What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-10-21 compared with 2021-10-26 · 241 added, 301 removed, 822 unchanged (40% of the section changed)

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Index to the Financial Statements

Reports of Independent Registered Public Accounting Firms

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Income and Comprehensive Income

Consolidated Statements of Cash Flows

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Omnibus Incentive Plan

Related Party Transactions

Segment and Customer Information

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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 28, 2021 and August 29, 2020, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows, for the fifty-two week periods ended August 28, 2021 and August 29, 2020, and the fifty-three week period ended August 31, 2019, and the related notes (collectively referred to as the "financial statements").

We have audited the accompanying consolidated balance sheets of The Simply Good Foods Company and subsidiaries (the "Company") as of August 27, 2022 and August 28, 2021, the related consolidated statements of income and comprehensive income, stockholders' equity, and cash flows, for the fifty-two week periods ended August 27, 2022, August 28, 2021, and August 29, 2020 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 27, 2022 and August 28, 2021, and the results of its operations and its cash flows for each of the three years in the period ended August 27, 2022, in conformity with accounting principles generally accepted in the United States of America.

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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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Trade Promotions — Refer to Note 2 to the financial statements

Revenue Recognition — Trade Promotions — Refer to Note 2 to the financial statements

Critical Audit Matter Description

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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.

The recognition of trade promotions requires the Company to make estimates regarding the volume of incentives that will be redeemed and their total cost.

These estimates are made using various information including historical data on performance of similar trade promotional activities, market data, and the Company's best estimates of current activity.

As of August 27, 2022, the allowance for trade promotions balance, which is recorded as a reduction to accounts receivable, was approximately $23.9 million.

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 28, 2021, required a high degree of auditor judgment and an increased extent of effort.

Given the subjectivity of estimating the expected promotional claims, performing audit procedures to evaluate whether the allowance for trade promotions balance is appropriately recorded as of August 27, 2022, 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 28, 2021, we:

Our auditing procedures related to the allowance for trade promotions balance included the following, among others:

• For a selection of allowance for trade promotions balance recorded as of August 27, 2022, 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 28, 2022.

◦ For a selection of those allowances for trade promotion balances based on volume estimates, we evaluated the appropriateness of those estimates using historical data on performance of similar trade promotional activities, third-party data, and subsequent customer activity.

◦ Evaluated the appropriateness of the year-end trade accrual estimate using historical data on performance of similar trade promotional activities, market data, and subsequent customer activity.

• 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 28, 2021, we compared that amount to the August 28, 2021 allowance for promotion balance and traced presented or resolved deduction to a properly recorded sale.

• For a selection of customer promotional claims resolved after August 27, 2022, we compared that amount to the August 27, 2022 allowance for promotions balance and traced the resolved deduction to a properly recorded sale.

/s/ Deloitte & Touche LLP

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Common stock, $0.01 par value, 600,000,000 shares authorized, 101,322,834 and 95,882,908 issued at August 27, 2022 and August 28, 2021, respectively 1,013 959

Treasury stock, 98,234 shares at cost at August 28, 2021 and August 29, 2020 ( 2,145 ) ( 2,145 )

Treasury stock, 1,818,754 shares and 98,234 shares at cost at August 27, 2022 and August 28, 2021, respectively ( 62,003 ) ( 2,145 )

Additional paid-in-capital 1,287,224 1,085,001

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The Simply Good Foods Company and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Income and Comprehensive Income

(In thousands, except share and per share data)

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Loss on impairment — — 3,000

Loss in fair value change of contingent consideration – TRA liability

Total operating expenses 242,802 236,091 246,104

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Gain on legal settlement — 5,000 —

Gain on settlement of TRA liability — — 1,534

(Loss) gain on foreign currency transactions ( 5 ) 658 ( 452 )

Gain (loss) on foreign currency transactions 191 ( 5 ) 658

Other (expense) income ( 453 ) ( 140 ) 441

Total other (expense) income ( 52,190 ) ( 92,815 ) 740

Income (loss) before income taxes 80,860 78,964 ( 8,523 )

Income before income taxes 150,569 80,860 78,964

Income tax expense 41,995 39,980 13,326

Net income (loss) $ 40,880 $ 65,638 $ ( 25,234 )

Other comprehensive income (loss):

Foreign currency translation adjustments 61 ( 43 ) ( 38 )

Comprehensive income (loss) $ 40,941 $ 65,595 $ ( 25,272 )

Earnings (loss) per share:

Net income $ 108,574 $ 40,880 $ 65,638

Other comprehensive income:

Foreign currency translation, net of reclassification adjustments ( 1,133 ) 61 ( 43 )

Comprehensive income $ 107,441 $ 40,941 $ 65,595

Earnings per share:

Basic $ 1.10 $ 0.43 $ 0.70

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Operating activities

Net income (loss)

$ 108,574 $ 40,880 $ 65,638

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

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

Depreciation and amortization 19,299 18,174 16,007

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Estimated credit losses 601 1,114 —

Loss in fair value change of contingent consideration – TRA liability — — 533

Gain on settlement of TRA liability — — ( 1,534 )

Unrealized loss (gain) on foreign currency transactions 5 ( 658 ) 452

Unrealized (gain) loss on foreign currency transactions ( 191 ) 5 ( 658 )

Deferred income taxes 11,789 9,403 8,216

Loss on disposal of property and equipment — — 6

Amortization of operating lease right-of-use asset 6,620 5,051 3,848

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Accrued expenses and other current liabilities ( 15,283 ) 15,423 ( 5,572 )

Other ( 2,083 ) ( 3,156 ) 74

Other assets and liabilities ( 5,536 ) ( 2,083 ) ( 3,156 )

Net cash provided by operating activities

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Proceeds from option exercises 4,343 700 4,206

Cash received from warrant exercises — — 113,464

Tax payments related to issuance of restricted stock units ( 3,660 ) ( 435 ) ( 191 )

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Deferred financing costs ( 544 ) — ( 8,208 )

Settlement of TRA liability — — ( 26,468 )

Net cash (used in) provided by financing activities ( 110,032 ) ( 150,049 ) 754,652

Net (decrease) increase in cash

Net decrease in cash

( 7,549 ) ( 20,466 ) ( 170,421 )

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Non-cash proceeds from sale of business $ — $ 3,000 $ —

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

Non-cash additions to property and equipment

$ 743 $ 1,203 $ —

Non-cash additions to intangible assets and other assets $ 86 $ 218 $ —

Issuance of common stock in extinguishment of warrant liabilities $ 189,897 $ — $ —

Operating lease right-of-use assets recognized after ASU No 2016-02 transition

$ 6,872 $ 26,222 $ 3,554

Non-cash additions to property and equipment

Operating lease right-of-use assets recognized at ASU No 2016-02 transition

$ — $ — $ 5,102

Non-cash additions to intangible assets and other assets $ 218 $ — $ —

Finance lease right-of-use assets recognized at ASU No 2016-02 transition

$ — $ — $ 1,185

See accompanying Notes to the Consolidated Financial Statements

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Common Stock Treasury Stock Additional Paid in Capital Retained Earnings

(Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Total

(Accumulated Deficit) Accumulated Other Comprehensive Loss Total

Shares Amount Shares Amount

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Foreign currency translation adjustments — — — — — — ( 43 ) ( 43 )

Repurchase of common stock — — 98,234 ( 2,145 ) — — — ( 2,145 )

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

Warrant conversion 11,200,299 112 — — 113,352 — — 113,464

Balance, August 29, 2020 95,751,845 $ 958 98,234 $ ( 2,145 ) $ 1,076,472 $ 64,927 $ ( 879 ) $ 1,139,333

Net loss — — — — — 65,638 — 65,638

Net income — — — — — 40,880 — 40,880

Stock-based compensation — — — — 8,265 — — 8,265

Foreign currency translation adjustments — — — — — — 61 61

Public equity offering 13,379,205 134 — — 349,085 — — 349,219

Shares issued upon vesting of restricted stock units 72,755 1 — — ( 436 ) — — ( 435 )

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Foreign currency translation adjustments — — — — — — 14 14

Reclassification adjustment for currency translation gains related to the liquidation of foreign entities — — — — — — ( 1,147 ) ( 1,147 )

Repurchase of common stock — — 1,720,520 ( 59,858 ) — — — ( 59,858 )

Warrant conversion 4,830,761 48 — — 189,849 — — 189,897

Shares issued upon vesting of restricted stock units 256,374 3 — — ( 3,663 ) — — ( 3,660 )

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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 “Business Combination”).

