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High Liner FoodsA n n u a l R e p o r t 2 0 1 9 © 2020 Nomad Fo o ds Ltd . | n om a dfo o ds .com 2 0 1 9 A n n u a l R e p o r t Nomad Foods is Europe’s leading frozen food company and one of the largest in the world. Our portfolio of leading niche brands, anchored by Birds Eye, Findus and iglo, has been serving local European markets for generations and stand for food that is great tasting, high quality and convenient. Table of Contents Letters to Our Shareholders ................................................................................................. 2-4 Financial Statements ............................................................................................................5-168 Corporate Information ............................................................................................................. 169 Sir Martin Ellis Franklin Co-Chairman Noam Gottesman Co-Chairman growth in market share, Nomad Foods is well- positioned to continue its organic growth trajectory. Despite the macro challenges we all face, Nomad Foods is stronger than ever. As we look to the future, we are proud of the commitment and dedication of our 4,800 team members that have pulled together to deliver quality products at record levels of production in this pandemic crisis. The culture and priorities of a company are more noticeable in tough times, and the best in human spirit has been on display from the teams at Nomad. Keeping our Nomad family safe, productive and supporting the communities in which we operate is important now more than ever as we navigate the current environment. We are working hard and remain committed to doing our part to continue delivering high-quality and nutritious food to our communities. We look forward to reporting on what looks like an historic 2020. Respectfully, Martin and Noam Dear Fellow Shareholders, We formed Nomad Foods over four years ago with a belief that market leadership in frozen food and trusted brands would provide us with a foundation for sustainable growth protected by strong, defensible moats. As we write this letter, the world and the global economy are shaken to their core by the COVID-19 virus and actions taken to minimize its spread. At the same time, the core attributes of Nomad Foods are on full display as your company, stronger than ever, navigates its way through this crisis. Now in our fourth year of consecutive organic growth, we continue to defend and grow our base business. Meanwhile, initiatives started years ago are bearing fruit. During this past year, we have lau nched a n ew frozen platform of sustainable and meat-free foods – Green Cuisine - as a core strategy, and we expect it to become a €100 million new business in 2022. We strengthened our balance sheet in 2019 in preparation for a pipeline of acquisition opportunities in front of us. Sticking to our acquisition discipline has paid off in hindsight given the current dislocation in the markets. In addition to our capital raise, we have generated over €200 million in free cash flow, while earnings have continued to grow. Given our available resources, we have dedicated some of our cash to a €300 million share repurchase program as acquisition activity has slowed within the current environment. Consumers gravitate towards brands t h e y k n o w a n d t r u s t i n t i m e s o f uncertainty. We also see new consumers who have found a new appreciation for the merits of frozen food. With this Succulent Meat-Free Meatballs from our Green Cuisine Range. 2 Nomad Foods Annual Report 2019 Nomad Foods Annual Report 2019 3 Dear Fellow Shareholders, N omad Food achieved another solid year in 2019, marking our third consecutive year of organic revenue growth, healthy profitability and strong cash generation. Organic revenue growth increased 2%, Adjusted EBITDA grew 15% and Adjusted Free Cash Flow exceeded €200 million. These results are a testament of our organization’s focus and commitment to achieving profitable growth year in and year out, all the while serving the world with better food. As the environment for packaged foods experiences ongoing disruption from changing consumer behavior, our business continues to benefit from a favorable category backdrop. In 2019, our Western European frozen food category footprint grew 2%. We know that consumers have always valued frozen for convenience and value. Increasingly, they are being drawn to the category for other, previously under-appreciated, benefits such as superior nutrient preservation, waste reduction and innovative meat-free meal solutions. Our market-leading brands are amongst the original pioneers in the frozen category and are well suited to attract new consumers through our pipeline of impactful marketing campaigns and break-through innovation. As the category leader, we know that our company has an important role to play in elevating frozen food and delivering high quality, great tasting food to our consumers. The future of frozen is very exciting and full of long-term growth opportunities. Nevertheless, as this letter goes to print in late April, our organization is fully engaged in helping tackle the global health crisis stemming from COVID-19. Throughout Europe, millions of people are secluded in their homes and, in many cases, under government lockdown. Out of home food consumption has all but grinded to a halt. This is leading to an unprecedented surge in demand for packaged food and, specifically for our business, frozen food. In response, our factory colleagues have risen to the challenge by significantly increasing production all the while enacting strict procedures and guidelines to protect the health and safety of our employees. I am proud of the way our organization has responded to this crisis and am confident that our business will emerge stronger than ever. During these uncertain times, we take comfort knowing that our products are in high demand and that our balance sheet is the healthiest that it has ever been. In 2019, we raised $400 million of equity to prepare for future acquisitions while preserving adequate balance sheet flexibility. Since that transaction, the business has generated significant cash flow resulting in 2019 year-end leverage in the mid-2x’s and over €800 million in cash. We will continue to pursue M&A as a driver of shareholder value while remaining disciplined and mindful of the current environment. 4 Nomad Foods Annual Report 2019 Stefan Descheemaeker CEO On the organic front, we remain optimistic on our near and long-term growth prospects. Renovation of our existing products has been the primary driver of organic revenue growth since 2017 and will remain a high priority as we strive to raise the bar even further across our existing portfolio. At the same time, we have plans to further dial up our innovation agenda through the strategic expansion of Green Cuisine, our meat-free range, that was introduced in the U.K. and Ireland in early 2019. As a business anchored in fish and vegetables, we are very well positioned to win in the rapidly growing meat-free segment, which presents us a unique opportunity to develop an adjacent category with high incrementality. While we are indeed optimistic about the future, we recognize that we operate in a world full of macro uncertainty. 2020 will mark a second consecutive year of elevated cost of goods as we encounter ongoing raw material inflation and transactional foreign currency headwinds. However, we believe the net revenue management capabilities that we built will provide the tools to navigate these headwinds in 2020, as they did in 2019. In summary, we have exciting plans for the coming year and believe we are well positioned to drive shareholder value. More than ever, our organization is unified and driven by our purpose to serve the world with better food. Our employees are fully engaged, our strategy is delivering results and our business model is well suited to navigate a wide range of macroeconomic outcomes. We look forward to executing the year ahead and updating you on our progress along the way. Respectfully yours, UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNITED STATES Washington, D.C. 20549 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F (Mark One) o Registration Statement Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934 (Mark One) FORM 20-F x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Fiscal Year Ended December 31, 2019 Registration Statement Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934 o o o x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Fiscal Year Ended December 31, 2019 Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Shell Company Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 o Shell Company Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 001-37669 Commission file number 001-37669 Nomad Foods Limited Nomad Foods Limited (Exact Name of Registrant as Specified in Its Charter) (Exact Name of Registrant as Specified in Its Charter) British Virgin Islands British Virgin Islands (Jurisdiction of Incorporation or Organization) (Jurisdiction of Incorporation or Organization) No. 1 New Square No. 1 New Square Bedfont Lakes Business Park Bedfont Lakes Business Park Feltham, Middlesex TW14 8HA Feltham, Middlesex TW14 8HA (Address of Principal Executive Offices) (Address of Principal Executive Offices) Samy Zekhout Samy Zekhout No. 1 New Square No. 1 New Square Bedfont Lakes Business Park Bedfont Lakes Business Park Feltham, Middlesex TW14 8HA Feltham, Middlesex TW14 8HA Telephone:+(44) 208 918 3200 Telephone:+(44) 208 918 3200 Facsimile:+(44) 208 918 3491 Facsimile:+(44) 208 918 3491 (Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person) (Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person) Securities registered or to be registered pursuant to Section 12(b) of the Act: Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of Each Class Title of Each Class Ordinary Shares, no par value NOMD Ordinary Shares, no par value NOMD Trading Symbol (s) Trading Symbol (s) Name of Each Exchange on which Registered Name of Each Exchange on which Registered New York Stock Exchange New York Stock Exchange Securities registered or to be registered pursuant to Section 12(g) of the Act: None Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: Preferred Shares, no par value Securities registered or to be registered pursuant to Section 12(g) of the Act: None Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: Preferred Shares, no par value Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. 194,542,957 Ordinary Shares and 1,500,000 Preferred Shares Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. xYes o No Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. 194,542,957 Ordinary Shares and 1,500,000 Preferred Shares Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. xYes o No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. o Yes x No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. o Yes x No 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 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 past 90 days. x Yes o No 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. x Yes o No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). x Yes o No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). x Yes o No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer, accelerated filer, and emerging growth company” in Rule 12b-2 of the Exchange Act.: Large accelerated filer x Accelerated filer o Non-accelerated filer o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer, accelerated filer, and emerging growth company” in Rule 12b-2 of the Exchange Act.: Large accelerated filer x Accelerated filer o Non-accelerated filer o If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. o If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use †The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. o Codification after April 5, 2012. †The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: Emerging growth company o Emerging growth company o U.S. GAAPo International Financial Reporting Standards as Issued Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: Othero by the International Accounting Standards Boardx U.S. GAAPo If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. o Item 17 o Item 18 If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. o Item 17 o Item 18 If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No International Financial Reporting Standards as Issued by the International Accounting Standards Boardx Othero 96214_164pg_Body.indd 1 96214_164pg_Body.indd 1 4/21/20 3:53 PM 4/21/20 3:53 PM Nomad Foods Annual Report 5 Nomad Foods Annual Report 5 TABLE OF CONTENTS TERMS USED IN THIS REPORT PRESENTATION OF FINANCIAL AND OTHER INFORMATION INDUSTRY AND MARKET DATA TRADEMARKS CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS PART I Item 1: Identity of Directors, Senior Management and Advisers Item 2: Offer Statistics and Expected Timetable Item 3: Key Information Item 4. Information on the Company Item 4A. Unresolved Staff Comments Item 5. Operating and Financial Review and Prospects Item 6. Directors, Senior Management and Employees Item 7. Major Shareholders and Related Party Transactions Item 8. Financial Information Item 9. The Offer and Listing Item 10. Additional Information Item 11. Quantitative and Qualitative Disclosures About Market Risk Item 12. Description of Securities Other than Equity Securities Item 13. Defaults, Dividend Arrearages and Delinquencies Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds Item 15. Controls and Procedures Item 16A. Audit Committee Financial Expert Item 16B. Code of Ethics Item 16C. Principal Accountant Fees and Services Item 16D. Exemptions from the Listing Standards for Audit Committees Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers Item 16F. Change in Registrants’ Certifying Accountant Item 16G. Corporate Governance Item 16H. Mine Safety Disclosure Item 17. Financial Statements Item 18. Financial Statements Item 19. Exhibits 6 Nomad Foods Annual Report 7 7 7 8 8 10 10 10 10 33 46 46 62 70 72 73 73 81 81 81 81 82 82 83 83 83 84 84 84 90 90 91 96214_164pg_Body.indd 2 96214_164pg_Body.indd 2 4/17/20 11:27 AM 4/17/20 11:27 AM TERMS USED IN THIS REPORT Unless the context otherwise requires, in this annual report, the term(s) (1) “we,” “us,” “our,” “Company,” “Nomad” and “our business” refer to Nomad Foods Limited (formerly known as Nomad Holdings Limited) and its consolidated subsidiaries and (2) “Iglo” and “the Iglo Group” refer solely to Nomad Foods Europe Holdings Limited (previously named Iglo Foods Holdings Limited) and its consolidated subsidiaries which we purchased on June 1, 2015. All references in this annual report to the “Predecessor” refer to Iglo for all periods prior to its acquisition by the Company (the “Iglo Acquisition”) and all references to the “Successor” refer to the Company for all periods after the Iglo Acquisition. PRESENTATION OF FINANCIAL AND OTHER INFORMATION In this annual report, references to “Euro” and “€” are to the single currency adopted by participating member states of the European Union ("EU") relating to Economic and Monetary Union, references to “$”, “US$” and “U.S. Dollars” are to the lawful currency of the United States of America, and references to “Pound Sterling”, “Sterling” and “£” are to the lawful currency of the United Kingdom ("UK"). The historical financial information for the Company and the Predecessor has been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS IASB”) and International Financial Reporting Standards as endorsed by the European Union (together “IFRS”) which can differ in certain significant respects from U.S. GAAP. Unless otherwise noted, all financial information for the Company and the Predecessor provided in this annual report is denominated in Euros. Historical Financial Information This annual report includes our consolidated financial statements at and as of the years ended December 31, 2019 (the “Fiscal 2019 Period”), December 31, 2018 (the “Fiscal 2018 Period”) and December 31, 2017 (the “Fiscal 2017 Period”). Non-IFRS Financial Measures In this annual report, we present certain supplemental financial measures that are not recognized by IFRS. These financial measures are unaudited and have not been prepared in accordance with IFRS, SEC requirements or the accounting standards of any other jurisdiction. The non-IFRS financial measures used in this annual report are Adjusted EBITDA and Adjusted EBITDA margin. For additional information on why we present non-IFRS financial measures, the limitations associated with using non-IFRS financial measures and reconciliations of our non-IFRS financial measures to the most comparable applicable IFRS measure, see Item 5: Operating and Financial Review and Prospects. INDUSTRY AND MARKET DATA We obtained the industry, market and competitive position data throughout this annual report from our own internal estimates and research as well as from industry and general publications and research, surveys and studies conducted by Euromonitor. Industry surveys and publications generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of the information contained in industry publications is not guaranteed. While we believe that each of these studies and publications is reliable, we have not independently verified market and industry data from third-party sources. While we believe our internal company research is reliable and the definitions of our market and industry are appropriate, neither this research nor these definitions have been verified by any independent source. Further, while we believe the market opportunity information included in this annual report is generally reliable, such information is inherently imprecise. In addition, projections, assumptions and estimates of the future performance of the industry in which we operate and our future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in Item 3D: Key Information - Risk Factors. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us. See Cautionary Note Regarding Forward-Looking Statements. Market share data presented throughout this annual report is measured by retail sales value. The frozen food market data we refer to throughout this annual report includes the following categories: Frozen Processed Meat, Frozen Processed Seafood, Frozen Meat Substitutes, Frozen Pizza, Frozen Ready Meals, Frozen Noodles, Frozen Soup, Frozen Baked Goods and Processed Frozen Vegetables. Nomad Foods Annual Report 7 96214_164pg_Body.indd 3 96214_164pg_Body.indd 3 4/17/20 11:27 AM 4/17/20 11:27 AM TRADEMARKS We operate under a number of trademarks, including, among others, “Iglo,” “Birds Eye”, “Goodfella's”, “Aunt Bessie's” and “Findus”, all of which are registered under applicable intellectual property laws. This annual report contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this annual report may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Some of the statements in this annual report constitute forward-looking statements that do not directly or exclusively relate to historical facts. You should not place undue reliance on such statements because they are subject to numerous uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These statements often include words such as “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions. Forward-looking statements included in this annual report include statements regarding: • • • • • • • • • • • • • • • our beliefs and intentions regarding our strategic initiatives and their impact on the growth and profitability of our business; our intent to profitably grow our business through our strategic initiatives; our intent to seek additional acquisition opportunities in food products and our expectation regarding competition for acquisitions; our beliefs regarding the anticipated impact of the exit by the UK from the EU ("Brexit") on our business; our expectations concerning our ability to fund our liquidity requirements and to raise cash through equity and debt offerings; our expectations concerning our capital expenditures in 2020; our beliefs regarding our sales, marketing and advertising strategies, competitive strengths and ability to successfully compete in the markets in which we participate; our expectations concerning consumer demand for our products, our future growth opportunities, market share and sales channels, including online channels; our beliefs and intentions regarding the impact of key industry trends on our business, our actions in response to such trends and the resulting impact on our profitability and competitive position; our future operating and financial performance; our intent to settle any Founder Preferred Shares Annual Dividend Amount (as defined herein) with equity; our belief that we have sufficient spare capacity to accommodate future growth in our main product categories and to accommodate the seasonal nature of some of our products; our beliefs and intentions regarding our sustainability program; our intent to rely on some of the available foreign private issuer exemptions to the New York Stock Exchange (the “NYSE”) corporate governance rules; and the accuracy of our estimates and key judgments regarding certain tax matters and accounting valuations. The forward-looking statements contained in this annual report are based on assumptions that we have made in light of our management’s experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the circumstances. As you read and consider this annual report, you should understand that these statements are not guarantees of performance or results. They involve known and unknown risks, uncertainties and assumptions. Although we believe that these forward- looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in these forward- looking statements. 8 Nomad Foods Annual Report 96214_164pg_Body.indd 4 96214_164pg_Body.indd 4 4/17/20 11:27 AM 4/17/20 11:27 AM These factors include but are not limited to: • • • • • • • • • • • • • • • • • • • • • • • • our ability to successfully implement our strategic initiatives; the anticipated benefits from the acquisition of the Aunt Bessie's and Goodfella's brands may take longer to realize and may cost more to achieve than expected; uncertainty about the terms and timing of the trade agreement between the UK and the EU associated with Brexit, as well as the potential adverse impact of Brexit on currency exchange rates, global economic conditions and cross-border agreements that affect our business; the loss of any of our executive officers or members of our senior management team or other key employees; the loss of any of our major customers or a decrease in demand for our products; our ability to effectively compete in our markets; changes in consumer preferences and our failure to anticipate and respond to such changes or to successfully develop and renovate products; our ability to successfully interpret and respond to key industry trends and to realize the expected benefits of our responsive actions; our ability to protect our brand names and trademarks; the commercial success of our Green Cuisine brand of products, including as a result of its expansion into continental Europe, and other innovations introduced to the markets; economic conditions that may affect our future performance including exchange rate fluctuations; fluctuations in the availability of food ingredients and packaging materials that we use in our products; our ability to effectively mitigate factors that negatively impact our supply of raw materials, including pea supply; disruptions in our information technology systems, supply network, manufacturing and distribution facilities or our workforce or the workforce of our suppliers; our ability to continue to comply with covenants and the terms of our credit instruments and our ability to obtain additional financing, as needed, to fund our liquidity requirements and capital expenditures; availability of debt and equity financing under favorable terms; increases in operating costs, including labor costs, and our ability to manage our cost structure; the occurrence of liabilities not covered by our insurance; our ability to successfully implement, and engage other stakeholders in implementing, our sustainability program; the loss of our financial arrangements with respect to receivables factoring; the loss of our foreign private issuer status; the effects of reputational damage from unsafe or poor quality food products, particularly if such issues involve products we manufactured or distributed; our failure to comply with, and liabilities related to, environmental, health and safety laws and regulations; and changes in applicable laws or regulations. These and other factors are more fully discussed in Item 3D: Key Information - Risk Factors and elsewhere in this annual report. These risks could cause actual results to differ materially from those implied by forward-looking statements in this annual report. All information contained in this annual report is materially accurate and complete as of the date of this annual report. You should keep in mind, however, that any forward-looking statement made by us in this annual report, or elsewhere, speaks only as of the date on which we make it. New risks and uncertainties come up from time to time, and it is impossible for us to predict these events or how they may affect us. We do not undertake any obligation to update or revise any forward-looking statements after the date of this annual report, whether as a result of new information, future events or otherwise, except as required by law. In light of these risks and uncertainties, you should keep in mind that any event described in a forward-looking statement made in this annual report or elsewhere might not occur. Nomad Foods Annual Report 9 96214_164pg_Body.indd 5 96214_164pg_Body.indd 5 4/17/20 11:27 AM 4/17/20 11:27 AM Item 1: Identity of Directors, Senior Management and Advisers PART I A. B. C. Directors and Senior Management Not applicable. Advisers Not applicable. Auditors Not applicable. Item 2: Offer Statistics and Expected Timetable A. B. Offer Statistics Not applicable. Method and Expected Timetable Not applicable. Item 3: Key Information A. Selected Financial Data The following table sets forth selected historical consolidated financial and other data for the Company and the Predecessor for the periods presented. The selected historical consolidated financial data below should be read in conjunction with our Audited Consolidated Financial Statements and related notes (Item 18), as well as Item 4: Information on the Company and Item 5: Operating and Financial Review and Prospects of this annual report. and regulations. Following the Iglo Acquisition, Iglo is considered to be our Predecessor under applicable SEC rules In June 2015, the Board of Directors approved a change in Nomad’s fiscal year end from March 31 to December 31 in order to align Nomad’s fiscal year with the Iglo Group’s historical reporting calendar. As a result of this change, the selected historical consolidated financial data includes financial information for the Successor for the twelve month periods ended December 31, 2019, 2018, 2017 and 2016 and the nine month period from April 1, 2015 to December 31, 2015. The statement of income data for the Fiscal 2019 Period, Fiscal 2018 Period and Fiscal 2017 Period and the balance sheet data as of December 31, 2019 and 2018 have been derived from our audited consolidated financial statements included elsewhere in this annual report. The statement of income data for the twelve months ended December 31, 2016, for the nine months ended December 31, 2015, for the twelve months ended March 31, 2015, and for the Predecessor, for the five months ended May 31, 2015 and balance sheet information for Nomad as of December 31, 2016 and 2015 have been derived from audited financial statements not included elsewhere in this annual report. presented. All results are continuing. Neither the Successor nor the Predecessor declared or paid cash dividends in the periods 10 Nomad Foods Annual Report 96214_164pg_Body.indd 6 96214_164pg_Body.indd 6 4/17/20 11:27 AM 4/17/20 11:27 AM Successor Successor Successor Successor Successor Successor Predecessor Year ended Dec 31 2019 Year ended Dec 31 2018 Year ended Dec 31 2017 Year ended Dec 31 2016 9 months ended Dec 31 2015 Year ended Mar 31 2015 5 months ended May 31 2015 €m €m €m €m €m €m €m 2,324.3 (1,626.4) 697.9 (359.9) (54.5) 2,172.8 (1,519.3) 653.5 (352.7) (17.7) 1,956.6 (1,357.2) 599.4 (319.3) (37.2) 1,927.7 (1,356.7) 571.0 (298.4) (134.5) 894.2 (663.0) 231.2 (138.6) (58.1) — — — (0.7) (0.7) — — — — — — — — (349.0) (165.8) 0.4 (0.4) 640.3 (417.9) 222.4 (109.5) (84.3) — — 283.5 283.1 242.9 138.1 (314.1) (167.6) 28.6 (73.2) (56.0) (74.4) 210.3 (56.7) 227.1 (56.6) 168.5 (32.0) (62.1) 76.0 (39.6) (35.5) 0.1 (115.7) (349.6) 12.3 (167.5) — (87.1) (40.9) 153.6 170.5 136.5 36.4 (337.3) (167.5) (128.0) 192,004,803 175,622,538 176,080,272 183,518,743 145,590,810 50,025,000 198,425,877 175,793,631 184,786,162 183,528,621 145,590,810 50,025,000 0.80 0.78 0.97 0.97 0.78 0.74 0.20 0.20 (2.32) (3.35) (2.32) (3.35) 5,904.5 2,556.7 — 5,340.8 2,059.1 — 4,601.7 1,852.6 — 4,709.5 1,902.5 — 4,929.7 1,888.1 — 447.4 274.9 — n.p. n.p. n.p. n.p. n.p. n.p. n.p. Statement of Income data: Revenue Cost of sales Gross profit Other operating expenses Exceptional items Charge related to Founder Preferred Shares Annual Dividend Amount Credit/(Charge) related to Warrant Redemption Liability Operating profit/ (loss) Net finance (costs)/ income Profit/(loss) before tax Taxation Profit/(loss) for the period Basic weighted number of shares Diluted weighted number of shares Basic earnings/(loss) per share Diluted earnings/ (loss) per share Balance Sheet data: Total assets Total equity Share capital n.p. not presented B. Capitalization and Indebtedness Not applicable. C. Reasons for the Offer and Use of Proceeds Not applicable. 96214_164pg_Body.indd 7 96214_164pg_Body.indd 7 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 11 D. Risk Factors An investment in our ordinary shares carries a significant degree of risk. You should carefully consider the following risks and other information in this annual report, including our consolidated financial statements and related notes included elsewhere in this annual report, before you decide to purchase our ordinary shares. Additional risks and uncertainties of which we are not presently aware or that we currently deem immaterial could also affect our business operations and financial condition. If any of these risks actually occur, our business, financial condition, results of operations or prospects could be materially affected. As a result, the trading price of our ordinary shares could decline and you could lose part or all of your investment. Risks Related to Our Business and Industry We operate in a highly competitive market and our failure to compete effectively could adversely affect our results of operations. The market for frozen food is highly competitive, and further consolidation in the industry would likely increase competition. Our competitors include retailers who promote private label products and well-established branded producers that operate on both a national and an international basis across single or multiple frozen food categories. We also face competition more generally from chilled food, distributors and retailers of fresh products, baked goods and ready-made meals. Our competitors generally compete with us on the basis of price, actual or perceived quality of products, brand recognition, consumer loyalty, product variety, new product development, customer service and improvements to existing products. We may not successfully compete with our existing competitors and new competitors may enter the market. Discounters are supermarket retailers which offer a narrow range of food and grocery products at discounted prices and which typically focus on non-branded rather than branded products. The increase in discounter sales may adversely affect the sales of our branded products. Further, we are increasing our investment in online sales (sales made through retailers’ online platforms). However, there is no guarantee we will achieve our expected return on investment from this strategy. The growth of online retailers, and the corresponding growth in our online sales, may also adversely affect our competitive position. In addition, we cannot predict the pricing or promotional actions of our competitors or their effect on consumer perceptions or the success of our own advertising and promotional efforts. Our competitors develop and launch products targeted to compete directly with our products. Our retail customers, most of which promote their own private label products, control the shelf space allocations within their stores. As a result, they may allocate more shelf space to private label products or to our branded competitors’ products in accordance with their respective promotional strategies. Decreases in shelf space allocated to our products, increases in competitor promotional activity, aggressive marketing strategies by competitors or other factors may require us to reduce our prices or invest greater amounts in advertising and promotion of our products to ensure our products remain competitive. Furthermore, some of our competitors may have substantially greater financial, marketing and other resources than we have. This creates competitive pressures that could cause us to lose market share or require us to lower prices, increase advertising expenditures or increase the use of discounting or promotional campaigns. These competitive factors may also restrict our ability to increase prices, including in response to commodity and other cost increases. If we are unable to continue to respond effectively to these and other competitive pressures, our customers may reduce orders of our products, may insist on prices that erode our margins or may allocate less shelf space and fewer displays for our products. These or other developments could materially and adversely affect our sales volumes and margins and result in a decrease in our operating results, which could have a material adverse effect on our business, financial condition and results of operations. 12 Nomad Foods Annual Report 96214_164pg_Body.indd 8 96214_164pg_Body.indd 8 4/17/20 11:27 AM 4/17/20 11:27 AM Sales of our products are subject to changing consumer preferences and trends; if we do not correctly anticipate such changes, our sales and profitability may decline. There are a number of trends in consumer preferences which have an impact on us and the frozen food industry as a whole. These include, among others, preferences for speed, convenience and ease of food preparation; natural, nutritious and well-proportioned meals; products that are sustainably sourced and produced and are otherwise environmentally friendly; as well as a recent trend towards meat substitutes. Concerns as to the health impacts and nutritional value of certain foods may increasingly result in food producers being encouraged or required to produce products with reduced levels of salt, sugar and fat and to eliminate trans-fatty acids and certain other ingredients. Consumer preferences are also shaped by concern over waste reduction and the environmental impact of products. The success of our business depends on both the continued appeal of our products and, given the varied backgrounds and tastes of our customer base, our ability to offer a sufficient range of products to satisfy a broad spectrum of preferences. Any shift in consumer preferences in the UK, Germany, France, Italy, Sweden or any other material market in which we operate could have a material adverse effect on our business. Consumer tastes are also susceptible to change. In addition, the growing presence of alternative retail channels could negatively impact our sales if we fail to adapt. For example, consumers with increasingly busy lifestyles are choosing the online grocery channel as a more convenient and faster way of purchasing their food products, and are also increasingly using the internet for meal ideas. Our competitiveness therefore depends on our ability to predict and quickly adapt to consumer preferences and trends, exploiting profitable opportunities for product development without alienating our existing consumer base or focusing excessive resources or attention on unprofitable or short-lived trends. All of these efforts require significant research and development and marketing investments. If we are unable to respond on a timely and appropriate basis to changes in demand or consumer preferences and trends, our sales volumes and margins could be adversely affected. Our future results and competitive position are dependent on the successful development of new products and improvement of existing products, which is subject to a number of difficulties and uncertainties. Our future results and ability to maintain or improve our competitive position depend on our capacity to anticipate changes in our key markets and to successfully identify, develop, manufacture, market and sell new or improved products in these changing markets. We aim to introduce new products and re-launch and extend existing product lines on a timely basis in order to counteract obsolescence and decreases in sales of existing products as well as to increase overall sales of our products. For example, in 2019 we launched Green Cuisine which offers consumers a wide range of meat free solutions and we currently intend to expand the brand to continental Europe. The launch and success of new or modified products are inherently uncertain, especially as to the products’ appeal to consumers, and there can be no assurance as to our continuing ability to develop and launch successful new products or variations of existing products. The failure to launch a product successfully can give rise to inventory write-offs and other costs and can affect consumer perception of our other products. Market factors and the need to develop and provide modified or alternative products may also increase costs. In addition, launching new or modified products can result in cannibalization of sales of our existing products if consumers purchase the new product in place of our existing products. If we are unsuccessful in developing new products in response to changing consumer demands or preferences in an efficient and economical manner, or if our competitors respond more effectively than we do, demand for our products may decrease, which could materially and adversely affect our business, financial condition and results of operations. The nature of the exit of the UK from the EU could adversely impact our business, results of operations and financial condition. On June 23, 2016 the UK electorate voted in favor of leaving the European Union (commonly referred to as “Brexit”), and on March 29, 2017 the UK government formally initiated the withdrawal process. The European Union (Withdrawal Agreement) Bill has now been passed by the UK Parliament and the UK left the European Union on January 31, 2020. Following its departure, the UK has commenced negotiations with the European Union to reach a trade agreement going forward. At present the date for the finalization of such an agreement is December 31, 2020 and until such date a standstill transition period is in place. This lack of clarity continues to create political and economic uncertainty, which has affected, and may continue to affect, market and macro-economic conditions in both the UK and EU economies. 96214_164pg_Body.indd 9 96214_164pg_Body.indd 9 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 13 For the year ended December 31, 2019, 95% of our revenue was derived from the EU as a whole and 30% was derived from the UK, which increased from the prior year due to the acquisitions of Goodfella's and Aunt Bessie's. In addition, we have manufacturing facilities and employees in both the UK and other European countries. As a result of Brexit, we may experience adverse impacts on consumer demand and profitability in the UK and other markets. Depending on the terms of Brexit and any subsequent trade agreement, the UK could also lose access to the single EU market, or specific countries in the EU, resulting in a negative impact on the general and economic conditions in the UK and the EU. Changes may occur in regulations that we are required to comply with as well as amendments to treaties governing tax, duties, tariffs, etc. which could adversely impact our operations and require us to modify our financial and supply arrangements. For example, the imposition of any import restrictions and duties levied on our products may make our products more expensive and less competitive from a pricing perspective. To avoid such impacts, we may have to restructure or relocate some or all of our operations which would be costly and negatively impact our profitability and cash flow. Additionally, political instability in the European Union as a result of Brexit may result in a material negative effect on credit markets, currency exchange rates and foreign direct investments and any subsequent trade agreement in the EU and UK. This deterioration in economic conditions could result in increased unemployment rates, increased short and long term interest rates, adverse movements in exchange rates, consumer and commercial bankruptcy filings, a decline in the strength of national and local economies, and other results that negatively impact household incomes. Further, a number of our employees in the UK are not UK citizens and, depending on the terms negotiated, may no longer have the right to work in the UK following the UK’s formal withdrawal from the EU. results of operations. Any of these factors could have a material adverse effect on our business, financial condition and We are exposed to economic and other trends that could adversely impact our operations in our key geographies. We conduct operations in our key markets of the UK, Italy, Germany, Sweden, France, and Norway, from which approximately 80% of our revenue was generated during the year ended December 31, 2019. We are particularly influenced by economic developments and changes in consumer habits in those countries. The geographic markets in which we compete have been affected by negative macroeconomic trends which have affected consumer confidence. For example, Brexit has created political and economic uncertainty both in the UK and the other EU member states. A deterioration in economic conditions could result in increased unemployment rates, increased short and long term interest rates, consumer and commercial bankruptcy filings, a decline in the strength of national and local economies, and other results that negatively impact household incomes. This can result in consumers purchasing cheaper private label products instead of equivalent branded products. Such macroeconomic trends could, among other things, negatively impact global demand for branded and premium food products, which could result in a reduction of sales or pressure on margins of our branded products or cause an increasing transfer to lower priced product categories. Our inability to source raw materials or other inputs of an acceptable type or quality, could adversely affect our results of operations. We use significant quantities of food ingredients and packaging materials and are therefore vulnerable to fluctuations in the availability and price of food ingredients, packaging materials, other supplies and energy costs. In particular, raw materials such as fish, livestock and crops have historically represented a significant portion of our cost of sales, and accordingly, adverse changes in raw material prices can impact our results of operations. Specifically, the availability and the price of fish, vegetables and other agricultural commodities, including poultry and meat, can be volatile. We are also affected by the availability of quality raw materials, most notably fish, which can be impacted by the fishing and agricultural policies of the European Union including national or international quotas that can limit volume of raw materials. General economic conditions, unanticipated demand, problems in manufacturing or distribution, natural disasters, weather conditions during the growing and harvesting seasons, plant, fish and livestock diseases and local, the impact of Brexit, national or international quarantines can also adversely affect availability and prices of commodities in the long and short term. 14 Nomad Foods Annual Report 96214_164pg_Body.indd 10 96214_164pg_Body.indd 10 4/17/20 11:27 AM 4/17/20 11:27 AM While we attempt to negotiate fixed prices for certain materials with our suppliers for periods ranging from one month to a full year, we cannot guarantee that our strategy will be successful in managing input costs if prices increase for extended periods of time. Additionally, by entering fixed price agreements we may potentially be limiting our ability to benefit from possible price decreases. Moreover, there is no market for hedging against price volatility for certain raw materials and accordingly such materials are bought at the spot rate in the market. Our ability to avoid the adverse effects of a pronounced, sustained price increase in raw materials is limited. Any increases in prices or scarcity of ingredients or packaging materials required for our products could increase our costs and disrupt our operations. If the availability of any of our inputs is constrained for any reason, we may not be able to obtain sufficient supplies or supplies of a suitable quality on favorable terms or at all. Such shortages could materially adversely affect our market share, business, financial condition and results of operations. Our inability to pass on price increases for materials or other inputs to our customers could adversely affect our results of operations. Our ability to pass through increases in the prices of raw materials to our customers depends, among others, on prevailing competitive conditions and pricing methods in the markets in which we operate, and we may not be able to pass through such price increases to our customers. Even if we are able to pass through increases in prices, there is typically a time lag between cost increases impacting our business and implementation of product price increases during which time our profit margin may be negatively impacted. Recovery of cost inflation, driven by both commodity cost increases or changes in the foreign exchange rate of the currency the commodity is denominated in, can also lead to disparities in retailers’ shelf-prices between different brands which can result in a competitive disadvantage and volume decline. During our negotiations to increase our prices to recover cost increases, customers may take actions which exacerbate the impact of such cost increases, for example by ceasing to offer our products or deferring orders until negotiations have ended. Our inability to pass through price increases in raw materials and preserve our profit margins in the future could materially adversely affect our business, financial condition and results of operations. We rely on sales to a limited number of large food retailers and should they perform poorly or give higher priority to private label or other brands or products or if the concentration and buying power of these large retailers increase, our business could be adversely affected. Our customers include supermarkets and large chain food retailers in the UK, Germany, France, Italy, Sweden and Norway. Throughout our markets, the food retail segments are highly concentrated. For the year ended December 31, 2019, our top 10 customers account for 36% of sales. In recent years, the major multiple retailers in those countries have increased their share of the grocery market and price competition between retailers has intensified. This price competition has led the major multiple retailers to seek lower prices from their suppliers, including us. The strength of the major multiple retailers’ bargaining position gives them significant leverage over their suppliers in negotiating pricing, product specification and the level of supplier participation in promotional campaigns and offers, which can reduce our margins. International alliances among retailers continue to become stronger, and the trend for consolidation in Europe at a local level and across borders is ongoing. Further consolidation among the major multiple retailers or disproportionate growth in relation to their competitors could increase their relative negotiating power and allow them to force a negative shift in our trade terms. Our results of operations could also be adversely affected if these retailers suffer a significant deterioration in sales performance, if we are required to reduce our prices or increase our promotional spending activity as a consequence, if we are unable to collect accounts receivable from our customers, if we lose business from a major customer or if our relationship with a major customer deteriorates. Our retail customers also offer private label products that compete directly with our products for retail shelf space and consumer purchases. Private label products typically have higher margins for retailers than other branded products. Accordingly, there is a risk that our customers may give higher priority to private label products or the branded products of our competitors, which would adversely affect sales of our products. Our major multiple retail customers are also expanding into non-food product lines in their stores, thereby exerting pressure on available shelf space for other categories such as food products. We may be unable to adequately respond to these trends and, as a result, the volume of our sales may decrease or we may need to lower the prices of our products, either of which could adversely affect our business, financial condition and results of operations. 96214_164pg_Body.indd 11 96214_164pg_Body.indd 11 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 15 Increased distribution costs or disruption of transportation services could adversely affect our business and financial results. Distribution costs have historically fluctuated significantly over time, particularly in connection with oil prices, and increases in such costs could result in reduced profits. In addition, certain factors affecting distribution costs are controlled by our third party carriers. To the extent that the market price for fuel or freight or the number or availability of carriers fluctuates, our distribution costs could be affected. Furthermore, temporary or long-term disruption of transportation services due to weather-related problems, strikes or other events could impair our ability to supply products affordably and in a timely manner or at all. Failure to deliver our perishable food products promptly could also result in inventory spoilage. These factors could impact our commercial reputation and result in our customers reducing their orders or ceasing to order our products. Any increases in the cost of transportation, and any disruption in transportation, could have a material adverse effect on our business, financial condition and results of operations. We require the use of refrigerated vehicles to ship our products and such distribution costs represent an important element of our cost structure. We are dependent on third parties for almost all of our transportation requirements. In Italy, our distribution network is shared with Unilever’s ice cream business. Our arrangement with Unilever is governed by a distribution agreement which expires in 2022. If we change the transportation services we use, we could face logistical difficulties that could delay deliveries, and we could incur costs and expend resources in connection with such change. We may not be able to consummate future acquisitions or successfully integrate acquisitions into our business which could result in unanticipated expenses and losses. Our strategy is largely based on our ability to grow through acquisitions of additional businesses to build an integrated group. Consummating acquisitions of businesses, or our failure to integrate such businesses successfully into our existing businesses, could result in unanticipated expenses and losses. Furthermore, we may not be able to realize any of the anticipated benefits from completed acquisitions, including the Goodfella's Pizza and Aunt Bessie's acquisitions. We anticipate that any future acquisitions we may pursue as part of our business strategy may be partially financed through additional debt or equity. Any future financial market disruptions or tightening of the credit markets may make it more difficult for us to obtain financing for acquisitions or increase the cost of obtaining financing. If new debt is added to current debt levels, or if we incur other liabilities, including contingent liabilities, in connection with an acquisition, the debt or liabilities could impose additional constraints and requirements on our business and operations, which could materially adversely affect our financial condition and results of operation. In addition, to the extent our ordinary shares are used for all or a portion of the consideration to be paid for future acquisitions, dilution may be experienced by existing shareholders. In connection with our completed and future acquisitions, the process of integrating acquired operations into our existing group operations may result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of existing operations. Some of the risks associated with acquisitions include: • unexpected losses of key employees or customers of the acquired company; • conforming the acquired company's standards, processes, procedures and controls with our operations; • coordinating new product and process development; • hiring additional management and other critical personnel; • negotiating with labor unions; and • increasing the scope, geographic diversity and complexity of our current operations. We may encounter unforeseen obstacles or costs in the integration of businesses that we may acquire. In addition, general economic and market conditions or other factors outside of our control could make our operating strategies difficult or impossible to implement. Any failure to implement these operational improvements successfully and/or the failure of these operational improvements to deliver the anticipated benefits could have a material adverse effect on our results of operations and financial condition. 16 Nomad Foods Annual Report 96214_164pg_Body.indd 12 96214_164pg_Body.indd 12 4/17/20 11:27 AM 4/17/20 11:27 AM We may be subject to antitrust regulations with respect to future acquisition opportunities. Many jurisdictions in which we operate have antitrust regulations which involve governmental filings for certain acquisitions, impose waiting periods and require approvals by government regulators. Governmental authorities may seek to challenge potential acquisitions or impose conditions, terms, obligations or restrictions that may delay completion of the acquisition or materially reduce the anticipated benefits (financial or otherwise). Our inability to consummate potential future acquisitions or to receive the full benefits of such acquisitions because of antitrust regulations could limit our ability to execute on our acquisition strategy which could have a material adverse effect on our financial condition and results of operations. We may face significant competition for acquisition opportunities. There may be significant competition in some or all of the acquisition opportunities that we may explore. Such competition may for example come from strategic buyers, sovereign wealth funds, special purpose acquisition companies and public and private investment funds, many of which are well established and have extensive experience in identifying and completing acquisitions. A number of these competitors may possess greater technical, financial, human and other resources than us. We cannot assure investors that we will be successful against such competition. Such competition may cause us to be unsuccessful in executing any acquisition or may result in a successful acquisition being made at a significantly higher price than would otherwise have been the case. Any due diligence by us in connection with potential future acquisitions may not reveal all relevant considerations or liabilities of the target business, which could have a material adverse effect on our financial condition or results of operations. We intend to conduct such due diligence as we deem reasonably practicable and appropriate based on the facts and circumstances applicable to any potential acquisition. The objective of the due diligence process will be to identify material issues which may affect the decision to proceed with any one particular acquisition target or the consideration payable for an acquisition. We also intend to use information revealed during the due diligence process to formulate our business and operational planning for, and our valuation of, any target company or business. While conducting due diligence and assessing a potential acquisition, we may rely on publicly available information, if any, information provided by the relevant target company to the extent such company is willing or able to provide such information and, in some circumstances, third party investigations. There can be no assurance that the due diligence undertaken with respect to an acquisition will reveal all relevant facts that may be necessary to evaluate such acquisition including the determination of the price we may pay for an acquisition target or to formulate a business strategy. Furthermore, the information provided during due diligence may be incomplete, inadequate or inaccurate. As part of the due diligence process, we will also make subjective judgments regarding the results of operations, financial condition and prospects of a potential target. If the due diligence investigation fails to correctly identify material issues and liabilities that may be present in a target company or business, or if we consider such material risks to be commercially acceptable relative to the opportunity, and we proceed with an acquisition, we may subsequently incur substantial impairment charges or other losses. In addition, following any acquisition, we may be subject to significant, previously undisclosed liabilities of the acquired business that were not identified during due diligence and which could contribute to poor operational performance, undermine any attempt to restructure the acquired company or business in line with our business plan and have a material adverse effect on our financial condition and results of operations. We do not have long-term contractual agreements with our key customers, which exposes us to increased risks with respect to such customers. As is typical in the food industry, sales to our key customers in our major markets are made on a daily demand basis. We generally do not have long-term contractual commitments to supply such customers and must renegotiate supply and pricing terms of our products on a regular basis. Customarily, trade terms are renegotiated annually; however, ad-hoc changes are often made on an informal basis, such as by email, to reflect discounts and promotional arrangements. Amounts paid are subject to end of period reconciliations to reflect these informal arrangements. In some cases, our customers seek to claim reimbursement for informal discount arrangements going back multiple periods. In addition, we do not have written contractual arrangements with a number of our other customers. Most of our customer relationships or arrangements could be terminated or renegotiated at any time and, in some cases, without reasonable notice. 96214_164pg_Body.indd 13 96214_164pg_Body.indd 13 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 17 Our customers may not be creditworthy. Our business is subject to the risks of nonpayment and nonperformance by our customers. We manage our exposure to credit risk through credit analysis and monitoring procedures, and sometimes use letters of credit, prepayments and guarantees. However, these procedures and policies cannot fully eliminate customer credit risk, and to the extent our policies and procedures prove to be inadequate, it could negatively affect our financial condition and results of operations. In addition, some of our customers may be highly leveraged and subject to their own operating and regulatory risks and, even if our credit review and analysis mechanisms work properly, we may experience financial losses in our dealings with such parties. Any future financial market disruptions or tightening of the credit markets could result in some of our customers experiencing a significant decline in profits and/or reduced liquidity. A significant adverse change in the financial position of a customer could require us to assume greater credit risk relating to that customer and could limit our ability to collect receivables. We do not maintain credit insurance to insure against customer credit risk. If our customers fail to fulfill their contractual obligations, it may have an adverse effect on our business, financial condition and results of operation. Failure to protect our brand names and trademarks could materially affect our business. Our principal brand names and trademarks (such as Birds Eye, Iglo, Findus, Aunt Bessie's and Goodfella's) are key assets of our business and our success depends upon our ability to protect our intellectual property rights. We rely upon trademark laws to establish and protect our intellectual property rights, but cannot be certain that the actions we have taken or will take in the future will be adequate to prevent violation of our proprietary rights. Litigation may be necessary to enforce our trademark or proprietary rights or to defend us against claimed infringement of the rights of third parties. In addition, the Birds Eye brand, which we use in the UK, is used by other producers in the United States and Australia. Even though the brands have different logos, adverse publicity from such other markets may negatively impact the perception of our brands in our respective markets. Adverse publicity, legal action or other factors could lead to substantial erosion in the value of our brands, which could lead to decreased consumer demand and could have a material adverse effect on our business, financial condition and results of operations. There is also a risk that other parties may have intellectual property rights covering some of our brands, products or technology. If any third parties bring a claim of intellectual property infringement against us, we may be subject to costly and time-consuming litigation, diverting the attention of management and our employees. If we are unsuccessful in defending against such claims, we may be subject to, among other things, significant damages, injunctions against development and sale of certain products, or we may be required to enter into costly licensing agreements, any of which could have an adverse impact on our business, financial condition, and results of operations. We are exposed to risks related to our financial arrangements with respect to receivables factoring. We enter into factoring arrangements from time to time with financial institutions to sell certain of our accounts receivables from customers without recourse. If we were to stop entering into these factoring arrangements, our operating results, financial condition and cash flows could be adversely impacted by delays or failures in collecting accounts receivables. However, by entering into these arrangements we are exposed to additional risks. If any of these financial institutions experiences financial difficulties or is otherwise unable to honor the terms of our factoring arrangements, we may experience material financial losses due to the failure of such arrangements which could have an adverse impact upon our operating results, financial condition and cash flows. Health concerns or adverse developments with respect to the safety or quality of products of the food industry in general, or our own products specifically, may damage our reputation, increase our costs of operations and decrease demand for our products. Food safety and the public’s perception that our products are safe and healthy are essential to our image and business. We sell food products for human consumption, which subjects us to safety risks such as product contamination, spoilage, misbranding or product tampering. Product contamination, including the presence of a foreign object, undeclared allergens, substance, chemical or other agent or residue or the introduction of a genetically modified organism, could require product withdrawals or recalls or the destruction of inventory, and could result in negative publicity, temporary plant closures and substantial costs of compliance or remediation. In addition, food producers, including us, have been targeted by extortion attempts that threatened to contaminate products displayed in supermarkets. Such attempts can result in the temporary removal of products from shelf displays as a precautionary measure and result in lost revenue. We may also be impacted by publicity concerning any assertion that our products caused illness or injury. In addition, we could be subject to claims or lawsuits relating to an actual or alleged illness stemming from product contamination or any other incidents that compromise the safety and quality of our products. Any significant lawsuit or widespread product recall or other events leading to the loss of consumer confidence in the safety 18 Nomad Foods Annual Report 96214_164pg_Body.indd 14 96214_164pg_Body.indd 14 4/17/20 11:27 AM 4/17/20 11:27 AM and quality of our products could damage our brand, reputation and image and negatively impact our sales, profitability and prospects for growth. We could also be adversely affected if consumers lose confidence in the safety and quality of certain food products or ingredients, or the food safety system generally. If another company recalls or experiences negative publicity related to a product in a category in which we compete, consumers might reduce their overall consumption of products in this category. Adverse publicity about these types of concerns, whether valid or not, may discourage consumers from buying our products or cause production and delivery disruptions. In addition, product recalls are difficult to foresee and prepare for and, in the event we are required to recall one or more of our products, such recall may result in loss of sales due to unavailability of our products and may take up a significant amount of our management’s time and attention. We maintain systems designed to monitor food safety risks and require our suppliers to do so as well. However, we cannot guarantee that our efforts will be successful or that such risks will not materialize. In addition, although we attempt, through contractual relationships and regular inspections, to control the risk of contamination caused by third parties in relation to the several manufacturing and distribution processes we outsource, we cannot guarantee that our efforts will be successful or that contamination of our products by third parties will not materialize. We are also subject to further risks affecting the food industry generally, including risks posed by widespread contamination and evolving nutritional and health-related concerns. Regulatory authorities may limit the supply of certain types of food products in response to public health concerns and consumers may perceive certain products to be unsafe or unhealthy. In addition, governmental regulations may require us to discontinue certain offerings or limit the range of products we offer. We may be unable to find substitutes that are as appealing to our customer base, or such substitutes may not be widely available or may be available only at increased costs. Such substitutions or limitations could also reduce demand for our products. We could also be subject to claims or lawsuits relating to an actual or alleged illness or injury or death stemming from the consumption of a misbranded, altered, contaminated or spoiled product, which could negatively affect our business. Awards of damages, settlement amounts and fees and expenses resulting from such claims and the public relations implications of any such claims could have an adverse effect on our business. The availability and price of insurance to cover claims for damages are subject to market forces that we do not control, and such insurance may not cover all the costs of such claims and would not cover damage to our reputation. Even if product liability claims against us are not successful or fully pursued, these claims could be costly and time consuming, increase our insurance premiums and divert our management’s time and resources towards defending them rather than operating our business. In addition, any adverse publicity concerning such claims, even if unfounded, could cause customers to lose confidence in the safety and quality of our products and damage our reputation and brand image. Potential liabilities and costs from litigation could adversely affect our business. There is no guarantee that we will be successful in defending ourselves in civil, criminal or regulatory actions, including under general, commercial, employment, environmental, food quality and safety, anti-trust and trade, advertising and claims, and environmental laws and regulations, or in asserting our rights under various laws. For example, our marketing or claims could face allegations of false or deceptive advertising or other criticisms which could end up in litigation and result in potential liabilities or costs. In addition, we could incur substantial costs and fees in defending ourselves or in asserting our rights in these actions or meeting new legal requirements. Even when not merited, the defense of these lawsuits may divert our management’s attention, and we may incur significant costs in defending these lawsuits. The costs and other effects of potential and pending litigation and administrative actions against us, and new legal requirements, cannot be determined with certainty and may differ from expectations. We are exposed to local business and tax risks in many different countries. We operate in various countries in Europe, predominantly in the UK, Germany, France, Italy, Sweden and Norway. As a result, our business is subject to risks resulting from differing legal, political, social and regulatory requirements, economic conditions and unforeseeable developments in these markets, all or any of which could result in disruption of our activities. These risks include, among others, political instability (including the impact of Brexit), differing economic cycles, tariffs, duties and adverse economic conditions, unexpected changes in regulatory environments, currency exchange rate fluctuations, inability to collect payments or seek recourse under or comply with ambiguous or vague commercial or other laws, changes in distribution and supply channels, foreign exchange controls and restrictions on repatriation of funds, and difficulties in attracting and retaining qualified management and employees. Our overall success in the markets in which we operate depends, to a considerable extent, on our ability to effectively manage differing legal, political, social and regulatory requirements, economic conditions and unforeseeable developments. We cannot guarantee that we will succeed in developing and implementing policies and strategies which will be effective in each location where we do business. 