What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-04-08 compared with 2021-01-07 · 154 added, 140 removed, 479 unchanged (38% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(Unaudited, dollars in thousands, except share data)

November 28, 2020 August 29, 2020

(Unaudited, dollars in thousands, except share and per share data)

February 27, 2021 August 29, 2020

Current assets:

6 unchanged sentences

Other current assets

12,833 11,947

Total current assets

31 unchanged sentences

Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued

Common stock, $0.01 par value, 600,000,000 shares authorized, 95,818,871 and 95,751,845 shares issued at November 28, 2020 and August 29, 2020, respectively 958 958

Treasury stock, 98,234 and 98,234 shares at cost at November 28, 2020 and August 29, 2020, respectively ( 2,145 ) ( 2,145 )

Common stock, $0.01 par value, 600,000,000 shares authorized, 95,856,715 and 95,751,845 shares issued at February 27, 2021 and August 29, 2020, respectively 959 958

Treasury stock, 98,234 and 98,234 shares at cost at February 27, 2021 and August 29, 2020, respectively ( 2,145 ) ( 2,145 )

Additional paid-in-capital

9 unchanged sentences

The Simply Good Foods Company and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited, dollars in thousands, except share and per share data)

Thirteen Weeks Ended

November 28, 2020 November 30, 2019

Thirteen Weeks Ended Twenty-Six Weeks Ended

February 27, 2021 February 29, 2020 February 27, 2021 February 29, 2020

Net sales $ 230,607 $ 227,101 $ 461,759 $ 379,254

7 unchanged sentences

Total operating expenses 56,924 60,125 111,778 125,316

Income (loss) from operations 39,187 ( 2,985 )

Income from operations 33,341 25,269 72,528 22,284

Other income (expense):

1 unchanged sentence

Interest expense ( 7,995 ) ( 10,589 ) ( 16,367 ) ( 15,558 )

Gain on foreign currency transactions 9 16

Gain (loss) on foreign currency transactions 975 ( 194 ) 984 ( 178 )

Other income 112 8 159 45

Total other expense ( 6,908 ) ( 10,690 ) ( 15,221 ) ( 14,227 )

Income (loss) before income taxes 30,874 ( 6,522 )

Income tax expense (benefit) 8,374 ( 1,729 )

Net income (loss) $ 22,500 $ ( 4,793 )

Other comprehensive income (loss):

Income before income taxes 26,433 14,579 57,307 8,057

Income tax expense 7,313 3,922 15,687 2,193

Net income $ 19,120 $ 10,657 $ 41,620 $ 5,864

Other comprehensive income:

Foreign currency translation adjustments 243 ( 141 ) 198 ( 141 )

Comprehensive income (loss) $ 22,455 $ ( 4,793 )

Earnings (loss) per share from net income (loss):

Comprehensive income $ 19,363 $ 10,516 $ 41,818 $ 5,723

Earnings per share from net income:

Basic $ 0.20 $ 0.11 $ 0.43 $ 0.06

7 unchanged sentences

(Unaudited, dollars in thousands)

Thirteen Weeks Ended

November 28, 2020 November 30, 2019

Twenty-Six Weeks Ended

February 27, 2021 February 29, 2020

Operating activities

Net income (loss)

$ 41,620 $ 5,864

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization 9,021 7,119

5 unchanged sentences

Loss on operating lease right-of-use asset impairment 681 —

Gain on lease termination ( 154 ) —

Other 216 789

35 unchanged sentences

$ 91,307 $ 46,115

Thirteen Weeks Ended

November 28, 2020 November 30, 2019

Twenty-Six Weeks Ended

February 27, 2021 February 29, 2020

Supplemental disclosures of cash flow information

2 unchanged sentences

Cash paid for taxes

$ 10,023 $ 4,345

Non-cash investing and financing transactions

16 unchanged sentences

Balance at November 28, 2020 95,818,871 $ 958 98,234 $ ( 2,145 ) $ 1,095,573 $ 163,030 $ ( 924 ) $ 1,256,492

Net income — — — — — 19,120 — 19,120

Stock-based compensation — — — — 2,484 — — 2,484

Foreign currency translation adjustments — — — — — — 243 243

Shares issued upon vesting of restricted stock units 7,034 — — — ( 51 ) — — ( 51 )

Exercise of options to purchase common stock 30,810 1 — — 369 — — 370

Balance at February 27, 2021 95,856,715 $ 959 98,234 $ ( 2,145 ) $ 1,098,375 $ 182,150 $ ( 681 ) $ 1,278,658

Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total

7 unchanged sentences

Balance at November 30, 2019 95,416,772 $ 954 98,234 $ ( 2,145 ) $ 1,084,671 $ 101,037 $ ( 836 ) $ 1,183,681

Net income — — — — — 10,657 — 10,657

Stock-based compensation — — — — 2,122 — — 2,122

Foreign currency translation adjustments — — — — — — ( 141 ) ( 141 )

Shares issued upon vesting of restricted stock units 771 — — — ( 10 ) — — ( 10 )

Exercise of options to purchase common stock 58,994 1 — — 723 — — 724

Balance at February 29, 2020 95,476,537 $ 955 98,234 $ ( 2,145 ) $ 1,087,506 $ 111,694 $ ( 977 ) $ 1,197,033

See accompanying notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

Nature of Operations and Principles of Consolidation

The Simply Good Foods Company (“Simply Good Foods” or the "Company") was formed by Conyers Park Acquisition Corp.

