UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _______________________________  
Form 10-Q
 _______________________________   
(Mark One)
ý
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 2016
or
 
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period from                      to                     
Commission File Number 001-35708
  _______________________________   
 
  WWAVA01A01A01A01A04.JPG
The WhiteWave Foods Company
(Exact name of the registrant as specified in its charter)
 _______________________________    
 
Delaware
 
46-0631061
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. employer
identification no.)
1225 Seventeenth Street, Suite 1000
Denver, Colorado 80202
(303) 635-4500
(Address, including zip code, and telephone number, including area code, of the registrant’s principal executive offices)
  _______________________________    
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ý     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ý     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):
 
Large accelerated filer
 
ý
  
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
o   (Do not check if a smaller reporting company)
  
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)    Yes   ¨     No   ý
As of October 31, 2016 , there were 177,228,763 outstanding shares of common stock, par value $0.01 per share.
 



Table of Contents
 
 
 
Page
Part I — Financial Information
 
 
 
 
Item 1
 
 
 
Item 2
 
 
 
Item 3
 
 
 
Item 4
 
 
Part II — Other Information
 
 
 
 
Item 1
 
 
 
Item 1A
 
 
 
Item 2C
 
 
 
Item 6
 
 



ii


Part I — Financial Information
Item 1. Condensed Consolidated Financial Statements (Unaudited)
The WhiteWave Foods Company
Condensed Consolidated Balance Sheets
(Unaudited)
 
September 30, 2016
 
December 31, 2015
 
(In thousands, except share data)
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
52,490

 
$
38,610

Trade receivables, net of allowance of $1,861 and $2,127
284,239

 
257,548

Inventories
296,083

 
270,737

Prepaid expenses and other current assets
68,777

 
39,782

Total current assets
701,589

 
606,677

Equity method investments
23,555

 
30,772

Property, plant, and equipment, net
1,204,169

 
1,137,521

Identifiable intangible and other assets, net
1,048,126

 
1,038,577

Goodwill
1,435,272

 
1,415,322

Total Assets
$
4,412,711

 
$
4,228,869

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued expenses
$
514,337

 
$
549,713

Current portion of debt and capital lease obligations
46,374

 
51,449

Income taxes payable
5,198

 
3,043

Total current liabilities
565,909

 
604,205

Long-term debt and capital lease obligations, net of debt issuance costs
2,077,216

 
2,078,940

Deferred income taxes
303,596

 
293,326

Other long-term liabilities
49,631

 
41,490

Total liabilities
2,996,352

 
3,017,961

Commitments and Contingencies (Note 12)

 

Shareholders’ equity:
 
 
 
Preferred stock, $0.01 par value; 170,000,000 shares authorized, no shares issued and outstanding at September 30, 2016 and December 31, 2015

 

Common stock, $0.01 par value; 1,700,000,000 shares authorized, 177,222,669 issued and outstanding at September 30, 2016; 176,246,199 issued and outstanding at December 31, 2015
1,772

 
1,762

Additional paid-in capital
943,833

 
914,975

Retained earnings
578,111

 
425,705

Accumulated other comprehensive loss
(107,357
)
 
(131,534
)
Total shareholders’ equity
1,416,359

 
1,210,908

Total Liabilities and Shareholders’ Equity
$
4,412,711

 
$
4,228,869

See notes to condensed consolidated financial statements (unaudited).

1


The WhiteWave Foods Company
Condensed Consolidated Statements of Income
(Unaudited)
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands, except share and per share amounts)
Net sales
$
1,053,598

 
$
1,003,888

 
$
3,142,941

 
$
2,838,661

Cost of sales
672,479

 
652,757

 
2,037,647

 
1,852,797

Gross profit
381,119

 
351,131

 
1,105,294

 
985,864

Operating expenses:
 
 
 
 
 
 
 
Selling, distribution and marketing
188,909

 
187,784

 
563,218

 
529,856

General and administrative
82,883

 
70,235

 
248,084

 
215,824

Total operating expenses
271,792

 
258,019

 
811,302

 
745,680

Operating income
109,327

 
93,112

 
293,992

 
240,184

Other expense:
 
 
 
 
 
 
 
Interest expense
18,655

 
15,979

 
50,772

 
38,580

Other expense, net
940

 
2,549

 
4,668

 
7,337

Total other expense
19,595

 
18,528

 
55,440

 
45,917

Income before income taxes
89,732

 
74,584

 
238,552

 
194,267

Income tax expense
29,194

 
21,831

 
79,290

 
64,227

Income before loss in equity method investments
60,538

 
52,753

 
159,262

 
130,040

Loss in equity method investments
2,501

 
2,731

 
6,856

 
9,227

Net income
$
58,037

 
$
50,022

 
$
152,406

 
$
120,813

Weighted average common shares:
 
 
 
 
 
 
 
Basic
177,185,368

 
175,846,533

 
176,902,352

 
175,290,113

Diluted
181,511,335

 
180,444,521

 
180,952,569

 
180,006,702

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.33

 
$
0.28

 
$
0.86

 
$
0.69

Diluted
$
0.32

 
$
0.28

 
$
0.84

 
$
0.67

See notes to condensed consolidated financial statements (unaudited).

2


The WhiteWave Foods Company
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
Net income
$
58,037

 
$
50,022

 
$
152,406

 
$
120,813

Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
Change in defined benefit pension plan, net of tax benefit/(expense) of $5, $4, $13 and ($78)
(9
)
 
(7
)
 
(26
)
 
155

Foreign currency translation adjustment
488

 
(13,305
)
 
25,191

 
(40,553
)
Change in fair value of derivative instruments, net of tax benefit of $56, $292, $4 and $259
166

 
(1,509
)
 
(988
)
 
(1,446
)
Other comprehensive income (loss), net of tax
645

 
(14,821
)
 
24,177

 
(41,844
)
Comprehensive income
$
58,682

 
$
35,201

 
$
176,583

 
$
78,969

See notes to condensed consolidated financial statements (unaudited).

3


The WhiteWave Foods Company
Condensed Consolidated Statements of Shareholders’ Equity
(Unaudited)
 
 
Common Stock
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
Additional Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
Equity
 
(In thousands, except share data)
Balance at December 31, 2015
176,246,199

 
$
1,762

 
$
914,975

 
$
425,705

 
$
(131,534
)
 
$
1,210,908

Net income

 

 

 
152,406

 

 
152,406

Share-based compensation

 

 
24,780

 

 

 
24,780

Excess tax benefit from share-based compensation

 

 
7,592

 

 

 
7,592

Shares issued in connection with share-based compensation
976,470

 
10

 
9,369

 

 

 
9,379

Minimum tax withholdings related to net share settlements of share-based compensation

 

 
(12,883
)
 

 

 
(12,883
)
Other comprehensive income

 

 

 

 
24,177

 
24,177

Balance at September 30, 2016
177,222,669

 
$
1,772

 
$
943,833

 
$
578,111

 
$
(107,357
)
 
$
1,416,359

See notes to condensed consolidated financial statements (unaudited).

4


The WhiteWave Foods Company
Condensed Consolidated Statements of Shareholders’ Equity
(Unaudited)
 
 
Common Stock
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
Additional Paid-
In Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
Equity
 
(In thousands, except share data)
Balance at December 31, 2014
174,388,132

 
$
1,744

 
$
878,549

 
$
257,312

 
$
(61,118
)
 
$
1,076,487

Net income






$
120,813




120,813

Share-based compensation




27,537






27,537

Excess tax benefit from share-based compensation




20,464






20,464

Shares issued in connection with share-based compensation
1,649,180


16


13,815






13,831

Minimum tax withholdings related to net share settlements of share-based compensation

 

 
(27,856
)
 

 

 
(27,856
)
Other comprehensive loss








(41,844
)

(41,844
)
Balance at September 30, 2015
176,037,312

 
$
1,760

 
$
912,509

 
$
378,125

 
$
(102,962
)
 
$
1,189,432

See notes to condensed consolidated financial statements (unaudited).

5


The WhiteWave Foods Company
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Nine months ended September 30,
 
2016
 
2015
 
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
152,406

 
$
120,813

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
103,407

 
86,675

Share-based compensation expense
24,780

 
27,537

Amortization of debt issuance costs
3,223

 
3,067

Loss (gain) on fixed asset disposals
6,515

 
(1,978
)
Deferred income taxes
5,620

 
(11,752
)
Unrealized (gain) loss on derivative instruments
(5,836
)
 
6,053

Loss in equity method investments
6,856

 
9,227

Gain on Earthbound settlement

 
(4,200
)
Other
(1,314
)
 
(1,235
)
Net change in operating assets and liabilities, net of acquisitions
(88,668
)
 
(65,162
)
Net cash provided by operating activities
206,989

 
169,045

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Investment in equity method investments

 
(701
)
Payments for acquisitions, net of cash acquired of $833 and $8,521
(17,373
)
 
(707,605
)
Proceeds from acquisition adjustments

 
346

Payments for property, plant, and equipment
(167,726
)
 
(196,896
)
Proceeds from sale of fixed assets
259

 
8,931

Net cash used in investing activities
(184,840
)
 
(895,925
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Repayment of debt
(33,750
)
 
(15,000
)
Payments on capital lease obligations
(872
)
 
(875
)
Proceeds from revolver line of credit
651,942

 
1,141,068

Payments on revolver line of credit
(627,080
)
 
(434,219
)
Proceeds from exercise of stock options
9,369

 
13,815

Minimum tax withholding paid on behalf of employees for share-based compensation
(12,883
)
 
(27,856
)
Excess tax benefit from share-based compensation
7,858

 
20,464

Payment of deferred financing costs
(426
)
 
(462
)
Net cash (used in) provided by financing activities
(5,842
)
 
696,935

Effect of exchange rate changes on cash and cash equivalents
(2,427
)
 
8,726

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
13,880

 
(21,219
)
Cash and cash equivalents, beginning of period
38,610

 
50,240

Cash and cash equivalents, end of period
$
52,490

 
$
29,021

SUPPLEMENTAL CASH FLOW INFORMATION
 
 
 
Non-cash activity - Accrued and unpaid purchases of plant and equipment
$
21,350

 
$
19,621

See notes to condensed consolidated financial statements (unaudited).

6


THE WHITEWAVE FOODS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Nine Months Ended September 30, 2016 and 2015
(Unaudited)
Unless otherwise indicated, references in these notes to the unaudited condensed consolidated financial statements to “we,” “us,” “our,” “WhiteWave,” or the “Company” refer to The WhiteWave Foods Company’s operations, taken as a whole.
1. General
Nature of Our Business — We are a leading consumer packaged food and beverage company focused on high-growth product categories that are aligned with emerging consumer trends. We manufacture, market and sell branded plant-based foods and beverages, coffee creamers and beverages, premium dairy products and organic produce. We sell products primarily in North America, Europe and through a joint venture in China. We focus on providing consumers with innovative, great-tasting food and beverage choices that meet their increasing desires for nutritious, flavorful, convenient, and responsibly-produced products. Our widely-recognized, leading brands distributed in North America include Silk , So Delicious and Vega plant-based foods and beverages, International Delight and LAND O LAKES coffee creamers and beverages, Horizon Organic and Wallaby Organic premium dairy products and Earthbound Farm organic salads, fruits and vegetables. Our popular plant-based foods and beverages brands in Europe include Alpro and Provamel .

Effective January 1, 2016, we report results of operations through two reportable segments: Americas Foods & Beverages and Europe Foods & Beverages. This reporting structure aligns with the way our Chief Operating Decision Maker ("CODM"), our CEO, monitors operating performance, allocates resources, and deploys capital. In 2015, we reported results of operations through three reportable segments: Americas Foods & Beverages, Americas Fresh Foods and Europe Foods & Beverages.  In connection with our management restructure in early 2016, we consolidated the historical Americas Foods & Beverages and Americas Fresh Foods segments into a single Americas Foods & Beverages segment. Accordingly, prior year segment data has been recast to reflect this new segment structure.
Basis of Presentation — The unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q (“Form 10-Q”) have been prepared on the same basis as the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2015 , which was filed with the Securities and Exchange Commission ("SEC") on February 29, 2016.
As discussed in Note 16 The Proposed Merger with Danone , on July 6, 2016 the Company entered into a merger agreement with Danone S.A., a  société anonyme  organized under the laws of France (“Danone”), as a result of which the Company is expected to become a wholly-owned subsidiary of Danone. Since the merger has not yet been completed, none of the unaudited condensed consolidated financial statements and related disclosures in this Form 10-Q consider the potential impact of the pending merger.
    
In our opinion, we have made all necessary adjustments (which generally include normal recurring adjustments) in order to present fairly, in all material respects, our consolidated financial position, results of operations and cash flows as of the dates and for the periods presented. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted pursuant to SEC rules and regulations applicable to quarterly reporting on Form 10-Q. The preparation of our unaudited condensed consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying footnotes. Actual results could differ from these estimates. Our results of operations for the three and nine months ended September 30, 2016 and 2015 may not be indicative of our operating results for the full year. The unaudited condensed consolidated financial statements contained in this Form 10-Q should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2015 contained in our Annual Report on Form 10-K for the year ended December 31, 2015 .
Recently Issued Accounting Pronouncements — In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers: Topic 606 , to clarify the principles used to recognize revenue for all entities. In July 2015, the FASB approved a one-year deferral of the effective date of ASU 2014-09. In 2016, the FASB has issued the following additional guidance: i) ASU No. 2016-08, Principal Versus Agent Considerations (Reporting Revenue Gross Versus Net), which provides clarification when assessing whether an entity is a principal or agent in a revenue transaction, and impacts whether an entity reports revenue on a gross or net basis, ii) ASU No. 2016-10, Identifying Performance Obligations and Licensing , which amends the guidance in ASU 2014-09 regarding the identification of performance obligations and accounting for licenses of intellectual property, iii) ASU No. 2016-11, Rescission of SEC

7


Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 Emerging Issues Task Force Meeting, which rescinds specific SEC guidance related to revenue recognition currently codified in US GAAP as a result of the new revenue standard, and iv) ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients, which amends the guidance in ASU 2014-09 by providing practical expedients to simplify the transition to the new revenue standard and clarify certain aspects of the standard. The new guidance will be effective for annual and interim periods beginning on or after December 15, 2017 and will replace most existing revenue recognition guidance under U.S. GAAP when it becomes effective. The standard includes a five step model to determine when revenue should be recognized, which is when promised goods or services are transferred to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The standard allows several methods of adoption including either a full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements. Early adoption will be permitted as of the December 31, 2016 original effective date. We are currently evaluating the effects, if any, the adoption of this guidance will have on the Company's consolidated financial statements and the transition method that we will select to implement the new standard.
In August 2014, the FASB issued ASU No. 2014-15,  Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern , to provide guidance on management's responsibility to perform interim and annual assessments of an entity’s ability to continue as a going concern and to provide related disclosure requirements. This guidance applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. Adoption will require establishing a going concern assessment process to meet the standard. The adoption will not have an impact to the Company’s consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory. This ASU discusses amendments to existing accounting guidance to modify the subsequent measurement of inventory. Under existing guidance, an entity measures inventory at the lower of cost or market, with market defined as replacement cost, net realizable value ("NRV"), or NRV less a normal profit margin. An entity uses current replacement cost provided that it is not above NRV (ceiling) or below NRV less a normal profit margin (floor). Amendments in the new guidance require an entity to subsequently measure inventory at the lower of cost or net realizable value and eliminates the need to determine replacement cost and evaluate whether it is above the ceiling or below the floor. NRV is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. For public business entities, the ASU is effective for interim and annual periods beginning after December 15, 2016. Early application is permitted for all entities and should be applied prospectively. We expect that the adoption of this guidance will not have any impact on the Company's consolidated financial statements.    
 
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) .  This ASU requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet.  A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term.  The new guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. We are currently evaluating the effects adoption of this guidance will have on the Company’s consolidated financial statements and financial statement disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting , which simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new guidance will require companies to include excess tax benefits (deficiencies) as a component of income tax expense rather than additional paid-in capital. This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods. The impact ASU No. 2016-09 will have on the Company’s consolidated financial statements upon adoption will mainly depend on unpredictable future events, including the timing and value realized for future share-based transactions upon exercise/vesting versus the fair value at grant date, and will create additional benefit or expense to our consolidated statements of income.
    
In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which provides changes on how companies measure and recognize credit losses on financial instruments. The new guidance will require companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of financial assets that are in the scope of the standard. The new standard is effective for public companies in fiscal years beginning after

8


December 31, 2019. We expect that the adoption of this guidance will not have any impact on the Company's consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments , which provides clarification on the treatment of certain cash receipts and cash payments on the statement of cash flows. The pronouncement provides clarification guidance on eight specific cash flow presentation issues that have developed due to diversity in practice. The issues include, but are not limited to, debt prepayment or extinguishment costs, proceeds from the settlement of insurance claims, and distributions received from equity method investees. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. We are currently evaluating transition date, but we do not expect that the adoption of this guidance will have any impact on the Company's consolidated financial statements.    

