SMPL 10-Q

Simply Good Foods Co (SMPL)

10-Q 2022-04-06 For: 2022-02-26

View Original

Added on April 12, 2026


Delaware						82-1038121
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


		Page
PART I. Financial Information
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Stockholders’ Equity	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30
Item 4.	Controls and Procedures	30
PART II. Other Information
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
	Signatures	33


	February 26, 2022		August 28, 2021
Assets
Current assets:
Cash	$	51,469	$	75,345
Accounts receivable, net	118,212		111,456
Inventories	120,937		97,269
Prepaid expenses	6,589		4,902
Other current assets	38,782		9,694
Total current assets	335,989		298,666

Long-term assets:
Property and equipment, net	18,279		16,584
Intangible assets, net	1,131,097		1,139,041
Goodwill	543,134		543,134
Other long-term assets	59,398		54,792
Total assets	$	2,087,897	$	2,052,217

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	65,209	$	59,713
Accrued interest	180		60
Accrued expenses and other current liabilities	41,979		53,606
Current maturities of long-term debt	287		285
Total current liabilities	107,655		113,664

Long-term liabilities:
Long-term debt, less current maturities	426,916		451,269
Deferred income taxes	105,645		93,755
Warrant liability	—		159,835
Other long-term liabilities	46,627		44,890
Total liabilities	686,843		863,413
See commitments and contingencies (Note 9)

Stockholders’ equity:
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued	—		—
Common stock, $0.01 par value, 600,000,000 shares authorized, 101,070,881 and 95,882,908 shares issued at February 26, 2022 and August 28, 2021, respectively	1,011		959
Treasury stock, 669,755 shares and 98,234 shares at cost at February 26, 2022 and August 28, 2021, respectively	(22,539)		(2,145)
Additional paid-in-capital	1,278,728		1,085,001
Retained earnings	145,420		105,807
Accumulated other comprehensive loss	(1,566)		(818)
Total stockholders’ equity	1,401,054		1,188,804
Total liabilities and stockholders’ equity	$	2,087,897	$	2,052,217


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	February 26, 2022		February 27, 2021		February 26, 2022		February 27, 2021
Net sales	$	296,718	$	230,607	$	577,983	$	461,759
Cost of goods sold	188,195		140,342		352,905		277,453
Gross profit	108,523		90,265		225,078		184,306

Operating expenses:
Selling and marketing	31,955		26,150		62,482		51,345
General and administrative	26,288		26,562		49,990		51,977
Depreciation and amortization	4,329		4,212		8,649		8,456


Total operating expenses	62,572		56,924		121,121		111,778

Income from operations	45,951		33,341		103,957		72,528

Other income (expense):
Interest income	—		—		1		3
Interest expense	(5,276)		(7,995)		(11,647)		(16,367)
Loss in fair value change of warrant liability	(12,745)		(45,334)		(30,062)		(24,881)

Gain on foreign currency transactions	780		975		427		984
Other income	—		112		9		159
Total other expense	(17,241)		(52,242)		(41,272)		(40,102)

Income (loss) before income taxes	28,710		(18,901)		62,685		32,426
Income tax expense	10,249		7,313		23,072		15,687
Net income (loss)	$	18,461	$	(26,214)	$	39,613	$	16,739

Other comprehensive income (loss):
Foreign currency translation, net of reclassification adjustments	$	(708)	$	243	$	(748)	$	198
Comprehensive income (loss)	$	17,753	$	(25,971)	$	38,865	$	16,937

Earnings (loss) per share from net income (loss):
Basic	$	0.19	$	(0.27)	$	0.41	$	0.17
Diluted	$	0.18	$	(0.27)	$	0.40	$	0.17
Weighted average shares outstanding:
Basic	98,599,271		95,734,591		97,228,058		95,712,057
Diluted	100,414,770		95,734,591		99,152,961		96,997,012