96214_164pg_Body.indd 15 96214_164pg_Body.indd 15 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 19 We must comply with complex and evolving tax regulations in the various jurisdictions in which we operate, which subjects us to international tax compliance risks. Some tax jurisdictions in which we operate have complex and subjective rules regarding income tax, value-added tax, sales or excise tax, tariffs, duties and transfer tax. From time to time, our foreign subsidiaries are subject to tax audits and may be required to pay additional taxes, interest or penalties should the taxing authority assert different interpretations, or different allocations or valuations of our services which could be material and could reduce our income and cash flow from our international subsidiaries. We currently have several pending tax assessments and audits in various jurisdictions including Germany, France, Sweden and Italy. The agreements by which we acquired certain businesses provide for certain indemnifications of tax liabilities which may arise in certain jurisdictions which we believe are sufficient to address these specific tax matters as far as they relate to those businesses. We have also established, where appropriate, reserves and provisions for tax assessments which we believe to be adequate to address potential tax liabilities. However, it is possible that the tax audits referred to above could result in the volatility of timings of cash tax payment and recoveries. Our business is dependent on third-party suppliers and changes or difficulties in our relationships with our suppliers may harm our business and financial results. We outsource some of our business functions to third-party suppliers, such as the processing of certain vegetables and other products, the manufacturing of packaging materials and distribution of our products. Our suppliers are subject to their own unique operational and financial risks, which are out of our control. Our suppliers may fail to meet timelines or contractual obligations or fail to provide us with sufficient products, which may adversely affect our business. Certain of our contracts with key suppliers, such as for the raw materials we use in our products, are short term, can be terminated by the supplier upon giving notice within a certain period and restrict us from using other suppliers. Also, a number of our supply contracts, including for fish and vegetables, may be terminated by the supplier upon a change in our ownership. Failure to appropriately structure or adequately manage our agreements with third parties may adversely affect our supply of products. We are also subject to credit risk with respect to our third-party suppliers. If any such suppliers become insolvent, an appointed trustee could potentially ignore the service contracts we have in place with such party, resulting in increased charges or the termination of the service contracts. We may not be able to replace a service provider within a reasonable period of time, on as favorable terms or without disruption to our operations. Any adverse changes to our relationships with third-party suppliers could have a material adverse effect on our image, brand and reputation, as well as on our business, financial condition and results of operations. In addition, to the extent that our creditworthiness is impaired, or general economic conditions decline, certain of our key suppliers may demand onerous payment terms that could materially adversely affect our working capital position, or such suppliers may refuse to continue to supply to us. A number of our key suppliers have taken out trade credit insurance on our ability to pay them. To the extent that such trade credit insurance becomes unobtainable or more expensive due to market conditions, we may face adverse changes to payment terms by our key suppliers or they may refuse to continue to supply us. The price of energy we consume in the manufacture, storage and distribution of our products is subject to volatile market conditions. The price of electricity and other energy resources required in the manufacture, storage and distribution of our products is subject to volatile market conditions. These market conditions are often affected by political and economic factors beyond our control, including, for instance, the energy policies of the countries in which we operate. For example, the German government’s decision to phase out nuclear power generation by 2022 could cause electricity prices and price volatility in Germany to increase. Any sustained increases in energy costs could have an adverse effect on the attractiveness of frozen food products for our customers and consumers and could affect our competitive position if our competitors’ energy costs do not increase at the same rate as ours. In addition, disruptions in the supply of energy resources could temporarily impair our ability to manufacture products for our customers. Such disruptions may also occur as a result of the loss of energy supply contracts or the inability to enter into new energy supply contracts on commercially attractive terms. Furthermore, natural catastrophes or similar events could affect the electricity grid. Any such disruptions, or increases in energy costs as a result of the aforementioned factors or otherwise, could have a material adverse effect on our business, financial condition and results of operations. 20 Nomad Foods Annual Report 96214_164pg_Body.indd 16 96214_164pg_Body.indd 16 4/17/20 11:27 AM 4/17/20 11:27 AM Any disruptions, failures or security breaches of our information technology systems could harm our business and reduce our profitability. We are increasingly dependent upon on our information technology systems for communication among our suppliers, manufacturing plants, distribution functions, headquarters and customers. Our performance depends on the availability of accurate and timely data and other information from key software applications to aid day-to- day business and decision-making processes. We may be adversely affected if our controls designed to manage information technology operational risks fail to contain such risks. If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure and to maintain the related automated and manual control processes, we could be subject to adverse effects including billing and collection errors, business disruptions, in particular concerning our manufacturing and logistics functions, issues with or errors in system's maintenance and security and migration of applications to the cloud and security breaches. Any disruption caused by failings in our information technology infrastructure equipment or of communication networks, could delay or otherwise impact our day-to-day business and decision-making processes and negatively impact our performance. In addition, we are reliant on third parties to service parts of our IT infrastructure. Failure on their part to provide good and timely service may have an adverse impact on our information technology network. Furthermore, we do not control the facilities or operations of our suppliers. An interruption of operations at any of their or our facilities or any failure by them to deliver on their contractual commitments may have an adverse effect on our business, financial condition and results of operations. Although our information technology systems are protected through physical and software safeguards, it is difficult to protect against the possibility of damage or breach created by cyber-attacks or other security attacks in every potential circumstance that may arise. As cyber-attacks are increasing in frequency and sophistication it becomes even more difficult to protect against a breach of our information technology systems. Cybersecurity incidents that impact the availability, reliability, speed, accuracy, or other proper functioning of these information technology systems could have a significant impact on our operations. If we are unable to prevent physical and electronic break-ins, cyber- attacks and other information security breaches, we may suffer financial and reputational damage, be subject to litigation or incur remediation costs or penalties because of the unauthorized disclosure of confidential information belonging to us or to our customers, suppliers or employees. The mishandling or inappropriate disclosure of non-public sensitive or protected information could lead to the loss of intellectual property, negatively impact planned corporate transactions or damage our reputation and brand image. Misuse, leakage or falsification of legally protected information could also result in a violation of data privacy laws and regulations and have a negative impact on our reputation, business, financial condition and results of operations. Changes in the European regulatory environment regarding privacy and data protection regulations, such as the European Union’s General Data Protection Regulation ("GDPR"), could expose us to risks of noncompliance and costs associated with compliance. On May 25, 2018, the EU’s GDPR became enforceable. The GDPR relates to the collection, use, retention, security, processing and transfer of personally identifiable information of residents of EU countries, and because of our operations in the EU, including in the UK, we are subject to these heightened standards. The GDPR created a range of new compliance obligations, and imposes significant fines and sanctions for violations. Among other things, the GDPR requires companies to meet stringent requirements regarding the handling of personal data of individuals located in the European Economic Area, or EEA. These more stringent requirements include expanded disclosures to inform customers about how we may use their personal data through external privacy notices, increased controls on profiling customers and increased rights for data subjects (including customers and employees) to access, control and delete their personal data. In addition, there are mandatory data breach notification requirements. The GDPR imposes substantial fines for breaches and violations (up to the greater of €20 million or 4% of our annual global revenue). The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies and obtain compensation for damages resulting from violations of the GDPR. Furthermore, there is significant uncertainty with respect to compliance with privacy and data protection laws and regulations, including the GDPR, because they are continuously evolving and developing and may be interpreted and applied differently from country to country and may create inconsistent or conflicting requirements. Our efforts to comply with privacy and data protection laws, including the GDPR, may impose significant costs and challenges that are likely to increase over time. 96214_164pg_Body.indd 17 96214_164pg_Body.indd 17 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 21 Our supply network and manufacturing and distribution facilities could be disrupted by factors beyond our control such as extreme weather, fire, terrorist activity, health epidemics and other outbreaks and natural disasters. Severe weather conditions and natural disasters, such as storms, floods, droughts, frosts, earthquakes or pestilence, may affect the supply of the raw materials that we use for the manufacturing of our products. For example, changing climate may cause flooding and drought in crop growing areas or changes in sea temperatures may affect marine biomass, fishing catch rates and overall fishing conditions. In addition, drought or floods may affect the feed supply for red meat and poultry, which in turn may affect the quality and availability of protein sources for our products. Adverse weather conditions and natural disasters can reduce crop size and crop quality, which in turn can reduce our supplies of raw materials, lower recoveries of usable raw materials, increase the prices of our raw materials, increase our cost of transporting and storing raw materials, or disrupt our production schedules. Competing food producers can be affected differently by weather conditions and natural disasters depending on the location of their supply sources. If our supplies of raw materials are reduced, we may not be able to find adequate supplemental supply sources, if at all, on favorable terms, which could have a material adverse effect on our business, financial condition and results of operation. Our supply network could also be adversely affected by the outbreak of various diseases, such as the recent Covid-19, or coronavirus epidemic in China. We currently source some of our fish supply and certain spices from China. Although we are currently seeking alternative sources of fish supply, there may be delays in procurement or we may be unable to access such alternative supply on commercially reasonable terms, which may have an adverse impact on our operating results. In addition, a significant outbreak of a contagious disease in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and have a material adverse effect on our results of operations. In addition, our manufacturing and distribution facilities may be subject to damage or disruption resulting from fire terrorist activity, natural disasters or other causes. For example, our Lowestoft and Bremerhaven manufacturing facilities are situated in regions which have historically been prone to flooding. Extensive damage to any of our thirteen major manufacturing facilities as a result of any of the foregoing reasons, could, to the extent that lost production could not be compensated for by unaffected facilities, severely affect our ability to conduct our business operations and, as a result, adversely affect our business, financial condition and results of operations. Furthermore, as we lease parts of our Boulogne, Bremerhaven, Lowestoft, and Tonsberg manufacturing sites, the use of these properties is subject to certain terms and conditions, the breach of which could affect our ability to continue use of these properties which in turn may disrupt our operations and may materially adversely affect our results of operations. We may be unable to realize the expected benefits of actions taken to align our resources, operate more efficiently and control costs. When required we take actions, such as workforce reductions, plant closures and consolidations, and other cost reduction initiatives, such as our factory optimization program, to align our resources with our growth strategies, operate more efficiently and control costs. As these plans and actions are complex, unforeseen factors could result in expected savings and benefits to be delayed or not realized to the full extent planned, could negatively impact labor relations, including causing work stoppages, and could lead to disruptions in our business and operations and higher short-term costs related to severance and related capital expenditures. In 2016, we announced the closure of our factory and pea processing operations in Bjuv, Sweden, and operations ceased in the first half of 2017 with production transferred to other factories in the Group’s network. In March 2018, we sold the factory building and parts of the premises. We may be unable to realize the expected benefits of these actions which could potentially adversely affect our profitability and operations. 22 Nomad Foods Annual Report 96214_164pg_Body.indd 18 96214_164pg_Body.indd 18 4/17/20 11:27 AM 4/17/20 11:27 AM Significant disruption in our workforce or the workforce of our suppliers could adversely affect our business, financial condition and results of operations. As of December 31, 2019, we employed approximately 4,775 employees, of which approximately 1,412 were located in Germany, 1,222 were located in the UK, 345 were located in France, 478 were located in Italy, 421 were located in Sweden/Norway and 897 employees in other locations. As of December 31, 2019, approximately 70% of our employees worked in our manufacturing operations. We have in the past, and may in the future, experience labor disputes and work stoppages at one or more of our manufacturing sites due to localized strikes or strikes in the larger retail food industry sector. We have also been involved in negotiations on collective bargaining agreements. A labor stoppage or other interruption at one of our thirteen manufacturing sites would impact our ability to supply our customers and could have a pronounced effect on our operations. Further, a number of our employees in the UK are not UK citizens and, subject to recent policy decisions, will need to apply for settled status to retain the right to work in the UK following the formal withdrawal from the EU. Future labor disturbance or work stoppage at any of our or our suppliers’ facilities in Germany, the UK, Italy or elsewhere may have an adverse effect on such facility’s operations and, potentially, on our business, financial condition and results of operations. Higher labor costs could adversely affect our business and financial results. We compete with other producers for good and dependable employees. The supply of such employees is limited and competition to hire and retain them may result in higher labor costs. Furthermore, a number of our employees are subject to national minimum wage requirements. If legislation is enacted in these countries that has the effect of raising the national minimum wage requirements, requires additional mandatory employee benefits or affects our ability to hire or dismiss employees, we could face substantially higher labor costs. In the UK, the National Minimum Wage and National Living Wage increased in April 2019. High labor costs could adversely affect our profitability if we are not able to pass them on to our customers. We are dependent upon key executives and highly qualified managers and we cannot assure their retention. Our success depends, in part, upon the continued services of key members of our management. Our executives’ and managers’ knowledge of the market, our business and our company represents a key strength of our business, which cannot be easily replicated. The success of our business strategy and our future growth also depend on our ability to attract, train, retain and motivate skilled managerial, sales, administration, development and operating personnel. There can be no assurance that our existing personnel will be adequate or qualified to carry out our strategy, or that we will be able to hire or retain experienced, qualified employees to carry out our strategy. The loss of one or more of our key management or operating personnel, or the failure to attract and retain additional key personnel, could have a material adverse effect on our business, financial condition and results of operations. Costs or liabilities relating to compliance with applicable directives, regulations and laws could have a material adverse effect on our business, financial condition and results of operations. As a producer of food products for human consumption, we are subject to extensive regulation in the UK, Germany, France, Italy, Sweden, Norway and other countries in which we operate, as well as the European Union, that governs production, composition, manufacturing, storage, transport, advertising, packaging, health, quality, labeling, safety and distribution standards. In addition, national regulations that have implemented European directives applicable to frozen products establish highly technical requirements regarding labeling, manufacturing, transportation and storage of frozen food products. For example, new regulations of the European Parliament and Council which took effect in December 2014 changed rules relating to the presentation of nutritional information on packaging and other rules on labeling. It is unclear how this will be impacted under Brexit but there may be changes and further regulations that the company has to adhere to. Local governmental authorities also set out health and safety related conditions and restrictions. Any failure to comply with applicable laws and regulations could subject us to civil remedies, including fines, injunctions, product recalls or asset seizures, as well as potential criminal sanctions, any of which could have a material adverse effect on our business, financial condition and results of operations. 96214_164pg_Body.indd 19 96214_164pg_Body.indd 19 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 23 In addition, our facilities and our suppliers’ facilities are subject to licensing, reporting requirements and official quality controls by numerous governmental authorities. These governmental authorities include European, national and local health, environmental, labor relations, sanitation, building, zoning, and fire and safety departments. Difficulties in obtaining or failure to obtain the necessary licenses or approval could delay or prevent the development, expansion or operation of a given production or warehouse facility. Any changes in those regulations may require us to implement new quality controls and possibly invest in new equipment, which could delay the development of new products and increase our operating costs. All of our products must comply with strict national and international hygiene regulations. Our facilities and our suppliers’ facilities are subject to regular inspection by authorities for compliance with hygiene regulations applicable to the sale, storage and manufacturing of foodstuffs and the traceability of genetically modified organisms, meats and other raw materials. Additionally, in certain jurisdictions, food business operators, including those in the food storage, processing and distribution sectors, are required to trace all food, animal feed, and food-producing animals under their control using registration systems that track the source of the products through the supply chain. Despite the precautions we undertake, should any non-compliance with such regulations be discovered during an inspection or otherwise, authorities may temporarily shut down any of our facilities, demand a product recall and/or levy a fine for such non-compliance, which could have a material adverse effect on our business, financial condition and results of operations. We could incur material costs to address violations of, or liabilities under, health, safety and environmental regulations. Our facilities and operations are subject to numerous health, safety and environmental regulations, including local and national laws, and European directives and regulations governing, among other things, water supply and use, water discharges, air emissions, chemical safety, solid and hazardous waste management and disposal, clean- up of contamination, energy use, noise pollution, and workplace health and safety. Health, safety and environmental legislation in Europe and elsewhere have generally become more comprehensive and restrictive and more rigid over time and enforcement has become more stringent. Failure to comply with applicable requirements, or the terms of required permits, can result in penalties or fines, clean-up costs, third party property damage and personal injury claims, which could have a material adverse effect on our brand, business, financial condition and results of operations. In addition, if health, safety and environmental laws and regulations in the UK, Germany, France, Italy, Sweden, Norway and the other countries in which we operate or from which we source raw materials and ingredients become more stringent in the future, the extent and timing of investments required to maintain compliance may exceed our budgets or estimates and may limit the availability of funding for other investments. Furthermore, under some environmental laws, we could be liable for costs incurred in investigating or remediating contamination at properties we own or occupy, even if the contamination was caused by a party unrelated to us or was not caused by us, and even if the activity which caused the contamination was legal at the time it occurred. The discovery of previously unknown contamination, or the imposition of new or more burdensome obligations to investigate or remediate contamination at our properties or at third-party sites, could result in substantial unanticipated costs which could have a material adverse effect on our business, financial condition and results of operations. In certain jurisdictions, we are also subject to legislation designed to significantly reduce industrial energy use, carbon dioxide emissions and the emission of ozone depleting compounds more generally. If we fail to meet applicable standards for energy use reduction or are unable to decrease, and in some cases eliminate, certain emissions within the applicable period required by relevant laws and regulations, we could be subject to significant penalties or fines and temporary or long-term disruptions to production at our facilities, all of which could have a material adverse effect on our business, financial condition and results of operations. 24 Nomad Foods Annual Report 96214_164pg_Body.indd 20 96214_164pg_Body.indd 20 4/17/20 11:27 AM 4/17/20 11:27 AM We are subject to a variety of regulatory schemes; failure to comply with applicable rules and regulations could adversely affect our business, results of operations and reputation. Our operations are subject to a variety of regulatory schemes which require us to implement processes, procedures and controls to provide reasonable assurance that we are operating in compliance with applicable regulations, including the UK Bribery Act, the Modern Slavery Act 2015, the Foreign Corrupt Practices Act of 1977, the Trade Sanctions and Export Controls and the EU General Data Protection Regulation. Failure to comply (or any alleged failure to comply) with the regulations referenced above or any other regulations could result in civil and criminal, monetary and non-monetary penalties, and any such failure or alleged failure (or becoming subject to a regulatory enforcement investigation) could also damage our reputation, disrupt our business, result in loss of customers and cause us to incur significant legal and investigatory fees. In addition, our business, including our ability to operate and continue to expand internationally, could be adversely affected if local and foreign laws or regulations are adopted, interpreted, or implemented in a manner that is inconsistent with our current business practices and that require rapid changes to these practices or our products, services, policies and procedures. If we are not able to adapt our business practices or strategies to changes in laws or regulations, it could subject us to liability, increased costs and reduced product demand. Additionally, the costs of compliance with laws and regulations may increase in the future as a result of changes in interpretation. Any failure by us to comply with applicable laws and regulations may subject us to significant liabilities and could adversely affect our business, results of operations and reputation. A failure in our cold chain could lead to unsafe food conditions and increased costs. “Cold chain” requirements setting out the temperatures at which our ingredients and products are stored are established both by statute and by us to help guarantee the safety of our food products. Our cold chain is maintained from the moment the ingredients arrive at, or are frozen by, our suppliers, through our manufacturing and transportation of products and ultimately to the time of sale in retail stores. These standards ensure the quality, freshness and safety of our products. A failure in the cold chain could lead to wastage, increased costs, food contamination, risks to the health of consumers, fines and damage to our brands and reputation, each of which could have an adverse effect on our business, financial condition and results of operations. Seasonality impacts our business, and our revenue and working capital levels may vary quarter to quarter. Our sales and working capital levels have historically been affected to a limited extent by seasonality. In general, sales volumes for frozen food are slightly higher in cold or winter months, partly because there are fewer fresh alternatives available for vegetables and because our customers typically allocate more freezer space to the ice cream segment in summer or hotter months. In addition, variable production costs, including costs for seasonal staff, and working capital requirements associated with the keeping of inventories, vary depending on the harvesting and buying periods of seasonal raw materials, in particular vegetable crops. For example, stock (and therefore net working capital) levels typically peak in August to September just after the pea harvest. If seasonal fluctuations are greater than anticipated, our business, financial condition and results of operations could be adversely affected. We have risks related to our indebtedness, including our ability to withstand adverse business conditions and to meet our debt service obligations. Our ability to make payments on and to refinance our indebtedness, and to fund our operations, working capital and capital expenditures, depends on our ability to generate cash. To a certain extent, our cash flow is subject to general economic, industry, financial, competitive, operating, legislative, regulatory and other factors, many of which are beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations or that future sources of cash will be available to us in an amount sufficient to enable us to pay amounts due on our indebtedness or to fund our other liquidity needs. 96214_164pg_Body.indd 21 96214_164pg_Body.indd 21 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 25 Additionally, if we incur additional indebtedness in connection with any future acquisitions or development projects or for any other purpose, our debt service obligations could increase. We may need to refinance all or a portion of our indebtedness before maturity. Our ability to refinance our indebtedness or obtain additional financing will depend on, among other things: • our financial condition and market conditions at the time; • restrictions in the agreements governing our indebtedness; • general economic and capital market conditions; • the availability of credit from banks or other lenders; • investor confidence in us; and • our results of operations. In addition, a significant part of our indebtedness includes provisions with respect to maintaining and complying with certain financial and operational covenants. Our ability to comply with these covenants may be affected by events beyond our control. A breach of one or more of these covenants could result in an event of default and may give rise to an acceleration of the debt. In the longer term, such breach of covenants could have a material adverse effect on our operations and cash flows. Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. An increase in market interest rates may increase our interest expense arising on our existing and future floating rate indebtedness. Pursuant to the terms of our Senior Facilities Agreement, the interest rate that we pay on indebtedness incurred under our term loan facilities or revolving credit facility varies based on a fixed margin over a base reference rate of LIBOR or EURIBOR. As a result, we are exposed to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. Pursuant to the Company interest rate hedging policy, we may enter into interest rate derivatives that may involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk. Our indebtedness is subject to changes in interest reference rates Pursuant to the terms of the current Senior Facilities Agreement, the interest rate paid on indebtedness incurred under our term loan facilities or revolving credit facility varies based on a fixed margin over a base reference rate of LIBOR or EURIBOR. As a result of decisions taken by national regulators, LIBOR and EURIBOR may become phased out and replaced by a replacement reference index. If LIBOR or EURIBOR ceases to exist, we may need to renegotiate our Senior Facilities Agreement with our lenders. As a result of changes to underlying interest reference rates, the Company may be exposed to volatility with regard to interest costs on indebtedness or linked interest rate hedging arrangements. We are exposed to exchange rate risks and such rates may adversely affect our results of operations. We are exposed to exchange rate risk. Our reporting currency is the Euro and a significant proportion of our sales and EBITDA are in Pound Sterling through our UK based business, and Norwegian Krone and Swedish Krona through our Norwegian and Swedish based businesses. We are exposed to foreign exchange translation risk as we convert the Pound Sterling results of our UK business and the Norwegian Krone and Swedish Krona results of our Norwegian and Swedish business into our reporting currency of Euro. Pursuant to Company foreign exchange hedging policy, we have converted a portion of our USD term loan to EUR and from EUR to GBP using cross currency interest rate swaps that act as a Net Investment hedge for our UK business. We are exposed to transactional exchange rate risk as many of our raw material purchases may be denominated in non-functional currencies of the purchasing entity, predominantly U.S. Dollars and Euro. Company policy is to reduce this risk by using foreign exchange forward contracts that are designated as cash flow hedges. Hedging arrangements may not fully protect us against currency fluctuations and may or not achieve hedge effectiveness. Fluctuations and sustained strengthening of non-functional currencies against the functional currency of the operating entities may materially adversely affect our business, financial condition and results of operations. 26 Nomad Foods Annual Report 96214_164pg_Body.indd 22 96214_164pg_Body.indd 22 4/17/20 11:27 AM 4/17/20 11:27 AM Changes to our payment terms with both customers and suppliers may materially adversely affect our operating cash flows. We may experience significant pressure from our key suppliers to reduce trade payable terms. At the same time, we may experience pressure from our customers to extend trade receivable terms. Any such changes in commercial arrangements regarding trade payable and trade receivable payment terms, may have a material adverse effect on our business, financial condition and results of operations. Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results. Generally accepted accounting principles and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business, including but not limited to revenue recognition, leases, estimating valuation allowances and accrued liabilities (including allowances for returns, doubtful accounts and obsolete and damaged inventory), accounting for income taxes, valuation of long-lived and intangible assets and goodwill, stock-based compensation and loss contingencies, are highly complex and involve many subjective assumptions, estimates and judgments by our management. Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments by our management could significantly change our reported or expected financial performance, and could have a material adverse effect on our business. Management continues to assess new accounting pronouncements and their impact on the Company prior to their adoption dates. We may incur liabilities that are not covered by insurance. While we seek to maintain appropriate levels of insurance, not all claims are insurable and we may experience major incidents of a nature that are not covered by insurance. Our insurance policies cover, among other things, employee-related accidents and injuries, property damage and liability deriving from our activities. In particular, our Lowestoft and Bremerhaven manufacturing facilities are situated in regions that have historically been affected by flooding. We may not be able to obtain flood insurance on reasonable terms or at all with respect to those facilities. We maintain an amount of insurance protection that we believe is adequate, but there can be no assurance that such insurance will continue to be available on acceptable terms or that our insurance coverage will be sufficient or effective under all circumstances and against all liabilities to which we may be subject. We could, for example, be subject to substantial claims for damages upon the occurrence of several events within one calendar year. In addition, our insurance costs may increase over time in response to any negative development in our claims history or due to material price increases in the insurance market in general. An impairment of the carrying value of goodwill or other intangible assets could negatively affect our consolidated operating results and net worth. Goodwill represents amounts arising from acquisitions and is the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Intangible assets can include computer software, brands, customer relationships and other acquired intangibles as of the acquisition date. Goodwill and other intangibles expected to contribute indefinitely to our cash flows are not amortized, but must be evaluated by management at least annually for impairment. If carrying value exceeds its recoverable amount, the intangible is considered impaired and is reduced to fair value via a charge to earnings. Factors outside of our control which could result in an impairment include, but are not limited to: (i) reduced demand for our products; (ii) higher commodity prices; (iii) lower prices for our products or increased marketing as a result of increased competition; and (iv) significant disruptions to our operations as a result of both internal and external events. Should the value of one or more of the acquired intangibles become impaired, our consolidated profit or loss and net assets may be materially adversely affected. As of December 31, 2019, the carrying value of intangible assets totaled €3,946.0 million, of which €1,862.9 million was goodwill and €2,083.1 million represented brands, computer software, customer relationships and other acquired intangibles compared to total assets of €5,904.5 million. We face risks associated with certain pension obligations. The Company has a mixture of partially funded and unfunded post-employment defined benefit plans in Germany, Sweden and Austria as well as defined benefit indemnity arrangements in Italy and France. Deterioration in the value or lower than expected returns on investments may lead to an increase in our obligation to make contributions to these plans. Nomad Foods Annual Report 27 96214_164pg_Body.indd 23 96214_164pg_Body.indd 23 4/17/20 11:27 AM 4/17/20 11:27 AM The obligations that arise from these plans are calculated using actuarial valuations which are based on assumptions linked to the performance of financial markets, interest rates and legislation which changes over time. Adverse changes to these assumptions will impact the obligations recognized and would lead to higher cash payments in the long term. Our obligation to make contributions to the pension plans could reduce the cash available for operational and other corporate uses and may have a materially adverse impact on our operations, financial condition and liquidity. If we fail to or are unable to implement and maintain effective internal controls over financial reporting, the accuracy and timeliness of our financial reporting may be adversely affected. We are subject to reporting obligations under U.S. securities laws. The SEC, as required under Section 404 of the Sarbanes-Oxley Act of 2002, has adopted rules requiring every public company to include a report of management on the effectiveness of such company's internal control over financial reporting in its annual report. In addition, an independent registered public accounting firm must issue an attestation report on the effectiveness of the company's internal control over financial reporting. We recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. If we fail to maintain effective internal control over financial reporting in the future, we and our independent registered public accounting firm may not be able to conclude that we have effective internal control over financial reporting at a reasonable assurance level. This could in turn result in the loss of investor confidence in the reliability of our financial statements. Furthermore, we have incurred and anticipate that we will continue to incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act. If we are not able to continue to meet the requirements of Section 404 in a timely manner or with adequate compliance, we might be subject to sanctions or investigation by the SEC, the NYSE or other regulatory authorities. Any such action could adversely affect the accuracy and timeliness of our financial reporting. We are a holding company whose principal source of operating cash is the income received from our subsidiaries. We are a holding company and rely on the earnings and cash flows of our subsidiaries, which are paid to us by our subsidiaries in the form of dividends and other payments or distributions, to meet our debt service and other obligations, and to pay dividends on our ordinary shares (which we do not intend to do in any case in the foreseeable future, as addressed elsewhere in these risk factors). The ability of our subsidiaries to pay dividends or make other payments or distributions to us will depend on their respective operating results and may be restricted by, among other things, the laws of their jurisdiction of organization (which may limit the amount of funds available for the payment of dividends and other distributions to us), their constitutional documents, documents governing any existing indebtedness and the covenants of any future outstanding indebtedness that our subsidiaries incur, and other factors which may be outside our control. The Founders and/or the Founder Entities may in the future enter into related party transactions with us, which may give rise to conflicts of interest between us and some or all of the Founders and/or the Directors. Our founders, Martin Franklin and Noam Gottesman (the “Founders”) and/or one or more of their affiliates, including Mariposa Acquisition II, LLC and TOMS Acquisition I LLC (the “Founder Entities”) may in the future enter into agreements with us that are not currently under contemplation. While we have implemented procedures to ensure we will not enter into any related party transaction without the approval of our Audit Committee, it is possible that the entering into of such an agreement might raise conflicts of interest between us and some or all of the Founders and/or the directors. Risks Related to our Ordinary Shares We have various equity instruments outstanding that would require us to issue additional ordinary shares. Therefore, you may experience significant dilution of your ownership interests and the future issuance of additional ordinary shares, or the anticipation of such issuances, could have an adverse effect on our share price. 28 Nomad Foods Annual Report 96214_164pg_Body.indd 24 96214_164pg_Body.indd 24 4/17/20 11:27 AM 4/17/20 11:27 AM We currently have various equity instruments outstanding that would require us to issue additional ordinary shares for no or a fixed amount of additional consideration. Specifically, as of February 21, 2020, we had outstanding the following: • • • 1,500,000 Founder Preferred Shares held by the Founder Entities, which are controlled by the Founders. The preferred shares held by the Founder Entities (the “Founder Preferred Shares”) will automatically convert into ordinary shares on a one for one basis (subject to adjustment in accordance with our Memorandum and Articles of Association) on the last day of the seventh full financial year following completion of the Iglo Acquisition and some or all of them may be converted following written request from the holder; 59,375 options held by certain current and former of our Directors which are exercisable to purchase ordinary shares, on a one-for-one basis, at any time at the option of the holder; and 4,989,522 equity awards issued under the LTIP, which may be converted into ordinary shares subject, in most cases, to meeting certain performance conditions. We currently have 13,563,888 ordinary shares currently available for issuance under our LTIP. Holders of the Founder Preferred Shares are entitled to receive annual dividend amounts subject to certain performance conditions (the “Founder Preferred Shares Annual Dividend Amount”). The payment of the Founder Preferred Shares Annual Dividend Amount became mandatory after January 1, 2015 if certain share price performance conditions are met for any given year. At our discretion, we may settle the Founder Preferred Shares Annual Dividend Amount by issuing shares or by cash payment, but we intend to equity settle. On December 31, 2019, we approved a 2019 Founder Preferred Share Dividend in an aggregate of 6,421,074 ordinary shares. The dividend price used to calculate the 2019 Founder Preferred Shares Annual Dividend Amount was $21.7289 (calculated based upon the volume weighted average price for the last ten trading days of 2019) and the Ordinary Shares were issued on January 2, 2020. In subsequent years, the Annual Dividend Amount will be calculated based upon the volume weighted average share price for the last ten trading days of the financial year and the resulting appreciated average share price compared to the highest price previously used in calculating the Annual Dividend Amount. The issuance of ordinary shares pursuant to the terms of the Founder Preferred Shares will reduce (by the applicable proportion) the percentage shareholdings of those shareholders holding ordinary shares prior to such issuance which may reduce your net return on your investment in our ordinary shares. Our ordinary share price may be volatile, and as a result, you could lose a significant portion or all of your investment. including the following: The market price of the ordinary shares on the NYSE may fluctuate as a result of several factors, • • • • • • • • • • • • • variations in our quarterly operating results; volatility in our industry, the industries of our customers and suppliers and the global securities markets; risks relating to our business and industry, including those discussed above; strategic actions by us or our competitors; reputational damage from unsafe or poor quality food products; actual or expected changes in our growth rates or our competitors’ growth rates; investor perception of us, the industry in which we operate, the investment opportunity associated with the ordinary shares and our future performance; addition or departure of our executive officers; changes in financial estimates or publication of research reports by analysts regarding our ordinary shares, other comparable companies or our industry generally; trading volume of our ordinary shares; future sales of our ordinary shares by us or our shareholders; domestic and international economic, legal and regulatory factors unrelated to our performance; or the release or expiration of lock-up or other transfer restrictions on our outstanding ordinary shares. Nomad Foods Annual Report 29 96214_164pg_Body.indd 25 96214_164pg_Body.indd 25 4/17/20 11:27 AM 4/17/20 11:27 AM Furthermore, the stock markets often experience significant price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions or interest rate changes may cause the market price of ordinary shares to decline. If securities or industry analysts do not publish or cease publishing research reports about us, if they adversely change their recommendations regarding our ordinary shares or if our operating results do not meet their expectations, the price of our ordinary shares could decline. The trading market for our ordinary shares will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. Securities and industry analysts currently publish limited research on us. If there is limited or no securities or industry analyst coverage of our company, the market price and trading volume of our ordinary shares would likely be negatively impacted. Moreover, if any of the analysts who may cover us downgrade our ordinary shares, provide more favorable relative recommendations about our competitors or if our operating results or prospects do not meet their expectations, the market price of our ordinary shares could decline. If any of the analysts who may cover us were to cease coverage or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline. As a foreign private issuer, we are subject to different U.S. securities laws and NYSE governance standards than domestic U.S. issuers. This may afford less protection to holders of our ordinary shares, and you may not receive corporate and company information and disclosure that you are accustomed to receiving or in a manner in which you are accustomed to receiving it. As a foreign private issuer, the rules governing the information that we disclose differ from those governing U.S. corporations pursuant to the Exchange Act. Although we report quarterly financial results and certain material events, we are not required to file quarterly reports on Form 10-Q or provide current reports on Form 8-K disclosing significant events within four days of their occurrence and our quarterly or current reports may contain less information than required for domestic issuers. In addition, we are exempt from the SEC’s proxy rules, and proxy statements that we distribute will not be subject to review by the SEC. Our exemption from Section 16 rules regarding sales of ordinary shares by insiders means that you will have less data in this regard than shareholders of U.S. companies that are subject to the Exchange Act. As a result, you may not have all the data that you are accustomed to having when making investment decisions with respect to U.S. public companies. As a foreign private issuer, we are exempt from complying with certain corporate governance requirements of the NYSE applicable to a U.S. issuer, including the requirement that a majority of our board of directors consist of independent directors. As the corporate governance standards applicable to us are different than those applicable to domestic U.S. issuers, you may not have the same protections afforded under U.S. law and the NYSE rules as shareholders of companies that do not have such exemptions. See Item 16G: Corporate Governance. We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses. We could cease to be a foreign private issuer if a majority of our outstanding voting securities are directly or indirectly held of record by U.S. residents and we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly higher than costs we incur as a foreign private issuer, which could have a material adverse effect on our business and financial results. 30 Nomad Foods Annual Report 96214_164pg_Body.indd 26 96214_164pg_Body.indd 26 4/17/20 11:27 AM 4/17/20 11:27 AM As the rights of shareholders under British Virgin Islands law differ from those under United States law, you may have fewer protections as a shareholder. Our corporate affairs are governed by our Memorandum and Articles of Association, the BVI Business Companies Act, 2004 (as amended, the “BVI Act”) and the common law of the British Virgin Islands. The rights of shareholders to take legal action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors under British Virgin Islands law are to a large extent governed by the common law of the British Virgin Islands and by the BVI Act. The common law of the British Virgin Islands is derived in part from comparatively limited judicial precedent in the British Virgin Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the British Virgin Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under British Virgin Islands law are not as clearly established as they would be under statutes or judicial precedents in some jurisdictions in the United States. In particular, the British Virgin Islands has a less developed body of securities laws as compared to the United States, and some states (such as Delaware) have more fully developed and judicially interpreted bodies of corporate law. As a result of the foregoing, holders of our ordinary shares may have more difficulty in protecting their interests through actions against our management, directors or major shareholders than they would as shareholders of a U.S. company. See Item 16G: Corporate Governance. The laws of the British Virgin Islands provide limited protection for minority shareholders, so minority shareholders will have limited or no recourse if they are dissatisfied with the conduct of our affairs. Under the laws of the British Virgin Islands, there is limited statutory law for the protection of minority shareholders other than the provisions of the BVI Act dealing with shareholder remedies (as summarized under Item 16G: Corporate Governance). The principal protection under statutory law is that shareholders may bring an action to enforce the constituent documents of the company and are entitled to have the affairs of the company conducted in accordance with the BVI Act and the memorandum and articles of association of the company. As such, if those who control the company have persistently disregarded the requirements of the BVI Act or the provisions of the Company’s memorandum and articles of association, then the courts will likely grant relief. Generally, the areas in which the courts will intervene are the following: (i) an act complained of which is outside the scope of the authorized business or is illegal or not capable of ratification by the majority; (ii) acts that constitute fraud on the minority where the wrongdoers control the company; (iii) acts that infringe on the personal rights of the shareholders, such as the right to vote; and (iv) acts where the company has not complied with provisions requiring approval of a special or extraordinary majority of shareholders, which are more limited than the rights afforded minority shareholders under the laws of many states in the United States. To the extent allowed by law, the rights and obligations among or between us, any of our current or former directors, officers and employees and any current or former shareholder will be governed exclusively by the laws of the British Virgin Islands and subject to the jurisdiction of the British Virgin Islands courts, unless those rights or obligations do not relate to or arise out of their capacities as such. Although there is doubt as to whether United States courts would enforce these provisions in an action brought in the United States under United States securities laws, these provisions could make judgments obtained outside of the British Virgin Islands more difficult to enforce against our assets in the British Virgin Islands or jurisdictions that would apply British Virgin Islands law. British Virgin Islands companies may not be able to initiate shareholder derivative actions, thereby depriving shareholders of one avenue to protect their interests. British Virgin Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. The circumstances in which any such an action may be brought, and the procedures and defenses that may be available in respect of any such action, may result in the rights of shareholders of a British Virgin Islands company being more limited than those of shareholders of a company organized in the United States. Accordingly, shareholders may have fewer alternatives available to them if they believe that corporate wrongdoing has occurred. The British Virgin Islands courts are also unlikely to recognize or enforce judgments of courts in the United States based on certain liability provisions of United States securities law or to impose liabilities, in original actions brought in the British Virgin Islands, based on certain liability provisions of the United States securities laws that are penal in nature. There is no statutory recognition in the British Virgin Islands of judgments obtained in the United States, although the courts of the British Virgin Islands will generally recognize and enforce the non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. This means that even if shareholders were to sue us successfully, they may not be able to recover anything to make up for the losses suffered. 96214_164pg_Body.indd 27 96214_164pg_Body.indd 27 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 31 Dividend payments on our ordinary shares are not expected. We do not currently intend to pay dividends on our ordinary shares. We intend only to pay such dividends at such times, if any, and in such amounts, if any, as the board determines appropriate and in accordance with applicable law, and then only if we receive dividends from our operating subsidiaries. Therefore, we cannot give any assurance that we will be able to pay or will pay dividends going forward or as to the amount of such dividends, if any. Shareholders may experience a dilution of their percentage ownership if we make non-pre-emptive offers of ordinary shares in the future. We have opted-out of statutory pre-emptive rights pursuant to the terms of our Memorandum and Articles of Association. No pre-emption rights therefore exist in respect of future issuance of ordinary shares whether or not for cash. Should we decide to offer additional ordinary shares on a non-pre-emptive basis in the future, this could dilute the interests of shareholders and/or have an adverse effect on the market price of the ordinary shares. Risks Related to Taxation Changes in tax law and practice may reduce any net returns for shareholders. The tax treatment of the Company, our shareholders and any subsidiary of ours (including Iglo and its subsidiaries), any special purpose vehicle that we may establish and any other company which we may acquire are all subject to changes in tax laws or practices in the British Virgin Islands, the UK, the U.S. and any other relevant jurisdiction. Any change may reduce the value of your investment in our ordinary shares. Failure to maintain our tax status may negatively affect our financial and operating results and shareholders. If we were to be considered to be resident in or to carry on a trade or business within the United States for U.S. taxation purposes or in any other country in which we are not currently treated as having a taxable presence, we could be subject to U.S. income tax or taxes in such other country on all or a portion of our profits, as the case may be, which may negatively affect our financial and operating results. Taxation of returns from subsidiaries may reduce any net return to shareholders. We and our subsidiaries are subject to taxes in a number of jurisdictions. It is possible that any return we receive from any present or future subsidiary may be reduced by irrecoverable withholding or other local taxes and this may reduce the value of your investment in our ordinary shares. If any dividend is declared in the future and paid in a foreign currency, U.S. holders may be taxed on a larger amount in U.S. Dollars than the U.S. Dollar amount actually received. U.S. holders will be taxed on the U.S. Dollar value of dividends at the time they are received, even if they are not converted to U.S. Dollars or are converted at a time when the U.S. Dollar value of the dividends has fallen. The U.S. Dollar value of the payments made in the foreign currency will be determined for tax purposes at the spot rate of the foreign currency to the U.S. Dollar on the date the dividend distribution is deemed included in such U.S. holder’s income, regardless of whether or when the payment is in fact converted into U.S. Dollars. We may be a “passive foreign investment company” for U.S. federal income tax purposes and adverse tax consequences could apply to U.S. investors. The U.S. federal income tax treatment of U.S. holders will differ depending on whether the Company is considered a passive foreign investment company (“PFIC”). In general, we will be considered a PFIC for any taxable year in which: (i) 75 percent or more of our gross income consists of passive income; or (ii) 50 percent or more of the average quarterly market value of our assets in that year are assets that produce, or are held for the production of, passive income (including cash). For purposes of the above calculations, if we, directly or indirectly, own at least 25 percent by value of the stock of another corporation, then we generally would be treated as if we held our proportionate share of the assets of such other corporation and received directly our proportionate share of the income of such other corporation. Passive income generally includes, among other things, dividends, interest, rents, royalties, certain gains from the sale of stock and securities, and certain other investment income. We do not believe that we will be a PFIC for our current taxable year. However, because the composition of the Company's income and assets will vary over time, we can provide no assurance that we will not be a PFIC for any taxable year. See item 10.E., U.S. Federal Income Taxation, Passive Foreign Investment Company ("PFIC") Considerations. 