Simply Good Foods Co 10-K/A

Item 8. Financial Statements and Supplementary Data TABLE OF CONTENTS Page Index to the Financial Statements Reports of Independent Registered Public Accounting Firms 42 Consolidated Balance Sheet s ( A s R estated) 45 Consolidated Statements of Operations and Comprehensive Income (Loss ) ( A s R estated) 46 Consolidated Statements of Cash Flow s ( A s R estated) 47 Consolidated Statements of Stockholders’ Equit y ( A s R estated) 49 Notes to Consolidated Financial Statements Note 1. Nature of Operations and Principles of Consolidation 50 Note 2. Restatement of Previously Issued Consolidated Financial Statements 51 Note 3. Change in Accounting Principle 55 Note 4. Summary of Significant Accounting Policies 55 Note 5. Business Combination 61 Note 6. Property and Equipment, Net 64 Note 7. Goodwill and Intangibles 64 Note 8. Accrued Expenses and Other Current Liabilities 65 Note 9. Long-Term Debt and Line of Credit 66 Note 10. Fair Value of Financial Instruments 67 Note 11. Income Taxes 69 Note 12. Leases 71 Note 13. Commitments and Contingencies 73 Note 14. Stockholder’s Equity 73 Note 15. Earnings Per Share 74 Note 16. Omnibus Incentive Plan 75 Note 17. Related Party Transactions 78 Note 18. Segment and Customer Information 78 Note 19. Restructuring and Related Charges 80 Note 20. Unaudited Quarterly Financial Data 80 Note 21. Subsequent Events 83 40 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of The Simply Good Foods Company Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of The Simply Good Foods Company and subsidiaries (the "Company") as of August 29, 2020 and August 31, 2019, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows, for the fifty-two week period ended August 29, 2020 and the fifty-three week period ended August 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 29, 2020 and August 31, 2019, and the results of its operations and its cash flows for each of the two years in the period ended August 29, 2020, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of August 29, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated October 28, 2020; (June 30, 2021 as to the effects of the material weakness described in Management’s Report on Internal Control over Financial Reporting (As Revised), which report expressed an adverse opinion on the Company’s internal control over financial reporting because of a material weakness). Restatement of the 2020 and 2019 Financial Statements As discussed in Note 2 to the financial statements, the accompanying 2020 and 2019 financial statements have been restated to correct misstatements. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the 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. Trade Promotions - Refer to Note 4 to the financial statements Critical Audit Matter Description The Company offers trade promotions through various programs to customers and consumers. Trade promotions include discounts, rebates, slotting, and other marketing activities. Trade promotions are recorded as a reduction to net sales with a corresponding reduction to accounts receivable at the time of revenue recognition for the underlying sale. The recognition of trade promotions requires the Company to make estimates regarding the volume of incentives that will be redeemed and their total costs. These estimates are made using various information including historical data on performance of similar trade promotional activities, current market data, and the Company's best estimates of current activity. As of August 29, 2020, the allowance for trade promotions balance, which is recorded as a reduction to accounts receivable, was approximately $25.2 million. 41 Given the subjectivity of estimating the expected promotional claims and the volume of trade promotions, performing audit procedures to evaluate whether the allowance for trade promotion balance is appropriately recorded as of August 29, 2020, required a high degree of auditor judgment and an increased extent of effort. How the Critical Audit Matter Was Addressed in the Audit Our auditing procedures related to the allowance for trade promotion balance included the following, among others: • For a selection of allowances for trade promotion balances recorded as of August 29, 2020, we: ◦ Confirmed contract terms directly with the customer. ◦ Agreed contract terms from the accounting records to the promotion agreement with the customer and verified the promotion period was prior to August 30, 2020. • We evaluated management’s ability to estimate promotional claims incurred, but not yet received for potential management bias by comparing historical promotional claims received to management’s estimates of the claims to be received. • For a selection of customer promotional claims presented or resolved after August 29, 2020, we compared that amount to the August 29, 2020 allowance for promotion balance and traced presented or resolved deduction to a properly recorded sale. Business Combination - Voyage Holdings, LLC and VMG Quest Blocker, Inc. - Valuation of brand and trademark and customer relationships intangible assets - Refer to Note 5 to the financial statements Critical Audit Matter Description The Company completed the acquisition of Voyage Holdings, LLC and VMG Quest Blocker, Inc. for $986.8 million on November 7, 2019. The Company accounted for the acquisition under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including brand and trademark intangible asset of $750.0 million and customer relationship intangible asset of $115.0 million. Management estimated the fair value of the brand and trademark and customer relationship intangible assets using an income approach and the with/without method, which estimates the value using the cash flow impact in a hypothetical scenario where the customer relationships are not in place. Given the fair value determination of brand and trademark intangible asset and customer relationship intangible asset for Voyage Holdings, LLC and VMG Quest Blocker Inc. requires management to make significant estimates and assumptions related to the forecasts of future cash flows and the selection of the discount rate, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our auditing procedures related to the forecasts of future cash flows and the selection of the discount rate included the following, among others: • We obtained an understanding of management’s key assumptions in developing the forecast. • We assessed the reasonableness of management's forecasts of future cash flows by comparing the projections to historical results and certain peer companies. • We evaluated whether the estimated future cash flows were consistent with projections used by the Company, as well as evidence obtained in other areas of the audit. • With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rate by: ◦ Testing the source information underlying the determination of the discount rate and testing the mathematical accuracy of the calculation. ◦ Developing a range of independent estimates and comparing those to the discount rate selected by management. /s/ Deloitte & Touche LLP Denver, Colorado October 28, 2020 (June 30, 2021 as to the effects of the restatement discussed in Note 2) We have served as the Company’s auditor since 2019. 42 Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of The Simply Good Foods Company and subsidiaries Opinion on the Financial Statements We have audited the consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for the 52-weeks ended August 25, 2018 of The Simply Good Foods Company (the “Company”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of the Company’s operations and its cash flows for the 52-weeks ended August 25, 2018 in conformity with U.S. generally accepted accounting principles. Restatement of Financial Statements As discussed in Note 2 to the consolidated financial statements, the 2018 consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for the 52-weeks ended August 25, 2018 have been restated to correct misstatements. Change in Accounting Principle As discussed in Note 3 to the consolidated financial statements, the Company has elected to change its principle of accounting for the classification of shipping & handling costs relating to the delivery of products to customers from operating expenses to cost of sales in the 52-week period ended August 31, 2019. This change in accounting principle has been retrospectively applied to all periods presented. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the 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 financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ Ernst & Young LLP We served as the Company’s auditor from 2011 to February 25, 2019 Denver, Colorado October 24, 2018 except with respect to our opinion on the consolidated financial statements insofar as it relates to the effects of the restatement discussed in Note 2 as to which the date is June 30, 2021 and except with respect to our opinion on the consolidated financial statements insofar as it relates to the effects of the accounting principle change discussed in Note 3, as to which the date is October 30, 2019 43 Table of Contents The Simply Good Foods Company and Subsidiaries Consolidated Balance Sheets (In thousands, except share data) (As Restated, see Note 2) August 29, 2020 August 31, 2019 Assets Current assets: Cash and cash equivalents $ 95,847 $ 266,341 Accounts receivable, net 89,740 44,240 Inventories 59,085 38,085 Prepaid expenses 3,644 2,882 Other current assets 11,947 6,059 Total current assets 260,263 357,607 Long-term assets: Property and equipment, net 11,850 2,456 Intangible assets, net 1,158,768 306,139 Goodwill 544,774 471,427 Other long-term assets 32,790 4,021 Total assets $ 2,008,445 $ 1,141,650 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 32,240 $ 15,730 Accrued interest 960 1,693 Accrued expenses and other current liabilities 38,007 29,933 Current maturities of long-term debt 271 676 Total current liabilities 71,478 48,032 Long-term liabilities: Long-term debt, less current maturities 596,879 190,259 Deferred income taxes 84,352 65,383 Warrant liability 93,638 124,576 Other long-term liabilities 22,765 532 Total liabilities 869,112 428,782 See commitments and contingencies (Note 13) 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, 95,751,845 and 81,973,284 issued at August 29, 2020 and August 31, 2019, respectively 958 820 Treasury stock, 98,234 and 98,234 shares at cost at August 29, 2020 and August 31, 2019, respectively ( 2,145 ) ( 2,145 ) Additional paid-in-capital 1,076,472 715,740 Retained earnings (accumulated deficit) 64,927 ( 711 ) Accumulated other comprehensive loss ( 879 ) ( 836 ) Total stockholders’ equity 1,139,333 712,868 Total liabilities and stockholders’ equity $ 2,008,445 $ 1,141,650 See accompanying Notes to the Consolidated Financial Statements 44 Table of Contents The Simply Good Foods Company and Subsidiaries Consolidated Statements of Operations and Comprehensive Income (Loss) (In thousands, except share and per share data) (As Restated, see Note 2) 52-Weeks Ended 53-Weeks Ended 52-Weeks Ended August 29, 2020 August 31, 2019 August 25, 2018 Net sales $ 816,641 $ 523,758 $ 437,854 Cost of goods sold 492,313 306,075 254,966 Gross profit 324,328 217,683 182,888 Operating expenses: Selling and marketing 94,469 67,694 59,186 General and administrative 106,251 62,180 49,427 Depreciation and amortization 15,259 7,496 7,498 Business transaction costs 27,125 7,107 2,259 Loss on impairment 3,000 — — Loss (gain) in fair value change of contingent consideration - TRA liability — 533 ( 2,848 ) Total operating expenses 246,104 145,010 115,522 Income from operations 78,224 72,673 67,366 Other income (expense): Interest income 1,516 3,826 — Interest expense ( 32,813 ) ( 13,627 ) ( 12,551 ) Gain (loss) in fair value change of warrant liability 30,938 ( 72,673 ) ( 34,391 ) Gain on settlement of TRA liability — 1,534 — Gain (loss) on foreign currency transactions 658 ( 452 ) 97 Other income 441 196 815 Total other income (expense) 740 ( 81,196 ) ( 46,030 ) Income (loss) before income taxes 78,964 ( 8,523 ) 21,336 Income tax expense (benefit) 13,326 16,711 ( 16,050 ) Net income (loss) $ 65,638 $ ( 25,234 ) $ 37,386 Other comprehensive income (loss): Foreign currency translation adjustments ( 43 ) ( 38 ) ( 817 ) Comprehensive income (loss) $ 65,595 $ ( 25,272 ) $ 36,569 Earnings (loss) per share: Basic $ 0.70 $ ( 0.31 ) $ 0.53 Diluted $ 0.35 $ ( 0.31 ) $ 0.51 Weighted average shares outstanding: Basic 93,968,953 80,734,091 70,582,149 Diluted 98,343,722 80,734,091 72,786,843 See accompanying Notes to the Consolidated Financial Statements 45 Table of Contents The Simply Good Foods Company and Subsidiaries Consolidated Statements of Cash Flows (In thousands) (As Restated, see Note 2) 52-Weeks Ended 53-Weeks Ended 52-Weeks Ended August 29, 2020 August 31, 2019 August 25, 2018 Operating activities Net income (loss) $ 65,638 $ ( 25,234 ) $ 37,386 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 16,007 7,644 7,672 Amortization of deferred financing costs and debt discount 3,508 1,352 1,312 Stock compensation expense 7,636 5,501 4,029 Loss on impairment 3,000 — — (Gain) loss in fair value change of warrant liability ( 30,938 ) 72,673 34,391 Loss (gain) in fair value change of contingent consideration - TRA liability — 533 ( 2,848 ) Gain on settlement of TRA liability — ( 1,534 ) — Unrealized loss (gain) on foreign currency transactions ( 658 ) 452 ( 97 ) Deferred income taxes 8,216 10,869 ( 20,344 ) Loss on disposal of property and equipment — 6 128 Amortization of operating lease right-of-use asset 3,848 — — Other ( 389 ) — — Changes in operating assets and liabilities, net of acquisition: Accounts receivable, net ( 18,288 ) ( 8,360 ) ( 6,158 ) Inventories 23,880 ( 8,178 ) 2,425 Prepaid expenses 680 ( 824 ) 847 Other current assets ( 5,022 ) ( 2,155 ) 3,094 Accounts payable ( 8,736 ) 4,734 ( 3,603 ) Accrued interest ( 733 ) 1,111 21 Accrued expenses and other current liabilities ( 5,572 ) 14,378 2,795 Other ( 3,156 ) 74 ( 12 ) Net cash provided by operating activities 58,921 73,042 61,038 Investing activities Purchases of property and equipment ( 1,736 ) ( 1,037 ) ( 1,770 ) Proceeds from sale of property and equipment — — 14 Issuance of note receivable ( 500 ) ( 750 ) — Proceeds from note receivable 1,250 — — Acquisition of business, net of cash acquired ( 982,075 ) — ( 1,757 ) Investments in intangible assets and other assets ( 933 ) — — Net cash used in investing activities ( 983,994 ) ( 1,787 ) ( 3,513 ) Financing activities Proceeds from option exercises 4,206 706 120 Cash received from warrant exercises — 113,464 232 Tax payments related to issuance of restricted stock units ( 191 ) ( 181 ) ( 120 ) Proceeds from issuance of common stock 352,542 — — Equity issuance costs ( 3,323 ) — — Repurchase of common stock — ( 2,145 ) — Payments on finance lease obligations ( 374 ) — — Principal payments of long-term debt ( 50,000 ) ( 2,000 ) ( 1,500 ) Repayments of Revolving Credit Facility ( 25,000 ) — — Proceeds from issuance of long term debt 460,000 — — Proceeds from Revolving Credit Facility 25,000 — — Deferred financing costs ( 8,208 ) — ( 319 ) Settlement of TRA liability — ( 26,468 ) — Net cash provided by (used in) financing activities 754,652 83,376 ( 1,587 ) Cash and cash equivalents Net (decrease) increase in cash ( 170,421 ) 154,631 55,938 Effect of exchange rate on cash ( 73 ) ( 261 ) ( 468 ) Cash at beginning of period 266,341 111,971 56,501 Cash and cash equivalents at end of period $ 95,847 $ 266,341 $ 111,971 46 Table of Contents (As Restated, see Note 2) 52-Weeks Ended 53-Weeks Ended 52-Weeks Ended August 29, 2020 August 31, 2019 August 25, 2018 Supplemental disclosures of cash flow information Cash paid for interest $ 30,038 $ 11,164 $ 11,218 Cash paid for taxes $ 4,530 $ 7,451 $ 4,577 Non-cash investing and financing transactions Operating lease right-of-use assets recognized at ASU No 2016-02 transition $ 5,102 $ — $ — Finance lease right-of-use assets recognized at ASU No 2016-02 transition $ 1,185 $ — $ — Operating lease right-of-use assets recognized after ASU No 2016-02 transition $ 3,554 $ — $ — See accompanying Notes to the Consolidated Financial Statements 47 Table of Contents The Simply Good Foods Company and Subsidiaries Consolidated Statements of Stockholders’ Equity (In thousands, except share data) (As Restated, see Note 2) (As Restated, see Note 2) (As Restated, see Note 2) Common Stock Treasury Stock Additional Paid in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Total