(“Conyers Park”) on March 30, 2017.

On April 10, 2017, Conyers Park and NCP-ATK Holdings, Inc., among others, entered into a definitive merger agreement (the “Merger Agreement”), pursuant to which on July 7, 2017, Conyers Park merged into Simply Good Foods and as a result acquired the companies which conducted the Atkins® brand business (the “Acquisition of Atkins”).

The common stock of Simply Good Foods is listed on the Nasdaq Capital Market under the symbol “SMPL.”

On August 21, 2019, the Company's wholly-owned subsidiary Simply Good Foods USA, Inc., formerly known as Atkins Nutritionals, Inc., (“Simply Good USA”) entered into a Stock and Unit Purchase Agreement (the "Purchase Agreement") to acquire Quest Nutrition, LLC ("Quest"), a healthy lifestyle food company (the "Acquisition of Quest").

On November 7, 2019, Simply Good USA completed the Acquisition of Quest, via Simply Good USA’s direct or indirect acquisition of 100% of the equity interests of Voyage Holdings, LLC (“Voyage Holdings”), and VMG Quest Blocker, Inc.

(“Voyage Blocker” and, together with Voyage Holdings, the “Target Companies”) for a cash purchase price of approximately $1.0 billion (subject to customary adjustments for the Target Companies’ levels of cash, indebtedness, net working capital and transaction expenses as of the closing date).

The unaudited condensed consolidated financial statements include the accounts of Simply Good Foods and its wholly-owned subsidiaries.

All intercompany accounts and transactions have been eliminated.

Unless the context otherwise requires, “we,” “us,” “our” and the “Company” refer to Simply Good Foods and its subsidiaries.

The Company maintains its accounting records on a 52/53-week fiscal year, ending on the last Saturday in August of each year.

Description of Business

The Simply Good Foods Company is a consumer-packaged food and beverage company that aims to lead the nutritious snacking movement with trusted brands that offer a variety of convenient, innovative, great-tasting, better-for-you snacks and meal replacements.

The Simply Good Foods Company (“Simply Good Foods” or the "Company") is a consumer-packaged food and beverage company that aims to lead the nutritious snacking movement with trusted brands that offer a variety of convenient, innovative, great-tasting, better-for-you snacks and meal replacements.

The Company’s nutritious snacking platform consists of the following core brands that specialize in providing products for consumers that follow certain nutritional philosophies, dietary approaches and/or health-and-wellness trends:

4 unchanged sentences

The Company's platform also positions it to continue to selectively pursue acquisition opportunities of brands in the nutritious snacking category.

The common stock of Simply Good Foods is listed on the Nasdaq Capital Market under the symbol “SMPL.”

Unaudited Interim Condensed Consolidated Financial Statements

The unaudited interim condensed consolidated financial statements include the accounts of Simply Good Foods and its wholly-owned subsidiaries.

All intercompany accounts and transactions have been eliminated.

Unless the context otherwise requires, “we,” “us,” “our” and the “Company” refer to Simply Good Foods and its subsidiaries.

The Company maintains its accounting records on a 52/53-week fiscal year, ending on the last Saturday in August of each year.

The interim condensed consolidated financial statements and related notes of the Company and its subsidiaries are unaudited.

1 unchanged sentence

Generally Accepted Accounting Principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”).

The unaudited interim condensed consolidated financial statements reflect all adjustments and disclosures which are, in our opinion, necessary for a fair presentation of the results of operations, financial position and cash flows for the indicated periods.

The unaudited interim condensed consolidated financial statements reflect all adjustments and disclosures which are, in the Company's opinion, necessary for a fair presentation of the results of operations, financial position and cash flows for the indicated periods.

All such adjustments were of a normal and recurring nature unless otherwise disclosed.

The year-end balance sheet data was derived from the audited financial statements and, in accordance with the instructions to Form 10-Q, certain information and footnote disclosures required by GAAP have been condensed or omitted.

The results reported in these unaudited interim condensed consolidated financial statements are not necessarily indicative of the results that may be reported for the entire fiscal year and should be read in conjunction with our consolidated financial statements for the fiscal year ended August 29, 2020, included in our Annual Report on Form 10-K (“Annual Report”), filed with the SEC on October 28, 2020.

Additionally, based on the duration and severity of economic effects from the novel coronavirus ("COVID-19") pandemic, including but not limited to stock market volatility, the potential for (i) continued increased rates of reported cases of COVID-19 (which has been referred to as a second wave), (ii) unexpected supply chain disruptions, (iii) changes to customer operations, (iv) continued or additional changes in consumer purchasing and consumption behavior beyond those evidenced to date, and (v) the closure of customer establishments, the Company remains uncertain of the ultimate effect COVID-19 could have on its business .

The results reported in these unaudited interim condensed consolidated financial statements are not necessarily indicative of the results that may be reported for the entire fiscal year and should be read in conjunction with the Company's consolidated financial statements for the fiscal year ended August 29, 2020, included in our Annual Report on Form 10-K (“Annual Report”), filed with the SEC on October 28, 2020.