	Twenty-Six Weeks Ended
	February 26, 2022		February 27, 2021
Operating activities
Net income	$	39,613	$	16,739
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	9,572		9,021
Amortization of deferred financing costs and debt discount	1,332		2,108
Stock compensation expense	5,697		3,594
Loss in fair value change of warrant liability	30,062		24,881
Estimated credit losses	(5)		—
Unrealized gain on foreign currency transactions	(427)		(985)
Deferred income taxes	11,814		8,119

Amortization of operating lease right-of-use asset	3,293		2,253
Loss on operating lease right-of-use asset impairment	—		681
Gain on lease termination	(30)		(154)

Other	571		216
Changes in operating assets and liabilities:
Accounts receivable, net	(6,880)		(7,015)
Inventories	(24,241)		(24,502)
Prepaid expenses	(1,695)		(1,191)
Other current assets	(29,211)		(674)
Accounts payable	6,109		10,275
Accrued interest	120		(577)
Accrued expenses and other current liabilities	(12,098)		(1,881)
Other assets and liabilities	(3,273)		(1,144)
Net cash provided by operating activities	30,323		39,764

Investing activities
Purchases of property and equipment	(4,339)		(449)
Issuance of note receivable	(1,500)		—

Proceeds from sale of business	—		5,800
Investments in intangible and other assets	(187)		(114)
Net cash (used in) provided by investing activities	(6,026)		5,237

Financing activities
Proceeds from option exercises	1,474		527
Tax payments related to issuance of restricted stock units and performance stock units	(3,289)		(252)
Payments on finance lease obligations	(157)		(168)
Repurchase of common stock	(20,394)		—
Principal payments of long-term debt	(25,000)		(50,000)
Deferred financing costs	(544)		—
Net cash used in financing activities	(47,910)		(49,893)

Cash and cash equivalents
Net decrease in cash	(23,613)		(4,892)
Effect of exchange rate on cash	(263)		352
Cash at beginning of period	75,345		95,847
Cash and cash equivalents at end of period	$	51,469	$	91,307


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


OR
o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________


	Common Stock			Treasury Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Shares	Amount		Shares	Amount
Balance at August 28, 2021	95,882,908	$	959	98,234	$	(2,145)	$	1,085,001	$	105,807	$	(818)	$	1,188,804
Net income	—	—		—	—		—		21,152		—		21,152
Stock-based compensation	—	—		—	—		2,605		—		—		2,605
Foreign currency translation adjustments	—	—		—	—		—		—		(40)		(40)
Shares issued upon vesting of restricted stock units and performance stock units	227,729	2		—	—		(3,190)		—		—		(3,188)
Exercise of options to purchase common stock	19,804	—		—	—		274		—		—		274
Balance at November 27, 2021	96,130,441	$	961	98,234	$	(2,145)	$	1,084,690	$	126,959	$	(858)	$	1,209,607
Net income	—	—		—	—		—		18,461		—		18,461
Stock-based compensation	—	—		—	—		3,092		—		—		3,092
Foreign currency translation adjustments	—	—		—	—		—		—		439		439
Reclassification adjustment for currency translation gains related to the liquidation of foreign entities	—	—		—	—		—		—		(1,147)		(1,147)
Repurchase of common stock	—	—		571,521	(20,394)		—		—		—		(20,394)
Warrant Conversion	4,830,761	48		—	—		189,849		—		—		189,897
Shares issued upon vesting of restricted stock units	9,679	1		—	—		(102)		—		—		(101)
Exercise of options to purchase common stock	100,000	1		—	—		1,199		—		—		1,200
Balance at February 26, 2022	101,070,881	$	1,011	669,755	$	(22,539)	$	1,278,728	$	145,420	$	(1,566)	$	1,401,054


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
(In thousands)	February 26, 2022		February 27, 2021		February 26, 2022		February 27, 2021
North America (1)
Atkins	$	135,582	$	114,155	$	269,376	$	236,916
Quest	152,573		105,025		290,867		200,794
Total North America	288,155		219,180		560,243		437,710
International	8,563		11,427		17,740		24,049
Total net sales	$	296,718	$	230,607	$	577,983	$	461,759
(1) The North America geographic area consists of net sales substantially related to the United States and there is no individual foreign country to which more than 10% of the Company’s net sales are attributed or that is otherwise deemed individually material.