Shares Amount Shares Amount Balance, August 26, 2017 70,562,477 $ 706 — $ — $ 592,103 $ ( 12,863 ) $ 19 $ 579,965 Net income — — — — — 37,386 — 37,386 Stock-based compensation — — — — 4,029 — — 4,029 Foreign currency translation adjustments — — — — — — ( 817 ) ( 817 ) Shares issued upon vesting of restricted stock units 12,986 — — — ( 120 ) — — ( 120 ) Exercise of options to purchase common stock 10,000 — — — 120 — — 120 Warrant conversion 20,212 — — — 232 — — 232 Balance, August 25, 2018 70,605,675 $ 706 — $ — $ 596,364 $ 24,523 $ ( 798 ) $ 620,795 Net loss — — — — — ( 25,234 ) — ( 25,234 ) Stock-based compensation — — — — 5,501 — — 5,501 Foreign currency translation adjustments — — — — — — ( 38 ) ( 38 ) Repurchase of common stock — — 98,234 ( 2,145 ) — — — ( 2,145 ) Shares issued upon vesting of restricted stock units 80,293 1 — — ( 182 ) — — ( 181 ) Exercise of options to purchase common stock 87,017 1 — — 705 — — 706 Warrant conversion 11,200,299 112 — — 113,352 — — 113,464 Balance, August 31, 2019 81,973,284 $ 820 98,234 $ ( 2,145 ) $ 715,740 $ ( 711 ) $ ( 836 ) $ 712,868 Net income — — — — — 65,638 — 65,638 Stock-based compensation — — — — 7,636 — — 7,636 Foreign currency translation adjustments — — — — — — ( 43 ) ( 43 ) Public equity offering 13,379,205 134 — — 349,085 — — 349,219 Shares issued upon vesting of restricted stock units 58,974 1 — — ( 192 ) — — ( 191 ) Exercise of options to purchase common stock 340,382 3 — — 4,203 — — 4,206 Balance, August 29, 2020 95,751,845 $ 958 98,234 $ ( 2,145 ) $ 1,076,472 $ 64,927 $ ( 879 ) $ 1,139,333 See accompanying Notes to the Consolidated Financial Statements 48 Table of Contents Notes to Consolidated Financial Statements (In thousands, except for share and per share data) 1. Nature of Operations and Principles of Consolidation Description of Business 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, pursuant to the Purchase Agreement, 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 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 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: Atkins® for those following a low-carb lifestyle; and Quest® for consumers seeking to partner with a brand that makes the foods they crave work for them, not against them, through a variety of protein-rich foods and beverages that also limit sugars and simple carbs. The Company distributes its products in major retail channels, primarily in North America, including grocery, club and mass merchandise, as well as through e-commerce, convenience, specialty and other channels. The Company's portfolio of nutritious snacking brands gives it a strong platform with which to introduce new products, expand distribution, and attract new consumers to its products. The Company's platform also positions it to continue to selectively pursue acquisition opportunities of brands in the nutritious snacking category. 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. Basis of Presentation The consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). The Company maintains its accounting records on a 52/53-week fiscal year, ending on the last Saturday in August. The financial information presented within the Company's consolidated financial statements has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The accompanying financial statements include Consolidated Balance Sheets for the periods ended August 29, 2020 and August 31, 2019. The remaining financial statements include the fifty-two week period ended August 29, 2020, the fifty-three week period ended August 31, 2019, and the fifty-two week period ended August 25, 2018. As discussed in Note 2, Restatement of Previously Issued Consolidated Financial Statements, the consolidated financial statements have been restated to reflect certain warrants as liabilities rather than equity. The consolidated financial statements include the accounts of the Company 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 on a consolidated basis. Reclassification of Prior Year Amounts Certain prior year amounts have been reclassified to conform to the current year presentation including (i) Selling expenses and Marketing expenses, which have been combined as Selling and marketing expenses on the Consolidated Statements of Operations and Comprehensive Income (Loss) and (ii) Other operating expense , which has been combined with General and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income (Loss). 49 Table of Contents 2. Restatement of Previously Issued Consolidated Financial Statements On April 12, 2021, the SEC issued a statement (the “SEC Statement”) on the accounting and reporting considerations for warrants issued by special purpose acquisition companies (“SPAC”). The SEC Statement discussed certain features of warrants issued in SPAC transactions that may be common across many entities. Specifically, the SEC Statement focused in part on provisions in warrant agreements that provide for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder. The SEC Statement indicated that, because the holder of a warrant is not an input into the pricing of a fixed-for-fixed option on equity shares, such provisions would preclude the warrant from being classified in equity and thus the warrant should be classified as a liability. Following consideration of the guidance in the SEC Statement, the Company concluded that its private warrants should be classified as a liability and measured at fair value at each reporting period, rather than as equity awards. Management concluded the effect of this error on the Company’s previously reported consolidated financial statements is material and, as such, the accompanying consolidated financial statements as of August 29, 2020 and August 31, 2019, and for the fifty-two week period ended August 29, 2020, the fifty-three week period ended August 31, 2019, and the fifty-two week period ended August 25, 2018, and accompanying notes thereto have been restated from the amounts previously reported to give effect to the correction of this error (the “Restatement”). As a result of the Restatement, the Company’s private warrants (the “Private Warrants”) are now reflected as a liability measured at fair value on the Consolidated Balance Sheets, and the change in the fair value of this liability in each period is recognized as a gain or loss in the Consolidated Statements of Operations and Comprehensive Income (Loss). The effect of the Restatement on the Consolidated Balance Sheets as of August 29, 2020 and August 31, 2019, and Consolidated Statements of Operations and Comprehensive Income (Loss) and Consolidated Statements of Cash Flows for the fifty-two week period ended August 29, 2020, the fifty-three week period ended August 31, 2019, and the fifty-two week period ended August 25, 2018, are presented below. The effect of the Restatement on the August 26, 2017 stockholders’ equity balances is presented on the Consolidated Statements of Stockholders’ Equity. Further, as a result of the Restatement, previously identified immaterial adjustments have been made to the 2018 and 2019 fiscal year results. These are reflected as “other adjustments” in the restated tables below. Regarding the statement of cash flows, the adjustments presented below to net income were offset by adjustments for the same amount within non-cash operating activities, and therefore the Restatement had no effect on total net cash flows from operating, investing or financing activities for the restated periods. Additionally, see Note 15, Earnings (Loss) Per Share, for restated earnings (loss) per share amounts and Note 20, Unaudited Quarterly Financial Data, for the Restatement effects to the quarterly periods during the fifty-two week period ended August 29, 2020 and the fifty-three week period ended August 31, 2019. Consolidated Balance Sheet August 29, 2020 (In thousands) As Previously Reported Restatement Adjustment As Restated Total assets $ 2,008,445 $ — $ 2,008,445 Warrant liability — 93,638 93,638 Total liabilities 775,474 93,638 869,112 Additional paid-in-capital 1,094,507 ( 18,035 ) 1,076,472 Retained earnings 140,530 ( 75,603 ) 64,927 Total stockholders’ equity 1,232,971 ( 93,638 ) 1,139,333 Total liabilities and stockholders’ equity $ 2,008,445 $ — $ 2,008,445 Consolidated Balance Sheet August 31, 2019 (In thousands) As Previously Reported Restatement Adjustment As Restated Total assets $ 1,141,650 $ — $ 1,141,650 Warrant liability — 124,576 124,576 Total liabilities 304,206 124,576 428,782 Additional paid-in-capital 733,775 ( 18,035 ) 715,740 Retained earnings (accumulated deficit) 105,830 ( 106,541 ) ( 711 ) Total stockholders’ equity 837,444 ( 124,576 ) 712,868 Total liabilities and stockholders’ equity $ 1,141,650 $ — $ 1,141,650 50 Table of Contents Consolidated Statement of Operations and Comprehensive Income (Loss) 52-Weeks Ended August 29, 2020 (In thousands) As Previously Reported Restatement Adjustment As Restated Income from operations $ 78,224 $ — $ 78,224 Gain in fair value change of warrant liability — 30,938 30,938 Total other (expense) income ( 30,198 ) 30,938 740 Income before income taxes 48,026 30,938 78,964 Income tax expense 13,326 — 13,326 Net income 34,700 30,938 65,638 Comprehensive income $ 34,657 $ 30,938 $ 65,595 As a result of the Restatement adjustments, basic earnings per share changed $ 0.33 per share, from $ 0.37 per share to $ 0.70 per share, and diluted earnings per share was unchanged. Consolidated Statement of Operations and Comprehensive Income (Loss) 53-Weeks Ended August 31, 2019 (In thousands) As Previously Reported Restatement Adjustment Other Adjustments As Restated Net sales $ 523,383 $ — $ 375 $ 523,758 Cost of goods sold 305,978 — 97 306,075 Gross profit 217,405 — 278 217,683 Selling and marketing 67,488 — 206 67,694 General and administrative 61,972 — 208 62,180 Total operating expenses 144,596 — 414 145,010 Income from operations 72,809 — ( 136 ) 72,673 Loss in fair value change of warrant liability — ( 72,673 ) — ( 72,673 ) Total other expense ( 8,523 ) ( 72,673 ) — ( 81,196 ) Income (loss) before income taxes 64,286 ( 72,673 ) ( 136 ) ( 8,523 ) Income tax expense 16,750 — ( 39 ) 16,711 Net income (loss) 47,536 ( 72,673 ) ( 97 ) ( 25,234 ) Comprehensive income (loss) $ 47,498 $ ( 72,673 ) $ ( 97 ) $ ( 25,272 ) As a result of the Restatement adjustments, basic earnings per share decreased by $ 0.90 per share, from $ 0.59 per share to a loss per share of $ 0.31 , and diluted earnings per share decreased $ 0.87 per share, from $ 0.56 per share to a loss per share of $ 0.31 . 51 Table of Contents Consolidated Statement of Operations and Comprehensive Income (Loss) 52-Weeks Ended August 25, 2018 (In thousands) As Previously Reported Restatement Adjustment Other Adjustments As Restated Net sales $ 431,429 $ — $ 6,425 $ 437,854 Cost of goods sold 251,063 — 3,903 254,966 Gross profit 180,366 — 2,522 182,888 Selling and marketing 59,092 — 94 59,186 General and administrative 49,635 — ( 208 ) 49,427 Total operating expenses 115,636 — ( 114 ) 115,522 Income from operations 64,730 — 2,636 67,366 Loss in fair value change of warrant liability — ( 34,391 ) — ( 34,391 ) Total other expense ( 11,639 ) ( 34,391 ) — ( 46,030 ) Income before income taxes 53,091 ( 34,391 ) 2,636 21,336 Income tax benefit ( 17,364 ) — 1,314 ( 16,050 ) Net income 70,455 ( 34,391 ) 1,322 37,386 Comprehensive income $ 69,638 $ ( 34,391 ) $ 1,322 $ 36,569 As a result of the Restatement adjustments, basic earnings per share declined $ 0.47 , from $ 1.00 per share to $ 0.53 per share, and diluted earnings per share changed $ 0.45 per share, from $ 0.96 per share to $ 0.51 per share. 52-Weeks Ended Consolidated Statement of Cash Flows August 29, 2020 (In thousands) As Previously Reported Restatement Adjustment As Restated Operating activities Net income $ 34,700 $ 30,938 $ 65,638 Adjustments to reconcile net income to net cash provided by operating activities: Gain in fair value change of warrant liability — ( 30,938 ) ( 30,938 ) Net cash provided by operating activities $ 58,921 $ — $ 58,921 53-Weeks Ended Consolidated Statement of Cash Flows August 31, 2019 (In thousands) As Previously Reported Restatement Adjustment Other Adjustments As Restated Operating activities Net income (loss) $ 47,536 $ ( 72,673 ) $ ( 97 ) $ ( 25,234 ) Adjustments to reconcile net income to net cash provided by operating activities: Loss in fair value change of warrant liability — 72,673 — 72,673 Deferred income taxes 10,908 — ( 39 ) 10,869 Changes in operating assets and liabilities, net of acquisition: Accounts receivable, net ( 7,985 ) ( 375 ) ( 8,360 ) Inventories ( 8,272 ) 94 ( 8,178 ) Accrued expenses and other current liabilities 13,961 — 417 14,378 Net cash provided by operating activities $ 73,042 $ — $ — $ 73,042 52 Table of Contents 52-Weeks Ended Consolidated Statement of Cash Flows August 25, 2018 (In thousands) As Previously Reported Restatement Adjustment Other Adjustments As Restated Operating activities Net income $ 70,455 $ ( 34,391 ) $ 1,322 $ 37,386 Adjustments to reconcile net income to net cash provided by operating activities: Loss in fair value change of warrant liability — 34,391 — 34,391 Deferred income taxes ( 21,108 ) — 764 ( 20,344 ) Changes in operating assets and liabilities, net of acquisition: Accounts receivable, net 267 — ( 6,425 ) ( 6,158 ) Inventories ( 1,081 ) — 3,506 2,425 Accrued expenses and other current liabilities 1,962 — 833 2,795 Net cash provided by operating activities $ 61,038 $ — $ — $ 61,038 Consolidated Statement of Stockholders’ Equity August 29, 2020 (In thousands) As Previously Reported Restatement Adjustment As Restated Additional paid-in-capital $ 1,094,507 $ ( 18,035 ) $ 1,076,472 Net income 34,700 30,938 65,638 Retained earnings 140,530 ( 75,603 ) 64,927 Total stockholders’ equity $ 1,232,971 $ ( 93,638 ) $ 1,139,333 Consolidated Statement of Stockholders’ Equity August 31, 2019 (In thousands) As Previously Reported Restatement Adjustments As Restated Additional paid-in-capital $ 733,775 $ ( 18,035 ) $ 715,740 Net income (loss) 47,536 ( 72,673 ) ( 25,234 ) Retained earnings (accumulated deficit) 105,830 ( 106,541 ) ( 711 ) Total stockholders’ equity $ 837,444 $ ( 124,576 ) $ 712,868 Consolidated Statement of Stockholders’ Equity August 25, 2018 (In thousands) As Previously Reported Restatement Adjustments As Restated Additional paid-in-capital $ 614,399 $ ( 18,035 ) $ 596,364 Net income 70,455 ( 34,391 ) 37,386 Retained earnings 58,294 ( 33,771 ) 24,523 Total stockholders’ equity $ 672,601 $ ( 51,806 ) $ 620,795 Consolidated Statement of Stockholders’ Equity August 26, 2017 (In thousands) As Previously Reported Restatement Adjustment As Restated Additional paid-in-capital $ 610,138 $ ( 18,035 ) $ 592,103 Retained earnings (accumulated deficit) ( 12,161 ) ( 702 ) ( 12,863 ) Total stockholders’ equity $ 598,702 $ ( 18,737 ) $ 579,965 53 Table of Contents 3. Change in Accounting Principle During the fourth quarter ended August 31, 2019, the Company changed its accounting principle related to the presentation of third-party delivery costs associated with shipping and handling activities previously included as operating expenses in Distribution in the Consolidated Statements of Operations and Comprehensive Income (Loss). The Company now presents these expenses within Cost of goods sold in the Consolidated Statements of Operations and Comprehensive Income (Loss). In connection with the change in accounting principle, the Company also changed its definition of shipping and handling costs to include costs paid to third-party warehouse operators associated with delivering product to a customer, previously included in General and administrative , and Depreciation and amortization of the assets at the third-party warehouse, previously included in Depreciation and amortization . Under the previous definition of shipping and handling costs, the Company only included delivery costs in Distribution . The accounting policy change was applied retrospectively to all periods presented and the Consolidated Statements of Operations and Comprehensive Income (Loss) reflect the effect of this accounting principle change for all periods presented. The effect of the adjustment is as follows in thousands: Fifty-Two Weeks Ended August 25, 2018 As Reported Change in Accounting Principle and Presentation Other Operating Expense (1) As Adjusted Other Adjustments (2) As Restated (3) Cost of goods sold $ 223,873 $ 27,190 $ — $ 251,063 $ 3,903 $ 254,966 Distribution 19,685 ( 19,685 ) — — — — General and administrative 56,333 ( 7,331 ) 633 49,635 ( 208 ) 49,427 Depreciation and amortization $ 7,672 $ ( 174 ) $ — $ 7,498 $ — $ 7,498 (1) Other operating expenses have been combined with General and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income (Loss). (2) Other Adjustments as reflected within Note 2 of the financial statements. (3) As restated amount as reflected within the restated Consolidated Statements of Operations and Comprehensive Income (Loss), and described within Note 2 of the financial statements. 