The Company remains uncertain of the ultimate effect COVID-19 could have on its business notwithstanding the distribution of several U.S.

government approved vaccines and various federal, state and local governments having begun to ease the movement restrictions and public health initiatives while continuing to adhere to enhanced safety measures, such as physical distancing and face mask protocols.

This uncertainty as to the duration and severity of economic effects from the COVID-19 pandemic stems from the potential for, among other things, (i) continued rates of reported cases of COVID-19 and the potential for mutations of COVID-19 to result in increased rates of reported cases for which currently approved vaccines are not effective, (ii) unexpected supply chain disruptions, (iii) changes to customer operations, (iv) continued or additional changes in consumer purchasing and consumption behavior beyond those evidenced to date, and (v) the closure of customer establishments.

Summary of Significant Accounting Policies

4 unchanged sentences

Simplifying the Accounting for Income Taxes, which amends the existing guidance relating to the accounting for income taxes.

This ASU is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles of accounting for income taxes and to improve the consistent application of U.S.

This ASU is intended to simplify the accounting for income taxes by removing certain exceptions to the

general principles of accounting for income taxes and to improve the consistent application of U.S.

GAAP for other areas of accounting for income taxes by clarifying and amending existing guidance.

22 unchanged sentences

Business Combination

On August 21, 2019, Simply Good USA entered into the Purchase Agreement with VMG Voyage Holdings, LLC, VMG Tax-Exempt II, L.P., Voyage Employee Holdings, LLC, and other sellers defined in the Purchase Agreement.

On November 7, 2019, pursuant to the Purchase Agreement, Simply Good USA completed the Acquisition of Quest for a cash purchase price at closing of $ 988.9 million subject to customary post-closing adjustments.

(the “Target Companies”) for a cash purchase price at closing of $ 988.9 million subject to customary post-closing adjustments for the Target Companies’ levels of cash, indebtedness, net working capital and transaction expenses as of the closing date.

Simply Good USA acquired Quest as a part of the Company's vision to lead the nutritious snacking movement with trusted brands that offer a variety of convenient, innovative, great-tasting, better-for-you snacks and meal replacements.

3 unchanged sentences

Cash sources of funding included $ 195.3 million of cash on hand, net proceeds of approximately $ 350.0 million from an underwritten public offering of common stock, and $ 443.6 million in new term loan debt.

third fiscal quarter of 2020, the Company received a post-closing release from escrow of approximately $ 2.1 million related to net working capital adjustments, resulting in a total net consideration paid of $ 986.8 million as of November 28, 2020.

For the thirteen weeks ended November 30, 2019, Business transaction costs within the Consolidated Statements of Operations and Comprehensive Income were $ 26.2 million, which included $ 14.5 million of transaction advisory fees related to the Acquisition of Quest, $ 3.2 million of banker commitment fees, $ 6.1 million of non-deferrable debt issuance costs related to the incremental term loan, and $ 2.4 million of other costs, including legal, due diligence, and accounting fees.

In the third fiscal quarter of 2020, the Company received a post-closing release from escrow of approximately $ 2.1 million related to net working capital adjustments, resulting in a total net consideration paid of $ 986.8 million as of February 27, 2021.

For the twenty-six weeks ended February 29, 2020, Business transaction costs within the Consolidated Statements of Operations and Comprehensive Income were $ 26.9 million, which included $ 14.5 million of transaction advisory fees related to the Acquisition of Quest, $ 3.2 million of banker commitment fees, $ 6.1 million of non-deferrable debt issuance costs related to the incremental term loan, and $ 3.1 million of other costs, including legal, due diligence, and accounting fees.

Included in the transaction advisory fees was $ 12.0 million paid to Centerview Partners LLC, an investment banking firm that served as the lead financial advisor to the Company for this transaction.

Three members of the Company’s Board of Directors, Messrs.

Kilts, West, and Ratzan, have business relationships with certain partners of Centerview Partners LLC (including relating to Centerview Capital Consumer, a private equity firm and affiliate of Conyers Park Sponsor LLC), but they are not themselves partners, executives or employees of Centerview Partners LLC, and Centerview Partners LLC is not a related party of the Company pursuant to applicable rules and policies.

LLC), but they are not themselves partners, executives or employees of Centerview Partners LLC, and Centerview Partners LLC is not a related party of the Company pursuant to applicable rules and policies.

The advisory fee paid to Centerview Partners LLC represented approximately 1.2% of the total cash purchase price paid by the Company on the closing date of the Acquisition of Quest.

33 unchanged sentences

Goodwill represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.

Since the initial preliminary estimates reported in the first fiscal quarter of 2020, the Company has updated certain amounts reflected in the final purchase price allocation, as summarized in the fair values of assets acquired and liabilities assumed as set forth above.

The Company completed its final assessment of purchase price allocation for the Acquisition of Quest to the estimated fair value of the net assets acquired at the date of acquisition during the first quarter of fiscal 2021.

Since the initial preliminary estimates reported in the first fiscal quarter of 2020, the Company updated certain amounts reflected in the final purchase price allocation, as summarized in the fair values of assets acquired and liabilities assumed as set forth above.

Specifically, the carrying amount of the intangible assets, net were increased by $ 20.0 million as a result of valuation adjustments related to the Company's finalization of tax attributes, which also resulted in a decrease to deferred income taxes of $ 3.2 million.

