Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On October 1, 2013, Pinnacle Foods Inc. (“Pinnacle”) acquired substantially all of the assets (the "Acquisition") of the Wish-Bone and Western Salad Dressing Business ("Wish-Bone") from Conopco, Inc., a New York corporation (“Unilever”), which is a subsidiary of Unilever PLC. The acquired portfolio includes a broad range of liquid and dry-mix salad dressing flavors under the Wish-Bone and Western brand names.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 30, 2012 gives effect to the Acquisition under the acquisition method of accounting as if had occured on December 26, 2011 (the first date of fiscal 2012) and combines the historical operating results of Pinnacle for the year ended December 30, 2012 with the historical revenues and direct expenses of the Wish-Bone Business for the twelve months ended December 31, 2012.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for the nine months ended September 29, 2013 gives effect to the Acquisition under the acquisition method of accounting as if had occured on December 26, 2011 (the first date of fiscal 2012) and combines the historical operating results of Pinnacle for the nine months ended September 29, 2013 with the historical revenues and direct expenses of the Wish-Bone Business for the nine months ended September 30, 2013.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet gives effect to the Acquisition and related financing as if they had occurred on September 29, 2013.
The Statements of Revenues and Direct Expenses include direct cost of production, marketing and distribution, including selling and direct overhead, depreciation and amortization, and all direct expenses incurred by Unilever on behalf of Wish-Bone. Certain other Unilever expenses and other income, such as corporate overhead, interest income, interest expense, and income taxes have been excluded from the statements of revenues and direct expenses. As a result, the Statement of Revenues and Direct Expenses are not indicative of the results of operations of Wish-Bone had the business been operated as a separate, stand-alone entity.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations adjustments are based upon available information, the structure of the transactions and certain assumptions that we believe are reasonable under the circumstances. The unaudited Pro Forma Condensed Consolidated Statements of Operations are presented for illustrative purposes only and are not necessarily indicative of the results of operations that would have actually been reported had the Acquisition occurred as of December 26, 2011, or what results will be for any future period.
The preliminary allocation of the purchase price was based upon a preliminary estimate of fair value of assets acquired, including fixed assets, inventory, tradenames, distributor relationships and non-compete agreement. The estimated fair values were determined by management. Our estimates and assumptions are subject to change upon the finalization of appraisals, purchase price adjustments, and accounting for income taxes.
The historical consolidated financial information has been adjusted in the pro forma financial statements to give effect to pro forma events that are (1) directly attributable to the merger, (2) factually supportable and (3) with respect to the statement of operations, recurring in nature.
The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes of Pinnacle included in Pinnacle’s prospectus filed with the SEC on March 28, 2013, quarterly report on Form 10-Q for the nine months ended September 29, 2013 and the historical Statement of Assets Acquired, the Statement of Revenues and Direct Expenses and related footnotes of Wish-Bone included herein. The unaudited pro forma financial statements do not reflect any operating efficiencies and cost savings that we may achieve with respect to the Acquisition. In connection with the Acquisition, Unilever agreed to continue to manufacture certain Wish-Bone products for approximately eighteen months following the consummation of the acquisition (with an option to extend for an additional six months) to enable Pinnacle to transition manufacturing of Wish-Bone into an existing Pinnacle facility.