4. Summary of Significant Accounting Policies Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Estimates also affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Business Combination On November 7, 2019 , pursuant to the Purchase Agreement, the Company completed the Acquisition of Quest for a cash purchase price of approximately $ 1.0 billion, subject to customary post-closing adjustments. The Acquisition of Quest was accounted for using the acquisition method of accounting prescribed by ASC Topic 805, Business Combinations (“ASC 805”), whereby the results of operations, including the revenues and earnings of Quest, are included in the financial statements from the date of acquisition. Additionally, assets acquired and liabilities assumed were recognized at their fair values based on widely accepted valuation techniques in accordance with ASC Topic 820, Fair Value Measurements, as of the closing date. The process for estimating fair values requires the use of significant estimates, assumptions and judgments, including determining the timing and estimates of future cash flows and developing appropriate discount rates. ASC 805 establishes a measurement period to provide the Company with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date. Measurement period adjustments are recognized in the reporting period in which the adjustments are determined and calculated as if the accounting had been completed as of acquisition date. The Company expects to complete the final fair value determination of the assets acquired and liabilities assumed as soon as practicable within the measurement period, but not to exceed one year from the acquisition date. Fair Value Measurements Fair value represents the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Assets and liabilities are valued based upon observable and non-observable inputs. Valuations using Level 1 inputs are based on unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date. Level 2 inputs utilize significant 54 Table of Contents other observable inputs available at the measurement date, other than quoted prices included in Level 1. Valuations using Level 3 inputs are based on significant unobservable inputs that cannot be corroborated by observable market data and require significant judgment. There were no significant transfers between levels during any period presented. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand, deposits available on demand and other short-term, highly liquid investments with original maturities of three months or less. Cash equivalents are carried at cost, which approximates fair value. Accounts Receivable, Net Accounts receivable, net consists primarily of trade receivables, net of allowances for doubtful accounts, returns and trade promotions. The Company sells its products for cash or on credit terms, which are established in accordance with local and industry practices and typically require payment within 30 days of delivery and may allow discounts for early payment. The Company estimates an allowance for doubtful accounts based upon a review of outstanding receivables, historical collection information and an analysis of customer data. Accounts receivable are written off when determined to be uncollectible. At August 29, 2020 and August 31, 2019, the allowance for doubtful accounts was $ 0.5 million and $ 0.6 million, respectively. Inventories Inventories are valued at the lower of cost or net realizable value on a first-in, first-out basis, adjusted for the value of inventory that is determined to be excess, obsolete, expired or unsaleable. Obsolete inventory is reserved at 50 % for inventory four to six months from expiration, and 100 % for items within three months of expiration. Reserves are also taken for certain products or packaging materials when it is determined their cost may not be recoverable. At August 29, 2020 and August 31, 2019, the provision for obsolete inventory was $ 0.5 million and $ 0.4 million, respectively. Property and Equipment, Net Property and equipment, net is stated at the allocated fair value for acquired assets. Additions to property and equipment are recorded at cost and depreciated on a straight-line basis over their estimated useful lives. The general ranges of estimated useful lives are: Furniture and fixtures 7 years Computer equipment, software and website development costs 3 - 5 years Machinery and equipment 7 years Office equipment 3 - 5 years Leasehold improvements are amortized over the shorter of the remaining term of the lease or the useful life of the improvement utilizing the straight-line method. The Company performs impairment tests for Property and equipment, net when circumstances indicate that the carrying value of the asset may not be recoverable. There were no indicators of impairment in the fifty-two week period ended August 29, 2020, the fifty-three week period ended August 31, 2019, or the fifty-two week period ended August 25, 2018. Goodwill and Intangible Assets, Net Goodwill and Intangible assets, net result primarily from the Acquisition of Atkins and other acquisitions. Intangible assets primarily include brands and trademarks with indefinite lives and customer-related relationships with finite lives. Upon acquisition, the purchase price is first allocated to identifiable assets and liabilities, including customer-related intangible assets and trademarks, with any remaining purchase price recorded as Goodwill . Goodwill and indefinite-lived intangible assets are not amortized but instead are tested for impairment at least annually, or more frequently if indicators of impairment exist. The Company conducts its annual impairment tests at the beginning of the fourth fiscal quarter. Goodwill and indefinite-lived intangible assets are assessed using either a qualitative or quantitative approach to determine whether it is more likely than not that the fair values of the reporting units are less than their carrying amounts. The qualitative assessment evaluates factors including macro-economic conditions, industry-specific and company-specific considerations, legal and regulatory environments, and historical performance. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, a quantitative assessment is performed. Otherwise, no further assessment is required. The quantitative approach compares the estimated fair value of the reporting unit to its carrying amount, including goodwill. Impairment is indicated if the estimated fair value of the reporting unit is less than the carrying amount of the reporting unit, and an impairment charge is recognized for the differential. 55 Table of Contents For fiscal year 2020, the Company elected to perform both qualitative and quantitative assessments of its goodwill and indefinite-lived intangible assets. During the fourth quarter of fiscal 2020, the Company determined there were indicators of impairment related to the SimplyProtein brand intangible asset. Therefore, the Company performed a quantitative assessment of its brand intangible asset, which indicated the fair value exceeded the carrying value, resulting in a loss on impairment of $ 3.0 million in the fifty-two week period ended August 29, 2020. There were no impairment charges related to goodwill in the fifty-two week period ended August 29, 2020. Additionally, for fiscal year 2019, we elected to perform quantitative assessments of goodwill and indefinite-lived intangible assets. No impairment charges related to goodwill or indefinite-lived intangibles were recognized in the fifty-three week period ended August 31, 2019. The Company performed qualitative assessments of goodwill and indefinite-lived intangible assets for fiscal year 2018. The qualitative assessments determined that it was more likely than not the reporting unit, brands and trademarks had a fair value in excess of their carrying value. Accordingly, no further impairment assessment was necessary, and no impairment charges related to goodwill or indefinite-lived intangibles were recognized in the fifty-two week period ended August 25, 2018. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. The Company reviews for impairment indicators of finite-lived intangibles and other long-lived assets as described in the “Property and Equipment, Net” significant accounting policy. Deferred Financing Costs and Debt Discounts Costs incurred in obtaining long-term financing paid to parties other than creditors are considered a deferred financing cost and are amortized over the terms of the long-term financing agreements using the effective-interest method. Amounts paid to creditors are recorded as a reduction in the proceeds received by the creditor and are considered a discount on the issuance of debt. Income Taxes Income taxes include federal, state and foreign taxes currently payable and deferred taxes arising from temporary differences between income for financial reporting and income tax purposes. Deferred tax assets and liabilities are determined based on the differences between the financial statement balances and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the fiscal year that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to amounts expected to be realized. Leases Contracts are evaluated to determine whether they contain a lease at inception. Leases are classified as either finance leases or operating leases based on criteria in ASC Topic 842, Leases. The Company’s operating leases are generally comprised of real estate and certain equipment used in warehousing products. The Company’s finance leases are generally comprised of warehouse equipment. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The majority of the Company's leases do not provide an implicit rate; therefore, the Company uses its secured incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments for those leases. The Company's incremental borrowing rate for a lease is the rate of interest it would pay to borrow on a collateralized basis over a similar term to the lease in a similar economic environment. The Company applied incremental borrowing rates using a portfolio approach. Right-of-use assets also include any lease payments made and exclude lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has elected not to recognize right-of-use assets and lease liabilities for short-term operating leases that have a term of one year or less. The Company monitors for triggering events or conditions that require a reassessment of its leases. When the reassessment requires a re-measurement of the lease liability, a corresponding adjustment is made to the carrying amount of the right-of-use asset. Additionally, the Company reviewed for impairment indicators of its right-of-use assets and other long-lived assets as described in the “Property and Equipment, Net” significant accounting policy. 56 Table of Contents Warrant Accounting The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued private placement stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480, Distinguishing Liabilities from Equity, and ASC 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is assessed as part of this evaluation. Prior to the Acquisition of Atkins, Conyers Park issued 13,416,667 public warrants and 6,700,000 Private Warrants. The Company assumed the Conyers Park warrants to purchase common stock in connection with the Acquisition of Atkins. As a result of the Acquisition of Atkins, the warrants issued by Conyers Park were no longer exercisable for shares of Conyers Park common stock, but were instead exercisable for common stock of the Company. All other features of the warrants were unchanged. Each whole warrant entitles the holder to purchase one share of the Company’s common stock at a price of $ 11.50 per share. The warrants became exercisable 30 days after the completion of the Acquisition of Atkins and expire five years after that date, or earlier upon redemption or liquidation, as applicable. The assumed 13,416,667 public warrants qualified for equity classification until the warrants were fully redeemed in fiscal 2019. The 6,700,000 Private Warrants remain outstanding, and are precluded from equity classification, being liability-classified. The Company accounts for these Private Warrants as a derivative warrant liability in accordance with ASC 815-40. Accordingly, the Company recognizes the Private Warrants as a liability at fair value and adjusts the Private Warrants to fair value at each reporting period through other income. The fair value adjustments are determined by using a Black-Scholes option-pricing methodology. The valuation is primarily based on observable market data while the related theoretical private warrant volatility assumption within the Black-Scholes model represents a Level 3 measurement within the fair value measurement hierarchy. The periodic remeasurement of the Private Warrants is reflected in Gain (loss) in fair value change of warrant liability within the Consolidated Statements of Operations and Comprehensive Income (Loss). Revenue Recognition The Company recognizes revenue when performance obligations under the terms of a contract with its customer are satisfied. The Company has determined that fulfilling and delivering products is a single performance obligation. Revenue is recognized at the point in time when the Company has satisfied its performance obligation and the customer has obtained control of the products. This generally occurs when the product is delivered to or picked up by the customer based on applicable shipping terms, which is typically within 30 days. Revenue is measured as the amount of consideration expected to be received in exchange for fulfilled product orders, including estimates of variable consideration. The most common forms of variable consideration include trade promotions, such as consumer incentives, coupon redemptions and other marketing activities, allowances for unsaleable product, and any additional amounts where a distinct good or service cannot be identified or the value cannot be reasonably estimated. Trade promotions are recorded as a reduction to net sales with a corresponding reduction to accounts receivable at the time of revenue recognition for the underlying sale. The recognition of trade promotions requires management to make estimates regarding the volume of incentive that will be redeemed and their total cost. At August 29, 2020 and August 31, 2019, the allowance for trade promotions was $ 25.2 million and $ 10.3 million, respectively. Estimates of variable consideration are made using various information including historical data on performance of similar trade promotional activities, market data from IRI, and the Company’s best estimate of current activity. The Company reviews these estimates regularly and makes revisions as necessary. Revisions can include changes for consideration paid to customers that lack sufficient evidence to support a distinct good or service assertion, or for which a reasonably estimable fair value cannot be determined, primarily related to the Company's assessments of cooperative advertising programs. Uncertainties related to the estimate of variable consideration are resolved in a short time frame and do not require any additional constraint on variable consideration. Adjustments to variable consideration are recognized in the period the adjustments are identified and have historically been insignificant. Revenue is recognized net of any taxes collected from customers and subsequently remitted to governmental authorities. The Company provides standard assurance type warranties that its products will comply with all agreed-upon specifications. No services beyond an assurance type warranty are provided to customers. While customers generally have a right to return defective or non-conforming products, past experience has demonstrated that product returns have been immaterial. Customer remedies for defective or non-conforming products may include a refund or exchange. As a result, the right of return is estimated and recorded as a reduction in revenue at the time of sale, if necessary. The Company's customer contracts identify product quantity, price and payment terms. Payment terms are granted consistent with industry standards. Although some payment terms may be more extended, the majority of the Company's payment terms are less than 60 57 Table of Contents days. As a result, revenue is not adjusted for the effects of a significant financing component. Amounts billed and due from customers are classified as Accounts receivable, net on the Consolidated Balance Sheets. The Company utilizes third-party contract manufacturers for the manufacture of its products. The Company has evaluated whether the it is the principal or agent in these relationships. The Company has determined that it is the principal in all cases, as it maintains the responsibility for fulfillment, risk of loss and establishes the price. In accordance with ASC Topic 606, Revenue from Contracts with Customers, the Company has elected the practical expedient to expense the incremental costs to obtain a contract, because the amortization period would be less than one year, and the practical expedient for shipping and handling costs. Shipping and handling costs incurred to deliver products to customers are accounted for as fulfillment activities, rather than a promised service, and as such are included in Cost of goods sold in the Consolidated Statements of Operations and Comprehensive Income (Loss). 