UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10-Q/A~~

~~(Amendment No. 1)~~10-Q


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

For the quarterly period ended November ~~28, 2020~~27, 2021


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

Commission File Number: 001-38115

___________________________________________________________________________________________________________

The Simply Good Foods Company

(Exact name of registrant as specified in its charter)


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

1225 17th Street, Suite 1000

Denver, CO 80202

(Address of principal executive offices and zip code)

(303) 633-2840

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, par value $0.01 per share

SMPL

Nasdaq

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of January ~~5, 2021,~~3, 2022, there were ~~95,720,637~~96,132,194 shares of common stock, par value $0.01 per share, issued and outstanding.

~~EXPLANATORY NOTE~~

This Amendment No. 1 to Form 10-Q (this “Amendment” or “Form 10-Q/A”) amends The Simply Good Foods Company's Quarterly Report on Form 10-Q for the thirteen weeks ended November 28, 2020, which was originally filed with the SEC on January 7, 2021 (the “Original Filing”). See Note 2, Restatement of Previously Issued Financial Statements, in Part I, Item 1, Financial Statements, for additional information.

On April 12, 2021, the SEC issued a statement (the “SEC Statement”) on the accounting and reporting considerations for warrants issued by special purpose acquisition companies (“SPACs”). The SEC Statement discussed certain features of warrants issued in SPAC transactions that may be common across many entities. Specifically, the SEC Statement focused in part on provisions in warrant agreements that provide for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder. The SEC Statement indicated that, because the holder of a warrant is not an input into the pricing of a fixed-for-fixed option on equity shares, such provisions would preclude the warrant from being classified in equity and thus the warrant should be classified as a liability. Following consideration of the guidance in the SEC Statement, The Simply Good Foods Company (the “Company”) concluded that its private warrants (“Private Warrants”) should be classified as a liability and measured at fair value, with changes in fair value each period reported in earnings in accordance with Accounting Standards Codification 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity.

On May 13, 2021, the Audit Committee of the Company’s Board of Directors, in consultation with management, concluded that the Company’s previously issued consolidated financial statements for the fiscal years ended August 29, 2020, August 31, 2019, and August 25, 2018, and for each of the Company’s previously issued unaudited interim quarterly financial statements for fiscal years 2020 and 2019 (the “Non-Reliance Period”), should no longer be relied upon. As such, the Company resolved to restate the consolidated financial statements for the Non-Reliance Period. See Note 2, Restatement of Previously Issued Financial Statements, in Part 1, Item 1, Financial Statements for additional information.

The Company is filing this Amendment to amend and restate the previously issued financial statements for the Company’s first fiscal quarter of 2021 to correct the misapplication of the accounting for the Private Warrants. This Amendment also amends and restates the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations and other disclosures made in the Original Filing as appropriate to reflect the restatement of the relevant periods (the “Restatement”).

~~Effect of Restatement~~

As a result of the Restatement, the Private Warrants are now reflected as a liability measured at fair value on the Company’s Condensed Consolidated Balance Sheets, and the change in the fair value of this liability in each period is recognized as a gain or loss in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

The effect of these adjustments on net income for the thirteen weeks ended November 28, 2020 and November 30, 2019, was a gain of $20.5 million and a gain of $13.3 million, respectively. The adjustments increased total liabilities at November 28, 2020 by $73.2 million with a corresponding decrease to total stockholders’ equity.

The restatement of the financial statements had no effect on the Company’s liquidity, cash, or cash equivalents, or cash flows from operating, investing and financing activities. See Note 2 to the Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Statements, of this Amendment for additional information on the restatement and the related financial statement effects.

~~Internal Control Considerations~~

As previously disclosed in our Annual Report on Form 10-K/A for the year ended August 29, 2020, we identified a material weakness in our internal controls over financial reporting related to inaccurate accounting for warrants issued in connection with our initial public offerings and private placement. As a result of the material weakness, the Company’s disclosure controls and procedures were not effective as of August 29, 2020. Management plans to implement changes to strengthen internal controls and to remediate the material weakness. For additional information, see Part I, Item 4, Controls and Procedures, of this Form 10-Q/A.

~~Items Amended in this Form 10-Q/A~~

~~The following sections in the Original Filing are amended and restated in the entirety in this Form 10-Q/A to reflect the restatement:~~

•~~Part I - Item 1 - Financial Statements (Unaudited)~~

•~~Part I - Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

•~~Part I - Item 4 - Controls and Procedures~~

•~~Part II - Item 6 - Exhibits~~

Our principal executive officer and principal financial officer have also provided new certifications as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 dated as of the filing date of this Form 10-Q/A. The certifications are included in this Form-10Q/A as Exhibits 31.1, 31.2, and 32.1.

This Form 10-Q/A sets forth only those items from the Original Filing that have been modified and superseded to reflect the Restatement. Except as provided above, this Amendment does not reflect events occurring after the filing of the Original Filing. Accordingly, this Form 10-Q/A should be read in conjunction with the Original Filing and filings with the SEC subsequent to the date on which the Company filed the Original Filing with the SEC.

THE SIMPLY GOOD FOODS COMPANY AND SUBSIDIARIES

FORM 10-Q

FOR THE QUARTER ENDED NOVEMBER ~~28, 2020~~27, 2021

INDEX


		Page
PART I. Financial Information
Item 1.	Financial Statements (Unaudited)	63
	Condensed Consolidated Balance ~~Sheets (As Restated)~~Sheets	63
	Condensed Consolidated Statements of Operations and Comprehensive Income ~~(Loss) (As Restated)~~	74
	Condensed Consolidated Statements of Cash ~~Flows (As Restated)~~Flows	85
	Condensed Consolidated Statements of Stockholders’ ~~Equity (As~~ ~~Restated)~~Equity	107
	Notes to Unaudited Condensed Consolidated Financial Statements	118
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2719
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3527
Item 4.	Controls and Procedures	3527
PART II. Other Information
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	3728
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	3829
	Signatures	3930

PART I. Financial Information

Item 1. Financial Statements (Unaudited)

The Simply Good Foods Company and Subsidiaries

Condensed Consolidated Balance Sheets

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

November 28, 2020 August 29, 2020
(As Restated,
see Note 2)
Assets
Current assets:
Cash and cash equivalents $ 91,476 $ 95,847
Accounts receivable, net 97,887 89,740
Inventories 76,067 59,085
Prepaid expenses 4,345 3,644
Other current assets 9,178 11,947
Total current assets 278,953 260,263
Long-term assets:
Property and equipment, net 11,344 11,850
Intangible assets, net 1,149,895 1,158,768
Goodwill 543,134 544,774
Other long-term assets 31,892 32,790
Total assets $ 2,015,218 $ 2,008,445
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 41,409 $ 32,240
Accrued interest 720 960
Accrued expenses and other current liabilities 32,972 38,007
Current maturities of long-term debt 275 271
Total current liabilities 75,376 71,478
Long-term liabilities:
Long-term debt, less current maturities 572,923 596,879
Deferred income taxes 88,543 84,352
Warrant liability 73,185 93,638
Other long-term liabilities 21,884�� 22,765
Total liabilities 831,911 869,112
See commitments and contingencies (Note 11) 0 0
Stockholders’ equity:
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued 0 0
Common stock, $0.01 par value, 600,000,000 shares authorized, 95,818,871 and 95,751,845 shares issued at November 28, 2020 and August 29, 2020, respectively 958 958
Treasury stock, 98,234 and 98,234 shares at cost at November 28, 2020 and August 29, 2020, respectively (2,145) (2,145)
Additional paid-in-capital 1,077,538 1,076,472
Retained earnings 107,880 64,927
Accumulated other comprehensive loss (924) (879)
Total stockholders’ equity 1,183,307 1,139,333
Total liabilities and stockholders’ equity $ 2,015,218 $ 2,008,445


	November 27, 2021		August 28, 2021
Assets
Current assets:
Cash	$	35,447	$	75,345
Accounts receivable, net	125,195		111,456
Inventories	112,433		97,269
Prepaid expenses	4,893		4,902
Other current assets	9,669		9,694
Total current assets	287,637		298,666

Long-term assets:
Property and equipment, net	17,416		16,584
Intangible assets, net	1,135,068		1,139,041
Goodwill	543,134		543,134
Other long-term assets	60,081		54,792
Total assets	$	2,043,336	$	2,052,217

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	44,811	$	59,713
Accrued interest	—		60
Accrued expenses and other current liabilities	35,665		53,606
Current maturities of long-term debt	289		285
Total current liabilities	80,765		113,664

Long-term liabilities:
Long-term debt, less current maturities	427,017		451,269
Deferred income taxes	100,499		93,755
Warrant liability	177,152		159,835
Other long-term liabilities	48,296		44,890
Total liabilities	833,729		863,413
See commitments and contingencies (Note 9)	0		0

Stockholders’ equity:
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued	—		—
Common stock, $0.01 par value, 600,000,000 shares authorized, 96,130,441 and 95,882,908 shares issued at November 27, 2021 and August 28, 2021, respectively	961		959
Treasury stock, 98,234 shares at cost at November 27, 2021 and August 28, 2021	(2,145)		(2,145)
Additional paid-in-capital	1,084,690		1,085,001
Retained earnings	126,959		105,807
Accumulated other comprehensive loss	(858)		(818)
Total stockholders’ equity	1,209,607		1,188,804
Total liabilities and stockholders’ equity	$	2,043,336	$	2,052,217

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

The Simply Good Foods Company and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income ~~(Loss)~~

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

Thirteen Weeks Ended
November 28, 2020 November 30, 2019
(As Restated,
see Note 2)
Net sales $ 231,152 $ 152,153
Cost of goods sold 137,111 89,947
Gross profit 94,041 62,206
Operating expenses:
Selling and marketing 25,195 18,434
General and administrative 25,415 18,145
Depreciation and amortization 4,244 2,453
Business transaction costs 0 26,159
Total operating expenses 54,854 65,191
Income (loss) from operations 39,187 (2,985)
Other income (expense):
Interest income 3 1,379
Interest expense (8,372) (4,969)
Gain in fair value change of warrant liability 20,453 13,308
Gain on foreign currency transactions 9 16
Other income 47 37
Total other income 12,140 9,771
Income before income taxes 51,327 6,786
Income tax expense (benefit) 8,374 (1,729)
Net income $ 42,953 $ 8,515
Other comprehensive income (loss):
Foreign currency translation adjustments (45) 0
Comprehensive income $ 42,908 $ 8,515
Earnings per share from net income:
Basic $ 0.45 $ 0.09
Diluted $ 0.23 $ (0.05)
Weighted average shares outstanding:
Basic 95,538,111 89,708,633
Diluted 99,763,119 93,529,865
~~150~~


	Thirteen Weeks Ended
	November 27, 2021		November 28, 2020
Net sales	$	281,265	$	231,152
Cost of goods sold	164,710		137,111
Gross profit	116,555		94,041

Operating expenses:
Selling and marketing	30,527		25,195
General and administrative	23,702		25,415
Depreciation and amortization	4,320		4,244


Total operating expenses	58,549		54,854

Income from operations	58,006		39,187

Other income (expense):
Interest income	1		3
Interest expense	(6,371)		(8,372)
(Loss) gain in fair value change of warrant liability	(17,317)		20,453

(Loss) gain on foreign currency transactions	(353)		9
Other income	9		47
Total other (expense) income	(24,031)		12,140

Income before income taxes	33,975		51,327
Income tax expense	12,823		8,374
Net income	$	21,152	$	42,953

Other comprehensive income:
Foreign currency translation adjustments	$	(40)	$	(45)
Comprehensive income	$	21,112	$	42,908

Earnings per share from net income:
Basic	$	0.22	$	0.45
Diluted	$	0.22	$	0.23
Weighted average shares outstanding:
Basic	95,856,845		95,538,111
Diluted	97,861,573		99,763,119

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

The Simply Good Foods Company and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited, dollars in thousands)


	Thirteen Weeks Ended
	November 27, 2021		November 28, 2020
Operating activities
Net income	$	21,152	$	42,953
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	4,741		4,513
Amortization of deferred financing costs and debt discount	821		1,077
Stock compensation expense	2,605		1,110
Loss (gain) in fair value change of warrant liability	17,317		(20,453)
Estimated credit losses	15		—
Unrealized loss on foreign currency transactions	353		9
Deferred income taxes	6,687		4,400

Amortization of operating lease right-of-use asset	1,643		1,182
Loss on operating lease right-of-use asset impairment	—		354
Gain on lease termination	(30)		—

Other	(27)		402
Changes in operating assets and liabilities:
Accounts receivable, net	(13,993)		(8,604)
Inventories	(15,331)		(18,138)
Prepaid expenses	—		(558)
Other current assets	(98)		2,874
Accounts payable	(14,220)		8,216
Accrued interest	(60)		(240)
Accrued expenses and other current liabilities	(17,902)		(5,127)
Other assets and liabilities	(1,002)		1,227
Net cash (used in) provided by operating activities	(7,329)		15,197

Investing activities
Purchases of property and equipment	(2,691)		(93)
Issuance of note receivable	(1,500)		—

Proceeds from sale of business	—		5,800
Investments in intangible and other assets	(186)		(114)
Net cash (used in) provided by investing activities	(4,377)		5,593

Financing activities
Proceeds from option exercises	274		157
Tax payments related to issuance of restricted stock units and performance stock units	(3,188)		(201)
Payments on finance lease obligations	(78)		(78)



Principal payments of long-term debt	(25,000)		(25,000)





Net cash used in financing activities	(27,992)		(25,122)

Cash and cash equivalents
Net decrease in cash	(39,698)		(4,332)
Effect of exchange rate on cash	(200)		(39)
Cash at beginning of period	75,345		95,847
Cash and cash equivalents at end of period	$	35,447	$	91,476

Table of Contents


	Thirteen Weeks Ended
	November 27, 2021		November 28, 2020
Supplemental disclosures of cash flow information
Cash paid for interest	$	5,731	$	7,535
Cash paid for taxes	$	8,775	$	282
Non-cash investing and financing transactions
Non-cash proceeds from sale of business	$	—	$	3,000
Operating lease right-of-use assets exchanged for operating lease liabilities	$	5,551	$	306

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

The Simply Good Foods Company and Subsidiaries

Condensed Consolidated Statements of ~~Cash Flows~~

~~(Unaudited, dollars in thousands)~~

Thirteen Weeks Ended
November 28, 2020 November 30, 2019
(As Restated,
see Note 2)
Operating activities
Net income $ 42,953 $ 8,515
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 4,513 2,525
Amortization of deferred financing costs and debt discount 1,077 455
Stock compensation expense 1,110 1,673
Gain in fair value change of warrant liability (20,453) (13,308)
Unrealized loss (gain) on foreign currency transactions 9 (16)
Deferred income taxes 4,400 (1,853)
Amortization of operating lease right-of-use asset 1,182 626
Loss on operating lease right-of-use asset impairment 354 0
Other 402 566
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable, net (8,604) 4,304
Inventories (18,138) (9,740)
Prepaid expenses (558) (3,513)
Other current assets 2,874 (1,416)
Accounts payable 8,216 (6,533)
Accrued interest (240) 1,536
Accrued expenses and other current liabilities (5,127) 8,556
Other assets and liabilities 1,227 (305)
Net cash provided by (used in) operating activities 15,197 (7,928)
Investing activities
Purchases of property and equipment (93) (280)
Issuance of note receivable 0 (1,250)
Acquisition of business, net of cash acquired 0 (984,201)
Proceeds from sale of business 5,800 0
Investments in intangible assets (114) 0
Net cash provided by (used in) investing activities 5,593 (985,731)
Financing activities
Proceeds from option exercises 157 208
Tax payments related to issuance of restricted stock units (201) (70)
Payments on finance lease obligations (78) (78)
Principal payments of long-term debt (25,000) (1,000)
Proceeds from issuance of common stock 0 352,542
Equity issuance costs 0 (3,323)
Proceeds from issuance of long-term debt 0 460,000
Deferred financing costs 0 (8,208)
Net cash (used in) provided by financing activities (25,122) 800,071
Cash and cash equivalents
Net decrease in cash (4,332) (193,588)
Effect of exchange rate on cash (39) (42)
Cash at beginning of period 95,847 266,341
Cash and cash equivalents at end of period $ 91,476 $ 72,711