32 Nomad Foods Annual Report 96214_164pg_Body.indd 28 96214_164pg_Body.indd 28 4/17/20 11:27 AM 4/17/20 11:27 AM Item 4. Information on the Company A. History and Development of the Company We are the leading manufacturer and distributor of branded frozen foods in Western Europe based on net sales value. We were incorporated with limited liability under the laws of the British Virgin Islands under the BVI Companies Act on April 1, 2014 under the name Nomad Holdings Limited by the Founder Entities. We were formed to undertake an acquisition of a target company or business. We completed our initial public offering in the UK on April 15, 2014. Our principal executive offices are located at No. 1 New Square, Bedfont Lakes Business Park, Feltham, Middlesex, TW14 8HA. Our telephone number is +(44) 208 918 3200 and our fax number is +(44) 208 918 3491. Our registered office is located at Nemours Chambers, Road Town, Tortola, British Virgin Islands and its telephone number is (284) 852-7900. Our registered agent in the United States is Mariposa Capital, LLC, 500 South Pointe Drive, Suite 240 Miami Beach, Florida 33139. The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding the Company and other issuers that file electronically with the SEC. The SEC's Internet website address is http://www.sec.gov. Our Internet website can be found at www.nomadfoods.com. See Item 5B: Operating and Financial Review and Prospects—Liquidity and Capital Resources for information regarding our capital expenditures for the past three fiscal years and principal capital expenditures currently in progress. B. Business Overview Our Company We are the leading branded frozen food player in Western Europe with a portfolio of best-in- class food brands within the frozen category, including fish, vegetables, poultry and meals (excluding ice cream). Our products are sold primarily through large grocery retailers under the brands “Birds Eye”, “Aunt Bessie's” and “Goodfella's” in the UK and Ireland, “Findus” in Italy, San Marino, France, Spain, Sweden and Norway, “Iglo” in Germany and other continental markets and “La Cocinera” in Spain. According to Euromonitor, our share of the savory frozen food market in the countries we operate stood at 12.6% in 2019 (1.9 times greater than the nearest competitor). We maintain the number one position in seven European geographies, namely the UK, Italy, Germany, Sweden, Austria, Spain, Belgium, Portugal and Ireland. The countries representing our top six markets, collectively UK, Italy, Germany, Sweden, Norway and France, represented approximately 68% of the total Western European frozen food markets. For a description of the principal markets in which we compete and related revenue, see Note 5 “Segment reporting” to our audited consolidated financial statements which appear elsewhere in this annual report. Frozen Food Market The European frozen food market is served by a number of national and international producers, both with branded and private label offerings, and within single or multiple product categories. We have the broadest participation by category and geography in Europe. According to Euromonitor, the savory frozen food market in Western Europe is estimated to have generated €28 billion in retail sales value in 2019. The frozen food business requires specialized manufacturing, logistics and distribution functions. There is also a high cost associated with building brand health, brand awareness and consumer trust. As a result, there are high barriers for profitable entry into the frozen food market in general and the branded segment in particular. Frozen food products are particularly attractive because they address important global food trends. Consumers increasingly prefer products that allow them to prepare meals quickly and with confidence, and expect products to be healthy and good value for money. In addition, consumers are increasingly focused on reducing food waste. Frozen food products can have all of these characteristics. They are easy to prepare, they reduce the need for artificial preservatives, they are often better value for money than chilled alternatives and they reduce waste at all points in the supply chain and also in-home (due to the long shelf life, and the ease of portionability). Nomad Foods Annual Report 33 96214_164pg_Body.indd 29 96214_164pg_Body.indd 29 4/17/20 11:27 AM 4/17/20 11:27 AM Over the last five years, notwithstanding the volatile macro-economic environment, the Western European savory frozen food market has grown on average 1.5% per year, driven by the aforementioned ability to address global food consumption trends. Furthermore, the amount of space that frozen food as a category occupies within the grocery retail environment is relatively stable due to the fixed amount of freezer space at the retailer that is not exposed to reductions in shelf space in favor of other categories or formats, as can be the case in shelf-stable parts of the retailer. Our Brands Our brands are household names with long histories and local heritage in their respective markets. Our Birds Eye brand was established in 1922 and is primarily marketed in the UK and Ireland, and the Aunt Bessie's brand was established in 1974 in the UK. The Goodfella's brand was established in Ireland in 1993 and is marketed also in the UK. The San Marco brand was established in 2003. The Findus brand, which is marketed in Italy, France, Spain, Sweden and Norway, was formed in Italy in 1941 and has a loyal following in each of its respective geographies. Iglo, founded in 1956, has a long-standing history and is marketed in Germany and other continental European countries. La Cocinera has allowed us to establish ourselves in Spain through a brand that was founded in 1962. Our Competitive Strengths contribute to our ongoing success. We believe the following competitive strengths differentiate us from our competitors and Market leader with solid European platform and strong acquisition opportunities. As the leading branded frozen food producer in Western Europe, we benefit from economies of scale and have developed a strong platform for our products throughout Europe in 2019, resulting in leadership positions in seven geographies and a 12.6% market share of the savory frozen food market in the countries we operate. We benefit from longstanding relationships with our customers which provide access to our diversified distribution channels, including supermarkets, discount retailers, the foodservice channel and other food retailers that sell directly to consumers. We benefit from a diverse category and geographic mix and believe our strong existing platforms facilitate our expansion within a large addressable market and provide a broad set of potential acquisition targets in various food categories and geographic markets. Effective brand equity strategy to leverage and expand well-known brands. Our brands are well-established household names with long histories and local heritage in their respective markets. We possess several iconic brand assets and focus on our local "hero" platforms that are designed to leverage these iconic assets such as the “Captain”. Each of the Birds Eye, Goodfella's, Aunt Bessie's, Iglo and Findus brands holds a leading position in terms of spontaneous brand awareness in certain European markets. Our leading brand recognition, broad product offering, and local provenance of these brands are key drivers of consumer trust and result in demand for our products. Experienced management team and Board with a proven track record. Our management team has extensive experience in the food industry and other fast moving consumer goods markets and has worked with leading multinational consumer goods companies globally. Our management team is complemented by an experienced Board of Directors, and collectively, they have a proven track record of successfully acquiring, integrating and managing consumer businesses. We believe our management team and Board of Directors’ collective industry knowledge, coupled with our track record of achieving growth and responding to challenging market conditions, will enable us to continue to generate profitable growth. 34 Nomad Foods Annual Report 96214_164pg_Body.indd 30 96214_164pg_Body.indd 30 4/17/20 11:27 AM 4/17/20 11:27 AM Optimized sourcing through established platform and diversified supplier base. We operate an efficient and centralized procurement and supply chain function which is closely aligned with our geographic footprint, allowing us to optimize our supply arrangements and reduce distribution costs. We source our products globally from a diverse supplier base and, as a result, we minimize our dependency on any one supplier. Our relationships with diverse suppliers enable us to safeguard the security of our supply and raw materials as well as enhance the quality and sustainability of such materials, while also delivering competitive pricing and limiting exposure to geographic risk and adverse currency movements. Strategic and geographically diversified manufacturing facilities. We own and operate an efficient network of thirteen manufacturing facilities with low capital expenditure requirements, all of which are located near the major markets we serve, providing for a balance between manufacturing and logistics costs and allowing for high levels of customer service. These facilities produce approximately 550 kilo tonnes of frozen product per year and have what we believe to be sufficient spare capacity to accommodate future growth in our main product categories. Commitment to innovation and research and development. We focus our new product efforts and our investment in market research on our Core products - fish, vegetables, meals and poultry - to ensure that the products we launch and re-launch overcome penetration barriers and win with consumers. For example, we recently introduced our vegetable based meat free innovations to meet a growing consumer need and trend. To ensure the development and introduction of successful products, we follow a structured process through which we move from idea generation, through concept screening, concept/product development and early volume sizing, to scale up and final validation. Our Strategy Our strategy is underpinned by three fundamental pillars which are to expand the category, grow the core and accelerate innovation. In addition, we have developed and made significant progress in implementing the following strategic initiatives: 1. Build an integrated group of best-in-class food companies and brands within existing and related food categories and expand our geographic footprint through strategic acquisitions. Our goal is to transform our company into an integrated best-in-class, global manufacturer, marketer and distributor of food products, within and outside of the frozen food category and the broader food sector. We believe there are significant growth opportunities in the European and North American markets and that our acquisitions provide a strong platform on which to grow our business and expand and enhance our market share in the food industry in key geographic markets. 2. Focus on “Core” products as a foundation for long-term growth. We continue our strategy which is rooted in relentless focus on our Core products which currently represent approximately 68% of our sales. These strategies include improving product quality, packaging renovation and executing in-store initiatives such as ensuring the right product assortment, display strategies and promotional efficiencies. We believe focusing on these Core product initiatives will accelerate growth, lead to margin expansion and improve our return on investment. To further accelerate growth, we continue to pursue innovation which leverages consumer trends such as health, wellness and convenience, but which are anchored in our core categories. 3. Align our business with consumer preferences and trends. Our goal is to create and acquire food businesses and brands that strongly align with consumer needs and preferences that have high growth and margin potential and that leverage our existing portfolio of brands. In addition, we seek to align our product innovation strategies with consumer trends such as increased demand for nutrition-packed meals that can be prepared in shorter times, vegetarian options, meat substitutes and sustainably sourced and produced food. Nomad Foods Annual Report 35 96214_164pg_Body.indd 31 96214_164pg_Body.indd 31 4/17/20 11:27 AM 4/17/20 11:27 AM 4. Leverage our acquisition expertise, strong management team and access to capital to identify and evaluate attractive growth opportunities. Our Founders and CEO have significant experience and expertise, and have been highly successful, in identifying, acquiring and integrating value-added businesses. We believe that this expertise, our access to capital and the deep industry knowledge of our management team will position us to acquire related and complementary food businesses that can enhance our market position, create synergies and fully leverage our existing marketing, manufacturing and supply chain capabilities, which we believe will allow us to deliver sustained profitable growth and maximize shareholder value. For example, on April 21, 2018 we completed the Goodfella's Acquisition including the Goodfella's and San Marco brands. This has enlarged our portfolio of brands to include the number one and number two market share positions within the frozen pizza category in Ireland and the UK, a successful frozen private label pizza business, and two frozen pizza manufacturing facilities. Also, on July 2, 2018 we completed the Aunt Bessie’s Ltd. acquisition. Aunt Bessie’s is a leading frozen food company based in the UK where it manufactures, distributes and sells a range of branded frozen food products. The Aunt Bessie’s brand holds number one and number two market share positions, respectively, within frozen Yorkshire puddings and frozen potatoes, which combine to represent the majority of its revenues. As a brand closely identified with roast dinners, Aunt Bessie’s has expanded Nomad Foods’ portfolio into this major eating occasion. The acquisition also included a production facility in Hull, England. 5. Respond to changing consumer shopping habits and drive advertising efficiency and impact. We are responding to the growing consumer shift to digital and mobile technologies, particularly in the UK, by investing in technology platforms and partnering with retailers that are executing their own e-commerce strategies to meet changing consumer habits. Online sales represented approximately 4% of our total sales as of December 31, 2019. We believe that the online sales channel will continue to provide further opportunities to drive market share gains through improved product content and upselling of our mealtime solution programs. In addition, our strategies are evolving in response to other consumer shopping trends such as increased purchases through the hard discounter channel, which has been growing significantly in the UK and Southern Europe. To further understand consumer trends and communicate with our consumers, we have begun to use more scientific methods to test creative concepts to better understand and drive consumer reaction and to optimize our advertising investments. 6. Generate strong margins and cash flow through disciplined net revenue management, supply chain optimization and disciplined cost management. We continue to increase our margins and cash flows by strengthening our net revenue management capabilities and focusing on supply chain optimization and disciplined cost management. These efforts, which will be implemented over time, will include developing stronger promotional programs, price pack architecture and trade terms as well as continuing our focus on lean manufacturing, factory footprint optimization, and procurement productivity. Products frozen food products: During the past three fiscal years, we have manufactured, marketed and distributed the following Fish: includes frozen fish products such as fish fingers, coated fish and natural fish. These products were the largest contributor to our revenues in 2019, 2018 and 2017. Vegetables: includes ready to cook vegetable products such as peas and spinach. Meals: includes ready to cook noodles, pasta, lasagne, pancakes and other ready-made meals under the Iglo, Findus and La Cocinera brand names. Poultry: includes frozen poultry and meat products such as nuggets, grills and burgers. Others: includes a variety of other offerings such as soups, pizza, bakery goods and, beginning in 2019, meat substitutes. 36 Nomad Foods Annual Report 96214_164pg_Body.indd 32 96214_164pg_Body.indd 32 4/17/20 11:27 AM 4/17/20 11:27 AM We continue to place a strong emphasis on renovation of our existing Core products, which include fish, vegetables, meals and poultry, in order to overcome penetration barriers and continue to build loyalty. For example, in 2019, we introduced under our new innovation platforms our Artisan (coated fish assortment), Veggie Power (modern vegetable blends) and Green Cuisine (pea protein sub-brand). We manage renovation and innovation centrally on European common product platforms and have more local involvement where products are differentiated and country specific. Our research and development continues to be centralized, allowing us to leverage our research and development investment across our markets and focus on our largest Core products. Customers Our customers are typically supermarkets and large food retail chains supplying food products directly to consumers. Each key market in which we operate has its own distinct retail landscape. We consider our key retailer clients to be, in the UK, Tesco, Asda and Sainsbury’s; in Italy, Coop, Conad and Esselunga; in Germany, Rewe and Edeka; in Sweden, ICA, Axfood and Coop; and in France, Carrefour, Auchan and E.Leclerc. For the year ended December 31, 2019, our top ten customers (in terms of revenue) accounted for 36% of revenues. The majority of our sales are to established retailers and we expect this channel to remain our most significant channel for the foreseeable future. We partner with traditional retailers when we identify commercial or marketing opportunities that can be of interest for both businesses. In addition, we are selectively building partnerships and are increasing our presence in the growing discounter channel. We are increasing our investment in online sales, which represented approximately 4% of our total sales as of December 31, 2019. The online grocery retail channel is growing faster than established grocery retail formats across developed markets. Frozen foods particularly benefit from the online channel as the advantages to the consumer of outsourcing transportation of frozen food to the retailer are greater than in other categories, and also because some of the barriers to purchasing in-store (e.g. colder aisles) are removed for the consumer online. Approximately 5% of our sales for the twelve month period ended December 31, 2019 were through the foodservice channel. The majority of these sales were in Sweden and consist primarily of sales of institutional and public sector customers such as schools and hospitals as well as privately run work canteens and quick service restaurants. Sales, Marketing and Pricing Our commercial strategy is centered around our Core products and our growth model focuses on three core elements: creating distinctive brands through leveraging our iconic brand assets, innovating to break penetration barriers balanced between renovation and innovation, and out executing in store through category leadership driving the right assortment, display and promotional efficiency. Our brand equity strategy aims to further increase brand awareness. We are utlizing our core iconic assets at all consumer touchpoints including traditional media, digital media, point of sale and packaging. Furthermore we have invested and will continue to seek to invest at sufficient levels of media on all our Core products. We maintain sales teams in each of our key markets and all other markets in which our products are sold with the exception of the Central and Eastern Europe markets where we operate via a distribution model. Our sales force is resourced to provide good store coverage. We have been chosen to lead category management projects by several leading supermarkets in each of our main product categories and have developed innovative presentations of our frozen food products and in-store marketing concepts with supermarkets in a number of our markets in order to increase shopper traffic and sales. Most recently, we have developed and are executing our “Perfect Store” concept which focuses on improving a consumer’s in-store shopping experience through presentation, layout and signage. 96214_164pg_Body.indd 33 96214_164pg_Body.indd 33 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 37 Manufacturing We own and operate thirteen manufacturing facilities which are located in Lowestoft and Hull (UK), Bremerhaven and Reken (Germany), Cisterna (Italy), Loftahammar and Bralanda (Sweden), Tonsberg and Larvik (Norway), Boulogne-sur-Mer (France), Valladolid (Spain), Longford and Naas (Republic of Ireland). These facilities produce approximately 550 kilo tonnes of frozen product per year, representing approximately 70% of the total volumes of our sales. The manufacturing facilities are located near the major markets we serve, providing for a balance between manufacturing and logistics costs and customer service. Our manufacturing facilities are focused on in house manufacturing of our main product categories and emphasize quality and efficiency through scale. We have also invested in automated lines, such as fish fingers, poultry and spinach lines. Although capacity differs per product line and facility, we estimate that we have sufficient spare capacity available to accommodate future growth in our main product categories and as necessary to accommodate the seasonal nature of some of our products, particularly vegetables. Procurement Our procurement functions are structured around primes (materials used in manufacturing which form a part of the end product, such as fish, vegetables, meat, other ingredients and packaging), non-production items (items purchased and services used to design, market and distribute the product, such as logistics, operations, including maintenance, sales and marketing) and co-pack (finished products bought from third parties, such as most vegetables other than peas and spinach). We have an efficient and centralized supply chain which is closely aligned with our geographic footprint, allowing us to optimize our supply arrangements and reduce distribution costs. We operate a centralized procurement function, with all procurement of primes and the majority of non-production items and co-pack procurement activities centralized to maximize scale efficiencies. We operate a global sourcing platform. Fish is sourced mainly from the United States, Russia and China, vegetables are sourced predominantly from Europe and poultry is sourced largely from South America (but also from Thailand and Eastern Europe). We have contracts in place with pea and spinach growers and third party pea processors in regions close to the location of pea growers. In addition, we utilize various co-pack suppliers for vegetables other than peas and spinach. The contract terms we enter into with various suppliers differ extensively with respect to length and provisions. We aim to maintain an appropriately diverse supplier base to safeguard the security of our supply of raw materials as well as enhance the quality and sustainability of such materials, while also delivering competitive pricing. We segregate vendors into “strategic” and “tactical” categories based on criteria such as bargaining power or opportunistic procurement. On that basis, we have identified a number of strategic suppliers with whom we maintain close relationships, particularly in relation to main product categories for which security of supply is critical. Raw materials are mostly directly shipped to our manufacturing facilities. The price of fish, vegetables and other agricultural commodities, including poultry and meat, can be volatile. We limit our exposure to price increases of raw materials by contractually securing prices for periods ranging from one month to a full year. Prices of raw materials that are harvested annually are generally fixed for a full year. Prices for certain other products, such as fish, dairy products and potatoes, are fixed for several months in line with industry practice. 38 Nomad Foods Annual Report 96214_164pg_Body.indd 34 96214_164pg_Body.indd 34 4/17/20 11:27 AM 4/17/20 11:27 AM Logistics Our distribution network is made up of our manufacturing facilities, warehouses, local distribution centers and third party providers of services (such as transport). We outsource the majority of our distribution processes to third parties seeking to collaborate with shared sites and integrated transport networks. Our distribution network is well consolidated and aligned with our manufacturing footprint in the UK, Ireland, Germany, Italy, Sweden, France, Norway and Spain. From our manufacturing plants, our products are sent to regional distribution centers to be further distributed to local markets. Our primary distribution centers are used to consolidate both local production and imported products to be sold locally. These sites include Wisbech in the UK, Reken in Germany, Vitulazio, Latina and Parma in Italy, Lognes in France, Tonsberg and Moss in Norway and Marcilla in Spain. Seasonality Our sales and working capital levels have historically been affected to a limited extent by seasonality. In general, sales volumes for frozen food are slightly higher in colder or winter months, partly because there are fewer fresh alternatives available for vegetables and because our retailers typically allocate more freezer space to the ice cream segment in hotter or summer months. In addition, variable production costs, including costs for seasonal staff, and working capital requirements associated with the keeping of inventories, vary depending on the harvesting and buying periods of seasonal raw materials, in particular vegetable crops. For example, stock levels typically peak in August to September just after the pea harvest, and as a result, we require more working capital during those months. Corporate Social Responsibility We continuously review our position to mitigate supply chain risks, working to meet relevant ethical, environmental and social obligations. We seek to source, manufacture and sell our food to consumers in a responsible way. We operate a sustainability program called Our Sustainable Path that reflects our commitments. We do this by endeavoring to: • Meet all relevant food and safety regulations • Uphold international sustainability standards • Lead, manage and review our approach, regularly assessing progress • Report progress annually through the Nomad Foods’ Sustainability report We also encourage all our suppliers to have or work towards a culture of continuous improvement. the UN Sustainability Development Goals (SDGs). It consists of three pillars, securing a “farm to fork” approach: Our sustainability program is based on the concepts of materiality and salience and aligned with 1. Good Sourcing • We focus on sustainably, responsibly sourced fish and seafood using independent sustainable standards, such as the Marine Stewardship Council standard (MSC) and Agriculture Stewardship Council (ASC). Our sustainable farming standards are expanding from regional practices to global standards with the introduction of the FSA standard (Farm Sustainability Assessment) from the Sustainable Agriculture Initiative (SAI). • We are committed to ethical trading, sourcing and procurement, upholding fundamental international standards. We are committed to require all suppliers to comply with applicable human rights laws and regulations. We request our direct suppliers to register to Sedex, one of the world’s largest collaborative platforms for sharing responsible sourcing data on supply chains. • We believe we are in compliance with all relevant environmental laws and regulations and we expect all suppliers to do the same. Nomad Foods Annual Report 39 96214_164pg_Body.indd 35 96214_164pg_Body.indd 35 4/17/20 11:27 AM 4/17/20 11:27 AM 2. Good Nutrition Every day our customers serve our food to their families. We want to inspire them to eat a more balanced diet and live healthier lifestyles. • We continuously work to improve our product portfolio, applying a nutrition strategy informed by an independent Nutritional Advisory Board and assessing our products using an externally verified Nutrient Profiling Tool. We also apply on pack nutritional labeling claims in markets where this is relevant. • We assess any new product development to drive higher sustainability across the portfolio. • We empower consumers to make their own decisions, communicating the nutritional values of our products on pack. 3. Good Operations • We recognize the importance of reducing the impact our operations have on the environment and are committed to reduce carbon emissions per tonne of produced volume from own production annually. • We consider the total packaging system when designing packaging, recognizing packaging plays an important role in terms of food safety, securing shelf life, convenience, communication as well as sustainability. We aim to minimize packaging material use. We work towards making all consumer packaging material recyclable, and prioritize packaging material from sustainable origins. • We believe that our people make the difference and make sure they have an active voice through the ‘Our Voice’ employee survey. Sustainability is important for our employees and we involve them in the work and encourage them to live our values every day. • We actively work to engage with and add value to the broader communities we operate in, while contributing to our wider sustainability agenda. We encourage our local businesses to support social causes in their regions, engaging at a local level. For example, a majority of our businesses contribute our products to local food banks and charities. Information Technology Our IT systems are critical to operating and growing our business, in particular to our general operations and logistics functions. A single SAP tool underpins the processes to support all of our operations and management reporting across countries with new tools being introduced to support Sales planning and Net Revenue Management activities. The IT architecture is designed as a consolidation platform enabling integration of future acquisitions. During 2019, Nomad migrated both the Goodfella's and Aunt Bessie's businesses onto the Nomad platform and the IT team are looking at ways to accelerate future integrations. We believe that the role of data and analytics will continue to increase in importance in decision-making, and we therefore intend to continue to enhance our capability to use such data and analytics in our decision-making process. The ability to integrate potential new acquisitions quickly with little or no adverse business impact, while maintaining the low cost of ownership, is a fundamental requirement of our IT strategy. Additionally, we utilize an outsourced infrastructure service provider, maintaining best in class IT cost alongside improved capability to scale in line with business developments. Intellectual Property Good brand protection continues to be of significant importance to our business as we rely on our brands to implement our master brand strategy. We have a substantial trademark portfolio with around 1,800 trademarks across all of our markets. Our intellectual property is managed centrally, and we work closely with a third party agency in respect of filings, renewals, recordings and the prosecution and enforcement of intellectual property matters internationally. 40 Nomad Foods Annual Report 96214_164pg_Body.indd 36 96214_164pg_Body.indd 36 4/17/20 11:27 AM 4/17/20 11:27 AM We own an EU trademark for our Birds Eye brand as well as national trademarks for our Birds Eye brand in the UK, Ireland and other EU countries, and in other parts of Europe outside the EU, parts of the Middle East, Asia and parts of Africa. For historical reasons, the Birds Eye trademark is owned by third parties in North America and Australia. We own a European Union trademark for our Iglo brand as well as national trademarks in many EU countries and in other parts of Europe outside the European Union, Australia, Israel, India, Canada, parts of Asia, South America and parts of Africa. We own the Findus trademark in many countries globally, other than in Switzerland, as well as (among others) the brands Lutosa in Belgium (until 2020) and La Cocinera in Spain and Andorra. We have secured registration for Nomad Foods in Europe and China, and have pending applications for the name in the US. Goodfella's and Aunt Bessie's joined our portfolio of brands in 2018 and are registered as European Union trademarks as well as national marks in other key markets of interest to the respective businesses. We are also in the process of securing registered protection for the new plant-based food sub-brand Green Cuisine across Europe. Material Contracts Each material contract to which we have been a party for the preceding two years, other than those entered into in the ordinary course of business, is listed as an exhibit to the registration statement to which this annual report is a part and is summarized elsewhere herein. Pensions We operate a number of different pension schemes across our various countries of operation, the majority of which are defined contribution schemes. We operate defined benefit pension plans in Germany, Sweden, Italy and Austria which are all closed to new entrants, as well as various defined contribution plans in other countries, the largest of which include Sweden and the UK. Long term service awards and other employee benefits are also in operation in a number of countries. Regulatory Matters Our activities are subject to laws and regulations regarding food safety, the environment and occupational health and safety. Food Safety Regulation As a manufacturer of foods intended for human consumption, we are subject to extensive legislation and regulation both from the European Union, the EU Member States and European free trade association (EFTA) members, in which we operate. The European Commission, Directorate-General for Health and Food Safety, is responsible for EU policy on food safety and health and for monitoring the implementation of related laws. The European Food Safety Authority advises the European Commission, the European Parliament and the EU Member States on food safety matters. EU Member States must ensure adequate enforcement, control and supervision of principles set forth in numerous EU Directives and Regulations and may be allowed to maintain or establish more stringent measures in their own legislation. These regulations govern the composition, manufacture, storage, handling, packaging, labeling, marketing and safety of our products. These regulations generally impose on food business operators an obligation to ensure that the operations under their control satisfy the relevant food law requirements and impose a mandatory traceability requirement along the food chain. The tracing information must be kept for a period of five years and upon request, must be made available to the relevant authorities. In addition, we are subject to specific food hygiene legislation that establishes rules and procedures governing the hygiene of food products. This legislation sets forth specific rules governing the proper hygiene for food products of animal origin and sets forth microbiological criteria for food products. In addition there are a number of other specific EU requirements relating to specific matters such as contaminants, packaging materials and additives. Nomad Foods Annual Report 41 96214_164pg_Body.indd 37 96214_164pg_Body.indd 37 4/17/20 11:27 AM 4/17/20 11:27 AM We are also subject to a broad range of European directives and regulations regarding the manufacture and sale of frozen foods for human consumption. These directives and regulations define technical standards of production, transport and storage of frozen foods intended for human consumption and require us to assure internal quality control at each stage of the “cold chain” and to implement any standards, as established by public authorities. continuous compliance with all relevant regulatory and food safety standards: Listed below are the various internal due diligence procedures we have established to ensure • • • • • • implementing food hygiene principles across all production sites in accordance with food hygiene regulations; annual external auditing of our production sites conducted by independent compliance companies applying the British Retail Consortium Global Standard for Food Safety Issue 8, its European equivalent, the International Food Standard or the Global Food Safety Initiative. Currently 93% of our suppliers are also certified to one or more of these food safety management systems and it is our long term objective to achieve 100% certification; ensuring that our Group’s Quality Management Systems comply with ISO 9001 with external audits to ISO or BRC standard; conducting internal audits covering all production sites as part of our internal audit program (including cross-audits where one site's audit team audits another's system); maintaining a risk-based microbiological and contaminant screening program, including screening for allergens, that covers raw materials and finished products; and holding monthly regulatory updates to assess emerging risk areas, update policies and review outstanding issues as part of the quality forum meeting which is attended by functional heads. Tariffs and Trade for our products. We are subject to specific trade requirements regarding fish and poultry, two main ingredients Food Labeling Regulation Pre-packaged food products must comply with provisions on labeling, which are harmonized throughout the European Union. Pre-packaged food products must also comply with provisions on nutrition labeling, which are also harmonized throughout the European Union. Under the Food Information for Consumers Regulation nutrition labeling is mandatory unless exempted. In addition to general and nutrition requirements, pre-packaged food products must bear a lot mark declaration via a manufacturing or packaging lot reference, which is also a harmonized system throughout the European Union. The lot reference allows consumers and businesses to trace the product in the event of a product withdrawal or recall. There are also specific labeling requirements for certain ingredients we use in our products. 42 Nomad Foods Annual Report 96214_164pg_Body.indd 38 96214_164pg_Body.indd 38 4/17/20 11:27 AM 4/17/20 11:27 AM Environmental Law The European Commission, Directorate-General for the Environment is responsible for EU policy on the environment and for monitoring the implementation of related laws. The European Union has issued numerous directives relating to environmental protection, including those aimed at improving the quality of water, addressing air and noise pollution, assuring the safety of chemicals and setting standards for waste disposal and clean-up of contamination. European directives are given effect by specific regulations in Member States and applicable regulations have been implemented in each of the countries in which we conduct our manufacturing activities. Accordingly, our facilities must obtain permits for certain operations and must comply with requirements relating to, among others, water supply and use, water discharges and air emissions, solid and hazardous waste storage, management and disposal of waste, clean-up of contamination and noise pollution. We are also subject to legislation designed to reduce energy usage and carbon dioxide emissions and also restrictions on the use of ozone depleting substances such as hydrochlorofluorocarbons (HCFCs). HCFCs are used in refrigeration systems and their use will be phased out as part of our normal maintenance, repair and replacement activities and we do not expect a need for significant incremental capital expenditures for this purpose. Compliance with environmental laws and regulations is managed at the facility level. Our manufacturing facilities all have a detailed environmental management system which are externally audited on an annual basis for compliance with ISO 14001 or BRC. In addition, under some environmental laws and regulations, we could be responsible for contamination we may have caused and investigating or remediating contamination at properties we own or occupy, even if the contamination was caused by a prior owner or other third party or was not due to our fault, and even if the activity which resulted in the contamination was legal at the time it occurred. We are in full preparation for potential scenarios regarding the impending exit of the UK from the EU, as we understand the situation at the present time. We believe there will be no impact on our compliance need as the UK has stated a full and equivalent legislation structure will be in place in the immediate post-exit timeframe. Occupational Health and Safety We have a legal responsibility to protect the health and safety of our employees, customers and any other persons who may be affected by our operations. We strive to provide a safe workplace; controlling and eliminating risks to health and wellbeing; ensuring that our facilities and the equipment within them are safe and that the environmental, health and safety procedures are both established and adhered to. We strive to ensure that dangerous articles and substances are transported, stored and used safely; provide adequate welfare facilities; provide workers with the information, instruction, training and supervision necessary to preserve and improve their health and safety; and consult with workers on health and safety matters. We aim to meet the European Framework Directive on Safety and Health at Work (89/391 EEC) ensuring we comply with all the local and European legislation in all the countries we have a presence, ensuring we share best practices and procedures across our business to continuously improve our safety and environmental performance whilst driving a positive safety culture. We have established a Health and Safety Management System modeled on the international Occupational Health & Safety management system specification OHSAS 18001. Our manufacturing facilities in the UK, Spain, Italy and Germany have achieved full accreditation to OHSAS 18001. Compliance Programs We have established policies and procedures aimed at compliance with applicable legislation and regulations, including policies for Anti-Bribery and Corruption as well as Trade Sanctions. In addition, our Code of Business Principles is designed to ensure compliance with applicable legal and regulatory requirements to drive a strong compliance culture. A breach of the Code of Business Principles can lead to disciplinary action, including termination of employment. 96214_164pg_Body.indd 39 96214_164pg_Body.indd 39 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 43 Our SafeCall Line, which is operated by an external service provider, allows employees to report issues anonymously. Compliance at the local level is based in large part on building strong local companies and developing a proper approach in coping with operational dilemmas within the boundaries of applicable laws and responsible conduct. Local management, assisted by the Internal Audit department, carries out reviews to identify compliance risks and to ensure that adequate systems to manage those risks are in place. We continually analyze and assess changes in applicable laws and regulations, and implement appropriate adaptations are implemented when necessary. Insurance We have a comprehensive Global Insurance Program covering all territories that the organization operates within and undertake regular risk reviews. We continually assess business risks as part of the review to ensure we maintain an effect insurance program covering risk exposures. The Global Insurance Program encompasses coverages such as directors and officers, property damage and business interruption, public liability, product liability, employers liability, personal accident and travel, advertising, motor and marine. 44 Nomad Foods Annual Report 96214_164pg_Body.indd 40 96214_164pg_Body.indd 40 4/17/20 11:27 AM 4/17/20 11:27 AM C. Organizational Structure We (Nomad Foods Limited) are a holding company with 43 subsidiaries, the majority of which are wholly-owned by us. The following table provides a list of all of our significant subsidiaries and country of incorporation. Name Nomad Foods Europe Holdings Limited Nomad Foods Europe Holdco Limited Nomad Foods Europe Finco Limited Nomad Foods Europe Midco Limited Nomad Foods Bondco Plc Nomad Foods Lux S.à.r.l. Nomad Foods Europe Limited Birds Eye Limited Nomad Foods Europe Finance Limited Aunt Bessie's Limited Birds Eye Ireland Limited Birds Eye Ireland Oldco Unlimited Company Iglo Holding GmbH Iglo Nederland B.V. Iglo Belgium S.A. Iglo Portugal Iglo Austria Holdings GmbH C.S.I. Compagnia Surgelati Italiana S.R.L. Findus Sverige Holdings AB Iglo GmbH Frozen Fish International GmbH Liberator Germany Newco GmbH Iglo Austria GmbH Findus Sverige AB Frionor Sverige AB Findus Holdings France SAS Findus France SAS Findus Espana SLU Findus Danmark A/S Findus Finland Oy Findus Norge AS Findus Norge Holding AS Toppfrys AB Activity Holding Holding Holding Holding/Finance Finance Finance Management Trading Finance Non-Trading Trading Non-Trading Holding Trading Trading Trading Holding Trading Holding Trading Trading Property Trading Trading Holding Holding Trading Trading Trading Trading Trading Holding Trading Country of incorporation England England England England England Luxembourg England England England England Republic of Ireland Republic of Ireland Germany Netherlands Belgium Portugal Austria Italy Sweden Germany Germany Germany Austria Sweden Sweden France France Spain Denmark Finland Norway Norway Sweden Ownership as of December 31, 2019 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 81% 96214_164pg_Body.indd 41 96214_164pg_Body.indd 41 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 45 D. Property, Plant and Equipment The following table sets forth information on the main manufacturing sites used by us in our Production (ktons) Utilization % Freehold/ Leasehold Footprint 53% Leasehold Buildings: 11,000 m2 business: Facility Boulogne, France Bralanda, Sweden Products Fish Products Vegetables Bremerhaven, Germany Fish Products Cisterna, Italy Hull, UK Larvik, Norway Vegetables, Free Flow Meals, Fish Fingers, Sofficini Yorkshire Puddings, Accompaniments & Desserts Vegetables, Free Flow Meals, Ready Meals Loftahammar, Sweden Bakery Products Longford, ROI Frozen Pizza Products Lowestoft, UK Vegetables, Fish Products, Poultry, Potato, Beef Burgers Naas, ROI Frozen Pizza Products Reken, Germany Tonsberg, Norway Valladolid, Spain Vegetables, Free Flow Meals, Ready Meals, Special Foods French Fries, Vegetables, Free Flow Meals Vegetables, Free Flow Meals, Ready Meals, Pastry Products, Pizza 21 10 93 71 26 7 3 18 112 44 99 30 16 35% Freehold 89% Leasehold 67% 55% 37% 56% 98% 85% 94% 68% Freehold Freehold Freehold Freehold Freehold Freehold Freehold Site: 80,000m2 Buildings: 40,000m2 Site: 90,000 m2 Buildings: 30,000 m2 Site: 269,560 m2 Buildings: 69,198 m2 Site: 39,000 m2 Buildings: 15,000 m2 Site: 57,968 m2 Buildings: 7,246 m2 Buildings: 5,300 m2 Site: 21,000 m2 Buildings: 6,200 m2 Buildings: 12,000 m2 Site: 20,000 m2 Buildings: 118,000 m2 Site: 43,000 m2 Buildings: 30,000 m2 Site: 58,000 m2 87% Leasehold 35% Freehold Buildings: 50,000 m2 Site: 80,000 m2 Mixed Site: 88,549 m2 For more information on property, plant and equipment see Note 12 “Property, plant and equipment”. We lease our principal executive offices located at No. 1 New Square, Bedfont Lakes Business Park, Feltham, Middlesex, TW14 8HA, which is 36,549 square feet in size. Item 4A. Unresolved Staff Comments None. Item 5. Operating and Financial Review and Prospects The following is a discussion of the financial condition and results of operations for the years ended December 31, 2019 and 2018. Discussion regarding our financial condition and results of operations for the year ended December 31, 2018 as compared to the year ended December 31, 2017 is included in Item 5 of our Annual Report on Form 20-F for the year ended December 31, 2018, filed with the SEC on February 28, 2018 (the "2018 Form 20-F"). 46 Nomad Foods Annual Report 96214_164pg_Body.indd 42 96214_164pg_Body.indd 42 4/17/20 11:27 AM 4/17/20 11:27 AM Some of the information contained in this discussion and analysis or set forth elsewhere in this annual report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in Item 3 Key Information-D. Risk Factors of this annual report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. This discussion should be read in conjunction with our audited historical consolidated financial statements and other financial information included elsewhere in this annual report. The historical financial information has been prepared in accordance with IFRS. Overview Nomad operates in the European frozen food market, selling its products primarily to large grocery retailers either directly or through distribution arrangements primarily in the UK, Italy, Germany, Sweden, France and Norway. The countries representing our top six markets collectively represented approximately 68% of the total Western European frozen food markets (in terms of retail sales value) and generated 80% of our revenue in 2019. We also sell our products in Ireland, Austria, Belgium (including the Belviva/Lutosa brand), Finland, Greece, Hungary, Ireland, Portugal, Switzerland, Denmark, The Netherlands and Spain (including the La Cocinera brand). The brands under which we sell our products are “Birds Eye”, "Aunt Bessie's" and "Goodfella's" in the UK and Ireland, "San Marco" in the UK, “Findus” in Italy, San Marino, France, Spain, Sweden and Norway and “Iglo” in Germany and other continental markets. Norway, two in Ireland, two in the UK and one each in Spain, Italy and France. We currently operate thirteen manufacturing plants, two in Germany, two in Sweden, two in Financings and Acquisitions On June 15, 2018, we amended and restated our Senior Facilities Agreement (as defined herein) establishing a $300.0 million incremental term loan and increasing the amount of U.S. Dollar Term Loans to $953.4 million. Principal outstanding under the Euro-denominated term loan remained unchanged at €558.0 million. Maturity dates of May 2024 and May 2023 for both Euro and U.S. Dollar denominated Term Loans, and the €80.0 million Revolving Credit Facility respectively also remained unchanged. On April 21, 2018 we completed the Goodfella's Acquisition, including the Goodfella's and San Marco brands, in an all cash deal valued at £209.7 million (€239.0 million). This has enlarged our portfolio of brands to include the number one and number two market share positions within the frozen pizza category in Ireland and the UK respectively, a successful frozen private label pizza business, and two frozen pizza manufacturing facilities. On July 2, 2018 we completed the Aunt Bessie’s Ltd. Acquisition for a purchase price of £209.0 million (€235.9 million). Aunt Bessie’s is a leading frozen food company based in the UK where it manufactures, distributes and sells a range of branded frozen food products. The Aunt Bessie’s brand holds number one and number two market share positions, respectively, within frozen Yorkshire puddings and frozen potatoes, which combine to represent the majority of its revenues. As a brand closely identified with roast dinners, Aunt Bessie’s has expanded Nomad Foods’ portfolio into this major eating occasion. The acquisition also included a production facility in Hull, England. On March 22, 2019 we issued 20,000,000 ordinary shares in a public offering at $20.00 per share for aggregate gross proceeds of $400.0 million (€353.6 million). Directly attributed transaction costs of €11.1 million were incurred. Accounting for the Goodfella's Acquisition in accordance with IFRS from the date of the acquisition, April 21, 2018. We have reflected the Goodfella's acquisition in our consolidated financial statements prepared 96214_164pg_Body.indd 43 96214_164pg_Body.indd 43 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 47 We have accounted for the acquisition using the purchase method as required by IFRS 3 "Business Combinations". The net assets of the Goodfella's acquisition has been adjusted to fair value as of April 21, 2018, the date when control passed to us. The excess of the costs of acquisition over the fair value of the assets and liabilities of the Goodfella's acquisition is recorded as goodwill. IFRS 3 "Business Combinations" allows the Company a year after the acquisition date in which to finalize the purchase price allocation. No changes have been made to the preliminary findings that were included within our consolidated financial statements as of December 31, 2018. Accounting for the Aunt Bessie's Ltd. Acquisition prepared in accordance with IFRS from the date of the acquisition, July 2, 2018. We have reflected the Aunt Bessie's Ltd. acquisition in our consolidated financial statements We have accounted for the acquisition using the purchase method as required by IFRS 3 "Business Combinations". The net assets of the Aunt Bessie's Ltd. acquisition has been adjusted to fair value as of July 2, 2018, the date when control passed to us. The excess of the costs of acquisition over the fair value of the assets and liabilities of the Aunt Bessie's Ltd. acquisition is recorded as goodwill. IFRS 3 "Business Combinations" allows the Company a year after the acquisition date in which to finalize the purchase price allocation and so preliminary findings were included within our consolidated financial statements as of December 31, 2018. An adjustment of €1.9 million has been recognized in the year to December 31, 2019 to recognize pre-acquisition related liabilities. Critical Accounting Estimates and Judgments Information relating to “Critical Accounting Estimates and Judgments” are described in Note 4 to the Financial Statements. The following is a review of the more significant assumptions and estimates as well as accounting policies we used to prepare our consolidated financial statements. Discounts and trade promotions Discounts given by the Company include rebates, price reductions and incentives given to customers, promotional couponing and trade communication costs. Each customer has a unique agreement that is governed by a combination of observable and unobservable performance conditions. Trade promotions comprise of amounts paid to retailers for programs designed to promote Company products and include pricing allowances, merchandising funds and customer coupons, which are offered through various programs to customers and consumers. The ultimate costs of these programs can depend upon retailer performance and is the subject of significant management estimates. The estimated ultimate cost of the program is based upon the programs offered, timing of those offers, estimated retailer performance based on history, management’s experience and current economic trends. At each financial year end date, any discount or trade promotion expense incurred but not yet invoiced is estimated and accrued for. In certain cases, the estimate for discounts and trade promotions requires the use of forecast information for future trading periods and therefore a degree of estimation uncertainty exists. These estimates are sensitive to variances between actual results and forecasts. The estimate is based on accumulated experience and the principle that revenue is only recognized to the extent that it is highly probable that a significant reversal will not occur. Management use judgment when considering when accruals can be released. Business combinations The Company is required to recognize separately, at the acquisition date, the identifiable assets, liabilities and contingent liabilities acquired or assumed in a business combination at their fair values. This involves a judgment as to what intangible assets can be separately identified as well as an estimate of fair value of all assets and liabilities acquired. Such estimates are based on valuation techniques, which require considerable estimation in forecasting future cash flows and developing other assumptions. These estimates are based on information available on the acquisition date and assumptions that have been deemed reasonable by management. 48 Nomad Foods Annual Report 96214_164pg_Body.indd 44 96214_164pg_Body.indd 44 4/17/20 11:27 AM 4/17/20 11:27 AM Significant areas of judgment and estimation include valuing tangible and intangible assets, including the determination of their remaining useful lives, as well as the consideration of liabilities, including uncertain tax positions. Where such items are material to the financial statements, we engage third-party valuation firms to assist in the valuation. The valuation of these assets and liabilities is based on the assumptions and criteria which include, in some cases, estimates of future cash flows discounted at the appropriate rates. The choice of assumptions and valuation technique can lead to significant differences in the valuation. We believe that the assumptions and techniques applied are reasonable based on information available on the date of acquisition. accounting for acquisitions made in 2018 as disclosed in Note 14 in Item 18. No acquisitions have been made in 2019, although the Company has finalized the acquisition Carrying value of goodwill and brands As of December 31, 2019, the Company has reported Goodwill of €1,862.9 million as well as indefinite-lived brands of €2,041.8 million. The Company’s goodwill and brand values have been allocated based on the enterprise value at acquisition of each cash generating unit. Goodwill is monitored at an operating segment level for which Nomad has one reporting and operating segment, ‘Frozen'. As required by IAS 36 “Impairment of Assets”, an annual review of the carrying amount of the goodwill and the indefinite life brands is carried out to identify whether there is any impairment to these carrying values. This is performed in the fourth quarter of each year. A qualitative review is performed to coincide with all interim reporting periods, which is extended to a full review where indicators of impairment are identified. Indicators of impairment include a sustained decrease in our market capitalization or sustained deterioration in any factor that affects profitability, such as market share or competition. The review is performed using the discounted cash flows model whereby a comparison of the carrying values to the value in use is made. As there is one reporting and operating segment, value in use is calculated as the net present value of the projected risk-adjusted cash flows of the Company as a whole. The estimation of the value in use calculation requires the entity to estimate the future cash flows expected to arise from the Company and apply a suitable discount rate in order to calculate present value. This requires us to make assumptions and estimates regarding historical information, future plans and external sources. Assumptions used are consistent with internal projections and we believe these are comparable to those used by other participants in the market. Unanticipated changes to the market or wider economy may affect the assumptions made and lead to reduced cash flows or higher discount rates, which could lead to an impairment being recognized. The discount rate is calculated using a capital asset pricing model to determine a weighted average cost of capital expected by a market participant. Observable market data is used, including available information on comparable companies, such as expected rates of return and equity structure. These variables are influenced by macroeconomic factors and an increase in these variables could reduce the present values of future cash flows in the model. A pre-tax discount rate of 7.1% was applied to the cash flows in the 2019 review, as well as a long-term growth rate of 1.0%. Neither of these assumptions reflect the long-term assumptions used by the Company for investment planning. Impairment was not required as at December 31, 2019. Valuations derived from the discounted cash flow model indicate a sufficient amount of headroom for which any reasonably possible change to key assumptions is unlikely to result in an impairment of the related goodwill. Employee benefit obligation The Group operates a number of defined benefit pension schemes and post-employment benefit schemes which are valued by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. Each scheme has an actuarial valuation performed and is dependent on a series of assumptions to estimate the projected obligations. The assumptions include variables which are revised periodically, that include discount rates, expected salary increases, inflation, employee turnover, retirement age, mortality and medical care costs. Our assumptions reflect historical experience and management's best judgment regarding future obligations. The assumptions used affect the current service cost and interest expense as well as changes in the obligation recognized. Net actuarial gains or losses arising from changes in assumptions and from experience are recognized in other comprehensive income/(loss). 96214_164pg_Body.indd 45 96214_164pg_Body.indd 45 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 49 Since defined benefit pension schemes and post-employment benefit schemes are measured on a discounted basis, the discount rate applied has an impact on the expense and obligation recognized. These discount rates are determined by reference to market yields at the end of the reporting period on high quality corporate bonds, except for Sweden where a deep market does not exist, where mortgage bonds are used. Our significant schemes operate in Germany and Sweden, where discount rates of 1.15% and 1.45% have been applied. A 1% increase in discount rates used throughout the Company would decrease the obligation by €51.4 million, whilst a 1% decrease in discount rates would increase the obligation by €68.1 million. The impact on profit before tax in either scenario is not significant. Management consider the discount rate to be the most significant assumption. Note 23 in Item 18 contains additional details on the schemes and obligation, including a sensitivity analysis over other key assumptions. Uncertain tax positions The Company actively seeks to manage tax exposures by proactively engaging with tax authorities and applying for Advanced Pricing Agreements where appropriate. Where tax exposures can be quantified, an accrual for uncertain tax positions is made based on best estimates with regard to the amounts expected to be paid to the relevant tax authority. Given the inherent uncertainties in assessing the outcomes of these exposures (which can sometimes be binary in nature), the Company could in future periods experience adjustments to these accruals. The factors considered include the progress of discussions with the tax authorities and the level of documentary support for historical positions taken by previous owners. Recently Issued and Not Yet Adopted Accounting Pronouncements under IFRS to the Financial Statements. Information relating to “IFRSs not yet adopted” are described in detail and are reported in Note 3 50 Nomad Foods Annual Report 96214_164pg_Body.indd 46 96214_164pg_Body.indd 46 4/17/20 11:27 AM 4/17/20 11:27 AM A. Operating Results Overview of Results Statement of Income data: Revenue Cost of sales Gross profit Other operating expenses Exceptional items Operating profit Finance income Finance costs Net finance costs Profit before tax Taxation Profit for the period Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 €m €m €m 2,324.3 (1,626.4) 2,172.8 (1,519.3) 1,956.6 (1,357.2) 697.9 (359.9) (54.5) 283.5 2.5 (75.7) (73.2) 210.3 (56.7) 153.6 653.5 (352.7) (17.7) 283.1 1.6 (57.6) (56.0) 227.1 (56.6) 170.5 599.4 (319.3) (37.2) 242.9 7.2 (81.6) (74.4) 168.5 (32.0) 136.5 The table below presents certain additional key performance indicators: (€ in millions, except percentages) Gross margin(1) Adjusted EBITDA(2) Adjusted EBITDA margin(3) Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 €m €m €m 30.0% 432.0 18.6% 30.1% 376.4 17.3% 30.6% 328.1 16.8% (1) Gross Margin. Gross margin represents gross profit as a percentage of revenue for the relevant period. (2) Adjusted EBITDA. EBITDA is profit or loss for the period before taxation, net financing costs, depreciation and amortization. Adjusted EBITDA is EBITDA adjusted to exclude, when they occur, the impacts of exited markets, acquisition purchase price adjustments, chart of account (“CoA”) alignments and exceptional items such as restructuring charges, goodwill and intangible asset impairment charges and other unusual or non-recurring items. In addition, we exclude other adjustments such as the impact of share based payment expenses and related employer payroll taxes, and non-operating M&A related costs, because we do not believe they are indicative of our normal operating costs, can vary significantly in amount and frequency, and are unrelated to our underlying operating performance. The Company believes Adjusted EBITDA provides important comparability of underlying operating results, allowing investors and management to assess operating performance on a consistent basis. Accordingly, the information has been disclosed in this annual report to permit a more complete and comprehensive analysis of our operating performance. You should exercise caution in comparing our Adjusted EBITDA with similarly titled measures of other companies, as the definition may not be comparable. Adjusted EBITDA should not be considered as an alternative to profit/(loss) for the period, determined in accordance with IFRS, as an indicator of the Company’s operating performance. (3) Adjusted EBITDA Margin. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of revenue for the relevant period. Adjusted EBITDA and Adjusted EBITDA margin are non-IFRS measures and you should not consider them an alternative or substitute to operating profit or operating margin as a measure of operating performance. 96214_164pg_Body.indd 47 96214_164pg_Body.indd 47 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 51 follows: The following table reconciles profit for the period to Adjusted EBITDA for the relevant period as Profit for the period Taxation Net financing costs Depreciation and amortization Acquisition purchase price adjustments Exceptional items (1) Other add-backs (2) Adjusted EBITDA Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 €m €m €m 153.6 56.7 73.2 68.3 — 54.5 25.7 170.5 56.6 56.0 46.3 5.7 17.7 23.6 136.5 32.0 74.4 42.4 — 37.2 5.6 432.0 376.4 328.1 (1) Elimination of exceptional items which management believes are non-recurring and do not have a continuing impact. Details of what has been identified as exceptional is included in the Results of Operations for each reporting period as set out in this item and in Item 5 of the 2018 Form 20-F. (2) Represents the elimination of share-based payment charges and related employer payroll expense of €22.4 million (2018: €14.7 million, 2017: €2.6 million) and elimination of non-operating M&A related costs, professional fees, transaction costs and purchase accounting related valuations of €3.3 million (2018: €8.9 million, 2017: €3.0 million). We exclude these costs because we do not believe they are indicative of our normal operating costs, can vary significantly in amount and frequency, and are unrelated to our underlying operating performance. Description of Key Line Items and Certain Key Performance Indicators Set forth below is a brief description of key items from our consolidated statements of income. For additional information, see Note 3 to our audited consolidated financial statements which appear elsewhere in this annual report. Revenue. Revenue is comprised of sales of goods after deduction of discounts and sales taxes. It does not include sales between Nomad subsidiaries. Discounts given by us include rebates, price reductions and incentives given to customers, promotional couponing and trade communication costs. At each end date of a reporting period, any discount incurred, but not yet invoiced, is estimated and accrued. Revenue is recognized when the risks and rewards of the underlying products have been transferred to the customer. This is usually upon either the dispatch of a shipment or the delivery of goods to the customer but is dependent upon contractual terms that have been agreed with a customer. Sales discounts incurred but not yet invoiced are established based on management’s best estimate at the end of the reporting period. Cost of Sales. Cost of Sales are comprised of the cost of the inventories and distribution costs. Cost of inventories includes expenses related to the procurement and purchase of raw materials, as well as conversion costs including labor costs, depreciation of production assets, fuel, electricity, equipment maintenance and inspection. Other Operating Expenses. Other operating expenses are comprised of advertising and promotions and indirect costs. Indirect costs include staff costs, selling and marketing expenses, administration expenses, research and development expenses, amortization of software, amortization of brands and other expenses. Exceptional items. The separate reporting of exceptional items which are presented as exceptional within the relevant income statement category helps provide an indication of our underlying business performance. Exceptional items have been identified and adjusted by virtue of their size, nature or incidence. In determining whether an event or transaction is exceptional, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence. Finance Income. Finance income is comprised of interest income, other financing related income and net foreign exchange gains on translations of financial assets and liabilities held in currencies other than the Company’s functional currency. 