2. Acquisitions
2016 Acquisitions
IPP
On June 2, 2016, the Company acquired Innovation Packaging and Process, S.A. DE C.V. ("IPP"). Founded in 2007, IPP is an aseptic beverage co-packer based in San Luis Potosi, Mexico. The Company purchased IPP for total cash consideration of $18.1 million . We funded this acquisition through cash provided from operations. Our preliminary purchase price allocation includes goodwill of $12.3 million , property, plant, and equipment of $9.1 million , intangible assets subject to amortization of $0.6 million related to customer relationships, and liabilities assumed net of working capital items of $3.9 million . Customer relationships are being amortized over a 3 year term.
The acquisition was accounted for using the acquisition method of accounting. Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their preliminary fair values. Certain estimated values for the acquisition are not yet finalized pending the final purchase price allocations, and as a result, the Company's estimates and assumptions are subject to change within the measurement period as valuations are finalized. We expect to finalize the allocation of the purchase price within one year of the acquisition.
IPP produces a wide variety of products for WhiteWave and third parties. The acquisition of IPP provides the ability to grow in Latin American markets by providing in-house manufacturing. We have included IPP's results of operations in our condensed consolidated statements of income in our Americas Foods & Beverages segment from the date of acquisition.

2015 Acquisitions
Wallaby    
On August 30, 2015, we completed our acquisition of Wallaby Yogurt Company, Inc. ("Wallaby") for approximately $122.4 million in cash. We funded this acquisition with borrowings under our credit facility. Founded in 1994 and based in American Canyon, California, Wallaby is a leading manufacturer and distributor of organic dairy yogurt products including Greek and Australian style yogurts and Kefir beverages. The addition of Wallaby strengthened and expanded our growing yogurt portfolio and provided entry into several fast-growing yogurt categories. The acquisition also provided us with additional West Coast manufacturing capabilities and further expansion and growth opportunities. We have included Wallaby's results of operations in our condensed consolidated statements of income in our Americas Foods & Beverages segment from the date of acquisition.

The acquisition was accounted for using the acquisition method of accounting. Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their fair values. The fair values were determined by management based in part on an independent valuation of assets acquired, which includes intangible assets of approximately $57.1 million and relate primarily to tradenames. Intangible assets subject to amortization of approximately $9.1 million are being amortized over a 15 year term and relate primarily to customer relationships.

During the the nine months ended September 30, 2016 , we recorded $6.3 million of purchase accounting adjustments to goodwill primarily related to the finalization of the fair value of certain intangible assets. See Note 5 "Goodwill and Intangible Assets." As of September 30, 2016 , the Company has finalized its purchase price allocations related to the acquisition of Wallaby.

9



Vega

On August 1, 2015, we completed our acquisition of Sequel Naturals Ltd, the company that owns the Vega brand ("Vega") and is a pioneer and leader in plant-based nutrition products, for approximately  $553.6 million  in cash funded by borrowings under our credit facility. Vega offers a broad range of plant-based nutrition products - primarily powdered shakes and snack bars. This acquisition extended the Company's Plant-based Foods and Beverages platform into nutritional powders and bars, and provided additional innovation opportunities. We have included Vega's results of operations in our condensed consolidated statements of income in our Americas Foods & Beverages segment from the date of acquisition.

The acquisition was accounted for using the acquisition method of accounting. Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their fair values. The fair values were determined by management based in part on an independent valuation of assets acquired, which includes intangible assets of approximately $296.9 million and relate primarily to tradenames and customer relationships. Intangible assets subject to amortization of approximately $106.9 million are being amortized over a 15 year term and relate primarily to customer relationships.
    
For the nine months ended September 30, 2016 , we recorded $4.4 million of purchase accounting adjustments to goodwill primarily related to the finalization of certain income tax matters. See Note 5 "Goodwill and Intangible Assets." As of June 30, 2016, the Company has finalized its purchase price allocations related to the acquisition of Sequel Naturals Ltd.

EIEIO
On May 29, 2015, the Company acquired substantially all of the assets and liabilities of EIEIO, Inc. ("EIEIO"), the company that owns the Magicow brand and other brands, for $40.2 million in cash. We funded this acquisition with borrowings under our credit facility. EIEIO, which is based outside Austin, Texas, manufactures, markets and distributes bulk, bag-in-box and shelf stable creamers, coffee beverages and whip toppings. The acquisition of EIEIO expanded our portfolio of bulk coffee creamer and flavor dispensing products and provided new product capabilities to support growth in our away-from-home channel. EIEIO's results of operations have been included in our condensed consolidated statements of income of our Americas Foods & Beverages segment from the date of acquisition.
The acquisition was accounted for using the acquisition method of accounting. Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their fair values. The fair values were determined by management based in part on an independent valuation of assets acquired, which includes intangible assets of approximately $21.8 million and relate primarily to tradenames and customer relationships. Intangible assets subject to amortization of approximately $10.2 million are being amortized over a 15 year term and relate primarily to customer relationships. As of June 30, 2016, the Company has finalized its purchase price allocations related to the acquisition of EIEIO.

        

10


The following table summarizes the allocation of the purchase price to the fair value of assets acquired and liabilities assumed for the fiscal 2015 acquisitions.
 
 
EIEIO
 
Vega
 
Wallaby
 
May 29, 2015
 
August 1, 2015
 
August 30, 2015
 
(In thousands)
Assets acquired:
 
 
 
 
 
Cash and cash equivalents
$
1,546

 
$
5,235

 
$
1,740

Inventories
3,050

 
18,379

 
2,252

Other current assets
1,951

 
18,886

 
5,245

Property, plant and equipment
554

 
650

 
11,492

Trademarks
11,600

 
189,963

 
48,036

Intangible assets with finite lives
10,160

 
106,920

 
9,058

Other long-term assets

 
1,779

 
50

Liabilities assumed:
 
 
 
 
 
Accounts payable and other accruals
2,296

 
12,802

 
1,542

Deferred taxes

 
76,739

 

Other long-term liabilities
173

 
7,581

 
1,031

Total identifiable net assets
26,392

 
244,690

 
75,300

Goodwill
13,810

 
308,942

 
47,052

Total purchase price
$
40,202

 
$
553,632

 
$
122,352

Goodwill is calculated as the excess of consideration paid over the net assets acquired and represents synergies, organic growth and other benefits that are expected to arise from integrating the acquired businesses into our operations. Goodwill related to the 2016 and 2015 acquisitions is recorded in the Americas Foods & Beverages segment. Goodwill related to EIEIO and Wallaby is tax deductible. None of the goodwill recorded in the Vega or IPP acquisitions is tax deductible.

The following table summarizes unaudited supplemental pro forma consolidated results of operations as if we acquired EIEIO, Vega and Wallaby on January 1, 2015. No pro forma unaudited consolidated results of operations is presented for the three and nine months ended September 30, 2016 or the corresponding prior periods related to the IPP acquisition as their results are not material to the condensed consolidated results of the Company.
 
Three months ended September 30, 2015
 
Nine months ended September 30, 2015
 
(In thousands, except share data)
Net sales
$
1,024,720

 
$
2,955,693

Income before income taxes
76,886

 
202,578

Diluted earnings per common share
$
0.32

 
$
0.76

The historical financial information has been adjusted to give effect to the pro forma adjustments. These adjustments are based upon currently available information and certain assumptions. Therefore, the pro forma consolidated results are not necessarily indicative of what the Company’s consolidated results of operations actually would have been had it completed the acquisitions on January 1, 2015. The historical results included in the pro forma consolidated results do not purport to project future results of operations of the combined companies nor do they reflect the expected realization of any cost savings or revenue synergies associated with the acquisitions. The pro forma consolidated results reflect purchase accounting adjustments primarily related to depreciation and amortization expense, as well as interest expense, tax expense and acquisition related costs.
    
3. Joint Venture with China Mengniu Dairy Company
On January 5, 2014, the Company entered into a joint venture agreement with China Mengniu Dairy Company Limited (“Mengniu”), a leading Chinese dairy company. The joint venture manufactures, markets and sells a range of premium plant-

11


based beverage products in China. Under the terms of the agreement, the Company owns a 49% stake in the venture while Mengniu owns a 51% stake.
Based on the joint venture agreement, the Company has the ability to exert significant influence over the operations and financial policies of the joint venture and has in-substance common stock in the joint venture. Thus, the joint venture is accounted for as an equity-method investment. No contributions were made during the three and nine months ended September 30, 2016 . The joint venture has a credit facility with Mengniu of Chinese yuan (CNY) 120 million ( $18.0 million USD) and, in 2016, entered into a new credit facility with Mengniu for up to an additional CNY of 90 million ( $13.5 million USD), for total capacity of CNY 210 million ( $31.5 million USD). The current facility is expected to support its liquidity requirements for 2016. We guarantee up to 49% on the total commitment amount of this credit facility or Chinese yuan 102.9 million ( $15.4 million USD). As of September 30, 2016 , the joint venture had borrowed Chinese yuan 190 million ( $28.5 million USD) under this facility.

4. Inventories
Inventories consisted of the following:
 
September 30,
2016
 
December 31,
2015
 
(In thousands)
Raw materials and supplies
$
141,105

 
$
120,922

Finished goods
154,978

 
149,815

Total
$
296,083

 
$
270,737

5. Goodwill and Intangible Assets
The changes in the carrying amount of goodwill for the nine months ended September 30, 2016 are as follows:
 
 
Americas Foods & Beverages
 
Europe Foods & Beverages
 
Total
 
(In thousands)
Balance at December 31, 2015
$
1,278,753

 
$
136,569

 
$
1,415,322

Acquisitions
12,257

 

 
12,257

Purchase price adjustments (1)
(10,492
)
 

 
(10,492
)
Foreign currency translation
14,322

 
3,863

 
18,185

Balance at September 30, 2016
$
1,294,840

 
$
140,432

 
$
1,435,272

 ____________________________________
(1) Purchase price adjustments are the result of adjustments made for the finalization of the fair value of certain intangible assets and the finalization of certain income tax matters.
The gross carrying amount and accumulated amortization of our intangible assets, other than goodwill, as of September 30, 2016 and December 31, 2015 are as follows:
 

12


 
September 30, 2016
 
December 31, 2015
 
Gross 
carrying
amount
 
Accumulated
amortization
 
Net carrying
amount
 
Gross 
carrying
amount
 
Accumulated
amortization
 
Net carrying
amount
 
(In thousands)
Intangible assets with indefinite lives:
 
 
 
 
 
 
 
 
 
 
 
Trademarks (1)
$
790,067

 
$

 
$
790,067

 
$
777,718

 
$

 
$
777,718

Intangible assets with finite lives:
 
 
 
 
 
 
 
 
 
 
 
Customer-related and other (1)
283,008

 
(54,223
)
 
228,785

 
270,801

 
(39,828
)
 
230,973

Supplier relationships
12,000

 
(2,640
)
 
9,360

 
12,000

 
(1,920
)
 
10,080

Non-compete agreements (1)
1,337

 
(835
)
 
502

 
1,267

 
(592
)
 
675

        Trademarks
968


(966
)

2


968


(965
)

3

Total
$
1,087,380

 
$
(58,664
)
 
$
1,028,716

 
$
1,062,754

 
$
(43,305
)
 
$
1,019,449

 ____________________________________
 (1) The change in the carrying amount is the result of foreign currency translation and purchase accounting adjustments.

Amortization expense on finite-lived intangible assets for the three months ended September 30, 2016 and 2015 was $5.2 million and $4.9 million , respectively. Amortization expense on finite-lived intangible assets for the nine months ended September 30, 2016 and 2015 was $15.5 million and $10.7 million , respectively.
6. Income Taxes
For each interim period, the Company estimates the effective tax rate expected to be applicable for the full year and applies that rate to income before income taxes for the period. Additionally, the Company records discrete income tax items in the period in which they are incurred.
The effective tax rate for the three months ended September 30, 2016 was 32.5% compared to 29.3% for the three months ended September 30, 2015 . The effective tax rate for the nine months ended September 30, 2016 was 33.2% compared to 33.1% for the nine months ended September 30, 2015 . The increase in the effective tax rates for the three and nine month comparative periods was due primarily to a decrease in favorable return to provision adjustments in 2015 related to changes in estimates associated with a credit for qualified research activities and an increase in the U.S. manufacturing deduction. The increase in the effective tax rate was partially offset by changes in the mix of income before income taxes between the U.S. and foreign countries, which were principally driven by an increase in the investment deduction in Belgium and the generally lower foreign tax rates associated with our Vega acquisition. Changes in the relative profitability of our operating segments, as well as changes to federal, state and foreign tax laws may cause the rate to change from historical rates.

7. Debt and Capital Lease Obligations
Our outstanding debt and capital lease obligations as of September 30, 2016 and December 31, 2015 consisted of the following:  
 
September 30, 2016
 
December 31, 2015
 
 
Amount
outstanding
 
Interest
rate
 
Amount
outstanding
 
Interest
rate
 
 
(In thousands, except percentages)
 
Senior secured credit facilities
$
1,623,550

 
2.39
%
$
1,627,000

 
2.54
%
Senior unsecured notes
500,000

 
5.38
%
 
500,000

 
5.38
%
 
Capital lease obligations
20,622

 
 
 
21,635

 
 
 
Other borrowings

 
 
 
5,133

 
3.70
%
 
Less current portion
(46,374
)
 
 
 
(51,449
)
 
 
 
Less debt issuance costs
(20,582
)
 
 
 
(23,379
)
 
 
 
Total long-term debt
$
2,077,216

 
 
 
$
2,078,940

 
 
 
 ____________________________________

13


* Represents a weighted average rate, including applicable interest rate margins.

Senior Secured Credit Facilities
The Company maintains a credit agreement (the “Credit Agreement”) with Bank of America, N.A. as administrative agent, JPMorgan Chase Bank, N.A., as syndication agent, and the other lenders party thereto. The Credit Agreement governs our senior secured credit facilities, consisting of a five -year $1.0 billion revolving credit facility commitment, a five -year $750 million term loan A-1, and a seven -year $750 million term loan A-2.

As of September 30, 2016 , we had outstanding borrowings of $1.6 billion under our $2.5 billion senior secured credit facilities consisting of $157.3 million outstanding under the revolving credit facility, a $721.9 million principal balance under term loan A-1, and a $744.4 million principal balance under term loan A-2. We have $9.0 million in outstanding letters of credit issued under our revolving credit facilities. We have additional borrowing capacity of approximately $833.7 million under our senior secured credit facilities, which amount will vary over time depending on our financial covenants and operating performance.

The senior secured credit facilities are secured by security interests and liens on substantially all of our domestic assets, and are guaranteed by our material domestic subsidiaries. As of September 30, 2016 , borrowings under the revolving credit facility and term loan A-1 bore interest at a rate of LIBOR plus 1.75% and the term loan A-2 at a rate of LIBOR plus 2.00% per annum.
Alpro Revolving Credit Facility
On June 29, 2015, Alpro entered into a revolving credit facility not to exceed €30.0 million or its currency equivalent. The facility is unsecured and guaranteed by the Company. The facility is available for working capital and other general purposes of Alpro and for the issuance of up to €30.0 million letters of credit or its currency equivalent. At September 30, 2016 and December 31, 2015 , there were no outstanding borrowings.
Vega Revolving Credit Facility
In April, 2016, Vega increased the limit on its uncommitted revolving credit facility from $10.0 million Canadian dollars ("CAD") to not exceed $15.0 million CAD. The facility is unsecured and guaranteed by the Company. The facility is available for working capital and other general purposes of Vega. At September 30, 2016 , there were no outstanding borrowings under this facility. At December 31, 2015 , there was $7.1 million CAD ( $5.1 million USD) outstanding in borrowings under the facility.
Senior Unsecured Notes
In 2014, we issued $500.0 million in aggregate principal amount of senior notes. The notes mature on October 1, 2022 and bear interest at a rate of 5.375% per annum payable on April 1 and October 1 of each year.
Capital Lease Obligations
We are party to leases of certain operating facilities and equipment under capital lease arrangements which bear interest at rates from 3.1% to 8.0% and have expiration dates through 2033 . These assets are included in property, plant, and equipment, net, in the condensed consolidated balance sheets.
8. Derivative Financial Instruments and Fair Value Measurement
The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by derivative instruments include interest rate risk, foreign currency risk and commodity price risk. Derivative contracts are entered into for periods consistent with the related underlying exposure and do not constitute positions independent of those exposures. The Company does not enter into derivative instruments for trading or speculative purposes.
Credit risk under these arrangements is believed to be remote as the counterparties to the derivatives are major financial institutions; however, if any of the counterparties to the derivative agreements become unable to fulfill their obligation, we may lose the financial benefits of these arrangements.
Interest Rates

14


In connection with our initial public offering, on October 31, 2012, Dean Foods novated to us certain of its interest rate swaps (the “2017 swaps”) with a notional value of $650 million and a maturity date of March 31, 2017 . The 2017 swaps effectively change the interest payments on a portion of our debt from variable-rate, based on short term LIBOR, to fixed-rate payments. We are the sole counterparty to the financial institutions under these swap agreements and are directly responsible for any required settlements, and the sole beneficiary of any receipts of funds, pursuant to their terms. We are subject to market risk with respect to changes in the underlying benchmark interest rate that impact the fair value of the 2017 swaps.
The following table summarizes the terms of the 2017 swap agreements as of September 30, 2016 :
 
Fixed Interest Rates
 
Expiration Date
 
Notional Amount
 
 
 
 
(In thousands)
2.75% to 3.19%
 
March 31, 2017
 
$
650,000

We have not designated such contracts as hedging instruments; therefore, the 2017 swap agreements are marked to market at the end of each reporting period and a derivative asset or liability is recorded in our condensed consolidated balance sheets. We recorded gains /(losses) on these contracts of $0.5 million and $(2.1) million for the three and nine months ended September 30, 2016 , respectively. For the three and nine months ended September 30, 2015 , losses on these contracts were $2.3 million and $7.1 million , respectively. Gains and losses are recorded in other expense, net in our condensed consolidated statements of income. A summary of these open swap agreements recorded at fair value in our condensed consolidated balance sheets at September 30, 2016 and December 31, 2015 is included in the fair value table below.