~~Table of Contents~~

Thirteen Weeks Ended
November 28, 2020 November 30, 2019
Supplemental disclosures of cash flow information
Cash paid for interest $ 7,535 $ 2,978
Cash paid for taxes $ 282 $ 373
Non-cash investing and financing transactions
Non-cash proceeds from sale of business $ 3,000 $ 0
Operating lease right-of-use assets recognized at ASU No 2016-02 transition $ 0 $ 5,102
Finance lease right-of-use assets recognized at ASU No 2016-02 transition $ 0 $ 1,211
Operating lease right-of-use assets recognized after ASU No 2016-02 transition $ 306 $ 0

~~See accompanying notes to the unaudited condensed consolidated financial statements.~~

~~Table of Contents~~

~~The Simply Good Foods Company and Subsidiaries~~

~~Condensed Consolidated Statements of~~ Stockholders’ Equity

(Unaudited, dollars in thousands, except share data)

(As Restated,
see Note 2) (As Restated,
see Note 2) (As Restated,
see Note 2)
Common Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total
Shares Amount Shares Amount
Balance at August 29, 2020 95,751,845 $ 958 98,234 $ (2,145) $ 1,076,472 $ 64,927 $ (879) $ 1,139,333
Net income (as restated) — — — — — 42,953 — 42,953
Stock-based compensation — — — — 1,110 — — 1,110
Foreign currency translation adjustments — — — — — — (45) (45)
Shares issued upon vesting of restricted stock units 53,908 0 — — (201) — — (201)
Exercise of options to purchase common stock 13,118 0 — — 157 — — 157
Balance at November 28, 2020 95,818,871 $ 958 98,234 $ (2,145) $ 1,077,538 $ 107,880 $ (924) $ 1,183,307


	Common Stock			Treasury Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Shares	Amount		Shares	Amount
Balance at August 28, 2021	95,882,908	$	959	98,234	$	(2,145)	$	1,085,001	$	105,807	$	(818)	$	1,188,804
Net income	—	—		—	—		—		21,152		—		21,152
Stock-based compensation	—	—		—	—		2,605		—		—		2,605
Foreign currency translation adjustments	—	—		—	—		—		—		(40)		(40)

Shares issued upon vesting of restricted stock units and performance stock units	227,729	2		—	—		(3,190)		—		—		(3,188)
Exercise of options to purchase common stock	19,804	—		—	—		274		—		—		274
Balance at November 27, 2021	96,130,441	$	961	98,234	$	(2,145)	$	1,084,690	$	126,959	$	(858)	$	1,209,607


		Common Stock			Treasury Stock			Additional Paid-In Capital				Retained Earnings		Accumulated Other Comprehensive Loss		Total							Common Stock					Treasury Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total
		Shares	Amount		Shares	Amount													Shares			Amount		Shares			Amount
Balance at August 31, 2019		81,973,284	$	820	98,234	$	(2,145)			$	715,740			$	(711)			$	(836)		$	712,868
Balance at August 29, 2020																				Balance at August 29, 2020			95,751,845		$	958		98,234	$	(2,145)		$	1,076,472		$	64,927		$	(879)		$	1,139,333
Net income	Net income	—	—		—	—		—				8,515		—		8,515				Net income			—		—			—	—		—			42,953			—			42,953
Stock-based compensation	Stock-based compensation	—	—		—	—		1,673				—		—		1,673				Stock-based compensation			—		—			—	—		1,110			—			—			1,110
Public equity offering		13,379,205	134		—	—		349,085				—		—		349,219

Foreign currency translation adjustments																				Foreign currency translation adjustments			—		—			—	—		—			—			(45)			(45)
Shares issued upon vesting of restricted stock units	Shares issued upon vesting of restricted stock units	46,911	0		—	—		(70)				—		—		(70)				Shares issued upon vesting of restricted stock units			53,908		—			—	—		(201)			—			—			(201)
Exercise of options to purchase common stock	Exercise of options to purchase common stock	17,372	0		—	—		208				—		—		208				Exercise of options to purchase common stock			13,118		—			—	—		157			—			—			157

Balance at November 30, 2019		95,416,772	$	954	98,234	$	(2,145)	$	1,066,636			$	7,804	$	(836)	$	1,072,413
Balance at November 28, 2020																				Balance at November 28, 2020			95,818,871		$	958		98,234	$	(2,145)	$	1,077,538		$	107,880		$	(924)		$	1,183,307

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

Notes to Unaudited Condensed Consolidated Financial Statements

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

1. Nature of Operations and Principles of Consolidation

The Simply Good Foods Company (“Simply Good Foods” or the “Company”) was formed by Conyers Park Acquisition Corp. (“Conyers Park”) on March 30, 2017. On April 10, 2017, Conyers Park and NCP-ATK Holdings, Inc., among others, entered into a definitive merger agreement (the “Merger Agreement”), pursuant to which on July 7, 2017, Conyers Park merged into Simply Good Foods and as a result acquired the companies which conducted the Atkins® brand business (the “Acquisition of Atkins”). The common stock of Simply Good Foods is listed on the Nasdaq Capital Market under the symbol “SMPL.”

On August 21, 2019, the Company’s wholly-owned subsidiary Simply Good Foods USA, Inc., formerly known as Atkins Nutritionals, Inc., (“Simply Good USA”) entered into a Stock and Unit Purchase Agreement (the “Purchase Agreement”) to acquire Quest Nutrition, LLC (“Quest”), a healthy lifestyle food company (the “Acquisition of Quest”). On November 7, 2019, Simply Good USA completed the Acquisition of Quest, via Simply Good USA’s direct or indirect acquisition of 100% of the equity interests of Voyage Holdings, LLC (“Voyage Holdings”), and VMG Quest Blocker, Inc. (“Voyage Blocker” and, together with Voyage Holdings, the “Target Companies”) for a cash purchase price of approximately $1.0 billion (subject to customary adjustments for the Target Companies’ levels of cash, indebtedness, net working capital and transaction expenses as of the closing date).

The unaudited condensed consolidated financial statements include the accounts of Simply Good Foods and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. Unless the context otherwise requires, “we,” “us,” “our” and the “Company” refer to Simply Good Foods and its subsidiaries.

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

Description of Business

The Simply Good Foods Company (“Simply Good Foods” or the “Company”) is a ~~consumer-packaged~~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. Simply Good Foods is poised to expand its wellness platform through innovation and organic growth along with acquisition opportunities in the nutritional snacking space.

The Company’s nutritious snacking platform consists of ~~the following core~~ brands that specialize in providing products for consumers that follow certain nutritional philosophies ~~dietary approaches and/or~~and health-and-wellness trends: Atkins® for those following a low-carb ~~lifestyle;~~lifestyle and Quest® for consumers seeking ~~to partner with a brand that makes the foods they crave work for them, not against them, through~~ a variety of protein-rich foods and beverages that also limit sugars and simple carbs. The Company distributes its products in major retail channels, primarily in North America, including grocery, club, and mass merchandise, as well as through e-commerce, convenience, specialty, and other channels. The Company’s portfolio of nutritious snacking brands gives it a strong platform with which to introduce new products, expand distribution, and attract new consumers to its products.

The ~~Company’s platform also positions it to continue to selectively pursue acquisition opportunities~~common stock of ~~brands in~~Simply Good Foods is listed on the ~~nutritious snacking category.~~Nasdaq Capital Market under the symbol “SMPL.”

Unaudited Interim Condensed Consolidated Financial Statements

The unaudited interim condensed consolidated financial statements include the accounts of Simply Good Foods and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. Unless the context otherwise requires, “we,” “us,” “our” and the “Company” refer to Simply Good Foods and its subsidiaries.

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

The interim condensed consolidated financial statements and related notes of the Company and its subsidiaries are unaudited. The unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”). The unaudited interim condensed consolidated financial statements reflect all adjustments and disclosures which are, in the Company’s opinion, necessary for a fair presentation of the results of operations, financial position and cash flows for the indicated periods. All such adjustments were of a normal and recurring nature unless otherwise disclosed. The year-end balance sheet data was derived from the audited financial statements and, in accordance with the instructions to Form 10-Q, certain information and footnote disclosures required by GAAP have been condensed or omitted. The results reported in these unaudited interim condensed consolidated financial statements are not necessarily indicative of the results that may be reported for the entire fiscal year and should be read in conjunction with the Company’s consolidated financial statements for the fiscal year ended August ~~29, 2020,~~28, 2021, included in ~~Amendment No. 1 to~~the Company’s Annual Report on Form 10-K (“~~Form 10-K/A”~~Annual Report”) filed with the SEC on ~~June 30,~~October 26, 2021. As discussed in Note 2, Restatement of Previously Issued Financial Statements, the condensed consolidated financial statements have been restated to reflect certain warrants as liabilities rather than equity.

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

~~Table~~ notwithstanding the distribution of ~~Contents~~

~~2. Restatement~~several U.S. government approved vaccines, the availability of ~~Previously Issued Financial Statements~~

~~On April 12, 2021,~~booster inoculations and the ~~SEC issued a statement (the “SEC Statement”) on~~easing of movement restrictions relative to the ~~accounting and reporting considerations~~onset of COVID-19. This uncertainty stems from the potential for, ~~warrants issued by special purpose acquisition companies (“SPAC”). The SEC Statement discussed certain features~~among other things, (i) the rise of ~~warrants issued~~COVID-19 mutations that have resulted in ~~SPAC transactions that~~increased rates of reported cases for which currently approved vaccines are or may not be ~~common across many entities. Specifically, the SEC Statement focused in part on provisions in warrant agreements that provide for potential~~as 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 ~~settlement amounts dependent upon the characteristics~~closure of the warrant holder. The SEC Statement indicated that, because the holder of a warrant is not an input into the pricing of a fixed-for-fixed option on equity shares, such provisions would preclude the warrant from being classified in equity and thus the warrant should be classified as a liability. Following consideration of the guidance in the SEC statement, the Company concluded that its private warrants should be classified as a liability and measured at fair value at each reporting period, rather than as equity awards. Management concluded the effect of this error on the Company’s previously reported consolidated financial statements is material and, as such, the accompanying condensed consolidated financial statements as of November 28, 2020 and the thirteen weeks ended November 28, 2020, and accompanying notes thereto have been restated from the amounts previously reportedor reduced access to give effect to the correction of this error (the “Restatement”). Effects of the Restatement on the Consolidated Balance Sheets as of August 29, 2020, and the Consolidated Statements of Operations and Comprehensive Income (Loss) for the thirteen weeks ended November 30, 2019, are presented in the Company’s Amendment No. 1 to Form 10-K (“Form 10-K/A”) for the fiscal year ended August 29, 2020 filed with the SEC on June 30, 2021. Additionally, see Note 13, Earnings Per Share, for restated earnings (loss) per share amounts.

As a result of the Restatement, the Company’s private warrants (the “Private Warrants”) are now reflected as a liability measured at fair value on the Company’s Condensed Consolidated Balance Sheets, and the change in the fair value of this liability in each period is recognized as a gain or loss in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). The effect of the Restatement on the Condensed Consolidated Balance Sheets as of November 28, 2020, and Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) and Condensed Consolidated Statements of Cash Flows for the thirteen weeks ended November 28, 2020, are presented below. Regarding the Condensed Consolidated Statements of Cash Flows, the adjustments below to net income were offset by adjustments to non-cash operating activities within cash flow provided by operations. The Restatement had no effect on total net cash flows from operating, investing or financing activities. The effect of the Restatement on the November 28, 2020 stockholders’ equity balances is presented in the Condensed Consolidated Statements of Stockholders’ Equity below.

Condensed Consolidated Balance Sheet November 28, 2020
(In thousands) As Previously Reported Restatement Adjustment As Restated
Warrant liability $ 0 $ 73,185 $ 73,185
Total liabilities 758,726 73,185 831,911
Additional paid-in-capital 1,095,573 (18,035) 1,077,538
Retained earnings 163,030 (55,150) 107,880
Total stockholders’ equity $ 1,256,492 $ (73,185) $ 1,183,307

Condensed Consolidated Statement of Operations and
Comprehensive Income (Loss) Thirteen Weeks Ended
November 28, 2020
(In thousands) As Previously Reported Restatement Adjustment As Restated
Gain in fair value change of warrant liability $ 0 $ 20,453 $ 20,453
Total other (expense) income (8,313) 20,453 12,140
Income before income taxes 30,874 20,453 51,327
Net income 22,500 20,453 42,953
Comprehensive income $ 22,455 $ 20,453 $ 42,908

~~As a result of the Restatement adjustments, basic earnings per share increased $0.21, from $0.24 per share to $0.45 per share, and diluted earnings per share was unchanged.~~

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Thirteen Weeks Ended
Condensed Consolidated Statement of Cash Flows November 28, 2020
(In thousands) As Previously Reported Restatement Adjustment As Restated
Operating activities
Net income $ 22,500 $ 20,453 $ 42,953
Adjustments to reconcile net income to net cash provided by operating activities:
Gain in fair value change of warrant liability 0 (20,453) (20,453)
Net cash provided by operating activities $ 15,197 $ 0 $ 15,197

Condensed Consolidated Statement of Stockholders’ Equity November 28, 2020
(In thousands) As Previously Reported Restatement Adjustment As Restated
Additional paid-in-capital $ 1,095,573 $ (18,035) $ 1,077,538
Net income 22,500 20,453 42,953
Retained earnings 163,030 (55,150) 107,880
Total stockholders’ equity $ 1,256,492 $ (73,185) $ 1,183,307
customer establishments.

3.2. Summary of Significant Accounting Policies

Refer to Note 4, 2,Summary of Significant Accounting Policies, to the consolidated financial statements included in the ~~Company’s Form 10-K/A~~Annual Report for a description of significant accounting policies.

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Recently Issued and Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

In ~~December 2019,~~March 2020, 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 the existing guidance relating to the accounting for income taxes. This ASU is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles of accounting for income taxes and to improve the consistent application of U.S. GAAP for other areas of accounting for income taxes by clarifying and amending existing guidance. This ASU is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company 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 No.~~ 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting. The amendments in this ASU are effective for all entities and can be applied to contract modifications due to rate reform and eligible existing and new hedging relationships entered into between March 12, 2020 ~~through~~and December 31, 2022. The amendments of this ASU should be applied on a prospective basis. The Company will continue to monitor the effects of rate reform, if any, on ~~its~~any new or amended contracts ~~and the effects of adoption of this ASU~~ through December 31, 2022. The Company does not anticipate the amendments in this ASU towill be material to its consolidated financial statements.

Recently Adopted Accounting Pronouncements

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 ~~No.~~ 2020-10, Codification Improvements, which ~~provides~~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 ~~U.S.~~ 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 is currently evaluating the effects adoption of this guidance will have on the consolidated financial statements and does not anticipate the adoption of this ASU will be material to its consolidated financial statements.