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. For revenue disaggregated by geographic area and brand refer to Note 18, Segment and Customer Information. Cost of Goods Sold Costs of goods sold represent costs directly related to the manufacture and distribution of the Company's products. Such costs include raw materials, co-manufacturing costs, packaging, shipping and handling, third-party distribution and depreciation of distribution center equipment and leasehold improvements. Shipping and Handling Costs Shipping and handling costs include costs paid to third-party warehouse operators associated with delivering product to customers and depreciation and amortization of assets at the third-party warehouse. Shipping and handling costs are recognized in Cost of goods sold . Costs of $ 49.8 million for the fifty-two week period ended August 29, 2020, $ 32.3 million for the fifty-three week period ended August 31, 2019, and $ 27.2 million for the fifty-two week period ended August 25, 2018 were recorded relating to products shipped to customers. Advertising Costs Production costs related to television commercials are expensed when first aired. All other advertising costs are expensed when incurred through Selling and marketing . Total advertising costs were $ 55.3 million for the fifty-two week period ended August 29, 2020, $ 35.4 million for the fifty-three week period ended August 31, 2019, and $ 34.0 million for the fifty-two week period ended August 25, 2018. Production costs related to television commercials not yet aired are included in Prepaid expenses in the accompanying Consolidated Balance Sheets. There were no productions costs related to television commercials not yet aired at August 29, 2020 or August 31, 2019. Research and Development Activities The Company’s research and development activities primarily consist of generating and testing new product concepts, new flavors and packaging. The Company expenses research and development costs as incurred related to compensation, facility costs, consulting and supplies. Research and development activities are primarily internal and associated costs are included in General and administrative . The Company’s total research and development expenses were $ 4.0 million for the fifty-two week period ended August 29, 2020, $ 2.2 million for the fifty-three week period ended August 31, 2019, and $ 2.5 million for the fifty-two week period ended August 25, 2018. Share-Based Compensation The Company uses share-based compensation, including stock options, restricted stock units and performance stock units, to provide long-term performance incentives for its employees and directors. Share-based compensation is recognized on a straight-line basis over the requisite service period of the award based on their grant-date fair value. Forfeitures are recognized as they occur. Share-based compensation expense is included in General and administrative. 58 Table of Contents Defined Contribution Plan The Company sponsors defined contribution plans to provide retirement benefits to its employees. The Company's 401(k) plan and similar plans for non-domestic employees are based on a portion of eligible pay up to a defined maximum. All matching contributions are made in cash. Expense associated with defined contribution plans was $ 1.3 million for the fifty-two week period ended August 29, 2020, $ 0.6 million for the fifty-three week period ended August 31, 2019, and $ 0.4 million for the fifty-two week period ended August 25, 2018. Foreign Currency Translation For all foreign operations, the functional currency is the local currency. Assets and liabilities of these operations are translated into U.S. dollars using the exchange rate in effect at the end of each reporting period. Income statement accounts are translated at the average exchange rate prevailing during each reporting period. Translation adjustments are recorded as a component of Other comprehensive income (loss) . Gains or losses resulting from transactions in foreign currencies are included in Other income (expense) . Recently Issued and Adopted Accounting Pronouncements Recently Issued Accounting Pronouncements Not Yet Adopted In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which modifies disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. This ASU is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The amendments of this ASU should be applied on a retrospective basis to all periods presented. The Company is currently evaluating the effects adoption of this guidance will have on the consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), which modifies disclosure requirements on fair value measurements of ASC 820. This ASU is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted including in any interim period for which financial statements have not yet been issued. Entities are permitted to early adopt the eliminated or modified disclosure requirements and delay the adoption new disclosure requirements until their effective date. The Company is currently evaluating the effects adoption of this guidance will have on the consolidated financial statements and does not anticipate adoption of this ASU will be material to its consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): 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. GAAP for other areas of accounting for income taxes by clarifying and amending existing guidance. This ASU is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company does not expect that the adoption of this new guidance will have a material effect on its consolidated financial statements. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting. The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022. The amendments of this ASU should be applied on a prospective basis. The Company is currently evaluating the effects adoption of this guidance will have on the consolidated financial statements. Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. ASU 2018-11 provides entities another option for transition, allowing entities to not apply the new standard in the comparative periods they present in their financial statements in the year of adoption. The amendments provide the option for the ASU to be applied at the beginning of the period adopted using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. On September 1, 2019, the Company adopted ASU No. 2016-02 using the alternative transition method under ASU No. 2018-11, which permits application of the new lease guidance at the beginning of the period of adoption, with comparative periods continuing to be reporting under Topic 840. Upon adoption, the Company recorded the following within the Condensed Consolidated Balance Sheets: operating lease right-of-use assets of $ 5.1 million included within Other long-term assets, current operating lease liabilities of $ 2.0 million included within Accrued expenses and other current liabilities, long-term operating lease liabilities of $ 3.8 million included within Other 59 Table of Contents long-term liabilities, finance lease right-of-use assets of $ 1.2 million included within Property and equipment, net, current finance lease liabilities of $ 0.2 million included within Current maturities of long term debt, and long-term finance lease liabilities of $ 1.0 million included within Long-term debt less current maturities . Following the Acquisition of Quest, the Company recorded the following amounts in the Condensed Consolidated Balance Sheets as of the closing date on November 7, 2019: operating lease right-of-use assets of $ 21.1 million included within Other long-term assets, current operating lease liabilities of $ 2.0 million included within Accrued expenses and other current liabilities, and long-term operating lease liabilities of $ 18.9 million included within Other long-term liabilities. The adoption of these ASUs did not result in a cumulative-effect adjustment to the opening balance of retained earnings. The guidance provided a number of optional practical expedients in adoption. The Company elected to adopt the package of practical expedients permitted under the transition guidance within the standard, which among other things, permits it to not reassess prior conclusions about lease identification, lease classification and initial direct costs under the new standard. The Company did not elect the use-of-hindsight practical expedient or the practical expedient pertaining to land easements, the latter not being applicable. Additionally, the Company elected to include both lease and non-lease components as a single component for all asset classes in which the Company is the lessee. For additional information regarding leases, refer to Note 12. In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. This ASU simplifies aspects of share-based compensation issued to non-employees by aligning the guidance with accounting for employee share-based compensation. The Company adopted this ASU as of the first day of fiscal 2020. The adoption of this ASU did not have a material effect on the consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted this ASU as of the first day of fiscal 2020. The adoption of this ASU did not have a material effect on the consolidated financial statements. 5. 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. 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. Quest is a healthy lifestyle food company offering a variety of bars, cookies, chips, ready-to-drink shakes and pizzas that compete in many of the attractive, fast growing sub-segments within the nutritional snacking category. The Acquisition of Quest was funded by the Company through a combination of cash, equity and debt financing. Total consideration paid on the closing date was $ 988.9 million. 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. 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 August 29, 2020. Business transaction costs within the Consolidated Statements of Operations and Comprehensive Income (Loss) for fifty-two week period ended August 29, 2020 was $ 27.1 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 $ 3.3 million of other costs, including legal, due diligence, and accounting fees. Included in the transaction advisory fees paid for the Acquisition of Quest is $ 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. The advisory fee paid to Centerview Partners LLC represents approximately 1.2 % of the total cash purchase price paid by the Company on the closing date of the Acquisition of Quest. All transaction advisory fees relating to the Acquisition of Quest were approved by the Company’s Audit Committee. The following table sets forth the preliminary purchase price allocation of the Acquisition of Quest to the estimated fair value of the net assets acquired at the date of acquisition. The preliminary purchase price allocation may be adjusted as a result of the finalization of the Company’s purchase price allocation procedures related to the assets acquired and liabilities assumed. 60 Table of Contents The preliminary November 7, 2019 fair value is as follows in thousands: Assets acquired: Cash and cash equivalents $ 4,745 Accounts receivable, net 26,537 Inventories 44,032 Prepaid assets 1,214 Other current assets 3,812 Property and equipment, net (1) 9,843 Intangible assets, net (2) 868,375 Other long-term assets 20,997 Liabilities assumed: Accounts payable 25,200 Other current liabilities 11,237 Deferred income taxes (3) 10,754 Other long-term liabilities 18,891 Total identifiable net assets 913,473 Goodwill (4) 73,347 Total assets acquired and liabilities assumed $ 986,820 (1) Property and equipment, net primarily consists of leasehold improvements for the Quest headquarters of $ 6.9 million, furniture and fixtures of $ 2.2 million, and equipment of $ 0.7 million. The Quest headquarters lease ends in April 2029. The useful lives of the leasehold improvements, furniture and fixtures, and equipment is consistent with the Company's accounting policies. (2) Intangible assets were recorded at fair value consistent with ASC 820 as a result of the Acquisition of Quest. Intangible assets consist of $ 750.0 million of indefinite brand and trademark, $ 115.0 million of amortizable customer relationships, and $ 3.4 million of internally developed software. The useful lives of the intangible assets are disclosed in Note 7 of the consolidated financial statements. The fair value measurement of the assets and liabilities was based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value measurement hierarchy. Level 3 fair market values were determined using a variety of information, including estimated future cash flows and market comparable data and companies. The fair values of the intangible assets were estimated using inputs primarily from the income approach and the with/without method, which estimates the value using the cash flow impact in a hypothetical scenario where the customer relationships are not in place. The significant assumptions used in estimating the fair value of the intangible assets include the estimated life the asset will contribute to cash flows, profitability, and the estimated discount rate. (3) Primarily as a result of the fair value attributable to the identifiable intangible assets, the deferred income tax liability was $ 10.8 million. (4) Goodwill was recorded at fair value consistent with ASC 820 as a result of the Acquisition of Quest. Amounts recorded for goodwill created in an acquisition structured as a stock purchase for tax are generally not expected to be deductible for tax purposes. Amounts recorded for goodwill resulting in a tax basis step-up are generally expected to be deductible for tax purposes. Tax deductible Goodwill is estimated to be $ 67.7 million. Goodwill represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The final determination of the fair value of the assets acquired and liabilities assumed is expected to be completed in the first fiscal quarter of 2021. Since the initial preliminary estimates reported in the first fiscal quarter of 2020, the Company has updated certain amounts reflected in the preliminary 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 $ 3.1 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 $ 22.7 million. Measurement period adjustments are recognized in the reporting period in which the adjustments are determined and calculated as if the accounting had been completed at the acquisition date. The final fair value determination of the assets acquired and liabilities assumed will be completed prior to one year from the transaction completion, consistent with ASC 805. 