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PINNACLE FOODS INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 30, 2012
(thousands, except per share data)
| Pinnacle | Wish-Bone | Adjustments | Pro forma Total | ||||||||||||
| Net sales | $ | 2,478,485 | $ | 192,196 | $ | — | $ | 2,670,681 | |||||||
| Cost of products sold | 1,893,936 | 122,244 | 2,131 | (a) | 2,018,311 | ||||||||||
| Gross profit | 584,549 | 69,952 | (2,131 | ) | 652,370 | ||||||||||
| Operating expenses | |||||||||||||||
| Marketing and selling expenses | 169,736 | 16,657 | — | 186,393 | |||||||||||
| Administrative expenses | 89,414 | — | — | 89,414 | |||||||||||
| Research and development expenses | 12,031 | — | — | 12,031 | |||||||||||
| Other expense (income), net | 29,774 | — | 666 | (b) | 30,440 | ||||||||||
| Total operating expenses | 300,955 | 16,657 | 666 | 318,278 | |||||||||||
Earnings before interest and taxes | 283,594 | 53,295 | (2,797 | ) | 334,092 | ||||||||||
| Interest expense | 198,484 | — | 19,891 | (c) | 218,375 | ||||||||||
| Interest income | 110 | — | — | 110 | |||||||||||
| Earnings before income taxes | 85,220 | 53,295 | (22,688 | ) | 115,827 | ||||||||||
| Provision for income taxes | 32,701 | 11,998 | (d) | 44,699 | |||||||||||
| Net earnings | $ | 52,519 | $ | 53,295 | $ | (34,686 | ) | $ | 71,128 | ||||||
| Net earnings per share | |||||||||||||||
| Basic | $0.65 | $0.88 | |||||||||||||
| Weighted average shares outstanding- basic | 81,231 | 81,231 | |||||||||||||
| Diluted | $0.61 | $0.82 | |||||||||||||
| Weighted average shares outstanding- diluted | 86,495 | 86,495 | |||||||||||||
| Dividends declared | $ | — | $ | — | |||||||||||
See accompanying notes to unaudited pro forma condensed consolidated statements of operations
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PINNACLE FOODS INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 29, 2013
(thousands, except per share data)
| Pinnacle | Wish-Bone | Adjustments | Pro forma Total | ||||||||||||
| Net sales | $ | 1,754,480 | $ | 148,895 | $ | — | $ | 1,903,375 | |||||||
| Cost of products sold | 1,297,808 | 95,903 | 1,633 | (a) | 1,395,344 | ||||||||||
| Gross profit | 456,672 | 52,992 | (1,633 | ) | 508,031 | ||||||||||
| Operating expenses | |||||||||||||||
| Marketing and selling expenses | 134,002 | 15,209 | — | 149,211 | |||||||||||
| Administrative expenses | 93,189 | — | — | 93,189 | |||||||||||
| Research and development expenses | 7,825 | — | — | 7,825 | |||||||||||
| Other expense (income), net | 45,096 | — | 500 | (b) | 45,596 | ||||||||||
| Total operating expenses | 280,112 | 15,209 | 500 | 295,821 | |||||||||||
Earnings before interest and taxes | 176,560 | 37,783 | (2,133 | ) | 212,210 | ||||||||||
| Interest expense | 107,878 | — | 14,918 | (c) | 122,796 | ||||||||||
| Interest income | 68 | — | — | 68 | |||||||||||
| Earnings before income taxes | 68,750 | 37,783 | (17,051 | ) | 89,482 | ||||||||||
| Provision for income taxes | 35,108 | 8,106 | (d) | 43,214 | |||||||||||
| Net earnings | $ | 33,642 | $ | 37,783 | $ | (25,157 | ) | $ | 46,268 | ||||||
| Net earnings per share | |||||||||||||||
| Basic | $ | 0.32 | $ | 0.45 | |||||||||||
| Weighted average shares outstanding- basic | 103,921 | 103,921 | |||||||||||||
| Diluted | $ | 0.32 | $ | 0.44 | |||||||||||
| Weighted average shares outstanding- diluted | 105,978 | 105,978 | |||||||||||||
| Dividends declared | $ | 0.36 | $ | 0.36 | |||||||||||
See accompanying notes to unaudited pro forma condensed consolidated statements of operations
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(thousands of dollars, except where noted in millions)
Pinnacle unaudited pro forma condensed consolidated statement of operations pro forma adjustments:
| (a) | Reflects the following: |
| Year ended | Nine months ended | ||||||
| December 30, 2012 | September 29, 2013 | ||||||
| Depreciation adjustment (i) | $ | 331 | $ | 283 | |||
| Transition manufacturing agreement (ii) | 1,800 | 1,350 | |||||
| $ | 2,131 | $ | 1,633 | ||||
i.The elimination of historical depreciation expense incurred by Wish-Bone and reflects annual depreciation expense based on the preliminary allocation of the purchase price to the fair value of the assets acquired. Acquired fixed assets consist of machinery and equipment with useful lives averaging 21 months.
| Year ended | Nine months ended | ||||||
| December 30, 2012 | September 29, 2013 | ||||||
| Depreciation expense based on the preliminary allocation of the purchase price | $ | 2,857 | $ | 2,143 | |||
| Historical depreciation expense included by the Wish-Bone Business | 2,526 | 1,860 | |||||
| $ | 331 | $ | 283 | ||||
The pro forma adjustment to depreciation expense reflects Pinnacle's preliminary allocation of purchase price to the fair value of the tangible assets acquired. If the final allocation of the purchase price were to result in an increase in the fair value of the fixed assets of 10% (approximately $500), Pinnacle estimates that depreciation expense would increase approximately $286 per year (based on the weighted average estimated useful life of approximately 21 months of such assets).