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~~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~~year 2022 on a result of adopting this ASU, 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 No. 2018-13, Fair Value Measurement (Topic 820), which modified disclosure requirements on fair value measurements of Accounting Standards Codification (“ASC”) 820. The Company adopted this ASU as of the first day of fiscal 2021.prospective basis. The adoption of this ASU did not have a material effect on the consolidated financial ~~statements~~statements.

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

~~4. Business Combination~~

On August 21, 2019, Simply Good USA entered into the Purchase Agreement with VMG Voyage Holdings, LLC, VMG Tax-Exempt II, L.P., Voyage Employee Holdings, LLC, and other sellers defined in the Purchase Agreement. On November 7, 2019, pursuant to the Purchase Agreement, Simply Good USA completed the Acquisition of Quest for a cash purchase price at closing of $988.9 million subject to customary post-closing adjustments.

Simply Good USA acquired Quest as a part of the Company’s vision to lead the nutritious snacking movement with trusted brands that offer a variety of convenient, innovative, great-tasting, better-for-you snacks and meal replacements. Quest is a healthy lifestyle food company offering a variety of bars, cookies, chips, ready-to-drink shakes and pizzas that compete in many of the attractive, fast growing sub-segments within the nutritional snacking category.

The Acquisition of Quest was funded by the Company through a combination of cash, equity and debt financing. Total consideration paid on the closing date was $988.9 million. Cash sources of funding included $195.3 million of cash on hand, net proceeds of approximately $350.0 million from an underwritten public offering of common stock, and $443.6 million in new term loan debt. In the third fiscal quarter of 2020, the Company received a post-closing release from escrow of approximately $2.1 million related to net working capital adjustments, resulting in a total net consideration paid of $986.8 million as of November 28, 2020.

~~For the thirteen weeks ended November 30, 2019,~~ ~~Business transaction costs~~ within the Consolidated Statements of Operations and Comprehensive Income were $26.2 million, which included $14.5 million of transaction advisory fees related to the Acquisition of Quest, $3.2 million of banker commitment fees, $6.1 million of non-deferrable debt issuance costs related to the incremental term loan, and $2.4 million of other costs, including legal, due diligence, and accounting fees. Included in the transaction advisory fees was $12.0 million paid to Centerview Partners LLC, an investment banking firm that served as the lead financial advisor to the Company for this transaction. Three members of the Company’s Board of Directors, Messrs. Kilts, West, and Ratzan, have business relationships with certain partners of Centerview Partners LLC (including relating to Centerview Capital Consumer, a private equity firm and affiliate of Conyers Park Sponsor LLC), but they are not themselves partners, executives or employees of Centerview Partners LLC, and Centerview Partners LLC is not a related party of the Company pursuant to applicable rules and policies. The advisory fee paid to Centerview Partners LLC represented approximately 1.2% of the total cash purchase price paid by the Company on the closing date of the Acquisition of Quest. All transaction advisory fees relating to the Acquisition of Quest were approved by the Company’s Audit Committee.

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~~The following table sets forth the final purchase price allocation of the Acquisition of Quest to the estimated fair value of the net assets acquired at the date of acquisition, in thousands:~~


~~Assets acquired:~~
~~Cash and cash equivalents~~	$	~~4,745~~
~~Accounts receivable, net~~	~~25,359~~
~~Inventories~~	~~44,032~~
~~Prepaid assets~~	~~1,214~~
~~Other current assets~~	~~3,812~~
~~Property and equipment, net(1)~~	~~9,843~~
~~Intangible assets, net(2)~~	~~868,375~~
~~Other long-term assets~~	~~20,997~~
~~Liabilities assumed:~~
~~Accounts payable~~	~~25,200~~
~~Other current liabilities~~	~~11,237~~
~~Deferred income taxes(3)~~	~~10,754~~
~~Other long-term liabilities~~	~~18,891~~
~~Total identifiable net assets~~	~~912,295~~
~~Goodwill(4)~~	~~74,525~~
~~Total assets acquired and liabilities assumed~~	$	~~986,820~~

(1) Property and equipment, net primarily consisted of leasehold improvements for the Quest headquarters of $6.9 million, furniture and fixtures of $2.2 million, and equipment of $0.7 million. The Quest headquarters lease ends in April 2029. The useful lives of the leasehold improvements, furniture and fixtures, and equipment are consistent with the Company’s accounting policies.

(2) Intangible assets were recorded at fair value consistent with ASC 820 as a result of the Acquisition of Quest. Intangible assets consisted of $750.0 million of indefinite brands and trademarks, $115.0 million of amortizable customer relationships, and $3.4 million of internally developed software. The useful lives of the intangible assets are disclosed in Note 6 of the consolidated financial statements. The fair value measurement of the assets and liabilities was based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value measurement hierarchy. Level 3 fair market values were determined using a variety of information, including estimated future cash flows and market comparable data and companies. The fair values of the intangible assets were estimated using inputs primarily from the income approach and the with/without method, which estimates the value using the cash flow impact in a hypothetical scenario where the customer relationships are not in place. The significant assumptions used in estimating the fair value of the intangible assets include the estimated life the asset will contribute to cash flows, profitability, and the estimated discount rate.

~~(3) Primarily as a result of the fair value attributable to the identifiable intangible assets, the deferred income tax liability was $10.8 million.~~

(4) Goodwill was recorded at fair value consistent with ASC 820 as a result of the Acquisition of Quest. Amounts recorded for goodwill created in an acquisition structured as a stock purchase for tax are generally not expected to be deductible for tax purposes. Amounts recorded for goodwill resulting in a tax basis step-up are generally expected to be deductible for tax purposes. Tax deductible Goodwill was estimated to be $67.7 million. Goodwill represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.

Since the initial preliminary estimates reported in the first fiscal quarter of 2020, the Company has updated certain amounts reflected in the final purchase price allocation, as summarized in the fair values of assets acquired and liabilities assumed as set forth above. Specifically, the carrying amount of the intangible assets, net were increased by $20.0 million as a result of valuation adjustments related to the Company’s finalization of tax attributes, which also resulted in a decrease to deferred income taxes of $3.2 million. Additionally, accounts receivable, net decreased $4.3 million and inventories increased $0.9 million due to fair value measurement period adjustments, and the carrying amount of property and equipment, net decreased by $0.5 million to reflect its estimated fair value. As a result of these adjustments and the change in total net consideration paid of approximately $2.1 million related to net working capital adjustments discussed above, goodwill has decreased $21.5 million. Measurement period adjustments were recognized in the reporting period in which the adjustments were determined and calculated as if the accounting had been completed at the acquisition date.

The results of Quest’s operations have been included in the Company’s Consolidated Financial Statements since November 7, 2019, the date of acquisition. The following table provides net sales from the acquired Quest business included in the Company’s results:

Thirteen Weeks Ended
(in thousands) November 28, 2020 November 30, 2019
Net sales(1)
$ 95,769 $ 17,082

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

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~~Unaudited Pro Forma Financial Information~~

Pro forma financial information is not intended to represent or be indicative of the actual results of operations of the combined business that would have been reported had the Acquisition of Quest been completed at the beginning of the fiscal year 2019, nor is it representative of future operating results of the Company. The pro forma combined financial information includes the fair value adjustments of the liability-classified Private Warrants.

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

~~Thirteen Weeks Ended~~

~~(in thousands)~~

~~November 30, 2019~~

~~Revenue~~

~~220,556~~

~~Gross profit~~

~~88,188~~

~~Net income~~

~~28,956~~

5.3. Revenue Recognition

~~Revenues~~Revenue from transactions with external customers for each of the Company’s products would be impracticable to disclose and management does not view its business by product line. The following is a summary of revenue disaggregated by geographic area and ~~brand:~~

Thirteen Weeks Ended
(In thousands) November 28, 2020 November 30, 2019
North America
Atkins $ 122,761 $ 127,812
Quest(2)
95,769 17,082
Total North America 218,530 144,894
International 12,622 7,259
Total net sales $ 231,152 $ 152,153
core brands:

~~(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.~~


	Thirteen Weeks Ended
(In thousands)	November 27, 2021		November 28, 2020
North America (1)
Atkins	$	133,794	$	122,761
Quest (2)	138,294		95,769
Total North America	272,088		218,530
International	9,177		12,622
Total net sales	$	281,265	$	231,152
(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.
(2) Quest net sales are primarily in North America.

Charges related to credit loss on accounts receivables from transactions with external customers ~~totaled~~were immaterial for the thirteen weeks ended November 27, 2021 and approximately $0.1 million for the thirteen weeks ended November 28, ~~2020 and were nominal for the thirteen weeks ended November 30, 2019.~~2020. As of November ~~28, 2020~~27, 2021 and August ~~29, 2020,~~28, 2021, the ~~allowance~~allowances for doubtful accounts related to these accounts receivable ~~was $0.6~~were $1.2 million and ~~$0.5~~$1.1 million, respectively.

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4. Goodwill and Intangibles

~~Changes to~~As of November 27, 2021 and August 28, 2021, Goodwill ~~during~~in the ~~thirteen week period ended November 28, 2020 were as follows:~~


~~(in thousands)~~	~~Goodwill~~
~~Balance as of August 29, 2020~~	$	~~544,774~~
~~Acquisition of business, measurement period adjustment~~	~~1,178~~
~~Sale of business~~	~~(2,818)~~
~~Balance as of November 28, 2020~~	$	~~543,134~~

~~The change in~~ ~~Goodwill~~ ~~attributed to the acquisition of a business during the thirteen weeks ended November 28, 2020~~Condensed Consolidated Balance Sheets was the result of measurement period adjustments made to finalize the acquisition method of accounting for the Acquisition of Quest as described in Note 4. 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”). In addition to purchasing these assets, the buyer assumed certain liabilities related to the SimplyProtein brand’s business. There was 0 gain or loss recognized as a result of the SimplyProtein Sale. In conjunction with the SimplyProtein Sale, the Company disposed of $2.8 million of goodwill associated with the SimplyProtein business.

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$543.1 million. There were 0no impairment charges related to goodwill during the thirteen weeks ended November ~~28, 2020~~27, 2021 or since the inception of the Company.

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


					November 28, 2020										November 27, 2021
(In thousands)	(In thousands)	Useful life			Gross carrying amount		Accumulated amortization		Net carrying amount		(In thousands)	Useful life			Gross carrying amount		Accumulated amortization		Net carrying amount
Intangible assets with indefinite life:	Intangible assets with indefinite life:										Intangible assets with indefinite life:
Brands and trademarks	Brands and trademarks	Indefinite life			$	974,000	$	—	$	974,000	Brands and trademarks	Indefinite life			$	974,000	$	—	$	974,000
Intangible assets with finite lives:	Intangible assets with finite lives:										Intangible assets with finite lives:
Customer relationships	Customer relationships	15 years			174,000		21,403		152,597		Customer relationships	15 years			174,000		33,003		140,997
Licensing agreements											Licensing agreements	13 years			22,000		7,144		14,856
Proprietary recipes and formulas	Proprietary recipes and formulas	7 years			7,000		3,381		3,619		Proprietary recipes and formulas	7 years			7,000		4,381		2,619
Licensing agreements		14 years			22,000		5,313		16,687
Software and website development costs	Software and website development costs	3	-	5 years	5,302		2,365		2,937		Software and website development costs	3	-	5 years	5,863		3,267		2,596
Intangible assets in progress		3	-	5 years	55		0		55
					$	1,182,357	$	32,462	$	1,149,895
															$	1,182,863	$	47,795	$	1,135,068


					August 29, 2020										August 28, 2021
(In thousands)	(In thousands)	Useful life			Gross carrying amount		Accumulated amortization		Net carrying amount		(In thousands)	Useful life			Gross carrying amount		Accumulated amortization		Net carrying amount
Intangible assets with indefinite life:	Intangible assets with indefinite life:										Intangible assets with indefinite life:
Brands and trademarks	Brands and trademarks	Indefinite life			$	979,000	$	—	$	979,000	Brands and trademarks	Indefinite life			$	974,000	$	—	$	974,000
Intangible assets with finite lives:	Intangible assets with finite lives:										Intangible assets with finite lives:
Customer relationships	Customer relationships	15 years			174,000		18,503		155,497		Customer relationships	15 years			174,000		30,103		143,897
Licensing agreements											Licensing agreements	13 years			22,000		6,664		15,336
Proprietary recipes and formulas	Proprietary recipes and formulas	7 years			7,000		3,131		3,869		Proprietary recipes and formulas	7 years			7,000		4,131		2,869
Licensing agreements		14 years			22,000		4,920		17,080
Software and website development costs	Software and website development costs	3	-	5 years	$	5,967	$	2,645	$	3,322	Software and website development costs	3	-	5 years	5,560		2,924		2,636
Intangible assets in progress											Intangible assets in progress	3	-	5 years	303		—		303
					$	1,187,967	$	29,199	$	1,158,768					$	1,182,863	$	43,822	$	1,139,041

Changes in Intangible assets, net during the thirteen weeks ended November ~~28, 2020~~27, 2021 were primarily related to ~~the SimplyProtein Sale and~~ recurring amortization expense. ~~In conjunction with the SimplyProtein Sale, the Company sold its SimplyProtein brand intangible asset, which had a carrying value of approximately $5.0 million as of the date of the sale.~~ Amortization expense related to intangible assets ~~during~~was $4.0 million and $3.9 million for the thirteen weeks ended November ~~28, 2020~~27, 2021 and November ~~30, 2019 was $3.9 million and $2.3 million,~~28, 2020, respectively. There were 0no impairment charges related to intangible assets during the thirteen weeks ended November ~~28, 2020~~27, 2021 and November ~~30, 2019.~~28, 2020.

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

(In thousands) Amortization
Remainder of 2021 $ 11,530
2022 15,224
2023 14,938
2024 14,257
2025 13,171
2026 and thereafter 106,720
Total $ 175,840


(In thousands)	Amortization
Remainder of 2022	$	11,867
2023	15,602
2024	14,917
2025	13,517
2026	13,517
2027 and thereafter	91,648
Total	$	161,068

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7.5. Long-Term Debt and Line of Credit

On July 7, 2017, the Company entered into a credit agreement with Barclays Bank PLC and other parties (as amended to date, the “Credit Agreement”). The Credit Agreement ~~provides~~at that time provided for (i) a term facility of $200.0 million (“Term Facility”) with a seven-

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year maturity and (ii) a revolving credit facility of up to $75.0 million (the “Revolving Credit Facility”) with a five ~~year~~-year maturity. Substantially concurrent with the consummation of the business combination between Conyers Park Acquisition ~~of Atkins,~~Corp. and NCP-ATK Holdings, Inc. on July 7, 2017, 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”,~~rate,” (b) the federal funds effective rate plus 0.50% ~~and~~, 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. The Simply Good Foods Company is not a borrower under the Credit Agreement and has not provided a guarantee of the Credit Agreement. Simply Good Foods USA, Inc., is the administrative borrower and certain other subsidiary holding companies are co-borrowers under the Credit Agreement. Each of the Company’s domestic subsidiaries that is not a named borrower under the Credit Agreement has provided a guarantee on a secured basis. As security for the payment or performance of ~~its~~the debt under the ~~Company has~~Credit Agreement, the borrowers and the guarantors have pledged certain equity interests in ~~its~~their respective subsidiaries and granted the lenders a security interest in substantially all of their domestic assets. 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.

On November 7, 2019, the Company entered into ana 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) and as of the Amendment No. 2 Effective Date (as defined in the Incremental Facility Amendment), the Initial Term Loans bear interest at a rate equal to, at the Company’s option, either LIBOR plus an applicable margin of 3.75%, or a base rate plus an applicable margin of 2.75%. The Incremental Facility Amendment was executed to partially finance the ~~Acquisition~~acquisition of ~~Quest.~~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 provides 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.