Additionally, accounts receivable, net decreased $ 4.3 million and inventories increased $ 0.9 million due to fair value measurement period adjustments, and the carrying amount of property and equipment, net decreased by $ 0.5 million to reflect its estimated fair value.

As a result of these adjustments and the change in total net consideration paid of approximately $ 2.1 million related to net working capital adjustments discussed above, goodwill has decreased $ 21.5 million.

Measurement period adjustments were recognized in the reporting period in which the adjustments were determined and calculated as if the accounting had been completed at the acquisition date.

1 unchanged sentence

The following table provides net sales from the acquired Quest business included in the Company's results:

Thirteen Weeks Ended

(in thousands) November 28, 2020 November 30, 2019

Thirteen Weeks Ended Twenty-Six Weeks Ended

(in thousands) February 27, 2021 February 29, 2020 February 27, 2021 February 29, 2020

Net sales (1)

$ 105,025 $ 88,305 $ 200,794 $ 105,387

(1) Net sales for the thirteen weeks ended November 28, 2020 excludes immaterial international net sales.

(1) Net sales for the thirteen and twenty-six weeks ended February 27, 2021 excludes immaterial international net sales.

Unaudited Pro Forma Financial Information

1 unchanged sentence

The following unaudited pro forma financial information presents the combined results of the Company and Quest as if the Acquisition of Quest has occurred at the beginning of fiscal 2019:

Thirteen Weeks Ended

(in thousands) November 30, 2019

Thirteen Weeks Ended Twenty-Six Weeks Ended

(in thousands) February 29, 2020 February 29, 2020

Revenue $ 227,101 $ 447,657

3 unchanged sentences

Revenues from transactions with external customers for each of the Company’s products would be impracticable to disclose and management does not view its business by product line.

The following is a summary of revenue disaggregated by geographic area and brand:

Thirteen Weeks Ended

(In thousands) November 28, 2020 November 30, 2019

The following is a summary of revenue disaggregated by geographic area and core brands:

Thirteen Weeks Ended Twenty-Six Weeks Ended

(In thousands) February 27, 2021 February 29, 2020 February 27, 2021 February 29, 2020

North America

Atkins $ 114,155 $ 131,435 $ 236,916 $ 259,247

Quest 95,769 17,082

105,025 88,305 200,794 105,387

Total North America (1)

219,180 219,740 437,710 364,634

International 11,427 7,361 24,049 14,620

Total net sales $ 230,607 $ 227,101 $ 461,759 $ 379,254

Charges related to credit loss on accounts receivables from transactions with external customers totaled approximately $ 0.1 million for the thirteen weeks ended November 28, 2020 and were nominal for the thirteen weeks ended November 30, 2019.

As of November 28, 2020 and August 29, 2020, the allowance for doubtful accounts related to these accounts receivable was $ 0.6 million and $ 0.5 million, respectively.

(1) Revenue within the North America geographic area substantially relates to the United States and includes the divested SimplyProtein brand.

(2) Quest net sales are primarily in North America.

Charges related to credit loss on accounts receivables from transactions with external customers were nominal for each of the thirteen and twenty-six weeks ended February 27, 2021 and were approximately $ 0.1 million for each of the thirteen and twenty-six weeks ended February 29, 2020.

As of February 27, 2021 and August 29, 2020, the allowance for doubtful accounts related to these accounts receivable was $ 0.6 million and $ 0.5 million, respectively.

Goodwill and Intangibles

Changes to Goodwill during the thirteen week period ended November 28, 2020 were as follows:

Changes to Goodwill during the thirteen week period ended February 27, 2021 were as follows:

(in thousands) Goodwill

2 unchanged sentences

Sale of business ( 2,818 )

Balance as of November 28, 2020 $ 543,134

The change in Goodwill attributed to the acquisition of a business during the thirteen weeks ended November 28, 2020 was the result of measurement period adjustments made to finalize the acquisition method of accounting for the Acquisition of Quest as described in Note 3.

Balance as of February 27, 2021 $ 543,134

The change in Goodwill attributed to the acquisition of a business during the twenty-six weeks ended February 27, 2021 was the result of measurement period adjustments made to finalize the acquisition method of accounting for the Acquisition of Quest as described in Note 3.

Additionally, effective September 24, 2020, the Company sold the assets exclusively related to its SimplyProtein® brand of products for approximately $ 8.8 million of consideration, including cash of $ 5.8 million and a note receivable for $ 3.0 million, to a newly formed entity led by the Company’s former Canadian-based management team who had been responsible for this brand prior to the sale transaction (the "SimplyProtein Sale").

2 unchanged sentences

In conjunction with the SimplyProtein Sale, the Company disposed of $2.8 million of goodwill associated with the SimplyProtein business.

There were no impairment charges related to goodwill during the thirteen weeks ended November 28, 2020 or since the inception of the Company.

There were no impairment charges related to goodwill during the thirteen and twenty-six weeks ended February 27, 2021 or since the inception of the Company.

Intangible assets, net in the Consolidated Balance Sheets consist of the following:

November 28, 2020

February 27, 2021

(In thousands) Useful life Gross carrying amount Accumulated amortization Net carrying amount

29 unchanged sentences

$ 1,187,967 $ 29,199 $ 1,158,768

Changes in Intangible assets, net during the thirteen weeks ended November 28, 2020 were primarily related to the SimplyProtein Sale and recurring amortization expense.