61 Table of Contents The results of Quest's operations have been included in the Simply Good Foods' Consolidated Financial Statements since November 7, 2019, the date of acquisition. The following table provides net sales from the acquired Quest business included in the Company's results: 52-Weeks Ended (In thousands) August 29, 2020 Net sales $ 286,803 Unaudited Pro Forma Financial Information Pro forma financial information is not intended to represent or be indicative of the actual results of operations of the combined business that would have been reported had the Acquisition of Quest been completed at the beginning of the fiscal year 2019, nor is it representative of future operating results of the Company. This unaudited pro forma combined financial information is prepared based on Article 11 of Regulation S-X period end guidance. The Company and the legacy Quest entity have different fiscal year ends, with Simply Good Foods’ fiscal year being the last Saturday of August while the legacy Quest business fiscal year end was December 31. Because the year ends differ by more than 93 days, Quest's financial information is required to be adjusted to a period within 93 days of Simply Good Foods’ fiscal period end. For the purposes of preparing the unaudited pro forma combined financial information for the fifty-three week period ended August 31, 2019, the Company added Quest’s unaudited consolidated statement of operations for the six months ended June 30, 2019 to Quest's unaudited consolidated statement of operations for the six months ended December 31, 2018, which was derived by deducting the historical unaudited consolidated statement of operations for the six months ended June 30, 2018, from the unaudited consolidated statement of operations for the fiscal year ended December 31, 2018. In addition to the above period end adjustments, the pro forma results include certain adjustments, as required under ASC 805, which are different than Article 11 pro forma requirements. ASC 805 requires pro forma adjustments to reflect the effects of fair value adjustments, transaction costs, capital structure changes, the tax effects of such adjustments, and also requires nonrecurring adjustments be prepared as though the Acquisition of Quest had occurred as of the beginning of the earliest period presented. The adjustments to the historical Quest financial results include the exclusion of legacy derivatives and interest expense that were settled in the execution of the Acquisition of Quest. Additional adjustments include non-recurring transaction costs and the portion of the inventory fair value adjustment recorded by the Company during the fifty-two week period ended August 29, 2020. Both periods were further adjusted to reflect a full period of (a) fair value adjustments related to inventory and incremental customer relationship amortization, (b) interest expense with the higher principal and interest rates associated with the Company's new term loan debt incurred to finance, in part, the Acquisition of Quest, and (c) the effects of the adjustments on income taxes and net income. The pro forma combined financial information includes the fair value adjustments of the liability-classified Private Warrants. The following unaudited pro forma combined financial information presents combined results of the Company and Quest as if the Acquisition of Quest has occurred at the beginning of fiscal 2019: 52-Weeks Ended 53-Weeks Ended (In thousands) August 29, 2020 August 31, 2019 Net sales $ 885,044 $ 832,629 Gross profit 355,395 317,758 Net income (loss) $ 90,028 $ ( 42,627 ) 62 Table of Contents 6. Property and Equipment, Net Property and equipment, net , as presented with the Consolidated Balance Sheets, are summarized as follows: (In thousands) August 29, 2020 August 31, 2019 Furniture and fixtures $ 3,197 $ 715 Computer equipment and software 1,062 956 Machinery and equipment 1,135 385 Website development costs — 2,237 Leasehold improvements 8,137 361 Finance lease right-of-use-assets 1,185 — Construction in progress — 139 Property and equipment, gross 14,716 4,793 Less: accumulated depreciation ( 2,866 ) ( 2,337 ) Property and equipment, net $ 11,850 $ 2,456 The increase in Property and equipment, net as of August 29, 2020 as compared to August 31, 2019 was primarily a result of the Acquisition of Quest. Total depreciation expense was $ 1.8 million for the fifty-two week period ended August 29, 2020, $ 1.1 million for the fifty-three week period ended August 31, 2019, and $ 1.2 million for the fifty-two week period ended August 25, 2018. General and administrative includes a $ 0.1 million loss on disposal of property and equipment in the fifty-two week period ended August 25, 2018. 7. Goodwill and Intangibles Changes to Goodwill during the fifty-two week period ended August 29, 2020 were as follows: (In thousands) Goodwill Balance as of August 31, 2019 $ 471,427 Acquisition of business 73,347 Balance as of August 29, 2020 $ 544,774 The Company performed the first step of the quantitative goodwill impairment assessment by comparing the fair value of each of the Company’s reporting units to its carrying amount, including goodwill. The goodwill impairment assessment was performed for each reporting unit that had goodwill, which consisted of both of the Company’s operating segments, Atkins and Quest. The estimated fair values of the Atkins and Quest reporting units substantially exceeded their carrying values. Therefore, the Company determined neither reporting unit was impaired. The change in Goodwill during the fifty-two week period ended August 29, 2020 was the result of the acquisition method of accounting related to the Acquisition of Quest as described in Note 5. There were no changes in the Company's goodwill in the fifty-three week period ended August 31, 2019. There were no impairment charges related to goodwill in the fifty-two week period ended August 29, 2020 or since the inception of the Company. Intangible assets, net in the Consolidated Balance Sheets consist of the following: August 29, 2020 (In thousands) Useful life Gross carrying amount Accumulated amortization Net carrying amount Intangible assets with indefinite life: Brands and trademarks Indefinite life $ 979,000 $ — $ 979,000 Intangible assets with finite lives: Customer relationships 15 years 174,000 18,503 155,497 Proprietary recipes and formulas 7 years 7,000 3,131 3,869 Licensing agreements 14 years 22,000 4,920 17,080 Software and website development costs 3 - 5 years 5,967 2,645 3,322 $ 1,187,967 $ 29,199 $ 1,158,768 63 Table of Contents August 31, 2019 (In thousands) Useful life Gross carrying amount Accumulated amortization Net carrying amount Intangible assets with indefinite life: Brands and trademarks Indefinite life $ 232,000 $ — $ 232,000 Intangible assets with finite lives: Customer relationships 15 years 59,000 8,382 50,618 Proprietary recipes and formulas 7 years 7,000 2,131 4,869 Licensing agreements 14 years 22,000 3,348 18,652 $ 320,000 $ 13,861 $ 306,139 Intangible assets, net changed due to the Acquisition of Quest, amortization expense, and an impairment loss related to brand and trademark intangible assets. During the fourth quarter of fiscal 2020, the Company determined there were indicators of impairment related to the SimplyProtein brand intangible asset. Therefore, the Company performed a quantitative assessment of its brand intangible asset, which indicated its fair value exceeded its carrying value, resulting in a loss on impairment of $ 3.0 million. Additionally, the Company had not identified indicators of impairment related to its finite-lived intangible assets, which are tested for impairment when events or circumstances indicated that the carrying amount may not be recoverable. Amortization expense related to intangible assets was $ 14.0 million for the fifty-two week period ended August 29, 2020, $ 6.5 million for the fifty-three week period ended August 31, 2019, and $ 6.5 million for the fifty-two week period ended August 25, 2018. Estimated future amortization for each of the next five fiscal years and thereafter is as follows: (In thousands) Amortization 2021 $ 15,446 2022 15,212 2023 14,938 2024 14,281 2025 13,171 Thereafter 106,720 Total $ 179,768 8. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities in the Consolidated Balance Sheets were comprised of the following: (In thousands) August 29, 2020 August 31, 2019 Accrued professional fees $ 3,125 $ 8,903 Accrued advertising allowances and claims 2,625 2,095 Accrued bonus expenses 12,261 10,908 Accrued freight expenses 1,795 1,791 Accrued payroll-related expenses 2,179 841 Accrued commissions 1,789 932 Income taxes payable 839 382 VAT payable 2,367 1,787 Accrued restructuring 4,139 — Other accrued expenses 2,559 2,294 Current operating lease liabilities 4,329 — Accrued expenses and other current liabilities $ 38,007 $ 29,933 The increase in Accrued expenses and other current liabilities as of August 29, 2020 as compared to August 31, 2019 was primarily a result of the Acquisition of Quest. 64 Table of Contents 9. Long-Term Debt and Line of Credit On July 7, 2017, the Company entered into a credit agreement with Barclays Bank PLC and other parties (as amended to date, the "Credit Agreement"). The Credit Agreement provides for (i) a term facility of $ 200.0 million (“Term Facility”) with a seven-year maturity and (ii) a revolving credit facility of up to $ 75.0 million (the “Revolving Credit Facility”) with a five-year maturity. Substantially concurrent with the consummation of the Acquisition of Atkins, the full $ 200.0 million of the Term Facility (the “Term Loan”) was drawn. The interest rate per annum is based on either (i) a base rate equaling the higher of (a) the “prime rate”, (b) the federal funds effective rate plus 0.50 % and (c) the Euro-currency rate applicable for an interest period of one month plus 1.00 % plus (x) 3.00 % margin for Term Loan or (y) 2.00 % margin for Revolving Credit Facility, or (ii) London Interbank Offered Rate (“LIBOR”) adjusted for statutory reserve requirements, plus (x) 4.00 % margin for the Term Loan subject to a floor of 1.00 % or (y) 3.00 % margin for the Revolving Credit Facility. As security for the payment or performance of its debt, the Company has pledged certain equity interests in its subsidiaries. On March 16, 2018 (the “Amendment Date”), the Company entered into an amendment (the “Repricing Amendment”) to the Credit Agreement. As a result of the Repricing Amendment, the interest rate on the Term Loan was reduced and, as of the Amendment Date, such loans had an interest rate equal to, at the Company's option, either LIBOR plus an applicable margin of 3.50 % or a base rate plus an applicable margin of 2.50 %. The Repricing Amendment did not change the interest rate on the Revolving Credit Facility. The Revolving Credit Facility continued to bear interest based upon the Company's consolidated net leverage ratio as of the last financial statements delivered to the administrative agent. No additional debt was incurred, or any proceeds received, by the Company in connection with the Repricing Amendment. The incremental fees paid to the administrative agent are reflected as additional debt discount and are amortized over the terms of the long-term financing agreements using the effective-interest method. On November 7, 2019, the Company entered into an amendment (the “Incremental Facility Amendment”) to the Credit Agreement to increase the principal borrowed on the Term Facility by $ 460.0 million. The Term Facility together with the incremental borrowing make up the Initial Term Loans (as defined in the Incremental Facility Amendment) and as of the Amendment No. 2 Effective Date (as defined in the Incremental Facility Amendment), the Initial Term Loans bear interest at a rate equal to, at the Company's option, either LIBOR plus an applicable margin of 3.75 % or a base rate plus an applicable margin of 2.75 %. The Incremental Facility Amendment was executed to partially finance the Acquisition of Quest. No amounts under the Term Facility were repaid as a result of the execution of the Incremental Facility Amendment. During the third fiscal quarter of 2020, the Company borrowed $ 25.0 million under the Revolving Credit Facility. This was a precautionary measure to preserve financial flexibility and to maintain liquidity in response to the spread of COVID-19 and uncertainty around consumer behavior. The Company used the proceeds of the Revolving Credit Facility to meet initial elevated customer orders in response to COVID-19, build finished goods inventory of some of its high velocity items, support working capital and support general corporate purposes. In the fourth fiscal quarter of 2020, the Company repaid the $ 25.0 million borrowing under the Revolving Credit Facility. The Company may repay borrowings under the Revolving Credit Facility at any time without penalty. As of August 29, 2020 and August 31, 2019, there were no amounts drawn against the Revolving Credit Facility. The Credit Agreement contains certain financial and other covenants that limit the Company’s ability to, among other things, incur and/or undertake asset sales and other dispositions, liens, indebtedness, certain acquisitions and investments, consolidations, mergers, reorganizations and other fundamental changes, payment of dividends and other distributions to equity and warrant holders, and prepayments of material subordinated debt, in each case, subject to customary exceptions materially consistent with credit facilities of such type and size. The Revolving Credit Facility has a maximum total net leverage ratio equal to or less than 6.25 :1.00 (with a reduction to 6.00 :1.00 on the third anniversary of the closing date of the credit facilities) contingent on credit extensions in excess of 30 % of the total amount of commitments available under the Revolving Credit Facility. 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 August 29, 2020 and August 31, 2019, respectively. Long-term debt consists of the following: (In thousands) August 29, 2020 August 31, 2019 Term Facility (effective rate of 4.8% at August 29, 2020) $ 606,500 $ 196,500 Finance lease liabilities (effective rate of 5.6% at August 29, 2020) 922 — Less: Deferred financing fees 10,272 5,565 Total debt 597,150 190,935 Less: Current maturities, net of deferred financing fees of $0.0 million at August 29, 2020 and $1.3 million at August 31, 2019, respectively — 676 Less: Current finance lease liabilities 271 — Long-term debt, net of deferred financing fees $ 596,879 $ 190,259 65 Table of Contents As of August 29, 2020, aggregate principal maturities of debt for each of the next five fiscal years and thereafter are as follows: (In thousands) Principal Maturities 2021 $ 236 2022 282 2023 262 2024 606,642 2025 — Total debt $ 607,422 The Company is no t required to make principal payments on the Term Facility over the twelve months following the period ended August 29, 2020. As of August 29, 2020, the Company had letters of credit in the amount of $ 5.9 million outstanding. These letters of credit offset against the availability of the Revolving Credit Facility. These letters of credit 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 August 29, 2020. 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 August 29, 2020 and August 31, 2019, 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. 10. Fair Value of Financial Instruments Fair value is defined as 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. To increase the comparability of fair value measurements, a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies, is as follows: Level 1 – Valuations based on quoted prices for identical assets and liabilities in active markets. Level 2 – Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3 – Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. A loss of $ 0.5 million and a benefit of $ 2.8 million was charged to the Loss (gain) in fair value change of contingent consideration - TRA liability for the fifty-three week period ended August 31, 2019 and fifty-two week period ended August 25, 2018, respectively. The Company settled the Income Tax Receivable Agreement (the “TRA”) during the fifty-three week period ended August 31, 2019, which resulted in a $ 1.5 million gain. Refer to Note 11, Income Taxes, for additional details regarding the TRA liability settlement. Level 3 Measurements The Company has outstanding liability-classified Private Warrants that allow holders to purchase 6,700,000 shares of the Company’s common stock. Such Private Warrants are held by Conyers Park Sponsor, LLC, a related party. The Company utilizes the Black-Scholes valuation model to estimate the fair value of the Private Warrants at each reporting date. The application of the Black-Scholes model utilizes significant assumptions, including volatility. Significant judgment is required in determining the expected volatility (the key assumption) of the Private Warrants. In order to determine the most accurate measure of this volatility, the Company measured expected volatility based on several inputs, including considering a peer group of publicly traded companies, the Company’s implied volatility based on traded options, the implied volatility of comparable SPAC warrants, and the implied volatility of any outstanding Public Warrants during the periods they were outstanding. As a result of the unobservable inputs that were used to determine the expected volatility of the Private Warrants, the fair value measurement of these warrants reflects a Level 3 measurement within the fair value measurement hierarchy. 