The Credit Agreement contains certain financial and other covenants that limit the Company’s ability to, among other things, incur and/or undertake asset sales and other dispositions, liens, indebtedness, certain acquisitions and investments, consolidations, mergers, reorganizations and other fundamental changes, payment of dividends and other distributions to equity and warrant holders, and prepayments of material subordinated debt, in each case, subject to customary exceptions materially consistent with credit facilities of such type and size. The Revolving Credit Facility has a maximum total net leverage ratio equal to or less than ~~6.25:1.00 (with a reduction to~~ 6.00:1.00 ~~on and after the third anniversary of the closing date of the Credit Agreement)~~ contingent on credit extensions in excess of 30% of the total amount of commitments available under the Revolving Credit Facility. Any failure to comply with the restrictions of the credit facilities may result in an event of default. The Company was in compliance with all financial covenants as of November ~~28, 2020~~27, 2021 and August ~~29, 2020,~~28, 2021, respectively.

Long-term debt consists of the following:


(In thousands)	(In thousands)	November 28, 2020		August 29, 2020		(In thousands)	November 27, 2021		August 28, 2021
Term Facility (effective rate of 4.8% at November 28, 2020)		$	581,500	$	606,500
Term Facility (effective rate of 4.8% at November 27, 2021)						Term Facility (effective rate of 4.8% at November 27, 2021)	431,500		456,500

Finance lease liabilities (effective rate of 5.6% at November 28, 2020)		892		922
Finance lease liabilities (effective rate of 5.6% at November 27, 2021)						Finance lease liabilities (effective rate of 5.6% at November 27, 2021)	620		690
Less: Deferred financing fees	Less: Deferred financing fees	9,194		10,272		Less: Deferred financing fees	4,814		5,636
Total debt	Total debt	573,198		597,150		Total debt	427,306		451,554

Less: Current finance lease liabilities	Less: Current finance lease liabilities	275		271		Less: Current finance lease liabilities	289		285
Long-term debt, net of deferred financing fees	Long-term debt, net of deferred financing fees	$	572,923	$	596,879	Long-term debt, net of deferred financing fees	$	427,017	$	451,269

The Company is not required to make principal payments on the Term Facility over the twelve months following the period ended November ~~28, 2020. Additionally, as~~27, 2021. The outstanding balance of ~~November 28, 2020 and August 29, 2020, there were no amounts drawn against~~ the ~~Revolving Credit Facility.~~Term Facility is due upon its maturity in July 2024.

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As of November ~~28, 2020,~~27, 2021, the Company had letters of credit in the amount of ~~$4.4~~$3.5 million outstanding. 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 November ~~28, 2020.~~27, 2021.

The Company utilizes market approaches to estimate the fair value of certain outstanding borrowings by discounting anticipated future cash flows derived from the contractual terms of the obligations and observable market interest and foreign exchange rates. The Company carries debt at historical cost and discloses fair value. As of November ~~28, 2020~~27, 2021 and August ~~29, 2020,~~28, 2021, the book value of the

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

8.6. Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measurements, a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies, is ~~as follows:~~used:

Level 1 – Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2 – Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

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

Level 3 Measurements

The Company has outstanding liability-classified Private Warrants that allow holders to purchase 6,700,000 shares of the Company’s common stock. Such Private Warrants are held by Conyers Park Sponsor, LLC, a related party. The Company utilizes the Black-Scholes ~~valuation~~ model to estimate the fair value of the Private Warrants at each reporting date. The application of the Black-Scholes model utilizes significant assumptions, including volatility. Significant judgment is required in determining the expected volatility, ~~(the~~historically the key ~~assumption)~~assumption, of the Private Warrants. In order to determine the most accurate measure of this volatility, the Company measured expected volatility based on several inputs, including considering a peer group of publicly traded companies, the Company’s implied volatility based on traded options, the implied volatility of comparable ~~SPAC~~ warrants, and the implied volatility of any outstanding ~~Public Warrants~~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.

There were 6,700,000 Private Warrants outstanding as of November ~~28, 2020~~27, 2021 and November ~~30, 2019.~~28, 2020. The table below summarizes the inputs used to calculate the fair value of the warrant liability at each of the ~~dates indicated below:~~following reporting dates:


		November 28, 2020			November 30, 2019				November 27, 2021			November 28, 2020
Exercise Price	Exercise Price	$	11.50		$	11.50		Exercise Price	$	11.50		$	11.50
Stock Price	Stock Price	$	22.36		$	27.63		Stock Price	$	37.93		$	22.36
Dividend Yield	Dividend Yield	—		%	—		%	Dividend Yield	—		%	—		%
Expected Term (in Years)	Expected Term (in Years)	1.60			2.60			Expected Term (in Years)	0.61			1.60
Risk-Free Interest Rate	Risk-Free Interest Rate	0.14		%	1.60		%	Risk-Free Interest Rate	0.15		%	0.14		%
Expected Volatility	Expected Volatility	25.60		%	21.50		%	Expected Volatility	27.34		%	25.60		%
Per Share Value of Warrants	Per Share Value of Warrants	$	10.92		$	16.61		Per Share Value of Warrants	$	26.44		$	10.92

The periodic remeasurement of the warrant liability is reflected in ~~Gain~~(Loss) gain in fair value change of warrant liability within the Condensed Consolidated Statements of Operations and Comprehensive ~~Income (Loss).~~Income. The adjustments for the thirteen weeks ended November 27, 2021 and November 28, 2020 ~~and November 30, 2019~~ were a ~~gain~~loss of ~~$20.5~~$17.3 million and a gain of ~~$13.3~~$20.5 million, respectively. The adjustments resulted in a total warrant liability at November 27, 2021 and November 28, 2020 ~~and November 30, 2019~~ of ~~$73.2~~$177.2 million and ~~$111.3~~$73.2 million, respectively.

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9.7. Income Taxes

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

Thirteen Weeks Ended
(In thousands) November 28, 2020 November 30, 2019
Income (loss) before income taxes $ 51,327 $ 6,786
Provision (benefit) for income taxes $ 8,374 $ (1,729)
Effective tax rate 16.3 % (25.5) %


	Thirteen Weeks Ended
(In thousands)	November 27, 2021			November 28, 2020
Income before income taxes	$	33,975		$	51,327
Income tax expense	$	12,823		$	8,374
Effective tax rate	37.7		%	16.3		%

The effective tax rate for the thirteen weeks ended November ~~28, 2020~~27, 2021 was ~~41.8%~~21.4% greater than the effective tax rate for the thirteen weeks ended November ~~30, 2019,~~28, 2020, which was primarily driven by the non-cash change in the fair value of the warrant liability and other permanent differences.

~~10.~~8. Leases

The components of lease expense were as follows:

Thirteen Weeks Ended
(In thousands) Statement of Operations Caption November 28, 2020 November 30, 2019
Operating lease cost:
Lease cost Cost of goods sold and General and administrative $ 1,498 $ 806
Variable lease cost (1)
Cost of goods sold and General and administrative 398 310
Operating lease cost 1,896 1,116
Short term lease cost General and administrative 0 6
Finance lease cost:
Amortization of right-of-use assets Cost of goods sold 68 70
Interest on lease liabilities Interest expense 13 16
Total finance lease cost 81 86
Total lease cost $ 1,977 $ 1,208


		Thirteen Weeks Ended
(In thousands)	Statements of Operations Caption	November 27, 2021		November 28, 2020
Operating lease cost:
Lease cost	Cost of goods sold and General and administrative	$	2,255	$	1,498
Variable lease cost (1)	Cost of goods sold and General and administrative	653		398
Total operating lease cost		2,908		1,896



Finance lease cost:
Amortization of right-of-use assets	Cost of goods sold	68		68
Interest on lease liabilities	Interest expense	9		13
Total finance lease cost		77		81

Total lease cost		$	2,985	$	1,977

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

In conjunction with the Company’s restructuring activities as discussed in Note ~~16,~~13, Restructuring and Related Charges, the Company ~~incurred~~recorded an immaterial gain on lease termination related to its lease in the Netherlands in the thirteen weeks ended November 27, 2021 and a $0.4 million impairment charge related to its operating lease right-of-use asset for its lease in Toronto, Ontario ~~during~~in the thirteen weeks ended November 28, 2020. ~~Costs for~~The effect of these restructuring activities ~~have~~has been included within General and administrative on the Condensed Consolidated Statements of Operations and Comprehensive Income. Refer to Note ~~16,~~13, Restructuring and Related Charges, for additional information regarding restructuring activities.

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

(In thousands) Balance Sheet Caption November 28, 2020 August 29, 2020
Assets
Operating lease right- of-use assets Other long-term assets $ 24,532 $ 25,703
Finance lease right-of-use assets Property and equipment, net 844 912
Total lease assets $ 25,376 $ 26,615
Liabilities
Current:
Operating lease liabilities Accrued expenses and other current liabilities $ 4,355 $ 4,329
Finance lease liabilities Current maturities of long-term debt 275 271
Long-term:
Operating lease liabilities Other long-term liabilities 21,882 22,764
Finance lease liabilities Long-term debt, less current maturities 617 651
Total lease liabilities $ 27,129 $ 28,015


(In thousands)	Balance Sheets Caption	November 27, 2021		August 28, 2021
Assets
Operating lease right-of-use assets	Other long-term assets	$	50,116	$	46,197
Finance lease right-of-use assets	Property and equipment, net	571		640
Total lease assets		$	50,687	$	46,837

Liabilities
Current:
Operating lease liabilities	Accrued expenses and other current liabilities	$	4,774	$	3,788
Finance lease liabilities	Current maturities of long-term debt	289		285
Long-term:
Operating lease liabilities	Other long-term liabilities	48,297		44,892
Finance lease liabilities	Long-term debt, less current maturities	331		405
Total lease liabilities		$	53,691	$	49,370

Future maturities of lease liabilities as of November ~~28, 2020~~27, 2021 were as follows:

(In thousands) Operating Leases Finance Leases
Fiscal year ending:
Remainder of 2021 $ 4,166 $ 235
2022 4,722 313
2023 4,187 278
2024 4,289 145
2025 3,837 0
Thereafter 11,050 0
Total lease payments 32,251 971
Less: Interest (6,014) (79)
Present value of lease liabilities $ 26,237 $ 892

As of November 28, 2020, the Company had entered into a lease with estimated total minimum future lease payments of $32.2 million over a 10.0-year minimum lease term that had not yet commenced, and as a result it is not recorded on the Consolidated Balance Sheets. The Company expects the lease to commence in fiscal year 2021, and the Company has the option to renew the lease for an additional 5.0 years or 10.0 years after the minimum lease term.


(In thousands)	Operating Leases		Finance Leases
Fiscal year ending:
Remainder of 2022	$	5,490	$	235
2023	8,349		278
2024	9,212		145
2025	8,462		—
2026	6,655		—
Thereafter	26,063		—
Total lease payments	64,231		658
Less: Interest	(11,160)		(38)
Present value of lease liabilities	$	53,071	$	620

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

November 28, 2020 August 29, 2020
Weighted-average remaining lease term (in years)
Operating leases 6.78 6.97
Finance leases 3.17 3.41
Weighted-average discount rate
Operating leases 5.7 % 5.7 %
Finance leases 5.6 % 5.6 %


	November 27, 2021		August 28, 2021
Weighted-average remaining lease term (in years)
Operating leases	7.83		8.38
Finance leases	2.20		2.44
Weighted-average discount rate
Operating leases	4.8	%	4.9	%
Finance leases	5.6	%	5.6	%

Supplemental and other information related to leases was as follows:


		Thirteen Weeks Ended					Thirteen Weeks Ended
(In thousands)	(In thousands)	November 28, 2020		November 30, 2019		(In thousands)	November 27, 2021		November 28, 2020
Cash paid for amounts included in the measurement of lease liabilities	Cash paid for amounts included in the measurement of lease liabilities					Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	Operating cash flows from operating leases	$	1,811	$	1,170	Operating cash flows from operating leases	$	2,054	$	1,811
Operating cash flows from finance leases	Operating cash flows from finance leases	7		11		Operating cash flows from finance leases	$	148	$	7
Financing cash flows from finance leases	Financing cash flows from finance leases	$	78	$	78	Financing cash flows from finance leases	$	78	$	78

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~~11.~~9. Commitments and Contingencies

Litigation

The Company is a party to certain litigation and claims that are considered normal to the operations of the business. From time to time, the Company has been and may again become involved in legal proceedings arising in the ordinary course of business. The Company is not presently a party to any litigation that it believes to be material, and the Company is not aware of any pending or threatened litigation against it that its management believes could have a material adverse effect on its business, operating ~~result,~~results, financial condition or cash flows.

During the fiscal year ended August 31, 2019, the Company reserved $3.5 million for the potential settlement of class action litigation concerning certain product label claims. During the thirteen weeks ended November 30, 2019, the Company reserved an additional $0.3 million. The reserve was included within General and administrative in the Consolidated Statements of Operations and Comprehensive Income, and the reserve was fully paid into escrow and settled during the fiscal year ended August 29, 2020.

As of November ~~28, 2020~~27, 2021 and August ~~29, 2020,~~28, 2021, the Company had ~~$1.3~~$0.7 million reserved for potential settlements.

Other

The Company has entered into endorsement contracts with certain celebrity figures and social media influencers to promote and endorse the Atkins and Quest brands and product lines. These contracts contain endorsement fees, which are expensed ratably over the life of the contract, and performance fees, that are recognized at the time of achievement. Based on the terms of the contracts in place and achievement of performance conditions as of November ~~28, 2020,~~27, 2021, the Company will be required to make payments of ~~$2.9~~$2.1 million over the next year.

~~12.~~10. Stockholders’ Equity

~~Public Equity Offering~~

On October 9, 2019, the Company completed an underwritten public offering of 13,379,205 shares of common stock at a price to the public of $26.35 per share. The Company paid underwriting discounts and commissions of $0.19 per share resulting in net proceeds to the Company of $26.16 per share, or approximately $350.0 million (the “Offering”). The Company paid $0.8 million for legal, accounting and registrations fees related to the Offering. The net proceeds were used to pay a portion of the purchase price and related fees and expenses for the Acquisition of Quest.

Warrants to Purchase Common Stock

~~Prior to~~ As of November 27, 2021, the ~~Acquisition of Atkins, Conyers Park issued 13,416,667 public warrants and 6,700,000~~Company has outstanding liability-classified Private ~~Warrants. The Company assumed the Conyers Park warrants~~Warrants that allow holders to purchase ~~common stock in connection with the Acquisition of Atkins. As a result~~6,700,000 shares of the ~~Acquisition of Atkins, the warrants issued~~Company’s common stock. Such Private Warrants are held 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.~~

Sponsor, LLC, a related party. Each whole warrant entitles the holder to purchase one share of the Company’s common stock at a price of $11.50 per share. The warrants ~~became exercisable 30 days after the completion of the Acquisition of Atkins in 2017 and~~ expire ~~five years after that date,~~on July 7, 2022 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.

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As of November 28, 2020, 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 8,6, 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. The periodic remeasurement of the warrant liability is reflected in ~~Gain~~(Loss) gain in fair value change of warrant liability within the Condensed Consolidated Statements of Operations and Comprehensive ~~Income (Loss).~~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. Under the stock repurchase program, the Company may repurchase shares from time to time in the open market or in privately negotiated transactions. The stock repurchase program does not obligate the Company to acquire any specific number of shares or acquire shares over any specific period of time. The stock repurchase program may be suspended or discontinued at any time by the Company and does not have an expiration date.