Changes in Intangible assets, net during the twenty-six weeks ended February 27, 2021 were primarily related to the SimplyProtein Sale and recurring amortization expense.

In conjunction with the SimplyProtein Sale, the Company sold its SimplyProtein brand intangible asset, which had a carrying value of approximately $ 5.0 million as of the date of the sale.

Amortization expense related to intangible assets during the thirteen weeks ended November 28, 2020 and November 30, 2019 was $ 3.9 million and $ 2.3 million, respectively.

There were no impairment charges related to intangible assets during the thirteen weeks ended November 28, 2020 and November 30, 2019.

Amortization expense related to intangible assets during each of the thirteen weeks ended February 27, 2021 and February 29, 2020 was $ 3.9 million, respectively.

Amortization expense related to intangible assets during the twenty-six weeks ended February 27, 2021 and February 29, 2020 was $ 7.7 million and $ 6.2 million, respectively.

There were no impairment charges related to intangible assets during the thirteen and twenty-six weeks ended February 27, 2021 and February 29, 2020.

Estimated future amortization for each of the next five fiscal years and thereafter is as follows:

23 unchanged sentences

Any failure to comply with the restrictions of the credit facilities may result in an event of default.

The Company was in compliance with all financial covenants as of November 28, 2020 and August 29, 2020, respectively.

The Company was in compliance with all financial covenants as of February 27, 2021 and August 29, 2020, respectively.

Long-term debt consists of the following:

(In thousands) November 28, 2020 August 29, 2020

Term Facility (effective rate of 4.8% at November 28, 2020)

(In thousands) February 27, 2021 August 29, 2020

Term Facility (effective rate of 4.8% at February 27, 2021)

$ 556,500 $ 606,500

Finance lease liabilities (effective rate of 5.6% at November 28, 2020)

Finance lease liabilities (effective rate of 5.6% at February 27, 2021)

Deferred financing fees

3 unchanged sentences

$ 548,884 $ 596,879

The Company is no t required to make principal payments on the Term Facility over the twelve months following the period ended November 28, 2020.

Additionally, as of November 28, 2020 and August 29, 2020, there were no amounts drawn against the Revolving Credit Facility.

As of November 28, 2020, the Company had letters of credit in the amount of $ 4.4 million outstanding.

The Company is no t required to make principal payments on the Term Facility over the twelve months following the period ended February 27, 2021.

The outstanding balance of the Term Facility is due upon its maturity in July 2024.

Additionally, as of February 27, 2021 and August 29, 2020, there were no amounts drawn against the Revolving Credit Facility.

As of February 27, 2021, the Company had letters of credit in the amount of $ 4.2 million outstanding.

These letters of credit offset against the availability of the Revolving Credit Facility and exist to support three of the Company's leased buildings and insurance programs relating to workers' compensation.

No amounts were drawn against these letters of credit at November 28, 2020.

No amounts were drawn against these letters of credit at February 27, 2021.

The Company utilizes market approaches to estimate the fair value of certain outstanding borrowings by discounting anticipated future cash flows derived from the contractual terms of the obligations and observable market interest and foreign exchange rates.

The Company carries debt at historical cost and discloses fair value.

As of November 28, 2020 and August 29, 2020, the book value of the

Company’s debt approximated fair value.

As of February 27, 2021 and August 29, 2020, the book value of the Company’s debt approximated fair value.

The estimated fair value of the Term Loan is valued based on observable inputs and classified as Level 2 in the fair value hierarchy.

6 unchanged sentences

These valuations require significant judgment.

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximated fair value as of November 28, 2020 and August 29, 2020 due to the relatively short maturity of these instruments.

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximated fair value as of February 27, 2021 and August 29, 2020 due to the relatively short maturity of these instruments.

The tax expense and the effective tax rate resulting from operations were as follows:

Thirteen Weeks Ended

(In thousands) November 28, 2020 November 30, 2019

Income (loss) before income taxes $ 30,874 $ ( 6,522 )

Provision (benefit) for income taxes $ 8,374 $ ( 1,729 )

Twenty-Six Weeks Ended

(In thousands) February 27, 2021 February 29, 2020

Income before income taxes $ 57,307 $ 8,057

Income tax expense $ 15,687 $ 2,193

Effective tax rate 27.4 % 27.2 %

The effective tax rate for the thirteen weeks ended November 28, 2020 was 0.6 % greater than the effective tax rate for the thirteen weeks ended November 30, 2019, which was primarily driven by other permanent differences.

The effective tax rate for the twenty-six weeks ended February 27, 2021 was 0.2 % greater than the effective tax rate for the twenty-six weeks ended February 29, 2020, which was primarily driven by permanent differences.

The components of lease expense were as follows:

Thirteen Weeks Ended

(In thousands) Statement of Operations Caption November 28, 2020 November 30, 2019

Thirteen Weeks Ended Twenty-Six Weeks Ended

(In thousands) Statement of Operations Caption February 27, 2021 February 29, 2020 February 27, 2021 February 29, 2020

Operating lease cost:

10 unchanged sentences

(1) Variable lease cost primarily consists of common area maintenance, such as cleaning and repairs.

In conjunction with the Company's restructuring activities as discussed in Note 15, the Company incurred a $ 0.4 million impairment charge related to its operating lease right-of-use asset for its lease in Toronto, Ontario during the thirteen weeks ended November 28, 2020.