52 Nomad Foods Annual Report 96214_164pg_Body.indd 48 96214_164pg_Body.indd 48 4/17/20 11:27 AM 4/17/20 11:27 AM Finance Costs. Finance costs are comprised of interest expenses, net interest on net defined pension plan obligations, amortization of borrowing costs, net foreign exchange costs on translations of financial assets and liabilities held in currencies other than the Company’s functional currency, financing costs incurred as a result of amendments of debt terms and other financing related costs. Taxation. Taxation is comprised of current tax expenses and deferred tax movements. Gross Margin. Gross margin is gross profit as a percentage of revenue. We also utilize certain additional key performance indicators, as described below. We believe these measures provide an important alternative measure with which to assess our underlying trading performance on a constant basis. Our calculation of Adjusted EBITDA and Adjusted EBITDA margin may be different from the calculations used by other companies and therefore comparability may be limited. Adjusted EBITDA and Adjusted EBITDA margin are non-IFRS measures and you should not consider them an alternative or substitute to operating profit or operating margin as a measure of operating performance. Adjusted EBITDA. EBITDA is profit or loss for the period before taxation, net financing costs, depreciation and amortization. Adjusted EBITDA is EBITDA adjusted to exclude, when they occur, the impacts of exited markets, acquisition purchase price adjustments, chart of account (“CoA”) alignments and exceptional items such as restructuring charges, goodwill and intangible asset impairment charges and other unusual or non-recurring items. In addition, we exclude other adjustments such as the impact of share based payment expenses and related employer payroll taxes, and non-operating M&A related costs, because we do not believe they are indicative of our normal operating costs, can vary significantly in amount and frequency, and are unrelated to our underlying operating performance. The Company believes Adjusted EBITDA provides important comparability of underlying operating results, allowing investors and management to assess operating performance on a consistent basis. Adjusted EBITDA Margin. Adjusted EBITDA margin is Adjusted EBITDA as a percentage of revenue. Currency Our consolidated financial statements have been presented in Euro, which is our functional currency. Unless specifically stated otherwise herein, transactions in foreign currencies have been translated at the foreign exchange rate at the date of the relevant transaction. Changes in foreign currency rates have a translation impact on our reported operating results. A significant portion of our operations have functional currencies other than Euro (including Pound Sterling, Norwegian Krone and Swedish Krona). In preparing our financial statements, translations in currencies other than our functional currency are recognized at the rates of exchange prevailing at the dates of transaction. Accordingly, our results for each of the periods presented below have been impacted by fluctuations in foreign exchange rates. Where material, the impact of translation of currency on results has been provided. For a discussion on strategies to mitigate the effect of these fluctuations see Note 33 "Financial risk management" to our consolidated financial statements which appear elsewhere in this annual report. 96214_164pg_Body.indd 49 96214_164pg_Body.indd 49 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 53 Results of Operations for the Year Ended December 31, 2019 and the Year Ended December 31, 2018 Statement of Income data: Revenue Cost of sales Gross profit Other operating expenses Exceptional items Operating profit Finance income Finance costs Net finance costs Profit before tax Taxation Profit for the period Year ended December 31, 2019 Year ended December 31, 2018 €m 2,324.3 (1,626.4) 697.9 (359.9) (54.5) 283.5 2.5 (75.7) (73.2) 210.3 (56.7) 153.6 €m 2,172.8 (1,519.3) 653.5 (352.7) (17.7) 283.1 1.6 (57.6) (56.0) 227.1 (56.6) 170.5 Revenue for the year ended December 31, 2019 was €2,324.3 million (year ended December 31, 2018: €2,172.8 million). The 7.0% revenue increase was driven by organic growth on the base business of 2.1% and an increase in revenue from the acquired businesses of 4.9%. Gross profit, defined as revenue less cost of sales, increased €44.4 million to €697.9 million for the year ended December 31, 2019 from €653.5 million for the year ended December 31, 2018. The adoption of IFRS 16 Leases on January 1, 2019, has not had a material impact on gross profit for the year ended December 31, 2019. The increase in gross profit was driven by the increase in revenue partly offset by a change in gross margin. Gross Margin, defined as gross profit as a percentage of revenue, fell by 10 basis points to 30.0% from 30.1% in the year ended December 31, 2018 primarily due to: • • • • A 20 basis points increase relating to the non-cash fair value uplift of inventory in 2018, recorded as part of the Goodfella's Pizza and Aunt Bessie's purchase price accounting. Acquisition mix of 50 basis points decrease due primarily to the acquired businesses product mix margin profile being lower. A 330 basis points benefit from pricing, promotional efficiencies and mix; A 310 basis points decrease due to cost of goods inflation. Other operating expenses increased to €359.9 million for the year ended December 31, 2019 (year ended December 31, 2018: €352.7 million). The increase of €7.2 million was driven by higher share-based payment expenses and associated employer payroll tax expense, and the annualized impact from acquired businesses' expenses. The adoption of IFRS 16 Leases on January 1, 2019, has not had a material impact on gross profit for the year ended December 31, 2019. Exceptional items of €54.5 million were incurred in the year ended December 31, 2019 (year ended December 31, 2018: €17.7 million). Included in this charge are (i) a charge of €44.0 million from the release of indemnification assets, (ii) costs of integrating the Goodfella’s pizza business and Aunt Bessie's business of €12.5 million (year ended December 31, 2018: €8.3 million), (iii) expenses for the Findus Group integration which relates to the roll-out of the Nomad ERP system of €3.5 million (year ended December 31, 2018: €10.4 million), (iv) expenses of €5.7 million relating to a three-year factory optimization program which was initiated in 2018 (year ended December 31, 2018: €1.6 million), and (v) expenses related to preparations for the potential adverse impacts of the United Kingdom exiting the European Union ("Brexit") of €1.6 million. Offsetting these charges are a net income on settlement of legacy matters relating to periods prior to acquisition of the Findus and Iglo businesses of €9.2 million (year ended December 31, 2018: income of €3.8 million), as well as income associated with supply chain reconfiguration, relating to restructuring activities in Sweden of €3.6 million (year ended December 31, 2018: net expense of €1.2 million). 54 Nomad Foods Annual Report 96214_164pg_Body.indd 50 96214_164pg_Body.indd 50 4/17/20 11:27 AM 4/17/20 11:27 AM Net finance costs of €73.2 million in the year ended December 31, 2019 (year ended December 31, 2018: €56.0 million) include €57.2 million of interest payable on long term borrowings, lease liabilities and other cash pay interest expenses net of hedges (year ended December 31, 2018: €49.8 million), losses on derivatives designated as fair value through profit and loss of €8.8 million (year ended December 31, 2018: gain of €1.4 million), €3.8 million of other interest and finance costs (year ended December 31, 2018: €4.9 million), €2.0 million of amortization of capitalized borrowing costs (year ended December 31, 2018: €1.5 million) and a loss of €3.9 million resulting from the translation of foreign currency-denominated financial assets and liabilities into Euros (year ended December 31, 2018: €0.3 million). This is offset by finance income of €2.5 million (year ended December 31, 2018: €0.2 million). interest payable for the year ended December 31, 2019. The adoption of IFRS 16 Leases on January 1, 2019, has resulted in a €4.6 million increase to There was a tax charge in the year ended December 31, 2019 of €56.7 million based on the underlying taxable profits. A taxation charge of €56.6 million was booked in the year ended December 31, 2018. This difference is principally caused by higher tax rates applied to profits in other jurisdictions, by greater non-deductible expenses, and by a reduction in the use of certain tax losses, offset by lower profits. As noted in Item 3:D. Risk Factors, the future performance of the business is affected by a range of governmental economic, fiscal, monetary and political factors. In particular, the outcome of Brexit negotiations could have a material impact on the future results of the business. B. Liquidity and Capital Resources Overview We believe that cash flow from operating activities, available cash and cash equivalents and our access to our revolving credit facility will be sufficient to fund our liquidity and other requirements for at least the next 12 months. At December 31, 2019, we had €887.6 million of total liquidity, comprising €826.1 million in cash and €62.8 million of available borrowings under our revolving credit facility, offset by bank overdrafts of €1.3 million. We also expect to continue to raise cash through equity and debt offerings to support the strategic aims of the Company when it is advisable to do so and market conditions allow. In addition, we may enter into working capital related facilities including receivables financing, reverse factoring and supply chain financing to support the requirements of the business. Our principal liquidity requirements are for working capital and general corporate purposes, including capital expenditures and debt service, as well as to identify and effect strategic acquisitions. As a holding company, we depend on our receipt of cash dividends from our operating subsidiaries. For more information, see Item 3D: Key Information - Risk Factors - We are a holding company whose principal source of operating cash is the income received from our subsidiaries. Restricted Cash Nomad had cash and cash equivalents of €826.1 million at December 31, 2019, of which €0.1 million was restricted. This compares with cash and cash equivalents of €327.6 million at December 31, 2018 of which €0.1 million was restricted. Cash may be restricted for reasons including, but not limited to collateral as support for issuance of guarantees, or funds held in escrow accounts. Cash Flows Our primary sources of liquidity for the periods reported were cash flow from operations and financing activities. Cash flows from financing activities have in the past included, among other things, borrowings under credit facilities, high yield notes and shareholder loan notes. Our liquidity requirements arise primarily from the need to meet debt service requirements, to fund capital expenditures, to meet working capital requirements and to fund pension and tax obligations. Cash flows generated from operating activities together with cash flows generated from financing activities, have historically been sufficient to meet our liquidity needs. 96214_164pg_Body.indd 51 96214_164pg_Body.indd 51 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 55 financing activities for the periods indicated: The following table summarizes net cash flows with respect to our operating, investing and Net cash provided by operating activities Net cash used in investing activities Net cash provided by/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at end of the period Net Cash Provided by Operating Activities Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 €m 315.4 (73.8) 251.4 493.0 824.8 €m 321.3 (513.2) 302.7 110.8 327.6 €m 193.8 (42.6) (241.8) (90.6) 219.2 Net cash provided by operating activities was €315.4 million for the year ended December 31, 2019, down from €321.3 million for the year ended December 31, 2018. Due to the adoption of IFRS 16 Leases on January 1, 2019, the payment of lease liabilities of €21.8 million are now classified within financing activities. The €5.9 million decrease was also the result of a decrease in cash flows related to exceptional items of €15.9 million compared to €43.4 million in the year ended December 31, 2018, offset by a €51.0 million decrease from the reversal of factoring of trade receivables, as well as cash flows relating to tax of €45.6 million compared to €32.9 million in the year ended December 31, 2018. Net Cash Used in Investing Activities Net cash used in investing activities was €73.8 million for the year ended December 31, 2019, compared to net cash used in investing activities of €513.2 million for the year ended December 31, 2018. The outflow in the year ended December 31, 2019 included the purchase of short-term investments of €25.0 million and capital expenditures. The net cash used in investing activities of €513.2 million for the year ended December 31, 2018, included payments totaling €471.6 million for acquisitions and €41.6 million of capital expenditures. Net Cash Provided by Financing Activities Net cash provided by financing activities was €251.4 million for the year ended December 31, 2019, compared to net cash provided by financing activities of €302.7 million for the year ended December 31, 2018. The inflow in the year ended December 31, 2019 relates primarily to the receipt of €354.1 million from the issuance of ordinary shares, offset in part by share issuance costs of €11.1 million, a repayment of €22.2 million of debt as well as cash outflows of €21.8 million for the payment of lease liabilities which were previously classified within operating cash flows. The net cash provided by financing activities of €302.7 million for the year ended December 31, 2018, related primarily to proceeds of €355.6 million from new loans and borrowings offset by interest payments. Capital Expenditures Our capital expenditures as of December 31, 2019 consisted, and in 2020 we expect to consist of, primarily expenditures for factory capacity expansion and maintenance, cost savings projects, information systems, innovation, regulatory compliance and other items. The anticipated source of such funds for such capital expenditures are cash flow from operating activities, available cash and cash equivalents and our revolving credit facility. 56 Nomad Foods Annual Report 96214_164pg_Body.indd 52 96214_164pg_Body.indd 52 4/17/20 11:27 AM 4/17/20 11:27 AM percentage of revenue: The following table sets forth our capital expenditures for the periods indicated, including as a Capital expenditures Capital expenditure as a % of revenue Trade Receivables - Factoring Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 €m 47.3 2.0% €m 41.6 1.9% €m 42.6 2.2% To assist in managing operating cash flow, we have entered into non-recourse factoring arrangements whereby we may sell specific account receivables on a true sale basis to one or more external financial institutions. Under the terms of such arrangements, the Company may continue to collect the cash from the customer receivables sold, albeit acting solely as a collecting agent on behalf of the purchaser of receivables. The Company retains no credit loss exposure to the receivables following sale. Factoring fees associated with the sale of factored receivables for the year ended December 31, 2019 were minimal (2018: €0.5 million, 2017: €nil). No receivables were factored at the end of December 31, 2019 (2018: €51 million), due to sufficient liquidity resources available to the Company. However, such facilities may continue to be drawn in future periods for strategic purposes. Registration Statement On June 4, 2018, we filed with the SEC an automatic shelf registration statement for well-known seasoned issuers on Form F-3ASR. This registration statement enables us to issue ordinary shares, preferred shares, debt securities or warrants, either separately or as units that include any of these securities. Under the rules governing automatic shelf registration statements, we will file a prospectus supplement and advise the SEC of the amount and type of securities each time we issue securities under this registration statement. On March 22, 2019, we issued 20,000,000 ordinary shares under this registration statement at $20.00 per share for aggregate gross proceeds of $400.0 million (€353.6 million). Funding and treasury policies The Company uses centralized financial management to oversee access to financial markets, monitor and manage financial risks, and control liquid assets. This process is conducted according to a policy that applies to all group entities. All financial risk management strategies employed are for the purposes of risk mitigation and not for speculation. The primary objective of our capital structure management is to maintain a strong financial profile for investor, creditor and customer confidence, and to support the growth of our business. We believe that the liquid assets of the Company, together with undrawn credit facilities and projections for future cash flows from operations, are sufficient to support the Company strategy. Access to external financing markets will be considered if funds are required other than from free cash flow (e.g. supporting acquisitions) to support the viability and growth of the business. Debt Senior Facilities Agreement We maintain a syndicated senior facilities agreement with certain finance parties and lenders, originally dated July 3, 2014, as subsequently amended and restated on October 23, 2015, April 28, 2017, December 20, 2017 and June 15, 2018 (the “Senior Facilities Agreement”). Credit Suisse AG, London Branch, is currently both the agent and the security agent. The Senior Facilities Agreement governs our term loan facilities and our revolving credit facility. 96214_164pg_Body.indd 53 96214_164pg_Body.indd 53 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 57 Term Loan Facilities U.S. Dollar Denominated Term Loan Facility The U.S. Dollar (USD) denominated term loan facility consists of term loans in an aggregate principal amount of $935.6 million. The USD denominated term loans bear interest at a rate per annum equal to LIBOR (subject to a zero floor) plus 2.25% per annum. As of December 31, 2019, the amount outstanding under the USD denominated term loan facility was accruing interest at a rate of 3.99% per annum. Euro Denominated Term Loan Facility The Euro (EUR) denominated term loan facility consists of term loans in an aggregate principal amount of €553.2 million. The EUR denominated term loans bear interest at a rate per annum equal to EURIBOR (subject to a zero floor) plus 2.75% per annum. As of December 31, 2019, the amount outstanding under the EUR denominated term loan facility was accruing interest at a rate of 2.75% per annum. Both the USD denominated term loan facility and the EUR denominated term loan facility are fully drawn and mature on May 15, 2024. Revolving Credit Facility The Senior Facilities Agreement provides for an €80.0 million revolving credit facility, of which up to €50 million can be used for the issuance of letters of credit and other ancillary facilities. The revolving credit facility matures on May 15, 2023 and bears interest at a rate per annum equal to LIBOR or, in relation to any loan in Euro, EURIBOR (subject in each case to a zero floor), plus the applicable margin. The applicable margin is 2.75% per annum. Interest on the revolving credit facility is payable at the end of each interest period. As of December 31, 2019, the amount outstanding under the revolving credit facility by way of issued letters of credit and bank guarantees was €17.2 million. Indebtedness at December 31, 2019 As of December 31, 2019, we had approximately €1,787.9 million (December 31, 2018: €1,394.5 million) of indebtedness outstanding under our term loan facilities and no amounts outstanding under our revolving credit facility, other than €17.2 million (December 31, 2018: €16.8 million) in relation to stand-by letters of credit and bank guarantees. Terms of the Senior Facilities Agreement The Senior Facilities Agreement contains certain customary operating covenants (certain of which are not applicable depending on the ratio of Consolidated Total Net Debt to Consolidated EBITDA) and other customary provisions relating to events of default, including non-payment of principal, interest or fees, misrepresentations, breach of covenants, creditor process, cross default to other indebtedness of the borrowers and its subsidiaries. If, in respect of any Relevant Period, the aggregate amount of: (i) all Revolving Facility Loans; (ii) drawn Letters of Credit; and (iii) Ancillary Outstanding’s (but excluding Ancillary Outstanding’s by way of undrawn letters of credit and undrawn bank guarantees under the relevant Ancillary Facility) calculated as at the last day of each such Relevant Period, is equal to or exceeds 40% of the Total Revolving Facility Commitments as at such date, Debt Cover in respect of that Relevant Period shall not exceed 8.00:1. (Each of the foregoing terms is defined in the Senior Facilities Agreement). As of December 31, 2019, we were in compliance with all financial and other covenants contained in our Senior Facilities Agreement. The USD denominated term loans include the requirement to repay 1% of notional per annum. In addition to the mandatory 1% per annum amortization, the Senior Facilities Agreement also includes an excess cashflow calculation whereupon an amount of principal shall be repaid based upon terms including cash generated during the year and Company leverage. 58 Nomad Foods Annual Report 96214_164pg_Body.indd 54 96214_164pg_Body.indd 54 4/17/20 11:27 AM 4/17/20 11:27 AM Hedging In order to mitigate underlying foreign exchange exposure, reduce overall interest charge, and mitigate interest rate risk, the Company has entered into a number of cross-currency interest rate swaps. In exchange for receiving cash flows in USD matching all of the payments of principal and interest due under the Senior USD debt, the Company pays fixed amounts of interest and principal on notional amounts of GBP and EUR. All USD to EUR swaps have been designated as a cash flow hedge whilst the majority of EUR to GBP swaps have been designated as a net investment hedge of the UK business. As a result of decisions taken by national regulators, LIBOR and EURIBOR may become phased out and replaced by an alternative reference index. If LIBOR or EURIBOR ceases to exist, we may need to renegotiate our Senior Facilities Agreement with our lenders and associated cross currency interest rate swaps. Our expectation is that both debt agreements and hedging contracts will be aligned to the new benchmarks as they become known, and as such it is highly probable that the existing hedging relationships can be continued. Fixed Rate Senior Secured Notes due 2024 On May 3, 2017, we entered into an indenture with Nomad Foods Bondco Plc and Deutsche Trustee Company Limited as trustee, pursuant to which we issued €400.0 million of 3.25% Fixed Rate Senior Secured Notes due May 15, 2024, payable semi-annually in arrears. The Fixed Rate Senior Secured Notes are currently admitted to the Official List of the Luxembourg Stock Exchange and for trading on the Euro MTF Market. As of December 31, 2019, we had €400.0 million of Fixed Rate Senior Secured Notes outstanding. The indenture contains customary events of default and customary covenants including limitations on indebtedness, restricted payments, liens, restrictions on distributions from restricted subsidiaries, sales of assets and subsidiary stock, affiliate transactions, our activities, such as merger, conveyance, transfer or lease of all or substantially all of our assets, and compliance requirements with respect to additional guarantees, reporting, additional intercreditor agreements, payment of notes, withholding taxes, change of control, compliance certificate, payments for consent and listing requirements. The Fixed Rate Senior Secured Notes are redeemable at our option in whole or in part on the terms detailed in the indenture. Intercreditor Agreement The finance parties under the Senior Facilities Agreement and the holders of the Fixed Rate Senior Secured Notes share the benefit of a security and guarantee package. The rights and obligations of the senior creditors and other creditors (including intra group creditors) between themselves is controlled by an Intercreditor Agreement originally dated June 3, 2014, as subsequently amended and restated on April 28, 2017. Pension Plans We maintain defined benefit pension plans in Germany, Sweden, Italy and Austria as well as various defined contribution plans in other countries. The defined benefit pension plans are partially funded in Germany and Austria and unfunded in Sweden and Italy. All defined benefit pension plans are closed to new entrants and there is no current requirement to fund the deficit in any plan. We also maintain various defined contribution pension plans in other countries, the largest of which include Sweden and the UK. In most countries, long term service awards are in operation. for the net employee benefit obligations equaled €237.5 million (December 31, 2018: €200.6 million). For accounting purposes, as of December 31, 2019 (based on the assumptions used), the deficit For the year ended December 31, 2019 pension costs related to defined benefit, defined contributions and long-term benefit plans equated to €16.8 million (2018: €16.9 million; 2017: €18.2 million). This includes all costs related to the pension schemes and other long-term benefits plans as well as associated interest costs. statements in Item 18. For additional information, see Note 23 “Employee benefits” to our consolidated financial Nomad Foods Annual Report 59 96214_164pg_Body.indd 55 96214_164pg_Body.indd 55 4/17/20 11:27 AM 4/17/20 11:27 AM set out in Note 3 and Note 4 to our audited consolidated statements which appear elsewhere in this annual report. A description of our principal accounting policies, critical accounting estimates and judgments is C. Research and development, patents and licenses, etc. We focus our efforts on renovation of core products and our investment in market research on ensuring that the products we launch overcome penetration barriers. In addition, we operate a structured stage gate process through which we take new products from idea generation, through concept screening, concept/products laboratories and early volume sizing, to final validation. Since 2017 we have operated a dual governance process with a “Central Monthly Operating Review Board” (“CMOR”) which is responsible for reviewing and approving innovations across the Company in our core areas that stretch across multiple markets. "Local Monthly Operating Reviews" ("LMOR") occur within each market on areas within local control. Our research and development team has global and local teams. This allows us to leverage our investment in research development across our markets where scale can be achieved and move fast within individual markets to address local tastes, thus maximizing our ability to generate successful innovations efficiently. D. Trend information may continue to impact, our business, operations and financial performance: We are subject to the following key industry trends and challenges which have impacted, and 1. 2. Consumer Preferences. Consumer preferences drive demand for our products. There are a number of trends in consumer preferences which are having an impact on us and the frozen food industry as a whole. These include preferences for speed, convenience and ease of food preparation; natural, nutritious and well-proportioned meals; and products that are sustainably sourced and produced and are otherwise environmentally friendly. Our results of operation depend in large part on the continued appeal of our products and, given the varying backgrounds and tastes of our customer base, our ability to offer a sufficient range of products to satisfy a broad spectrum of preferences. For example, there is a growing trend towards greater consumption of vegetarian and vegan foods, especially by meat eaters, which resulted in 40% of households in the UK purchasing meat substitutes in 2019. In order to address consumer needs and ensure the continued success of our products, we aim to introduce new products, renovate core products and extend existing product lines on a timely basis. Competition. In addition to the competition we face from traditional, well-established branded frozen food manufacturers, over the last few years we have seen increased competition from the discounter channel. Discounters are supermarket retailers which offer food and grocery products at discounted prices and which typically focus on non- branded rather than branded products. The discounter channel has been growing at a faster rate than the traditional retailer channels over the last several years. To address this growing trend, we continue to pursue opportunities to increase our presence with the discounter channel, particularly the hard discounter channel. With the growth of the discounter channel, in an effort to compete, our traditional retail customers have increased their offering of their own private label products. Because these customers control the shelf space allocations within their stores, they may allocate more shelf space to their private label products in accordance with their respective promotional strategies. To address decreases in shelf space allocated to our products, we have expanded our focus on “category management projects". We have been chosen to lead category management projects by several retailers and provide objective advice regarding the strategic development of our food categories. As we increase our influence with retailers, we expect this will translate into an increased share of shelf space and provide more favorable positioning of our products relative to the competition. 60 Nomad Foods Annual Report 96214_164pg_Body.indd 56 96214_164pg_Body.indd 56 4/17/20 11:27 AM 4/17/20 11:27 AM 3. Shopping Habits. The online grocery retail channel is growing faster than traditional grocery retail formats across developed markets. Consumers with increasingly busy lifestyles are choosing the online grocery channel as a more convenient and faster way of purchasing their food products, and are also increasingly using the internet for meal ideas. Frozen foods particularly benefit from the online channel as the advantages to the consumer of outsourcing transportation of frozen food to the retailer are greater than in other categories, and also because some of the barriers to purchasing in-store (e.g. colder aisles) are removed for the consumer online. We are responding to the growing consumer shift to digital and mobile technologies, particularly in the UK, by investing in technology platforms and partnering with retailers that are executing their own e-commerce strategies to meet changing consumer habits. E. Off-balance sheet arrangements We did not have any material off-balance sheet arrangements during the reported periods. F. Tabular disclosure of contractual obligations The following table summarizes our estimated material contractual cash obligations and commercial commitments as of December 31, 2019, and the future periods in which such obligations are expected to be settled in cash: (€ in millions) Long term debt Long term debt—interest (1) Cross currency interest rate swap payments (2) Cross currency interest rate swap receipts (2) Forward contracts - Sell (2) Forward contracts - Buy (2) Lease liabilities and operating leases (3) Purchase commitments (4) Total (5) Cash payments due by period Total 1,791.0 264.4 Less than 1 year 10.8 61.1 1-3 years 18.2 119.2 3-5 years 1,762.0 84.1 After 5 years — — 1,215.8 38.8 1,177.0 (1,233.6) 666.2 (658.5) 153.1 246.0 2,444.4 (49.4) 666.2 (658.5) 18.9 207.1 295.0 (1,184.2) — — 32.1 33.6 195.9 — — — — 16.4 4.9 1,867.4 — — — — 85.7 0.4 86.1 (1) Represents estimates of future interest payable, which will depend upon the timing of cash flows as well as fluctuations in the applicable interest rates and the Company’s debt structure. These forecasts have been compiled using the debt structure as at December 31, 2019 with constant foreign exchange and interest rates until the debt matures in 2024. (2) Cross currency interest rate swap payments and forward contracts are presented alongside receipts to show the net liability. (3) Excludes contractual annual increases linked to inflation indices. (4) Represents capital and raw material expenditures as well as long term service contracts which we have committed to make but which are not yet payable. (5) Retirement benefit obligations of €237.5 million are not presented above as the timing of the settlement of these obligations is uncertain. Certain long-term liabilities related to income taxes, insurance accruals, other accruals and provisions included on the consolidated balance sheet are excluded from the above table as we are unable to estimate the timing of payments for these items. G. Safe harbor beginning of this annual report. See the section entitled “Cautionary Statement Regarding Forward-Looking Statements” at the 96214_164pg_Body.indd 57 96214_164pg_Body.indd 57 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 61 Item 6. Directors, Senior Management and Employees A. Executive Officers and Directors and positions as of February 21, 2020. The following table lists each of our executive officers and directors and their respective ages Name Sir Martin E. Franklin Noam Gottesman Ian G.H. Ashken Stéfan Descheemaeker Jeremy Isaacs CBE James E. Lillie Stuart MacFarlane Lord Myners of Truro CBE Victoria Parry Simon White Samy Zekhout Director since April 4, 2014 April 4, 2014 June 16, 2016 June 1, 2015 February 16, 2016 May 28, 2015 May 8, 2019 April 4, 2014 February 16, 2016 November 30, 2016 April 1, 2018 Age Position 55 Co-Chairman 58 Co-Chairman 59 Director 59 Chief Executive Officer and Director 55 Director 58 Director 52 Director 71 Lead Independent Director 54 Director 61 Director 57 Chief Financial Officer and Director Set forth below is a brief biography of each of our executive officers and directors. Sir Martin Ellis Franklin, KGCN, our co-founder and co-Chairman is the founder and CEO of Mariposa Capital LLC, a Miami-based family investment firm focused on long-term value creation across various industries, and Chairman and controlling shareholder of Royal Oak Enterprises, LLC. Sir Franklin is also the Founder and Executive Chairman of Element Solutions Inc (previously known as Platform Specialty Products Corporation), and co-founder and co-Chairman of APi Group Corporation (previously known as J2 Acquisition Limited). Sir Franklin was the co-founder and Chairman of Jarden Corporation ("Jarden") from 2001 until April 2016 when Jarden merged with Newell Brands Inc ("Newell"). Sir Franklin became Chairman and Chief Executive Officer of Jarden in 2001, and served as Chairman and Chief Executive Officer until 2011, at which time he began service as Executive Chairman. Prior to founding Jarden in 2001, Sir Franklin served as the Chairman and/or Chief Executive Officer of three public companies: Benson Eyecare Corporation, Lumen Technologies, Inc., and Bollé Inc. between 1992 and 2000. In the last five years, Sir Franklin served as a director of the following public companies: Newell Brands, Inc., Restaurant Brands International Inc. and Burger King Worldwide, Inc. (until its transaction with Tim Hortons, Inc. and the creation of Restaurant Brands International Inc. in December 2014). Noam Gottesman, our co-founder and co-Chairman is the Founder and Managing Partner of TOMS Capital LLC, which he founded in 2012. Mr. Gottesman is also a co-founder and non-executive director of Digital Landscape Group, Inc. (previously known as Landscape Acquisition Holdings Limited), a global aggregator of real property interests underlying wireless telecommunications cell sites. Mr. Gottesman was the co-founder of GLG Partners Inc. and its predecessor entities where he served in various chief executive capacities until January 2012. Mr. Gottesman served as GLG’s chief executive officer from September 2000 until September 2005, and then as its co- chief executive officer from September 2005 until January 2012. Mr. Gottesman was also chairman of the board of GLG following its merger with Freedom Acquisition Holdings Inc. and prior to its acquisition by Man Group plc. Mr. Gottesman co-founded GLG as a division of Lehman Brothers International (Europe) in 1995 where he was a Managing Director. Prior to 1995, Mr. Gottesman was an executive director of Goldman Sachs International, where he managed global equity portfolios in the private client group. Ian G.H. Ashken serves as a director of APi Group Corporation and Element Solutions Inc. Previously, he was the co-founder of Jarden and served as its Vice Chairman and President until the consummation of Jarden’s business combination with Newell in April 2016. Mr. Ashken was appointed to the Jarden board on June 25, 2001 and served as Vice Chairman, Chief Financial Officer and Secretary from September 24, 2001. Mr. Ashken was Secretary of Jarden until February 15, 2007 and Chief Financial Officer until June 12, 2014. Prior to Jarden, Mr. Ashken served as the Vice Chairman and/or Chief Financial Officer of three public companies, Benson Eyecare Corporation, Lumen Technologies, Inc. and Bollé Inc. between 1992 and 2000. Mr. Ashken is also a director or trustee of a number of private companies and charitable institutions. During the last five years, Mr. Ashken also previously served as a director of Newell Brands, Inc. 62 Nomad Foods Annual Report 96214_164pg_Body.indd 58 96214_164pg_Body.indd 58 4/17/20 11:27 AM 4/17/20 11:27 AM Stéfan Descheemaeker was appointed as the Chief Executive Officer of the Company on June 1, 2015. He was previously at Delhaize Group SA, the international food retailer, where he was Chief Financial Officer between 2008 and 2011 before becoming Chief Executive Officer of its European division until October 2013. Since leaving Delhaize Group SA, Mr. Descheemaeker held board positions with Telenet Group Holdings N.V. and Group Psychologies, served as an industry advisor to Bain Capital and is currently a professor at the Université Libre de Bruxelles. Between 1996 and 2008, Mr. Descheemaeker was at Interbrew (now Anheuser-Busch InBev) where he was Head of Strategy & External Growth responsible for managing M&A and strategy, during the time of the merger of Interbrew and AmBev in 2004, and prior to that he held operational management roles as Zone President in the U.S., Central and Eastern Europe, and Western Europe. Mr. Descheemaeker started his career with Cobepa, at that time the Benelux investment company of BNP-Paribas. Mr. Descheemaeker served as a Director on the Board of Anheuser- Busch InBev, a position he has held from 2008 to 2019. Since June 2019, Mr. Descheemaeker has served as Chairman of the Board of Verlinvest. Jeremy Isaacs is a Founding Partner of JRJ Group. At JRJ Group, Mr. Isaacs is closely involved with the implementation and guidance of fund strategy, as well as the development and execution of portfolio company strategy. Prior to establishing JRJ Group, in late 2008, Mr. Isaacs held senior executive positions with Lehman Brothers with responsibility for businesses outside North America. Mr. Isaacs serves as a non-executive director of Marex Spectron and served as a non-executive director of Landscape Acquisition Holdings Limited from November 2017 until its business combination with Associated in February 2020. He participates in numerous philanthropic activities, holding a range of positions, including Trustee of The J Isaacs Charitable Trust, and Trustee of the Noah’s Ark Children’s Hospice. Mr. Isaacs is an Honorary Fellow of the London Business School. He served as non-executive director of Imperial College Healthcare NHS Trust from October 2013 to September 2016, and was a member of the British Olympic Advisory Board between 2007 and 2012 and a member of the Bridges Development Fund Advisory Board between 2008 and March 2018. Mr. Isaacs was appointed Commander of the Order of the British Empire (CBE) in the 2015 Queen’s Birthday Honours for his services to the NHS. In May 2019, Mr. Isaacs received Doctor of Philosophy Honoris Causa from the Haifa University, Israel. James E. Lillie serves as co-Chairman of APi Group Corporation since October 2019, and previously served as its director from October 2017. Mr. Lillie has also served on the board of directors of Tiffany & Co. since February 2017. He served as Jarden’s Chief Executive Officer from June 2011 until the consummation of Jarden’s business combination with Newell in April 2016. He joined Jarden in 2003 as Chief Operating Officer and was named President in 2004 and CEO in June 2011. From 2000 to 2003, Mr. Lillie served as Executive Vice President of Operations at Moore Corporation, Limited. From 1999 to 2000, he served as Executive Vice President of Operations at Walter Industries, Inc., a Kohlberg, Kravis, Roberts & Company (KKR) portfolio company. From 1990 to 1999, Mr. Lillie held a succession of senior level management positions across a variety of disciplines including human resources, manufacturing, finance and operations at World Color, Inc., another KKR portfolio company. Stuart MacFarlane joined the Whitbread Beer Company in 1992, which was later acquired by Interbrew and, subsequently, Anheuser-Busch InBev ("ABInBev"). At ABInBev, Mr. MacFarlane held various senior roles throughout the course of his career, including in Finance, Marketing, Sales and as Managing Director for the company's business in Ireland. He was appointed President of ABInBev UK & Ireland in 2008 and in 2012 became a member of the Executive Board of Management, serving as President of Central & Eastern Europe. Mr. MacFarlane most recently served as ABInBev's President of a combined Europe & Middle East from 2014 to May 2019. Mr. MacFarlane is currently serving as a director and member of the Corporate Governance Committee of Anadolu EFES, a brewer company, until May 28, 2019. He previously served as a director of ABI-EFES Russia & Ukraine, a joint venture of Anadolu EFES and ABInBev. Mr. MacFarlane has a degree in Business Studies from Sheffield University in the UK and is also a qualified Chartered Management Accountant. Lord Myners is Chancellor of the University of Exeter and a member of Court and Council of the London School of Economics and Political Science. He served as the Financial Services Secretary in Her Majesty’s Treasury, the United Kingdom’s finance ministry, from October 2008 to May 2010. Prior to his service at the Treasury, Lord Myners served as chairman or a member of the board of several organizations, including as chairman of Guardian Media Group from 2000 to 2008, director of GLG Partners Inc. from 2007 to 2008, Director of Land Securities Group plc from 2006 to 2008 (chairman from 2007 to 2008), chairman of Marks & Spencer plc from 2004 to 2006, and chairman of Aspen Insurance Holdings Ltd from 2002 to 2007. Lord Myners served as chairman of Platform Acquisition Holdings Limited (now known as Element Solutions Inc) from April 2013 until its business combination with MacDermid, Incorporated in October 2013. He also served as the chairman of of Landscape Acquisition Holdings Limited from November 2017 until its business combination with Associated in February 2020 and of Justice Holdings Limited, a Nomad Foods Annual Report 63 96214_164pg_Body.indd 59 96214_164pg_Body.indd 59 4/17/20 11:27 AM 4/17/20 11:27 AM special purpose acquisition company, from February 2011 until its business combination with Burger King Worldwide, Inc. in June 2012. From 1986 to 2001, he served as a director of Gartmore Investment Management Limited. He has also served in an advisory capacity to the United Kingdom Treasury and the United Kingdom Department of Trade & Industry, with particular focus on corporate governance practices. Other positions held by Lord Myners have included chairman of the Trustees of Tate, chairman of the Low Pay Commission, a member of the Court of the Bank of England, a member of the Investment Board of GIC, Singapore’s sovereign wealth fund. Lord Myners is currently serving as a non-executive director of Windmill Hill Asset Management. He is vice chairman of Global Counsel, chairman and a partner of Cevian Capital LLP and Chairman of Daniel J Edelman (UK). Lord Myners is a graduate, with honors, from University of London and has an honorary doctorate from the University of Exeter. He is a Visiting Fellow at Nuffield College, Oxford and an Executive Fellow at London Business School. He is a crossbench member of the UK’s House of Lords, the senior chamber in Parliament. Victoria Parry was Global Head of Product Legal for Man Group plc until April 2013 and now acts as an independent non-executive director to the funds industry. Prior to the merger of Man Group plc with GLG Partners, Inc. in 2010, she was Senior Legal Counsel for GLG Partners LP. Ms. Parry joined Lehman Brothers International (Europe) in April 1996 where she was Legal Counsel with responsibility for inter alia the activities of the GLG Partners division and left Lehman Brothers in September 2000 upon the establishment of GLG Partners LP. Prior to joining Lehman Brothers in 1996 Ms. Parry practiced as a solicitor with a leading London based firm of solicitors. Ms. Parry graduated from University College Cardiff, with a LLB (Hons) in 1986. Ms. Parry is a solicitor and a member of the Law Society of England and Wales. Ms. Parry is a director of a number of other companies. Simon White was, until 2014, Chief Operating Officer of Man Group PLC where he was a member of the Executive Committee. Prior to the merger of Man Group PLC with GLG Partners, Inc. in 2010, Mr. White served as Chief Operating Officer of GLG Partners, Inc. from its inception and was also Chief Financial Officer until mid-2008. From 1993 to 2000 he worked at Lehman Brothers in a number of different roles. Since 2014, Mr. White has been involved in leadership roles in a range of early stage businesses with a special focus on FinTech, and is currently a director of Smike Consulting Limited, formed in September 2019. In 2017, he became a non-executive director of Ask Inclusive Finance and has previously served as a non-executive director of Bridge Invest Limited and Axim Holdings Limited. In February 2020, he became a non-executive director of DMS Investment Management Services (UK) Limited. Mr. White is a Fellow of the Institute of Chartered Accountants in England and Wales. Samy Zekhout has served as Chief Financial Officer of Nomad since April 1, 2018. Prior to joining the Company, Mr. Zekhout most recently served as CFO and Vice President of Global Grooming at Procter & Gamble since 2007. Mr. Zekhout has held various finance roles at Procter & Gamble throughout the course of his more than 30 year career at that company. B. Compensation of Executive Officers and Directors This section sets forth for the year ended December 31, 2019: (i) the compensation and benefits provided to our executive officers, (ii) a brief description of the bonus programs in which our executive officers participated, and (iii) the total amounts set aside for pension, retirement and similar benefits for our executive officers. This section also describes the Nomad Foods Amended and Restated Long Term 2015 Incentive Plan (“LTIP”) including a summary of the material terms of the LTIP, a description of current executive employment agreements and equity awards granted thereunder, and a description of our director compensation program. Executive Compensation Executive Officer Compensation and Benefits for the year ended December 31, 2019 For the year ended December 31, 2019, Nomad’s executive officers received total compensation, including base salary, cash and equity bonus, and certain perquisites, equal to €9.7 million in the aggregate. Pension, Retirement and Similar Benefits Our executive officers who participate in our money purchase pension plans do so on generally the same terms as our other employees. The aggregate amount of the employer contributions to this plan for our executive officers during the year ended December 31, 2019 was less than €0.1 million. 64 Nomad Foods Annual Report 96214_164pg_Body.indd 60 96214_164pg_Body.indd 60 4/17/20 11:27 AM 4/17/20 11:27 AM Employment Agreements Chief Executive Officer. Stéfan Descheemaeker was appointed as the Chief Executive Officer of the Company and as a Director of the Company effective on June 1, 2015. He entered into his Service Agreement with us on June 17, 2015. Under the agreement, Mr. Descheemaeker will receive an annual salary of £700,000 that will be reviewed, but not necessarily increased, on an annual basis. Mr. Descheemaeker's salary was reviewed in 2019 resulting in an increase of his salary to £750,000. Mr. Descheemaeker is entitled to receive the following benefits under the terms of his agreement: (a) an annual contribution of £75,000 (based on an increase in 2019) paid either to a pension plan or to Mr. Descheemaeker directly (as he so directs); (b) eligibility for performance-related discretionary cash bonuses (target performance equates to 100% of base salary), subject to the achievement of financial and other performance targets as we may decide; (c) a one-time award of 2,000,000 ordinary shares remaining in the Company, 50% of which will vest on the Company exceeding an agreed EBITDA target and 50% of which will vest subject to the Company’s shares achieving a specified target price. Both tranches of shares are also subject to further vesting conditions relating to Mr. Descheemaeker’s tenure as Chief Executive Officer; and (d) an annual car allowance of £14,400, death in service benefit (three times salary), group income protection (offering 75% of base salary less £5,000) and family medical insurance. We have the right to place Mr. Descheemaeker on paid leave for up to six months of his 12 month notice period. Mr. Descheemaeker is subject to confidentiality provisions and to non-competition and non- solicitation restrictive covenants for a period of between six and 12 months after the termination of his employment, subject to an off-set for paid leave. We may terminate Mr. Descheemaeker’s employment at any time by serving a notice stating that we will pay to Mr. Descheemaeker within 14 days a sum equal to the basic salary (as at the date of the employment agreement), pension payment and car allowance in lieu of any required period of notice less certain deductions. We may also terminate Mr. Descheemaeker’s employment agreement without any payment of compensation, damages, payment in lieu of notice or otherwise under certain circumstances, including, among other things, gross misconduct, material breach of the terms of such agreement or charge or conviction of a criminal offence. Chief Financial Officer. Samy Zekhout was appointed as the Chief Financial Officer of the Company and as a Director of the Company effective on April 1, 2018. He entered into his Service Agreement with us on February 15, 2018. Under the agreement, Mr. Zekhout will receive an annual salary of £425,000 that will be reviewed, but not necessarily increased, on an annual basis. The first review took place in 2019 resulting in an increase of his salary to £437,000. Mr. Zekhout was or is entitled to receive the following benefits under the terms of his agreement: (a) an annual contribution of 10% of his base salary, paid either to a pension plan or to Mr. Zekhout directly (as he so directs); (b) eligibility for performance-related discretionary cash bonuses (up to 100% of salary with an opportunity to increase this to 200% depending on business performance), subject to the achievement of financial and other performance targets as the Company may decide; (c) a one-time award of 300,000 ordinary shares as incentive compensation under the Company's LTIP, subject to performance-based vesting conditions and the other terms and conditions set forth in a share grant award agreement; and (d) an annual car allowance of £13,200, death in service benefit (three times salary), group income protection (offering 75% of base salary less £5,000) and family medical insurance. 96214_164pg_Body.indd 61 96214_164pg_Body.indd 61 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 65 We have the right to place Mr. Zekhout on paid leave for his notice period. Mr. Zekhout is subject to confidentiality provisions and to non-competition and non-solicitation restrictive covenants for a period of 12 months after the termination of his employment, subject to an off-set for paid leave. We have the right to terminate Mr. Zekhout’s employment at any time by serving a notice stating that we will pay to Mr. Zekhout within 14 days a sum equal to the basic salary (as at the date of the employment agreement), in lieu of any required period of notice less certain deductions. We also have the right to terminate Mr. Zekhout’s employment agreement without any payment of compensation, damages, payment in lieu of notice or otherwise under certain circumstances, including, among other things, gross misconduct, material breach of the terms of such agreement or charge or conviction of a criminal offence. Nomad Foods Limited Amended and Restated Long Term 2015 Incentive Plan (“LTIP”) Eligibility The LTIP is discretionary and will enable the Compensation Committee to make grants (“Awards”) to any director or employee of the Company, although the current intention of the Committee is that Awards be granted only to directors and senior management. Awards Under the LTIP, the Committee or Board may grant Awards in the form of rights over ordinary shares. Where an Award vests, the participant will receive ordinary shares free and clear of any restrictions, other than those imposed by applicable securities laws. Performance conditions The vesting of Awards will be subject to conditions determined by the Committee. The current policy of the Committee is for vesting to be both time-based and related to the financial performance of the Company. Generally, the vesting period (i.e. the period over which performance is to be measured) will be between three and five years, and the ordinary shares subject to the Award will vest subject to the participant remaining an employee of the Company and not being on notice of termination at the vesting date and any performance targets relating to the Award having been fulfilled. Permitted dilution No Award may be granted on any date if, as a result, the total number of ordinary shares issued or remaining issuable pursuant to Awards or options granted in the previous ten years under the LTIP or any other employees’ share plan operated by the Company would exceed 10% of the issued ordinary share capital of the Company on that date. Awards may at the discretion of the Committee be satisfied out of new issue shares, treasury shares or shares provided out of an employee trust. Ordinary shares issued will rank pari passu with ordinary shares in issue at that time, save in relation to rights arising by reference to a record date before the date of issue. Participants will not be entitled to votes or dividends on the ordinary shares subject to Awards until such Awards vest. Early vesting Unless otherwise determined by the Committee, if a participant ceases to be employed by the Company due to death, disability, or otherwise as a good leaver, as determined by the Committee Awards will vest to the extent performance targets (adapted, if necessary, at the discretion of the Committee, to take into account the shortened vesting period) have been achieved and subject to the Committee’s discretion to waive the performance targets in whole or in part. If a participant ceases employment for any other reason their Award(s) will lapse to the extent unvested at the date of cessation. Change of Control Unless otherwise determined by the Committee, in the event of a Change of Control or winding up of the Company (including by reason of an offer or scheme of arrangement), Awards will vest in accordance with the performance targets applied at the date of the Change of Control, subject to the Committee’s discretion to waive such targets in whole or in part. 66 Nomad Foods Annual Report 96214_164pg_Body.indd 62 96214_164pg_Body.indd 62 4/17/20 11:27 AM 4/17/20 11:27 AM Variation in share capital The Committee may make such adjustments to Awards as it considers appropriate to preserve their value in the event of any variation in the ordinary share capital of the Company or to take account of any demerger or special dividend paid (or similar event which materially affects the market price of ordinary shares). Amendments The Committee may amend the LTIP as it considers appropriate, subject to the written consent of participants to changes to their disadvantage to existing Awards. Shareholder approval is required to increase the permitted dilution limits. General Benefits under the LTIP will not be pensionable. Awards are not transferable except to the participant’s personal representatives on death. Director Compensation In 2019, each of our non-executive directors (other than Messrs. Gottesman and Franklin) received, and are entitled to receive in 2020, $50,000 per year together with an annual restricted stock grant issued under the LTIP equal to $100,000 of ordinary shares valued at the date of issue, which vest on the earlier of the date of the following year’s annual meeting of shareholders or 13 months from the issuance date. For those Directors who are members of board committees, each member is entitled to receive an additional $2,000 per year. The chairman of the Audit Committee, currently, is entitled to receive $10,000 per year and the chairmen of the Compensation and Nominating and Corporate Governance Committees, currently and respectively, are entitled to receive $7,500 per year. Messrs. Gottesman and Franklin will not receive a fee in relation to their services as Directors. reimbursed by us for travel, hotel and other expenses incurred by them in the course of their directors’ duties. Director fees are payable quarterly in arrears. In addition, all of the Directors are entitled to be C. Board Practices Board Composition and Election of Directors Our board of directors currently consists of eleven members. Our Memorandum and Articles of Association provides that our board of directors must be composed of at least one director. The number of directors is determined from time to time by resolution of our board of directors. Messrs. Gottesman and Franklin serve as Co- Chairmen of our board of directors. The Co-Chairmen have primary responsibility for providing leadership and guidance to our board and for managing the affairs of our board. Lord Myners is our lead independent director. Pursuant to our Memorandum and Articles of Association, our directors are appointed at the annual meeting of shareholders for a one year term, with each director serving until the annual meeting of shareholders following their election. In addition, for so long as an initial holder of Founder Preferred Shares holds 20% or more of the Founder Preferred Shares in issue, such holder is entitled to nominate, and the directors are required to appoint, a person as director. For additional information regarding our board of directors, see Item 6A: Directors, Senior Management and Employees - Executive Officers and Directors. Our non-executive directors do not have service contracts with us or any of our subsidiaries providing for benefits upon termination of employment. Committees of the Board of Directors Committee and a Nominating and Corporate Governance Committee. Our board of directors has three standing committees: an Audit Committee, a Compensation 96214_164pg_Body.indd 63 96214_164pg_Body.indd 63 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 67 Audit Committee Our Audit Committee consists of three directors: Messrs. Lillie, White and MacFarlane, and Mr. Lillie serves as its chairman. Our Audit Committee is responsible for, among other things, assisting the board of directors in its oversight of the integrity of our financial statements, of our compliance with legal and regulatory requirements, and of the independence, qualifications and performance of our independent auditors. In addition, it focuses on compliance with accounting policies and ensuring that an effective system of internal and external audit and financial controls is maintained, and oversees our policies and procedures with respect to risk assessment and risk management. Our Audit Committee will meet at least quarterly with management and the independent auditors and report on such meetings to the board of directors. The responsibilities of our Audit Committee as set forth in its charter include oversight of the following: external audit, financial reporting, public disclosure, internal controls, risk management and compliance and whistleblowing. Compensation Committee Our Compensation Committee consists of three directors: Messrs. Isaacs, Ashken, and Ms. Parry, and Mr. Isaacs serves as its chairman. Our Compensation Committee is responsible for determining the compensation of our executive officers. The responsibilities of our Compensation Committee as set forth in its charter include the following: assisting the board in evaluating potential candidates for executive positions, determining the compensation of our chief executive officer, making recommendations to the board with respect to the compensation of other executive officers, reviewing our incentive compensation and other equity-based plans, and reviewing, on a periodic basis, director compensation. Nominating and Corporate Governance Committee three directors: Lord Myners, Ms. Parry, and Mr. Lillie and Lord Myners serves as its chairman. Our Nominating and Corporate Governance Committee (the “N&CG Committee”) consists of Our N&CG Committee is responsible for considering and making recommendations to the board of directors in respect of appointments to the board. The responsibility of our N&CG Committee as set forth in its Charter include the following: recommending directors to the board to serve as members of each committee, developing and recommending a set of corporate governance principles applicable to our company and overseeing board evaluations. It is also responsible for regularly reviewing the structure, size and composition of the board and making recommendations to the board with regard to any changes it deems necessary. D. Employees As of December 31, 2019, we had approximately 4,775 employees. We also employed on average 370 temporary staff, in addition to 720 agency workers in 2019. We source the majority of our temporary workers from agencies to allow us to quickly respond and adapt to production demands. Approximately 70% of our employees work in our manufacturing operations, with the remaining employees involved in sales, marketing, finance, administration, procurement, logistics, product development, IT and other areas. Following are the number of employees by region for the last three years: Region United Kingdom Germany Italy Sweden/Norway France Other Total 2019 1,222 1,412 478 421 345 897 4,775 2018 1,223 1,394 456 467 346 927 4,813 2017 801 1,267 451 536 335 485 3,875 A number of our employees are members of trade unions in the UK, Germany, Italy, France, Sweden, Norway or Spain. Trade union membership is not required to be disclosed by employees, however, we estimate that less than 40% of our employees are members of a trade union. Many of our plants are governed by collective agreements with the respective unions. Our relationships with the trade unions are currently stable. 68 Nomad Foods Annual Report 96214_164pg_Body.indd 64 96214_164pg_Body.indd 64 4/17/20 11:27 AM 4/17/20 11:27 AM E. Share Ownership beneficial ownership of our ordinary shares by: The following table sets forth, as of February 21, 2020, certain information regarding the • • • each of our current directors; each of our named executive officers for the fiscal year ended December 31, 2019; and all of our current directors and current executive officers as a group. Percentages are based on the 201,127,847 ordinary shares that were issued and outstanding on February 21, 2020. Director and Executive Officers: Martin E. Franklin Noam Gottesman Ian G.H. Ashken Stéfan Descheemaeker Jeremy Isaacs James E. Lillie Stuart MacFarlane Lord Myners of Truro CBE Victoria Parry Simon White Samy Zekhout Directors and Executive Officers as a Group (11 persons) Number 11,451,700 (1) 13,340,236 (2) 967,891 (3) 2,600,647 (4) 23,624 (5) 967,996 (6) - (7) 95,652 (8) 13,818 (9) 28,557 (10) - (11) 27,601,587 Percentage 5.7 6.6 * 1.3 * * - * * * - 13.7 * (1) (2) (3) Represents beneficial ownership of less than one percent of ordinary shares outstanding. Consists of (i) 5,539,705 ordinary shares held indirectly through the Martin E. Franklin Revocable Trust, (ii) 750,000 Founder Preferred Shares held indirectly through Mariposa Acquisition II, LLC (which are convertible at any time at the option of the holder into ordinary shares on a one-for-one basis) , (iii) 3,147,559 ordinary shares held indirectly through RSMA, LLC and (iv) 944,267, 944,267 and 125,902 ordinary shares held by other members of Mariposa Acquisition II, LLC, respectively, which Sir Franklin has the sole power to vote pursuant to irrevocable proxy agreements dated each of June 15, 2018 and January 7, 2019. In addition, Sir Franklin indirectly owns 69% of Mariposa Acquisition II, representing 517,500 Founder Preferred Shares. Sir Franklin disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. Includes (i) 11,168,647 ordinary shares of which 4,460,537 are held by TOMS Acquisition I LLC and 6,708,110 are held by TOMS Capital Investments LLC, (ii) 750,000 Founder Preferred Shares which are convertible at any time at the option of the holder into ordinary shares on a one-for-one basis and all of which are held by TOMS Acquisition I LLC and (iii) an aggregate of 1,421,589 ordinary shares held by the members of TOMS Acquisition I LLC that are subject to an irrevocable proxy agreement granted to Mr. Gottesman. Mr. Gottesman is the managing member and majority owner of TOMS Acquisition I LLC and TOMS Capital Investments LLC and may be considered to have beneficial ownership of TOMS Acquisition I LLC’s and TOMS Capital Investments LLC’s interests in the Company. In addition, Mr. Gottesman owns or controls, directly or indirectly, 77.5% of TOMS Acquisition I LLC and 100% of TOMS Capital Investments LLC. Mr. Gottesman disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. Includes 944,267 ordinary shares held by Tasburgh, LLC, all of which are subject to an irrevocable proxy agreement granted to Sir Franklin (see note 1 above). Mr. Ashken is the Managing Manager of Tasburgh, LLC. Excludes an indirect pecuniary interest in 56,250 Founder Preferred Shares (which are convertible at any time at the option of the holder into ordinary shares on a one-for-one basis) held by Mariposa Acquisition II, LLC. Also excludes 4,921 ordinary shares issuable under currently outstanding equity awards issued under the LTIP, all of which will vest on the earlier of (i) the date of the Company’s annual meeting of shareholders in 2020 or (ii) July 19, 2020. 