| ii. | Pro forma charges from the transition manufacturing agreement were approximately $1.8 million and $1.4 million for the year ended December 30, 2012 and nine months ended September 29, 2013, respectively. |
| (b) | Increased Other expense is based upon Pinnacle's preliminary allocation of purchase price to $5.0 million of distributor relationships and $1.0 million to a non-compete agreement. Distributor relationships are being amortized over 30 years using the double declining balance method. This life was based on an attrition rate based on industry experience which management believes is appropriate in Pinnacle's circumstances. The non-compete is being amortized over 3 years, the contractual length of the agreement. The total adjustment to Other expense related to amortization was approximately $0.7 million and $0.5 million for the year ended December 30, 2012 and nine months ended September 29, 2013, respectively. |
Pro forma depreciation and amortization expense for Wish-Bone was approximately $3.5 million and $2.6 million for the year ended December 30, 2012 and nine months ended September 29, 2013, respectively.
| (c) | Increased interest expense is based upon the following pro forma amounts of debt giving effect to the financing of the Acquisition: |
| Year ended | Nine months ended | ||||||
| December 30, 2012 | September 29, 2013 | ||||||
| Term Loan (i) | $ | 17,063 | $ | 12,797 | |||
| Amortization of financing fees(ii) | 2,828 | 2,121 | |||||
| Pro forma interest expense | $ | 19,891 | $ | 14,918 | |||
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(thousands of dollars, except where noted in millions)
| i. | Pursuant to the terms of Term Loan H, the interest rates on the term loan bear interest at the Eurodollar rate (which at no time shall be less than 0.75%) + 2.5%. The assumed interest rates for Term Loan H reflect the Eurodollar rate of 0.75%, the approximate average of the Eurodollar rate during all relevant periods. A change in the interest rate of one-eigth of one percent would change interest expense on Term Loan H by $656 annually. However, we have mitigated approximately 70% of this risk through the use of cash flow hedges of interest rate risk. |
| ii. | Deferred debt issue costs and original issue discount are amortized using the effective interest method over the life of the related debt. Total fees related to the debt issuance in connection with Term Loan H amounted to $18.4 million, including an original issue discount of approximately $8.5 million, with a weighted amortization period of 6.5 years for all items. This resulted in amortization of approximately $2.8 million for the year ended December 31, 2012 and $2.1 million for the nine months ended September 29, 2013, respectively. |
| (d) | Income taxes are provided on the operating results of Wish-Bone, as adjusted, at our statutory tax rate of 39.2% for the year ended December 31, 2012 and 39.1% for the nine months ended September 29, 2013. |
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PINNACLE FOODS INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 29, 2013
(thousands, except share and per share data)
| Pinnacle | Wish-Bone | Adjustments | Pro forma total | |||||||||||||
| Current assets: | ||||||||||||||||
| Cash and cash equivalents | $ | 110,403 | $ | (72,399 | ) | (a) | $ | 38,004 | ||||||||
| Accounts receivable, net of allowances of $5,707 | 168,916 | — | 168,916 | |||||||||||||
| Inventories | 394,328 | 15,428 | 1,572 | (b) | 411,328 | |||||||||||
| Other current assets | 7,266 | — | 7,266 | |||||||||||||
| Deferred tax assets | 121,181 | 121,181 | ||||||||||||||
| Total current assets | 802,094 | 15,428 | (70,827 | ) | 746,695 | |||||||||||
| Plant assets, net of accumulated depreciation of $283,426 | 512,351 | 18,860 | (13,860 | ) | (b) | 517,351 | ||||||||||
| Tradenames | 1,603,992 | 250,000 | (b) | 1,853,992 | ||||||||||||
| Other assets, net | 161,423 | 15,851 | (c) | 177,274 | ||||||||||||
| Goodwill | 1,441,495 | 297,000 | (b) | 1,738,495 | ||||||||||||
| Total assets | $ | 4,521,355 | $ | 34,288 | $ | 478,164 | $ | 5,033,807 | ||||||||
| Current liabilities: | ||||||||||||||||
| Short-term borrowings | $ | 1,065 | $ | — | $ | 1,065 | ||||||||||
| Current portion of long-term obligations | 19,436 | 5,250 | (a) | 24,686 | ||||||||||||
| Accounts payable | 180,055 | — | 180,055 | |||||||||||||
| Accrued trade marketing expense | 38,920 | — | 38,920 | |||||||||||||
| Accrued liabilities | 106,675 | 3,883 | (a) | 110,558 | ||||||||||||
| Dividends payable | 21,354 | — | 21,354 | |||||||||||||
| Total current liabilities | 367,505 | — | 9,133 | 376,638 | ||||||||||||
| Long-term debt | 1,968,907 | 511,219 | (a) | 2,480,126 | ||||||||||||