Costs for these restructuring activities have been included within General and administrative on the Consolidated Statements of Operations and Comprehensive Income.

In conjunction with the Company's restructuring activities as discussed in Note 14, the Company incurred impairment charges of $ 0.3 million and $ 0.7 million in the thirteen and twenty-six weeks ended February 27, 2021, respectively, related to its operating lease right-of-use assets for leases in Toronto, Ontario and the Netherlands.

Additionally, the Company terminated the lease in Toronto, Ontario, which resulted in a gain on lease termination of $0.2 million in the thirteen and twenty-six weeks ended February 27, 2021.

The effect of these restructuring activities has been included within General and administrative on the Consolidated Statements of Operations and Comprehensive Income.

Refer to Note 14, Restructuring and Related Charges, for additional information regarding restructuring activities.

The gross amounts of assets and liabilities related to both operating and finance leases are as follows:

(In thousands) Balance Sheet Caption November 28, 2020 August 29, 2020

(In thousands) Balance Sheet Caption February 27, 2021 August 29, 2020

Operating lease right-of-use assets Other long-term assets $ 23,089 $ 25,703

6 unchanged sentences

Total lease liabilities $ 25,941 $ 28,015

Future maturities of lease liabilities as of November 28, 2020 were as follows:

Future maturities of lease liabilities as of February 27, 2021 were as follows:

(In thousands) Operating Leases Finance Leases

8 unchanged sentences

Present value of lease liabilities $ 25,115 $ 826

As of November 28, 2020, the Company had entered into a lease with estimated total minimum future lease payments of $ 32.2 million over a 10.0 -year minimum lease term that had not yet commenced, and as a result it is not recorded on the Consolidated Balance Sheets.

As of February 27, 2021, the Company had entered into a lease with estimated total minimum future lease payments of $ 32.2 million over a 10.0 -year minimum lease term that had not yet commenced, and as a result it is not recorded on the Consolidated Balance Sheets.

The Company expects the lease to commence in fiscal year 2021, and the Company has the option to renew the lease for an additional 5.0 years or 10.0 years after the minimum lease term.

The weighted-average remaining lease term and weighted-average discount rate for operating and finance leases were as follows:

November 28, 2020 August 29, 2020

February 27, 2021 August 29, 2020

Weighted-average remaining lease term (in years)

5 unchanged sentences

Supplemental and other information related to leases was as follows:

Thirteen Weeks Ended

(In thousands) November 28, 2020 November 30, 2019

Twenty-Six Weeks Ended

(In thousands) February 27, 2021 February 29, 2020

Cash paid for amounts included in the measurement of lease liabilities

7 unchanged sentences

During the fiscal year ended August 31, 2019, the Company reserved $ 3.5 million for the potential settlement of class action litigation concerning certain product label claims.

During the thirteen weeks ended November 30, 2019, the Company reserved an additional $ 0.3 million.

During the twenty-six weeks ended February 29, 2020, the Company reserved an additional $ 0.3 million.

The reserve was included within General and administrative in the Consolidated Statements of Operations and Comprehensive Income, and the reserve was fully paid into escrow and settled during the fiscal year ended August 29, 2020.

As of November 28, 2020 and August 29, 2020, the Company had $ 1.3 million reserved for potential settlements.

As of February 27, 2021 and August 29, 2020, the Company had $ 0.7 million and $ 1.3 million reserved for potential settlements, respectively.

The Company has entered into endorsement contracts with certain celebrity figures and social media influencers to promote and endorse the Atkins and Quest brands and product lines.

These contracts contain endorsement fees, which are expensed ratably over the life of the contract, and performance fees, that are recognized at the time of achievement.

Based on the terms of the contracts in place and achievement of performance conditions as of November 28, 2020, the Company will be required to make payments of $ 2.9 million over the next year.

Based on the terms of the contracts in place and achievement of performance conditions as of February 27, 2021, the Company will be required to make payments of $ 2.8 million over the next year.

Stockholders’ Equity

9 unchanged sentences

All other features of the warrants were unchanged.

As of November 28, 2020, the private placement warrants to purchase 6,700,000 shares of the Company’s common stock remain outstanding.

As of February 27, 2021, the private placement warrants to purchase 6,700,000 shares of the Company’s common stock remain outstanding.

Stock Repurchase Program

3 unchanged sentences

The stock repurchase program may be suspended or discontinued at any time by the Company and does not have an expiration date.

During the thirteen weeks ended November 28, 2020 and November 30, 2019, the Company did no t repurchase any shares of common stock.

As of November 28, 2020, approximately $ 47.9 million remained available under the stock repurchase program.

During the twenty-six weeks ended February 27, 2021 and February 29, 2020, the Company did no t repurchase any shares of common stock.

As of February 27, 2021, approximately $ 47.9 million remained available under the stock repurchase program.

Earnings Per Share

Basic earnings (loss) per share is based on the weighted average number of common shares issued and outstanding.

Basic earnings per share is based on the weighted average number of common shares issued and outstanding.

In periods in which the Company has net income, diluted earnings per share is based on the weighted average number of common shares issued and outstanding and the effect of all dilutive common stock equivalents outstanding during each period.