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 “Quest Acquisition”).

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

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

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 product portfolio the Company develops, markets and sells consists primarily of protein bars, ready-to-drink (“RTD”) shakes, sweet and salty snacks and confectionery products marketed under the Atkins®, Atkins Endulge®, and Quest® brand names.

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

Simply Good Foods is poised to expand its wellness platform through innovation and organic growth along with acquisition opportunities in the nutritional snacking space.

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

government approved vaccines and the easing of movement restrictions.

This uncertainty stems from the potential for, among other things, (i) the presence of current mutations of COVID-19 which have resulted in increased rates of reported cases for which currently approved vaccines are not as effective along with the possibility of future mutations occurring for which current approved vaccines are less effective, (ii) unexpected supply chain disruptions, including disruptions resulting from labor shortages or other human capital challenges, (iii) changes to customer operations, (iv) a reversal in recently improving consumer purchasing and consumption behavior, and (v) the closure of customer establishments.

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

While the Company’s business has improved from the end of fiscal year 2021, driven in part by the increasing normalization of consumer mobility and shopper traffic patterns in brick-and-mortar retailers versus prior periods that were pressured by COVID-19 movement restrictions, the ultimate effect COVID-19, supply chain challenges, cost pressures, and the overall effects of the current high inflation environment on consumer purchasing patterns could have on our business continues to be not fully known.

Additionally, management is continuing to monitor the conflict in Ukraine, especially regarding the availability and cost of raw materials that are produced in this region and Europe in general.

Management is also monitoring for signs of any expansion of economic or supply chain disruptions or broader supply chain inflationary costs resulting either directly or indirectly from the crisis in Eastern Europe.

Factors contributing to the uncertainty described above, among other things, include (i) continued supply chain disruptions, including disruptions resulting from labor shortages and other cost pressures, (ii) changes to customer operations, (iii) a reversal in improving consumer purchasing and consumption behavior, and (iv) unforeseen business disruptions or other effects due to current global geopolitical tensions, including relating directly or indirectly to the Ukraine crisis.

Basis of Presentation

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The accompanying financial statements include Consolidated Balance Sheets for the periods ended August 27, 2022 and August 28, 2021.

The remaining financial statements include the fifty-two weeks ended August 28, 2021, the fifty-two weeks ended August 29, 2020, and the fifty-three weeks ended August 31, 2019.

The remaining financial statements include the fifty-two weeks ended August 27, 2022, the fifty-two weeks ended August 28, 2021, and the fifty-two weeks ended August 29, 2020.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

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Business Combination

On November 7, 2019 , pursuant to the Purchase Agreement, the Company completed the Quest Acquisition for a cash purchase price of approximately $ 1.0 billion, subject to customary post-closing adjustments.

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

The Quest Acquisition 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.

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Accounts receivable are written off when determined to be uncollectible.

Charges related to credit loss on accounts receivables from transactions with external customers were approximately $ 0.6 million, $ 0.5 million, and $ 0.1 million for the fifty-two weeks ended August 28, 2021, fifty-two weeks ended August 29, 2020, and fifty-three weeks ended August 31, 2019, respectively.

At August 28, 2021 and August 29, 2020, the allowance for doubtful accounts was $ 1.1 million and $ 0.5 million, respectively.

Additionally, during the fifty-two weeks ended August 28, 2021 the Company recorded a $ 0.5 million expected credit loss reserve on its $ 3.0 million note receivable related to the SimplyProtein Sale, which is defined in Note 5, Goodwill and Intangibles.

Charges related to credit loss on accounts receivables from transactions with external customers were approximately $ 0.1 million, $ 0.6 million, and $ 0.5 million for the fifty-two weeks ended August 27, 2022, August 28, 2021, and August 29, 2020, respectively.

As of August 27, 2022 and August 28, 2021, the allowance for doubtful accounts was $ 1.2 million and $ 1.1 million, respectively.

Additionally, as of August 27, 2022, the Company had an expected credit loss reserve of $ 1.0 million on its $ 3.0 million note receivable related to the SimplyProtein Sale, as defined in Note 5, Goodwill and Intangibles, of which $ 0.5 million was recorded during each of the fifty-two weeks ended August 27, 2022 and August 28, 2021, respectively.

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.

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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 weeks ended August 28, 2021, the fifty-two weeks ended August 29, 2020, or the fifty-three weeks ended August 31, 2019.

There were no indicators of impairment in the fifty-two weeks ended August 27, 2022, August 28, 2021, or August 29, 2020.

Goodwill and Intangible Assets, Net

Goodwill and Intangible assets, net result primarily from the Business Combination and other acquisitions.

Goodwill and Intangible assets, net result primarily from the consummation of the business combination between Conyers Park Acquisition Corp.

and NCP-ATK Holdings, Inc.

on July 7, 2017, which created the Company, and the Quest Acquisition.

Intangible assets primarily includes brands and trademarks with indefinite lives and customer-related relationships with finite lives.

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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 or indefinite-lived intangible assets are less than their carrying amounts.

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 value of a reporting unit or an indefinite-lived intangible asset is less than its carrying amount.

The qualitative assessment evaluates factors including macro-economic conditions, industry-specific and company-specific considerations, legal and regulatory environments, and historical performance.

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Impairment is indicated if the estimated fair value of the reporting unit or indefinite-lived intangible asset is less than the carrying amount, and an impairment charge is recognized for the differential.

For fiscal year 2021, the Company performed qualitative goodwill impairment assessments for each reporting unit that had goodwill, which consisted of both of the Company’s operating segments, Atkins and Quest, and its indefinite-lived intangible assets.

The qualitative assessments did not identify indicators of impairment, and it was determined that it was more likely than not each reporting unit and indefinite-lived intangible had fair values in excess of their carrying values.

Accordingly, no further impairment assessment was necessary, and the Company determined neither reporting unit or any indefinite-lived intangibles were impaired.

There were no

impairment charges related to goodwill in the fifty-two weeks ended August 28, 2021 or since the inception of the Company.

There were no impairment charges related to indefinite-lived intangibles recognized in the fifty-two weeks ended August 28, 2021 or the fifty-three weeks ended August 31, 2019.

There was a $ 3.0 million loss on impairment of an indefinite-lived intangible in the fifty-two weeks ended August 29, 2020, as discussed in Note 5, Goodwill and Intangibles.