96214_164pg_Body.indd 65 96214_164pg_Body.indd 65 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 69 (4) (5) (6) (7) (8) (9) (10) (11) Represents an indirect interest held by Olidipoli Sprl, a company owned by Mr. Descheemaeker. Excludes (i) 598,600 ordinary shares issuable under the LTIP that vested on February 24, 2020 (after giving effect to ordinary shares withheld to satisfy certain tax liabilities), (ii) 350,000 ordinary shares issuable under the LTIP that will vest on January 1, 2021 (the performance based vesting conditions for which have been satisfied), and (iii) 600,000 ordinary shares issuable under the LTIP, which will vest subject to performance based vesting conditions (and in each of cases (ii) and (iii), subject to further vesting conditions relating to Mr. Descheemaeker’s tenure as Chief Executive Officer). Excludes 4,921 ordinary shares issuable under currently outstanding equity awards issued under the LTIP, all of which will vest on the earlier of (i) the date of the Company’s annual meeting of shareholders in 2020 or (ii) July 19, 2020. Includes 944,267 ordinary shares held by Powder Horn Hill Partners II, LLC, all of which are subject to an irrevocable proxy agreement granted to Sir Franklin (see note 1 above).Mr. Lillie is the Managing Member of Powder Horn Hill Partners II, LLC. Excludes an indirect pecuniary interest in 56,250 Founder Preferred Shares (which are convertible at any time at the option of the holder into ordinary shares on a one-for-one basis) held by Mariposa Acquisition II, LLC. Also excludes 4,921 ordinary shares issuable under currently outstanding equity awards issued under the LTIP, all of which will vest on the earlier of (i) the date of the Company’s annual meeting of shareholders in 2020 or (ii) July 19, 2020. Excludes 4,921 ordinary shares issuable under currently outstanding equity awards issued under the LTIP, all of which will vest on the earlier of (i) the date of the Company's annual meeting of shareholders in 2020 or (ii) July 19, 2020. Includes 50,000 ordinary shares issuable pursuant to a five-year option that expires on June 2, 2020 at a purchase price of $11.50 per share. Excludes 4,921 ordinary shares issuable under currently outstanding equity awards issued under the LTIP, all of which will vest on the earlier of (i) the date of the Company’s annual meeting of shareholders in 2020 or (ii) July 19, 2020. Excludes 4,921 ordinary shares issuable under currently outstanding equity awards issued under the LTIP, all of which will vest on the earlier of (i) the date of the Company’s annual meeting of shareholders in 2020 or (ii) July 19, 2020. Excludes 4,921 ordinary shares issuable under currently outstanding equity awards issued under the LTIP, all of which will vest on the earlier of (i) the date of the Company's annual meeting of shareholders in 2020 or (ii) July 19, 2020. Excludes 300,000 ordinary shares issuable under the LTIP, which will vest subject to performance based vesting conditions (and subject to further vesting conditions relating to Mr. Zekhout's tenure as Chief Financial Officer). There are no arrangements for involving the employees in the capital of the Company, including any arrangement that involves the issue or grant of options or shares or securities of the Company, other than those described under Item 6. Directors, Senior Management and Employees—B. Compensation of Executive Officers and Directors—Nomad Foods Limited Amended and Restated Long Term 2015 Incentive Plan (“LTIP"). Item 7. Major Shareholders and Related Party Transactions A. Major Shareholders The following table sets forth certain information regarding the beneficial ownership of our ordinary shares by each person known by us to be a beneficial owner of more than 5% of the ordinary shares. Currently we only have one class of listed shares issued and outstanding, that being ordinary shares, which have no par value. All of our ordinary shares have the same voting rights. Percentages are based on the 201,127,847 ordinary shares that were issued and outstanding on February 21, 2020. 70 Nomad Foods Annual Report 96214_164pg_Body.indd 66 96214_164pg_Body.indd 66 4/17/20 11:27 AM 4/17/20 11:27 AM Name of Beneficial Owner: 5% Shareholders: T. Rowe Price Associates Inc. 100 East Pratt Street Baltimore, MD 21202 Noam Gottesman c/o TOMS Acquisition I, LLC 450 W. 14th Street, 13th Floor New York, NY 10014 Boston Partners One Beacon Street, 30th Floor Boston, MA 02108 Martin E. Franklin c/o Mariposa Capital, LLC 500 South Pointe Drive, Suite 240 Miami Beach, FL 33139 FMR LLC 245 Summer Street Boston, MA 02210 Ordinary Shares Beneficially Owned Number Percentage 14,835,761 (1) 13,340,236 (2) 13,030,867 (3) 11,451,700 (4) 10,308,881 (5) 7.4 6.6 6.5 5.7 5.1 (1) (2) (3) (4) (5) Based on a Schedule 13G/A filed by T. Rowe Price Associates Inc. on February 14, 2020. Based on a Schedule 13D/A filed by Mr. Gottesman, TOMS Acquisition I LLC and the other reporting persons described therein on January 6, 2020. Based on a Schedule 13G/A filed by Boston Partners on February 10, 2020. Based on a Schedule 13D/A filed by Sir Franklin, Martin E. Franklin Revocable Trust and the other reporting persons described therein on January 6, 2020. Based on a Schedule 13G filed by FMR LLC on February 7, 2020. As of February 21, 2020, we also have 1,500,000 preferred shares (Founder Preferred Shares) issued and outstanding, which have the same voting rights as the ordinary shares. Each of Mariposa Acquisition II, LLC and TOMS Acquisition I, LLC, our Founder Entities, owns 750,000 Founder Preferred Shares. In addition, on September 12, 2017, Pershing Square Capital Management L.P., which as of March 28, 2017, beneficially owned 18.3% of our ordinary shares, filed a Schedule 13G/A to report that it no longer beneficially owned any of our ordinary shares. On July 18, 2017, Birds Eye Iglo Limited Partnership Inc., which as of March 28, 2017, beneficially owned 7.6% of our ordinary shares, filed a Schedule 13G/A to report that it no longer beneficially owned any of our ordinary shares. On February 9, 2018, Third Point LLC, which as of March 28, 2017, beneficially owned 5.8% of our ordinary shares, filed a Schedule 13G/A to report that it no longer beneficially owned any of our ordinary shares. On February 14, 2018, Corvex Management, LP filed a Schedule 13G/A to report that its percentage ownership in our ordinary shares decreased from 9.6%, as of March 31, 2017, to 4.9%. On January 10, 2017, Wellington Management Group LLP, which, as of March 31, 2016, beneficially owned 13.9% of our ordinary shares, and as of September 12, 2016, beneficially owned 8.2% of our ordinary shares, filed a Schedule 13G/A to report that it no longer beneficially owned any of our ordinary shares. On February 7, 2017, T. Rowe Price Associates Inc. filed a Schedule 13G to report that it beneficially owned 5.7% of our ordinary shares. On January 13, 2020, Elliott Associates, L.P. which as of September 18, 2017, beneficially owned 5.4% of our ordinary shares, filed a Schedule 13G/A to report that it no longer beneficially owned any of our ordinary shares. Except for the foregoing, no major shareholder has disclosed a significant change in its percentage ownership of our ordinary shares during the three years ended December 31, 2019. B. Related Party Transactions consolidated financial statements which appear elsewhere in this annual report. For a description of our related party transactions, see Note 37, Related Parties, to our audited 96214_164pg_Body.indd 67 96214_164pg_Body.indd 67 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 71 Related Party Transactions Procedures The Audit Committee Charter provides that the Audit Committee shall review all related party transactions, as defined under Item 404 of Regulation S-K under the Securities Act of 1933, as amended. Following such review, the Audit Committee determines whether such transaction should be approved based on the terms of the transaction, the business purpose for the transaction and whether the transaction is in the best interest of the Company and its shareholders. No member of the Audit Committee shall participate in any review, consideration or approval of any related party transaction with respect to which such member or any of his or her immediate family members is the related party. Item 8. Financial Information A. Consolidated Statements and Other Financial Information Financial Statements Export Sales Please see Item 18 below. information - External revenue by geography in Item 18, Note 5 below. For a description of our export sales which constitute all of our sales, please see Geographical Legal Proceedings We are not currently subject to any legal proceedings, nor to the best of our knowledge, is any proceeding threatened, the results of which would have a material impact on our properties, results of operation, or financial condition. Tax audits are taking place in a number of countries. Whenever there is a difference in view between local tax authorities and the Company, to the extent deemed necessary, provisions are made for exposures for which it will be probable that they will lead to additional tax liabilities. To the best of our knowledge, none of our officers or directors is involved in any legal proceedings in which we are an adverse party. Dividend Policy We have not declared or paid any dividends on our ordinary shares since our inception on April 1, 2014, and have no current plans to pay dividends on our ordinary shares. The declaration and payment of future dividends to holders of our ordinary shares will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, earnings, legal requirements, restrictions in our debt agreements and other factors deemed relevant by our board of directors. In addition, as a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay dividends as a result of the laws of their respective jurisdictions of organization, agreements of our subsidiaries or covenants under future indebtedness that we or they may incur. See Item 3D: Key Information - Risk Factors - Risks Related to our Ordinary Shares - Dividend payments on our ordinary shares are not expected, and for a discussion of taxation of any dividends, see Item 10E: Additional Information - Taxation. 72 Nomad Foods Annual Report 96214_164pg_Body.indd 68 96214_164pg_Body.indd 68 4/17/20 11:27 AM 4/17/20 11:27 AM The Founder Preferred Shares are entitled to receive an annual stock dividend based on the market price of our ordinary shares if such market price exceeds certain trading price minimums and to participate in any dividends on the ordinary shares. On December 31, 2019, we approved a 2019 Founder Preferred Share Dividend in an aggregate of 6,421,074 ordinary shares. The dividend price used to calculate the 2019 Founder Preferred Shares Annual Dividend Amount was $21.7289 (calculated based upon the volume weighted average price for the last ten trading days of 2019) and the Ordinary Shares were issued on January 2, 2020. For the year ended December 31, 2018, we approved a 2018 Founder Preferred Share Dividend in an aggregate of 171,092 ordinary shares. The dividend price used to calculate the 2018 Founder Preferred Shares Annual Dividend Amount was $16.7538 and the Ordinary Shares were issued on January 2, 2019. For the year ended December 31, 2017, we approved a 2017 Founder Preferred Share Dividend in an aggregate of 8,705,890 ordinary shares. The dividend price used to calculate the 2017 Founder preferred Shares Annual Dividend Amount was $16.6516 (calculated based upon the volume weighted average price for the last ten trading days of 2017) and the Ordinary Shares were issued on January 2, 2018. For the year ended December 31, 2016, no Founder Preferred Shares Annual Dividend Amount was payable pursuant to the terms of the Founder Preferred Shares. On January 12, 2016, we had approved the 2015 Founder Preferred Share Dividend in an aggregate of 3,620,510 ordinary shares. The dividend price used to calculate the 2015 Founder Preferred Shares Annual Dividend Amount was $11.4824 (calculated based upon the volume weighted average price for the last ten trading days of 2015) and the Ordinary Shares were issued on January 12, 2016. In subsequent years, the Founder Preferred Shares Annual Dividend Amount will be calculated based upon the volume weighted average price for the last ten trading days of the year and the appreciated average share price compared to the highest price previously used in calculating the Founder Preferred Shares Annual Dividend Amount. We currently expect to retain all our future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends for the foreseeable future. The declaration and payment of future dividends to holders of our ordinary shares will be at the discretion of our board of directors and will depend upon many factors, including our financial condition, earnings, legal requirements, and restrictions in our debt agreements, including the Revolving Credit Facility, and other factors deemed relevant by our board of directors. As a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay dividends as a result of the laws of their respective jurisdictions of organization, agreements of our subsidiaries or covenants under future indebtedness that we or they may incur. Furthermore, under British Virgin Islands law, we may pay dividends to our shareholders only if, immediately after the dividend, the value of our assets would exceed our liabilities and we would be able to pay our debts as they fall due. B. Significant Changes No significant change has occurred since the date of the annual financial statements included in this annual report. Item 9. The Offer and Listing A. Offer and Listing Details Our ordinary shares are currently listed for trading on the NYSE under the symbol “NOMD”. As of February 21, 2020, approximately 179,711,111 ordinary shares, representing approximately 89.4% of our outstanding ordinary shares, were held by approximately 18,980 United States beneficial holders and one record holder and all of our preferred shares were held by two United States record holders. There is no public market for our preferred shares and the preferred shares will not be listed for trading on any exchange. Item 10. Additional Information A. Share Capital Not applicable. 96214_164pg_Body.indd 69 96214_164pg_Body.indd 69 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 73 B. Memorandum and Articles of Association A copy of our Memorandum and Articles of Association have been previously filed as Exhibit 99.1 to our Report of Foreign Private Issuer on Form 6-K (File No. 001-37669), filed with the SEC on January 14, 2016, and is incorporated by reference into this annual report. The information called for by this Item 10B: Additional Information - Memorandum and Articles of Association has been reported previously in our Registration Statement on Form F-3 (File No. 333-225402), filed with the SEC on June 4, 2018 (the “Registration Statement”), under the heading “Description of Share Capital,” and is incorporated by reference into this annual report. There are no limitations on the rights to own securities, including the rights of non-resident or foreign shareholders to hold or exercise voting rights on the securities imposed by the laws of the British Virgin Islands or by our Memorandum. C. Material Contracts Each material contract to which the Company has been a party for the preceding two years, other than those entered into in the ordinary course of business, is listed as an exhibit to the Registration Statement and is summarized elsewhere herein. D. Exchange Controls We are not aware of any governmental laws, decrees, regulations or other legislation in the British Virgin Islands that restrict the export or import of capital, including the availability of cash and cash equivalents for use by our affiliated companies, or that affect the remittance of dividends, interest or other payments to non-resident holders of our securities. E. Taxation U.S. Federal Income Taxation General The following discussion is a summary of certain U.S. federal income tax issues relevant to the acquisition, holding and disposition of the ordinary shares. Additional tax issues may exist that are not addressed in this discussion and that could affect the U.S. federal income tax treatment of the acquisition, holding and disposition of the ordinary shares. This discussion does not address U.S. state, local or non-U.S. income tax consequences. The discussion applies, unless indicated otherwise, only to holders of ordinary shares who acquire the ordinary shares as capital assets. It does not address special classes of holders that may be subject to different treatment under the Internal Revenue Code of 1986, as amended (the “Code”), such as: • • • • • • • • • • certain financial institutions, insurance companies, underwriters, real estate investment trusts, or regulated investment companies; controlled foreign corporations or passive foreign investment companies; dealers and traders in securities; persons holding ordinary shares as part of a hedge, straddle, conversion or other integrated transaction; partnerships or other entities or arrangements classified as partnerships for U.S. federal income tax purposes; persons liable for the alternative minimum tax; tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; certain U.S. expatriates or former long-term residents of the United States; a person that is required to accelerate the recognition of any item of gross income with respect to ordinary shares as a result of such income being recognized on an applicable financial statement; a person that acquired ordinary shares as compensation for services; 74 Nomad Foods Annual Report 96214_164pg_Body.indd 70 96214_164pg_Body.indd 70 4/17/20 11:27 AM 4/17/20 11:27 AM • • persons holding ordinary shares that own or are deemed to own 10 percent or more (by vote or value) of the Company’s voting stock; or persons that do not use the U.S. Dollar as their functional currency. This section is based on the Code, its legislative history, existing and proposed Treasury regulations, published rulings by the Internal Revenue Service (“IRS”) and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis. Holders of ordinary shares should consult their own tax advisers concerning the U.S. federal, state, local and non-U.S. tax consequences of acquiring, holding and disposing of ordinary shares in their particular circumstances. As used herein, a “U.S. Holder” is a beneficial owner of ordinary shares that is, for U.S. federal income tax purposes: (i) an individual who is a citizen or resident of the United States; (ii) a corporation or other entity taxable as a corporation, created or organized in or under the laws of the United States or any political subdivision thereof; (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (iv) a trust if (1) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more “United States persons” (within the meaning of the Code) have the authority to control all substantial decisions of the trust, or (2) it has a valid election in effect under applicable Treasury regulations to be treated as a “United States person”. This discussion does not consider the tax treatment of partnerships or other pass-through entities that hold ordinary shares, or of persons who hold ordinary shares through such entities. If a partnership (or other entity or arrangement classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of ordinary shares, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. This discussion is based upon certain understandings and assumptions with respect to the business, assets and shareholders, including that the Company is not, does not expect to become, nor at any time has been, a controlled foreign corporation as defined in Section 957 of the Code (a “CFC”). The Company believes that it is not and has never been a CFC, and does not expect to become a CFC. In the event that one or more of such understandings and assumptions proves to be inaccurate, the following discussion may not apply and material adverse U.S. federal income tax consequences may result to U.S. Holders. Passive Foreign Investment Company (“PFIC”) Considerations Company is considered a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes. The U.S. federal income tax treatment of U.S. Holders will differ depending on whether the In general, the Company will be considered a PFIC for any taxable year in which: (i) 75 percent or more of its gross income consists of passive income; or (ii) 50 percent or more of the average quarterly market value of its assets in that year are assets (including cash) that produce, or are held for the production of, passive income. For purposes of the above calculations, if the Company, directly or indirectly, owns at least 25 percent by value of the stock of another corporation, then the Company generally would be treated as if it held its proportionate share of the assets of such other corporation and received directly its proportionate share of the income of such other corporation. Passive income generally includes, among other things, dividends, interest, rents, royalties, certain gains from the sale of stock and securities, and certain other investment income. Based on the current and anticipated composition of the income, assets and operations of the Company and its subsidiaries, the Company believes that it will not be a PFIC in its current taxable year and is not likely to be a PFIC in future taxable years. However, there is no assurance that the Company will not be a PFIC in any taxable year because PFIC status is factual in nature, depends upon factors not wholly within the Company's control, generally cannot be determined until the close of the taxable year in question, and is determined annually. If the Company is a PFIC for any taxable year during which a U.S. Holder holds (or, in the case of a lower-tier PFIC, is deemed to hold) its ordinary shares, such U.S. Holder will be subject to significant adverse U.S. federal income tax rules. U.S. Holders should consult their tax advisors on the federal income tax consequences of the Company being treated as a PFIC. 96214_164pg_Body.indd 71 96214_164pg_Body.indd 71 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 75 Tax Consequences for U.S. Holders if the Company is not a PFIC Dividends In general, subject to the PFIC rules discussed above, a distribution on an ordinary share will constitute a dividend for U.S. federal income tax purposes to the extent that it is made from the Company’s current or accumulated earnings and profits as determined under U.S. federal income tax principles. If a distribution exceeds the Company’s current and accumulated earnings and profits, it will be treated as a non-taxable reduction of basis to the extent of the U.S. Holder’s tax basis in the ordinary share on which it is paid, and to the extent it exceeds that basis it will be treated as capital gain. For purposes of this discussion, the term “dividend” means a distribution that constitutes a dividend for U.S. federal income tax purposes. The gross amount of any dividend on an ordinary share (which will include the amount of any foreign taxes withheld) generally will be subject to U.S. federal income tax as foreign source dividend income, and will not be eligible for the corporate dividends received deduction. The amount of a dividend paid in foreign currency will be its value in U.S. Dollars based on the prevailing spot market exchange rate in effect on the day the U.S. Holder receives the dividend. A U.S. Holder will have a tax basis in any distributed foreign currency equal to its U.S. Dollar amount on the date of receipt, and any gain or loss realized on a subsequent conversion or other disposition of foreign currency generally will be treated as U.S. source ordinary income or loss. If dividends paid in foreign currency are converted into U.S. Dollars on the date they are received by a U.S. Holder, the U.S. Holder generally should not be required to recognize foreign currency gain or loss in respect of the dividend income. Subject to certain exceptions for short-term and hedged positions, a dividend that a non-corporate holder receives on an ordinary share will be subject to a maximum federal income tax rate of 20 percent if the dividend is a “qualified dividend” not including the Medicare Contribution Tax described below. A dividend on an ordinary share will be a qualified dividend if (i) either (a) the ordinary shares are readily tradable on an established market in the United States or (b) the Company is eligible for the benefits of a comprehensive income tax treaty with the United States that the Secretary of the Treasury determines is satisfactory for purposes of these rules and that includes an exchange of information program, and (ii) the Company was not, in the year prior to the year the dividend was paid, and is not, in the year the dividend is paid, a PFIC. Since the ordinary shares are listed on the New York Stock Exchange, the ordinary shares should be treated as readily tradable on an established securities market in the United States. Even if dividends on the ordinary shares would otherwise be eligible for qualified dividend treatment, in order to qualify for the reduced qualified dividend tax rates, a non-corporate holder must hold the ordinary share on which a dividend is paid for more than 60 days during the 120-day period beginning 60 days before the ex-dividend date, disregarding for this purpose any period during which the non-corporate holder has an option to sell, is under a contractual obligation to sell or has made (and not closed) a short sale of substantially identical stock or securities, is the grantor of an option to buy substantially identical stock or securities or, pursuant to Treasury regulations, has diminished its risk of loss by holding one or more other positions with respect to substantially similar or related property. In addition, to qualify for the reduced qualified dividend tax rates, the non-corporate holder must not be obligated to make related payments with respect to positions in substantially similar or related property. Payments in lieu of dividends from short sales or other similar transactions will not qualify for the reduced qualified dividend tax rates. A non-corporate holder that receives an extraordinary dividend eligible for the reduced qualified dividend rates must treat any loss on the sale of the stock as a long-term capital loss to the extent of the dividend. For purposes of determining the amount of a non-corporate holder’s deductible investment interest expense, a dividend is treated as investment income only if the non-corporate holder elects to treat the dividend as not eligible for the reduced qualified dividend tax rates. Special limitations on foreign tax credits with respect to dividends subject to the reduced qualified dividend tax rates apply to reflect the reduced rates of tax. The U.S. Treasury has announced its intention to promulgate rules pursuant to which non-corporate holders of stock of non-U.S. corporations, and intermediaries through whom the stock is held, will be permitted to rely on certifications from issuers to establish that dividends are treated as qualified dividends. Because those procedures have not yet been issued, it is not clear whether the Company will be able to comply with them. Non-corporate holders of ordinary shares are urged to consult their own tax advisers regarding the availability of the reduced qualified dividend tax rates with respect to dividends received on the ordinary shares in light of their own particular circumstances. 76 Nomad Foods Annual Report 96214_164pg_Body.indd 72 96214_164pg_Body.indd 72 4/17/20 11:27 AM 4/17/20 11:27 AM Capital Gains Subject to the PFIC rules discussed above, on a sale or other taxable disposition of an ordinary share, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference between the U.S. Holder’s adjusted basis in the ordinary share and the amount realized on the sale or other disposition, each determined in U.S. Dollars. Such capital gain or loss will be long-term capital gain or loss if at the time of the sale or other taxable disposition the ordinary share has been held for more than one year. In general, any adjusted net capital gain of an individual is subject to a maximum federal income tax rate of 20 percent, not including the Medicare Contribution Tax, discussed below. Capital gains recognized by corporate U.S. holders generally are subject to U.S. federal income tax at the same rate as ordinary income. The deductibility of capital losses is subject to limitations. Any gain a U.S. Holder recognizes generally will be U.S. source income for U.S. foreign tax credit purposes, and, subject to certain exceptions, any loss will generally be a U.S. source loss. If a non-U.S. income tax is paid on a sale or other disposition of an ordinary share, the amount realized will include the gross amount of the proceeds of that sale or disposition before deduction of the non-U.S. tax. The generally applicable limitations under U.S. federal income tax law on crediting foreign income taxes may preclude a U.S. Holder from obtaining a foreign tax credit for any non-U.S. tax paid on a sale or other disposition of an ordinary share. The rules relating to the determination of the foreign tax credit are complex, and U.S. holders are urged to consult with their own tax advisers regarding the application of such rules. Alternatively, any non-U.S. income tax paid on the sale or other disposition of an ordinary share may be taken as a deduction against taxable income, provided the U.S. Holder takes a deduction and not a credit for all foreign income taxes paid or accrued in the same taxable year. Medicare Contribution Tax Dividends received with respect to ordinary shares and capital gains from the sale or other taxable disposition of the ordinary shares recognized by certain non-corporate U.S. Holders will be includable in computing net investment income of such U.S. Holder for purposes of the 3.8 percent Medicare Contribution Tax. Tax Consequences for Non-U.S. Holders of Ordinary Shares Holder nor a partnership (or entity or arrangement classified as a partnership) for U.S. federal income tax purposes. As used herein, a "non-U.S. Holder" is a beneficial owner of ordinary shares that is neither a U.S. Dividends A non-U.S. Holder generally will not be subject to U.S. federal income tax or withholding on dividends received from the Company with respect to ordinary shares, other than in certain specific circumstances where such income is deemed effectively connected with the conduct by the non-U.S. Holder of a trade or business in the United States. If a non-U.S. Holder is entitled to the benefits of a U.S. income tax treaty with respect to those dividends, that income is generally subject to U.S. federal income tax only if it is attributable to a permanent establishment maintained by the non-U.S. Holder in the United States. A non-U.S. Holder that is subject to U.S. federal income tax on dividend income under the foregoing exception generally will be taxed with respect to such dividend income on a net basis in the same manner as a U.S. Holder unless otherwise provided in an applicable income tax treaty; a non-U.S. Holder that is a corporation for U.S. federal income tax purposes may also be subject to a branch profits tax with respect to such item at a rate of 30 percent (or at a reduced rate under an applicable income tax treaty). Sale, Exchange or Other Taxable Disposition of Ordinary Shares respect to any gain recognized on a sale, exchange or other taxable disposition of ordinary shares unless: A non-U.S. Holder generally will not be subject to U.S. federal income tax or withholding with • • the gain is treated as effectively connected with the conduct by the non-U.S. Holder of a trade or business in the United States (and, if an applicable income tax treaty so requires, such gain is attributable to a permanent establishment maintained by the non-U.S. Holder in the United States); or the non-U.S. Holder is an individual and is present in the United States for 183 or more days in the taxable year of the sale, exchange or other taxable disposition, and meets certain other requirements. 96214_164pg_Body.indd 73 96214_164pg_Body.indd 73 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 77 If the first exception applies, the non-U.S. Holder generally will be subject to U.S. federal income tax with respect to such item on a net basis in the same manner as a U.S. Holder unless otherwise provided in an applicable income tax treaty; a non-U.S. Holder that is a corporation for U.S. federal income tax purposes may also be subject to a branch profits tax with respect to such item at a rate of 30 percent (or at a reduced rate under an applicable income tax treaty). If the second exception applies, the non-U.S. Holder generally will be subject to U.S. federal income tax at a rate of 30 percent (or at a reduced rate under an applicable income tax treaty) on the amount by which such non- U.S. Holder’s capital gains allocable to U.S. sources exceed capital losses allocable to U.S. sources during the taxable year of disposition of the ordinary shares. Tax Consequences for Holders of Preferred Shares Generally, the U.S. federal income tax consequences of holding preferred shares is the same as the U.S. federal income tax consequences of holding ordinary shares, as discussed above. Holders of preferred shares may be eligible for a distribution of ordinary shares as a dividend with respect to the holding of preferred shares. The distribution of a stock dividend may under certain circumstances be received free of U.S. federal income taxes. In that case, the adjusted tax basis of the ordinary shares distributed will be determined based on an allocation of the basis of the preferred shares in accordance with the fair market value of the preferred shares and the ordinary shares distributed. Holders of preferred shares are urged to consult their own tax advisers about the U.S. federal, state and local Tax consequences of receiving a stock dividend. Information Reporting and Backup Withholding Under U.S. federal income tax laws, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation (including IRS Forms 926). Persons who are required to file these information returns and fail to do so may be subject to substantial penalties. Pursuant to Section 1298(f) of the Code, for any year in which the Company is a PFIC, each U.S. Holder will be required to file an information statement, Form 8621, regarding such U.S. Holder’s ownership interest in the Company. U.S. Holders of ordinary shares should consult with their own tax advisers regarding the requirements of filing information returns. Furthermore, certain U.S. Holders who are individuals and to the extent provided in future regulations, certain entities, will be required to report information with respect to such U.S. Holder’s investment in “foreign financial assets” on IRS Form 8938. An interest in the Company constitutes a foreign financial asset for these purposes. Persons who are required to report foreign financial assets and fail to do so may be subject to substantial penalties. Potential shareholders are urged to consult with their own tax advisers regarding the foreign financial asset reporting obligations and their application to an investment in ordinary shares. Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting and to backup withholding unless the U.S. Holder is a corporation or other exempt recipient or, in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that no loss of exemption from backup withholding has occurred. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle such U.S. Holder to a refund, provided that the required information is furnished to the IRS. Non-U.S. Holders generally are not subject to information reporting or backup withholding with respect to dividends paid on ordinary shares, or the proceeds from the sale, exchange or other disposition of ordinary shares, provided that each such non-U.S. Holder certifies as to its foreign status on the applicable duly executed IRS Form W-8 or otherwise establishes an exemption. Foreign Account Tax Compliance Act Under certain circumstances, the Company or its paying agent may be required, pursuant to the Foreign Account Tax Compliance Act ("FATCA"), to withhold U.S. tax at a 30 percent rate on all or a portion of payments of dividends or other corporate distributions to holders of ordinary shares that are treated as "foreign pass-thru payments" made on or after the date that is two years after the issuance of final regulations concerning such foreign pass-thru payments are published, if such payments are not in compliance with FATCA. Such regulations have not yet been issued. The rules regarding FATCA and "foreign pass-thru payments," including the treatment of proceeds from the disposition of ordinary shares, are complex and holders of ordinary shares are encouraged to consult their own tax advisers regarding the impact of the FATCA rules on them. 78 Nomad Foods Annual Report 96214_164pg_Body.indd 74 96214_164pg_Body.indd 74 4/17/20 11:27 AM 4/17/20 11:27 AM This summary is for general information only and it is not intended to be, nor should it be construed to be, tax or legal advice to any prospective shareholder. Further, this summary is not intended to constitute a complete analysis of all U.S. federal income tax consequences relating to holders of their acquisition, ownership and disposition of the ordinary shares. Accordingly, prospective holders of ordinary shares should consult their own tax advisers about the U.S. federal, state, local and non-U.S. tax consequences of the acquisition, ownership and disposition of the ordinary shares. British Virgin Islands Taxation The Company capital or stamp duties are levied in the British Virgin Islands on the issue, transfer or redemption of ordinary shares. We are not subject to any income, withholding or capital gains taxes in the British Virgin Islands. No Shareholders Shareholders who are not tax resident in the British Virgin Islands will not be subject to any income, withholding or capital gains taxes in the British Virgin Islands, with respect to the ordinary shares of the Company owned by them and dividends received on such ordinary shares, nor will they be subject to any estate or inheritance taxes in the British Virgin Islands. United Kingdom Taxation General The following is a general summary of material UK tax considerations relating to the ownership and disposal of our ordinary shares. The comments set out below are based on current UK tax law as of the date of this summary, which is subject to change, possibly with retrospective effect. This summary does not constitute legal or tax advice and applies only to shareholders holding our ordinary shares as an investment and who are the beneficial owners thereof, whose ordinary shares are not held through an individual savings account or a self-invested personal pension and who have not acquired their or another person’s ordinary shares by reason of their or another person’s employment. These comments may not apply to certain classes of persons, including dealers in securities, insurance companies and collective investment schemes. This summary is for general information only and is not intended to be, nor should it be considered to be, legal or tax advice to any particular investor. It does not address all of the tax considerations that may be relevant to specific investors in light of their particular circumstances or to investors subject to special treatment under UK tax law. Potential investors should consult their own tax advisers concerning the overall tax consequences of acquiring, holding and disposing of our ordinary shares in their particular circumstances. The Company and therefore became resident in the UK for UK taxation purposes. As previously stated, on January 12, 2016, we became centrally managed and controlled in the UK Accordingly, since that date, we are subject to UK taxation on our income and gains, except where an exemption applies. Dividend income will generally be exempt from UK corporation tax on income if certain conditions are met. We may be treated as a dual resident company for UK tax purposes. As a result, our right to claim certain reliefs from UK tax may be restricted, and changes in law or practice in the UK could result in the imposition of further restrictions on our right to claim UK tax reliefs. Shareholders Sale, Exchange or Other Taxable Disposition of Ordinary Shares Subject to their individual circumstances, shareholders who are resident in the UK for UK taxation purposes will potentially be liable to UK taxation, as further explained below, on any gains which accrue to them on a sale or other disposition of their ordinary shares which constitutes a “disposal” for UK taxation purposes. 96214_164pg_Body.indd 75 96214_164pg_Body.indd 75 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 79 A shareholder who is not resident in the UK for UK tax purposes will not generally be subject to UK tax on chargeable gains on a disposal of ordinary shares unless such a shareholder carries on a trade, profession or vocation in the UK through a branch or agency or, in the case of a corporate shareholder, a permanent establishment. For shareholders in such circumstances, a gain on a disposal of our ordinary shares may be subject to UK taxation. An individual shareholder who acquires ordinary shares while UK resident, who temporarily ceases to be UK resident or becomes resident in a territory outside the UK for the purposes of double taxation relief arrangements, and who disposes of our ordinary shares during that period of temporary non-UK residence, may on his or her return to the UK be liable to UK capital gains tax on any chargeable gain realized on that disposal. For an individual shareholder within the charge to capital gains tax, a disposal of ordinary shares may give rise to a chargeable gain or allowable loss for the purposes of UK capital gains tax. The rate of capital gains tax is 10% for individuals who are subject to income tax at the basic rate and 20% to the extent that an individual shareholder’s chargeable gains, when aggregated with his or her income chargeable to income tax, exceeds the basic rate band for income tax purposes. However, an individual shareholder is entitled to realize £12,000 of gains (the annual exempt amount) in the UK tax year ended April 5, 2020, without being liable to tax. For a shareholder within the charge to UK corporation tax, a disposal (or deemed disposal) of ordinary shares may give rise to a chargeable gain or allowable loss for the purposes of UK corporation tax. Corporation tax is charged on chargeable gains at the rate applicable to that company, subject to any available exemption or relief. Indexation allowance may reduce the amount of chargeable gain that is subject to corporation tax (but may not give rise to or increase an allowable loss). No indexation allowance is available in respect of any period of ownership falling after December 2017. Dividends on Ordinary Shares No UK tax will be withheld or deducted at source from dividends paid by us on our ordinary shares. circumstances, be liable to UK income tax or, as the case may be, UK corporation tax on dividends paid to them by us. Shareholders who are resident in the UK for tax purposes may, subject to their individual The UK Government has introduced an annual dividend tax allowance per tax year. For the year ended April 5, 2020, it is £2,000. If and to the extent that an individual shareholder who is subject to UK income tax receives dividends in each tax year which, in aggregate, do not exceed that allowance, the individual will not be liable to UK income tax on those dividends. If and to the extent that an individual shareholder who is subject to UK income tax receives dividends in each tax year which, in aggregate, exceed that allowance, the individual will be subject to UK income tax on those dividends at the rate of 7.5% (in the case of basic rate taxpayers), 32.5% (in the case of higher rate taxpayers) and 38.1% (in the case of additional rate taxpayers), and the individual will not be entitled to any tax credit in respect of those dividends. Shareholders who are within the charge to UK corporation tax are generally likely to be exempt from corporation tax on dividends they receive from us, provided the dividends fall within an exempt class and certain conditions are met. Stamp duty/stamp duty reserve tax (i) Issue of Ordinary Shares No UK stamp duty or stamp duty reserve tax will be payable on the issue of ordinary shares. (ii) Transfers of Ordinary Shares UK stamp duty will in principle be payable on any instrument of transfer of our ordinary shares that is executed in the UK or that relates to any property situated, or to any matter or thing done or to be done, in the UK. An exemption from stamp duty is available on an instrument transferring ordinary shares where the amount or value of the consideration is £1,000 or less and it is certified on the instrument that the transaction effected by the instrument does not form part of a larger transaction or series of transactions in respect of which the aggregate amount or value of the consideration exceeds £1,000. Shareholders should be aware that, even where an instrument of transfer is in principle subject to stamp duty, stamp duty is not required to be paid unless it is necessary to rely on the instrument for legal purposes, for example to register a change of ownership or in litigation in a UK court. An instrument of transfer need not be stamped in order for the British Virgin Islands register of ordinary shares to be updated, and the register is conclusive proof of legal ownership. 80 Nomad Foods Annual Report 96214_164pg_Body.indd 76 96214_164pg_Body.indd 76 4/17/20 11:27 AM 4/17/20 11:27 AM Provided that the ordinary shares are not registered in any register maintained in the UK by or on behalf of us and are not paired with any shares issued by a UK incorporated company, any agreement to transfer ordinary shares will not be subject to UK stamp duty reserve tax. We currently do not intend that any register of our ordinary shares will be maintained in the UK. F. Dividends and Paying Agents Not applicable. G. Statements by Experts Not applicable. H. Documents on Display Documents concerning us that are referred to herein may be inspected at our principal executive offices at: No. 1 New Square, Bedfont Lakes Business Park, Feltham, Middlesex, TW14 8HA. Those documents, which include our registration statements, periodic reports and other documents which were filed with the SEC, may be obtained electronically from the Investor section of our website at www.nomadfoods.com or from the SEC’s website at www.sec.gov. We do not incorporate the information contained on, or accessible through, our website into this annual report, and you should not consider it a part of this annual report. I. Subsidiary Information Not applicable. Item 11. Quantitative and Qualitative Disclosures About Market Risk We are exposed to certain market risks during the normal course of our business, such as risk arising from fluctuations in foreign currency exchange rates, as well as fluctuations in interest rates. In attempts to manage these risks, we employ certain strategies to mitigate the effect of these fluctuations. For a detailed discussion of these risks, see Note 33 “Financial risk management” to our audited consolidated financial statements which appear elsewhere in this annual report. Item 12. Description of Securities Other than Equity Securities Not applicable. Item 13. Defaults, Dividend Arrearages and Delinquencies None. Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds Use of Proceeds None. None. 96214_164pg_Body.indd 77 96214_164pg_Body.indd 77 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 81 Item 15. Controls and Procedures Disclosure Controls and Procedures We carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules l3a-15(e) and l5d - 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report in providing a reasonable level of assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods in SEC rules and forms, including providing a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Changes in internal control over financial reporting During the period covered by this report, there have been no changes to our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Management’s annual report on internal control over financial reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2019 using criteria described in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that the internal control over financial reporting was effective as of December 31, 2019 based on the criteria established in this Internal Control-Integrated Framework (2013). Attestation report of the independent registered public accounting firm The independent registered public accounting firm that audited the Consolidated Financial Statements, PricewaterhouseCoopers LLP, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, appearing under Item 18. Item 16A. Audit Committee Financial Expert The board of directors has determined that Mr. Lillie qualifies as an audit committee financial expert as defined in Item 16A of Form 20-F, and that he is also “independent,” as defined in Rule 10A-3 under the Exchange Act and applicable NYSE standards. For more information about Mr. Lillie, see Item 6A: Directors, Senior Management and Employees - Directors and Senior Management. 82 Nomad Foods Annual Report 96214_164pg_Body.indd 78 96214_164pg_Body.indd 78 4/17/20 11:27 AM 4/17/20 11:27 AM Item 16B. Code of Ethics We have adopted a Code of Ethics that applies to our Chief Executive Officer and all senior financial officers. The Code of Ethics is located on our Internet website at www.nomadfoods.com under "Investor Relations - Corporate Governance". website within five business days following the date of the amendment or waiver. We intend to provide disclosure of any amendments or waivers of our Code of Ethics on our Item 16C. Principal Accountant Fees and Services PricewaterhouseCoopers LLP (“PwC”) acted as our independent auditor for the years ended December 31, 2019 and 2018. The table below sets out the total amount billed to us by PwC, for services performed in the years ended December 31, 2019 and 2018, and breaks down these amounts by category of service: (€ in millions) Audit fees Audit-related fees Tax fees All other fees Total Audit Fees For the year ended December 31, 2019 3.3 0.1 1.5 0.1 5.0 For the year ended December 31, 2018 2.8 0.1 1.1 — 4.0 Audit fees in the years ended December 31, 2019 and 2018 are related to the audit of our consolidated financial statements and other audit or interim review services provided in connection with statutory and regulatory filings or engagements. Audit-Related Fees services on capital market transactions. Audit-related fees in the years ended December 31, 2019 and 2018 are related to other assurance Tax Fees tax related services. All Other Fees Tax fees in the years ended December 31, 2019 and 2018 are related to tax compliance and other Other fees in the year ended December 31, 2019 relate to other non-audit assurance services. There were no other fees in the year ended 2018. Pre-Approval Policies and Procedures been delegated, is required for all audit and non-audit services provided by our auditors. The advance approval of the Audit Committee or members thereof, to whom approval authority has All services provided by our auditors are approved in advance by either the Audit Committee or members thereof, to whom authority has been delegated, in accordance with the Audit Committee’s pre-approval policy. No such services were approved pursuant to the procedures described in Rule 2-01(c)(7)(i)(C) of Regulation S-X, which waives the general requirement for pre-approval in certain circumstances. Item 16D. Exemptions from the Listing Standards for Audit Committees None. Nomad Foods Annual Report 83 96214_164pg_Body.indd 79 96214_164pg_Body.indd 79 4/17/20 11:27 AM 4/17/20 11:27 AM Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 16F. Change in Registrants’ Certifying Accountant Not applicable. Item 16G. Corporate Governance Comparison of Shareholder Rights We are incorporated under, and are governed by, the laws of the British Virgin Islands. The following discussion summarizes material differences between the rights of holders of our ordinary shares and the rights of common shareholders of a typical corporation incorporated under the laws of the State of Delaware. Director’s Fiduciary Duties Under Delaware corporate law, a director of a solvent Delaware corporation owes fiduciary duties to the corporation and its shareholders. These duties have two components: the duty of care and the duty of loyalty. The duty of care requires that a director inform himself of all material information regarding a decision. The duty of loyalty requires that a director act in a manner he reasonably believes to be in the best interests of the corporation and its shareholders. A director must not use his corporate position for personal gain or advantage. The duty of loyalty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder that is not shared by the shareholders generally. In general, the “business judgment rule” presumes that actions of the board of directors are made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation and its shareholders. This presumption may be rebutted by evidence of a breach of the directors’ fiduciary duties. If this presumption is rebutted, the board of directors bear the burden of proving that the actions were “entirely fair” to the corporation or its minority shareholders. In addition, Delaware common law imposes “heightened” judicial scrutiny on actions of directors in certain circumstances, such as upon a sale of the corporation. British Virgin Islands law provides that every director of a British Virgin Islands company in exercising his powers or performing his duties, shall act honestly and in good faith and in what the director believes to be in the best interests of the company. Additionally, the director shall exercise the care, diligence, and skill that a reasonable director would exercise in the same circumstances taking into account the nature of the company, the nature of the decision and the position of the director and his responsibilities. In addition, British Virgin Islands law provides that a director shall exercise his powers as a director for a proper purpose and shall not act, or agree to the company acting, in a manner that contravenes British Virgin Islands law or the memorandum and articles of association of the company. Amendment of Governing Documents Under Delaware corporate law, with very limited exceptions, a vote of the shareholders of a corporation is required to amend the certificate of incorporation. In addition, Delaware corporate law provides that shareholders have the right to amend the corporation’s bylaws, but the certificate of incorporation may also confer such right on the directors of the corporation. Consent in Lieu of Meeting Under Delaware corporate law, a consent in lieu of a meeting of the directors must be unanimous to take effect. Under British Virgin Islands law and our Memorandum and Articles, only a majority of the directors are required to sign a written consent. Under Delaware corporate law, unless otherwise provided in the certificate of incorporation, any action to be taken at any annual or special meeting of shareholders of a corporation may be taken without a meeting by consent of the holders of outstanding stock having not less than the minimum number of votes that would be necessary to take that action at a meeting at which all shareholders entitled to vote were present and voted. If any shareholder action is taken by less than unanimous consent, notice of such action must be given to those shareholders who have not consent and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that consents signed by a sufficient number of shareholders were delivered to the corporation. 84 Nomad Foods Annual Report 96214_164pg_Body.indd 80 96214_164pg_Body.indd 80 4/17/20 11:27 AM 4/17/20 11:27 AM Our Memorandum and Articles provides that any shareholder action permitted to be taken at a shareholder meeting may also be taken by written consent of a majority of the votes of shares entitled to vote thereon. If any shareholder resolution is adopted otherwise than by the unanimous written consent of all shareholders, a copy of such resolution shall be sent to all shareholders not consenting to such resolution. Shareholder Proposals Under Delaware corporate law, a shareholder has the right to put any proposal before the annual meeting of shareholders, provided it complies with the relevant provisions (if any) in the corporation’s certificate of incorporation or bylaws. A meeting of shareholders may be called by the board of directors or any other person authorized to do so by the corporation’s certificate of incorporation or bylaws; shareholders may be precluded therein from calling special meetings. British Virgin Islands law and our Memorandum and Articles provide that our directors shall call a meeting of the shareholders if requested in writing to do so by shareholders entitled to exercise at least 30% of the voting rights in respect of the matter for which the meeting is requested. Sale of Assets Under Delaware corporate law, a vote of the shareholders is required to approve a sale, lease or exchange of property and assets of a corporation (including property and assets of its qualifying subsidiaries) only when all or substantially all of the corporation’s property and assets are being sold other than to a qualifying subsidiary of the corporation. Under British Virgin Islands law generally, shareholder approval is required when more than 50% of a company’s total assets by value are being disposed of or sold to any person if not made in the usual or regular course of the business carried out by the company. Under our Memorandum and Articles, this requirement of British Virgin Islands law has been disapplied and accordingly no shareholder approval is required in relation to such a disposal or sale. Redemption of Shares Under Delaware corporate law, by provision of the certificate of incorporation, any class or series of stock may be made subject to redemption by the corporation at its option, at the option of the holders of that stock or upon the happening of a specified event, provided that after such redemption shares of a class or series of stock with full voting power remain outstanding. The class or series of stock may, by provision of the certificate of incorporation, be made redeemable for cash, property or rights, as specified in the certificate of incorporation or in the resolution of the board of directors providing for the issue of the stock pursuant to the power expressly vested in the board of directors by the certificate of incorporation. Under Delaware corporate law, shares also may be repurchased with the consent of both the corporation and the holder, except that shares may not be repurchased for more than the price at which such shares may then be redeemed at the option of the corporation. Both the redemption and repurchase of shares of a Delaware corporation are subject to certain solvency limitations established by Delaware corporate law and Delaware common law. As permitted by British Virgin Islands law and our Memorandum and Articles, shares may be repurchased, redeemed or otherwise acquired by us. However, the consent of the shareholder whose shares are to be repurchased, redeemed or otherwise acquired must be obtained, except as specified in the terms of the applicable class or series of shares. Squeeze-Out Merger Under the Delaware General Corporation Law § 253, in a process known as a “short form” merger, a corporation that owns at least 90% of the outstanding shares of each class of voting stock of another corporation and where at least one of the corporations is a Delaware corporation and the laws of the jurisdiction of the other corporation don’t prohibit such action, may either merge the other corporation into itself or merge itself into the other corporation by executing, acknowledging and filing with the Delaware Secretary of State a certificate of ownership and merger setting forth a copy of the resolution of its board of directors authorizing such merger. If the parent corporation is a Delaware corporation that is not the surviving corporation, the merger also must be approved by a majority of the outstanding stock of the parent corporation entitled to vote thereon and the resolution must include provision for the pro rata issuance of stock of the surviving corporation to the holders of the stock of the parent corporation on surrender of any certificate therefor. If the parent corporation does not own all of the stock of the subsidiary corporation immediately prior to the merger, the minority shareholders of the subsidiary corporation party to the merger have appraisal rights as set forth in § 262 of the Delaware General Corporation Law. Under the BVI Act, subject to any limitations in a company’s memorandum and articles of association, members holding 90% of the votes of the outstanding shares entitled to vote, and members holding 90% of the votes of the outstanding shares of each class of shares entitled to vote, may give a written instruction to the company directing the company to redeem the shares held by the remaining members. In our Memorandum and Articles, we have opted out of the BVI Act’s squeeze out provisions. Nomad Foods Annual Report 85 96214_164pg_Body.indd 81 96214_164pg_Body.indd 81 4/17/20 11:27 AM 4/17/20 11:27 AM Variation of Rights of Shares Under Delaware corporate law, a corporation may vary the rights of a class of stock with the approval of a majority of the outstanding shares entitled to vote thereon, and, in certain circumstances, including if such variation would change the rights of such class so as to affect them adversely, with the approval of a majority of the outstanding shares of such class, voting separately as a single class. As permitted by British Virgin Islands law and our Memorandum and Articles, we may vary the rights attached to any class with the written consent of at least 50% of the holders of each class of shares affected or by a resolution passed by at least 50% of the votes cast by eligible holders of the issued shares of the affected class at a separate meeting of the holders of that class. Election of Directors Under Delaware corporate law generally, unless otherwise specified in the certificate of incorporation or bylaws of a corporation, directors are elected by a plurality of the votes of the shares entitled to vote on the election of directors and vacancies and newly created directorships resulting from an increase in the number of directors may be filled by a majority of the directors then in office (although less than a quorum) or by the sole remaining director. Subject to the BVI Act and pursuant to our Memorandum and Articles, directors shall be appointed at any time, and from time to time, by our directors, without the approval of shareholders, either to fill a vacancy or as an alternate or additional director. The shareholders may, by a majority vote, appoint any person as a director. In addition, for so long as an initial holder of Founder Preferred Shares holds 20% or more of the Founder Preferred Shares in issue, such holder is entitled to nominate, and the directors are required to appoint, a person as director. If such holder notifies the Company to remove any director nominated by him or her, the other directors shall remove such director, and the holder will have the right to nominate a director to fill the resulting vacancy. In the event an initial holder ceases to be a holder of Founder Preferred Shares or holds less than 20% of the Founder Preferred Shares in issue, such initial holder will no longer be entitled to nominate a person as a director, and the holders of a majority of the Founder Preferred Shares in issue will be entitled to exercise that initial holder’s former rights to appoint a director instead. Removal of Directors Under Delaware corporate law generally, a director of a corporation without a classified board may be removed, with or without cause, by the holders of a majority (or such larger portion set forth in the certificate of incorporation) of the outstanding shares entitled to vote at an election of directors. Under Delaware corporate law, generally a director of a corporation with a classified board may be removed only for cause with the approval of a majority (or such larger portion set forth in the certificate of incorporation) of the outstanding shares entitled to vote at an election of directors, unless the certificate of incorporation provides otherwise. Under Delaware corporate law, generally a director may resign at any time upon notice given in writing or by electronic transmission to the corporation. Our Memorandum and Articles provide that a director may be removed at any time if: (i) he resigns by written notice to the Company; (ii) he is requested to resign by written notice of all of the other directors; (iii) he ceases to be a director by virtue of any provision of law or becomes prohibited by law from or is disqualified from being a director; (iv) he becomes bankrupt or makes any arrangement or composition with his creditors generally or otherwise has any judgment executed on any of his assets; (v) he becomes of unsound mind or incapable; (vi) he is absent from meetings of directors for a consecutive period of 12 months and the other directors resolve that his office shall be vacated; (vii) he dies; or (viii) a resolution of shareholders is approved by a majority of the shares entitled to vote on such matter passed at a meeting of shareholders called for the purposes of removing the director or for purposes including the removal of the director or a written special resolution of shareholders is passed by at least 75% of the votes of shares entitled to vote thereon. 