During the thirteen weeks ended November ~~28, 2020~~27, 2021 and November ~~30, 2019,~~28, 2020, the Company did not repurchase any shares of common stock. As of November ~~28, 2020,~~27, 2021, approximately $47.9 million remained available under the stock repurchase program.

~~13.~~11. 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 ~~antidilutive.~~anti-dilutive.

~~The~~ As of November 27, 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 ~~antidilutive,~~anti-dilutive, the share settlement is excluded.

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

Thirteen Weeks Ended
(In thousands, except per share data) November 28, 2020 November 30, 2019
Basic earnings per share computation:
Numerator:
Net income available to common stock stockholders $ 42,953 $ 8,515
Denominator:
Weighted average common shares - basic 95,538,111 89,708,633
Basic earnings per share from net income $ 0.45 $ 0.09
Diluted earnings (loss) per share computation:
Numerator:
Net income available to common stock stockholders $ 42,953 $ 8,515
Gain in fair value change of warrant liability (20,453) (13,308)
Numerator for diluted earnings per share $ 22,500 $ (4,793)
Denominator:
Weighted average common shares outstanding - basic 95,538,111 89,708,633
Private Warrants 3,216,252 3,821,232
Employee stock options 899,375 0
Non-vested shares 109,381 0
Weighted average common shares - diluted 99,763,119 93,529,865
Diluted earnings (loss) per share from net income $ 0.23 $ (0.05)


	Thirteen Weeks Ended
(In thousands, except per share data)	November 27, 2021		November 28, 2020
Basic earnings per share computation:
Numerator:
Net income available to common stockholders	$	21,152	$	42,953
Denominator:
Weighted average common shares outstanding - basic	95,856,845		95,538,111
Basic earnings per share from net income	$	0.22	$	0.45

Diluted earnings per share computation:
Numerator:
Net income available for common stockholders	$	21,152	$	42,953
Gain in fair value change of warrant liability	—		(20,453)
Numerator for diluted earnings per share	$	21,152	$	22,500
Denominator:
Weighted average common shares outstanding - basic	95,856,845		95,538,111

Private Warrants	—		3,216,252
Employee stock options	1,652,577		899,375
Non-vested shares	352,151		109,381
Weighted average common shares - diluted	97,861,573		99,763,119
Diluted earnings per share from net income	$	0.22	$	0.23

~~Table~~ The diluted earnings per share calculation for the thirteen weeks ended November 27, 2021 excluded 4.6 million shares, issuable upon exercise of ~~Contents~~

Private Warrants, that would have been anti-dilutive. Diluted earnings ~~(loss)~~ per share calculations for the thirteen weeks ended November 27, 2021 and November 28, 2020 ~~and November 30, 2019~~ excluded ~~0.7~~0.2 million and ~~2.7~~0.7 million shares of common stock ~~options~~ issuable upon exercise of stock options, respectively, that would have been anti-dilutive. ~~Diluted~~An immaterial number of non-vested restricted stock units that would have been anti-dilutive were excluded from diluted earnings per share calculations for the thirteen weeks ended November 27, 2021 and November 28, 2020 excluded an immaterial number of non-vested shares that would have been anti-dilutive. For the thirteen weeks ended November 30, 2019, the loss per share excluded 0.3 million of non-vested shares that would have been anti-dilutive.2020.

~~14.~~12. 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 included within General and administrative expense, which is the same financial statement caption where the recipient’s other compensation is reported.

The Company recorded stock-based compensation expense of ~~$1.1~~$2.6 million and ~~$1.7~~$1.1 million in the thirteen weeks ended November 27, 2021 and November 28, 2020, ~~and November 30, 2019,~~ respectively.

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Stock Options

The following table summarizes stock option activity for the thirteen weeks ended November ~~28, 2020:~~27, 2021:

Shares Underlying Options Weighted Average
Exercise Price Weighted Average Remaining Contractual Life (Years)
Outstanding as of August 29, 2020 2,615,899 $ 14.33
Granted 282,952 20.28
Exercised (13,118) 12.00
Forfeited (39,575) 23.08
Outstanding as of November 28, 2020 2,846,158 $ 14.81 7.34
Vested and expected to vest as of November 28, 2020 2,846,158 $ 14.81 7.34
Exercisable as of November 28, 2020 2,228,465 $ 13.22 6.85


	Shares underlying options	Weighted average exercise price		Weighted average remaining contractual life (years)
Outstanding as of August 28, 2021	2,993,163	$	16.31
Granted	138,479	40.88
Exercised	(19,804)	13.83
Forfeited	(2,300)	19.89
Outstanding as of November 27, 2021	3,109,538	$	17.42	6.73

Vested and expected to vest as of November 27, 2021	3,109,538	$	17.42	6.73

Exercisable as of November 27, 2021	2,494,944	$	14.13	6.10

As of November ~~28, 2020,~~27, 2021, the Company had ~~$4.0~~$6.5 million of total unrecognized compensation cost related to stock option plans that will be recognized over a weighted average period of ~~2.1~~2.3 years. During ~~each of~~ the thirteen weeks ended November ~~28, 2020~~27, 2021 and November ~~30, 2019,~~28, 2020, the Company received $0.3 million and $0.2 million in cash from stock option ~~exercises.~~exercises, respectively.

Restricted Stock Units

The following table summarizes restricted stock unit activity for the thirteen weeks ended November ~~28, 2020:~~27, 2021:

Restricted Stock Units Weighted average
grant-date fair value
Non-vested as of August 29, 2020 208,023 $ 22.82
Granted 293,907 21.16
Vested (63,759) 26.27
Forfeited (12,530) 23.68
Non-vested as of November 28, 2020 425,641 $ 21.13


	Units	Weighted average grant-date fair value
Non-vested as of August 28, 2021	496,334	$	24.56
Granted	129,423	39.54
Vested	(139,459)	22.13
Forfeited	(10,675)	25.72
Non-vested as of November 27, 2021	475,623	$	29.34

As of November ~~28, 2020,~~27, 2021, the Company had ~~$8.4~~$12.1 million of total unrecognized compensation cost related to restricted stock units that will be recognized over a weighted average period of ~~2.6~~2.0 years.

~~Table of Contents~~

Performance Stock Units

During the thirteen weeks ended November ~~28, 2020,~~27, 2021, the Board of Directors granted performance stock units under the Company’s equity compensation plan. Performance stock units vest in a range between 0% and 200% based upon certain performance criteria in a three-year period. Performance stock units were valued using a ~~Monte-Carlo~~Monte Carlo simulation.

The following table summarizes performance stock unit activity for the thirteen weeks ended November ~~28, 2020:~~27, 2021:

Performance Stock Units Weighted average
grant-date fair value
Non-vested as of August 29, 2020 295,256 $ 17.93
Granted 116,309 23.59
Vested 0 0
Forfeited (26,400) 22.06
Non-vested as of November 28, 2020 385,165 $ 19.35


	Units	Weighted average grant-date fair value
Non-vested as of August 28, 2021	380,097	$	19.31
Granted	50,212	63.42
Vested	(166,688)	11.93
Forfeited	(6,350)	16.48
Non-vested as of November 27, 2021	257,271	$	32.77

As of November ~~28, 2020,~~27, 2021, the Company had ~~$5.1~~$5.7 million of total unrecognized compensation cost related to performance stock units that will be recognized over a weighted average period of 1.8 years.

Table of Contents

Stock Appreciation Rights

Stock appreciation rights (“SARs”) permit the holder to participate in the appreciation of the Company’s common stock ~~price.~~price and are awarded to non-employee, consultants of the Company. The Company’s SARs settle in shares of its common stock once the applicable vesting criteria has been met. SARs cliff vest 3three years from the date of grant and must be exercised within 10ten years.

The following table summarizes SARs activity for the thirteen weeks ended November ~~28, 2020:~~27, 2021:

Shares Underlying SARs Weighted Average
Exercise Price Weighted Average Remaining Contractual Life (Years)
Outstanding as of August 29, 2020 150,000 $ 24.20
Granted 0 0
Exercised 0 0
Forfeited 0 0
Outstanding as of November 28, 2020 150,000 $ 24.20 8.93
Vested and expected to vest as of November 28, 2020 150,000 $ 24.20 8.93
Exercisable as of November 28, 2020 0 $ 0 0.00


	Shares underlying SARs	Weighted average exercise price		Weighted average remaining contractual life (years)
Outstanding as of August 28, 2021	150,000	$	24.20
Granted	—	—
Exercised	—	—
Forfeited	—	—
Outstanding as of November 27, 2021	150,000	$	24.20	7.93

Vested and expected to vest as of November 27, 2021	150,000	$	24.20	7.93

Exercisable as of November 27, 2021	—	$	—	0.00

As of November ~~28, 2020,~~27, 2021, the Company had ~~$0.3~~$0.1 million of total unrecognized compensation cost related to its SARs that will be recognized over a weighted average period of ~~1.93~~0.9 years.

~~15. Segment and Customer Information~~

Following the Acquisition of Quest, the Company’s operations are organized into two operating segments, Atkins and Quest, which are aggregated into 1 reporting segment due to similar financial, economic and operating characteristics. The operating segments are also similar in the following areas: (a) the nature of the products; (b) the nature of the production processes; (c) the methods used to distribute products to customers, (d) the type of customer for the products; and, (e) the nature of the regulatory environment.

~~16.~~13. Restructuring and Related Charges

In May 2020, the Company announced certain restructuring activities in conjunction with the implementation of the Company’s future-state organization design, which created a fully integrated organization with its completed ~~Acquisition~~acquisition of ~~Quest.~~Quest Nutrition, LLC on November 7, 2019. 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.

~~Table of Contents~~

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~~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.

Changes to the restructuring liability during the thirteen weeks ended November ~~28, 2020~~27, 2021 were as follows:


~~(in thousands)~~	~~Restructuring Liability~~
~~Balance as of August 29, 2020~~	$	~~4,139~~
~~Charges~~	~~2,165~~
~~Cash payments~~	~~(5,966)~~
~~Non-cash settlements or adjustments~~	0
~~Balance as of November 28, 2020~~	$	~~338~~


(In thousands)	Termination benefits and severance		Other		Restructuring liability
Balance as of August 28, 2021	$	851	$	—	$	851
Charges	44		28		72
Cash payments	(748)		(28)		(776)

Balance as of November 27, 2021	$	147	$	—	$	147

In addition to the ~~$2.2 million~~ restructuring costs ~~incurred related to one-time termination benefits and employee severance as~~ shown above, the Company ~~incurred a $0.4 million restructuring-related impairment charge~~recorded an immaterial gain on lease termination related to its lease in the Netherlands in the thirteen weeks ended November ~~28, 2020 related to its operating lease right-of-use asset for its lease in Toronto, Ontario.~~27, 2021. As a result, ~~for~~the Company’s total restructuring and restructuring-related costs incurred in the thirteen weeks ended November ~~28, 2020, the~~27, 2021 were immaterial. The Company incurred a total of $2.5 million in restructuring and restructuring-related costs in the thirteen weeks ended November 28, 2020. The effect of these restructuring ~~related costs, which have~~activities has been included within General and administrative on the Condensed Consolidated Statements of Operations and Comprehensive Income.

~~As of November 28,~~Since the restructuring activities were announced in May 2020, the Company has incurred aggregate restructuring and restructuring-related costs of ~~$8.0 million since May 2020.~~$9.9 million. Overall, the Company expects to incur a total of approximately ~~$9.2~~$10.1 million in restructuring and ~~restructuring related~~restructuring-related costs, which are to be paid ~~throughout fiscal 2021 and~~through the ~~first~~second quarter of fiscal year 2022.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form ~~10-Q/A~~10-Q (this ~~“Amendment”~~“Report”) contains forward-looking statements. When used anywhere in this ~~Amendment,~~Report, the words “expect,” “believe,” “anticipate,” “estimate,” “intend,” “plan” and similar expressions are intended to identify forward-looking statements. These statements relate to future events or our future financial or operational performance and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. These statements include, but are not limited to, the effect of the ~~novel coronavirus (“COVID-19”)~~COVID-19 pandemic on our business, financial condition and results of ~~operations.~~operations, our expectations regarding our supply chain, including but not limited to, raw materials and logistics costs, and the effect of price increases. We disclaim any undertaking to publicly update or revise any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. These statements reflect our current views with respect to future events and are based on assumptions subject to risks and uncertainties. Such risks and uncertainties include those related to our ability to sell our products.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in our Annual Report on Form ~~10-K/A~~10-K for the fiscal year ended August ~~29, 2020~~28, 2021 (“Annual Report”) and our unaudited condensed consolidated financial statements and the related notes appearing elsewhere in this ~~Amendment.~~Report. In addition to historical information, the following discussion contains forward-looking statements, including, but not limited to, statements regarding the Company’s expectation for future performance, liquidity and capital resources that involve risks, uncertainties and assumptions that could cause actual results to differ materially from the Company’s expectations. The Company’s actual results may differ materially from those contained in or implied by any forward-looking statements. Factors that could cause such differences include those identified in Item 1A. “Risk Factors” of our Annual ~~Report on Form 10-K/A.~~Report. The Company assumes no obligation to update any of these forward-looking statements.

Unless the context requires otherwise in this ~~Amendment,~~Report, the terms “we,” “us,” “our,” the “Company” and “Simply Good Foods” refer to The Simply Good Foods Company and its subsidiaries.

Overview

The Simply Good Foods Company is a ~~consumer-packaged~~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 we develop, market and sell 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. We believe Simply Good Foods is poised to expand its wellness platform through innovation and organic growth along with acquisition opportunities in the nutritional snacking space.

Our nutritious snacking platform consists of ~~the following core~~ brands that specialize in providing products for consumers that follow certain nutritional philosophies ~~dietary approaches and/or~~and health-and-wellness trends: Atkins® for those following a low-carb ~~lifestyle;~~lifestyle and Quest® for consumers seeking ~~to partner with a brand that makes the foods they crave work for them, not against them, through~~ a variety of protein-rich foods and beverages that also limit sugars and simple carbs. We distribute our products in major retail channels, primarily in North America, including grocery, club, and mass merchandise, as well as through e-commerce, convenience, specialty, and other channels. Our portfolio of nutritious snacking brands gives us a strong platform with which to introduce new products, expand distribution, and attract new consumers to our products. ~~Our platform also positions us to continue to selectively pursue acquisition opportunities~~

Effects of ~~brands in the nutritious snacking category.~~COVID-19

ToFor the thirteen weeks ended November 27, 2021, our business 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 ~~end,~~were pressured by COVID-19 movement restrictions. The improvement in ~~November 2019,~~consumer mobility and shopper traffic patterns however remains fragile and there continues to be uncertainty related to the sustainability and longevity of these trends. In addition, these positive trends could be negatively affected by an increase in the number and rate of reported positive cases of COVID-19, especially resulting from new variants of the virus, along with any government actions to reimpose mobility restrictions. During fiscal year 2022, we ~~completed~~expect our business performance will continue to be affected by the ~~acquisition~~level of ~~Quest Nutrition, LLC (“Quest”), a healthy lifestyle food company, for a cash purchase price of approximately $1.0 billion (subject~~consumer mobility, which includes the rate at which consumers return to ~~customary adjustments) (the “Acquisition of Quest”). For more information, please see “Liquidity and Capital Resources - Acquisition of Quest.”~~

~~Effects of COVID-19~~working outside the home.