66 Table of Contents The periodic remeasurement of the warrant liability is reflected in Gain (loss) in fair value change of warrant liability within the Consolidated Statements of Operations and Comprehensive Income (Loss). The adjustments for the fifty-two week period ended August 29, 2020, the fifty-three week period ended August 31, 2019, and the fifty-two week period ended August 25, 2018 were a gain of $ 30.9 million, a loss of $ 72.7 million and a loss of $ 34.4 million, respectively. The adjustments resulted in a total warrant liability at August 29, 2020 and August 31, 2019 of $ 93.6 million and $ 124.6 million, respectively. There were 6,700,000 Private Warrants outstanding as of August 29, 2020, August 31, 2019, and August 25, 2018. Based on the fair value assessment that was performed, the Company determined a fair value price per Private Warrant of $ 13.98 , $ 18.59 , and $ 7.75 as of August 29, 2020, August 31, 2019, and August 25, 2018, respectively. The table below summarizes the inputs used to calculate the fair value of the warrant liability at each of the dates indicated below: August 29, 2020 August 31, 2019 August 25, 2018 Exercise Price $ 11.50 $ 11.50 $ 11.50 Stock Price $ 25.39 $ 29.63 $ 17.98 Dividend Yield — % — % — % Expected Term (in Years) 1.85 2.85 3.87 Risk-Free Interest Rate 0.14 % 1.43 % 2.68 % Expected Volatility 29.20 % 21.10 % 18.40 % Per Share Value of Warrants $ 13.98 $ 18.59 $ 7.75 The following table presents changes in Level 3 liabilities measured at fair value for the year ended August 31, 2019: (In thousands) Private Warrants Balance at August 25, 2018 $ 51,903 Change in fair value of warrant liabilities 72,673 Balance at August 31, 2019 $ 124,576 The following table presents changes in Level 3 liabilities measured at fair value for the year ended August 29, 2020: (In thousands) Private Warrants Balance at August 31, 2019 $ 124,576 Change in fair value of warrant liabilities ( 30,938 ) Balance at August 29, 2020 $ 93,638 There were no transfers of financial instruments between the three levels of the fair value hierarchy during the fiscal years ended August 29, 2020, August 31, 2019, and August 25, 2018, respectively. 67 Table of Contents 11. Income Taxes The sources of income before income taxes are as follows: 52-Weeks Ended 53-Weeks Ended 52-Weeks Ended (In thousands) August 29, 2020 August 31, 2019 August 25, 2018 Domestic $ 78,418 $ ( 8,565 ) $ 17,993 Foreign 546 42 3,343 Total income before income taxes $ 78,964 $ ( 8,523 ) $ 21,336 Income tax expense (benefit) was comprised of the following: 52-Weeks Ended 53-Weeks Ended 52-Weeks Ended (In thousands) August 29, 2020 August 31, 2019 August 25, 2018 Current: Federal $ 3,056 $ 2,784 $ 3,134 State and local 1,835 2,684 159 Foreign 219 374 1,001 Total current expense $ 5,110 $ 5,842 $ 4,294 Deferred: Federal $ 6,747 $ 9,937 $ ( 20,459 ) State and local 1,637 1,086 ( 26 ) Foreign ( 168 ) ( 154 ) 141 Total deferred income tax expense (benefit) 8,216 10,869 ( 20,344 ) Total tax expense (benefit) $ 13,326 $ 16,711 $ ( 16,050 ) A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows: 52-Weeks Ended 53-Weeks Ended 52-Weeks Ended (In thousands) August 29, 2020 August 31, 2019 August 25, 2018 Statutory income tax expense: 21.0 % 21.0 % 25.5 % Change in fair value of warrant liabilities ( 10.8 ) ( 222.2 ) ( 42.5 ) State income tax expense, net of federal 5.0 3.9 3.1 Valuation allowance ( 1.2 ) ( 0.6 ) 0.6 Taxes on foreign income above the U.S. tax 0.1 0.2 0.4 Tax Cuts and Jobs Act — — ( 58.4 ) Change in tax rate 1.5 1.5 ( 4.0 ) Non-deductible transaction costs 0.1 — — TRA contingent consideration — ( 0.4 ) ( 1.5 ) Other permanent items 1.2 0.5 1.6 Income tax expense (benefit) 16.9 % ( 196.1 ) % ( 75.2 ) % The comparability of the Company's operating results of fiscal 2018 as compared to subsequent fiscal years 2019 and 2020 was effected by the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which was enacted on December 22, 2017. The Tax Act introduced significant changes to U.S. income tax law including reducing the U.S. federal statutory tax rate from 35% to 21% and imposing new taxes on certain foreign-sourced earnings and certain intercompany payments. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, the Company made reasonable estimates of the effects and recorded provisional amounts in its financial statements as of fiscal 2018 in accordance with SEC Staff Accounting Bulletin No. 118 (“SAB 118”). During the period ended February 23, 2019, the Company completed its accounting for the Tax Act with no material adjustment to the provisional estimates recorded. For the Global Intangible Low-Taxed Income (“GILTI”) provisions of the Tax Act, the Company completed its assessment during the second quarter of 2019 and, effective August 26, 2018, elected an accounting policy to record GILTI as period costs if and when 68 Table of Contents incurred. Additionally, the Company concluded that it had not met the threshold requirements of the base erosion and anti-abuse tax. Although the measurement period has closed, further technical guidance related to the Tax Act, including final regulations on a broad range of topics, is expected to be issued. In accordance with ASC 740, the Company will recognize any effects of the guidance in the period that such guidance is issued. The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities at August 29, 2020 and August 31, 2019 were as follows: (In thousands) August 29, 2020 August 31, 2019 Deferred tax assets Accounts receivable allowances $ 2,427 $ 2,601 Inventories write-downs 92 67 Accrued expenses 3,968 3,680 Net operating loss carryforwards 3,837 4,179 Share-based compensation 2,770 1,755 Tax credits 256 351 Lease liabilities 6,785 — Other 3,714 2,247 Deferred tax assets 23,849 14,880 Valuation allowance ( 3,190 ) ( 3,786 ) Deferred tax asset, net of valuation allowance $ 20,659 $ 11,094 Deferred tax liabilities: Prepaid expense $ ( 514 ) $ ( 474 ) Excess tax over book depreciation ( 2,278 ) ( 169 ) Website development costs ( 816 ) ( 226 ) Intangible assets ( 94,398 ) ( 74,431 ) Lease right-of-use assets ( 6,442 ) — Other ( 563 ) ( 1,177 ) Deferred tax liabilities ( 105,011 ) ( 76,477 ) Net deferred tax liabilities $ ( 84,352 ) $ ( 65,383 ) The Company had state net operating loss carryforwards of $ 11.9 million and $ 12.2 million and foreign net operating losses of $ 12.8 million and $ 14.2 million at August 29, 2020 and August 31, 2019, respectively. The state net operating loss carryforwards will begin to expire in 2021. As of August 29, 2020, the Company has recorded total valuation allowances of $ 3.2 million, of which $ 2.9 million relates to valuation allowances on deferred tax assets related to foreign net operating loss carryforwards. The majority of this amount represents a full valuation allowance on the deferred tax assets of foreign entities within the United Kingdom, Netherlands, and Spain. Of the valuation allowance on deferred tax assets, $ 0.3 million relates to state net operating losses. During the fifty-two week period ended August 29, 2020, there was a $ 1.4 million decrease to the tax loss carryforwards in foreign jurisdictions. As the carryforwards were generated in jurisdictions where the Company has historically recognized book losses or does not have strong future earnings projections, the Company concluded it is more likely than not that the operating losses would not be realized, and thus maintained a full valuation allowance against the associated deferred tax assets. During the fifty-two week period ended August 29, 2020, the Company changed its intentions and determined to not indefinitely reinvest its foreign earnings within its subsidiaries in the United Kingdom, Spain, and Canada. The change in assertion did not result in recognition of tax liabilities related to these jurisdictions. It is the Company’s intention to reinvest the earnings of its other non-U.S. subsidiaries in those operations. As of August 29, 2020, the Company has not made a provision for U.S. or additional foreign withholding taxes for any outside basis differences inherent in its investments in foreign subsidiaries that are indefinitely reinvested. It is not practicable to estimate the amount of deferred tax liability related to investments in these foreign subsidiaries. As of August 29, 2020 and August 31, 2019, the Company has no unrecognized tax benefits. 69 Table of Contents The Company records interest and penalties associated with unrecognized tax benefits as a component of tax expense. As of August 29, 2020 and August 31, 2019, the Company has no t accrued interest or penalties on unrecognized tax benefits, as there is no position recorded as of these fiscal years. No changes to the uncertain tax position balance are anticipated within the next 12 months, and are not expected to materially affect the financial statements. As of August 29, 2020, tax years 2014 to 2019 remain subject to examination in the United States and the tax years 2014 to 2019 remain subject to examination in other major foreign jurisdictions where the Company conducts business. State income tax returns are generally subject to examination for a period of three to five years after the filing of the respective return. Tax Receivable Agreement Concurrent with the Acquisition of Atkins, the Company entered into the TRA with the historical stockholders of Atkins. The TRA was valued based on the future expected payments under the terms of the agreement. The TRA provides for the payment by Simply Good Foods to the Atkins’ selling equity holders for certain federal, state, local and non-U.S. tax benefits deemed realized in post-closing taxable periods by Simply Good Foods, Conyers Park, Atkins and Atkins’ eligible subsidiaries from the use of up to $ 100 million of the following tax attributes: (i) net operating losses available to be carried forward as of the closing of the Acquisition of Atkins, (ii) certain deductions generated by the consummation of the business transaction and (iii) remaining depreciable tax basis from the 2003 acquisition of Atkins Nutritionals, Inc. The Company re-measured the TRA in the second fiscal quarter of 2018 due to the Tax Act. The second quarter assessment of these changes resulted in a provisional one-time gain of $ 4.7 million, recognized in Loss (gain) in fair value change of contingent consideration - TRA liability . During the first fiscal quarter of 2019, the Company entered into a termination agreement (the “Termination Agreement”) with Atkins Holdings, LLC and Roark Capital Acquisition, LLC. Pursuant to the Termination Agreement, the Company paid $ 26.5 million to settle the TRA in full. Under the Termination Agreement, each of the parties thereto agreed to terminate the TRA and to release any and all obligations and liabilities of the other parties thereunder effective as of the receipt of the termination payment. The Company recorded a $ 0.5 million loss on the fair value change in the TRA liability through the settlement on November 14, 2018 and recognized a gain of $ 1.5 million in connection with the execution of the Termination Agreement and final cash payment. 12. Leases On September 1, 2019, the Company adopted ASU No. 2016-02, Leases, using the modified retrospective approach under ASU No. 2018-11, which permits application of the new guidance at the beginning of the period of adoption, with comparative periods continuing to be reported under ASC Topic 840, Leases. The components of lease expense were as follows: 52-Weeks Ended (In thousands) Statement of Operations Caption August 29, 2020 Operating lease cost: Lease cost Cost of goods sold and General and administrative $ 5,242 Variable lease cost (1) Cost of goods sold and General and administrative 1,648 Operating lease cost $ 6,890 Short term lease cost General and administrative $ 30 Finance lease cost: Amortization of right-of use assets Cost of goods sold $ 273 Interest on lease liabilities Interest expense 60 Total finance lease cost $ 333 Total lease cost $ 7,253 (1) Variable lease cost primarily consists of common area maintenance, such as cleaning and repairs. 70 Table of Contents The gross amounts of assets and liabilities related to both operating and finance leases are as follows: (In thousands) Balance Sheet Caption August 29, 2020 Assets Operating lease right-of-use assets Other long-term assets $ 25,703 Finance lease right-of-use assets Property and equipment, net 912 Total lease assets $ 26,615 Liabilities Current: Operating lease liabilities Accrued expenses and other current liabilities $ 4,329 Finance lease liabilities Current maturities of long-term debt 271 Long-term: Operating lease liabilities Other long-term liabilities 22,764 Finance lease liabilities Long-term debt, less current maturities 651 Total lease liabilities $ 28,015 Future maturities of lease liabilities as of August 29, 2020 were as follows: (In thousands) Operating Leases Finance Leases Fiscal year ending: 2021 $ 5,697 $ 313 2022 4,649 313 2023 4,114 278 2024 4,216 145 2025 3,765 — Thereafter 11,014 — Total lease payments 33,455 1,049 Less: Interest ( 6,362 ) ( 127 ) Present value of lease liabilities $ 27,093 $ 922 As of August 29, 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. 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 terms and weighted-average discount rates for operating and finance leases as of August 29, 2020 were as follows: Operating Leases Finance Leases Weighted-average remaining lease term (in years) 6.97 3.41 Weighted-average discount rate 5.7 % 5.6 % Supplemental and other information related to leases was as follows: 52-Weeks Ended (In thousands) August 29, 2020 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 6,534 Operating cash flows from finance leases 18 Financing cash flows from finance leases $ 338 71 Table of Contents Comparative Information as Reported Under Previous Accounting Standards The following comparative information is reported based upon previous accounting standards in effect for the periods presented. Future minimum payments under lease arrangements with a remaining term in excess of one year were as follows as of August 31, 2019: (In thousands) August 31, 2019 2020 $ 2,546 2021 1,947 2022 1,677 2023 1,093 2024 87 Thereafter 56 Total $ 7,406 For the fifty-three week period ended August 31, 2019, rent expenses for operating leases were $ 2.2 million. For the fifty-two week period ended August 25, 2018, rent expenses for operating leases were $ 2.4 million. 13. Commitments and Contingencies Litigation The Company is a party to certain litigation and claims that are considered normal to the operations of the business. From time to time, the Company has been and may again become involved in legal proceedings arising in the ordinary course of business. The Company is not presently a party to any litigation that it believes to be material, and the Company is not aware of any pending or threatened litigation against it that its management believes could have a material adverse effect on its business, operating result, financial condition or cash flows. During the fifty-three week period 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 fifty-two week period ended August 29, 2020, the Company reserved an additional $ 0.3 million. The reserve is included within General and administrative in the Consolidated Statements of Operations and Comprehensive Income (Loss) and the reserve was fully paid into escrow and settled during the fifty-two week period ended August 29, 2020. As of August 29, 2020, the Company had $ 1.3 million reserved for potential settlements, of which $ 1.2 million were acquired as part of the Acquisition of Quest. Other 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 August 29, 2020 the Company will be required to make payments of $ 2.9 million over the next year. 14. Stockholders’ Equity Public Equity Offering On October 9, 2019, the Company completed an underwritten public offering of 13,379,205 shares of common stock at a price to the public of $ 26.35 per share. The Company paid underwriting discounts and commissions of $ 0.19 per share resulting in net proceeds to the Company of $ 26.16 per share, or approximately $ 350.0 million (the “Offering”). The Company paid $ 0.8 million for legal, accounting and registrations fees related to the Offering. The net proceeds were used to pay a portion of the purchase price and related fees and expenses for the Acquisition of Quest. 