86 Nomad Foods Annual Report 96214_164pg_Body.indd 82 96214_164pg_Body.indd 82 4/17/20 11:27 AM 4/17/20 11:27 AM Mergers Under Delaware corporate law, one or more constituent corporations may merge into and become part of another constituent corporation in a process known as a merger. A Delaware corporation may merge with a foreign corporation as long as the law of the foreign jurisdiction permits such a merger. To effect a merger under Delaware General Corporation Law § 251, an agreement of merger must be properly adopted and the agreement of merger or a certificate of merger must be filed with the Delaware Secretary of State. In order to be properly adopted, the agreement of merger must be adopted by the board of directors of each constituent Delaware corporation by a resolution or unanimous consent in lieu of a meeting. In addition, the agreement of merger generally must be approved at a meeting of shareholders of each constituent Delaware corporation by a majority of the outstanding stock of such corporation entitled to vote, unless the certificate of incorporation provides for a supermajority vote. In general, the surviving corporation is vested in all of the assets and liabilities of the disappearing corporation or corporations as a result of the merger. Under the BVI Act, two or more companies may merge or consolidate in accordance with the statutory provisions. A merger means the merging of two or more constituent companies into one of the constituent companies, and a consolidation means the uniting of two or more constituent companies into a new company. In order to merge or consolidate, the directors of each constituent company must approve a written plan of merger or consolidation, which must be authorized by a resolution of shareholders. One or more companies may also merge or consolidate with one or more companies incorporated under the laws of jurisdictions outside the British Virgin Islands if the merger or consolidation is permitted by the laws of the jurisdictions in which the companies incorporated outside the British Virgin Islands are incorporated. In respect of such a merger or consolidation, a British Virgin Islands company is required to comply with the provisions of the BVI Act, and a company incorporated outside the British Virgin Islands is required to comply with the laws of its jurisdiction of incorporation. Shareholders not otherwise entitled to vote on the merger or consolidation may still acquire the right to vote if the plan of merger or consolidation contains any provision that, if proposed as an amendment to the memorandum and articles of association, would entitle them to vote as a class or series on the proposed amendment. In any event, all shareholders must be given a copy of the plan of merger or consolidation irrespective of whether they are entitled to vote at the meeting or consent to the written resolution to approve the plan of merger or consolidation. Inspection of Books and Records Under Delaware corporate law, any shareholder of a corporation may, upon proper demand, and for any proper purpose, inspect or make copies of the corporation’s stock ledger, list of shareholders and other books and records. Members of the public, on payment of the requisite fee, can obtain a copy of a Delaware corporation’s certificate of incorporation. Under British Virgin Islands law, members of the general public, on payment of a nominal fee, can obtain copies of the public records of a company available at the office of the British Virgin Islands Registrar of Corporate Affairs, including the company’s certificate of incorporation, its memorandum and articles of association (with any amendments), records of license fees paid to date, any articles of dissolution, any articles of merger and a register of charges if the company has elected to file such a register. A shareholder of a company is entitled, on giving written notice to the company, to inspect: (a) (b) (c) (d) the memorandum and articles of association; the register of members; the register of directors; and the minutes of meetings and resolutions of shareholders and of those classes of shares of which he is a shareholder. In addition, a shareholder may make copies of or take extracts from the documents and records referred to in (a) through (d) above. However, subject to the memorandum and articles of association of the company, the directors may, if they are satisfied that it would be contrary to the company’s interests to allow a shareholder to inspect any document, or part of any document, specified in (b), (c) or (d) above, refuse to permit the shareholder to inspect the document or limit the inspection of the document, including limiting the making of copies or the taking of extracts from the records. Where a company fails or refuses to permit a shareholder to inspect a document or permits a shareholder to inspect a document subject to limitations, that shareholder may apply to the court for an order that he should be permitted to inspect the document or to inspect the document without limitation. Nomad Foods Annual Report 87 96214_164pg_Body.indd 83 96214_164pg_Body.indd 83 4/17/20 11:27 AM 4/17/20 11:27 AM Where a company keeps a copy of the register of members or the register of directors at the office of its registered agent, it is required to notify the registered agent of any changes to the originals of such registers, in writing, within 15 days of any change; and to provide the registered agent with a written record of the physical address of the place or places at which the original register of members or the original register of directors is kept. Where the place at which the original register of members or the original register of directors is changed, the company is required to provide the registered agent with the physical address of the new location of the records within 14 days of the change of location. A company is also required to keep at the office of its registered agent or at such other place or places, within or outside the British Virgin Islands, as the directors determine the minutes of meetings and resolutions of shareholders and of classes of shareholders, and the minutes of meetings and resolutions of directors and committees of directors. If such records are kept at a place other than at the office of the company’s registered agent, the company is required to provide the registered agent with a written record of the physical address of the place or places at which the records are kept and to notify the registered agent, within 14 days, of the physical address of any new location where such records may be kept. The Company’s registered agent in the British Virgin Islands is: Intertrust Corporate Services (BVI) Limited, Ritter House, Wickhams Cay II, Road Town, Tortola, British Virgin Islands. Conflict of Interest Under Delaware corporate law, a contract or transaction between a corporation and a director or officer, or between a corporation and any other organization in which a director or officer has a financial interest or is a director or officer, is not void or voidable as long as (i) the material facts as to the director’s or officer’s relationship or interest are disclosed or known and either (A) a majority of the disinterested directors authorizes the contract or transaction in good faith or (B) the shareholders vote in good faith to approve the contract or transaction or (ii) the contract or transaction is fair to the corporation when it is authorized, approved or ratified by the board of directors, a committee thereof or the shareholders. Delaware corporate law permits the corporation to renounce, in its certificate of incorporation or by action of its board of directors, any interest or expectancy of the corporation in, or in being offered an opportunity to participate in, specified business opportunities or specified classes or categories of business opportunities that are presented to the corporation or one or more of its officers, directors or stockholders. The BVI Act provides that a director shall, forthwith after becoming aware that he is interested in a transaction entered into or to be entered into by the company, disclose that interest to the board of directors of the company. The failure of a director to disclose that interest does not affect the validity of a transaction entered into by the director or the company, so long as the director’s interest was disclosed to the board prior to the company’s entry into the transaction or was not required to be disclosed because the transaction is between the company and the director himself and is otherwise in the ordinary course of business and on usual terms and conditions. As permitted by British Virgin Islands law and our Memorandum and Articles, a director interested in a particular transaction may vote on it, attend meetings at which it is considered and sign documents on our behalf that relate to the transaction. In addition, if our directors have other fiduciary obligations, including to other companies on whose board of directors they presently sit and to other companies whose board of directors they may join in the future, to the extent that they identify business opportunities that may be suitable for us or other companies on whose board of directors they may sit, our directors are permitted to honor those pre-existing fiduciary obligations ahead of their obligations to us. Accordingly, they may refrain from presenting certain opportunities to us that come to their attention in the performance of their duties as directors of such other entities unless the other companies have declined to accept such opportunities or clearly lack the resources to take advantage of such opportunities. Transactions with “Interested Stockholders” Delaware corporate law contains a business combination statute applicable to Delaware public corporations whereby, unless the corporation has specifically elected not to be governed by that statute by appropriate action, it is prohibited from engaging in certain business combinations with an “interested stockholder” for three years following the date that the person becomes an “interested stockholder.” An “interested stockholder” generally is a person or group that owns or owned 15% or more of the company’s outstanding voting stock within the past three years. This statute has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the company in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which the shareholder becomes an “interested stockholder,” the board of directors approves either the business combination or the transaction that resulted in the person becoming an “interested stockholder.” British Virgin Islands law has no comparable provision. However, although British Virgin Islands law does not regulate transactions between a company and its significant shareholders, it does provide that these transactions must be entered into in the bona fide best interests of the company and not with the effect of constituting a fraud on the minority shareholders. 88 Nomad Foods Annual Report 96214_164pg_Body.indd 84 96214_164pg_Body.indd 84 4/17/20 11:27 AM 4/17/20 11:27 AM Independent Directors There are no provisions under Delaware corporate law or under the BVI Act that require a majority of our directors to be independent. Cumulative Voting Under Delaware corporate law, cumulative voting for elections of directors is not permitted unless the company’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholder’s voting power with respect to electing such director. There are no prohibitions on cumulative voting under the laws of the British Virgin Islands, but our Memorandum and Articles do not provide for cumulative voting. Shareholders’ Rights under British Virgin Islands Law Generally The BVI Act provides for certain remedies that may be available to shareholders. Where a company incorporated under the BVI Act or any of its directors engages in, or proposes to engage in, conduct that contravenes the BVI Act or the company’s memorandum and articles of association, British Virgin Islands courts can issue a restraining or compliance order. However, shareholders cannot also bring derivative, personal and representative actions under certain circumstances. The traditional English basis for shareholders’ remedies has also been incorporated into the BVI Act: where a shareholder of a company considers that the affairs of the company have been, are being or are likely to be conducted in a manner likely to be oppressive, unfairly discriminating or unfairly prejudicial to him, he may apply to the court for an order based on such conduct. In addition, any shareholder of a company may apply to the courts for the appointment of a liquidator of the company and the court may appoint a liquidator of the company if it is of the opinion that it is just and equitable to do so. The BVI Act also provides that any shareholder of a company is entitled to payment of the fair value of his shares upon dissenting from any of the following: (i) a merger, if the company is a constituent company, unless the company is the surviving company and the shareholder continues to hold the same or similar shares; (ii) a consolidation, if the company is a constituent company; (iii) any sale, transfer, lease, exchange or other disposition of more than 50% in value of the assets or business of the company if not made in the usual or regular course of the business carried on by the company but not including (a) a disposition pursuant to an order of the court having jurisdiction in the matter, (b) a disposition for money on terms requiring all or substantially all net proceeds to be distributed to the shareholders in accordance with their respective interest within one year after the date of disposition, or (c) a transfer pursuant to the power of the directors to transfer assets for the protection thereof; (iv) a redemption of 10% or fewer of the issued shares of the company required by the holders of 90% or more of the shares of the company pursuant to the terms of the BVI Act; and (v) an arrangement, if permitted by the court. Generally any other claims against a company by its shareholders must be based on the general laws of contract or tort applicable in the British Virgin Islands or their individual rights as shareholders as established by a company’s memorandum and articles of association. Foreign Private Issuer Exemption As a “foreign private issuer,” as defined by the SEC, we are permitted to follow certain corporate governance practices of our home country, the British Virgin Islands, instead of those otherwise required under the NYSE for domestic issuers. While we voluntarily follow most NYSE corporate governance rules, we intend to take advantage of the following limited exemptions: • Unlike NYSE corporate governance rules, under BVI law, there is no requirement that our board of directors consist of a majority of independent directors and our independent directors are not required to hold executive sessions. Currently, however only seven out of our eleven board members are independent based on NYSE independence standards. Also, while our board’s non- management directors will meet regularly in executive session without management, our board does not intend to hold an executive session of only independent directors at least once a year as called for by the NYSE. 96214_164pg_Body.indd 85 96214_164pg_Body.indd 85 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 89 • • The NYSE rules applicable to domestic issuers require disclosure within four business days of any determination to grant a waiver of the code of business conduct and ethics to directors and officers. Although we will require board approval of any such waiver, we may choose not to disclose the waiver in the manner set forth in the NYSE rules, as permitted by the foreign private issuer exemption. We are exempt from the rules and regulations under the Exchange Act and NYSE related to the furnishing and content of proxy statements. Therefore, we intend to hold annual shareholder meetings in accordance with the corporate governance practices of the British Virgin Islands and our Memorandum and Articles of Association. Similarly, with respect to matters on which shareholders will have a right to vote, we intend to comply with corporate governance practices of the British Virgin Islands and the voting requirements under the NYSE rules applicable to foreign private issuers. Item 16H. Mine Safety Disclosure None. Item 17. Financial Statements Not Applicable. 90 Nomad Foods Annual Report 96214_164pg_Body.indd 86 96214_164pg_Body.indd 86 4/17/20 11:27 AM 4/17/20 11:27 AM Item 18. Financial Statements The following financial statements, together with the report of PricewaterhouseCoopers LLP thereon, are filed as part of this annual report: NOMAD FOODS LIMITED AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm Consolidated Statements of Financial Position Consolidated Statements of Profit or Loss Consolidated Statements of Comprehensive Income Consolidated Statements of Changes in Equity Consolidated Statements of Cash Flows Notes to the Consolidated Financial Statements Page F-1 F-4 F-5 F-6 F-7 F-10 F-11 96214_164pg_Body.indd 87 96214_164pg_Body.indd 87 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 91 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Nomad Foods Limited Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying Consolidated Statements of Financial Position of Nomad Foods Limited and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related Consolidated Statements of Profit or Loss, of Comprehensive Income, of Changes in Equity, and of Cash Flows for each of the three years in the period ended December 31, 2019, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board and in conformity with International Financial Reporting Standards as adopted by the European Union. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Change in Accounting Principle As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 15. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. F-1 Nomad Foods Annual Report 96214_164pg_Body.indd 88 96214_164pg_Body.indd 88 4/17/20 11:27 AM 4/17/20 11:27 AM Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Goodwill impairment assessment As described in Note 3, 4 and 13 to the consolidated financial statements, the Company’s consolidated goodwill balance was €1,862.9 million at December 31, 2019. Management performs an annual review of the carrying amount of the goodwill to identify whether there is any impairment to these carrying values. Potential impairment is identified by comparing the value in use of the cash-generating unit (“CGU”) to its carrying value, including goodwill. Value in use is calculated as the net present value of the projected risk-adjusted cash flows of each CGU. Estimating value in use required various management judgments and assumptions including revenue and profit margin growth rates, long-term growth rate and discount rate. The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment is a critical audit matter are there was significant judgment by management when developing the value in use of the CGUs using the discounted cash flows technique. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence obtained related to management’s cash flow forecasts and significant assumptions, including revenue and profit margin growth rates, long-term growth rate and discount rate. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Company’s CGUs. These procedures also included, among others, testing management’s process for developing the value in use estimates; evaluating the appropriateness of the discounted cash flow model; testing the completeness, accuracy and relevance of underlying data used in the model; and evaluating the reasonableness of the significant assumptions used by management including the revenue and profit margin growth rates, long-term growth rate and discount rate. Evaluating the reasonableness of management’s assumptions related to the Company’s cash flow forecasts involved evaluating whether the revenue and profit margin growth rates were reasonable considering (i) the current and past performance of the CGUs, (ii) the consistency with external market and industry data, (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit and (iv) performing sensitivity analyses. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow model, and certain significant assumptions, including the long-term growth rate and discount rate. Nomad Foods Annual Report F-2 96214_164pg_Body.indd 89 96214_164pg_Body.indd 89 4/17/20 11:27 AM 4/17/20 11:27 AM Uncertain tax positions As described in Note 3, 4 and 11 to the consolidated financial statements, the Company operates in many different jurisdictions and in some of these, certain matters are under discussion with local tax authorities. These discussions are often complex and can take many years to resolve, and are in different stages with respect to assessments, appeals and refunds. Where tax exposures can be quantified, a provision is made based on management’s estimates and judgments with regard to the amounts expected to be paid to the relevant tax authority. As of December 31, 2019, the current tax payables of €217.2 million and deferred tax assets of €96.4 million included €137.8 million of provisions for tax uncertainties. As management has further disclosed, given the inherent uncertainties in assessing the outcomes of these exposures, the Company could in future periods experience adjustments to these accruals. The principal considerations for our determination that performing procedures relating to uncertain tax positions is a critical audit matter are there was significant judgment by management when determining uncertain tax positions, including a high degree of estimation uncertainty relative to the numerous and complex tax laws, frequency of tax audits, and potential for significant adjustments as a result of such audits. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate the timely identification and accurate measurement of uncertain tax positions. Also, the evaluation of audit evidence available to support the tax liabilities for uncertain tax positions is complex and required significant auditor judgment as the nature of the evidence is often highly subjective, and the audit effort involved the use of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the identification and recognition of the liability for uncertain tax positions, and controls addressing completeness of the uncertain tax positions, as well as controls over measurement of the liability. These procedures also included, among others, (i) testing the information used in the calculation of the liability for uncertain tax positions; (ii) testing the calculation of the liability for uncertain tax positions by jurisdiction, including management’s assessment of the technical merits of tax positions and estimates of the amount of tax benefit expected to be sustained; (iii) testing the completeness of management’s assessment of both the identification of uncertain tax positions and possible outcomes of each uncertain tax position; and (iv) evaluating the status and results of income tax audits with the relevant tax authorities. Professionals with specialized skill and knowledge were used to assist in the evaluation of the completeness and measurement of the Company’s uncertain tax positions, including evaluating the reasonableness of management’s assessment of whether tax positions are more-likely-than-not of being sustained and the amount of potential benefit to be realized, the application of relevant tax laws, and estimated interest and penalties. /s/ PricewaterhouseCoopers LLP London, United Kingdom February 27, 2020 We have served as the Company’s or its predecessor's1 auditor since 2006. 1Nomad Foods Europe Holdings Limited (previously Iglo Foods Holdings Limited) and its subsidiaries F-3 Nomad Foods Annual Report 96214_164pg_Body.indd 90 96214_164pg_Body.indd 90 4/17/20 11:27 AM 4/17/20 11:27 AM Consolidated Statements of Financial Position Non-current assets Goodwill Intangibles Property, plant and equipment Other non-current assets Derivative financial instruments Deferred tax assets Total non-current assets Current assets Cash and cash equivalents Inventories Trade and other receivables Indemnification assets Short-term investments Derivative financial instruments Total current assets Total assets Current liabilities Trade and other payables Current tax payable Provisions Loans and borrowings Derivative financial instruments Total current liabilities Non-current liabilities Loans and borrowings Employee benefits Other non-current liabilities Provisions Derivative financial instruments Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Share capital and capital reserve Share-based compensation reserve Founder Preferred Shares Dividend Reserve Translation reserve Cash flow hedging reserve Accumulated deficit reserve Equity attributable to owners of the parent Non-controlling interests Total equity December 31, 2019 December 31, 2018 Note €m €m 13 13 12 18 34 16 20 17 18 19 34 34 22 24 21 34 21 23 22 24 34 16 25 26 27 28 29 1,862.9 2,083.1 422.4 1.9 17.5 96.4 4,484.2 826.1 323.2 206.7 35.4 25.0 3.9 1,420.3 5,904.5 525.2 217.2 40.9 27.7 12.1 823.1 1,847.6 237.5 2.7 5.9 32.8 398.2 2,524.7 3,347.8 2,556.7 2,095.4 22.6 370.1 94.8 (13.2) (11.8) 2,557.9 (1.2) 2,556.7 1,861.0 2,087.2 348.8 2.6 35.7 68.7 4,404.0 327.6 342.5 173.9 79.4 — 13.4 936.8 5,340.8 571.6 201.2 44.3 21.4 1.5 840.0 1,742.9 200.6 1.3 69.4 35.4 392.1 2,441.7 3,281.7 2,059.1 1,748.5 9.4 372.6 88.8 8.5 (167.9) 2,059.9 (0.8) 2,059.1 The accompanying notes are an integral part of these consolidated financial statements. Nomad Foods Annual Report F-4 96214_164pg_Body.indd 91 96214_164pg_Body.indd 91 4/17/20 11:27 AM 4/17/20 11:27 AM Consolidated Statements of Profit or Loss Revenue Cost of sales Gross profit Other operating expenses Exceptional items Operating profit Finance income Finance costs Net financing costs Profit before tax Taxation Profit for the period Attributable to: Equity owners of the parent Non-controlling interests Earnings per share: Basic earnings per share Diluted earnings per share Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 Note 5 €m 2,324.3 (1,626.4) €m 2,172.8 (1,519.3) €m 1,956.6 (1,357.2) 7 6 10 10 11 697.9 (359.9) (54.5) 283.5 2.5 (75.7) (73.2) 210.3 (56.7) 153.6 154.0 (0.4) 153.6 653.5 (352.7) (17.7) 283.1 1.6 (57.6) (56.0) 227.1 (56.6) 170.5 171.2 (0.7) 170.5 30 30 €0.80 €0.78 €0.97 €0.97 599.4 (319.3) (37.2) 242.9 7.2 (81.6) (74.4) 168.5 (32.0) 136.5 136.5 — 136.5 €0.78 €0.74 The accompanying notes are an integral part of these consolidated financial statements. F-5 Nomad Foods Annual Report 96214_164pg_Body.indd 92 96214_164pg_Body.indd 92 4/17/20 11:27 AM 4/17/20 11:27 AM Consolidated Statements of Comprehensive Income Profit for the period Other comprehensive (loss)/income: Actuarial (losses)/gains on defined benefit pension plans Taxation credit/(charge) on remeasurement of defined benefit pension plans Items not reclassified to the Consolidated Statement of Profit or Loss Gain/(loss) on investment in foreign subsidiary, net of hedge Effective portion of changes in fair value of cash flow hedges Taxation credit/(charge) relating to components of other comprehensive income Items that may be subsequently reclassified to the Consolidated Statement of Profit or Loss Other comprehensive (loss)/income for the period, net of tax Total comprehensive income for the period Attributable to: Equity owners of the parent Non-controlling interests Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 Note €m €m €m 153.6 170.5 136.5 23 11 29 11 (35.9) (12.9) 6.7 (29.2) 6.0 (27.3) 5.6 (15.7) (44.9) 108.7 109.1 (0.4) 108.7 3.3 (9.6) 5.6 15.5 (4.0) 17.1 7.5 178.0 178.7 (0.7) 178.0 2.9 (2.0) 0.9 (0.8) (16.4) 5.0 (12.2) (11.3) 125.2 125.2 — 125.2 The accompanying notes are an integral part of these consolidated financial statements. 96214_164pg_Body.indd 93 96214_164pg_Body.indd 93 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-6 Consolidated Statements of Changes in Equity Consolidated Statements of Changes in Equity Share capital and capital reserve Share-based compensation reserve Balance at January 1, 2017 Profit for the year Share capital and capital reserve Note €m Share-based compensation reserve 1,800.7 — €m Founder preferred shares dividend reserve €m Note €m Cash flow hedging reserve 493.4 — Accumulated deficit reserve €m €m €m Equity attributable 84.0 to owners of the parent — €m Other comprehensive (loss)/income for Balance at January 1, 2017 the year Profit for the year Other comprehensive (loss)/income for Total comprehensive (loss)/income 1,800.7 — €m 1.0 Translation reserve — €m 84.0 — — (0.8) — — (0.8) — — — (0.7) — — 2.6 — 1.9 83.2 2.9 1.0 — — 493.4 — — — (177.1) — — (0.5) — (0.7) 2.6 0.6 — — — — — — — — — (177.1) (0.5) 0.6 — (177.0) 1,623.7 — 493.4 1.9 (177.0) 2.9 1,623.7 Founder preferred shares dividend reserve €m Translation reserve Cash flow hedging reserve Accumulated deficit reserve Equity attributable to owners of the parent Non- controlling interests €m €m €m €m 8.4 Non- controlling interests — €m — (11.4) — — (11.4) — — — — — — — — — — — — (3.0) Total Equity (485.0) 136.5 €m 1,902.5 136.5 0.9 (11.3) 137.4 — 125.2 (177.1) (0.5) — — — (0.1) 2.6 1,902.5 136.5 (11.3) 125.2 (177.1) (0.5) (0.1) 2.6 (175.1) 1,852.6 — (347.6) (175.1) 1,852.6 Total Equity €m 1,902.5 136.5 (11.3) 125.2 (177.1) (0.5) (0.1) 2.6 (175.1) 1,852.6 — — — — — — — — — — 8.4 — (11.4) (11.4) — — — — — — — — — — — — (3.0) 493.4 (485.0) 136.5 1,902.5 136.5 (0.8) 0.9 137.4 — — — — (11.3) (0.8) — 125.2 (177.1) (0.5) — — — (0.1) 2.6 — (347.6) (175.1) — 1,852.6 83.2 the year for the year for the year Total comprehensive (loss)/income Repurchase of ordinary shares Repurchase of ordinary shares Listing and share transaction costs Listing and share transaction costs Vesting of Non-Executive Restricted Vesting of Non-Executive Restricted Stock award Stock award Share based payment charge Share based payment charge Total transactions with owners, Total transactions with owners, recognized directly in equity recognized directly in equity Balance as of December 31, 2017 Balance as of December 31, 2017 F-7 Nomad Foods Annual Report F-7 Nomad Foods Annual Report F-7 Nomad Foods Annual Report 2019 96214_164pg_Body.indd 94 96214_164pg_Body.indd 94 4/17/20 11:27 AM 4/17/20 11:27 AM Consolidated Statements of Changes in Equity (Continued) Consolidated Statements of Changes in Equity (Continued) Share capital and capital reserve Share-based compensation reserve Share capital and capital reserve Note Share-based €m compensation reserve Founder preferred shares dividend reserve €m Translation reserve Cash flow €m hedging reserve Accumulated deficit reserve €m Translation reserve Equity attributable to owners of the parent Founder preferred shares dividend reserve €m 493.4 (3.0) — — €m (347.6) 18.1 €m 83.2 1,852.6 — 18.1 Cash flow hedging reserve Non- €m controlling interests (3.0) €m — — — Equity attributable to owners of the parent Non- controlling interests €m €m Accumulated deficit reserve €m Total Equity €m (347.6) 18.1 1,852.6 18.1 1,852.6 18.1 €m 1,623.7 — 1,623.7 — — — Balance at January 1, 2018 Balance at January 1, 2018 Change in accounting policy (IFRS 9) Change in accounting policy (IFRS 9) Restated Equity as at January 1, Restated Equity as at January 1, Note 2018 2018 Profit/(loss) for the year Profit/(loss) for the year Other comprehensive income/(loss) for Other comprehensive income/(loss) for the period the period for the period Total comprehensive income/(loss) Total comprehensive income/(loss) Founder Preferred Shares Annual for the period Dividend Amount Founder Preferred Shares Annual Vesting of Non-Executive Restricted Stock award Dividend Amount Issue of ordinary shares 8 Vesting of Non-Executive Restricted Share based payment charge 8 8 Stock award Reclassification of awards for Issue of ordinary shares settlement of tax liabilities Non-controlling interests on acquisition Share based payment charge of subsidiary 26 14 27 120.8 €m 1,623.7 — 2.9 — €m 493.4 — 1,623.7 2.9 — — 493.4 — — — — — — — — (120.8) 0.6 3.4 — — — 27 8 8 8 120.8 (0.8) (3.3) 13.0 0.6 (2.4) 3.4 — — — — — — — Reclassification of awards for Total transactions with owners, recognized directly in equity settlement of tax liabilities Balance as of December 31, 2018 Non-controlling interests on acquisition of subsidiary 124.8 1,748.5 26 6.5 9.4 — (120.8) 372.6 14 — Total transactions with owners, recognized directly in equity Balance as of December 31, 2018 124.8 1,748.5 €m 2.9 83.2 — — 2.9 83.2 — — 5.6 — 5.6 — — — — — — (0.8) (3.3) — 13.0 — — (2.4) 88.8 — 6.5 9.4 493.4 (3.0) — — (329.5) 171.2 83.2 1,870.7 171.2 — (3.0) — (0.7) — 1,870.7 170.5 (329.5) 171.2 1,870.7 171.2 (0.7) (9.6) 7.5 5.6 — 11.5 7.5 (9.6) 161.6 178.7 (0.7) 178.0 7.5 5.6 — 11.5 — 161.6 — 178.7 (0.7) 178.0 11.5 11.5 — — — — (120.8) — — — — — 8.5 — — — — — (120.8) 372.6 — — — — — — — — — — (0.2) 0.1 13.0 (2.4) — — (167.9) 10.5 — 2,059.9 — — 88.8 — — — — — — — — (0.1) (0.1) — (0.8) — (0.2) 0.1 13.0 (2.4) (0.1) 10.4 2,059.1 — — — — — — — (0.2) 0.1 13.0 (2.4) — — 8.5 — (167.9) 10.5 2,059.9 — — — — — — — — — Total Equity €m 1,852.6 18.1 1,870.7 170.5 7.5 — (0.2) 0.1 13.0 (2.4) (0.1) (0.1) (0.1) (0.8) 10.4 2,059.1 Nomad Foods Annual Report F-8 Nomad Foods Annual Report F-8 96214_164pg_Body.indd 95 96214_164pg_Body.indd 95 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report 2019 F-8 Consolidated Statements of Changes in Equity (continued) Consolidated Statements of Changes in Equity (continued) Share capital and capital reserve €m Balance at January 1, 2019 Note Change in accounting policy (IFRS 16) Balance at January 1, 2019 Restated Equity as at January 1, 2019 Change in accounting policy (IFRS 16) Restated Equity as at January 1, 2019 Profit/(loss) for the year Profit/(loss) for the year Other comprehensive income/(loss) for the Other comprehensive income/(loss) for the year year — Total comprehensive income/(loss) for the Total comprehensive income/(loss) for the year — year 1,748.5 — 1,748.5 — 27 award Founder Preferred Shares Annual Dividend Founder Preferred Shares Annual Dividend Amount Amount Vesting of Non-Executive Restricted Stock award Vesting of Non-Executive Restricted Stock Issue of ordinary shares Listing and share transaction costs Issue of ordinary shares Share based payment charge Listing and share transaction costs Reclassification of awards for settlement of tax liabilities Share based payment charge Total transactions with owners, recognized directly in equity Reclassification of awards for settlement of Balance as of December 31, 2019 8 25 25 8 26 tax liabilities 2.5 — 355.5 (11.1) — — 346.9 2,095.4 Total transactions with owners, recognized directly in equity Share capital and capital reserve Founder preferred shares dividend reserve 1,748.5 €m — 9.4 1,748.5 — 9.4 — — 372.6 — 372.6 — — — — — — — — (2.5) 2.5 — (0.8) (1.3) — 355.5 14.9 (11.1) — 0.4 — — — — — 13.2 22.6 (2.5) 370.1 — 346.9 €m 27 8 25 25 8 26 The accompanying notes are an integral part of these consolidated financial statements. Balance as of December 31, 2019 2,095.4 Note Share-based compensation reserve €m €m Translation reserve €m Cash flow hedging reserve Accumulated deficit €m Share-based compensation reserve Founder preferred shares dividend reserve Translation reserve Cash flow hedging reserve Equity attributable to owners of the 88.8 parent €m — 2,059.9 31.3 88.8 2,091.2 — 154.0 €m Non- controlling 8.5 interests €m — (0.8) 8.5 — (0.8) — (0.4) Equity attributable to owners of the parent Accumulated deficit Non- controlling interests Total Equity €m €m €m €m Total Equity €m (167.9) 31.3 2,059.1 (136.6) 31.3 154.0 2,090.4 153.6 2,059.9 31.3 2,091.2 154.0 (0.8) 2,059.1 — (0.8) (0.4) 31.3 2,090.4 153.6 €m €m 9.4 — 88.8 9.4 — — 88.8 — 372.6 — 8.5 372.6 — — 8.5 — €m (167.9) 31.3 (136.6) 154.0 — 6.0 (21.7) 6.0 — (21.7) — — (29.2) 6.0 (44.9) (21.7) — (29.2) (44.9) (44.9) — (44.9) 124.8 109.1 6.0 (0.4) (21.7) 108.7 124.8 109.1 (0.4) 108.7 — — — — (0.8) — (1.3) — — — 14.9 — 94.8 0.4 13.2 22.6 — — — — — — — (13.2) (2.5) — — — — — — — — — — — — (11.8) — — (0.8) 354.2 — (11.1) 14.9 — — 0.4 — 357.6 2,557.9 — — — — — — — — — — — — — (1.2) — — (0.8) 354.2 (11.1) 14.9 0.4 357.6 2,556.7 — — — — — — — (0.8) 354.2 (11.1) 14.9 0.4 (2.5) 370.1 — 94.8 — (13.2) — (11.8) 357.6 2,557.9 (1.2) 2,556.7 — — — — — — — — (0.8) 354.2 (11.1) 14.9 0.4 357.6 The accompanying notes are an integral part of these consolidated financial statements. F-9 Nomad Foods Annual Report F-9 Nomad Foods Annual Report F-9 Nomad Foods Annual Report 2019 96214_164pg_Body.indd 96 96214_164pg_Body.indd 96 4/17/20 11:27 AM 4/17/20 11:27 AM Consolidated Statements of Cash Flows Cash generated from operations before tax and exceptional items Cash flows relating to exceptional items Tax paid Net cash flows from operating activities Cash flows from investing activities Purchase of subsidiaries, net of cash acquired Purchase of property, plant and equipment and intangibles Purchase of investments Net cash used in investing activities Cash flows from financing activities Proceeds from issuance of Ordinary Shares Share issuance costs Proceeds from new loans and notes Repayment of loan principal Payment of lease liabilities Payment of financing fees Repurchase of ordinary shares Interest paid Interest received Other financing cash flows Net cash provided by/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Effect of exchange rate fluctuations Cash and cash equivalents at end of period Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 €m €m €m 376.9 (15.9) (45.6) 315.4 (1.5) (47.3) (25.0) (73.8) 354.1 (11.1) 2.0 (22.2) (21.8) — — (48.4) 2.4 (3.6) 251.4 493.0 327.6 4.2 824.8 397.6 (43.4) (32.9) 321.3 (471.6) (41.6) — (513.2) 0.1 — 355.6 (5.9) — (2.6) — (45.3) 0.2 0.6 302.7 110.8 219.2 (2.4) 327.6 358.5 (99.5) (65.2) 193.8 — (42.6) — (42.6) — — 1,470.5 (1,469.5) (1.6) (16.7) (177.6) (48.8) 0.3 1.6 (241.8) (90.6) 329.5 (19.7) 219.2 Note 32 14 34 25 25 20 20 The accompanying notes are an integral part of these consolidated financial statements. 96214_164pg_Body.indd 97 96214_164pg_Body.indd 97 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-10 Notes to the Consolidated Financial Statements 1) General information Nomad Foods Limited (the “Company” or “Nomad”) was incorporated in the British Virgin Islands on April 1, 2014. The address of Nomad’s registered office is Nemours Chambers, Road Town, Tortola, British Virgin Islands. The Company is domiciled for tax in the United Kingdom. Nomad Foods Limited (NYSE: NOMD) is a leading frozen foods company building a global portfolio of best- in-class food companies and brands within the frozen category and in the future across the broader food sector. Nomad produces, markets and distributes brands in 17 countries and has the leading market share in Western Europe. The Company’s portfolio of leading frozen food brands includes Birds Eye, Iglo, Findus, Goodfella's and Aunt Bessie's. 2) Basis of preparation The consolidated financial statements of Nomad and its subsidiaries (the “Company” or “Nomad”) have been prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board. These consolidated financial statements are also in accordance with International Financial Reporting Standards as adopted by the European Union. References to "Iglo" or "Findus" refer to the groups of companies separately acquired by Nomad in June and November 2015, respectively. Impact of adoption of IFRS 16 On January 1, 2019, the Company adopted IFRS 16 Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases and replaces IAS 17 ‘Leases’. The standard introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. The Standard also contains enhanced disclosure requirements for lessees. The Company has applied the modified retrospective approach allowed by IFRS 16 and so comparative figures have not been restated. All right-of-use assets have been measured at the amount of the lease liability on adoption (adjusted for any prepaid or accrued lease expenses). The Company has also elected to apply the practical expedients in IFRS 16 for short-term leases and leases for which the underlying asset is of low value. The weighted- average incremental borrowing rate for lease liabilities initially recognized as of January 1, 2019, was 2.9%, with the exception of a significant lease of a cold store in Bjuv, Sweden for which a rate of 6.3% has been used to reflect the specific nature of the asset and length of the lease term. As a result of the adoption of this standard, the Company has capitalized eligible operating leases under the classification right-of-use assets within property, plant & equipment. The total amount capitalized on transition is €83.9 million. The discounted present value of lease payments has also been recognized as a lease payable of €120.8 million. As a consequence of transition, the onerous lease recognized in relation to a factory and cold store in Bjuv, Sweden as presented in Note 24 of €66.9 million has been released as an adjustment to opening equity attributable to the parent as at January 1, 2019. The value of the right-of-use-asset recognized in relation to this lease has been subject to an impairment review on transition so that the value of the asset recognized is €35.6 million less than the lease payable. The net effect of these two adjustments of €31.3 million has been recognized as an increase in equity attributable to the parent. Payments for leases recognized in the Statement of Financial Position have become financing cash flows. As a result, the Company has seen a reduction in operating cash outflows, with a corresponding increase in financing cash outflows, based on leases in place as of the transition date. Within the Statement of Profit or Loss, a straight-line depreciation expense on the right-of-use-asset over the life of the lease and a front-loaded interest expense on the lease payable has replaced the operating lease expense. The actual impact of IFRS 16 on our profits depends not only on the lease agreements in effect at the time of adoption but also on new lease agreements entered into or terminated in 2019. The profit before tax for the year ended December 31, 2019, has been negatively impacted by €2.8 million as a result of adopting the new rules. Adjusted EBITDA for the year ended December 31, 2019, has increased by €17.7 million as the operating lease expenses were previously included within Adjusted EBITDA but the depreciation on the right-of-use-asset for the year ended December 31, 2019, of €16.1 million as well as the interest on the lease liability are excluded. The impact of IFRS 16 adversely impacted EPS by €0.01. F-11 Nomad Foods Annual Report 96214_164pg_Body.indd 98 96214_164pg_Body.indd 98 4/17/20 11:27 AM 4/17/20 11:27 AM Summary of adjustments to the Statement of Financial Position arising from application of IFRS 16 as of January 1, 2019: Property, plant and equipment Current loans and borrowings Non-current loans and borrowings Current provisions Non-current provisions Trade and other payables Accumulated deficit reserve Opening balance as reported Transition adjustments Opening balance IFRS 16 €m €m €m 348.8 (21.4) (1,742.9) (44.3) (69.4) — 167.9 83.9 (20.4) (100.4) 3.6 63.3 1.3 (31.3) 432.7 (41.8) (1,843.3) (40.7) (6.1) 1.3 136.6 Reconciliation from operating lease commitments to lease liability On adoption of IFRS 16, the group recognized lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of January 2019. Operating lease commitments disclosed as at December 31, 2018 Discounted using the incremental borrowing rate at January 1, 2019 Less: short-term and low value leases recognized on a straight-line basis as expense Less: contracts assessed as service agreements Add: adjustments as a result of a different treatment of extension and termination options Lease liability as at January 1, 2019 Amended standards early adopted €m 181.6 (54.9) (2.0) (8.1) 4.2 120.8 The Company has elected to early adopt the ‘Amendments to IAS 39 and IFRS 7 Interest Rate Benchmark Reform’ issued in September 2019. In accordance with the transition provisions, the amendments have been adopted retrospectively to hedging relationships that existed at the start of the reporting period and to the amount accumulated in the cash flow hedge reserve at that date. The amendments provide temporary relief from applying specific hedge accounting requirements to hedging relationships directly affected by IBOR reform. The reliefs have the effect that IBOR reform should not generally cause hedge accounting to terminate. However, any hedge ineffectiveness continues to be recorded in the Statement of Profit or Loss. In summary, the reliefs provided by the amendments that apply are: • When considering the ‘highly probable’ requirement, the Company has assumed that the LIBOR interest rate on which our hedged debts are based does not change as a result of IBOR reform. • In assessing whether the hedge is expected to be highly effective on a forward-looking basis, the Company has assumed that the LIBOR interest rate on which the cash flows of the hedged debt and the interest rate swap that hedges it are based is not altered by IBOR reform. • The Company will not discontinue hedge accounting during the period of IBOR-related uncertainty solely because the retrospective effectiveness falls outside the required 80-125% range. • The Company has not recycled the cash flow hedge reserve relating to the period after the reforms are expected to take effect. 96214_164pg_Body.indd 99 96214_164pg_Body.indd 99 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-12 Note 33 provides the required disclosures of the uncertainty arising from IBOR reform for hedging relationships for which the reliefs have been applied. Other The Company’s financial statements and notes are presented in the reporting currency of millions of Euros. All financial information has been rounded to the nearest €0.1 million, except where otherwise indicated. The consolidated financial statements were approved for issuance by the Board of Directors of Nomad Foods Limited on February 25, 2020. The Directors have, at the time of approving the financial statements, a reasonable expectation that Nomad has adequate resources to continue in operational existence for the foreseeable future given the cash funds available and the current forecast cash outflows. Thus, Nomad continues to adopt the going concern basis of accounting in preparing the financial statements. 3) Accounting policies The accounting policies set out below have, unless otherwise stated, been applied consistently. Judgments made by the Directors in the application of these accounting policies that have a significant effect on the financial statements and key sources of estimation uncertainty are discussed in Note 4. 3.1 Measurement convention The financial statements are prepared on the historical cost basis with the exception of derivative financial instruments, business combinations, share based payments, and founder preferred shares which are stated at fair value. 3.2 Business combination The Company uses the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interest issued by the Company. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are expensed as incurred. Non-controlling interests arise from business combinations in which the Company acquires less than a 100 per cent interest. Non-controlling interests are initially measured at either fair value or at the non-controlling interest’s proportionate share of the fair value of the acquiree’s identifiable net assets. Nomad determines on a transaction by transaction basis which measurement method is used. The excess of the consideration transferred, the amount of any non-controlling interests in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets is recorded as goodwill. Where selling shareholders have contractually agreed to indemnify Nomad Foods Limited for contingent liabilities, an indemnification asset is recognized equivalent to the fair value of the liability recognized by Nomad. The indemnification asset is deducted from consideration transferred for the business combination. The indemnification asset value will subsequently be revised where revisions are made to the value of the liability or where there are doubts over the ability to recover losses from the selling shareholders. 3.3 Basis of consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions, and any unrealized income and expenses arising from intra-group transactions are eliminated. Accounting policies are applied consistently across the Company. F-13 Nomad Foods Annual Report 96214_164pg_Body.indd 100 96214_164pg_Body.indd 100 4/17/20 11:27 AM 4/17/20 11:27 AM Subsidiaries are all entities (including structured entities) over which Nomad has control; directly or indirectly. The Company controls an entity when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases. Where the Company owns less than a 100 per cent interest in a subsidiary, a non- controlling interest is recognized. The carrying amount of non-controlling interests is increased or decreased by the non-controlling interest’s share of subsequent changes in equity and payments to the non-controlling interest. Total comprehensive income is attributed to the non-controlling interests even if this results in the non-controlling interests having a negative balance. 3.4 Foreign currency i) Foreign currency transactions Transactions in foreign currencies (currencies other than the functional currency) are translated into the functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the foreign exchange rate ruling the financial year end. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges, qualifying net investment hedges or are attributable to part of a net investment in a foreign operation. Non-monetary assets and liabilities in a foreign currency are translated into the functional currency to establish historical cost, using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at foreign exchange rates ruling at the date the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. The revenues and expenses of foreign operations are translated at an average rate for the period (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transaction). ii) Assets and liabilities of foreign operations For the purposes of presenting consolidated financial statements, the assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated at foreign exchange rates ruling at the financial year ended December 31, 2019 of £1:€1.17 (December 31, 2018: £1: €1.11, December 31, 2017: £1:€1.13). The revenues and expenses of foreign operations are translated at an average rate for the period where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Foreign exchange gains and losses that relate to these assets and liabilities are presented in the Consolidated Statement of Profit or Loss within ‘finance income or costs’, except where hedge accounting applies. iii) Net investment in foreign operations Exchange differences arising from the translation of foreign operations and of related qualifying hedges are taken directly to the translation reserve within equity. They are realized through the Consolidated Statement of Profit or Loss upon disposal of the related foreign operation. Nomad Foods Annual Report F-14 96214_164pg_Body.indd 101 96214_164pg_Body.indd 101 4/17/20 11:27 AM 4/17/20 11:27 AM 3.5 Goodwill Goodwill represents amounts arising on acquisition of subsidiaries. Goodwill is the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Goodwill is stated at cost less any accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is not monitored below the operating segment. Goodwill is not amortized but is tested annually for impairment. 3.6 Other intangible assets Intangible assets acquired separately are recorded at cost and those acquired as part of a business combination are recorded at fair value as at the date of acquisition. i) Computer software Capitalized software costs include the cost of acquired computer software licenses and costs that are directly associated with the design, construction and testing of such software where this relates to a major business system. Costs associated with identifying, sourcing, evaluating or maintaining computer software are recognized as an expense within other operating expenses as incurred. The assets are stated at cost less accumulated amortization and impairment losses. Software costs are amortized by equal monthly installments over their estimated useful economic life of five to seven years once the software is capable of being brought into use. ii) Brands Based on the market position of the brands, the significant levels of investment in advertising and promoting the brands, and the fact that Goodfella's and Aunt Bessie's brands have been established for over 20 years, with the Birds Eye, Iglo and Findus brands established for over 50 years, the Directors consider that the brands have indefinite lives. Therefore these brands are not amortized, but instead held at historical cost less provision for any impairment. Brands that are deemed to not have an indefinite life are being amortized by equal monthly installments within other operating expenses over the course of their remaining useful economic life. iii) Customer relationships Long standing Food Service customer relationships have been identified as intangible assets as part of the Findus Acquisition. These are deemed to not have an indefinite life and are being amortized by equal monthly installments within other operating expenses over 14 years. 3.7 Impairment of non-current assets The carrying amounts of the Company’s non-current assets are reviewed annually to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. Impairment losses are recognized in the Consolidated Statement of Profit or Loss in the period in which they arise. For goodwill and assets that have an indefinite useful life an impairment review is performed at least annually. F-15 Nomad Foods Annual Report 96214_164pg_Body.indd 102 96214_164pg_Body.indd 102 4/17/20 11:27 AM 4/17/20 11:27 AM Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the net carrying amount may not be recoverable. An impairment loss is recognized whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. i) Calculation of recoverable amount Recoverable amount is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows of the business are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. ii) Allocation of impairment losses Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash- generating units, then to reduce the carrying amount of the other assets in the unit on a pro rata basis. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. iii) Reversals of impairment An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. 3.8 Property, plant and equipment i) Owned assets Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. ii) Leased assets As a result of the adoption of IFRS 16, the Company has changed its accounting policy for leased assets. Until December 31, 2018, leases of property, plant and equipment where the Company, as a lessee, has substantially all the risks and rewards of ownership were classified as finance leases and all others as operating leases. The Company leases various properties, equipment and cars. Since January 1, 2019, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Nomad Foods Annual Report F-16 96214_164pg_Body.indd 103 96214_164pg_Body.indd 103 4/17/20 11:27 AM 4/17/20 11:27 AM Where a contract contains both lease and non-lease components, the Group has elected to account for the contract as a single lease. Leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of- use asset is classified within property, plant and equipment and is depreciated over the shorter of the asset's useful life or the lease term on a straight-line basis. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities are presented within loans and borrowings and include the net present value of expected lease payments, including those from extension options if the Company reasonably expects to exercise them. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, otherwise the Company’s incremental borrowing rate is used. Right- of-use assets are measured at cost comprising the amount of the lease liability, adjusted for payments made or received before the commencement date, initial direct costs and restoration costs. Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss. Short- term leases are leases with a lease term of 12 months or less. Low-value assets primarily comprise IT equipment and small items of office furniture. iii) Depreciation Depreciation is charged to the Consolidated Statement of Profit or Loss on a straight line basis over the shorter of the lease term and the estimated useful lives of each part of an item of property, plant and equipment once the item is brought into use. Land is not depreciated. The estimated useful lives are as follows: • • • Buildings 40 years Plant and equipment 5 to 14 years Computer equipment 3 to 5 years The assets’ residual values and useful lives are reviewed on a frequent basis. 3.9 Inventories Inventories are stated at the lower of cost and net realizable value. Cost is based on the weighted average principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Inventories that are acquired through business combinations are fair valued at the time of acquisition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of direct costs and overheads based on normal operating capacity. Provision is made for slow moving, obsolete and defective inventories. 3.10 Employee benefits i) Defined contribution plans Obligations for contributions to defined contribution pension plans are recognized as an expense in the Consolidated Statement of Profit or Loss as incurred. Prepaid contributions are recognized as an asset to the extent that a cash refund or reduction in the future payments is available. F-17 Nomad Foods Annual Report 96214_164pg_Body.indd 104 96214_164pg_Body.indd 104 4/17/20 11:27 AM 4/17/20 11:27 AM ii) Defined benefit plans The Company’s net obligation in respect of defined benefit pension plans and other post-employment benefits is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. That net obligation is discounted to determine its present value. The calculation is performed by a qualified actuary using the projected unit credit method. The current service cost of the defined benefit plan, recognized in the Consolidated Statement of Profit or Loss in staff costs included within Operating profit/(loss), except where included in the cost of an asset, reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes, curtailments and settlements. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in Other Comprehensive Income in the period in which they arise. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the Consolidated Statement of Profit or Loss. Past service cost is recognized immediately. iii) Share-based payment schemes Employee benefits given through share-based payment schemes are discussed further in section 3.15 of this note. 3.11 Founder Preferred Shares Nomad Foods issued Founder Preferred Shares to both TOMS Acquisition I, LLC and Mariposa Acquisition II, LLC (collectively the “Founder Entities”) in connection with its initial public offering in April 2014. Holders of the Founder Preferred Shares are entitled to receive annual dividend amounts subject to certain performance conditions (the “Founder Preferred Shares Dividend Amount”). The instrument and its component parts were analyzed under IFRS 2. The Company intends that any future Founder Preferred Shares Annual Dividend Amount will be equity settled. Accordingly, the Founder Preferred Shares Annual Dividend Amount as of June 1, 2015, of €531.5 million (the “Founder Preferred Shares Dividend reserve”) was classified as equity and no further revaluations will be required or recorded. Should a Founder Preferred Share Annual Dividend Amount become due and payable, the market value of any dividend paid will be deducted from the Founder Preferred Shares Dividend reserve, with any excess deducted from the accumulated profit/(deficit) reserve within equity. 3.12 Provisions Provisions are recognized when the Company has a legal or constructive present obligation as a result of a past event and it is probable that the Company will be required to settle that obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to settle the obligation at the financial year end date and are discounted to present value where the effect is material. Where it is not possible to make a reliable estimate of the estimated financial effect of a provision, appropriate disclosure of the resulting contingent liability is made, but no provision is recognized. Nomad Foods Annual Report F-18 96214_164pg_Body.indd 105 96214_164pg_Body.indd 105 4/17/20 11:27 AM 4/17/20 11:27 AM The Company has concluded its discussions with the tax authorities in one of its markets regarding the treatment of the acquisition of the Iglo Group in 2006 by the previous owners. The Company has an indemnity in respect of this tax issue and expects to recover the amount due during 2020. 3.13 Financial instruments Financial assets and liabilities are recognized in the Company’s Statement of Financial Position when the Company becomes a party to the contractual provisions of the instrument. i) Trade receivables Trade receivables are amounts due from customers for goods sold when control of the products has transferred, being when the products are delivered in accordance with the contractual arrangements. At this point, there is no unfulfilled performance obligation that could affect the customer’s acceptance of the product, except for returns due to quality. The Company holds the trade receivables with the objective of collecting the contractual cash flows and so they are subsequently measured at amortized cost using the effective interest method, less any loss allowance. Since trade receivables are due within one year, this equates to initial carrying value less any loss allowance. To assist in managing operating cash flow, we may enter into non- recourse factoring arrangements with certain receivables whereby we sell specific account receivables on a true sale basis to one or more external financial institutions. These trade receivables are sold on a true sale basis when we have surrendered control over the related assets. Up to the point of sale, these receivables are treated as held for sale and measured at fair value through Profit or Loss. Under the terms of the contractual arrangements, the Company may continue to collect the cash from the customer receivables sold, albeit acting solely as a collecting agent on behalf of the purchaser of receivables. Any cash received from customers which is due to be paid to the agent is presented as a financial liability in the Statement of Financial Position and as a financing activity within the Statement of Cash Flows. Factoring fees associated with the sale of factored receivables were minimal for the year ended December 31, 2019 (December 31, 2018: €0.5 million, December 31, 2017: minimal). See Note 18. The Company applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. Trade receivables are grouped by days past due. Expected loss rates are based on historical credit losses experienced in each market as well as forward looking information where this is significant. Trade receivables are written off when there is no reasonable expectation of recovery. Appropriate allowances for expected credit losses and estimated irrecoverable amounts are recognized in the Consolidated Statement of Profit or Loss. Trade receivables are presented net of associated contract liabilities, referred to as 'trade terms'. ii) Cash and cash equivalents Cash and cash equivalents comprise of cash balances and deposits and are measured at amortized cost. Deposits held in money market funds are measured at fair value through Profit or Loss as the cash flows do not only represent principal and interest. F-19 Nomad Foods Annual Report 96214_164pg_Body.indd 106 96214_164pg_Body.indd 106 4/17/20 11:27 AM 4/17/20 11:27 AM iii) Loans and borrowings a. Valuation Interest bearing borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest bearing loans and borrowings are stated at amortized cost with any difference between cost and redemption value being recognized in the Consolidated Statement of Profit or Loss over the expected period of the borrowings. b. Capitalization of transaction costs Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. iv) Trade payables Trade payables are measured at initial recognition at fair value and are subsequently measured at amortized cost using the effective interest method. Since trade payables are largely due within one year, this equates to initial carrying value. v) Derivative financial instruments and hedge accounting Derivative financial instruments are recognized at fair value. When a derivative financial instrument is not designated in a hedge accounting relationship, all changes in its fair value are recognized immediately in the Consolidated Statement of Profit or Loss. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged. The fair value of all financial derivative instruments (including but not limited to forward foreign exchange contracts, currency swaps and cross currency interest rates swaps), is determined per market standard using forward foreign exchange and interest rates at the balance sheet date, with the resulting value discounted back to present value. Cross currency interest rate swaps can be entered into in order to mitigate perceived risks to foreign exchange translation risk and interest rate risk. The Company applies the hedge accounting requirements of IAS 39 to all hedging relationships. a. Cash flow hedges Where a derivative financial instrument is designated as a hedge of the cash flow of a recognized asset or liability, (including a highly probable forecast transaction) the effective part of any gain or loss on the derivative financial instrument is recognized directly in the cash flow hedging reserve. Any ineffective portion of the hedge is recognized immediately in the Consolidated Statement of Profit or Loss. Nomad Foods Annual Report F-20 96214_164pg_Body.indd 107 96214_164pg_Body.indd 107 4/17/20 11:27 AM 4/17/20 11:27 AM When a hedging instrument expires or is sold, exercised or otherwise terminated, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognized when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealized gain or loss recognized in equity is recognized in the Consolidated Statement of Profit or Loss immediately. b. Net investment hedges Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are recognized in Other Comprehensive Income to the extent that the hedge is effective, and are presented in the translation reserve within equity. To the extent that the hedge is ineffective, such differences are recognized in the Consolidated Statement of Profit or Loss. When the hedged net investment is disposed of, the relevant amount in the translation reserve is transferred to the Consolidated Statement of Profit or Loss as part of the gain or loss on disposal. vi) Short-term investments The Company invests surplus cash positions in short-term investments to manage liquidity and credit risk. Short‐term investments are held within managed investment funds and are measured at fair value. All changes in fair value are recognized immediately in the Consolidated Statement of Profit or Loss. The short-term investments are held within managed investment funds which invest in supply chain financing receivables, the creditworthiness of which are enhanced by an insurance wrapper as provided by established insurance companies with a long- term credit rating of at least A. Short-term investments are valued using inputs that are derived principally from or corroborated by observable market data. 3.14 Revenue from contracts with customers The Company manufactures and sells a range of frozen foods to retail, wholesale and Food Service markets. Revenue is recognized when control of the products has transferred, being when the products are delivered to the customer in accordance with the contractual arrangements. At this point, there is no unfulfilled performance obligation that could affect the customer’s acceptance of the product, except for returns due to quality. A provision for product return allowances, which is estimated based upon the Company’s historical performance and management’s experience, is recorded as a reduction of sales in the same period that the revenue is recognized. Revenue excludes sales taxes and intra-company sales. Products are often sold with variable pricing arrangements, including payment discounts, trade promotions and slotting fees. Discounts given by the Company include rebates, price reductions and incentives to customers, promotional couponing and trade communication costs. Trade promotions consist of pricing allowances, merchandising funds and customer coupons, which are offered through various programs to customers and consumers. Certain retailers require the payment of slotting fees to obtain space for the Company’s products on the retailers’ store shelves. Where variable pricing arrangements are in place, revenue is only recognized to the extent that it is highly probable that the amount recognized is unlikely to be reversed. Accumulated experience is used to estimate and provide for the discounts. Revenue is only recognized to the extent that it is highly probable that a significant reversal will not occur. Accruals for expected pay- F-21 Nomad Foods Annual Report 96214_164pg_Body.indd 108 96214_164pg_Body.indd 108 4/17/20 11:27 AM 4/17/20 11:27 AM outs under these programs are collectively known as ‘trade terms’ and are included within trade and other receivables or within trade and other payables in the Consolidated Statement of Financial Position. No element of financing is deemed present as the sales are made in line with market practice and accruals are typically settled within twelve months of the sale. 3.15 Share based payments The Nomad Foods Long-term Incentive Plan known as the (the "Management Share Awards"), which incorporates an annual Non-Executive Directors Restricted Stock Scheme, falls within the provisions of IFRS 2 “Share-based Payment” and awards under the Management Share Awards represent equity settled share based payments. A charge is taken to the Consolidated Statement of Profit or Loss for the difference between the fair value of the shares at grant date and the amount subscribed, spread over the vesting period. Share based payment arrangements in which Nomad receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share based payment transactions, regardless of how the equity instruments are obtained by Nomad. The grant date fair value of share-based payment awards granted to any Director or employee is recognized as an expense, with a corresponding increase in equity, over the period that any Director or employee becomes unconditionally entitled to the awards. The fair value of the awards granted is measured using a valuation model, taking into account the terms and conditions upon which the awards were granted. The amount recognized as an expense is adjusted to reflect the actual number of awards for which the related service and non- market vesting conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. See Note 8(b) for further information on the Company’s share-based payment arrangements and details of the valuation model used. 3.16 Interest income Interest income is recognized in the Consolidated Statement of Profit or Loss on an accruals basis using the effective interest method. 