Commodities
We are exposed to commodity price fluctuations, including organic and conventional milk, butterfat, almonds, organic and non-genetically modified (“non-GMO”) soybeans, coconut, cashews, sweeteners, and other commodity costs used in the manufacturing, packaging, and distribution of our products, including utilities, natural gas, resin, and diesel fuel. To secure adequate supplies of materials and bring greater stability to the cost of ingredients and their related manufacturing, packaging, and distribution, we routinely enter into forward purchase contracts and other purchase arrangements with suppliers. Under the forward purchase contracts, we commit to purchasing agreed-upon quantities of ingredients and commodities at agreed-upon prices at specified future dates. The outstanding purchase commitment for these commodities at any point in time typically ranges from one month ’s to eighteen month's anticipated requirements, depending on the ingredient or commodity, but can be longer in limited cases. These contracts are considered normal purchases.
In addition to entering into forward purchase contracts, from time to time we may purchase over-the-counter hedge contracts from qualified financial institutions for commodities associated with the production and distribution of our products. Certain of these contracts offset the risk of increases in our commodity costs and are designated as cash flow hedges when appropriate. As of September 30, 2016 , we have not entered into any commodity cash flow hedges.
Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to commodity price risk but do not meet the authoritative guidance for hedge accounting. From time to time, the Company enters into commodity forward contracts to fix the price of natural gas and diesel fuel purchases and other commodities at a future delivery date. Changes in the fair value of derivatives not designated in hedging relationships are recorded to cost of sales and selling, distribution, and marketing expenses in our condensed consolidated statements of income depending on commodity type. We recorded gains/(losses) on these contracts of $(0.9) million and $1.3 million for the three and nine months ended September 30, 2016 , respectively. For the three and nine months ended September 30, 2015 , we recorded losses of $8.0 million and $8.9 million , respectively. As of September 30, 2016 , the Company had outstanding contracts for the purchase of 19.9 million gallons of diesel expiring throughout 2016 and 2017. A summary of our open commodities contracts recorded at fair value in our condensed consolidated balance sheets at September 30, 2016 and December 31, 2015 is included in the table below.
Although we may utilize forward purchase contracts and other instruments to mitigate the risks related to commodity price fluctuation, such strategies do not fully mitigate commodity price risk. Adverse movements in commodity prices over the terms of the contracts or instruments could decrease the economic benefits we derive from these strategies.
Foreign Currency
Our international operations represented approximately 19% of net sales for the nine months ended September 30, 2016 and 2015 . Sales in foreign countries, as well as certain expenses related to those sales, are transacted in currencies other than our reporting currency, the U.S. dollar. Our foreign currency exchange rate risk primarily consists of the Euro, British pound, Canadian dollar, Mexican peso and Chinese yuan related to net sales and expenses in currencies other than the functional

15


currency of the business. We may, from time to time, employ derivative financial instruments to manage our exposure to fluctuations in foreign currency rates or enter into forward currency exchange contracts to hedge our net investment and intercompany payable or receivable balances in foreign operations. These contracts are designated as cash flow hedges and are recorded as an asset or liability in our condensed consolidated balance sheets at fair value with an offset to accumulated other comprehensive loss to the extent the hedge is effective. Derivative gains and losses included in accumulated other comprehensive loss are reclassified into earnings as the underlying transaction occurs. As of September 30, 2016 , the Company had an aggregate U.S. dollar equivalent of $256.3 million of U.S. dollar foreign currency contracts outstanding, expiring throughout 2016 and 2017 for an intercompany note receivable and commodity purchases denominated in a currency other than the functional currency. Any ineffectiveness in our foreign currency exchange hedges is recorded as an adjustment to cost of goods sold in our condensed consolidated statements of income. There was no material hedge ineffectiveness related to our foreign currency exchange contracts designated as hedging instruments during the three and nine months ended September 30, 2016 and 2015 .

Fair Value - Derivatives
As of September 30, 2016 and December 31, 2015 , derivatives recorded at fair value in our condensed consolidated balance sheets were as follows:
 
 
Derivative assets
 
Derivative liabilities
 
September 30,
2016
 
December 31,
2015
 
September 30,
2016
 
December 31,
2015
 
(In thousands)
Derivatives designated as Hedging Instruments
 
 
 
 
 
 
 
Foreign currency contracts - current (1)(3)
$
1,761

 
$
483

 
$
10

 
$

Total
1,761

 
483

 
10

 

Derivatives not designated as Hedging Instruments
 
 
 
 
 
 
 
Interest rate swap contracts - current (1)

 

 
7,852

 
15,228

Commodities contracts - current  (1)
936

 

 
3,484

 
11,093

Commodities contracts - noncurrent (2)
380

 

 

 
1,551

Interest rate swap contracts - noncurrent (2)

 

 

 
3,142

Total
$
1,316

 
$

 
$
11,336

 
$
31,014

Total derivatives
$
3,077

 
$
483

 
$
11,346

 
$
31,014

  ____________________________________
(1)
Derivative assets and liabilities that have settlement dates equal to or less than 12 months from the respective balance sheet date were included in prepaid expenses and other current assets and accounts payable and accrued expenses, respectively, in our condensed consolidated balance sheets.
(2)
Derivative assets and liabilities that have settlement dates greater than 12 months from the respective balance sheet date were included in identifiable intangible and other assets, net and other long-term liabilities, respectively, in our condensed consolidated balance sheets.
(3)
$1.6 million of the derivative asset balance as of September, 30 2016 relates to a foreign currency hedge on an intercompany note for which the change in fair value offsets the impact of the note being re-measured into the functional currency.

Gains on derivatives designated as cash flow hedges reclassified from accumulated other comprehensive loss into income for the three and nine months ended September 30, 2016 and 2015 were as follows:
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
Realized gains/(losses) on foreign currency contracts (1)
$
(31
)
 
$
623

 
$
24

 
$
982

 
  ____________________________________
(1) Recorded in cost of sales in our condensed consolidated statements of income. See Note 10 "Accumulated Other Comprehensive Loss."
Based on current exchange rates, we estimate that $ 1.8 million in net gains of hedging activity related to our foreign currency contracts will be reclassified from accumulated other comprehensive loss to operating results within the next 12 months.
Fair Value Measurements

16


Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering assumptions, we follow a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
 
Level 1 — Quoted prices for identical instruments in active markets.
Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets.
Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

A summary of our financial assets and liabilities subject to recurring fair value measurements and the basis for that measurement according to the levels in the fair value hierarchy as of September 30, 2016 and December 31, 2015 is as follows:
 
 
Fair value as of September 30, 2016
 
Level 1
 
Level 2
 
Level 3
 
(In thousands)
Assets:
 
 
 
 
 
 
 
Cash equivalents
$
88

 
$
88

 
$

 
$

Supplemental Executive Retirement Plan investments
3,747

 
3,747

 

 

Qualifying insurance policies  (1)
11,001

 

 

 
11,001

Foreign currency contracts
1,761

 

 
1,761

 

Commodities contracts
1,316

 

 
1,316

 

Deferred compensation investments
5,079

 

 
5,079

 

Total assets
$
22,992

 
$
3,835

 
$
8,156

 
$
11,001

Liabilities:
 
 
 
 
 
 
 
Foreign currency contracts
$
10

 
$

 
$
10

 
$

Commodities contracts
3,484

 

 
3,484

 

Interest rate swap contracts
7,852

 

 
7,852

 

Total liabilities
$
11,346

 
$

 
$
11,346

 
$

  ____________________________________
(1) Change in value since December 31, 2015 due to foreign currency translation.

There were no transfers between the three levels of the fair value hierarchy during the nine months ended September 30, 2016 .
 
Fair value as of December 31, 2015
 
Level 1
 
Level 2
 
Level 3
 
(In thousands)
Assets:
 
 
 
 
 
 
 
Cash equivalents
$
107

 
$
107

 
$

 
$

Supplemental Executive Retirement Plan investments
3,164

 
3,164

 

 

Qualifying insurance policies
10,631

 

 

 
10,631

Foreign currency contracts
483




483



Deferred compensation investments
4,359

 

 
4,359

 

Total assets
$
18,744

 
$
3,271

 
$
4,842

 
$
10,631

Liabilities:
 
 
 
 
 
 
 
Commodities contracts
$
12,644

 
$

 
$
12,644

 
$

Interest rate swap contracts
18,370

 

 
18,370

 

Total liabilities
$
31,014

 
$

 
$
31,014

 
$


17



We sponsor two deferred compensation plans, Pre-2005 Executive Deferred Compensation Plan and Post-2004 Executive Deferred Compensation Plan, under which certain employees with a base compensation of at least $150,000 may elect to defer receiving payment for a portion of their salary and bonus until periods after their retirements or upon separation from service. The investments are classified as trading securities and the assets related to these plans are primarily invested in money mutual funds and are held at fair value. We classify these assets as Level 2 as fair value can be corroborated based on quoted market prices for identical or similar instruments in markets that are not active. Changes in the fair value are recorded in general and administrative expense in our condensed consolidated statements of income.
 
Additionally, we maintain a Supplemental Executive Retirement Plan (“SERP”), which is a nonqualified deferred compensation arrangement for our executive officers and other employees earning compensation in excess of the maximum compensation that can be taken into account with respect to our 401(k) plan. The SERP is designed to provide these employees with retirement benefits that are equivalent, as a percentage of total compensation, to the benefits provided to other employees. The investments are classified as trading securities and are primarily invested in money market funds and held at fair value. We classify these assets as Level 1 as fair value can be corroborated based on quoted market prices for identical instruments in active markets. Changes in the fair value are recorded in general and administrative expense in our condensed consolidated statements of income.

Our assets and liabilities recorded at fair value on a recurring basis include cash equivalent money market funds. Due to their near-term maturities, the carrying amounts of trade accounts receivable and accounts payable are considered equivalent to fair value. In addition, because the interest rates on our senior secured credit facilities are variable, their fair values approximate their carrying values.

We estimate the fair value of our senior unsecured notes primarily using quoted market prices in markets that are not active. As of September 30, 2016 , the carrying value and fair value of the Company's borrowings was $500.0 million and $570.0 million , respectively. See Note 7 "Debt and Capital Lease Obligations." As of December 31, 2015, the carrying value and fair value of the Company's borrowings was $500.0 million and $521.3 million , respectively. If measured at fair value in the condensed consolidated balance sheets, our senior unsecured notes would be classified in Level 2 of the fair value hierarchy.

The fair value of our interest rate swaps is determined based on the notional amounts of the swaps and the forward LIBOR curve relative to the fixed interest rates under the swap agreements. The fair value of our commodities contracts is based on the quantities and fixed prices under the agreements and quoted forward commodity prices. The fair value of our foreign currency contracts is based on the notional amounts and rates under the contracts and observable market forward exchange rates. We classify these instruments in Level 2 because quoted market prices can be corroborated utilizing observable benchmark market rates at commonly quoted intervals and observable market transactions of spot currency rates and forward currency prices. We did not significantly change our valuation techniques from prior periods.
Our qualified pension plan investments are comprised of qualifying insurance policies and the guaranteed premiums are invested in the general assets of the insurance company. We classify these assets as Level 3 as there is little or no market data to support the fair value. The qualifying insurance policies are valued at the amount guaranteed by the insurer to pay out the insured benefits. The funding policy is to contribute assets at least equal in amount to regulatory minimum requirements. Funding is based on legal requirements, tax considerations, and investment opportunities. See Note 11 “Employee Retirement Plans.”

9. Share-Based Compensation
Under the Amended and Restated 2012 Stock Incentive Plan (the "2012 SIP"), a total of 26,850,000 shares of our common stock were reserved for issuance upon the exercise of stock options or the vesting of restricted stock units (“RSUs”), performance stock units ("PSUs") or restricted stock awards that may be issued to our employees, non-employee directors and consultants. The 2012 SIP also permits awards of stock appreciation rights (“SARs”) and phantom shares as part of our long-term incentive compensation program. In general, awards granted to our employees under the 2012 SIP vest one-third on the first anniversary of the grant date, one-third on the second anniversary of the grant date, and one-third on the third anniversary of the grant date. Unvested awards vest immediately in the following circumstances: (i) an employee retires after reaching the age of 65 , (ii) in certain cases upon an employee’s death or qualified disability, (iii) an employee with 10 years of service retires after reaching the age of 55 , or (vi) upon a change of control, except for PSUs and all equity awards granted after 2014 to the Company's executive officers.
Upon the completion of the acquisition of the Company by Danone S.A., all of the Company's outstanding share-based compensation awards will vest. See Note 16 The Proposed Merger with Danone for further discussion.

18


Share-Based Compensation Expense
The following table summarizes the share-based compensation expense recognized for the Company’s equity and liability classified plans in the three and nine months ended September 30, 2016 and 2015 :
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
Equity awards:
 
 
 
 
 
 
 
Stock options
$
1,541

 
$
2,353

 
$
7,249

 
$
9,410

RSUs
2,603

 
3,676

 
11,289

 
13,277

PSUs
1,374

 
1,075

 
6,242

 
4,850

Equity awards share-based compensation expense
5,518

 
7,104

 
24,780

 
27,537

 
 
 
 
 
 
 
 
Liability awards:
 
 
 
 
 
 
 
Phantom shares

 
62

 
13

 
802

SARs
357

 
(282
)
 
1,126

 
4,693

Liability awards share-based compensation expense
357

 
(220
)
 
1,139

 
5,495

Total share-based compensation expense
$
5,875

 
$
6,884

 
$
25,919

 
$
33,032


Share-based compensation expense is recorded within general and administrative expense. Except for PSUs, this expense is recognized one-third on the first anniversary of the grant date, one-third on the second anniversary of the grant date, and one-third on the third anniversary of the grant date, unless the employee has reached the retirement age of 65 or is 55 years of age and has 10 years of service, in which case all share-based compensation expense is recognized at the time of grant.

Stock Options
Under the terms of the 2012 SIP, our employees may be granted options to purchase our common stock at a price equal to the market price on the date the option is granted. The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model with the following assumptions:  
 
Nine months ended September 30,
 
2016
 
2015
Expected volatility
28% - 29%
 
28% - 29%
Expected dividend yield
0%
 
0%
Expected option term
6 years
 
6 years
Risk-free rate of return
1.14% to 1.70%
 
1.45% to 1.82%
Forfeiture rate
—%
 
—%
Since the Company’s common stock did not have a long history of being publicly traded at grant date, the expected term was determined under the simplified method, using an average of the contractual term and vesting period of the stock options. For stock options granted in 2015 and thereafter, the expected volatility assumption was calculated based on a blend of compensation peer group analysis of stock price volatility with a six -year look back period ending on the grant date, and the Company's current implied stock price volatility. For stock options granted prior to 2015, the expected volatility assumption was calculated based solely on a compensation peer group analysis of stock price volatility with a six -year look back period ending on the grant date. The risk-free rates were based on the average implied yield available on five -year and seven -year U.S. Treasury issues. The forfeiture rates are based on historical rates and the Company elected to use a 0% forfeiture rate due to historically immaterial forfeiture rates. We have not paid, and do not anticipate paying, a cash dividend on our common stock.
The following table summarizes stock option activity during the nine months ended September 30, 2016 :

19


 
 
Number of options
 
Weighted average
exercise price
 
Weighted average
contractual life in years
 
Aggregate
intrinsic value
Options outstanding at January 1, 2016
9,440,803

 
$
19.14

 
 
 
 
Granted
813,267

 
$
36.59

 
 
 
 
Forfeited, canceled and expired (1)
(53,119
)
 
$
40.59

 
 
 
 
Exercised (including tax withholding) (1)
(1,115,518
)
 
$
19.83

 
 
 
 
Options outstanding at September 30, 2016
9,085,433

 
$
20.49

 
5.51
 
$
308,323,353

Options vested and expected to vest at September 30, 2016
9,085,433

 
$
20.49

 
5.51
 
$
308,323,353

Options exercisable at September 30, 2016
7,499,147

 
$
17.42

 
4.84
 
$
277,562,397

 ____________________________________
(1)
Pursuant to the terms of the 2012 SIP, options that are forfeited, canceled or expired may be available for future grants; however shares delivered to or withheld by the Company for the payment of the exercise price of an option and/or tax withholding related to an exercise, and shares subject to an option that are not issued upon the net exercise of such option, are not added back to the pool of shares available for future awards.
During the nine months ended September 30, 2016 , we received $9.4 million of cash from stock option exercises. At September 30, 2016 , there is $8.4 million of unrecognized stock option expense, all of which is related to non-vested awards. This compensation expense is expected to be recognized over the weighted-average remaining vesting period of 1.66 years.
Restricted Stock Units
RSUs are issued to certain senior employees under the 2012 SIP as part of our long-term incentive program. An RSU represents the right to receive one share of common stock in the future. RSUs have no exercise price. RSUs granted to employees vest ratably over three years .

The following table summarizes RSU activity during the nine months ended September 30, 2016 :
 
RSUs outstanding January 1, 2016
839,252

RSUs granted
409,415

Shares issued upon vesting of RSUs (including tax withholding) (1)
(443,594
)
RSUs canceled (1)
(33,659
)
RSUs outstanding at September 30, 2016
771,414

Weighted average grant date fair value per share
$
34.99

 __________________________________
(1)
Pursuant to the terms of the 2012 SIP, RSUs that are canceled or forfeited before they vest may be available for future grants; however shares delivered to or withheld by the Company for the payment of the employee's tax withholding related to an RSU vesting are not added back to the pool of shares available for future awards.
At September 30, 2016 , there is $14.1 million of total unrecognized RSU expense, all of which is related to unvested awards. This compensation expense is expected to be recognized over the weighted-average remaining vesting period of 1.68 years.

