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8-K/A - 8-K/A - INVENTURE FOODS, INC.a14-4182_18ka.htm
EX-99.2 - EX-99.2 - INVENTURE FOODS, INC.a14-4182_1ex99d2.htm
EX-99.3 - EX-99.3 - INVENTURE FOODS, INC.a14-4182_1ex99d3.htm
EX-23.1 - EX-23.1 - INVENTURE FOODS, INC.a14-4182_1ex23d1.htm

Exhibit 99.4

 

PRO FORMA FINANCIAL INFORMATION

 

On November 8, 2013, Inventure Foods, Inc. (“Inventure Foods” or “the Company”) completed an acquisition of Fresh Frozen Foods, LLC (“Fresh Frozen).  Pursuant to the terms and conditions of the Asset Purchase Agreement, dated as of November 8, 2013, by and among the Company, FFF Acquisition Sub, Inc., a wholly owned subsidiary of the Company (“Acquisition Sub”), Fresh Frozen, and Fresh Frozen’s members, Acquisition Sub acquired substantially all of the assets, properties and rights of Fresh Frozen (the “Acquisition”).

 

Headquartered in Georgia, Fresh Frozen is a family-owned, full-service processor and supplier of more than 60 varieties of frozen vegetables and fruits to retail outlets. The Acquisition will allow both companies to leverage each other’s sales organizations, distribution channels, and products. Additionally, the Company will now have year-round freezing operations and be able to freeze blueberries and other fruits in a new region of the country.

 

The following unaudited pro forma combined balance sheet as of September 28, 2013 and the unaudited pro forma combined statements of income for the nine months ended September 28, 2013 and the year ended December 29, 2012 are based on the historical financial statements of Inventure Foods, after giving effect to the Acquisition using the acquisition method of accounting and net borrowings of approximately $41,400,000 under our financing facilities (the “Borrowings”). For the purposes of these illustrative pro forma combined financial statements, the entire Borrowings and the related interest expense, using current interest rates, were included in the pro forma adjustments.

 

The unaudited pro forma combined balance sheet as of September 28, 2013 is presented as if the Acquisition and the Borrowings occurred on September 28, 2013. The unaudited pro forma combined statements of income for the nine months ended September 28, 2013 and for the year ended December 29, 2012 are presented as if the Acquisition and the Borrowings had taken place on January 1, 2012. For additional information, see the assumptions and adjustments described in the accompanying notes to the unaudited pro forma combined financial statements.

 

The Acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total purchase price presented in the accompanying unaudited pro forma combined financial statements was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The excess of the purchase price over the total of estimated fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed is recognized as goodwill.

 

The unaudited pro forma combined financial statements are presented for illustrative purposes only and, therefore, are not necessarily indicative of the operating results and financial position that might have been achieved had the transaction occurred as of an earlier date, nor are they necessarily indicative of operating results and financial position that may occur in the future.

 

The unaudited pro forma combined financial statements, including the notes thereto, should be read in conjunction with Inventure Food’s historical consolidated financial statements for the year ended December 29, 2012 included in our Annual Report on Form 10-K for the year ended December 29, 2012 and our historical unaudited consolidated financial statements as of and for the nine months ended September 28, 2013 included in our Quarterly Report on Form 10-Q for the quarterly period ended September 28, 2013, as well as Fresh Frozen’s financial statements for the year ended December 31, 2012 included in Exhibit 99.2 to this Form 8-K/A and the unaudited financial statements as of and for the nine months ended September 30, 2013 included in Exhibit 99.3 to this Form 8-K/A.

 

1



 

INVENTURE FOODS, INC. AND SUBSIDIARIES

CONDENSED COMBINED PRO FORMA BALANCE SHEET

(UNAUDITED)

AS OF SEPTEMBER 28, 2013

 

 

 

(1)

 

(2)

 

 

 

 

 

 

 

 

Inventure Foods,
Inc.