In periods in which the Company has a net loss, diluted earnings per share is based on the weighted average number of common shares issued and outstanding as the effect of including common stock equivalents outstanding would be anti-dilutive.

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

Thirteen Weeks Ended

(In thousands, except per share data) November 28, 2020 November 30, 2019

Basic earnings (loss) per share computation:

Net income (loss) $ 22,500 $ ( 4,793 )

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

Thirteen Weeks Ended Twenty-Six Weeks Ended

(In thousands, except per share data) February 27, 2021 February 29, 2020 February 27, 2021 February 29, 2020

Basic earnings per share computation:

Net income $ 19,120 $ 10,657 $ 41,620 $ 5,864

Weighted average common shares - basic 95,734,591 95,339,489 95,712,057 92,524,061

Basic earnings (loss) per share from net income (loss) $ 0.24 $ ( 0.05 )

Diluted earnings (loss) per share computation:

Net income (loss) $ 22,500 $ ( 4,793 )

Basic earnings per share from net income $ 0.20 $ 0.11 $ 0.43 $ 0.06

Diluted earnings per share computation:

Net income $ 19,120 $ 10,657 $ 41,620 $ 5,864

Weighted average common shares outstanding - basic 95,734,591 95,339,489 95,712,057 92,524,061

3 unchanged sentences

Weighted average common shares - diluted 101,152,896 100,336,571 100,604,137 97,597,614

Diluted earnings (loss) per share from net income (loss) $ 0.23 $ ( 0.05 )

Earnings (loss) per share calculations for the thirteen weeks ended November 28, 2020 and November 30, 2019 excluded 0.7 million and 2.7 million shares of stock options issuable upon exercise, respectively, that would have been anti-dilutive.

Earnings per share for the thirteen weeks ended November 28, 2020 excluded an immaterial number of non-vested shares that would have been anti-dilutive.

For the thirteen weeks ended November 30, 2019, the loss per share excluded 0.3 million of non-vested shares that would have been anti-dilutive.

Diluted earnings per share from net income $ 0.19 $ 0.11 $ 0.41 $ 0.06

Earnings per share calculations for the thirteen weeks ended February 27, 2021 and February 29, 2020 excluded 0.2 million and 0.4 million shares underlying stock options issuable upon exercise, respectively, that would have been anti-dilutive.

Earnings per share calculations for the thirteen weeks ended February 27, 2021 excluded an immaterial number of non-vested shares that would have been anti-dilutive.

Earnings per share calculations for the twenty-six weeks ended February 27, 2021 and February 29, 2020 excluded 0.6 million and 0.3 million shares underlying stock options issuable upon exercise, respectively, that would have been anti-dilutive.

Earnings per share for the twenty-six weeks ended February 27, 2021 excluded an immaterial number of non-vested shares that would have been anti-dilutive.

Omnibus Incentive Plan

2 unchanged sentences

Stock-based compensation expense is included within General and administrative expense, which is the same financial statement caption where the recipient’s other compensation is reported.

The Company recorded stock-based compensation expense of $ 1.1 million and $ 1.7 million in the thirteen weeks ended November 28, 2020 and November 30, 2019, respectively.

The Company recorded stock-based compensation expense of $ 2.5 million and $ 2.1 million in the thirteen weeks ended February 27, 2021 and February 29, 2020, respectively, and $ 3.6 million and $ 3.8 million in the twenty-six weeks ended February 27, 2021 and February 29, 2020, respectively.

Stock Options

The following table summarizes stock option activity for the thirteen weeks ended November 28, 2020:

The following table summarizes stock option activity for the twenty-six weeks ended February 27, 2021:

Shares Underlying Options Weighted Average

4 unchanged sentences

Forfeited ( 39,575 ) 23.08

Outstanding as of November 28, 2020 2,846,158 $ 14.81 7.34

Vested and expected to vest as of November 28, 2020 2,846,158 $ 14.81 7.34

Exercisable as of November 28, 2020 2,228,465 $ 13.22 6.85

As of November 28, 2020, the Company had $ 4.0 million of total unrecognized compensation cost related to stock option plans that will be recognized over a weighted average period of 2.1 years.

During each of the thirteen weeks ended November 28, 2020 and November 30, 2019, the Company received $0.2 million in cash from stock option exercises.

Outstanding as of February 27, 2021 2,821,951 $ 14.88 7.11

Vested and expected to vest as of February 27, 2021 2,821,951 $ 14.88 7.11

Exercisable as of February 27, 2021 2,197,655 $ 13.24 6.61

As of February 27, 2021, the Company had $ 3.5 million of total unrecognized compensation cost related to stock option plans that will be recognized over a weighted average period of 1.9 years.

During the twenty-six weeks ended February 27, 2021 and February 29, 2020, the Company received $0.5 million and $0.9 million in cash from stock option exercises, respectively.

Restricted Stock Units

The following table summarizes restricted stock unit activity for the thirteen weeks ended November 28, 2020:

The following table summarizes restricted stock unit activity for the twenty-six weeks ended February 27, 2021:

Restricted Stock Units Weighted average

4 unchanged sentences

Forfeited ( 15,706 ) 22.99

Non-vested as of November 28, 2020 425,641 $ 21.13

As of November 28, 2020, the Company had $ 8.4 million of total unrecognized compensation cost related to restricted stock units that will be recognized over a weighted average period of 2.6 years.