Performance Stock Units
In February 2015 and 2016, we granted PSUs to our executive officers under the 2012 SIP as part of our long-term incentive compensation program. PSUs vest based on a comparison of the Company’s diluted adjusted EPS growth over the three -year performance period to the diluted adjusted EPS growth of companies in the S&P 500 over the same period. In the first year, one third of the PSUs will vest based on our diluted adjusted EPS growth in that year compared to the one -year diluted adjusted EPS growth of S&P 500 companies. In the second year, one third of the PSUs will vest based on our cumulative diluted adjusted EPS growth over the past two years compared to the cumulative two -year diluted adjusted EPS growth of S&P 500 companies. In the third year, one third of the PSUs will vest based on our cumulative diluted adjusted EPS growth over the past three years compared to the cumulative three-year diluted adjusted EPS growth of S&P 500 companies. PSUs will be converted to common stock upon vesting and the payout range is 0 to 200% .

20



We recognize share-based compensation expense in the condensed consolidated statements of income over the three year performance period based on the Company’s estimated relative performance for each vesting tranche. Accordingly, for the grant made each year we recognize 100% of the estimated first year expense, 50% of the estimated second year expense and 33.3% of the estimated third year expense. As of September 30, 2016 , based upon our assessment of our relative performance versus the S&P 500, the 2015 PSU awards have been expensed based upon a target payout 188% for the year two tranche (2015-2016) and 158% for the year three tranche (2015-2017). As of September 30, 2016 , the 2016 PSU awards have been expensed based upon a target payout assumption of 175% for year one tranche (2016-2017), 138% for tranche year two (2016-2018), and 125% for tranche year three (2016-2019).

The following table summarizes PSU activity during the nine months ended September 30, 2016 :
PSUs outstanding January 1, 2016
107,358

PSUs granted
155,846

Shares issued upon vesting of PSUs (1)
(71,580
)
PSUs canceled (1)

PSUs outstanding at September 30, 2016
191,624

Weighted average grant date fair value per share
$
37.16

__________________________________________
(1)
Pursuant to the terms of the 2012 SIP, PSUs that are canceled or forfeited before they vest may be available for future grants; however shares delivered to or withheld by the Company for the payment of the employee's tax withholding related to a PSU vesting are not added back to the pool of shares available for future awards. Shares issued upon vesting of PSUs on April 18, 2016 were 71,580 , which represented 200% payout.
At September 30, 2016 there is $2.3 million of total unrecognized PSU expense, all of which is related to unvested awards. This compensation expense is expected to be recognized over the weighted-average remaining vesting period of 1.40 years.

Phantom Shares
We previously granted phantom shares under the 2012 SIP as part of our long-term incentive compensation program, which are similar to RSUs in that they are based on the price of WhiteWave stock and vest ratably over a three -year period, but are cash-settled based upon the value of WhiteWave stock at each vesting period. The fair value of the awards was re-measured at each reporting period. As of March 31, 2016 all phantom shares have been cash settled.

Stock Appreciation Rights
We previously granted SARs under the 2012 SIP as part of our long-term incentive compensation program, which are similar to stock options in that they are based on the price of WhiteWave stock and vest ratably over a three -year period, but are cash-settled based upon the value of WhiteWave stock at the exercise date. We have not granted any SARs since 2013 and all outstanding SARs are fully vested.

      The fair value of the awards is re-measured at each reporting period. A liability has been recorded in current liabilities in our condensed consolidated balance sheets totaling $1.8 million and $2.7 million as of September 30, 2016 and December 31, 2015 , respectively. The following table summarizes SARs activity during the nine months ended September 30, 2016 :
 
 
Number of
SARs
 
Weighted
average
exercise price
 
Weighted average
contractual life in years
 
Aggregate
intrinsic value
SARs outstanding at January 1, 2016
122,031

 
$
16.45

 
 
 
 
Granted

 
$

 
 
 
 
Forfeited and canceled (1)

 
$

 
 
 
 
Exercised
(74,397
)
 
$
16.44

 
 
 
 
SARs outstanding at September 30, 2016
47,634

 
$
16.45

 
6.16
 
$
1,809,028

SARs vested and expected to vest at September 30, 2016
47,634

 
$
16.45

 
6.16
 
$
1,809,028

SARs exercisable at September 30, 2016
47,634

 
$
16.45

 
6.16
 
$
1,809,028

 _____________________________________

21


(1)
Pursuant to the terms of the 2012 SIP, SARs that are canceled or forfeited may be available for future grants.


10. Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss by component for the three months ended September 30, 2016 were as follows (net of tax):
 
Derivative
instruments  (1)
 
Defined benefit pension plan  (2)
 
Foreign currency translation adjustment
 
Total
 
 
 
(In thousands)
 
 
Balance at July 1, 2016
$
(649
)
 
$
(778
)
 
$
(106,575
)
 
$
(108,002
)
Other comprehensive income/(loss) before reclassifications
245

 
(14
)
 
488

 
719

Amounts reclassified from accumulated other comprehensive income/(loss)
(79
)
 
5

 

 
(74
)
Other comprehensive income/(loss), net of tax benefit of $61
166

 
(9
)
 
488

 
645

Balance at September 30, 2016
$
(483
)
 
$
(787
)
 
$
(106,087
)
 
$
(107,357
)
  ____________________________________
(1)
The accumulated other comprehensive loss reclassification components affect cost of sales. See Note 8 “Derivative Financial Instruments and Fair Value Measurement.”
(2)
The accumulated other comprehensive loss reclassification components are related to amortization of unrecognized actuarial losses and prior service costs which are both included in the computation of net periodic pension cost. See Note 11 “Employee Retirement Plans.”

The changes in accumulated other comprehensive loss by component for the nine months ended September 30, 2016 were as follows (net of tax):
 
Derivative
instruments  (1)
 
Defined benefit pension plan  (2)
 
Foreign currency translation adjustment
 
Total
 
 
 
(In thousands)
 
 
Balance at January 1, 2016
$
505

 
$
(761
)
 
$
(131,278
)
 
$
(131,534
)
Other comprehensive income/(loss) before reclassifications
(964
)
 
(29
)
 
25,191

 
24,198

Amounts reclassified from accumulated other comprehensive income/(loss)
(24
)
 
3

 

 
(21
)
Other comprehensive income/(loss), net of tax benefit of $17
(988
)
 
(26
)
 
25,191

 
24,177

Balance at September 30, 2016
$
(483
)
 
$
(787
)
 
$
(106,087
)
 
$
(107,357
)
  ____________________________________
(1)
The accumulated other comprehensive loss reclassification components affect cost of sales. See Note 8 “Derivative Financial Instruments and Fair Value Measurement.”
(2)
The accumulated other comprehensive loss reclassification components are related to amortization of unrecognized actuarial losses and prior service costs which are both included in the computation of net periodic pension cost. See Note 11 “Employee Retirement Plans.”

The changes in accumulated other comprehensive loss by component for the three months ended September 30, 2015 were as follows (net of tax):
 
Derivative
instruments  (1)
 
Defined benefit pension plan  (2)
 
Foreign currency translation adjustment
 
Total
 
 
 
(In thousands)
 
 
Balance at July 1, 2015
$
837

 
$
(1,888
)
 
$
(87,090
)
 
$
(88,141
)
Other comprehensive income/(loss) before reclassifications
(2,132
)
 
17

 
(13,305
)
 
(15,420
)
Amounts reclassified from accumulated other comprehensive income/(loss)
623

 
(24
)
 

 
599

Other comprehensive income/(loss), net of tax benefit of $296
(1,509
)
 
(7
)
 
(13,305
)
 
(14,821
)
Balance at September 30, 2015
$
(672
)
 
$
(1,895
)
 
$
(100,395
)
 
$
(102,962
)
  ____________________________________

22


(1)
The accumulated other comprehensive loss reclassification components affect cost of sales. See Note 8 “Derivative Financial Instruments and Fair Value Measurement.”
(2)
The accumulated other comprehensive loss reclassification components are related to amortization of unrecognized actuarial losses and prior service costs which are both included in the computation of net periodic pension cost. See Note 11 “Employee Retirement Plans.”
The changes in accumulated other comprehensive loss by component for the nine months ended September 30, 2015 were as follows (net of tax):
 
Derivative
instruments  (1)
 
Defined benefit pension plan  (2)
 
Foreign currency translation adjustment
 
Total
 
 
 
(In thousands)
 
 
Balance at January 1, 2015
$
774

 
$
(2,050
)
 
$
(59,842
)
 
$
(61,118
)
Other comprehensive income/(loss) before reclassifications
(2,428
)
 
227

 
(40,553
)
 
(42,754
)
Amounts reclassified from accumulated other comprehensive income/(loss)
982

 
(72
)
 

 
910

Other comprehensive income/(loss), net of tax benefit of $181
(1,446
)
 
155

 
(40,553
)
 
(41,844
)
Balance at September 30, 2015
$
(672
)
 
$
(1,895
)
 
$
(100,395
)
 
$
(102,962
)
  ____________________________________
(1)
The accumulated other comprehensive loss reclassification components affect cost of sales. See Note 8 “Derivative Financial Instruments and Fair Value Measurement.”
(2)
The accumulated other comprehensive loss reclassification components are related to amortization of unrecognized actuarial losses and prior service costs which are both included in the computation of net periodic pension cost. See Note 11 “Employee Retirement Plans.”
11. Employee Retirement Plans
We provide employee retirement benefits under 401(k) and defined benefit plans. Additionally, we contribute to one multi-employer pension plan on behalf of certain employees. We have defined benefit pension plans for certain of our Europe Foods and Beverages segment employees, under which the benefits are based on years of service and employee compensation.
The components of net periodic benefit cost for our pension plans for the three and nine months ended September 30, 2016 and 2015 are detailed below:
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
Components of net periodic benefit cost:
 
 
 
 
 
 
 
Service cost
$
404

 
$
444

 
$
1,214

 
$
1,332

Interest cost
95

 
84

 
285

 
252

Expected return on plan assets
(71
)
 
(68
)
 
(211
)
 
(204
)
Amortization:
 
 
 
 
 
 
 
Unrecognized net loss
1

 
24

 
3

 
72

Net periodic benefit cost
$
429

 
$
484

 
$
1,291

 
$
1,452

12. Commitments and Contingencies
Lease and Purchase Obligations
We lease certain property, plant, and equipment used in our operations under both capital and operating lease agreements. Such operating leases, which are primarily for operating facilities, office space, and equipment, have lease terms ranging from one to 14 years. Rent expense was $9.4 million and $8.4 million for the three months ended September 30, 2016 and 2015 , respectively, and $27.5 million and $18.7 million for the nine months ended September 30, 2016 and 2015 , respectively. The Company leases certain operating facilities and equipment under capital lease arrangements. These assets are included in property, plant, and equipment, net, on the condensed consolidated balance sheets.
We have entered into various contracts, in the normal course of business, obligating us to purchase minimum quantities of raw materials used in our production and distribution processes, including soybeans and organic raw milk. We enter into these

23


contracts from time to time to ensure a sufficient supply of raw materials. In addition, we have contractual obligations to purchase various services that are part of our production and distribution process.
Litigation, Investigations, and Audits
The Company is involved in various litigation, investigations, and audit proceedings in the normal course of business. It is management’s opinion, after consultation with counsel and a review of the facts, that a material adverse effect on the financial position, liquidity, or results of operations, or cash flows of the Company is not probable or reasonably possible.
13. Segment, Geographic, and Customer Information

Effective January 1, 2016, we report results of operations through two reportable segments: Americas Foods & Beverages and Europe Foods & Beverages. This reporting structure aligns with the way our Chief Operating Decision Maker ("CODM"), our CEO, monitors operating performance, allocates resources, and deploys capital. In 2015, we reported results of operations through three reportable segments: Americas Foods & Beverages, Americas Fresh Foods and Europe Foods & Beverages.  In connection with our management restructure in early 2016, we consolidated the historical Americas Foods & Beverages and Americas Fresh Foods segments into a single Americas Foods & Beverages segment. Accordingly, prior year segment data has been recast to reflect this new segment structure.
The Americas Foods & Beverages segment offers products in the plant-based foods and beverages, coffee creamers and beverages, premium dairy products and organic produce categories throughout North America. Our Europe Foods & Beverages segment offers plant-based food and beverage products throughout Europe. We sell our products to a variety of customers, including grocery stores, mass merchandisers, club stores, health food stores and convenience stores, as well as various away-from-home channels, including foodservice outlets, across North America and Europe. We sell our products in North America and Europe primarily through our direct sales force, independent brokers, regional brokers, and distributors. We utilize twelve manufacturing plants, multiple distribution centers, and three strategic co-packers across North America. Additionally, we have three plants across Europe in the United Kingdom, Belgium and France, each supported by an integrated supply chain. We also utilize third-party co-packers across Europe for certain products.
We evaluate the performance of our segments based on net sales and operating income. The amounts in the following tables are obtained from reports used by our chief operating decision maker. There are no significant non-cash items reported in segment profit or loss other than depreciation and amortization.
Expense related to share-based compensation has not been allocated to our segments and is reflected entirely within the caption “Corporate and other”.

The following table presents the summarized income statement amounts by segment:

24


 
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
Total net sales:
 
 
 
 
 
 
 
Americas Foods & Beverages
$
909,450


$
869,074


$
2,702,668


$
2,440,463

Europe Foods & Beverages
144,148


134,814


440,273


398,198

Total net sales
$
1,053,598


$
1,003,888


$
3,142,941


$
2,838,661

Operating income:







Americas Foods & Beverages
$
120,350


$
94,662


$
321,985


$
265,512

Europe Foods & Beverages
17,299


18,959


53,009


50,066

Total reportable segment operating income
137,649


113,621


374,994


315,578

Corporate and other
(28,322
)

(20,509
)

(81,002
)

(75,394
)
Total operating income
109,327


93,112


293,992


240,184

Other expense:







Interest expense
18,655

 
15,979

 
50,772

 
38,580

Other expense, net
940

 
2,549

 
4,668

 
7,337

Income before taxes
$
89,732


$
74,584


$
238,552


$
194,267

Depreciation and amortization:







Americas Foods & Beverages
$
28,144


$
25,868


$
83,291


$
70,831

Europe Foods & Beverages
6,295


4,943


18,442


14,180

Corporate and other
580


527


1,674


1,664

Total depreciation and amortization
$
35,019


$
31,338


$
103,407


$
86,675

The following tables present sales amounts by product categories:
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
Total net sales:
 
 
 
 
 
 
 
Americas Foods & Beverages
 
 
 
 
 
 
 
Plant-based foods and beverages
$
277,315

 
$
252,831

 
$
819,614

 
$
680,090

Coffee creamers and beverages
298,832

 
274,526

 
862,106

 
775,045

Premium dairy
205,566

 
195,165

 
605,055

 
547,897

Fresh foods
127,737

 
146,552

 
415,893

 
437,431

Americas Foods & Beverages net sales
909,450

 
869,074

 
2,702,668

 
2,440,463

 
 
 
 
 
 
 
 
Europe Foods & Beverages
 
 
 
 
 
 
 
Plant-based foods and beverages
144,148

 
134,814

 
440,273

 
398,198

Europe Foods & Beverages net sales
144,148

 
134,814

 
440,273

 
398,198

 
 
 
 
 
 
 
 
Total net sales
$
1,053,598

 
$
1,003,888

 
$
3,142,941

 
$
2,838,661


The following tables present assets and capital expenditures by segment:  

25


 
September 30, 2016
 
December 31, 2015
 
(In thousands)
Assets:
 
 
 
Americas Foods & Beverages
$
3,669,413


$
3,555,988

Europe Foods & Beverages
668,867


605,843

Corporate
74,431


67,038

Total
$
4,412,711


$
4,228,869

 
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
Capital expenditures:
 
 
 
 
 
 
 
Americas Foods & Beverages
$
39,068


$
32,787


$
94,319


$
125,313

Europe Foods & Beverages
34,977


21,620


72,088


59,443

Corporate
599


84


1,319


327

Total
$
74,644


$
54,491


$
167,726


$
185,083

Significant Customers
The Company had a single customer that represented 13.7% and 14.0% of its consolidated net sales in the three months ended September 30, 2016 and 2015 , respectively. The same customer represented 13.0% and 13.9% of our consolidated net sales in the nine months ended September 30, 2016 and 2015 , respectively. Sales to this customer are primarily included in the Americas Foods & Beverages segment.
14. Earnings Per Share
Basic earnings per share is based on the weighted average number of common shares outstanding during each period. Diluted earnings per share is based on the weighted average number of common shares outstanding and the effect of all dilutive common stock equivalents outstanding during each period.