 

Fresh Frozen
Foods, LLC

 

Pro Forma
Adjustments

 

 

Pro Forma
Combined

 

ASSETS

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

819

 

$

559

 

$

(559

)

(A)

$

819

 

Accounts receivable, net

 

22,228

 

2,523

 

 

 

24,751

 

Inventories

 

41,505

 

7,648

 

 

 

49,153

 

Deferred income tax asset

 

848

 

 

235

 

(B)

1,083

 

Other current assets

 

1,072

 

74

 

 

 

1,146

 

Total current assets

 

66,472

 

10,804

 

(324

)

 

76,952

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

40,419

 

7,153

 

1,271

 

(C)

48,843

 

Goodwill

 

14,763

 

2,439

 

5,862

 

(D)

23,064

 

Trademarks and other intangibles, net

 

5,862

 

 

19,962

 

(C)

25,824

 

Other assets

 

948

 

 

540

 

(E)

1,488

 

Total assets

 

$

128,464

 

$

20,396

 

$

27,311

 

 

$

176,171

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

12,733

 

$

5,628

 

$

 

 

$

18,361

 

Accrued liabilities

 

17,424

 

495

 

 

 

17,919

 

Current portion of long-term debt

 

2,785

 

3,071

 

268

 

(F)

6,124

 

Total current liabilities

 

32,942

 

9,194

 

268

 

 

42,404

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, less current portion

 

14,013

 

9,847

 

38,243

 

(F)

62,103

 

Line of credit

 

17,380

 

 

(11,595

)

(G)(E)(H)

5,785

 

Deferred income tax liability

 

4,019

 

 

 

 

4,019

 

Interest rate swaps

 

577

 

 

 

 

577

 

Other liabilities

 

2,849

 

 

2,652

 

(I)

5,501

 

Total liabilities

 

71,780

 

19,041

 

29,568

 

 

120,389

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

 

 

Common stock

 

198

 

 

 

 

198

 

Additional paid-in capital

 

30,516

 

(11,784

)

11,784

 

(J)

30,516

 

Accumulated other comprehensive loss

 

(262

)

 

 

 

(262

)

Retained earnings

 

26,703

 

13,139

 

(14,041

)

(J)(H)

25,801

 

 

 

57,155

 

1,355

 

(2,257

)

 

56,253

 

Less : treasury stock

 

(471

)

 

 

 

(471

)

Total shareholders’ equity

 

56,684

 

1,355

 

(2,257

)

 

55,782

 

Total liabilities and shareholders’ equity

 

$

128,464

 

$

20,396

 

$

27,311

 

 

$

176,171

 

 


(1)               As reported in Inventure Food’s Quarterly Report on Form 10-Q for the quarterly period ended September 28, 2013 filed with the Securities and Exchange Commission (“SEC”) on November 5, 2013.

 

(2)               Derived from the financial statements included in Exhibit 99.3 to this Form 8-K/A.

 

See accompanying notes to unaudited pro forma combined financial statements.

 

2



 

INVENTURE FOODS, INC. AND SUBSIDIARIES

CONDENSED COMBINED PRO FORMA STATEMENT OF INCOME

(UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 28, 2013

 

 

 

 

 

(2)

 

 

 

 

 

 

 

 

 

 

(1)
Inventure
Foods, Inc.

 

Willamette
Valley Fruit
Company, LLC

 

(3)
Fresh Frozen
Foods, LLC

 

Pro Forma
Adjustments

 

 

Pro Forma
Combined

 

Net revenues

 

$

156,728

 

$

6,949

 

$

42,198

 

$

(518

)

(K)

$

205,357

 

Cost of revenues

 

128,711

 

6,084

 

34,807

 

(321

)

(K)(L)

169,281

 

Gross profit

 

28,017

 

865

 

7,391

 

(197

)

 

36,076

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

20,241

 

667

 

3,681

 

536

 

(L)(M)(P)

25,125

 

Operating income

 

7,776

 

198

 

3,710

 

(733

)

 

10,951

 

Non-operating (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

641

 

 

1,057

 

(242

)

(N)

1,456

 

Income before income tax expense

 

7,135

 

198

 

2,653

 

(491

)

 

9,495

 

Income tax expense

 

2,524

 

74

 

 

800

 

(O)

3,398

 

Net income

 

$

4,611

 

$

124

 

$

2,653

 

$

(1,291

)

 

$

6,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.24

 

 

 

 

 

 

 

 

$

0.32

 

Diluted

 

$

0.23

 

 

 

 

 

 

 

 

$

0.31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

19,329

 

 

 

 

 

 

 

 

19,329

 

Diluted

 

19,746

 

 

 

 

 

 

 

 

19,746

 

 


(1)               As reported in Inventure Food’s Quarterly Report on Form 10-Q for the quarterly period ended September 28, 2013 filed with the SEC on November 5, 2013.

 

(2)               Derived from the unaudited year-to-date May 28, 2013 results of the acquired business of Willamette Valley Fruit Company, LLC, (“Willamette”) prior to acquisition by Inventure Foods, Inc., as reported in Inventure Food’s Form 8-K filed with the SEC on June 3, 2013.

 

(3)               Derived from the financial statements included in Exhibit 99.3 to this Form 8-K/A.

 

See accompanying notes to unaudited pro forma combined financial statements.

 

3



 

INVENTURE FOODS, INC. AND SUBSIDIARIES

CONDENSED COMBINED PRO FORMA STATEMENT OF INCOME

(UNAUDITED)

FOR THE YEAR ENDED DECEMBER 29, 2012

 

 

 

 

 

(2)

 

 

 

 

 

 

 

 

 

 

(1)
Inventure
Foods, Inc.

 

Willamette
Valley Fruit
Company, LLC

 

(3)
Fresh Frozen
Foods, LLC

 

Pro Forma
Adjustments

 

 

Pro Forma
Combined

 

Net revenues

 

$

185,179

 

$

17,719

 

$

56,351

 

$

(1,459

)

(K)

$

257,790

 

Cost of revenues

 

148,287

 

14,109

 

46,014

 

(989

)

(K)(L)

207,421

 

Gross profit

 

36,892

 

3,610

 

10,337

 

(470

)

 

50,369

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

25,548

 

2,312

 

5,367

 

1,196

 

(L)(M)

34,423

 

Operating income

 

11,344

 

1,298

 

4,970

 

(1,666

)

 

15,946

 

Non-operating (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of DSD business

 

(1,101

)

 

 

 

 

(1,101

)

Interest expense, net

 

764

 

(7

)

1,290

 

(6

)

(N)

2,041

 

Income before income tax expense

 

11,681

 

1,305

 

3,680

 

(1,660

)

 

15,006

 

Income tax expense

 

4,233

 

483

 

 

748

 

(O)

5,464

 

Net income

 

$

7,448

 

$

822

 

$

3,680

 

$

(2,408

)

 

$

9,542

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.40

 

 

 

 

 

 

 

 

$

0.51

 

Diluted

 

$

0.38

 

 

 

 

 

 

 

 

$

0.49

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

18,821

 

 

 

 

 

 

 

 

18,821

 

Diluted

 

19,574

 

 

 

 

 

 

 

 

19,574

 

 


(1)               As reported in Inventure Food’s Annual Report on Form 10-K for the annual period ended December 29, 2012 filed with the SEC on March 13, 2013.

 

(2)               Derived from the unaudited year-to-date December 31, 2012 results of Willamette prior to acquisition by Inventure Foods, as reported in Inventure Food’s Form 8-K filed with the SEC on June 3, 2013.

 

(3)               Derived from the financial statements included in Exhibit 99.2 to this Form 8-K/A.

 

See accompanying notes to unaudited pro forma combined financial statements.

 

4



 

NOTES TO CONDENSED COMBINED PRO FORMA FINANCIAL INFORMATION

(UNAUDITED)

 

1. Basis of Pro Forma Presentation

 

On November 8, 2013 (the “Effective Date”), FFF Acquisition Sub, Inc. (“Acquisition Sub”), a Delaware corporation and wholly owned subsidiary of Inventure Foods, Inc. (the “Company”), acquired (the “Acquisition”) substantially all of the assets, properties and rights of Fresh Frozen, LLC, a Georgia limited liability company (“Fresh Frozen”), a branded frozen vegetable processor, pursuant to an Asset Purchase Agreement, dated as of November 8, 2013, by and among the Company, Acquisition Sub, Fresh Frozen and Fresh Frozen’s members (the “Purchase Agreement”).

 

In accordance with the Purchase Agreement, Acquisition Sub acquired substantially all of the assets, properties and rights of Fresh Frozen, including, without limitation, Fresh Frozen’s frozen food processing equipment assets, certain real property located in Jefferson, Georgia and Thomasville, Georgia, and other intellectual property, accounts receivable and inventory rights.  As consideration for the acquisition, Acquisition Sub assumed certain liabilities and obligations of Fresh Frozen and paid an aggregate amount of $38,375,000 in cash plus a preliminary working capital adjustment of $401,000.  A portion of the proceeds was used to settle Fresh Frozen’s existing debt as of the Effective Date.  Additional proceeds are being held in escrow to secure post-closing purchase price adjustments and indemnity claims.  An additional amount of up to $3.0 million is payable to Fresh Frozen in the form of an earn-out based on 2014 performance. The contingent payment, if any, will be paid during the first quarter of 2015.  Acquisition Sub assumed certain liabilities of Fresh Frozen relating to existing business contracts and leases, and accounts payable and accrued liabilities included on Fresh Frozen’s balance sheet as of the Effective Date.  The acquisition was funded with a senior syndicated credit facility led by U.S. Bank National Association, which also closed on November 8, 2013.