For fiscal year 2022, the Company performed a qualitative goodwill impairment assessment for its consolidated reporting unit and its indefinite-lived intangible assets.

The qualitative assessments did not identify indicators of impairment, and it was determined that it was more likely than not the reporting unit and indefinite-lived intangibles had fair values in excess of their carrying values.

Accordingly, no further impairment assessment was necessary, and the Company determined neither its reporting unit or any indefinite-lived intangibles were impaired.

There were no impairment charges related to goodwill in the fifty-two weeks ended August 27, 2022 or since the inception of the Company.

There were no impairment charges related to indefinite-lived intangibles recognized in the fifty-two weeks ended August 27, 2022 or August 28, 2021.

There was a $ 3.0 million loss on impairment of an indefinite-lived intangible related to the SimplyProtein brand in the fifty-two weeks ended August 29, 2020.

Refer to Note 5, Goodwill and Intangibles for additional information regarding the Company’s reporting units and impairment assessments.

Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives.

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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 Business Combination, Conyers Park issued 13,416,667 public warrants and 6,700,000 private warrants (the “Private Warrants”).

The Company assumed the Conyers Park warrants to purchase common stock in connection with the Business Combination.

As a result of the Business Combination, 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 Business Combination 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.

As of August 28, 2021, 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 (“Black-Scholes model”).

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 (Loss) gain in fair value change of warrant liability within the Consolidated Statements of Operations and Comprehensive Income (Loss).

As of August 28, 2021, the Company had outstanding liability-classified private warrants that allowed holders to purchase 6,700,000 shares of the Company’s common stock (the “Private Warrants”).

Such Private Warrants were held by Conyers Park Sponsor, LLC (“Conyers Park”), a related party.

Each whole warrant entitled the holder to purchase one share of the Company’s common stock at a price of $ 11.50 per share.

On January 7, 2022, Conyers Park elected to exercise the Private Warrants in full on a cashless basis, resulting in a net issuance of 4,830,761 shares of the Company’s common stock.

As a result of the cashless exercise on January 7, 2022, there were no outstanding liability-classified Private Warrants as of August 27, 2022.

During the reporting periods the Private Warrants were outstanding, they were precluded from equity classification, being liability-classified.

The Company accounted for these Private Warrants as a derivative warrant liability in accordance with ASC 815-40.

Accordingly, the Company recognized the Private Warrants as a liability at fair value and adjusted the Private Warrants to fair value at each reporting period through other income.

The fair value adjustments were determined using a Black-Scholes option-pricing methodology (“Black-Scholes model”).

The valuation was primarily based on observable market data while the related theoretical private

warrant volatility assumption within the Black-Scholes model represented a Level 3 measurement within the fair value measurement hierarchy.

The periodic remeasurement of the Private Warrants was reflected in (Loss) gain in fair value change of warrant liability within the Consolidated Statements of Income and Comprehensive Income.

Revenue Recognition

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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 28, 2021 and August 29, 2020, the allowance for trade promotions was $ 22.3 million and $ 25.2 million, respectively.

As of August 27, 2022 and August 28, 2021, the allowance for trade promotions was $ 23.9 million and $ 22.3 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.

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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.

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Shipping and handling costs are recognized in Cost of goods sold .

Costs of $ 66.5 million for the fifty-two weeks ended August 28, 2021, $ 49.8 million for the fifty-two weeks ended August 29, 2020, and $ 32.3 million for the fifty-three weeks ended August 31, 2019 were recorded relating to products shipped to customers.

Costs relating to products shipped to customers were $ 91.7 million, $ 66.5 million, and $ 49.8 million for the fifty-two weeks ended August 27, 2022, August 28, 2021, and August 29, 2020, respectively.

Advertising Costs

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All other advertising costs are expensed when incurred or when the advertising service is received through Selling and marketing .

Total advertising costs were $ 74.9 million for the fifty-two weeks ended August 28, 2021, $ 55.3 million for the fifty-two weeks ended August 29, 2020, and $ 35.4 million for the fifty-three weeks ended August 31, 2019.

Total advertising costs were $ 84.3 million, $ 74.9 million, and $ 55.3 million for the fifty-two weeks ended August 27, 2022, August 28, 2021, and August 29, 2020, respectively.

Production costs related to television commercials not yet aired and prepaid advertising services not yet received are included in Prepaid expenses in the accompanying Consolidated Balance Sheets.

Total prepaid advertising expenses were $ 1.6 million and $ 0.2 million at August 28, 2021 and August 29, 2020.

As of August 27, 2022 and August 28, 2021, total prepaid advertising expenses were $ 2.0 million and $ 1.6 million, respectively.

Research and Development Activities

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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 $ 3.5 million for the fifty-two weeks ended August 28, 2021, $ 4.0 million for the fifty-two weeks ended August 29, 2020, and $ 2.2 million for the fifty-three weeks ended August 31, 2019.

The Company’s total research and development expenses were $ 4.1 million, $ 3.5 million, and $ 4.0 million for the fifty-two weeks ended August 27, 2022, August 28, 2021, and August 29, 2020, respectively.

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.

The Company uses share-based compensation, including stock options, restricted stock units, performance stock units, and stock appreciation rights, to provide long-term performance incentives for its employees, directors, and consultants of the Company.

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.

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All matching contributions are made in cash.

Expense associated with defined contribution plans was $ 1.4 million for the fifty-two weeks ended August 28, 2021, $ 1.3 million for the fifty-two weeks ended August 29, 2020, and $ 0.6 million for the fifty-three weeks ended August 31, 2019.

Expense associated with defined contribution plans was $ 1.1 million, $ 1.4 million, and $ 1.3 million for the fifty-two weeks ended August 27, 2022, August 28, 2021, and August 29, 2020, respectively.

Foreign Currency Translation

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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) .

Translation adjustments are recorded as a component of Other comprehensive income .

Gains or losses resulting from transactions in foreign currencies are included in Other income (expense) .

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Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, which amends existing guidance related 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 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, 2020, with early adoption permitted.

The Company is currently evaluating the effects adoption of this guidance will have on the consolidated financial statements and does not expect that the adoption of this ASU will be material to its consolidated financial statements.

In March 2020, the FASB issued ASU 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.

In March 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 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 and can be applied to contract modifications due to rate reform and eligible existing and new hedging relationships entered into between March 12, 2020 and December 31, 2022.

The amendments of this ASU should be applied on a prospective basis.

On January 21, 2022, the Company entered into a repricing amendment (the “2022 Repricing Amendment”) to its credit agreement with Barclays Bank PLC and other parties (as amended to date, the “Credit Agreement”), as described in Note 7, Long-Term Debt and Line of Credit.

In addition to replacing the London Interbank Offered Rate (“LIBOR”) as the Credit Agreement’s reference rate with the Secured Overnight Financing Rate (“SOFR”), the 2022 Repricing Amendment contemporaneously modified other terms that changed, or had the potential to change, the amount or timing of contractual cash flows as contemplated by the guidance in ASU 2020-04.

As such, the contract modifications related to the 2022 Repricing Amendment were outside of the scope of the optional guidance in ASU 2020-04.

The Company will continue to monitor the effects of rate reform, if any, on any new or amended contracts through December 31, 2022.

The Company does not anticipate the amendments in this ASU will be material to its consolidated financial statements.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which provides updates for technical corrections, clarifications to guidance, simplifications to wording or structure of guidance, and other minor improvements across various areas of accounting within GAAP.

This ASU is effective for all entities for fiscal years beginning after December 15, 2020, with early adoption permitted.