Non-vested as of February 27, 2021 431,622 $ 21.39

As of February 27, 2021, the Company had $ 7.6 million of total unrecognized compensation cost related to restricted stock units that will be recognized over a weighted average period of 2.2 years.

Performance Stock Units

During the thirteen weeks ended November 28, 2020, the Board of Directors granted performance stock units under the Company’s equity compensation plan.

During the twenty-six weeks ended February 27, 2021, the Board of Directors granted performance stock units under the Company’s equity compensation plan.

Performance stock units vest in a range between 0 % and 200 % based upon certain performance criteria in a three -year period.

Performance stock units were valued using a Monte-Carlo simulation.

The following table summarizes performance stock unit activity for the thirteen weeks ended November 28, 2020:

The following table summarizes performance stock unit activity for the twenty-six weeks ended February 27, 2021:

Performance Stock Units Weighted average

3 unchanged sentences

Forfeited ( 26,400 ) 22.06

Non-vested as of November 28, 2020 385,165 $ 19.35

As of November 28, 2020, the Company had $ 5.1 million of total unrecognized compensation cost related to performance stock units that will be recognized over a weighted average period of 1.8 years.

Non-vested as of February 27, 2021 385,165 $ 19.35

As of February 27, 2021, the Company had $ 4.4 million of total unrecognized compensation cost related to performance stock units that will be recognized over a weighted average period of 1.6 years.

Stock Appreciation Rights

2 unchanged sentences

SARs cliff vest 3 years from the date of grant and must be exercised within 10 years.

The following table summarizes SARs activity for the thirteen weeks ended November 28, 2020:

The following table summarizes SARs activity for the twenty-six weeks ended February 27, 2021:

Shares Underlying SARs Weighted average

3 unchanged sentences

Forfeited — —

Outstanding as of November 28, 2020 150,000 $ 24.20 8.93

Vested and expected to vest as of November 28, 2020 150,000 $ 24.20 8.93

Exercisable as of November 28, 2020 — $ — 0.00

As of November 28, 2020, the Company had $ 0.3 million of total unrecognized compensation cost related to its SARs that will be recognized over a weighted average period of 1.93 years.

Segment and Customer Information

Following the Acquisition of Quest, the Company's operations are organized into two operating segments, Atkins and Quest, which are aggregated into one reporting segment due to similar financial, economic and operating characteristics.

The operating segments are also similar in the following areas:

(a) the nature of the products;

(b) the nature of the production processes;

and, (e) the nature of the regulatory environment.

Outstanding as of February 27, 2021 150,000 $ 24.20 8.68

Vested and expected to vest as of February 27, 2021 150,000 $ 24.20 8.68

Exercisable as of February 27, 2021 — $ — 0.00

As of February 27, 2021, the Company had $ 0.2 million of total unrecognized compensation cost related to its SARs that will be recognized over a weighted average period of 1.7 years.

Restructuring and Related Charges

5 unchanged sentences

Restructuring accruals are based upon management estimates at the time and can change depending upon changes in facts and circumstances subsequent to the date the original liability was recorded.

Changes to the restructuring liability during the thirteen weeks ended November 28, 2020 were as follows:

(in thousands) Restructuring Liability

Changes to the restructuring liability during the twenty-six weeks ended February 27, 2021 were as follows:

(in thousands) Termination benefits and severance Other Restructuring Liability

Balance as of August 29, 2020 $ 4,139 $ — $ 4,139

2 unchanged sentences

Non-cash settlements or adjustments — — —

Balance as of November 28, 2020 $ 338

In addition to the $2.2 million restructuring costs incurred related to one-time termination benefits and employee severance as shown above, the Company incurred a $ 0.4 million restructuring-related impairment charge in the thirteen weeks ended November 28, 2020 related to its operating lease right-of-use asset for its lease in Toronto, Ontario.

As a result, for the thirteen weeks ended November 28, 2020, the Company incurred a total of $ 2.5 million in restructuring and restructuring related costs, which have been included within General and administrative on the Consolidated Statements of Operations and Comprehensive Income.

As of November 28, 2020, the Company has incurred aggregate restructuring and restructuring-related costs of $ 8.0 million since May 2020.

Balance as of February 27, 2021 $ 1,111 $ — $ 1,111

In addition to the restructuring costs shown above, the Company incurred impairment charges of $ 0.3 million and $ 0.7 million in the thirteen and twenty-six weeks ended February 27, 2021, respectively, related to its operating lease right-of-use assets for leases in Toronto, Ontario and the Netherlands.

Additionally, the Company terminated the lease in Toronto, Ontario, which resulted in a gain on lease termination of $0.2 million in the thirteen and twenty-six weeks ended February 27, 2021.

As a result, for the thirteen and twenty-six weeks ended February 27, 2021, the Company incurred a total of $ 1.3 million and $ 3.8 million in restructuring and restructuring related costs, respectively, which have been included within General and administrative on the Consolidated Statements of Operations and Comprehensive Income.

As of February 27, 2021, the Company has incurred aggregate restructuring and restructuring-related costs of $ 9.3 million since May 2020.

Overall, the Company expects to incur a total of approximately $ 10.0 million in restructuring and restructuring related costs, which are to be paid throughout fiscal 2021 and the first quarter of fiscal 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements