UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A (Amendment No. 1) |
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): September 6, 2017
PILGRIM'S PRIDE CORPORATION
(Exact Name of registrant as specified in its charter)
Delaware | 1-9273 | 75-1285071 | |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |
1770 Promontory Circle Greeley, CO | 80634-9038 | ||
(Address of principal executive offices) | (Zip Code) | ||
Registrant's telephone number, including area code: (970) 506-8000
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.01 Completion of Acquisition or Disposition of Assets.
On September 11, 2017, Pilgrim’s Pride Corporation, a Delaware corporation (“Parent”), filed a current report on Form 8-K (the “Original Form 8-K”) announcing that on September 8, 2017, Onix Investments UK Limited, a private limited company incorporated under the laws of England and Wales and registered with company number 10934285 (“Purchaser”) and a wholly-owned subsidiary of Parent, entered into a Share Purchase Agreement (the “Purchase Agreement”) with JBS S.A. a sociedade anônima organized under the laws of the Federative Republic of Brazil, Granite Holdings S.a.r.l., a société à responsabilité limitée organized under the laws of the Grand Duchy of Luxembourg (the “Company”) and, for certain limited purposes set forth in the Purchase Agreement, Parent, pursuant to which Purchaser simultaneously acquired all of the issued and outstanding shares of the Company.
This amendment to the Original Form 8-K is being filed to include financial information for Parent and the Company that was not available at the time of the original filing.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
Audited Consolidated Financial Statements of Granite Holdings S.a.r.l. for the years ended December 31, 2016, December 31, 2015 and December 31, 2014.
(b) Pro Forma Financial Information
Unaudited pro forma condensed combined financial information of Pilgrim’s Pride Corporation for the fifty-two weeks ended December 25, 2016 and December 27, 2015, giving effect to Purchaser’s acquisition of the Company.
(d) Exhibits
Exhibit Number | Description |
Consent of KPMG in Ireland, Independent Auditors | |
Consent of BDO Northern Ireland, Independent Accountants | |
Audited Consolidated Financial Statements of Granite Holdings S.a.r.l. for the years ended December 31, 2016, December 31, 2015 and December 31, 2014 | |
Unaudited pro forma condensed combined financial information of Pilgrim’s Pride Corporation for the fifty-two weeks ended December 25, 2016 and December 27, 2015, giving effect to Purchaser’s acquisition of the Company | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
PILGRIM’S PRIDE CORPORATION | |||
Date: | November 24, 2017 | /s/ Fabio Sandri | |
Fabio Sandri | |||
Chief Financial Officer | |||
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors
Granite Holdings S.a.r.l.:
We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-74984; 333-111929; 333-163639; 333-179563; 333-182586 and 333-186934) of Pilgrim’s Pride Corporation of our report dated November 24, 2017, with respect to the consolidated balance sheet of Granite Holdings S.a.r.l. as of December 31, 2016, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the year ended December 31, 2016, which report appears in the Form 8-K/A of Pilgrims’ Pride Corporation dated November 24, 2017.
/s/ KPMG
Belfast, Northern Ireland
November 24, 2017
Exhibit 23.2
Consent of Independent Accountants
Pilgrim’s Pride Corporation
Greeley, Colorado
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-74984; 333-111929; 333-163639; 333-179563; 333-182586 and 333-186934) of Pilgrim’s Pride Corporation of our report dated November 24, 2017, relating to the consolidated financial statements of Granite Holdings S.a.r.l., which appears in this Form 8K/A.
/s/ BDO Northern Ireland
BDO Northern Ireland
Belfast, United Kingdom
November 24, 2017
Exhibit 99.1
1
GRANITE HOLDINGS S.A.R.L.
FINANCIAL STATEMENTS FOR THE YEARS ENDED 31
DECEMBER 2016, 2015 and 2014
Exhibit 99.1
2
GRANITE HOLDINGS S.A.R.L.
CONTENTS
Independent Auditors’ reports 3
Consolidated income statements 5
Consolidated statements of other comprehensive income 6
Consolidated balance sheets 7
Consolidated statements of changes in equity 9
Consolidated cash flow statements 10
Notes to the consolidated financial statements 11
Exhibit 99.1
3
Independent Auditor’s Report
The Board of Directors
Granite Holdings S.A.R.L.
We have audited the accompanying consolidated balance sheet of Granite Holdings S.A.R.L. and subsidiaries as of
December 31, 2016 and the related consolidated income statement, statement of other comprehensive income, statement
of changes in equity, cash flow statement and the related notes for the year then ended. These consolidated financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Granite Holdings S.A.R.L. and subsidiaries as of December 31, 2016, and the results of the operations and cash
flows for the year then ended in conformity with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
/s/ KPMG
KPMG
Belfast, UK
November 24, 2017
Exhibit 99.1
4
Independent Auditor’s Report
Board of Directors
Granite Holdings S.a.r.l
Luxembourg, Luxembourg
We have audited the accompanying consolidated financial statements of Granite Holdings S.a.r.l and its subsidiaries, which
comprise the consolidated balance sheets as of December 31, 2015 and 2014, and the related consolidated statements of
income, other comprehensive income, changes in equity and cash flows for the years then ended, and the related notes to
the consolidated financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance
with International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the
design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our
audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the
consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such
opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Granite Holdings S.a.r.l and its subsidiaries as of December 31, 2015 and 2014, and the results of their operations
and their cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
/s/ BDO Northern Ireland
BDO Northern Ireland
Belfast, United Kingdom
November 24, 2017
Exhibit 99.1
5
GRANITE HOLDINGS S.A.R.L.
CONSOLIDATED INCOME STATEMENTS
For the years ended 31 December 2016, 2015 and 2014
Note 2016 2015 2014
£’000 £’000 £’000
Revenue 4 1,437,428 1,442,268 1,421,701
Cost of sales (1,265,559) (1,293,029) (1,262,671)
Gross profit 171,869 149,239 159,030
Sales and distribution costs (71,831) (73,100) (75,750)
Administration expenses (36,603) (31,947) (39,219)
Other operating costs (1,676) (1,372) (109)
Exceptional costs 6 - (12,528) (249)
Group operating profit 61,759 30,292 43,703
Finance costs 7 (21,909) (22,237) (11,986)
Finance income 8 718 1,292 569
Net finance costs (21,191) (20,945) (11,417)
Profit before taxation 40,568 9,347 32,286
Taxation 9 (7,960) 3,328 (10,479)
Profit for the year 32,608 12,675 21,807
Attributable to:
Owners of the parent 32,608 12,675 21,807
Profit for the year 32,608 12,675 21,807
The accompanying notes form part of these consolidated financial statements.
Exhibit 99.1
6
GRANITE HOLDINGS S.A.R.L.
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME
For the years ended 31 December 2016, 2015 and 2014
Note 2016 2015 2014
£’000 £’000 £’000
Profit for the year 32,608 12,675 21,807
Other comprehensive income/(losses):
Items that may subsequently be reclassified to profit or
loss
Foreign exchange rate gains/(losses) 4,685 (1,620) (1,653)
Cash flow hedges 119 174 -
Total comprehensive income for the year, net of tax 37,412 11,229 20,154
Attributable to:
Owners of the parent 37,412 11,229 20,154
Total comprehensive income for the year, net of tax 37,412 11,229 20,154
The accompanying notes form part of these consolidated financial statements.
Exhibit 99.1
7
GRANITE HOLDINGS S.A.R.L.
CONSOLIDATED BALANCE SHEETS
As at 31 December 2016, 2015 and 2014
Note 2016 2015 2014
£’000 £’000 £’000
Assets
Non-current assets
Intangible assets 10 204,759 207,120 212,539
Property, plant and equipment 11 270,913 247,463 264,798
Trade and other receivables 15 2,879 2,535 -
Total non-current assets 478,551 457,118 477,337
Current assets
Biological assets 13 52,857 49,051 47,077
Inventory 14 78,869 67,000 73,961
Trade and other receivables 15 124,461 74,870 106,582
Cash and cash equivalents 16 139,735 173,392 70,641
Total current assets 395,922 364,313 298,261
Total assets 874,473 821,431 775,598
The accompanying notes form part of these consolidated financial statements.
Exhibit 99.1
8
GRANITE HOLDINGS S.A.R.L.
CONSOLIDATED BALANCE SHEETS (continued)
As at 31 December 2016, 2015 and 2014
Note 2016 2015 2014
£’000 £’000 £’000
Equity and liabilities
Equity attributable to owners of the parent
Share capital 21 9 9 9
Retained earnings 22 246,929 225,671 248,596
Other reserves/(deficit) 22 1,122 (3,682) (2,236)
248,060 221,998 246,369
Non-controlling interests 22 (746) (746) (746)
Total equity 247,314 221,252 245,623
Liabilities
Non-current liabilities
Loans and borrowings 18 312,143 306,709 209,655
Trade and other payables 17 1,986 1,753 1,785
Capital grants 19 9,424 8,162 7,394
Deferred tax liabilities 20 46,511 47,573 55,058
Total non-current liabilities 370,064 364,197 273,892
Current liabilities
Loans and borrowings 18 14,475 20,630 23,921
Trade and other payables 17 242,620 215,352 232,162
Total current liabilities 257,095 235,982 256,083
Total liabilities 627,159 600,179 529,975
Total equity and liabilities 874,473 821,431 775,598
The accompanying notes form part of these consolidated financial statements.
Exhibit 99.1
9
GRANITE HOLDINGS S.A.R.L.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the years ended 31 December 2016, 2015 and 2014
Share
capital
Retained
earnings
Translation
reserve*
Hedge
Reserve*
Non-
controlling
interest Total
£’000 £’000 £’000 £’000 £’000 £’000
At 1 January 2014 9 409,022 (561) - (746) 407,724
Total comprehensive income for the year
Profit for year - 21,807 - - - 21,807
Foreign exchange gains/(losses) - 22 (1,675) - - (1,653)
Transactions with owners recorded directly in
equity
Dividend paid (note 27) - (175,000) - - - (175,000)
Adjustments arising on common control
transactions (note 2)
- (7,255)
- - - (7,255)
At 31 December 2014 9 248,596 (2,236) - (746) 245,623
Total comprehensive income for the year
Profit for year - 12,675 - - - 12,675
Foreign exchange losses - - (1,620) - - (1,620)
Fair value gain - - - 174 - 174
Transactions with owners recorded directly in
equity
Dividend paid (note 27) - (35,600) - - - (35,600)
At 31 December 2015 9 225,671 (3,856) 174 (746) 221,252
Total comprehensive income for the year
Profit for year - 32,608 - - - 32,608
Foreign exchange gains - - 4,685 - - 4,685
Fair value gain - - - 119 - 119
Transactions with owners recorded directly in
equity
Dividend paid (note 27) - (11,350) - - - (11,350)
At 31 December 2016 9 246,929 829 293 (746) 247,314
* Included in consolidated Balance Sheet as Other Reserves.
The accompanying notes form part of these consolidated financial statements.
Exhibit 99.1
10
GRANITE HOLDINGS S.A.R.L.
CONSOLIDATED CASH FLOW STATEMENTS
For the years ended 31 December 2016, 2015 and 2014
Note
2016
2015
2014
Cash flows from operating activities £’000 £’000 £’000
Profit before taxation 40,568 9,347 32,286
Adjustments for:
Depreciation of property, plant & equipment 11 31,482 31,763 29,989
Impairment of property, plant & equipment 11 - 8,394 -
Amortisation of intangible assets 10 2,782 3,470 3,274
Amortisation of biological assets 13 29,831 33,632 30,727
Amortisation of capital grants 19 (991) (1,141) (798)
Net finance costs 21,191 20,945 11,417
(Profit)/Loss on disposal of assets (245) 56 (381)
124,618 106,466 106,514
Changes in working capital:
Movement in inventory and biological consumable
assets
(12,393) 769 (9,463)
Movement in trade and other receivables (45,058) 23,212 1,279
Movement in trade and other payables 16,224 (8,488) 5,199
Cash generated from operations 83,391 121,959 103,529
Interest received 419 246 162
Interest paid (20,789) (21,293) (9,458)
Income tax paid (6,031) (8,515) (5,902)
Net cash inflow from operating activities 56,990 92,397 88,331
Cash flows from investing activities
Purchase of property, plant and equipment 11 (50,713) (27,483) (28,920)
Sale of property, plant and equipment and intangible
assets
1,909 2,105 1,522
Receipt of capital grants 19 2,258 1,929 2,220
Purchase of bearer assets (29,610) (30,781) (34,706)
Purchase of subsidiaries 12 - - (7,777)
Net cash outflow from investing activities (76,156) (54,230) (67,661)
Cash flows from financing activities
Cash inflow from lease financing of fixed assets - 7,262 6,491
Capital element of Finance lease repayments (7,306) (8,641) (7,806)
Capital element of group loan receivables - 5,320 6,752
Capital element of group loans liabilities (1,983) (2,000) (15,294)
Capital element of other loans movements 5,684 (239) (23,068)
Proceeds from 6.25% Senior Notes 18 - 98,900 197,800
Dividends paid 27 (11,350) (35,600) (175,000)
Net cash (outflow)/inflow from financing activities (14,955) 65,002 (10,125)
Net (decrease)/increase in cash and cash equivalents (34,121) 103,169 10,545
Cash and cash equivalents at 1 January 173,392 70,641 60,343
Movement in cash due to foreign exchange 464 (418) (247)
Cash and cash equivalents at 31 December 16 139,735 173,392 70,641
The accompanying notes form part of these consolidated financial statements.
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11
1. GENERAL INFORMATION
Granite Holdings S.a.r.l. (formerly Moy Park Lux S.a.r.l.), a private limited company (societe a responsabilite limitee), was
incorporated on 25th September 2015 under the laws of Luxembourg. The address of the registered office is 8 – 10
Avenue de la Gare, L-1610 Luxembourg. The Company is the holding company of Moy Park Holdings (Europe) Limited and
its subsidiaries (collectively, the “Group”), whose principal activity is focused on the integrated poultry production
providing fresh, high quality locally farmed poultry and complementary convenience food products to major retailers and
large food service customers throughout the UK, Ireland and Europe. A full list of subsidiaries is provided in note 12.
The ultimate parent company of the group is JBS S.A., a company listed on the Brazilian stock exchange, who acquired
the group on 28th September 2015 from Marfrig Global Foods SA. On 8th September 2017 JBS S.A. sold the group to its
subsidiary Pilgrim’s Pride Corporation, whose common stock is listed on the NASDAQ Global Select Market.
The consolidated financial statements were authorised for issue by the Board of Directors on the 24th November 2017.
2. ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.
(a) Basis of preparation
Granite Holdings S.a.r.l. was incorporated and inserted as a new holding company for Moy Park Holdings (Europe)
Limited in September 2015 as part of a common control transaction within the group of the previous ultimate parent
company, Marfrig Global Foods S.A. The consolidated financial statements of the group have therefore been prepared
as if Granite Holdings S.a.r.l had always been in existence. The Group financial statements consolidate those of the
company and its subsidiaries (together referred to as the “Group”).
The non-statutory consolidated financial statements of Granite Holdings S.a.r.l. have been prepared in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board. The consolidated
financial statements have been prepared under the historical cost convention, as modified by the revaluation of biological
assets, financial assets and liabilities (including derivative instruments) at fair value through profit or loss.
Consolidation and subsidiaries
Subsidiaries (as listed in note 12) are all entities over which the group has the power to govern the financial and operating
policies generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully
consolidated from the date on which the control is transferred to the group. They are deconsolidated from the date that
control ceases.
The group applies the acquisition method to account for business combinations with entities not under common control.
The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities
incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred
includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair
values at the acquisition date. The group recognises any non-controlling interest in the acquiree on an acquisition by
acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts
of the acquiree’s identifiable net assets. Acquisition costs are expensed as incurred.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-
controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than
the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12
2. ACCOUNTING POLICIES (continued)
(a) Basis of preparation (continued)
For business combinations of entities under common control that are outside the scope of IFRS 3(revised), the principles
of predecessor accounting are applied whereby all entities are included at their pre-combination carrying amounts as
recognised in the consolidated financial statements of the ultimate parent entity. This accounting treatment leads to
recognition of intangible assets, goodwill and deferred tax liabilities as related to the acquired entity and previously
accounted for in the ultimate parent entity financial statements.
In November 2008, Marfrig Global Foods SA purchased 100% of Moy Park Limited and its subsidiaries using a UK
registered holding company, Moy Park Holdings (Europe) Limited. Acquisition accounting was recorded for this
transaction.
In April 2014 the Moy Park group acquired Moy Park France Holdco SARL, Moy Park Beef Orleans SARL and Moy Park
Food Service Dublin Limited, three fellow subsidiaries of the then ultimate parent company Marfrig Global Foods S.A.
Marfrig had acquired the two French companies as part of a previous transaction in October 2010.
These acquisitions have been accounted for using predecessor accounting under which Moy Park Holdings (Europe)
Limited has included the whole prior period Income Statement and the results from the beginning of 2014. When
predecessor accounting is used the Moy Park Group must include the acquired entities’ results and capital structure as if
the Moy Park Group has always existed in this form even through the business combination did not occur until 1 April
2014. The Group also recognises goodwill, other intangible assets and deferred tax liabilities recognised in the previous
parent company of the acquired entities. The consideration paid for this acquisition was £7.8m.
Intercompany transactions, balances, income and expenses on transactions between group companies are eliminated.
Profits and losses resulting from intercompany transactions that are recognised in assets are also eliminated. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.
The financial statements are presented in thousands of pounds sterling (“£”) except when otherwise indicated.
(b) Directors’ responsibilities in respect of the financial statements
In preparing these non-statutory financial statements, the directors have:
• selected suitable accounting policies and applied them consistently;
• made judgements and estimates that are reasonable and prudent;
• stated whether applicable Accounting Standards have been followed; subject to any material departures being
disclosed and explained in the non-statutory financial statements; and
• prepared the non-statutory financial statements on the going concern basis as they believe that the Company
will continue in business.
The directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any
time the assets, liabilities, financial position and profit or loss of the Company. They have a general responsibility for
taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect
fraud and other irregularities.
(c) Going concern
The consolidated financial statements relating to the group have been prepared on the going concern basis.
After making appropriate enquiries and having prepared and reviewed cash flow forecasts which take into account
reasonably possible changes in trading performance, the directors have a reasonable expectation that the group has
adequate resources to continue in operational existence for the foreseeable future and for at least one year from the
date of these financial statements. For these reasons they continue to adopt the going concern basis in preparing the
group’s financial statements.
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13
2. ACCOUNTING POLICIES (continued)
(d) New standards, amendments and interpretations
New and amended standards adopted by the group
There were no IFRSs or IFRIC interpretations that were effective for the first time for the financial year beginning on 1
January 2016 that had a material impact on the group.
New standards and interpretations not yet adopted by the group
square4 IFRS 9 'Financial instruments' (effective 1 January 2018). This is a new standard on classification and measurement
of financial assets that will replace IAS 39. IFRS 9 has two measurement categories: amortised cost and fair value. All
equity instruments are measured at fair value. A debt instrument is at amortised cost only if the entity is holding it
to collect contractual cash flows and the cash flows represent principal and interest, otherwise it is at fair value
through profit or loss. Amortised cost accounting will also be applicable for most financial liabilities, with bifurcation
of embedded derivatives. The main change is that in cases where the fair value option is taken for financial liabilities,
the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather
than the income statement, unless this creates an accounting mismatch. IFRS 9 will also introduce an ‘expected loss’
impairment model replacing the ‘incurred loss’ model. This new model will mean an entity will now always recognise
12 months of expected losses on financial assets in profit or loss. This change is expected to have an immaterial
impact on the Group’s provision for impairment of trade receivables. The Group is in the process of completing its
assessment of the impact of the application of IFRS 9 on its financial statements for the year ended 31 December
2018 and expects to complete this in the first quarter of 2018.
square4 IFRS 15 ‘Revenue from contracts with customers’ (effective 1 January 2018) The objective of IFRS 15 is to clarify the
principles of revenue recognition with the core principle being to recognise revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration to which the entity expects to
be entitled in exchange for those goods or services. The Group has completed a preliminary assessment of the new
standard by reviewing its impact on the current revenue recognition policy. The Group is in the process of completing
its assessment of the impact of the application of IFRS 15 on its financial statements for the year ended 31 December
2018 and expects to complete this in the first quarter of 2018
square4 IFRS 16 ‘Leases’ (effective 1 January 2019). This is a new standard establishing principles for the recognition,
measurement, presentation and disclosure of leases, with the objective of ensuring that lessees and lessors provide
relevant information that faithfully represents those transactions. The standard replaces IAS 17 and provides a single
lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12
months or less or the underlying asset has a low value. The Group is yet to assess the impact of IFRS 16 on its financial
statements. Current operating lease commitments are disclosed in note 23(b).
(e) Foreign currency translation
The functional currency of the Company is pounds sterling because that is the currency of the primary economic
environment in which the Group operates. The Group’s presentation currency is pounds sterling.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in the income statement.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income
statement within ‘finance income or costs’. All other foreign exchange gains and losses are presented in the income
statement within ‘other operating income/costs’.
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14
2. ACCOUNTING POLICIES (continued)
(e) Foreign currency translation (continued)
Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency
as follows:
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that
balance sheet;
• income and expenses for each income statement presented are translated at average exchange rates (unless
this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
• all resulting exchange differences are recognised in other comprehensive income.
The following exchange rates were applied for £1 at 31 December:
2016
2015
2014
United States dollar 1.2303 1.4819 1.5512
Euro 1.1651 1.3605 1.2740
(f) Property, plant and equipment
Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost
includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition
for its intended use. When parts of an item of property, plant and equipment have different useful lives, those
components are accounted for as separate items of property, plant and equipment.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can
be measured reliably.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised
in the income statement.
Leased assets
Leases under which the Group assumes substantially all the risks and rewards of ownership of an asset are classified as
finance leases. Property, plant and equipment acquired under finance leases is recorded at fair value or, if lower, the
present value of minimum lease payments at inception of the lease, less depreciation and any impairment.
Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of
finance charges, are included in the other long-term payables. The interest element of the finance cost is charged to the
income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of
the liability for each period. The property, plant and equipment under finance leases is depreciated over the shorter of
the useful life of the asset and lease term.
Depreciation
Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of each part of an item of
property, plant and equipment. The property, plant and equipment acquired under finance leases is depreciated over
the shorter of the useful life of the asset and the lease term. Freehold land is not depreciated. The estimated useful lives
are as follows:
● Buildings – 20 to 50 years
● Plant and Machinery – 4 to 15 years
● Fixture, fittings, tools and equipment – 3 to 25 years
The residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15
2. ACCOUNTING POLICIES (continued)
(g) Intangible assets
Intangible assets comprise goodwill, certain acquired separable corporate brand names and acquired customer
relationships. Goodwill represents the excess of fair value attributed to investments in businesses or subsidiary
undertakings over the fair value of the underlying net assets, including intangible assets, at the date of their acquisition.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate
a potential impairment. The carrying value of goodwill is compared to the net present value of future cash flows derived
from the underlying assets using a projection period of up to five years for each cash-generating unit. After the projection
period a steady growth rate representing an appropriate long-term growth rate for the industry is applied. Any
impairment is recognised immediately as an expense and is not subsequently reversed.
Corporate brand names and customer relationships acquired as part of acquisitions of businesses are capitalised
separately from goodwill as intangible assets if their value can be measured reliably on initial recognition and it is probable
that the expected future economic benefits that are attributable to the asset will flow to the Group.
Certain corporate brands and customer relationships of the Group are considered to have an indefinite economic life
because of the nature of the corporate brand names and relationships, their proven ability to maintain market leadership
and profitable operations over long periods of time and the Group’s commitment to develop and enhance their value.
The carrying value of these intangible assets is reviewed at least annually for impairment and adjusted to the recoverable
amount if required.
Amortisation
Amortisation is charged to profit or loss (within other operating costs) on a straight-line basis over the estimated useful
lives of intangible assets unless such lives are indefinite. Customer relationships (not considered to have an indefinite
useful life) are being amortised between 5 and 16 years. The majority of trade names are considered to have an indefinite
useful life while the remaining trade names have a 16 year life.
(h) Impairment of non-financial assets
Assets not subject to amortisation are tested annually for impairment. Assets that are subject to amortisation are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For
the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for
possible reversal of the impairment at each reporting date.
(i) Financial assets
Classification
The Group classifies its financial assets as loans and receivables. Management determines the classification of its
financial assets at initial recognition.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that arise principally
through the provision of services to customers. They are initially recognised at fair value, and are subsequently stated at
amortised cost using the effective interest method. They are included in current assets, except for maturities greater
than 12 months after the end of the reporting period. Loans and receivables comprise mainly cash and cash equivalents
and trade and other receivables.
Impairment of financial assets
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the
part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the
amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying
amount and the present value of the future expected cash flows (discounted at the original effective interest rate)
associated with the impaired receivable.
For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss
being recognised within sales and distribution costs in the income statement. On confirmation that the trade receivable
will not be collectable, the gross carrying value of the asset is written off against the associated provision.
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16
2. ACCOUNTING POLICIES (continued)
(j) Derivative financial instruments and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-
measured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item being hedged. The group designates certain
derivatives as either:
a) Hedges of the fair value of recognised assets or liabilities (fair value hedges); or
b) Hedges of a particular risk associated with a recognised asset or liability or a highly probably forecast transaction
(cash flow hedges).
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the Income
Statement together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged
risk.
Changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in other
comprehensive income. Amounts accumulated in equity are reclassified to either profit or loss in the periods when the
hedged item affects profit or loss or to the initial measurement of the cost of a non-financial asset when the forecast
transaction that is hedged results in recognition of such an asset.
(k) Inventory
Inventories are stated at the lower of cost (which for biological assets transferred to inventory is fair value at the date
of transfer) and net realisable value. Cost is determined on the first in first out basis. Cost comprises material costs,
direct wages and other direct production costs together with a proportion of production overheads relevant to the
stage of completion of work in progress and finished goods and excludes borrowing costs. Net realisable value
represents the estimated selling price less costs to completion and appropriate selling and distribution costs. Provision
is made, where necessary, for slow moving, obsolete and defective inventories.
(l) Biological assets
Biological assets are comprised of live poultry which are categorised as either bearer (breeding bird) assets or consumable
assets (broilers and hatching eggs).
Biological assets are recognised in the financial statements as follows:
• Consumable assets are measured at fair value less costs to sell and are transferred to processing plant inventory at
fair value less costs to sell;
• Due to the short formation period of poultry the group believes that the fair value of bearer assets is substantially
represented by its formation cost. Bearer assets are capitalised at formation cost at the beginning of their productive
cycle (formation cost includes the purchase cost of day old chick, feeding costs, labour costs and veterinary costs)
and are amortised based on laying profile, over the anticipated productive cycle to its estimated realisable values.
Consequently the fair value of the asset is materially equivalent to amortised cost throughout the life of the asset;
• Costs incurred in respect of bearer assets subsequent to the beginning of their productive cycle are expensed in the
income statement;
• Changes in fair value of consumable assets and amortisation of bearer assets are recognised in the income statement
within cost of sales; and
• The formation cost of the group’s bearer assets is included as a cash outflow in investing activities as these bearer
assets are used to produce the consumable assets that the group uses in its manufacturing process.
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17
2. ACCOUNTING POLICIES (continued)
(l) Biological assets (continued)
In measuring the fair value of poultry, various management estimates and judgements are required:
• Estimates and judgements in determining the fair value of poultry relate to market prices, average lifecycle growth
and laying profile; and
• Market prices for poultry are based on the group’s knowledge of a limited market for poultry transactions at various
points of the consumable and bearer assets’ lifecycle.
(m) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less.
Bank factored receivables in which full recourse lies with the lender are recognised as a liability and included within
current liabilities, loans and borrowings while the related receivables continue to be reported separately in trade and
other receivables until the related account balances are collected.
(n) Trade and other receivables
Trade and other receivables are recognised initially at fair value and are subsequently measured at amortised cost less
any provision for impairment.
Bank factored receivables in which the lender has no recourse are derecognised when the rights to receive cash flows
from those receivables have expired or have been transferred and the group has transferred substantially all risks and
rewards of ownership.
(o) Trade and other payables
Trade and other payables are initially stated at fair value and subsequently measured at amortised cost.
(p) Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised
in the income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is
probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs.
To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is
capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
(q) Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result
of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the
effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and, when appropriate, the risks specific to the liability. The
increase in the provision due to passage of time is recognised in finance costs.
(r) Revenue
Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for
goods supplied, stated net of discounts, returns and value added taxes. The group recognises revenue when the amount
of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when
specific criteria have been met for each of the group’s activities, as described below. The group bases its estimate of
return on historical results, taking into consideration the type of customer, the type of transaction and the specifics of
each arrangement.
Revenue is recognised at the point that the risks and rewards of the inventory have passed to the customer, which is
either at the point of dispatch or on delivery of the products. This varies from customer to customer according to the
terms of sale.
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18
2. ACCOUNTING POLICIES (continued)
(r) Revenue (continued)
Rebates given to customers mainly comprise of volume related rebates on sales of finished goods. Contractual volume
related rebates are accrued as goods are sold based on the percentage rebate applicable to forecast total sales over the
rebate period, where it is probable the rebates will be paid and the amount can be estimated reliably. Such rebates are
debited against turnover in the income statement.
(s) Leases
The costs associated with operating leases are taken to the income statement on a straight line basis over the period of
the lease. Where the company enters into a lease which entails taking substantially all the risks and rewards of ownership
of an asset, the lease is treated as a “finance lease”, the accounting policy for which is disclosed in (f).
(t) Net finance costs
Finance costs
Finance costs comprise interest payable on borrowings and direct issue costs.
Finance income
Finance income comprises interest receivable on funds invested in loans and cash and cash equivalents. Interest income
is recognised in profit or loss as it accrues using the effective interest method.
(u) Income tax
Income tax for the years presented comprises current and deferred tax. Income tax is recognised in profit or loss except
to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially
enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of
other assets or liabilities that affect neither accounting nor taxable profit; nor differences relating to investments in
subsidiaries to the extent that they are unlikely to reverse in the foreseeable future. The amount of deferred tax provided
is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax
rates enacted or substantially enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related
tax benefit will be realised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by
the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle
the balances on a net basis.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except
for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group
and it is probable that the temporary difference will not reverse in the foreseeable future.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to
pay the related dividend.
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19
2. ACCOUNTING POLICIES (continued)
(v) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting to the Board of Directors which has
been identified as the chief operating decision maker.
(w) Employee benefits: Pension obligations
The group operates a defined contribution plan. A defined contribution plan is a pension plan under which the group
pays fixed contributions into a separate entity. The group has no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in
the current and prior periods.
The group has no further payment obligations once the contributions have been paid. The contributions are recognised
as employee benefit expense over the period of employee service. Prepaid contributions are recognised as an asset to
the extent that a cash refund or a reduction in the future payments is available.
(x) Capital grants
Capital grants are initially recognised at their fair value where there is a reasonable assurance that the grant will comply
with all attached conditions.
Grants relating to property, plant and equipment are included in non-current liabilities as deferred capital grants and are
credited to the income statement on a straight line basis over the expected lives of the related assets.
(y) Dividend distribution
Dividend distribution to the company’s shareholders is recognised as a liability in the group’s financial statements in the
period in which the dividends are approved by the company’s shareholders.
(z) Exceptional items
Exceptional items are those items that are disclosed separately in the financial statements where management believe
that it is necessary to do so to provide further understanding of the financial performance of the group.
(aa) Fair value estimation
Fair values are estimated based on the fair value hierarchy of IFRS 13 which defines the different levels of fair value as
follows:
• Quoted prices in active markets for identical assets or liabilities (level 1).
• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly or indirectly (level 2).
• Inputs for the asset or liability that are not based on observable market data (level 3).
(ab) Operating profit
The Group uses the operating profit measure in its decision making because it provides information useful to assess the
Group’s performance. This measure should not be viewed in isolation or as an alternative to the measures presented
according to IFRS. Operating profit is calculated by excluding from the profit for the year before taxation all results derived
from finance income and costs and exceptional items (as defined in Noted 2(z)).
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20
3. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the Group’s financial statements under IFRS requires the Directors to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. Estimates
and judgements are continually evaluated and are based on historical experience and other factors including expectations
of future events that are believed to be reasonable under the circumstances. Actual results may differ from these
estimates.
The Directors consider that the following estimates and judgements are likely to have the most significant effect on the
amounts recognised in the financial statements:
Depreciation and amortisation of intangible assets and property, plant & equipment
Intangible assets and property, plant & equipment (as detailed in notes 10 and 11), except for goodwill and trade names
with indefinite lives, are depreciated or amortised at historical cost using a straight-line method based on the estimated
useful life, taking into account any residual value. The asset’s residual value and useful life are based on the directors’
best estimates and are reviewed, and adjusted if required, at each balance sheet date. If the estimate of useful lives was
adjusted by +/- one year with all other variables held constant, the depreciation/amortisation charge would have been
£2.5m/£3.0m lower/higher than the charge recognised in the income statement (2015: £2.6m/£3.4m, 2014:
£2.0m/£2.4m). The carrying value of intangible assets and property, plant & equipment at 31 December 2016 were
£204.8m and £270.9m respectively (2015: £207.1m and £247.5m, 2014: £212.5m and £264.8m).
Useful life of intangible assets and impairment
Corporate brand names and customer relationships acquired (as detailed in note 10) as part of acquisitions of businesses
are capitalised separately from goodwill as intangible assets if their value can be measured reliably on initial recognition
and it is probable that the expected future economic benefits that are attributable to the asset will flow to the Group.
Certain corporate brands of the Group are considered to have an indefinite economic life because of the nature of the
corporate brand names, their proven ability to maintain market leadership and profitable operations over long periods
of time and the Group’s commitment to develop and enhance their value. The carrying value of these intangible assets is
reviewed at least annually for impairment and adjusted to the recoverable amount if required.
The group annually tests whether goodwill and intangible assets with indefinite useful lives have suffered any
impairment. In testing for potential impairment, the directors must make significant judgements and estimates to
determine whether the recoverable amount is less than the carrying value. The recoverable amount is the higher of the
fair value less cost to sell and value in use. In assessing the value in use, the estimated future cash flows are discounted
to their present value using a discount rate that reflects current market assessments of the time value of money and the
asset-specific risks. Determining cash flows requires the use of judgements and estimates that have been included in the
group’s strategic plans and long-term forecasts. The data necessary for the execution of the impairment tests are based
on the directors’ estimates of future cash flows, which require estimating revenue growth rates and profit margins.
4. SEGMENTAL REPORTING
Management has determined the operating segments based on the operating reports reviewed by the Board of directors
that are used to assess both performance and strategic decisions. Management has identified that the Board of directors
is the chief operating decision maker in accordance with the requirements of IFRS 8 ‘Operating segments’.
The Board of directors considers the business to be split into two main types of business generating revenue and
operating profit namely UK & Ireland and Europe.
The Board of directors assesses the performance of the segments based on EBITDA and revenue.
All segment revenue and EBITDA are attributable to the principal activity of the group being integrated poultry production
providing fresh, high quality locally farmed poultry and convenience food products to major retailers and large food
service customers throughout the UK, Ireland and Europe.
Revenue from external customers, EBITDA and operating profit is measured in a manner consistent with the income
statement.
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21
4. SEGMENTAL REPORTING (continued)
*EBITDA is defined as earnings before finance costs, income tax, depreciation and amortisation and therefore adds back
the amortisation arising on the group’s bearer biological assets. Management uses this measure internally as bird
amortisation relates to the cost of bearer assets which are used to produce the broiler assets which are used in the
group’s manufacturing process.
2016
UK &
Ireland Europe
Segment
total
Corporate
costs Total
£’000 £’000 £’000 £’000 £’000
Revenue
Total revenue from external customers 1,079,377 358,051 1,437,428 - 1,437,428
Net Profit 46,070 3,384 49,454 (16,846) 32,608
Net finance costs 1,024 310 1,334 19,857 21,191
Taxation expense/(credit) 8,372 2,647 11,019 (3,059) 7,960
Operating profit 55,466 6,341 61,807 (48) 61,759
Amortisation of bearer assets 29,831 - 29,831 - 29,831
Other depreciation and amortisation 27,820 6,444 34,264 - 34,264
EBITDA* 113,117 12,785 125,902 (48) 125,854
2015
UK &
Ireland Europe
Segment
total
Corporate
costs inc
exceptional
items** Total
£’000 £’000 £’000 £’000 £’000
Revenue
Total revenue from external customers 1,124,123 318,145 1,442,268 - 1,442,268
Net Profit 32,386 3,421 35,807 (23,132) 12,675
Net finance costs 3,135 831 3,966 16,979 20,945
Taxation expense/(credit) 3,555 (497) 3,058 (6,386) (3,328)
Operating profit 39,076 3,755 42,831 (12,539) 30,292
Amortisation of bearer assets 33,632 - 33,632 - 33,632
Other depreciation and amortisation 29,003 6,230 35,233 - 35,233
EBITDA* 101,711 9,985 111,696 (12,539) 99,157
**Note 6 provides more detail on exceptional items
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22
4. SEGMENTAL REPORTING (continued)
2014
UK &
Ireland Europe
Segment
total
Corporate
Costs inc
Exceptional
Items** Total
£’000 £’000 £’000 £’000 £’000
Revenue
Total revenue from external customers 1,103,695 318,006 1,421,701 - 1,421,701
Net Profit 29,541 (1,214) 28,327 (6,520) 21,807
Net finance costs 2,881 1,214 4,095 7,322 11,417
Taxation expense/(credit) 9,268 2,262 11,530 (1,051) 10,479
Operating profit 41,690 2,262 43,952 (249) 43,703
Amortisation of bearer assets 30,727 - 30,727 - 30,727
Other depreciation and amortisation 26,319 6,944 33,263 - 33,263
EBITDA* 98,736 9,206 107,942 (249) 107,693
**Note 6 provides more detail on exceptional items
The group is domiciled in the UK. The result of its revenue from external customers in the UK is £1,070m (2015:
£1,091.9m, 2014: £1,039.8m), revenue from external customers in France is £228.6m (2015: £211.7m, 2014: £226.3m)
and the total revenue from other countries is £138.8m (2015: £138.7m, 2014: £155.6m).
Revenues of approximately £270.3m and £262.1m (2015: £295.2m and £234.6m, 2014: £284.5m and £233.6m) were
derived from two individual customers.
Non current assets located in the UK are £392.6m (2015: £374.9m, 2014: £389.8m). The group also has non current assets
of £61.1m (2015: £57.8m, 2014: £62.4m) located in France and other non current assets of £24.9m (2015: £24.4m, 2014:
£25.1m).
5. EMPLOYEES AND DIRECTORS
(a) Key management compensation
Key management personnel are those persons having authority and responsibility for planning, directing and controlling
the activities of the Group, both directly and indirectly.
The following table details the aggregate compensation paid in respect of the members of key management
2016 2015 2014
£’000 £’000 £’000
Wages and salaries (including termination benefits) 2,633 2,839 2,685
Short-term non-monetary benefits 69 99 78
Post-employment benefits 117 142 138
Sums paid to third parties for management services 351 232 314
3,170 3,312 3,215
There are no defined benefit schemes for key management. Pension costs under defined contribution schemes are
included in the post-employment benefits disclosed above.
(b) Retirement benefits
The Group offers membership of one of the Group’s Pension Schemes to eligible employees. The schemes are all defined
contribution schemes and the pensions cost in the year was £5.0m (2015: £4.9m, 2014: £4.9m).
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23
6. EXPENSES BY NATURE
2016 2015 2014
£’000 £’000 £’000
Raw materials and consumables used 794,414 836,480 831,310
Other costs of sales 180,611 177,785 165,353
Employee costs 250,365 234,061 227,042
Depreciation and amortisation 64,095 68,865 63,990
Transportation expenses 32,107 33,693 34,553
Advertising costs 4,431 4,047 7,747
Other selling expenses 16,937 17,946 20,639
Operating lease payments 20,063 17,426 17,504
Exceptional items - 12,528 249
Other expenses 12,646 9,145 9,611
1,375,669 1,411,976 1,377,998
Other costs of sales include directly related production overheads.
Total exceptional items in 2015 were £12.5m. This comprised £10m of restructuring costs (including £8.4m of property,
plant & equipment impairments) and £2.5m of costs incurred on an aborted Initial Public Offering process that was
pursued by the previous parent company Marfrig Alimentos S.A. before their decision to sell the group to JBS S.A.
7. FINANCE COSTS
2016 2015 2014
£’000 £’000 £’000
Interest costs:
Interest payable on borrowings 21,137 19,603 9,870
Interest arising from finance leases 772 924 866
Interest payable on group loans - 88 388
Foreign exchange losses on financing activities - 1,269 862
Fair value losses on financial instruments (foreign exchange
forward contracts) - 353 -
Finance costs 21,909 22,237 11,986
8. FINANCE INCOME
2016 2015 2014
£’000 £’000 £’000
Interest income 419 1,292 299
Foreign exchange gains on financing activities 214 - -
Fair value gains on financial instruments (foreign exchange
forward contracts)
85 - 270
718 1,292 569
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24
9. TAXATION
Analysis of charge in year 2016 2015 2014
£’000 £’000 £’000
Current tax on profits for the year 9,326 5,968 11,161
Changes in estimates related to prior years (61) (1,908) 156
Total current tax 9,265 4,060 11,317
Origination and change in timing differences (468) (1,077) (840)
Changes in estimates related to prior years 1,847 (1,120) 83
Impact of change in tax rate (2,684) (5,191) (81)
Total deferred tax (note 20) (1,305) (7,388) (838)
Income tax charge/(credit) 7,960 (3,328) 10,479
The tax charge / (credit) for the year differs from the standard rate of corporation tax in the UK 20.00% (2015: 20.25%,
2014: 21.5%). The differences are explained below:
2016 2015 2014
£’000 £’000 £’000
Profit before tax 40,568 9,347 32,286
Profit multiplied by the rate of corporation tax in the UK of 20%
(2015: 20.25%, 2014: 21.5%) 8,114 1,893 6,941
Effects of:
Expenses not deductible 1,112 2,812 1,146
French social contributions, imports etc (258) (1,620) 61
Losses of foreign subsidiary (87) 1,046 1,323
Changes in estimates related to prior years 1,786 (3,028) 769
Impact of change in tax rate and foreign tax rates (2,707) (4,431) 239
Income tax charge/(credit) 7,960 (3,328) 10,479
UK Corporation tax rates have been applied as the major part of the group’s operations is based in the UK.
Reductions in the UK corporation tax rate to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were
substantively enacted on 26 October 2015. Finance Act 2016 further reduced the 18% rate to 17% from 1 April 2020,
following substantive enactment on 6 September 2016. Together this will reduce the Group’s future tax charge
accordingly.
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25
10. INTANGIBLE ASSETS
2016
Total
Trade name
Customer
relationships
Goodwill
£’000 £’000 £’000 £’000
Cost
At 1 January 169,751 34,738 24,555 229,044
Disposals - (5,502) - (5,502)
Exchange adjustments 180 250 919 1,349
At 31 December 169,931 29,486 25,474 224,891
Accumulated amortisation
At 1 January 336 21,588 - 21,924
Charge for the year 63 2,719 - 2,782
On disposals - (4,574) - (4,574)
At 31 December 399 19,733 - 20,132
Net book amount
At 31 December 169,532 9,753 25,474 204,759
2015
Total
Trade name
Customer
relationships
Goodwill
Cost £’000 £’000 £’000 £’000
At 1 January 169,824 36,439 24,927 231,190
Disposals - (1,600) - (1,600)
Exchange adjustments (73) (101) (372) (546)
At 31 December 169,751 34,738 24,555 229,044
Accumulated amortisation
At 1 January 275 18,376 - 18,651
Charge for the year 61 3,409 - 3,470
On disposals - (197) - (197)
At 31 December 336 21,588 - 21,924
Net book amount
At 31 December 169,415 13,150 24,555 207,120
2014
Total
Trade name
Customer
relationships
Goodwill
Cost £’000 £’000 £’000 £’000
At 1 January 169,897 34,941 25,302 230,140
Additions - 1,600 - 1,600
Exchange adjustments (73) (102) (375) (550)
At 31 December 169,824 36,439 24,927 231,190
Accumulated amortisation
At 1 January 212 15,165 - 15,377
Charge for the year 63 3,211 - 3,274
At 31 December 275 18,376 - 18,651
Net book amount
At 31 December 169,549 18,063 24,927 212,539
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26
10. INTANGIBLE ASSETS (continued)
All amortisation charges have been treated as an expense in the income statement. Trade names considered to have an
indefinite useful life have a carrying value of £169m (2015 and 2014: £168.8m). Customer relationships considered to
have an indefinite useful life have a carrying value of £1.7m (2015: £1.5m, 2014: £1.6m)
Management reviews the business performance based on operating segments identified as UK & Ireland and Europe.
Goodwill and other intangible assets with indefinite useful lives are monitored by management at operating segment
level. £195.4m (2015: £199.1m, 2014 £203.9m) of goodwill and intangible assets are within the UK & Ireland segment
and £9.4m (2015: £8m, 2014: £8.6m) of goodwill and intangible assets are within the Europe segment.
The recoverable amount of all CGUs has been determined based on value in use calculations. These calculations use pre-
tax cash flow projections based on financial budgets approved by management covering a five year period. Cash flows
beyond the five year period are extrapolated using the estimated growth rates stated below. The growth rate does not
exceed the long term average growth rate for the poultry business in which the CGU operates. The key assumptions used
for value in use calculations were as follows:
2016 2015 2014
Compound revenue growth 4.3% 4.1% 4.3%
Gross margin 12.8% 11.0% 10.7%
Long term growth rate 3.0% 3.0% 3.0%
Discount rate 8.4% 9.6% 8.5%
Management determined budgeted gross margin based on past performance and its expectations of market
development. The growth rates used are consistent with the forecasts included in industry reports. The discount rates
used are pre-tax and reflect specific risks relating to the relevant operating segments. Management have considered the
sensitivity of these assumptions and consider that no reasonable changes in the assumptions would lead to an
impairment of the intangible assets.
11. PROPERTY, PLANT AND EQUIPMENT
2016
Land and
buildings
Plant and
machinery
Fixtures,
fittings, tools
and equipment Total
£’000 £’000 £’000 £’000
Cost
At 1 January 250,049 352,485 43,645 646,179
Additions at cost 14,149 30,651 5,913 50,713
Disposals (2,547) (10,248) (1,019) (13,814)
Exchange adjustments 8,168 10,301 340 18,809
At 31 December 269,819 383,189 48,879 701,887
Accumulated depreciation
At 1 January 120,782 246,785 31,149 398,716
Charge for the period 8,374 18,929 4,179 31,482
Disposals (2,534) (9,520) (1,018) (13,072)
Exchange adjustments 6,124 7,405 319 13,848
At 31 December 132,746 263,599 34,629 430,974
Net book amount
At 31 December 137,073 119,590 14,250 270,913
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27
11. PROPERTY, PLANT AND EQUIPMENT (continued)
2015
Land and
buildings
Plant and
machinery
Fixtures,
fittings, tools
and equipment Total
£’000 £’000 £’000 £’000
Cost
At 1 January 253,158 339,219 40,332 632,709
Additions at cost 3,900 18,747 4,836 27,483
Disposals (3,730) (1,092) (1,394) (6,216)
Exchange adjustments (3,279) (4,389) (129) (7,797)
At 31 December 250,049 352,485 43,645 646,179
Accumulated depreciation
At 1 January 112,024 227,988 27,899 367,911
Charge for the period 9,212 18,141 4,410 31,763
Impairment 3,625 4,463 306 8,394
Disposals (1,800) (861) (1,394) (4,055)
Exchange adjustments (2,279) (2,946) (72) (5,297)
At 31 December 120,782 246,785 31,149 398,716
Net book amount
At 31 December 129,267 105,700 12,496 247,463
2014
Land and
buildings
Plant and
machinery
Fixtures,
fittings, tools
and equipment Total
£’000 £’000 £’000 £’000
Cost
At 1 January 251,770 326,860 36,015 614,645
Additions at cost 6,552 17,882 4,486 28,920
Disposals (1,911) (1,089) (36) (3,036)
Exchange adjustments (3,253) (4,434) (133) (7,820)
At 31 December 253,158 339,219 40,332 632,709
Accumulated depreciation
At 1 January 106,032 214,803 24,194 345,029
Charge for the period 9,085 17,048 3,856 29,989
Disposals (853) (997) (36) (1,886)
Exchange adjustments (2,240) (2,866) (115) (5,221)
At 31 December 112,024 227,988 27,899 367,911
Net book amount
At 31 December 141,134 111,231 12,433 264,798
Included within the net book value of £270.9m (2015: £247.5m, 2014: £264.8m) is £18.8m (2015: £9.0m, 2014: £16.3m)
relating to assets under the course of construction.
Finance lease commitments
Included in property, plant and equipment are assets held under finance leases and hire purchase agreements with a net
book value of £17.2m (2015: £22.5m, 2014: £22.9m) and accumulated depreciation of £8.6m (2015: £21.0m, 2014:
£22.0m). These assets are used as security on their related borrowings.
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28
12. INVESTMENTS
Principal subsidiary undertakings of the Group
The Company substantially owns directly or indirectly the whole of the issued and fully paid ordinary share capital of its
subsidiary undertakings. Principal subsidiary undertakings of the Group at 31 December 2016 are presented below:
Subsidiary Nature of business
Country of
incorporation
Proportion of
ordinary
shares held
by parent
Proportion of
ordinary
shares held
by the Group
% %
Moy Park Holdings (Europe) Ltd
Moy Park Ltd
Moy Park France Holding SAS
Moy Park France SAS
Dungannon Proteins Ltd
O’Kane Blue Rose (Newco 1) Ltd
O’Kane Poultry Ltd
Kitchen Range Foods Ltd
Bakewell Foods Ltd
Albert van Zoonen B.V.
Rose Energy Ltd
Moy Park Newco Ltd
Moy Park Bondco plc
Holding company
Value added poultry processing
Holding company
Value added poultry processing
Processing poultry by-products
Holding company
Non trading
Trading and production of sweet,
savoury and deep frozen snacks
Holding company
Manufacture of frozen foods
Biomass energy
Holding company
Financing company
UK
UK
France
France
UK
UK
UK
UK
UK
Holland
UK
UK
UK
100
100
100
100
100
100
100
100
100
100
67
100
100
100
100
100
100
100
100
100
100
100
100
67
100
100
Moy Park France Holdco SARL
Moy Park Beef Orleans SARL
Moy Park Food Service Dublin Ltd
Holding company
Value added meat processing
Value added meat processing
France
France
Ireland
100
100
100
100
100
100
Moy Park France Holdco SARL, Moy Park Beef Orleans SARL and Moy Park Food Service Dublin Limited (formerly McKey
Holdco SARL, McKey Food Service SARL and Keystone Manufacturing Ireland Ltd respectively) were acquired by Moy Park
Holdings Europe Limited in April 2014 for a consideration of £7.8m. As explained in note 2, this acquisition has been
accounted for using the principles of predecessor accounting as a business combination between entities under common
control.
There are no restrictions on the Company’s ability to access or use the assets and settle the liabilities of the Company’s
subsidiaries.
13. BIOLOGICAL ASSETS
2016 2015 2014
£’000 £’000 £’000
At 1 January 49,051 47,077 44,843
Increase due to purchases 485,112 497,909 490,183
Consumables transferred to inventory (451,949) (462,415) (457,385)
Change in fair value due to biological transformation 46,637 57,860 53,761
Amortisation of bearer assets (29,831) (33,632) (30,727)
Sales of biological assets (46,163) (57,748) (53,598)
At 31 December 52,857 49,051 47,077
Bearer assets 21,453 21,674 24,524
Consumable assets 31,404 27,377 22,553
52,857 49,051 47,077
At 31 December 2016 the company had 3.2m bearer assets (2015: 3.0m, 2014: 3.3m) and 33.6m consumable assets
(2015: 31.3m, 2014: 26.9m). During the year the company processed 265.7m birds (2015: 258.5m, 2014: 234.6m).
The fair value of the group’s bearer assets are determined using level 3 of the fair value hierarchy , whilst the fair value
of the group’s consumable assets are determined using level 2 of the fair value hierarchy.
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
29
14. INVENTORY
2016 2015 2014
£’000 £’000 £’000
Raw materials 34,400 27,829 25,577
Work in progress 15,871 14,552 16,287
Finished goods 28,598 24,619 32,097
78,869 67,000 73,961
The cost of inventories recognised and included in cost of sales amounted to £1,043.5m (2015: £1,059.0m, 2014:
£1,066.1m).
15. TRADE AND OTHER RECEIVABLES
2016 2015 2014
£’000 £’000 £’000
Trade receivables - gross 105,950 56,910 76,143
Provision for trade receivables (1,702) (3,024) (2,787)
Trade receivables – net 104,248 53,886 73,356
Other receivables 12,845 13,789 10,833
Group loans - - 4,274
Prepayments 10,247 9,730 18,119
127,340 77,405 106,582
Less non-current portion – other receivables (2,879) (2,535) -
Trade and other receivables - current 124,461 74,870 106,582
Trade and other receivables are held at cost and any fair value difference is not material. Trade and other receivables are
considered past due once they have passed their contracted due date. Trade receivables are reviewed for impairment if
they are past due beyond 60 days.
The carrying amounts of the group’s trade and other receivables are denominated in the following currencies:
2016 2015 2014
£’000 £’000 £’000
Sterling 96,488 49,541 77,598
Euro 30,830 27,864 28,816
United States dollar 22 - 168
127,340 77,405 106,582
Movements on the group provision for impairment of trade receivables are as follows:
2016 2015 2014
£’000 £’000 £’000
At 1 January 3,024 2,787 2,256
Provision for receivables impairment 780 287 549
Reductions (2,212) - (24)
Exchange movement 110 (50) 6
At 31 December 1,702 3,024 2,787
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30
15. TRADE AND OTHER RECEIVABLES (continued)
The creation and release of provision for impaired receivables has been included in ‘sales and distribution costs’ in the
income statement. Amounts charged to the allowance account are generally written off, when there is no expectation of
recovering additional cash.
The other classes within trade and other receivables do not contain impaired assets.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned
above. The group does not hold any collateral as security.
At 31 December 2016, trade receivables of £9.6m (2015: £6.8m, 2014: £11.5m) were past due but not impaired. These
relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these
trade receivables is as follows:
2016 2015 2014
£’000 £’000 £’000
Up to 3 months 9,548 6,687 10,030
3 to 6 months - 35 1,425
Over 6 months 70 83 79
At 31 December 9,618 6,805 11,534
At 31 December 2016, trade receivables of £1.7m (2015: £3.0m, 2014: £2.8m) were impaired. The ageing analysis of
these trade receivables is as follows:
2016 2015 2014
£’000 £’000 £’000
Up to 3 months 186 101 12
3 to 6 months 92 408 134
Over 6 months 1,424 2,515 2,641
At 31 December 1,702 3,024 2,787
16. CASH AND CASH EQUIVALENTS
Group
2016 2015 2014
£’000 £’000 £’000
Cash and cash equivalents
Cash at bank and in hand 139,735 173,392 70,641
139,735 173,392 70,641
The following amounts were held in foreign currencies:
2016 2015 2014
£’000 £’000 £’000
United States dollar 4 40 3,410
Euro 4,497 4,027 6,709
4,501 4,067 10,119
17. TRADE AND OTHER PAYABLES
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31
Group
2016 2015 2014
£’000 £’000 £’000
Trade payables 193,380 173,080 184,428
Income tax payable 5,346 4,943 9,062
Social security payable 11,058 8,121 8,420
Accruals and other payables 34,822 30,961 32,037
244,606 217,105 233,947
Trade and other payables - current 242,620 215,352 232,162
Trade and other payables – non-current 1,986 1,753 1,785
244,606 217,105 233,947
The fair value of trade and other payables approximates their carrying value due to short maturities.
18. LOANS AND BORROWINGS
At 31 December 2016 borrowings of £7.2m (2015: £8.8m, 2014: £8.5m) were secured on trade accounts receivable.
In 2015, £100m of senior notes were issued at cost of £2.8m (£1.1m of which was deducted at source). In 2014 £200m
of senior notes were issued at a cost of £4.5m (£2.2m of which was deducted at source).
18. LOANS AND BORROWINGS (continued)
2016 2015 2014
£’000 £’000 £’000
Non-current
Bank borrowings 10,371 1,166 2,158
Senior Notes 295,147 294,047 195,426
Finance lease liabilities 6,625 11,496 12,071
312,143 306,709 209,655
Current
Bank borrowing 7,756 9,789 10,714
Senior Notes 1,803 1,803 1,202
Finance lease liabilities 4,916 7,320 8,144
Group loans - - 3,861
Other loans - 1,718 -
14,475 20,630 23,921
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
32
Interest rate profile of interest bearing borrowings
2016 2015 2014
Debt
£’000
Interest
rate
Debt
£’000
Interest
rate
Debt
£’000
Interest
rate
Non-current borrowings
Bank borrowings 10,371 2.3% 1,166 3.8% 2,158 4.4%
Senior Notes 295,147 6.2% 294,047 6.2% 195,426 6.2%
Finance lease liabilities 6,625 3.9% 11,496 3.2% 12,071 3.8%
312,143 306,709 209,655
Current borrowings
Bank borrowing 7,756 0.9% 9,789 1.0% 10,714 2.4%
Senior Notes 1,803 6.2% 1,803 6.2% 1,202 6.2%
Finance lease liabilities 4,916 3.9% 7,320 3.2% 8,144 3.8%
Group loans - - - - 3,861 3.5%
Other loans - - 1,718 3.5% - -
14,475 20,630 23,921
326,618 327,339 233,576
The carrying amounts and fair value of the non-current borrowings are as follows:
2016 2015 2014
Carrying
Amount
£’000
Fair Value
£’000
Carrying
Amount
£’000
Fair Value
£’000
Carrying
Amount
£’000
Fair Value
£’000
Non-current borrowings
Bank borrowings 10,371 10,068 1,166 1,072 2,158 1,983
Senior Notes 295,147 311,353 294,047 301,382 195,426 188,676
Finance lease liabilities 6,625 6,126 11,496 10,681 12,071 10,868
312,143 327,547 306,709 313,135 209,655 201,527
The fair value of current borrowings equals their carrying amount, as the impact of discounting is not significant. The fair
value of the Senior Notes is determined using level 1 of the fair value hierarchy. The fair values of other non-current
borrowings are determined using level 2 of the fair value hierarchy and are based on cash flows discounted using a rate
based on the facility borrowing rates.
Borrowings have the following maturity profile:
2016 2015 2014
£’000 £’000 £’000
Less than 1 year 14,475 20,630 23,921
1-5 years 312,143 12,662 14,203
Over 5 years - 294,047 195,452
326,618 327,339 233,576
18. LOANS AND BORROWINGS (continued)
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
33
The carrying amounts of the Group’s borrowings are denominated in the following currencies:
2016 2015 2014
£’000 £’000 £’000
Sterling 319,454 316,557 220,646
Euro 7,164 10,782 12,930
326,618 327,339 233,576
(a) Finance lease liabilities
Lease liabilities are effectively secured as the rights to the leased assets revert to the lessor in the event of default.
2016 2015 2014
£’000 £’000 £’000
Gross finance lease liabilities - minimum lease payments
No later than 1 year 5,384 8,001 8,953
Later than 1 year and no later than 5 years 7,234 12,571 13,278
Later than 5 years - - 40
12,618 20,572 22,271
Future finance charges on finance lease liabilities (1,077) (1,756) (2,056)
Present value of finance lease liabilities 11,541 18,816 20,215
The present value of finance lease liabilities is as follows:
2016 2015 2014
£’000 £’000 £’000
No later than 1 year 4,916 7,320 8,144
Later than 1 year and no later than 5 years 6,625 11,496 12,045
Later than 5 years - - 26
11,541 18,816 20,215
19. CAPITAL GRANTS
2016 2015 2014
£’000 £’000 £’000
Balance at 1 January 8,162 7,394 5,972
Grants claimed in year 2,258 1,929 2,220
Released to income statement (991) (1,141) (798)
Movement due to foreign exchange (5) (20) -
At 31 December 9,424 8,162 7,394
There is a contingent liability to repay capital grants if the group fails to comply with the terms of the letters of offer
under which they are received. In the opinion of the directors the terms of the letters of offer have been complied with
and no loss is expected.
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
34
20. DEFERRED TAX
The analysis of the deferred tax liability is as follows:
2016 2015 2014
£’000 £’000 £’000
Deferred tax liabilities:
Deferred tax liability to be recovered after more than 12
months
45,824 46,845 54,169
Deferred tax liability to be recovered within 12 months 687 728 889
Deferred tax liabilities 46,511 47,573 55,058
The movement in deferred tax liabilities during the year is as follows:
Accelerated tax
depreciation
Fair value
gains Total
£’000 £’000 £’000
At 1 January 2014 6,199 49,795 55,994
Credited to the income statement 214 (1,052) (838)
Exchange difference (29) (69) (98)
At 31 December 2014 6,384 48,674 55,058
Credited to the income statement (1,133) (6,255) (7,388)
Exchange difference (28) (69) (97)
At December 2015 5,223 42,350 47,573
Credited to the income statement 1,679 (2,984) (1,305)
Exchange difference 73 170 243
At December 2016 6,975 39,536 46,511
Fair value gains relate to deferred tax liabilities arising on fair value adjustments to non-current tangible and intangible
fixed assets.
The group has tax losses of approximately £45.9m (2015: £46.3m, 2014: £52.1m) available for carry forward and offset
against future taxable profits arising from the same trade. The group has a potential deferred tax asset of £15.6m (2015:
£15.7m, 2014: £17.7m), which has not been recognised in these financial statements as its future recovery is uncertain.
This potential deferred tax asset will be recognised when it can be regarded as more likely than not that there will be
sufficient taxable profits from which the tax losses can be deducted.
21. SHARE CAPITAL
Number of
shares
Ordinary
shares Total
£’000 £’000
At 1 January 2014 9,200 9 9
Movement in year - - -
At 31 December 2014, 2015 and 2016 9,200 9 9
All shares are authorised, allotted and fully paid up. There is no allotted but unpaid share capital.
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
35
22. RETAINED EARNINGS AND OTHER RESERVES
Retained
earnings
Translation
reserve*
Hedge
Reserve*
Non-
controlling
interest Total
£’000 £’000 £’000 £’000 £’000
At 1 January 2014 409,022 (561) - (746) 407,715
Profit for year 21,807 - - 21,807
Foreign exchange (losses)/gains 22 (1,675) - - (1,653)
Dividend paid (175,000) - - - (175,000)
Adjustments arising on common control transactions (7,255) - - - (7,255)
At 31 December 2014 248,596 (2,236) - (746) 245,614
Profit for the year 12,675 - - - 12,675
Foreign exchange losses - (1,620) - - (1,620)
Fair value gain - - 174 - 174
Dividend paid (35,600) - - - (35,600)
At December 2015 225,671 (3,856) 174 (746) 221,243
Profit for year 32,608 - - - 32,608
Foreign exchange gains - 4,685 - - 4,685
Fair value gain - - 119 - 119
Dividend paid (11,350) - - - (11,350)
At 31 December 2016 246,929 829 293 (746) 247,305
* Included in Consolidated Balance Sheet as Other Reserves.
23. COMMITMENTS
(a) Capital commitments
Authorised and contracted future capital expenditure before deduction of available government grants amounted to:
2016 2015 2014
£’000 £’000 £’000
Property, plant and equipment 6,874 7,883 4,910
6,874 7,883 4,910
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
36
23. COMMITMENTS (continued)
(b) Operating lease commitments
The Group leases various properties under non-cancellable operating lease agreements. The lease terms are between 1
and 21 years, and the majority of lease agreements are renewable at the end of the lease period at market rate. The
Group also leases various vehicles, plant and equipment under non- cancellable lease agreements. The lease expenditure
charged to the income statement during the year is disclosed in note 6.
The future aggregate minimum lease payments under non-cancellable operating leases as follows:
2016 2015 2014
£’000 £’000 £’000
Within 1 year 11,885 10,188 8,086
Later than 1 year and less than 5 years 27,519 24,201 18,168
After 5 years 21,229 15,009 14,062
60,633 49,398 40,316
24. FINANCIAL INSTRUMENTS – RISK MANAGEMENT
Financial risk management
The group’s activities expose it to a variety of financial risks that include the effects of changes in market prices, (including
foreign exchange, interest rate risk and commodity price risk), credit risk and liquidity risk.
Risk management is carried out by the board of directors. The company has in place a risk management programme that
seeks to limit the adverse effects on the financial performance of the company by monitoring levels of debt finance and
the related finance costs.
(a) Market risk
(i) Foreign exchange risk
The group operates in the UK, Ireland, France and the Netherlands and is therefore exposed to foreign exchange risk.
Foreign exchange risk arises on sales and purchases made in foreign currencies and on recognised assets and liabilities
and net investments in foreign operations.
The group monitors its exposure to currency fluctuations on an on-going basis. The group uses foreign currency bank
accounts and forward foreign exchange contracts to reduce its exposure to foreign currency translation risk.
At 31 December 2016 if Sterling had weakened/strengthened by 10% against the Euro and US Dollar with all other
variables held constant, post-tax profit for the year would have been £0.6m/£0.5m, (2015: £1.6m/£1.3m, 2014:
£2.2m/£1.8m) higher/lower, mainly as a result of foreign exchange gains/losses on translation of Euro and US dollar-
denominated trade receivables, Euro and US dollar-denominated bank accounts and profits/losses realised in the
European subsidiaries denominated in Euro.
(ii) Interest rate risk
The group’s interest rate risk arises from the group's borrowings as disclosed in Note 18. Where possible the group
seeks to fix the interest rates that it pays to mitigate the risk of interest rate fluctuations.
(iii) Commodity price risk
The group’s commodity price risk results from price fluctuations in the raw materials used to produce feed for its
biological asset production operations. In order to minimise this risk, the group has a policy of seeking professional
advice from expert commodity traders and this advice is given very careful consideration and acted upon as
appropriate.
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
37
24. FINANCIAL INSTRUMENTS – RISK MANAGEMENT (continued)
(b) Credit risk
Concentrations of credit risk exist in relation to transactions with major customers however as the majority of these are
blue chip companies, the company considers there to be minimal risk of default. The group has policies in place to ensure
that sales of goods are made to customers with an appropriate credit history. Cash and cash equivalents are held with
reputable institutions. Trade receivables at 31 December 2016 were £104.2m (2015: £53.9m, 2014: £73.4m). Further
detail is provided in note 15.
No credit limits were exceeded during the reporting period, and management does not expect any losses from non-
performance by these counterparties. Management believe that no further credit risk provision is required in excess of
normal provision for doubtful receivables.
(c) Liquidity risk
Cash flow forecasting is performed in the operating entities of the group and aggregated by group finance. Group finance
monitors rolling forecasts of the group’s liquidity requirements to ensure it has sufficient cash to meet operational needs
while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the group
minimises the risk of breaching borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes
into consideration the group’s debt financing plan and covenant compliance requirements on its borrowings.
An analysis of the group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining
period at the balance sheet date to the contractual maturity date is provided in note 18.
Financial liabilities have the following cash flow profile:
Less than 1 year
Between
1 and 3 years
Between
3 and 5 years Over 5 years
£’000 £’000 £’000 £’000
At 31 December 2016
Loans and borrowings 32,657 54,666 328,839 -
Trade and other payables (excluding tax and social
security)
226,216 1,986 - -
258,873 56,652 328,839 -
Less than 1 year
Between
1 and 3 years
Between
3 and 5 years Over 5 years
£’000 £’000 £’000 £’000
At 31 December 2015
Loans and borrowings 38,973 48,134 40,718 309,375
Trade and other payables (excluding tax and social
security)
202,288 1,753 - -
241,261 49,887 40,718 309,375
Less than 1 year
Between
1 and 3 years
Between
3 and 5 years Over 5 years
£’000 £’000 £’000 £’000
At 31 December 2014
Loans and borrowings 32,301 36,270 29,180 225,040
Trade and other payables (excluding tax and social
security)
214,680 1,785 - -
246,981 38,055 29,180 225,040
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
38
24. FINANCIAL INSTRUMENTS – RISK MANAGEMENT (continued)
(d) Capital risk management
The aim of the group is to maintain sufficient funds to enable it to safeguard its ability to continue as a going concern and
to make suitable investments and incremental acquisitions while providing returns for shareholders with minimal
recourse to bankers.
Capital risk measures such as gearing ratios are not currently relevant to the group.
25. RELATED PARTY TRANSACTIONS
Key management compensation is given in note 5.
The company’s ultimate and immediate parent company during 2016 was JBS S.A., a company registered in Brazil.
The company’s ultimate parent company changed during the 2015 year. Until 28 September 2015, Marfrig Global Foods
S.A., a company registered in Brazil was the ultimate parent company while the company’s immediate parent company
was Marfrig Holdings Europe BV.
Related party transactions with fellow members of the JBS Group (from 28 September 2015) were as follows:
Trading transactions
Transaction amount Balance
Related party relationship Transaction type 2016 2015 2014 2016 2015 2014
£’000 £’000 £’000 £’000 £’000 £’000
Parent company Purchases / recharges (5,950) - - 37 - -
Other group companies Purchases / recharges (15,513) (2,191) - (2,431) (566) -
Other group companies Loans/loan interest - - - - - -
Related party transactions with fellow members of the Marfrig Group up to 28 September 2015 were as follows:
Trading transactions
Transaction amount Balance
Related party relationship Transaction type 2016 2015 2014 2016 2015 2014
£’000 £’000 £’000 £’000 £’000 £’000
Parent companies Purchases / recharges - (8,748) (5,443) - - (752)
Other group companies Purchases / recharges - (23,151) (32,022) - - (2,582)
Parent companies Loans/loan interest - 1,045 184 - - 4,274
Other group companies Loans/loan interest - (88) (338) - - (3,861)
These transactions are trading relationships which are made at market value. The Company has not made any provision
for impairment in respect of related party debtors nor has any guarantee been given during 2016, 2015 or 2014 regarding
the related party transactions above.
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
39
26. FINANCIAL INSTRUMENTS
(a) BY CATEGORY
2016 2015
Loans and
receivables
£’000
Assets at fair
value through
profit and loss
£’000
Total
£’000
Loans and
receivables
£’000
Assets at fair
value through
profit and loss
£’000
Total
£’000
Assets as per balance sheet
Derivative financial instruments (note 26(b)) - 372 372 --- 172 172
Trade & other receivables excluding
prepayments (note 15)
116,721 --- 116,721 67,503 - 67,503
Cash and cash equivalents (note 16) 139,735 --- 139,735 173,392 ---- 173,392
256,456 372 256,828 240,895 172 241,067
2014
Loans and
receivables
£’000
Assets at fair
value through
profit and loss
£’000
Total
£’000
Assets as per balance sheet
Derivative financial instruments (note 26(b)) - 270 270
Trade & other receivables excluding
prepayments (note 15) 88,193 --- 88,193
Cash and cash equivalents (note 16) 70,641 --- 70,641
158,834 270 159,104
2016 2015
Financial
liabilities at
amortised cost
£’000
Liabilities at fair
value through
profit and loss
£’000 Total
£’000
Financial
liabilities at
amortised
cost
£’000
Liabilities at fair
value through
profit and loss
£’000 Total
£’000
Liabilities as per balance sheet
Derivative financial instruments (note 26(b)) - - - - 269 269
Loans and borrowings – current (note 18) 14,475 - 14,475 20,630 - 20,630
Loans and borrowings – non-current (note
18)
312,143 - 312,143 306,709 - 306,709
Trade and other payables excluding non-
financial liabilities (note 17)
228,202 - 228,202 204,041 - 204,041
554,820 - 554,820 531,380 269 531,649
2014
Financial
liabilities at
amortised cost
£’000
Liabilities at fair
value through
profit and loss
£’000 Total
£’000
Liabilities as per balance sheet
Derivative financial instruments (note 26(b)) - - -
Loans and borrowings – current (note 18) 23,921 - 23,921
Loans and borrowings – non-current (note
18) 209,655 - 209,655
Trade and other payables excluding non-
financial liabilities (note 17) 216,465 - 216,465
450,041 - 450,041
Exhibit 99.1
GRANITE HOLDINGS S.A.R.L.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
40
26. FINANCIAL INSTRUMENTS (continued)
(b) DERIVATIVE FINANCIAL INSTRUMENTS
2016 2015 2014
Assets
£’000
Liabilities
£’000
Assets
£’000
Liabilities
£’000
Assets
£’000
Liabilities
£’000
Forward foreign exchange contracts not
designated for hedge accounting
2
-
-
269
270
-
Forward foreign exchange contracts
designated for hedge accounting
370
-
172
-
-
-
372 - 172 269 270 -
The notional principal amounts of the outstanding forward foreign exchange contracts at 31 December 2016 were £9.0m
(2015: £4.8m, 2014: £10.3m).
Derivative financial instruments are Level 2 financial instruments. The fair value of forward exchange contracts is
determined using quoted forward exchange rates at the reporting date and present value calculations based on high
credit quality yield curves in the respective currency.
27. DIVIDENDS
The dividends paid in 2016 were £11.35m (£1,234 per share) (2015: £35.6m, 2014: £175m - Dividends paid in 2015 and
2014 were paid by Moy Park Holdings (Europe) Limited, before the creation of Granite Holdings SARL as its immediate
parent company).
28. EVENTS AFTER THE REPORTING DATE
On 11 September 2017, the US based Pilgrim’s Pride Corporation announced that it had acquired Moy Park from JBS
S.A.. JBS S.A. remains the ultimate parent company of Moy Park Limited by virtue of its majority shareholding in Pilgrim’s
Pride Corporation. The company’s immediate parent company is Onix Investments UK Ltd as a result of this transaction.
The directors are aware that on 30 May 2017, J&F Investimentos, a shareholder of the ultimate parent company JBS S.A.,
entered into a leniency agreement with the Brazilian Federal Prosecuter’s Office. The directors confirm that this
agreement and connected investigations are not related to the activities of any member of the Granite Holdings SARL
Group.
There are no other events after the reporting date requiring adjustment or disclosure in the financial statements.
Exhibit 99.2
Unaudited Pro Forma Combined Financial Information
On September 8, 2017, a wholly-owned subsidiary of Pilgrim’s Pride Corporation acquired from JBS S.A. 100% of the issued and outstanding shares of common stock of Granite Holdings S.a.r.l. (formerly Moy Park Lux S.a.r.l.) (“Granite”). We refer to this transaction as the “Moy Park Acquisition.” Granite is predominately comprised of Moy Park Holdings (Europe) Ltd. (“Moy Park”) and its subsidiaries (the “Moy Park Group”).
“Pilgrim’s Pride,” “Pilgrim’s,” “PPC,” “we,” “us,” “our,” “ours,” the “Company” and words of a similar effect are to Pilgrim’s Pride Corporation together with its subsidiaries (other than Granite and its subsidiaries).
The following unaudited pro forma combined financial information presents the unaudited pro forma combined statement of operations based upon combining the following historical financial information of PPC and Granite, after giving effect to the Moy Park Acquisition and adjustments described in the accompanying notes: (1) PPC’s audited historical consolidated financial statements for the fifty-two weeks ended December 25, 2016 and December 27, 2015, and the related notes thereto, which are included elsewhere in this filing; and (2) Granite’s audited historical consolidated financial statements for the years ended December 31, 2016 and December 31, 2015, and the related notes thereto, which are included elsewhere in this filing. The unaudited pro forma combined financial information should be read in conjunction with, and is qualified in its entirety by reference to, such historical financial statements and historical financial information and the related notes contained therein.
JBS S.A., through its indirect wholly-owned subsidiaries (together, “JBS”), beneficially owned 78.6% of the outstanding common stock of Pilgrim’s Pride Corporation as of September 8, 2017. Prior to the Moy Park Acquisition, Granite was a wholly-owned subsidiary of JBS S.A. Accordingly, the Moy Park Acquisition is accounted for as a transaction among entities under common control. Granite was initially recorded by PPC at Granite’s historic carrying value and PPC will include the activities of Granite in its financial statements since the date the entities were first under common control. Pilgrim’s Pride Corporation and Granite came under common control as of September 30, 2015, the date JBS S.A. acquired Granite.
The unaudited pro forma combined financial information is presented for illustrative purposes only to reflect the Moy Park Acquisition, and does not represent what PPC’s results of operations or financial position would actually have been had the Moy Park Acquisition occurred on the dates assumed within Note 1 (Basis of Presentation), or had the combined operations taken place from the earliest date of common control, September 30, 2015. Further, the unaudited pro forma combined financial information does not represent or project Pilgrim’s results of operations or financial position for any future periods. The unaudited pro forma combined financial information is intended to provide information about the continuing impact of the Moy Park Acquisition as if it had been consummated on September 30, 2015, in the case of the unaudited pro forma combined statements of income. The pro forma adjustments are based on available information and certain assumptions that management believes are factually supportable and are expected to have a continuing impact on PPC’s results of operations. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma combined financial information have been made. As Granite and PPC were only under common control as of September 30, 2015, the unaudited pro forma combined statement of operations for the fifty-two weeks ended December 27, 2015 will include the full fifty-two weeks of PPC’s financial information, but only thirteen weeks of Granite’s financial information. Finally, as we filed our Q3 10-Q prior to the filing of this 8-K/A, the effects of the Moy Park Acquisition have already been reflected in the most recent interim statement of operations and balance sheet, and therefore the only periods presented herein are for each of the fifty-two weeks ended December 25, 2016 and
1
Exhibit 99.2
December 27, 2015 (only inclusive of the thirteen weeks in 2015 for which PPC and Granite were under common control).
Unaudited Pro Forma Combined Statement of Operations
For the Fifty-Two Weeks Ended December 27, 2015
(In thousands)
Pilgrim's Pride Corporation Historical | Granite Holdings S.a.r.l. (Note 3) | Pro Forma Adjustments | Notes (See Note 5) | Pilgrim's Pride Corporation Combined | |||||||||||
Net sales | $ | 8,180,104 | $ | 573,554 | $ | — | $ | 8,753,658 | |||||||
Cost of sales | 6,925,727 | 528,734 | — | 7,454,461 | |||||||||||
Gross profit | 1,254,377 | 44,820 | — | 1,299,197 | |||||||||||
Selling, general and administrative expense | 203,881 | 28,160 | — | 232,041 | |||||||||||
Administrative restructuring charges | 5,605 | 140 | — | 5,745 | |||||||||||
Operating income | 1,044,891 | 16,520 | — | 1,061,411 | |||||||||||
Interest expense, net of capitalized interest | 37,548 | 9,183 | 12,459 | (a) | 59,190 | ||||||||||
Interest income | (3,673 | ) | (170 | ) | — | (3,843 | ) | ||||||||
Foreign currency transaction losses | 25,940 | 196 | — | 26,136 | |||||||||||
Miscellaneous, net | (7,682 | ) | (1,386 | ) | — | (9,068 | ) | ||||||||
Income (loss) before income taxes | 992,758 | 8,697 | (12,459 | ) | 988,996 | ||||||||||
Income tax expense (benefit) | 346,796 | (14,381 | ) | (4,348 | ) | (b) | 328,067 | ||||||||
Net income (loss) | 645,962 | 23,078 | (8,111 | ) | 660,929 | ||||||||||
Less: Net income attributable to noncontrolling interest | 48 | — | — | 48 | |||||||||||
Net income (loss) attributable to Pilgrim's Pride Corporation | $ | 645,914 | $ | 23,078 | $ | (8,111 | ) | $ | 660,881 | ||||||
2
Exhibit 99.2
Unaudited Pro Forma Combined Statement of Operations
For the Fifty-Two Weeks Ended December 25, 2016
(In thousands)
Pilgrim's Pride Corporation Historical | Granite Holdings S.a.r.l. (Note 3) | Pro Forma Adjustments | Notes (See Note 5) | Pilgrim's Pride Corporation Combined | |||||||||||
Net sales | $ | 7,931,123 | $ | 1,942,083 | $ | — | $ | 9,873,206 | |||||||
Cost of sales | 7,016,763 | 1,752,190 | — | 8,768,953 | |||||||||||
Gross profit | 914,360 | 189,893 | — | 1,104,253 | |||||||||||
Selling, general and administrative expense | 199,781 | 112,852 | — | 312,633 | |||||||||||
Administrative restructuring charges | 1,069 | — | — | 1,069 | |||||||||||
Operating income | 713,510 | 77,041 | — | 790,551 | |||||||||||
Interest expense, net of capitalized interest | 45,921 | 29,601 | 49,836 | (a) | 125,358 | ||||||||||
Interest income | (1,724 | ) | (970 | ) | — | (2,694 | ) | ||||||||
Foreign currency transaction losses | 3,897 | 335 | — | 4,232 | |||||||||||
Miscellaneous, net | (7,219 | ) | (1,830 | ) | — | (9,049 | ) | ||||||||
Income (loss) before income taxes | 672,635 | 49,905 | (49,836 | ) | 672,704 | ||||||||||
Income tax expense (benefit) | 232,906 | 4,504 | (18,639 | ) | (b) | 218,771 | |||||||||
Net income (loss) | 439,729 | 45,401 | (31,197 | ) | 453,933 | ||||||||||
Less: Net loss attributable to noncontrolling interest | (803 | ) | — | — | (803 | ) | |||||||||
Net income (loss) attributable to Pilgrim's Pride Corporation | $ | 440,532 | $ | 45,401 | $ | (31,197 | ) | $ | 454,736 | ||||||
3
Exhibit 99.2
Notes to Unaudited Pro Forma Combined Financial Information
1. Basis of Presentation
The historical financial information has been adjusted to give pro forma effect to events that are (i) directly attributable to the transaction, (ii) factually supportable, and (iii) with respect to the unaudited pro forma combined statement of operations, expected to have a continuing impact on the combined results. The pro forma adjustments have been prepared to illustrate the estimated effect of the Moy Park Acquisition and certain other adjustments.
Description of Transaction
On September 8, 2017, Onix, a wholly-owned subsidiary of Pilgrim’s Pride Corporation, acquired 100% of the equity of Granite. Granite is a 100% equity-owned subsidiary of JBS S.A. JBS S.A. beneficially owns 78.6% of Pilgrim’s Pride Corporation’s outstanding common stock.
This acquisition is deemed a transaction among entities under common control. Accordingly, PPC accounted for the acquisition of Granite as a transfer of net assets between entities under common control. Granite was initially recorded by PPC at Granite’s historic carrying value and PPC included the activities of Granite in its financial statements as of the date of common control. Pilgrim’s Pride Corporation and Granite came under common control as of September 30, 2015, the date JBS S.A. acquired Granite.
The unaudited pro forma combined financial information were prepared in accordance with the requirements of common control business acquisitions under accounting principles generally accepted in the United States (“U.S. GAAP”).
The audited financial statements included elsewhere in this filing are presented for the Granite Holdings S.a.r.l. (“Granite”). Granite is predominately comprised of the Moy Park Group. In addition to Granite’s investment in Moy Park, the entity holds an insignificant cash balance and incurs limited administrative expenses.
As Granite reports in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), management converted Granite’s pro forma information from IFRS as issued by the IASB to U.S. GAAP.
The unaudited pro forma combined statements of operations for the fifty-two weeks ended December 25, 2016 and December 27, 2015 (collectively referred to as the “Unaudited Pro Forma Statements of Operations”) have been prepared assuming combined operations from the earliest date of common control, September 30, 2015, and assuming that financing of the Moy Park Acquisition had been completed at the beginning of the earliest period presented.
4
Exhibit 99.2
2. Aggregate Purchase Price
The Moy Park Acquisition by Pilgrim’s Pride was completed for a purchase price of £1 billion which translated to $1.3 billion USD using the September 8, 2017 Moy Park Acquisition date exchange rate equal to £1/US$1.3099.
The purchase price was funded by the sources of funds as described in the table below (in thousands).
Cash payment at closing | $ | 301,278 | |
Borrowings under short term promissory note | 736,806 | ||
Cash acquired | (155,616 | ) | |
Liabilities assumed | 426,451 | ||
Total purchase price | $ | 1,308,919 | |
The purchase price is subject to change with the final closing statement prepared ninety days post the acquisition date to account for changes in working capital and identified indebtedness and additional transaction costs. Additionally, on September 29, 2017, Pilgrim’s Pride issued $850 million in Senior Notes with which the Company used to repay in full the short term promissory note. Refer to the pro forma adjustment in Note 5 for further discussion of the Senior Notes.
3. Historical Granite Financial Information Adjustments
The historical Granite financial information was adjusted in the following ways: (i) to record entries related to alignment of accounting policies (primarily reclassifications of financial statement line items); (ii) to record the push-down accounting entries related to the original acquisition of Granite by JBS S.A. which were previously recorded at the JBS S.A. level; and (iii) to record IFRS to U.S. GAAP adjustments. Additionally, the below amounts have been translated into U.S. dollars based on the criteria and rates described herein. Finally, PPC and Granite have different period end dates as PPC is based on a fifty-two week year and Granite is based on a calendar year end. For example, Granite’s most recent fiscal year end reporting date was December 31, 2016 whereas PPC’s was December 25, 2016. For purposes of creating the pro forma financial information, no adjustments related to the different reporting dates were made by management as the other entity’s year end differs by 93 days or less from the registrant’s year end, and therefore the registrant would combine its income statements and that of the other entity using their respective fiscal years. Additionally, there are no known significant differences identified by management based on these differing period end dates.
5
Exhibit 99.2
Unaudited Pro Forma Granite Adjusted Historical Statement of Income
For the Thirteen Weeks Ended December 27, 2015
(In thousands)
Granite Holdings S.a.r.l. Historical | Granite Holdings S.a.r.l. Reclassified Line Items | Push-down Accounting Entries to Record Purchase Accounting Adjustments Previously Recorded at JBS S.A. Level (Note 4) | Notes (See Note 4) | Granite Holdings S.a.r.l. IFRS to US GAAP Adjustments | Granite Holdings S.a.r.l. Adjusted | ||||||||||||||
(Three months ended December 31, 2015) | (Thirteen weeks ended December 27, 2015) | ||||||||||||||||||
Note 3a(i) | Note 3b(i) | Note 3c(i) | Note 3d(i) | ||||||||||||||||
Revenue | $ | 573,554 | $ | (573,554 | ) | $ | — | $ | — | $ | — | ||||||||
Net sales | — | 573,554 | — | — | 573,554 | ||||||||||||||
Cost of sales | 516,667 | 12,067 | — | — | 528,734 | ||||||||||||||
Gross profit (loss) | 56,887 | (12,067 | ) | — | — | 44,820 | |||||||||||||
Selling, general and administrative expense | — | 26,688 | 1,472 | (4a) | — | 28,160 | |||||||||||||
Administrative restructuring charges | — | 140 | — | — | 140 | ||||||||||||||
Sales and distribution costs | 26,846 | (26,846 | ) | — | — | — | |||||||||||||
Administration expenses | 10,598 | (10,598 | ) | — | — | — | |||||||||||||
Other operating costs (income) | 121 | (121 | ) | — | — | — | |||||||||||||
Operating income (loss) | 19,322 | (1,330 | ) | (1,472 | ) | — | 16,520 | ||||||||||||
Finance costs | 9,183 | (9,183 | ) | — | — | — | |||||||||||||
Finance income | (170 | ) | 170 | — | — | — | |||||||||||||
Interest expense, net of capitalized interest | — | 9,183 | — | — | 9,183 | ||||||||||||||
Interest income | — | (170 | ) | — | — | (170 | ) | ||||||||||||
Foreign currency transaction losses | — | 196 | — | — | 196 | ||||||||||||||
Miscellaneous, net | — | (1,386 | ) | — | — | (1,386 | ) | ||||||||||||
Other exceptional costs | 140 | (140 | ) | — | — | — | |||||||||||||
Income (loss) before income taxes | 10,169 | — | (1,472 | ) | — | 8,697 | |||||||||||||
Income tax benefit | — | (11,078 | ) | (3,303 | ) | (4b) | — | (14,381 | ) | ||||||||||
Taxation | (11,078 | ) | 11,078 | — | — | — | |||||||||||||
Net income | $ | 21,247 | $ | — | $ | 1,831 | $ | — | $ | 23,078 | |||||||||
6
Exhibit 99.2
Unaudited Pro Forma Granite Adjusted Historical Income Statement
For the Fifty-Two Weeks Ended December 25, 2016
(In thousands)
Granite Holdings S.a.r.l. Historical | Granite Holdings S.a.r.l. Reclassified Line Items | Push-down Accounting Entries to Record Purchase Accounting Adjustments Previously Recorded at JBS S.A. Level (Note 4) | Notes (See Note 4) | Granite Holdings S.a.r.l. IFRS to US GAAP Adjustments | Granite Holdings S.a.r.l. Adjusted | ||||||||||||||
(Year ended December 31, 2016) | (Fifty-two weeks ended December 25, 2016) | ||||||||||||||||||
Note 3a(i) | Note 3b(i) | Note 3c(i) | Note 3d(i) | ||||||||||||||||
Revenue | $ | 1,942,083 | $ | (1,942,083 | ) | $ | — | $ | — | $ | — | ||||||||
Net sales | — | 1,942,083 | — | — | 1,942,083 | ||||||||||||||
Cost of sales | 1,709,874 | 42,316 | — | — | 1,752,190 | ||||||||||||||
Gross profit (loss) | 232,209 | (42,316 | ) | — | — | 189,893 | |||||||||||||
Selling, general and administrative expense | — | 107,947 | 4,905 | (4a) | — | 112,852 | |||||||||||||
Sales and distribution costs | 97,050 | (97,050 | ) | — | — | — | |||||||||||||
Administration expenses | 49,454 | (49,454 | ) | — | — | — | |||||||||||||
Other operating costs (income) | 2,264 | (2,264 | ) | — | — | — | |||||||||||||
Operating income (loss) | 83,441 | (1,495 | ) | (4,905 | ) | — | 77,041 | ||||||||||||
Finance costs | 29,601 | (29,601 | ) | — | — | — | |||||||||||||
Finance income | (970 | ) | 970 | — | — | — | |||||||||||||
Interest expense, net of capitalized interest | — | 29,601 | — | — | 29,601 | ||||||||||||||
Interest income | — | (970 | ) | — | — | (970 | ) | ||||||||||||
Foreign currency transaction losses | — | 335 | — | — | 335 | ||||||||||||||
Miscellaneous, net | — | (1,830 | ) | — | — | (1,830 | ) | ||||||||||||
Income (loss) before income taxes | 54,810 | — | (4,905 | ) | — | 49,905 | |||||||||||||
Income tax expense (benefit) | — | 10,755 | (6,251 | ) | (4b) | — | 4,504 | ||||||||||||
Taxation | 10,755 | (10,755 | ) | — | — | — | |||||||||||||
Net income | $ | 44,055 | $ | — | $ | 1,346 | $ | — | $ | 45,401 | |||||||||
(3a) Granite — Historical
(i) | These are the historical Granite IFRS consolidated statements of income for the fifty-two weeks ended December 31, 2016 and thirteen weeks ended December 31, 2015. As Granite and PPC came under common control on September 30, 2015, only thirteen weeks of Granite financial information are included for 2015. The December 31, 2016 statement of income is directly extracted from the audited IFRS condensed consolidated financial information of Granite. The statement of income for the thirteen weeks ended December 31, 2015 is derived from internal management accounts of Granite. They are prepared in accordance with IFRS as issued by the IASB, and translated from pounds sterling to U.S. dollars using the average exchange rates for the fifty-two week period ended December 31, 2016 and the thirteen week period ended December 31, 2015 equal to £1/US$1.35108 and £1/US$1.51688, respectively. |
7
Exhibit 99.2
(3b) Granite — Reclassified Line Items
(i) | Granite’s reclassified consolidated statements of income for the fifty-two weeks ended December 31, 2016 and thirteen weeks ended December 31, 2015, are based on Granite’s consolidated statements of income for the fifty-two weeks ended December 31, 2016 and thirteen weeks ended December 31, 2015. The December 31, 2016 statement of income is directly extracted from the audited IFRS condensed consolidated financial information of Granite. The statement of income for the thirteen weeks ended December 31, 2015 is derived from internal management accounts of Granite. These statements of income are prepared accordance with IFRS as issued by the IASB, and then adjusted in order to align it with PPC’s accounting policies. |
(3c) Push-down accounting entries to record purchase price accounting adjustments previously recorded at JBS S.A. level
(i) | Granite’s audited IFRS consolidated statements of income for the fifty-two weeks ended December 31, 2016 and thirteen weeks ended December 31, 2015 are adjusted for the impact of JBS S.A.’s cost basis, which reflects the fair values assigned to the assets and liabilities of Granite, following its acquisition by JBS S.A. on September 30, 2015. This adjustment also consisted of converting Granite’s information (accounted for in pounds sterling) to U.S. dollars using the average exchange rates for the fifty-two week periods ended December 31, 2016 and thirteen weeks ended December 31, 2015 equal to £1/US$1.35108 and £1/US$ 1.51688, respectively. Refer to Note 4 for further discussion of these adjustments. |
(3d) Granite — IFRS to U.S. GAAP Adjustments
(i) | Management performed an analysis of to IFRS to U.S. GAAP differences and related accounting policies. Based on this analysis, management did not identify any adjustments to the statements of operations. |
4. Original Purchase Price Unaudited Pro Forma Adjustments
JBS S.A. acquired Granite on September 30, 2015. At the time of JBS S.A.’s acquisition of Granite, purchase price adjustments were not pushed down to the separate accounts of the Granite, which is typical for financial statements prepared in accordance with IFRS as issued by the IASB. These adjustments are to reflect the acquisition related accounting adjustments on the stand alone separate accounts of Granite. The related amortization of intangibles and depreciation of property, plant and equipment are also being reflected within Granite as an adjustment.
(4a) Selling, general and administration expense increased due to depreciation and amortization recorded on the fair value adjustments made to identified intangible assets and property, plant and equipment during the income statement period. The adjustments represent the incremental differences between Granite's basis and JBS S.A.’s basis in these assets.
(4b) Income tax expense decreased as a result of the additional depreciation and amortization expense recorded related to the assets acquired in the original acquisition on September 30, 2015.
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Exhibit 99.2
5. Unaudited Pro Forma Adjustments
(a) To record interest expense related to PPC’s sale of $250 million aggregate principal amount of its 5.750% Senior Notes due 2025 (the “Additional 2025 Notes”) and $600 million aggregate principal amount of its 5.875% Senior Notes due 2027 (the “2027 Notes” and, together with the Additional 2025 Notes, the “Notes”). The Additional 2025 Notes were issued at a price of 102.000% of the aggregate principal amount, reflecting a yield to maturity of 5.420%. The issuance of these Notes included $8.8 million in debt issuance costs, which were subsequently capitalized and amortized. The Company used the net proceeds from the sale of the Notes to repay in full the $736.8 million indebtedness outstanding under the promissory note issued on September 8, 2017 used to finance the Moy Park Acquisition.
For the Thirteen Weeks Ended December 27, 2015 | For the Fifty-Two Weeks Ended December 25, 2016 | ||||||
(In thousands) | |||||||
Interest expense on Notes | $ | 12,200 | $ | 48,800 | |||
Amortization of debt issuance costs | 259 | 1,036 | |||||
Pro forma adjustments to interest expense | $ | 12,459 | $ | 49,836 | |||
(b) Reflects the income tax effect of pro forma adjustments based on the federal and state statutory rate of 37.4% for the fifty-two weeks ended December 25, 2016 and 34.9% for the fifty-two weeks ended December 27, 2015.
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