				February 26, 2022
(In thousands)	Useful life			Gross carrying amount		Accumulated amortization		Net carrying amount
Intangible assets with indefinite life:
Brands and trademarks	Indefinite life			$	974,000	$	—	$	974,000
Intangible assets with finite lives:
Customer relationships	15 years			174,000		35,903		138,097
Licensing agreements	13 years			22,000		7,623		14,377
Proprietary recipes and formulas	7 years			7,000		4,631		2,369
Software and website development costs	3	-	5 years	5,863		3,609		2,254

				$	1,182,863	$	51,766	$	1,131,097


(In thousands)	Amortization
Remainder of 2022	$	7,896
2023	15,602
2024	14,917
2025	13,517
2026	13,517
2027 and thereafter	91,648
Total	$	157,097


	August 28, 2021
Exercise Price	$	11.50
Stock Price	$	35.35
Dividend Yield	—		%
Expected Term (in Years)	0.86
Risk-Free Interest Rate	0.06		%
Expected Volatility	21.70		%
Per Share Value of Warrants	$	23.86


(In thousands)	Balance Sheets Caption	February 26, 2022		August 28, 2021
Assets
Operating lease right-of-use assets	Other long-term assets	$	48,465	$	46,197
Finance lease right-of-use assets	Property and equipment, net	503		640
Total lease assets		$	48,968	$	46,837

Liabilities
Current:
Operating lease liabilities	Accrued expenses and other current liabilities	$	5,202	$	3,788
Finance lease liabilities	Current maturities of long-term debt	287		285
Long-term:
Operating lease liabilities	Other long-term liabilities	46,632		44,892
Finance lease liabilities	Long-term debt, less current maturities	263		405
Total lease liabilities		$	52,384	$	49,370


(In thousands)	Operating Leases		Finance Leases
Fiscal year ending:
Remainder of 2022	$	3,626	$	157
2023	8,349		278
2024	9,212		145
2025	8,462		—
2026	6,655		—
Thereafter	26,063		—
Total lease payments	62,367		580
Less: Interest	(10,533)		(30)
Present value of lease liabilities	$	51,834	$	550


	February 26, 2022		August 28, 2021
Weighted-average remaining lease term (in years)
Operating leases	7.64		8.38
Finance leases	1.97		2.44
Weighted-average discount rate
Operating leases	4.8	%	4.9	%
Finance leases	5.6	%	5.6	%


	Shares underlying options	Weighted average exercise price		Weighted average remaining contractual life (years)
Outstanding as of August 28, 2021	2,993,163	$	16.31
Granted	138,479	40.88
Exercised	(119,804)	12.30
Forfeited	(2,300)	19.89
Outstanding as of February 26, 2022	3,009,538	$	17.60	6.52

Vested and expected to vest as of February 26, 2022	3,009,538	$	17.60	6.52

Exercisable as of February 26, 2022	2,397,145	$	14.23	5.87


	Units	Weighted average grant-date fair value
Non-vested as of August 28, 2021	496,334	$	24.56
Granted	130,223	39.52
Vested	(151,761)	22.69
Forfeited	(14,489)	26.02
Non-vested as of February 26, 2022	460,307	$	29.38


	Units	Weighted average grant-date fair value
Non-vested as of August 28, 2021	380,097	$	19.31
Granted	50,212	63.42
Vested	(166,688)	11.93
Forfeited	(7,196)	17.76
Non-vested as of February 26, 2022	256,425	$	32.79


				Total Number of Shares Purchased	Maximum Dollar Value of Shares
	Total Number of	Average Price		as Part of Publicly Announced	That May Yet Be Purchased Under
Period	Shares Purchased	Paid Per Share		Plans or Programs(1)	the Plans or Programs
November 28, 2021 - January 1, 2022	—	$	—	—	$	47,853,462
January 2, 2022 - January 29, 2022	445,874	35.75		445,874	31,912,327
January 30, 2022 - February 26, 2022	125,647	35.45		125,647	27,458,739
Total	571,521	$	35.68	571,521	$	27,458,739


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
(In thousands, except per share data)	February 26, 2022		February 27, 2021		February 26, 2022		February 27, 2021
Basic earnings (loss) per share computation:
Numerator:
Net income (loss) available to common stockholders	$	18,461	$	(26,214)	$	39,613	$	16,739
Denominator:
Weighted average common shares outstanding - basic	98,599,271		95,734,591		97,228,058		95,712,057
Basic earnings (loss) per share from net income (loss)	$	0.19	$	(0.27)	$	0.41	$	0.17

Diluted earnings (loss) per share computation:
Numerator:
Net income (loss) available for common stockholders	$	18,461	$	(26,214)	$	39,613	$	16,739

Numerator for diluted earnings (loss) per share	$	18,461	$	(26,214)	$	39,613	$	16,739
Denominator:
Weighted average common shares outstanding - basic	98,599,271		95,734,591		97,228,058		95,712,057


Employee stock options	1,640,199		—		1,645,793		1,056,707
Non-vested stock units	175,300		—		279,110		228,248
Weighted average common shares - diluted	100,414,770		95,734,591		99,152,961		96,997,012
Diluted earnings (loss) per share from net income (loss)	$	0.18	$	(0.27)	$	0.40	$	0.17


	Shares underlying SARs	Weighted average exercise price		Weighted average remaining contractual life (years)
Outstanding as of August 28, 2021	150,000	$	24.20
Granted	—	—
Exercised	—	—
Forfeited	—	—
Outstanding as of February 26, 2022	150,000	$	24.20	7.68

Vested and expected to vest as of February 26, 2022	150,000	$	24.20	7.68

Exercisable as of February 26, 2022	—	$	—	0.00


(In thousands)	Termination benefits and severance		Other		Restructuring liability
Balance as of August 28, 2021	$	851	$	—	$	851
Charges	52		76		128
Cash payments	(903)		(76)		(979)

Balance as of February 26, 2022	$	—	$	—	$	—


Exhibit No.						Document
31.1*						Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
31.2*						Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
32.1**						Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act.
10.1						Amendment No. 3 (Extension Amendment), dated as of December 16, 2021, by and among Atkins Intermediate Holdings, LLC, a Delaware limited liability company, Conyers Park Acquisition Corp., a Delaware corporation, Simply Good Foods USA, Inc., a New York corporation, Atkins Nutritionals Holdings, Inc., a Delaware corporation, Atkins Nutritionals Holdings II, Inc., a Delaware corporation, NCP-ATK Holdings, Inc., a Delaware corporation and the financial institutions party thereto as Consenting Lenders and the Replacement Lender and Barclays Bank PLC, as administrative agent (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on December 22, 2021).
10.2						Repricing Amendment, dated as of January 21, 2022, by and among Atkins Intermediate Holdings, LLC, a Delaware limited liability company, Conyers Park Acquisition Corp., a Delaware corporation, Simply Good Foods USA, Inc., a New York corporation, Atkins Nutritionals Holdings, Inc., a Delaware corporation, Atkins Nutritionals Holdings II, Inc., a Delaware corporation, NCP-ATK Holdings, Inc., a Delaware corporation, the other guarantors party thereto, the financial institutions party thereto as Consenting Lenders and the Replacement Lender and Barclays Bank PLC, as administrative agent (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on January 25, 2022).
10.3†						The Simply Good Foods Company Amended and Restated Executive Severance Compensation Plan (Effective January 20, 2022) (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on January 25, 2022).
101.INS*						XBRL Instance Document
101.SCH*						XBRL Taxonomy Extension Schema Document
101.CAL*						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*						XBRL Taxonomy Extension Label Linkbase Document
101.PRE*						XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).
* Filed herewith.
** Furnished herewith.
† Indicates a management contract or compensatory plan.