation
|
|
20,464
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,464
|
|
|
|
|
Payment of deferred financing costs
|
|
(462
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(462
|
)
|
|
|
|
|
Net cash provided by financing activities
|
|
695,306
|
|
|
193,354
|
|
|
544,619
|
|
|
(736,344
|
)
|
|
696,935
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
—
|
|
|
—
|
|
|
8,726
|
|
|
—
|
|
|
8,726
|
|
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
—
|
|
|
3,074
|
|
|
(24,293
|
)
|
|
—
|
|
|
(21,219
|
)
|
|
Cash and cash equivalents, beginning of period
|
|
—
|
|
|
524
|
|
|
49,716
|
|
|
—
|
|
|
50,240
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
—
|
|
|
$
|
3,598
|
|
|
$
|
25,423
|
|
|
$
|
—
|
|
|
$
|
29,021
|
|
16. The Proposed Merger with Danone
On July 6, 2016, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Danone, and July Merger Sub Inc., a Delaware corporation and an indirect wholly owned subsidiary of Danone (“Merger Sub”).
The Merger Agreement provides that, among other things, Merger Sub will be merged with and into the Company (the “Merger”) with the Company continuing as the surviving corporation. As a result of the Merger, the Company will become a wholly-owned subsidiary of Danone. At the effective time of the Merger (the “Effective Time”), each share of common stock of the Company, par value
$0.01
per share, issued and outstanding prior to the Effective Time (other than shares owned by the Company or any of its subsidiaries or Danone or any of its subsidiaries (including Merger Sub)), will automatically be canceled for no consideration, and converted into the right to receive
$56.25
in cash, without interest.
If the Merger Agreement were to be terminated in specified circumstances, the Company would be required to pay Danone a termination fee of
$310.0 million
. These circumstances include if the merger agreement were terminated because closing has not occurred by the specified long stop date (subject to applicable extensions) or because WhiteWave has breached its obligations under the agreement, and a Company takeover proposal has been made for WhiteWave which is not publicly withdrawn as of the date of termination, and prior to the first anniversary of such termination WhiteWave enters into a definitive agreement with respect to or consummates a Company takeover proposal.
On October 4, 2016 stockholders approved our merger agreement with Danone. The closing of the merger remains subject to the satisfaction of customary conditions, including the expiration or termination of all applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act (“HSR”) and approval of the merger by the European Commission pursuant to the EU Merger Regulation. On October 3, 2016, the United States Department of Justice (“DOJ”) issued a request for additional information, commonly known as a “second request,” which extends the HSR waiting period until the 30
th
calendar day after the date that both parties substantially comply with the second request, unless the waiting period terminates earlier. On October 26, 2016, Danone filed its Form CO with the European Commission. WhiteWave and Danone continue to work with the DOJ and the European Commission to obtain regulatory clearance and approval. We currently expect closing to occur in first quarter 2017, though there can be no assurance regarding timing of completion of regulatory processes.
During the third quarter of 2016, the Company has incurred
$7.5 million
of transaction costs related to the planned Merger with Danone, which were recorded in general and administrative expense in our condensed consolidated statements of income.