BUSINESS ACQUISITIONS

Acquisition of Diamond Foods

On February 29, 2016, we acquired Diamond Foods, Inc. ("Diamond Foods") for $1,857.2 million in a cash and stock transaction, including our repayment of $651.0 million of Diamond Foods’ indebtedness, accrued interest and related fees. Diamond Foods, a leading snack food company, possessed five brands including Kettle Brand^® potato chips, KETTLE^® Chips, Pop Secret^® popcorn, Emerald^® snack nuts, and Diamond of California^® culinary nuts. As a result of the acquisition, Diamond Foods became our wholly-owned subsidiary. We also obtained 26% of the outstanding shares of Metcalfe's Skinny Limited ("Metcalfe"), owner of Metcalfe's skinny^®, a premium ready-to-eat ("RTE") popcorn brand in the United Kingdom ("U.K."), which is described below.

At the effective time of the acquisition of Diamond Foods, all of its outstanding stock-based compensation awards, then comprised of restricted shares, restricted units, performance-based restricted units, and stock options, converted to replacement Snyder's-Lance awards or were settled with merger consideration as described within the Registration Statement on Form S-4 we filed with the SEC on January 20, 2016. The fair value of the replacement awards, whether vested or unvested, was included in the purchase price to the extent that pre-acquisition services had been rendered. The purchase price also included the fair value of accelerated vesting for awards that vested at the acquisition date due to change in control provisions. The remainder of the fair value of the unvested outstanding replacement awards are being recorded as compensation expense over the applicable future vesting period in the periods following the acquisition date.

The Diamond Foods acquisition was accounted for as a business combination. Management used its best estimate in the preliminary allocation of the purchase price to assets acquired and liabilities assumed based on the estimated fair value of such assets and liabilities as of April 2, 2016. Subsequent to the quarter ended April 2, 2016, we adjusted our initial purchase price allocation for changes in the valuation of certain assets and liabilities throughout the year ended December 31, 2016. As discussed in our 2016 Form 10-K, included within these adjustments was a correction to acquired cash of $6.6 million and the corresponding amount to accounts payable as a result of Diamond Foods' prior cash accounting, which resulted in a reclassification of a cash outflow from operating activities to investing activities on the Condensed Consolidated Statement of Cash Flows for the six months ended July 2, 2016. The impact of the remaining adjustments on previously presented condensed consolidated financial statements was not significant.

In addition, we recorded payables of $12.4 million for certain dissenting shareholders of Diamond Foods associated with the acquisition as of July 2, 2016, which is reflected as non-cash investing activity for the six months ended July 2, 2016. During the year ended December 31, 2016, a settlement was reached with such dissenting shareholders and we paid such liability and recognized additional $1.6 million and $0.5 million as transaction related expenses in the second quarter and third quarter, respectively, of 2016.

Transaction and integration related expenses associated with the acquisition of Diamond Foods were approximately $9.9 million and $58.9 million for the second quarter and first six months, respectively, of 2016, and are included in a separate line in the Condensed Consolidated Statements of Income/(Loss). These expenses primarily consisted of severance and retention costs, accelerated stock-based compensation, investment banking fees and other professional fees and legal costs associated with completion of the acquisition and subsequent integration of Diamond Foods.

Diamond Foods' results were included in our Condensed Consolidated Statements of Income/(Loss) from February 29, 2016. Incremental net revenue from Diamond Foods of $135.6 million and $183.9 million was included for the second quarter and first six months, respectively, of 2016. A portion of Diamond Foods' revenue was eliminated in consolidation as it was sold to our other subsidiaries for distribution through our national direct-store-delivery distribution network ("DSD network"). As a result of progress made integrating Diamond Foods, it is impracticable to disclose separately Diamond Foods' contributions to income before income taxes for the second quarter and first six months of 2016.

The following unaudited pro forma condensed consolidated financial information has been prepared as if the acquisition of Diamond Foods had taken place at the beginning of the first quarter of 2016. The unaudited pro forma results include estimates and assumptions regarding increased amortization of intangible assets related to the acquisition, reduced interest expense related to debt due to lower interest rates associated with the new combined debt and the related tax effects, and reductions of non-recurring transaction-related expenses. Pro forma results are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the date indicated, or that may result in the future for various reasons including the potential impact of revenue and cost synergies on the business.



(in thousands)	Quarter Ended July 2, 2016		Six Months Ended July 2, 2016
Net revenue ⁽¹⁾	$	609,500	$	1,201,879
Net income attributable to Snyder's-Lance, Inc. ⁽¹⁾	$	19,681	$	43,392

⁽¹⁾ The unaudited pro forma condensed consolidated financial information does not reflect the sale of Diamond of California.

Acquisition of Metcalfe's Skinny Limited

In January 2016, Diamond Foods obtained 26% of the outstanding shares of Metcalfe, owner of Metcalfe's skinny^®, a premium RTE popcorn brand in the U.K., which we acquired in the Diamond Foods’ transaction. On September 1, 2016, we completed the acquisition of the remaining 74% interest of Metcalfe for approximately $9.7 million. Metcalfe is a leading premium RTE popcorn brand in the U.K., in addition to a growing range of corn and rice cake products.

Because of our purchase of the remaining 74% interest in Metcalfe, the equity of the entire entity was increased to fair value, which resulted in the revaluation of our prior 26% interest. However, as this 26% interest was recorded at fair value in the Diamond Foods' opening balance sheet on February 29, 2016, the revaluation did not result in a significant gain or loss. The fair value of 100% of Metcalfe was determined to be $13.2 million, of which $1.5 million was preliminarily allocated to current assets, $7.2 million to goodwill, $8.8 million to other intangible assets and $4.3 million to total liabilities. During the six months ended July 1, 2017, we made several immaterial adjustments to the opening balance sheet. Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized.

Our 26% share of income for the period subsequent to February 29, 2016, was not material for the second quarter and first six months of 2016, and was included in other income, net, in the Condensed Consolidated Statements of Income/(Loss). Subsequent to our acquisition of the remaining 74% of Metcalfe on September 1, 2016, Metcalfe's results were consolidated into our Condensed Consolidated Statements of Income/(Loss).

Investment in Natural Foodworks Group, LLC

On February 17, 2017, we made a $1.5 million investment for approximately 23% of the ownership in Natural Foodworks Group, LLC, an experienced food manufacturer specializing in natural and organic products. We are accounting for this investment under the equity method.