In December 2019, a novel coronavirus disease, or COVID-19, was reported and in January 2020, the World Health Organization, or WHO, declared it a Public Health Emergency of International Concern. On February 28, 2020, the WHO raised its assessment of the COVID-19 threat from high to very high at a global level due to the continued increase in the number of cases and affected countries, and on March 11, 2020, the WHO characterized COVID-19 as a pandemic. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law. The CARES Act provided a substantial stimulus and assistance package intended to address the effect of the COVID-19 pandemic, including tax relief and government loans, grants and investments. Additionally, various federal, state and local government-imposed movement restrictions and initiativesWe have been implemented to reduce the global transmission of COVID-19, including reduced or eliminated food services, the closure of retailing establishments, the promotion of social distancing and the adoption of remote working policies.

~~Beginning in the third quarter of 2020, we~~ actively engaged with the various elements of our value chain, including our retail customers, contract manufacturers, and logistics and transportation providers, to meet demand for our products and to remain informed of any challenges within our value chain. Given the unpredictable nature of the COVID-19 pandemic and the initial surge in consumption, we increased finished goods inventory of some of our key products. In the fourth quarter of 2020 and continuing into the first quarter of 2021,Although consumer consumption habits ~~became more steady and~~have become steadier, inventory levels ~~normalized.~~remain variable. Based on information available to us as of the date of this ~~Amendment,~~Report, we believe we will be able to deliver ~~our~~ products at acceptable levels to ~~meet~~fulfil customer orders on a timely ~~basis, and~~basis; therefore, we expect our products will continue to be available for purchase to meet consumer meal replacement and snacking needs ~~for the foreseeable future. We~~

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for the foreseeable future. We continue to monitor customer and consumer demand along with our logistics capabilities and intend to adapt our plans as needed to continue to drive our business and meet our obligations during the continuing and evolving COVID-19 situation.

We implemented remote work arrangements and restricted business travel in March 2020, and to date, these arrangements have not materially affected our ability to maintain our business operations, including the operation of financial reporting systems, internal control over financial reporting, and disclosure controls and procedures. We believe our lean infrastructure, which allows for significant flexibility, speed-to-market and minimal capital investment, has enabled us to adjust our expenditures to maintain cash flow until the more fulsome reopening of the U.S. economy and the associated return of shopping behavior to more normal patterns occurs. We also believe the return of these shopping patterns along with our brand benefits of active nutrition and weight management will drive more better-for-you snacking and meal replacement usage occasions.

Our consolidated results of operations for the thirteen weeks ended November 28, 2020 continued to be affected by changes in consumer shopping and consumption behavior due to COVID-19. The nutritional snacking category has experienced a marked decrease in shopping trips (particularly in the mass channel) and fewer usage occasions. There is still uncertainty related to the duration of reduced consumer mobility and when shopping trips will return to pre-pandemic levels, particularly in the mass market retail channel. This has affected our portable and convenient on-the-go products, especially the nutrition and protein bar portion of our business for both our Atkins and Quest brands. While our Quest brand has outperformed its portion of the nutritious snaking segment, the performance of our Atkins brand, which is part of the weight management portion of the market, has remained slower due to what we believe is the temporary softer interest in weight management for consumers, fewer on-the-go usage occasions and weakness in the mass channel that has experienced reduced shopper traffic during the pandemic.

Based on the duration and severity of economic effects from the COVID-19 pandemic, including but not limited to stock market volatility, the potential for (i) continued increased rates of reported cases of COVID-19, (ii) unexpected supply chain disruptions, (iii) changes to customer operations, (iv) continued or additional changes in consumer purchasing and consumption behavior beyond those evidenced to date, and (v) the closure of customer establishments, we remain uncertain of the ultimate effect COVID-19 could have on our ~~business. We also believe~~business notwithstanding the distribution of several U.S. government approved vaccines, the availability of booster inoculations and the easing of movement restrictions relative to the onset of COVID-19. This uncertainty stems from the potential for, among other things, (i) the rise of COVID-19 ~~uncertainty will continue during our 2021 fiscal year.~~mutations that have resulted in increased rates of reported cases for which currently approved vaccines are or may not be as 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 or reduced access to customer establishments.

Restructuring and Related Charges

In May 2020, we announced certain restructuring activities in conjunction with the implementation of our future-state organization design, which created a fully integrated organization with our completed ~~Acquisition~~acquisition of ~~Quest.~~Quest Nutrition, LLC on November 7, 2019. 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.

~~For~~ Total restructuring and restructuring-related costs incurred in the thirteen weeks ended November ~~28, 2020, we~~27, 2021 were immaterial. We incurred a total of $2.5 million in restructuring and restructuring-related costs in the thirteen weeks ended November 28, 2020. The effect of these restructuring ~~related costs which have~~activities has been included within General and administrative on the Condensed Consolidated Statements of Operations and Comprehensive Income. ~~As of November 28,~~Since the restructuring activities were announced in May 2020, we have incurred aggregate restructuring and ~~restructuring related~~restructuring-related costs of ~~$8.0 million since May 2020.~~$9.9 million. Overall, we expect to incur a total of approximately ~~$9.2~~$10.1 million in restructuring and restructuring-related costs, including the $9.9 million previously incurred, and the balance of which ~~are to~~will be paid ~~throughout fiscal 2021 and~~through the ~~first~~second quarter of fiscal year 2022. As of November 27, 2021, the outstanding restructuring liability was $0.1 million. Refer to Note ~~16,~~13, Restructuring and Related Charges, of our Notes to Unaudited Condensed Consolidated Financial Statements in this ~~Amendment~~Report for additional information regarding restructuring activities.

SimplyProtein Sale

Effective September 24, 2020, we sold the assets exclusively related to our 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”). In addition to purchasing these assets, the buyer assumed certain liabilities related to the ~~SimplyProtein~~SimplyProtein® brand’s business. There was no gain or loss recognized as a result of the SimplyProtein Sale. The transaction ~~enables~~has enabled our management to focus its full time and ~~our~~ resources on our core Atkins® and Quest® branded businesses and other strategic initiatives.

~~Change in Fair Value of Warrant Liability~~Supply Chain

~~During~~ We expect higher raw material and logistics costs in fiscal year 2022. As a result, we instituted a price increase effective in September 2021, the ~~thirteen weeks ended November 28, 2020 and November 30, 2019, there were fluctuations in the fair value~~first month of our ~~liability-classified private warrants (“Private Warrants”). These fluctuations created significant gains~~fiscal year 2022. Management believes the price increase and ~~losses on the remeasurement of our Private Warrants which are recognized as a liability measured at fair value on our Condensed Consolidated Balance Sheets. These remeasurements are recognized as~~ ~~Gain~~cost savings initiatives will enable us to continue to invest in ~~fair value change of warrant liability~~ ~~on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).~~projects that drive growth.

We have begun to see logistics challenges, which we believe have contributed to lower retail and e-commerce sales of our products due to out-of-stock situations, delayed recognition of sales and higher than historical inventory levels. In addition, we could experience additional lost sale opportunities at our retail and e-commerce customers if our products are not available for purchase as a result of disruptions in our supply chain relating to an inability to obtain ingredients or packaging, labor challenges at our logistics providers or our contract manufacturers, or if our customers experience delays in stocking our products.

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~~Our Reportable Segment~~

Following the Acquisition of Quest, our operations are organized into two operating segments, Atkins and Quest, which are aggregated into one reporting segment, due to similar financial, economic and operating characteristics. The operating segments are also similar in the following areas: (a) the nature of the products; (b) the nature of the production processes; (c) the methods used to distribute products to customers, (d) the type of customer for the products, and (e) the nature of the regulatory environment. The recently announced restructuring and new organization design creates an efficient and fully integrated organization that will continue to support and build multi-category nutritional snacking brands.

Key Financial Definitions

Net sales. Net sales consist primarily of product sales less the cost of promotional activities, slotting fees and other sales credits and adjustments, including product returns.

Cost of goods sold. Cost of goods sold consists primarily of the costs we pay to our contract manufacturing partners to produce the products sold. These costs include the purchase of raw ingredients, packaging, shipping and handling, warehousing, depreciation of warehouse equipment, and a tolling charge for the contract manufacturer. Cost of goods sold includes products provided at no charge as part of promotions and the non-food materials provided with customer orders.

Operating expenses. Operating expenses consist primarily of selling and marketing, general and administrative, depreciation and amortization, and business transaction costs. The following is a brief description of the components of operating expenses:

•Selling and marketing. Selling and marketing expenses ~~are comprised of~~comprise broker commissions, customer marketing, media and other marketing costs.

•General and administrative. General and administrative expenses ~~are comprised of~~comprise expenses associated with corporate and administrative functions that support our business, including employee ~~salaries,~~compensation, stock-based compensation, professional services, integration costs, restructuring costs, insurance and other general corporate expenses.

•Depreciation and amortization. Depreciation and amortization costs consist of costs associated with the depreciation of fixed assets and capitalized leasehold improvements and amortization of intangible assets.

•~~Business transaction costs.~~ Business transaction costs are comprised of legal, due diligence, consulting and accounting firm expenses associated with the process of actively pursuing potential and completed business combinations, including the Acquisition of Quest.

Results of Operations

~~Overall,~~Sales and earnings growth improved for both the ~~results in~~Atkins® and Quest® brands during the ~~first quarter of fiscal 2020 were better than expected amid the ongoing challenges of operating in the COVID-19 environment. The Acquisition of Quest~~thirteen weeks ended November 27, 2021, driven by improving consumer mobility and ~~the strong performance of the Quest brand drove the increases in net sales and net operating income for~~shopper trips compared to the thirteen weeks ended November 28, 2020, ~~compared~~as well as increasing household penetration and innovation that continues to resonate with consumers. As a result of the price increase effective in September 2021 as well as favorable product form and retail channel mix, we were able to more than offset the unfavorable effects of higher raw material costs, logistics costs, and supply chain challenges in the thirteen weeks ended November ~~30, 2019. While~~27, 2021 and achieve gross margin expansion and earnings growth. As previously discussed above in “Supply Chain,” we ~~are encouraged with our start~~continue to expect to have higher raw material and logistics costs in fiscal year 2022 as compared to fiscal year 2021, including the momentum of the Quest brand and the progress made against our strategic initiatives, there is still uncertainty related to when mobility, consumption behavior and shopping trips will return to pre-COVID-19 levels.2021.

In assessing the performance of our business, we consider a number of key performance indicators used by management and typically used by our competitors, including the non-GAAP measures ~~of Adjusted~~ EBITDA and Adjusted ~~Diluted Earnings Per Share.~~EBITDA. Because not all companies use identical calculations, ~~this~~the presentation of ~~Adjusted~~ EBITDA and Adjusted ~~Diluted Earnings Per Share~~EBITDA may not be comparable to other similarly titled measures of other companies. See “Reconciliation of EBITDA and Adjusted EBITDA” below for a reconciliation of EBITDA and Adjusted EBITDA to net income for each applicable period. ~~See “Reconciliation of Adjusted Diluted Earnings Per Share” below for a reconciliation of Adjusted Diluted Earnings Per Share to diluted earnings per share for each applicable period.~~

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Table of Contents

Comparison of Unaudited Results for the Thirteen Weeks Ended November ~~28, 2020~~27, 2021 and the Thirteen Weeks Ended

November ~~30, 2019~~28, 2020

The following unaudited table presents, for the periods indicated, selected information from our Condensed Consolidated Statements of Operations and Comprehensive Income, including information presented as a percentage of net sales:

As Restated
Thirteen Weeks Ended Thirteen Weeks Ended
(In thousands) November 28, 2020 % of Sales November 30, 2019 % of Sales
Net sales $ 231,152 100.0 % $ 152,153 100.0 %
Cost of goods sold 137,111 59.3 % 89,947 59.1 %
Gross profit 94,041 40.7 % 62,206 40.9 %
Operating expenses:
Selling and marketing 25,195 10.9 % 18,434 12.1 %
General and administrative 25,415 11.0 % 18,145 11.9 %
Depreciation and amortization 4,244 1.8 % 2,453 1.6 %
Business transaction costs — — % 26,159 17.2 %
Total operating expenses 54,854 23.7 % 65,191 42.8 %
Income (loss) from operations 39,187 17.0 % (2,985) (2.0) %
Other income (expense):
Interest income 3 — % 1,379 0.9 %
Interest expense (8,372) (3.6) % (4,969) (3.3) %
Gain in fair value change of warrant liability 20,453 8.8 % 13,308 5.8 %
Gain on foreign currency transactions 9 — % 16 — %
Other income 47 — % 37 — %
Total other income 12,140 5.3 % 9,771 6.4 %
Income before income taxes 51,327 22.2 % 6,786 4.5 %
Income tax expense (benefit) 8,374 3.6 % (1,729) (1.1) %
Net income $ 42,953 18.6 % $ 8,515 5.6 %
Other financial data:
Adjusted EBITDA(1)
$ 48,697 21.1 % $ 31,795 20.9 %

~~(1) Adjusted EBITDA is a non-GAAP financial metric. See “Reconciliation of Adjusted EBITDA” below for a reconciliation of Adjusted EBITDA to net income for each applicable period.~~


	Thirteen Weeks Ended				Thirteen Weeks Ended
(In thousands)	November 27, 2021		% of Sales		November 28, 2020		% of Sales
Net sales	$	281,265	100.0	%	$	231,152	100.0	%
Cost of goods sold	164,710		58.6	%	137,111		59.3	%
Gross profit	116,555		41.4	%	94,041		40.7	%

Operating expenses:
Selling and marketing	30,527		10.9	%	25,195		10.9	%
General and administrative	23,702		8.4	%	25,415		11.0	%
Depreciation and amortization	4,320		1.5	%	4,244		1.8	%


Total operating expenses	58,549		20.8	%	54,854		23.7	%

Income from operations	58,006		20.6	%	39,187		17.0	%

Other income (expense):
Interest income	1		—	%	3		—	%
Interest expense	(6,371)		(2.3)	%	(8,372)		(3.6)	%
(Loss) gain in fair value change of warrant liability	(17,317)		(6.2)	%	20,453		8.8	%

(Loss) gain on foreign currency transactions	(353)		(0.1)	%	9		—	%
Other income	9		—	%	47		—	%
Total other (expense) income	(24,031)		(8.5)	%	12,140		5.3	%

Income before income taxes	33,975		12.1	%	51,327		22.2	%
Income tax expense	12,823		4.6	%	8,374		3.6	%
Net income	$	21,152	7.5	%	$	42,953	18.6	%

Other financial data:
Adjusted EBITDA (1)	$	65,615	23.3	%	$	48,697	21.1	%
(1) Adjusted EBITDA is a non-GAAP financial metric. See “Reconciliation of EBITDA and Adjusted EBITDA” below for a reconciliation of net income to EBITDA and Adjusted EBITDA for each applicable period.

Net sales. Net sales of ~~$231.2~~$281.3 million represented an increase of ~~$79.0~~$50.1 million, or ~~51.9%~~21.7%, for the thirteen weeks ended November ~~28, 2020~~27, 2021 compared to the thirteen weeks ended November ~~30, 2019.~~28, 2020. The ~~net sales~~ increase ~~of 51.9%~~ was primarily attributable to retail sales volume growth and e-commerce growth for both the ~~Acquisition~~Atkins® and Quest® brands, which increased our North America net sales by 24.5% in the thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020. Additionally, we instituted a price increase effective in September 2021, the first month of ~~Quest, which drove 51.7% of the increase.~~our fiscal year 2022. The ~~remaining 0.2%~~ increase in net sales ~~attributable to the legacy Atkins business~~ was ~~primarily driven by international sales growth,~~ partially offset by a ~~1.7% decrease~~27.3% decline in ~~net sales~~our international business due to the ~~SimplyProtein Sale in the first quarter of fiscal year 2021 as well as reduced~~European exit. The European exit represented a 1.6% headwind to total Company net sales ~~volume due to the continued effects of COVID-19 related movement restrictions and stay-at-home orders.~~growth.