3.17 Expenses i) Operating lease payments Payments associated with short-term leases, leases of low-value assets, variable lease payments and leases assessed as service agreements are recognized on a straight-line basis as an expense in profit or loss and presented as "operating leases". Lease incentives received are recognized on a straight line basis in the Consolidated Statement of Profit or Loss as an integral part of the total lease expense. ii) Borrowing costs Unless capitalized as part of the cost of borrowing (see Note 3.13 (iii)), borrowing costs are recognized in the Consolidated Statement of Profit or Loss in the period in which they are incurred. 96214_164pg_Body.indd 109 96214_164pg_Body.indd 109 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-22 iii) Exceptional items The separate reporting of exceptional items which are presented as exceptional within the relevant Consolidated Statement of Profit or Loss category, helps provide an indication of the Company’s underlying business performance. Exceptional items have been identified and presented by virtue of their size, nature or incidence. In determining whether an event or transaction is exceptional, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence. Exceptional items comprise restructuring costs, impairments or reversal of impairments of intangible assets, operational restructuring, integration and acquisition costs relating to new acquisitions, implementation of strategic opportunities and other significant items (see Note 7). iv) Research and development Expenditure on research activities is recognized in the Consolidated Statement of Profit or Loss as an expense as incurred. 3.18 Taxation Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognized in the Consolidated Statement of Profit and Loss except to the extent that it relates to items recognized in Other Comprehensive Income, in which case it is recognized within the Statement of Other Comprehensive Income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the financial year end date, and any adjustment to tax payable in respect of previous years. Where tax exposures can be quantified, an accrual for uncertain tax positions is made based on the best estimates and management’s judgments. Given the inherent uncertainties in assessing the outcomes of these exposures (which can sometimes be binary in nature), the Company could in future periods experience adjustments to these accruals. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities recognized for financial reporting purposes and the amounts used for taxation purposes on an undiscounted basis. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the financial year end date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. 3.19 Segment reporting The Chief Operating Decision Maker (“CODM”) has been determined to be the Chief Executive Officer as he is primarily responsible for the allocation of resources to the segments and the assessment of performance of the segments. F-23 Nomad Foods Annual Report 96214_164pg_Body.indd 110 96214_164pg_Body.indd 110 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad’s operations are organized into one operating unit, "Frozen", which comprises all the brands, as well as the factories, private label business units and certain corporate overheads. The CODM primarily uses “Adjusted EBITDA”, disclosed in Note 5, as the key measure of the segment’s results. Adjusted EBITDA is EBITDA adjusted to exclude, when they occur, the impacts of exited markets, acquisition purchase price adjustments, chart of account (“CoA”) alignments and exceptional items such as restructuring charges, goodwill and intangible asset impairment charges and other unusual or non-recurring items. In addition, we exclude other adjustments such as the impact of share based payment expenses and related employer payroll taxes, and non-operating M&A related costs, because we do not believe they are indicative of our normal operating costs, can vary significantly in amount and frequency, and are unrelated to our underlying operating performance. EBITDA, disclosed in Note 5, is defined as profit/(loss) for the period before taxation, net financing costs, depreciation and amortization. 3.20 Onerous contracts provisions Where the costs of fulfilling a contract exceed the economic benefits that the Company expects to receive from it, an onerous contract provision is recognized for the net unavoidable costs. In estimating the net unavoidable costs, management estimate foreseeable income that may be received and offset this against the minimum future cash outflows from fulfilling the contract. All cash flows are discounted at an appropriate discount rate. 3.21 Unfavorable contracts Unfavorable contracts recognized from business combinations in relation to leases are classified as a liability, discounted and recognized over the term of the underlying contract as a reduction in the associated expense. As a result of the adoption of IFRS 16 Leases, unfavorable contracts are no longer recognized where the contract falls into the scope of this standard. 3.22 IFRSs not yet adopted At the date of authorization of these financial statements, there are no Standards and Interpretations relevant to the Company which are in issue but not yet effective. 4) Critical accounting estimates and judgments The preparation of financial statements in accordance with IFRS requires the use of judgment in applying the accounting policies and estimation. Significant judgments are made in the process of applying accounting policies for Business Combinations that have a significant effect on the amounts reported in the consolidated financial statements. The Company is required to recognize separately, at the acquisition date, the identifiable assets, liabilities and contingent liabilities acquired or assumed in a business combination at their fair values. This involves judgment over whether intangible assets can be separately identified. Information about accounting estimates and assumptions that have significant effects on the amounts reported in the consolidated financial statements is as follows: a) Discounts and trade promotions Discounts given by the Company include rebates, price reductions and incentives given to customers, promotional couponing and trade communication costs. Each customer has a unique agreement that is governed by a combination of observable and unobservable performance conditions. 96214_164pg_Body.indd 111 96214_164pg_Body.indd 111 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-24 Trade promotions comprise of amounts paid to retailers for programs designed to promote Company products and include pricing allowances, merchandising funds and customer coupons, which are offered through various programs to customers and consumers. The ultimate costs of these programs can depend upon retailer performance and is the subject of significant management estimates. The estimated ultimate cost of the program is based upon the programs offered, timing of those offers, estimated retailer performance based on history, management’s experience and current economic trends. At each financial year end date, any discount or trade promotion expense incurred but not yet invoiced is estimated and accrued for. In certain cases, the estimate for discounts and trade promotions requires the use of forecast information for future trading periods and therefore a degree of estimation uncertainty exists. These estimates are sensitive to variances between actual results and forecasts. The estimate is based on accumulated experience and the principle that revenue is only recognized to the extent that it is highly probable that a significant reversal will not occur. The accruals are presented as ‘trade terms’ and offset against trade receivables due to the same customer, or as trade term payables where there is no receivable to be offset. The balance of the reduction in trade receivables for trade terms as of December 31, 2019 is disclosed in Note 18 and the balance classified as a trade term payable is disclosed in Note 22. Management use judgment when considering when accruals can be released. b) Business combinations The Company is required to recognize separately, at the acquisition date, the identifiable assets, liabilities and contingent liabilities acquired or assumed in a business combination at their fair values. This involves an estimate of fair value of all assets and liabilities acquired. Such estimates are based on valuation techniques, which require considerable estimation in forecasting future cash flows and developing other assumptions. These estimates are based on information available on the acquisition date and assumptions that have been deemed reasonable by management. The following estimates and assumptions can materially affect our financial position and profit: • The fair value and expected useful economic life of acquired intangible and tangible assets that are subject to depreciation or amortization in future periods. • Future changes to the assumptions over forecast future profitability used in estimating the value of intangible assets and goodwill may result in additional expenses or income. • Future changes to the assumptions used in estimating the value of uncertain tax positions may result in additional expenses or income. c) Carrying value of goodwill and brands Determining whether goodwill and brands are impaired requires an estimation of the value in use of the cash generating unit to which goodwill and brands have been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value. Details of impairment reviews are provided in Note 13. d) Employee benefit obligation The Group operates a number of defined benefit pension schemes and post- employment benefit schemes which are valued by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. Each Scheme has an actuarial valuation performed and is dependent on a series of assumptions. See Note 23 for details of these assumptions and a sensitivity analysis on material assumptions. F-25 Nomad Foods Annual Report 96214_164pg_Body.indd 112 96214_164pg_Body.indd 112 4/17/20 11:27 AM 4/17/20 11:27 AM e) Uncertain tax positions Where tax exposures can be quantified, an accrual for uncertain tax positions is made based on best estimates and judgments with regard to the amounts expected to be paid to the relevant tax authority. Given the inherent uncertainties in assessing the outcomes of these exposures (which can sometimes be binary in nature), the Company could in future periods experience adjustments to these accruals. The factors considered include the progress of discussions with the tax authorities and the level of documentary support for historical positions taken by previous owners. f) Fair value of derivative financial instruments. Note 34 includes details of the fair value of the derivative instruments that the Company holds at each balance sheet period. Management has estimated the fair value of these instruments by using valuations based on discounted cash flow calculations. g) Share-based payments At the end of each reporting period, the Company, in estimating its share-based payment charge, assesses and revises its estimates of the number of interests that are expected to vest based on the non-market vesting conditions. Note 8b contains details of these assumptions and of the valuation model used. 5) Segment reporting Nomad has one reporting and operating segment, "Frozen", reflected in the segment presentation below for the periods presented. The CODM primarily uses (“Adjusted EBITDA”), disclosed in Note 3.19, as the key measure of the segment’s results, which is considered non-IFRS financial information. Segment Adjusted EBITDA Profit for the period Taxation Net financing costs Depreciation and amortization EBITDA Acquisition purchase price adjustments Exceptional items Other add-backs Adjusted EBITDA Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 Note €m €m €m 153.6 56.7 73.2 68.3 351.8 — 54.5 25.7 432.0 170.5 56.6 56.0 46.3 329.4 5.7 17.7 23.6 376.4 136.5 32.0 74.4 42.4 285.3 — 37.2 5.6 328.1 7 Acquisition purchase price adjustments relate to the reversal of the non-cash increase applied to inventory acquired in business combinations to value it at fair value as opposed to cost. Other add-backs include the elimination of share-based payment expense and related employer payroll expense of €22.4 million (2018: €14.7 million, 2017: €2.6 million) and elimination of non-operating M&A related costs, professional fees and transaction costs of €3.3 million (2018: €8.9 million, 2017: €3.0 million). We exclude these costs because we do not believe they are indicative of our normal operating costs, can vary significantly in amount and frequency, and are unrelated to our underlying operating performance. No information on segment assets or liabilities is presented to the CODM. Product information Management considers the products it sells belong to one category, being "Frozen". Nomad Foods Annual Report F-26 96214_164pg_Body.indd 113 96214_164pg_Body.indd 113 4/17/20 11:27 AM 4/17/20 11:27 AM Geographical information External revenue by geography United Kingdom Italy Germany Sweden France Norway Austria Spain Rest of Europe Total external revenue by geography Non-current assets by geography United Kingdom Germany Italy Sweden Norway France Rest of Europe Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 €m €m €m 712.5 394.1 329.6 175.7 176.6 120.4 108.2 79.5 227.7 585.4 383.6 310.2 192.7 174.1 122.5 102.4 76.7 225.2 411.9 371.4 300.3 208.0 170.0 123.3 96.7 81.2 193.8 2,324.3 2,172.8 1,956.6 December 31, 2019 December 31, 2018 €m €m 131.3 124.9 68.2 51.1 29.6 17.2 56.0 141.5 121.8 52.5 26.5 14.3 17.0 52.4 Total non-current assets by geography 478.3 426.0 Non-current assets exclude deferred tax assets, goodwill and brands which are not bound to one geographical area and as explained in Note 2, as of January 1, 2019, include leased assets resulting in a significant increase in the year ended December 31, 2019. 6) Operating profit Operating profit is stated after charging: Staff costs Depreciation of property, plant and equipment (1) Impairment of property, plant and equipment Amortization of software and brands Operating lease charges(1) Exchange (gains)/losses Research & development expenditure Note 8 12 12 13 Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 €m €m €m 308.6 59.7 0.1 8.6 4.5 (14.6) 18.9 299.7 39.3 — 7.0 18.5 2.9 15.5 257.4 35.9 0.3 6.5 15.0 (1.2) 15.4 Inventories recognized as an expense within cost of goods sold 1,536.0 1,410.0 1,273.3 F-27 Nomad Foods Annual Report 96214_164pg_Body.indd 114 96214_164pg_Body.indd 114 4/17/20 11:27 AM 4/17/20 11:27 AM (1) As a result of the adoption of IFRS 16 Leases on January 1, 2019, which is explained in Note 2, the majority of leases have been capitalized and are being depreciated. Expenses relating to leases that are not capitalized continue to be shown within Operating Profit. 7) Exceptional items Exceptional items are made up as follows: Implementation of strategic opportunities (1) Supply chain reconfiguration (2) Findus Group integration expenses (3) Expenses related to transactions (4) Brexit (5) Goodfella's Pizza & Aunt Bessie's integration expenses (6) Factory optimization (7) Settlement of legacy matters (8) Release/remeasurement of indemnification assets (9) Total exceptional items Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 €m €m €m — (3.6) 3.5 — 1.6 12.5 5.7 (9.2) 44.0 54.5 — 1.2 10.4 — — 8.3 1.6 (3.8) — 17.7 18.8 14.0 15.1 3.2 — — — (5.6) (8.3) 37.2 We do not consider these items to be indicative of our ongoing operating performance. (1) Implementation of strategic opportunities In the year ended December 31, 2017, the Company incurred expenses in relation to the implementation of the Nomad strategic vision, which primarily relates to changes to the organizational structure to align behind core products and implement net revenue management initiatives. (2) Supply chain reconfiguration Supply chain reconfiguration relates to activities associated with the closure of the Bjuv manufacturing facility in Sweden which ceased production in 2017. The income of €3.6 million in the year ended December 31, 2019 (2018: charge of €1.2 million, 2017: charge of €14.0 million) includes income on sale of the agricultural land which completed in May 2019 and the finalization of consideration received for the sale of the industrial property which completed in 2018. Costs in prior years relate to the closure and relocation of production and have been partially offset by income from the disposal of tangible assets. (3) Findus Group integration expenses Following the acquisition of the Findus Group on November 2, 2015, the Company initiated a substantial integration project. Expenses of €3.5 million have been incurred in the year ended December 31, 2019 (2018: €10.4 million, 2017: €15.1 million). Expenses incurred since 2017 primarily relate to the roll-out of the Nomad ERP system which completed in 2019. (4) Expenses related to transactions The expense for the year ended December 31, 2017 relates to enhanced control compliance procedures in territories following the acquisition of the Iglo Group. (5) Brexit With the uncertainty of the United Kingdom exiting the European Union, commonly referred to as Brexit, we have begun preparations for the potential adverse impacts of Brexit to our supply chain, such as tariffs and delays at ports of entry and departure. 96214_164pg_Body.indd 115 96214_164pg_Body.indd 115 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-28 (6) Goodfella's Pizza & Aunt Bessie's integration costs Following the acquisition of the Goodfella’s pizza business in April 2018 and the Aunt Bessie's business in July 2018, the Company has initiated an integration project. (7) Factory optimization In 2018, the Company initiated a three-year factory optimization program. The focus of the program is to develop a new suite of standard manufacturing and supply chain processes, that will provide a single network of optimized factories. The program is expected to provide a number of benefits, including an optimized supply chain infrastructure, benefits derived from the implementation of a standardized global manufacturing and planning processes, and an increased level of sustainable performance improvement. (8) Settlement of legacy matters A net income of €9.2 million has been recognized associated with the release of acquired tax liabilities relating to periods prior to acquisition by the Company. Net income of €3.8 million was recognized in the year ended December 31, 2018. This includes an income of €2.7 million recognized on settlement of contingent consideration for the La Cocinera acquisition and net income of €0.7 million associated with settlements of tax audits. Net income of €5.6 million were recognized in the year ended December 31, 2017. This includes a charge of €3.9 million associated with settlements of tax audits, offset by gains of €4.2 million from the reassessment of sales tax provisions, €1.2 million from the reassessment of interest on sales tax provisions, a €2.8 million gain on a legacy pension plan in Norway and a €1.3 million gain on disposal of a non-operational factory. (9) Release/remeasurement of indemnification assets The charge in 2019 relates to the release of shares held in escrow as part of the consideration on the acquisition of the Findus Group, as discussed in Note 19. The charge in 2017 relates to the remeasurement of the indemnification asset following a movement in the value of shares that are held in escrow, which are limited to the value at which the asset was originally recognized, as well as the release of indemnification assets associated with the acquisition of the Iglo Group. Tax impact of exceptional items The tax impact of the exceptional items amounts to a credit of €3.1 million in the year ended December 31, 2019 (year ended December 31, 2018: €3.2 million, year ended December 31, 2017: €13.8 million). Cash flow impact of exceptional items Included in the Consolidated Statements of Cash Flows for the year ended December 31, 2019 is €15.9 million (year ended December 31, 2018: €43.4 million, year ended December 31, 2017: €99.5 million) of cash outflows relating to exceptional items. This includes cash flows related to the above items as well as the cash impact of the settlement of provisions brought forward from previous accounting periods. 8) Payroll costs, share based payments and management incentive schemes (a) Payroll costs The average number of persons employed by the Company (excluding non-Executive Directors) is analyzed and set out below: Production Administration, distribution & sales Total number of employees F-29 Nomad Foods Annual Report Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 3,308 1,448 4,756 2,915 1,510 4,425 2,285 1,572 3,857 96214_164pg_Body.indd 116 96214_164pg_Body.indd 116 4/17/20 11:27 AM 4/17/20 11:27 AM The increase in the average number of employees in the table above for the year ended December 31, 2019 compared with the year ended December 31, 2018 is primarily due to the acquisitions of Goodfella's and Aunt Bessie's in 2018. The table below discloses the Company’s aggregate payroll costs of these persons. Payroll costs exclude long term management incentive scheme and share based payment costs, but includes bonus costs. Wages and salaries Social security costs Other pension costs Total payroll costs Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 €m €m €m 250.4 45.2 13.0 308.6 240.6 46.0 13.1 299.7 200.8 42.0 14.6 257.4 (b) Share based payments The Company's discretionary share award scheme, the LTIP, enables the Company’s Compensation Committee to make grants (“Awards”) in the form of rights over ordinary shares, to any Director, Non-Executive Director or employee of the Company. However, it is the Committee’s current intention that Awards be granted only to Directors and senior management, whilst recognizing a separate annual Restricted Stock Award for Non-Executive Directors. All Awards are to be settled by physical delivery of shares. Non-Executive Director Restricted Share Awards In accordance with the Board approved independent Non-Executive Director compensation guidelines, each independent Non-Executive Director is granted $100,000 of restricted shares annually on the date of the annual general meeting, valued at the closing market price for such shares on this date. The restricted shares vest on the earlier to occur of the date of the Company’s annual meeting of shareholders or thirteen months from the date of grant. The Non-Executive Directors restricted share awards granted on June 16, 2016, which consisted of 55,680 shares at a share price of $8.98, vested on June 19, 2017 and were issued at a share price of $14.38, resulting in a €0.3 million increase in the share based compensation reserve. Of the total 55,680 number of shares vesting, 9,384 shares were held back from issue by the Company as settlement towards personal tax liabilities arising on the vested shares. The Non-Executive Directors restricted share awards granted on June 19, 2017, which consisted of 53,498 shares at a share price of $14.38, vested on June 14, 2018 and were issued at a share price of $17.94, resulting in a €0.2 million increase in the share based compensation reserve. Of the total 53,498 number of shares vesting, 12,312 shares were held back from issue by the Company as settlement towards personal tax liabilities arising on the vested shares. The Non-Executive Directors restricted share awards granted on June 19, 2018, which consisted of 32,172 shares at a share price of $18.07, vested on June 14, 2019 and were issued at a share price of $20.74, resulting in a €0.1 million increase in the share based compensation reserve. Of the total 44,272 number of shares vesting, 12,100 shares were held back from issue by the Company as settlement towards personal tax liabilities arising on the vested shares. On June 14, 2019, after the Company's annual general meeting of shareholders, the current Non-Executive Directors were granted 39,370 restricted share award at a share price of $20.32. In July 2019, following the resignation of a Non-Executive Director, 2,460 shares were vested and issued. Nomad Foods Annual Report F-30 96214_164pg_Body.indd 117 96214_164pg_Body.indd 117 4/17/20 11:27 AM 4/17/20 11:27 AM The total charge for Non-Executive Director grants within the Statement of Consolidated Profit or Loss for the year ended December 31, 2019 for stock compensation awards was €0.9 million (year ended December 31, 2018: €0.9 million; year ended December 31, 2017: €0.8 million). Director and Senior Management Share Awards As part of its long term incentive initiatives, the Company has outstanding awards over 4,518,964 ordinary shares granted to certain members of its management team (the “Management Share Awards”) as of the following four award dates: January 1, 2016 Award January 1, 2017 Award January 1, 2018 Award January 1, 2019 Award Total Number of awards outstanding at January 1, 2019 New awards granted in the period Awards vested and issued in the period Forfeitures in the period Number of awards outstanding at December 31, 2019 3,025,953 — — (60,439) 1,015,000 — (85,315) (91,562) 583,700 — — (34,800) — 166,427 — — 4,624,653 166,427 (85,315) (186,801) 2,965,514 838,123 548,900 166,427 4,518,964 The 2016, 2017 and 2018 awards have vesting conditions based on cumulative EBITDA performance and over four years and Company share price performance over two to five years. During 2019, the Compensation Committee of the Board of Directors amended the targets for these awards resulting in a revaluation of the awards reflected in the expense taken in 2019. The share price and EBITDA performance conditions are weighted 50% each per award. • • • For the 2016 award, the initial two-year period is through to January 1, 2018 and the subsequent revised three-year period is through to January 1, 2021. For the 2017 award, the initial two-year period is through to January 1, 2019 and the subsequent two-year period is through to January 1, 2021. For the 2018 award, the initial two-year period is through to January 1, 2020 and the subsequent revised three-year period is through to January 1, 2023. If the revised respective four-year cumulative EBITDA Performance Condition is satisfied, up to 50% of such award will vest on January 1, 2020, 2021 and 2022, respectively, as the case may be. The incremental fair value granted as a result of the modifications made to the January 1, 2016 and 2017 awards was $9.9 million (€8.7 million), $1.1 million (€1.0 million), respectively. There was no incremental fair value on modification for the January 1, 2018 award. In September 2019, 166,427 restricted share awards were granted as part of the 2019 Management Share Award. The performance period associated with the award began as of January 1, 2019. The 2019 awards have vesting conditions based on three-year cumulative EBITDA and net sales, and Company share price performance measures. One third of the total share award is assigned to each type of performance measure. All shares are subject to a holding period of an additional year and require that the participants to the scheme are still actively employed during the entire four year period, through January 1, 2023. In September 2018, 294,810 restricted shares granted as part of the 2016 Management Share Awards vested based on share price performance, resulting in the issuance of 181,054 ordinary shares in October 2018 (net of 113,756 ordinary shares held back from issue by the Company as settlement towards personal tax liabilities arising on the vested ordinary shares). F-31 Nomad Foods Annual Report 96214_164pg_Body.indd 118 96214_164pg_Body.indd 118 4/17/20 11:27 AM 4/17/20 11:27 AM In January 2019, 85,315 restricted shares granted as part of the 2017 Management Share Awards vested based on share price performance, resulting in the issuance of 51,932 ordinary shares (net of 33,383 ordinary shares held back from issue by the Company as settlement towards personal tax liabilities arising on the vested ordinary shares). The stock compensation charge reported within the Consolidated Statement of Profit or Loss for the year ended December 31, 2019 related to the director and senior management share awards is €14.0 million (year ended December 31, 2018: €12.1 million: year ended December 31, 2017: €1.8 million). The Company calculates the cost of the Management Share Awards based upon their fair value using the Monte Carlo Model, which is considered to be the most appropriate methodology considering the restricted shares only vest once the market performance conditions have been satisfied. Following the revisions to the EBITDA Performance Conditions and benchmark market share price targets described above, and the addition of the January 1, 2019 scheme, the inputs and assumptions underlying the Monte Carlo models for all awards outstanding as of valuation date are now as follows: January 1, 2016 award January 1, 2017 award January 1, 2018 award January 1, 2019 award Revised grant date price Exercise price Expected life of restricted share Expected volatility of the share price Dividend yield expected Risk free rate Employee exit rate EBITDA Performance Target Condition $ — $ 16.72 $ $ 1.00 - 2.00 years 22.6% —% 2.65% 6.0% 93.0% 16.72 $ — $ 16.72 $ — $ 2.00 years 22.6% —% 2.65% 14.0% 72.0% 1.5 - 4.00 years 22.7% —% 2.55% 14.0% 35.0% 20.15 — 4.00 years 24.0% —% 1.33% 14.0% 35.0% The expected volatility of the share price inputs above were estimated by referencing selected quoted companies which are considered to exhibit some degree of comparability with the Company, as the Company has only been listed for approximately four years. Based on the revised assessment in the current period of fair value and the number of shares expected to vest, the total fair values in respect of the Restricted Shares are: • 2016 award - $28.2 million (€24.7 million) • 2017 award - $5.2 million (€4.6 million) • 2018 award - $1.6 million (€1.3 million) • 2019 award - $1.4 million (€1.2 million) Initial Director Options In 2014, certain Non-Executive Directors were granted options (“Initial Options”) to purchase a maximum of 125,000 Ordinary Shares at an exercise price of $11.50 per ordinary share. The awards were valued at issuance and expensed during the two years ended April 1, 2016. In June 2018, a former Non-Executive Director exercised 9,375 of 125,000 initial options granted to them for €0.1 million. Throughout 2019, former Non-Executive Directors exercised a further 56,250 of the 125,000 initial options granted to them for €0.6 million. The remaining 59,375 options expire on May 31, 2020. The awards are exercisable within a 5 year period, which commenced on the trading day immediately following the Iglo Group acquisition on June 1, 2015. Nomad Foods Annual Report F-32 96214_164pg_Body.indd 119 96214_164pg_Body.indd 119 4/17/20 11:27 AM 4/17/20 11:27 AM 9) Directors and Key Management compensation Short-term employee benefits Share-based payment expense Termination benefits Non-Executive Director fees Total Directors' and executive officers' compensation Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 €m €m €m 2.8 7.6 — 0.4 10.8 3.3 6.3 0.1 0.4 10.1 2.0 1.4 0.4 0.3 4.1 All significant management decision making authority is vested within the Board of Directors and the executive team, therefore key management are considered to be the Directors and executive Officers. Benefits are accruing to the following number of key management personnel under: Defined contribution plans Share based payment schemes 10) Finance income and costs Interest income Net fair value gains on derivatives held at fair value through profit or loss Finance income Interest and finance charges paid/payable for lease liabilities and financial liabilities not at fair value through profit or loss (1) Cross-currency interest rate swaps: cash flow hedges, transfer from equity Net pension interest costs Amortization of borrowing costs Net foreign exchange losses on translation of financial assets and liabilities Interest on unwinding of discounted items Net fair value losses on derivatives held at fair value through profit or loss Financing costs incurred in amendment of terms of debt (2) Finance costs Net finance costs Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 2 2 3 3 2 2 Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 €m €m €m 2.5 — 2.5 0.2 1.4 1.6 0.2 7.0 7.2 (79.0) (64.4) (54.0) 21.8 (3.8) (2.0) (3.9) — (8.8) — (75.7) (73.2) 14.6 (3.8) (1.5) (0.3) (1.1) — (1.1) (57.6) (56.0) 3.9 (3.6) (2.7) (3.9) (1.2) — (20.1) (81.6) (74.4) (1) Following the adoption of IFRS 16 Leases on January 1, 2019, this caption includes the unwinding of discounting on lease liabilities. (2) A one-off charge of €20.1 million was incurred as a consequence of the refinancing in May 2017 and repricing in December 2017. Of this, deferred transaction costs of €15.7 million relating to the previous senior debt were written off. F-33 Nomad Foods Annual Report 96214_164pg_Body.indd 120 96214_164pg_Body.indd 120 4/17/20 11:27 AM 4/17/20 11:27 AM 11) Taxation Current tax expense Current tax on profits for the period Adjustments in respect of prior periods Deferred tax income/(expense) Origination and reversal of temporary differences Impact of change in tax rates Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 Note €m €m €m (66.4) — (66.4) 9.7 — 9.7 (63.9) 2.8 (61.1) 4.5 — 4.5 16 (37.5) 3.2 (34.3) (2.1) 4.4 2.3 (32.0) Total tax expense (56.7) (56.6) Reconciliation of effective tax rate: Profit before tax Tax charge at the standard UK corporation tax rate 19% (2018: 19%; 2017: 19.25%) Difference in tax rates Non tax deductible interest Other income and expenses not taxable or deductible Unrecognized tax assets Provisions for uncertainties Impact of change in deferred tax rates Prior period adjustment Total tax expense Effective tax rates Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 €m €m €m 210.3 227.1 168.5 (39.9) (11.9) 0.6 (1.2) (0.9) (3.4) — — (56.7) (43.2) (14.8) — 5.3 0.6 (7.3) — 2.8 (32.5) (10.0) 4.4 16.8 (19.3) 1.0 4.4 3.2 (56.6) (32.0) Effective from and including January 12, 2016, the Company become a resident in the United Kingdom for United Kingdom tax purposes. The effective tax rate for the year ended December 31, 2019 was 27.0% (year ended December 31, 2018: 24.9%). The change is principally caused by higher tax rates applied to profits in other jurisdictions and by an increase in non deductible expenses. The Company operates in many different jurisdictions and in some of these, certain matters are under discussion with local tax authorities. These discussions are often complex and can take many years to resolve, and are in different stages with respect to assessments appeals and refunds. The Company actively seeks to manage the associated risks by proactively engaging with tax authorities and applying for Advanced Pricing Agreements where appropriate. Accruals for tax contingencies require management to make estimates and judgments with respect to the ultimate outcome of a tax audit, and actual results could vary from these estimates. Where tax exposures can be quantified, a provision is made based on best estimates and management’s judgments. Given the inherent uncertainties in assessing the outcomes of these exposures (which can sometimes be binary in nature), the Company could, in future years, experience adjustments to this provision, including releases of provisions when those exposures become time- barred. Notwithstanding this, management believes that the Company’s position on all open matters including those in current discussion with local tax authorities is robust and that the Company is appropriately provided. As of December 31, 2019, the current tax payable of €217.2m and deferred tax assets of €96.4m includes provisions for tax uncertainties of €137.8m. As of December 31, 2018, the current tax payable of €201.2m and deferred tax assets of €68.7m included provisions for tax uncertainties of €135.9m. Nomad Foods Annual Report F-34 96214_164pg_Body.indd 121 96214_164pg_Body.indd 121 4/17/20 11:27 AM 4/17/20 11:27 AM Following the enactment of the Finance Act 2016, the standard rate of corporation tax in the UK is 19% for 2019 (2018: 19%). The standard rate of corporation tax in the UK reduced from 20% to 19% with effect from April 1, 2017 and was due to reduce by a further 2% to 17% from April 1, 2020. As the reductions to 19% and 17% were substantially enacted on September 6, 2016, these rates are reflected in these financial statements. The UK government has indicated that this further reduction will not now take place, the impact of which will be reflected in the financial statements once it is substantially enacted. The tax (credit)/charge relating to components of other comprehensive income is as follows: Year ended December 31, 2019 Remeasurement of post-employment benefit liabilities Net investment hedge Cash flow hedges Other comprehensive loss/(income) Current tax Deferred tax Year ended December 31, 2018 Remeasurement of post-employment benefit liabilities Net investment hedge Cash flow hedges Other comprehensive (income)/loss Current tax Deferred tax Year ended December 31, 2017 Remeasurement of post-employment benefit liabilities Net investment hedge Cash flow hedges Other comprehensive loss/(income) Current tax Deferred tax Before tax €m Note Tax credit €m After tax €m 29.2 (6.0) 21.7 44.9 After tax €m 9.6 (5.6) (11.5) (7.5) 35.9 (6.0) 27.3 57.2 (6.7) — (5.6) (12.3) — (12.3) (12.3) Before tax €m Tax (credit)/ charge €m 12.9 (5.6) (15.5) (8.2) (3.3) — 4.0 0.7 — 0.7 0.7 Before tax €m Tax charge/ (credit) €m After tax €m (2.9) 0.8 16.4 14.3 (0.9) 0.8 11.4 11.3 2.0 — (5.0) (3.0) — (3.0) (3.0) 16 Note 16 Note 16 F-35 Nomad Foods Annual Report 96214_164pg_Body.indd 122 96214_164pg_Body.indd 122 4/17/20 11:27 AM 4/17/20 11:27 AM 12) Property, plant and equipment Owned property, plant and equipment (i) Right-of-use assets (ii) Property, plant and equipment December 31, 2019 December 31, 2018 €m €m 350.0 72.4 422.4 348.8 — 348.8 As detailed in Note 2, the right-of-use assets have been recognized following the adoption of IFRS 16 Leases on January 1, 2019. (i) Owned property, plant and equipment Cost Balance at December 31, 2017 Acquisitions through business combinations Additions Disposals Effect of movements in foreign exchange Balance at December 31, 2018 Additions Disposals Effect of movements in foreign exchange Balance at December 31, 2019 Accumulated depreciation and impairment Balance at December 31, 2017 Depreciation Effect of movements in foreign exchange Balance at December 31, 2018 Depreciation Impairment Disposals Effect of movements in foreign exchange Balance at December 31, 2019 Net book value December 31, 2017 Net book value December 31, 2018 Balance at December 31, 2019 Assets under construction Land and buildings €m Plant and equipment Computer equipment €m €m Total €m 117.4 32.7 6.7 (3.5) (1.5) 151.8 4.1 (1.5) 1.8 156.2 8.2 7.2 (1.1) 14.3 7.7 — — 1.0 23.0 109.2 137.5 133.2 242.5 28.1 24.5 (0.5) (4.4) 290.2 34.7 (1.1) 8.1 331.9 57.4 31.7 (3.6) 85.5 34.4 0.1 (0.3) 5.3 125.0 185.1 204.7 206.9 3.2 0.5 5.3 — — 9.0 4.7 — 0.1 13.8 2.1 0.4 (0.1) 2.4 1.5 — — — 3.9 1.1 6.6 9.9 363.1 61.3 36.5 (4.0) (5.9) 451.0 43.5 (2.6) 10.0 501.9 67.7 39.3 (4.8) 102.2 43.6 0.1 (0.3) 6.3 151.9 295.4 348.8 350.0 Additions to for the year ended December 31, 2019 includes assets under construction of €13.1 million (year ended December 31, 2018: €10.2 million). 96214_164pg_Body.indd 123 96214_164pg_Body.indd 123 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-36 Security Borrowings have been provided by a syndicate of third party lenders, (the “Syndicate”). The Syndicate together with holders of the bond issue have security over the assets of the "Guarantor Group". The "Guarantor Group" consists of those companies which individually have more than 5% of consolidated total assets or EBITDA (as defined in the Senior Facilities Agreement) of the Company and in total comprise more than 80% of consolidated total assets or EBITDA at any testing date. (ii) Right-of-use assets Net book value Land and Buildings Plant and equipment and motor vehicles Computer equipment Right-of-use assets December 31, 2019 December 31, 2018 €m €m 62.8 9.2 0.4 72.4 — — — — Additions to the right-of-use assets during the year ended December 31, 2019 were €6.2 million. Lease liabilities are included within loans and borrowings in Note 21. Interest on lease liabilities is presented as a finance cost in Note 10. Payments of lease liabilities are included as a financing activity within the Statement of Cash Flows. Depreciation Land and Buildings Plant and equipment Computer equipment Depreciation expense of right-of-use assets Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 €m €m €m 10.7 5.2 0.2 16.1 — — — — — — — — F-37 Nomad Foods Annual Report 96214_164pg_Body.indd 124 96214_164pg_Body.indd 124 4/17/20 11:27 AM 4/17/20 11:27 AM 13) Goodwill and Intangibles Cost Balance at December 31, 2017 Acquisitions through business combinations Additions Effect of movements in foreign exchange Balance at December 31, 2018 Acquisitions through business combinations Additions Disposals Effect of movements in foreign exchange Balance at December 31, 2019 Accumulated amortization and impairment Balance at December 31, 2017 Amortization Effect of movements in foreign exchange Balance at December 31, 2018 Amortization Effect of movements in foreign exchange Balance at December 31, 2019 Net book value December 31, 2017 Net book value December 31, 2018 Net book value December 31, 2019 Goodwill Brands Computer software Customer relationships €m €m €m €m Total €m 1,745.6 1,688.9 115.4 362.2 — — — — 1,861.0 2,051.1 1.9 — — — — — — — 1,862.9 2,051.1 18.3 1.1 6.6 (0.6) 25.4 — 4.8 (0.1) (0.3) 29.8 31.0 3,483.8 — — — 31.0 — — — — 478.7 6.6 (0.6) 3,968.5 1.9 4.8 (0.1) (0.3) 31.0 3,974.8 Goodwill Brands Computer software Customer relationships €m €m €m €m Total €m — — — — — — 1.5 1.2 — 2.7 1.7 — — 1,745.6 1,861.0 4.4 1,687.4 2,048.4 1,862.9 2,046.7 7.5 3.6 (0.5) 10.6 4.7 (0.1) 15.2 10.8 14.8 14.6 4.8 2.2 — 7.0 2.2 — 9.2 26.2 24.0 21.8 13.8 7.0 (0.5) 20.3 8.6 (0.1) 28.8 3,470.0 3,948.2 3,946.0 Amortization of €8.6 million (December 31, 2018: €7.0 million; December 31, 2017: €6.5 million) is included in ‘other operating expenses’ in the Consolidated Statement of Profit or Loss. The Company’s goodwill, brand and customer relationships values have been allocated based on the enterprise value at acquisition of each cash generating unit (“CGU”). Goodwill is monitored at an operating segment level. As required by IAS 36 'Impairment of Assets', an annual review of the carrying amount of the goodwill and the indefinite life brands is carried out to identify whether there is any impairment to these carrying values. This is done by means of comparison of the carrying values to the value in use of the CGU. Value in use is calculated as the net present value of the projected risk-adjusted cash flows of each CGU. Key assumptions The values for the key assumptions were arrived at by taking into consideration detailed historical information and comparison to external sources where appropriate, such as market rates for discount factors. • Budgeted cash flows: the calculation of value in use has been based on the cash flow forecasts by management for 2020 to 2022. The trends in these forecasts have been extrapolated to produce 2023 and 2024 forecast cash flows. Beyond 2024 the same assumptions have been applied for future periods in the absence of longer term detailed forecasts. These plans have been prepared and approved by management, and incorporate past performance of the entities acquired in the period, historical growth rates and projections of developments in key markets. Nomad Foods Annual Report F-38 96214_164pg_Body.indd 125 96214_164pg_Body.indd 125 4/17/20 11:27 AM 4/17/20 11:27 AM • • • • • Revenue: projected revenues are built up with reference to markets and product platforms. They incorporate past performance, historical growth rates and projections of developments in key markets. Profit margins: projected margins reflect historical performance. Capital expenditure forecast includes an allowance for the replacement of leased right-of-use assets. Discount rate: a pre-tax discount rate of 7.1% (2018: 8.2%) was applied to the cash flows. This discount rate has been calculated using a capital asset pricing model using observable market data, including the share price of Nomad Foods Limited. Long-term growth rates: the growth rate used in the testing after the detailed forecasting period was 1.0% (2018: 1.0%). These rates do not reflect the long-term assumptions used by the Company for investment planning. Sensitivity to changes in assumptions Impairment was not required at either December 31, 2019, or December 31, 2018. In each case the valuations derived from the discounted cash flow model indicate a sufficient amount of headroom for which any reasonably possible change to key assumptions is unlikely to result in an impairment of the related goodwill. 14) Acquisitions (a) Goodfella’s Pizza On April 21, 2018, the Company completed its acquisition of all of the share capital of Green Isle Foods Limited (“Goodfella’s Pizza”) for £209.7 million (€239.0 million), including post-acquisition working capital and net debt adjustments. Goodfella’s Pizza (legal entity subsequently renamed Birds Eye Pizza Limited and then Birds Eye Ireland Limited), is a pizza producer based in Ireland that complements our existing business model. The purchase price allocation exercise over the assets and liabilities of Birds Eye Pizza Limited/Birds Eye Ireland Limited at the date acquisition and the consideration paid, was finalized on April 20, 2019, without any changes to the provisional estimates reported as at December 31, 2018. These were as follows: Assets: Intangible assets Property, plant and equipment Current assets Inventories Deferred tax assets Total assets Liabilities: Current liabilities Deferred tax liabilities Total liabilities Total identifiable net assets acquired Total purchase consideration Total identifiable net assets acquired Goodwill F-39 Nomad Foods Annual Report April 21, 2018 €m 158.0 33.2 7.5 10.7 0.9 210.3 31.2 22.6 53.8 156.5 239.0 (156.5) 82.5 96214_164pg_Body.indd 126 96214_164pg_Body.indd 126 4/17/20 11:27 AM 4/17/20 11:27 AM Goodwill recognized on acquisition is €82.5 million. The goodwill recognized is attributable mainly to the growth prospects for the business expected organically and operational synergies. (b) Toppfrys AB Effective March 2, 2018, the Company acquired a 60% stake of the outstanding share capital of Toppfrys AB, a pea processing business in Sweden that complements our existing business model. The Company paid €1.7 million (SEK 17.0 million) for the equity share acquired and subsequently provided loans of €1.5 million (SEK 13.6 million), bringing the total payments to €3.2 million (SEK 30.6 million). The Company had consolidated the business and has recognized a 40% non-controlling interest as it was determined to have control based on an assessment of the acquired business. The shareholder arrangements include a put option for the non-controlling interest to sell their remaining shares from 2020 and call options for the Company to acquire the remaining shares from 2022. The purchase price allocation exercise for the acquisition was finalized on March 1, 2019, valuing the 60% stake of net liabilities acquired were valued at €0.1 million and resulting in goodwill recognized of €1.8 million. The Company believes the future value of goodwill will be obtained through its market position in Sweden. On December 29, 2018, the Company increased its stake in Toppfrys AB to 81%, acquiring newly issued shares for consideration of €3.0 million (SEK 30.7 million). The shares were settled in exchange for loans payable by the subsidiary to another wholly owned subsidiary. The Company continues to consolidate the business and has recognized a 19% non-controlling interest from this date. (c) Aunt Bessie's On July 2, 2018, the Company completed its acquisition of all the share capital of Aunt Bessie’s Limited (“Aunt Bessie's”) from William Jackson & Son Limited for a purchase price of £209.0 million (€235.9 million). Aunt Bessie’s is a leading frozen food company in the United Kingdom where it manufactures, distributes and sells a range of branded frozen food products. The Aunt Bessie’s brand holds number one and number two market share positions, respectively, within frozen Yorkshire puddings and frozen potatoes, which combine to represent the majority of its revenues. 96214_164pg_Body.indd 127 96214_164pg_Body.indd 127 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-40 The purchase price allocation exercise over the assets and liabilities of Aunt Bessie's Limited at the date of acquisition and the consideration paid, was finalized on July 1, 2019. An adjustment of €1.9 million has been recognized in the year to recognize pre-acquisition related liabilities. The consideration paid is the same as that reported as at December 31, 2018. These were as follows: Assets: Intangible assets Property, plant and equipment Current assets Inventories Total assets Liabilities: Current liabilities Deferred tax liabilities Total liabilities Total identifiable net assets acquired Total purchase consideration Total identifiable net assets acquired Goodwill July 2, 2018 €m 205.3 23.1 19.5 13.2 261.1 20.6 37.6 58.2 202.9 235.9 (202.9) 33.0 Goodwill recognized on acquisition is €33.0 million. The goodwill recognized is attributable mainly to the growth prospects for the business expected organically and operational synergies. (d) Purchase consideration - cash outflow Outflow of cash to acquire subsidiary, net of cash acquired Cash consideration Less cash acquired Contingent consideration paid related to acquisitions 24 Net outflow of cash - investing activities Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 €m €m €m — — 1.5 1.5 474.9 (9.8) 6.5 471.6 — — — — F-41 Nomad Foods Annual Report 96214_164pg_Body.indd 128 96214_164pg_Body.indd 128 4/17/20 11:27 AM 4/17/20 11:27 AM 15) Investments The following are the Company's significant investments as of December 31, 2019. Nomad Foods Europe Holdings Limited Nomad Foods Europe Holdco Limited Nomad Foods Europe Finco Limited Nomad Foods Europe Midco Limited Nomad Foods Bondco Plc Nomad Foods Lux S.à.r.l. Nomad Foods Europe Limited Birds Eye Limited Nomad Foods Europe Finance Limited Aunt Bessie's Limited Birds Eye Ireland Limited Activity Holding Holding Holding Holding/ Finance Finance Finance Management Trading Finance Non-Trading Trading Birds Eye Ireland Oldco Unlimited Company Non-Trading Iglo Holding GmbH Iglo Nederland B.V. Iglo Belgium S.A. Iglo Portugal Iglo Austria Holdings GmbH C.S.I. Compagnia Surgelati Italiana S.R.L Findus Sverige Holdings AB Iglo GmbH Frozen Fish International GmbH Liberator Germany Newco GmbH Iglo Austria GmbH Findus Sverige AB Frionor Sverige AB Findus Holdings France SAS Findus France SAS Findus Espana SLU Findus Danmark A/S Findus Finland Oy Findus Norge AS Findus Norge Holding AS Toppfrys AB Holding Trading Trading Trading Holding Trading Holding Trading Trading Property Trading Trading Holding Holding Trading Trading Trading Trading Trading Holding Trading Country of incorporation England England England Class of shares held Ordinary Ordinary Ordinary England Ordinary England Luxembourg England England England England Republic of Ireland Republic of Ireland Germany Netherlands Belgium Portugal Austria Italy Sweden Germany Germany Germany Austria Sweden Sweden France France Spain Denmark Finland Norway Norway Sweden Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ownership as of December 31, 2019 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 81% 96214_164pg_Body.indd 129 96214_164pg_Body.indd 129 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-42 16) Deferred tax assets and liabilities Recognized deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Property, plant and equipment Intangible assets Employee benefits Tax value of loss carry forwards Derivative financial instruments Other Tax assets/(liabilities) December 31, 2019 December 31, 2018 Assets Liabilities €m 23.0 0.4 40.2 20.7 3.2 8.9 96.4 €m (29.3) (357.0) (0.4) — (0.3) (11.2) (398.2) Total €m (6.3) (356.6) 39.8 20.7 2.9 (2.3) (301.8) Assets Liabilities €m 15.6 0.3 30.0 19.1 — 3.7 68.7 €m (28.0) (354.4) (0.4) — (2.5) (6.8) (392.1) Total €m (12.4) (354.1) 29.6 19.1 (2.5) (3.1) (323.4) Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future taxable profits is probable. Deferred tax assets that the Company has not recognized in the financial statements amount to €70.3 million (December 31, 2018: €66.3 million). These deferred tax assets had not been recognized as the likelihood of recovery is not probable. The aggregate deferred tax relating to items that have been credited directly to equity is €12.3 million (December 31, 2018: debit of €0.7 million). Movement in deferred tax during the year: Property, plant and equipment Intangible assets Employee benefits Tax value of loss carry forwards Derivative financial instruments Other Total deferred tax Opening balance Jan 1, 2019 Recognized in Statement of Profit or Loss Recognized in Other Comprehensive Income €m €m €m Movement in foreign exchange €m Closing balance Dec 31, 2019 €m (12.4) (354.1) 29.6 19.1 (2.5) (3.1) (323.4) 6.3 (2.5) 3.5 1.6 — 0.8 9.7 — — 6.7 — 5.6 — 12.3 (0.2) — — — (0.2) — (0.4) (6.3) (356.6) 39.8 20.7 2.9 (2.3) (301.8) F-43 Nomad Foods Annual Report 96214_164pg_Body.indd 130 96214_164pg_Body.indd 130 4/17/20 11:27 AM 4/17/20 11:27 AM Opening balance Jan 1, 2018 €m Opening balance restatement due to IFRS 9 transition Acquired in business combinations Recognized in Statement of Profit or Loss Recognized in Other Comprehensive Income Movement in foreign exchange €m €m €m €m €m Closing balance Dec 31, 2018 €m Property, plant and equipment Intangible assets Employee benefits Tax value of loss carry forwards Derivative financial instruments Other (15.2) (295.0) 28.2 15.6 1.4 1.6 Total deferred tax (263.4) 17) Inventories Raw materials and consumables Work in progress Finished goods and goods for resale Total inventories — — — — — (3.7) (3.7) — (59.3) — — — — (59.3) 3.2 0.2 (1.5) 3.5 0.1 (1.0) 4.5 — — 3.3 — (4.0) — (0.7) (0.4) — (0.4) — — — (12.4) (354.1) 29.6 19.1 (2.5) (3.1) (0.8) (323.4) December 31, 2019 December 31, 2018 €m €m 86.8 48.3 188.1 323.2 81.6 50.7 210.2 342.5 During the year ended December 31, 2019, €9.0 million (year ended December 31, 2018 €7.1 million, year ended December 31, 2017: €7.6 million) was charged to the Consolidated Statement of Profit or Loss for the write down of inventories. 18) Trade and other receivables Current assets Trade receivables Prepayments and accrued income Other receivables Tax receivable Total current trade and other receivables Non-current assets Other receivables Total non-current trade and other receivables Total trade and other receivables December 31, 2019 December 31, 2018 €m €m 143.6 8.0 31.0 24.1 206.7 1.9 1.9 98.3 9.2 38.4 28.0 173.9 2.6 2.6 208.6 176.5 Trade receivables, prepayments and other receivables, except for those defined as non-current, are expected to be recovered in less than 12 months. Other receivables includes VAT receivable. 96214_164pg_Body.indd 131 96214_164pg_Body.indd 131 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-44 The ageing of trade receivables is detailed below: December 31, 2019 Not past due Past due less than 1 month Past due 1 to 3 months Past due 3 to 6 months Past due more than 6 months Sub-total Reduction in trade-terms(1) Total trade receivables December 31, 2018 Not past due Past due less than 1 month Past due 1 to 3 months Past due 3 to 6 months Past due more than 6 months Sub-total Reduction in trade-terms (1) Total trade receivables Gross €m Impaired €m Net €m 288.1 32.5 7.5 3.6 7.9 339.6 (0.2) (0.3) (0.2) (0.2) (3.9) (4.8) 287.9 32.2 7.3 3.4 4.0 334.8 (191.2) 143.6 Gross €m Impaired €m Net €m 228.5 20.9 4.8 1.6 5.6 261.4 — — — (0.2) (4.1) (4.3) 228.5 20.9 4.8 1.4 1.5 257.1 (158.8) 98.3 (1) Refer to Note 4(a). Reduction in trade term amounts are primarily not past due. Trade receivables have been provided against based on expected credit losses. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable. The Company does not hold any collateral as security. Debts past due are not impaired where there are eligible trade terms deductions which can be offset against them. The Company entered into facilities with third-party banks in which the Company may sell qualifying trade debtors on a non-recourse basis. Under the terms of the agreements, the Company has transferred substantially all the credit risks and control of the receivables, which are subject to this agreement, and accordingly €nil (December 31, 2018: €51.0 million) of trade receivables has been derecognized at the period end. Liabilities related to contracts with customers The Company has recognized the following liabilities related to contracts with customers: Trade terms liabilities reported within trade receivables Trade terms liabilities reported within trade and other payables (Note 22) Total trade terms liabilities Significant changes to trade terms December 31, 2019 December 31, 2018 €m (191.2) (59.4) (250.6) €m (158.8) (79.5) (238.3) No significant changes to trade terns occurred in the year ended December 31, 2019. F-45 Nomad Foods Annual Report 96214_164pg_Body.indd 132 96214_164pg_Body.indd 132 4/17/20 11:27 AM 4/17/20 11:27 AM Revenue recognized in relation to trade terms Trade terms relate to sales made with variable consideration and are an estimate as disclosed in Note 4 (a). Revenue recognized in the year ended December 31, 2019 relating to performance obligations that were satisfied in the prior year was €17.3 million (2018: €17.2 million). 19) Indemnification assets Balance at January 1 Recognized through business combinations Utilized Release of indemnified provision Balance at December 31 Year ended December 31, 2019 Year ended December 31, 2018 €m €m 79.4 — — (44.0) 35.4 73.8 6.1 (0.5) — 79.4 As at December 31, 2019, €29.8 million (December 31, 2018: €73.8 million) of the indemnification assets relate to the acquisition of the Findus Group for which 1,583,627 shares are held in escrow and are valued at $22.37 (€19.96) (December 31, 2018: 6,964,417 shares valued at $16.72 (€14.62)) each. The shares placed in escrow will be released in stages over a four-year period beginning January 2019 and each anniversary thereafter. During 2019, 5,380,790 shares were released from escrow. As a consequence, the indemnification asset was reduced by €44.0 million with a corresponding charge to the Statement of Profit or Loss. In January 2020, 965,528 shares were released from escrow. As a consequence the indemnification asset will be reduced by approximately €17.8 million with a corresponding charge of to the Statement of Profit or Loss within the financial statements for the year ended December 31, 2020. The indemnification asset of €5.6 million (2018: €5.6 million) recognized in relation to the Goodfella’s Pizza acquisition relates to several contingent liabilities that arose prior to acquisition. 20) Cash and cash equivalents Cash and cash equivalents Restricted cash Cash and cash equivalents Bank overdraft Cash and cash equivalents per Statement of Cash Flows December 31, 2019 December 31, 2018 Note €m €m 826.0 0.1 826.1 (1.3) 824.8 22 327.5 0.1 327.6 — 327.6 ‘Cash and cash equivalents’ comprise cash balances and deposits. Restricted cash comprises money that is primarily reserved for a specific purpose and therefore not available for immediate or general business use. Bank overdrafts that are repayable on demand and form an integral part of the Company's cash management are included as a component of cash and cash equivalents for the purposes of the Statement of Cash Flows. 96214_164pg_Body.indd 133 96214_164pg_Body.indd 133 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-46 21) Loans and borrowings The repayment profile of the syndicated and other loans held by the Company is as follows: Current liabilities/(assets) Syndicated loans Lease liabilities Less deferred borrowing costs to be amortized within 1 year Total due in less than one year Non-current liabilities Syndicated loans 2024 fixed rate senior secured notes Lease liabilities Less deferred borrowing costs to be amortized in 2-5 years Less deferred borrowing costs to be amortized in more than 5 years Total due after more than one year Total borrowings December 31, 2019 December 31, 2018 €m €m 10.8 18.9 (2.0) 27.7 1,364.4 400.0 90.1 (6.9) — 1,847.6 1,875.3 23.4 — (2.0) 21.4 1,351.8 400.0 — (7.9) (1.0) 1,742.9 1,764.3 As detailed in Note 2, following the adoption of IFRS 16 Leases on January 1, 2019, loans and borrowings now includes €109.0 million relating to lease liabilities. On May 3, 2017 the Company completed a refinancing of its Senior debt. All Senior debt as at the balance sheet date was repaid and replaced with new Senior Euro debt of €500.0 million and Senior U.S. Dollar debt of $610.0 million. Both are repayable on May 15, 2024. The Senior U.S. Dollar debt requires a mandatory repayment of 1% of notional, of which $6.6 million was repaid in 2018 and $9.6 million in 2019. The existing revolving credit facility was also replaced with a new €80.0 million facility, which is available until May 15, 2023 and may be utilized to support working capital requirements, including letters of credit and bank guarantees. Concurrent to the refinancing, the Company repaid the senior secured notes due 2020 and completed a private offering of €400.0 million of 3.25% senior secured notes due May 15, 2024 (the “Notes”), payable semi-annually in arrears. Both the new Senior debt and the Notes are guaranteed on a senior basis by the Company and certain subsidiaries thereof. Eligible transaction costs of approximately €9.8 million were capitalized as part of the refinancing and will be amortized over the life of the debt. On December 20, 2017 we further amended and restated our Senior Facilities Agreement to reprice our $610.0 million and €500.0 million term loan facilities. The margin was reduced by 50 basis points on the U.S. Dollar- denominated term loan and 25 basis points on the Euro-denominated term loan. There were no changes to the maturity dates of the term loan facilities. These amendments were accounted for as a modification of the existing loan, so that the modified cash flows are recognized at the original effective interest rate, with a corresponding reduction to the carrying value of the loans. We also established a $50.0 million incremental term loan facility and a €58.0 million incremental term loan facility which were fully drawn down on January 31, 2018 and February 9, 2018 respectively. Eligible transaction costs of approximately €2.5 million have been capitalized as part of this amendment and will be amortized over the life of the debt. On June 15, 2018, we amended and restated our Senior Facilities Agreement to establish an incremental U.S. Dollar denominated term loan that increased the amount of U.S. Dollar Term Loans by $300.0 million to $953.4 million. Principal outstanding under the Euro-denominated term loan remained unchanged at €558.0 million. The maturity dates remained May 2024 for both Euro and U.S. Dollar denominated Term Loans. The €80.0 million multicurrency revolving credit facility remained unchanged and matures in May 2023. As at December 31, 2019 €17.2 million (December 31, 2018: €16.8 million) has been utilized for issuance of letters of credit and bank guarantees. F-47 Nomad Foods Annual Report 96214_164pg_Body.indd 134 96214_164pg_Body.indd 134 4/17/20 11:27 AM 4/17/20 11:27 AM Guarantees and secured assets The Senior Facility Agreement that governs the Company’s Senior debt, establishes security over the assets of the “Guarantor Group”. The Guarantor Group consists of those companies that individually have more than 5% of consolidated total assets or EBITDA (as defined in the Senior Facilities Agreement) of the Company and in total comprise more than 80% of consolidated total assets or EBITDA at any testing date. The Senior Facilities Agreement includes an excess cash flow calculation whereupon an amount of principal shall be repaid based upon terms including cash generated during the year and leverage. In 2019 the amount repaid was €12.1 million relating to the calculation performed at the end of 2018. Based on the calculation performed for December 31, 2019, there will be no excess cash flow repayment in 2020. In connection with its pension scheme, Findus Sverige AB, a 100% owned subsidiary, is required to obtain credit insurance with PRI Pensionsgaranti (“PRI”), a credit insurance company that provides insurance annually against the risk of a sponsoring company’s insolvency. In connection with such credit insurance, as at December 31, 2019 Findus Sverige AB has granted floating charges over certain assets in favor of PRI in an amount of SEK 300 million (€28.7 million) (December 31, 2018: €29.3 million) and Nomad Foods Limited has issued a parent guarantee to PRI which will not exceed SEK 450 million (€43.0 million) (December 31, 2018: €43.9 million) and has a maturity date of March 31, 2021. 22) Trade and other payables Current liabilities Trade payables Accruals and deferred income Trade terms payable Social security and other taxes Other payables Financial payables Bank overdrafts Total current trade and other payables Non-current liabilities Accruals and deferred income Total non-current trade and other payables Total trade and other payables 23) Employee benefits December 31, 2019 December 31, 2018 €m €m 306.5 109.4 59.4 25.7 18.8 4.1 1.3 525.2 2.7 2.7 527.9 321.1 125.3 79.5 19.0 19.0 7.7 — 571.6 1.3 1.3 572.9 The Company operates defined benefit pension plans in Germany, Italy, Sweden and Austria, as well as various defined contribution plans in other countries. i. Defined contribution plans The total expense relating to defined contribution plans for the year ended December 31, 2019 was €9.0 million (year ended December 31, 2018: €9.1 million, year ended December 31, 2017: €8.5 million) ii. Defined benefit plans The Company operates partially funded defined benefit pension plans in Germany and Austria as well as unfunded plans in Sweden and Italy. In addition, an unfunded post-retirement medical plan is operated in Austria. In Germany and Italy, long term service awards are in operation and various other countries provide other employee benefits. 