 

2. Preliminary Purchase Price Allocation

 

The unaudited pro forma consolidated financial statements have been prepared to give effect to the Acquisition, which was accounted for under the acquisition method of accounting.  The aggregate amount of the consideration paid by the Company was approximately $38.8 million in cash. Under the acquisition method of accounting, the total estimated purchase price is allocated to Fresh Frozen’s tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of November 8, 2013, the effective date of the acquisition.

 

The following table summarizes the purchase price and estimated fair value of assets acquired and liabilities assumed at the date of acquisition (in thousands):

 

Purchase price paid as:

 

 

 

 

 

Cash

 

 

 

$

38,375

 

Net working capital adjustment

 

 

 

401

 

Contingent consideration

 

 

 

2,653

 

Total purchase price

 

 

 

41,429

 

 

 

 

 

 

 

Fair value of net assets acquired:

 

 

 

 

 

Current assets

 

$

10,774

 

 

 

Property and equipment

 

8,424

 

 

 

Deferred tax assets

 

235

 

 

 

Identifiable intangible assets:

 

 

 

 

 

Trade name

 

9,475

 

 

 

Customer relationships

 

10,487

 

 

 

Current liabilities

 

(6,252

)

 

 

Long-term capital lease obligation

 

(15

)

 

 

Total fair value of net assets acquired

 

 

 

33,128

 

 

 

 

 

 

 

Excess purchase price over fair value of net assets acquired (“goodwill”)

 

 

 

$

8,301

 

 

The above allocation will remain preliminary until the Company has all of the information necessary to finalize the allocation of the purchase price.

 

5



 

NOTES TO CONDENSED COMBINED PRO FORMA FINANCIAL INFORMATION

(UNAUDITED)

(continued)

 

Identified intangible assets of $19,962,000 consist of customer relationships and trade name.  The customer relationships are amortized using the straight-line method over the estimated useful life of twelve years.  We believe the acquired trade name has the continued ability to generate cash flows indefinitely, and therefore the trade name has been determined to have an indefinite life.

 

Goodwill of $8,301,000 represents the excess of the purchase price over the estimated fair value assigned to tangible and identifiable intangible assets acquired and liabilities assumed from Fresh Frozen. In accordance with current accounting standards, the goodwill is not amortized and will be tested for impairment annually in the fourth quarter of our fiscal year.

 

3.  Borrowings

 

Debt and Equity Financing Arrangements

 

In connection with the Acquisition, we entered into a new $60.0 million senior secured term loan and a new $30.0 million senior secured revolving line of credit with a syndicate of lenders led by U.S. Bank National Association (“US Bank”), pursuant to a Credit Agreement, a Security Agreement and certain other customary ancillary agreements (the “Senior Credit Facility”).  As of November 8, 2013, the Company’s obligations under the Senior Credit Facility totaled $64.9 million, $60.0 million of which was borrowed under the senior secured term loan and $4.9 million of which was borrowed under the senior secured revolving line of credit.  All obligations under the Senior Credit Facility mature on November 8, 2018.  The senior secured term loan will be repaid in quarterly installments throughout the term of the Senior Credit Facility.

 

The Senior Credit Facility was used to (a) fund the acquisition of substantially all of the assets, properties and rights of Fresh Frozen, and (b) repay the Company’s two existing equipment term loans totaling $8.4 million as of November 8, 2013, and the Company’s existing revolving line of credit totaling $17.6 million as of November 8, 2013, all of which repaid loans were made pursuant to the Loan and Security Agreement the Company entered into with U.S. Bank on March 22, 2013 (the “LSA”).  Two term loans totaling $8.4 million as of November 8, 2013, remain outstanding under the LSA.  See Item 2.03 on our Form 8-K filed on March 28, 2013, for additional information regarding the LSA.  To facilitate the Senior Credit Facility, the Company and its wholly owned subsidiaries entered into a Letter Amendment Agreement dated as of November 8, 2013 with U.S. Bank National Association (the “Letter Amendment”).  The Letter Amendment reconciled the terms of Senior Credit Facility with the terms of the LSA and that certain Loan Agreement (Term Loan), dated as of November 30, 2006, by and between the Company’s wholly owned subsidiary, La Cometa Properties, Inc., and U.S. Bank.