72 Table of Contents Warrants to Purchase Common Stock Prior to the Acquisition of Atkins, Conyers Park issued 13,416,667 public warrants and 6,700,000 Private Warrants. The Company assumed the Conyers Park warrants to purchase common stock in connection with the Acquisition of Atkins. As a result of the Acquisition of Atkins, the warrants issued by Conyers Park were no longer exercisable for shares of Conyers Park common stock, but were instead exercisable for common stock of the Company. All other features of the warrants were unchanged. Each whole warrant entitles the holder to purchase one share of the Company’s common stock at a price of $ 11.50 per share. The warrants became exercisable 30 days after the completion of the Acquisition of Atkins in 2017 and expire five years after that date, or earlier upon redemption or liquidation, as applicable. From August 26, 2018 through October 5, 2018, public warrants to purchase an aggregate of 9,866,451 shares of the Company’s common stock were exercised for cash at an exercise price of $ 11.50 per share, resulting in aggregate gross proceeds to the Company of $ 113.5 million. On October 4, 2018, the Company delivered a notice for the redemption (the “Redemption Notice”) of all of its public warrants that remained unexercised immediately after November 5, 2018. Exercises of public warrants following the Redemption Notice were required to be done on a cashless basis. Accordingly, holders were no longer permitted to exercise public warrants in exchange for payment in cash of $ 11.50 per share. Instead, a holder exercising a public warrant was deemed to have paid the $ 11.50 per share exercise price by the surrender of 0.61885 of a share of common stock that the holder would have been entitled to receive upon a cash exercise of each public warrant. Exercising holders received 0.38115 of a share of the Company’s common stock for each public warrant surrendered for exercise. Following the Redemption Notice, 3,499,639 public warrants were exercised on a cashless basis. An aggregate of 1,333,848 shares of the Company’s common stock were issued in connection with these exercises of the public warrants. All remaining public warrants were redeemed as of November 5, 2018 for an immaterial amount. The Private Warrants to purchase 6,700,000 shares of the Company's common stock remain outstanding, have not been transferred by Conyers Park Sponsor, LLC, a related party, and remain liability-classified. As discussed in Note 10, the liability-classified warrants are remeasured on a recurring basis, primarily based on observable market data while the related theoretical private warrant volatility assumption within the Black-Scholes model represents a Level 3 measurement within the fair value measurement hierarchy. The periodic remeasurement of the warrant liability is reflected in Gain (loss) in fair value change of warrant liability within the Consolidated Statements of Operations and Comprehensive Income (Loss). Stock Repurchase Program On November 13, 2018, the Company announced that its Board of Directors had adopted a $ 50.0 million stock repurchase program. Under the stock repurchase program, the Company may repurchase shares from time to time in the open market or in privately negotiated transactions. The stock repurchase program does not obligate the Company to acquire any specific number of shares or acquire shares over any specific period of time. The stock repurchase program may be suspended or discontinued at any time by the Company, and does not have an expiration date. During the fifty-two week period ended August 29, 2020, the Company did not repurchase any shares of common stock. During the fifty-three week period ended August 31, 2019, the Company repurchased 98,234 shares of common stock at an average share price of $ 21.83 per share. As of August 29, 2020, approximately $ 47.9 million remained available under the stock repurchase program. 15. Earnings (Loss) Per Share Basic earnings or loss per share is based on the weighted average number of common shares issued and outstanding. In computing diluted earnings per share, basic earnings per share is adjusted for the assumed issuance of all potentially dilutive securities. 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 antidilutive. The Company has outstanding liability-classified Private Warrants to purchase 6,700,000 shares of the Company’s common stock. During periods when the effect is dilutive, the Company assumes share settlement of the instruments as of the beginning of the reporting period and adjusts the numerator to remove the change in fair value of the warrant liability and adjusts the denominator to include the dilutive shares, calculated using the treasury stock method. During periods when the impact is antidilutive, the share settlement is excluded. 73 Table of Contents The following table reconciles the numerators and denominators used in the computations of both basic and diluted earnings per share: 52-Weeks Ended 53-Weeks Ended 52-Weeks Ended (In thousands, except share and per share data) August 29, 2020 August 31, 2019 August 25, 2018 Basic earnings per share computation: Numerator: Net income (loss) available to common stock stockholders $ 65,638 $ ( 25,234 ) $ 37,386 Denominator: Weighted average common shares - basic 93,968,953 80,734,091 70,582,149 Basic earnings (loss) per share from net income $ 0.70 $ ( 0.31 ) $ 0.53 Diluted earnings per share computation: Numerator: Net income (loss) available to common stock stockholders $ 65,638 $ ( 25,234 ) $ 37,386 Gain in fair value change of warrant liability ( 30,938 ) — — Numerator for diluted earnings per share 34,700 ( 25,234 ) 37,386 Denominator: Weighted average common shares outstanding - basic 93,968,953 80,734,091 70,582,149 Public warrants — — 2,111,561 Private Warrants 3,327,656 — — Employee stock options 1,001,542 — 43,779 Non-vested shares 45,571 — 49,354 Weighted average common shares - diluted 98,343,722 80,734,091 72,786,843 Diluted earnings (loss) per share from net income (loss) $ 0.35 $ ( 0.31 ) $ 0.51 Diluted earnings per share calculations for the fifty-two week period ended August 29, 2020, fifty-three week period ended August 31, 2019, and fifty-two week period ended August 25, 2018 excluded 0.6 million, 1.0 million and 0.2 million shares of common stock options issuable upon exercise of stock options, respectively, that would have been anti-dilutive. In addition, the fifty-three week period ended August 31, 2019, and fifty-two week period ended August 25, 2018 excluded 3.0 million and 0.9 million shares, issuable upon exercise, of Private Warrants that would have been anti-dilutive. The fifty-three week period ended August 31, 2019 excluded 0.6 million shares, issuable upon exercise, of public warrants that would have been anti-dilutive. An immaterial number of non-vested shares were excluded from diluted earnings per share calculations for the fifty-two week period ended August 29, 2020, fifty-three week period ended August 31, 2019, and fifty-two week period ended August 25, 2018. 16. Omnibus Incentive Plan Stock-based compensation includes stock options, restricted stock unit, performance stock unit awards and stock appreciation rights, which are awarded to employees, directors, and consultants of the Company. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period of the award based on their grant date fair value. 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 $ 7.6 million in the fifty-two week period ended August 29, 2020, $ 5.5 million in the fifty-three week period ended August 31, 2019, and $ 4.0 million in the fifty-two week period ended August 25, 2018 . In July 2017, the Company's stockholders approved the 2017 Omnibus Incentive Plan (the “Incentive Plan”). The Incentive Plan provides for the issuance of a maximum of 9,067,917 shares of stock-denominated awards to directors, employees, officers and agents of the Company. As of August 29, 2020, there were 5.2 million shares available for grant under the Incentive Plan. Stock Options Stock options granted under the Incentive Plan are granted at a price equal to or more than the fair value of common stock on the date the option is granted. Stock options under the Incentive Plan generally become exercisable ratably over three years from the date of grant and must be exercised within ten years from the date of grant. 74 Table of Contents The following table summarizes stock option activity for the fifty-two week period ended August 29, 2020: (In thousands, except share and per share data) Shares Weighted average exercise price Weighted average remaining contractual life (in years) Aggregate intrinsic value Outstanding as of August 31, 2019 2,748,735 $ 13.35 8.13 $ 44,743 Granted 229,024 23.87 Exercised ( 340,382 ) 12.36 Forfeited ( 21,478 ) 21.92 Outstanding as of August 29, 2020 2,615,899 $ 14.33 7.29 $ 28,927 Vested and expected to vest as of August 29, 2020 2,615,899 $ 14.33 7.29 $ 28,927 Exercisable as of August 29, 2020 2,082,569 $ 12.65 7.00 $ 26,537 The following table summarizes information about stock options outstanding at August 29, 2020: Range of Exercise Prices Number Outstanding Weighted-Average Exercise Price Weighted-Average Remaining Life (Years) Number Exercisable Weighted-Average Exercise Price $ 12.00 - 14.99 1,938,833 $ 12.04 6.90 1,893,950 $ 12.02 $ 15.00 - 17.99 117,553 16.88 7.89 78,368 16.88 $ 18.00 - 20.99 293,465 19.89 8.02 94,507 19.89 $ 21.00 - 23.99 48,396 21.85 9.56 4,462 21.49 $ 24.00 - 26.99 217,652 24.19 8.91 11,282 24.08 2,615,899 $ 14.33 7.29 2,082,569 $ 12.65 The weighted average fair value of options granted during the fifty-two week period ended August 29, 2020, fifty-three week period ended August 31, 2019, and fifty-two week period ended August 25, 2018 were $ 7.79 , $ 7.10 and $ 4.60 , respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes Option Pricing Model based on the following assumptions: 52-Weeks Ended 53-Weeks Ended 52-Weeks Ended August 29, 2020 August 31, 2019 August 25, 2018 Expected volatility 30.27 % - 33.82 % 29.30 % - 32.09 % 26.72 % - 27.50 % Expected dividend yield — % — % — % Expected option term 6 6 6 Risk-free rate of return 0.38 % - 1.8 % 1.82 % - 3.13 % 1.98 % - 2.79 % Expected term is estimated using the simplified method, which takes into account vesting and contractual term. The simplified method is being used to calculate expected term instead of historical experience due to a lack of relevant historical data resulting from changes in option vesting schedules and changes in the pool of employees receiving option grants. Due to a lack of sufficient trading history for the Company's common stock, expected stock price volatility is based on a sampling of comparable publicly traded companies. The Company believes a sample of comparable publicly traded companies most closely models the nature of the business and stock price volatility. The risk-free rates are based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. Future annual dividends over the expected term are estimated to be nil . As of August 29, 2020, $ 2.3 million of total unrecognized compensation cost related to stock option plans that will be recognized over a weighted average period of 1.6 years. During the fifty-two week period ended August 29, 2020, fifty-three week period ended August 31, 2019, and fifty-two week period ended August 25, 2018, the Company received $ 4.2 million, $ 0.7 million, and $ 0.1 million in cash from stock option exercises, respectively. 75 Table of Contents Restricted Stock Units Restricted stock units granted under the Incentive Plan are granted at a price equal to closing market price of the Company's common stock on the date of grant. Restricted stock units under the Incentive Plan generally vest over three years . The following table summarizes restricted stock unit activity for the fifty-two week period ended August 29, 2020: Units Weighted average grant-date fair value Non-vested as of August 31, 2019 92,400 $ 17.50 Granted 193,533 23.17 Vested ( 67,354 ) 17.07 Forfeited ( 10,556 ) 19.45 Non-vested as of August 29, 2020 208,023 $ 22.82 As of August 29, 2020, the Company had $ 3.0 million of total unrecognized compensation cost related to restricted stock units that will be recognized over a weighted average period of 1.9 years. Performance Stock Units During the fifty-two week period ended August 29, 2020, 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 over a period of three years . Performance stock units were valued using a Monte-Carlo simulation. The following table summarizes performance stock unit activity for the fifty-two week period ended August 29, 2020: Units Weighted average grant-date fair value Non-vested as of August 31, 2019 192,389 $ 11.93 Granted 121,288 27.39 Vested — — Forfeited ( 18,421 ) 17.62 Non-vested as of August 29, 2020 295,256 $ 17.93 As of August 29, 2020, the Company had $ 3.2 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 Stock appreciation rights ("SARs") permit the holder to participate in the appreciation of the Company's common stock price. The Company's SARs settle in shares of its common stock once the applicable vesting criteria has been met. SARs cliff vest three years from the date of grant and must be exercised within ten years . 76 Table of Contents The following table summarizes SARs activity for the fifty-two week period ended August 29, 2020: Shares Underlying SARs Weighted average exercise price Weighted average remaining contractual life (in years) Outstanding as of August 31, 2019 — $ — Granted 150,000 24.20 Exercised — — Forfeited — — Outstanding as of August 29, 2020 150,000 $ 24.20 9.18 Vested and expected to vest as of August 29, 2020 150,000 $ 24.20 9.18 Exercisable as of August 29, 2020 — $ — 0.00 As of August 29, 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 2.2 years. 17. Related Party Transactions Tax Receivable Agreement During the fifty-three week period ended August 31, 2019, the Company entered into the Termination Agreement, pursuant to which, the Company paid $ 26.5 million to settle the TRA (the “Termination Payment”), which provided former stockholders of Atkins with payments for federal, state, local and non-U.S. tax benefits deemed realized by the Company. Under the Termination Agreement, each of the parties thereto agreed to terminate the TRA and to release and discharge any and all obligations and liabilities of the other parties thereunder effective as of the exchange agent’s receipt of the Termination Payment. Richard Laube, a former director of the Company, Joseph Scalzo, President and Chief Executive Officer and a director of the Company, and Scott Parker, Chief Marketing Officer, were each former stockholders of Atkins and received their respective pro rata share of the Termination Payment as additional consideration for their former stock ownership in accordance with the terms of the Merger Agreement. The TRA liability and subsequent settlement are discussed in Note 11, Income Taxes. Merger Agreement Working Capital Adjustment In the first quarter of fiscal 2018, pursuant to the terms of the Merger Agreement, Simply Good Foods paid a working capital adjustment of $ 1.8 million to the former owners of Atkins, which resulted in an increase to the previously recognized goodwill. 18. 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; (c) the methods used to distribute products to customers; (d) the type of customer for the products; and, (e) the nature of the regulatory environment. 