The following table reconciles the numerators and denominators used in the computations of both basic and diluted earnings per share:  

26


 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands, except share and per share data)
Basic earnings per share computation:
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
Net income
$
58,037

 
$
50,022

 
$
152,406

 
$
120,813

Denominator:
 
 
 
 
 
 
 
Weighted average common shares
177,185,368

 
175,846,533

 
176,902,352

 
175,290,113

Basic earnings per share
$
0.33

 
$
0.28

 
$
0.86

 
$
0.69

Diluted earnings per share computation:
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
Net income
$
58,037

 
$
50,022

 
$
152,406

 
$
120,813

Denominator:
 
 
 
 
 
 
 
Weighted average common shares - basic
177,185,368

 
175,846,533

 
176,902,352

 
175,290,113

Stock option conversion (1)
3,757,586

 
3,903,791

 
3,456,172

 
4,033,138

Stock units (2)
568,381

 
694,197

 
594,045

 
683,451

Weighted average common shares - diluted
181,511,335

 
180,444,521

 
180,952,569

 
180,006,702

Diluted earnings per share
$
0.32

 
$
0.28

 
$
0.84

 
$
0.67

(1)  Anti-dilutive options excluded
32,888
 
448,961

 
209,328

 
359,955

(2)  Anti-dilutive RSUs excluded
0
 
7,706

 
100

 
2,597


15. Supplemental Guarantor Financial Information

In September of 2014, we issued debt securities that are guaranteed by certain of our 100% owned subsidiaries. In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act of 1933, the following condensed consolidating financial statements present the balance sheets as of September 30, 2016 and December 31, 2015 , the statements of comprehensive income for the three and nine months ended September 30, 2016 and 2015, and the statements of cash flows for the nine months ended September 30, 2016 and 2015 for The WhiteWave Foods Company (referred to as “Parent” for the purpose of this note only), the combined guarantor subsidiaries, the combined non-guarantor subsidiaries and elimination adjustments necessary to arrive at the information for the Parent, guarantor subsidiaries and non-guarantor subsidiaries on a consolidated basis. Investments in subsidiaries are accounted for using the equity method for this presentation. All guarantors of our debt securities are also guarantors for our senior secured credit facilities. The guarantee is full and unconditional and joint and several. Our senior secured credit facilities are secured by security interest and liens on substantially all of our assets and the assets of our domestic subsidiaries and is presented in the Parent column of the accompanying condensed consolidating balance sheets as of September 30, 2016 and December 31, 2015 .

27


Condensed Consolidating Balance Sheets
 
 
September 30, 2016
 
 
Parent
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated Total
 
 
(In thousands)
ASSETS
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
3

 
$
4,672

 
$
47,815

 
$

 
$
52,490

Trade receivables, net of allowance
 
473

 
195,795

 
87,971

 

 
284,239

Inventories
 

 
255,117

 
48,140

 
(7,174
)
 
296,083

Prepaid expenses and other current assets
 
29,703

 
22,803

 
16,271

 

 
68,777

Intercompany receivables
 
1,914,669

 
802,197

 
6,761

 
(2,723,627
)
 

Total current assets
 
1,944,848

 
1,280,584

 
206,958

 
(2,730,801
)
 
701,589

Equity method investments
 
2,255

 

 
21,300

 

 
23,555

Investment in consolidated subsidiaries
 
2,405,870

 
1,008,175

 

 
(3,414,045
)
 

Property, plant, and equipment, net
 
5,795

 
897,393

 
300,981

 

 
1,204,169

Identifiable intangible and other assets, net
 
41,461

 
659,432

 
375,486

 
(28,253
)
 
1,048,126

Goodwill
 

 
982,922

 
452,350

 

 
1,435,272

Total Assets
 
$
4,400,229

 
$
4,828,506

 
$
1,357,075

 
$
(6,173,099
)
 
$
4,412,711


 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY
 

 

 

 

 

Current liabilities:
 

 

 

 

 

Accounts payable and accrued expenses
 
$
54,534

 
$
308,065

 
$
151,738

 
$

 
$
514,337

Current portion of debt and capital lease obligations
 
45,000

 
1,374

 

 

 
46,374

Income taxes payable
 

 

 
5,198

 

 
5,198

Intercompany payables
 
802,197

 
1,882,281

 
39,149

 
(2,723,627
)
 

Total current liabilities
 
901,731

 
2,191,720

 
196,085

 
(2,723,627
)
 
565,909

Long-term debt and capital lease obligations, net of debt issuance costs
 
2,057,968

 
19,248

 

 

 
2,077,216

Deferred income taxes
 

 
209,362

 
122,487

 
(28,253
)
 
303,596

Other long-term liabilities
 
24,171

 
2,306

 
23,154

 

 
49,631

Total liabilities
 
2,983,870

 
2,422,636

 
341,726

 
(2,751,880
)
 
2,996,352

Total shareholders' equity
 
1,416,359

 
2,405,870

 
1,015,349

 
(3,421,219
)
 
1,416,359

Total Liabilities and Shareholders' Equity
 
$
4,400,229

 
$
4,828,506

 
$
1,357,075

 
$
(6,173,099
)
 
$
4,412,711


28


Condensed Consolidating Balance Sheets
 
 
December 31, 2015
 
 
Parent
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated Total
 
 
(In thousands)
ASSETS
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$

 
$
2,282

 
$
36,328

 
$

 
$
38,610

Trade receivables, net of allowance
 
2,649

 
200,808

 
54,091

 

 
257,548

Inventories
 

 
232,757

 
46,755

 
(8,775
)
 
270,737

Prepaid expenses and other current assets
 
15,442

 
11,070

 
13,270

 

 
39,782

Intercompany receivables
 
1,878,299

 
686,469

 
37,962

 
(2,602,730
)
 

Total current assets
 
1,896,390

 
1,133,386

 
188,406

 
(2,611,505
)
 
606,677

Equity method investments
 
2,983

 

 
27,789

 

 
30,772

Investment in consolidated subsidiaries
 
2,156,856

 
943,501

 

 
(3,100,357
)
 

Property, plant, and equipment, net
 
6,169

 
893,594

 
237,758

 

 
1,137,521

Identifiable intangible and other assets, net
 
34,441

 
663,101

 
365,316

 
(24,281
)
 
1,038,577

Goodwill
 

 
991,085

 
424,237

 

 
1,415,322

Total Assets
 
$
4,096,839

 
$
4,624,667

 
$
1,243,506

 
$
(5,736,143
)
 
$
4,228,869

 
 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
 
$
47,713

 
$
374,483

 
$
127,517

 
$

 
$
549,713

Current portion of debt and capital lease obligations
 
45,000

 
1,415

 
5,034

 

 
51,449

Income taxes payable
 

 

 
3,043

 

 
3,043

Intercompany payables
 
710,984

 
1,866,496

 
25,250

 
(2,602,730
)
 

Total current liabilities
 
803,697

 
2,242,394

 
160,844

 
(2,602,730
)
 
604,205

Long-term debt and capital lease obligations, net of debt issuance costs
 
2,058,621

 
20,219

 
100

 

 
2,078,940

Deferred income taxes
 

 
200,642

 
116,965

 
(24,281
)
 
293,326

Other long-term liabilities
 
23,613

 
4,556

 
13,321

 

 
41,490

Total liabilities
 
2,885,931

 
2,467,811

 
291,230

 
(2,627,011
)
 
3,017,961

Total shareholders' equity
 
1,210,908

 
2,156,856

 
952,276

 
(3,109,132
)
 
1,210,908

Total Liabilities and Shareholders' Equity
 
$
4,096,839

 
$
4,624,667

 
$
1,243,506

 
$
(5,736,143
)
 
$
4,228,869


29


Condensed Consolidating Statements of Comprehensive Income
 
 
Three months ended September 30, 2016
 
 
Parent
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated Total
 
 
(In thousands)
Net sales

$


$
886,351


$
209,720


$
(42,473
)

$
1,053,598

Cost of sales



588,308


125,134


(40,963
)

672,479

Gross profit



298,043


84,586


(1,510
)

381,119

Operating expenses:










Selling, distribution and marketing



147,051


41,858




188,909

General and administrative

25,269


38,602


19,012




82,883

Total operating expenses

25,269


185,653


60,870




271,792

Operating (loss) income

(25,269
)

112,390


23,716


(1,510
)

109,327

Other (income) expense:










Interest expense

18,340


258


57




18,655

Other (income) expense, net

(42,407
)

42,265


1,082




940

Total other (income) expense

(24,067
)

42,523


1,139




19,595

Income (loss) before income taxes and equity in earnings of subsidiaries

(1,202
)

69,867


22,577


(1,510
)

89,732

Income tax (benefit) expense

(2,052
)

24,952


6,294




29,194

Income before loss in equity method investments and equity in earnings of subsidiaries

850


44,915


16,283


(1,510
)

60,538

Loss in equity method investments

260




2,241




2,501

Equity in earnings of consolidated subsidiaries

57,447


12,532




(69,979
)


Net income

58,037


57,447


14,042


(71,489
)

58,037

Other comprehensive income, net of tax

645


645


645


(1,290
)

645

Comprehensive income

$
58,682


$
58,092


$
14,687


$
(72,779
)

$
58,682





30


Condensed Consolidating Statements of Comprehensive Income
 
 
Three months ended September 30, 2015
 
 
Parent
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated Total
 
 
(In thousands)
Net sales

$


$
861,699


$
161,062


$
(18,873
)

$
1,003,888

Cost of sales



576,277


92,764


(16,284
)

652,757

Gross profit



285,422


68,298


(2,589
)

351,131

Operating expenses:










Selling, distribution and marketing



156,124


31,660




187,784

General and administrative

17,648


35,403


17,184




70,235

Total operating expenses

17,648


191,527


48,844




258,019

Operating (loss) income

(17,648
)

93,895


19,454


(2,589
)

93,112

Other (income) expense:










Interest expense

15,684


207


88




15,979

Other (income) expense, net

(27,700
)

30,666


(417
)



2,549

Total other (income) expense

(12,016
)

30,873


(329
)



18,528

Income (loss) before income taxes and equity in earnings of subsidiaries

(5,632
)

63,022


19,783


(2,589
)

74,584

Income tax (benefit) expense

(6,930
)

26,963


1,798




21,831

Income before loss in equity method investments and equity in earnings of subsidiaries

1,298


36,059


17,985


(2,589
)

52,753

Loss in equity method investments

236




2,495




2,731

Equity in earnings of consolidated subsidiaries

48,960


12,901




(61,861
)


Net income

50,022


48,960


15,490


(64,450
)

50,022

Other comprehensive loss, net of tax

(14,821
)

(14,821
)

(13,315
)

28,136


(14,821
)
Comprehensive income

$
35,201


$
34,139


$
2,175


$
(36,314
)

$
35,201







31


Condensed Consolidating Statements of Comprehensive Income

 
 
Nine months ended September 30, 2016
 
 
Parent
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated Total
 
 
(In thousands)
Net sales
 
$

 
$
2,648,427

 
$
583,376

 
$
(88,862
)
 
$
3,142,941

Cost of sales
 

 
1,784,066

 
342,754

 
(89,173
)
 
2,037,647

Gross profit
 

 
864,361

 
240,622

 
311

 
1,105,294

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Selling, distribution and marketing
 

 
445,653

 
117,565

 

 
563,218

General and administrative
 
73,041

 
116,769

 
58,274

 

 
248,084

Total operating expenses
 
73,041

 
562,422

 
175,839

 

 
811,302

Operating (loss) income
 
(73,041
)
 
301,939

 
64,783

 
311

 
293,992

Other (income) expense:
 
 
 
 
 
 
 
 
 
 
Interest expense
 
49,716

 
684

 
372

 

 
50,772

Other (income) expense, net
 
(115,534
)
 
118,208

 
1,994

 

 
4,668

Total other (income) expense
 
(65,818
)
 
118,892

 
2,366

 

 
55,440

Income (loss) before income taxes and equity in earnings of subsidiaries
 
(7,223
)
 
183,047

 
62,417

 
311

 
238,552

Income tax (benefit) expense
 
(1,298
)
 
66,777

 
13,811

 

 
79,290

(Loss) income before loss in equity method investments and equity in earnings of subsidiaries
 
(5,925
)
 
116,270

 
48,606

 
311

 
159,262

Loss in equity method investments
 
728

 

 
6,128

 

 
6,856

Equity in earnings of consolidated subsidiaries
 
159,059

 
42,789

 

 
(201,848
)
 

Net income
 
152,406

 
159,059

 
42,478

 
(201,537
)
 
152,406

Other comprehensive income, net of tax
 
24,177

 
24,177

 
24,177

 
(48,354
)
 
24,177

Comprehensive income
 
$
176,583

 
$
183,236

 
$
66,655

 
$
(249,891
)
 
$
176,583



32


Condensed Consolidating Statements of Comprehensive Income (Loss)
 
 
Nine months ended September 30, 2015
 
 
Parent
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated Total
 
 
(In thousands)
Net sales
 
$

 
$
2,433,087

 
$
424,447

 
$
(18,873
)
 
$
2,838,661

Cost of sales
 

 
1,627,921

 
241,160

 
(16,284
)
 
1,852,797

Gross profit
 

 
805,166

 
183,287

 
(2,589
)
 
985,864

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Selling, distribution and marketing
 

 
438,177

 
91,679

 

 
529,856

General and administrative
 
67,965

 
102,244

 
45,615

 

 
215,824

Total operating expenses
 
67,965

 
540,421

 
137,294

 

 
745,680

Operating (loss) income
 
(67,965
)
 
264,745

 
45,993

 
(2,589
)
 
240,184

Other (income) expense:
 
 
 
 
 
 
 
 
 
 
Interest expense
 
37,543

 
796

 
241

 

 
38,580

Other (income) expense, net
 
(104,718
)
 
108,330

 
3,725

 

 
7,337

Total other (income) expense
 
(67,175
)
 
109,126

 
3,966

 

 
45,917

Income (loss) before income taxes and equity in earnings of subsidiaries
 
(790
)
 
155,619

 
42,027

 
(2,589
)
 
194,267

Income tax (benefit) expense
 
(3,469
)
 
60,920

 
6,776

 

 
64,227

Income before loss in equity method investments and equity in earnings of subsidiaries
 
2,679

 
94,699

 
35,251

 
(2,589
)
 
130,040

Loss in equity method investments
 
575

 

 
8,652

 

 
9,227

Equity in earnings of consolidated subsidiaries
 
118,709

 
24,010

 

 
(142,719
)
 

Net income
 
120,813

 
118,709

 
26,599

 
(145,308
)
 
120,813

Other comprehensive loss, net of tax
 
(41,844
)
 
(41,844
)
 
(40,319
)
 
82,163

 
(41,844
)
Comprehensive income (loss)
 
$
78,969

 
$
76,865

 
$
(13,720
)
 
$
(63,145
)
 
$
78,969



33


Condensed Consolidating Statements of Cash Flows
 
 
 
 
 
Nine months ended September 30, 2016
 
 
 
 
 
Parent
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated Total
 
 
 
 
 
(In thousands)
 CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities
 
$
11,932

 
$
89,497

 
$
105,560

 
$

 
$
206,989

 CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
 
 
Payments for acquisitions, net of cash acquired of $833
 

 
(60
)
 
(17,313
)
 

 
(17,373
)
 
 
Payments for property, plant, and equipment
 
(1,259
)
 
(91,722
)
 
(74,745
)
 

 
(167,726
)
 
 
Intercompany contributions
 
(11,128
)
 

 

 
11,128

 

 
 
Proceeds from sale of fixed assets
 

 
251

 
8

 

 
259

 
 
 
Net cash used in investing activities
 
(12,387
)
 
(91,531
)
 
(92,050
)
 
11,128

 
(184,840
)
 CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
 
 
Intercompany contributions
 

 
5,296

 
5,832

 
(11,128
)
 

 
 
Repayment of debt
 
(33,750
)
 

 

 

 
(33,750
)
 
 
Payments on capital lease obligations
 

 
(872
)
 

 

 
(872
)
 
 
Proceeds from revolver line of credit
 
574,400

 

 
77,542

 

 
651,942

 
 
Payments on revolver line of credit
 
(544,100
)



(82,980
)



(627,080
)
 
 
Proceeds from exercise of stock options
 
9,369

 

 

 

 
9,369

 
 
Minimum tax withholding paid on behalf of employees for share-based compensation
 
(12,883
)
 

 

 

 
(12,883
)
 
 
Excess tax benefit from share-based compensation
 
7,848

 

 
10

 

 
7,858

 
 
Payment of deferred financing costs
 
(426
)
 

 

 

 
(426
)
 
 
 
Net cash provided by financing activities
 
458

 
4,424

 
404

 
(11,128
)
 
(5,842
)
 
 
 
Effect of exchange rate changes on cash and cash equivalents
 

 

 
(2,427
)
 

 
(2,427
)
 INCREASE IN CASH AND CASH EQUIVALENTS
 
3

 
2,390

 
11,487

 

 
13,880

 Cash and cash equivalents, beginning of period
 

 
2,282

 
36,328

 

 
38,610

 Cash and cash equivalents, end of period
 
$
3

 
$
4,672

 
$
47,815

 
$

 
$
52,490


34


Condensed Consolidating Statements of Cash Flows
 
 
 
 
 
Nine months ended September 30, 2015
 
 
 
 
 
Parent
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated Total
 
 
 
 
 
(In thousands)
 CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities
 
$
41,984

 
$
103,850

 
$
23,211

 
$

 
$
169,045

 CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
 
 
Investment in equity method investments
 
(701
)
 

 

 

 
(701
)
 
 
Payments for acquisition, net of cash acquired of $8,521
 

 
(159,208
)
 
(548,397
)
 

 
(707,605
)
 
 
Proceeds from acquisition adjustments
 

 
346

 

 

 
346

 
 
Payments for property, plant, and equipment
 
(245
)
 
(137,420
)
 
(59,231
)
 

 
(196,896
)
 
 
Intercompany contributions
 
(736,344
)
 

 

 
736,344

 

 
 
Proceeds from sale of fixed assets
 

 
2,152

 
6,779

 

 
8,931

 
 
 
Net cash used in investing activities
 
(737,290
)
 
(294,130
)
 
(600,849
)
 
736,344

 
(895,925
)
 CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
 
 
Intercompany contributions
 

 
194,229

 
542,115

 
(736,344
)
 

 
 
Repayment of debt
 
(15,000
)
 

 

 

 
(15,000
)
 
 
Payments on capital lease obligations
 

 
(875
)
 

 

 
(875
)
 
 
Proceeds from revolver line of credit
 
1,093,945

 

 
47,123

 

 
1,141,068

 
 
Payments on revolver line of credit
 
(389,600
)
 

 
(44,619
)
 

 
(434,219
)
 
 
Proceeds from exercise of stock options
 
13,815

 

 

 

 
13,815

 
 
Minimum tax withholding paid on behalf of employees for share-based compensation
 
(27,856
)
 

 

 

 
(27,856
)
 
 
Excess tax benefit from share-based compensation
 
20,464

 

 

 

 
20,464

 
 
Payment of deferred financing costs
 
(462
)
 

 

 

 
(462
)
 
 
 
Net cash provided by financing activities
 
695,306

 
193,354

 
544,619

 
(736,344
)
 
696,935

 
 
 
Effect of exchange rate changes on cash and cash equivalents
 

 

 
8,726

 

 
8,726

 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 

 
3,074

 
(24,293
)
 

 
(21,219
)
 Cash and cash equivalents, beginning of period
 

 
524

 
49,716

 

 
50,240

 Cash and cash equivalents, end of period
 
$

 
$
3,598

 
$
25,423

 
$

 
$
29,021


16. The Proposed Merger with Danone
On July 6, 2016, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Danone, and July Merger Sub Inc., a Delaware corporation and an indirect wholly owned subsidiary of Danone (“Merger Sub”).
    

35


The Merger Agreement provides that, among other things, Merger Sub will be merged with and into the Company (the “Merger”) with the Company continuing as the surviving corporation. As a result of the Merger, the Company will become a wholly-owned subsidiary of Danone. At the effective time of the Merger (the “Effective Time”), each share of common stock of the Company, par value $0.01 per share, issued and outstanding prior to the Effective Time (other than shares owned by the Company or any of its subsidiaries or Danone or any of its subsidiaries (including Merger Sub)), will automatically be canceled for no consideration, and converted into the right to receive $56.25 in cash, without interest.

If the Merger Agreement were to be terminated in specified circumstances, the Company would be required to pay Danone a termination fee of $310.0 million . These circumstances include if the merger agreement were terminated because closing has not occurred by the specified long stop date (subject to applicable extensions) or because WhiteWave has breached its obligations under the agreement, and a Company takeover proposal has been made for WhiteWave which is not publicly withdrawn as of the date of termination, and prior to the first anniversary of such termination WhiteWave enters into a definitive agreement with respect to or consummates a Company takeover proposal.

On October 4, 2016 stockholders approved our merger agreement with Danone. The closing of the merger remains subject to the satisfaction of customary conditions, including the expiration or termination of all applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act (“HSR”) and approval of the merger by the European Commission pursuant to the EU Merger Regulation.  On October 3, 2016, the United States Department of Justice (“DOJ”) issued a request for additional information, commonly known as a “second request,” which extends the HSR waiting period until the 30 th calendar day after the date that both parties substantially comply with the second request, unless the waiting period terminates earlier.  On October 26, 2016, Danone filed its Form CO with the European Commission. WhiteWave and Danone continue to work with the DOJ and the European Commission to obtain regulatory clearance and approval. We currently expect closing to occur in first quarter 2017, though there can be no assurance regarding timing of completion of regulatory processes.

During the third quarter of 2016, the Company has incurred $7.5 million of transaction costs related to the planned Merger with Danone, which were recorded in general and administrative expense in our condensed consolidated statements of income.

    


36


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in this Form 10-Q is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements, the accompanying notes, and the MD&A included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 . Unless otherwise specified, any description of “our”, “we”, and “us” in this MD&A refer to The WhiteWave Foods Company and its operating and non-operating subsidiaries included within our reporting segments and Corporate.
Cautionary Statement Regarding Forward-Looking Statements
This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are predictions based on our current expectations and our projections about future events, and are not statements of historical fact. Forward-looking statements include statements concerning our business strategy, among other things, including anticipated trends and developments in, and management plans for, our business and the markets in which we operate. In some cases, you can identify these statements by forward-looking words, such as “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “believe,” “forecast,” “foresee,” “likely,” “may,” “should,” “might,” “will,” and “could,” the negative or plural of these words and other comparable terminology. All forward-looking statements included in this Form 10-Q are based upon information available to us as of the filing date of this Form 10-Q, and we undertake no obligation to update any of these forward-looking statements for any reason. You should not place undue reliance on these forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these statements. These factors include the matters discussed in the section entitled “Part II — Other Information — Item 1A — Risk Factors” in this Form 10-Q, and elsewhere in this Form 10-Q. You should carefully consider the risks and uncertainties described under these sections.
Overview of the Business
We are a leading consumer packaged food and beverage company focused on high-growth product categories that are aligned with emerging consumer trends. We manufacture, market and sell branded plant-based foods and beverages, coffee creamers and beverages, premium dairy products and organic produce. We sell products primarily in North America, Europe and through a joint venture in China. We focus on providing consumers with innovative, great-tasting food and beverage choices that meet their increasing desires for nutritious, flavorful, convenient, and responsibly-produced products. Our widely-recognized, leading brands distributed in North America include Silk , So Delicious and Vega plant-based foods and beverages, International Delight and LAND O LAKES coffee creamers and beverages, Horizon Organic and Wallaby Organic premium dairy products and Earthbound Farm organic salads, fruits and vegetables. Our popular plant-based foods and beverages brands in Europe include Alpro and Provamel .
Effective January 1, 2016, we report our results of operations through two reportable segments: Americas Foods & Beverages and Europe Foods & Beverages. This reporting structure aligns with the way our Chief Operating Decision Maker ("CODM"), our CEO, monitors operating performance, allocates resources, and deploys capital. In 2015, we reported results of operations through three reportable segments: Americas Foods & Beverages, Americas Fresh Foods and Europe Foods & Beverages.  In connection with our management restructure in early 2016, we consolidated the historical Americas Foods & Beverages and Americas Fresh Foods segments into a single Americas Foods & Beverages segment. Accordingly, prior year segment data has been recast to reflect this new segment structure.
We sell our products to a variety of customers, including grocery stores, mass merchandisers, club stores, health food stores and convenience stores, as well as through various away-from-home channels, including foodservice outlets. We sell our products primarily through our direct sales force, independent brokers, regional brokers and distributors.
We have an extensive production and supply chain footprint and we utilize twelve production facilities and also rely on third-party co-packers to fulfill our manufacturing needs in North America and Latin America. In Europe, we have strategically positioned three plants in the United Kingdom, Belgium, and France, each supported by an integrated supply chain, and we also utilize third-party co-packers. Furthermore, we utilize a broad commercial partner network to access certain markets in Europe, in addition to our own sales organizations in the United Kingdom, Belgium, Germany, and the Netherlands.

Recent Developments
On July 6, 2016, we entered into a definitive merger agreement with Danone S.A., a  société anonyme  ("Danone") under which Danone will acquire the Company for $56.25 per share in an all-cash transaction. The transaction has been unanimously approved by the Board of Directors of both companies. On October 4, 2016 stockholders approved our merger agreement with

37


Danone. The closing of the merger remains subject to the satisfaction of customary conditions, including the expiration or termination of all applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act (“HSR”) and approval of the merger by the European Commission pursuant to the EU Merger Regulation.  On October 3, 2016, the United States Department of Justice (“DOJ”) issued a request for additional information, commonly known as a “second request,” which extends the HSR waiting period until the 30 th calendar day after the date that both parties substantially comply with the second request, unless the waiting period terminates earlier.  On October 26, 2016, Danone filed its Form CO with the European Commission. WhiteWave and Danone continue to work with the DOJ and the European Commission to obtain regulatory clearance and approval. We currently expect closing to occur in first quarter 2017, though there can be no assurance regarding timing of completion of regulatory processes.
For additional information regarding the Company and Danone transaction, see Note 16 to the condensed consolidated financial statements within Item 1 of this report on Form 10-Q.

Factors Affecting Our Business and Results of Operations
The following trends have impacted our sales and operating income over the past two years and we believe that they will continue to be factors affecting our business and results of operations in the future:
Acquisitions and Joint Venture
We have grown and may continue to grow our business in part by acquiring new brands and businesses, and forming joint ventures, both in the United States and globally. The addition of acquisitions or joint ventures allows us to leverage our resources and capabilities but can also divert resources and management attention from our day-to-day operations as we integrate them into existing operations.
New Product Introductions

We intend to continue to respond to evolving consumer preferences by delivering innovative products. We have a proven track record of innovation through either creating or largely developing our subcategories and we continue to focus on innovation that we believe will drive increased consumption of our products.

Volatility in Commodity Costs

Our business is heavily dependent on raw materials and other inputs, such as organic and conventional raw milk, butterfat, almonds, organic and non-genetically modified (“non-GMO”) soybeans, coconut, cashews, sweeteners, organic salads, fruits and vegetables, and other commodity costs used in the manufacturing, packaging, and distribution of our products, including utilities, natural gas, resin and diesel fuel. Changes in the costs of raw materials and other inputs historically impacted, and are expected to continue to impact our profitability. Increases in commodity costs have led, and in the future could lead, to price increases across our portfolio to mitigate the impacts of these increased costs.
Consumer Preferences for Nutritious, Flavorful, Convenient, and Responsibly Produced Products

The plant-based foods and beverages, organic salads, fruits and vegetables, coffee creamers and beverages, and premium dairy categories are aligned with emerging consumer preferences for products that are nutritious, flavorful, convenient, and responsibly produced. As a result, we believe these product categories will continue to offer attractive growth opportunities relative to traditional food and beverage categories. Our plant-based foods and beverages and premium dairy products are well positioned within the dairy and dairy alternatives sector, as well as the organic sector. The growth of the organic sector is outpacing the growth of the overall food and beverage industry. In addition, our coffee creamers and beverages continue to benefit from the growth and overall size of the coffee creamers sector.
Manufacturing and Warehousing Capacity Constraints

Our volume growth has required production levels and warehousing above our historical internal capacity. In response, we have relied on our third-party network for some production, which has resulted in higher costs for the production, distribution, and warehousing of our products. In addition, capacity constraints sometimes create the need for us to shift production between internal facilities, which increases overall shipping and warehousing costs. We have increased and are

38


increasing internal capacity and will continue to both shift production between internal facilities and utilize our co-packing network, as needed, to meet our production and warehousing requirements.
Matters Affecting Comparability

Our results of operations for the three and nine months ended September 30, 2016 and 2015 were affected by the following:
    
Acquisitions of IPP, Wallaby, Vega and EIEIO

On June 2, 2016, the Company acquired Innovation Packaging and Process, S.A. DE C.V. ("IPP"). Founded in 2007, IPP is an aseptic beverage co-packer based in San Luis Potosi, Mexico. We funded this acquisition through cash provided from operations. The Company purchased IPP for total cash consideration of $18.1 million . Our preliminary purchase price allocation includes goodwill of $12.3 million , property, plant, and equipment of $9.1 million , intangible assets subject to amortization of $0.6 million related to customer relationships, and liabilities assumed net of working capital items of $3.9 million . Customer relationships are being amortized over a 3 year term. The acquisition was accounted for using the acquisition method of accounting. Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their preliminary fair values. Certain estimated values for the acquisition are not yet finalized pending the final purchase price allocations, and as a result, the Company's estimates and assumptions are subject to change within the measurement period as valuations are finalized. We have included IPP's results of operations in our condensed consolidated statements of income in our Americas Foods & Beverages segment from the date of acquisition.

On August 30, 2015, we completed our acquisition of Wallaby Yogurt Company, Inc. ("Wallaby") for approximately $122.4 million in cash. We funded this acquisition with borrowings under our credit facility. We have included Wallaby's results of operations in our condensed consolidated statements of income in our Americas Foods & Beverages segment from the date of acquisition. The acquisition was accounted for using the acquisition method of accounting. Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their fair values. The fair values were determined by management based in part on an independent valuation of assets acquired, which includes estimated intangible assets of approximately $57.1 million and relate primarily to tradenames. Intangible assets subject to amortization of approximately $9.1 million are being amortized over a 15 year term and relate primarily to customer relationships. During the nine months ended September 30, 2016 , we recorded $6.3 million of purchase accounting adjustments to goodwill primarily related to the finalization of the fair value of certain intangible assets.

On August 1, 2015, we completed our acquisition of Sequel Naturals Ltd, the company that owns the Vega brand ("Vega") and is a pioneer and leader in plant-based nutrition products, for approximately $553.6 million in cash funded by borrowings under our credit facility. We have included Vega's results of operations in our condensed consolidated statements of income in our Americas Foods & Beverages segment from the date of acquisition. The acquisition was accounted for using the acquisition method of accounting. Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their fair values. The fair values were determined by management based in part on an independent valuation of assets acquired, which includes intangible assets of approximately $296.9 million and relate primarily to tradenames and customer relationships. Intangible assets subject to amortization of approximately $106.9 million are being amortized over a 15 year term and relate primarily to customer relationships. During the nine months ended September 30, 2016 , we recorded $4.4 million of purchase accounting adjustments to goodwill primarily related to the finalization of certain income tax matters.

On May 29, 2015, the Company acquired substantially all the assets and liabilities of EIEIO, Inc. ("EIEIO"), which owns the Magicow brand as well as other brands, for $40.2 million in cash. We funded this acquisition with borrowings under our credit facility. The acquisition was accounted for using the acquisition method of accounting. Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their fair values. The fair values were determined by management based in part on an independent valuation of assets acquired, which includes intangible assets of approximately $21.8 million and relate primarily to tradenames. Intangible assets subject to amortization of approximately $10.2 million are being amortized over a 15 year term and relate primarily to customer relationships. We have included EIEIO's results of operations in our condensed consolidated statements of income in our Americas Foods & Beverages segment from the date of acquisition.

Foreign Exchange Movements

Due to the international aspect of our business, our net sales and expenses are influenced by foreign exchange movements. Our exposures to foreign exchange rates are primarily the Euro, British pound, Canadian dollar, Mexican peso and

39


Chinese yuan against the U.S. dollar. The financial statements of our Europe Foods & Beverages segment are translated to U.S. dollars. The functional currency of our foreign subsidiaries is generally the local currency of the country of our subsidiary. Accordingly, income and expense items are translated at the average rates prevailing during the period. Changes in exchange rates that affect cash flows and the related receivables or payables are recognized as transaction gains and losses and are recorded in general and administrative expense in the condensed consolidated statements of income.
Results of Operations
The following table presents, for the periods indicated, selected information from our condensed consolidated financial results, including information presented as a percentage of net sales (note: totals may not sum and percentages may not recalculate due to rounding):
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
 
Dollars
 
Percent
 
Dollars
 
Percent
 
Dollars
 
Percent
 
Dollars
 
Percent
 
(Dollars in millions)
Total net sales
$
1,053.6

 
100.0
%
 
$
1,003.9

 
100.0
%
 
$
3,142.9

 
100.0
%
 
$
2,838.7

 
100.0
%
Cost of sales
672.5

 
63.8
%
 
652.8

 
65.0
%
 
2,037.6

 
64.8
%
 
1,852.8

 
65.3
%
Gross profit (1)
381.1

 
36.2
%
 
351.1

 
35.0
%
 
1,105.3

 
35.2
%
 
985.9

 
34.7
%
Operating expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Selling, distribution and marketing
188.9

 
17.9
%
 
187.8

 
18.7
%
 
563.2

 
17.9
%
 
529.9

 
18.7
%
General and administrative
82.9

 
7.9
%
 
70.2

 
7.0
%
 
248.1

 
7.9
%
 
215.8

 
7.6
%
Total operating expenses
271.8

 
25.8
%
 
258.0

 
25.7
%
 
811.3

 
25.8
%
 
745.7

 
26.3
%
Operating income
109.3

 
10.4
%
 
93.1

 
9.3
%
 
294.0

 
9.4
%
 
240.2

 
8.5
%
Interest and other expenses, net
19.6

 
 
 
18.6

 
 
 
55.4

 
 
 
46.0

 
 
Income tax expense
29.2

 
 
 
21.8

 
 
 
79.3

 
 
 
64.2

 
 
Loss in equity method investments
2.5

 
 
 
2.7

 
 
 
6.9

 
 
 
9.2

 
 
Net income
$
58.0

 
 
 
$
50.0

 
 
 
$
152.4

 
 
 
$
120.8

 
 
   ____________________________________
(1)
We include certain shipping and handling costs within selling, distribution, and marketing expense. As a result, our gross profit may not be comparable to other companies that present all shipping and handling costs as a component of cost of sales.
The key performance indicators for our reportable segments are net sales, gross profit, and operating income, which are presented in the segment results tables and discussion below.

Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015
Consolidated Results
Total net sales — Total net sales by segment are shown in the table below (note: totals may not sum due to rounding):
 
 
Three months ended September 30,
 
2016
 
2015
 
$ Increase
 
% Increase
 
(Dollars in millions)
Americas Foods & Beverages
$
909.5

 
$
869.1

 
$
40.4

 
4.6
%
Europe Foods & Beverages
144.1

 
134.8

 
9.3

 
6.9
%
Total net sales
$
1,053.6

 
$
1,003.9

 
$
49.7

 
5.0
%
The changes in total net sales were due to the following (note: totals may not sum due to rounding):

40


 
 
Change in net sales
Three months ended September 30, 2016 vs. September 30, 2015
 
Acquisitions
 
Volume
 
Pricing, product mix and currency changes
 
Total increase
 
(Dollars in millions)
Americas Foods & Beverages
$
25.7

 
$
(2.1
)
 
$
16.9

 
$
40.4

Europe Foods & Beverages

 
20.4

 
(11.1
)
 
9.3

Total change in net sales
$
25.7

 
$
18.3

 
$
5.8

 
$
49.7

Total net sales — Consolidated total net sales increased $49.7 million , or 5.0% , for the three months ended September 30, 2016 compared to the same period in 2015 . This increase was driven by acquisitions within the last year, which contributed 2.6 percentage points of growth, along with organic growth that was largely volume driven with an additional contribution from a favorable mix. The increase was partially offset by an unfavorable currency impact of approximately 90 basis points.
Cost of sales — Cost of sales increased $19.7 million , or 3.0% , for the three months ended September 30, 2016 compared to the same period in 2015 . This increase was principally driven by higher sales volumes, including the impact of acquisitions, partially offset by lower raw material costs, $1.2 million of foreign currency translation, and $ 0.4 million of mark-to-market gains on commodity hedges compared to losses of $1.1 million in the same period of 2015.
Gross profit — Gross profit margin increased to 36.2% for the three months ended September 30, 2016 compared to 35.0% for the same period in 2015 as an increase in the Americas Foods & Beverages segment offset the currency related decline in the Europe Foods & Beverages segment. Currency impact reduced gross margin by approximately 40 basis points.
Operating expenses — Total operating expenses increased $13.8 million , or 5.3% , for the three months ended September 30, 2016 compared to the same period in 2015 .
Selling, distribution and marketing expense increased $1.1 million for the three months ended September 30, 2016 compared to the same period in 2015 . This increase was driven primarily by volume related growth in selling expense, including incremental growth from acquisitions, which was partially offset by $1.4 million of gains on commodity hedges compared to losses of $2.9 million in 2015, as well as cost savings in both the Americas Foods & Beverages and Europe Foods & Beverages segments.

General and administrative expense increased $12.7 million for the three months ended September 30, 2016 compared to the same period in 2015 , due principally to the impact of acquisitions, as well as higher employee-related costs. Costs related to management of our joint venture investment in China was $0.8 million compared to $1.1 million in the third quarter of 2015 . During the third quarter of 2016, we incurred $1.2 million of integration costs related to acquisitions, down from $2.1 million incurred in the same quarter of 2015. Also during the quarter, we incurred $7.6 million of transaction costs related to the planned merger with Danone and other merger and acquisition activities compared to $7.0 million of transaction costs related to acquisitions in the same quarter of 2015. Offsetting the prior year transaction costs related to acquisitions was a $7.9 million gain recognized on the negotiated purchase price settlement of the Earthbound Farm acquisition that occurred after purchase accounting was closed.
Interest and other expenses, net — Interest and other expenses, net for the three months ended September 30, 2016 increased $1.0 million compared to the same period in 2015 . The increase was primarily driven by higher debt levels outstanding during the quarter due to the acquisitions completed in 2015 and continued capital investments. These increases were partially offset by a mark-to-market gain on our interest rate swaps of $0.5 million in the third quarter of 2016 compared to a $2.3 million mark-to-market loss in the same quarter of 2015 .
Income tax expense — The effective tax rate for the three months ended September 30, 2016 was 32.5% compared to 29.3% for the three months ended September 30, 2015 . The increase in the effective tax rate was due primarily to a decrease in favorable return to provision adjustments in 2015 related to changes in estimates associated with a credit for qualified research activities and an increase in the U.S. manufacturing deduction. The increase in the effective tax rate was partially offset by changes in the mix of income before income taxes between the U.S. and foreign countries, which were principally driven by an increase in the investment deduction in Belgium and the generally lower foreign tax rates associated with our Vega acquisition. Changes in the relative profitability of our operating segments, as well as changes to federal, state and foreign tax laws may cause the rate to change from historical rates.

41



Loss in equity method investments — Our share of the loss related to the China joint venture was $2.2 million in the three months ended September 30, 2016 compared to $2.5 million in the same period of 2015 . Our share of the loss related to our other equity investment was $0.3 million and $0.2 million for the three months ended September 30, 2016 and 2015, respectively.

Americas Foods & Beverages Segment Results
The following table presents certain financial information concerning our Americas Foods & Beverages segment’s financial results (note: totals may not sum and percentages may not recalculate due to rounding):  
 
Three months ended September 30,
 
2016
 
2015
 
 
 
 
 
Dollars
 
Percent
 
Dollars
 
Percent
 
$ Change
 
% Change
 
(Dollars in millions)
Total net sales
$
909.5

 
100.0
%
 
$
869.1

 
100.0
%
 
$
40.4

 
4.6
%
Cost of sales
588.6

 
64.7
%
 
578.3

 
66.5
%
 
10.3

 
1.8
%
Gross profit
320.8

 
35.3
%
 
290.8

 
33.5
%
 
30.0

 
10.3
%
Operating expenses
200.5

 
22.0
%
 
196.1

 
22.6
%
 
4.4

 
2.2
%
Operating income
$
120.4

 
13.2
%
 
$
94.7

 
10.9
%
 
$
25.7

 
27.1
%
Total net sales — Total net sales increased $40.4 million , or 4.6% , for the three months ended September 30, 2016 compared to the same period in 2015 . This increase was driven by acquisitions within the last year, which contributed $25.7 million in net sales in the quarter, and organic growth from a favorable mix that was partially offset by pricing. These increases were partially offset by a $0.1 million unfavorable impact of currency translation driven by the strengthening of the U.S. dollar compared to the Canadian dollar and the Mexican peso.
Net sales in the Plant-based Foods and Beverages platform increased 9.7% behind contributions from acquisitions and organic growth. The acquisitions of Vega and IPP contributed 6.1 percentage points of growth. Organic growth was driven by increased sales of plant-based yogurts, frozen desserts, and nutritional offerings, which was partially offset by a decline in soy beverages of $4.6 million. Sales and market share performance in plant-based beverages were hampered by a transition to new Silk packaging designs that negatively impacted shelf presence and brand shoppability, along with a significant increase in competitive promotional and marketing activity during the quarter.
Net sales in the Coffee Creamers and Beverages platform increased 8.9% . This growth was primarily driven by higher volumes from new product introductions, including Stok cold-brew coffees and new flavors of International Delight iced-coffees, along with increases in flavored creamers, plant-based creamers and organic dairy creamers driven by expanded distribution and increased velocities.
Premium Dairy platform net sales increased 5.3% . This growth was principally driven by the acquisition of Wallaby, which contributed 5.3 percentage points of growth. Net sales across the balance of the platform were essentially flat compared to the prior year period and in line with management expectations due to continued historically high price gaps to conventional milks.

Fresh Foods platform sales decreased 12.8% primarily due to supply chain-related constraints hampering order fulfillment in the quarter, along with continued lower retail distribution levels following the SAP implementation-related business disruptions experienced in the fourth quarter of 2015. The platform continues to focus on supply chain enhancements and customer service improvements to rebuild distribution levels.
Cost of sales — Cost of sales increased $10.3 million , or 1.8% , for the three months ended September 30, 2016 compared to the same period in 2015 . This increase was driven by the impact of acquisitions, along with underlying volume increases, partially offset by decreases in commodity costs including $0.4 million of gains on our commodity hedges compared to losses of $1.1 million in the same period of 2015.

42


Gross profit — Gross profit margin increased 180 basis points to 35.3% for the three months ended September 30, 2016 . The increase was primarily driven by a favorable product mix, including the impact of acquisitions, and lower commodity costs.
Operating expenses — Operating expenses increased $4.4 million , or 2.2% , for the three months ended September 30, 2016 compared to the same period in 2015. This increase was primarily due to incremental expenses attributable to acquisitions and higher employee-related costs, partially offset by lower distribution expense and other cost saving initiatives. During the quarter, we incurred $0.8 million of integration costs related to acquisitions, compared to $2.0 million in the same period of 2015.

Europe Foods & Beverages Segment Results
The following table presents certain financial information concerning our Europe Foods & Beverages segment’s financial results (note: totals may not sum due to rounding):
 
 
Three months ended September 30,
 
2016
 
2015
 
 
 
 
 
Dollars
 
Percent
 
Dollars
 
Percent
 
$ Change
 
% Change
 
(Dollars in millions)
Total net sales
$
144.1

 
100.0
%
 
$
134.8

 
100.0
%
 
$
9.3

 
6.9
 %
Cost of sales
83.8

 
58.2
%
 
74.5

 
55.3
%
 
9.3

 
12.5
 %
Gross profit
60.4

 
41.9
%
 
60.3

 
44.7
%
 
0.1

 
0.2
 %
Operating expenses
43.0

 
29.8
%
 
41.3

 
30.6
%
 
1.7

 
4.1
 %
Operating income
$
17.3

 
12.0
%
 
$
19.0

 
14.1
%
 
$
(1.7
)
 
(8.9
)%
Total net sales — Net sales increased $9.3 million , or 6.9% , for the three months ended September 30, 2016 compared to the same period in 2015 . The increase was driven principally by continued strong volume growth led by increases in nut-based, coconut and oat beverages, and strong growth in plant-based yogurts. Net sales growth was partially offset by unfavorable foreign currency translation, which reduced growth by 6.4 percentage points.
Cost of sales — Cost of sales increased $9.3 million , or 12.5% , for the three months ended September 30, 2016 compared to the same period in 2015 driven by higher sales volumes, unfavorable mix and higher depreciation, which was partially offset by cost leverage from increased internal production and currency translation which decreased cost of sales by $1.1 million.
Gross profit — Gross profit margin decreased to 41.9% for the three months ended September 30, 2016 compared to 44.7% for the same period in 2015 , primarily due to currency translation which had an unfavorable impact of approximately 250 basis points, as well as higher levels depreciation expense and warehousing costs.
Operating expenses — Operating expenses increased $1.7 million , or 4.1% , for the three months ended September 30, 2016 compared to the same period in 2015 . The increase was primarily driven by higher general and administrative expenses as a result of investments in personnel and infrastructure, and higher distribution costs due to increased volumes that was largely offset by efficiencies from greater levels of internal production.

Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015
Consolidated Results
Total net sales — Total net sales by segment are shown in the table below (note: totals may not sum due to rounding):
 
 
Nine months ended September 30,
 
2016
 
2015
 
$ Increase
 
% Increase
 
(Dollars in millions)
Americas Foods & Beverages
$
2,702.7

 
$
2,440.4

 
$
262.3

 
10.7
%
Europe Foods & Beverages
440.3

 
398.2

 
42.1

 
10.6
%
Total net sales
$
3,142.9

 
$
2,838.6

 
$
304.3

 
10.7
%
The changes in total net sales were due to the following (note: totals may not sum due to rounding):

43


 
 
Change in net sales
Nine months ended September 30, 2016 vs. September 30, 2015
 
Acquisitions
 
Volume
 
Pricing, product mix and currency changes
 
Total increase
 
(Dollars in millions)
Americas Foods & Beverages
$
152.9

 
$
64.0

 
$
45.4

 
$
262.3

Europe Foods & Beverages

 
57.4

 
(15.3
)
 
42.1

Total change in net sales
$
152.9

 
$
121.4

 
$
30.1

 
$
304.3

Total net sales — Consolidated total net sales increased $304.3 million , or 10.7% , for the nine months ended September 30, 2016 compared to the same period in 2015 . This increase was driven by a combination of acquisitions within the last year, which contributed 5.4 percentage points of growth, and organic growth that was largely volume driven with additional contributions from pricing and a favorable mix. The increase was partially offset by an unfavorable currency impact of approximately 65 basis points.
Cost of sales — Cost of sales increased $184.8 million , or 10.0% , for the nine months ended September 30, 2016 compared to the same period in 2015 . This increase was principally driven by higher sales volumes, including the impact of acquisitions, partially offset by $2.3 million of foreign currency translation and $3.1 million of gains on our commodity hedges compared to $0.3 million in the same period of 2015. Costs were also impacted by the $2.2 million first quarter 2016 write-off of a warehouse in the Europe Foods & Beverages segment and $10.2 million of costs related to the SAP implementation within the Fresh Foods platform in the Americas Foods & Beverages segment.
Gross profit — Gross profit margin increased to 35.2% for the nine months ended September 30, 2016 from 34.7% for the same period in 2015 . This increase was primarily driven by a favorable mix of products sold, increased costs leverage from higher volumes, including a margin benefit from acquisitions, partly offset by currency impacts that reduced gross margin by approximately 30 basis points.
Operating expenses — Total operating expenses increased $65.6 million , or 8.8% , for the nine months ended September 30, 2016 compared to the same period in 2015 .
Selling, distribution and marketing expense increased $33.3 million for the nine months ended September 30, 2016 compared to the same period in 2015 . This increase was driven primarily by an increase in distribution and selling costs driven by higher sales volumes, including the impact of acquisitions, along with higher marketing expenses. These increases were partially offset by $7.3 million of gains on our commodity hedges compared to $0.7 million in the same period of 2015.

General and administrative expense increased $32.3 million for the nine months ended September 30, 2016 compared to the same period in 2015 , due principally to the impact of acquisitions and higher employee-related costs. Cost related to management of our joint venture investment in China was $2.7 million for the nine months ended September 30, 2016 and 2015 . During the nine months ended September 30, 2016 , we incurred $5.9 million of integration costs related to acquisition activities, of which $1.9 million related to the SAP implementation within the Fresh Foods platform, compared to $6.9 million of integration costs related to acquisitions in the same period of 2015. Also during the nine months ended September 30. 2016, we incurred $11.2 million of transaction costs related to the planned merger with Danone and other merger and acquisition activities compared to $9.8 million of transaction costs related to acquisitions in the prior year. Offsetting the prior year transaction costs related to acquisitions was a $7.9 million gain recognized on the negotiated purchase price settlement of the Earthbound Farm acquisition that occurred after purchase accounting was closed.
Interest and other expenses, net — Interest and other expenses, net for the nine months ended September 30, 2016 increased $9.4 million compared to the same period in 2015 . The increase was driven by higher debt levels outstanding during the first nine months primarily due to acquisitions completed in 2015 and continued capital investments. These increases were partially offset by lower mark-to-market losses on our interest rate swaps of $2.1 million for the nine months ended September 30, 2016 compared to $7.1 million in the same period of 2015 .
Income tax expense — The effective tax rate for the nine months ended September 30, 2016 was 33.2% compared to 33.1% for the nine months ended September 30, 2015 . The increase in the effective tax rate was due primarily to a decrease in favorable return to provision adjustments in 2015 related to changes in estimates associated with a credit for qualified research activities and an increase in the U.S. manufacturing deduction. The increase in the effective tax rate was partially offset by

44


changes in the mix of income before income taxes between the U.S. and foreign countries, which were principally driven by an increase in the investment deduction in Belgium and the generally lower foreign tax rates associated with our Vega acquisition. Changes in the relative profitability of our operating segments, as well as changes to federal, state and foreign tax laws may cause the rate to change from historical rates.
Loss in equity method investments — Our share of the loss related to the China joint venture was $6.1 million in the nine months ended September 30, 2016 compared to $8.7 million in the same period of 2015 . This decrease was due to heavy start-up costs in the first quarter of 2015 compared to same period of 2016. Our share of the loss related to our other equity investment was $0.8 million and $0.6 million for the nine months ended September 30, 2016 and 2015, respectively.

Americas Foods & Beverages Segment Results
The following table presents certain financial information concerning our Americas Foods & Beverages segment’s financial results (note: totals may not sum due to rounding):  
 
Nine months ended September 30,
 
2016
 
2015
 
 
 
 
 
Dollars
 
Percent
 
Dollars
 
Percent
 
$ Change
 
% Change
 
(Dollars in millions)
Total net sales
$
2,702.7

 
100.0
%
 
$
2,440.4

 
100.0
%
 
$
262.3

 
10.7
%
Cost of sales
1,782.9

 
66.0
%
 
1,630.0

 
66.8
%
 
152.9

 
9.4
%
Gross profit
919.8

 
34.0
%
 
810.4

 
33.2
%
 
109.4

 
13.5
%
Operating expenses
597.8

 
22.1
%
 
544.9

 
22.3
%
 
52.9

 
9.7
%
Operating income
$
322.0

 
11.9
%
 
$
265.5

 
10.9
%
 
$
56.5

 
21.3
%
Total net sales — Total net sales increased $262.3 million , or 10.7% , for the nine months ended September 30, 2016 compared to the same period in 2015 . This increase was driven by volume growth, including acquisitions within the last year which contributed $152.9 million in net sales year-to-date and 6.3 percentage points of growth, and a favorable mix. These increases were partially offset by a $3.5 million unfavorable impact of currency translation driven by the strengthening of the U.S. dollar compared to the Canadian dollar and the Mexican peso.
Net sales in the Plant-based Foods and Beverages platform increased 20.5% , with the acquisition of Vega and IPP contributing 15.2 percentage points of growth, collectively, and organic growth. Organic growth was primarily driven by increased sales of plant-based yogurts and frozen desserts, coconut beverages and nut-based beverages, including almond and cashew products, which was partially offset by declines in soy beverages of $13.3 million.
Net sales growth in the Coffee Creamers and Beverages platform increased 11.2% . This performance was primarily driven by organic growth largely from increased volumes, with the acquisition of EIEIO contributing 1.1 percentage point growth. Organic growth was primarily driven by new product introductions, including Stok cold-brewed coffees, along with increases in flavored creamers, plant-based creamers and organic dairy creamers driven by expanded distribution and improved velocities, along with some benefit of pricing taken in the third quarter of 2015.
Premium Dairy platform sales growth of 10.4% was principally driven by the acquisition of Wallaby, which contributed 7.5 percentage points of growth. Excluding Wallaby, growth was largely driven by growth in refrigerated and aseptic milks driven by higher pricing taken in the second quarter of 2015 to offset the rising costs of organic milk, along with growth in organic cheese.

Fresh Foods platform net sales decreased 4.9% for the nine months ended September 30, 2016 primarily due to lower packaged salad volumes as a result of supply chain constraints and lower distribution, partially offset by higher pricing. The platform continues to focus on supply chain enhancements and customer service improvements to rebuild distribution levels following the SAP implementation-related business disruptions experienced in the fourth quarter of 2015.
Cost of sales — Cost of sales increased $152.9 million , or 9.4% , for the nine months ended September 30, 2016 compared to the same period in 2015 . This increase was driven by the impact of acquisitions, along with underlying volume increases, partially offset by $3.1 million of gains on our commodity hedges compared to $0.3 million in the same period of 2015. Costs were also impacted by $10.2 million of costs as a result of the SAP implementation at the Fresh Foods platform.

45


Gross profit — Gross profit margin increased 80 basis points to 34.0% for the nine months ended September 30, 2016 . The increase was primarily driven by a favorable product mix, including the impact of acquisitions, and pricing that offset increased commodity costs. Margin improvement was partially offset by the approximate 40 basis point impact of the SAP implementation related costs.
Operating expenses — Operating expenses increased $52.9 million , or 9.7% , for the nine months ended September 30, 2016 compared to the same period in 2015. The increase was primarily due to incremental expenses attributed to acquisitions and marketing investments, higher selling and distribution costs related to increased volumes, and higher employee-related costs. During the nine months ended September 30, 2016, we incurred $5.5 million of integration costs related to merger and acquisition activities, including the SAP implementation within the Fresh Foods platform, compared to $6.8 million in the same period of 2015.

Europe Foods & Beverages Segment Results
The following table presents certain financial information concerning our Europe Foods & Beverages segment’s financial results (note: totals may not sum due to rounding):
 
 
Nine months ended September 30,
 
2016
 
2015
 
 
 
 
 
Dollars
 
Percent
 
Dollars
 
Percent
 
$ Change
 
% Change
 
(Dollars in millions)
Total net sales
$
440.3

 
100.0
%
 
$
398.2

 
100.0
%
 
$
42.1

 
10.6
%
Cost of sales
254.7

 
57.8
%
 
222.8

 
56.0
%
 
31.9

 
14.3
%
Gross profit
185.6

 
42.2
%
 
175.4

 
44.0
%
 
10.2

 
5.8
%
Operating expenses
132.5

 
30.1
%
 
125.3

 
31.5
%
 
7.2

 
5.7
%
Operating income
$
53.0

 
12.0
%
 
$
50.1

 
12.6
%
 
$
2.9

 
5.8
%
Total net sales — Net sales increased $42.1 million , or 10.6% , for the nine months ended September 30, 2016 compared to the same period in 2015 . The increase was driven principally by continued strong volume growth and a favorable mix, led by nut-based, coconut and oat beverages, and strong growth in our plant-based yogurts. Net sales growth was partially offset by unfavorable foreign currency translation which reduced growth by 3.8 percentage points.
Cost of sales — Cost of sales increased $31.9 million , or 14.3% , for the nine months ended September 30, 2016 compared to the same period in 2015 driven by higher sales volumes, unfavorable mix, higher depreciation, and negative currency impacts. In addition, during the first quarter of 2016, we wrote off $2.2 million in fixed assets related to the demolition of the Wevelgem warehouse in connection with European capacity expansion. Currency translation increased cost of sales by $2.2 million.
Gross profit — Gross profit margin decreased to 42.2% for the nine months ended September 30, 2016 compared to 44.0% for the same period in 2015 . The warehouse write off had an unfavorable impact on gross margins of approximately 50 basis points and currency translation contributed an additional unfavorable impact of approximately 150 basis points.
Operating expenses — Operating expenses increased $7.2 million , or 5.7% , for the nine months ended September 30, 2016 compared to the same period in 2015 . The increase was primarily driven by higher general and administrative expenses as a result of investments in personnel and infrastructure, increased marketing investments, and higher distribution costs from increased volumes that was largely offset by increased internal production and shipping efficiencies. Currency translation increased operating expenses by $3.4 million.
Liquidity and Capital Resources
Debt Facilities

On November 6, 2015, the Company entered into the fourth amendment to its existing senior secured credit facility (the “Fourth Amendment”), which among other things extended the maturity dates of the revolving credit facility and the term loan A-1 credit facility to November 6, 2020 and the term loan A-2 credit facility to November 6, 2022 and increased the term loan on both the A-1 and A-2 credit facilities to $750 million. In addition, the Fourth Amendment modified the maximum consolidated senior secured net leverage ratio to be set at 4.00 to 1.0 at all times.


46


As of October 31, 2016, we had outstanding borrowings of $1.6 billion under our $2.5 billion senior secured credit facilities, which consisted of $1.5 billion of term loan borrowings and $137.9 million borrowed under our $1.0 billion revolving credit facility commitment. We further had $9.0 million in outstanding letters of credit issued under our revolving credit facility. We had the ability to incur up to a maximum of approximately $825 million of additional indebtedness as governed by the current financial covenants under our senior secured credit facility, assuming such proceeds are not utilized to acquire additional businesses or operations.

The senior secured credit facilities are secured by security interests and liens on substantially all of our assets and the assets of our domestic subsidiaries. The senior secured credit facilities are guaranteed by our material domestic subsidiaries. As of October 31, 2016, borrowings under our senior secured credit facilities bore interest at a rate of LIBOR plus 1.75% per annum for the $1.0 billion revolving commitment and the $721.9 million currently outstanding on the term loan A-1 facility and LIBOR plus 2.00% per annum for the $744.4 million currently outstanding on the term loan A-2 facility.

The completion of the Merger of the Company with a wholly-owned subsidiary of Danone will trigger a change of control default under the senior secured credit facilities; however, under the Merger Agreement, Danone has agreed to repay the facility at closing if the change of control default provision is not modified or waived.
Alpro maintains a revolving credit facility not to exceed €30.0 million or its currency equivalent. The facility is unsecured and guaranteed by the Company. The Alpro revolving credit facility is available for working capital and other general corporate purposes of Alpro and for the issuance of up to €30.0 million letters of credit or its currency equivalent. At October 31, 2016 and December 31, 2015, Alpro did not have any outstanding borrowings. The facility matures on June 29, 2017.
Vega maintains an uncommitted revolving credit facility not to exceed $15.0 million CAD. The facility is unsecured and guaranteed by the Company. The facility is available for working capital and other general corporate purposes of Vega. At October 31, 2016, there were no amounts outstanding in borrowings under the facility. At December 31, 2015, there was $7.1 million CAD ($5.1 million USD) outstanding in borrowings under the facility.
As of September 30, 2016 , we were in compliance with all related (or associated) covenants under our debt facilities.

Liquidity
Based on current and anticipated level of operations, we believe that our cash on hand, together with operating cash flows, and amounts expected to be available under our senior secured credit facilities, will be sufficient to meet our anticipated liquidity needs over the next twelve months. Our anticipated uses of cash include capital expenditures, working capital needs, other general corporate purposes, and financial obligations such as payments under the senior secured credit facility. In addition, we also evaluate and consider strategic acquisitions, divestitures, joint ventures, and stock repurchases, as well as other transactions to create stockholder value and enhance financial performance. Such transactions may require cash expenditures by us or generate proceeds for us. In connection with such transactions, or to fund other anticipated uses of cash, we may modify our senior secured credit facilities, seek additional debt financing or issue equity securities.
As of September 30, 2016 , $47.8 million  of our total cash on hand was attributable to our foreign operations and currently domiciled outside the U.S. We anticipate permanently reinvesting our foreign earnings outside the U.S.
Capital Resources
Our Board of Directors has authorized a share repurchase program, under which the Company may repurchase up to $150.0 million of its common stock. The primary purpose of the program is to offset dilution from the Company’s equity compensation plans, but the Company also may make discretionary purchases. Shares may be repurchased under the program from time to time in one or more open market or other transactions, at the discretion of the Company, subject to market conditions and other factors. The authorization to repurchase shares will end when the Company has repurchased the maximum amount of shares authorized, or the Company’s Board of Directors has determined to discontinue such repurchases. To date, no shares have been repurchased under the share repurchase program.
Historical Cash Flow
The following table summarizes our cash flows from operating, investing, and financing activities (note: totals may not sum and percentages may not recalculate due to rounding):
 

47


 
Nine months ended September 30,
 
2016
 
2015
 
Change
 
(In millions)
Net cash flows from:
 
 
 
 
 
Operating activities
$
207.0

 
$
169.0

 
$
38.0

Investing activities
(184.8
)
 
(895.9
)
 
711.1

Financing activities
(5.8
)
 
696.9

 
(702.7
)
Effect of exchange rate changes on cash and cash equivalents
(2.4
)
 
8.8

 
(11.2
)
Net increase (decrease) in cash and cash equivalents
$
13.9

 
$
(21.2
)
 
$
35.1

Operating Activities
Net cash provided by operating activities was $207.0 million for the nine months ended September 30, 2016 compared to $169.0 million for the nine months ended September 30, 2015 . The primary drivers of the increase in cash from operating activities was an increase in net income after adjustments for items such as depreciation and amortization and deferred income taxes offset by a decrease in cash provided from operating assets and liabilities. The decrease in cash provided from operating assets and liabilities was primarily due to an increase in prepaid expense and other assets driven primarily by an increase in income tax receivable due to timing and advance payments related to agricultural operations; along with lower accounts payable and accruals driven by the timing of cash disbursements related to outstanding payments at the end of 2015 relative to the end of 2014, and higher cash payments of employee bonuses in the first nine months of 2016 compared to 2015 as a result of higher operating results in 2015 compared to 2014 and increases in headcount. These decreases in operating liabilities were partially offset by a lesser increase in accounts receivable related to a more significant increase in sales during the first nine months of 2015 to 2016, and a lower increase in inventory in relation to sales primarily due a specific reduction of inventory related to a co-manufacturer transition in 2016.

Investing Activities
Net cash used in investing activities was $ 184.8 million for the nine months ended September 30, 2016 compared to net cash used in investing activities of $895.9 million for the nine months ended September 30, 2015 . The decrease was primarily driven by a $690.2 million decrease in payments for acquisitions and a lower level of capital expenditures in 2016.

Financing Activities
Net cash used in financing activities was $ 5.8 million for the nine months ended September 30, 2016 compared to net cash provided of $696.9 million for the nine months ended September 30, 2015 . The decrease in the amount of cash from financing activities from 2015 was driven primarily by the lower amount of financing related to acquisition activities.
Contractual Obligations and Other Long-Term Liabilities
There have been no material changes in the information provided in Item 7-Management’s Discussion and Analysis of Financial Condition and Results of Operations – “Contractual Obligations and Other Long-Term Liabilities” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 .
Off-Balance Sheet Arrangements
As of September 30, 2016 , we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.
Critical Accounting Policies
The process of preparing our consolidated financial statements in conformity with generally accepted accounting principles requires the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and judgments are based on historical experience, future expectations, and other factors and assumptions we believe to be reasonable under the circumstances. The most significant estimates and judgments are reviewed on an ongoing basis and revised when necessary. Actual results may differ materially from these estimates. We have identified the following policies as critical accounting policies:
 
Goodwill and Intangible Assets, Purchase Price Allocation;

48


Revenue Recognition, Sales Incentives, and Trade Accounts Receivable;
Share-Based Compensation;
Property, Plant, and Equipment; and
Income Taxes.
These critical accounting policies are discussed in more detail in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 .
Recent Accounting Pronouncements

For information regarding recent accounting pronouncements, see Note 1 to the unaudited condensed consolidated financial statements within Item 1 of this report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There were no material changes in the Quantitative and Qualitative Disclosures About Market Risk disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 .
Item 4. Controls and Procedures
 
(a)
Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer, with assistance from other members of management, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”) and, based upon such evaluation, have concluded that as of the Evaluation Date, the Company’s disclosure controls and procedures were effective.
 
(b)
Changes in Internal Control over Financial Reporting
There has been no change in the Company’s internal control over financial reporting during the quarter ending September 30, 2016 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Part II — Other Information
Item 1. Legal Proceedings

On July 12, 2016, plaintiff Kenneth Bottesi, a purported stockholder of WhiteWave, filed a putative class action lawsuit in the District Court for the City and County of Denver, Colorado, against WhiteWave, its directors, Danone, and July Merger Sub Inc., a Delaware corporation and an indirect wholly owned subsidiary of Danone ("Merger Sub"), challenging the proposed merger between WhiteWave and Danone ( Bottesi v. The WhiteWave Foods Company, et al. ). The complaint alleged that the WhiteWave directors breached their fiduciary duties in connection with the proposed merger, and that WhiteWave, Danone, and Merger Sub aided and abetted the directors’ alleged breaches of fiduciary duty. On September 6, 2016, plaintiff Bottesi voluntarily dismissed his claims with prejudice.

Between August 8 and August 15, four (4) putative class action lawsuits were filed in the United States District Court for the District of Colorado, each asserting a claim for violations of Section 14(a) of the Exchange Act and SEC Rule 14a-9 against WhiteWave and its directors and a claim for violations of Section 20(a) of the Exchange Act against the WhiteWave Board of Directors ( Malkoff v. Engles, et al., Vanden Berge v. Engles, et al., McDonald v. The WhiteWave Foods Company, et al, and Gilhousen v. Engles, et al. ). On August 23, 2016, the court ordered the Malkoff , Vanden Berge , McDonald , and Gilhousen actions be consolidated (the “Consolidated Action”). On September 13, 2016, the United States District Court for the District of Colorado dismissed the Consolidated Action, with prejudice.

On August 23, 2016, a fifth putative class action lawsuit was filed in the United States District Court for the District of Colorado, asserting a claim for violations of Section 14(a) of the Exchange Act and SEC Rule 14a-9 against WhiteWave and its directors and a claim for violations of Section 20(a) of the Exchange Act against the WhiteWave Board of Directors and Danone ( Louie v. The WhiteWave Foods Company et al .). On September 9, 2016, Plaintiff Edward Louie dismissed the action with prejudice.   

49



The Company has agreed, after arm’s-length negotiations to pay plaintiffs in the Bottesi action, Consolidated Action and Louie action a combined fee and expense payment of $0.5 million , for having caused the Company to make certain supplemental disclosures to the Definitive Proxy Statement regarding the proposed merger, which supplemental disclosures were included in a Current Report on Form 8-K filed with the SEC on September 9, 2016. No court has approved, and no court will approve, the fee and expense payment.
 
On September 19, 2016, a putative class action lawsuit was filed in the United States District Court for the District of Colorado challenging the proposed merger between WhiteWave and Danone by City of Dearborn Heights Act 345 Police & Retirement System, a purported stockholder of WhiteWave, against WhiteWave, its directors, Danone, and Merger Sub. The complaint alleges that the directors of WhiteWave breached their fiduciary duties in connection with the proposed merger by, among other things, conducting an allegedly unfair and inadequate sale process, agreeing to an allegedly unfair and inadequate price, agreeing to deal protection devices that allegedly preclude other potential bidders from making competing bids for WhiteWave, allegedly failing to protect against certain purported conflicts of interest, and allegedly failing to disclose all material information to WhiteWave stockholders in connection with the proposed merger, and that Danone and Merger Sub aided and abetted such alleged breaches of fiduciary duty. The complaint further asserts a claim for violations of Section 14(a) of the Exchange Act and SEC Rule 14a-9 against WhiteWave and its directors, and a claim for violations of Section 20(a) of the Exchange Act against the WhiteWave directors, Danone, and Merger Sub for allegedly disseminating a materially misleading proxy statement in connection with the proposed merger. The complaint seeks, among other things, rescissory damages, and costs, including attorneys’ and experts’ fees. WhiteWave believes the lawsuit is without merit.

Item 1A. Risk Factors
    
There have been no material changes from the risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 except as previously disclosed in our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2016.
Item 2C. Issuer Purchases of Equity Securities
On May 23, 2013, the Company announced that its Board of Directors had authorized a share repurchase program, under which the Company may repurchase up to $150.0 million of its common stock. As of September 30, 2016 , no shares of common stock have been repurchased under this program. There is no expiration date for the program, and the authorization to repurchase shares will end when the Company has repurchased the maximum amount of shares authorized, or the Company’s Board of Directors has determined to discontinue such repurchases.

50


Item 5. Other Information
None.


Item 6. Exhibits
 
 
 
31.1
 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
31.2
 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
32.1
 
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
 
32.2
 
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
 
101.INS
 
XBRL Instance Document
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
 
 
101.CAL
 
XBRL Taxonomy Calculation Linkbase Document
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
101.LAB
 
XBRL Taxonomy Label Linkbase Document
 
 
101.PRE
 
XBRL Taxonomy Presentation Linkbase Document
Attached as Exhibit 101 to this report are the following materials from the WhiteWave Foods Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 , formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015 , (ii) the Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2016 and 2015 , (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2016 and 2015 , (iv) the Condensed Consolidated Statements of Equity for the nine months ended September 30, 2016 and 2015 , (v) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 , and (vi) Notes to Condensed Consolidated Financial Statements.
In accordance with Rule 406T of Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act, is deemed not filed for purposes of section 18 of the Exchange Act, and otherwise is not subject to liability under these sections.

51


SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
THE WHITEWAVE FOODS COMPANY
 
/s/ James T. Hau
James T. Hau
Vice President and Chief Accounting Officer
November 9, 2016


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