| Pension and other postretirement benefits | 93,090 | — | 93,090 | |||||||||||||
| Other long-term liabilities | 24,802 | — | 24,802 | |||||||||||||
| Deferred tax liabilities | 530,148 | (3,089 | ) | (a) | 527,059 | |||||||||||
| Total liabilities | 2,984,452 | — | 517,263 | 3,501,715 | ||||||||||||
| Commitments and contingencies | ||||||||||||||||
| Shareholders' equity: | ||||||||||||||||
| Pinnacle preferred stock: $.01 per share, 50,000,000 shares authorized, none issued | — | — | ||||||||||||||
| Pinnacle common stock: par value $.01 per share, 200,000,000 shares authorized; issued and outstanding 117,220,795 | 1,172 | — | 1,172 | |||||||||||||
| Additional paid-in-capital | 1,325,835 | — | 1,325,835 | |||||||||||||
| Retained earnings | 244,410 | (4,811 | ) | (a) | 239,599 | |||||||||||
| Accumulated other comprehensive loss | (34,514 | ) | — | (34,514 | ) | |||||||||||
| Total shareholders' equity | 1,536,903 | — | (4,811 | ) | 1,532,092 | |||||||||||
| Total liabilities and shareholders' equity | $ | 4,521,355 | $ | — | $ | 512,452 | $ | 5,033,807 | ||||||||
See accompanying notes to unaudited pro forma condensed consolidated balance sheet
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(thousands of dollars, except where noted in millions)
Pinnacle unaudited pro forma condensed consolidated balance sheet pro forma adjustments:
| (a) | The following table sets forth the estimated sources and uses of cash in the Acquisition, assuming it had occurred on |
September 29, 2013.
| Sources: | |||
| Incremental term loan facility (i) | $ | 525,000 | |
| Cash on hand | 72,399 | ||
| Accrued liabilities | 3,883 | ||
| $ | 601,282 | ||
| Uses: | |||
| Wish-Bone purchase price | $ | 575,000 | |
| Transaction fees and expenses (ii) | 26,282 | ||
| $ | 601,282 | ||
| (i) | Reflects the incurrence of $525.0 million under the Term Loan H entered into at the closing of the Acquisition. Loans under the Term Loan H facility were issued at a 1.625% discount, with net proceeds to us of $516.5 million and will require scheduled quarterly payments of 0.25% of the original principal amount, with the balance payable in the final quarterly installment. On a pro forma basis as of September 29, 2013, the current portion of Term Loan H was $5.3 million. |
| (ii) | Reflects the fees and expenses associated with the Acquisition, as described in the table below: |
| Deferred financing costs: | |||
| Financing fees(i) | $ | 18,179 | |
| Other financing costs(ii) | 203 | ||
| Total deferred financing costs | 18,382 | ||
| Costs to be expensed by PF: | |||
| Other transaction costs(ii) | 7,900 | ||
| Total transaction costs | $ | 26,282 | |
| (i) | Reflects financing fees incurred in connection with Term Loan H. Includes original issue discount of $8.5 million. |
| (ii) | Represents estimated transaction costs, other than those included in (i) above, including fees attributable to professional advisers and other fees associated with the completion and integration of the Acquisition. The costs will result in a tax benefit of approximately $3.1 million. |
| (b) | Reflects the preliminary allocation of the purchase price to the estimated fair values of assets acquired: |
| Purchase Price of Wish-Bone | $ | 575,000 | |
| Assets acquired: | |||
| Inventories (i) | 17,000 | ||
| Plant assets | 5,000 | ||
| Trade names (ii) | 250,000 | ||
| Distributor Relationships and Non-Compete (iii) | 6,000 | ||
| Goodwill | 297,000 | ||
| Total cost of Acquisition | $ | 575,000 | |
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(thousands of dollars, except where noted in millions)
| (i) | Inventories acquired in the Acquisition were valued at estimated fair value (net realizable value, which is defined as estimated selling prices less the sum of costs of disposal and a reasonable profit allowance for the selling effort of the acquiring entity), which is approximately $3.6 million higher than historical manufacturing cost. Additionally, excludes approximately $2.0 million of certain inventories to conform with our accounting policies. |
| (ii) | We have assigned $250.0 million to the estimated value of the trade names acquired. The values of the trade names are not subject to amortization but are reviewed annually for impairment. |
| (iii) | Of the total intangible assets acquired, an estimated $5.0 million has been assigned to distributor relationships and $1.0 million to a non-compete agreement. See note (b) in the notes to the unaudited pro forma consolidated statement of operations for further details. |
| (c) | Other assets, net, consists of $9.9 million of deferred financing costs, $5.0 million of distributor relationships and $1.0 million for a non-compete agreement. |
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