Cost of goods sold. Cost of goods sold increased ~~$47.2~~$27.6 million, or ~~52.4%~~20.1%, for the thirteen weeks ended November ~~28, 2020~~27, 2021 compared to the thirteen weeks ended November ~~30, 2019.~~28, 2020. The cost of goods sold increase was driven by the sales volume growth ~~attributable~~for both the Atkins® and Quest® brands, as discussed above. Additionally, our cost of goods sold for the thirteen weeks ended November 27, 2021 was unfavorably affected by higher raw material costs, logistics costs, and supply chain challenges. As previously discussed above in “Supply Chain,” we continue to ~~the Acquisition of Quest.~~expect to have higher raw material and logistics costs in fiscal year 2022 as compared to fiscal year 2021.

Gross profit. Gross profit increased ~~$31.8~~$22.5 million, or ~~51.2%~~23.9%, for the thirteen weeks ended November ~~28, 2020~~27, 2021 compared to the thirteen weeks ended November ~~30, 2019.~~28, 2020, which was primarily driven by the sales volume growth for both the Quest® and Atkins®

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brands as discussed above. Gross profit of ~~$94.0~~$116.6 million, or 41.4% of net sales, for the thirteen weeks ended November 27, 2021 increased 70 basis points from 40.7% of net sales for the thirteen weeks ended November 28, ~~2020 decreased 20 basis points from 40.9% of net sales for the thirteen weeks ended November 30, 2019.~~2020. The ~~decrease~~increase in gross profit margin was primarily the result of the ~~Acquisition of Quest’s lower~~price increase which became effective in September 2021 as well as favorable product form and retail channel mix given higher shopper traffic volume within brick and mortar retailers. The increase in gross profit ~~margins,~~margin was partially offset by ~~a non-cash $2.4 million inventory purchase accounting step-up adjustment~~the unfavorable effects of higher raw material costs, logistics costs, and supply chain challenges in the ~~first quarter of fiscal year 2020.~~

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thirteen weeks ended November 27, 2021 as previously discussed.

Operating expenses. Operating expenses ~~decreased $10.3~~increased $3.7 million, or ~~15.9%~~6.7%, for the thirteen weeks ended November ~~28, 2020~~27, 2021 compared to the thirteen weeks ended November ~~30, 2019~~28, 2020 due to the following:

•Selling and marketing. Selling and marketing expenses increased ~~$6.8~~$5.3 million, or ~~36.7%~~21.2%, for the thirteen weeks ended November ~~28, 2020~~27, 2021 compared to the thirteen weeks ended November ~~30, 2019.~~28, 2020. The increase was primarily related to additional brand building initiatives for both Atkins® and Quest® in the ~~Acquisition of Quest.~~thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020.

•General and administrative. General and administrative expenses ~~increased $7.3~~decreased $1.7 million, or ~~40.1%~~6.7%, for the thirteen weeks ended November ~~28, 2020~~27, 2021 compared to the thirteen weeks ended November ~~30, 2019.~~28, 2020. The ~~increase~~decrease was primarily attributable to ~~the Acquisition~~reductions in costs related to business integration activities of ~~Quest as well as~~$1.2 million and restructuring charges of $2.5 million in the thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020. These ~~increases~~decreases were partially offset by ~~reductions~~an increase in incentive compensation, including an increase of stock-based compensation ~~and costs related~~of $1.5 million, in the thirteen weeks ended November 27, 2021 compared to the ~~integration of Quest.~~thirteen weeks ended November 28, 2020.

•Depreciation and amortization. Depreciation and amortization expenses increased $1.8 million, or 73.0%, for the thirteen weeks ended November 28, 2020 compared to the thirteen weeks ended November 30, 2019. The increase was primarily due to amortization for the intangible assets recognized in the Acquisition of Quest of $2.2 million.

•~~Business transaction costs. Business transaction costs were $26.2~~remained approximately flat at $4.3 million for the thirteen weeks ended November ~~30, 2019~~27, 2021 and ~~was comprised of expenses related to~~$4.2 million for the ~~Acquisition of Quest.~~November 28, 2020.

Interest income. Interest income ~~decreased $1.4 million~~was nominal for each of the thirteen weeks ended November 27, 2021 and November 28, 2020 compared to the thirteen weeks ended November 30, 2019 primarily due to $195.3 million of cash on hand being utilized for the Acquisition of Quest in the first quarter of fiscal year 2020 and lower market rates.2020.

Interest expense. Interest expense ~~increased $3.4~~decreased $2.0 million for the thirteen weeks ended November ~~28, 2020~~27, 2021 compared to the thirteen weeks ended November ~~30, 2019~~28, 2020, primarily due to principal payments reducing the ~~first quarter~~outstanding balance of ~~fiscal year 2020 term loan funding~~the Term Facility (as defined below) to $431.5 million as of ~~$460.0~~November 27, 2021 from $581.5 million as of November 28, 2020. Additionally, interest expense related to ~~partially finance~~ the ~~Acquisition~~amortization of ~~Quest.~~deferred financing costs and debt discount decreased $0.3 million for the thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020.

~~Gain~~(Loss) gain in fair value change of warrant ~~liability~~liability.. During ~~the~~ thirteen weeks ended November 27, 2021 and November 28, 2020, ~~and the thirteen weeks ended November 30, 2019,~~ we recorded a ~~$20.5~~non-cash loss of $17.3 million ~~gain~~ and a ~~$13.3~~non-cash gain of $20.5 million, ~~gain,~~ respectively, related to ~~the change~~changes in ~~fair value~~valuation of our liability-classified warrants issued through a private placement (“Private ~~Warrants,~~Warrants”), which is primarily driven by movements in our stock price.

~~Gain~~(Loss) gain on foreign currency transactions. ~~The gain~~A loss of $0.4 million in foreign currency ~~related~~transactions was recorded for the thirteen weeks ended November 27, 2021 compared to ~~our international operations was nominal~~an immaterial foreign currency gain for the thirteen weeks ended November 28, ~~2020 and November 30, 2019.~~2020. The variance primarily relates to changes in foreign currency rates related to our international operations.

Income tax ~~expense (benefit).~~expense. Income tax expense increased ~~$10.1~~$4.4 million for the thirteen weeks ended November ~~28, 2020~~27, 2021 compared to the thirteen weeks ended November ~~30, 2019.~~28, 2020. The increase in our income tax expense is primarily driven by higher income from operations, partially offset by ~~other~~changes in permanent differences.

Net income. Net income was $21.2 million for the thirteen weeks ended November 27, 2021, a decrease of $21.8 million compared to net income of $43.0 million for the thirteen weeks ended November 28, ~~2020, an increase of $34.4 million compared to~~2020. The decrease in net income was primarily driven by the ~~net~~non-cash fair value loss of ~~$8.5~~$17.3 million ~~for~~in the thirteen weeks ended November ~~30, 2019. The increase was primarily~~27, 2021 compared to a non-cash fair value gain of $20.5 million in the thirteen weeks ended November 28, 2020 related to the measurement of our liability-classified Private Warrants, which was partially offset by increased ~~operating~~ income ~~decreased transaction costs~~ from operations driven by the ~~Acquisition of Quest in the first quarter of fiscal year 2020,~~Atkins® and ~~favorable fair value movements in the warrant liability.~~Quest® brand sales volume growth as discussed above.

Adjusted EBITDA. Adjusted EBITDA increased $16.9 million, or ~~53.2%,~~34.7% for the thirteen weeks ended November 27, 2021 compared to the thirteen weeks ended November 28, 2020, ~~compared to the thirteen weeks ended November 30, 2019,~~ driven primarily by sales volume growth for the ~~Acquisition of Quest.~~Atkins® and Quest® brands as discussed above. For a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, see “Reconciliation of EBITDA and Adjusted EBITDA” below.

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Reconciliation of EBITDA and Adjusted EBITDA

~~Adjusted~~ EBITDA. and Adjusted EBITDA ~~is a~~are non-GAAP financial ~~measure~~measures commonly used in our industry and should not be construed as ~~an alternative~~alternatives to net income as an indicator of operating performance or as ~~an alternative~~alternatives to cash flow provided by operating activities as a measure of liquidity (each as determined in accordance with GAAP). Simply Good Foods defines ~~Adjusted~~ EBITDA ~~(earnings before interest, tax, depreciation, and amortization)~~ as net income or loss before interest income, interest expense, income tax expense, depreciation and amortization, ~~with~~and Adjusted EBITDA as further ~~adjustments~~adjusted to exclude the following items: ~~business transaction costs, fair value changes in mark to market warrant liability measurements,~~ stock-based compensation expense, ~~inventory step-up,~~ integration costs, restructuring ~~costs, non-core legal~~ costs, gain or loss in fair value change of warrant liability, and other non-core expenses. The Company believes that ~~the inclusion of these supplementary adjustments in presenting~~EBITDA and Adjusted EBITDA, when used in conjunction with net income, are ~~appropriate~~useful to provide additional information to ~~investors, and management~~investors. Management of the Company uses EBITDA and Adjusted EBITDA to supplement net income because ~~it reflects more accurately~~these measures reflect operating results of the on-going operations, ~~enhances~~eliminate items that are not directly attributable to the Company’s underlying operating performance, enhance the overall understanding of past financial performance and future prospects, and ~~allows~~allow for greater transparency with respect to the key metrics the ~~Company~~Company’s management uses in its financial and operational decision making. The Company also believes that Adjusted EBITDA is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in its ~~industry~~.industry. Adjusted EBITDA may not be comparable to other similarly titled captions of other companies due to differences in the non-GAAP calculation.

The following unaudited ~~tables below provide~~table provides a reconciliation of EBITDA and Adjusted EBITDA to its most directly comparable GAAP measure, which is net income, for the thirteen weeks ended November ~~28, 2020~~27, 2021 and November ~~30, 2019:~~

(In thousands) Thirteen Weeks Ended
November 28, 2020 November 30, 2019
(As Restated) (As Restated)
Net income $ 42,953 $ 8,515
Interest income (3) (1,379)
Interest expense 8,372 4,969
Income tax expense (benefit) 8,374 (1,729)
Depreciation and amortization 4,513 2,525
EBITDA 64,209 12,901
Business transaction costs — 26,159
Stock-based compensation expense 1,110 1,673
Inventory step-up — 2,437
Integration of Quest 1,246 1,438
Restructuring 2,519 —
Non-core legal costs — 479
Gain in fair value change of warrant liability (20,453) (13,308)
Other (1)
66 16
Adjusted EBITDA $ 48,697 $ 31,795

~~(1)~~ ~~Other items consist principally of exchange impact of foreign currency transactions and other expenses.~~28, 2020:

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(In thousands)	Thirteen Weeks Ended
	November 27, 2021		November 28, 2020
Net income	$	21,152	$	42,953
Interest income	(1)		(3)
Interest expense	6,371		8,372
Income tax expense	12,823		8,374
Depreciation and amortization	4,741		4,513
EBITDA	45,086		64,209

Stock-based compensation expense	2,605		1,110

Integration of Quest	55		1,246
Restructuring	42		2,519

Loss (gain) in fair value change of warrant liability	17,317		(20,453)

Other (1)	510		66
Adjusted EBITDA	$	65,615	$	48,697
(1) Other items consist principally of exchange impact of foreign currency transactions and other expenses.

Liquidity and Capital Resources

Overview

We have historically funded our operations with cash flow from operations and, when needed, with borrowings under our ~~credit facilities.~~Credit Agreement (as defined below). Our principal uses of cash have been working capital, debt service, ~~working capital~~ and ~~the Acquisition of Quest.~~acquisition opportunities.

We had ~~$91.5~~$35.4 million in cash ~~and cash equivalents~~ as of November ~~28, 2020.~~27, 2021. We believe our sources of liquidity and capital will be sufficient to finance our continued operations, growth strategy and additional expenses we expect to incur for at least the next twelve months. As circumstances warrant, we may issue debt and/or equity securities from time to time on an opportunistic basis, dependent upon market conditions and available pricing. We make no assurance that we can issue and sell such securities on acceptable terms or at all.

Our material future cash requirements from contractual and other obligations relate primarily to our principal and interest payments for our Term Facility, as defined and discussed below, and our operating and finance leases. Refer to Note 5, Long-Term Debt and Line of Credit, and Note 8, Leases, of the Notes to Unaudited Condensed Consolidated Financial Statements in this Report for additional information related to the expected timing and amount of payments related to our contractual and other obligations.

Debt and Credit Facilities

On July 7, 2017, we entered into a credit agreement with Barclays Bank PLC and other parties (as amended to date, the “Credit Agreement”). The Credit Agreement ~~provides~~at that time provided for (i) a term facility of $200.0 million (“Term Facility”) with a ~~seven year~~seven-year maturity and (ii) a revolving credit facility of up to $75.0 million (the “Revolving Credit Facility”) with a ~~five year~~five-year maturity. Substantially

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concurrent with the consummation of the business combination between Conyers Park Acquisition ~~of Atkins,~~Corp. and NCP-ATK Holdings, Inc. on July 7, 2017, 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”,~~rate,” (b) the federal funds effective rate plus 0.50% ~~and~~, 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. The Simply Good Foods Company is not a borrower under the Credit Agreement and has not provided a guarantee of the Credit Agreement. Simply Good Foods USA, Inc., is the administrative borrower and certain other subsidiary holding companies are co-borrowers under the Credit Agreement. Each of our domestic subsidiaries that is not a named borrower under the Credit Agreement has provided a guarantee on a secured basis. As security for the payment or performance of ~~its~~the debt weunder the Credit Agreement, the borrowers and the guarantors have pledged certain equity interests in ~~its~~their respective subsidiaries and granted the lenders a security interest in substantially all of their domestic assets. 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”), we 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 our 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 our 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 us in connection with the Repricing Amendment. The incremental fees paid to the administrative agent are reflected as additional debt discount and are amortized over the terms of the long-term financing agreements using the effective-interest method.

On November 7, 2019, we entered into ana 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) 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 our option, either LIBOR plus an applicable margin of 3.75% or a base rate plus an applicable margin of 2.75%. The Incremental Facility Amendment was executed to partially finance the ~~Acquisition~~acquisition of ~~Quest.~~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.

The Applicable Rate per annum applicable to the loans under the Credit Agreement Amendment is, with respect to any Initial Term Loan that is an ABR Loan (as defined in the Credit Agreement), 2.75% per annum, and with respect to any Initial Term Loan that is a Eurodollar Loan, 3.75% per annum. The incremental term loans will mature on the maturity date applicable to the Initial Term Loans, which ~~date~~ is July 7, 2024.

The Credit Agreement contains certain financial and other covenants that limit our ability to, among other things, incur and/or undertake asset sales and other dispositions, liens, indebtedness, certain acquisitions and investments, consolidations, mergers, reorganizations and other fundamental changes, payment of dividends and other distributions to equity and warrant holders, and prepayments of material subordinated debt, in each case, subject to customary exceptions materially consistent with credit facilities of such type and size. The Revolving Credit Facility has a maximum total net leverage ratio equal to or less than ~~6.25:1.00 (with a reduction to~~ 6.00:1.00 ~~on and after the third anniversary of the closing date of the Credit Agreement)~~ contingent on credit extensions in excess of 30% of the total amount of commitments available under the Revolving Credit Facility. Any failure to comply with the restrictions of the credit facilities may result in an event of default. We were in compliance with all financial covenants as of November ~~28, 2020~~27, 2021 and August ~~29, 2020,~~28, 2021, respectively.