 

The Senior Credit Facility bears interest at the 30-day LIBOR rate plus a floating rate of interest which is set quarterly between the range of 1.375% to 2.25% depending on our financial performance.  The agreements governing the Senior Credit Facility are subject to certain customary limitations, including, among others: limitation on liens; limitation on mergers; consolidations and sales of assets; limitation on debt; limitation on dividends, stock redemptions and the redemption and/or prepayment of other debt; limitation on investments (including loans and advances) and acquisitions; limitation on transactions with affiliates; and limitation on annual capital expenditures.  We are also subject to financial covenants, which include a maximum leverage ratio of 3.5 to 1.0 through September 27, 2014 and 3.25 to 1.0 thereafter, and a minimum fixed charge coverage ratio of 1.20 to 1.0. The Senior Credit Facility is secured by substantially all present and future assets and properties of the Company.

 

As is customary in such financings, U.S. Bank, on behalf of the syndicate of lenders, may terminate the syndicate’s commitments, accelerate the repayment of amounts outstanding and exercise other remedies upon the occurrence of an event of default (as defined in the Senior Credit Facility) subject, in certain instances, to the expiration of an applicable cure period.

 

6



 

NOTES TO CONDENSED COMBINED PRO FORMA FINANCIAL INFORMATION

(UNAUDITED)

(continued)

 

4.  Pro Forma Adjustments

 

The accompanying unaudited pro forma combined financial statements have been prepared as if the Acquisition was completed on September 28, 2013 for balance sheet purposes and on January 1, 2012 for statement of income purposes and reflect the following pro forma adjustments:

 

(A)       To reflect the elimination of cash not acquired.

 

(B)       To record the deferred tax asset associated with the acquisition of Fresh Frozen.

 

(C)       To record the adjustment to the fair value of property and equipment and identifiable intangible assets acquired.

 

(D)       To eliminate Fresh Frozen’s historical goodwill and record the goodwill resulting from the Acquisition.

 

(E)        To record deferred financing fees of $540,000.

 

(F)         To eliminate Fresh Frozen’s historical debt that was not acquired and to record the new Senior Credit Facility.

 

(G)       To record the net payments to the senior secured revolving line of credit upon inception of the Senior Credit Facility.

 

(H)      To record the related transaction costs totaling $902,000.

 

(I)           To record fair market value of estimated contingent consideration in the form of an earn-out if certain performance thresholds are met during the 12-month period ending December 27, 2014.

 

(J)           To eliminate Fresh Frozen’s historical members’ equity account.

 

(K)      To eliminate intercompany sales and cost of goods sold between Willamette and Rader Farms, Inc.

 

(L)        To eliminate historical depreciation and record the depreciation of property and equipment acquired in the acquisition:

 

 

 

Nine Months

 

 

 

 

 

Ended

 

Year Ended

 

 

 

September 28, 2013

 

December 29, 2012

 

Elimination of Willamette’s historical depreciation

 

(73

)

(202

)

Depreciation of property and equipment acquired in the Willamette acquisition

 

125

 

300

 

Elimination of Fresh Frozen’s historical depreciation

 

(396

)

(497

)

Depreciation of property and equipment acquired in the Fresh Frozen Acquisition

 

422

 

562

 

 

(M)    To record amortization of finite-lived intangible assets acquired in the acquisition:

 

 

 

Nine Months

 

 

 

 

 

Ended

 

Year Ended

 

 

 

September 28, 2013

 

December 29, 2012

 

Amortization of Willamette’s customer relationship

 

133

 

320

 

Amortization of Fresh Frozen’s customer relationship

 

655

 

874

 

 

(N)       To eliminate Fresh Frozen’s historical interest expense and record the interest expense and the amortization of the deferred financing fees incurred to finance the Acquisition.  The interest expense is calculated based on a current weighted average interest rate of 2.3%, resulting from the borrowings under our financing facilities to fund the purchase price.

 

(O)       To reflect the income tax effect of the pro forma adjustments using an effective tax rate of 37%, the statutory rates in effect during the periods presented.

 

(P)         To eliminate acquisition costs of $254,000 incurred during the acquisition of Willamette, which are included in the results of Inventure Foods for periods presented.

 

7