77 Table of Contents Reconciliations of the totals of reported segment revenue, profit or loss measurement, assets and other significant items reported by segment to the corresponding GAAP totals is not applicable to the Company as it only has one reportable segment. Additionally, revenues from transactions with external customers for each of Simply Good Foods’ 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: 52-Weeks Ended 53-Weeks Ended 52-Weeks Ended (In thousands) August 29, 2020 August 31, 2019 August 25, 2018 Net sales North America (1) $ 501,472 $ 498,571 $ 411,480 International (1) 28,366 25,187 26,374 Total Atkins 529,838 523,758 437,854 Quest (2) 286,803 — — Total $ 816,641 $ 523,758 $ 437,854 (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 Company’s net sales are attributed or that is otherwise deemed individually material. (2) Quest net sales are primarily in North America. The following is a summary long lived assets by geographic area: (In thousands) August 29, 2020 August 31, 2019 Long lived assets North America (1) $ 11,841 $ 2,437 International (1) 9 19 Total $ 11,850 $ 2,456 (1) The North America geographic area consists of long-lived assets substantially related to the United States and there is no individual foreign country in which more than 10% of the Company’s long-lived assets are located or that is otherwise deemed individually material. Significant Customers As a result of the Acquisition of Quest, the Company's exposure to credit risk concentrated in one customer was reduced during 2020. Credit risk for the Company was concentrated in two customers who comprised more than 10% of the Company’s total sales for the fifty-two week period ended August 29, 2020. For the fifty-three week period ended August 31, 2019 and the fifty-two week period ended August 25, 2018, credit risk for the Company was concentrated in one customer who comprised more than 10% of the Company’s total sales. 52-Weeks Ended 53-Weeks Ended 52-Weeks Ended August 29, 2020 August 31, 2019 August 25, 2018 Customer 1 34 % 44 % 43 % Customer 2 10 % n/a n/a n/a - Not applicable as the customer was not significant during these fiscal years. At August 29, 2020 and August 31, 2019, the following amounts of the Company’s accounts receivable, net were related to these significant customers for the periods in which the customers were significant: (In thousands) August 29, 2020 August 31, 2019 Customer 1 $ 34,411 38 % $ 17,386 39 % Customer 2 $ 12,345 14 % n/a n/a n/a - Not applicable as the customer was not significant as of this date. No other customers of the Company accounted for more than 10% of sales during these periods. The Company generally does not require collateral from its customers and has not incurred any significant losses on uncollectible accounts receivable. 78 Table of Contents 19. Restructuring and Related Charges In May 2020, the Company announced certain restructuring activities in conjunction with the implementation of the Company’s future-state organization design, which creates a fully integrated organization with its completed Acquisition of Quest. The new organization design became effective on August 31, 2020. These restructuring plans primarily include workforce reductions and changes in management structure. The one-time termination benefits and employee severance costs to be incurred in relation to these restructuring activities are accounted for in accordance with ASC Topic 420, Exit or Disposal Cost Obligations, and ASC Topic 712, Compensation-Nonretirement Postemployment Benefits, respectively. The Company recognizes a liability and the related expense for these restructuring costs when the liability is incurred and can be measured. 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. For the fifty-two week period ended August 29, 2020, the Company incurred $ 5.5 million of costs for these restructuring activities which have been included within General and administrative on the Consolidated Statements of Operations and Comprehensive Income (Loss). Overall, the Company expects to incur a total of approximately $ 8.1 million in restructuring costs, including the $ 5.5 million referenced above. The one-time termination benefits and employee severance costs are to be paid throughout fiscal 2021 and the first quarter of fiscal 2022. Changes to the restructuring liability during the fifty-two week period ended August 29, 2020 were as follows: (in thousands) Termination benefits and severance Other Restructuring Liability Balance as of August 31, 2019 $ — $ — $ — Charges 4,139 1,388 5,527 Cash payments — ( 1,388 ) ( 1,388 ) Non-cash settlements or adjustments — — — Balance as of August 29, 2020 $ 4,139 $ — $ 4,139 20. Unaudited Quarterly Financial Data Summarized quarterly financial data: 52-Weeks Ended 13-Weeks Ended 13-Weeks Ended 13-Weeks Ended 13-Weeks Ended (In thousands, except per share amounts) August 29, 2020 August 29, 2020 May 30, 2020 February 29, 2020 November 30, 2019 Net sales $ 816,641 $ 222,286 $ 215,101 $ 227,101 $ 152,153 Gross profit 324,328 88,102 88,626 85,394 62,206 Income (loss) from operations 78,224 24,832 31,108 25,269 ( 2,985 ) Net income (loss) $ 65,638 $ ( 39,290 ) $ 48,112 $ 48,301 $ 8,515 Earnings (loss) per share: Basic $ 0.70 $ ( 0.41 ) $ 0.50 $ 0.51 $ 0.09 Diluted $ 0.35 $ ( 0.41 ) $ 0.17 $ 0.11 $ ( 0.05 ) 53-Weeks Ended 14-Weeks Ended 13-Weeks Ended 13-Weeks Ended 13-Weeks Ended (In thousands, except per share amounts) August 31, 2019 August 31, 2019 May 25, 2019 February 23, 2019 November 24, 2018 Net sales $ 523,758 $ 139,184 $ 139,468 $ 123,800 $ 121,306 Gross profit (1) $ 217,683 $ 59,173 $ 56,657 $ 49,655 $ 52,198 Income from operations $ 72,673 $ 12,115 $ 20,510 $ 19,002 $ 21,046 Net (loss) income $ ( 25,234 ) $ ( 42,231 ) $ 5,859 $ 7,112 $ 4,026 Earnings (loss) per share: Basic $ ( 0.31 ) $ ( 0.52 ) $ 0.07 $ 0.09 $ 0.05 Diluted $ ( 0.31 ) $ ( 0.52 ) $ 0.07 $ 0.09 $ 0.05 79 Table of Contents (1) During the fifty-three weeks period ended August 31, 2019, certain reclassifications were made to previously reported amounts to conform to the current presentation. On the consolidated statement of operations, inbound freight previously included in Distribution, distribution center expenses previously included in General and administrative , and depreciation for equipment used in warehouse operations were reclassified to Cost of goods sold . Including these expenses in Cost of goods sold better aligned costs with the related revenue. As a result, the first three quarters of fiscal year 2019 have been adjusted on a retrospective basis to reflect the reclassification. For additional information on the change in accounting principle, see Note 3. Earnings per common share amounts are computed independently for each of the quarters presented. Therefore, the sum of the quarterly earnings per share amounts may not equal the quarterly earnings per share amounts or the annual earnings per share amounts due to rounding. The restated amounts presented above are inclusive of fair market value adjustments, disclosed in detail below. Restatement of previously issued Unaudited Consolidated Financial Statements In lieu of filing amended Quarterly Reports on Form 10-Q, the following tables represent the Company’s restated unaudited consolidated financial statements for each of the fiscal quarters during the fiscal years ended August 29, 2020 and August 31, 2019. Regarding the statement of cash flows, the adjustments presented below to net income were offset by adjustments for the same amount within non-cash operating activities, and therefore the Restatement had no effect on total net cash flows from operating, investing or financing activities for the restated periods. See Note 2, Restatement of Previously Issued Consolidated Financial Statements, for additional information. The restated consolidated financial statement tables present a reconciliation from prior periods, as previously reported, to the restated amounts. The amounts as previously reported were derived from the Company’s Quarterly Reports on Form 10-Q for the interim periods of 2020 and 2019 and from the Annual Report on Form 10-K for the fiscal year ended August 29, 2020. The effects of this error on the previously reported 2020 quarterly Condensed Consolidated Balance Sheets are as follows: As Previously Reported Adjustments As Restated (In thousands) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Warrant liability $ — $ — $ — $ — $ 111,268 $ 73,624 $ 41,921 $ 93,638 $ 111,268 $ 73,624 $ 41,921 $ 93,638 Total liabilities 832,380 804,315 824,495 775,474 111,268 73,624 41,921 93,638 943,648 877,939 866,416 869,112 Additional paid-in-capital 1,084,671 1,087,506 1,089,652 1,094,507 ( 18,035 ) ( 18,035 ) ( 18,035 ) ( 18,035 ) 1,066,636 1,069,471 1,071,617 1,076,472 Retained earnings (accumulated deficit) 101,037 111,694 128,103 140,530 ( 93,233 ) ( 55,589 ) ( 23,886 ) ( 75,603 ) 7,804 56,105 104,217 64,927 Total stockholders' equity 1,183,681 1,197,033 1,215,649 1,232,971 ( 111,268 ) ( 73,624 ) ( 41,921 ) ( 93,638 ) 1,072,413 1,123,409 1,173,728 1,139,333 Total liabilities and stockholders' equity $ 2,016,061 $ 2,001,348 $ 2,040,144 $ 2,008,445 $ — $ — $ — $ — $ 2,016,061 $ 2,001,348 $ 2,040,144 $ 2,008,445 The effects of this error on the previously reported 2020 quarterly Condensed Consolidated Statements of Comprehensive Income (Loss) on a quarter-to-date basis are as follows: As Previously Reported Adjustments As Restated (In thousands, except share data) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Gain (loss) in fair value change of warrant liability $ — $ — $ — $ — $ 13,308 $ 37,644 $ 31,703 $ ( 51,717 ) $ 13,308 $ 37,644 $ 31,703 $ ( 51,717 ) Total other (expense) income ( 3,537 ) ( 10,690 ) ( 8,654 ) ( 7,317 ) 13,308 37,644 31,703 ( 51,717 ) 9,771 26,954 23,049 ( 59,034 ) (Loss) income before income taxes ( 6,522 ) 14,579 22,454 17,515 13,308 37,644 31,703 ( 51,717 ) 6,786 52,223 54,157 ( 34,202 ) Net (loss) income ( 4,793 ) 10,657 16,409 12,427 13,308 37,644 31,703 ( 51,717 ) 8,515 48,301 48,112 ( 39,290 ) Comprehensive (loss) income $ ( 4,793 ) $ 10,516 $ 16,470 $ 12,464 $ 13,308 $ 37,644 $ 31,703 $ ( 51,717 ) $ 8,515 $ 48,160 $ 48,173 $ ( 39,253 ) Earnings (loss) per share: Basic $ ( 0.05 ) $ 0.11 $ 0.17 $ 0.13 $ 0.14 $ 0.40 $ 0.33 $ ( 0.54 ) $ 0.09 $ 0.51 $ 0.50 $ ( 0.41 ) Diluted $ ( 0.05 ) $ 0.11 $ 0.17 $ 0.12 $ — $ — $ — $ ( 0.53 ) $ ( 0.05 ) $ 0.11 $ 0.17 $ ( 0.41 ) 80 Table of Contents The effects of this error on the previously reported 2020 quarterly Condensed Consolidated Statements of Comprehensive Income (Loss) on a year-to-date basis are as follows: As Previously Reported Adjustments As Restated (In thousands, except share data) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Gain (loss) in fair value change of warrant liability $ — $ — $ — $ — $ — $ 13,308 $ 50,952 $ 82,655 $ 30,938 $ 13,308 $ 50,952 $ 82,655 $ 30,938 Total other (expense) income ( 3,537 ) ( 14,227 ) ( 22,881 ) ( 30,198 ) 13,308 50,952 82,655 30,938 9,771 36,725 59,774 740 (Loss) income before income taxes ( 6,522 ) 8,057 30,511 48,026 13,308 50,952 82,655 30,938 6,786 59,009 113,166 78,964 Net (loss) income ( 4,793 ) 5,864 22,273 34,700 13,308 50,952 82,655 30,938 8,515 56,816 104,928 65,638 Comprehensive (loss) income $ ( 4,793 ) $ 5,723 $ 22,193 $ 34,657 $ 13,308 $ 50,952 $ 82,655 $ 30,938 $ 8,515 $ 56,675 $ 104,848 $ 65,595 Earnings (loss) per share: Basic $ ( 0.05 ) $ 0.06 $ 0.24 $ 0.37 $ 0.14 $ 0.55 $ 0.88 $ 0.33 $ 0.09 $ 0.61 $ 1.12 $ 0.70 Diluted $ ( 0.05 ) $ 0.06 $ 0.23 $ 0.35 $ — $ — $ — $ — $ ( 0.05 ) $ 0.06 $ 0.23 $ 0.35 The effects of this error on the previously reported 2019 quarterly Condensed Consolidated Balance Sheets are as follows: As Previously Reported Adjustments As Restated (In thousands) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Warrant liability $ — $ — $ — $ — $ 63,037 $ 68,647 $ 76,254 $ 124,576 $ 63,037 $ 68,647 $ 76,254 $ 124,576 Total liabilities 282,773 289,005 294,623 304,206 63,037 68,647 76,254 124,576 345,810 357,652 370,877 428,782 Additional paid-in-capital 728,864 730,584 732,181 733,775 ( 18,035 ) ( 18,035 ) ( 18,035 ) ( 18,035 ) 710,829 712,549 714,146 715,740 Retained earnings (accumulated deficit) 73,551 86,273 99,739 105,830 ( 45,002 ) ( 50,612 ) ( 58,219 ) ( 106,541 ) 28,549 35,661 41,520 ( 711 ) Total stockholders' equity 802,578 816,714 829,986 837,444 ( 63,037 ) ( 68,647 ) ( 76,254 ) ( 124,576 ) 739,541 748,067 753,732 712,868 Total liabilities and stockholders' equity $ 1,085,351 $ 1,105,719 $ 1,124,609 $ 1,141,650 $ — $ — $ — $ — $ 1,085,351 $ 1,105,719 $ 1,124,609 $ 1,141,650 The effects of this error on the previously reported 2019 Condensed Consolidated Statements of Comprehensive Income (Loss) on a quarter-to-date basis are as follows: As Previously Reported Adjustments As Restated (In thousands, except share data) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Net sales $ 120,931 $ 123,800 $ 139,468 $ 139,184 $ 375 $ — $ — $ — $ 121,306 $ 123,800 $ 139,468 $ 139,184 Cost of goods sold 69,011 74,145 82,811 80,011 97 — — — 69,108 74,145 82,811 80,011 Gross profit 51,920 49,655 56,657 59,173 278 — — — 52,198 49,655 56,657 59,173 Selling and marketing 15,319 14,729 17,550 19,890 206 — — — 15,525 14,729 17,550 19,890 General and administrative 11,998 13,732 15,947 20,295 208 — — — 12,206 13,732 15,947 20,295 Total operating expenses 30,738 30,653 36,147 47,058 414 — — — 31,152 30,653 36,147 47,058 Income from operations 21,182 19,002 20,510 12,115 ( 136 ) — — — 21,046 19,002 20,510 12,115 (Loss) gain in fair value change of warrant liability — — — — — ( 11,134 ) ( 5,610 ) ( 7,607 ) ( 48,322 ) ( 11,134 ) ( 5,610 ) ( 7,607 ) ( 48,322 ) Total other (expense) income ( 1,300 ) ( 2,253 ) ( 2,460 ) ( 2,510 ) ( 11,134 ) ( 5,610 ) ( 7,607 ) ( 48,322 ) ( 12,434 ) ( 7,863 ) ( 10,067 ) ( 50,832 ) Income before income taxes 19,882 16,749 18,050 9,605 ( 11,270 ) ( 5,610 ) ( 7,607 ) ( 48,322 ) 8,612 11,139 10,443 ( 38,717 ) Income tax expense (benefit) 4,625 4,027 4,584 3,514 ( 39 ) — — — 4,586 4,027 4,584 3,514 Net income (loss) 15,257 12,722 13,466 6,091 ( 11,231 ) ( 5,610 ) ( 7,607 ) ( 48,322 ) 4,026 7,112 5,859 ( 42,231 ) Comprehensive income (loss) $ 15,399 $ 12,543 $ 13,212 $ 6,344 $ ( 11,231 ) $ ( 5,610 ) $ ( 7,607 ) $ ( 48,322 ) $ 4,168 $ 6,933 $ 5,605 $ ( 41,978 ) Earnings (loss) per share: Basic $ 0.20 $ 0.16 $ 0.16 $ 0.07 $ ( 0.15 ) $ ( 0.07 ) $ ( 0.09 ) $ ( 0.59 ) $ 0.05 $ 0.09 $ 0.07 $ ( 0.52 ) Diluted $ 0.18 $ 0.15 $ 0.16 $ 0.07 $ ( 0.13 ) $ ( 0.06 ) $ ( 0.09 ) $ ( 0.59 ) $ 0.05 $ 0.09 $ 0.07 $ ( 0.52 ) 81 Table of Contents The effects of this error on the previously reported 2019 quarterly Condensed Consolidated Statements of Comprehensive Income (Loss) on a year-to-date basis are as follows: As Previously Reported Adjustments As Restated (In thousands, except share data) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Net sales $ 120,931 $ 244,731 $ 384,199 $ 523,383 $ 375 $ 375 $ 375 $ 375 $ 121,306 $ 245,106 $ 384,574 $ 523,758 Cost of goods sold 69,011 143,156 225,967 305,978 97 97 97 97 69,108 143,253 226,064 306,075 Gross profit 51,920 101,575 158,232 217,405 278 278 278 278 52,198 101,853 158,510 217,683 Selling and marketing 15,319 30,048 47,598 67,488 206 206 206 206 15,525 30,254 47,804 67,694 General and administrative 11,998 25,730 41,677 61,972 208 208 208 208 12,206 25,938 41,885 62,180 Total operating expenses 30,738 61,391 97,538 144,596 414 414 414 414 31,152 61,805 97,952 145,010 Income from operations 21,182 40,184 60,694 72,809 ( 136 ) ( 136 ) ( 136 ) ( 136 ) 21,046 40,048 60,558 72,673 (Loss) gain in fair value change of warrant liability — — — — — ( 11,134 ) ( 16,744 ) ( 24,351 ) ( 72,673 ) ( 11,134 ) ( 16,744 ) ( 24,351 ) ( 72,673 ) Total other (expense) income ( 1,300 ) ( 3,553 ) ( 6,013 ) ( 8,523 ) ( 11,134 ) ( 16,744 ) ( 24,351 ) ( 72,673 ) ( 12,434 ) ( 20,297 ) ( 30,364 ) ( 81,196 ) Income before income taxes 19,882 36,631 54,681 64,286 ( 11,270 ) ( 16,880 ) ( 24,487 ) ( 72,809 ) 8,612 19,751 30,194 ( 8,523 ) Income tax expense (benefit) 4,625 8,652 13,236 16,750 ( 39 ) ( 39 ) ( 39 ) ( 39 ) 4,586 8,613 13,197 16,711 Net income (loss) 15,257 27,979 41,445 47,536 ( 11,231 ) ( 16,841 ) ( 24,448 ) ( 72,770 ) 4,026 11,138 16,997 ( 25,234 ) Comprehensive income (loss) $ 15,399 $ 27,942 $ 41,154 $ 47,498 $ ( 11,231 ) $ ( 16,841 ) $ ( 24,448 ) $ ( 72,770 ) $ 4,168 $ 11,101 $ 16,706 $ ( 25,272 ) Earnings (loss) per share: Basic $ 0.20 $ 0.35 $ 0.52 $ 0.59 $ ( 0.15 ) $ ( 0.21 ) $ ( 0.31 ) $ ( 0.90 ) $ 0.05 $ 0.14 $ 0.21 $ ( 0.31 ) Diluted $ 0.18 $ 0.33 $ 0.49 $ 0.56 $ ( 0.13 ) $ ( 0.19 ) $ ( 0.28 ) $ ( 0.87 ) $ 0.05 $ 0.14 $ 0.21 $ ( 0.31 ) 21. Subsequent Events 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 Canadian-based management team who had been responsible for this brand prior to the sale transaction. In addition to purchasing these assets, the buyer assumed certain liabilities related to the SimplyProtein brand’s business. The transaction enables management to focus its full time and Company’s resources on its core Atkins® and Quest® branded businesses and other strategic initiatives. 82 Table of Contents