At November ~~28, 2020,~~27, 2021, the outstanding balance of the Term Facility was ~~$581.5~~$431.5 million. We are not required to make principal payments on the Term Facility over the twelve months following the period ended November ~~28, 2020.~~27, 2021. The outstanding balance of the Term Facility is due upon its maturity in July 2024. As of November ~~28, 2020,~~27, 2021, there were no amounts drawn against the Revolving Credit Facility.

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~~Public Equity Offering~~

On October 9, 2019, we completed an underwritten public offering of 13,379,205 shares of our common stock at a price to the public of $26.35 per share. We paid underwriting discounts and commissions of $0.19 per share resulting in net proceeds to us of $26.16 per share, or approximately $350.0 million (the “Offering”). We paid $0.8 million for legal, accounting and registrations fees related to the Offering. The net proceeds were used to pay a portion of the purchase price and related fees and expenses for the Acquisition of Quest.

~~Acquisition of Quest~~

On August 21, 2019, our 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”) with VMG Voyage Holdings, LLC, VMG Tax-Exempt II, L.P., Voyage Employee Holdings, LLC, and other sellers, as defined in the Purchase Agreement, to acquire Quest, a healthy lifestyle food company. On November 7, 2019, pursuant to the Purchase Agreement, Simply Good USA completed the Acquisition of Quest, for a cash purchase price of approximately $1.0 billion, subject to customary post-closing adjustments.

The Acquisition of Quest was funded through a combination of cash, equity and debt financing. Total consideration paid on the closing date was $988.9 million. Cash sources of funding included $195.3 million of cash on hand, net proceeds of approximately $350.0 million from an underwritten public offering of common stock, and $443.6 million of new term loan debt. In the third fiscal quarter of 2020, we received a post-closing release from escrow of approximately $2.1 million related to net working capital adjustments, resulting in a total net consideration paid of $986.8 million as of November 28, 2020. For the thirteen weeks ended November 30, 2019, we incurred business transaction costs $26.2 million.

Private Warrants to Purchase Common Stock

As of November ~~28, 2020, our~~27, 2021, we have outstanding liability-classified Private Warrants that allow holders to purchase 6,700,000 shares of the Company’s common ~~stock remain outstanding,~~stock. Such Private Warrants are held by Conyers Park Sponsor, LLC, a related ~~party, and remain liability-classified.~~party. Each whole warrant entitles the holder to purchase one share of the Company’s common stock at a price of $11.50 per share. If all Private Warrants are exercised at the $11.50 exercise price per warrant, our cash would increase by $77.1 million. The warrants expire on July 7, 2022 or earlier upon redemption or liquidation, as applicable.

Cash Flows

The following table sets forth the major sources and uses of cash for each of the periods set forth below (in thousands):

Thirteen Weeks Ended
November 28, 2020 November 30, 2019
Net cash provided by (used in) operating activities $ 15,197 $ (7,928)
Net cash provided by (used in) investing activities $ 5,593 $ (985,731)
Net cash (used in) provided by financing activities $ (25,122) $ 800,071


	Thirteen Weeks Ended
	November 27, 2021		November 28, 2020
Net cash (used in) provided by operating activities	$	(7,329)	$	15,197
Net cash (used in) provided by investing activities	$	(4,377)	$	5,593
Net cash used in financing activities	$	(27,992)	$	(25,122)

Operating activities. Our net cash (used in) provided by operating activities ~~increased $23.1~~decreased $22.5 million to $7.3 million cash used in operating activities for the thirteen weeks ended November 27, 2021 compared to cash provided by operating activities of $15.2 million for the thirteen weeks ended November 28, ~~2020 compared~~2020. The decrease in cash provided by operating activities was primarily attributable to changes in working capital, including $14.0 million of accounts receivable, net, $14.2 million of accounts payable and $17.9 million of accrued expenses and other current liabilities due to timing of payments and receipts during the thirteen weeks ended November 27, 2021. Additionally, seasonal building of inventory levels contributed to $15.3 million of negative working capital changes in inventory for the thirteen weeks ended November 27, 2021. These decreases in cash provided by operating activities were partially offset by the $18.8 million increase in income from operations primarily attributable to retail sales volume growth and e-commerce growth for both the Atkins® and Quest® brands as discussed in “Results of Operations” above.

Investing activities. Our net cash used in ~~operating~~investing activities ~~of $7.9~~was $4.4 million for the thirteen weeks ended November ~~30, 2019. The increase in cash provided by operating activities in the current period~~27, 2021 compared to the prior period was primarily driven by increased sales volumes in the current period and significant non-recurring business transactions costs and changes in working capital related to the Acquisition of Quest during the thirteen weeks ended November 30, 2019, including $26.2 million in transaction costs which were not incurred in the current period, partially offset by increased cash paid for interest on outstanding term loan balances of $4.5 million and restructuring costs of $2.5 million.

~~Investing~~ ~~activities. Our~~ net cash provided by investing activities ~~was~~of $5.6 million for the thirteen weeks ended November 28, 2020. Our net cash used in investing activities for the thirteen weeks ended November 27, 2021 primarily comprised $2.7 million of purchases of property and equipment and the issuance of a $1.5 million note receivable. The $5.6 million of net cash provided by investing activities for the thirteen weeks ended November 28, 2020 ~~which was~~ primarily ~~related to~~comprised the $5.8 million of cash proceeds received from the SimplyProtein Sale. The net cash used in investing activities of $985.7 million for the thirteen weeks ended November 30, 2019 was primarily related to the cash paid for the Acquisition of Quest, net of cash acquired, of $984.2 million.

Financing activities. Our net cash used in financing activities was $28.0 million for the thirteen weeks ended November 27, 2021 compared to $25.1 million for the thirteen weeks ended November 28, ~~2020 compared to net~~2020. Net cash ~~provided by~~used in financing activities ~~of $800.1 million~~ for the thirteen weeks ended November ~~30, 2019.~~27, 2021 primarily consisted of $25.0 million in principal payments on the Term Facility and $3.2 million of tax payments related to issuance of restricted stock units and performance stock units. Net cash used in financing activities for the thirteen weeks ended November 28, 2020 primarily consisted of a $25.0 million in principal ~~payment~~payments on the Term Facility. For the thirteen weeks ended November 30, 2019, net cash provided by financing activities included gross proceeds of $352.5 million from the Offering offset by issuance costs of $3.3 million, proceeds of $460.0 million from the Term Facility borrowing related to the Incremental Facility Amendment offset by issuance costs of $8.2 million, and a $1.0 million principal payment on the Term Facility.

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~~Contractual Obligations~~

Our contractual obligations are related to our Credit Agreement and our finance and operating leases. There have been no material changes to our contractual obligations from our Annual Report on Form 10-K/A.

~~Off-Balance Sheet Arrangements~~

As of November 28, 2020, we had no material off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, income or expenses, results of operations, liquidity, capital expenditures or capital resources.

New Accounting Pronouncements

For a description of critical accounting policies that affect our significant judgments and estimates used in the preparation of our consolidated financial statements, refer to our Annual ~~Report on Form 10-K/A. There have been no significant changes to our critical accounting policies since August 29, 2020.~~Report. Refer to Note 3 2, Summary of Significant Accounting Policies, of our unaudited interim ~~condensed~~ consolidated financial statements in this ~~Amendment~~Report for further information regarding recently issued accounting standards.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There were no material changes in our market risk exposure during the thirteen week period ended November ~~28, 2020.~~27, 2021. We continue to expect to experience logistics challenges in our supply chain as well as higher raw material and logistics costs in fiscal year 2022. We instituted a price increase effective in September 2021, the first month of our fiscal year 2022, which management believes, along with productivity initiatives, will enable us to continue to invest in projects that drive growth. We are continuing to assess available alternatives to mitigate potential input cost inflation for fiscal year 2022. For a discussion of our market risks, see “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual ~~Report on Form 10-K.~~Report.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosures.

Management, including the participation of our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation (pursuant to Rule 13a-15(b) under the Exchange Act) of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this ~~Amendment.~~Report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of November ~~28, 2020,~~27, 2021, the Company’s disclosure controls and procedures were ~~not~~ effective ~~due to a material weakness in internal control over financial reporting described below.~~

As previously disclosed in our Annual Report on Form 10-K/A for the year ended August 29, 2020, we identified a material weakness in our internal controls over financial reporting related to inaccurate accounting for warrants issue in connection with our initial public offering and private placement. Notwithstanding this material weakness, management has concluded that our unaudited condensed consolidated financial statements included in the Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with GAAP for each of the periods presented therein.

~~Remediation Plan~~

We have expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. Our plans at this time include acquiring enhanced access to accounting literature, increased communication among our personnel regarding the application of complex accounting transactions, hiring additional technical resources and enhanced reviews of technical analyses to ensure the proper application of GAAP. Our remediation plan can only be accomplished over time and will be continually reviewed to determine that it is achieving its objectives. We can offer no assurance that these initiatives will ultimately have the intended effects.

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Changes in Internal Control over Financial Reporting

As of the first day of fiscal year 2021, the financial reporting of the Company’s U.S. operations were fully integrated onto a single enterprise resource platform. In addition, other than the change made to remediate the material weakness described above and the integration and implementation of the enterprise resource platform, thereThere were no changes in our internal controls over financial reporting during the quarter ended November ~~28, 2020~~27, 2021 that have materially affected, or are reasonably likely to materially affect, our internal controls ~~over financial reporting.~~

Except as disclosed above, there were no changes in our internal control over financial reporting during the quarter ended November 28, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Additionally, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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PART II. Other Information

Item 1. Legal Proceedings

From time to time, we have been and may again become involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any litigation that we believe to be material and we are not aware of any pending or threatened litigation against us that we believe could have a material adverse effect on our business, operating results, financial condition or cash flows.

Item 1A. Risk Factors

Readers should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our ~~Amendment No. 1 to Form 10-K (“Form 10-K/A”),~~Annual Report, which could materially affect our business, financial condition, cash flows or future results. There have been no material changes in our risk factors included in our ~~Form 10-K/A.~~Annual Report. The risks described in our ~~Form 10-K/A~~Annual Report are not the only risks facing ~~the~~our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also ~~may~~ materially adversely affect our business, financial condition or future results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Table of Contents

Item 6. Exhibits


Exhibit No.						Document
31.1						Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
31.2						Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
32.1						Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes Oxley Act.
10.1						Amendment No. 3 (Extension Amendment), dated as of December 16, 2021, by and among Atkins Intermediate Holdings, LLC, a Delaware limited liability company, Conyers Park Acquisition Corp., a Delaware corporation, Simply Good Foods USA, Inc., a New York corporation, Atkins Nutritionals Holdings, Inc., a Delaware corporation, Atkins Nutritionals Holdings II, Inc., a Delaware corporation, NCP-ATK Holdings, Inc., a Delaware corporation and the financial institutions party thereto as Consenting Lenders and the Replacement Lender and Barclays Bank PLC, as administrative agent.
101.INS						XBRL Instance Document
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Extension Label Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).

3729

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this ~~Amendment No. 1 to Form 10-Q~~report to be signed on its behalf by the undersigned thereunto duly authorized.

By:

THE SIMPLY GOOD FOODS COMPANY

/s/ Timothy A. Matthews

Date:

~~June 30, 2021~~January 5, 2022

Name:

Timothy A. Matthews

Title:

Vice President, Controller, and Chief Accounting Officer

(Principal Accounting Officer)

3830


	November 28, 2020		August 29, 2020
	(As Restated, see Note 2)
Assets
Current assets:
Cash and cash equivalents	$	91,476	$	95,847
Accounts receivable, net	97,887		89,740
Inventories	76,067		59,085
Prepaid expenses	4,345		3,644
Other current assets	9,178		11,947
Total current assets	278,953		260,263

Long-term assets:
Property and equipment, net	11,344		11,850
Intangible assets, net	1,149,895		1,158,768
Goodwill	543,134		544,774
Other long-term assets	31,892		32,790
Total assets	$	2,015,218	$	2,008,445

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	41,409	$	32,240
Accrued interest	720		960
Accrued expenses and other current liabilities	32,972		38,007
Current maturities of long-term debt	275		271
Total current liabilities	75,376		71,478

Long-term liabilities:
Long-term debt, less current maturities	572,923		596,879
Deferred income taxes	88,543		84,352
Warrant liability	73,185		93,638
Other long-term liabilities	21,884��		22,765
Total liabilities	831,911		869,112
See commitments and contingencies (Note 11)	0		0

Stockholders’ equity:
Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued	0		0
Common stock, $0.01 par value, 600,000,000 shares authorized, 95,818,871 and 95,751,845 shares issued at November 28, 2020 and August 29, 2020, respectively	958		958
Treasury stock, 98,234 and 98,234 shares at cost at November 28, 2020 and August 29, 2020, respectively	(2,145)		(2,145)
Additional paid-in-capital	1,077,538		1,076,472
Retained earnings	107,880		64,927
Accumulated other comprehensive loss	(924)		(879)
Total stockholders’ equity	1,183,307		1,139,333
Total liabilities and stockholders’ equity	$	2,015,218	$	2,008,445


Condensed Consolidated Balance Sheet	November 28, 2020
(In thousands)	As Previously Reported		Restatement Adjustment		As Restated


Warrant liability	$	0	$	73,185	$	73,185
Total liabilities	758,726		73,185		831,911
Additional paid-in-capital	1,095,573		(18,035)		1,077,538
Retained earnings	163,030		(55,150)		107,880
Total stockholders’ equity	$	1,256,492	$	(73,185)	$	1,183,307


	Thirteen Weeks Ended
Condensed Consolidated Statement of Cash Flows	November 28, 2020
(In thousands)	As Previously Reported		Restatement Adjustment		As Restated
Operating activities
Net income	$	22,500	$	20,453	$	42,953
Adjustments to reconcile net income to net cash provided by operating activities:





Gain in fair value change of warrant liability	0		(20,453)		(20,453)
















Net cash provided by operating activities	$	15,197	$	0	$	15,197


(In thousands)	Amortization
Remainder of 2021	$	11,530
2022	15,224
2023	14,938
2024	14,257
2025	13,171
2026 and thereafter	106,720
Total	$	175,840


		Thirteen Weeks Ended
(In thousands)	Statement of Operations Caption	November 28, 2020		November 30, 2019
Operating lease cost:
Lease cost	Cost of goods sold and General and administrative	$	1,498	$	806
Variable lease cost (1)	Cost of goods sold and General and administrative	398		310
Operating lease cost		1,896		1,116

Short term lease cost	General and administrative	0		6

Finance lease cost:
Amortization of right-of-use assets	Cost of goods sold	68		70
Interest on lease liabilities	Interest expense	13		16
Total finance lease cost		81		86

Total lease cost		$	1,977	$	1,208


(In thousands)	Balance Sheet Caption	November 28, 2020		August 29, 2020
Assets
Operating lease right- of-use assets	Other long-term assets	$	24,532	$	25,703
Finance lease right-of-use assets	Property and equipment, net	844		912
Total lease assets		$	25,376	$	26,615

Liabilities
Current:
Operating lease liabilities	Accrued expenses and other current liabilities	$	4,355	$	4,329
Finance lease liabilities	Current maturities of long-term debt	275		271
Long-term:
Operating lease liabilities	Other long-term liabilities	21,882		22,764
Finance lease liabilities	Long-term debt, less current maturities	617		651
Total lease liabilities		$	27,129	$	28,015


	Restricted Stock Units	Weighted average grant-date fair value
Non-vested as of August 29, 2020	208,023	$	22.82
Granted	293,907	21.16
Vested	(63,759)	26.27
Forfeited	(12,530)	23.68
Non-vested as of November 28, 2020	425,641	$	21.13