96214_164pg_Body.indd 135 96214_164pg_Body.indd 135 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-48 Net employee benefit obligations-Germany Net employee benefit obligations-Sweden Net employee benefit obligations-Italy Net employee benefit obligations-Austria Sub-total Net employee benefit obligations- total of other countries Total net employee benefit obligations December 31, 2019 December 31, 2018 €m €m 151.3 71.7 4.8 5.8 233.6 3.9 237.5 128.0 60.5 4.7 4.3 197.5 3.1 200.6 The net obligation of €3.9 million (December 31, 2018: €3.1 million) in respect of other countries is the aggregate of a number of different types of minor schemes, each one not being considered material individually or in aggregate. Consequently detailed disclosure of these schemes is not provided. The amount included in the Statement of Financial Position arising from the Company’s obligations in respect of its defined benefit retirement plans and post-employment benefits is as follows: December 31, 2019 Present value of unfunded defined benefit obligations Present value of funded defined benefit obligations Subtotal present value of defined benefit obligations Fair value of plan assets Recognized liability for net defined benefit obligations December 31, 2018 Present value of unfunded defined benefit obligations Present value of funded defined benefit obligations Subtotal present value of defined benefit obligations Fair value of plan assets Recognized liability for net defined benefit obligations Defined benefit retirement plans €m Post- employment medical benefits and other benefits €m 77.6 237.3 314.9 (86.4) 228.5 5.1 — 5.1 — 5.1 Defined benefit retirement plans €m Post- employment medical benefits and other benefits €m 65.8 208.4 274.2 (81.5) 192.7 4.8 — 4.8 — 4.8 Total €m 82.7 237.3 320.0 (86.4) 233.6 Total €m 70.6 208.4 279.0 (81.5) 197.5 F-49 Nomad Foods Annual Report 96214_164pg_Body.indd 136 96214_164pg_Body.indd 136 4/17/20 11:27 AM 4/17/20 11:27 AM Movements in recognized liability for net defined benefit obligations: Opening balance January 1, 2019 Current service cost Interest cost Actuarial losses Contributions to plan Benefits paid Exchange adjustments As at December 31, 2019 Opening balance January 1, 2018 Current service cost Interest cost Actuarial losses Contributions to plan Benefits paid Exchange adjustments As at December 31, 2018 Defined benefit retirement plans €m Post- employment medical benefits and other benefits €m 192.7 4.0 3.6 35.3 (0.6) (5.2) (1.3) 228.5 4.8 0.2 — — — — 0.1 5.1 Defined benefit retirement plans €m Post- employment medical benefits and other benefits €m 180.5 3.9 3.6 12.9 (0.6) (5.4) (2.2) 192.7 4.9 (0.1) — — — — — 4.8 Total €m 197.5 4.2 3.6 35.3 (0.6) (5.2) (1.2) 233.6 Total €m 185.4 3.8 3.6 12.9 (0.6) (5.4) (2.2) 197.5 96214_164pg_Body.indd 137 96214_164pg_Body.indd 137 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-50 Movements in present value of defined benefit obligations: Opening balance January 1, 2019 Current service cost Interest cost Actuarial experience losses Actuarial losses arising from changes in financial assumptions Actuarial gains arising from changes in demographic assumptions Contributions to plan Benefits paid Exchange adjustments As at December 31, 2019 Opening balance January 1, 2018 Current service cost Interest cost Actuarial experience losses Actuarial losses arising from changes in financial assumptions Actuarial gains arising from changes in demographic assumptions Contributions to plan Benefits paid Exchange adjustments As at December 31, 2018 Defined benefit retirement plans €m Post- employment medical benefits and other benefits €m 274.2 4.0 5.0 0.2 43.2 (3.0) 0.4 (7.8) (1.3) 314.9 4.8 0.2 — — — — — — 0.1 5.1 Defined benefit retirement plans €m Post- employment medical benefits and other benefits €m 261.8 3.9 5.2 0.5 13.8 (1.1) 0.4 (8.1) (2.2) 274.2 4.9 (0.1) — — — — — — — 4.8 Movements in fair value of plan assets of defined benefit retirement plans: Opening balance January 1, 2019 Interest income Actuarial gains arising from the return on plan assets, excluding interest income Contributions by employer Contributions by members Benefits paid As at December 31, 2019 Total €m 279.0 4.2 5.0 0.2 43.2 (3.0) 0.4 (7.8) (1.2) 320.0 Total €m 266.7 3.8 5.2 0.5 13.8 (1.1) 0.4 (8.1) (2.2) 279.0 2019 €m 81.5 1.4 5.1 0.5 0.5 (2.6) 86.4 F-51 Nomad Foods Annual Report 96214_164pg_Body.indd 138 96214_164pg_Body.indd 138 4/17/20 11:27 AM 4/17/20 11:27 AM Opening balance January 1, 2018 Interest income Actuarial gains arising from the return on plan assets, excluding interest income Contributions by employer Contributions by members Benefits paid As at December 31, 2018 Expense recognized in the Consolidated Statement of Profit or Loss: Current service cost Interest cost For the year ended December 31, 2019 Current service cost Interest cost For the year ended December 31, 2018 Defined benefit retirement plans 2019 €m 4.0 3.6 7.6 Defined benefit retirement plans 2018 €m Post- employment medical benefits and other benefits 2019 €m 0.2 — 0.2 Post- employment medical benefits and other benefits 2018 €m 3.9 3.6 7.5 (0.1) — (0.1) 2018 €m 81.3 1.6 0.3 0.5 0.5 (2.7) 81.5 Total 2019 €m Total 2018 €m 4.2 3.6 7.8 3.8 3.6 7.4 Current service cost is allocated between cost of sales and other operating expenses. Interest on net defined benefit obligation is disclosed in net financing costs. Amount recognized in the Consolidated Statement of Comprehensive Income: Actuarial experience losses Actuarial losses arising from changes in financial assumptions Actuarial gains arising from changes in demographic assumptions Actuarial gains arising from the return on plan assets, excluding interest income Total actuarial losses Cumulative amount of actuarial losses recognized in Consolidated Statement of Comprehensive Income Year ended December 31, 2019 Year ended December 31, 2018 €m €m 0.2 43.2 (3.0) (5.1) 35.3 0.5 13.8 (1.1) (0.3) 12.9 Year ended December 31, 2019 Year ended December 31, 2018 €m €m 49.5 14.2 Nomad Foods Annual Report F-52 96214_164pg_Body.indd 139 96214_164pg_Body.indd 139 4/17/20 11:27 AM 4/17/20 11:27 AM The fair value of plan assets, all at quoted prices are as follows: Equities Debt instruments Property Other Total December 31, 2019 December 31, 2018 €m €m 20.5 40.3 13.1 12.5 86.4 20.2 47.2 10.9 3.2 81.5 Post-employment medical benefits and other benefits Defined benefit retirement plans December 31, 2019 Discount rate Inflation rate Rate of increase in salaries Rate of increase for pensions in payment Long term medical cost of inflation Germany Sweden Austria Italy Germany Austria 1.15% 2.00% 2.80% 1%-2% — 1.45% 1.80% 2.80% — — 1.00% 1.53% 2.00% 2.00% — 0.67% 1.50% — — — 0.45% 2.00% 2.80% — — 0.30% 1.53% 3.00% — 2.00% December 31, 2018 Discount rate Inflation rate Rate of increase in salaries Rate of increase for pensions in payment Long term medical cost of inflation Defined benefit retirement plans Post-employment medical benefits and other benefits Germany Sweden Austria Italy Germany Austria 1.75% 2.00% 2.80% 1%-2% — 2.25% 2.00% 2.75% —% — 2.00% 2.00% 3.00% 2.00% — 1.60% 1.50% — — — 1.20% 2.00% 2.80% — — 1.00% 2.00% 3.00% — 2.00% In valuing the liabilities of the pension fund at December 31, 2019 and December 31, 2018, mortality assumptions have been made as indicated below. The assumptions relating to longevity underlying the pension liabilities at the financial year end date are based on standard actuarial mortality tables and include an allowance for future improvements in longevity. The assumptions are based on the following mortality tables: • • • • Germany: Richttafeln 2018 G Sweden: DUS 14 Austria: AVÖ 2018 - P Italy: RG48 These four references are to the specific standard rates of mortality that are published and widely used in each country for the use of actuarial assessment of pension liabilities and take account of local current and future average life expectancy. December 31, 2019 (years) Retiring at the end of the year: Male Female Germany Sweden Austria Italy 21 24 22 24 23 25 19 22 F-53 Nomad Foods Annual Report 96214_164pg_Body.indd 140 96214_164pg_Body.indd 140 4/17/20 11:27 AM 4/17/20 11:27 AM December 31, 2018 (years) Retiring at the end of the year: Male Female Germany Sweden Austria Italy 21 24 22 24 23 25 19 22 The history of experience adjustments from inception of the Company for the defined benefit retirement plans is as follows: Present value of defined benefit obligations Fair value of plan assets Recognized liability in the scheme Experience losses on scheme liabilities Experience gains on scheme assets December 31, 2019 December 31, 2018 December 31, 2017 €m €m €m 314.9 (86.4) 228.5 0.2 (5.1) 274.2 (81.5) 192.7 0.5 (0.3) 261.8 (81.3) 180.5 0.5 (1.9) Post-employment medical benefits- sensitivity analysis The effect of a 1% movement in the assumed medical cost trend rate is not significant. Defined benefit obligation- sensitivity analysis The effect of a 1% movement in the most significant assumptions for the year ended December 31, 2019 is as follows: Discount rate Inflation rate Rate of increase in salaries Rate of increase for pensions in payment Increase Decrease €m €m (51.4) 43.5 16.6 44.9 68.1 (35.4) (12.3) (36.3) There are no deficit elimination plans for any of the defined benefit schemes. Expected contributions and payments to post-employment benefit plans for the period ending December 31, 2020 are €5.5 million. The weighted average duration of the defined benefit obligations is 19.6 years years. 96214_164pg_Body.indd 141 96214_164pg_Body.indd 141 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-54 24) Provisions Balance at December 31, 2017 Acquired through business combinations Additional provision in the period Release of provision Utilization of provision Unwinding of discounting Foreign exchange Balance at December 31, 2018 Impact of transition to IFRS 16 Balance at January 1 2019 Acquired through business combinations Additional provision in the period Release of provision Utilization of provision Unwinding of discounting Foreign exchange Balance at December 31, 2019 Analysis of total provisions: December 31, 2019 Current Non-current Total Restructuring 40.9 5.9 46.8 Restructuring Onerous/ unfavorable contracts Provisions related to other taxes Contingent consideration €m €m €m €m Other €m Total €m 26.3 — 4.0 (1.5) (16.5) — — 12.3 — 12.3 — 3.2 (1.5) (6.7) — 0.1 7.4 75.4 10.2 10.4 18.5 140.8 — — — (4.3) 0.8 (3.1) 68.8 (66.9) 1.9 — — — (0.9) — 0.2 1.2 — 0.3 — (4.7) — — 5.8 — 5.8 — 2.4 (1.3) — — — 6.9 — — (2.7) (6.5) 0.3 — 1.5 — 1.5 — — — (1.5) — — — 7.0 4.1 (2.0) (2.3) — — 25.3 — 25.3 1.9 10.2 (5.7) (0.5) — 0.1 31.3 7.0 8.4 (6.2) (34.3) 1.1 (3.1) 113.7 (66.9) 46.8 1.9 15.8 (8.5) (9.6) — 0.4 46.8 December 31, 2018 Impact of transition to IFRS 16 Restated balance as of December 31, 2018 44.3 69.4 113.7 (3.6) (63.3) (66.9) 40.7 6.1 46.8 The €7.4 million (2018: €12.3 million) provision relates to committed plans for certain restructuring activities of exceptional nature which are due to be completed within the next 12 months. The amounts have been provided based on the latest information available on the likely remaining expenditure required to complete the committed plans. €6.7 million has been utilized in the year ended December 31, 2019 which mainly relates to the closure of the production facilities in Bjuv as well as other reorganizational activities across the Company. Onerous/unfavorable contracts Of the onerous/unfavorable contracts provision reported as of December 31, 2018, €66.9 million was held in relation to a lease for a warehouse and factory facility in Bjuv, Sweden. The factory is vacant and the Company currently anticipates the warehouse space will not be fully utilized by the Company or other third parties, so the lease was identified as being onerous. As disclosed in Note 2, upon transition to IFRS 16 Leases the full lease liability is now recognized in the Statement of Financial Position so that the provision has been released. The remaining provision of €1.2 million relates to a service contract covering the same warehouse facility. Provisions relating to other taxes The €6.9 million (2018: €5.8 million) provision relates to other, non-income taxes due to tax authorities after tax investigations within certain operating subsidiaries within the Nomad Group. F-55 Nomad Foods Annual Report 96214_164pg_Body.indd 142 96214_164pg_Body.indd 142 4/17/20 11:27 AM 4/17/20 11:27 AM Contingent consideration During the year ended December 31, 2019, the contingent consideration provision was utilized to settle all remaining liabilities in respect of the Lutosa Brand, which is being used under license until 2020. This payment has been presented as an investing cash flow within the Statement of Cash Flows. Other Other provisions include €6.6 million (December 31, 2018: €6.6 million) of contingent liabilities acquired as part of the Goodfella’s Pizza acquisition that are indemnified by the Seller’s insurance policies, €4.7 million (December 31, 2018: €5.0 million) of obligations in Italy, €6.0 million (December 31, 2018: €5.9 million) for asset retirement obligations, €1.9 million (December 31, 2018: nil) of pre-acquisition related liabilities recognized in the year as an adjustment to the acquisition date liabilities of Aunt Bessie's Limited, €8.3 million (December 31, 2018: €1.0 million) of additional provisions in the period relate to employer taxes on the Long-term Incentive Plan (see Note 8) which would become payable on the issuance of shares, and other obligations from previous accounting periods. 25) Share capital and capital reserves Share capital and capital reserve Authorized: Unlimited number of Ordinary Shares with nil nominal value issued at $10.00 per share Unlimited number of Founder Preferred Shares with nil nominal value issued at $10.00 per share Issued and fully paid: 194,542,957 (December 31, 2018: 174,229,051) Ordinary Shares with nil nominal value 1,500,000 (December 31, 2018: 1,500,000) Founder Preferred Shares with nil nominal value Total share capital and capital reserve Listing and share transaction costs Total net share capital and capital reserve Ordinary Shares Balance at December 31, 2017 Shares issued in the year Balance at December 31, 2018 Shares issued in the year Balance at December 31, 2019 As at December 31, 2019 As at December 31, 2018 €m €m n/a n/a 2,109.7 10.6 2,120.3 (24.9) 2,095.4 n/a n/a 1,751.7 10.6 1,762.3 (13.8) 1,748.5 Issued and Repurchased Ordinary shares (in millions) 165.3 8.9 174.2 20.3 194.5 Note 8(b) sets out the Non-Executive Director, Initial Director Options and Director and Senior Management Restricted share awards. 96214_164pg_Body.indd 143 96214_164pg_Body.indd 143 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-56 On January 2, 2018, the Company issued a share dividend of 8,705,890 ordinary shares (the "Founder Preferred Share Dividend") calculated as 20% of the increase in the market price of our ordinary shares compared to 2015 dividend price of $11.4824 multiplied by Preferred Share Dividend Equivalent. The Dividend Price used to calculate the Annual Dividend Amount was $16.6516 (calculated based upon the volume weighted average price for the last ten consecutive trading days of 2017). On January 2, 2019, the Company issued a share dividend of 171,092 ordinary shares calculated as 20% of the increase in the market price of our ordinary shares compared to 2017 dividend price of $16.6516 multiplied by Preferred Share Dividend Equivalent. The Dividend Price used to calculate the Annual Dividend Amount was $16.7538 (calculated based upon the volume weighted average price for the last ten consecutive trading days of 2018). On March 22, 2019, the Company issued 20,000,000 ordinary shares in a public offering at $20.00 per share for aggregate gross proceeds of $400.0 million (€353.6 million). Directly attributed transaction costs of €11.1 million were incurred. Listing and share transaction costs As at December 31, 2019, cumulative listing and share transaction costs, which includes the total cost of admission and share issuance expenses, as well as costs associated with share repurchases were €24.9 million and are disclosed as a deduction directly against the capital reserve. At December 31, 2017 Placement fees At December 31, 2018 Share transaction costs At December 31, 2019 €m 13.8 — 13.8 11.1 24.9 Founder Preferred Shares Annual Dividend Amount Each of the Founder Entities holds 750,000 shares for a total of 1,500,000 Founder Preferred Shares which were issued at $10.00 per share. The Founder Preferred Shares are intended to incentivize the Founders to achieve Nomad’s objectives. In addition to providing long term capital, the Founder Preferred Shares are structured to provide a dividend based on the future appreciation of the market value of the ordinary shares thus aligning the interests of the Founders with those of the holders of ordinary shares on a long term basis. The Founder Preferred Shares are also intended to encourage the Founders to grow Nomad to maximize value for holders of ordinary shares. There are no Founder Preferred Shares held in Treasury. Founder Preferred Shares confer upon the holder the following: 1. 2. the right to one vote per Founder Preferred Share on all matters to be voted on by shareholders generally and to vote together with the holders of ordinary shares; commencing on January 1, 2015 and for each financial year thereafter: a. b. once the average price per ordinary share for the Dividend Determination Period, i.e. the last ten consecutive trading days of a year is at least $11.50 (which condition has been satisfied for the year ended December 31, 2015), the right to receive a Founder Preferred Shares Annual Dividend Amount (as more fully described below), payable in Ordinary Shares or cash, at the Company’s sole option; and the right to receive dividends and other distributions as may be declared from time to time by the Company’s board of directors with respect to the Ordinary Shares (such dividends to be distributed among the holders of Founder Preferred Shares, as if for such purpose the Founder Preferred Shares had been converted into Ordinary Shares immediately prior to such distribution) plus an amount equal to 20% of the dividend which would be distributable on such number of Ordinary Shares equal to the Preferred Share Dividend Equivalent (as defined below); and F-57 Nomad Foods Annual Report 96214_164pg_Body.indd 144 96214_164pg_Body.indd 144 4/17/20 11:27 AM 4/17/20 11:27 AM 3. 4. 5. in addition to amounts payable pursuant to clause 2 above, the right, together with the holders of Ordinary Shares, to receive such portion of all amounts available for distribution and from time to time distributed by way of dividend or otherwise at such time as determined by the Directors; and the right to an equal share (with the holders of Ordinary Shares on a share for share basis) in the distribution of the surplus assets of Nomad on its liquidation as are attributable to the Founder Preferred Shares; and the ability to convert into Ordinary Shares on a 1-for-1 basis (mandatorily upon a Change of Control or the seventh full financial year after an acquisition) See Note 27 for further information on the Founder Preferred Shares Dividends issued. 26) Share-based compensation reserve The Company's discretionary share award scheme, the LTIP, enables the Company’s Compensation Committee to make grants (“Awards”) in the form of rights over ordinary shares, to any Director, Non-Executive Director or employee of the Company. However, it is the Committee’s current intention that Awards be granted only to Directors and senior management, whilst recognizing a separate annual Restricted Stock Award for Non-Executive Directors. All Awards are to be settled by physical delivery of shares. Note 8(b) sets out the Non-Executive Director and Director and Senior Management Restricted share awards. Balance as of January 1, 2019 Non-Executive Director restricted share awards charge Directors and Senior Management share awards charge Vesting of Non-Executive Director restricted shares Vesting of LTIP Share awards Reclassification of awards for settlement of tax liabilities Balance as of December 31, 2019 Share based compensation reserve €m 9.4 0.9 14.0 (0.8) (1.3) 0.4 22.6 27) Founder Preferred Shares Dividend Reserve Nomad has issued Founder Preferred Shares to its Founder Entities. A summary of the key terms of the Founder Preferred Shares is set out in Note 25. The Founder Preferred Shares Annual Dividend Amount is structured to provide a dividend based on the future appreciation of the market value of the ordinary shares, thus aligning the interests of the Founders with those of the investors on a long term basis. Commencing in 2015, the Founder Preferred Share Annual Dividend Amount became payable because the Company’s volume weighted average ordinary share price was above $11.50 for the last ten consecutive trading days of the 2015 financial year. The Preferred Shares Annual Dividend amount is determined with reference to the Dividend Determination Period of a financial year, ie the last ten consecutive trading days and calculated as 20% of the increase in the volume weighted average share price of our ordinary shares across the determination period compared to the highest price previously used in calculating the Founder Preferred Share Annual Dividend Amounts (currently $21.7289) multiplied by 140,220,619 Preferred Share Dividend Equivalent (the “Preferred Share Dividend Equivalent”). The Preferred Share Dividend Equivalent is equal to the number of ordinary shares outstanding immediately following the Iglo Acquisition, but excluding the 13.7 million ordinary shares issued to the seller of the Iglo Group. The Founder Preferred Shares Annual Dividend Amount is paid for so long as the Founder Preferred Shares remain outstanding. The amounts used for the purposes of calculating the Founder Preferred Shares Annual Dividend Amount and the relevant numbers of ordinary shares are subject to such adjustments for share splits, share dividends and certain other recapitalization events as the Directors in their absolute discretion determine to be fair and reasonable in the event Nomad Foods Annual Report F-58 96214_164pg_Body.indd 145 96214_164pg_Body.indd 145 4/17/20 11:27 AM 4/17/20 11:27 AM of a consolidation or sub-division of the ordinary shares in issue, as determined in accordance with Nomad Foods’ Memorandum and Articles of Association. Dividends on the Founder Preferred Shares are payable until the Founder Preferred Shares are converted into Ordinary Shares. The Founder Preferred Shares automatically convert on a one for one basis (i) on the last day of the seventh full financial year following our acquisition of Iglo Foods (or if such day is not a trading day, the next trading day) or (ii) in the event of a change of control (unless the independent directors of our board of directors determine otherwise). The holders of Founder Preferred Shares may also be converted to Ordinary shares on a one for one basis at the option of the holder. In the event of an automatic conversion, a dividend on the Founder Preferred Shares shall be payable with respect to the shorted dividend year on the trading day immediately prior to the conversion. In the event of an optional conversion by the holder, no dividend on the Founder Preferred Shares shall be payable with respect to the year in which the conversion occurred. On December 29, 2017, the Company’s Board of Directors approved a share dividend of an aggregate of 8,705,890 ordinary shares calculated as 20% of the increase in the market price of our ordinary shares compared to 2015 dividend price of $11.4824 multiplied by Preferred Share Dividend Equivalent. The Dividend Price used to calculate the Annual Dividend Amount was $16.6516 (calculated based upon the volume weighted average price for the last ten consecutive trading days of 2017) and the ordinary shares underlying the Founder Preferred Share Dividend were issued on January 2, 2018. On December 31, 2018, the Company’s Board of Directors approved a share dividend of an aggregate of 171,092 ordinary shares calculated as 20% of the increase in the market price of our ordinary shares compared to 2017 dividend price of $16.6516 multiplied by the Preferred Share Dividend Equivalent. The Dividend Price used to calculate the Annual Dividend Amount was $16.7538 (calculated based upon the volume weighted average price for the last ten consecutive trading days of 2018) and the ordinary shares underlying the Founder Preferred Share Dividend were issued on January 2, 2019. On December 31, 2019, the Company’s Board of Directors approved a share dividend of an aggregate of 6,421,074 ordinary shares calculated as 20% of the increase in the market price of our ordinary shares compared to 2018 dividend price of $16.7538 multiplied by the Preferred Share Dividend Equivalent. The Dividend Price used to calculate the Annual Dividend Amount was $21.7289 (calculated based upon the volume weighted average price for the last ten consecutive trading days of 2019) and the ordinary shares underlying the Founder Preferred Share Dividend were issued on January 2, 2020. Balance as of January 1, 2019 Settlement of dividend through share issue Balance as of December 31, 2019 28) Translation reserve Founder Preferred Shares Dividend Reserve €m 372.6 (2.5) 370.1 The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations, as well as from the translation of liabilities that hedge the Company’s net investment in a foreign subsidiary. Balance as of January 1 Foreign currency translation adjustments Net deferred (losses)/gains on net investment hedges (1) Total presented in Other Comprehensive Income Balance as of December 31 F-59 Nomad Foods Annual Report Year ended December 31, 2019 €m 2018 €m 2017 €m 88.8 19.2 (13.2) 6.0 94.8 83.2 2.2 3.4 5.6 88.8 84.0 (8.9) 8.1 (0.8) 83.2 96214_164pg_Body.indd 146 96214_164pg_Body.indd 146 4/17/20 11:27 AM 4/17/20 11:27 AM (1) (Losses)/gains on net investment hedges are offset by €19.0 million of gains (2018: losses of €3.7 million, 2017: losses of €8.7 million) on GBP net investments included within the foreign currency translation adjustments. The translation reserve as at December 31, 2019, includes €3.8 million (2018: €15.8 million) relating to continuing hedging relationships in respect of GBP net investments, as well as €46.4 million (2018: €47.6 million) relating to a discontinued hedging relationship in respect of GBP net investments. 29) Cash flow hedging reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred. Details of the Company's cash flow hedge accounting is detailed in Note 33. The reserve relating to forward currency contracts will be reclassified to the Statement of Profit or Loss within 12 months whilst the reserve relating to the cross currency interest rate swaps will be reclassified over the life of the instruments which mature in 2022. The table below shows the movement in the cash flow hedging reserve during the year, including the gains or losses arising on the revaluation of hedging instruments during the year and the amount reclassified from Other Comprehensive Income ("OCI") to the Consolidated Statement of Profit or Loss in the year. Balance as of January 1, 2017 Change in fair value of hedging instrument recognized in OCI for the year Reclassified to cost of goods sold Reclassified from OCI to finance costs Deferred tax Balance as of December 31, 2017 Change in fair value of hedging instrument recognized in OCI for the year Reclassified to cost of goods sold Reclassified from OCI to finance costs Deferred tax Balance as of December 31, 2018 Change in fair value of hedging instrument recognized in OCI for the year Reclassified to cost of goods sold Reclassified from OCI to finance costs Deferred tax Balance as of December 31, 2019 30) Earnings per share Basic earnings per share Cross currency interest rate swaps Forward currency contracts Total Cash flow hedge reserve €m €m €m — (56.8) — 56.3 0.1 (0.4) 49.5 — (47.9) (0.3) 0.9 28.1 — (37.4) 1.6 (6.8) 8.4 (19.7) 3.8 — 4.9 (2.6) 20.3 (6.4) — (3.7) 7.6 3.8 (21.8) — 4.0 (6.4) 8.4 (76.5) 3.8 56.3 5.0 (3.0) 69.8 (6.4) (47.9) (4.0) 8.5 31.9 (21.8) (37.4) 5.6 (13.2) Profit for the period attributable to equity owners of the parent (€m) Weighted average Ordinary Shares and Founder Preferred Shares Basic earnings per share (€’s) Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 154.0 171.2 136.5 192,004,803 175,622,538 176,080,272 0.80 0.97 0.78 For the year ended December 31, 2019, basic earnings per share is calculated by dividing the profit attributable to the shareholders of the Company of €154.0 million (year ended December 31, 2018: €171.2 million, year ended December 31, 2017: €136.5 million) by the weighted average number of Ordinary Shares of 190,504,803 Nomad Foods Annual Report F-60 96214_164pg_Body.indd 147 96214_164pg_Body.indd 147 4/17/20 11:27 AM 4/17/20 11:27 AM (December 31, 2018: 174,122,538, year ended December 31, 2017: 174,580,272) and Founder Preferred Shares of 1,500,000 (December 31, 2018: 1,500,000, year ended December 31, 2017: 1,500,000). Diluted earnings per share Profit for the period attributable to equity owners of the parent (€m) Weighted average Ordinary Shares and Founder Preferred Shares Diluted earnings per share (€’s) Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 154.0 171.2 136.5 198,425,877 175,793,631 184,786,162 0.78 0.97 0.74 For the year ended December 31, 2019, the number of shares in the diluted earnings per share calculation include 6,421,074 shares for the dilutive impact of the Ordinary shares to settle the Founder Preferred Shares Annual Dividend for the year ended December 31, 2019, which were issued in January 2020. Refer to Notes 27 and 38 for further details. 31) Reconciliation of liabilities arising from financing activities The table below details changes in the Company's liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be classified in the Company's consolidated statements of cash flows from financing activities. Cash / non-cash Total loans and borrowings (Note 21) Financial payables (Note 22) Derivatives: (Net) Fair value of forward foreign exchange and currency swap contracts FVPTL Derivatives: (Net) Fair value of cross currency interest rate swaps Opening balance January 1, 2019 Restatement on adoption of IFRS 16 (Note 2) Restated opening balance January 1, 2019 Cash inflow (1) Cash outflow (2) Interest accretion Exchange movement Fair value changes Other non-cash adjustments Closing balance December 31, 2019 €m 1,764.3 Non-cash 120.8 Cash Cash Cash Non-cash Non-cash Non-cash 1,885.1 2.0 (44.0) 5.3 15.7 — 11.2 1,875.3 €m €m €m 7.7 — 7.7 — (72.7) 73.7 (1.1) — (3.5) 4.1 0.1 — 0.1 4.7 — — — (5.0) — (0.2) (0.3) — (0.3) 20.9 (4.0) — — (1.3) — 15.3 F-61 Nomad Foods Annual Report 96214_164pg_Body.indd 148 96214_164pg_Body.indd 148 4/17/20 11:27 AM 4/17/20 11:27 AM Cash / non- cash Total loans and borrowings (Note 21) Financial payables (Note 22) Derivatives: (Net) Fair value of forward foreign exchange and currency swap contracts FVPTL Derivatives: (Net) Fair value of cross currency interest rate swaps Opening balance January 1, 2018 Restatement on adoption of IFRS 9 (Note 2) Restated opening balance January 1, 2018 Cash inflow (1) Cash outflow (2) Interest accretion Cash Cash Cash Acquired through business combinations Non-cash Exchange movement Fair value changes Other non-cash adjustments Closing balance December 31, 2018 Non-cash Non-cash Non-cash €m 1,398.4 Non-cash (21.8) €m €m €m 3.1 — 3.1 3.4 (59.1) 64.4 — (0.8) — (3.3) 7.7 0.7 — 0.7 0.8 — — — — (1.4) — 0.1 42.8 — 42.8 13.8 (3.6) — — — (53.3) — (0.3) 1,376.6 355.6 (5.9) — 2.5 32.7 — 2.8 1,764.3 (1) Cash inflows from cross currency interest rate swaps are part of effective cash flow hedging relationships and are presented within interest paid within the Consolidated Statements of Cash Flows. (2) Cash outflows from cross currency interest rate swaps are not part of a cash flow hedge and are presented within proceeds on settlement of derivatives within the Consolidated Statements of Cash Flows. Note: IFRS 16 Leases became effective as of January 1, 2019, at which point operating lease liabilities have been added to loans and borrowings. 32) Cash flows from operating activities Cash flows from operating activities Profit for the period Adjustments for: Exceptional items Non-cash fair value purchase price adjustment of inventory Share based payments expense Depreciation and amortization Loss on disposal and impairment of property, plant and equipment Net finance costs Taxation Operating cash flow before changes in working capital, provisions and exceptional items Decrease/(increase) in inventories Increase in trade and other receivables (Decrease)/increase in trade and other payables Increase/(decrease) in employee benefit and other provisions Cash generated from operations before tax and exceptional items Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2017 Note €m €m €m 153.6 170.5 136.5 7 5 10 11 54.5 — 14.9 68.3 0.6 73.2 56.7 421.8 23.5 (34.4) (40.6) 6.6 376.9 17.7 5.7 13.0 46.3 0.3 56.0 56.6 366.1 (20.2) (10.8) 64.5 (2.0) 397.6 37.2 — 2.6 42.4 0.5 74.4 32.0 325.6 16.7 (1.6) 18.1 (0.3) 358.5 Nomad Foods Annual Report F-62 96214_164pg_Body.indd 149 96214_164pg_Body.indd 149 4/17/20 11:27 AM 4/17/20 11:27 AM 33) Financial risk management Overall risk management policy The Company’s activities expose it to a variety of financial risks, including currency risk, interest rate risk, credit risk and liquidity risk. The Company’s overall risk management program focuses on minimizing potential adverse effects on the Company’s financial performance. Where appropriate, the Company uses derivative financial instruments to hedge certain risk exposures. Risk management is led by senior management and executed according to Company policy. All hedging activity is carried out by a central treasury department that evaluates and hedges financial risks according to forecasts provided by the Company’s operating units. Derivatives and hedging Derivatives are used for economic hedging purposes and not as speculative investments. Where derivatives do not meet hedge accounting criteria, they are classified as 'fair value through profit or loss' for accounting purposes and are accounted for at fair value through profit or loss. They are presented as current assets or liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period. The Company's derivative financial instruments are disclosed within Note 34. Hedge accounting is applied to remove the accounting mismatch between the hedging instrument and the hedged item. The effective portion of the change in the fair value of the hedging instrument is accounted for in the translation reserve or cash flow hedge reserve through Other Comprehensive Income and will be recognized in profit or loss in the same period as the hedged item. Movements in the Company's translation reserve and cash flow hedging reserve are presented in Notes 28 & 29 respectively. The Company's accounting policy for hedge accounting is disclosed within Note 3. As at December 31, 2019, the Company has $935.6 million of U.S. Dollar LIBOR floating rate debt. The Company uses cross currency interest rate swaps to convert this into €845.1 million of debt with a fixed rate of interest, designated as a cash flow hedge. Additionally cross currency interest rate swaps have been entered into which receive €309.7 million with fixed interest flows and pays £260.8 million with fixed interest flows. £222.5 million of these swaps have been designated as a net investment hedge of the Company's investments in Pound Sterling. In creating cash flow hedges over U.S. Dollar debt, the Company enters into cross currency hedging arrangements with similar critical terms as the hedged item, such as reference rate, reset dates, payment dates, and notional amount. As all critical terms matched during the year, the economic relationship was 100% effective. If due to certain circumstances one or more critical terms do not match, the economic relationship and the hedge effectiveness will be assessed quantitatively using a cumulative dollar-offset test. Hedge ineffectiveness may occur due to: the credit value/debit value adjustment on the cross currency interest rate swaps that is - not matched to the underlying liability, and/or differences in critical terms between the cross currency interest rate swaps and - underlying liability, and/or the effects of the forthcoming reforms to LIBOR, because these might take effect at a - different time and have a different impact on the hedged item and the hedging instrument. There was no material ineffectiveness during 2019 in relation to the cross currency interest rate swaps. The effects of the cash flow hedging instruments on the Company's financial position and performance are as follows: F-63 Nomad Foods Annual Report 96214_164pg_Body.indd 150 96214_164pg_Body.indd 150 4/17/20 11:27 AM 4/17/20 11:27 AM All amounts stated in €m, unless otherwise stated Derivative financial instruments - cross currency interest rate swaps Carrying amount of asset/(liability) Notional amount (USD) Maturity date Change in fair value of outstanding hedging instruments since January 1 Change in value of hedged item used to determine effectiveness Weighted average hedged rate for the year December 31, 2019 December 31, 2018 (18.5) $935.6 5/15/2022 7.1 (7.1) 1.11 (25.6) $953.4 5/15/2022 35.6 (35.6) 1.11 The effects of the net investment hedging instruments on the Company's financial position and performance are as follows: All amounts stated in €m, unless otherwise stated UK cross-currency interest rate swaps hedge Carrying amount of cross-currency interest rate swaps Notional amount (GBP) Maturity Date Change in fair value of cross-currency interest rate swaps as a result of foreign currency movements since January 1 Change in value of hedged item used to determine hedge effectiveness Weighted average hedged rate for the year December 31, 2019 December 31, 2018 2.4 £222.5 5/15/2022 21.6 £224.7 5/15/2022 (13.2) 13.2 1.19 3.7 (3.4) 1.19 The impact of the net investment hedge is taken directly to equity via the foreign currency translation reserve. The amount taken to this reserve that arose on the translation of the notional component of cross currency interest rate swaps was a loss of €13.2 million (2018: €3.4 million gain). In determining hedge effectiveness for a net investment hedge, the economic relationship between hedging instrument and balance sheet exposure should be established including the notional amount and currency of the underlying investment. Hedge ineffectiveness may arise due to the value of the hedged item being less than the notional value of the hedging instrument. There was no material ineffectiveness in the net investment hedge in either 2019 or 2018. The ineffective amount taken through the Consolidated Statements of Profit or Loss in 2019 amounted to €nil (2018: €0.3 million). The Company's policy is to reduce its risk of foreign exchange movements on material operating cash flows in currencies other than the operating entity's functional currency using forward foreign exchange contracts designated as cash flow hedges. In order to qualify as a cash flow hedge, the hedging instrument must meet the requirements of IAS 39, including that the hedging instrument must align with the hedged item. The group designates the forward component of forward contracts as the hedging instrument. Hedge ineffectiveness may arise if the timing of the forecast transaction changes from what was originally estimated. The effects of the foreign currency hedging instruments on the Company's financial position and performance are as follows: 96214_164pg_Body.indd 151 96214_164pg_Body.indd 151 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-64 As at December 31, 2019 EUR/USD GBP/USD GBP/EUR SEK/EUR Other Currencies €m €m €m €m €m Derivative financial instruments - forward currency contracts Carrying amount of asset/(liability) Notional amount Fair value (gains)/losses of outstanding hedging instruments since January 1 Weighted average hedge rate for the year 2.1 220.6 10.5 1.14 (1.7) 56.5 (0.7) 1.28 (8.3) 217.4 (10.9) 1.12 (0.3) 70.1 2.1 0.09 (0.3) 42.3 0.2 0.21 As at December 31, 2018 EUR/USD GBP/USD GBP/EUR SEK/EUR Other Currencies €m €m €m €m €m Derivative financial instruments - forward currency contracts Carrying amount of asset/(liability) Notional amount Fair value losses of outstanding hedging instruments since January 1 Weighted average hedge rate for the year 8.4 224.9 14.1 1.20 2.0 47.2 4.5 1.34 1.4 97.4 1.9 1.12 (0.6) 65.6 1.5 0.10 0.5 38.5 0.8 — Gains in the year from foreign exchange swap contracts used for liquidity purposes designated as fair value through the Consolidated Statements of Profit or Loss amounted to €4.8 million (2018: €1.0 million loss, 2017: €3.5 million loss). Losses in the year from cross currency interest rate swap contracts designated as fair value through the Consolidated Statement of Profit or Loss amounted to €13.6 million (2018: €0.4 million gain, 2017: €3.9 million gain). Market risk (including foreign exchange and interest rate risk) In managing market risks, the Company aims to minimize the impact of short term fluctuations on the Company’s earnings. Over the longer term, permanent changes in both foreign exchange rates and interest rates will have an impact on consolidated earnings. Currency risk Foreign currency risk on assets and liabilities in currencies other than functional currency Foreign Exchange translation risk The Company is exposed to foreign exchange translation risk arising from the translation of assets and liabilities denominated in currencies other than the Euro. Key areas of foreign currency exposure include non-Euro debt and investments in subsidiaries not held in Euro. Company policy is to mitigate the potential foreign exchange translation risk by converting where appropriate, borrowings into Euro. This has been achieved on the U.S. Dollar debt through the use of cross currency swaps designated as a cash flow hedge. The Company also hedges translational exposure on consolidation of GBP net assets through the use of currency swaps designated as a net investment hedge. Mitigation & Impact on Statement of Financial Foreign exchange translation risk resulting from the translation of non-Euro Position Denominated borrowings into Euros, to the extent that they are hedged will be mitigated by the translation of the underlying cross currency interest rate hedging arrangements. As at 31 December 2019, 85.3% of the Company’s Pound Sterling cross currency interest rate swaps are designated as hedges against the Company’s investment in its UK subsidiaries (2018: 85.3%, 2017: 82.8%). As at December 31, 2019, this represented 104% of the net assets held in GBP (2018: 103%). F-65 Nomad Foods Annual Report 96214_164pg_Body.indd 152 96214_164pg_Body.indd 152 4/17/20 11:27 AM 4/17/20 11:27 AM Sensitivity analysis During 2019, the Euro weakened by 5.3% against Pound Sterling (2018: strengthened by 1.3%). The notional amount of Pound Sterling cross currency interest rate swaps designated as a Net Investment hedge is £222.5 million. A 1% movement in the GBP-EUR foreign exchange rate would result in a gain or loss of €2.6 million (2018: €2.5 million) which would be taken to equity. Hedge accounting is not applied to 14.7% of the Company's Pound Sterling cross currency interest rate swaps. A 1% movement in the GBP-EUR foreign exchange rate would result in a gain or loss of €0.5 million (2018: 0.5 million). In addition, the impact on the related interest charge for each 1% movement in the GBP-EUR foreign exchange rate would be to decrease or increase the charge by €0.1 million, (2018: €0.1 million) within the Company Consolidated Statements of Profit or Loss. Currency risk Foreign currency risk on purchases The Company is exposed to foreign exchange risk where a business unit has material operating cash flows in a currency other than the functional currency of that entity. The most significant exposures for the Company are the purchase of raw materials, stock and services purchased in U.S. Dollars and Euros. Mitigation & Impact on The Company’s policy is to reduce this risk by using foreign exchange forward contracts Statement of Financial which are designated as cash flow hedges. Position / Equity As at December 31, 2019, the fair value of forward contracts entered into to hedge the future purchase of U.S. Dollars is an asset of €0.4 million (2018: €10.6 million asset). All forecast transactions are still expected to occur. As at December 31, 2019, 82.7% (2018: 85.2%) of forecast future U.S. Dollar payments to the end of 2019 were hedged through the use of forward contracts and existing cash. All forward contracts have been designated as cash flow hedges and have a maturity within the next 12 months. The fair value of the Euro forward contracts with reference to non-Euro functional currencies as at December 31, 2019, is a liability of €9.0 million (2018: €1.1 million). As at December 31, 2019, 95.2% (2018: 69.5%) of forecast future net Euro payments to the end of 2019 were hedged through the use of forward contracts and existing cash. All forward contracts have been designated as cash flow hedges and have a maturity within the next 12 months. Sensitivity analysis During 2019, the Euro weakened by 5.3% against Pound Sterling (2018: strengthened by 1.3%, 2017: strengthened by 3.9%), weakened by 2% against the U.S.Dollar (2018: weakened by 4.5%, 2017: strengthened by 13.9%) and strengthened by 2.2% against the Swedish Krona (2018: strengthened by 4.1%, 2017: strengthened by 2.7%). On an annualized 2019 basis, and assuming all other factors remain constant, for each 1% movement in value of the Euro against Pound Sterling, the impact to the Company profit or loss before tax would be approximately €1.4 million (2018: €1.2 million), excluding the impact of any forward contracts. On an annualized 2019 basis, and assuming all other factors remain constant, for each 1% movement in value of the Euro against the U.S.Dollar, the impact to the Company profit or loss before tax would be approximately €2.8 million (2018: €2.3 million), excluding the impact of any forward contracts. On an annualized 2019 basis, and assuming all other factors remain constant, for each 1% movement in value of the Euro against Swedish Krona, the impact to the Company profit or loss before tax would be approximately €1.2 million (2018: €1.3 million), excluding the impact of any forward contracts. We do not expect purchase levels to be materially different in the coming year. Nomad Foods Annual Report F-66 96214_164pg_Body.indd 153 96214_164pg_Body.indd 153 4/17/20 11:27 AM 4/17/20 11:27 AM Interest rate risk Description The Company is exposed to changes in interest rates to the extent that it enters into floating rate borrowings. Mitigation & Impact on Equity / Income The Company’s policy on interest rate risk is to mitigate the Company’s exposure to fluctuations Statement in interest rates. As a result of decisions taken by national regulators, LIBOR and EURIBOR may become phased out and replaced by a replacement reference index. If LIBOR ceases to exist, we may need to renegotiate our Senior Facilities Agreement with our lenders and cross currency interest rate swaps, and continue to discuss the topic with our external banking counterparties. Our expectation is that these contracts can be aligned to the new benchmarks as they become known, and that it is highly probable that the existing hedging relationships can be continued. Sensitivity analysis During 2019, three month EURIBOR rates remained below zero (2018: no change). Within the Euro denominated senior loans, there is a EURIBOR floor of 0%. If interest rates were to move by 1%, this would have a correspondingly decrease or increase in the Company’s profit/(loss) before tax by approximately €5.6 million (2018: €5.7 million). Credit risk Description Credit risk arises on cash and cash equivalents, derivative financial instruments with banks and financial institutions, any short term investments, as well as on credit exposures to customers. See Note 18 for analysis of the trade receivables balance and Note 20 for analysis of the cash and cash equivalents balance. Mitigation The Company limits counterparty exposures by monitoring each counterparty carefully and where possible, sets credit limits according to approved treasury policy. The Company limits its exposure to individual financial institutions by diversification of exposure across a range of financial institutions. The credit quality of customers is assessed taking into account their financial position, past experience and other factors. Credit limits are set for customers and regularly monitored to mitigate ongoing payment risk. Liquidity risk Description Mitigation The Company is exposed to the risk that it is unable to meet its commitments as they fall due. The Company has financial conditions, including financial covenants as part of the Senior debt arrangements which it must comply with in order to maintain its current level of borrowings. There have been no breaches of the covenants throughout the year. The Company ensures that it has sufficient cash and available funding through regular cash flow and covenant forecasting. In addition, the Company has access to a revolving credit facility of €80.0 million, expiring in May 2023 and receivables financing facilities. This is available to finance working capital requirements and for general corporate purposes. Currently €17.2 million is utilized for letters of credit, overdrafts, customer bonds and bank guarantees. Capital risk management The objective of the Company when considering total capital is to protect the value of capital investments and to generate returns on shareholder funds. Total capital is defined as including Loans and Borrowings and equity, including derivatives used for the purpose of hedging currency and interest exposure on Loans and Borrowings, but excluding the cashflow hedging reserve. F-67 Nomad Foods Annual Report 96214_164pg_Body.indd 154 96214_164pg_Body.indd 154 4/17/20 11:27 AM 4/17/20 11:27 AM In support of its objectives, the Company may undertake actions to adjust its capital structure accordingly. Actions may include, but not limited to, raising or prepayment of Borrowings together with related derivative instruments, issuance of additional share capital, payment of dividends or share buy-back. Maturity analysis The USD denominated term loans include the requirement to repay 1% of notional per annum. In 2019 this amounts to €8.6 million (2018: €8.4 million) In addition, the Senior Facilities Agreement also includes an excess cashflow calculation whereupon an amount of principal shall be repaid based upon terms including cash generated and leverage. Based upon the calculation as at December 31, 2019, no excess cashflow will be repayable in 2020 (2018: €12.1 million, repaid in 2019). Amounts have been reflected as current borrowings in the tables below. The tables below show a maturity analysis of contractual undiscounted cash flows prepared using forward interest rates where applicable, showing items at the earliest date on which the Company could be required to pay the liability: 2019 Borrowings-principal Borrowings-interest Forward contracts Sell Forward contracts Buy Cross Currency Interest Rate Swaps Pay Cross Currency Interest Rate Swaps Receive Lease Liabilities Trade and other payables excluding non- financial liabilities Total 2020 €m 10.8 61.1 666.2 (658.5) 38.8 2021 €m 9.6 59.8 — — 38.6 2022 €m 8.6 59.4 — — 1,138.4 (49.4) 16.8 (48.2) 15.2 (1,136.0) 13.3 2023 €m 8.6 59.1 — — — — 7.5 2024 €m 1,753.4 25.0 — — — Over 5 years €m Total €m — 1,791.0 264.4 — 666.2 — (658.5) — — 1,215.8 — 7.0 — (1,233.6) 145.5 85.7 483.4 569.2 — 75.0 — 83.7 — 75.2 — 1,785.4 — 85.7 483.4 2,674.2 As detailed in Note 2, following the adoption of IFRS 16 Leases on January 1, 2019, loans and borrowings now include lease liabilities. 2018 Borrowings-principal Borrowings-interest Forward contracts Sell Forward contracts Buy Cross Currency Interest Rate Swaps Pay Cross Currency Interest Rate Swaps Receive Trade and other payables excluding non- financial liabilities Total 2019 €m 23.4 67.9 671.9 (686.7) 40.1 2020 €m 2021 €m 2022 €m 8.4 67.6 — — 8.4 67.1 — — 8.4 66.7 — — 39.8 39.6 1,130.8 (56.7) (56.4) (55.9) (1,130.1) 534.9 594.8 — 59.4 — 59.2 — 75.8 2023 €m 8.4 66.3 Over 5 years €m 1,737.4 26.3 Total €m 1,794.4 361.9 — — — — — — — 671.9 (686.7) — 1,250.3 — (1,299.1) — 534.9 74.7 1,763.7 2,627.6 96214_164pg_Body.indd 155 96214_164pg_Body.indd 155 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-68 34) Financial instruments Categories of financial instruments The following table shows the carrying amount of each Statement of Financial Position class split into the relevant category of financial instrument as defined in IFRS 9 'Financial Instruments'. Financial assets at amortized cost Financial Assets at Fair Value through profit or loss Derivatives at fair value through profit or loss Derivatives used for hedging Financial liabilities at amortized cost €m €m €m €m €m 2019 Assets Trade receivables Derivative financial instruments Cash and cash equivalents Short - term investments Liabilities Trade and other payables excluding non-financial liabilities Derivative financial instruments Loans and borrowings (1) 143.6 — 747.4 — — — — — — 78.7 25.0 — — — Total 891.0 103.7 Total €m 143.6 21.4 826.1 25.0 — — — — (483.4) — (1,884.2) (2,367.6) (483.4) (44.9) (1,884.2) (1,396.4) — 1.0 — — — — — 1.0 — 20.4 — — — (44.9) — (24.5) (1) Loans and borrowings excludes €8.9 million of deferred borrowing costs which are included within €1,875.3 million of total loans and borrowings in Note 21. 2018 Assets Trade receivables Derivative financial instruments Cash and cash equivalents Liabilities Trade and other payables excluding non-financial liabilities Derivative financial instruments Loans and borrowings (2) Financial assets at amortized cost Financial Assets at Fair Value through profit or loss Derivatives at fair value through profit or loss Derivatives used for hedging Financial liabilities at amortized cost €m €m €m €m €m 98.3 — 297.0 — — — — — 30.6 — — — — 4.6 — — (0.3) — 4.3 — 44.5 — — (36.6) — 7.9 Total €m 98.3 49.1 327.6 — — — (534.9) — (1,775.2) (2,310.1) (534.9) (36.9) (1,775.2) (1,872.0) Total 395.3 30.6 (2) Loans and borrowings excludes €10.9 million of deferred borrowing costs which are included within €1,764.3 million of total non-current loans and borrowings in Note 21. F-69 Nomad Foods Annual Report 96214_164pg_Body.indd 156 96214_164pg_Body.indd 156 4/17/20 11:27 AM 4/17/20 11:27 AM Fair values Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, Nomad uses various methods including market, income and cost approaches. Based on these approaches, Nomad utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs may be readily observable, market corroborated, or generally unobservable inputs. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories: Level 1—Quoted prices for identical assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 2—Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data. Level 3—Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation; also includes observable inputs for non binding single dealer quotes not corroborated by observable market data. Where market information is not available to support internal valuations, reviews of third party valuations are performed. While Nomad believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The following is a description of the valuation methodologies and assumptions used for estimating the fair values of financial instruments held by the Company. (i) Derivative financial instruments Derivative financial instruments are held at fair value. There is no difference between carrying value and fair value. The valuation technique utilized by the Company maximizes the use of observable market data where it is available. All significant inputs required to fair value the instrument are observable. The Company has classified its derivative financial instruments as level 2 instruments as defined in IFRS 13 ‘Fair value measurement’. (ii) Trade and other payables/receivables The notional amount of trade and other payables/receivables are deemed to be carried at fair value, short term and settled in cash. (iii) Cash and cash equivalents The carrying value of cash and cash equivalents is deemed to equal fair value. (iv) Short-term investments Short-term investments are valued using inputs that are derived principally from or corroborated by observable market data. The Company has classified these as level 2 instruments as defined in IFRS 13 “Fair value measurement”. (v) Interest bearing loans and liabilities The fair value of secured notes is determined by reference to price quotations in the active market in which they are traded. They are classified as level 1 instruments. The fair value of the senior loans is calculated by discounting the expected future cash flows at the year end’s prevailing interest rates. They are classified as level 2 instruments. There is no requirement to determine or disclose the fair value of lease liabilities. Nomad Foods Annual Report F-70 96214_164pg_Body.indd 157 96214_164pg_Body.indd 157 4/17/20 11:27 AM 4/17/20 11:27 AM Senior EUR/USD loans Other external debt 2024 fixed rate senior secured notes Less deferred borrowing costs Derivatives Cross Currency Interest Rate Swaps Forward foreign exchange contracts Total assets Cross Currency Interest Rate Swaps Forward foreign exchange contracts Total liabilities Total Offsetting of derivatives Fair value Carrying value December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 €m 1,396.9 3.3 411.3 — 1,811.5 €m 1,347.2 3.0 395.2 — 1,745.4 €m 1,371.9 3.3 400.0 (8.9) 1,766.3 €m 1,372.2 3.0 400.0 (10.9) 1,764.3 As at December 31, 2019 As at December 31, 2018 €m €m 17.5 3.9 21.4 (32.8) (12.1) (44.9) (23.5) 35.7 13.4 49.1 (35.4) (1.5) (36.9) 12.2 Derivative contracts are held under International Swaps and Derivatives Association (ISDA) agreements with financial institutions. An ISDA is an enforceable master netting agreement that permits the Company to settle net in the event of default. The following table sets out the carrying amounts of recognized financial instruments that are subject to the above agreements. As at Dec 31, 2019 Derivatives - assets Derivatives - liabilities As at Dec 31, 2018 Derivatives - assets Derivatives - liabilities Gross amount of financial instruments as presented upon balance sheet Related financial instruments that are offset €m €m Net amount €m 21.4 (44.9) (21.4) 21.4 — (23.5) Gross amount of financial instruments as presented upon balance sheet Related financial instruments that are offset €m €m 49.1 (36.9) (29.8) 29.8 Net amount €m 19.3 (7.1) F-71 Nomad Foods Annual Report 96214_164pg_Body.indd 158 96214_164pg_Body.indd 158 4/17/20 11:27 AM 4/17/20 11:27 AM 35) Operating leases As detailed in Note 2, following the adoption of IFRS 16 Leases on January 1, 2019, a number of leased assets have been capitalized. Certain operating leases do not qualify for capitalization. Non-cancellable operating lease rentals relate to total future aggregate minimum lease payments and are payable as follows: Less than one year Between one and three years Between three and five years More than five years Total As at December 31, 2019 As at December 31, 2018 €m €m 2.1 3.6 1.9 — 7.6 22.2 38.5 26.0 94.9 181.6 Non-cancellable operating leases relate to equipment, motor vehicles and land and buildings and may be subject to contractual annual increases linked to inflation indices. The payments shown above exclude the impact of these contractual increases which cannot be reliably estimated. 36) Capital commitments Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows: Property, plant and equipment Intangible assets Total 37) Related parties Founder Preferred Shares As at December 31, 2019 As at December 31, 2018 €m €m 11.5 0.6 12.1 6.8 2.8 9.6 Nomad has issued Founder Preferred Shares to its Founder Entities. The conditions of the Founder Preferred Shares Annual Dividend Amount in 2017, 2018 and 2019 were met and further details relating to these dividends is set out in Note 27. Advisory Services Agreements On June 15, 2015, the Company entered into an Advisory Services Agreement with Mariposa Capital, LLC, an affiliate of Mr. Franklin, and TOMS Capital LLC, an affiliate of Mr. Gottesman. Pursuant to the terms of the Advisory Services Agreement, Mariposa Capital, LLC and TOMS Capital LLC provide high-level strategic advice and guidance to the Company. Under the terms of the Advisory Services Agreement, Mariposa Capital, LLC and TOMS Capital LLC are entitled to receive an aggregate annual fee equal to $2.0 million, payable in quarterly installments. This agreement expires on June 1st annually and will be automatically renewed for successive one-year terms unless any party notifies the other parties in writing of its intention not to renew the agreement no later than 90 days prior to the expiration of the term. The agreement may only be terminated by the Company upon a vote of a majority of its directors. In the event that the agreement is terminated by the Company, the effective date of the termination will be six months following the expiration of the initial term or a renewal term, as the case may be. 96214_164pg_Body.indd 159 96214_164pg_Body.indd 159 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-72 Expenses of €0.2 million and €0.3 million for certain travel costs of Mariposa Capital, LLC and TOMS Capital LLC respectively in the year ending December 31, 2019 were reimbursed (year ended December 31, 2018: €0.2 million and €0.1 million respectively). Directors and Key Management All significant management decision making authority is vested within the Board of Directors and the Executive Team, therefore key management are considered to be the Directors and Executive Officers. Their remuneration has been disclosed in Note 9. As part of the sale of the Iglo Group to Nomad Foods Limited, former Executive Officer and former Non- Executive Director, Paul Kenyon acquired shares in the Company from Birds Eye Iglo Group LP Inc. Mr. Kenyon acquired 37,060 shares at a price of $10.50 (€9.71) per share which was deemed to be at fair value. In connection with the Permira share repurchase in 2017 (and upon removal of certain transfer restrictions relating to their shares), Mr. Kenyon sold 26,372 shares, respectively, and no further shares were sold in 2018 or 2019. Lord Myners of Truro CBE, a Non-Executive Director, holds 95,652 Ordinary Shares in Nomad Foods Limited which includes 50,000 Ordinary Shares granted pursuant to a five-year option that expires on June 2, 2020 at a purchase price of $11.50 per share. The Non-Executive Directors are eligible to an annual restricted stock grant issued under the LTIP which will vest on the earlier to occur of the date of the Company’s annual meeting of shareholders or thirteen months from the date of grant. Details of the annual restricted stock grants under the LTIP can be found in Note 8(b). As part of its long term incentive initiatives, the Company has granted 4,518,964 restricted shares to the management team (the “Management Share Awards”). The Directors and Executive Officers have all been awarded shares. The associated performance metrics and valuation method is detailed in Note 8(b). 38) Significant events after the Statement of Financial Position date On December 31, 2019, the Company’s Board of Directors approved a Founder Preferred Share dividend of an aggregate of 6,421,074 Ordinary Shares calculated as 20% of the increase in the market price of our Ordinary Shares compared to 2018 dividend price of $16.7538 multiplied by Preferred Share Dividend Equivalent. The Dividend Price used to calculate the Annual Dividend Amount was $21.7289 (calculated based upon the volume weighted average price for the last ten consecutive trading days of 2019) and the Ordinary Shares underlying the Founder Preferred Share Dividend were issued on January 2, 2020. F-73 Nomad Foods Annual Report 96214_164pg_Body.indd 160 96214_164pg_Body.indd 160 4/17/20 11:27 AM 4/17/20 11:27 AM Item 19. Exhibits The following exhibits are filed as part of this annual report: EXHIBIT INDEX Incorporation by Reference Exhibit No. 1.1 2.1 Exhibit Description Amended and Restated Memorandum and Articles of Association. Registration Rights Agreement dated as of June 1, 2015 among Nomad Holdings Limited, Birds Eye Iglo Limited Partnership Inc, Mariposa Acquisition II, LLC, TOMS Acquisition I LLC, TOMS Capital Investments LLC and funds managed by Pershing Square. Form 6- K (001-37669) F-1 (333-20818 1) Period Covered or Date of Filing 1/14/2016 Exhibit No. 99.1 4.1 11/24/2015 Filed with this Annual Report 2.2 2.3 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 8.1 Indenture dated as of May 3, 2017 among Nomad Foods Bondco PLC, Nomad Foods Limited, Deutsche Trustee Company Limited, Deutsche Bank AG, London Branch, Deutsche Bank Luxembourg S.A., and Credit Suisse AG, London Branch and the Subsidiary Guarantors named therein. Description of Securities. 6-K (001-37669) 99.3 5/3/2017 Share Sale and Purchase Agreement, dated as of October 29, 2015, among Liongem Sweden 1 AB, Iglo Foods Group Limited and Nomad Foods Limited F-1 (333-20818 1) 2.2 11/24/2015 Intercreditor Agreement, originally dated as of July 3, 2014, as amended and restated from time to time including, pursuant to the 2017 Amendment and Restatement Agreement among Nomad Foods Limited, Credit Suisse AG, London Branch, Deutsche Bank Company Limited and certain entities named therein. Amendment and Restatement Agreement, dated June 15, 2018, relating to Senior Facilities Agreement, originally dated July 3, 2014, as amended and restated from time to time, including pursuant to Amendment and Restatement Agreement dated December 20, 2017 for Nomad Foods Limited with Credit Suisse AG, London Branch. Nomad Foods Limited Amended and Restated Long- Term 2015 Incentive Plan. Nomad Foods Limited Long Term 2015 Incentive Plan Restricted Share Unit Agreement. Service Agreement between the Company and Stéfan Descheemaeker. Service Agreement, dated as of February 15, 2018, between the Company and Samy Zekhout. Advisory Services Agreement, dated as of June 15, 2015, among Nomad Foods Limited, Mariposa Capital, LLC and TOMS Capital LLC. List of Significant Subsidiaries. 6-K (001-37669) 99.2 5/3/2017 F-1 (333-208181) 20-F (001-37669) F-1 (333-208181) 10.3 11/24/2015 4.7 3/22/2018 10.5 11/24/2015 12.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. X X X X X X 96214_164pg_Body.indd 161 96214_164pg_Body.indd 161 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-74 Exhibit No. 12.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Exhibit Description Financial Officer. 13.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 13.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 15.1 Consent of PricewaterhouseCoopers LLP 101.I NS 101.S CH XBRL Instance Document XBRL Taxonomy Extension Schema Document 101.D EF XBRL Taxonomy Extension Definition Linkbase Document 101.C AL XBRL Taxonomy Extension Calculation Linkbase Document 101.L AB XBRL Taxonomy Extension Label Linkbase Document 101.P RE XBRL Taxonomy Extension Presentation Linkbase Document Incorporation by Reference Form Exhibit No. Period Covered or Date of Filing Filed with this Annual Report X X X X X X X X X X F-75 Nomad Foods Annual Report 96214_164pg_Body.indd 162 96214_164pg_Body.indd 162 4/17/20 11:27 AM 4/17/20 11:27 AM The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on Form 20-F on its behalf. Date: February 27, 2020 SIGNATURES NOMAD FOODS LIMITED By: /s/ Samy Zekhout Name: Samy Zekhout Title: Chief Financial Officer 96214_164pg_Body.indd 163 96214_164pg_Body.indd 163 4/17/20 11:27 AM 4/17/20 11:27 AM Nomad Foods Annual Report F-76 96214_164pg_Body.indd 164 96214_164pg_Body.indd 164 4/17/20 11:27 AM 4/17/20 11:27 AM Annual Report 2019 Corporate Information Independent Registered Public Accounting Firm PriceWaterhouseCoopers LLP London, UK Investor Relations Taposh Bari, CFA Head of Investor Relations 718-290-7950 taposh.bari@nomadfoods.com If you would like a free copy of the annual report please e-mail investors@nomadfoods.com or write to: Investor Relations 1, New Square Bedfont Lakes Business Park Feltham Middlesex TW14 8HA Transfer Agent Computershare Toll Free Telephone US 800-368-5948 Toll and International Telephone 781-575-4223 By Regular Mail P.O. BOX 505000 Louisville, KY 40233-5000 United States By Overnight Delivery 462 South 4th Street Suite 1600 Louisville, KY 40233-5000 United States vwww.computershare.com/ investor Securities Listing Our shares of common stock are listed on the NYSE Ticker symbol: NOMD Board of Directors and Executive Officers Noam Gottesman Founder Co-Chairman and Non-Executive Director Sir Martin Ellis Franklin, KGCN Founder Co-Chairman and Non-Executive Director Ian G.H. Ashken Independent Non-Executive Director Stefan Descheemaeker Chief Executive Officer and Director Jeremy Isaacs CBE Independent Non-Executive Director James E. Lillie Independent Non-Executive Director Stuart M. MacFarlane Independent Non-Executive Director Lord Myners of Truro CBE Independent Non-Executive Director Victoria Parry Independent Non-Executive Director Simon White Independent Non-Executive Director Samy Zekhout Chief Financial Officer and Director Nomad Foods Annual Report 2019 169 A n n u a l R e p o r t 2 0 1 9 © 2020 Nomad Fo o ds Ltd . | n om a dfo o ds .com 2 0 1 9 A n n u a l R e p o r t
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