The amendments of this ASU should be applied retrospectively.

The Company does not anticipate the adoption of this ASU will be material to its consolidated financial statements.

No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material effect on the Company’s consolidated financial statements.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), which modified the measurement of expected credit losses of certain financial instruments.

The Company adopted this ASU as of the first day of fiscal 2021.

As a result, the Company changed its method of estimating its allowance for doubtful accounts for trade receivables to be based upon the Company’s historical credit loss experience, adjusted for asset-specific risk characteristics, current economic conditions, and reasonable forecasts.

The change in estimating the allowance for doubtful accounts did not have a material effect on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), which modified disclosure requirements on fair value measurements of ASC Topic 820, Fair Value Measurement.

The Company adopted this ASU as of the first day of fiscal 2021.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

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

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

The Company adopted this ASU as of the first day of fiscal year 2022.

The adoption of this ASU did not have a material effect on the consolidated financial statements.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which provided updates for technical corrections, clarifications to guidance, simplifications to wording or structure of guidance, and other minor improvements across various areas of accounting within GAAP.

The Company adopted this ASU as of the first day of fiscal year 2022 on a prospective basis.

The adoption of this ASU did not have a material effect on the consolidated financial statements.

No other new accounting pronouncement issued or effective during the fiscal year had or is expected to have a material effect on the Company’s consolidated financial statements.

Business Combination

On August 21, 2019 , Simply Good USA entered into the Purchase Agreement to acquire Quest.

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

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

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.

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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.

Business transaction costs within the Consolidated Statements of Operations and Comprehensive Income (Loss) for the fifty-two weeks ended August 29, 2020 was $ 27.1 million, which included $ 14.5 million of transaction advisory fees related to the Quest Acquisition, $ 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.

Business transaction costs within the Consolidated Statements of Income and Comprehensive Income for the fifty-two weeks ended August 29, 2020 was $ 27.1 million, which included $ 14.5 million of transaction advisory fees related to the Quest Acquisition, $ 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 Quest Acquisition was $ 12.0 million paid to Centerview Partners LLC, an investment banking firm that served as the lead financial advisor to the Company for this transaction.

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

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

Company pursuant to applicable rules and policies.

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 Quest Acquisition.

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

52-Weeks Ended 52-Weeks Ended

(In thousands) August 28, 2021 August 29, 2020

52-Weeks Ended

(In thousands) August 29, 2020

Net sales 286,803

$ 453,619 $ 286,803

(1) Net sales for the fifty-two weeks ended August 28, 2021 excludes immaterial international sales.

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 Quest Acquisition been completed at the beginning of the fiscal year 2019, nor is it representative of future operating results of the Company.

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

52-Weeks Ended 53-Weeks Ended

(In thousands) August 29, 2020 August 31, 2019

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

52-Weeks Ended

(In thousands) August 29, 2020

Net sales $ 885,044

Gross profit $ 355,395

Net income (loss) $ 90,028 $ ( 42,627 )

Net income $ 90,028

Property and Equipment, Net

Property and equipment, net , as presented with the Consolidated Balance Sheets, is summarized as follows:

(In thousands)

August 28, 2021 August 29, 2020

(In thousands) August 27, 2022 August 28, 2021

Furniture and fixtures $ 7,232 $ 3,100

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Property and equipment, net $ 18,157 $ 16,584

Total depreciation expense was $ 2.3 million for the fifty-two weeks ended August 28, 2021, $ 1.8 million for the fifty-two weeks ended August 29, 2020, and $ 1.1 million for the fifty-three weeks ended August 31, 2019.

Total depreciation expense was $ 3.2 million for the fifty-two weeks ended August 27, 2022, $ 2.3 million for the fifty-two weeks ended August 28, 2021, and $ 1.8 million for the fifty-two weeks ended August 29, 2020.

Goodwill and Intangibles

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Balance as of August 29, 2020 $ 544,774

Acquisition of business 73,347

Balance as of August 29, 2020 $ 544,774

Acquisition of business 1,178

Acquisition of business measurement period adjustments 1,178

Sale of business ( 2,818 )

Balance as of August 28, 2021 $ 543,134

The change in Goodwill attributed to the acquisition of a business during the fifty-two weeks ended August 28, 2021 and the fifty-two weeks ended August 29, 2020 was the result of the Quest Acquisition and subsequent measurement period adjustments made to finalize the acquisition method of accounting as described in Note 3, Business Combination.

Balance as of August 27, 2022 $ 543,134

The change in Goodwill attributed to the acquisition of a business during the fifty-two weeks ended August 28, 2021 was the result of subsequent measurement period adjustments made to finalize the acquisition method of accounting for the Quest Acquisition as described in Note 3, Business Combination.

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

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

The qualitative assessments did not identify indicators of impairment, and it was determined that it was more likely than not each reporting unit had fair values in excess of their carrying values.

Accordingly, no further impairment assessment was necessary, and the Company determined neither reporting unit was impaired.

During the fifty-two weeks ended August 27, 2022, the Company substantially completed its efforts to fully integrate its operations and organization structure after the Quest Acquisition.

The Company aligned the nature of its production processes and the methods used to distribute products to customers for the Atkins® and Quest® brands.

The Company also designed its organizational structure to support entity-wide business functions across brands, products, customers, and geographic regions.

Additionally, the Company’s chief operating decision maker reviews operating results and forecasts at the consolidated level.

As a result, the Company determined its operations are organized into one , consolidated operating segment and reporting unit.

Previously, during the fifty-two weeks ended August 28, 2021 and August 29, 2020, the Company had two reporting units which were its operating segments, Atkins and Quest.

For fiscal year 2022, the Company performed a qualitative goodwill impairment assessment for its consolidated reporting unit.

The qualitative assessment did not identify indicators of impairment, and it was determined that it was more likely than not the reporting unit had a fair value in excess of its carrying value.

Accordingly, no further impairment assessment was necessary, and the Company determined its reporting unit was not impaired.

There were no impairment charges related to goodwill in the fifty-two weeks ended August 27, 2022 or since the inception of the Company.

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Software and website development costs 3 - 5 years 5,863 4,190 1,673

Intangible assets in progress 3 - 5 years 303 — 303

$ 1,182,863 $ 59,605 $ 1,123,258

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Software and website development costs 3 - 5 years 5,560 2,924 2,636

Intangible assets in progress 3 - 5 years 303 — 303

$ 1,182,863 $ 43,822 $ 1,139,041

Changes in Intangible assets, net during the fifty-two weeks ended August 27, 2022 were primarily related to recurring amortization expense.

Changes in Intangible assets, net during the fifty-two weeks ended August 28, 2021 were primarily related to the SimplyProtein Sale and recurring amortization expense.

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

Changes in Intangible assets, net during the fifty-two weeks ended August 29, 2020 were primarily related to the Quest Acquisition, recurring 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 did not exceed its carrying value, resulting in a loss on impairment of $ 3.0 million during the fifty-two weeks ended August 29, 2020.

During the fifty-two weeks ended August 27, 2022, the Company performed qualitative impairment assessments for its indefinite-lived intangible assets.

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Accordingly, no further impairment assessment was necessary.

There were no impairment charges related to indefinite-lived intangibles recognized in the fifty-two weeks ended August 28, 2021 or the fifty-three weeks ended August 31, 2019.

There was a $ 3.0 million loss on impairment of an indefinite-lived intangible in the fifty-two weeks ended August 29, 2020, as discussed above.

There were no impairment charges related to indefinite-lived intangibles recognized in the fifty-two weeks ended August 27, 2022 or August 28, 2021, respectively.

There was a $ 3.0 million loss on impairment of an indefinite-lived intangible related to the SimplyProtein brand in the fifty-two weeks ended August 29, 2020.

During the fifty-two weeks ended August 27, 2022, the Company did not identify 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.

There were no impairment charges related to the Company’s finite-lived intangible assets in the fifty-two weeks ended August 28, 2021, fifty-two weeks ended August 29, 2020, or the fifty-three weeks ended August 31, 2019.

Amortization expense related to intangible assets was $ 15.6 million for the fifty-two weeks ended August 28, 2021, $ 14.0 million for the fifty-two weeks ended August 29, 2020, and $ 6.5 million for the fifty-three weeks ended August 31, 2019.

There were no impairment charges related to the Company’s finite-lived intangible assets in the fifty-two weeks ended August 27, 2022, August 28, 2021, or August 29, 2020, respectively.

Amortization expense related to intangible assets was $ 15.8 million for the fifty-two weeks ended August 27, 2022, $ 15.6 million for the fifty-two weeks ended August 28, 2021, and $ 14.0 million for the fifty-two weeks ended August 29, 2020.

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

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The Credit Agreement at that time provided 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 Business Combination, 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 %, or (c) the Euro-currency rate applicable for an interest period of one month plus 1.00 % plus (x) 3.00 % margin for the Term Loan or (y) 2.00 % margin for the 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.

Substantially concurrent with the consummation of the business combination which formed the Company between Conyers Park Acquisition Corp.

and NCP-ATK Holdings, Inc.

on July 7, 2017, the full $ 200.0 million of the Term Facility (the “Term Loan”) was drawn.

On November 7, 2019, the Company entered into a second 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).

The Incremental Facility Amendment was executed to partially finance the acquisition of Quest Nutrition, LLC on November 7, 2019.

No amounts under the Term Facility were repaid as a result of the execution of the Incremental Facility Amendment.

Effective as of December 16, 2021, the Company entered into a third amendment (the “Extension Amendment”) to the Credit Agreement.

The Extension Amendment provided for an extension of the stated maturity date of the Revolving Commitments and Revolving Loans (each as defined in the Credit Agreement) from July 7, 2022 to the earlier of (i) 91 days prior to the maturity date of the Initial Term Loans on July 7, 2024 and (ii) December 16, 2026.

On January 21, 2022, the Company entered into a repricing amendment (the “2022 Repricing Amendment”) to the Credit Agreement.

The 2022 Repricing Amendment, among other things, (i) reduced the interest rate per annum applicable to the Initial Term Loans outstanding under the Credit Agreement immediately prior to the effective date of the 2022 Repricing Amendment, (ii) reset the prepayment premium for the existing Initial Term Loans to apply to Repricing Transactions (as defined in the Credit Agreement) that occur within six months after the effective date of the 2022 Repricing Amendment, and (iii) implemented the Secured Overnight Financing Rate (“SOFR”) and related replacement provisions for the London Interbank Offered Rate (“LIBOR”).

Effective as of the 2022 Repricing Amendment dated January 21, 2022, the interest rate per annum is based on either:

A base rate equaling the higher of (a) the “prime rate,” (b) the federal funds effective rate plus 0.50 %, or (c) the Adjusted Term SOFR Rate (as defined in the Credit Agreement) applicable for an interest period of one month plus 1.00 % plus (x) 2.25 % margin for the Term Loan or (y) 2.00 % margin for the Revolving Credit Facility;

SOFR plus a credit spread adjustment equal to 0.10 % for one-month SOFR, 0.15 % for up to three-month SOFR and 0.25 % for up to six-month SOFR, subject to a floor of 0.50 %, plus (x) 3.25 % margin for the Term Loan or (y) 3.00 % margin for the Revolving Credit Facility.

The Simply Good Foods Company is not a borrower under the Credit Agreement and has not provided a guarantee of the Credit Agreement.

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All guarantors other than Quest Nutrition, LLC are holding companies with no assets other than their investments in their respective 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.

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 Quest Acquisition.

No amounts under the Term Facility were repaid as a result of the execution of the Incremental Facility Amendment.

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 6.00 :1.00 contingent on credit extensions in excess of 30 % of the total amount of commitments available under the Revolving Credit Facility.

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As of August 27, 2022, the Company had letters of credit in the amount of $ 3.5 million outstanding.

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

These letters of credit offset against the $ 75.0 million availability of the Revolving Credit Facility and exist to support three of the Company’s leased buildings and insurance programs relating to workers’ compensation.

No amounts were drawn against these letters of credit at August 27, 2022.

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These valuations require significant judgment.

A loss of $ 0.5 million was charged to the Loss in fair value change of contingent consideration – TRA liability for the fifty-three weeks ended August 31, 2019.

The Company settled the Income Tax Receivable Agreement (the “TRA”) during the fifty-three weeks

ended August 31, 2019, which resulted in a $ 1.5 million gain.

Refer to Note 9, 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 model to estimate the fair value of the Private Warrants at each reporting date.

As of August 28, 2021, the Company had outstanding liability-classified Private Warrants that allowed holders to purchase 6,700,000 shares of the Company’s common stock.

Such Private Warrants were held by Conyers Park Sponsor, LLC (“Conyers Park”), a related party.

On January 7, 2022, Conyers Park elected to exercise the Private Warrants in full on a cashless basis, resulting in a net issuance of 4,830,761 shares of the Company’s common stock.

As a result of Conyers Park’s election to exercise the Private Warrants, there were no outstanding liability-classified Private Warrants as of August 27, 2022.

Refer to Note 12, Stockholders’ Equity, for additional details regarding the cashless exercise of the Private Warrants.

The Company utilized the Black-Scholes 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.

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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 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.

The periodic remeasurement of the warrant liability is reflected in (Loss) gain in fair value change of warrant liability within the Consolidated Statements of Operations and Comprehensive Income (Loss).

The adjustments for changes in fair value of the warrant liability for the fifty-two weeks ended August 28, 2021, the fifty-two weeks ended August 29, 2020, and the fifty-three weeks ended August 31, 2019 were a loss of $ 66.2 million, a gain of $ 30.9 million and a loss of $ 72.7 million, respectively.

The adjustments resulted in a total warrant liability at August 28, 2021 and August 29, 2020 of $ 159.8 million and $ 93.6 million, respectively.

There were 6,700,000 Private Warrants outstanding as of August 28, 2021, August 29, 2020, and August 31, 2019.

Based on the fair value assessment that was performed, the Company determined a fair value price per Private Warrant of $ 23.86 , $ 13.98 , and $ 18.59 as of August 28, 2021, August 29, 2020, and August 31, 2019, respectively.

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 reflected a Level 3 measurement within the fair value measurement hierarchy.

There were no Private Warrants outstanding as of August 27, 2022.

As of August 28, 2021 and August 29, 2020, the Company had 6,700,000 Private Warrants outstanding with a fair value price per Private Warrant of $ 23.86 and $ 13.98 , respectively.

The table below summarizes the inputs used to calculate the fair value of the warrant liability at each of the following reporting dates:

August 28, 2021 August 29, 2020 August 31, 2019

August 28, 2021 August 29, 2020

Exercise price $ 11.50 $ 11.50

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Per share value of warrants $ 23.86 $ 13.98

The periodic remeasurement of the warrant liability has been reflected in (Loss) gain in fair value change of warrant liability within the Consolidated Statements of Income and Comprehensive Income.

The adjustments for the fifty-two weeks ended August 27, 2022, August 28, 2021, and August 29, 2020 resulted in a loss of $ 30.1 million, a loss of $ 66.2 million and a gain of $ 30.9 million, respectively.

There were no transfers of financial instruments between the three levels of the fair value hierarchy during the fiscal years ended August 27, 2022, August 28, 2021, and August 29, 2020, respectively.

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Foreign 2,489 1,334 546

Total income (loss) before income taxes $ 80,860 $ 78,964 $ ( 8,523 )

Total income before income taxes $ 150,569 $ 80,860 $ 78,964

Income tax expense was comprised of the following:

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Non-deductible transaction costs — — 0.1

TRA contingent consideration — — ( 0.4 )

Other permanent items ( 1.9 ) 1.4 1.2

Income tax expense (benefit) 49.4 % 16.9 % ( 196.1 ) %

Income tax expense 27.9 % 49.4 % 16.9 %

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities at August 27, 2022 and August 28, 2021 were as follows:

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The Company had state net operating loss carryforwards of $ 2.1 million and $ 2.5 million and foreign net operating losses of $ 0.0 million and $ 9.4 million at August 27, 2022 and August 28, 2021, respectively.

The state and foreign net operating loss carryforwards will begin to expire in 2022.

As of August 28, 2021, the Company has recorded total valuation allowances of $ 2.2 million on deferred tax assets related to foreign net operating loss carryforwards.

This amount represents a full valuation allowance on the deferred tax assets of foreign entities within the United Kingdom and the Netherlands.

During the fifty-two weeks ended August 28, 2021, and August 29, 2020, the Company changed its intentions and determined to not indefinitely reinvest its foreign earnings within its subsidiaries in the Netherlands and in the United Kingdom, Spain, and Canada.

The change in assertion did not result in recognition of tax liabilities related to these jurisdictions.

The state net operating loss carryforwards will begin to expire in 2029.

As of August 27, 2022, the Company has no valuation allowances on its deferred tax assets.

The Company had previously recorded a valuation allowance of $2.2 million on deferred tax assets related to foreign net operating loss carryforwards generated within the United Kingdom and the Netherlands.

As of August 27, 2022, the Company no longer had operations in either jurisdiction.

Accordingly, during the fifty-two weeks ended August 27, 2022, the Company wrote off the United Kingdom and Netherlands net operating loss carryforwards and the corresponding $2.2 million valuation allowance as the net operating loss carryforwards were no longer utilizable.

As of August 27, 2022, the Company does not intend to indefinitely reinvest its foreign earnings within its subsidiary in Canada and has not recognized any tax liabilities related to this jurisdiction.

It is the Company’s intention to reinvest the earnings of its other non-U.S.

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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 Business Combination, 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 Business Combination, (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 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.

The components of lease expense for the fifty-two weeks ended August 28, 2021 and August 29, 2020 were as follows.

52-Weeks Ended 52-Weeks Ended

(In thousands) Statement of Operations Caption August 28, 2021 August 29, 2020

The components of lease expense were as follows.

52-Weeks Ended 52-Weeks Ended 52-Weeks Ended

(In thousands) Statement of Operations Caption August 27, 2022 August 28, 2021 August 29, 2020

Operating lease cost:

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Cost of goods sold and General and administrative

Operating lease cost $ 8,433 $ 6,890

3,068 1,681 1,648

Total operating lease cost $ 12,145 $ 8,433 $ 6,890

Short-term lease cost General and administrative $ — $ — $ 30

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

Under the previous lease accounting standard in effect for the period, ASC Topic 840, Leases, rent expense for operating leases was $ 2.2 million for the fifty-three weeks ended August 31, 2019.

In conjunction with the Company’s restructuring activities as discussed in Note 17, the Company incurred impairment charges of $ 0.7 million in the fifty-two weeks ended August 28, 2021 related to its operating lease right-of-use assets for leases in Toronto, Ontario and the Netherlands.

Additionally, the Company terminated the lease in Toronto, Ontario, which resulted in a gain on lease termination of $ 0.2 million in the fifty-two weeks ended August 28, 2021.

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

In conjunction with the Company’s restructuring activities as discussed in Note 16, Restructuring and Related Charges, the Company recorded an immaterial gain on lease termination related to its lease in the Netherlands in the fifty-two weeks ended August 27, 2022 and a $ 0.5 million impairment charge, net of a gain on lease termination, related to its leases in Toronto, Ontario and the Netherlands in the fifty-two weeks ended August 28, 2021.

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

Refer to Note 16, Restructuring and Related Charges, for additional information regarding restructuring activities.

The right-of-use assets and corresponding liabilities related to both operating and finance leases are as follows:

(In thousands) Balance Sheet Caption August 28, 2021 August 29, 2020

(In thousands) Balance Sheets Caption August 27, 2022 August 28, 2021

Operating lease right-of-use assets Other long-term assets $ 46,460 $ 46,197

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2024 9,424 145

2024 7,489 145

Thereafter 19,848 —

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Present value of lease liabilities $ 50,731 $ 406

The weighted-average remaining lease terms and weighted-average discount rates for operating and finance leases as of August 28, 2021 were as follows:

Operating Leases Finance Leases

As of August 28, 2021

Weighted-average remaining lease term (in years) 8.38 2.44

Weighted-average discount rate 4.9 % 5.6 %

As of August 29, 2020

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

August 27, 2022 August 28, 2021

Weighted-average remaining lease term (in years)

Operating leases 7.27 8.38

Finance leases 1.51 2.44

Weighted-average discount rate

Operating leases 4.7 % 4.9 %

Finance leases 5.6 % 5.6 %

Supplemental and other information related to leases was as follows:

52-Weeks Ended 52-Weeks Ended

(In thousands) August 28, 2021 August 29, 2020

52-Weeks Ended 52-Weeks Ended 52-Weeks Ended

(In thousands) August 27, 2022 August 28, 2021 August 29, 2020

Cash paid for amounts included in the measurement of lease liabilities

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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 results, financial condition or cash flows.

During the fifty-three weeks 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 weeks ended August 29, 2020 , the Company reserved an additional $ 0.3 million.

The reserve was included within General and administrative in the Consolidated Statements of Operations and Comprehensive Income (Loss) and the reserve was fully paid into escrow and settled during the fifty-two weeks ended August 29, 2020 .

During the fifty-two weeks ended August 28, 2021, the Company received a $ 5.0 million gain on a legal settlement, which has been presented as an item within Other income (expense) in the Consolidated Statements of Operations and Comprehensive Income (Loss).

As of August 28, 2021 and August 29, 2020, the Company had $ 0.7 million and $ 1.3 million reserved for potential settlements, respectively.

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

The Company enters 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 28, 2021, the Company will be required to make payments of $ 2.7 million over the next year.

Based on the terms of contracts in place and achievement of performance conditions as of August 27, 2022, the Company will be required to make payments of $ 0.9 million over the next year.

Stockholders’ Equity

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Warrants to Purchase Common Stock

Prior to the Business Combination, 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 Business Combination.

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 Business Combination 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.

As of August 28, 2021, 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 8, Fair Value of Financial Instruments, 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.

As of August 28, 2021, the Company had outstanding liability-classified Private Warrants that allowed holders to purchase 6,700,000 shares of the Company’s common stock.

Such Private Warrants were held by Conyers Park, a related party.

Each whole warrant entitled the holder to purchase one share of the Company’s common stock at a price of $ 11.50 per share.

On January 7, 2022, Conyers Park elected to exercise the Private Warrants in full on a cashless basis, resulting in a net issuance of 4,830,761 shares of the Company’s common stock.

As a result of the cashless exercise on January 7, 2022, there were no outstanding liability-classified Private Warrants as of August 27, 2022.

As discussed in Note 8, Fair Value of Financial Instruments, the liability-classified warrants were 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 fair value remeasurements of the warrant liability, including the cashless exercise and the settlement of the warrant liability, have been reflected in (Loss) gain in fair value change of warrant liability within the Consolidated Statements of Income and Comprehensive Income.

Stock Repurchase Program

On November 13, 2018, the Company announced that its Board of Directors had adopted a $ 50.0 million stock repurchase program.

The Company adopted a $ 50.0 million stock repurchase program on November 13, 2018.

On April 13, 2022, the Company announced that its Board of Directors had approved the addition of $ 50.0 million to its stock repurchase program, resulting in authorized stock repurchases of up to an aggregate of $ 100.0 million.

Under the stock repurchase program, the Company may repurchase shares from time to time in the open market or in privately negotiated transactions.

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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 weeks ended August 28, 2021 and August 29, 2020, the Company did not repurchase any shares of common stock.

During the fifty-three weeks ended August 31, 2019, the Company repurchased 98,234 shares of common stock at an average share price of $ 21.83 per share.

During the fifty-two weeks ended August 27, 2022, the Company repurchased 1,720,520 shares of common stock at an average share price of $ 34.79 per share.

The Company did not repurchase any shares of common stock during the fifty-two weeks ended August 28, 2021 or August 29, 2020.

As of August 27, 2022, approximately $ 38.0 million remained available under the stock repurchase program.

Earnings (Loss) Per Share

Accumulated Other Comprehensive Loss

During the fifty-two weeks ended August 27, 2022, the Company recognized a foreign currency translation gain of $ 1.1 million related to the liquidation of a foreign subsidiary.

The gain is reflected as a component of Other income (expense) in Gain (loss) on foreign currency transactions within the Consolidated Statements of Income and Comprehensive Income.

Earnings 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 anti-dilutive.

As of August 28, 2021, 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 anti-dilutive, the share settlement is excluded.

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

In computing diluted earnings per share, basic earnings per share is adjusted for the assumed issuance of all potentially dilutive securities, including the Company’s employee stock options, non-vested stock units, and Private Warrants for the periods during which they were outstanding.

During periods when the effect of the outstanding Private Warrants was dilutive, the Company assumed share settlement of the instruments as of the beginning of the reporting period and adjusted the numerator to remove the change in fair value of the warrant liability and adjusted the denominator to include the dilutive shares, calculated using the treasury stock method.

During periods when the effect of the outstanding Private Warrants was anti-dilutive, the share settlement was excluded.

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

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

52-Weeks Ended 52-Weeks Ended 52-Weeks Ended

(In thousands, except share and per share data) August 27, 2022 August 28, 2021 August 29, 2020

Basic earnings (loss) per share computation:

Net income (loss) available to common stock stockholders $ 40,880 $ 65,638 $ ( 25,234 )

Basic earnings per share computation:

Net income available to common stock stockholders $ 108,574 $ 40,880 $ 65,638

Weighted average common shares outstanding – basic 98,754,913 95,743,413 93,968,953

Basic earnings (loss) per share from net income (loss) $ 0.43 $ 0.70 $ ( 0.31 )

Diluted earnings (loss) per share computation:

Net income (loss) available to common stock stockholders $ 40,880 $ 65,638 $ ( 25,234 )

Basic earnings per share from net income $ 1.10 $ 0.43 $ 0.70

Diluted earnings per share computation:

Net income available to common stock stockholders $ 108,574 $ 40,880 $ 65,638

Gain in fair value change of warrant liability — — ( 30,938 )

Numerator for diluted earnings (loss) per share $ 40,880 $ 34,700 $ ( 25,234 )

Numerator for diluted earnings per share $ 108,574 $ 40,880 $ 34,700

Weighted average common shares outstanding – basic 98,754,913 95,743,413 93,968,953

Public warrants — — —

Private Warrants — — 3,327,656

Employee stock options 1,578,329 1,311,889 1,001,542

Restricted stock units 310,296 45,571 —

Non-vested stock units 255,914 310,296 45,571

Weighted average common shares – diluted 100,589,156 97,365,598 98,343,722

Diluted earnings (loss) per share from net income (loss) $ 0.42 $ 0.35 $ ( 0.31 )

Diluted earnings or loss per share calculations for the fifty-two weeks ended August 28, 2021 and fifty-three weeks ended August 31, 2019 excluded 4.1 million and 3.0 million shares, issuable upon exercise of Private Warrants, respectively, that would have been anti-dilutive.

In addition, the fifty-three weeks ended August 31, 2019 excluded 0.6 million shares, issuable upon exercise, of public warrants that would have been anti-dilutive.

Diluted earnings or loss per share calculations for the fifty-two weeks ended August 28, 2021, fifty-two weeks ended August 29, 2020, and fifty-three weeks ended August 31, 2019 excluded an immaterial number, 0.6 million and 1.0 million shares of common stock options issuable upon exercise of stock options, respectively, that would have been anti-dilutive.

An immaterial number of non-vested restricted stock units that would have been anti-dilutive were excluded from diluted earnings or loss per share calculations for the fifty-two weeks ended August 28, 2021, fifty-two weeks ended August 29, 2020, and fifty-three weeks ended August 31, 2019.

Diluted earnings per share from net income $ 1.08 $ 0.42 $ 0.35

Diluted earnings per share calculations for the fifty-two weeks ended August 27, 2022 and August 28, 2021 excluded 0.7 million and 4.1 million shares, issuable upon exercise of Private Warrants, respectively, that would have been anti-dilutive.

Diluted earnings per share calculations for the fifty-two weeks ended August 27, 2022, August 28, 2021, and August 29, 2020 excluded 0.3 million shares, an immaterial number of shares, and 0.6 million shares of common stock issuable upon exercise of stock options, respectively, that would have been anti-dilutive.

Diluted earnings per share calculations for the fifty-two weeks ended August 27, 2022, August 28, 2021, and August 29, 2020 excluded an immaterial number of non-vested stock units that would have been anti-dilutive.

Omnibus Incentive Plan

Stock-based compensation includes stock options, restricted stock units, 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 recognized on a straight-line basis over the requisite service period of the award based on its 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 $ 8.3 million in the fifty-two weeks ended August 28, 2021, $ 7.6 million in the fifty-two weeks ended August 29, 2020, and $ 5.5 million in the fifty-three weeks ended August 31, 2019 .

For the fifty-two weeks ended August 27, 2022, August 28, 2021, and August 29, 2020, the Company recorded stock-based compensation expense of $ 11.7 million, $ 8.3 million, and $ 7.6 million, respectively.

In July 2017, the Company’s stockholders approved the 2017 Omnibus Incentive Plan (the “Incentive Plan”).

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The following table summarizes stock option activity for the fifty-two weeks ended August 27, 2022:

(In thousands, except share and per share data) Shares Weighted average

(In thousands, except share and per share data) Shares underlying options Weighted average

exercise price Weighted average remaining life

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2,776,551 $ 18.04 6.10 2,191,573 $ 14.54

$ 30.00 - 32.99 — — 0.00 — —

$ 33.00 - 35.99 — — 0.00 — —

$ 36.00 - 38.99 200,000 36.56 9.96 — —

2,993,163 $ 16.31 6.83 2,281,640 $ 13.42

The weighted average fair value of options granted during the fifty-two weeks ended August 28, 2021, fifty-two weeks ended August 29, 2020, and fifty-three weeks ended August 31, 2019 were $ 9.99 , $ 7.79 and $ 7.10 , respectively.

The weighted average fair value of options granted during the fifty-two weeks ended August 27, 2022, August 28, 2021, and August 29, 2020 were $ 15.32 , $ 9.99 and $ 7.79 , 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:

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Risk-free rate of return 1.26 % 0.80 % - 0.935 % 0.38 % - 1.80 %

Because the Company’s Incentive Plan has not been in place for a sufficient amount of time as compared to the expected stock option terms nor does the Company have sufficient history with changes in option vesting schedules and changes in the pool of employees receiving option grants, the Company estimates the expected term using its historical experience of the time awards have been outstanding

as well as an expected time outstanding, which takes into account the award vesting and contractual term.

Additionally, due to a lack of sufficient trading history for the Company’s common stock, expected stock price volatility is based on a combination of a sampling of comparable publicly traded companies and the Company’s historical common stock price activity.

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As of August 27, 2022, the Company had $ 4.3 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 weeks ended August 28, 2021, fifty-two weeks ended August 29, 2020, and fifty-three weeks ended August 31, 2019, the Company received $ 0.7 million, $ 4.2 million, and $ 0.7 million in cash from stock option exercises, respectively.

During the fifty-two weeks ended August 27, 2022, August 28, 2021, and August 29, 2020, the Company received $ 4.3 million, $ 0.7 million, and $ 4.2 million in cash from stock option exercises, respectively.

Restricted Stock Units

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Granted 50,212 63.42

Vested ( 166,688 ) 11.93

Forfeited ( 8,598 ) 19.33

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Exercisable as of August 27, 2022 — $ — 0.00

As of August 28, 2021, the Company had $ 0.2 million of total unrecognized compensation cost related to its SARs that will be recognized over a weighted average period of 1.2 years.

Related Party Transactions

Tax Receivable Agreement

During the fifty-three weeks 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 9, Income Taxes.

As of August 27, 2022, the Company had an immaterial amount of total unrecognized compensation cost related to its SARs that will be recognized over a weighted average period of 0.2 years.

Segment and Customer Information

Following the Quest Acquisition, 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;

(d) the type of customer for the products;

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

During the fifty-two weeks ended August 27, 2022, the Company substantially completed its efforts to fully integrate its operations and organization structure after the Quest Acquisition.

The Company aligned the nature of its production processes and the methods used to distribute products to customers for the Atkins® and Quest® brands.

The Company also designed its organizational structure to support entity-wide business functions across brands, products, customers, and geographic regions.

Additionally, the Company’s chief operating decision maker reviews operating results and forecasts at the consolidated level.

As a result, the Company determined its operations are organized into one , consolidated operating segment and reportable segment.

Previously, during the fifty-two weeks ended August 28, 2021 and August 29, 2020, the Company had two operating segments, Atkins and Quest, which were aggregated into one reporting segment due to similar financial, economic and operating characteristics.

Reconciliation 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.

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Atkins $ 540,328 $ 506,860 $ 501,472

453,619 286,803 —

Quest 593,943 453,619 286,803

Total North America 1,134,271 960,479 788,275

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Total $ 1,168,678 $ 1,005,613 $ 816,641

(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.

(1) The North America geographic area consists of net sales substantially related to the United States and there is no individual foreign country to which more than 10% of the Company’s net sales are attributed or that is otherwise deemed individually material.

The following is a summary of long lived assets by geographic area:

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$ 18,157 $ 16,584

International — 9

Total $ 18,157 $ 16,584

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Significant Customers

As a result of the Quest Acquisition, 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 each comprised more than 10% of the Company’s total sales for the fifty-two weeks ended August 28, 2021 and August 29, 2020.

For the fifty-three weeks ended August 31, 2019, credit risk for the Company was concentrated in one customer who comprised more than 10% of the Company’s total sales.

Credit risk for the Company was concentrated in three customers who each comprised more than 10% of the Company’s total sales for the fifty-two weeks ended August 27, 2022, August 28, 2021, and August 29, 2020.

52-Weeks Ended 52-Weeks Ended 52-Weeks Ended

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Customer 1 31 % 31 % 34 %

Customer 2 12 % 10 % n/a

Customer 2 13 % 12 % 10 %

Customer 3 10 % n/a n/a

n/a - Not applicable as the customer was not significant during these fiscal years.

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Customer 2 $ 21,829 16 % $ 27,962 25 %

Customer 3 $ 18,521 14 % n/a n/a

n/a - Not applicable as the customer was not significant during these fiscal years.

No other customers of the Company accounted for more than 10% of sales during these periods.

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The new organization design became effective on August 31, 2020.

These restructuring plans primarily include workforce reductions, changes in management structure, and the relocation of business activities from one location to another.

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.

These restructuring plans primarily included workforce reductions, changes in management structure, and the relocation of business activities from one location to another.

The Company substantially completed its restructuring activities during the fifty-two weeks ended August 27, 2022.

Since the announcement of the restructuring activities in May 2020, the Company incurred aggregate restructuring and restructuring-related costs of $ 9.9 million.

The one-time termination benefits and employee severance costs incurred in relation to these restructuring activities were accounted for in accordance with ASC Topic 420, Exit or Disposal Cost Obligations, and ASC Topic 712, Compensation - Nonretirement Post-employment Benefits, respectively.

The Company recognized a liability and the related expense for these restructuring costs when the liability was incurred and could be measured.

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

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

Changes to the restructuring liability during the fifty-two weeks ended August 27, 2022 and August 28, 2021 were as follows:

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Balance as of August 27, 2022 $ — $ — $ —

In addition to the restructuring costs shown above, the Company incurred impairment charges of $ 0.7 million in the fifty-two weeks ended August 28, 2021 related to its operating lease right-of-use assets for leases in Toronto, Ontario and the Netherlands.

Additionally, the Company terminated the lease in Toronto, Ontario, which resulted in a gain on lease termination of $ 0.2 million in the fifty-two weeks ended August 28, 2021.

As a result, the Company incurred a total of $ 4.3 million and $ 5.5 million in restructuring and restructuring-related costs in fifty-two weeks ended August 28, 2021 and August 29, 2020, respectively.

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

Since the restructuring activities were announced in May 2020, the Company has incurred aggregate restructuring and restructuring-related costs of $ 9.8 million.

Overall, the Company expects to incur a total of approximately $ 10.1 million in restructuring and restructuring-related costs, which are to be paid through the second quarter of fiscal year 2022.

The Company’s total restructuring and restructuring-related costs incurred in the fifty-two weeks ended August 27, 2022 were $ 0.1 million , which included an immaterial gain on lease termination related to its lease in the Netherlands in addition to the restructuring costs shown above.

In the fifty-two weeks ended August 28, 2021, the Company incurred a total of $ 4.3 million in restructuring and restructuring-related costs, which included a $ 0.5 million impairment charge, net of a gain on lease termination, related to its leases in Toronto, Ontario and the Netherlands.

The Company’s total restructuring and restructuring-related costs incurred in the fifty-two weeks ended August 29, 2020 were $ 5.5 million.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data